10-Q 1 bhe33120form10-q.htm 3.31.20 FORM 10-Q Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2020
or
[  ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from ______ to _______
 
 
Exact name of registrant as specified in its charter
 
 
 
 
State or other jurisdiction of incorporation or organization
 
 
Commission
 
Address of principal executive offices
 
IRS Employer
File Number
 
Registrant's telephone number, including area code
 
Identification No.
001-14881
 
BERKSHIRE HATHAWAY ENERGY COMPANY
 
94-2213782
 
 
(An Iowa Corporation)
 
 
 
 
666 Grand Avenue, Suite 500
 
 
 
 
Des Moines, Iowa 50309-2580
 
 
 
 
515-242-4300
 
 
 
 
 
 
 
001-05152
 
PACIFICORP
 
93-0246090
 
 
(An Oregon Corporation)
 
 
 
 
825 N.E. Multnomah Street
 
 
 
 
Portland, Oregon 97232
 
 
 
 
888-221-7070
 
 
 
 
 
 
 
333-90553
 
MIDAMERICAN FUNDING, LLC
 
47-0819200
 
 
(An Iowa Limited Liability Company)
 
 
 
 
666 Grand Avenue, Suite 500
 
 
 
 
Des Moines, Iowa 50309-2580
 
 
 
 
515-242-4300
 
 
 
 
 
 
 
333-15387
 
MIDAMERICAN ENERGY COMPANY
 
42-1425214
 
 
(An Iowa Corporation)
 
 
 
 
666 Grand Avenue, Suite 500
 
 
 
 
Des Moines, Iowa 50309-2580
 
 
 
 
515-242-4300
 
 
 
 
 
 
 
000-52378
 
NEVADA POWER COMPANY
 
88-0420104
 
 
(A Nevada Corporation)
 
 
 
 
6226 West Sahara Avenue
 
 
 
 
Las Vegas, Nevada 89146
 
 
 
 
702-402-5000
 
 
 
 
 
 
 
000-00508
 
SIERRA PACIFIC POWER COMPANY
 
88-0044418
 
 
(A Nevada Corporation)
 
 
 
 
6100 Neil Road
 
 
 
 
Reno, Nevada 89511
 
 
 
 
775-834-4011
 
 
 
 
 
 
 
 
 
N/A
 
 
 
 
(Former name or former address, if changed from last report)
 
 




Registrant
Securities registered pursuant to Section 12(b) of the Act:
BERKSHIRE HATHAWAY ENERGY COMPANY
None
PACIFICORP
None
MIDAMERICAN FUNDING, LLC
None
MIDAMERICAN ENERGY COMPANY
None
NEVADA POWER COMPANY
None
SIERRA PACIFIC POWER COMPANY
None
Registrant
Name of exchange on which registered:
BERKSHIRE HATHAWAY ENERGY COMPANY
None
PACIFICORP
None
MIDAMERICAN FUNDING, LLC
None
MIDAMERICAN ENERGY COMPANY
None
NEVADA POWER COMPANY
None
SIERRA PACIFIC POWER COMPANY
None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Registrant
Yes
No
BERKSHIRE HATHAWAY ENERGY COMPANY
X
 
PACIFICORP
X
 
MIDAMERICAN FUNDING, LLC
 
X
MIDAMERICAN ENERGY COMPANY
X
 
NEVADA POWER COMPANY
X
 
SIERRA PACIFIC POWER COMPANY
X
 
Indicate by check mark whether the registrants have submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrants were required to submit such files). Yes  x  No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Registrant
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
BERKSHIRE HATHAWAY ENERGY COMPANY
 
 
X
 
 
PACIFICORP
 
 
X
 
 
MIDAMERICAN FUNDING, LLC
 
 
X
 
 
MIDAMERICAN ENERGY COMPANY
 
 
X
 
 
NEVADA POWER COMPANY
 
 
X
 
 
SIERRA PACIFIC POWER COMPANY
 
 
X
 
 
If an emerging growth company, indicate by check mark if the registrants have elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  o
Indicate by check mark whether the registrants are a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes  o  No  x




All shares of outstanding common stock of Berkshire Hathaway Energy Company are privately held by a limited group of investors. As of April 30, 2020, 76,368,874 shares of common stock, no par value, were outstanding.
All shares of outstanding common stock of PacifiCorp are indirectly owned by Berkshire Hathaway Energy Company. As of April 30, 2020, 357,060,915 shares of common stock, no par value, were outstanding.
All of the member's equity of MidAmerican Funding, LLC is held by its parent company, Berkshire Hathaway Energy Company, as of April 30, 2020.
All shares of outstanding common stock of MidAmerican Energy Company are owned by its parent company, MHC Inc., which is a direct, wholly owned subsidiary of MidAmerican Funding, LLC. As of April 30, 2020, 70,980,203 shares of common stock, no par value, were outstanding.
All shares of outstanding common stock of Nevada Power Company are owned by its parent company, NV Energy, Inc., which is an indirect, wholly owned subsidiary of Berkshire Hathaway Energy Company. As of April 30, 2020, 1,000 shares of common stock, $1.00 stated value, were outstanding.
All shares of outstanding common stock of Sierra Pacific Power Company are owned by its parent company, NV Energy, Inc. As of April 30, 2020, 1,000 shares of common stock, $3.75 par value, were outstanding.
This combined Form 10-Q is separately filed by Berkshire Hathaway Energy Company, PacifiCorp, MidAmerican Funding, LLC, MidAmerican Energy Company, Nevada Power Company and Sierra Pacific Power Company. Information contained herein relating to any individual company is filed by such company on its own behalf. Each company makes no representation as to information relating to the other companies.





TABLE OF CONTENTS
 
PART I
 
 
PART II
 


i



Definition of Abbreviations and Industry Terms

When used in Forward-Looking Statements, Part I - Items 2 through 3, and Part II - Items 1 through 6, the following terms have the definitions indicated.
Berkshire Hathaway Energy Company and Related Entities
BHE
 
Berkshire Hathaway Energy Company
Berkshire Hathaway
 
Berkshire Hathaway Inc.
Berkshire Hathaway Energy or the Company
 
Berkshire Hathaway Energy Company and its subsidiaries
PacifiCorp
 
PacifiCorp and its subsidiaries
MidAmerican Funding
 
MidAmerican Funding, LLC and its subsidiaries
MidAmerican Energy
 
MidAmerican Energy Company
NV Energy
 
NV Energy, Inc. and its subsidiaries
Nevada Power
 
Nevada Power Company and its subsidiaries
Sierra Pacific
 
Sierra Pacific Power Company
Nevada Utilities
 
Nevada Power Company and Sierra Pacific Power Company
Registrants
 
Berkshire Hathaway Energy Company, PacifiCorp, MidAmerican Funding, MidAmerican Energy, Nevada Power and Sierra Pacific
Northern Powergrid
 
