Turn Down the Heat – It's Getting Warmer
With all the talk out there about energy efficiency and reduced use, I can’t help but think of my mom, telling us kids to put on a sweater, the heat would not go up. I laugh at the person I’ve become, as I tell my own kids the same thing, adding the environmental commentary that it’s one little thing we can do and if we don’t, climate change will turn up the heat more than we’d like – before we know it.
So what’s a shareholder to do, in this day and age of climate change, when a company in your portfolio is arguing to a utilities commission that their predicted power demand requires them to build a coal-fired power plant to meet it? Since a request to turn down the heat in an Iowa winter probably wouldn’t go very far, we took a more productive approach: we filed a shareholder resolution asking Alliant Energy to report on their efforts to curb future demand through incentives to increase energy efficiency for their customers.
Last May, a Standard & Poors report indicated that energy efficiency is likely to emerge as a major part of the solution to climate change, and warned that “utilities may be affected, if revenues and profits decline with consumption,” unless policies are changed to provide incentives for utilities to reduce consumption of electricity. “Decoupling” revenues and profits from consumption (making a utility volume-insensitive) has emerged as one of the more effective ways to reduce carbon emissions, and as more states consider the option, we wanted to be sure that a company whose returns make a difference to our clients was working on the same issue where they do business.
Our concern included the impact upon shareholder value that could be brought about from the reputation risks associated with their proposal to build a 630 megawatt coal-fired power plant in Iowa that would emit several million tons of carbon dioxide a year. No one across the political spectrum doubts that carbon trading and other kinds of carbon constraints are increasingly imminent, meaning that cost estimates for a plant like this can easily rise as carbon starts to trade. We hoped to see a serious commitment to efficiency as a solution to reducing demand, and thereby reducing carbon linked risks, be taken by the company. Through our negotiations around our resolutions, we think we’ve gotten closer.
Working with Ceres, we were pleased to agree to withdraw our shareholder resolution when Alliant agreed to publish a report on their energy efficiency efforts. They were willing to talk with us at some length, and made available many of their experts on policy, efficiency and demand projections to answer our questions. Alliant management was clear that they’d rather work with us than against our resolution, and agreed to honor our request to publish a report to shed some light on their plans to mitigate demand as a method to build shareholder value.
Of course, it’s too soon to conclude, “problem solved.” Citizens in Iowa dispute Alliant’s demand projections, which the company has agreed to explain in this report. We’re starting to see coal-fired plants cancelled in places like Kansas, Nevada and even the fossil-fuel loving Idaho because of the mounting carbon costs and concerted citizen efforts to stop them. We’d like to see Alliant and other utilities take more proactive steps to curb their demand in the near term, and to propose more renewable energy projects for the demand that just won’t go away. Because let’s face it – not every mom wants to wear hats and sweaters at home in the winter just to keep the thermostat hovering at 60 degrees.