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US SEC backs shareholder asking utilities to report costs of climate efforts

The U.S. SEC has sided with an energy company's request to block a pro-renewables resolution. It also has allowed a measure by the co-founder of a pro-coal campaign targeting two other utilities for their climate-related efforts.

Agency staff on March 13 gave MGE Energy Inc. the thumbs up to block a shareholder resolution that asked the company to outline its options for transitioning to 100% renewable energy.

The proposal before MGE Energy came from four of its shareholders who are part of a group known as MGE Shareholders for Clean Energy. In a no-action letter, SEC staff found that the resolution aims to "micromanage the company by seeking to impose specific methods for implementing complex policies in place of the ongoing judgments of management as overseen by its board of directors."

Heading into the annual proxy season, the SEC has given mixed responses to companies' requests to block climate-related resolutions at their annual shareholder meetings. For the most part, the agency has declined to block votes on proposals that ask companies to report on climate-related or environmental issues but has rejected proposals that ask companies to go a step further and set specific targets. Shareholder resolutions are advisory in nature, but companies tend to pay heed to proposals that garner majority support.

The SEC is mulling whether to tweak its shareholder resolution process rules amid efforts by the Trump administration to promote fossil fuel development.

On March 12, the SEC sided with a shareholder seeking to have Duke Energy Corp. and Exelon Corp. report on the costs and the benefits to shareholders, the public health and the environment of those companies' environment-related activities.

That shareholder, Steven Milloy, is the publisher of and a former employee of Murray Energy Corp. Milloy and Fred Palmer, a former Peabody Energy Corp. official, have launched a "Burn More Coal" online campaign. And Milloy, who was on President Donald Trump's transition team for the U.S. Environmental Protection Agency, said in an interview that he bought shares in more than a dozen other energy companies he intends to target with similar resolutions in 2020. A person must hold shares in a company for at least a year before becoming eligible to submit resolutions.

Milloy asserted that some utilities are claiming to pursue clean energy objectives in the name of climate change even though their efforts make no real dent in global emissions. He also questioned whether utilities have "good financial reasons" for shuttering coal-fired plants and building more wind and solar projects.

"There's this boasting about what you're doing for the environment when you're really not doing anything, there's a problem with that," Milloy said. "So what I hope eventually is that if companies talk about the environment, they're going to have to be forced to talk about the environment in realistic and rational terms. ... I'd like to know how much money [they are] wasting on these bogus environmental initiatives."

Duke in 2017 announced plans to curb its carbon dioxide emissions 40% from 2005 levels by 2030. As for Exelon, that company ranks among the lowest carbon-emitting power producers in the U.S. and claims on its website to be the nation's 14th largest wind producer.

Duke spokesman Neil Nissan in an email said his company's retirement and investment strategies "have benefited our customers and diversified our generation portfolio." Moreover, Nissan noted that Duke operates in "highly regulated jurisdictions so these investments are reviewed and approved by our regulators to ensure that all customers are being provided the most cost-efficient, reliable service possible."

"The data we disclose in our [regulatory filings] show that the decreasing cost of natural gas and renewable generation, combined with the cost of compliance with environmental regulations, make these sources more cost-efficient replacements for our coal generating facilities as they age and are retired," Nissan said.

Exelon spokesman Paul Adams said in an email, "Exelon stands with the overwhelming majority of our communities and customers who say they want cleaner air and affordable, reliable energy, and those core principles will continue to guide our strategic decisions and investments."

Meanwhile, a number of energy companies have now issued their proxy materials for their upcoming shareholder meetings. On May 9, DTE Energy Co.'s shareholders will vote on one proposal that asks the company to appoint an independent board chairman and another that would have DTE disclose its political spending activities. And on May 7, Dominion Energy Inc.'s shareholders will weigh in on a resolution that asks the company to appoint an independent chairman. For both utilities, the resolutions cite a number of environmental concerns. The companies' boards oppose the resolutions, they said in proxy materials distributed ahead of the meeting.