Tom Fanning, our genial CEO host, said some things I’ve never heard him say before like Southern Company is “pivoting towards wind” and SO’s board soon has to decide whether to go forward with Plant Vogtle “or not” probably by August. Fanning gets the first and last word in this blog post, plus a complete transcript of what I asked and Tom Fanning’s response, along with summaries of the other questions and answers.

Please hear me! I think renewables are exceedingly important in the future.
— Tom Fanning, CEO, Southern Company

In SO’s own meeting video of the 25 May 2017 Stockholder Meeting, you can see much praise about solar power and wind and R&D and a smart grid, along with stockholders wondering:

• what SO was going to do about climate change and corporate governance for rhetoric,
• why a stockholder couldn’t transfer her AGL stock,
• what about cybersecurity countermeasures.
• what about a carbon tax,
• what will happen to Lake Sinclair without its coal plant,
• whether all our eggs in the natural gas basket is a bad idea,
• what about money collected for Yucca Mountain, how much Plant Vogtle attorneys are costing, and will it be finished on time,
• whether nuclear is a dead horse,
• and whether solar and wind power is the winning horse

Solar panels, heck yeah! —Tom Fanning

“Oh, solar panels! Oh, heck yeah!”,

This was in response to the first question, about solar panels at Warner Robins Air Force Base, from Richard Alexander of Perry, Georgia.

Fanning expanded on that saying Southern Company has the biggest relationship of any company with the U.S. military about renewable energy.

Climate change? —Sam Booher

Sam Booher, with 3,283 shares, all for the benefit of his wife, asked:

The world’s climate is changing, and it’s not getting better for anyone. Southern Company has a real opportunity to shape the federal climate policy that works with our business strategy. With the progress Southern has made in solar, and in the future wind energy, we have a voice with the other electrical power producers that carries significant weight.

I would like to see Southern Company organize the collective voices of all of our electrical power producers to support the existing Paris agreement to fight climate change.

In the Paris agreement, companies like ExxonMobil, Dow Company, and other major corporations have already come out publicly in support of upholding the Paris agreement. We need to be on that list.

Tom Fanning responded that Southern Company avoided rhetoric in preference for real solutions. Unfortunately the “solutions” he named first were “clean coal” and nuclear. He did get around to mentioning renewables and Southern Company’s biggest private utility R&D operation, plus longleaf pines for natural CO2 capture.

By the way, SO hasn’t historically avoided rhetoric; they were caught last year funding ALEC climate change denial rhetoric.

Corporate governance for rhetoric?

An unknown speaker (they didn’t turn on the mic until after he said his name) asked what was the corporate governance for ensuring that any SO rhetoric matches corporate positions.

Tom Fanning responded saying that Chris Womack was in charge of reports to the board about that. Fanning continued about clean, safe, reliable power.

All our eggs in the natural gas basket? —Charles Ray

Charles Ray from Port St Lucie with 2,264 shares noted that his county is home to two nuclear power plants, which he considers safe and reliable (although very old now), and he questioned putting all our eggs in the natural gas basket.

Tom Fanning responded comparing a stock portfolio to SO’s energy portfolio, “some stocks like Southern that have low beta, low risk” balanced with “some crazy stuff” with high beta. Well, that’s been my point for five years now: Kemper Coal and the Vogtle nukes are crazy stuff, and too much of it. He did point out nuclear is the highest capital cost (capex) but said it was cheap to run, as in low operational cost (opex), citing $1/million BTU. He said Kemper coal was similar. He disparaged renewables for being intermittent. This is exactly where Southern Company could be most useful by solving that problem with batteries and other storage and a smart grid. Instead he continued to tout natural gas as the connector in the middle.

