Category Archives: Berkshire Hathaway Energy

Berkshire Hathaway’s Utilities Save Millions in Q2 Thanks to EIM

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A number of Berkshire Hathaway’s utilities, including PacifiCorp and NV Energy, has saved millions million so far this year through the western Energy Imbalance Market (EIM).

The California Independent System Operator (ISO) reported that the western Energy Imbalance Market produced benefits of $39.52 million in the second quarter of 2017. The benefits since the western regional market was launched in 2014 now total $213.24 million.

In 2014, Berkshire Hathaway Energy’s PacifiCorp agreed to become the first participant in a new Energy Imbalance Market (EIM) as a way to balance electricity in-flows and out-flows on a regional basis and bring millions of dollars in benefits to participating utilities.

During the most recent three-month period, PacifiCorp saw benefits of $8.81 million, and NV Energy total benefits in April and May were $4.62 million, while June benefits are still pending data verification.

The EIM began financially-binding operation on November 1, 2014, by optimizing resources across the ISO and PacifiCorp’s balancing authority areas (BAAs), which includes California, Oregon, Washington, Utah, Idaho and Wyoming.

The EIM improves the integration of renewable resources and increases reliability by sharing information between balancing authorities on electricity delivery conditions across the entire EIM region.

Portland General Electric plans to enter the EIM in October 2017, followed by Idaho Power and Canada’s Powerex in April 2018. The Balancing Authority of Northern California/Sacramento Municipal Utility District, Seattle City Light and Los Angeles Department of Water and Power will begin participating in April 2019. Salt River Project of Phoenix is slated to enter the market in April 2020.

The EIM’s state-of-art technology automatically optimizes the real-time grid to find low cost energy regardless of its location to serve consumers in California, Arizona, Oregon, Washington, Utah, Idaho, Wyoming and Nevada.

Excess renewable energy in one area can be used to serve demand in another seamlessly and effectively, avoiding turning off clean energy resources when not enough local demand exists to use it. Another benefit comes from reducing the amount of energy flexibility reserves utilities must carry to manage load and supply variability, as they can tap into resources outside of their service area to serve their load at less cost.

During Q2 2017, the western EIM helped improve use of renewable resources that is estimated to have reduced carbon emissions by 28,700 metric tons. These emission reductions were made possible by using 67,055 megawatt-hours of excess renewable energy that otherwise would have been turned off.

“The EIM had another strong quarter,” said ISO President and CEO Steve Berberich. “The western real-time market is a proven platform for utilities to find and use low-cost energy that produces substantial cost savings — and it will only get better with seven more utilities preparing to join the market by 2020.”

© 2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Berkshire Supports Oncor’s Plan to Swap Assets with Sharyland

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Berkshire Hathaway has no problem with Oncor planned asset swap with Texas utility Sharyland.

Oncor announced that it had entered into an agreement with Sharyland to swap assets in a transaction valued at approximately $400 million.

Under the terms of the proposal, Sharyland will exchange their retail distribution assets and retail distribution operations for a set of Oncor’s transmission lines in West and Central Texas.

Sharyland and Sharyland Distribution & Transmission Services (SDTS) will transfer to Oncor their retail distribution assets and retail distribution operations located in their Stanton, Brady, and Celeste (SBC) service territories, as well as their McAllen service territory.

Oncor will transfer to SDTS transmission lines of similar value located in West and Central Texas, which Sharyland will operate on behalf of SDTS.

The proposed transaction also means that Sharyland’s approximately 54,000 retail distribution customers will become Oncor customers and, as a result, will see significantly reduced regulated retail delivery rates.

In a statement, Berkshire Hathaway Energy said applauds Oncor and the various stakeholders for developing solutions to ensure continued safe, reliable, and affordable service for customers.

“The problem-solving culture demonstrated by Oncor and its management team will be a great fit with Berkshire Hathaway Energy,” said Greg Abel, Berkshire Hathaway Energy chairman, president and CEO. “The conditions of the agreements are examples of Oncor’s strong commitment to customers; that same commitment is reflected across Berkshire Hathaway Energy’s businesses.”

© 2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Bankruptcy Court Adopts Berkshire’s Timeline for Oncor Deal

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The U.S. Bankruptcy Court adopted key hearing dates for future bankruptcy proceedings related to Berkshire Hathaway Energy’s offer to purchase Energy Future Holdings Corp. (EFH) and, ultimately, Oncor Electric Delivery Company LLC.

“We are pleased with the Bankruptcy Court’s decision, which maintains the timelines set forth in our merger agreement,” said Greg Abel, Berkshire Hathaway Energy chairman, president and CEO. “Our offer is a simple, straightforward deal that is beneficial to Oncor’s customers. Once the necessary approvals are received, we’re looking forward to Oncor joining the many Berkshire Hathaway businesses that are helping to grow the economy in Texas.”

