Wall St J,

" California lawmakers will vote Tuesday on a bill that would increase accountability for utilities that cause wildfires. The legislation, introduced over the weekend, pushed shares of PG&E (PCG) and Edison International (EIX) down about 20% each on Monday.

Bill details: The Senate Bill 492 includes limits on executive compensation if the utility causes a wildfire, a fast-pay program for victims, and a ban on transferring or selling any wildfire claim to a private equity group. The bill needs approval from two-thirds of the legislature and will take effect once it's signed into law. SB 492 was the result of a last-minute compromise between California Gov. Gavin Newsom and lawmakers following pushback on his previous proposal. Newsom had sought to reduce utilities' exposure to wildfire claims to shield them from bankruptcy as it could put survivors' compensation at risk. While Newsom acknowledged that SB 492 marks "real progress," he called for full structural reform. "I urge the Legislature to build on this progress next year and finish the work we started to secure the Wildfire Fund's long-term durability, stabilize electricity rates, and ensure fire victims are never again turned into unsecured creditors in a bankruptcy proceeding," he said.

What's at risk: Equipment owned and maintained by investor-owned utilities has started at least seven wildfires in California over the past two decades. These include the 2018 Camp Fire that killed 85 people and the 2025 Eaton Fire that killed 19 people. PG&E, whose poorly maintained transmission line led to the 2018 fire, filed for bankruptcy protection in 2019 due to billions of dollars in liabilities. Mizuho downgraded PG&E, Edison and Sempra (SRE) to Neutral from Outperform, noting that SB 492 is more focused on victim protections without any new investor protections. "We believe the state's utilities will make another push for legislation in 2027, but with a new administration set to take over in January, we see it as an uphill climb," Mizuho stated. BMO Capital said SB 492 "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."

Bigger picture: While PG&E emerged from bankruptcy in July 2020, the absence of additional protections from the state raises questions about the utility's financing costs, capital plan, and ability to return more cash to shareholders. Edison is on the hook for billions of dollars in claims following the 2025 Eaton Fire, making the failure to reform the state's liability structure particularly consequential. Both utilities criticized SB 492, saying it was not a sustainable long-term solution. PG&E said the bill does not adequately address the financing risks created by California's current wildfire liability framework. "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," Southern California Edison said. SA analyst Eleceed Capital in July noted that wildfire-related charges add ~$20-$40 per month, or 14%-19%, to customer bills based on PG&E management's estimates."