Berkshire Hathaway Shifts Focus to Wildfire Safety Amid Lawsuits, Losses

In response to the increasing threat of wildfires, Berkshire Hathaway's Vice Chairman Greg Abel has announced new measures to ensure the safety of the company's power supply. Abel, speaking at the company's annual shareholder meeting, emphasized that the primary goal of the company's employees and management has traditionally been to maintain a reliable power supply. However, the recent wildfires have forced a shift in priorities. "When wildfires pose a significant threat, ensuring a stable power supply is no longer the top priority," Abel stated. "Our focus has shifted to protecting public safety and preventing the spread of fires."

Abel highlighted that the company's approach to managing wildfire risks includes maintaining infrastructure and cutting power when adverse weather conditions or fire threats are imminent. "As a team, we have come to realize that we must de-energize these assets," Abel said. He also noted that Berkshire Hathaway's utility companies cannot be the sole insurers in the event of a wildfire. "We cannot be the last insurer. We cannot be responsible for everything that happens in a state," Abel added.

Abel's comments come as Pacificorp, a subsidiary of Berkshire Hathaway Energy, faces multiple lawsuits related to wildfires in Oregon and Northern California. The company is accused of failing to cut power during a storm in September 2020, which allegedly sparked wildfires that destroyed over 2,000 buildings and more than 500,000 acres of land. Pacificorp has already incurred pre-tax losses of $2.75 billion and faces potential liabilities of at least $4.8 billion. Additionally, the U.S. government and the state of Oregon are seeking to recover over $900 million from Pacificorp to compensate for natural resource damages and other expenses.

Abel also addressed the potential impact on hospitals and other critical infrastructure if power is cut. He assured that Berkshire Hathaway's utility companies will enhance communication to understand any special circumstances customers might face. However, he reiterated that the company cannot be held responsible for all outcomes. "We cannot be the last insurer," Abel said. "We cannot be responsible for everything that happens in a state."

Berkshire Hathaway's Chairman and CEO Warren Buffett also acknowledged mistakes in managing the wildfire risks. "In some places, it would be very unwise for a private utility to operate," Buffett said. He noted that the company acquired Pacificorp in 2006 for $5.1 billion and has since faced significant challenges in managing wildfire risks. "We made some mistakes in not insulating Pacificorp from wildfire liabilities as much as we could have," Buffett admitted.

Other utility companies, such as Southern California Edison, are also facing lawsuits related to wildfires. Although Pacificorp is not involved in these specific cases, Berkshire Hathaway reported that its insurance business incurred $1.1 billion in losses in the first quarter due to wildfires in Southern California. The company is collaborating with legislators in Oregon and neighboring states to draft legislation that could protect utility companies implementing wildfire mitigation plans from lawsuits arising from fires caused by their equipment.

In Utah, legislators have already passed a law allowing large utility companies to charge customers an additional fee to establish a wildfire fund and cap some liability for claims. Abel emphasized that wildfire risks are not going away and that the company will continue to prioritize public safety over maintaining a stable power supply when necessary. "We will continue to focus on protecting public safety and preventing the spread of fires," Abel concluded.