Berkshire Hathaway Offers to Spend $8.3 Billion on Emergency Power Plants in Texas

Source: By Russell Gold, Wall Street Journal • Posted: Sunday, March 28, 2021

The move comes a month after the state suffered devastating blackouts

Berkshire Hathaway CEO Warren Buffett in 2018; the company said it could build 10 large natural-gas plants that would only operate during times of extreme need. Photo: Nati Harnik/Associated Press

Warren Buffett’s Berkshire Hathaway Inc. is pitching Texas lawmakers on a plan to spend $8.3 billion to build power plants that would run during electricity emergencies, a month after the state suffered devastating blackouts.

Chris Brown, the chief executive of Berkshire Hathaway Energy Infrastructure, said it could build 10 large natural-gas plants that would only operate during times of extreme need, and not otherwise compete in the state’s power market. He said the plants could be operational by November 2023.

“The state and its residents should have a reliable source of backup power generation during emergencies to protect residents and businesses,” said Mr. Brown. “This is a break-the-glass-in-case-of-emergency plan.”

In February, half of the state’s power plants failed during a severe cold snap, forcing the grid operator to institute widespread blackouts that lasted for four days.

The Texas legislature would need to approve changes to its laws to allow for a new regulated utility to provide emergency backup power.

Mr. Brown said he hoped to receive a 9.3% rate of return on the investment, the same as regulated electric companies that operate a portion of the grid such as Sempra Energy unit Oncor and CenterPoint Energy Inc.

He said Berkshire Hathaway would create a $4 billion financial guarantee the state would receive if the plants didn’t operate when needed. They would have a week’s supply of liquefied natural gas on site, fixing the problem of the state’s gas supply infrastructure freezing up.

Berkshire officials have met with state leaders in recent days.

Some rival power generators said the proposed idea was a poor solution to Texas’ problems with power reliability and expressed anger over the idea that Berkshire could be given a guaranteed return for a service it would also provide.

Chris Moser, executive vice president of operations for NRG Energy Inc., one of Texas’ largest power generators, said the proposal had the potential to create an unfair dynamic for the existing power plants in the state’s competitive power market, known as Ercot. He likened it to operating a hot dog stand and having another hot dog stand open next door, but with guaranteed profits.

“That doesn’t feel very fair in a laissez-faire competitive state like Texas,” he said. “In a competitive market, the companies are supposed to bear the risk, not the consumer. This flips that on its head and guarantees profits to one of the world’s richest men.”

Kelly Hancock, a Republican who chairs the state senate’s business-and-infrastructure committee, said he was lukewarm on the idea. “We need to make sure the events that occurred don’t ever occur again, so you don’t take anything off the table,” he said. But he added that “I have not heard a lot of receptivity toward moving in this direction.”

Others were more enthusiastic. State Sen. Nathan Johnson, a Democrat, said he would like to explore the idea further because it would allow the state to preserve its competitive market design, which has generally kept wholesale prices low by compensating generators only for the power they produce.

“It gives us the reliability that we want without altering the market,” he said. “We can keep our clean energy and be able to turn the lights on in the cold and the heat.”

Berkshire has been interested in the Texas power market for several years. In 2017, it attempted to purchase Oncor for $9 billion, but was outbid by Sempra.

The Omaha conglomerate has a history of swooping to help troubled companies with timely loans—at a price. In 2019, it came to the aid ofOccidental Petroleum Corp. , which was in a pitched battle with Chevron Corp. to acquire Anadarko Petroleum Corp. Occidental’s bid was enabled by $10 billion in preferred stock that Berkshire purchased, which paid an 8% coupon, or $800 million in an annual dividend. Before that, Berkshire opportunistically provided financing to Dow Chemical and Goldman Sachs.

Write to Russell Gold at and Katherine Blunt at