IFRS Foundation

Electric Utilities & Power Generators

Select Language
Current language: English
Electric Utilities & Power Generators industry entities generate electricity; build, own and operate transmission and distribution (T&D) lines; and sell electricity. Utilities generate electricity from many different sources, commonly including coal, natural gas, nuclear energy, hydropower, solar, wind and other renewable and fossil fuel energy sources. The industry comprises entities operating in both regulated and unregulated business structures. Regulated utilities face comprehensive regulatory oversight of their pricing mechanisms and their allowed return on equity, among other types of regulation, to maintain their licence to operate as a monopoly. Unregulated entities or merchant power entities are often independent power producers (IPPs) that generate electricity to sell to the wholesale market, which includes regulated utility buyers and other end users. Furthermore, entities in the industry may operate across both regulated and deregulated power markets depending on their operational span. Regulated markets typically contain vertically integrated utilities that own and operate everything from the generation of power to its retail distribution. Deregulated markets commonly split generation from distribution to encourage wholesale power generation competition. Overall, the complex task of providing reliable, accessible, low-cost power while balancing the protection of human life and the environment remains a challenge.

Relevant Issues (9 of 26)

Why are some issues greyed out? The SASB Standards vary by industry based on the different sustainability-related risks and opportunities within an industry. The issues in grey were not identified during the standard-setting process as the most likely to be useful to investors, so they are not included in the Standard. Over time, as the ISSB continues to receive market feedback, some issues may be added or removed from the Standard. Each company determines which sustainability-related risks and opportunities are relevant to its business. The Standard is designed for the typical company in an industry, but individual companies may choose to report on different sustainability-related risks and opportunities based on their unique business model.

Disclosure Topics

What is the relationship between General Issue Category and Disclosure Topics? The General Issue Category is an industry-agnostic version of the Disclosure Topics that appear in each SASB Standard. Disclosure topics represent the industry-specific impacts of General Issue Categories. The industry-specific Disclosure Topics ensure each SASB Standard is tailored to the industry, while the General Issue Categories enable comparability across industries. For example, Health & Nutrition is a disclosure topic in the Non-Alcoholic Beverages industry, representing an industry-specific measure of the general issue of Customer Welfare. The issue of Customer Welfare, however, manifests as the Counterfeit Drugs disclosure topic in the Biotechnology & Pharmaceuticals industry.
General Issue Category
(Industry agnostic)

Disclosure Topics (Industry specific) for: Electric Utilities & Power Generators

GHG Emissions
  • Greenhouse Gas Emissions & Energy Resource Planning

    Electricity generation represents the largest source of greenhouse gas (GHG) emissions in the world. Mainly carbon dioxide, methane and nitrous oxide, these emissions are mostly by-products of fossil fuel combustion. The transmission or distribution (T&D) segments of the industry produce negligible emissions. Electric utility entities could face significant operating costs and capital expenditures for mitigating GHG emissions as environmental regulations become increasingly stringent. Although many of these costs may be passed to a utility’s customers, some power generators, especially in deregulated markets, may be unable to recoup these costs. Entities may reduce GHG emissions from electricity generation through careful infrastructure investment planning by ensuring the delivery of an energy mix capable of meeting the emissions requirements set forth by regulations, and by implementing industry-leading technologies and processes. Being proactive in cost-effectively reducing GHG emissions may create a competitive advantage for entities and mitigate unanticipated regulatory compliance costs. Failure to properly estimate capital-expenditure needs and permitting costs, or other difficulties in reducing GHG emissions, may result in significant negative effects on returns in the form of asset write-downs, the costs to obtain carbon credits, or unexpected increases in operating and capital expenditures. Regulatory emphasis on this issue may increase in the coming decades, as exemplified by the international emissions-reduction agreement made at the 21st session of the United Nations Conference of the Parties in 2015.
Air Quality
  • Air Quality

    Fuel combustion in electricity-generation operations generates hazardous air pollutants (HAPs), criteria air pollutants (CAPs), and volatile organic compounds (VOCs). HAPs, CAPs, and VOCs have more localised, but nonetheless significant, human health and environmental impacts compared with the global impacts of greenhouse gases (GHGs). The most common and impactful are nitrogen oxides (excluding nitrous oxide), sulphur oxide, particulate matter (PM), lead, and mercury. Emissions of these localised air pollutants are often strictly regulated, creating significant risks for electricity generators. Regulatory and legal risks are higher for those entities operating near large communities. An entity’s energy-generation mix is the best indicator of its relative risk related to air quality. Harmful air emissions from operations may result in regulatory penalties that affect extraordinary expenses, higher regulatory compliance costs, and new capital expenditures to instal best-in-class control technology. In some cases, such expenditures can be prohibitive to the continuation of a facility. Entities can manage air quality concerns through internal actions to reduce emissions, as well as by working with regulators to establish priorities and incorporate risks into short- and long-term capital planning.
Water & Wastewater Management
  • Water Management

