Shares of PG&E and Edison International fell sharply on Friday after California state legislators blocked a key wildfire liability proposal that would have limited utilities' exposure to catastrophic fire claims.
PG&E declined about 10% while Edison International dropped roughly 3.5% in afternoon trading. The declines followed the collapse of negotiations late Thursday during a closed-door meeting between Governor Gavin Newsom's staff and Democratic state legislators.
The blocked plan aimed to prevent state insurance companies from recovering losses from publicly traded utilities responsible for catastrophic wildfires through subrogation, the process by which insurers seek reimbursement from liable parties. Governor Newsom had proposed the measure as part of a broader effort to cap utility liability payments and prevent potential bankruptcies that could drain the state's wildfire liability fund, which is financed by ratepayers and shareholders.
Major insurance company executives had warned that the proposal would lead to substantial increases in insurance premiums and threaten the stability of California's insurance market, contributing to the legislative opposition. The governor's office acknowledged in a Thursday-night memo obtained by KCRA 3 that there was no viable path forward for broader structural reform to significantly reduce costs.
Despite the failure of the comprehensive plan, the governor's office indicated it would still pursue several targeted measures, including prohibiting bonuses for CEOs of utilities whose companies cause wildfires, creating an accelerated claims payment program for victims, establishing a statewide wildfire-fighting strategy, launching a wildfire data-sharing platform, and banning speculative investments in wildfire claims by hedge funds and private equity firms.
The legislative impasse leaves California's investor-owned utilities facing continued exposure to wildfire liability claims, potentially increasing financial risks for companies like PG&E and Edison International as the state's wildfire season intensifies.
