California’s biggest utilities in crisis mode as shares fall off a cliff and insurers smell blood

California’s biggest utility companies were rocked Monday after lawmakers dealt Gov. Gavin Newsom a blow over a sweeping wildfire liability overhaul.

Pacific Gas and Electric Company (PG&E Corp.) and Edison International shares plunged nearly 20% and 24%, respectively, Monday morning after California Democrats gutted Newsom’s proposal, which sought to change who pays when utility equipment sparks catastrophic wildfires.

The plan would have blocked insurance companies from suing utilities to recover some of their wildfire losses — a move insurers fiercely opposed.

Edison International had the company’s worst single-day decline in more than 25 years, according to 24/7 Wall St, as shares of Southern California Edison’s parent company were down 23% to $54.22 Monday.

Both utilities serve around 30 million Californians.

Lawmakers instead backed a much narrower compromise after opposition from insurance companies, hedge funds and trial lawyers.

At the center of the dispute is a practice known as subrogation, which allows insurers to seek reimbursement from utilities they believe caused the fires — after insurance firms have paid out victims.

Newsom initially sought to eliminate the practice entirely, then offered to phase it out before his administration proposed limiting insurers to recovering 50% of their costs. Lawmakers rejected that compromise, too.

The final measure includes provisions aimed at stopping utility CEOs from receiving bonuses after their companies ignite wildfires and getting money to fire survivors faster.

Under the proposed legislation, executives of investor-owned utilities would be barred from receiving bonuses if their company’s fire destroys at least 500 structures — this rule is in place for the year the fire happens and the following year.

The measure would also cap attorney fees in wildfire cases, restrict hedge funds and private equity firms from investing in wildfire claims and create a fast-pay program for victims.

The bill would also give the California Earthquake Authority the power to borrow money and issue bonds to support the state’s wildfire liability fund if it runs out of cash.

PG&E been blamed for several major California wildfires in recent years, including the 2018 Camp Fire, 2019 Kincade Fire, 2020 Zogg Fire and 2021 Dixie Fire.

SoCal Edison has also faced major wildfire liability — including the deadly 2025 Eaton Fire, which killed 19 people and destroyed or damaged more than 9,000 structures in the Los Angeles County foothills. The Justice Department also sued SoCal Edison over the 2022 Fairview Fire, alleging the utility’s equipment sparked that blaze.

The California Post reached out to PG&E and Southern California Edison for comment on the sharp declines in their shares. Neither company directly addressed the market reaction.

PG&E said the legislation would make “some progress in helping wildfire survivors recover,” but argued that “it would not” provide the sustainable solution California needs.

“The bill does not adequately address the financing risks created by California’s current wildfire liability framework,” the utility said. “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.”

SoCal Edison similarly said the state needs a more comprehensive approach to wildfire policy.

“Californians need durable wildfire reform that protects fire survivors, keeps bills affordable and supports critical investments required to make the grid safer and more resilient,” a company spokesperson told the Post.

“Southern California Edison will engage with the next governor and legislature to finish the work needed to address the state’s wildfire risk. California’s wildfire policies must evolve with the changing climate,” the spokesperson added.

California has two wildfire liability funds that are funded by a combination of utility shareholders and ratepayers.

The first, created after the 2019 Camp Fire, has about $22 billion in claim-paying capacity, while a second “continuation account” created last year has an $18 billion capacity for fires occurring after September 2025. Newsom’s administration expects claims from the Eaton Fire to exhaust the first fund.

Newsom acknowledged that the broader fight is not over, saying the system needs “full structural reform — not a partial one” and urging lawmakers to continue the effort next year.

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