California Water Services Group Water Management 2014
|Company||California Water Service Group|
|Filer||Calvert Asset Management Company, Inc.|
|Subject(s)||Climate Change; Sustainability Reporting; Water Scarcity|
|Resolved Clause Summary||Water Management|
The US water and wastewater utilities industry faces growing challenges to its traditional business model, primarily related to supply and operations uncertainty due to climate change. For example, treatment plants may be at risk from flooding or storm damage, as was the case during Hurricane Sandy, and utilities may face diminished water supply due to changes in rainfall patterns, lack of snowpack, and wildfires. In addition, the sector must confront issues related to aging infrastructure, unpredictable demand, rising energy costs, and a difficult balance between affordability, conservation, and revenue generation. Traditional methods of disclosing utility revenue projections fail to account for these pressures. Several groups have recommended improved disclosure and management of these risks – including the need to safeguard investor interests – such as Ceres, the CEO Water Mandate, and others.
Although California Water Service Group published a “2012 Corporate Citizenship Report” that discussed its approach to conservation and reduction of greenhouse gas emissions, the report does not disclose whether it has made use of climate change projections to asses water supply risks, what tools were used to do so, and what the results of such an analysis were. The company’s 2013 10-K filing discloses risks from climate change legislation, but not from climate change itself, nor the cost of adapting to climate change. Finally, our company has not disclosed the condition of watersheds that it depends on for supply, nor how it intends to manage watersheds in partnership with other water users.
Our company operates in geographic regions – such as California, New Mexico, and Hawaii -- recognized to be at high risk for water stress and climate change.
California Water Service Group will need to make significant capital expenditures to adapt to climate change. A 2009 study by the Association of Metropolitan Water Agencies forecast the cost to maintain and adapt US water and wastewater services through 2050 to be between $448 billion and $944 billion. In the California/Southwest region alone, the amount ranged from $179 to $346 billion. This estimate does not include losses from extreme weather events.
The need for capital expenditures to adapt to climate change is exacerbated by other infrastructure investment requirements. The US Environmental Protection Agency (EPA) estimates that aging US water and waste water infrastructure will need $384 billion of capital expenditures through 2030. The EPA estimated that California alone would require about $44 billion – more than any other US state.
Shareholders request that within 6 months of the 2014 annual meeting, the Board of Directors provide a report to shareholders, prepared at reasonable cost and omitting proprietary information, describing how California Water Service Group is managing risks related to climate change, including physical risks and supply risks.
We recommend that the report include a discussion of how the need for consumer affordability and conservation will affect revenue, and how the company is securing water supply relative to other users.