Tag: Berkshire Hathaway Energy

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Berkshire Hathaway Energy

Benefits From Energy Imbalance Market Top $45 million

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Berkshire Hathaway Energy’s participation in the western Energy Imbalance Market continue to meet projections. The company has two utilities, NV Energy and PacifiCorp, participating.

According to the California Independent System Operator (ISO), total benefits realized in the 2015 fourth quarter were $12.29 million, which increases the total benefit since the November 2014 EIM launch to $45.7 million.

These benefits accrue to all EIM participants and their customers, as well as the ISO.

The totals are in line with initial projections and as expected, increased participation benefits all EIM participants. Benefits for October were $2.51 million, down slightly from the summer months because of reduced transmission capacity resulting from a line outage.

With the line restored to service, benefits increased again in November to $3.49 million. With NVE’s entry into EIM in December, the benefits jumped to $6.29 million, including $840,000 that accrued to NVE and its customers and also additional benefits to PacifiCorp and ISO customers because of NVE’s participation and additional transfer capability that they bring to the EIM operation.

NV Energy entering the real-time market in December 2015 produced significant benefits because their participation increases transfer capability between the participants. Interregional transfers enabled in EIM allows each balancing area to take advantage of lower cost resources in other areas.

Besides the benefits produced by interregional transfers, savings were also realized by avoiding having to reduce renewable resources’ output in the ISO control area during times of oversupply. The total avoided energy reduction for Q4 was 17,573 megawatt hours, which greatly outpaced the avoided reductions of 828 megawatt-hours in Q3. Avoiding the renewables output reductions in Q4 displaced an estimated 7,521 metric tons of carbon emissions.

About the Energy Imbalance Market

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. The only real-time energy market in the Western U.S., advanced ISO market systems automatically balance supply and demand for electricity every fifteen minutes, dispatching the least-cost resources every five minutes.

© 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 Energy Commentary

Commentary: Berkshire Hathaway’s Compromise on Nevada Solar Panel Fees is Just Round One

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Berkshire Hathaway has become a world-leader in renewable energy power generation based on its huge and varied solar and wind farms, but it has been on the other side of the renewable energy fence as it comes to rooftop solar panels purchased by consumers.

At issue is who pays for the electric transmission grid when solar panel owners pay little or nothing for power, and sell back their excess power to utilities through the grid.

Ground zero is Nevada, where Berkshire Hathaway Energy’s lobbying produced a host of new fees for existing solar panel owners, and a prohibitive cost structure that caused rooftop solar supplier SolarCity to announce that it would lay-off 2,000 workers and leave the state.

The fees caused an uproar from solar panel owners that watched their expensive capital intensive investments, which had been promoted as bringing many years of savings, lose all economic benefit.

Now, Berkshire is backing off at least a bit.

On February 1, Berkshire’s utility NV Energy will submit a proposal to the State of Nevada Public Utilities Commission proposing to grandfather in the existing 30,000 solar panel owners to the old rate structure for a period of up to twenty years. The move may quell homeowner anger, but it still doesn’t address the viability of the home solar panel industry.

According to reports, Berkshire’s proposed rate changes still do not make new rooftop solar panels viable in terms of cost savings for the homeowner.

Nevada Governor Brian Sandoval has supported NV Energy’s position that additional fees are necessary in order to not leave non-rooftop solar panel homes with the burden for paying for both the transmission grid and the retirement costs of decommissioning old fossil fuel plants, which are primarily highly polluting coal-fired plants.

While it’s probably not a winning long-term strategy for energy producers, such as Berkshire Hathaway Energy, to rely on legislation and rate structures that make home solar panel ownership uneconomical, they are right that they do need to find a way for solar panel owners to pay a share of the maintenance of the transmission grid. However, they must do this without killing what has become a clean power source for hundreds of thousands of consumers.

