What Comes After the Wildfires in the West?

Extreme Weather Events: How S&P Global Ratings Evaluates the Credit Impacts in U.S. Public Finance

All else being equal, the better the credit quality at the time of the disaster the more likely a credit is to avoid major deterioration thereafter. Areas with what Ratings believes have high levels of physical damage and operational disruption and have weaker finances are more likely to be negatively affected, in Ratings' view, and may be placed on CreditWatch with negative implications or assigned a negative outlook prior to contact with management, if appropriate.

Ratings views the availability of federal grants and disaster assistance as a key component in stabilizing communities after extreme weather events, especially for areas with little to no support from private insurance. There are typically delays in receipt of aid, which underscores the importance of liquidity.

California Public Power Utilities Face Disparate Physical and Credit Exposures to Wildfires

California wildfires are increasing in frequency and size due to a variety of factors including climate change, which has resulted in negative credit actions within Ratings' public power portfolio, but overall credit quality remains strong. California's "inverse condemnation" doctrine puts electric utilities in the state at considerable risk of substantial wildfire liability claims, whether or not utilities are negligent.

California Power Shortfall Forces Sweeping Review of Grid Reliability Strategy

In an August 19 letter to Gov. Gavin Newsom, the heads of the California Public Utilities Commission, California Energy Commission and CAISO, the state's primary wholesale grid operator, committed to using a forthcoming root-cause analysis of conditions that forced Aug. 14 and Aug. 15 rolling blackouts to inform their reassessment of the state's approach to electric reliability. The state's top energy officials already made one major conclusion. "Renewable energy did not cause the rotating outages," they said, countering a scathing Aug. 19 editorial by The Wall Street Journal on "California's green blackouts."

NY Focused on Power Grid Reliability in Wake of California Blackouts

With New York drastically remaking its power grid to run on 70% renewable electricity resources by 2030 and carbon-free power by 2040, experts weighed in on how reliability can be ensured while transitioning to a cleaner power system. New York’s power system has some key differences to California’s and the grid operator, along with other stakeholders, are working to ensure power grid reliability as more intermittent generation is added in the next 20 years.

California Power Shortages Stem from Lack of Firm Generation Capacity: Experts

California faced the prospect of rolling power blackouts for the first time in almost 20 years, and stakeholders are pinning the blame on regulators' failure to heed warnings that shortages could occur unless steps were taken to ensure adequate resources were on call to cover peak demand periods. Those warnings came from the California ISO, power producers and the California Public Utilities Commission's own former president.

"We told the CPUC 4,700 MW was needed through 2022 and that the gap started in 2020," ISO CEO Steve Berberich said during an Aug. 17 briefing. "Despite all that, only 3,300 MW was authorized for procurement, but that's not starting [until] 2021."

State Farm, Farmers Among Biggest Homeowners Writers in Fire-Stricken Oregon

Early estimates of insured losses resulting from the wildfires have yet to be released, but the 2019 annual statutory data shows that State Farm Mutual Automobile Insurance Co. has the largest exposure in the homeowners line of business in Oregon. State Farm subsidiary State Farm Fire & Casualty Co. wrote $198.3 million in direct premium, controlling 22% of the homeowners insurance market in the state.