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October 28, 2004
European Utilities Top Oekom Sustainability Rankings, US Utilities Crowd the Bottom
    by William Baue

Corporate sustainability rating firm Oekom Research rewards climate change mitigation and enhancing energy accessibility for the economically disadvantaged in its latest report.

Utilities companies significantly impact not only the environment through greenhouse gas (GHG) emissions, but also society in how they provide energy and water. They are therefore prime candidates for being rated on corporate sustainability. European utilities are performing much better on environmental and social sustainability than their North American counterparts, according to the latest Corporate Responsibility Rating (CRR) report from Oekom Research, a Munich-based sustainability rating firm. The report assesses 37 of the world's major utility companies on 200 environmental and social factors, rating them on a scale ranging from A+ (best) to D- (worst).

"In the present study a wide gap is noticeable in the results of the Corporate Responsibility Rating between companies such as Scottish and Southern Energy [ticker: SSE.L] and Severn Trent [SVT.L] with grades of B on the one hand and Southern [SO], Pacific Gas & Electric [PCG], FPL Group [FPL], Terasen [TTER], Dominion Resources [D], and FirstEnergy [FE] with grades of D+ and D on the other hand," state Evelyn Bohle, Oliver Rüdel, and Dietrich Wild, the Oekom analysts who authored the report. "Six of the seven leading companies have their headquarters in Europe, while five of the six stragglers are from the US."

In the utilities industry, Oekom assesses the mix of energy sources a company relies on, rating renewable energy and natural gas higher than nuclear energy and coal, which produce toxic waste and significant greenhouse gas emissions, respectively. Industry leader Scottish and Southern Energy devotes almost four fifths of its generation to natural gas (69.6 percent) and renewables (8 percent) and just over one fifth to nuclear (12.7 percent) and hard coal (9 percent). Industry laggard FirstEnergy devotes more than four fifths of its generation to coal (55 percent) and nuclear (28 percent) and only about one tenth to natural gas (8 percent) and renewables such as hydro power (5 percent). Dominion Resources, which came in next-to-last place in the overall CRR, reports no commitment to renewables at all.

Another factor Oekom assesses is the thermal efficiency of fossil-fueled power plants.

"Although many companies have invested in new power plants equipped with cogeneration technologies, it has to be pointed out that the overall thermal efficiency of the fossil-fueled power stations of all the companies is still around 40 percent," the report states. "As modern cogeneration plants can reach a thermal efficiency of 80 percent to up to 98 percent, this result appears to be very poor."

Scottish and Southern reports that its average group thermal efficiency in March 2004 was 52.5 percent, rising significantly from 46.6 percent in 2000, according to Oekom. While FirstEnergy did not disclose thermal efficiency, Dominion's thermal efficiency was less than 40 percent in 2000, the most recent date for which data was provided.

US companies did better in their social ratings compared to their environmental ratings. Oekom praised the work of Entergy (ETR), which ranked in the top third of the industry in its overall CRR rating, largely on the strength of its high social rating.

"Entergy publishes a detailed annual Low-Income Customer Assistance Progress Report," the report states. "The company has established Customer Assistance Funds, which provide financial aid to elderly and disabled customers in paying their utility bills."

"In addition, Entergy has launched a customer credit policy initiative designed to support customers with payment problems," the report adds.

Interestingly, industry laggard Dominion similarly addresses this problem through its EnergyShare program, which is funded by tax-deductible donations from customers, stockholders, employees, and Dominion itself, which also covers administrative costs.

"EnergyShare is a fuel assistance program that helps pay home heating bills for those in need living within the company's service area," the report states. "To qualify for EnergyShare assistance, a person must be in danger of losing an important heat source; must have a household income not higher than one-half of the local median income level; be unemployed; or demonstrate a personal or family crisis."


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