PG&E Power Shutdowns vs San Francisco Bay Companies
You’ve probably already heard or read about the planned and already executed power shutdowns by PG&E in the Northern California region. What does this have to do with stocks you might ask? Well if I’ve learned one thing in my trading carrier is that everything affects stocks. Of course in this article, we will make just a presumption of what could those power shutdowns cause and how they might affect certain stock prices. At first glance, it could look as a far fetched theory, but every theory has its’ roots and is not wrong until proven wrong. So lets’ just say that this article is focused more on speculation of how the power shutdowns could affect the San Francisco Bay companies.
The first thing we need to do is get familiar with the topic by answering the following questions:
Who are the PG&E?
Pacific Gas and Electric Company is incorporated in California back in 1905, and currently is one of the largest natural gas and electric energy companies in the US. The company has 106,681 circuit miles of electric distribution lines and 18,466 circuit miles of interconnected transmission lines. By 1984 the company was the largest electric utility business. On January 14th this year the company announced that it was filing for Chapter 11 bankruptcy in response to the financial challenges associated with the catastrophic wildfires that occurred in Northern California. A few months later today the company faces similar challenges and are reacting to them by power shutdowns.
Power Shutdowns:
The weather is obviously the biggest competitor of the company situated in the San Francisco bay. The problem in Northern California comes from the strong impact of winds causing damages to electric infrastructure which in addition could cause wildfires. In order to protect the public from such events the company is planning and executing the so-called Public Safety Power Shutoff or PSPS for short. The PSPSs have already started today in the San Francisco Bay Area. The analysis and expectations of gusty winds, dry conditions and higher fire risk caused the company to shut down the electricity of more than 20,000 PG&E customers so far with the expectancy of this number to grow up to 513,000. A second de-energizing phase is scheduled for later today between noon and 5 PM US time. Customers of the company in the following regions will be affected: Alameda, Contra Costa, San Mateo, Santa Clara and Santa Cruz. Currently, the majority of outages are in Fairfield, Vacaville areas and Napa Valley. Looking at their website we can see the zones those power outages are expected to occur in the following days. These shutdowns could leave thousands of customers without electricity for a couple of days.
San Francisco Bay Area:
Why the San Francisco Bay Area? Well, the answer to that is simple — a lot of tech companies are situated in Silicon Valley and a power outage could lead to some troubles. Of course, there are thousands of companies situated in that area, so it would be hard to predict which of them might experience some issues due to the outages unless we know which electric provider they are using, but this information would be hard to gather. So I am taking a different approach here. I’ll be looking at companies that are dependent on electric supply and an internet connection, due to the fact that electric outages could strongly impact computer processes and internet connectivity. An important thing I’d like to add here is that obviously, those tech giants have additional electric supply and internet connection — not dumb obviously, however, the devil is in the details and a power outage could affect their systems and cause issues for those companies.
Before we continue you can track the planned outages and which zones of California they’d effect here: https://www.pge.com/en_US/safety/emergency-preparedness/natural-disaster/wildfires/psps-weather-map.page
How power outages could affect companies?
As we know computer processes rely on RAM in order to be executed and to be maintained. A power outage could lead to a loss for RAM data, which could affect the overall processes running especially the automated ones. Although a power outage won’t lead to loss of data it still can affect running processes and shut them down due to loss of RAM data as explained. Another issue is that a power outage could open the door for breach in security protocols of the computer and breach of the data, which is basically a welcome present for black hat hackers. Looking at yet another issue caused by power outages is the possibility of internet connection failure. Especially for tech companies that really heavily on internet connectivity in order to maintain their processes which require huge transfers of data throughout the web this could mean trouble. Now lets’ review the companies that could potentially be affected by the PSPS protocols taking place in California.
Stocks — Top 3 picks:
#1
PG&E Stock:
Now, unfortunately, I do not have the stock of PG&E with the broker I am trading, but this would be the obvious choice for a short and that is why I am including it here. As mentioned the company filed for bankruptcy back in January due to the same issues they are facing currently in Northern California. I expect the stock to be losing value for the next couple of days as the company will lose money due to not supplying power to their customer and possibly customers turning to other electric suppliers in the region.
The current price of the stock: 10.90$ (NYSE)
#2
Salesforce Inc:
Salesforce is a company that specializes in customer relationship management, engaging in the provision of enterprise software. The company offers a portfolio of services such as sales force automation, customer service and support, marketing automation, digital management, professional cloud services and more. With the heavy reliance on stable internet connection and electric power for their automated processes to run smoothly and for the company to be able to serve their customers a power outage, especially one for a few days could lead to heavy losses for the company, which could impact negatively their stock price.
The current price of the stock: 145.88$ (NYSE)
#3
Adobe Systems Inc.:
The company engages in the provision of digital marketing and digital media solutions. It operates through the following segments: Digital Media, Digital Marketing and Print and Publishing. All of those services require stable electric power and internet connection in order for their processes to run smoothly. A power outage combined with the issues Adobe are having with US sanctions and shutting down accounts in Venezuela could lead to more troubles for the already troubled stock price.
The current price of the stock: 270.83$ (NYSE)
Other companies you should follow:
I would like to just give out a few more companies whose processes and operations could be affected by the power shutdowns performed by PG&E. Of course, you should monitor closely the news about those power outages and about the companies in order to find the one that could be affected by them. I’ll list them below:
- Applied Materials
- PayPal
- Charles Schwab
- Cisco
Conclusion:
I’d like to remind you again that this is purely a speculative theory and should not be taken as sole investment advice. I’d advise you to do your research on how PG&E power shutdowns could affect companies in the San Francisco Bay Area and continue following on issues that might appear due to those power outages before pulling the trigger on an investment. With this article, I just wanted to take your attention to a possibility that might be overlooked by a lot of people but could lead to serious implications.
Have fun and happy trading!