The Importance of the Transmission Grid

Sometimes lost in the debate is that even rooftop solar panel owners benefit from the grid. The grid supplies power to solar-panel owners at night, on cloudy days, and maintains fleets of repair trucks that not only do regular maintenance, but also respond quickly to natural disasters. The robust ability that utilities have to restore the grid after natural disasters should not be taken lightly, as their collaboration across large geographic areas often means that crews quickly come from hundreds or thousands of miles away to help restore service after hurricanes, blizzards, and other disasters.

For utilities, rooftop solar either represents competition for their centrally generated energy model, or a growing replacement for antiquated power sources.

As a replacement for other power sources, it’s unreasonable to expect utilities to buy back power at retail rates. That’s like asking a clothing store to buy clothes from you at retail and sell it at retail.

The real battle needs to be fought in the marketplace, where the true cost of cleaner forms of energy generation will determine the winners and losers. The cost of solar panels for both residential and utility scale generation has dropped dramatically, and as it continues to drop, it will determine which part of the economic model is most cost effective for consumers.

Another factor that should not be forgotten is that utilities have to cover the cost of retiring old fossil fuel burning plants. These costs must be shared by everyone, as everyone benefitted from the power they produced. Those costs cannot be left for just the consumers that are relying solely on the grid for their electricity needs.

In the end, both sides need a deal where both can prosper. After all, there are many customers that will never have solar panels and will continue to rely on utilities due to their location, cost, or the amount of time they will be living in a given home or apartment. And utilities will not only be needed to provide power to homes, but also factories, hospitals, schools, street lights, and a host of other settings that can’t afford to be left with a disproportionate share of the cost of the transmission grid.

What is also clear, is that Berkshire’s proposal is just the next round in a battle over who pays for the electric grid, and how much.

© 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 Energy

Berkshire Hathaway’s Illinois Wind Farm Gets Approved for Construction

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Officials in Bureau County, Illinois, have approved Berkshire Hathaway’s proposed Walnut Ridge wind farm. The go ahead means the planned 215MW wind farm can proceed even though it was initially rejected by the local zoning board of appeals.

The Bureau County Board has approved conditional use permits that will allow the construction of 118 wind turbines. The plan was originally for up to 123 turbines, but nine were rejected as too close to a landing strip.

Walnut Ridge is located on approximately 14,000 acres of farmland in North-central Bureau County south of the Village of Walnut. This site was chosen as a location for a wind farm due to the existence of a ridge running from Mendota to the northeast and past Princeton to the south.

The project was originally developed by Edina, Minnesota-based Geronimo Energy, LLC, and was sold to Berkshire Hathaway Energy in May 2015 in a package of renewable energy projects that also included the Grande Prairie Wind Farm in Holt County, Nebraska, and a portfolio of future Minnesota solar projects.

Walnut Ridge was temporarily delayed  in May 2015 by a federal lawsuit by property owners claiming the wind farm would blight the area in northwestern Illinois.

The wind farm will make land use payments of roughly $1.2 million per year, and will pay taxes of approximately $1.6 million per year.

The General Services Administration has already entered into a 10-year agreement to buy the power generated by the wind farm.

© 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 Energy

Oregon Environmental Groups Hail Berkshire Energy’s Plan to Eliminate Coal

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Two west coast utilities have pledged to eliminate coal-powered electricity generation from their energy production. The utilities are Berkshire Hathaway’s Pacific Power and Portland General Electric Company.

Pacific Power serves customers in Oregon and Washington, Idaho, Wyoming, Montana and Northern California. Portland General Electric serves Portland, Salem and a total of 52 Oregon cities.

The two utilities pledged to eliminate their use of coal by 2035, and the move drew strong praise from a coalition of environmental groups that had pushed for the move. In return, the environmental groups that include the Oregon Environmental Council, Climate Solutions, and the Sierra Club, among others, agreed shelve a proposed Oregon ballot measure that would have required the utilities to get fifty-percent of their energy from renewable sources by 2040. The move for the ballot measure will be halted provided  the Oregon legislature passes similar legislation.

The two utilities have been heavily reliant on coal, with Pacific Power getting nearly 60-percent of its power from coal in 2014, and Portland General Electric Company got roughly 24-percent of its power from coal over the same period.

