Shareholders beat NRG on ‘Carbon Principles’

March 19, 2009

The U.S. Securities and Exchange Commission (SEC) has ruled that nuclear power utility NRG Energy must allow shareholders to vote on a proposal to have the company justify its involvement with the so-called “Carbon Principles” –a green initiative to pressure banks not to finance coal-fired power plants.

The Free Enterprise Action Fund submitted the following proposal to NRG Energy on December 1, 2008:

Carbon Principles Report

Resolved: The shareholders request that the Company prepare by October 2009, at reasonable expense and omitting proprietary information, a Carbon Principles Report. The report should describe and discuss how the Company’s involvement with the Carbon Principles has impacted the environment.

Supporting Statement:

Coal is used to provide 50 percent of the U.S. electricity supply. The burning of coal by U.S. electricity utilities is clean and safe for the environment. Air emissions are regulated by states and the federal government. Since burning coal is the least expensive way to produce electricity, consumers and the U.S. economy benefit from comparatively low electricity rates.

The Company is an “industry advisor” to the so-called “Carbon Principles,” a voluntary bank lending policy stigmatizing and discriminating against coal-fired electricity based on the dubious assumption that carbon dioxide emissions from the burning of coal are causing global warming.

But in May 2008, the Oregon Institute of Science and Medicine released a petition signed by more than 31,000 U.S. scientists stating, “There is no convincing scientific evidence that human release of carbon dioxide, methane or other greenhouse gases is causing, or will cause in the future, catastrophic heating of the Earth’s atmosphere and disruption of the Earth’s climate…”

India’s National Action Plan on Climate Change issued in June 2008 states, “No firm link between the documented [climate] changes described below and warming due to anthropogenic climate change has yet been established.”

Researchers belonging to the UN Intergovernmental Panel on Climate Change (IPCC) reported in the science journal Nature (May 1, 2008) that, after adjusting their climate model to reflect actual sea surface temperatures of the last 50 years, “global surface temperature may not increase over the next decade,” since natural climate variation will drive global climate.

Climate scientists reported in the December issue of the International Journal of Climatology, published by the UK’s Royal Meteorological Society, that observed temperature changes measured over the last 30 years don’t match well with temperatures predicted by the mathematical climate models relied on by the United Nations Intergovernmental Panel on Climate Change (IPCC).

A British judge ruled in October 2007 that Al Gore’s film, “An Inconvenient Truth,” contained so many factual errors that a disclaimer was required to be shown to students before they viewed the film.

NRG asked the SEC asked for permission to exclude the proposal from its annual proxy statement — and thereby deny shareholders a chance to vote on the proposal — claiming that it had only a limited advisory role in the development of the Carbon Principles.

But the Fund countered that,

[The proposal] requests a report on how NRG’s involvement with the Carbon Principles has impacted the environment. NRG admits it helped draft the Carbon Principles. NRG now apparently wants to get away with claiming that, “All we did was draft the Carbon Principles. But we’re not involved with them.” This is disingenuous. Drafting rules for lenders to comply with renders NRG inseparable from the Carbon Principles’ process.

The SEC decided in favor of the Free Enterprise Action Fund — and the rest of NRG’s shareholders.

The upshot is that NRG shareholders will have the opportunity to vote on the proposal through proxy voting and at the NRG annual meeting.

Stay tuned for developments.

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