NEW YORK (Reuters) – Berkshire Hathaway, the conglomerate led by Warren Buffett, will fight all lawsuits brought against its utility business due to wildfires as the cases are “unfounded,” a top executive said on Saturday.
Greg Abel, who is widely recognised as Buffett’s successor and the future Berkshire chief executive, said at Berkshire’s annual shareholding meeting that “all the litigation will be challenged” in relation to PacifiCorp [PPWLO.PK].
One thousand victims filed $30 billion of new claims against PacifiCorp last month, blaming it for causing Oregon wildfires in 2020. The lawsuit comes on top of $825 million that PacifiCorp has already paid or owes in claims due to other wildfire related lawsuits.
Berkshire’s utility business emerged as a potential drag on the conglomerate’s earnings in the past year. Buffett said earlier this year that his failure to anticipate adverse developments in the utility business was a “costly mistake.”
“When we come to the wildfires, that’s been a substantial challenge because it’s the first time there’s been a lot of discussion around one of our utilities” that is experiencing “significant losses associated with wildfires,” Abel said.
Utilities can reduce the risk of wildfires by insulating wires to reduce the threat of sparks, trimming or cutting down trees that could contact power equipment, burying transmission lines underground, and temporarily shutting off power.
But Abel said temporarily shutting off power during storms or wildfires was not on the minds of utility employees, and it required Berkshire “to fundamentally change the culture.”
“Our employees worked incredibly hard to keep the power on day in day out through storms,” Abel said. “Unfortunately, through the 2020 fires, the instincts were not to turn off the power. The instinct was to keep the power on to keep hospitals fire stations responding.”
Utah lawmakers in March allowed large utilities to collect surcharges from customers to establish wildfire funds, and capped liability on some claims, a move that Abel described as the “gold standard.”
Abel said Berkshire has started telling employees to shut the power during wildfires, has updated its system so it can be done quickly, and is also continuing to invest in the business to reduce wildfire risks.
But Abel said Berkshire will be “very disciplined” about making additional investments in utilities. “As Warren said, we don’t want to throw good capital after bad capital.”
(Reporting by Koh Gui Qing; Editing by Nick Zieminski)
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