Wildfire Risks Spark Insurance Woes for Utility Companies

Shrinking options and escalating costs for power companies mirror the home insurance crises facing consumers.

Evelyn Pimplaskar
Evelyn PimplaskarEditor-in-Chief, Director of Content
  • 10+ years in insurance and personal finance content

  • 30+ years in media, PR, and content creation

Evelyn leads Insurify’s content team. She’s passionate about creating empowering content to help people transform their financial lives and make sound insurance-buying decisions.

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Chris Schafer
Edited byChris Schafer
Chris Schafer
Chris SchaferSenior Editor
  • 15+ years in content creation

  • 7+ years in business and financial services content

Chris is a seasoned writer/editor with past experience across myriad industries, including insurance, SAS, finance, Medicare, logistics, marketing/advertising, and many more.

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John Leach
Reviewed byJohn Leach
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John LeachSenior Insurance Copy Editor
  • Licensed property and casualty insurance agent

  • 8+ years editing experience

John leads Insurify’s copy desk, helping ensure the accuracy and readability of Insurify’s content. He’s a licensed agent specializing in home and car insurance topics.

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Published June 26, 2024 at 12:00 PM PDT | Reading time: 2 minutes

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Homeowners aren’t the only ones facing high insurance rates and difficulty finding coverage because of wildfires. Power companies are also feeling the heat.

Utilities in states affected by wildfires are struggling to find affordable insurance — if they can find it at all, according to Bloomberg.

“The trouble comes after power companies from Hawaii to Texas have collectively faced tens of billions of dollars in damages from wind-driven wildfires linked to their equipment,” Bloomberg reports.

Power lines spark wildfires

Power lines can cause wildfires in multiple ways, according to the Texas Wildfire Mitigation Project. If a power line falls and fail-safe systems fail, a live line can lay on the ground and arc for “multiple tens of minutes.” Lines that come into contact with vegetation may cause a branch to ignite. Circuit components may fail, or conductors may slap into each other, all creating conditions that could lead to a fire.

Climate change has increased the frequency and severity of conditions that can lead to wildfires, according to California’s Public Utilities Commission. “Hotter, drier conditions during summer and a longer dry season have resulted in lower moisture levels in vegetation, making it easier to ignite,” the commission says on its website.

Wildfires lead to lawsuits

Wind-driven wildfires linked to utility company equipment have prompted numerous lawsuits, Bloomberg reports.

Hawaiian Electric faced more than a dozen lawsuits following the deadly wildfires that swept Maui and claimed more than 100 lives in August 2023. In California, Orange County has sued Southern California Edison in connection with wildfires in 2020 and 2022. Xcel Energy faces hundreds of lawsuits stemming from a 2021 fire in Colorado and a February 2024 fire in the Texas Panhandle.

What’s next? Impact on insurance for consumers and utilities

In states with high wildfire risks, like California, Texas, New Mexico, and Colorado, homeowners face escalating home insurance costs and a shrinking number of options. Texas and Colorado are also among the most expensive states for home insurance, according to Insurify data.

Utility companies are finding themselves in the same position, Bloomberg reports. Insurance for power companies has become “prohibitively expensive, if not impossible” to secure, the journal says.

Without affordable options, utilities must either self-insure or go without coverage altogether, leaving them exposed to the financial impact of lawsuits. Being uninsured also makes it more difficult for utility companies to find capital to fund much-needed improvements to their power grids.

“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,” Michael Wara, director of the Climate and Energy Policy Program at Stanford University, told Bloomberg.

Evelyn Pimplaskar
Evelyn PimplaskarEditor-in-Chief, Director of Content

Evelyn Pimplaskar is Insurify’s director of content. With 30-plus years in content creation – including 10 years specializing in personal finance – Evelyn’s done everything from covering volatile local elections as a beat reporter to building fintech content libraries from the ground up.

Before joining Insurify, she was editor-in-chief at Credible, where she launched and developed the lending marketplace’s media partnership’s content initiative and managed the restructuring of the editorial team to enhance content production efficiency. Formerly, as tax editor for Credit Karma, Evelyn built a library of more than 300 educational articles on federal and state taxes, achieving triple-digit year-over-year growth in e-files from organic search.

Her early career included work as a content marketer, vice president and managing officer of a boutique public relations agency, chief copy editor for 14 weekly Forbes publications, reporting for large and mid-sized daily newspapers, and freelancing for the Associated Press.

Evelyn is passionate about creating personal finance content that distills complex topics into relatable, easy-to-understand stories. She believes great content helps empower readers with the information they need to make important personal finance decisions.

Chris Schafer
Edited byChris SchaferSenior Editor
Chris Schafer
Chris SchaferSenior Editor
  • 15+ years in content creation

  • 7+ years in business and financial services content

Chris is a seasoned writer/editor with past experience across myriad industries, including insurance, SAS, finance, Medicare, logistics, marketing/advertising, and many more.

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John Leach
Reviewed byJohn LeachSenior Insurance Copy Editor
Photo of an Insurify author
John LeachSenior Insurance Copy Editor
  • Licensed property and casualty insurance agent

  • 8+ years editing experience

John leads Insurify’s copy desk, helping ensure the accuracy and readability of Insurify’s content. He’s a licensed agent specializing in home and car insurance topics.

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