Wildfires

Investors in California utilities, particularly PCG,  have been thinking about wildfires a lot lately.  People keep discussing the increase in fires over the last few decades, and that utilities could be at risk for some of the costs of the fires if their equipment is involved in the start of the fire, even if the equipment was maintained and operated in a manner that is considered best practice.  A short article in Businessweek (see here) got me thinking that some changes are going to have to come to how wildfire liabilities are distributed, because things could get much worse.  According to the article 10 million acres burned in the US in 2017, but this is far less than burned earlier this century.  The chart in the article shows over 50 million acres burned each year in 1930 and 1931.  (Note that the chart says that the reporting process wasn’t standardized until 1983, but even if the old numbers need some downward adjustment, those years are way higher than today.)  It appears that the last half of the 20th century could be the outlier.  With increased development throughout the west, there is no way a utility could pay for the potential damage caused by increased fires.  We need utilities, and society will find to avoid their financial ruin from a threat that has a risk of getting worse in the future.