In January 2010, the United States Security and Exchange Commission (SEC) issued interpretive guidance documents that apply to the practice of disclosing the risks associated with climate change. The SEC Guidance documents were released in a concurrent effort by the United States Environmental Protection Agency's January 1, 2010, mandatory greenhouse gas reporting rules, which marked the first instance where the federal government has required large emitters to report emissions data to an administrative agency. The scope of the EPA's efforts was specifically cited by the SEC guidance documents through a reference to the EPA's December 2009, "'endangerment and cause or contribute finding' for greenhouse gases under the Clean Air Act", which brings greenhouse gas emissions under the regulatory scope of the EPA. Accordingly, the broad reporting mechanisms of the guidance documents should be considered very strongly by utility companies, who will encounter the duel new administrative regulatory requirements of the SEC and EPA.

While not mandatory, these guidance documents will likely produce the largest response by the private sector related to the evaluation and implementation of business process changes through greenhouse gas monitoring programs that has occurred to date. Already, large business associations, for example: the SEC cited National Association of Insurance Commissioners, have "promulgated a uniform standard for mandatory disclosure by insurance companies to state regulators of financial risks due to climate change and actions taken to mitigate them." These standards are expected to emerge with growing frequency and the energy sector is the prime target for high level regulation and reform under the intended restructuring of energy policy. Moreover, the next shoe to drop will like come in the form of enforcement, as the EPA analyzes the use of its regulatory powers under the Clean Air Act and as fallout from the British Petroleum Oil Spill in the Gulf takes full effect.

In such a context, utilities seeking to comply with the SEC guidance documents will need to offer detailed self assessments pertaining to the risks and opportunities posed by climate change in their 10K, 10Q, item 101, item 103, item 503c, Item 303, and 20-F (foreign entity) disclosures and maintain a detailed accounting of their greenhouse gas emissions to effectively disclose their position in any future cap and trade modeled programs. In such a context, opportunities exist to differentiate the capabilities of utilities prior to the implementation of new regulations that will undoubted create substantial fluctuation within the energy sector. Accordingly, the ability to exercise the appropriate level of foresight in implementing sound and successful strategies related to the implementation of practical internal auditing and process improvements will be vital to achieving the competitive advantages and increased revenue opportunities that will inevitably become available in a competitive forum of this nature.

If you would like to learn more, please contact Foresite System's Environmental Compliance Department via my email address travis.miller@foresitesystems.com or via phone at (408) 377-7400.