Warren Buffett's Pacificorp Controlling the Energy in 11 Western States

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    Warren Buffetts PacifiCorp Commits to Energy-SharingMarket

    A regional Energy Imbalance Market could smooth renewable

    integration.

    by Herman K. Trabish

    February 13, 2013

    0PacifiCorp andthe California Independent System Operator Corporation (the ISO) will worktogether to lead the entire western U.S. toward a new energy-sharing market that will smooth theway for more reliability in power delivery and more renewables.

    PacifiCorp (PINK:PPWRP), which controls two balancing authorities covering portions of sixwestern states, and the ISO, the regional powerhouse, signed a memorandum of understanding(MOU) to work toward creating an energy imbalance market by October 2014, according toMidAmerican Energy Holding Company VP Jonathan Weisgall.

    PacifiCorp is a subsidiary ofMidAmerican Energy.MidAmerican is one of the dominant U.S.utilities in theownership of renewables,and is itself a subsidiary of Warren Buffetts BerkshireHathaway (NYSE:BRK.A).

    Californias ISO operates the onlyadvanced energy market in the Western Interconnect region.Like much of the Northeast, Midwest and Canada, the ISOs real-time, IT-optimized market

    automatically balances electricity deviations every five minutes by choosing the least-costresources available.

    The 39+ other electricity delivery systems in the West, including PacifiCorp, manage deviationswith manual dispatches and a system of reserves.

    http://www.greentechmedia.com/articles/read/Warren-Buffetts-PacifiCorp-Commits-to-Energy-Sharing-Market#disqus_threadhttp://www.greentechmedia.com/articles/read/Warren-Buffetts-PacifiCorp-Commits-to-Energy-Sharing-Market#disqus_threadhttp://www.pacificorp.com/index.htmlhttp://www.greentechmedia.com/articles/read/Californias-Grid-System-Operator-Confronts-33-Percent-Renewables-by-2020/https://www.google.com/finance?q=PPWRP&ei=A-gbUaiiDJTI0AGmpAEhttps://www.google.com/finance?q=PPWRP&ei=A-gbUaiiDJTI0AGmpAEhttp://www.greentechmedia.com/articles/read/SunPowers-579-MW-Solar-Project-Sold-to-MidAmericanhttp://www.greentechmedia.com/articles/read/buffetts-midamerican-energy-holding-forms-renewables-unithttp://www.greentechmedia.com/articles/read/buffetts-midamerican-energy-holding-forms-renewables-unithttps://www.google.com/finance?q=NYSE%3ABRK.A&sq=PacifiCorp&sp=1&ei=mR4bUdCABYSZiQK9bAhttp://www.greentechmedia.com/articles/read/getting-33-percent-renewables-on-the-grid-part-3/http://www.greentechmedia.com/articles/read/getting-33-percent-renewables-on-the-grid-part-3/https://www.google.com/finance?q=NYSE%3ABRK.A&sq=PacifiCorp&sp=1&ei=mR4bUdCABYSZiQK9bAhttp://www.greentechmedia.com/articles/read/buffetts-midamerican-energy-holding-forms-renewables-unithttp://www.greentechmedia.com/articles/read/SunPowers-579-MW-Solar-Project-Sold-to-MidAmericanhttps://www.google.com/finance?q=PPWRP&ei=A-gbUaiiDJTI0AGmpAEhttp://www.greentechmedia.com/articles/read/Californias-Grid-System-Operator-Confronts-33-Percent-Renewables-by-2020/http://www.pacificorp.com/index.htmlhttp://www.greentechmedia.com/articles/read/Warren-Buffetts-PacifiCorp-Commits-to-Energy-Sharing-Market#disqus_thread
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    This MOU signals a crucial shift by PacifiCorp toward the ISOs method that could lead the wayto a regionalEnergy Imbalance Market (EIM).A Public Utility Commission Energy ImbalanceMarket (PUCEIM) group composed of researchers from the National Renewable Energy Lab,the Western Governors Association, and multiple independent agencies isworking on such aplan.

    This is good news for customers, renewables, integration of renewables, reliability andoversupply challenges, Weisgall said.

