Xcel Energy and New York Attorney General Andrew Cuomo have reached an agreement requiring the utility to disclose climate change-related risks to shareholders. The compromise comes after nearly a year of negotiations between Cuomo and Xcel, one of the country's largest utilities and producers of greenhouse gas emissions, following the launch of an investigation into the disclosure of climate change-related financial risks in September 2007. Peabody Energy, Dominion, Dynegy, and AES Corp. were also targeted in the investigation, though none have yet agreed to the risk disclosure Cuomo has asked for. Xcel is now required to discuss the financial risks associated with state- and federal-level lawsuits and potential carbon legislation in future filings with the S.E.C. Previously, such admissions only came about voluntarily, such as through organizations like the Carbon Disclosure Project, or through shareholder resolutions forced through at annual meetings. Xcel's agreement is a significant step for a utility. The power generation sector has a lot of exposure to potential climate-related legislation, including the introduction of a federal cap-and-trade scheme or a carbon tax (however unlikely). State-level decisions to ban construction of coal fired power plants are another significant financial risk power utilities hav started to face. In agreeing to the disclosures, Xcel has effectively demonstrated for the industry that climate change and the environment are far more important that corporate social responsibility and sustainability issues - they are real problems with financial consequences. Cuomo apparently took a page out of former New York Attorney General Eliot Spitzer's book (no, not that one) in leveraging New York's Martin Act, which allows the AG to bring both civil and criminal charges against corporations suspected of shareholder fraud. As such, Cuomo's argument is that by not disclosing climate change-related risk, utilities are withholding critical information from shareholders, and may be defrauding them. This may place such risks on the same level as critical material disclosures, such as supply chain weaknesses, technology failure, or insufficient liquidity. In other words, climate change has finally become a big f*&$ing deal for utilities. This may lead to critical changes in such things as their long-standing opposition to distributed generation and lack of investment in transmission and distribution capacity. There are fundamental regulatory, operational and financial issues underlying those problems as well. On the other hand, it's not like Xcel has that much to hide. In the utility world, the Minneapolis based power producer is like a model citizen. According to AWEA, Xcel generates the most amount of wind power of any utility - even thoug FPL technically has more capacity - and the company has shed nearly 18 million tons of CO2 emissions since 2003. It's also leading a number of large solar projects in Colorado and deploying one of the first wholly integrated smart grid systems in Boulder. A lot of these efforts may be lost, however, when the Republic National Convention releases approximately 20 million tons of hot air when its takes over the Xcel Energy Center in Minneapolis next week. While we're on the topic of SEC rules... The Commission announced today it may allow companies worth more than $700 million to switch to international accounting standards by 2010, at the earliest. This means roughly the largest 110 companies in the U.S. will get to ignore those pesky Sarbanes-Oxley regulations Congress established in the wake of the corporate accounting scandals of the early 2000s. While there's some argument that U.S. companies following international accounting standards achieve higher profits, there's also concern that the principles-based accounting followed by other western economies lack the stringent reporting and auditing requirements in place in the U.S. This is important because, well... it just is.