Northern Powergrid Holdings Company
BHE Pipeline Group
 
Northern Natural Gas and Kern River
Northern Natural Gas
 
Northern Natural Gas Company
Kern River
 
Kern River Gas Transmission Company
BHE Transmission
 
BHE Canada Holdings Corporation and BHE U.S. Transmission
BHE Canada
 
BHE Canada Holdings Corporation
AltaLink
 
AltaLink, L.P.
BHE U.S. Transmission
 
BHE U.S. Transmission, LLC
BHE Renewables
 
BHE Renewables, LLC and CalEnergy Philippines
HomeServices
 
HomeServices of America, Inc. and its subsidiaries
Utilities
 
PacifiCorp, MidAmerican Energy Company, Nevada Power Company and Sierra Pacific Power Company
Domestic Regulated Businesses
 
PacifiCorp, MidAmerican Energy Company, Nevada Power Company, Sierra Pacific Power Company, Northern Natural Gas Company and Kern River Gas Transmission Company
Topaz
 
Topaz Solar Farms LLC
Agua Caliente
 
Agua Caliente Solar, LLC
 
 
 
Certain Industry Terms
 
 
2017 Tax Reform
 
The Tax Cuts and Jobs Act enacted on December 22, 2017, effective January 1, 2018
AB 1054
 
California Assembly Bill 1054
AESO
 
Alberta Electric System Operator
AFUDC
 
Allowance for Funds Used During Construction
AUC
 
Alberta Utilities Commission
COVID-19
 
Coronavirus Disease 2019
CPUC
 
California Public Utilities Commission
DEAA
 
Deferred Energy Accounting Adjustment
Dth
 
Decatherm
EBA
 
Energy Balancing Account
ECAM
 
Energy Cost Adjustment Mechanism
EPA
 
United States Environmental Protection Agency

ii



FERC
 
Federal Energy Regulatory Commission
GAAP
 
Accounting principles generally accepted in the United States of America
GEMA
 
Gas and Electricity Markets Authority
GWh
 
Gigawatt Hour
GTA
 
General Tariff Application
IPUC
 
Idaho Public Utilities Commission
ICC
 
Illinois Commerce Commission
IRP
 
Integrated Resource Plan
kV
 
Kilovolt
MATS
 
Mercury and Air Toxics Standards
MW
 
Megawatt
MWh
 
Megawatt Hour
OATT
 
Open Access Transmission Tariff
Ofgem
 
Office of Gas and Electric Markets
OPUC
 
Oregon Public Utility Commission
PTC
 
Production Tax Credit
PUCN
 
Public Utilities Commission of Nevada
RAC
 
Renewable Adjustment Clause
REC
 
Renewable Energy Credit
RPS
 
Renewable Portfolio Standards
RRA
 
Renewable Energy Credit and Sulfur Dioxide Revenue Adjustment Mechanism
SEC
 
United States Securities and Exchange Commission
SIP
 
State Implementation Plan
TAM
 
Transition Adjustment Mechanism
UPSC
 
Utah Public Service Commission
WPSC
 
Wyoming Public Service Commission
WUTC
 
Washington Utilities and Transportation Commission


iii



Forward-Looking Statements

This report contains statements that do not directly or exclusively relate to historical facts. These statements are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements can typically be identified by the use of forward-looking words, such as "will," "may," "could," "project," "believe," "anticipate," "expect," "estimate," "continue," "intend," "potential," "plan," "forecast" and similar terms. These statements are based upon the relevant Registrant's current intentions, assumptions, expectations and beliefs and are subject to risks, uncertainties and other important factors. Many of these factors are outside the control of each Registrant and could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These factors include, among others:
general economic, political and business conditions, as well as changes in, and compliance with, laws and regulations, including income tax reform, initiatives regarding deregulation and restructuring of the utility industry, and reliability and safety standards, affecting the respective Registrant's operations or related industries;
changes in, and compliance with, environmental laws, regulations, decisions and policies that could, among other items, increase operating and capital costs, reduce facility output, accelerate facility retirements or delay facility construction or acquisition;
the outcome of regulatory rate reviews and other proceedings conducted by regulatory agencies or other governmental and legal bodies and the respective Registrant's ability to recover costs through rates in a timely manner;
changes in economic, industry, competition or weather conditions, as well as demographic trends, new technologies and various conservation, energy efficiency and private generation measures and programs, that could affect customer growth and usage, electricity and natural gas supply or the respective Registrant's ability to obtain long-term contracts with customers and suppliers;
performance, availability and ongoing operation of the respective Registrant's facilities, including facilities not operated by the Registrants, due to the impacts of market conditions, outages and repairs, transmission constraints, weather, including wind, solar and hydroelectric conditions, and operating conditions;
the effects of catastrophic and other unforeseen events, which may be caused by factors beyond the control of each respective Registrant or by a breakdown or failure of the Registrants' operating assets, including severe storms, floods, fires, earthquakes, explosions, landslides, an electromagnetic pulse, mining incidents, litigation, wars, terrorism, pandemics (including potentially in relation to COVID-19), embargoes, and cyber security attacks, data security breaches, disruptions, or other malicious acts;
a high degree of variance between actual and forecasted load or generation that could impact a Registrant's hedging strategy and the cost of balancing its generation resources with its retail load obligations;
changes in prices, availability and demand for wholesale electricity, coal, natural gas, other fuel sources and fuel transportation that could have a significant impact on generating capacity and energy costs;
the financial condition, creditworthiness and operational stability of the respective Registrant's significant customers and suppliers;
changes in business strategy or development plans;
availability, terms and deployment of capital, including reductions in demand for investment-grade commercial paper, debt securities and other sources of debt financing and volatility in interest rates;
changes in the respective Registrant's credit ratings;
risks relating to nuclear generation, including unique operational, closure and decommissioning risks;
hydroelectric conditions and the cost, feasibility and eventual outcome of hydroelectric relicensing proceedings;
the impact of certain contracts used to mitigate or manage volume, price and interest rate risk, including increased collateral requirements, and changes in commodity prices, interest rates and other conditions that affect the fair value of certain contracts;
the impact of inflation on costs and the ability of the respective Registrants to recover such costs in regulated rates;
fluctuations in foreign currency exchange rates, primarily the British pound and the Canadian dollar;
increases in employee healthcare costs;

iv



the impact of investment performance and changes in interest rates, legislation, healthcare cost trends, mortality and morbidity on pension and other postretirement benefits expense and funding requirements;
changes in the residential real estate brokerage, mortgage and franchising industries and regulations that could affect brokerage, mortgage and franchising transactions;
the ability to successfully integrate future acquired operations into a Registrant's business;
unanticipated construction delays, changes in costs, receipt of required permits and authorizations, ability to fund capital projects and other factors that could affect future facilities and infrastructure additions;
the availability and price of natural gas in applicable geographic regions and demand for natural gas supply;
the impact of new accounting guidance or changes in current accounting estimates and assumptions on the financial results of the respective Registrants; and
other business or investment considerations that may be disclosed from time to time in the Registrants' filings with the SEC or in other publicly disseminated written documents.
 