    Those who dont understand how renewables are integrated into Californias system argue thattheirvariability threatens reliability.

    If you havewider geographic areas sharing different plants, you can smooth some of thatvariability, Interwest Energy Alliance Southwest Representative Amanda Ormond recently toldGTM. An energy imbalance market allows dispatch of the lowest-cost resource to addressenergy imbalance when a load turns on unexpectedly.

    The Wests many balancing areas are presently relatively inflexible, Ormond said, because theyhave only their own reserves to call on for imbalance. They therefore keep large amounts

    ofenergy in reserve to meet potential contingencies. And the last generators you turn on aretypically the most expensive.

    Without an EIM solution, Ormond said, more renewables will increase variability and theinefficiencies will become more costly. With an EIM, there is more flexibility.

    Modernized grid dispatching across interconnected systems using automated tools can moreaccurately balance a wider array of resources , according to PacifiCorp. By capturing that wider

    http://www.greentechmedia.com/articles/read/for-western-states-transmission-will-there-be-strength-in-unityhttp://www.greentechmedia.com/articles/read/with-the-utility-regulators-day-1-its-all-about-the-audience/http://www.greentechmedia.com/articles/read/with-the-utility-regulators-day-1-its-all-about-the-audience/http://www.greentechmedia.com/articles/read/how-to-match-wind-and-solar-with-the-gridhttp://www.greentechmedia.com/articles/read/is-the-u.s.-building-transmission-fast-enough-or-too-fast/http://www.greentechmedia.com/articles/read/grid-integration-part-2-the-rubiks-cube-of-renewable-energy/http://www.greentechmedia.com/articles/read/With-the-Utility-Regulators-Day-2-Portfolio-Theory-Makes-Wind-and-Solar-M/http://www.greentechmedia.com/articles/read/With-the-Utility-Regulators-Day-2-Portfolio-Theory-Makes-Wind-and-Solar-M/http://www.greentechmedia.com/articles/read/grid-integration-part-2-the-rubiks-cube-of-renewable-energy/http://www.greentechmedia.com/articles/read/is-the-u.s.-building-transmission-fast-enough-or-too-fast/http://www.greentechmedia.com/articles/read/how-to-match-wind-and-solar-with-the-gridhttp://www.greentechmedia.com/articles/read/with-the-utility-regulators-day-1-its-all-about-the-audience/http://www.greentechmedia.com/articles/read/with-the-utility-regulators-day-1-its-all-about-the-audience/http://www.greentechmedia.com/articles/read/for-western-states-transmission-will-there-be-strength-in-unity
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    portfolio of resources, an EIM ensures electricity shows up where and when it is needed, cuttingcosts and enhancing reliability.

    Each new EIM participant will have a start-up cost related to the size of its participation.PacifiCorp estimates it will pay $2 million, its press release said, though existing ISO players

    will pay nothing. Subsequent use of the EIM will be on a pay-as-you-go basis. The ISO andPacifiCorp are working to define additional costs and benefits.

    To preserve current balancing authorities autonomy, Ormond stressed, the western interconnectEIM would be a voluntary market. In an EIM, if I am a utility and I have a couple of generatorsthat arent running, I could offer them to the system. When someone needs energy, they aregoing to ask for energy. I can either allow that to be scheduled or not.

    An objection voiced by the American Public Power Association (APPA), a utilities advocatewhich opposes a Western Interconnect EIM, is that an absence of critical details about

    governance,market monitoring and supervision,and cost raise the concern that an EIM couldquickly evolve into a Regional Transmission Organization (RTO).

    In response to this concern, Ormond clarified that it isa market for balancing energy,not anRTO. Legal opinions suggest an EIM can have a hard wall to prevent it leading to an RTO. It isa centralized unit for dispatch of balancing energy. It is not for capacity. If you offer a unit, it canbe scheduled within the parameters you allow.

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    Most importantly, she repeated, it is voluntary. If I want to go into this market, I can. But if Iget into this market andfind out it is not cost-effective for me, I can step back out.The APPA contends infrastructure and operating costs could, in some scenarios, outweigh theestimated benefits, with the net costs potentially reaching $1.25 billion in net present value termsover the first ten years.

