What happened

Shares of PG&E (PCG 0.90%) traded up more than 17% at the open Wednesday, the stock's second straight day of double-digit gains after losing about half of its market value in the prior two trading sessions. The bankrupt California utility's fate remains uncertain, but the company's equity is rallying on news that improves the odds that shareholders will get some recovery from the eventual reorganization plan.

So what

PG&E filed for bankruptcy protection in January to deal with the estimated $30 billion in wildfire liabilities stemming from the 2018 Camp fire in northern California. While equity holders typically are wiped out in a bankruptcy, there has been hope from the beginning that PG&E's reorganization would preserve some of the share value.

Power transmission lines across a rural landscape.

Image source: Getty Images.

That hope has been challenged by recent events. Earlier this month, the judge overseeing the bankruptcy allowed alternative plans filed by creditors to be considered, a potential blow to equity holders because it could shift more of PG&E's value toward victims and other creditors.

PG&E is also facing fresh heat over the Kincade fire currently burning in Sonoma County, north of San Francisco. Last week, the utility told state regulators that one of its transmission towers near where the fire ignited had malfunctioned, raising concerns that PG&E equipment had sparked the fire.

But shares got a boost on word that the bankruptcy judge has appointed a mediator to work through competing plans and come up with a compromise that would allow PG&E's reorganization to proceed. The hope is that creditors, and in particular fire victims, need a settlement sooner rather than later and will be open to a compromise that would incorporate at least some of PG&E's plan and preserve some equity value.

Now what

It's worth noting that even after an impressive 50%-plus rally over two days, PG&E shares are still down 30% since Oct. 24. This is a volatile stock that is likely to continue to spike up and down based on headlines until the bankruptcy case is resolved.

PCG Price Chart

PCG Price data by YCharts.

Utility stocks can be a valuable part of an income-focused portfolio, but PG&E remains a crapshoot. There is no good argument for long-term investors to buy shares of PG&E right now.