Business Plan for 2C Warming Scenario

2017 – Southern Company

WHEREAS: The 2014 Intergovernmental Panel on Climate Change (IPCC) Synthesis Report warns that global warming will have “severe, pervasive and irreversible impacts for people and ecosystems”. Costs of failing to address climate change are significant and are estimated to have an average value at risk of $4.2 trillion globally.  To mitigate the worst impacts of climate change and limit warming to below 2 degrees Celsius (2C), as affirmed by the Paris Agreement, the International Energy Agency (IEA) estimates that US energy utilities overall need to limit their carbon dioxide emissions to 100g/kWh by 2030, moving toward a 90% global emissions reduction by 2050.

In June 2016, the credit rating agency Moody’s indicated that they would begin analyzing carbon transition risk based on scenarios consistent with the Paris Agreement, noting the high carbon risk exposure of the power sector.

Southern Company has had a proactive response toward the low-carbon transition by adding more than 4,000 MW of renewable projects since 2012, developing “clean coal” technology, adding nuclear energy generation, and completing the issuance of investment-grade Green Bonds to finance renewable energy valued at $1.2billion.

However, accelerated efforts are necessary: Southern is the third largest carbon dioxide emitter in the country and ranked 26th out of 29 utility companies for life cycle energy efficiency savings in a benchmarking report produced by Ceres in 2016.

Regulatory and technology changes are underway that will profoundly impact the utility business model. Meanwhile, developments in new technologies are leading to sharply declining costs, increasing competitiveness of renewable energy generation and storage. 

Rates must be designed for maximum flexibility to achieve climate objectives while providing just and universal access to electricity services, including affordable services to low-income customers.

Recognizing the unique constraints on innovation for the low-carbon transition in each regulated market, Southern’s subsidiary companies can demonstrate a willingness to work with regulators to develop frameworks to catalyze the low-carbon transition.  In Minnesota, utilities, rate-payers, and regulators collaborate to map the transition to a regulatory model that enables innovation, customer options, and realizes public policy goals.

Proponents offer this supportive but stretching resolution to urge Southern to position itself to thrive for the long-term in a decarbonized energy sector. 

RESOLVED:  Shareholders request that Southern Company commit by November 30, 2017 to issue a report at reasonable cost and omitting proprietary information, on Southern’s strategy for aligning business operations with the IEA 2C scenario, while maintaining the provision of safe, affordable, reliable energy.

Supporting Statement: Proponents believe this report should include:

· Strategic goals and milestones for reducing emissions in accordance with IEA emission reduction targets for US utilities.

· Plans to integrate technological, regulatory, and business model innovations such as: distributed energy resources (storage and generation), demand response, smart grid technologies, increased customer energy efficiency, and corresponding revenue models and rate designs. 

· Information on aligning incentives, research and development, public policy positions, engagement strategy with state regulators, and board governance with Southern’s business plan compatible with this strategy.