Firefighters fight against a wind-driven wildfire in the hills of Canyon Country north of Los Angeles, California, USA October 24, 2019.
Gene Blevins | Reuters
California's largest utility is not the only US company struggling with the increased strength and frequency of fires.
The number of S&P 500 companies flagging "wildfires" as a potential risk factor in annual reports has increased dramatically over the past decade ̵[ads1]1; from 9 throughout 2010 to 37 so far in 2019. Over the past year, At least 14 companies in the S&P 500, including Marriott and Monster Beverage, added fires to their basket of concerns in 10-K filings with the Securities and Exchange Commission. While many S&P 500 companies have included "fire" in the risk factor section of the 10-K, this analysis stands in particular for "wildfire."
California-based tools PG&E and Edison International have drawn a lot of attention since 2017 and more recently, as the two companies prophylactically shut off power to large parts of their service areas in October. But over the last couple of years, businesses across an armada of industries have begun to sound alarm.
Perhaps surprisingly, real estate companies make up the largest proportion – 10 of 37 – that have marked delusions in 10- K registrations this year. But concerns have spread across sectors from banking to biotechnology to semiconductors.
The scattered concerns are reflected in the data. Ten of the 20 most devastating American wildfires since 1923 have ignited over the last five years.
S&P 500 companies mark "wildfires" as a risk in their annual filings of 10K
A number of these companies have added fires to a burgeoning list of threats about natural disasters, which include earthquakes and tornadoes. Orville, Ohio-based consumer giant JM Smucker, for example, had flagged the risk of tornadoes at its Kansas and Alabama manufacturing plants in 2018. But this year, the consumer giant added a new line to the California fire.
Other companies have been more explicit in their warnings.
In the recent filing of 10K, Houston, Texas-based power infrastructure company Quanta Services, investors warned that the current insurance coverage may not adequately cause a fire risk.
our insurance companies decide to exclude cover for fires in the future, because of the increased risk of such events in certain geographies or otherwise, we may be exposed to significant liabilities and potential disruption to operations, executives say Quanta Services. "If our risk exposure increases as a result of unfortunate changes in our insurance coverage, we may be subject to increased claims and liabilities that may adversely affect our business, financial condition, results of operations and cash flows.
Redwood City, California Equinix-based data center company , meanwhile, has directly cited PG&E when it works to confront the rising fire threat. In January, PG&E petitioned for bankruptcy protection, saying they face more than $ 30 billion in commitments after it was determined the power lines sparked last year's devastating camp fire. , the deadliest in California history, killed 86 people and left 30,000 homeless.The power company was also considered responsible for 12 of the fires that ripped through Northern California in October 2017, according to state authorities.  While PG&E has said they will honor $ 42 billion in existing power agreements as part of its plan Restructuring and finally coming out of bankruptcy, e-scaling running fire threats add additional uncertainty to companies in a number of industries that depend on the tool. On Thursday, PG&E reported $ 1.6 billion in losses last quarter as it faces increased pressure from state and local officials.
"If PG&E seeks and is allowed to reject power agreements, it is difficult to predict the consequences of such an action for us," Equinix executives said in their latest submission at 10 K. "But they can potentially include procuring electricity from more expensive sources, reducing the availability and reliability of electricity delivered to our plants and relying on a larger percentage of electricity produced from fossil fuels, which could reduce the supply of electricity available to our businesses or increase our costs for current. "
But Equinix is not alone, and executives in a variety of companies – everything from Comcast to Ulta Beauty to Corona brewer Constellation Brands – are closely monitoring the amount of wildfires that have ravaged California since mid-October. According to the California Department of Forestry and Fire Protection, local and state officials lifted all mandatory evacuation orders last week, but investigations are ongoing.
2019, a "below average "fire year to date
Despite several weeks of dangerous weather and hurricane gusts as high as 102 miles per hour, the 2019 fire season has actually caused less havoc compared to the past two years. 2018 was not only 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 sheer scale.
However, However, 2019 through October has been an "below average" year for wildfires with several important metrics, according to researchers at Bank of America Merrill Lynch. Compared to the average seen during the first ten months of the years 2013-2018, fires in 2019 have burned fewer acres and destroyed fewer structures. There have been 314 so far in 2019 against 2,700 on average over the same periods in 2013-2018.
Some industry experts claim this year's fires have been partially less devastating due to improved security and 1962.
"While many factors are coming in, these data suggest that the more proactive degeneracy programs that were set this year has helped to curb fires, "Antoine Aurimond, a research analyst at Bank of America-Merrill Lynch, wrote in a recent note.
