Bonds of PG&E Corp. and Edison International weakened Monday after California lawmakers pushed back on a central pillar of Governor Gavin Newsom's plan to move wildfire liabilities off utilities. Shares of PG&E and Edison International were plunging Monday.
According to Trace at 8:43 a.m. in New York, PG&E's 6.3% notes due 2056 were 15 basis points wider at a 138 basis-point spread, and Edison International's 4% 2047 notes were quoted 10 basis points wider, leaving them at a 133 basis-point spread.
Lawmakers introduced legislation Saturday to overhaul California's wildfire response but keep liability with publicly traded utilities. Newsom had proposed blocking insurers from recouping wildfire costs from utilities via subrogation.
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Instead, the bill would forbid insurers from transferring utility-linked claims to buyers including hedge funds, and it would bar bonus payouts to CEOs at utilities deemed responsible for especially catastrophic wildfires. It would also set up a program to speed payments to wildfire survivors and bolster California's wildfire prevention efforts, with a vote by lawmakers likely on Tuesday.
Tony Trzcinka of Impax Asset Management, who serves as a portfolio manager, called leaving utilities exposed to future subrogation claims "material credit negative." "We would not be surprised to see rating agency downgrades," he said.
Newsom's proposal was viewed as a key tool to help utilities manage wildfire costs as climate change intensifies disaster risks in California. Lawmakers warned that eliminating subrogation could push insurers to raise rates, adding to living costs in a state where residents already face high insurance prices.
