Shares of PG&E and Edison International declined after California lawmakers rejected Governor Gavin Newsom's wildfire liability plan, citing concerns over market stability.
PG&E fell 10% on Friday, while Edison International dropped about 3.5%, according to market data. The declines followed the collapse of negotiations late Thursday during a closed-door meeting between the governor's staff and Democratic state lawmakers. The proposal aimed to prevent insurers from suing or recovering losses from utilities responsible for catastrophic wildfires through subrogation, a process where insurers recoup payments from at-fault parties.
The plan also sought to address concerns that a future utility-caused wildfire could deplete California's wildfire liability fund, which is financed by ratepayers and shareholders, potentially risking bankruptcy for affected utilities. However, insurers warned that ending subrogation would lead to substantial premium increases and destabilize the state's insurance market.
In a memo obtained by KCRA 3 on Thursday night, the governor's office acknowledged that there was no clear path to implement broader structural reforms to contain costs. Despite the setback, the memo indicated the administration would still pursue several measures, including banning utility CEO bonuses if their company ignites a wildfire, creating a fast-pay program for victim compensation, and establishing a statewide wildfire strategy and data-sharing platform. The memo also proposed outlawing speculative investing in wildfire claims by hedge funds and private equity firms.
The rejection reflects ongoing tensions between California's push for wildfire accountability and the financial stability of its utilities and insurers.
