Jonathan Stempel
March 2 (Reuters) – S&P Global said on Monday it may downgrade utility PacifiCorp, owned by Berkshire Hathaway, to junk status due to rising liabilities arising from a class-action lawsuit stemming from a series of wildfires in Oregon in 2020.
The warning comes after an Oregon jury on Feb. 25 awarded $305 million, or about $19 million each, to 16 plaintiffs who accused PacifiCorp of failing to turn off power lines during the Labor Day weekend storm. Plaintiffs in early trials were awarded an average of about $5 million.
Standard & Poor’s said it could downgrade PacifiCorp’s “BBB–” credit rating (the minimum investment grade) by at least two notches if future damages amount to about $19 million per plaintiff, or one notch if the damages are “significant” but smaller. It said it would closely monitor the verdict in the coming weeks.
Trials in the so-called James class action lawsuit are scheduled to last until early 2028, and Berkshire Hathaway Energy, PacifiCorp’s immediate parent, said the utility faces $48 billion in potential damages on top of the $1 billion it has already received. PacifiCorp faces about $50 billion in overall wildfire risk.
In response to S&P’s action, PacifiCorp said it plans to appeal the $305 million verdict and is committed to “providing certainty” to employees, customers and communities.
PacifiCorp is awaiting a ruling from the Oregon Court of Appeals on whether the class action lawsuit was properly certified and whether claimants can recover emotional distress damages.
Berkshire Hathaway Energy said losing investment-grade status could prevent PacifiCorp from raising capital to support ongoing operations, including paying suppliers and delivering power to customers.
“PacifiCorp believes it will have sufficient liquidity to meet its operations and obligations for more than one year,” the parent company added.
Berkshire Hathaway has a high investment-grade credit rating.
In his first annual letter to shareholders, Berkshire CEO Greg Abell said the Omaha, Nebraska-based conglomerate accepts liability when it sparks wildfires but will fight unreasonable claims in court.
“PacifiCorp is not an insurance company of last resort and should not be viewed as an insurance company with deep pockets,” he wrote.
(Reporting by Jonathan Stempel in New York; Editing by Cynthia Osterman)
