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Dominion, PPL Agree To Water Availability Risks, Plan Reporting
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In response to shareholder requests, three leading electric utilities, Dominion, Southern and PPL, have agreed to significantly expand reporting and disclosure on water availability risks and plans for mitigating those risks.
The agreements come as prolonged droughts, growing water demand and climate change place increasing stress on water supplies and create challenges for electric power producers in many parts of the United States.
Power plants, including nuclear, coal, oil and natural gas, account for 40 percent of the nation’s freshwater withdrawals, requiring an estimated 136 billion gallons a day for generating and cooling the steam that drives electric turbines.
"Water scarcity is a growing risk to many public utilities and investors want to know how companies are preparing for increased competition for supplies, emerging regulations and potential revenue losses from shortages,” said Mindy S. Lubber, president of Ceres and director of the $9.5 trillion Investor Network on Climate Risk.
Investors filed shareholder resolutions with the utilities several months ago asking them to evaluate and disclose their strategies for wide-ranging water risks, including low flows, thermal impacts, and emerging regulations. The resolutions were withdrawn in recent weeks after the companies agreed to undertake the studies.
Southern Company agreed to prepare a comprehensive "water action report," describing its water management philosophy, water use and consumption by generation type, water discharges, and emerging risks, including water risks in its fuel supply chain. Based in Atlanta, Georgia, where a federal judicial order may reduce the city’s water withdrawals by as early as 2012, Southern is one of the nation’s largest electric generators, with 42 gigawatts of generation capacity.
“We have asked Southern Company to be mindful of these issues, and are pleased that the company has given shareholders the assurance that it will integrate these considerations into its long-term planning,” said Denise Nappier, Connecticut State Treasurer, whose office manages $24.6 billion in assets and was the lead filer of the resolution. “Southern clearly sees water risk as a strategic challenge that needs to be met to assure the future growth and sustainability of the company, as well as the entire energy sector.”
Investors also persuaded Virginia-based Dominion to commit to respond to the Carbon Disclosure Project’s water survey, which asks companies to report their water use and risks associated with changing water availability.
PPL agreed to report on the water intensity of its generation, its water resources and cooling system types and water rights of major facilities. The company will provide the information in its upcoming CSR report. Based in Allentown, Pennsylvania PPL’s operating territory includes Pennsylvania, Montana and Kentucky.
"We are pleased with PPL's willingness to discuss water issues with investors this year," said Luan Steinhilber, ESG analyst and director of shareholder advocacy at Miller/Howard Investments, the lead filer on the resolution. "We look forward to working with PPL as the company continues to assess risks and opportunities related to water.” Miller/Howard Investments has $1.9 billion in assets under management.
Electric power providers face a range of physical risks related to water scarcity, including low and variable water flows and higher water temperatures linked to climate change; regulatory risks linked to new requirements to minimize cooling system impacts on aquatic life; and legal risks as communities increasingly seek to challenge the construction or expansion of power plants in water-stressed regions.
A single nuclear generating unit can use as much as 1.1 million gallons of water per minute. If water levels fall below the intake structure, lowering it can cost upwards of $200 million for a single nuclear or coal power plant and installing a less water-intensive cooling system can cost more than $1 billion.
Water risks are already leading some utilities in drought-prone regions in the U.S. West to turn away from water-intensive coal-fired power generation. Some power plants have been blocked from obtaining water permits as they have attempted to expand or build new coal-fired facilities.
During the 2007-2008 drought in the southeastern U.S., Southern was forced to buy $33 million in fossil fuels to replace lost power in Atlanta when hydropower generation declined by half due to low water levels. More recently, In August 2010, the Tennessee Valley Authority was forced to reduce generation at three of its nuclear facilities in Alabama and Tennessee when a heat wave pushed water temperatures to the permitted maximum temperature of 90°F.
The three resolutions are among 29 filed with 19 U.S. electric power companies in the 2011 proxy season on issues ranging from water-scarcity concerns to GHG emissions and usage of renewable energy to mountain top removal.
Ceres is a leading coalition of investors, environmental groups and other public interest groups working with companies to address sustainability challenges such as global climate change. Ceres also directs the Investor Network on Climate Risk, a network of 96 institutional investors with $9.5 trillion of collective assets focused on the business impacts of climate change.
For more information, visit the Ceres website.
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3/28/2011 |
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