Tag: Berkshire Hathaway Energy

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Berkshire Hathaway Energy may soon be joined by Mexico grid operator CENACE in the western Energy Imbalance Market. CENACE has decided to explore EIM participation for Baja California Norte FOLSOM, California.

CENACE, a public agency, controls Mexico’s electric system and manages the wholesale electricity market as it transitions to a fully competitive market. The grid operator dispatched 68,044 megawatts of electricity in 2015 using more than 33,000 miles of high-voltage power transmission lines. Mexico energy policies mandate a renewables portfolio goal, including hydroelectricity, of 25 percent in 2018, 30 percent in 2021, and 35 percent by 2024.

As the western Energy Imbalance Market continues to yield proven benefits, the California Independent System Operator (ISO) and El Centro Nacional de Control de Energía (CENACE) announced that the Mexican electric system operator has agreed to explore participation of its Baja California Norte grid in the real-time market. CENACE and the ISO will begin a benefits assessment as well as enter into a cooperation agreement to support CENACE’s market implementation as directed by the clean energy memorandum of understanding between the Ministry of Energy of the United Mexican States and the State of California.

The MOU was signed by the Mexican Secretary General of Energy Pedro J. Coldwell and California Governor Edmund G. Brown Jr. in July 2014. The Baja California Norte region has two California grid connections — Otay Mesa and Imperial Valley (both also known as Path 45), but it is not connected to Baja California Sur or the Mexico mainland grid.

“CENACE’s Baja California Norte participation in the western EIM will enable it to benefit from the savings that a large geographic region can offer,” said Steve Berberich, ISO President and CEO. “Like our current EIM participants, we recognize that a successful energy future relies on regional collaboration to best plan and optimize resources, especially renewable power. We welcome CENACE’s interest and agreement to explore participating in the western EIM.”

CENACE General Director Eduardo Meraz agreed that participation in the western real-time market and the benefits realized so far by other participants is worthy of serious consideration. “Mexico has had a long, productive relationship with the ISO as we coordinate the management of our interconnected electricity grids,” Meraz said. “It is only logical for CENACE to carefully consider Baja California Norte’s participation in the western EIM, with its promises of lower-cost electricity and increased renewable integration.”

The ISO uses state-of-the-art technology to automatically match lower cost energy supply from across the West with demand every five minutes. This flexibility enables ISO grid operators to more efficiently use wind and solar resources from a wide geographic area where power output can change rapidly depending on wind speeds and cloud cover. The resource optimization occurs across the entire EIM footprint giving utilities new access to low cost generation. The cost and environmental benefits produced by the EIM to date have been positive.

Since it began operation with Berkshire Hathaway’s Oregon-based PacifiCorp in November 2014, the western EIM has realized more than $88 million in cost benefits. The real-time energy market also saved over 126,000 metric tons of carbon emissions by using excess renewable energy to offset fossil fuel generation that would have been needed to meet regional demand that otherwise would have been turned off to protect grid reliability.

The EIM currently operates in eight western U.S. states, including California, Oregon, Washington, Utah, Idaho, Wyoming, Arizona and Nevada.

Another Berkshire Hathaway utility, NV Energy of Las Vegas, entered the market in December 2015, while Arizona Public Service, based in Phoenix, and Puget Sound Energy of Washington began EIM participation on October 1.

Portland General Electric in Oregon is scheduled to enter in October 2017 followed by Idaho Power in April 2018.

© 2016 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.

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Denmark-based Vestas has received a firm and unconditional order from MidAmerican Energy Company for 214 MW of Production Tax Credit (PTC) qualifying V110-2.0 MW turbine components.

Vestas, the only global energy company dedicated exclusively to wind energy, will supply up to 1,000 V110-2.0 MW wind turbines for MidAmerican Energy’s new Iowa 2 GW Wind XI farm.

The turbines will be installed between 2016 and 2019, and Vestas will also receive a five-year Active Output Management 4000 service agreement that includes extension options for up to 10 years.

“Wind energy helps us keep prices stable and more affordable for customers. It provides jobs for Iowans and other economic benefits for our customers, communities and the state. Wind energy also contributes to a cleaner environment for everyone,” said Bill Fehrman, president and CEO, MidAmerican Energy. “We are proud to expand wind generation in Iowa. And, our customers appreciate that we’re doing it without asking for an increase in rates to pay for it.”

