Public utility NV Energy, which is composed of Nevada Power Co. and Sierra Pacific Power Co., has proposed self-insurance programs costing $500 million for utility companies, according to a report by AM Best.
According to the report, the programs aimed to provide utility companies with robust liability coverage in cases where utility equipment allegedly caused or worsened a wildfire. A filing with the Public Utilities Commission of Nevada (PUCN) stated that the programs would cover third-party claims and be in excess to commercial wildfire liability insurance coverage that is already in place.
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Collectively, the self-insurance police would offer about $1 billion in coverage. Additionally, NV Energy, which supplies around 90% of the electricity in Nevada, would fund the coverage through the addition of a recovery charge to customer rates.
NV Energy said in a statement that its customers in Northern Nevada would be charged with a higher rate that is projected to cost them an extra $2.40 every month. This would reflect the higher wildfire risk within the area. Meanwhile, other residents would be charged an average of 50 cents per month.
The proposed rates for each region utilized the method that the PUCN had approved for commercial wildlife insurance.
Across the Western United States, wildfires present a challenge to utility providers, leading companies to seek additional wildfire liability coverage. With such coverage being expensive and difficult for utilities to secure, many companies have had to resort to self-insurance.
“While NV Energy remains committed to taking actions to reduce the risk of a wildfire occurring in connection with our electric grid, as other utilities in the West have recognized, a self-insurance approach ensures that there is financial support in place in advance of a wildfire occurring to provide greater financial certainty to all involved,” NV Energy president and CEO Doug Cannon said in a statement.
