Another California Utility Loses Billions in Value as Wildfire Rages
Once again, thousands are fleeing a wildfire in California. And, once again, the worry on Wall Street is that a major electric utility might end up on the hook for the damages.
Shares of Edison International plunged the most in 15 years on Tuesday, wiping out more than $3 billion in market value, as a fast-moving fire fanned by high winds in Southern California’s Ventura and Santa Barbara counties charred 50,000 acres of land, burned hundreds of homes and damaged citrus crops. Firefighters were still trying to contain the blaze late Tuesday.
Authorities haven’t cited a cause. But, as with the conflagrations in the state’s famed wine country in October, stock-market investors are worried downed power lines may have played a role in sparking the flames. Under a controversial rule known as “inverse condemnation,” utilities are liable for property damage if their equipment is found to have contributed. In Northern California, similar speculation is centered on PG&E Corp., which has said it’s too soon to pinpoint a cause. Edison said it had no indication its equipment was the source of the latest fires.
“This is like catching a falling knife,” Shahriar Pourreza, an analyst for Guggenheim Securities, said of the stock slide. “Anyone who tells you this is an overreaction really has no idea about the state and what is happening there.”
PG&E lost more than $7 billion in market value after state investigators said they were looking at the San Francisco-based utility’s equipment as a possible cause of deadly fires that tore through wine country in October.
Edison’s slide on Tuesday was the stock’s worst performance since October 2002. The shares closed $10.26 lower at $70 in New York.
Based on the apparent origin of the fires and the performance of its system, Southern California Edison said it had no indication its equipment was a source. In a statement, the company said the state fire service would be carrying out an investigation.
Under California law, utilities can ask regulators to spread the costs of wildfires to customers. Last month, however, California regulators denied a request by San Diego Gas & Electric to bill customers for expenses related to a decade-old wildfire.
“Based on our initial read of the facts, we expect Edison to absorb any financial implications of this fire, and view the significant stock price drop as an overreaction,” SunTrust Robinson Humphrey Inc. wrote in a note Tuesday. “However, we acknowledge that facts are still developing in the case, and the issue could remain an overhang for a while.”
The fire-stoking winds whipping Southern California will last into Thursday, according to the National Weather Service.
There could be breaks in the winds Wednesday afternoon, but they will re-intensify as night falls and continue into Thursday. Weather conditions have created extreme and critical fire danger across the region.
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