Shares of PG&E Corp. fell 8.1% to $16.50 in afternoon trading on Thursday after California lawmakers ended closed-door negotiations and rejected a proposal by Governor Gavin Newsom to eliminate or restrict insurers' ability to sue energy utilities for wildfire-related payouts.
The legislative outcome directly undermines PG&E's capital investment strategy, which management had stated was contingent on favorable wildfire liability reforms. The company's plan through 2030 was explicitly tied to legislative progress on subrogation rights, a legal mechanism allowing insurers to seek reimbursement from utilities for wildfire claims.
Analysts had previously linked PG&E's valuation to progress on this issue. On August 25, Baird maintained its buy rating, citing wildfire legislation as a key support for the stock. Morgan Stanley had lowered its price target to $22 from $23 the prior week, though the bank did not immediately comment on Thursday's development.
The decline extended beyond PG&E, with Edison International also falling as the broader sector reacted to the legislative outcome. California utility stocks faced pressure amid the uncertainty, though broader U.S. equity benchmarks showed only modest declines: the S&P 500 was down 0.3%, the Dow Jones Industrial Average fell 0.1%, and the Nasdaq Composite declined 0.5%. Analysts noted the sector-specific move in utilities was not explained by broader market weakness alone.
The legislative rejection follows months of negotiations and underscores the persistent regulatory risks facing California's energy utilities as they manage wildfire exposure and related liabilities.