Chasing a dead nuclear horse? —Charles Wade

Charles Wade from Noonan, Georgia, with about 4,000 shares said his portfolio was not balanced “I’m heavy in Southern”. He wanted to know “what you’ve done for me lately. The last five years have been a dead horse.” He had the Atlanta Journal-Constitution article about Plant Vogtle being exhibit A for why no company had built any nuclear plants in the past 30 years, and he wanted to know why Southern Company thought it could do it.

This is the main newspaper article he was referring to: Russell Grantham Johnny Edwards, The Atlanta Journal-Constitution, 19 May 2017, At Plant Vogtle, nuclear rebirth becomes financial quagmire, headline since dumbed down to “How much will Plant Vogtle’s new reactors really cost us?”

Wade read some comments from the newspaper, including that SO is trying to re-create an industry with no live knowledge base. He wondered, “It sounds like we’re chasing a dead horse.”

Fanning, for once paused, perhaps briefly at a loss for words, then complained the AJC doesn’t always give a balanced story. His version was slow permits, schedule delays, and still working out cost to complete. He claimed the $6.3 billion Westinghouse has written out has almost none accrued to the bills of Georgia Power customers. He said SO had successfully lobbied for loan guarantees and “all sorts of other” things. He said cost increases to Georgia Power customers would be 6.5-8 cents, not 12. Um, that’s still an increase, when solar power would produce a decrease. He did also say this:

I’m an enormous fan of renewables, you all know that. I said that the first time I got on this stage. And I mentioned solar. And now we’re either the biggest, depending on what day, we’re either the biggest owner or second biggest owner of solar in America.

And now I wasn’t crazy about wind and now we’re pivoting towards wind. And it’s gotten to a point where I think it makes sense. It still has some infirmities relying on long-haul transmission and things like that.

He wrapped up his response by saying Plant Vogtle depended on whether Toshiba stood by its guarantees, cost-benefit analysis, what GA-PSC says, what co-owners say, etc., and that all feeds into “this board’s decision on whether to recommend going forward, or not.”

Which is the first time I’ve ever heard him say he or his board or Southern Company might decide not to go forward with Plant Vogtle.

Carbon tax? —Joyce Lemon

Joyce Lemon of Birmingham, Alabama, with 155 shares, said she was proud of those shares, and Fanning agreed. She commended the leadership council and the board on their efforts to contain emissions because she wants to pass on a livable planet. She said she had sent him an article about “the improbable set of circumstances” SO had to contend with back in 2008 or so when it decided to build new nukes at Plant Vogtle, including flat demand, low natural gas prices, and no price on carbon. The price on carbon is what she wanted to address, having taught micro-economics, and she said the price of carbon is too low because it fails to cover the whole cost to society. She asked him to consider the opportunity to get a carbon price set with the proceeds of a “market-based, revenue-neutral” price going back to the people, not the government, as a carbon dividend.

Fanning agreed that low natural gas prices had changed many things. He cited the 2009-10 timeframe decision to go ahead with Kemper coal. Note that that is before Fanning became CEO, something he remarked on explicitly at another time in the meeting. Plant Vogtle was also decided before his time, which I think he also mentioned. He continued saying internally SO does evaluate a carbon price with a matrix of outcomes to “create a dominant solution” and said that was an indirect price of carbon on transmission, generation, and “environmental solutions”. I don’t think SO’s matrices take into account the exponential deployment rates of solar and wind power.

I also think a carbon tax is too little too late. Too little because it doesn’t include methane, and because it would be gamed by big fossil fuel companies and utilities to delay getting off of thermal generation (fossil fuels, nuclear, and biomass) and onto renewable sun, wind, and water power. Too late because we no longer have time for half measures.

Will you lead to sun and wind power? —John S. Quarterman

John S. Quarterman of Lowndes County, Georgia, with 200 shares:

Howdy, and once again it’s your fault I own those shares, you’re such a good salesman!

Fanning: [Chuckles.] What’d you bring us?

I’ve brought you the traditional present from Okra Paradise Farms, okra pickles!

Fanning: [Claps.] Excellent, okra. Did you bring some for everybody?

