Will PacifiCorp's credit rating be downgraded below investment grade (BB+ or lower) by any major agency by year-end 2026?

The 17x gap between claims ($48B) and reserves ($2.75B) is staggering, but rating agencies evaluate expected losses, not filed claims. Weekly mini-trials starting Feb 2026 create a steady flow of data points -- if verdicts establish per-claim benchmarks 3-4x higher than reserved, reserves could jump to $8-10B+. However, S&P just downgraded to BBB- and has already priced in significant risk. For a further notch to BB+, they need evidence losses are substantially worse than reflected. Berkshire's implicit support ($381.6B cash, never let a subsidiary default) is a powerful mitigant that S&P explicitly considers. The 11-month timeline gives enough runway for adverse verdict trends but also for settlements or exculpatory findings on Santiam Canyon (60% of claims).

The appeal bond requirement (~$9B through 2028) is underappreciated but PacifiCorp has $13B+ in secured bonds outstanding with asset backing. A single large verdict ($1B+) before mid-2026 could trigger a rating agency review cycle, but most wildfire cases involve smaller per-plaintiff amounts. S&P has already downgraded once and agencies are reluctant to downgrade in quick succession absent fundamentally new information. The BBB- rating already reflects substantial concern. Federal government claims ($900M+) add risk but are on a separate track with slower resolution timelines.

S&P's utility rating methodology considers standalone creditworthiness plus parent support uplift. PacifiCorp likely receives a 1-2 notch uplift from Berkshire's implicit support. Even if standalone credit deteriorates further, the parent support uplift may keep it at investment grade. Berkshire has $381.6B in cash and behavioral history of supporting subsidiaries. Greg Abel's statement about not being 'insurer of last resort' introduces uncertainty about willingness, but Buffett's track record and Berkshire's reputational stakes override rhetoric. Exculpatory evidence on Santiam Canyon fire (60% of claims) provides a potential positive catalyst.

PacifiCorp is BBB-, one notch from junk, and has been for some time. Rating agencies move deliberately and have already factored in known wildfire exposure. For a downgrade by year-end 2026, you need trial outcomes significantly worse than reserved AND S&P to conclude Berkshire parent support is insufficient. The first is plausible given weekly mini-trials. The second is very unlikely given Berkshire's $381.6B cash buffer and track record of never letting a subsidiary default. This is a low-probability but non-trivial event.

The market is overweighting the headline $48B claims number vs. the reality that wildfire claims typically settle for far less than filed. The $2.75B reserve is management's estimate and while there is a 17x gap, the gap between filed claims and actual payouts in wildfire litigation is typically enormous. Oregon DOF found exculpatory evidence for Santiam Canyon (60% of claims) -- if that holds up in trials, total liability could be far lower than feared. Weekly mini-trials could produce favorable outcomes supporting the current rating. S&P would be hard-pressed to cut a subsidiary to junk when the parent has nearly $400B in cash.

The timeline matters. Feb to Dec 2026 is 11 months with weekly mini-trials just starting. It takes months for a verdict trend to become clear. Even if early verdicts are adverse, S&P would likely issue a negative outlook or CreditWatch before downgrading -- that is another 3-6 month cycle. For a full downgrade to junk by Dec 2026, you need: adverse verdicts establishing high per-claim benchmarks by mid-2026, S&P placing on CreditWatch by Q2-Q3, then downgrading by Q4. Tight but possible. This is the highest-probability run because the trial acceleration schedule (twice weekly in 2027) could pull some pressure forward into late 2026.

BBB- with one notch cushion. $48B claims vs $2.75B reserves. But Berkshire parent has $381.6B cash and has never let a subsidiary default. Rating agencies rarely downgrade subsidiaries to junk when the parent is an AAA-equivalent credit with massive cash reserves and a demonstrated track record of support. Parent support uplift is the decisive factor.

Wildfire trial outcomes are the swing variable. If cumulative verdicts exceed $2B (the committee-identified downgrade trigger), rating pressure intensifies. Currently at $370M in verdicts. Getting to $2B in 11 months of weekly trials is possible but requires consistently large verdicts averaging $4M+ per week. More likely verdicts stay manageable and the rating holds, though adverse trends could trigger a CreditWatch.

Rating agencies are slow to move and factor in parent support. BBB- already reflects the risk. Berkshire's $381.6B cash buffer and track record of never letting a subsidiary default make a junk downgrade unlikely absent a catastrophic verdict scenario. Exculpatory evidence on Santiam Canyon (60% of claims) provides additional downside protection for PacifiCorp's rating.