For the second time, a major utility company has agreed to disclose financial risks faced by coal-fired power plants in an era of global climate change.  Dynegy’s settlement follows Xcel Energy in agreeing to address these business risks. Dynegy has agreed to disclose material risks in its annual Form 10-K filings with the Securities and Exchange Commission.  The SEC is, separately, reviewing a petition to determine whether, and the extent to which, climate-related risks warrant mandatory disclosure.

Specifically, according to a press release issued by the New York Attorney General’s office, Dynegy will disclose material risks related to:

• Present and probable future climate change regulation and legislation
• Climate-change related litigation
• Physical impacts of climate change.

Other disclosures will include:

• Current carbon emissions
• Projected increases in carbon emissions from planned coal-fired power plants
• Company strategies for reducing, offsetting, limiting or otherwise managing its carbon emissions and expected emission reductions from these actions
• Corporate governance actions related to climate change, including environmental performance.

Dynegy owns six plants in Northeastern states that are members of the Regional Greenhouse Gas Initiative.  RGGI will begin operating a cap-and-trade program for GHG emissions in January 2009, meaning covered plants will be required to purchase allowances to cover the GHG emissions at these facilities.  Although Dynegy’s plants primarily burn natural gas, all fossil-fuel plants with greater than 25 megawatt capacity are included in RGGI.  Dynegy also operates five plants in California and two in Arizona, members of the Western Climate Initiative, which is expected to begin operating in 2012.

This atmosphere for plants generating energy from fossil fuels creates significant challenges for utilities.  With a new Administration sworn into office next January, federal policy may well make such challenges even greater.  This provides companies both opportunities and incentives to follow Dynegy’s example in advancing disclosure of climate change matters.

For further information about this topic, please contact Akin Gump.