Further details of the potential risks and uncertainties affecting the Registrants are described in the Registrants' filings with the SEC, including Part II, Item 1A and other discussions contained in this Form 10-Q. Each Registrant undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The foregoing factors should not be construed as exclusive.


v



Item 1.
Financial Statements
Berkshire Hathaway Energy Company and its subsidiaries
 
 
 
 
 
 
 
 
 
PacifiCorp and its subsidiaries
 
 
 
 
 
 
 
 
MidAmerican Energy Company
 
 
 
 
 
 
 
 
MidAmerican Funding, LLC and its subsidiaries
 
 
 
 
 
 
 
 
Nevada Power Company and its subsidiaries
 
 
 
 
 
 
 
 
Sierra Pacific Power Company
 
 
 
 
 
 
 
 



1



Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations



2



Berkshire Hathaway Energy Company and its subsidiaries
Consolidated Financial Section


3



PART I
Item 1.
Financial Statements


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Shareholders of
Berkshire Hathaway Energy Company

Results of Review of Interim Financial Information

We have reviewed the accompanying consolidated balance sheet of Berkshire Hathaway Energy Company and subsidiaries (the "Company") as of March 31, 2020, the related consolidated statements of operations, comprehensive income, changes in equity and cash flows for the three-month periods ended March 31, 2020 and 2019, and the related notes (collectively referred to as the "interim financial information"). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2019, and the related consolidated statements of operations, comprehensive income, changes in equity, and cash flows for the year then ended (not presented herein); and in our report dated February 21, 2020, we expressed an unqualified opinion on those consolidated financial statements and included an explanatory paragraph regarding changes in accounting principles. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2019 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

This interim financial information is the responsibility of the Company's management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our reviews in accordance with standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.


/s/ Deloitte & Touche LLP


Des Moines, Iowa
May 1, 2020

4



BERKSHIRE HATHAWAY ENERGY COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
(Amounts in millions)

 
As of
 
March 31,
 
December 31,
 
2020
 
2019
ASSETS
Current assets:
 
 
 
Cash and cash equivalents
$
2,071

 
$
1,040

Restricted cash and cash equivalents
217

 
212

Trade receivables, net
1,772

 
1,910

Inventories
912

 
873

Mortgage loans held for sale
1,183

 
1,039

Other current assets
1,229

 
839

Total current assets
7,384

 
5,913

 
 

 
 

Property, plant and equipment, net
72,664

 
73,305

Goodwill
9,562

 
9,722

Regulatory assets
2,834

 
2,766

Investments and restricted cash and cash equivalents and investments
6,293

 
6,255

Other assets
2,069

 
2,090

 
 
 
 

Total assets
$
100,806

 
$
100,051


The accompanying notes are an integral part of these consolidated financial statements.


5



BERKSHIRE HATHAWAY ENERGY COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited) (continued)
(Amounts in millions)

 
As of
 
March 31,
 
December 31,
 
2020
 
2019
LIABILITIES AND EQUITY
Current liabilities:
 
 
 
Accounts payable
$
1,542

 
$
1,839

Accrued interest
514

 
493

Accrued property, income and other taxes
417

 
537

Accrued employee expenses
296

 
285

Short-term debt
2,088

 
3,214

Current portion of long-term debt
1,324

 
2,539

Other current liabilities
1,634

 
1,350

Total current liabilities
7,815

 
10,257

 
 

 
 

BHE senior debt
11,010

 
8,231

BHE junior subordinated debentures
100

 
100

Subsidiary debt
29,061

 
28,483

Regulatory liabilities
6,957

 
7,100

Deferred income taxes
9,677

 
9,653

Other long-term liabilities
3,614

 
3,649

Total liabilities
68,234

 
67,473

 
 

 
 

Commitments and contingencies (Note 8)
 
 


 
 

 
 

Equity:
 

 
 

BHE shareholders' equity:
 

 
 

Common stock - 115 shares authorized, no par value, 76 and 77 shares issued and outstanding

 

Additional paid-in capital
6,382

 
6,389

Long-term income tax receivable
(530
)
 
(530
)
Retained earnings
28,846

 
28,296

Accumulated other comprehensive loss, net
(2,253
)
 
(1,706
)
Total BHE shareholders' equity
32,445

 
32,449

Noncontrolling interests
127

 
129

Total equity
32,572

 
32,578

 
 
 
 

Total liabilities and equity
$
100,806

 
$
100,051


The accompanying notes are an integral part of these consolidated financial statements.


6



BERKSHIRE HATHAWAY ENERGY COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Amounts in millions)

 
Three-Month Periods
 
Ended March 31,
 
2020
 
2019
Operating revenue:
 
 
 
Energy
$
3,634

 
$
3,825

Real estate
893

 
785

Total operating revenue
4,527

 
4,610

 
 
 
 
Operating expenses:
 
 
 
Energy:
 
 
 
Cost of sales
1,038

 
1,214

Operations and maintenance
737

 
802

Depreciation and amortization
809

 
720

Property and other taxes
151

 
149

Real estate
873

 
806

Total operating expenses
3,608

 
3,691

 
 
 
 
Operating income
919

 
919

 
 
 
 
Other income (expense):
 
 
 
Interest expense
(483
)
 
(477
)
Capitalized interest
17

 
16

Allowance for equity funds
34

 
32

Interest and dividend income
20

 
30

Gains (losses) on marketable securities, net
27

 
(68
)
Other, net
(27
)
 
35

Total other income (expense)
(412
)
 
(432
)
 
 
 
 
Income before income tax benefit and equity loss
507

 
487

Income tax benefit
(184
)
 
(148
)
Equity loss
(18
)
 
(10
)
Net income
673

 
625

Net income attributable to noncontrolling interests
3

 
3

Net income attributable to BHE shareholders
$
670

 
$
622


The accompanying notes are an integral part of these consolidated financial statements.
 

7



BERKSHIRE HATHAWAY ENERGY COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(Amounts in millions)

 
Three-Month Periods
 
Ended March 31,
 
2020
 
2019
 
 
 
 
Net income
$
673

 
$
625

 
 
 
 
Other comprehensive (loss) income, net of tax:
 
 
 
Unrecognized amounts on retirement benefits, net of tax of $11 and $(7)
34

 
(32
)
Foreign currency translation adjustment
(548
)
 
155

Unrealized losses on cash flow hedges, net of tax of $(10) and $(2)
(33
)
 
(8
)
Total other comprehensive (loss) income, net of tax
(547
)
 
115

 
 

 
 

Comprehensive income
126

 
740

Comprehensive income attributable to noncontrolling interests
3

 
3

Comprehensive income attributable to BHE shareholders
$
123

 
$
737


The accompanying notes are an integral part of these consolidated financial statements.