The proposed legislation, which would be a renewal of the Renewable Portfolio Standard that became law in 2007, would require utilities to meet renewable energy goals of 27-percent renewables by 2025, 35-percent by 2035, and 50-percent renewables by 2040.

Pacific Power is already hard at work on that goal, with the recent construction of the Black Cap Solar Facility, located on 20 acres a few miles west of Lakeview, Oregon. The 2-megawatt photovoltaic solar panel facility is equipped with a sophisticated tracking system that optimizes the sun’s power. It is also buying power from the Old Mill solar plant near Bly, Oregon, which is the state’s largest solar facility. It was built by Obsidian Renewables in 2015 on the site of a long-closed former Weyerhaeuser sawmill 50 miles east of Klamath Falls. Combined, the two facilities provide 7-megawatts of solar power.

Berkshire Hathaway and Renewable Energy

Berkshire Hathaway Energy has one of the largest renewable energy portfolios in the U.S. The company gets approximately a quarter of its generating capacity from renewable and noncarbon sources such as wind, water, solar and geothermal.

© 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 Energy

Tax Credit Extension for Wind and Solar Boosts Berkshire’s Renewable Energy Investments

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Both the United States House and Senate agreed to grant extensions to the 30 percent investment tax credit (ITC) for the production of solar energy and the 2.3-cent-per-kilowatt-hour production tax credit (PTC) for the production of wind power.

The extensions will fuel the growth of both wind and solar, as the industries gain tax credits through 2020.

The credits were originally scheduled to expire for any projects beginning construction after December 31, 2014.The credits have now been extended to construction starting before January 1, 2020, with gradual phase-outs.

A Big Boost for Berkshire

With its huge commitment to wind power in Iowa, Nebraska and Texas, Berkshire Hathaway is reportedly the largest user of these energy investment tax credits.

In October, Berkshire Hathaway Energy borrowed $275 Million for its Jumbo Road wind farm in Texas, and Berkshire Hathaway’s MidAmerican Energy Company is currently building the tallest land-based wind turbine ever built in the United States at its wind farm in Adams County, Iowa.

Meeting Lower Carbon Goals

In August 2015, President Obama and the EPA announced the Clean Power Plan, which set aggressive goals for reducing carbon pollution from power plants. When the Clean Power Plan is fully in place in 2030, carbon pollution from the power sector will be 32 percent below 2005 levels.

Expanded use of wind and solar power generation will enable the retirement of antiquated coal-burning and oil-burning plants, which will not only reduce carbon dioxide (CO2) emissions linked to climate change, but will also reduce emissions of sulfur dioxide and other pollutants that cause an assortment of health ailments.

© 2015 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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Acquisitions Berkshire Hathaway Automotive

Special Report: Did CarMax Just Make a Berkshire Hathaway Automotive Acquisition More Likely?

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CarMax, the no haggle, used car retailer with 150+ locations nationwide,
has greatly increased its presence in Boston. The move creates competitive pressures for all of Boston’s car dealers and brings up a big question.

Is it now likely that the Herb Chambers group of auto dealerships will become part of Berkshire Hathaway Automotive (BHA)?

Herb Chambers Companies, a privately-held, Boston-based dealership group with 55 total dealerships, looks to be the perfect fit for BHA, and its owner could be ready to sell. Herb Chambers could be all the more ready now that CarMax has expanded from a single outlet in the town of North Attleboro, Massachusetts, to adding two new outlets in the towns of Norwood and Danvers.

The Norwood store features 40,000 square-feet of showroom and service area, and the Danvers store features 20,000 square-feet of showroom and service area.

And There’s More Coming to Boston

A CarMax a little further west in the town of Westborough is scheduled to open in the summer of 2016, so the competition will only continue ratcheting up in the greater Boston area.

CarMax is not just another dealership group. It has muscle. It’s  a national used car power house that’s grown to be a member of the FORTUNE 500 and the S&P 500.

