PG&E Corp shares soared 40 percent in after-hours trade on Thursday following a report that a regulatory official told investors the agency does not want the utility to go into bankruptcy should it be found responsible for this month’s deadly wildfire in northern California.
Bloomberg reported the comment by a California Public Utilities Commission (CPUC) official on a call hosted by Bank of America Corp, citing a person familiar with the matter.
A CPUC spokesman said he could not confirm the remarks and Bank of America declined to comment. CPUC issued a statement emphasizing that state law requires it to consider a utility’s financial health when weighing a request to cover costs associated with wildfires.
“A utility filing bankruptcy is not in the best interest of consumers, but that decision is not the CPUC’s,” a CPUC spokeswoman told Reuters.
Late on Thursday, Moody’s cut parent PG&E’s credit rating to one notch above junk, although many of the company’s bonds were already trading at non-investment grade levels earlier in the day.
S&P Global Ratings, citing rising risks that the company may face from the wildfire, also lowered its rating on PG&E by one notch to BBB-minus.
It placed the company on CreditWatch with negative implications, saying the risks increase the probability of another downgrade over the next few months.
Investors are watching for clues about whether California’s government will step in to save PG&E should it eventually be found responsible for the Camp Fire, which destroyed the town of Paradise a week ago, and should any potential liability exceeds the utility’s resources.
“The CPUC is mindful that in order for a utility to operate safely, it must have the financial means to function and implement new safety measures,” the commission said in the statement.