As a member of Warren Buffett’s Berkshire Hathaway Inc. family of businesses, Oncor would receive the financial support to continue investing capital in critical infrastructure that will make the Texas energy grid even stronger and more reliable.

Establishing the bankruptcy court schedule was an important part of the acquisition process. Berkshire Hathaway Energy will continue working with stakeholders in Texas to garner additional support for its bid for Oncor.

So far, 10 major stakeholder and consumer groups have endorsed the deal and its 47 regulatory commitments that benefit the stakeholders in Texas.

© 2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Stakeholders Continue to Line Up for Berkshire’s Oncor Bid

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Berkshire Hathaway continues to line up supporters for its Oncor Electric Delivery Company bid, including from a host of key stakeholders.

The International Brotherhood of Electrical Workers Local 69 and Targa Pipeline Mid-Continent WestTex LLC/Targa Midstream Services LLC are the latest stakeholders to have expressed support for Berkshire’s proposed acquisition of Oncor.

“Support from the IBEW and Targa along with the endorsements we’ve received from other Texas business, community and consumer groups reinforces that our proposal is good for both Oncor’s customers and for Texas,” said Greg Abel, Berkshire Hathaway Energy chairman, president and CEO. “We appreciate the continued and growing support as we work through the transaction process; collectively, these efforts help move the proposal forward to benefit Oncor’s customers, creditors and key stakeholders.”

The announcement brings the total number of influential Texas stakeholder groups that support Berkshire Hathaway Energy’s proposed acquisition of Oncor to 10, including: Public Utility Commission Staff; Cities Served by Oncor; Texas Industrial Energy Consumers; Office of Public Utility Counsel; TXU Energy; NRG Energy; the Texas Energy Association for Marketers (TEAM); the Alliance for Retail Markets (ARM); IBEW Local 69; and Targa Pipeline Mid-Continent WestTex LLC/Targa Midstream Services LLC. TXU Energy and NRG Energy represent two of the largest retail electric providers in Texas, with TEAM and ARM representing dozens of Texas electric market participants. ARM participating members include Champion Energy Services, LLC; Direct Energy, L.P.; NRG Retail Companies; and TXU Energy Retail Company LLC.

© 2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Berkshire Lines Up Support for Oncor Deal

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Berkshire Hathaway Energy has announced the support of new Texas stakeholder groups for its proposed acquisition of Oncor Electric Delivery Company.

The announcement adds to an influential list of Texas business, community and consumer groups that have endorsed Berkshire Hathaway Energy’s bid for Oncor.
TXU Energy, NRG Energy, the Texas Energy Association for Marketers (TEAM) and the Alliance for Retail Markets (ARM) have signed a growing list of regulatory commitments proposed by Berkshire Hathaway Energy and agreed to support approval of the transaction as proposed.

“Today’s announcement illustrates the growing support for Berkshire Hathaway Energy’s proposed acquisition of Oncor,” said Greg Abel, Berkshire Hathaway Energy chairman, president and CEO. “Ours is a different kind of proposal. It’s one that hasn’t been seen before, and we want Texans to know that we will be a stable, long-term partner.”

In addition to the 44 regulatory commitments previously proposed by Berkshire Hathaway Energy, the company today also announced the addition of three more commitments that support the successful competitive energy market in Texas.

“Berkshire Hathaway Energy has worked tirelessly to put together a widely supported deal for Oncor customers, one that supports growing the Texas economy,” said Bob Shapard, Oncor CEO.

TXU Energy and NRG Energy represent two of the largest retail electric providers in Texas, with TEAM and ARM representing dozens of Texas electric market participants.

ARM participating members include Champion Energy Services, LLC; Direct Energy, L.P.; NRG Retail Companies; and TXU Energy Retail Company LLC.

Berkshire believes that having the support of these entities further distinguishes this transaction from those that have been previously proposed and demonstrates a growing momentum that provides the largest infrastructure company in Texas with the backing and financial resources of Berkshire Hathaway Inc.

“We will continue working with the state of Texas and other interested parties to provide long-term value for Texans. Once all necessary approvals are received, we look forward to Oncor joining the Berkshire Hathaway Energy family of companies,” said Abel.

Today’s announcement brings the total number of influential Texas stakeholder groups that support Berkshire Hathaway Energy’s proposed acquisition of Oncor to eight, including: Cities Served by Oncor, Texas Industrial Energy Consumers, Office of Public Utility Counsel, and Public Utility Commission Staff.

© 2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Commentary: Berkshire’s Patience Rewarded in Oncor

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With news that Berkshire Hathaway is acquiring Texas utility Oncor, Warren Buffett has once again shown that he is in the market for big acquisitions that produce solid, dependable revenue.