8



BERKSHIRE HATHAWAY ENERGY COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited)
(Amounts in millions)
 
BHE Shareholders' Equity
 
 
 
 
 
 
 
 
 
 
Long-term
 
 
 
Accumulated
 
 
 
 
 
 
 
 
 
Additional
 
Income
 
 
 
Other
 
 
 
 
 
Common
 
Paid-in
 
Tax
 
Retained
 
Comprehensive
 
Noncontrolling
 
Total
 
Shares
 
Stock
 
Capital
 
Receivable
 
Earnings
 
Loss, Net
 
Interests
 
Equity
Balance, December 31, 2018
77

 
$

 
$
6,371

 
$
(457
)
 
$
25,624

 
$
(1,945
)
 
$
130

 
$
29,723

Net income

 

 

 

 
622

 

 
3

 
625

Other comprehensive income

 

 

 

 

 
115

 

 
115

Common stock purchases

 

 
(16
)
 

 
(277
)
 

 

 
(293
)
Distributions

 

 

 

 

 

 
(7
)
 
(7
)
Other equity transactions

 

 

 

 
(1
)
 

 

 
(1
)
Balance, March 31, 2019
77

 
$

 
$
6,355

 
$
(457
)
 
$
25,968

 
$
(1,830
)
 
$
126

 
$
30,162

 
 

 
 

 
 

 
 
 
 

 
 

 
 

 
 

Balance, December 31, 2019
77

 
$

 
$
6,389

 
$
(530
)
 
$
28,296

 
$
(1,706
)
 
$
129

 
$
32,578

Net income

 

 

 

 
670

 

 
3

 
673

Other comprehensive loss

 

 

 

 

 
(547
)
 

 
(547
)
Common stock purchases
(1
)
 

 
(6
)
 

 
(120
)
 

 

 
(126
)
Distributions

 

 

 

 

 

 
(5
)
 
(5
)
Other equity transactions

 

 
(1
)
 

 

 

 

 
(1
)
Balance, March 31, 2020
76

 
$

 
$
6,382

 
$
(530
)
 
$
28,846

 
$
(2,253
)
 
$
127

 
$
32,572


The accompanying notes are an integral part of these consolidated financial statements.

9



BERKSHIRE HATHAWAY ENERGY COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Amounts in millions)

 
Three-Month Periods
 
Ended March 31,
 
2020
 
2019
Cash flows from operating activities:
 
 
 
Net income
$
673

 
$
625

Adjustments to reconcile net income to net cash flows from operating activities:
 

 
 

(Gains) losses on marketable securities, net
(27
)
 
68

Depreciation and amortization
821

 
733

Allowance for equity funds
(34
)
 
(32
)
Equity loss, net of distributions
29

 
26

Changes in regulatory assets and liabilities

 
(52
)
Deferred income taxes and amortization of investment tax credits
47

 
(21
)
Other, net
63

 
1

Changes in other operating assets and liabilities, net of effects from acquisitions:
 
 
 
Trade receivables and other assets
(118
)
 
144

Derivative collateral, net
(19
)
 
(3
)
Pension and other postretirement benefit plans
(23
)
 
(21
)
Accrued property, income and other taxes, net
(364
)
 
(48
)
Accounts payable and other liabilities
117

 
68

Net cash flows from operating activities
1,165

 
1,488

 
 

 
 

Cash flows from investing activities:
 

 
 

Capital expenditures
(1,356
)
 
(1,393
)
Acquisitions, net of cash acquired

 
(26
)
Purchases of marketable securities
(188
)
 
(159
)
Proceeds from sales of marketable securities
180

 
153

Equity method investments
(153
)
 
(7
)
Other, net
43

 
17

Net cash flows from investing activities
(1,474
)
 
(1,415
)
 
 

 
 

Cash flows from financing activities:
 

 
 

Proceeds from BHE senior debt
3,231

 

Repayments of BHE senior debt
(350
)
 

Common stock purchases
(126
)
 
(293
)
Proceeds from subsidiary debt
1,093

 
2,945

Repayments of subsidiary debt
(1,347
)
 
(1,420
)
Net repayments of short-term debt
(1,109
)
 
(311
)
Other, net
(34
)
 
(21
)
Net cash flows from financing activities
1,358

 
900

 
 

 
 

Effect of exchange rate changes
(13
)
 
1

 
 

 
 

Net change in cash and cash equivalents and restricted cash and cash equivalents
1,036

 
974

Cash and cash equivalents and restricted cash and cash equivalents at beginning of period
1,268

 
883

Cash and cash equivalents and restricted cash and cash equivalents at end of period
$
2,304

 
$
1,857


The accompanying notes are an integral part of these consolidated financial statements.

10



BERKSHIRE HATHAWAY ENERGY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(1)
General

Berkshire Hathaway Energy Company ("BHE") is a holding company that owns a highly diversified portfolio of locally managed businesses principally engaged in the energy industry (collectively with its subsidiaries, the "Company") and is a consolidated subsidiary of Berkshire Hathaway Inc. ("Berkshire Hathaway").

The Company's operations are organized as eight business segments: PacifiCorp, MidAmerican Funding, LLC ("MidAmerican Funding") (which primarily consists of MidAmerican Energy Company ("MidAmerican Energy")), NV Energy, Inc. ("NV Energy") (which primarily consists of Nevada Power Company ("Nevada Power") and Sierra Pacific Power Company ("Sierra Pacific")), Northern Powergrid Holdings Company ("Northern Powergrid") (which primarily consists of Northern Powergrid (Northeast) Limited and Northern Powergrid (Yorkshire) plc), BHE Pipeline Group (which primarily consists of Northern Natural Gas Company ("Northern Natural Gas") and Kern River Gas Transmission Company ("Kern River")), BHE Transmission (which consists of BHE Canada Holdings Corporation ("BHE Canada") (which primarily consists of AltaLink, L.P. ("AltaLink")) and BHE U.S. Transmission, LLC), BHE Renewables (which primarily consists of BHE Renewables, LLC and CalEnergy Philippines) and HomeServices of America, Inc. (collectively with its subsidiaries, "HomeServices"). The Company, through these locally managed and operated businesses, owns four utility companies in the United States serving customers in 11 states, two electricity distribution companies in Great Britain, two interstate natural gas pipeline companies in the United States, an electric transmission business in Canada, interests in electric transmission businesses in the United States, a renewable energy business primarily investing in wind, solar, geothermal and hydroelectric projects, the largest residential real estate brokerage firm in the United States and one of the largest residential real estate brokerage franchise networks in the United States.