Uh, no, but I do have enough yellow squash for everybody, in the car.

Ronnie Just has offered to hold these for me.

Ronny Just texting back to people who just heard his name on the live video feed.

Fanning: Thank you John. Appreciate it. Always fun to have you here.

All righty. This is now five years since I first came here and asked you what you were gonna do when those Big Bets go bad.

Fanning: [The video does not show, but he nodded at that. Also note Southern Company’s official history they were giving out in multiple formats five years ago is entitled Big Bets: Decisions and Leaders That Shaped Southern Company.]

And I see Kemper Coal got yet another Moody’s downgrade in March.

Plant Vogtle, quagmire, like a land war in Asia.

Friends, Romans, countrymen, lend me your ears.
I come to bury Caesar, not to praise him.
—Mark Antony, Julius Caesar, Act 1, Scene 2,
by William Shakespeare

But! I’m not here to talk about that.

I am not here to bury Plant Vogtle; I’ll let Georgia PSC do that.

I am here to praise Tom Fanning and Southern Company.

And to start with, to congratulate you all on closing coal plants, like Plant Mitchell. I look forward to you closing Plant Scherer so it will stop sending mercury up in the air that comes down in our Alapaha River.

[Some nearby stockholders started clapping.]

Yes, you want to clap? Ok, yay.

OK, so, however. We don’t want your coal ash. We don’t want your coal ash in our landfill in Lowndes County, which is a quarter mile uphill from the Withlacoochee River and in an aquifer recharge zone.

And if I can briefly put on my other hat as Suwannee Riverkeeper…

Fanning: [The video doesn’t show, but Fanning nodded; he does his homework.]

…we don’t want your coal ash in any landfill in the Suwannee River Basin. I’m speaking not only for our Georgia members but also for the ones in Florida, we don’t want your coal ash in our landfills or coming down our rivers to the Suwannee and into the Gulf or into the Floridan Aquifer.

Georgia Power and the rest of you made it and it seems you can find a way to store it.

And, um, I would like to recommend that you do; this is question number one; that you do what you did in 2015, which is that after a dozen years of opposition to changing the Georgia law to facilitate solar financing, you guys backed the bill and changed it and started selling solar power.

I recommend that in 2017 you pivot that way about coal, and instead of what you guys did this year of opposing a very mild-mannered set of coal ash bills that basically would have brought greater transparency, I recommend in 2017 that you pivot and support transparency in coal ash and even better bills.

OK, so as part of AGL you got Pivotal Energy. Which includes Pivotal LNG. Which has a deal to ship liquid natural gas to Jacksonville for export. That means LNG bomb trucks going past Moultrie Technical College in Tifton, past Wiregrass Technical College in Valdosta, past Lowndes High School in Valdosta, where I went to school. I do not see this as a good Big Bet.

Now, getting slightly more personal here, since you own AGL, you also own the pipeline that starts on my property and runs to Moody Air Force Base.

And since you own half of Southern Natural Gas, you own half of the other pipeline it connects to, which also means you own the step-down station that is constantly hissing 24 by 7 [hisses].

And I’ve looked through the easement papers my father signed, and I do not see anywhere where it say that the pipeline company gets a noise easement for the surrounding 40 acres. [audience chuckles]

So, I have a suggestion. Another congratulations here: Warner Robins. Somebody mentioned solar panels at Warner Robins and all those other military bases: yay! [claps, joined by a few others]

Please keep doing that. And in particular, how about at Moody Air Force Base? You put enough solar panels at Moody; they won’t need that pipeline; they can shut it down. Then I won’t hear that hissing. You can do that!

2017 Mix:

2016 Mix:

OK, I noticed comparing the proxy letter this year to the proxy letter last year the mix. The percentage of renewables more than doubled in one year.

That’s twice as fast as solar power is increasing total deployed capacity in this country. Southern Company is actually now leading the country in speed of deployment of solar.