“With this order, MidAmerican positions itself to secure the full value of the PTC for the Wind XI project, and takes the next step in delivering low-cost, domestic wind energy to its customers. As the only state to generate more than 30 percent of its energy from wind, Iowa leads the country in delivering wind energy’s economic and environmental benefits to its communities, and it’s an honor to be a part of the largest wind project in the state’s history.” said Chris Brown, President of Vestas’ sales and service division in the United States and Canada.

© 2016 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.

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Berkshire Hathaway’s NV Energy has been in a fight on several fronts. On one side it has rooftop solar companies, such as Solar City, trying to pitch consumers to generate their own electricity. On the other side are major casinos that are looking to dump NV Energy because they say their rates are too high.

Both MGM Resorts and Wynn Resorts are paying tens of millions to exit the NV Energy power grid on October 1.

Faced with these challenges, NV Energy is doing the smartest thing it can. It is working to cut the cost of generating electricity in order to make it the most attractive option for residential and commercial customers alike.

A proposed 100-megawatt solar project in Boulder City, Nevada, will do just that. When it comes on-line in 2018, it will produce electricity at only four cents per kilowatt-hour, which is one of the lowest costs in the United States.

The new solar energy project is the result of a Request for Proposals that was issued earlier this year. With the oversight of an independent evaluator, NV Energy signed a 25-year power purchase agreement with Techren Solar LLC to build a 100-megawatt high-efficiency single-axis solar photovoltaic project in Eldorado Valley. The project is in the development phase and, subject to regulatory approval, is expected to be operational in the fourth quarter of 2018.

NV Energy’s Senior Vice President of Energy Supply Kevin Geraghty noted that the selection criteria for the new solar project was primarily based on the best value to NV Energy customers, but also factored in economic and job benefits to Nevada.

“At an average cost of energy for the life of the project at approximately four cents per kilowatt-hour, this is one of the lowest-cost solar projects in the nation. And, we are very pleased with the fact that Techren has already signed a work-site agreement with local unions 357 and 396 of the International Brotherhood of Electrical Workers,” Geraghty said.

This is not the first low-cost solar deal for NV Energy. In 2015 it agreed to a 20-year fixed-rate contract for First Solar’s soon to be built 100 MW Playa Solar 2 at the low rate of only 3.87 cents a kilowatt-hour.

Retiring Higher Cost, High Polluting Coal-Fired Plants

The other part of the battle is getting rid of higher cost, legacy coal-fired plants. The plants not only cost a lot to run, but put NV Energy on the wrong side of green consumers.

Also in its August 15 filing, NV Energy proposed an earlier retirement date for the remaining 257-megawatt coal-fired unit at the Reid Gardner Generating Station. The proposal asks to move the original December 31, 2017, retirement date to February 28, 2017.

NV Energy already retired the first three generating units at Reid Gardner at the end of 2014, and is also exiting its participation in Arizona’s coal-fired Navajo Generating Station by the end of 2019.

Lots of Sunshine

With Nevada having an average of 294 sunny days a year, it’s one the most attractive states for rooftop solar, but that also makes it one of the best states for large-scale solar farms.

The good news for NV Energy, and all of Berkshire Hathaway Energy, is the cost of large-scale solar power generation has dropped far more rapidly than analysts had predicted.

The U.S. Department of Energy (DOE) noted that “2020 price projections are approximately one-half of what same analysts projected 5-10 years ago.”

The DOE is projecting a decline in solar PV system module prices for utility scale installations from its $4 in 2010 to less than $2 by 2016. Utility-scale PV is defined as ground-mounted systems that are greater than ≥5 megawatts.

NV Energy is betting that it can retain customers by aggressively lowering the cost of power generation with low-cost, long-term agreements, and by closing its legacy coal-fired generating plants. Its planned 100-megawatt Techren Solar project will bring NV Energy’s total renewable energy portfolio to more than 1,900 megawatts–enough energy to serve more than a million average homes.

It’s the right plan for NV Energy in the battle for the Nevada consumer.

© 2016 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.

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Berkshire Hathaway’s MidAmerican Energy has received the go-ahead from Iowa regulators for its $3.6 billion Wind XI wind farm.