The unaudited Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and the United States Securities and Exchange Commission's rules and regulations for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the disclosures required by GAAP for annual financial statements. Management believes the unaudited Consolidated Financial Statements contain all adjustments (consisting only of normal recurring adjustments) considered necessary for the fair presentation of the unaudited Consolidated Financial Statements as of March 31, 2020 and for the three-month periods ended March 31, 2020 and 2019. The results of operations for the three-month period ended March 31, 2020 are not necessarily indicative of the results to be expected for the full year.

The preparation of the unaudited Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the unaudited Consolidated Financial Statements and the reported amounts of revenue and expenses during the period. Actual results may differ from the estimates used in preparing the unaudited Consolidated Financial Statements. Note 2 of Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2019 describes the most significant accounting policies used in the preparation of the unaudited Consolidated Financial Statements. There have been no significant changes in the Company's assumptions regarding significant accounting estimates and policies during the three-month period ended March 31, 2020.

Coronavirus Disease 2019 ("COVID-19")

In March 2020, COVID-19 was declared a global pandemic and containment and mitigation measures were recommended worldwide, which has had an unprecedented impact on society in general and many of the customers served by the Company. While the rapid outbreak of COVID-19 has not had a material impact on the Company's financial results or operations through March 31, 2020, impacts are likely to occur that affect future financial results. The duration and extent of COVID-19 and its future impact on the Company's businesses cannot be reasonably estimated at this time. Accordingly, significant estimates used in the preparation of the Company's unaudited Consolidated Financial Statements, including those associated with evaluations of certain long-lived assets, goodwill and other intangible assets for impairment, expected credit losses on amounts owed to the Company and potential regulatory deferral or recovery of certain costs may be subject to significant adjustments in future periods.


11



(2)
Property, Plant and Equipment, Net

Property, plant and equipment, net consists of the following (in millions):
 
 
 
As of
 
Depreciable
 
March 31,
 
December 31,
 
Life
 
2020
 
2019
Regulated assets:
 
 
 
 
 
Utility generation, transmission and distribution systems
5-80 years
 
$
80,530

 
$
81,127

Interstate natural gas pipeline assets
3-80 years
 
8,181

 
8,165

 
 
 
88,711

 
89,292

Accumulated depreciation and amortization
 
 
(26,414
)
 
(26,353
)
Regulated assets, net
 
 
62,297

 
62,939

 
 
 
 

 
 

Nonregulated assets:
 
 
 

 
 

Independent power plants
5-30 years
 
6,994

 
6,983

Other assets
3-30 years
 
1,798

 
1,834

 
 
 
8,792

 
8,817

Accumulated depreciation and amortization
 
 
(2,244
)
 
(2,183
)
Nonregulated assets, net
 
 
6,548

 
6,634

 
 
 
 

 
 

Net operating assets
 
 
68,845

 
69,573

Construction work-in-progress
 
 
3,819

 
3,732

Property, plant and equipment, net
 
 
$
72,664

 
$
73,305


Construction work-in-progress includes $3.7 billion as of March 31, 2020 and $3.6 billion as of December 31, 2019, related to the construction of regulated assets.


12



(3)
Investments and Restricted Cash and Cash Equivalents and Investments

Investments and restricted cash and cash equivalents and investments consists of the following (in millions):
 
As of
 
March 31,
 
December 31,
 
2020
 
2019
Investments:
 
 
 
BYD Company Limited common stock
$
1,176

 
$
1,122

Rabbi trusts
364

 
410

Other
171

 
187

Total investments
1,711

 
1,719

 
 

 
 

Equity method investments:
 
 
 
BHE Renewables tax equity investments
3,232

 
3,130

Electric Transmission Texas, LLC
562

 
555

Bridger Coal Company
77

 
81

Other
182

 
181

Total equity method investments
4,053

 
3,947

 
 
 
 
Restricted cash and cash equivalents and investments:
 

 
 

Quad Cities Station nuclear decommissioning trust funds
541

 
599

Other restricted cash and cash equivalents
233

 
230

Total restricted cash and cash equivalents and investments
774

 
829

 
 

 
 

Total investments and restricted cash and cash equivalents and investments
$
6,538

 
$
6,495

 
 
 
 
Reflected as:
 
 
 
Current assets
$
245

 
$
240

Noncurrent assets
6,293

 
6,255

Total investments and restricted cash and cash equivalents and investments
$
6,538

 
$
6,495


Investments

Gains (losses) on marketable securities, net recognized during the period consists of the following (in millions):
 
Three-Month Periods
 
Ended March 31,
 
2020
 
2019
Unrealized gains (losses) recognized on marketable securities still held at the reporting date
$
25

 
$
(68
)
Net gains recognized on marketable securities sold during the period
2

 

Gains (losses) on marketable securities, net
$
27

 
$
(68
)


13



Cash and Cash Equivalents and Restricted Cash and Cash Equivalents

Cash equivalents consist of funds invested in money market mutual funds, United States Treasury Bills and other investments with a maturity of three months or less when purchased. Cash and cash equivalents exclude amounts where availability is restricted by legal requirements, loan agreements or other contractual provisions. Restricted cash and cash equivalents as of March 31, 2020 and December 31, 2019, consist substantially of funds restricted for the purpose of constructing solid waste facilities under tax-exempt bond obligation agreements and debt service obligations for certain of the Company's nonregulated renewable energy projects. A reconciliation of cash and cash equivalents and restricted cash and cash equivalents as of March 31, 2020 and December 31, 2019, as presented in the Consolidated Statements of Cash Flows is outlined below and disaggregated by the line items in which they appear on the Consolidated Balance Sheets (in millions):
 
As of
 
March 31,
 
December 31,
 
2020
 
2019
Cash and cash equivalents
$
2,071

 
$
1,040

Restricted cash and cash equivalents
217

 
212

Investments and restricted cash and cash equivalents and investments
16

 
16

Total cash and cash equivalents and restricted cash and cash equivalents
$
2,304

 
$
1,268


(4)
Recent Financing Transactions

Long-Term Debt

In April 2020, PacifiCorp issued $400 million of its 2.70% First Mortgage Bonds due 2030 and $600 million of its 3.30% First Mortgage Bonds due 2051. PacifiCorp intends to use the net proceeds to fund capital expenditures, primarily for renewable resources and associated transmission projects, and for general corporate purposes.

In March 2020, BHE issued $1.25 billion of its 4.05% Senior Notes due 2025, $1.1 billion of its 3.70% Senior Notes due 2030 and $900 million of its 4.25% Senior Notes due 2050. BHE used the net proceeds to refinance a portion of the Company's short-term indebtedness and for general corporate purposes.

In January 2020, Nevada Power issued $425 million of its 2.40% General and Refunding Mortgage Notes, Series DD, due 2030 and $300 million of its 3.125% General and Refunding Mortgage Notes, Series EE, due 2050. Nevada Power used the net proceeds for the early redemption of $575 million of its 2.75% General and Refunding Mortgage Notes, Series BB, due April 2020 and for general corporate purposes.