But even that doubling every two year rate of solar power, that’s like as you mentioned before, compound interest. There’s only two power sources that are growing like that: solar and wind.

For those of us who like compound interest, and interest from dividends….

[Another stockholder turned and smiled at that]

Some of us might like to suggest that Southern Company’s board should look carefully at how many billions of dollars have you spent on natural gas and what return have you gotten for it. Because in that same comparison of mix tables, natural gas is flat. Coal and nuclear are down. The only thing that is increasing is renewables. It looks to me like that’s where the winning horse is.

But you’re the CEO, not me, it’s your decision for sure.

OK, so I’d also like to congratulate you on all that solar and wind you have deployed and the battery deal with Tesla [which Fanning announced in 2015]. Add to that a smart grid. As you always point out the only or the biggest private R&D utility operation in the country; add to that your expanded territory: you have the capability to, well.

You’ve been doing this for at least five years now, I know because I’ve seen you up there for that long. So probably at this point you’re thinking about your legacy.

Or your board is.

Fanning: [Smiles, and audience chuckles.]

The evil that men do lives after them;
The good is oft interrèd with their bones.
So let it be with Caesar.
—Mark Antony, Julius Caesar, Act 1, Scene 2,
by William Shakespeare

Do you want your legacy to be a nuclear quagmire?

Or do you want it to be that you, Tom Fanning, had the energy, to pivot the Titanic company of Southern Company away from the nuclear iceberg and lead it: the company, the southeast, the country, and the world towards the sun and the wind power?

Thank you.

Yes, I was alluding to Shakespeare’s play Julius Caesar, but let me be clear: I went straight to what Mark Antony worked around to; I came not to bury Plant Vogtle but to praise Tom Fanning and SO and to ask them to do more: to make a legacy that will live on.

Fanning chuckled and answered:

Thanks, John, I always look forward to your comments.

Let me, uh, let me say a few things [looking at his notes].

I’m not familiar about the hissing station. I take you at your word. Here’s Drew Evans. Talk to him and see what’s going on.

On the ash, you know, I think I made a little news here, ah, three years ago? Where I said today we’re going to close all of our ash ponds, and some of our guys said, “we are?” And son of a gun! Particularly here in Georgia, working in concert with your state EDP we’ve commenced that in a big way. And we’re doing it in an exceedingly responsible way. We’re removing all the ash and putting it in a landfill, a safe landfill lined and everything else, where you’re near any waterway. And even where you’re not, we’re using the highest level of technology. Closing in place, but putting in place slurry walls, that do not permit the migration of anything from the close-in-place dike to anywhere outside our boundary of our plant.

So we’re using the highest level of technology, working hand in glove with the state of Georgia.

Right, and Georgia Power worked hand in glove with GA-EPD in shooting down those coal ash bills, too, so there is room to improvement. Fanning did not address my request for SO to pivot to support new and better coal ash bills.

And the state of Georgia in fact is ahead of the federal requirements. But all of our companies are working on these kinds of issues across the southeast. So, um, back in Georgia, we’re ahead of the federal game in that regard.

Last thing, renewables mix. It’s fascinating. I’ve talked about this before, and I wish we could continue to grow solar and everything else the way we have. You know that in legislation passed last year they are phasing out some of the tax benefits associated with investment tax credits associated with solar, and production tax credit associated with wind. We have made a commitment to do more wind and to take advantage of those production tax credits.

Um, I think it will be an interesting period going forward in this new tax reform package that may or may not get debated effectively in Congress. And we see that Tr… president Trump has come out with his own proposal. What the fate of that is….

You know that this immense growth that we saw, remember how we went from two and a half billion in our capex for renewables became four and a half billion that’s what led to all these changes that you’ve seen. Whether we can sustain that or not, I can tell you that our budget this year is only a billion and a half.

