PG&E, other utility stocks sink as California leaves investors exposed to wildfire liability

By Claudia Assis

A California bill is 'more focused on victim protections without any new investor protections,' according to analysts

California Gov. Gavin Newsom had pushed to move the wildfire liability burden to insurance companies, but that effort failed.

Shares of PG&E sank to their worst day in more than six years and dragged down shares of other utility companies Monday, as Wall Street fretted that California lawmakers didn't go far enough to protect the state's utilities from wildfire liability.

California Gov. Gavin Newsom had pushed to move that liability burden to insurance companies, but the effort failed to gather enough support.

Instead, state lawmakers on Saturday proposed a bill that is "more focused on victim protections without any new investor protections," as Mizuho analysts put it in a note Monday.

The path forward is unclear, as Newsom's term ends in January and the state legislature wrapped up for the year on Monday.

Shares of PG&E (PCG) fell 20% - ending at their lowest since July 17, 2025, and posting their largest one-day percentage drop since March 18, 2020, when they fell more than 21%.

Monday's losses also wiped out the stock's year-to-date gains, which had been building as investors hoped that Newsom's efforts on that liability shift would succeed.

The Mizuho analysts on Monday lowered their rating on shares of PG&E, as well as those of Edison International (EIX) and Sempra (SRE), to the equivalent of hold from the equivalent of buy, and others on Wall Street followed suit. All three utilities are based in California.

Shares of Edison International posted their largest one-day percentage decline since April 6, 2001. The stock was the worst performer in the S&P 500 index SPX on Monday afternoon. The iShares U.S. Power Infrastructure ETF POWR also fell.

"While the California utilities trade at very attractive valuations, we see limited catalysts," the Mizuho analysts said.

Analysts at BMO also cut their rating on PG&E shares to the equivalent of hold, saying that the proposed legislation "does nothing to ensure the wildfire fund's long-term solvency."

That exposes investors to "open-ended" wildfire risk, and there's no support currently to revisit that "critical deficiency," the BMO analysts said.

For its part, PG&E is expected to announce changes in its capital-allocation strategies, but it's unclear if that would placate investors. The company is scheduled to hold a call with investors Wednesday to discuss "this and other developments from the legislative session," a company spokesperson said.

Analysts at Citi said they expect PG&E to cut down on its capital-investment program; reallocate some money towards dividends, stock buybacks and debt reduction; and try to reengage politicians in Sacramento next year.

"This outcome is disappointing given the amount of work that went into this process over the last two years and how close a constructive outcome seemed to be," the Citi analysts added. Given the amount of political capital already spent and with Newsom's term ending, the path forward is "very uncertain," they said.

Even a revised capital-allocation strategy might not be enough to improve investor sentiment, the BMO analysts noted.

In a statement after the bill passed, PG&E said that the proposed legislation "would not provide the sustainable solution California needs."

"Specifically, the bill does not adequately address the financing risks created by California's current wildfire liability framework. As a result, it falls short of creating the long-term durability needed to attract affordable investment to support a safer, more reliable energy system and help keep costs down for customers," the company said.

When asked for further comment, a PG&E spokesperson pointed to the statement and to the Wednesday call with analysts.

PG&E emerged from bankruptcy in 2020 after seeking protection the year before. The company has been implicated in several wildfires, including the 2018 Camp Fire that destroyed the town of Paradise, Calif., in a rural area about 90 miles north of Sacramento.

That fire was started by downed power lines due to high winds. According to state officials, 85 people lost their lives in the Camp Fire, which also destroyed more than 18,000 structures, including 9,000 homes.

-Claudia Assis

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08-31-26 1640ET