    The PUCEIM group, Ormond said, haspreliminary cost estimates from the Southwest PowerPool (SPP) and Californias ISO suggesting an estimated $3.50 per megawatt-hour cost butfurther cost-benefit analyses, along with potentialmarket design studies,are under way.

    Well be working in the coming weeks with the CAISO to finalize the terms of a more specificagreement, Weisgall said. We also continue to support ongoing regional discussions that willeventually lead to much broader, region-wide coordination, and were hopeful this initial stepwill help facilitate these broader efforts.

    http://www.greentechmedia.com/articles/read/Keeping-the-Lights-on-in-California-with-33-Renewables-Environmental-Manda/http://www.greentechmedia.com/articles/read/do-wind-and-solar-add-more-benefit-to-the-grid-than-cost/http://www.greentechmedia.com/articles/read/the-transmission-quandary-of-california/http://www.greentechmedia.com/articles/read/the-transmission-quandary-of-california/http://www.greentechmedia.com/articles/read/do-wind-and-solar-add-more-benefit-to-the-grid-than-cost/http://www.greentechmedia.com/articles/read/Keeping-the-Lights-on-in-California-with-33-Renewables-Environmental-Manda/
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    1/28/2016 Can Warren Buffett's Pacificorp bring the Northwest's renewable riches to market? | Utility Dive

    http://www.utilitydive.com/news/can-warren-buffetts-pacificorp-bring-the-northwests-renewable-riches-to-m/308875/

    Utility Dive

    Can Warren Buffett's Pacificorp bring the Northwest's renewable riches to market?

    The Energy Gateway will change the way America uses energy when it gets finished.

    By Herman K. Trabish | September 15, 2014

    States will need the Pacific Northwests flexible natural gas and abundant renewables to meet energy mandates in the coming decade.And those resources may become even more necessary when the Environmental Protection Agencys proposed 2030 emissionsreductions targets (http://www.utilitydive.com/news/the-role-of-renewables-in-the-new-epa-emissions-rule/272865/) are finalized.

    Although it has barely begun, Rocky Mountain Powers planned Energy Gateway Transmission Expansion Project(https://www.rockymountainpower.net/ed/tp/eg.html) plans to knit those riches together.

    It accesses really high-value wind and solar resources with generation profiles that vary by time of day and season, explainedCameron Yourkowski, senior policy manager for Renewable Northwest (http://www.rnp.org/) , a non-profit advocacy group. That willmake bringing more renewables to market easier and more cost-effective.

    Transmission allows you to take advantage of flexible resources anywhere in the systems footprint, agreed American Wind EnergyAssociation (AWEA) (http://www.awea.org/) Head of Research Michael Goggin. One of the best ways to integrate renewables is to do itover a large area with transmission.

    Energy Gateway: 'A triangle of reliability'

    We call Energy Gateway a triangle of reliability, said Rocky Mountain Power (https://www.rockymountainpower.net/transmission)spokeswoman Margaret Oler. It is being built in segments but, once completed, the somewhat triangular design will increase capacityand reliability. If something happens on one leg, we can still deliver electricity another way. And the configuration enables the company treceive a variety of existingand new resources.

    Rocky Mountain Power's parent company Pacificorp, itself asubsidiary of Warren Buffett-owned Berkshire Hathaway Energy(http://www.berkshirehathawayenergyco.com/) , took the project on in 2007. The utility had seen more than a 26% demand increase inthe preceding twenty years from the 1.8 million customers in Rocky Mountain Power's Wyoming-Idaho-Utah territory and Pacific Power'sWashington-Oregon-California territory. Constraints were becoming apparent.

