As the United States continues to struggle with the COVID-19 pandemic and individual areas recover from a year of increased climate and weather-based crises, many businesses are still struggling to maintain profitability. Electrical contractors are perhaps some of the most affected, as both pandemic-induced demand and natural disasters have driven profit down over the last year.
Recent Chapter 7 bankruptcies by California’s Delucchi Electric, Inc. and New Jersey’s Mac Electrical Contractors, Inc. — both filed on May 5, 2021 — serve to illustrate some of the widespread issues plaguing electrical contractors.
Delucchi Electric’s filing listed total liabilities of $469,741.46, with its only claimed assets being $200 of office equipment.
According to documents, Delucchi Electric is currently involved in five lawsuits which variously involve the non-payment of rent, labor union contributions, employee wages, and loans.
At least $239,369.78 of Delucchi Electric’s debts are owed to contractors, materials suppliers, or the electrical contractor’s union, the International Brotherhood of Electrical Workers.
Mac Electrical’s issues are similar, as out of its total of $1.06 million in debts $888,666.60 is owed to contractors and materials suppliers. In contrast, Mac Electrical does list significant assets, listing $70,324 in property as part of its filing.
Mac Electrical is also facing five legal actions, with four currently pending. All five lawsuits allege significant non-payment on the part of Mac Electrical stemming from electrical equipment, supplies, and services.
Chapter 7 bankruptcy — often referred to as “liquidation” bankruptcy — allows for a company to sell off its nonexempt assets in order to pay off its debts. This doesn’t allow the company to restructure itself or its debt, often resulting in loss of property or the folding of the business, meaning that this is likely the end for both Delucchi Electric and Mac Electrical.
Though it’s difficult to point to the specifics of why these two companies have faced such difficulty, they aren’t alone in their struggle to maintain profitability and pay debts. Louisiana contractor Total Instrument & Electrical Services, Inc., which filed for Chapter 7 bankruptcy on December 23, 2020, serves as a notable example after it reported an 87.6% decrease in its gross revenue in the years leading up to the filing.
Failings in US infrastructure and decreased workforce foreshadow possible long-term ramifications
While the aforementioned financial losses are most easily seen in relation to a company’s failings, they extend to individual workers as well, and highlight the impact of bankruptcy on the workforce.
A May 2021 report from the Associated Press and Center for Public Integrity highlighted how one contractor’s Chapter 7 filing caused a company’s electrical workers — whose pay had already been subjected to months-long wage theft — to fall into significant debt.
A September 30, 2020, article by former Montana State Senator Greg Jergeson pointed out that bankruptcies by Enron, Montana Power/Touch America, NorthWestern Corporation, and Southern Montana Electric wiped out huge parts of the electrical workforce — with former workers losing retirement portfolios and stocks, and eventually being left with some of the highest electricity rates in the country as part of the fallout.
These trends have led to a shrinking workforce at the worst time. An October 2020 study by Klein Tools and The Accelerate Group outlined the need for skilled electricians, stating that the US would need over 250,000 positions added to the workforce by 2030 in order to support and maintain the country’s rapidly developing infrastructure.
However, the same report also maintains that current trends show the gap between necessary workers and available workers in the workforce was over 251,000 by that point in time, leading to the possibility of decreased response times to significant power outages and rolling blackouts becoming fixtures of US infrastructure in the coming decades if this gap is not closed.
Climate events and weather disasters pose significant issues, lead to bankruptcy and debt for contractors and consumers
Concerns over electrical infrastructure and workforce may only continue to grow — an issue that becomes deeper when compounded with mounting concerns over climate change in the US.
According to the National Oceanic and Atmospheric Administration’s (NOAA) National Centers for Environmental Information, the US experienced 22 climate disaster events with economic losses exceeding $1 billion in 2020 alone, setting a new record for such occurrences — with the previous record being 16 such events in both 2011 and 2017.
While the annual average for these events from 1980 to 2020 is 7.1, the average for the most recent five years of available data (2016–2020) is 16.2 events per year — highlighting that the major weather events (and their possible increase) continue to have significant and increasing impact on the country and its economy.
A recent article in the April 2021 issue of Electrical Contractor highlighted the difficulties that natural disasters and climate events pose for the field, noting that large areas of the US have dealt with abnormally low temperatures in 2021 — with such severe weather heavily impacting Texas, Colorado, Wyoming, and Nebraska in recent months — while 2020 saw fires ravage significant swaths of the nation.
Such disasters of any kind often can lead to the destruction of electrical equipment or overload of infrastructure capabilities, causing a significant hardship for contractors and consumers alike.
The Texas storm in particular has led to high-level legal action over its fallout, displaying the far-reaching effects of climate disasters. Texas Attorney General Ken Paxton filed a lawsuit in March against Griddy Energy, LLC after customers were served with exorbitant energy bills — a lawsuit which led to Griddy Energy itself filing for Chapter 11 bankruptcy on March 15, 2021.
Texas electrical cooperative Brazos Electric Power Cooperative, Inc. filed for Chapter 11 bankruptcy in March 2021 following February’s disastrous winter storm, saying that it received a $1.8 billion claim from the Electric Reliability Council of Texas following “catastrophic failures” during the event.
Company officials presented the filing as a direct result of the storm, claiming in a statement that “Brazos Electric was presented with excessively high invoices by ERCOT for collateral and for purported cost of electric service, payment of which was required within days.”
“As a cooperative whose costs […] are ultimately borne by Texas retail consumers served by its Member cooperatives, Brazos Electric determined that it cannot and will not foist this catastrophic financial event on its members and those consumers.”