For decades, the core mission of an electric utility has been straightforward: keep the lights on. Reliability was the scorecard. Outages were the enemy. That mission has not changed, but the conditions surrounding it have.

Public Safety Power Shutoffs (PSPS), the practice of proactively de-energizing lines that pose an ignition risk during dangerous weather conditions, have become an essential part of wildfire mitigation for utilities across the country. For many utilities, especially those that have not historically dealt with significant wildfire exposure, building a PSPS program represents a genuine operational and cultural shift. It asks utility teams to do something that runs counter to everything they have been trained to prioritize: intentionally turn off the power.

Understanding why that shift is necessary, and how to make it work, is where most utilities need to start.

Why PSPS Is Becoming a Standard of Care

PSPS is no longer just a tool used by large California utilities. Regulators across the country are increasingly expecting utilities of all sizes to have a PSPS program in place, even if they do not anticipate using it frequently. The underlying logic is straightforward: when weather conditions create a high risk of an asset-caused ignition, proactively de-energizing the at-risk lines is preferable to allowing an uncontrolled outage or, worse, a wildfire.

Allowing extreme weather conditions to dictate the outcome, rather than acting ahead of them, removes control from the utility entirely. A forced outage under high-wind, low-humidity conditions carries the same ignition risk as an intentional one, but without any of the preparation, communication, or community protection that a well-executed PSPS provides.

The shift toward what many utilities now call a “surgical PSPS” reflects a maturation in how this tool is being applied. Rather than shutting off power across broad areas whenever a Red Flag Warning is issued, utilities are using better risk intelligence to isolate the specific circuits where ignition risk is genuinely elevated. The result is fewer customers affected, shorter outage durations, and more defensible decisions.

What Operationalizing PSPS Actually Looks Like

For utilities building or refining a PSPS program, the process typically involves three connected challenges.

The first is identifying risk early enough to act. Most utilities have a 48 to 72 hour customer notification requirement before a PSPS event. That window sounds manageable until you consider what needs to happen inside it: analyzing weather forecasts, assessing fuel and terrain conditions across potentially thousands of miles of line, identifying candidate circuits, and making go or no-go decisions with incomplete information. For smaller utilities without large operations centers or dedicated meteorological support, that compressed timeline can be particularly demanding. Access to reliable forecasted risk data, updated continuously, is what makes the difference between a confident decision and a reactive one.

The second is the decision itself. Utility personnel making PSPS calls are balancing real competing interests. Customers lose power, sometimes for extended periods. Businesses are disrupted. Medically dependent customers face heightened risk. These are not abstract tradeoffs. The best PSPS programs build clear decision frameworks that give operations teams the authority and the data they need to make those calls without hesitation when conditions warrant it.

The third is communication. A well-executed PSPS is not just an operational event, it is a communication event. Customers who understand why power is being shut off, what conditions triggered the decision, and when they can expect restoration are far more likely to accept the disruption than those who receive little to no explanation. Leading utilities are investing in transparent, proactive communication before, during, and after PSPS events, and the trust that builds over time is one of the most durable outcomes of doing this well.

The Bottom Line

Building a PSPS program is achievable for utilities of any size. It does not require an unlimited budget or a large dedicated team. It requires clear protocols, reliable risk data, and a willingness to reframe what operational excellence looks like in a world where wildfire risk is part of the job.

The utilities navigating this transition most successfully are not the ones that have eliminated the tension between reliability and safety. They are the ones that have learned to manage it, one well-informed decision at a time.

Electric utility risk managers are facing a growing credibility gap. While asset-caused wildfire ignitions are a longstanding challenge, the escalating frequency and severity of these events, coupled with the specter of liability, have fundamentally altered the landscape.

The disconnect is growing between the elevated perceived risk and the actions by electric utilities to keep up with that risk. This disconnect is not only impacting insurance costs but also directly threatening credit ratings, placing the financial health of electric utilities nationwide at risk.

The Insurance Industry’s Demand for Measurable Mitigation

Insurers are no longer satisfied with simple risk assessments. They are demanding concrete evidence of quantifiable risk reduction.

However, most electric utilities struggle to demonstrate and quantify the effectiveness of their mitigation efforts. Insurers are seeking data that proves a direct correlation between investments and reduced net risk, a higher level of transparency and accountability than have been required historically.

The Credit Agency Perspective is Changing

Credit rating agencies have become deeply involved in assessing wildfire risk, particularly with their long history of engagement with California utilities.

Credit rating agencies are now moving beyond geographic risk assessments and delving into the specifics of utility operations and planning. Beyond the checkbox of a Wildfire Management Plan, agencies are scrutinizing everything from EOC capabilities to the implementation of enhanced trip settings and Public Safety Power Shutoffs (PSPS), highlighting the need for a comprehensive, data-driven approach to risk mitigation.