Aurimond added that seven of the 10 most devastating forest fires between 2013 and 2018 were caused by power lines, suggesting that state makers have the right to hone in on tools to reduce burns. Most recently, Southern California Edison, a subsidiary of Edison International, on Oct. 29, revealed that the equipment "likely" caused the Woolsey fire in 2018, which burned nearly 97,000 acres, destroyed more than 1,500 structures and killed 3 people.
But when the tools prove to deliberately shut down electricity to limit future fires, companies in other industries are stiffening for impact.
In light of more dangerous conditions ahead, PG&E Director Bill Johnson recently said that planned shutdowns would be needed for the next 10 years as the company upgrades its electrical systems.
These preventive measures – which forced businesses and school districts to close in the fall – have enormous financial ramifications. Michael Wara, a senior researcher at the Stanford Woods Institute for the Environment, estimated the financial costs of PG & E's preventive power outage in early October – affecting 800,000 customers, or nearly three million people – could be at a peak of $ 2.5 billion. Other forecasts suggest that hundreds of millions were lost in spoiled food costs, and an estimated $ 30 million daily consumer spending reduction.
"The scale, scope, complexity, and overall impact on people's lives, businesses, and the economy of this action cannot be underestimated," California California Utilities Commission spokeswoman Marybel Batjer wrote in a letter to PG & E's CEO last month.
Corporate concerns have been compounded by rising fire suppression costs, which topped $ 3 billion for the first time last year, according to government data. Most of the cost centers in California, which spent $ 947 million on fire suppression and preparedness in 2018, and exceeded the $ 450 million allocated in the state budget. To keep pace with these increased demands, the US Forest Service, which takes most of the fire suppression costs, said it now expects the fire budget to consume two-thirds of the total budget in 2019. That's four years earlier than originally planned.
Many analysts suggest that the number, which includes insurance claims and cleanup costs such as debris removal, will balloon as climate patterns change and California's housing shortage forces residents into precarious areas.
California Governor Gavin Newsom added more support to fight the recent fires, securing a grant from the Federal Emergency Management Agency earlier this month.
However, as the shot exchanges become more intense and expensive, funding can come under pressure, adding more risks to businesses depending on the tools.
Mitigation Strategies: Technological Solutions vs. Rolling Blackout
Although the heavy winds have been reduced, California is only midway through its fire season. Residents and companies can 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 wildfires in 2017 and 2018 happened later in the calendar year. The camps and the Woolsey fires in 2018 ignited in November, while the Thomas fire 2017 in the counties of Ventura and Santa Barbara triggered in December.
While several industry experts believe tools have no choice but to trigger more power cuts in 2019 and beyond, 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 HD cameras that deliver power in exposed areas. The cameras capture evidence of hazardous conditions, allowing the tool to turn off damaged or damaged power lines before they can fire fires. Southern California Edison has rolled out similar fire surveillance cameras across Orange County, while PG&E plans to deploy 600 cameras throughout its service area between now and 2022.
Technical companies also want to fill the void.
Last month, software giant Splunk invested in San Francisco-based cloud startup Zonehaven, one of a handful of companies using big data to curb the state's growing running fire threats.
Gathering data from controlled burns, real-time weather patterns and satellite imagery, Zonehaven generates fire simulations that map the leaves and recommend specific evacuation sequences for residents.
"The real goal is to make sure that during the first five to ten hours of a fire, we get people out of the way," Charlie Crocker, CEO of Zonehaven and former Autodesk veteran, told CNBC.
Moraga-Orinda is one of several Bay Area fire districts that has partnered with Zonehaven and installed 15 ground sensors in October 2018.
"These [severe wind] incidents often exceed the reflex time associated with recall and delivery a response team, "said Dave Winnacker, Moraga-Orinda's fire chief. "The next step is to not only notify that something is wrong, but to make personalized recommendations about what actions to take."
Winnacker added that he had conversations with representatives in Waze, the Google-owned navigation app, to incorporate his traffic monitoring systems to improve evacuation procedures. Google's parent company Alphabet was one of six tech companies that cited "wildfire" risk in their recent regulatory filings with the SEC.
But there is still concern that California regulation and policy is not yet sufficient for technology to roll out instead of planned interruptions.
"We have tried, but so far without luck, to gain traction with the state," Winnacker said.
Many of California's policy makers have recently focused on PG&E, which Governor Newsom held with the tool's top executives last week. Newsom has threatened a public takeover of PG&E and appointed an energy vessel to steer the company out of bankruptcy. PG&E must go out of business by June 2020 to take part in the state's gunfire fund, which would help protect against future losses.
– contributed to this report.