(Bloomberg) -- Warren Buffett is leaving little to chance when it comes to winning a piece of one of the biggest American power deals.
The billionaire’s Berkshire Hathaway Energy has spent the past two years pushing to overhaul how the Texas electrical grid works, and is now promoting a bill that would require the state to fund construction of natural gas-fired power plants that would be turned on when the system is under strain. Cost estimates range from about $10 billion to $18 billion.
BHE is the only industry voice publicly backing the proposal, known as Senate Bill 6, which has passed the Senate and is winding its way through the House. It closely resembles a concept that BHE pitched to lawmakers in 2021 as a way to shore up the grid after a winter storm left millions without power for days.
That proposal fizzled out, but industry insiders say the revived effort — if it becomes law — would set up Buffett’s company to win a significant role in creating backup power. The plan calls for constructing as much as 10,000 megawatts of natural gas generation, enough to power 2 million homes, with a guaranteed return for the builder of as high as 10%.
They’re “positioned to jump and they want it,” said Michael Webber, an energy professor at the University of Texas at Austin.
But there’s plenty of opposition against it. An analysis released last week showed the costs could reach $18 billion, much higher than BHE’s estimate of $10.8 billion. A perception is setting in among lawmakers that BHE is pushing a plan that seems designed to enrich the company at the expense of electricity customers and taxpayers.
“My concern is that this $10 billion of insurance money — it’s not our money, it’s the taxpayers’ money,” Senator Jose Menendez, a Democrat, said on the floor of the senate last week. He said this plan would build more capacity than is needed for the grid, and a better solution is making the whole system more efficient.
Critics, including electricity generators, also say it will disincentive private investment in the grid. They see it as a giveaway to the natural gas industry that shifts the risks of building new generation to customers and other market participants.
BHE said it stands by the $10.8 billion construction cost estimate it gave to lawmakers in February. The bill under consideration “will provide the reliability and resiliency that Texans need,” Alicia Knapp, the chief executive officer of BHE Infrastructure Group, said in an email. She emphasized that BHE didn’t design the bill and would look forward to participating in a competitive bidding process.
Representatives from NRG Energy Inc. and Vistra Corp., two of the biggest power companies in Texas, registered their opposition to Senate Bill 6 at a hearing in March.
“SB6 is not an insurance policy,” Michele Richmond, the executive director of Texas Competitive Power Advocates, whose members include NRG and Vistra, said in an email. “It is the equivalent of buying new cars to keep in your garage in case your main vehicle breaks down catastrophically, which is inefficient and expensive.”
BHE first pitched the idea after Winter Storm Uri in February 2021, which punished the state with subfreezing temperatures, snow and ice that shut down power plants, leaving millions of Texans without electricity and heat for days. It ultimately resulted in more than 200 deaths.
In the aftermath, BHE hired more than 20 lobbyists to promote the idea of building backup generators to Texas lawmakers, though it didn’t gain traction amid concern it too heavily favored the company that came up with the idea. But lawmakers liked the concept and decided to revive it this year.
In contrast to BHE’s proposal in 2021, this bill requires that at least two companies win the contracts.
BHE, which operates pipelines, grids and power plants and has more than 12 million customers in the US, Canada and UK, has maintained a sizable presence at the state capitol and hired 18 lobbyists for this year’s session. In 2022, the firm also donated to the campaigns of key political players in the Texas legislature including both the leader of the house and senate as well as the senator who sponsored Senate Bill 6.
“This bill is the only bill you’re going to hear today that guarantees new construction of generation built here in Texas,” Julia Rathgeber, a lobbyist representing BHE, said during testimony before lawmakers on March 23.
The office of Senator Charles Schwertner, who co-authored the bill, said the $18 billion estimate from the Lower Colorado River Authority is too high and the cost could be lower depending on the exact types of plants built.
Schwertner’s office said any company interested in the work will have a fair shot.
Senate Bill 6 still needs approval from the House and governor to become law, and for now its prospects are uncertain.
“There’s a lot of pushback in the House,” said Mark Jones, a political science professor at Rice University in Houston, who has been an observer of the Texas legislature for nearly two decades. There’s now a “large number of groups ranging from companies to nonprofits to experts who are openly stating that this is a bad bill.”
--With assistance from Naureen S. Malik.
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