Why did we go from four and a half to a billion and a half? That’s because the tax credits are eroding; the market is drying up a little bit.

I still think; please hear me!

I think renewables are exceedingly important in the future. Look at what we’ve done. I stand behind my word. We’ll see how it develops. If it develops well, we’ll be right there in a leadership role.

So John, thank you so much. You’re always welcome.

And I thank you, Tom, for your hospitality and your thoughtful answer. But in previous years you told us all how much influence you and Southern Company have over federal energy policy. And SO has more influence than anyone else on the planet over wind in the Atlantic offshore from Georgia, which SO is not yet doing. Plus the price of solar and wind power keeps going down, so that they are already competitive without tax benefits, unlike nuclear, which you just said in this meeting required a federal loan guarantee and other subsidies. As for the “market drying up”, last year more new U.S. electricity came from solar power than any other source, as you know.

So instead of waiting to see, I ask you again to secure your own legacy by leading us into the future of solar and wind power with storage and a smart grid.

Cybersecurity countermeasures? —Nancy Everett

Nancy Everett of Panama City with 5,019 shares wanted to know what security scenario keeps Fanning awake at night and what IT countermeasures SO is implementing, including employing and training the brightest and best.

Fanning, a former CIO, said he could “go on and wax eloquent for hours” on this subject. He said he chairs for the U.S. the electricity sector for cybersecurity and physical security, apparently referring to “his role as chairman of the Electricity Sub-Sector Coordinating Council, an obscure yet potent group of 30 executives that interacts with federal government intelligence and energy agencies to protect the nation’s power grid from threats and devise responses should an incident occur.” Rod Kuckro, E&E, 20 June 2014, Southern Co. CEO relishes role as chairman of industry’s cyber brain trust.

He mentioned a report to the president by the National Infrastructure Advisory Council (NIAC), presumably refering to this latest one listed on NIAC’s web site, dated 16 February 2017, which lists on page 15 under “Who We Talked To”:

Critical Infrastructure Community

• Tom Fanning, Chairman and CEO, Southern Company; Chair, Electricity SCC

Fanning said NIAC called out “the electricity sector’s stance or preparation” is the best in the United States. He said out of a longer list of critical sectors, “we have simplified that down to three” finance, electricity, telecom, and they’ve been coordinating response to any potential cyber incursion. He used human antibodies as an analogy with internal cyber defenses if a cyber attack gets past the first levels that try to keep it out. He said he has “high classified status” with national security, and two SO board members, Linda Hudson and Dale Klein, likewise have that kind of security clearance. All three get classified briefings on “what the bad guys are doing”.

He said he was very proud of harmonizing information sharing and security for a deep defense, especially since the private sector owns 87% of the critical infrastructure in this country. He said much more, praising the three-letter agencies, about white listing, black listing, and grey areas, using a trout fishing analogy of looking for swirls near fishing pools.

Which is all true, although he didn’t say anything about the three-letter agencies curating zero-day exploits and deliberately infecting every device they can. One of the main reasons the Internet is so insecure is those agencies like it that way.

He praised fusion centers for coordinating local, state, federal, and private security, and international. He did not mention that those very same fusion centers have been used against peaceful unarmed U.S. protestors in Occupy, and water protectors at Standing Rock, among specific examples that are known.

He said former NYC Mayor Rudy Giuliani, advising the president, has asked Fanning along with retired General Keith Alexander formerly simultaneously head of NSA and U.S. Cyber Command, to brief the president on security of the electric grid.

Fanning concluded by saying the U.S. electric grid was “well spoken for and resilient”.

Why couldn’t transfer AGL stock? —Martha Godfrey

Martha Godfey from LaGrange, Georgia, with 4,200 shares, said she owned substantial shares in AGL because her father used to work there; she could not sell them due to the merger deal; so she got cash, and a tax bill. She wanted to know why she couldn’t transfer stock for stock.

