In a first-of-its-kind deal, Xcel Energy (NYSE: XEL), one of the nation’s largest power utilities, has agreed to disclose detailed warnings of the risk posed to its business by climate change, according to a New York Times report.
The agreement follows a subpoena by New York attorney general Andrew M. Cuomo, and could have a significant impact on efforts by environmental groups to pressure the energy industry into reducing emissions of the greenhouse gases.
Cuomo used the Martin Act to subpoena Xcel and four other major utilities– AES Corporation (NYSE: AES), Dominion (NYSE: D), Dynegy (NYSE: DYN) and Peabody Energy (NYSE: BTU). The subpoenas seek to determine whether new coal-fired power plants built by these companies pose risks not disclosed to investors, like future lawsuits or higher costs to comply with possible regulations restricting carbon emissions.
“This landmark agreement sets a new industrywide precedent that will force companies to disclose the true financial risks that climate change poses to their investors,” Mr. Cuomo said in a statement. “Coal-fired power plants can significantly contribute to global warming, and investors have the right to know all the associated risks.”
Environmentalists and investory groups have been pushing companies to analyze the likely effects of current and future legislation on business practices. In doing so, they hope to force the market to accept a larger definition of the "cost" of carbon dioxide emissions, taking into account environmental damage.
Xcel will disclose the financial risks of lawsuits and of federal or state court decisions, as well as “material financial risks” associated with global warming, such as drought–coal plants use vast amounts of water.
“We previously provided detailed information concerning the expected impact of climate change and greenhouse gas emissions regulations on our operations, and under this agreement we will make even more detailed disclosures,” Xcel chairman Richard C. Kelly said. “This agreement will enhance our already aggressive efforts to be responsible environmental stewards.”
Xcel said it plans to build 6,000 megawatts of renewable energy generation by the end of the next decade. The company also said it has reduced greenhouse gases by 18 million tons since 2003.
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