Feb 29 (Reuters) - Xcel Energy's shares fell 8% on Thursday after the company disclosed a letter it received from a law firm that said the utility could be liable for damages resulting from the largest wildfire on record in Texas.

The company said the unnamed law firm sent the letter on Feb. 28 on behalf of various property insurers whose clients were affected by the Smokehouse Creek fire, which charred a land mass bigger than the state of Rhode Island.

The letter also requested Xcel to preserve a fallen utility pole of its local unit, Southwestern Public Service Company, within the fire's vicinity.

The company said investigations into the origin of the fire are underway.

The development comes as Xcel faces another lawsuit related to Colorado's costliest wildfire on record.

Xcel's shares fell as much as 8.9% earlier in the session and hit their lowest in nearly four years, while the S&P utilities sector declined 0.3%.

Several U.S. utility firms have been sued in the recent past for their alleged role in wildfires. California-based PG&E Corp filed for bankruptcy protection in 2019, and subsequently restructured, citing potential liabilities exceeding $30 billion stemming from wildfires that were blamed on its equipment.

Last year, peer Hawaiian Electric was subject to several lawsuits from investors and residents of Maui claiming that the utility was responsible for a deadly wildfire that razed the historic town of Lahaina in August. The company had denied its role in the fires back then.

(Reporting by Sourasis Bose in Bengaluru; Editing by Devika Syamnath)