Firefighters Fight Wind Blowing in Canyon Country Hills North of Los Angeles, CA, USA, October 24, 2019.
Gene Blevins | Reuters
California's largest utilities are not the only US companies to combat the increased power and frequency of wildfires.
The number of S&P 500 companies that mark "fire" as a potential risk factor in annual reports has increased dramatically compared to the previous decade ̵
Services based in California, PG&E and Edison International have attracted much of the spotlight from 2017 and recently, since in October the two companies proactively shut off power to large parts of their service areas. But it is only in the last few years that businesses across the armada of industries have begun to sound an alarm.
Perhaps surprisingly, real estate companies make up the largest share – 10 out of 37 – that have identified the risk of fire in 10-K filings this year. But concerns are spread across sectors from banking to biotechnology to semiconductors.
These spreading concerns are reflected in the data. Ten of the 20 most devastating fires in the United States since 1923 have ignited over the past five years.
S&P 500 companies mark "fire" as a risk in their annual 10-K filings
A number of these companies have added fires to a growing list of natural disasters threats which include earthquakes and tornadoes. Orville, Ohio-based consumer giant JM Smucker, for example, was at risk of a tornado of its facilities in Kansas and Alabama in 2018. But this year, the consumer giant added a new line for the California fire.
In their last 10-K Houston filing, Texas-based energy infrastructure company Quanta Services warned investors that their current insurance coverage may not be sufficiently risky. "
" Our insurers decide to exclude forest fires in the future because of the increased risk of such events in certain geographies or otherwise, we could be exposed to significant liabilities and eventual disruption to our operations, "Quanta executives said Services. "If our risk exposure increases as a result of adverse changes in our insurance coverage, we could be subject to increased claims and liabilities that could adversely affect our business, financial condition, results of operations and cash flows.
Redwood City, California Meanwhile, data center firm Equinix directly cited PG&E as it works to tackle the growing fire threat.In January, PG&E filed for bankruptcy protection, claiming it was facing more than 30 billion dollars in debt after it was determined that her power lines sparked a devastating campfire last year. The fire, the deadliest in California history, killed 86 people and left 30,000 homeless. The electric company was also held responsible for 12 of the fires that ravaged Northern California in October 2017, according to state officials.  While PG&E has stated that it will implement $ 42 billion in existing power agreements as part of its restructuring plan and ultimately go bankrupt, scaling up forest fire threats adds additional uncertainty for businesses in a number of industries that rely on utility. On Thursday, PG&E reported losses of $ 1.6 billion in the last quarter as it faces increased pressure from state and local officials.
"If PG&E seeks and is authorized to reject power agreements, it is difficult to anticipate the consequences of any such action for us," the Equinix executives said in their latest 10-K filing. "But they could potentially include buying electricity from more expensive sources, reducing the availability and reliability of the electricity delivered to our facilities and relying on a higher percentage of electricity generated from fossil fuels, each of which could reduce the supply of el electricity available for our operations or increasing our energy costs. "
But Equinix is not alone and the executives of a number of companies – from Comcast to Ulta Beauty to Corona Constellation Brands – are closely monitoring the probes in the wildfire that devastated California from the middle of October. At one point, 16 states were burning across the country. As of Friday, all but one were fully contained, according to the California Department of Forestry and Fire Protection. Local and state officials have lifted all mandatory evacuation orders over the past week, but investigations continue.
2019, "below average" year to date of fire
Despite several weeks of hazardous weather and wind gusts caused by a hurricane as high as 102 miles per hour, the fierce fire season in 2019 In fact, it has caused less damage than in the last two years. Not only was 2018 the deadliest fire season on record for California, but with more than 1.6 million total acres destroyed, it was also the worst in terms of net reach.
However, in October 2019, there was a "below average" year for forest fires by several key indicators, according to Bank of America Merrill Lynch researchers. Compared to the average observed in the first ten months of the years 2013-2018, wild fires in 2019 have burned fewer acres and destroyed fewer structures. So far, there have been 314 in 2019 compared to 2700, averaging over the same periods in 2013-2018.
Some industry experts say fires have been less devastating this year in part due to improved safety and prevention programs.
"While many factors come into play, these data suggest that the more proactive decontamination programs created this year helped to mitigate the fires," Antoine Aurimond, an analyst at Bank of America-Merrill Lynch, wrote in a recent note.
Aurimond added that seven of the 10 most devastating fires between 2013 and 2018 were caused by power lines, suggesting that policymakers are right to back down on utility equipment to reduce damage from a fire. Just recently, Southern California Edison, a subsidiary of Edison International, revealed on October 29 that its equipment "probably" caused the Woolsey fire in 2018, which burned nearly 97,000 acres, destroyed more than 1,500 structures and killed 3 people.
