Cinergy Corp. Releases Climate Risk Report to Shareholders
As a result of a shareholder resolution filed with Cinergy Corp., the Ohio-based company today released a report analyzing the potential effects of climate change regulations on its operations. Because of Cinergy's reliance on coal to generate electricity at its nine Midwest power plants, shareholders are concerned that potential future policies restricting greenhouse gas emissions might put their investments at risk.
In November of last year, the Mission Responsibility through Investment of the Presbyterian Church (USA) filed a resolution asking Cinergy's board of directors to "assess how the company is responding to rising regulatory, competitive and public pressure to significantly reduce carbon dioxide and other greenhouse gas emissions." The company agreed in February 2004 to prepare the report and the resolution was withdrawn.
The report - one of several that major electric power companies are preparing or have completed as a result of global warming shareholder resolutions filed last year - reviews a range of current regulatory requirements and proposed national legislation, provides analysis for each, and discusses the various actions the company is taking to reduce or offset its emissions. The report also outlines the key challenges facing Cinergy, including the obstacles facing renewable energy and natural gas supplies, significant regulatory uncertainty about carbon controls, and the lack of commercial availability of clean energy technologies such as Integrated Gasification Combined Cycle (IGCC) plants.
The report, which was reviewed by the Public Policy Committee of Cinergy's board of directors, includes the following conclusions:
- The current regulatory uncertainty has made it difficult to plan capital expenditures that will bring the company into compliance with environmental requirements while also serving customer needs
- Overlapping regulations with differing implementation timelines are inefficient and unnecessarily costly for the company and customers
- A long-term, multi-emissions bill would take the unnecessary uncertainty out of national environmental policy
- Carbon controls are inevitable and a "well constructed policy that gradually and predictably" reduces greenhouse gas emissions can be managed "without undue disruption to the company or the economy."
- Although other energy alternatives are likely to become more economical and practical over time with technological breakthroughs, the nation cannot dismiss a fuel that is domestically as abundant as coal. The company indicates it is planning to build a 'demonstration' IGCC plant, possibly as its next "base-load" facility.
Mindy S. Lubber, executive director of Ceres, which provided input to the report, commended Cinergy for the quality of its report. "This report is a clear testament to the financial risks and challenges utilities face trying to make capital-investment decisions in a regulatory void. We applaud Cinergy for recognizing the inevitability of carbon controls and for joining the growing number of companies seeking regulatory clarity sooner rather than later, so that unforeseen financial risks can be avoided and shareholder value preserved."
The Rev. William Somplatsky-Jarman, speaking on behalf of the Committee on Mission Responsibility through Investment, said: "We believe that shareholder value and environmental responsibility go hand-in-hand, and seek to have both reflected in our investments. Cinergy's response to our request for the report modeled leadership in corporate social responsibility and partnership. While the report is very much Cinergy's, the process was very much a collaboration with investors and stakeholders."
Cinergy's report can be found at: http://www.cinergy.com