    The Energy Gateway system

    http://www.berkshirehathawayenergyco.com/http://www.awea.org/http://www.rnp.org/https://www.rockymountainpower.net/ed/tp/eg.htmlhttp://www.utilitydive.com/news/the-role-of-renewables-in-the-new-epa-emissions-rule/272865/http://www.utilitydive.com/news/the-role-of-renewables-in-the-new-epa-emissions-rule/272865/http://www.utilitydive.com/editors/herman/http://www.berkshirehathawayenergyco.com/https://www.rockymountainpower.net/transmissionhttp://www.awea.org/http://www.rnp.org/https://www.rockymountainpower.net/ed/tp/eg.htmlhttp://www.utilitydive.com/news/the-role-of-renewables-in-the-new-epa-emissions-rule/272865/http://www.utilitydive.com/editors/herman/
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    1/28/2016 Can Warren Buffett's Pacificorp bring the Northwest's renewable riches to market? | Utility Dive

    http://www.utilitydive.com/news/can-warren-buffetts-pacificorp-bring-the-northwests-renewable-riches-to-m/308875/

    Credit: Rocky Mountain Power (https://www.rockymountainpower.net/content/dam/pacificorp/doc/Transmission/Transmission_Projects/7723-

    49_PC_EnergyGateway_FactSheet_v2.pdf)

    The Energy Gateway Transmission Expansion Project consists of Gateway Central, Gateway West(https://www.rockymountainpower.net/content/dam/pacificorp/image/Transmission/Transmission_Projects/2013_1114_GW_OverviewMa, Gateway South (https://www.rockymountainpower.net/content/dam/pacificorp/doc/Transmission/Transmission_Projects/6709-50_RMP_GatewaySouth_FactSheet_r3.pdf) , and a crucial West of Hemingway piece being built by partner Idaho Power. After sevenyears of work, Gateway Souths in-service target is between 2020 and 2022 Gateway Wests target is between 2020 and 2024. Theintention is to build it and put it in service in pieces, Rocky Mountain Power's Oler explained.

    Pacificorp (http://www.pacificorp.com/index.html) offers no estimate of the overall cost. We dont quote numbers because it takes a longtime and the world changes. When you are done, you know, Oler said. It will be billions of dollars.

    The progress so far

    The Gateway Central Segment B double-circuit, 345 kilovolt, 135-mile transmission line was completed in 2010. It connects southeastIdaho to northern Utah near the Salt Lake City airport.

    Segmentation allowed Pacificorp to ask each states regulators (http://www.berkshirehathawayenergyco.com/assets/upload/financial-filing/20121231_89_pc_annual-1.pdf) to rate base a portion of the $864 million cost. For all such "prudent" expenditures, the new lineamong them, the Utah Public Service Commission (UPSC) granted a 7% rate increase for 2011, a 6% increase for 2012, and a 3%increase for 2013.

    Idahos regulators granted permissions for debt recovery but deferred consideration of rate increases(http://www.berkshirehathawayenergyco.com/assets/upload/financial-filing/20131231_89_pc_annual.pdf) until 2016.

    Wind potential along the Energy Gateway system

    Credit: Rocky Mountain Power (https://www.rockymountainpower.net/content/dam/pacificorp/doc/Transmission/Transmission_Projects/WindPotential.13_F.pdf)

    The Gateway Central Segment C single-circuit 500-kilovolt and 345-kilovolt line was completed in 2013 at a cost of $402 million. Itconnects central Utah to the Salt Lake Valley, where voltage will be stepped down for the double circuit 345-kilovolt line running east toSalt Lake City.

    The Utah PSC is considering rate increases of 2% for 2014-15 and 1% for 2015-16 for Utah customers.

    https://www.rockymountainpower.net/content/dam/pacificorp/doc/Transmission/Transmission_Projects/WindPotential.13_F.pdfhttp://www.berkshirehathawayenergyco.com/assets/upload/financial-filing/20131231_89_pc_annual.pdfhttp://www.berkshirehathawayenergyco.com/assets/upload/financial-filing/20121231_89_pc_annual-1.pdfhttp://www.pacificorp.com/index.htmlhttps://www.rockymountainpower.net/content/dam/pacificorp/doc/Transmission/Transmission_Projects/6709-50_RMP_GatewaySouth_FactSheet_r3.pdfhttps://www.rockymountainpower.net/content/dam/pacificorp/image/Transmission/Transmission_Projects/2013_1114_GW_OverviewMap.pdfhttps://www.rockymountainpower.net/content/dam/pacificorp/doc/Transmission/Transmission_Projects/7723-49_PC_EnergyGateway_FactSheet_v2.pdf
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    1/28/2016 Can Warren Buffett's Pacificorp bring the Northwest's renewable riches to market? | Utility Dive

    http://www.utilitydive.com/news/can-warren-buffetts-pacificorp-bring-the-northwests-renewable-riches-to-m/308875/

    As Segment C was completed, construction began on the Gateway South Segment G 170 mile, single-circuit, 345-kilovolt line fromsouth-central Utah to southwestern Utah.