According to the company, during the 12 months ending February 28, 2014, nationally CarMax retailed 526,929 used cars and sold 342,576 wholesale vehicles at in-store auctions.

Who is Herb Chambers?

Herb Chambers is a former copier salesman who has spent the past thirty years building a top dealership group that is the 12th largest privately-held auto group in the nation.

Would he sell?

Chambers has already stated that he would sell if the price is right, and he tips his hat to Warren Buffett’s $4.1 billion Van Tuyl Group acquisition for boosting his personal net worth to some $1.5 billion, as valuations jumped throughout the whole sector.

Auto sales are currently at record levels and private equity money, including financier George Soros, has been looking to get in.

Opening the Door to Berkshire

Over the years, Chambers has turned down offers from AutoNation Inc. and Penske Automotive Group. Now, with valuations high for auto groups, there may be no better time to cash out.

Like Buffett, Chambers is a Shrewd Guy

Herb Chambers is certainly not afraid to sell when the time is right. Three decades ago he founded A-Copy America, and after merging it with Ikon Office Solutions, he cashed out with a big sale to Ricoh. It was a shrewd move, and Chambers has proved to be a shrewd guy who currently sells more cars than anyone else in New England.

Now, with competition heating up in the Boston market, the perfect exit strategy for Herb Chambers this time could involve Berkshire. After all, Warren Buffett’s already let be known that his goal is to make BHA much bigger.

Buffett wrote in his 2015 Berkshire Hathaway Chairman’s Letter that “…if we can buy dealerships at sensible prices – we will build a business that before long will be multiples the size of Van Tuyl’s $9 billion of sales.”

A deal with Herb Chambers could be just the way to do it.

© 2015 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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Acquisitions Berkshire Hathaway Automotive Berkshire Hathaway Energy Duracell Minority Stock Positions NetJets Precision Castparts Warren Buffett

Commentary: A Christmas Wish List for Under Warren Buffett’s Tree

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Here’s a Christmas wish list for presents under Warren Buffett’s tree. The items are big, so we’ll fit them under Charlie Munger’s tree as well.

1. Precision Castparts: There’s nothing like getting the present you bought for yourself. The pending acquisition the aerospace manufacturer looks like the gift that will keep on giving.  Demand for new airplanes will double over the next 15 years, as aging fleets are retired and millions more people start to fly regularly in India and China.

2. Duracell: Because everyone likes to get cash for Christmas! With the Duracell acquisition set to close in February 2016, Berkshire will gain not only the leading alkaline battery manufacturer, but will also get a company recapitalized by P&G with $1.7 billion in cash, and will get huge tax savings as it trades in its appreciated P&G stock for the battery maker.

3. More German Companies: Warren Buffett’s admiration for the German economy was on full display at the Berkshire Hathaway annual meeting in May 2015. This past February, Berkshire Hathaway struck a deal to acquire Devlet Louis Motorradvertriebs, a mail-order and retail chain selling motorbike clothing and accessories. The move, according to Buffett, was just the first small acquisition in a country with a strong economy and work ethic. And, with a rising dollar and a shaky euro, will more German companies fit under Berkshire’s tree?

4. Lots of Natural Gas: As the world dumps coal and moves to cheaper and cleaner forms of energy, Berkshire’s on the verge of striking it rich in Australia’s gas fields. Natural gas prices may be cratering now, but it never hurts to have a majority share of four trillion cubic feet of gas-in-place (yes, trillion) in Australia’s Whicher Range and Wonnerup gas fields. A new test well hopefully will bring good news in the new year.

5. More Auto Dealers: When Berkshire Hathaway jumped into the auto retailing business in March 2015, with its acquisition of the Van Tuyl Group, it added a whole new line of business to the mega-conglomerate. The Van Tuyl Group was the largest privately owned auto dealership group in the U.S., and Buffett promised that this was just the start of building a major auto-retailing empire. So, will Herb Chambers Companies, a privately-held, Boston-based dealership group with 55 total dealerships, be the perfect fit for Berkshire Hathaway Automotive? Its owner looks ready to sell. Time to wrap this one up and put a bow on it.

