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Southern Company Water Risk 2011

The U.S. electric power industry accounts for 41 percent 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], “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 DOB’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.”
Georgia, Florida, and Alabama have been fighting in court for nearly 20 years over how to allocate water from the shared Apalachicola-Chattahoochee-Flint river basin, and the outcome of the dispute remains uncertain. The Southern Company has 5 generation facilities operating in this river basin.
Electric utilities use water for a number of core operational functions such as generating electricity through hydropower, steam generation, cooling electric turbines, removing air pollutants, coal ash disposal, and for carbon capture and storage. There is also significant water use and pollution by utilities’ suppliers of both coal and gas.
This poses a number of risks to electric utilities, including:
  • Water scarcity and water stress due to increasing competition for decreasing water supplies
  • Compliance with existing and emerging state and federal regulations such as regulations implementing the Clean Water Act
  • Plant shut downs due to lack of water, or inability to sufficiently cool discharge water to meet regulatory limits I Capital costs for investments to reduce water usage and water loss (such as through evaporation)
  • Increased fuel costs if water is not available to fuel suppliers in sufficient quantities or if water regulations for coal and gas companies increase.
  • Inability to use new and developing technologies such as carbon capture and storage clue to water scarcity

The shareholders of Southern Company requests the Board of Directors to prepare a report to shareowners by November 2011 on water risk (at reasonable cost and omitting proprietary information). Such a report would include a survey of water usage in electric generation and in the fuel supply chain, identification of risks to the company from Water scarcity and other Water risks, and steps the company is taking to develop a plan to address those risks.