CFC Solutions Cast

Welcome to Solutions Cast. I’m Alisha Pinto, CFC’s Senior Energy Industry Analyst. Let’s talk about a topic that is becoming only more critical in 2026: wildfire mitigation. Now, before we dive too deeply into this topic, it’s important to recognize that wildfires are no longer just a safety or operational issue for electric utilities. They have become a material financial risk, a credit risk and, increasingly, a governance issue.

As extreme weather events grow more frequent and more severe, wildfires are having devastating impacts on the communities we serve. Homes are lost, businesses are disrupted and local economies are strained. When a wildfire occurs, electric utilities are often at the center of both the response and the recovery.

For utilities, wildfires can also mean damaged infrastructure, service disruptions and, in some cases, significant legal liability when equipment is involved. The result isn’t just recovery costs, but prolonged financial stress.

And the risk doesn’t stop at the fire line. One of the clearest examples is what we are seeing in insurance markets. Commercial insurers and reinsurers are reassessing their exposure to wildfire prone regions. As a result, insurance premiums are rising, coverage terms are tightening and, in some areas, coverage is becoming difficult or even impossible to obtain.

When insurance becomes unaffordable or unavailable, utilities may be forced to self insure or turn to alternative financial instruments. That can tie up capital reserves—capital that could otherwise support operations, reliability improvements or system modernization.

Tied up capital reduces financial flexibility. And reduced flexibility can pressure key financial metrics, such as equity levels and debt coverage ratios.

Those pressures don’t go unnoticed. Credit rating agencies are now explicitly incorporating wildfire and broader extreme-weather risk into their assessments. We’ve seen credit outlooks revised and ratings downgraded when utilities face elevated wildfire exposure or liability risk.

In California, for example, S&P Global Ratings revised its outlook to negative for several utilities, citing increasing wildfire risk. For any utility, a lower credit rating can mean higher borrowing costs and fewer options to finance infrastructure and long term investments. That’s why wildfire risk is no longer just an operational concern—it’s a fiduciary issue for boards and executive leadership.

The good news is that electric cooperatives are not powerless.

In medium- to high-risk areas, prioritizing wildfire mitigation can reduce long term financial stress and strengthen organizational resilience.

The first step is recognizing wildfire risk as an enterprise level risk. It belongs in strategic planning, financial forecasting and board level oversight, alongside cyber risk, regulatory risk and other financial risks.

The second step is developing and implementing a wildfire mitigation plan. These plans identify the strategies, tools and investments needed to reduce ignition risk and improve response. Whether required by state law or undertaken voluntarily, a credible mitigation plan sends a strong signal to insurers, regulators and credit markets that the cooperative is proactively managing risk.

Once a plan is in place, cooperatives can make targeted investments such as system hardening, vegetation management, enhanced situational awareness and operational protocols for high risk conditions.

Finally, wildfire preparedness requires close coordination and clear communication. Cooperatives must work closely with partners like Federated Rural Electric Insurance Exchange, local fire departments, weather agencies, emergency managers and first responders. Clearly defined roles, effective communication and advance preparation can make a critical difference when conditions escalate.

At its core, wildfire mitigation is about more than emergency response. It’s about protecting financial stability, preserving access to capital and ensuring electric cooperatives can continue to fulfill their mission of serving members reliably and affordably for the long term.

That’s all for today. As always, thank you for joining us. Be on the lookout for more industry and technology Trends Report content at nrucfc.coop/Solutions. We’ll talk with you soon!