In January 2020, Pinyon Pines I and II issued $382 million of fifteen year variable-rate term loans due 2034 with a portion of the proceeds used to repay $284 million of existing variable-rate term loans due April 2020. The new term loans amortize semiannually and have variable interest rates based on LIBOR plus a margin that varies during the terms of the agreements. The Company has entered into interest rate swaps that fix the interest rate on 100% of the new term loans. The variable interest rate as of March 31, 2020 was 2.61% while the fixed interest rate as of March 31, 2020 was 3.23%.


14



(5)
Income Taxes

A reconciliation of the federal statutory income tax rate to the effective income tax rate applicable to income before income tax benefit is as follows:
 
Three-Month Periods
 
Ended March 31,
 
2020
 
2019
 
 
 
 
Federal statutory income tax rate
21
 %
 
21
 %
Income tax credits
(46
)
 
(29
)
State income tax, net of federal income tax benefit

 
(17
)
Income tax effect of foreign income
(3
)
 
(3
)
Effects of ratemaking
(8
)
 
(3
)
Equity income
(1
)
 
(1
)
Other, net
1


2

Effective income tax rate
(36
)%
 
(30
)%

Income tax credits relate primarily to production tax credits ("PTCs") from wind-powered generating facilities owned by MidAmerican Energy, PacifiCorp and BHE Renewables. Federal renewable electricity PTCs are earned as energy from qualifying wind-powered generating facilities is produced and sold and are based on a per-kilowatt hour rate pursuant to the applicable federal income tax law. Wind-powered generating facilities are eligible for the credits for 10 years from the date the qualifying generating facilities are placed in-service.

The Company's provision for income taxes has been computed on a stand-alone basis. Berkshire Hathaway includes the Company in its consolidated United States federal and Iowa state income tax returns and the majority of the Company's United States federal income tax is remitted to or received from Berkshire Hathaway. For the three-month periods ended March 31, 2020 and 2019, the Company made payments for federal income taxes to Berkshire Hathaway totaling $100 million and $- million, respectively.

(6)
Employee Benefit Plans

Domestic Operations

Net periodic benefit cost (credit) for the domestic pension and other postretirement benefit plans included the following components (in millions):
 
Three-Month Periods
 
Ended March 31,
 
2020
 
2019
Pension:
 
 
 
Service cost
$
3

 
$
4

Interest cost
23

 
27

Expected return on plan assets
(35
)
 
(38
)
Net amortization
9

 
9

Net periodic benefit cost
$

 
$
2

 
 
 
 
Other postretirement:
 
 
 
Service cost
$
1

 
$
2

Interest cost
6

 
6

Expected return on plan assets
(9
)
 
(10
)
Net amortization
(1
)
 
(2
)
Net periodic benefit credit
$
(3
)
 
$
(4
)


15



Amounts other than the service cost for pension and other postretirement benefit plans are recorded in Other, net in the Consolidated Statements of Operations. Employer contributions to the domestic pension and other postretirement benefit plans are expected to be $13 million and $1 million, respectively, during 2020. As of March 31, 2020, $3 million and $- million of contributions had been made to the domestic pension and other postretirement benefit plans, respectively.

Foreign Operations

Net periodic benefit (credit) cost for the United Kingdom pension plan included the following components (in millions):
 
Three-Month Periods
 
Ended March 31,
 
2020
 
2019
 
 
 
 
Service cost
$
4

 
$
4

Interest cost
10

 
13

Expected return on plan assets
(25
)
 
(25
)
Net amortization
10

 
9

Net periodic benefit (credit) cost
$
(1
)
 
$
1


Amounts other than the service cost for the United Kingdom pension plan are recorded in Other, net in the Consolidated Statements of Operations. Employer contributions to the United Kingdom pension plan are expected to be £43 million during 2020. As of March 31, 2020, £11 million, or $14 million, of contributions had been made to the United Kingdom pension plan.

(7)
Fair Value Measurements

The carrying value of the Company's cash, certain cash equivalents, receivables, payables, accrued liabilities and short-term borrowings approximates fair value because of the short-term maturity of these instruments. The Company has various financial assets and liabilities that are measured at fair value on the Consolidated Financial Statements using inputs from the three levels of the fair value hierarchy. A financial asset or liability classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The three levels are as follows:

Level 1 — Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2 — Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).
Level 3 — Unobservable inputs reflect the Company's judgments about the assumptions market participants would use in pricing the asset or liability since limited market data exists. The Company develops these inputs based on the best information available, including its own data.


16



The following table presents the Company's financial assets and liabilities recognized on the Consolidated Balance Sheets and measured at fair value on a recurring basis (in millions):
 
 
Input Levels for Fair Value Measurements
 
 
 
 
 
 
Level 1
 
Level 2
 
Level 3
 
Other(1)
 
Total
As of March 31, 2020
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
Commodity derivatives
 
$
1

 
$
38

 
$
105

 
$
(20
)
 
$
124

Interest rate derivatives
 

 
5

 
51

 

 
56

Mortgage loans held for sale
 

 
1,183

 

 

 
1,183

Money market mutual funds(2)
 
1,750

 

 

 

 
1,750

Debt securities:
 
 
 
 
 
 
 
 
 
 
United States government obligations
 
154

 

 

 

 
154

International government obligations
 

 
4

 

 

 
4

Corporate obligations
 

 
66

 

 

 
66

Municipal obligations
 

 
3

 

 

 
3

Agency, asset and mortgage-backed obligations
 

 
1

 

 

 
1

Equity securities:
 
 
 
 
 
 
 
 
 
 
United States companies
 
300

 

 

 

 
300

International companies
 
1,185

 

 

 

 
1,185

Investment funds
 
172

 

 

 

 
172

 
 
$
3,562


$
1,300


$
156


$
(20
)
 
$
4,998

Liabilities:
 
 

 
 

 
 

 
 

 
 

Commodity derivatives
 
$
(3
)

$
(167
)

$
(53
)

$
112

 
$
(111
)
Interest rate derivatives
 
(4
)
 
(65
)
 
(6
)
 

 
(75
)
 
 
$
(7
)
 
$
(232
)
 
$
(59
)
 
$
112

 
$
(186
)
 
 
Input Levels for Fair Value Measurements
 
 
 
 
 
 
Level 1
 
Level 2
 
Level 3
 
Other(1)
 
Total
As of December 31, 2019
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
Commodity derivatives
 
$

 
$
45

 
$
108

 
$
(24
)
 
$
129

Interest rate derivatives
 

 
2

 
14

 

 
16

Mortgage loans held for sale
 

 
1,039

 

 

 
1,039

Money market mutual funds(2)
 
824

 

 

 

 
824

Debt securities:
 
 
 
 
 
 
 
 
 
 
United States government obligations
 
189

 

 

 

 
189

International government obligations
 

 
4

 

 

 
4

Corporate obligations
 

 
58

 

 

 
58

Municipal obligations
 

 
1

 

 

