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AGs vs. Utilities

State attorneys general target energy policy issues.

Fortnightly Magazine - June 2009

the SEC to place on all companies subject to SEC regulation the same emissions disclosures the New York AG had sought under New York’s securities fraud law. Although the SEC so far has declined to act on the proposal, the same group of petitioners submitted a supplemental petition in June 2008 again urging SEC action.

AGs also have pressed the FTC for stringent regulations on how companies may advertise their environmentally beneficial activities, or “green claims.” Eleven AGs sent a letter to the FTC urging it to adopt rigorous standards for carbon offset claims, including potentially sweeping requirements for both the language used to make a green claim and the substantiation required for such claims. 11

The Value of Being Proactive

Through both direct enforcement activities and by lobbying other key regulatory agencies, AGs are having an important impact on the energy industry. Surprisingly, however, many companies with established government relations teams and litigation strategies overlook AGs. Their exposure is usually not considered until after investigations or litigations arise. Since energy issues will continue to lead the news and political discourse, energy companies now have a unique opportunity to work proactively with AGs to craft solutions to energy issues that enhance the industry’s public image and serve to resolve legal and policy issues.

In-house and outside counsel should make efforts to get to know and understand AGs, as well as their staffs, who often are influential and sometimes operate with limited oversight. Waiting to establish contact merely delays or eliminates a company’s opportunity to build a reputation among AGs as a good corporate citizen.

The key to establishing a good reputation and rapport with AGs is to deliver a positive message early and often. Energy companies can highlight the jobs and benefits they provide to the state and its citizens. Companies should emphasize steps they are taking to address issues of public concern—like pollution, climate change, increased energy prices, and safety. An open dialogue fosters mutual trust and respect, which can result in the resolution of issues before a formal investigation or litigation commences, or before a dispute even becomes public. At a minimum, openness to a constructive compromise is likely to diffuse litigious situations before they unravel and spin out of control.

Efforts to gather intelligence and foster trust with AGs are worth the investment. Each AG possesses his or her own unique interests and motivations, and each office has its own history. Understanding these elements facilitates the outreach process. In addition, AGs’ interests are represented by four major AG associations: the National Association of Attorneys General, the Conference of Western Attorneys General, the Democratic Attorneys General Association, and the Republican Attorneys General Association. At their periodic meetings, AGs share strategies and focus joint attention on major issues. For example, an April 2008 summit was devoted exclusively to energy issues. Attending or having a presence at these events can allow a company to discern AG inclinations before they become problems.

With increased scrutiny of the energy industry and its impact on the environment, companies will face increasing costs from investigations and