6. Happy Pilots at NetJets: Forget your crazy uncle, there’s nothing like having a happy family at Christmas. This holiday, NetJets’ pilots and its flight attendants will be celebrating their new contracts that bring substantial raises. Hopefully, they’ll use it to buy some of Berkshire’s fine products. How about some jewelry from Borsheims? It’s been a good year. Go for it!

7. More Solar & Wind! Berkshire’s quickly becoming the leading energy producer and distributor of solar and wind energy. This year saw major wind farm projects, including a new wind farm site in Adams County, Iowa, which will produce 162 megawatts of additional wind generation capacity in Iowa. Berkshire’s aggressive expansion of it solar power farms saw its Topaz Solar Farm in San Luis Obispo County, California, become one of the largest photovoltaic solar farms in the world. And, there’s plenty of room under the tree for more such projects, which not only bring cheap energy, but also lower environmental costs as they are emissions free. With the cost of solar energy dropping fast, Berkshire’s been signing amazing deals that are a Christmas present now and for decades to come. In Nevada, it has contracted to buy electricity from First Solar’s soon to be built Playa Solar 2 at the astoundingly low rate of only 3.87 cents a kilowatt-hour, and the deal is a fixed rate contract for twenty years.

8. More Deals with 3G Capital: Because everyone likes surprises. 3G’s aggressive acquisition strategy has been the perfect partner for Berkshire’s cash. 3G brings not only the aggressive cost-cutting (aggressive is an understatement) that is bringing legacy companies such as Kraft-Heinz into the 21st century, but also gives excellent financing and equity opportunities. 3G’s merger of Burger King with Tim Hortons brought Berkshire fat interest payments and made Berkshire a minority owner of the newly formed Restaurant Brands International. Surely, there are more deals to be done.

Hard to fit this all under the Christmas tree? Berkshire’s a big company. There’s room for all this and more.

Merry Christmas everybody!

–David Mazor

© 2015 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 Energy Special Report

Special Report: Is Berkshire Hathaway About to Strike it Rich in Natural Gas?

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With natural gas prices tumbling to prices not seen since January of 2002, a big natural gas field would not seem to be the hottest news, but Berkshire Hathaway’s success has often been based on running counter to the herd. They are patient enough to know that energy prices will be higher in the future, and they have the money to drill now when others are strapped for cash.

In mid-November, Berkshire Hathaway Energy’s Australian subsidiary, CalEnergy Resources,  drilled a test well in Western Australia for what could be what the company is calling modestly a “significant gas field.”

How Significant?

Four trillion cubic feet of gas-in-place significant.

Exploration permit EP 408 is located approximately 280 kilometers south of Perth, and covers both the Whicher Range and Wonnerup gas fields.

The gas fields were first discovered in 1968 and 1971, respectively, and are located in ancient sandstone reservoirs nearly four kilometers underground.

The fields contain an estimated four trillion cubic feet gas-in-place, and Berkshire’s share currently stands at approximately 84%. Other partners include Which Range Energy.

CalEnergy Resources is the operator, with Farley Riggs, Australia’s largest well testing and data acquisition service provider, running the testing program.

Currently, down hole gauges are being used on Whicher Range-1 and Whicher Range-4/ST1 to test the interconnectivity of the reservoir before a three-month well test commences, The test will hopefully demonstrate flow rates in excess of four million cubic feet per day.

Not About Fracking

While the excitement in the oil and gas business in recent years has been all about fracking, the tumble in energy prices has hurt the fracking business due to its relatively high cost of energy recovery.

Fortunately, the Whicher Range and Wonnerup gas fields are conventional gas fields, and are neither shale gas nor coal seam gas. The cost of recovery should be much lower than gas produced by fracking.

Natural Gas for Western Australia

The natural gas will support the growing energy needs of Perth’s 1.8 million people. The fields are located on the southern edge of the State’s current gas pipeline network, and are roughly 20 kilometers south of Busselton. The cost of connecting to the pipeline is estimated to be in the range of $10 million Australian dollars.

