Shares of California utility Edison International drop 10% as wildfires rage

David Swanson | Reuters
Smoke billows as fire burns while powerful winds fueling devastating wildfires in the Los Angeles area force people to evacuate, at the Eaton Fire in Altadena, California, U.S. January 8, 2025.

Fear and uncertainty surrounding the wildfires in California appear to be weighing on shares of Edison International, whose Southern California Edison is the power utility for the areas directly surrounding the city of Los Angeles.

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The stock fell 10.2% on Wednesday and was down more than 13% at session lows.

The drop comes as multiple large fires are burning around Los Angeles, with strong winds making them difficult to contain. Tens of thousands of people have been ordered to evacuate, and at least two people have died, according to the Associated Press.

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More than 3 million Edison customers were dealing with outages Wednesday, according to the utility's website.

Public utilities have been grappling with issues around wildfire prevention and readiness for years. Previous wildfires in California have been linked to issues with power equipment, but so far there is no public information tying Edison to the fires.

"At this time, there is no indication that SCE equipment is believed to have started the fire, as SCE has not filed an electric service incident report (ESIR). ... There are multiple media reports indicating SCE equipment has been at least impacted by the fires and we would expect some incremental expenses related to the fire, regardless of ignition source," Bank of America analyst Ross Fowler said in a note to clients Wednesday.

Mike Blake | Reuters
Smoke engulfs buildings off Sunset Boulevard during a wildfire in the Pacific Palisades neighborhood of west Los Angeles, California, January 7, 2025.

Previous wildfires have had massive financial impacts on utilities and their investors. Northern California utility Pacific Gas and Electric Company filed for bankruptcy in 2019, in large part due to its liability from wildfires. The utility exited bankruptcy in 2020.

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However, a 2020 state law known as AB 1054 limited the liability for utility companies going forward.

"Investors remain nervous from our conversations given the lack of containment with a 'sell first, ask questions later' mindset. We remain comfortable due to the AB 1054 liability protections that limits the tail risks for the utilities," Jefferies analyst Julien Dumoulin-Smith said in a note to clients Wednesday.

Other California utility stocks were also down Wednesday. Shares of the reconstituted PG&E fell 3.7%. Sempra, whose footprint includes power and gas in the San Diego area, was down 1.7%. Sempra's SDG&E said on its website that it has shut off power to about 9,000 customers due to fire risks.

— CNBC's Michael Bloom contributed reporting.