 
1

Agency, asset and mortgage-backed obligations
 

 
1

 

 

 
1

Equity securities:
 
 
 
 
 
 
 
 
 
 
United States companies
 
336

 

 

 

 
336

International companies
 
1,131

 

 

 

 
1,131

Investment funds
 
169

 

 

 

 
169

 
 
$
2,649

 
$
1,150

 
$
122

 
$
(24
)
 
$
3,897

Liabilities:
 
 
 
 
 
 
 
 
 
 
Commodity derivatives
 
$
(4
)
 
$
(143
)
 
$
(11
)
 
$
103

 
$
(55
)
Interest rate derivatives
 
(2
)
 
(19
)
 

 

 
(21
)
 
 
$
(6
)
 
$
(162
)
 
$
(11
)
 
$
103

 
$
(76
)

17




(1)
Represents netting under master netting arrangements and a net cash collateral receivable of $92 million and $79 million as of March 31, 2020 and December 31, 2019, respectively.
(2)
Amounts are included in cash and cash equivalents; other current assets; and noncurrent investments and restricted cash and investments on the Consolidated Balance Sheets. The fair value of these money market mutual funds approximates cost.
Derivative contracts are recorded on the Consolidated Balance Sheets as either assets or liabilities and are stated at estimated fair value unless they are designated as normal purchases or normal sales and qualify for the exception afforded by GAAP. When available, the fair value of derivative contracts is estimated using unadjusted quoted prices for identical contracts in the market in which the Company transacts. When quoted prices for identical contracts are not available, the Company uses forward price curves. Forward price curves represent the Company's estimates of the prices at which a buyer or seller could contract today for delivery or settlement at future dates. The Company bases its forward price curves upon market price quotations, when available, or internally developed and commercial models, with internal and external fundamental data inputs. Market price quotations are obtained from independent brokers, exchanges, direct communication with market participants and actual transactions executed by the Company. Market price quotations are generally readily obtainable for the applicable term of the Company's outstanding derivative contracts; therefore, the Company's forward price curves reflect observable market quotes. Market price quotations for certain electricity and natural gas trading hubs are not as readily obtainable due to the length of the contract. Given that limited market data exists for these contracts, as well as for those contracts that are not actively traded, the Company uses forward price curves derived from internal models based on perceived pricing relationships to major trading hubs that are based on unobservable inputs. The estimated fair value of these derivative contracts is a function of underlying forward commodity prices, interest rates, currency rates, related volatility, counterparty creditworthiness and duration of contracts.

The Company's mortgage loans held for sale are valued based on independent quoted market prices, where available, or the prices of other mortgage whole loans with similar characteristics. As necessary, these prices are adjusted for typical securitization activities, including servicing value, portfolio composition, market conditions and liquidity.

The Company's investments in money market mutual funds and debt and equity securities are stated at fair value. When available, a readily observable quoted market price or net asset value of an identical security in an active market is used to record the fair value. In the absence of a quoted market price or net asset value of an identical security, the fair value is determined using pricing models or net asset values based on observable market inputs and quoted market prices of securities with similar characteristics.

The following table reconciles the beginning and ending balances of the Company's assets and liabilities measured at fair value on a recurring basis using significant Level 3 inputs (in millions):
 
Three-Month Periods
 
Ended March 31,
 
 
 
Interest
 
Commodity
 
Rate
 
Derivatives
 
Derivatives
2020:
 
 
 
Beginning balance
$
97

 
$
14

Changes included in earnings
(3
)
 
72

Changes in fair value recognized in net regulatory assets
(40
)
 

Purchases
2

 

Settlements
(4
)
 
(41
)
Ending balance
$
52

 
$
45

2019:
 
 
 
Beginning balance
$
99

 
$
10

Changes included in earnings
(3
)
 
53

Changes in fair value recognized in net regulatory assets
(11
)
 

Purchases
1

 

Settlements

 
(45
)
Ending balance
$
86

 
$
18


18




The Company's long-term debt is carried at cost, including fair value adjustments and unamortized premiums, discounts and debt issuance costs as applicable, on the Consolidated Balance Sheets. The fair value of the Company's long-term debt is a Level 2 fair value measurement and has been estimated based upon quoted market prices, where available, or at the present value of future cash flows discounted at rates consistent with comparable maturities with similar credit risks. The carrying value of the Company's variable-rate long-term debt approximates fair value because of the frequent repricing of these instruments at market rates. The following table presents the carrying value and estimated fair value of the Company's long-term debt (in millions):
 
As of March 31, 2020
 
As of December 31, 2019
 
Carrying
 
Fair
 
Carrying
 
Fair
 
Value
 
Value
 
Value
 
Value
 
 
 
 
 
 
 
 
Long-term debt
$
41,495

 
$
47,220

 
$
39,353

 
$
46,004


(8)
Commitments and Contingencies

Construction Commitments

During the three-month period ended March 31, 2020, MidAmerican Energy entered into firm construction commitments totaling $269 million for the remainder of 2020 through 2021 related to the construction of wind-powered generating facilities in Iowa.

Easements

During the three-month period ended March 31, 2020, MidAmerican Energy entered into non-cancelable easements with minimum payment commitments totaling $95 million through 2060 for land in Iowa on which some of its wind-powered generating facilities will be located.

Maintenance and Service Contracts

During the three-month period ended March 31, 2020, MidAmerican Energy entered into non-cancelable maintenance and service contracts related to wind-powered generating facilities with minimum payment commitments totaling $72 million through 2031.


19



BHE Renewables' Counterparty Risk

On January 29, 2019, PG&E Corporation and Pacific Gas and Electric Company (the "PG&E Utility") (together "PG&E") filed voluntary petitions for relief under chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Northern District of California ("PG&E Bankruptcy Filing"). The Company owns 100% of Topaz Solar Farm LLC ("Topaz") and owns a 49% interest in Agua Caliente Solar, LLC ("Agua Caliente"). Topaz is a 550-MW solar photovoltaic electric power generating facility located in California. Topaz sells 100% of its energy, capacity and renewable energy credits ("RECs") generated from the facility to PG&E Utility under a 25-year wholesale power purchase agreement ("PPA") that is in effect until October 2039. As of March 31, 2020, the Company's consolidated balance sheet includes $1.0 billion of property, plant and equipment, net and $0.8 billion of non-recourse project debt related to Topaz. Agua Caliente is a 290-MW solar photovoltaic electric power generating facility located in Arizona. Agua Caliente sells 100% of its energy, capacity and RECs generated from the facility to PG&E Utility under a 25-year wholesale PPA that is in effect until June 2039. As of March 31, 2020, the Company's equity investment in Agua Caliente totals $76 million and the project has $0.7 billion of non-recourse project debt owed to the United States Department of Energy. The PG&E Bankruptcy Filing is an event of default under the Topaz PPA ("PPA Default"). PG&E has paid in full all amounts invoiced to date for post-petition energy deliveries for both Topaz and Agua Caliente. PG&E has not paid for the power delivered from January 1 through January 28, 2019. The Company continues to perform on its obligations and deliver renewable energy to the PG&E Utility, and PG&E has publicly stated it will pay suppliers in full under normal terms for post-petition goods and services received. The Company maintains that, in light of the current facts and circumstances, the PPA Default could not reasonably be expected to result in a material adverse effect under the Topaz indenture and, therefore, no default has occurred under the Topaz indenture. In July 2019, the California Governor signed California Assembly Bill 1054 ("AB 1054") into law. AB 1054 is comprehensive legislation addressing wildfire risk in the state of California that, among other items, authorizes a wildfire fund which would operate as an insurance fund to support the creditworthiness of electrical utilities, if certain utilities, including PG&E, participate by making the required contributions, among other things. In July 2019, PG&E notified the California Public Utilities Commission ("CPUC") of its intent to participate in the insurance fund and such participation requires, among other items, PG&E to exit bankruptcy by June 30, 2020. The Company believes it is more likely than not that no impairment exists and current debt obligations will be met, as post-petition contractual revenue payments are expected to be paid by PG&E Utility to the Topaz and Agua Caliente projects. The Company will continue to monitor the situation, including continued receipt of future PG&E payments and the future risk of the PPAs being rejected or modified through the bankruptcy process.

Legal Matters

The Company is party to a variety of legal actions arising out of the normal course of business. Plaintiffs occasionally seek punitive or exemplary damages. The Company does not believe that such normal and routine litigation will have a material impact on its consolidated financial results. The Company is also involved in other kinds of legal actions, some of which assert or may assert claims or seek to impose fines, penalties and other costs in substantial amounts and are described below.

Environmental Laws and Regulations

The Company is subject to federal, state, local and foreign laws and regulations regarding climate change, renewable portfolio standards, air and water quality, emissions performance standards, coal combustion byproduct disposal, hazardous and solid waste disposal, protected species and other environmental matters that have the potential to impact the Company's current and future operations. The Company believes it is in material compliance with all applicable laws and regulations.


20



Hydroelectric Relicensing

PacifiCorp is a party to the 2016 amended Klamath Hydroelectric Settlement Agreement ("KHSA"), which is intended to resolve disputes surrounding PacifiCorp's efforts to relicense the Klamath Hydroelectric Project. The KHSA does not guarantee dam removal. Instead, it establishes a process for PacifiCorp, the states of Oregon and California ("States") and other stakeholders to assess whether dam removal can occur consistent with the settlement's terms. For PacifiCorp, the key elements of the settlement include: (1) a contribution from PacifiCorp's Oregon and California customers capped at $200 million plus $250 million in California bond funds; (2) complete indemnification from harms associated with dam removal; (3) transfer of the Federal Energy Regulatory Commission ("FERC") license to a third-party dam removal entity, the Klamath River Renewal Corporation ("KRRC"), who would conduct dam removal; and (4) ability for PacifiCorp to operate the facilities for the benefit of customers until dam removal commences.

In September 2016, the KRRC and PacifiCorp filed a joint application with the FERC to transfer the license for the four main-stem Klamath dams from PacifiCorp to the KRRC. Over the past two years, the KRRC has been supplementing the application with additional information about its financial, technical, and legal capacity to become the licensee. In July 2019, the KRRC provided the FERC with additional information about its financial capacity to become a licensee, including updated cost estimates, and its insurance, bonding and liability transfer package. The FERC is evaluating the KRRC's information and the proposed license transfer. The KRRC will continue to refine its insurance, bonding and liability transfer package, and PacifiCorp will review the KRRC's capacity to fulfill its indemnity obligation under the KHSA. If certain conditions in the amended KHSA are not satisfied (e.g., inadequate funding or inability of KRRC to satisfy its indemnification obligation) and the license does not transfer to the KRRC, PacifiCorp will resume relicensing with the FERC.

The United States Court of Appeals for the District of Columbia Circuit issued a decision in the Hoopa Valley Tribe v. FERC litigation, in January 2019, finding that the states of California and Oregon have waived their Clean Water Act, Section 401, water quality certification authority over the Klamath hydroelectric project relicensing. This decision has the potential to limit the ability of the States to impose water quality conditions on new and relicensed projects. Environmental interests, supported by California, Oregon and other states, asked the court to rehear the case, which was denied. Subsequently, environmental groups, supported by numerous states, filed a petition for certiorari before the United States Supreme Court, which was denied on December 9, 2019, thereby allowing the circuit court opinion to stand as a final and unappealable decision.

Guarantees

The Company has entered into guarantees as part of the normal course of business and the sale of certain assets. These guarantees are not expected to have a material impact on the Company's consolidated financial results.



21



(9)
Revenue from Contracts with Customers

Energy Products and Services

The following table summarizes the Company's energy products and services revenue from contracts with customers ("Customer Revenue") by regulated energy and nonregulated energy, with further disaggregation of regulated energy by customer class and line of business, including a reconciliation to the Company's reportable segment information included in Note 12 (in millions):
 
 
For the Three-Month Period Ended March 31, 2020
 
 
PacifiCorp
 
MidAmerican Funding
 
NV Energy
 
Northern Powergrid
 
BHE Pipeline Group
 
BHE Transmission
 
BHE Renewables
 
BHE and
Other(1)
 
Total
Customer Revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Regulated:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retail electric
 
$
1,122

 
$
410

 
$
529

 
$

 
$

 
$

 
$

 
$

 
$
2,061

Retail gas
 

 
187

 
47

 

 

 

 

 

 
234

Wholesale
 

 
64

 
14

 

 

 

 

 
(1
)
 
77

Transmission and
   distribution
 
22

 
15

 
23

 
233

 

 
169

 

 

 
462

Interstate pipeline
 

 

 

 

 
400

 

 

 
(48
)
 
352

Other
 
26

 

 
1

 

 

 

 

 

 
27

Total Regulated
 
1,170

 
676

 
614

 
233

 
400

 
169

 

 
(49
)
 
3,213

Nonregulated
 

 
6

 
1

 
7

 

 
3

 
159

 
127

 
303

Total Customer Revenue
 
1,170

 
682

 
615

 
240

 
400

 
172

 
159

 
78

 
3,516

Other revenue
 
36

 
4

 
7

 
26

 
1

 

 
19

 
25

 
118

Total
 
$
1,206

 
$
686

 
$
622

 
$
266

 
$
401

 
$
172

 
$
178

 
$
103

 
$
3,634


 
 
For the Three-Month Period Ended March 31, 2019
 
 
PacifiCorp
 
MidAmerican Funding
 
NV Energy
 
Northern Powergrid
 
BHE Pipeline Group
 
BHE Transmission
 
BHE Renewables
 
BHE and
Other(1)
 
Total
Customer Revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Regulated: