Tag Archives: wildfire

Millions Of Californians Will “Plunge Into Darkness” As PG&E Commits To Cut Power During Wildfire Season

As a result of a new plan to cut power on high wind days during wildfire season, millions of Californians could wind up unprepared and in darkness, according to Bloomberg.

Now bankrupt PG&E proposed the precautionary plan after a transmission line that snapped in windy weather likely started last year‘s Camp Fire – the deadliest wildfire in state history. The plan addresses the problem of wildfires, but creates another one in the process: blindsiding Californians with days of blackouts.

This has caused some California residents to turn to home battery systems and alternative means of power in their homes. However, the number of these systems in use is relatively small when compared to the 5.4 million customers PG&E currently services. Governor Gavin Newsom has said that he’s budgeting $75 million to help communities deal with the threat.

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The “Failing Angels” Are Back

Lehman, WorldCom And Now PG&E

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(ZeroHedge) One week ago when we wrote that with PG&E facing a threat of an imminent bankruptcy (which we now know will soon be realized), the most bizarre development in this latest corporate fiasco was that until the first week of January, both S&P and Moody’s had rated the California utility with over $30 billion in debt as investment grade even as its bonds and stocks were cratering ahead of what investors deemed to be an imminent Chapter 11 filing.

And while we have extensively discussed the multi-trillion threat posed by “falling angel” companies, or those corporations rated BBB – the lowest investment grade equivalent rating – as they slide into junk territory, the recent events surrounding PG&E highlight an even greater blind spot in the corporate bond arsenal: that of the failing angel.

As Bank of America’s Hans Mikkelsen wrote in a recent research note, Investment Grade defaults – defined as defaults within one year of being rated IG – are “rare and unpredictable” (even if in the case of PG&E, its downfall was quite obvious to many) as globally in more than half of years historically there were no HG defaults at all.

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As such, Monday’s pre-announcement by The Pacific Gas and Electric Company (PCG) that it intends to file Chapter 11 by January 29th…

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… is a singular event and if the company follows through, it will become the third largest IG default since 1999, behind Lehman and Worldcom, with $17.5bn of index eligible debt.

The chart below lists all US index defaults since 1999 that occurred within one year of being included in ICE BofAML benchmark US high grade index. The three largest defaults in terms of index notional were Lehman ($34.9bn), WorldCom ($22.9bn) and CIT Group ($12.4bn).

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In fact, as BofA adds, if PG&E does file before the end of the month the company will become a member of a much more exclusive group of “Failing Angel”, formerly-IG companies consisting of Enron, Lehman and MF Global that defaulted directly out of IG, before making it into the HY index as Fallen Angels.

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Ironically, as Mikkelsen adds, until recently he had looked at PCG as set to become a large Fallen Angel from BBB accounting for 1.4% of the HY market. Now it appears the company plans to bypass the HY market, and proceed straight to default.

So as the world obsesses over the risk of “falling angels”, just how many other “failing angels” are hiding in the shadows, waiting for their moment to wipe out billions in stakeholder value as the economy continues to slowdown to what is now an inevitable recession, and just what will the knock-on effects of this “historic” default be? We will find out in less than two weeks.

Source: ZeroHedge

Yet Another Unfunded Trillion Dollar Liability, California Wildfire Damage

( John Rubio-DollarCollapse) Yesterday an entire California town burned down. Paridise, CA has (had) 27,000 residents and over 1,000 buildings, and now it’s pretty much gone. A fire started nearby on a windy day and within hours everything was ash and cinders.

That fire and several others are still expanding across the state, threatening tens of thousands of homes. The sets of the TV show WestWorld are gone. Malibu has been evacuated. And dry, windy conditions persist, so the story is nowhere near over.

If this sounds familiar, it’s because massive, sometimes uncontrollable California wildfires are now an annual occurrence, due in part to gradual warming and persistent drought which combine to suck the moisture out of vegetation and turn the landscape into a tinderbox. Here’s a chart showing the recent take-off in the number of fires reported in the state (2013 was most recent year I could find, but the trend is clear – and since then the number of fires has apparently soared).

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The reason this rates coverage in a financial blog is population. We’ve been moving millions of people into a place that has always had and always will have wildfires. California’s population is now about four times what it was in 1950, and the influx continues.

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Fire is a crucial part of that and many other ecosystems, clearing out dead plants to make room for living. But add 40 million humans along with their buildings and vehicles, and a healthy, resilient semi-desert becomes a hellscape.

A very expensive hellscape. What does it cost to rebuild a town of 27,000 people from scratch? A back-of-the-envelope calculation (1,000 buildings at $100,000 a pop, 15,000 cars at $25,000 per, $10,000 per person for roads, sewers, landscaping, etc) yields several hundred million dollars. For one little town.

Is California budgeting for this? Are the insurance companies? Is Washington? All probably say they are, but only the insurance companies actually are – and even they are probably under-reserved for the past few years’ natural disasters.

This is a massive public planning failure, and yet another unfunded liability – that is, a future cost incurred but not saved for – to go alongside public pensions, government debt and multiplying environmental time bombs.

The result: A future of unpleasant surprises, in which governments are constantly saying “Oops, there’s this huge new expense that no one could have foreseen, and we’re all going to have to tighten our belts to cover it, sorry about the bad roads and closed libraries” – or – “Oops, there’s a huge unforeseen expense and we’re going to have to create a trillion new dollars to cover it, sorry about the inflation.”

But isn’t this mostly a private sector issue, between homeowner and insurance company, you ask? In many cases that’s true. But insurance companies have to make a profit, which means homeowner policy premiums have to be high enough to cover expected losses. As the latter rise, so necessarily do the former. Which means the part of our cost of living that’s devoted to insurance will soar as a direct result of California’s asleep-at-the-switch population management policy.

Are California wildfires as big an unfunded liability as the one resulting from the Right Coast’s soaring Hurricane Alley population? Probably not, because fires, even big ones, are smaller than tropical storms. Still, it could easily exceed a trillion dollars (let’s see what today’s fires end up costing) which – hitting a state that’s already overburdened with unfunded pensions and crumbling infrastructure – will probably end up being added to the federal government’s balance sheet via some kind of bail-out.

All of which makes a currency reset that much more likely in the not too distant future. Paying off this mountain of debts, promises and “guaranteed surprises” with current dollars is mathematically impossible. But after a 70% devaluation the numbers might work.

Source: ZeroHedge

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SoCal Fire May Have Ejected “Incredibly Dangerous” Radioactive Particles Into The Atmosphere

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Nearby resident: “Every person on our street has had cancer

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California Utilities Implode, Lose A Third Of Their Value In 2 Days On Massive Fire Damages

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With the two giant wildfires in northern and southern California projected to result in $25 billion in damages, the shares of California’s two largest utility owners have crashed the most in nearly two decades.

 

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California Wildfires Set For $25 Billion In Damages As Death Toll Hits 31; Suspected Looters Arrested

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California Wildfires: Cars Filled with Dead Bodies – Burnt Skeletons

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Fire Swept Through Santa Susana Nuclear Testing Site In California

California Is Running Out Of Prisoners To Fight Their Wildfires

While many on the left have celebrated California’s push to legalize marijuana as a victory for a progressive, harm-reduction approach to combating addiction and crime, the pullback in the number of low-level prisoners entering the state’s penal system is leaving the California Department of Forestry and Fire Protection.

Court mandates to reduce overcrowding in the state’s prisons – combined with the legalization of marijuana, the most commonly used drug in America (aside from alcohol, of course) – have led to a sharp drop in the number of prisoners housed at state facilities in recent years. Interestingly, one byproduct of this trend is it’s creating headaches for the state officials who are responsible for coordinating the emergency wildfire response just as California Gov. Jerry Brown is warning that the severe fires witnessed this year – the most destructive in the state’s history – could become the new status quo.

To wit, since 2008, the number of prisoner-firemen has fallen 13%.

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As the Atlantic reports, California has relied on inmates to help combat its annual wildfires since World War II, when a paucity of able-bodied men due to the war effort forced the state to turn to the penal system for help. More than 1,700 convicted felons fought on the front lines of the destructive wildfires that raged across Northern California in October.

While communities from Sonoma to Mendocino evacuated in the firestorm’s path, these inmates worked shifts of up to 72 straight hours to contain the blaze and protect the property residents left behind, clearing brush and other potential fuel and digging containment lines often just feet away from the flames. Hundreds more are on the fire line now, combating the inferno spreading across Southern California.

But over the course of the last decade, their ranks have begun to thin. As drought and heat have fueled some of the worst fires in California’s history, the state has faced a court mandate to reduce overcrowding in its prisons. State officials, caught between an increasing risk of wildfires and a decreasing number of prisoners eligible to fight them, have striven to safeguard the valuable labor inmates provide by scrambling to recruit more of them to join the force. Still, these efforts have been limited by the courts, public opinion, and how far corrections officials and elected leaders have been willing to go…

With dry conditions expected to persist for the foreseeable future, California will need to adjust to this new reality. Meanwhile, the fate of the inmate-firefighting program lies in the balance between two trends: the increasing need for cheap labor, and the pending decline in incarceration.

The push to reduce overcrowding is a reaction to the rising incarceration rates of the 1990s, when President Bill Clinton declared gangsters and criminals “superpredators” and authorized stiff penalties for relatively minor drug offenses.

For inmates, the reduction in state prison populations that first nudged that balance was long overdue. In the 1990s and 2000s, increasingly severe overcrowding in California prisons compromised medical services for prisoners and led to roughly one preventable death each week. A federal court ruled in 2009 that the inadequate health care violated the Eighth Amendment’s embargo against cruel and unusual punishment, and ordered the state to reduce its prison population by just shy of 27 percent – a cut of nearly 40,000 prisoners at the time of the ruling. California appealed the decision, but the Supreme Court upheld it in May 2011.

As one might expect, the push to reduce overcrowding has had the greatest impact on the population of inmates in minimum security prisons. Typically, state officials prefer to recruit minimum security inmates who are already serving relatively light sentences and thus have the most incentive to cooperate and not cause problems (like disappearing into the wilderness).

Also, state guidelines prohibit the recruitment of certain violent criminals and, of course, sex offenders.

The pool of potential recruits was limited long before the courts’ mandate. It comprises only inmates who earn a minimum-custody status through good behavior behind bars and excludes arsonists, kidnappers, sex offenders, gang affiliates, and those serving life sentences. To join the squad, inmates must meet high physical standards and complete a demanding course of training. They also have to volunteer.

“But,” cautioned David Fathi, the director of the ACLU’s National Prison Project, “you have to understand the uniquely coercive prison environment, where few things are clearly voluntary.” In the eyes of criminal-justice reformers, corrections officials recruit inmates under duress. “In light of the vast power inequality between prisoners and those who employ them,” Fathi continued, “there is a real potential for exploitation and abuse.”

Aside from the shrinking inmate population, a handful of inmate deaths this year while battling the NorCal wildfires is causing some low-level offenders to reconsider whether the incentives being offered by the state – credit toward parole, and a generous wage (at least by prison standards) – are really worth the risks.

Many inmates join the force to escape unpalatable prison conditions. In doing so they take on great personal risk, performing tasks that put them in greater danger than most of their civilian counterparts, who work farther from the flames driving water trucks and flying helicopters, among other activities. By contrast, inmates are often the first line of defense against fires’ spread, as they’re trained specifically to cut firebreaks—trenches or other spaces cleared of combustible material—to stop or redirect advancing flames. The work can be fatal: So far this year, two inmates have died in the line of duty, along with one civilian wildland-firefighter. The first, 26-year-old Matthew Beck, was crushed by a falling tree; the second, 22-year-old Frank Anaya, was fatally wounded by a chainsaw.

“Obviously this is not something that everyone is willing to volunteer for,” said Bill Sessa, a CDCR spokesman. “We’ve always been limited by the number of inmates who were willing to volunteer for the project.” Even when state prisons were at their most crowded, the camps where inmate firefighters live weren’t filled to capacity. And as the pool of qualified prisoners has contracted, he said, corrections officials have had to “work harder now than we did before to bring the camp to the inmates’ attention.”

In an effort to entice more recruits to join up, state officials are trying to emphasize the benefits of volunteering to fight the blazes: Volunteer firefighters can receive visits from family out in the open, instead of behind a thick pane of glass. It also allows them to escape the confines of the prison – for a brief time at least.

But with legal marijuana rapidly draining the ranks of low level offenders, a sizable shortfall will likely to persist in the years to come.

And after the death and devastation wrought by this year’s fires, many inmates have good reason to reconsider.

After all, you can’t enjoy visits with family and friends when you’re dead.

Source: ZeroHedge