Will cumulative PacifiCorp wildfire jury verdicts exceed $2B by year-end 2026?

The $100M FY2025 accrual is the pivotal new data point. PacifiCorp management's accrual represents their best estimate of probable losses from both verdicts AND anticipated settlements. The drop from $346M in FY2024 and $1.9B in FY2023 signals one or more of: fewer adverse verdicts in FY2025, more favorable per-claim outcomes than expected, or accelerated settlement at below-reserve rates. All three are bearish for the YES resolution. Starting from $370M cumulative, we need roughly $1.63B in additional adverse verdicts by December 31, 2026 -- about 40 more weeks of weekly mini-trials. To clear $2B through verdicts alone (not settlements, which tend to produce smaller reported figures), per-trial averages would need to run at roughly $40M+. The accrual deceleration implies management sees no evidence of verdict acceleration at that magnitude. Moderately reducing from the prior 20% estimate.

The structural math is challenging for a YES outcome. Cumulative verdicts of $370M as of late 2025 against the $2B threshold means 5.4x growth in verdict totals is required within one calendar year. The mini-trial format (weekly cadence) is designed to resolve cases efficiently, but efficiency typically means smaller per-trial awards and more pressure to settle. The accrual trajectory ($1.9B FY2023, $346M FY2024, $100M FY2025) shows sharply diminishing reserve additions -- if FY2025 verdicts were producing large adverse outcomes, management would not have been able to slow accruals. Additionally, the Oregon DOF exculpatory evidence on Santiam Canyon fire (60% of claims) may have begun to gain legal traction in FY2025 trial outcomes, depressing per-claim verdicts for the dominant claim category. The federal government's $900M+ claims remain pending but are negotiated differently from jury trials. Lowering slightly below prior 20%.

Holding slightly above the other opus runs because the mini-trial acceleration is a genuine wildcard. Weekly trials running since February 2026 means we are now in the period of maximum verdict data generation. While the FY2025 accrual deceleration is bearish, it reflects outcomes through December 2025 -- before the accelerated 2026 schedule began in earnest. There is a scenario where the mini-trial cadence produces clustered adverse verdicts on cases from specific fire events (e.g., Echo Mountain Complex, Archie Creek) where exculpatory evidence is weaker. The PG&E analog is relevant: cumulative wildfire liability surprises to the upside over time. However, PacifiCorp has the benefit of PG&E's experience and has had years to negotiate settlements and build legal defenses. The 'reasonably possible significant additional losses' language in the 10-K is standard legal boilerplate and does not indicate management has new information pointing to large imminent verdicts. Net assessment: modestly below prior 20%.

The question hinges on whether the weekly mini-trial schedule generates large enough jury verdicts to push cumulative totals from $370M past $2B within 2026. The $100M FY2025 accrual decelerates the prior trend but does not eliminate it entirely. Mini-trials are specifically designed to process many cases quickly -- the volume of cases decided in 2026 will be substantially higher than prior years. If even a subset of these cases produce verdicts at $20-30M per claim (below the prior $370M cumulative average), the math could work. However, $20-30M per claim verdict averages seem optimistic for plaintiffs given the exculpatory evidence on Santiam Canyon cases and the broader trend toward settlement. The reserve math ($2.85B cumulative probable, ~$1.37B+ already paid) leaves a remaining unpaid probable loss reserve of roughly $1.48B -- but this covers all forms of resolution, not just jury verdicts. Jury verdicts specifically hitting $2B cumulative is a higher bar than total resolution costs. Slight downward revision from prior 20%.