    Traditionally, transmission has been built to carry electricity from a generation source to a load but this entire Gateway system isdesigned in a hub and spokes pattern, Oler said. It can pick up generation from existing sources and will be able to pick up futuregeneration wherever it is built.

    Solar potential along the Energy Gateway system.

    Credit: Rocky Mountain Power (https://www.rockymountainpower.net/content/dam/pacificorp/doc/Transmission/Transmission_Projects/SolarPotential.13_F.pdf)

    Of all the pieces, Segment B was built first due to constraints in the more densely populated Salt Lake region. It was also one of theshortest pieces. Perhaps more importantly, much of the 90 mile corridor was already owned by Rocky Mountain Power and thereforerequired little permitting through the National Environmental Policy Act (NEPA) (http://www.epa.gov/compliance/nepa/) .

    Notorious NEPA delays

    NEPA permitting is notorious for complexities and delays. Gateway was selected as one of seven focus projects for the Obamaadministrations Federal Rapid Response Team for Transmission (RRTT)(http://www.whitehouse.gov/administration/eop/ceq/initiatives/interagency-rapid-response-team-for-transmission) , created to streamlinefederal agency cooperation in NEPA procedures. Pacificorp was initially anxious the selection would slow progress, according to

    observers. In the end, Gateway has served as an example of what does and doesnt work.

    What didnt work, Oler said, was that Gateway West had been fully permitted when the Bureau of Land Management decided to performadditional reviews on the Morley Nelson Snake River Birds of Prey National Conservation Area(http://www.blm.gov/id/st/en/prog/blm_special_areas/birds_of_prey_nca.html) . Final permitting is now expected in 2016.

    But an example of what can go right may be a recent resolution between Idaho Power and the Department of Defense (DOD). IdahoPowers West of Hemingway (http://www.boardmantohemingway.com/) addition to Gateway West will, pivotally, link through theBonneville Power Administration to load centers like Seattle and Portland and to interties to California, according to Yourkowski. Theutility recently sustained progress by finding a detour that satisfied DODs concerns about a nearby bombing range.

    http://www.boardmantohemingway.com/http://www.blm.gov/id/st/en/prog/blm_special_areas/birds_of_prey_nca.htmlhttp://www.whitehouse.gov/administration/eop/ceq/initiatives/interagency-rapid-response-team-for-transmissionhttp://www.epa.gov/compliance/nepa/https://www.rockymountainpower.net/content/dam/pacificorp/doc/Transmission/Transmission_Projects/SolarPotential.13_F.pdf
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    1/28/2016 Can Warren Buffett's Pacificorp bring the Northwest's renewable riches to market? | Utility Dive

    http://www.utilitydive.com/news/can-warren-buffetts-pacificorp-bring-the-northwests-renewable-riches-to-m/308875/

    Geothermal potential along the Energy Gateway system.

    Credit: Rocky Mountain Power (https://www.rockymountainpower.net/content/dam/pacificorp/doc/Transmission/Transmission_Projects/GeothermalPotential.13_F.pdf)

    Bringing everybody in and making the process better

    There is no way around the NEPA (http://www.blm.gov/id/st/en/prog/nepa_register/gateway-west.html) process, Oler said. But wherepeople get involved, the process goes faster, Oler said. All the state and county and city officials and the public have to be in theconversation from the beginning.

    Agencies working through NEPA dont operate in a vacuum, Oler said. They need public input. Companies can only go by what is inthe public record and sometimes thats outdated. Something important may have changed and anybody may have that information.

