Trinity Public Utilities District’s power lines snake through the lower reaches of the Cascade Range, a rugged, remote and densely forested terrain in Northern California that has some of the highest wildfire risk in the country. But for several years, the company has been without insurance to protect it from such a threat.
“Wildfire risk is the number one issue for utilities,” said Michael Kolodner, the practice leader for the US power and renewables industry at Marsh & McLennan Companies Inc., a US insurance broker. “This is impacting every single utility in North America.” “If utilities can’t get insurance or if the insurance is really expensive, it’s harder for them to construct new facilities they need to build like transmission lines and distribution lines,” said Michael Wara, an expert on utility wildfire risks who serves as director of the Climate and Energy Policy Program at Stanford University. The problem is akin to potential homeowner being unable to secure a mortgage to buy a house because they can’t get property insurance, Wara said.
As it stands now, utilities have become the “insurer of last resort” when it comes to damage claims from wildfires tied to their equipment, said Emily Fisher, general counsel at the Edison Electric Institute, an investor-owned utility trade group. The industry has become difficult to insure because there isn’t a limit to their potential wildfire liabilities, Fisher added.
Utilities also have been turning to state governments for help. PacifiCorp backed legislation passed earlier this year in Utah that sets up a catastrophic fire insurance fund for utilities and caps non-economic damage claims arising from utility-linked fires.