The sharpest bearish signal is the accrual trajectory: $1.9B (FY2023) → $346M (FY2024) → $100M (FY2025). This is not random variation -- it is a systematic deceleration. Management's accrual process at major utilities is rigorous (Deloitte flagged it as a Critical Audit Matter, meaning auditors were intensely scrutinizing loss estimates). A $100M accrual in FY2025 means the actuarial and legal teams saw only modest additional probable losses from trial activity during the year. This directly implies that jury verdicts in FY2025 mini-trials were not generating the type of headline awards that would drive cumulative totals to $2B. The weekly 2026 cadence is new, but it emerged from the same case inventory. Settlement activity in FY2025 may have cleared many high-liability cases at below-verdict rates, leaving a pool of remaining cases with lower per-claim exposure. Meaningful downward revision from prior 20%.

Maintaining the highest gemini estimate because the weekly mini-trial schedule running since February 2026 introduces genuine real-time uncertainty that the FY2025 accrual cannot fully capture. The accrual was fixed as of December 31, 2025 -- any verdicts in January-February 2026 are not reflected. If the accelerated 2026 schedule has already produced several substantial verdicts since the 10-K was filed, the trajectory could shift rapidly. The question resolution date is year-end 2026, meaning there are approximately 10 more months of trial activity. The PG&E precedent is instructive: initial reserve estimates proved dramatically insufficient as trial activity accelerated. However, PacifiCorp's legal team has had the benefit of PG&E's experience and has been more proactive. I assign slightly higher probability than the other gemini runs because I weight the forward-looking trial schedule more heavily against the backward-looking accrual signal.

The key insight is that reserve accruals and jury verdicts are related but distinct measures. Reserve accruals reflect management's estimate of probable losses across all resolution paths (verdicts, settlements, government claims). The $100M FY2025 accrual could reflect favorable settlements in cases that never went to trial -- those cases would reduce total liability without generating jury verdict amounts. The question asks specifically about JURY VERDICTS, not total liability resolution. So even if PacifiCorp settled many cases cheaply in FY2025 (which would reduce accruals), that says nothing directly about what jury verdicts will look like in 2026 when mini-trials dominate. Mini-trials by definition go to verdict -- that's why they're trials. The question is whether the remaining cases in the trial queue have higher or lower per-claim severity than the prior $370M batch. The exculpatory evidence on Santiam Canyon (60% of claims) is the most relevant factor -- if it's gaining traction, the 2026 verdict pool may be skewed toward the lower-severity cases. Slight downward revision from prior 20%.

Running the math more precisely: $370M cumulative verdicts to date. Need $1.63B additional from ~40 weekly mini-trials remaining in 2026 (assuming trials started in February 2026 and run through end of year). That requires an average of approximately $40.75M per trial verdict. For context, the $370M in prior verdicts came from a much smaller number of large, precedent-setting cases -- the mini-trial format is specifically designed to handle higher-volume, lower-per-claim cases efficiently. Average per-case severity in the mini-trial pool is likely lower than the precedent-setting early cases. Even at $15-20M per verdict (which would be a substantial wildfire verdict), 40 trials would yield $600M-$800M, bringing cumulative to roughly $1B -- well short of $2B. To reach $2B, you'd need either a few catastrophic individual verdicts (possible but not systematic) or per-trial averages well above historical norms. The $100M FY2025 accrual does not support an expectation of $40M+ per trial averages.

Balancing the bearish accrual signal against the genuine tail risk from accelerated trial cadence. The 'reasonably possible significant additional losses' language in the 10-K maintains optionality for PacifiCorp's legal risk beyond the $2.85B probable reserve -- this language is not merely boilerplate when auditors are scrutinizing it as a Critical Audit Matter. The combination of weekly mini-trials in 2026 and twice-weekly in 2027 represents a significant acceleration in verdict generation. If even 10-15% of the mini-trials produce verdicts at $100M+ (the tail catalyst the Black Swan Beacon identified at 15-25% probability per case), cumulative verdicts could jump substantially. However, the $100M FY2025 accrual argues against systematic occurrence of $100M+ verdicts in FY2025. The tail risk is real but not the base case. I place this slightly above the sonnet-2 estimate because I weight the forward trial acceleration and remaining tail risk more heavily than the backward accrual signal alone. Modest downward revision from prior 20%.