Devastating wildfires fueled by strong winds are wreaking havoc in the Los Angeles area, resulting in mandatory evacuations and at least two fatalities. The Eaton Fire in Altadena, California, is a prominent concern, causing significant fear and uncertainty amongst investors, particularly affecting the stock of Edison International. On January 8, 2025, shares dropped 12% as nearly 70,000 customers experienced power outages due to the fires. While previous California wildfires have been linked to utility equipment, there is no current evidence tying Edison to the current blazes, according to analysts. However, the fires have reportedly impacted Edison’s equipment, raising concerns about potential incremental costs. The financial ramifications of wildfires on utilities are notable, as seen with Pacific Gas and Electric’s 2019 bankruptcy due to wildfire liabilities. A law enacted in 2020, AB 1054, has since limited utility liability risks, offering some solace to investors despite ongoing fears. Other utility stocks, including PG&E and Sempra, also experienced declines as the wildfire situation continues to develop in Southern California. The market reaction reflects a cautious “sell first, ask questions later” mentality among investors grappling with fire risks.