Fanning answered that it was because SO paid cash and only later did a stock deal, which turned out to be a good deal since SO’s stock went up on the announcement.

Lake Sinclair after coal plant closed? —Richard Alexander

Richard Alexander of Perry, Georgia, with over 100 shares, first apologized for not understanding the protocol in his first Southern Company meeting, and said how proud he was to be a stockholder. His two questions were about the plant being closed at Lake Sinclair.

1. What’s going to happen to the lake now that the plant is closed?
2. And what about those fishermen running around because they can’t find the plant to go home?

Fanning laughed and said Paul Bowers, president and CEO of Georgia Power Company, would hand out compasses, and Bowers would handle the closing issue.

Nuclear fuel buried at Yucca Mountain, Nevada? —Richard Tenny

Richard Tenney with 4,000 shares wanted to know what has happened with nuclear fuel buried at Yucca Mountain.

Fanning clarified that the subject was Yucca Mountain, said no fuel had been buried there, it had been under litigation for some time, and called on Steve Kuczynski, Chairman, President and Chief Executive Officer of Southern Nuclear, to explain.

Kuczynski said no more funds had been collected in several years due to the litigation, and they were hopeful that with a new administration something might happen. Fanning added there were other potential sites, including in Texas.

Tenny further asked about lawyer’s fees at Plant Vogtle.

Fanning said it was a big number, he didn’t know how much, but it was money well spent compared to the amounts at stake in capital cost and financing cost 45.7% of $15 billion, “spending money on good legal help was a smart thing to do”.

Tenny wanted to know if the new units at Vogtle would be completed by 2020.

Fanning reiterated that they were evaluating that and they hoped to know by August.

Everybody’s opinion matters —Tom Fanning

Fanning wrapped up by saying they tried to be good listeners and to move forward for the greater good.

Acknowledgments

As always, I praise Tom Fanning for being a class A CEO and for hosting a very civil, congenial, and informative stockholder meeting. Thanks to Ronny Just, Governmental Relations Manager, Georgia Power, to Paul Bowers, president and CEO, Georgia Power, and to other SO and Georgia Power executives who were most hospitable as always.

I thank the communications director who came up to me afterwards, whose name I unfortunately did not get, who seems to have implemented my suggestion to enable linking directly to specific times in the videos. Plus the meeting video is broken up into four major parts, which greatly simplifies finding things in it. Now if we can also have transcripts again…. Also thanks for putting me on the cover of your video:

Thanks to Andrew W. Evans, Chairman of the Board, President and Chief Executive Officer, Southern Company Gas, for clarifying his position on Pivotal LNG, which is that it’s not for export, it’s for fueling ships, and Pivotal is building an liquefaction plant in Jacksonville so as to avoid the need for sending LNG there by truck. Also he says LNG in trucks won’t explode. My opinion on that differs, and I will blog more later on that with evidence, but thanks for the communication.

Also, Drew Evans, or “President Hiss” as I’m told he’s now called, said he would follow up about the hissing sound. I look forward to that.

As ever thanks to Sierra Club for having people there asking great questions (including at least one in a previous part of the meeting). I am a member of Sierra Club, but I was not there to speak for Sierra Club. I spoke for myself, for Okra Paradise Farms, and from when I pulled out the bumper sticker also as Suwannee Riverkeeper for WWALS Watershed Coalition.

Grateful thanks to the stockholders who so far as I know are not associated with Sierra Club for asking questions such as is SO chasing a dead nuclear horse and is it wise to put all our eggs in the natural gas basket.

Southern Company stockholder meetings: more fun than you can have without paying for it! Oh, wait, I did, when I bought that stock….

-jsq

Investigative reporting costs money, for open records requests, copying, web hosting, gasoline, and cameras, and with sufficient funds we can pay students to do further research. You can donate to LAKE today!

“Oh, solar panels! Oh, heck yeah!” —Tom Fanning, CEO, Southern Company

Short Link: