What happened

Shares of PG&E (NYSE:PCG) climbed 10.7% on Friday after the California utility announced an $11 billion deal to settle the majority of claims with insurance carriers related to 2017 and 2018 wildfires. The deal is a big step in the process of reorganizing and exiting bankruptcy, but there are still hurdles ahead.

So what

PG&E filed for bankruptcy protection in late January as part of a plan to deal with upward of $30 billion in wildfire liabilities stemming from a blaze last fall. The so-called Camp Fire in Northern California, which resulted in 85 deaths and massive property damage, was sparked by a PG&E power line.

Utility lines stretch across the horizon.

Image source: Getty Images.

The utility said Friday that it has an agreement in principle with entities representing about 85% of insurance claims from the Camp Fire and other fires in 2017. The deal, which is subject to approval by the bankruptcy court, resolves issues with a coalition of creditors that had sought to take control of PG&E's reorganization by presenting its own plan to the court.

PG&E still has considerable work to do. The utility needs to negotiate with wildfire victims groups who claim more than $40 billion in damages for lost homes, businesses, and loved ones, with PG&E proposing to cap those payments at $8.4 billion. It is also working under the watchful eye of state lawmakers, who are considering helping to establish a fund that would help utilities manage future liabilities.

Now what

Investing in utility stocks comes with a unique set of opportunities and challenges even in the best of times. That's particularly true in the case of PG&E.

Friday's settlement is an important accomplishment and keeps the company on track to emerge from bankruptcy without wiping out its shareholders. That's a rarity in reorganizations. But investors need to be mindful that the company remains at the mercy of the court, and in need of support from state lawmakers -- meaning its fate is far from clear.