But as utilities turn to deliberately shutting down power supplies to curb future fires, companies in other industries are preparing for impact.
In anticipation of more dangerous conditions ahead, PG&E CEO Bill Johnson recently said that planned interruptions would be needed for the next 10 years, as
these preventive measures – which forced businesses and school districts to close this one. autumn – have huge economic consequences. Michael Vara, a senior researcher at the Stanford Woods Institute for the Environment, estimates the economic cost of PG&E preventive interruptions in early October – leading to 800,000 customers or nearly three million people – could exceed $ 2.5 billion. Other estimates suggest that hundreds of millions are lost to spoiled food costs and an estimated $ 30 million reduction in daily consumer spending.
"The scope, scale, complexity and overall impact on people's life, business and economy cannot be discounted," California Public Utilities Commission Chairman Meribel Butier wrote in a letter to PG&E's CEO last
Corporate worries were hampered by rising fire suppression costs, which for the first time last year reached $ 3 billion, according to the government's bulk of California spending, which spends 947 million the fire suppression and emergency response mill in 2018, surpassing the state budget of $ 450 million to keep up with these increased requirements, the US Forest Service, which bears most of the costs Fire Extinguisher said it now expects the fire budget to spend two-thirds of its total budget in 2019. That's four years earlier than originally planned.
Many analysts suggest that number that includes insurance claims and expenses for cleanup, such as waste disposal, will balloon as climate models change and California's housing shortage is forcing residents in precarious areas.
California Governor Gavin Newsome adds more support to help combat the latest fires, providing a grant from the Federal Emergency Management Agency earlier this month.
But as wildfire seasons get more intense and expensive, this funding can come under pressure, adding more risks to utilities-dependent businesses.
Mitigation Strategies: Technological Solutions Against Power Disruptions
Although strong winds have weakened, California is only halfway through its fire season. Residents and businesses may face more dangerous conditions before the end of the year.
Aurimond and a team of researchers at Bank of America Merrill Lynch note that the most devastating fires in 2017 and 2018 occurred later in the calendar year. The 2018 fires at Camp and Woolsey ignited in November, while the 2017 fire in Ventura and Santa Barbara counties exploded in December.
While several industry experts believe that utility companies have no choice but to start more power outages in 2019 and to continue moving forward, some are testing new technology to improve local response to fire emergencies.
Sempra Energy's San Diego Gas & Electric relies on a network of 15 high-resolution cameras that are transmitted live in areas at risk of fire. The cameras capture evidence of hazardous conditions, allowing the utility network to shut down broken or damaged power lines before fires can ignite. Southern California Edison introduced similar fire monitoring cameras in Orange County, while PG&E plans to deploy 600 cameras throughout its service area between now and 2022.
Tech companies are also looking to fill the void.
Last month, software giant Splunk invested in a cloud-based startup in San Francisco-based Zonehaven, one of a handful of big-data companies to curb the state's growing wildfire threats.
Aggregation of burned data, real-time climate models, and satellite images, Zonehaven generates fire simulations that outline the path of flames and recommend specific escape sequences for residents.
"The real purpose is to ensure that we get people out of the way for the first five to ten hours of a fire," Charlie Crocker, Zonehaven executive director and former Autodesk veteran, told CNBC.
Moraga-Orinda is one of several Bay Area firefighting partners with Zonehaven, installing 15 ground-based sensors in October 2018.
"These events [severe wind] often exceed the reflex time associated with calling and providing a team for an answer, "said Dave Wenacker, chief of the Moraga-Orinda Fire Department." The next step is not only the signaling that something is wrong, but also personalized recommendations on what action to take. "
Winnacker added that he had discussions with representatives of Waze, a Google-owned navigation app, about integrating its traffic monitoring systems to improve evacuation procedures The parent company of Google Alphabet was one of six technology companies that cited "wildfire" in its latest SEC filing.
But there are still fears that regulation and policy in California are still not enough to introduce technology.
"We have tried, but so far unsuccessfully, to gain traction with the state," Wenacker says.
Much of the latest attention from California politicians focuses on PG&E, with Governor Newsom hosting meetings with top utilities leaders last week. Newsom threatened the public takeover of PG&E and appointed an energy king to avoid the company from bankruptcy. PG&E must leave bankruptcy by June 2020 to participate in a state wildfire fund that would help prevent future losses.
– contributed to this report.