After California lawmakers block Newsom wildfire plan, PG&E and other utility stocks take a hit
SACRAMENTO, Calif. —
Investors took notice on Friday after KCRA 3’s report about a clash between the insurance and utility industries. California investor-owned utilities’ stocks were punished for being on the losing side – for now.
The market moving news: California lawmakers blocked Gov. Gavin Newsom from pursuing his plan to prevent insurance companies in California from recouping their losses from investor-owned utilities that cause a catastrophic wildfire, multiple sources close to the negotiations confirmed to Political Director Ashley Zavala.
After the story was first published at around 9:30 a.m., stocks for PG&E and the parent companies for Southern California Edison and San Diego Gas and Electric fell into the red.
PG&E’s stock was the hardest hit. It plunged by more than 10% before recovering by the end of trading to 7.62% down.
Edison International fell as low as 5.93% before ending the day down 4.76%.
Sempra, the parent company for SDGE, traded down 1% before closing down 0.52% in the red.
How the talks over subrogation collapsed
The sources said negotiations broke down late Thursday night during a closed-door meeting between the governor’s staff and Democratic state lawmakers who are part of a working group on wildfire liability.
Newsom has wanted to end what’s known as subrogation, a process in which insurance companies recoup losses from utilities after the companies pay wildfire claims for damaged or destroyed property.
The CEOs of major insurance companies warned this would cause premiums to skyrocket and risked destabilizing the state’s insurance market again.
The governor has been pushing this plan with fears that a future wildfire caused by an investor-owned utility could drain the state’s wildfire liability fund that is funded by ratepayers and shareholders and risk bankruptcy for the investor-owned utility companies.
Facing frustration from some lawmakers and the insurance industry, the governor’s office attempted to pare down the proposal late Thursday afternoon by offering to end subrogation in phases instead of eliminating it immediately. The plan still did not sit well with the Democrats in the State Senate, according to the sources.
The high-stakes meeting happened as lawmakers and the governor faced a deadline Friday to put any wildfire liability changes into a bill. California’s legislative session ends Monday, Aug. 31 at midnight.
What’s next?
A spokesperson for Newsom’s office said Friday that negotiations are still ongoing.
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