Edison Stock Volatility: Wildfire Blame and Uncertainty

Edison International's stock has been on a rollercoaster ride as the company faces growing blame for its role in recent wildfires, leaving investors uncertain about the company's future. The parent company of Southern California Edison (SCE), Edison International (NYSE: EIX) has seen its stock price fluctuate significantly in recent weeks, reflecting the market's concerns about the company's potential liabilities and financial stability.



Edison International's stock price plunged by 23% in January 2025, making it one of the worst performers on the Standard & Poor’s 500 index. The decline came as accusations and lawsuits about the utility's potential role in starting the fires mounted. However, the stock price rebounded by 5% on January 16, 2025, after Ladenburg Thalmann analysts upgraded their rating to neutral, citing worst-case outcomes associated with the current wildfires. Market analyst Zacks also downgraded Edison International stock from outperform to neutral after the fires started last week, predicting that higher-than-expected decommissioning costs could materially impact the company's operating results.



The recent wildfires in California have raised significant questions about Edison's financial health and its ability to manage wildfire risks. The company has already recorded substantial charges related to wildfire liabilities, with a $1.2 billion charge in the fourth quarter of 2021 leading to a net loss of $341 million. Edison has also increased its estimate of liabilities from the Thomas and Woolsey wildfires by $1.3 billion to $7.5 billion in its quarterly earnings announcement in January 2025.

Edison's financial stability has been further impacted by settlements and fines related to wildfire prevention and control efforts. In October 2021, the company reached a $550 million settlement with the California Public Utilities Commission, including a $110 million fine and giving up the right to charge ratepayers for $375 million in third-party claims. While the settlement did not admit imprudent behavior, it highlights the financial strain that wildfire-related costs have placed on the company.

Despite these challenges, Edison has made progress in resolving claims related to the Thomas and Woolsey fires. The company has settled about 70% of its estimated exposure to claims, but the unresolved portion has increased to $2.2 billion (29%) from $1.4 billion (23%) in June 2021. This ongoing uncertainty about Edison's liabilities has contributed to the volatility in the company's stock price.

The establishment of the California wildfire fund, split equally between shareholders and utility customers, has provided some financial relief for Edison. However, the company remains responsible for the first $1 billion of losses, and the fund's ability to cover future fires is uncertain. If investigators determine that Edison's equipment caused the Eaton or Paradise fire, the company could face significant financial consequences, potentially impacting its earnings and stock performance.

In conclusion, Edison International's stock has been volatile due to growing blame for its role in recent wildfires and the uncertainty surrounding the company's financial health. While the company has made progress in resolving claims and mitigating wildfire risks, increased liability costs and uncertainty about the wildfire fund's ability to cover future fires could continue to impact Edison's earnings and stock performance. Investors should closely monitor the situation as investigations into the recent wildfires progress and Edison's financial health becomes more clear.