Potential $1 Billion Lawsuit Looms for PacifiCorp Over Wildfire Costs in Oregon and California

The U.S. government is considering legal action against PacifiCorp, a subsidiary of Berkshire Hathaway owned by Warren Buffett, to recover almost $1 billion in expenses related to the 2020 wildfires in southern Oregon and northern California.

The company is attempting to negotiate a settlement for this potential lawsuit. This news was disclosed in an annual report filed by PacifiCorp's Iowa-based parent company, Berkshire Hathaway Energy, on Monday - just two days after Buffett expressed disappointment with the results at the conglomerate’s utility division in his letter to Berkshire Hathaway shareholders.

This new liability comes after the utility had already agreed to pay hundreds of millions of dollars in lawsuits related to these fires. In its annual report, Berkshire Hathaway Energy stated that the U.S. Justice Department is seeking $625 million for firefighting and cleanup costs associated with the September 2020 Archie Creek and Susan Creek fires. Oregon’s Justice Department also claims it is owed $109 million in damages related to these same fires.

In addition, the U.S. Forest Service has requested that PacifiCorp pay $356 million for firefighting costs and damages linked to the Slater Fire, which began in California but spread into Oregon as well. The wildfires were among the worst natural disasters in Oregon's history, resulting in nine deaths, over 1,875 square miles (4,856 square kilometers) burned, and more than 5,000 homes and other structures destroyed.

The lawsuits filed by Oregon claim that PacifiCorp negligently failed to turn off power for its 600,000 customers during a windstorm over Labor Day weekend in 2020, despite warnings from state leaders and top fire officials, leading to multiple fires caused by the company's power lines. Representatives of PacifiCorp and Berkshire Hathaway Energy have declined to comment on these new liabilities. The Justice Department did not immediately respond to a request for comment regarding potential lawsuits.

Omaha, Nebraska-based Berkshire estimates that its utilities face at least $8 billion in claims across all the wildfire lawsuits already filed in Oregon and California; however, these damages could be doubled or even tripled in some cases, and some of the lawsuits do not list a specific dollar amount. These costs, combined with the uncertain regulatory environment in western states where wildfires have become more prevalent, are making it difficult for utilities like PacifiCorp to decide when it makes sense to invest in major new power plants and transmission lines.

Buffett said that it will be many years until they know the final tally from Berkshire Hathaway Energy's forest-fire losses and can make intelligent decisions about future investments in vulnerable western states. "It remains to be seen whether the regulatory environment will change elsewhere," Buffett added. The billionaire investor also mentioned that extreme cases, such as with Pacific Gas and Electric in California or Hawaiian Electric utilities, could face bankruptcy, leading the country to consider turning to public power if private investors are no longer willing to take on the risks associated with utility businesses.