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AGs vs. Utilities

State attorneys general target energy policy issues.

Fortnightly Magazine - June 2009

case, a state court found ExxonMobil liable for oil that seeped into wetlands from refinery sites it had not used since 1972. 3 Similar damage theories for alleged pollution of state waters have been asserted by the AGs of New Mexico, California, and New Hampshire. 4 In February 2008, the Montana AG settled an NRD suit over alleged pollution of the Upper Clark Ford River Basin, obligating Atlantic Richfield to pay more than $72 million.

Climate change also is increasingly the subject of AG activity. AGs have brought public nuisance suits for greenhouse-gas emissions by claiming the effects of climate-change impact on the general public, thereby circumventing requirements that the plaintiff itself must be injured. These public nuisance claims give AGs another tool for effecting the kind of broad changes usually left to legislatures. In 2004, eight AGs sued five of the largest power companies in the United States, seeking abatement of greenhouse gas-emitting activities on a theory of public nuisance. They alleged power plant emissions can cause climate change resulting in snow melt, flooding, and wildfires in their states. 5 Two years later, the California AG sued the Big Six automakers on the theory that car emissions contribute to climate change in the state.

Protecting Consumers and Investors

AGs also are becoming more innovative in their use of other state laws to address climate change. In 2007, the New York AG issued subpoenas under that state’s securities fraud law, the Martin Act, 6 to five major energy companies seeking information about the emissions of greenhouse gases from their plants. The AG argued that because future regulations will add substantial operational costs, the failure to disclose such costs misleads investors. The letters accompanying the subpoenas concluded with the warning “[the companies] cannot excuse [their] failure to provide disclosure and analysis by claiming there is insufficient information concerning known climate change trends and uncertainties.” At present, the AG has succeeded in persuading two of the companies to disclose such data.

Using their roles as consumer protectors, AGs are scrutinizing companies that produce and supply fuel and energy to their states. And they have been more aggressive in regulating and investigating the pricing of utilities.

• In September 2005, 40 AGs investigated allegations of pricing misbehavior by fuel producers, refiners, suppliers, and retailers in the aftermath of hurricanes Katrina and Rita.

• Recently, the Florida AG launched an investigation into Morgan Stanley and its subsidiary, TransMontaigne, a major gasoline wholesale supplier, on allegations the companies engaged in price-gouging for gasoline during Florida’s state of emergency prior to hurricane Ike’s arrival in September 2008.

• In December 2008, the Connecticut AG declared he would fight alleged unreasonable rate increases for natural gas by Connecticut Natural Gas and South Connecticut Gas, claiming consumers cannot afford such increases in the middle of a recession.

• In December 2008, the Mississippi AG filed suit against Entergy and its subsidiaries, alleging they manipulated the purchase and sale of electricity to maximize profits at consumers’ expense.

Delaying Infrastructure Projects

Plans to expand energy infrastructure also have been scrutinized by AGs