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As investors push sustainability, gas utilities increase emissions transparency

As activist investors step up their push for shareholder resolutions on climate change, often targeting energy companies for their emissions, some utilities have found ways to work with their investors and avoid or resolve major actions.

Consolidated Edison Inc. has largely avoided climate and sustainability shareholder resolutions, according to Ceres, which tracks these types of investor actions dating at least to 2009. The company, which has a market capitalization over $23 billion, operates in New York, where state regulators have opened dockets to pursue energy efficiency, renewable power and lower-emission fuel initiatives.

"We're sensitive to those issues, and I think we're in tune with our investors," Marc Huestis, Consolidated Edison Co. of New York Inc.'s senior vice president of gas operations, said on the sidelines of the American Gas Association's Financial Forum in Phoenix.

One shareholder resolution targeting ConEd in 2014 was resolved through discussions on methane emissions reductions and reporting. The other two noted on Ceres' tracker were less focused on specific climate goals and instead related to lobbying reporting and proxy access bylaws.

Huestis in a presentation at the forum emphasized the work the company is doing to minimize its environmental impacts. For both environmental and operational reasons, ConEd has cut its average repair time from 47 days in 2014 to 22 days in 2017 for leaks that are not immediately hazardous, and the company has kept its leak backlog under 300 leaks for the past two years, he said. The company has also aggressively increased its pipeline modernization work and the pace at which it addresses leaks from the system.

These shifts came in the wake of both the 2014 shareholder request and a 2014 fatal gas pipeline leak and explosion.

Southwest Gas Holdings Inc., whose market capitalization is over $3.4 billion, has been issuing an annual sustainability report for several years and has been subject to relatively few shareholder actions, according to Ceres. A 2015 shareholder resolution, for instance, which focused on the importance of greenhouse gas emissions reduction goals, was ultimately withdrawn in light of company commitments.

But John Hester, the company's president and CEO, sees room for additional transparency and consistency across the industry to address investor questions and concerns about emissions and other sustainability issues.

To that effect, Southwest Gas Corp. is working with the American Gas Association and other companies in the utility sector to establish more comparable metrics for gas and electric utilities, Hester said. "All of that information is currently made public in one way or another, but to put that together to tell a more succinct story so that you if you as an investor want to see that you don't have to look through a number of different filings," Hester said on the sidelines of the forum in Phoenix. "That's something we think we're going to be doing in the near future, as well."

David Anderson, Northwest Natural Gas Co.'s president and CEO, said the company's regulatory and sustainability track record has contributed to a positive relationship with its shareholders. NW Natural, which has a market capitalization of nearly $1.7 billion, was among the first gas utilities to use a decoupled rate mechanism, divorcing the company's earnings from its ratepayers' consumption levels, Anderson noted.

"That puts me on the same side as you: I'm not trying to get you to use more of the product," Anderson said on the sidelines of the Financial Forum. "Environmental stewardship is one of our core values, so I think we fit all that and I think they see what we're trying to do. I think [investors] are very supportive of it."

The only shareholder measure Ceres listed for NW Natural was a 2011 resolution related to publishing regular sustainability reports. The company and the investor reached an agreement and the resolution was withdrawn, according to Ceres.

ConEd, Southwest Gas and NW Natural are also all part of the U.S. Environmental Protection Agency's Methane Challenge program. The voluntary program is focused on giving oil and gas companies a way to make specific and transparent commitments to reducing methane emissions.