Smoke rises as fire burns as strong winds fuel devastating wildfires in the Los Angeles area, forcing people to evacuate, at the Eaton Fire in Altadena, California, USA, January 8, 2025.
David Swanson | Reuters
Fear and uncertainty surrounding the California wildfires appear to be weighing on stocks Edison Internationalwhose Southern California Edison is the energy provider for the areas immediately surrounding the city of Los Angeles.
The stock fell 10.2% on Wednesday and was down more than 13% at the session's lows.
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Utility stock Edison International fell sharply on Wednesday.
The decline comes as several large fires burn around Los Angeles, with strong winds making containment difficult. According to the Associated Press, tens of thousands of people were ordered to evacuate and at least two people died.
More than three million Edison customers were dealing with outages Wednesday, according to the utility's website.
Public utilities have been dealing with wildfire prevention and preparedness issues for years. Previous wildfires in California have been linked to problems with power systems, but so far there is no public information linking Edison to the fires.
“At this time there is no evidence that SCE equipment caused the fire as SCE has not filed an Electric Service Incident Report (ESIR). … There are several media reports indicating that SCE equipment was at least impacted by the fires and we would expect some additional costs associated with the fire, regardless of the ignition source,” said Bank of America analyst Ross Fowler in a note to clients on Wednesday.
Smoke engulfs buildings on Sunset Boulevard during a wildfire in the Pacific Palisades neighborhood of western Los Angeles, California, January 7, 2025.
Mike Blake | Reuters
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, due in large part to its wildfire liability. The energy supplier emerged from bankruptcy in 2020.
However, a 2020 state law known as AB 1054 limited future liability for utilities.
“In our discussions, investors remain nervous about the lack of containment with a 'sell first, ask questions later' mindset. “We remain comfortable because of AB 1054’s liability protections, which limit tail risks for utilities,” Jefferies analyst Julien Dumoulin-Smith said in a note to clients on Wednesday.
Other California utility stocks also fell on Wednesday. Shares of those recovered PG&E fell by 3.7%. alwayswhose footprint includes electric and gas in the San Diego area, fell 1.7%. Sempra's SDG&E said on its website that it had shut off power to about 9,000 customers due to fire risks.
—CNBC's Michael Bloom contributed reporting.