The all-cash consideration for reorganized EFH is $9 billion implying an equity value of approximately $11.25 billion for 100% of Oncor and is subject to closing conditions, including the receipt of required state, federal and bankruptcy court approvals. The transaction is currently expected to be completed in the fourth quarter of 2017.

Buffett has certainly been patient in pursuing this Texas-sized prize, and if successful, would mean he was able to acquire one of the biggest power-transmission companies in the United States.

Back in September 2014, Berkshire Hathaway Energy and several other energy companies, including NextEra Energy and Hunt Consolidated, signed confidentiality agreements for the purpose of exploring the acquisition of Oncor, which was up for auction due to the April 2014 bankruptcy of electric utility Energy Future Holdings.

Energy Future Holdings went under after being burdened with $40 billion in debt from a 2007 leveraged buyout.

Bankruptcy Drama

Over the past two years, while Oncor went through the bankruptcy process, it repeatedly looked like Berkshire was on the losing end in the pursuit of the utility. It was too bad, as it was the perfect fit for Berkshire, as it continues to build it energy company portfolio.

However, the proposed deal comes because the Public Utility Commission of Texas (PUCT) ended up rejecting NextEra Energy’s deal to buy Oncor, opening the door once again for an offer from Berkshire.

A Texas-Sized Energy Asset

Oncor is a quite a prize. The company is a regulated electric transmission and distribution service provider that serves 10 million customers across Texas. The company has the largest distribution and transmission system in Texas; with approximately 122,000 miles of lines and serving approximately 10 million Texans across the state.

Oncor is an excellent fit for Berkshire Hathaway, and we are pleased to make another long-term investment in Texas – when we invest in Texas, we invest big!” said Warren Buffett, chairman of Berkshire Hathaway. “Oncor is a great company with similar values and outstanding assets.”

Greg Abel, Berkshire Hathaway Energy chairman, president and CEO, said, “This partnership combines the strengths of two companies that share a common goal of providing exceptional customer service and a commitment to invest in critical infrastructure that will make the Texas energy grid even stronger and more reliable.”

“By joining forces with Berkshire Hathaway Energy, we will gain access to additional operational and financial resources as we continue to position Oncor to support the evolving energy needs of our state,” said Bob Shapard, CEO of Oncor. “Being part of Berkshire Hathaway Energy is a great outcome for Oncor. Oncor will remain a locally managed Texas company headquartered in Dallas, committed to the communities we serve, and our customers will continue to receive the safe and reliable service they have come to expect from our dedicated team of employees.”

Effective upon closing of the transaction, Bob Shapard will assume the role of executive chairman of the Oncor Board, and Allen Nye will assume the role of CEO of Oncor. “We are excited to begin the regulatory approval process as this transaction has significant support across our key stakeholders,” Nye said. “The stakeholders are eager to obtain a great outcome for Texas.”

“We are pleased to be working with Texas and stakeholders to ensure Oncor continues to be a strong electric transmission and distribution company. Oncor is an exceptional company with great employees and an excellent management team,” said Abel.

Energy Transmission is Great ROE

Transmission lines have been high on Berkshire Hathaway Energy’s wish list of late because they are a great way to put Berkshire’s huge insurance float to work for a high return with very low risk.

The AltaLink Example

In April 2014, BHE made a $2.9 billion purchase of Canadian company AltaLink from SNC-Lavalin Group Inc. The acquisition got the company the transmission lines for Calgary, Alberta, and gives it an 8.75-percent after-tax return on equity, with consumers picking up 100-percent of the tab for any new transmission lines.

Like AltaLink, the acquisition of Oncor will be a perfect fit for Berkshire Hathaway Energy, and with $935 million in operating revenues and $73 million in net income in the quarter ending March 31, Oncor will put a portion of Berkshire’s over $90 billion in cash to good use.

Growing Berkshire’s Energy Business

Berkshire Hathaway Energy currently has over $70 billion in assets, including one of the largest portfolios of renewable energy in the world.

Energy sector businesses made up 9.5 percent of Berkshire Hathaway’s earnings in 2016.

Now, it looks like Buffett’s patience has been rewarded, and Oncor will help Berkshire pass the $100 billion in energy assets mark.

© 2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Rocky Mountain Power to Build 140-mile, 500-kV Transmission Line

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Berkshire Hathaway’s Rocky Mountain Power, a unit of PacifiCorp, will build a new 140-mile, 500-kV transmission line running from the new Aeolus substation to the new Anticline substation; a 16-mile, 230-kV transmission line from the company’s existing Shirley Basin substation to the new Aeolus substation; rebuild four miles of 230-kV transmission line between Aeolus and the existing Freezeout substation; to rebuild 14 miles of an existing 230-kV transmission line between the Freezeout substation and the Standpipe substation.

