PacifiCorp, a unit of Warren Buffett’s Berkshire Hathaway, is attempting to negotiate a settlement with the US government, as the latter is threatening to sue the company to redeem nearly $1 billion in costs related to the 2020 wildfires in southern Oregon and northern California.

The potential lawsuits were revealed in an annual report filed by PacifiCorp’s Iowa-based parent company, Berkshire Hathaway Energy, yesterday, two days after Buffett expressed disappointment in the results at the conglomerate's utility division in his annual letter to the shareholders of Berkshire Hathaway. This new liability emerged after the utility already accepted to compensate with hundreds of millions of dollars in lawsuits related to the fires.

A deeper dive into the lawsuits against PacifiCorp

In its annual report, Berkshire Hathaway Energy stated that the US Justice Department informed the company it is asking for $625 million in firefighting and cleanup costs in regards to the September 2020 Archie Creek and Susan Creek fires. However, Oregon’s Justice Department revealed that it is also requesting $109 million in damages related to those fires.

Moreover, the US Forest Service has called on PacfiCorp to pay $356 million for firefighting costs and damages regarding the Slater Fire that started in California, moving across the border into Oregon. 

In Oregon's entire history of natural disasters, these fires constitute some of the most horrible, as nine people were killed, more than 1,875 square miles (4,856 square kilometers) were burned, and more than 5,000 homes and other structures were demolished.

The Oregon lawsuits' argument is based on PacifiCorp's negligence, alleging PacifiCorp had failed to cut off power to its 600,000 customers during a windstorm over Labor Day weekend in 2020, despite warnings from state leaders and top fire officials. This resulted in its power lines causing multiple fires.

Representatives of PacifiCorp and Berkshire Hathaway Energy refused to comment about the new liabilities, while the Justice Department did not immediately answer a request for comment regarding the potential lawsuits. 

Buffet is worried about the fate of similar capitalist companies

The Omaha-Nebraska-based Berkshire predicts that its utilities will be confronted by at least $8 billion in claims over all the wildfire lawsuits already filed in Oregon and California, with the damages possibly doubled or even tripled in some of those cases as some of the lawsuits do not even indicate a dollar amount.

Utilities like PacifiCorp are in turn struggling with concluding whether it is feasible or not to invest in major new power plants and transmission lines due to these costs, and the ambiguous regulatory environment in western states where wildfires have become more dominant.

Buffet stated in his letter “It will be many years until we know the final tally from BHE’s (Berkshire Hathaway Energy’s) forest-fire losses and can intelligently make decisions about the desirability of future investments in vulnerable western states,” adding, “It remains to be seen whether the regulatory environment will change elsewhere.”

Buffett also added that in severe cases like with Pacific Gas and Electric in California or Hawaiian Electric, utilities could undergo bankruptcy and the country may have to determine whether to head toward public power if private investors no longer accept taking risks related to the utility business.