Berkshire Hathaway and Energy Exploration

While Berkshire has built up one of the largest renewable energy portfolios in the world, with solar and wind power leading the way, it’s not a company people think of when it comes to fossil fuel exploration.

As always, Berkshire is full of surprises.

(This article has been updated since it was first published.)

© 2015-2016 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 Energy

NV Energy Begins Saving Millions

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Another one of Berkshire Hathaway’s utilities has begun saving millions through participation in an energy imbalance market.

NV Energy, which serves 2.4 million customers in Nevada, commenced participation in the western Energy Imbalance Market (EIM) on December 1, 2015.

“We welcome NV Energy’s entry into the western EIM,” said Steve Berberich, ISO President and CEO. “The real-time energy market is already generating significant cost savings, and NV Energy’s participation is expected to add to those benefits while incorporating more clean energy into the grid.”

In its first 12 months of operation, the real-time market has already produced more than $33 million in cost savings for Berkshire Hathaway’s PacifiCorp, the first EIM participant, and the ISO. Those savings are projected to increase as more utilities join the EIM.

NV Energy President and CEO Paul Caudill said his company’s participation in the EIM aligns with NV Energy’s longstanding commitment to seek opportunities that provide greater value to customers and support renewable energy.

“I am very pleased with the hard work many of my colleagues at NV Energy have done in the past year,” said Caudill. “I am also confident this work will be good for Nevada, as all resulting cost benefits will flow directly to our customers.” With the addition of NV Energy, the EIM expands into Nevada.

The ISO and NV Energy prepared for the utility to join the market for nearly a year, including extensive testing of operations and interfacing in the last two months. The ISO’s state-of-the-art software analyzes western grid needs every five minutes and automatically finds the lowest-cost generation to meet demand.

Millions in Annual Savings

NV Energy will save millions annually. The company’s attributed share of gross benefits is estimated to range from $6 million to $10 million in 2017, and from $8 million to $12 million by 2022.

Berkshire’s PacifiCorp Already Saving Millions

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

About the Energy Imbalance Market

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. The only real-time energy market in the Western U.S., advanced ISO market systems automatically balance supply and demand for electricity every fifteen minutes, dispatching the least-cost resources every five minutes.

A 2013 study by the National Renewable Energy Laboratory found that an EIM with participation of all western states could cut electricity production costs by $1.3 billion a year.

© 2015 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 Energy

NV Energy Can Join Energy Imbalance Market with Conditions

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Last week the Federal Energy Regulatory Commission (FERC) granted Berkshire Hathaway’s NV Energy permission to enter the western Energy Imbalance Market (EIM), a move that will save NV Energy millions a year.

However, the authorization comes with conditions.

FERC wrote in their November 19, 2015 order, “…we will allow the Berkshire EIM Sellers to participate in the EIM at market-based rates on the condition that: (1) the Berkshire EIM Sellers offer their units that are participating in the EIM into the EIM at or below each unit’s Default Energy Bid, as defined below; and (2) the Berkshire EIM Sellers facilitate CAISO’s enforcement of all internal transmission constraints in the PacifiCorp and NV Energy balancing authority areas.”

Financially binding participation in the real-time market will commence on December 1, 2015.

With the entry of NV Energy, the EIM will cover almost all of Nevada, Utah and Wyoming, along with California and some of Washington, Oregon and Idaho.

The Savings Add Up

NV Energy will save millions annually. The company’s attributed share of gross benefits is estimated to range from $6 million to $10 million in 2017, and from $8 million to $12 million by 2022.

Berkshire’s PacifiCorp Already Saving Millions

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

The predicted benefits for PacifiCorp have proven to be true, and the California Independent Service Operator (CAISO) has been able to quantify the benefits for the year so far were over $33 million.

About the Energy Imbalance Market

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. The only real-time energy market in the Western U.S., advanced ISO market systems automatically balance supply and demand for electricity every fifteen minutes, dispatching the least-cost resources every five minutes.

© 2015 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.