PG&E shares tumbled 13.4% in pre-market trading on Monday after California lawmakers adjourned without passing Governor Gavin Newsom’s proposed wildfire liability reform. The bill, SB 492, would have capped utilities’ financial exposure to future wildfire-related subrogation claims, a process through which insurers recover losses directly from utilities. Without the reform, PG&E’s stock fell to $14.37, nearing its 52-week low of $14.34.
The legislative outcome follows a 7.5% drop in PG&E shares on Friday as the session’s conclusion approached. The failure to pass SB 492 leaves the company and the state’s wildfire fund vulnerable to claims exceeding the 20% liability cap tied to the fund’s solvency. Insurance industry opposition to Newsom’s proposal, which would have ended the subrogation process, was cited as a key factor in the bill’s rejection. Industry leaders warned the reform would force steep increases in statewide property insurance premiums.
Analysts responded swiftly to the legislative setback. Mizuho downgraded PG&E to Neutral from Outperform and reduced its price target from $21 to $16. BMO Capital similarly downgraded the stock to Market Perform from Outperform, while raising estimates for wildfire liabilities exceeding the cap for fires after 2030. Wells Fargo maintained its Equal Weight rating but acknowledged investor concerns over whether PG&E could trade below book value, though it did not revise earnings estimates.
The broader utilities sector also faced repricing. Edison International, a direct competitor, saw a sharp decline as investors reassessed liability risks across California’s utility companies. The legislative outcome underscores the structural challenges facing utilities in a state with recurring wildfire risks, leaving PG&E and peers exposed to ongoing financial and operational uncertainty.
