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Impacts Of Climate Change Poised To Hit GRDA Finances

Brody Hessin

The Grand River Dam Authority is grappling with climate change in its role as an electric utility.

GRDA was recently informed by its excess liability insurance provider, AEGIS, rates are going up 15% with a $150,000 surcharge. The increases are in order to cover increased costs from claims resulting from wildfires that ravaged western states and were sparked by electric utilities. GRDA General Counsel Heath Lofton told the agency's board that will roughly double their premium, though there is a way to avoid the surcharge.

"We tried to establish that we have a great plan in place. We do the vegetation management, and we think that this is little risk to us. So, option two, they said, 'OK, if you think that this is little risk to us, then why don't you assume 50% of any claim that arises out of a wildfire?'" Lofton said.

NASA researchers say climate change is creating warmer, drier conditions in the western U.S., which are causing more severe wildfires. Five of California’s 10 largest wildfires on record happened last year, and power lines have sparked several fires in the state over the past few years.

Record-breaking winter storm Uri is also causing GRDA to re-evaluate policies. CFO Lorie Gudde recommended the board do away with maximums for reserve funds and a requirement customers pay back within three years increased costs those reserves might be used to cover.

"When we wrote this policy back in 2018, we couldn't even contemplate an event that would be north of a $100 million impact in a few days," Gudde said.

Uri plunged the central U.S. into a deep freeze for two weeks in February. Spiking natural gas prices caused utilities to take on billions of dollars in increased costs.

The image in this story is licensed under CC BY 4.0.

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