California utility stocks tumble as amended wildfire bill preserves insurer claims

PG&E

Yesterday 13:41

Aug 31 (Reuters) - Utilities stocks slid in premarket trading on Monday after an amendment to a Senate bill in California did little to alter the exposure of grid operators in the state to wildfire liabilities.
Shares of PG&E PCG.N and Edison International EIX.N, which operate public utilities in California, fell 15.7% and 10.4%, respectively, while Sempra SRE.N fell 3.5%. 
The state has been particularly vulnerable to the risks related to wildfires over the past couple of years and some lawmakers had sought to bring about broader cost-sharing reforms to avoid pressure on the state's Wildfire Fund. 
However, California lawmakers settled on allowing the issuance of bonds to expand financing and did not make changes to insurers' right to seek recovery from utilities.
"We reached a compromise that blocks hedge funds from profiteering off wildfire survivors, bars utility executives from taking bonuses when their company ignites a fire, and gets money into survivors’ hands faster," California Governor Gavin Newsom said in a statement. 
Brokerage BMO downgraded PG&E to a "market perform" rating from "outperform", after the amendment, while Mizuho cut Edison to a "neutral" rating from "outperform."
"The proposed legislation does nothing to ensure the wildfire fund's long-term solvency (and associated liability cap), which exposes investors to open-ended wildfire-related tail risk," analysts at the brokerage said on the impact of the amendment on PG&E.

 (Reporting by Johann M Cherian in Bengaluru; Editing by Devika Syamnath)
 ((johann.mcherian@thomsonreuters.com;))