    It takes too long to build a transmission project and federal agencies need to keep improving procedures, Yourkowski said.

    For planning on the Mountain States Transmission Intertie (MSTI), Renewable Northwest created the MSTI Review Project(http://www.mstireviewproject.org/) , an interactive geographic information systems (GIS) process. By streamlining the assessment ofpublic input, the Review Project moved MSTI through permitting after other efforts failed.

    People on the ground fill out questionnaires that detail their values, Yourkowski explained. The GIS evaluation picks the paths of leastresistance according to the communitys own values.

    Involving local government and providing much-needed and accurate information can only make the process better and, as the reviewsLessons Learned (http://www.mstireviewproject.org/lessons-learned/) explained, demonstrated that complicated issues related totransmission lines can be illuminated in an objective, easily understandable way.

    Editor's Note: Coming installments in Utility Dive's transmission series will look at progress on Idaho Power's West of Hemingway line,the Sunzia project in the Desert Southwest, and the PPL-PSE&G Roseland-Susquehanna line from Pennsylvania to New Jersey.

    Top Image Credit: Flickr Energy.gov (https://www.flickr.com/photos/departmentofenergy/7795441182)

    Filed Under:

    GenerationTransmission & DistributionSolar & RenewablesRegulation & Policy

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    3 Electric Utilities That Could Be on Warren Buffett's

    Buy List

    www.fool.com /investing/general/2015/10/25/3-electric-utilities-that-could-be-on-warren-buffe.aspx

    Travis Hoium

    (TMFFlushDraw)

    Oct 25, 2015 at 12:05PM

    Warren Buffett's Berkshire Hathaway(NYSE:BRK-A)(NYSE:BRK-B) has been on an energy buying spree

    over the past decade, and he shows no signs of slowing it down. Regulated utilities provide the kind of

    consistent returns and cash flow that Buffett loves, and with $60.4 billion in cash on Berkshire's balance

    sheet as of the end of the second quarter, he may think it's time to go hunting for energy companies again.

    If Berkshire Hathaway does want to buy another utility, here are the three we think Buffett will look at first.

    Travis Hoium(Xcel Energy):Warren Buffett is attracted to one thing about utilities: Consistent cash flow.

    What makes utilities more consistent than most other companies is the fact that they're regulated

    monopolies. That gives them the exclusive right to sell electricity, at least in the areas where Buffett is

    interested in utilities. Cash flow yields may be lower than what you could find elsewhere, but knowing that

    he can expect decades of consistency is why Buffett is interested in the first place.

    Xcel Energy(NYSE:XEL) may be on Buffett's list of utilities to buy because it operates in regulated states

    like Minnesota and Colorado, and generates consistent returns. Just look at the steady return on equity

    http://www.fool.com/investing/general/2015/10/25/3-electric-utilities-that-could-be-on-warren-buffe.aspxhttp://www.fool.com/investing/general/2015/10/25/3-electric-utilities-that-could-be-on-warren-buffe.aspxhttp://www.fool.com/investing/general/2015/10/25/3-electric-utilities-that-could-be-on-warren-buffe.aspxhttp://www.fool.com/investing/general/2015/10/25/3-electric-utilities-that-could-be-on-warren-buffe.aspxhttp://www.fool.com/investing/general/2015/10/25/3-electric-utilities-that-could-be-on-warren-buffe.aspxhttp://www.fool.com/investing/general/2015/10/25/3-electric-utilities-that-could-be-on-warren-buffe.aspxhttp://www.fool.com/investing/general/2015/10/25/3-electric-utilities-that-could-be-on-warren-buffe.aspxhttp://www.fool.com/quote/nyse/xcel-energy-inc/xelhttp://my.fool.com/profile/TMFFlushDraw/info.aspxhttp://www.fool.com/quote/nyse/berkshire-hathaway/brk-bhttp://www.fool.com/quote/nyse/berkshire-hathaway-inc/brk-ahttp://my.fool.com/profile/TMFFlushDraw/activity.aspxhttp://www.fool.com/investing/general/2015/10/25/3-electric-utilities-that-could-be-on-warren-buffe.aspx
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    and the booming cash from operations over the past decade.

