California lawmakers adjourned without voting on Senate Bill 492, a compromise bill intended to address utility liability for wildfires and expedite victim compensation. The bill, which had been the subject of intense negotiations, failed to gain sufficient support in the Assembly, effectively killing it. This outcome was a disappointment for Governor Gavin Newsom and some wildfire victims who had negotiated the last-minute deal.
The proposed legislation included provisions to speed up payments to wildfire survivors, ban hedge funds from profiting from wildfire claims, and prohibit bonuses for utility executives if their company's equipment caused significant fires. However, utilities, particularly Pacific Gas & Electric (PG&E) and Southern California Edison (Edison International), argued that the bill did not go far enough to reduce their financial risks. They contended that the bill preserved the ability for wildfire survivors, local governments, and insurers to pursue claims against them without capping damages.
The failure of the bill had immediate financial repercussions for the utilities. PG&E and Edison International had seen their stock prices plummet on Monday—PG&E's by 20% and Edison International's by 23% (their largest single-day decline in over 25 years)—as investors reacted negatively to the details of the compromise, which did not include proposals to shift more costs to property insurers. Following the bill's demise on Tuesday, PG&E's stock closed up 6%, and Edison International's closed up 8.9%, reversing some of their earlier losses. The CEOs of both utilities had warned lawmakers that the lack of adequate protections could lead to constrained investment, higher utility bills, and fewer jobs, citing a collective loss of $20 billion in market value since the previous Thursday. Analysts at Bank of America downgraded Edison International from "buy" to "neutral," lowering its price objective from $81 to $51, citing elevated wildfire risk and policy uncertainty.
While the bill's failure was seen as a win for utilities in the short term, it leaves the broader issue of wildfire liability unresolved. The utilities have emphasized the need to attract tens of billions of dollars in private investment annually to mitigate wildfire risks, strengthen the grid, and meet the state's clean energy goals. Lawmakers are expected to continue working on reforms, including potentially limiting how much utilities must pay for fires sparked by their equipment. Consumer advocacy groups and insurance companies had opposed the bill, urging lawmakers not to "bail out" utilities or shift costs to consumers.