In a joint news conference on April 14, 2016, held with Iowa Gov. Terry Branstad, the company first announced plans to invest $3.6 billion to install additional wind turbines in Iowa by year-end 2019.

Now that it has been approved by the Iowa Utilities Board, Wind XI will within three years become the largest economic development project in Iowa’s history.

When the 2,000-megawatt Wind XI project is completed, Hathaway’s MidAmerican Energy’s annual renewable energy generation is expected to reach a level that’s equivalent to approximately 85% of Iowa’s retail customers’ annual use.

In a release issued by the IUB:

“Today’s order states that MidAmerican has satisfied the two conditions in Iowa Code and is therefore eligible for advance ratemaking principles. The ratemaking principles associated with Wind XI, as agreed to by the parties, are reasonable. The Settlement as a whole will reduce MidAmerican’s reliance on fossil-fueled generation and position MidAmerican to meet ongoing and future environmental mandates in a manner that is more likely to benefit its ratepayers.

The Settlement’s benefits to retail customers will help ensure that MidAmerican’s current and future customers continue to enjoy adequate service and facilities at just and reasonable rates. In the settlement agreement, the ratemaking principles approved set the cost cap for Wind XI Iowa project at $1.792 million per MW including allowance for funds used during construction (AFUDC). For the return on equity (ROE), the settlement agreement provides an allowed return on the common equity portion of Wind XI that will be included in Iowa electric rate base at 11.00 percent.

MidAmerican filed their Wind XI request for advanced ratemaking principles with the Board on April 14, 2016.”

© 2016 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.

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NextEra Energy is the winner in the bidding for Oncor Electric Delivery Company, a regulated electric transmission and distribution service provider that serves 10 million customers across Texas. NextEra Energy will pay $18.4 billion in cash and stock.

Berkshire Hathaway Energy was one of the other bidders considered to be in the lead for the prized energy distribution asset.

Oncor has been in and out of auction ever since the April 2014 bankruptcy of its biggest shareholder, Energy Future Holdings. The company went under after being burdened with $40 billion in debt from a 2007 leveraged buyout.

A Texas-Sized Asset

Oncor is a quite a prize. The company has the largest distribution and transmission system in Texas; with approximately 119,000 miles of lines and more than 3 million meters across the state.

Energy Transmission is Great ROE

Back in June 2014, Warren Buffett proclaimed he was ready to put at least $15 billion into energy generation and transmission assets, and at that time Oncor, with a value of roughly $17.5 billion looked like a good fit.

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 would have been a perfect fit for Berkshire Hathaway Energy, which currently has $70 billion in assets, including one of the largest portfolios of renewable energy in the world.

© 2016 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.

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Hawaiian Electric, the electric utility for all of Hawaii, is not for sale according to company spokesmen, noting that “the company is not currently in discussions with any other party regarding a business combination and does not intend to initiate any such discussions.”

Berkshire Hathaway has been actively seeking energy assets, and is currently bidding for Oncor Electric Delivery Company, a regulated electric transmission and distribution service provider that serves 10 million customers across Texas.

Rumors of a bid for Hawaiian Electric by Berkshire Hathaway heated up after the Hawaii Public Utilities Commission denied NextEra Energy’s bid to acquire Hawaiian Electric. The denial of NextEra’s application appeared to open the door for a bid by Berkshire Hathaway Energy. However, Hawaiian Electric is not interested.

Thanks, But No Thanks

Hawaiian Electric released the following full statement:

“Although Hawaiian Electric Industries (HEI) has a long standing policy of not commenting on market rumors and speculation, in view of the frequent questions raised by various stakeholders since the recent termination of the company’s merger agreement with NextEra Energy, HEI is deviating from this policy in this instance.

The business and affairs of HEI are managed under the direction of its boards of directors. In accordance with its fiduciary duties, the boards have determined that it is in the best interests of the company and all of the stakeholders that it serves – including shareholders, customers, employees and communities – to remain independent and to work toward realizing the clean energy future and vibrant local economy we all want for Hawaii. In this regard, and despite statements reported in the media about other unnamed parties rumored to be interested in acquiring HEI, the company is not currently in discussions with any other party regarding a business combination and does not intend to initiate any such discussions.