Many utilities lack the robust technological infrastructure and operational procedures necessary to demonstrate effective wildfire risk management, placing them both at operational risk for a wildfire, and at financial risk for a credit downgrade.

A Shifting Landscape

A 2024 report by the economic consulting firm Charles River Associates indicates over 100 electric utilities have experienced credit downgrades due to wildfire risk.

Even electric utilities in historically low-risk areas are being penalized for a lack of demonstrable situational awareness and operational control. This shift in market perspective underscores the need for utilities to move beyond reactive measures and implement proactive, data-driven strategies that can be clearly communicated to insurers and credit rating agencies.

The Bottom Line

The future of electric utility financial stability hinges on the ability to move beyond simply assessing wildfire risk. Proactive, data-driven mitigation strategies that are transparent and quantifiable are what insurers, creditors, regulators, and communities are now expecting.

This is not just about securing insurance or maintaining creditworthiness. It is about building trust with stakeholders and ensuring the long-term resilience of the utility in an increasingly fire-prone environment. The shift from passive risk assessment to active, demonstrable risk control is underway across the industry.

The Big Picture

Wildfire, once perceived as a California problem, has become a nationwide concern for electric utilities, driven by escalating liability, growing regulatory demands, and investor scrutiny.

The 2023 Lahaina Fire served as a stark wake-up call, forcing electric utilities across the country to confront the financial and operational reality of wildfire exposure. Several catastrophic and deadly fires have followed.

Wildfire risk now looms as a top-tier threat capable of severely impacting electric utilities with little warning. This shift calls for a fundamental reconsideration of risk management strategies, from improved modeling to proactive mitigation.

What’s Changing, Fast

Liability Risk is Spreading

The Lahaina Fire tragedy illustrated that catastrophic wildfire risk extends far beyond traditional high-risk regions. Hawaiian Electric’s rapid market cap decline and subsequent large settlement underscore the potential for devastating financial repercussions, regardless of perceived culpability. Even in states where liability caps are being considered, those protections come with substantial expectations that utilities do everything in their power to manage fire risk. The 2024 Smokehouse Creek Fire further solidified the reality that no region and no electric utility is immune from the consequences of asset-caused wildfire ignitions.

Investors, Creditors, and Insurance are Questioning Their Support and Demanding Change

Electric utilities are grappling with uncapped liability, a concern amplified by Warren Buffett’s public questioning of the industry’s investment viability in 2024. Investor confidence is directly tied to a utility’s ability to demonstrate robust wildfire risk management. Credit rating agencies are scrutinizing wildfire risk management practices and are actively downgrading utilities without adequate systems in place. Insurance availability and affordability have become critical challenges, with many electric utilities facing difficulty securing coverage or resorting to self-insurance.

Regulatory and Stakeholder Pressures Are Growing

States outside of California are increasingly implementing stringent regulatory compliance requirements, including mandated wildfire mitigation plans. Shareholders, local governments, regulators, community members, and insurers are all demanding that utilities employ proactive wildfire mitigation measures for improved decision-making.

How Electric Utilities Can Respond

Electric utility risk managers are no longer facing a theoretical threat. Wildfire risk, once considered a localized issue, has become a pervasive and financially consequential hazard.

The core challenge is accurately understanding and quantifying a dynamic, complex, and previously underestimated risk. This is not just about modeling fire behavior. It is about translating that knowledge into actionable mitigation strategies and operational decision-making that address liability, regulatory compliance, investor confidence, and stakeholder trust.

The path forward involves moving from reactive to proactive, from generalized risk assessments to granular, defensible strategies, and ensuring long-term financial stability and operational resilience in the face of an increasingly volatile environment.

What Is Next: Embrace Proactive Risk Management

By leveraging sophisticated tools for real-time monitoring, predictive analytics, and granular consequence modeling, electric utilities can move beyond reactive measures and static assessments.

Electric utilities can advance risk reduction with more data-driven decision-making across all facets of the organization. For daily operations, this translates to optimized resource allocation, proactive mitigation efforts in high-risk zones, and more informed decisions regarding Public Safety Power Shutoffs. For long-term asset planning, a clear understanding of wildfire consequence enables utilities to strategically prioritize infrastructure hardening and investments.

Hear from the CEO of PG&E, Patti Poppe, as she explains to Bloomberg News how technology is helping PG&E combat risk the of wildfire through advanced modeling, strengthened situational awareness, and improved decision making for asset hardening.

Watch & learn from a great discussion with Pedro Pizarro, CEO of Edison International, about how electric companies are finding success in hardening & adapting their grid to the growing threat of wildfire.