(Bloomberg) – Warren Buffett’s Berkshire Hathaway Inc. is proposing a $ 8.3 billion plan to help Texas prevent a repeat of February’s blackouts: build several new natural gas plants.
The conglomerate is asking state lawmakers to approve a plan for a new company that would add about 10 gigawatts of gas plants and emergency gas storage, according to a presentation seen by Bloomberg. The Texas network operator would control the plants and could take advantage of them to prevent blackouts like the one that left more than 4 million homes and businesses in the dark.
“We really want to make sure that it never happens again. So, we really want a partnership with the state, ”said Chris Brown, executive director of the Berkshire Hathaway Energy Infrastructure Group, in an interview. “The proposal is simple: state residents must have a reliable source of backup power.”
If Berkshire succeeds in its lobby, Texas will add a great deal of new gas-powered capacity at a time when President Joe Biden is trying to move the country away from fossil fuels – and in a state that invests heavily in wind power. and solar energy.
Under the proposal, Texas energy customers would pay a fee to cover plant costs. In exchange for making the investment, Berkshire proposes to obtain a rate of return of 9.3%, which would need to be approved by state regulators.
A spokesman for the Mayor of Texas, Dade Phelan, confirmed that the office had received the slides and met with Berkshire to discuss the plan.
“We see little or no chance that Texas will approve this Buffett proposal,” said Andy DeVries, a public services analyst at CreditSights. “If they were to spend that amount of money – which is a big if – they would do it with Texas companies.”
Berkshire Hathaway’s plan was first reported by the Dallas Morning News.
Texas’ historic power outage occurred during a rare and powerful winter storm that increased demand for electricity. At least 110 people died in the cold, and economic losses total $ 129 billion.
Berkshire is calling its proposed company the Texas Emergency Power Reserve and may have its plan operational in the winter of 2023, according to the slides. The proposal would cost less than preparing the state’s power generators for the winter or creating a so-called capacity market, where generating units are paid to supply supplies in the coming years, according to Berkshire.
The additional capacity created by Berkshire would ensure that no customer would be without power for more than three hours, the company said. Texas Reliability Corp. would offer a $ 4 billion performance guarantee provided by an investment-grade counterpart.
Height Securities analyst Josh Price said he was “skeptical” that the idea would have traction among lawmakers.
“The main question will be whether policymakers are willing to give up market-based principles if a non-competitive approach is more economical,” he said by email.
(Add new name of the company proposed in paragraph 10.)
For more articles like this, visit us at bloomberg.com
Sign up now to stay up to date with the most trusted business news source.
© 2021 Bloomberg LP