PacifiCorp, reeling from wildfire liabilities, aims to sell power line stake to related company

PacifiCorp is asking state regulators to approve a plan to sell its share of the Boardman-to-Hemingway transmission line to a subsidiary of its parent company, which would then lease the line’s capacity back to the utility for at least 20 years.

The prospective buyer is a special-purpose subsidiary of Berkshire Hathaway Energy, the Nebraska-based multinational conglomerate that’s controlled by billionaire Warren Buffet, according to PacifiCorp’s request filed with the Oregon Utility Commission last month.

PacifiCorp is also a wholly owned subsidiary of Berkshire Hathaway Energy, which in turn is part of Berkshire Hathaway.

The request comes as PacifiCorp is facing potentially billions in wildfire-related damages, credit rating downgrades and growing pressure on its ability to finance operations and wildfire-related legal settlements.

The filing also follows concerns about PacifiCorp’s decision to use its share of the power from the line to primarily serve a data center and not hundreds of thousands of its residential customers as the utility had previously promised.

The 300-mile transmission line, also known as B2H, is one of Oregon’s largest transmission projects in decades. It’s set to run through Idaho and across five Oregon counties. Its construction, which launched this summer after two decades of planning, permitting and lawsuits, comes just as Oregon faces skyrocketing energy demand and a severe transmission crunch.

The deal would allow PacifiCorp to retain the use of the transmission line while reducing its own capital expenditures at a time when wildfire expenditures and proposed investments in renewable energy to meet state emission targets are putting pressure on the utility’s cash reserves and credit ratings, which affect its ability to borrow at lower interest rates.

Bob Jenks, executive director of the Oregon Citizens’ Utility Board, which represents utility customers in Oregon, said the deal may also be a way for Berkshire Hathaway to inject much-needed capital into PacifiCorp without putting that money at risk if the utility’s wildfire liabilities ultimately drive it into bankruptcy, a possibility the company has raised itself.

In its filing with regulators, the utility argues that selling B2H to the Berkshire subsidiary “will enable PacifiCorp to fulfill its obligations to facilitate the construction and energization of the B2H Project while providing much needed liquidity for the utility and maintaining the basic rights and obligations with regard to the use of the line for the benefit of its customers.”

The document filed with the commission does not disclose the sale price. The cost of the project has been estimated at $1 to $1.2 billion. PacifiCorp owns 55% of the project and Idaho Power, the project’s developer, owns the rest.

The transaction “secures the funding necessary to ensure the project’s completion,” PacifiCorp spokesperson Simon Gutierrez told The Oregonian/OregonLive via email. “PacifiCorp remains committed to the project in partnership with Idaho Power.”

The exact lease payment amount that PacifiCorp would pay to the Berkshire Hathaway subsidiary also won’t be known until the closing of the proposed transaction, Gutierrez said.

In November, PacifiCorp’s credit rating was downgraded by S&P Global Ratings to the lowest investment-grade rating due to concerns over the company’s increasing wildfire liabilities. The credit rating also has been lowered by other agencies, including Moody’s in September.

PacifiCorp has paid nearly $750 million thus far in settlements over the deadly Labor Day 2020 wildfires, the most destructive fires in Oregon’s history. That includes $125 million paid to Oregon wineries over smoke damage from the fires. Juries also have ordered the utility to pay about $500 million to individual plaintiffs after a class-action ruling found it negligent by failing to shut off power during extreme fire conditions.

PacifiCorp is appealing those verdicts, but thousands of additional claims could push its liability into the billions – and the utility has said future damages could exceed its ability to pay.

In its analysis, S&P Global said PacifiCorp could improve its financial stance by reducing its capital expenditures.

“We believe PacifiCorp can reduce its capital spending during periods of stress, which indicates a limited need for refinancing under such conditions,” the analysts wrote.

Opponents of the B2H project claim the proposed leaseback sale is a move to bypass state oversight and a strategy for PacifiCorp to avoid serving its residential customers – which the utility had until recently claimed would benefit from the power.

Last month, the utility commission declined to rescind the certificate of public convenience and necessity that authorizes Idaho Power to seize private land via eminent domain. The commission originally issued the certificate in 2023 because PacifiCorp had demonstrated the line would serve its 805,000 residential customers, including 620,000 customers in Oregon.

But this spring, the utility reversed course, saying the line would serve an industrial customer instead because it was unable to procure firm transmission rights from the Bonneville Power Administration to move power west.

Last month, regulators maintained the line remains in the public interest because PacifiCorp might still pursue the transmission rights to serve its residential customers.

If the utility sells off its share of the project, that’s unlikely to happen, contends Irene Gilbert, a retired state employee and the co-chair of the nonprofit Stop B2H Coalition who has challenged the transmission project for years.

The proposed transaction is “an obvious manipulation of state agency rules to accommodate the developers,” Gilbert said. She added that the leaseback arrangement would allow the conglomerate to generate profits from the line equivalent to the state-regulated return PacifiCorp would earn if the asset were included in its rate base.

As part of its request to approve the sale, PacifiCorp asks the commission to find that “a proposed sale-leaseback for the B2H Project is consistent with the public interest.

The utility commission said it’s evaluating the utility’s request and will determine whether to proceed via an open meeting process or conduct a contested case hearing that’s similar to a civil court proceeding, said commission spokesperson Kandi Young.

The commission is required to issue an order on PacifiCorp’s request within 90 days, Young said.

The Oregon Department of Energy is also looking into whether the proposed transaction would impact the transmission line’s site certificate, a state authorization required to construct and operate certain large energy facilities, including large high-voltage transmission lines.

“We are evaluating whether PacifiCorp’s planned sale of its interest in the Boardman to Hemingway project would have any effect on the Energy Facility Siting Council approval,” department spokesperson Jennifer Kalez told The Oregonian/OregonLive.