Who Turned Out the Lights?  How to Prepare for Rolling Blackouts

By:  David Handy, CPCU

So does the term “Stage Three Energy Alert-Rolling Blackouts Expected?” still strike fear into your heart? After many weeks of hearing the same warning, most of us are taking it all in stride. However, don’t let complacency fool you into thinking that this energy shortage couldn’t have serious consequences for your business! 

A number of our clients have called us to see if they are protected from business income or property losses in the event of a rolling blackout. The best general answer is no. While many business income coverage forms cover power interruption, most have a minimum time deductible of 12 to 48 hours before coverage comes to the rescue.  And because most blackouts last only an hour or two, no coverage comes into play. To further complicate matters, many insurance policies require that an insured peril cause the power interruption, and frankly speaking, bad planning on part of the state and utilities is not a covered peril. Similarly, most power interruptions themselves do not cause real property damage.  However, ensuing property losses may be covered. You would need to check the specifics of your policy. Most boiler and machinery coverage forms cover damage from power surges, a very real potential for loss when the power comes back on. They may also cover consequential damage from loss of refrigeration, for example.

We feel that the best course of action is to prevent losses in the first place. A potential source of serious damage is to your computer network or PC’s. They should be outfitted with an uninterruptible power supply (UPS), a battery back-up system that provides enough power so that when the electricity goes off, you have enough power and time to safely save your work in progress and to shut down the system.  You should then turn off the UPS system until after the power has been restored to avoid any danger from power surges.  In fact, it is a good idea to turn-off and unplug all electronic devices to avoid damage when power has been interrupted. If unplugging these components is unfeasible, make sure that they are routed through properly rated surge protectors.

If you have refrigeration or critical manufacturing issues, it is a good idea to have your own source of power. Back up generators are good ways to keep these critical components from suffering potential disastrous down time.  You can either manually start the back-up generators, or have them set to recognize the interruption of utility power and then automatically start themselves. This is an important feature if the blackout occurs during the evening hours, or at other times when no employees may be present at your facilities.

In all cases, being prepared is the best insurance policy you can take.  From what is looks like, with summer electricity demands looming just around the corner and no new electricity supplies coming on-line, stage three power alerts are going to be the norm in California for the foreseeable future. Take matters into your own hands and prepare. You will be glad you did.

last updated: February 14, 2001

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