Overview
S&P Global on Monday said it is considering downgrading PacifiCorp, the electric utility owned by Berkshire Hathaway, to junk credit status as the company faces mounting liabilities from litigation tied to a series of Oregon wildfires in 2020. The announcement followed a recent jury award in Oregon that significantly raised the dollar amounts attached to individual plaintiff awards in the class action.
Recent verdict and S&P reaction
An Oregon jury on February 25 awarded $305 million to 16 plaintiffs who said PacifiCorp failed to de-energize power lines during a Labor Day weekend windstorm, a figure that averages roughly $19 million per plaintiff. S&P said that if future awards are in that same range, it could lower PacifiCorp’s current "BBB-minus" rating by at least two notches, which would move the company below investment grade. The agency added that a one-notch downgrade remains possible if awards are "significant" but smaller than the recent verdict.
S&P indicated it will closely monitor additional verdicts in the coming weeks. Trials associated with the so-called James class action are scheduled through early 2028, keeping the company under prolonged legal and rating scrutiny.
Scale of exposure and company responses
PacifiCorp’s immediate parent, Berkshire Hathaway Energy, has said the utility faces $48 billion of potential payouts in addition to $1 billion already awarded, leaving the utility with roughly $50 billion of wildfire exposure overall.
PacifiCorp said it intends to appeal the $305 million judgment and emphasized its focus on "providing certainty" to its employees, customers and communities. The utility is also awaiting a ruling from the Oregon Court of Appeals on whether the class action was properly certified and whether claimants may recover damages for emotional distress.
Berkshire Hathaway Energy warned that a loss of investment-grade status could impair PacifiCorp’s ability to raise financing needed to support ongoing operations, including payments to suppliers and the provision of electricity to customers. At the same time, the parent company stated that PacifiCorp believes it will have sufficient liquidity to cover operations and obligations beyond a year. Berkshire Hathaway itself retains high investment-grade credit ratings.
Management stance
In his first annual letter to shareholders, Berkshire Chief Executive Greg Abel acknowledged the company accepts responsibility when it causes wildfires but said the company will contest what it views as unjustified claims in court. He wrote, "PacifiCorp is not an insurer of last resort and should not be treated as a deep pocket."
What remains uncertain
Key open items include the outcomes of the scheduled trials through early 2028 and the Oregon Court of Appeals decision on class certification and emotional distress damages. S&P’s final rating actions will depend on the scale and frequency of future jury awards and how they affect PacifiCorp’s financial position.