The company will not provide any updates to the above statement nor otherwise comment on market rumors or speculation.”

Never Say Never

While the statement doesn’t completely slam the door shut, it’s not exactly an invitation to bid. One of the biggest hurdles is local opposition to any outside ownership due to fear of rising rates.

© 2016 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.

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It may seem like a longshot, but ominous storm clouds forming over the planned acquisition of Hawaiian Electric Company by NextEra Energy may mean an opportunity for Berkshire Hathaway Energy if the deal falls through.

Key to NextEra’s purchase of the Honolulu-based utility is the approval of the Public Utility Commission, and that commission just had a major change in leadership.

Governor David Ige, who has opposed the merger, and has openly questioned NextEra Energy’s commitment to Hawaii’s goal of 100% renewable energy, just appointed a new PUC Commissioner.

On July 1, Thomas G. Gorak was sworn as a Commissioner to the Hawaii Public Utilities Commission after being appointed to the Commission by Governor Ige on June 29.

Berkshire’s Proven Commitment to Renewable Energy

Berkshire Hathaway not only believes in renewable energy, it already has one of the largest renewable energy portfolios in the world. Its subsidiary BHE Renewables encompasses BHE Solar, BHE Wind, BHE Geothermal, BHE Hydro as well as renewable project development and commercial management. BHE Renewables owns solar, wind, geothermal and hydroelectric projects in eight states that produce energy for both the wholesale market and for customers under long-term power agreements.

The company already has 3,877 megawatts of renewable energy capacity, including one of the world’s largest solar farms, the 579 MW Solar Star project in southern California.

Another example of Berkshire’s commitment to renewable energy is in Iowa, where it is aggressively working towards producing 100% of the state’s energy needs through wind power.

In April, Berkshire’s MidAmerican Energy Company announced plans for a $3.6 billion, 2,000 megawatt wind farm in Iowa that will feature 1,000 wind turbines.

Does Berkshire Have an Interest in Hawaiian Electric?

Berkshire already owns BHE Hydro’s Wailuku run-of-river 10 megawatt hydro project in Hawaii. The hydroelectric project consists of a massive 60-inch pipeline located 2,000 feet above sea level that carries water nearly three miles, transporting it from the Wailuku River diversion all the way to the powerhouse.

In addition, Berkshire recently registered MidAmerican Energy Services LLC as a new business in Hawaii.

It could just be possible that Warren Buffett will be saying “aloha” in Hawaii.

© 2016 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.

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After looking all but out, Berkshire Hathaway Energy is back in the running for Oncor Electric Delivery Company, a regulated electric transmission and distribution service provider that serves 10 million customers across Texas.

Oncor has been in and out of auction ever since the April 2014 bankruptcy of its biggest shareholder, Energy Future Holdings. The company went under after being burdened with $40 billion in debt from a 2007 leveraged buyout.

A Texas-Sized Asset

Oncor is a quite a prize. The company has the largest distribution and transmission system in Texas; with approximately 119,000 miles of lines and more than 3 million meters across the state.

The End of a Long Waiting Game

After originally pushing back the auction of Oncor from November 2014 to March 2015, it looked like no auction would ever happen. Instead, the creditors in the holding companies Energy Future Intermediate Holdings and Energy Future Holdings were expected to take ownership of Oncor.

Then, in September 2015, U.S. Bankruptcy Judge Christopher Sontchi agreed to a plan by Hunt Consolidated that would have allowed the company to take ownership with Oncor’s current management remaining in place. When this deal fell apart over the terms set by the Public Utility Commission of Texas, Oncor came back into play.

Energy Transmission is Great ROE

Back in June 2014, Warren Buffett proclaimed he was ready to put at least $15 billion into energy generation and transmission assets, and Oncor, with a value of roughly $17.5 billion looked like a good fit.

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

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.

It’s money that like the electricity keeps flowing day and night.

The Key Bidders for Oncor

NextEra Energy Inc. has already made an offer to acquire Oncor and is reportedly the closest of any of the seven interested companies, which includes BHE and Edison International.

The acquisition of Oncor would be a perfect fit for Berkshire Hathaway Energy, which currently has $70 billion in assets, including one of the largest portfolios of renewable energy in the world.

© 2016 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.