(Reuters) - The chief of California's top utilities regulator said on Friday he was shocked to learn that reassurances he made to investors about PG&E PCG.N caused the embattled power utility's stock to surge over 40 percent in a matter of minutes.

Employees of Pacific Gas & Electric (PG&E) work in the aftermath of the Camp Fire in Paradise, California, U.S., November 14, 2018. REUTERS/Terray Sylvester

PG&E’s stock had slumped over 60 percent since the state’s deadliest-ever wildfire broke out last week on fears that without help from California’s government, the utility could go bankrupt should it eventually be found responsible. The fire destroyed the town of Paradise and has killed at least 63 people.

California Public Utilities Commission President Michael Picker told Reuters on Friday that utilities must be able to borrow money cheaply in order to properly serve ratepayers. That echoed comments he made on an investor conference call organized by Bank of America on Thursday, when he said he could not imagine allowing the state’s largest utility to go into bankruptcy.

Picker was surprised hours later on Thursday to learn that PG&E’s stock had surged over 40 percent in extended trading in reaction to his comments.

“I was stunned and terrified,” Picker said. “I left the call yesterday and I went back to a workshop I was in, so I didn’t find out about it until several hours later.”

Picker’s market-moving remarks to a private group were unusual, in part because public companies and their executives must follow federal rules aimed at avoiding selective disclosure of material news, but a government official or other outside parties sharing an outlook on a public company does not face the same obligations, experts say.

PG&E shares on Friday closed up 37.54 percent at $24.40 on the New York Stock Exchange. The stock is still down about 50 percent from before the fire started, erasing nearly $13 billion in market capitalization.

The cause of the Camp Fire that destroyed the town of Paradise remains under investigation.

With PG&E potentially facing mounting costs from wildfires, the regulator would also consider potential options to restructure the company, including separating its electricity and gas units, Picker told Reuters.

Keeping Wall Street interested in investing in PG&E and other California utilities is key to reducing the state’s carbon emissions and making the power system more efficient, he said.

“I don’t think we over-reward people. ... But we want to make sure that we can continue to keep the lights on, and be cleaner and cleaner, and ideally more reliable.”

GRAPHIC: PG&E shares surge after Thursday's close on utility regulator's comments - tmsnrt.rs/2QNMYF1

California state Senator Bill Dodd told Reuters it was “too soon” to speculate about future legislation that might provide relief to PG&E in case it is found liable for the Camp Fire.

Dodd sponsored legislation passed this year that lets utilities pass some of the costs related to liability from wildfires on to ratepayers, but the bill did not specifically provide for 2018.

GRAPHIC: Fire Fear - tmsnrt.rs/2PyMu9a

Citigroup on Friday upgraded PG&E’s stock to “buy” from “neutral.”

“Given the reaction in the stock market, we think there was an appropriate level of urgency that something needed to be done,” Citigroup analysts wrote, referring to the regulator’s statement.

The price for PG&E's more than $18 billion of bonds also rose. The price of the March 2034 694308GE1= bond was up about 5 points in afternoon trading after earlier trading as much as 11 points higher.

PG&E’s debt was pressured earlier this week after the utility borrowed $3.3 billion under its credit lines and warned it could face liabilities in excess of its insurance coverage should its equipment be found to have caused the fire.

The gains in bond prices came even after both Moody’s Investors Service and Standard & Poor’s cut their credit ratings on PG&E late Thursday to just one notch above junk bond territory and said the outlook remained negative.

Fitch Ratings on Friday also downgraded the utility’s long-term issuer default ratings.

With the collapse in its bond prices this week, most of PG&E’s bonds were trading as though they were already speculative-grade securities, although Friday’s recovery brought many of them back in line with comparably low-investment-grade-rated corporate bonds.

PG&E has about $500 million of floating rate notes maturing in two weeks and does not face another maturing security until October 2020.

That October 2020 $800 million bond, with a 3.5 percent coupon 694308GT8=RRPS, yielded more than 10 percent at one point in trading on Thursday, the first of PG&E's securities to have breached that threshold. On Friday, the October 2020 note was up more than 4 points to 95.25 cents on the dollar, with the yield dropping to 6.24 percent.

Shares of Edison International EIX.N, whose Southern California Edison subsidiary provides power in Southern California, jumped 15 percent. While investors view it as at less risk than PG&E to massive liabilities from wildfires, its stock has been volatile over the past week as a second fire burned in that region.

The Woolsey Fire in Southern California also remains under investigation.

The volatility in PG&E shares has drawn a rush of trading in options. Traders are betting the stock will remain prone to wild gyrations in the near term.