Rocky Mountain Power, which serves nearly 1.1 million customers in Idaho, Utah and Wyoming, will file request for approval of the project on June 30 with the Utah Public Service Commission.

The company’s application will include a request for approval to procure or build new Wyoming wind resources with a total capacity of 860 MW.

© 2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Berkshire Provides Financing for Texas Wind Farm

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Berkshire Hathaway’s MidAmerican Wind Tax Equity will provide some of the financing for the Rattlesnake wind project in McCulloch County, Texas. Also providing financing is Citi.

The wind farm project is being built by Renewable Energy Systems (RES) and Chicago-based Goldwind Americas, a subsidiary of China’s Xinjiang Goldwind Science & Technology.

The project will consist of 64 Goldwind 2.5MW Permanent Magnet Direct-Drive (PMDD) 109m turbines, and will be the largest U.S. wind project that Goldwind has outfitted to date.

Goldwind is aggressively building wind projects around the world, and in May announced it will begin construction of a 149 wind turbine, 530MW wind farm to be called the Stockyard Hill Wind Farm in Australia.

RES is the world’s largest independent renewable energy company with a 12 GW portfolio of wind and solar energy projects.

© 2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Salt River Project to Join Western Energy Imbalance Market

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Another utility is joining the western Energy Imbalance Market (EIM) that has been saving two Berkshire Hathaway utilities, PacifiCorp and NV Energy, millions of dollars a year.

The Salt River Project (SRP) signed an agreement for the Phoenix-based municipal utility to participate in the EIM beginning in April 2020.

“The EIM produces efficient use of resources and lower costs of energy for participating utilities,” said Steve Berberich, ISO President and CEO. “We welcome Salt River Project to the western EIM and look forward to working with the utility for a seamless entry in 2020.”

SRP is a community-based, not-for-profit public power utility and the largest provider of electricity in the greater Phoenix area. It serves more than 1 million customers and is the metropolitan area’s largest supplier of water.

It is estimated that SRP, which has been serving central Arizona since 1903, can save up to $4.5 million annually by participating in the EIM.

“The EIM can help save money for SRP and its customers by providing real-time access to the lowest cost resources across a significant portion of the Western grid,” said John Coggins, Senior Director of Power Delivery. “It will complement SRP owned generating resources and energy purchases from the wholesale market.”

The western EIM’s advanced market systems automatically find the lowest-cost energy to serve real-time consumer demands of participating utilities. This market enables utilities to buy and sell power more efficiently in the hour before the energy is needed, with five-minute plant dispatching, which result in improved efficiencies and cost savings.

Current western EIM participants, which include the two Berkshire Hathaway Energy companies, have realized savings totaling nearly $142 million since the wholesale market was launched in November 2014.

Utilities now active in the western EIM include Oregon-based PacifiCorp; NV Energy of Las Vegas, NV; Puget Sound Energy of Washington state; and Arizona Public Service of Phoenix, Ariz.

Other utilities that have formally agreed to join the EIM include Portland General Electric on October 1, 2017, Idaho Power on April 1, 2018, and Seattle City Light and Balancing Area of Northern California/Sacramento Municipal Utility District on April 1, 2019.

The western EIM serves utility consumers in Arizona, California, Idaho, Nevada, Oregon, Utah, Washington, and Wyoming.

© 2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Data Centers Offer Growth Opportunity for NV Energy

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Berkshire Hathaway’s NV Energy is looking towards an expanding number of Nevada-based data centers to fuel its growth.

The key is so called green tariffs, where corporations negotiate that all the power will come from renewable sources.

In January 2017, NV Energy and Apple reached an agreement to build 200 megawatts of additional solar energy in Nevada by early 2019. The project will support Apple’s renewable energy needs for its Reno data center. And in May, Apple announced that it had committed $1 billion too expand its data center at the Reno Technology Park.

Reno has become a hub for giant data centers powered by renewable energy, and in addition to Apple, Google has a data center there as well.

NV Energy has filed an application with the Public Utilities Commission of Nevada (PUCN) to enter into a power purchase agreement (PPA) for the solar power plant.

The project will bring NV Energy’s total to more than 529 megawatts of new solar resources in construction in Nevada or under review for approval.

Why Nevada for Data Centers?

Key to data centers is reliability, and Nevada offers several important benefits weather-wise in that area. In addition to having lots of sunshine for solar power, the state doesn’t suffer from floods, hurricanes or tornados.

There already are 491 megawatts of universal solar resources in Nevada currently serving NV Energy customers. Apple will also dedicate up to 5 megawatts of power to NV Energy’s future subscription solar program for residential and commercial customers.

© 2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.