California Omits Wildfire Liability Cap; Edison Falls 23%
The California wildfire bill advanced by lawmakers on Monday leaves out the protections utilities had counted on. Senate Bill 492 speeds up claims payments to wildfire victims, strengthens data sharing and authorizes additional bond issuance for the state wildfire fund. Four provisions that mattered to the companies did not make the text: Governor Gavin Newsom's proposal barring insurers from suing utilities to recover wildfire claims, a $6B per-incident cap on liability, repeal of the fund's 2028 sunset, and any mechanism to replenish the fund once it is drawn down. PG&E said the bill "does not adequately address the financing risks created by California's current wildfire liability framework."
The reaction was confined to one state's utilities: Edison International fell 23% and PG&E 18%. Sempra lost 2%-3% and the utilities ETF XLU 1%, against a 0.66% decline in the S&P 500 the same day. That spread marks it as California statute risk rather than sector weakness. The mechanism is the missing ceiling on liability: Edison has more than 30,000 claims in active litigation and has extended over 2,200 offers worth more than $775M through its wildfire compensation program. Bond spreads widened at both companies, and Edison management flagged a strong likelihood of credit rating downgrades for California's investor-owned utilities; PG&E already sits one notch below investment grade at S&P.
