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Coal-Fired Plants Scrapped as Part of Utility Deal


This is MORNING EDITION from NPR News. I'm Renee Montagne.


And I'm Steve Inskeep.

Some states are moving ahead of the federal government in attacking global climate change. The governors of five Western states agreed to act on their own. The governors represent Arizona, California, New Mexico, Oregon and Washington State. They've agreed to develop a regional target to lower gases like carbon dioxide that are linked to global warming. This issue has taken on political urgency in Western states. The region has suffered from drought and severe fire seasons. And whether those particular events are linked to global warming or not, they have heightened people's sensitivity to the issue.

MONTAGNE: The last several days have been very rewarding for people who want the country to take climate change more seriously. In addition to the governors' pact, the documentary featuring Al Gore's global warming warning won an Oscar on Sunday.

And as NPR's Elizabeth Shogren reports, the sale of a huge Texas power company is perhaps the biggest signal that the momentum is building for action on climate change.

ELIZABETH SHOGREN: For environmentalists, TXU Corporation - the largest electricity producer in Texas - has symbolized the country's refusal to face up to the challenge of climate change. The company wanted to build 11 new coal-fired power plants, which would have caused a major increase in greenhouse gas emissions. Now TXU's owners want to sell the company to investors with very different ideas.

David Hawkins, from the Natural Resources Defense Council, says the sale will turn a foe into an ally.

Mr. DAVID HAWKINS (Natural Resources Defense Council): We have the largest power company in Texas doing a u-turn on global warming policy. TXU in the past has been one of the vocal opponents of doing anything about global warming, and now they are going to become a company that is going to be arguing that Congress needs to act on global warming.

SHOGREN: When the investors were cooking up the deal, they asked Hawkins and a representative of the environmental group to help craft a new strategy for the company. One of the key players was William Reilly, who headed the Environmental Protection Agency under the first President Bush. He's a senior advisor to Texas Pacific Group, one of the investment companies that's agreed to buy TXU.

Mr. WILLIAM REILLEY (Senior Advisor, Texas Pacific Group; Former Director, EPA): We chose to bring them in and committed very early that without their cooperation and support, we would not do this investment.

SHOGREN: Reilley worked out the deal with environmentalists through a 13-hour negotiation. The buyers agreed to build three new coal-fired power plants instead of 11. They'll double their investment in wind power. They'll reduce the company's greenhouse gas emissions to 1990 levels by 2020, and they'll work to get Congress to approve legislation requiring nationwide emission cuts.

Some utility industry observers were skeptical. They say the only green in this deal is money.

James Lucier is an analyst for Prudential Equity Group.

Mr. JAMES LUCIER (Analyst, Prudential Equity Group): I think the environmental groups are being used as window dressing for a deal that's really driven by the strong economic fundamentals.

SHOGREN: Lucier says it was never clear that TXU would be allowed to build most of the 11 plants, and the three that are left are the ones the company really wanted. He says together with the company's other coal-fired power plants, they will make a lot of money.

Still, David Hawkins of NRDC says the role that environmentalists played was unique and significant.

Mr. HAWKINS: So this is a first, and not only is this perhaps the largest leveraged buyout, but it's probably the first and largest leveraged environmental deal in history.

SHOGREN: Hawkins says the deal reflects the changing attitudes about climate change. He says California is requiring greenhouse gas reductions across the board. Several northeastern states are working to reduce emissions from power plants, and just yesterday, four more Western governors pledged to join in.

Mr. HAWKINS: It's almost like the Reformation. There has been a shift that's very sudden. We are seeing the political system recognize that the time has come to deal with global warming, and we're seeing the business community realize that the time has come to take action. And once that realization takes place, then change can happen quite quickly. And that's what we're seeing.

SHOGREN: TXU's buyers say they want to be part of this trend. But first the deal will have to be approved by the company's shareholders and Texas regulators.

Elizabeth Shogren, NPR News, Washington. Transcript provided by NPR, Copyright NPR.

Elizabeth Shogren is an NPR News Science Desk correspondent focused on covering environment and energy issues and news.