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December 19, 2006
TXU Shareowners File Three Resolutions Questioning Wisdom of Pulverized Coal Plants
    by Bill Baue

Part one of this two-part article examines how shareowners are raising environmental and regulatory concerns over the TXU coal expansion plan, as well as environmentally preferable alternatives to coal such as energy efficiency.


Texas-based utility TXU (ticker: TXU) is proceeding with plans to build 11 new pulverized coal-burning power plants in its home state that will annually emit 78 million tons of carbon dioxide (CO2)--the primary greenhouse gas (GHG) contributing to global warming. This would more than double the company's current annual carbon emissions of 55 million tons. It also represents the first phase in TXU's plan to add 13 more "cookie-cutter" plants (designed the same as the Texas plants) nationwide that would emit an additional 92 million tons of CO2. Combined, these 225 million tons of annual CO2 emissions would give TXU the largest corporate carbon footprint in the US--all at a time when scientists say we need to stabilize (not increase) carbon emissions to avoid catastrophic climate change.

Some shareowners are voicing loud opposition to this project. Ceres, a coalition of environmental organizations and institutional investors, has coordinated the filing of three separate shareowner resolutions challenging the company's coal plant project. Five New York City pension funds filed a resolution that asks TXU to report on how it is responding to rising regulatory, competitive, and public pressure to reduce carbon and other emissions (such as mercury) from its proposed plants.

"At a time when other major utility companies are seeking to reduce their contribution to global warming and are proposing cleaner plants that would release less CO2 and provide for greater control over emissions, such as gasification, TXU is building 11 big power plants that will be fueled with pulverized coal," said New York City Comptroller William Thompson. "Given the anticipated focus on federal regulations of CO2 emissions in the new Congress, TXU's strategic thinking seems glaringly short-sighted and unsustainable."

American Electric Power (AEP), Xcel Energy (XEL), and Duke Energy (DUK) are amongst the power producers planning to implement Integrated Gasification Combined Cycle (IGCC), an environmentally preferable means of using coal than the pulverized process TXU is using. The second resolution--in which the Benedictine Sisters of Boerne, Texas ask TXU to report on efforts to reduce CO2 and mercury emissions--points out that IGCC captures pre-combustion CO2 and hence represents a more efficient option than capturing carbon after combustion.

"IGCC is not a proven technology, nor is it a technology that can be used on the type of coal available in Texas (Texas lignite and Powder River Basin coal shipped in from Wyoming)," TXU spokeswoman Lisa Singleton told SocialFunds.com. "Currently, there is no technology that solves the carbon issue."

TXU plans to spend up to $2 billion researching emerging technologies. For example, it recently invested in Skyonic, a company that uses power plant emissions as "inputs" that it converts into commercial-grade chemicals, such as hydrogen, chlorine, and carbonates (or solid carbon). While IGCC is amongst the technologies TXU will explore, the expansion project demonstrates the company is not placing its eggs in that basket, but instead designing its plants to be ready for retrofitting with carbon sequestration technologies once they become viable.

"TXU has engineered its reference plant design . . . to meet carbon capture and storage ready criteria," said Ms. Singleton of TXU.

The Benedictine Sisters resolution also points to the intentions of Senator Barbara Boxer (D-CA) to push for Congress to regulate carbon emissions.

"While CO2 is not now regulated federally or in Texas, the in-coming chair of the Senate environmental committee has indicated that California's new law requiring a 25 percent reduction in CO2 by 2020 will be a model for federal legislation," the resolution states.

When asked what precautions TXU is taking to prepare for the impending regulation of CO2 by a Democratic Congress, Ms. Singleton only referred SocialFunds.com to the ReliableTexasPower.com website that the company publishes.

The third shareowner resolution, filed by Connecticut State Treasurer Denise Nappier as sole fiduciary of the Connecticut Retirement Plans and Trust Funds (CRPTF), calls on TXU to examine energy efficiency and conservation as alternative options to its coal project plan. The resolution cites a November 2006 report by Environmental Defense that "shows that investing in energy efficiency measures offers Texas the best, fastest, cleanest, and cheapest route to solving the state's short-term energy needs."

Rarely do companies face three shareowner resolutions on the same issue, a fact that has not gone unnoticed by socially responsible investing (SRI) rating firm Innovest Strategic Value Advisors, which currently rates TXU "A" on a bond-like scale from AAA to CCC.

"In general, TXU's expansion strategy marks a departure from the strong environmental initiatives demonstrated in recent years," states Eric Kane, the Innovest analyst who covers North American electric power companies. "Given that alternative power sources such as wind are not only cost competitive, but in some cases cost efficient in the state of Texas, Innovest regards this initiative as a demonstration of poor strategic planning on the part of senior management at TXU, which will result in a downgrading of the company's rating in the next rating cycle of the North American Electric Utility sector."


Part two of this two-part article looks at how the Rainforest Action Network is sending a letter to 54 financial institutions asking them to withhold financing from TXU.

 

 
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