PG&E’s stock fell 13.4% in pre-market trading on Friday, dropping to $14.37—near its 52-week low of $14.34—after California’s legislature passed SB 492 without adopting broader wildfire liability reforms sought by the utility sector.
The bill, which concluded California’s legislative session on August 29, preserved the existing 20% rate base liability cap for transmission and distribution claims under the state’s wildfire fund. Liabilities above the cap for fires occurring after 2030 remain unfunded, leaving PG&E’s balance sheet and the ratepayer-funded mechanism exposed to potential subrogation claims from insurers. The utility had already declined 7.5% in the prior session as the legislative outcome became clearer.
Analysts responded swiftly to the legislation’s limitations. Mizuho downgraded PG&E to Neutral from Outperform, cutting its price target to $16 from $21, while also downgrading Sempra Energy on the same grounds. BMO Capital moved its rating to Market Perform from Outperform, reducing its target to $21 from $28 and raising assumed wildfire liabilities beyond the cap. Wells Fargo maintained its Equal Weight rating but acknowledged the stock was expected to open materially lower, citing debates over whether PG&E could trade below book value without further downgrades to earnings estimates.
Governor Gavin Newsom’s proposal to end insurers’ ability to recover wildfire losses directly from utilities via subrogation was rejected by legislative leaders in both the Assembly and Senate. Insurance executives had warned that eliminating subrogation would force property insurance premiums sharply higher across California, complicating the state’s affordability crisis.
The broader market showed limited reaction, with the S&P 500 down 0.1%, the Dow Jones Industrial Average slipping 0.1%, and the Nasdaq flat.
