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Dominion Water Risk 2011

The U.S. electric power industry accounts for 41% of the country’s total freshwater withdrawals, requiring an estimated 136 billion gallons a day for generation and cooling. According to the U.S. Department of Energy (DOE) website, “Water shortages, potentially the greatest challenge to face all sectors of the United States in the 21st century, will be an especially difficult issue for thermoelectric generators due to the large amount of cooling water required for power generation.”
Water scarcity is increasing and according to current projections, climate change is expected to exacerbate water shortages. According to the DOE’s U.S. Climate Change Science Program, “there is agreement among climate models that there will be a redistribution of water, as well as changes in the availability by season. As currently designed, power plants require significant amounts of water, and they will be vulnerable to fluctuations in water.”
Higher temperatures of available water also pose increased regulatory risk for electric utilities. U.S. regulations limit the temperature of water discharged by power plants in order to mitigate heat-related damage to aquatic species. When a heat wave raises river temperatures, power plants (particularly nuclear plants) may not achieve sufficient cooling within permit limits, and may be forced to reduce their power output. During a heat wave in August 2010, the Tennessee Valley Authority was forced to decrease power generation for two weeks at three of its facilities in Alabama and Tennessee, costing the utility an estimated $10 million in lost power production.
Dominion’s generation mix is 33% coal, and coal-fired power plants are major sources of heavy metal pollution in waterways, accounting for 94% of all water releases of arsenic in the United States. In November 2010, the EPA announced that it would issue new rules regulating coal plant discharge of heavy metals into waterways in 2012.
Coal combustion waste can severely impact water quality, and is also likely to be regulated as coal ash impoundments face heightened scrutiny. The EPA is currently considering whether to regulate coal combustion waste as hazardous waste and whether to regulate the structural integrity of coal ash surface impoundments through wastewater discharge permits.
The Board of Directors will provide a report to shareholders by September 1, 2011, prepared at reasonable cost and omitting proprietary information, disclosing how Dominion plans to mitigate risks related to the company’s use of and impacts on water, including low flows, thermal impacts, and emerging regulations.
Investors ask that the company provide information on material water risks caused by changing climatic conditions, emerging regulation, and increased competition for water resources.
Relevant information would include details on:
• Water intensity of generation
• Water sources and cooling systems for thermoelectric facilities
• Any water-related shutdowns or reductions in generation
• Proposed regulations that would require retrofitting of generation assets and estimated costs
• Measures to reduce risk, such as strategies to reduce power—and therefore water—demand; and measures to rebalance generation portfolio toward low-water intensity, clean energy.