California Utility Stocks Plunge After Wildfire Bill Denies Liability Shields

Shares of several major California utilities plummeted on Monday following the introduction of wildfire legislation that denies liability shields for publicly traded companies. The bill, introduced by state lawmakers on Saturday, ignores previous requests from Governor Gavin Newsom and investors to protect utilities from wildfire-related lawsuits.

PG&E Corporation experienced its steepest decline since 2020, with shares falling as much as 21%. Edison International saw a drop of up to 23%, while Sempra shares fell 5.2%. The market reaction followed a wave of analyst downgrades from Wells Fargo, BMO Capital Markets, and Mizuho Securities.

Analysts cited concerns over the solvency of the state's wildfire fund and the heightened risk of utility bankruptcies. Experts warn that without liability protection, these companies face multi-billion-dollar downside risks and will struggle to attract necessary capital due to open-ended tail risk associated with future wildfires.