    XEL Revenue (TTM)data by YCharts

    Another thing that might please Buffett is that Xcel Energy doesn't operate in regions that are currently

    being disrupted by solar energy. He's having headaches in Nevada, whereNV Energyshut down rooftop

    solar installations, much to the chagrin of homeowners and solar companies. But that shutdown won't last

    long, and if enough customers flood to the solar industry, it could lead to declining revenue long-term for

    the company. In Minnesota, where I live, the threat of going solar isn't a big concern for utilities, and a

    utility like Xcel Energy won't see much in the way of competition for many years to come.

    Dan Caplinger

    (Entergy):One thing that Warren Buffett likes to see in companies is the willingness to make tough

    decisions, and Entergy (NYSE:ETR) has not shied away from controversial moves. Just this month,

    the utility company said that it expects to shut down its Pilgrim Nuclear Generating Station in Plymouth,

    Mass., by mid-2019, citing poor market conditions, reduced sales, and rising operational costs. This

    followed a similar decision to close its Vermont Yankee Nuclear Power Plant at the end of last year, as

    cheap natural gas is making nuclear power less cost-effective, especially in light of the costs of maintaining

    aging plants.

    Entergy's recent moves have made it more reliant on its regulated electricity-transmission business, under

    which it has 2.8 million customers in Texas, Arkansas, Louisiana, and Mississippi. Yet the company still

    has a substantial presence in electricity generation, which includes nuclear, hydroelectric, and fossil-fuel

    powered plants. Given the opportunities for growth in the fast-growing Southern U.S., Entergy has high

    hopes for expansion in the region, and combined with its willingness to be smart about pulling the plug on

    unprofitable and challenging operations, the company could well appeal to Buffett in his broader utility

    plans.

    Tyler Crowe(Pinnacle West Capital): When you look at a map of Berkshire Hathaway Energy's overall

    holdings, there are a couple of patterns that emerge.

    http://my.fool.com/profile/TMFDirtyBird/info.aspxhttp://www.fool.com/quote/nyse/entergy-corp/etrhttp://my.fool.com/profile/TMFGalagan/info.aspxhttp://ycharts.com/http://ycharts.com/companies/XEL/revenues_ttm
  • 7/25/2019 Warren Buffett's Pacificorp Controlling the Energy in 11 Western States

    11/12

    Image: Berkshire Hathaway.

    Of course, there are the basics of a typical Berkshire Hathaway business: They are well run companies

    with strong returns. However, there's one other component that has been very noticeable. Many of those

    electric utilities happen to be in places with high potential for utility-scale renewable energy projects, andmost of them have very large interstate transmission line projects that could be used to move

    that renewable power to centers of demand.

    That is part of the reason why I think the next utility in Berkshire Hathaway's sights is Pinnacle West

    Capital(NYSE:PNW), the owner of Arizona Public Services. Pinnacle West is awfully similar to NV

    Energy: It has a long history of profitability with an average return on equity for the past 20 years of 9.68%;

    it has a very strong balance sheet; the state has lots of potential as a utility-scale solar producer; and it's

    building out large interstate transmission lines into California.

    Those last two are very intriguing traits. When you consider that California imports about 30% of its

    electricity from neighboring states, and it needs to import way more renewable energy it if ever plans onmeeting its emission reduction targets. In fact, Berkshire Hathaway Energy and Pinnacle West have

    already formed a joint venture called Transcanyon, which is designed to pursue more interstate

    transmission lines across the Western U.S. And I'm guessing you can bet which markets those

    transmission lines would be designed to serve.

    Pinnacle West by itself would be a prototypical Berkshire Hathaway company. But the added bonus of

    being in an opportune place to supply California with renewable energy should put it high on Berkshire's

    buy list.

    The next billion-dollar iSecret

    http://www.fool.com/investing/general/2013/07/17/the-not-so-dirty-secret-behind-warren-buffets-rece.aspxhttp://www.fool.com/quote/nyse/pinnacle-west-capital-corp/pnw
  • 7/25/2019 Warren Buffett's Pacificorp Controlling the Energy in 11 Western States

    12/12

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