New York Subpoenas Five Energy Companies (Oct 2007)
Attorney General Andrew M. Cuomo of New York has opened an investigation of five large energy companies, questioning whether their plans to build coal-fired power plants pose undisclosed financial risks that their investors should know about. According to The New York Times (NYT), Cuomo is using the same state securities law tactics as his predecessor, Gov. Eliot Spitzer, to investigate corruption on Wall Street. He sent subpoenas to the top executives of the five companies. The companies include: AES Corp., Dominion, Dynegy, Peabody Energy and Xcel Energy.
It is rare, if not unique, for a securities law to be used for an environmental purpose, in this case the fight against new coal-fired power plants according to NYT.
In letters accompanying the subpoenas, the attorney general’s office asked whether investors received adequate information about the potential financial liabilities of carbon dioxide emissions that exacerbate climate change.
“Any one of the several new or likely regulatory initiatives for CO2 emissions from power plants—including state carbon controls, E.P.A.’s regulations under the Clean Air Act, or the enactment of federal global warming legislation—would add a significant cost to carbon-intensive coal generation,” the letters said. “Selective disclosure of favorable information or omission of unfavorable information concerning climate change is misleading.”
Cuomo’s move represents a new tactic in an expanding campaign against some of the more than 100 coal-fired power plants currently under consideration.
The nationwide anti-coal effort, according to NYT, is being directed by a coalition of environmental groups, activist shareholders, and state officials in the Northeast and on the West Coast, including New York and California. “The concept here is using the securities laws to investigate whether the economic risks of these plants are being disclosed- the economic risks which are dovetailing with the environmental concerns,” said Cuomo.
Peabody issued the following statement. “The New York state attorney general’s office is using purported legal and regulatory claims to promote a political message by announcing an investigation of climate risk disclosure among major U.S. energy companies,” the company said. “It is unwarranted to use the legal process to advance the “just say no” agenda, which opposes practical energy answers and has driven America to an unnecessary energy crisis. The legal system is designed to protect—not harass—those such as Peabody which are providing clean energy solutions for America. A process intended to protect shareholders is instead being used to advance a political agenda. It is already accomplishing the first objective: to gain headlines for a cause that has nothing to do with investor communications.
“Peabody is happy to point out our clear disclosures regarding climate change and correct the letter's inaccuracies. For instance, the letter states that we don’t have climate disclosure...but in fact we do, in multiple places in our SEC filings on Form 10-K, annual report and social responsibility report. These are all available via Internet for anyone wanting to research the company.
“The letter also includes the inaccurate claim that we currently operate power plants. As our investors understand, we are a minority partner in the proposed Prairie State Energy Campus in Southern Illinois and would own less than 10%,” said the company. “Prairie State’s environmental permits have been confirmed by the state of Illinois, the U.S. Environmental Protection Agency and most recently by the U.S. Court of Appeals. This clean plant has a CO2 footprint 15% lower than comparable existing plants. In addition to advancing clean new coal generation, Peabody is a founding member of the zero-emissions FutureGen project to commercialize carbon capture and storage.
“We encourage the attorney general’s office to research the vital role of clean coal in bolstering America’s fragile electricity system, where new demand is outpacing supply by more than three to one. We urge it to review the poor decisions that have New York residents paying at least 50% more for electricity than the U.S. average. And we encourage the office to support clean energy solutions, rather than the excuses that will come when the economy stalls and the lights go out.”