    Electricity generation is one of the most water-intensive industries in the world in terms of water withdrawals. Thermoelectric power plants—typically coal, nuclear and natural gas—use large quantities of water for cooling purposes. The industry is facing increasing water-related supply and regulatory risks, potentially requiring capital investment in technology or even creating stranded assets. As water supplies tighten in many regions—and electricity generation, agriculture and community use compete for water supplies—power plants increasingly may be unable to operate at full capacity, or at all, because of region-specific water constraints. The availability of water is an important factor to consider when calculating the future value of many electricity-generating assets and for evaluating proposals for new generation sources. Increased water scarcity—because of factors such as increasing consumption and reduced supplies resulting from climate change, which could result in more frequent or intense droughts—could prompt regulatory authorities to limit entities’ ability to withdraw necessary amounts of water, especially in regions with high baseline water stress. Furthermore, entities must manage the growing number of regulations related to the significant biodiversity impacts that such large withdrawals may cause. To mitigate these risks, entities can invest both in more efficient water-usage systems for plants, and place strategic priority on assessing long-term water availability, as well as water-related biodiversity risks, when siting new power plants.
Waste & Hazardous Materials Management
  • Coal Ash Management

    Electricity generators must safely dispose of the hazardous by-products of their operations. Coal-fired electricity generation is a major source of hazardous waste because of its by-product, coal ash. Coal ash can have a significant effect on entity value in the power-generation segment of the industry. This issue will affect entities differently, depending on the extent to which they generate electricity from coal. Coal ash is one of the largest industrial waste streams in the world. It contains heavy metal contaminants that have been associated with cancer and other serious diseases, especially when they leach into groundwater. Coal ash can have beneficial uses when recycled or reused, such as in the creation of fly ash concrete or wallboard, creating revenue opportunities for electric utilities. Safe handling of coal ash, location of coal ash impoundments that minimise harm to human life and/or the environment, strong monitoring and containment of coal ash, and the sale for beneficial uses of coal ash are important strategies to reduce regulatory compliance costs as well as penalties for non-compliance. There can be significant litigation and/or remediation costs if the coal ash leaches into the surrounding environment.
Access & Affordability
  • Energy Affordability

    A de facto objective of regulated electric utilities is to provide reliable, affordable, and sustainable electricity. Entities in the industry are tasked with managing these potentially competing priorities to maintain favourable relations with customers and regulators—and ultimately to earn appropriate returns for shareholders. The affordability of energy is particularly challenging for entities to balance, as it often conflicts with other core objectives. Utility energy bills are widely perceived to be increasingly unaffordable for low-income customers (affordability is determined by both the net cost of energy bills and the underlying customer economics). Ensuring that utility bills are affordable is crucial for utilities working to build trust (intangible asset value) with regulators and customers. Quality of regulatory relations is a key value driver for utilities, and one of the more closely analysed issues by investment analysts. The willingness of regulators to grant rate requests, rate structure modifications, cost recovery, and allowed returns is a primary determinant of financial performance and investment risk. Effectively managing affordability may enable utilities to invest more capital, favourably revise rate structures, and increase allowed returns. Furthermore, utilities that do not effectively manage affordability are increasingly exposed to customers defecting from the grid (or reducing reliance on the grid) by implementing distributed energy resources or pursuing other alternative energy sources (e.g., industrial customers’ use of combined heat and power). Managing affordability involves operating an efficient business with a well-thought-out, long-term perspective and strategy, as well as working closely with regulators and public policymakers on rate structures and, potentially, bill-assistance programs. While the precise nature of financial impacts of affordability are largely determined by utilities’ business models and rate structures, affordability is a critical business issue for utilities to manage in terms of maintaining (and growing) customer bases, building intangible asset value, creating investment and return opportunities, and ultimately delivering shareholder returns.
Employee Health & Safety
  • Workforce Health & Safety

    Employees of entities in the industry face numerous hazards in the construction and maintenance of electric transmission and distribution (T&D) lines, as well as with the various means of electricity generation. Many of these employees work for extended periods at great heights, operate heavy machinery, and face electrocution risks. While the industry has made significant strides in safety improvements, significant risks and opportunities remain for further improvements. The nature of the industry—as a necessity of modern life and economies, as well as commonly a societally granted monopoly—means that the actions of entities in the industry receive significant public and regulatory scrutiny. Entities need to maintain a culture of safety to ensure adequate working conditions for their workers, ensure strong operational productivity, uphold positive views from the perspective of regulators, and manage potential risks of regulatory penalties.
Business Model Resilience
  • End-Use Efficiency & Demand

    Energy efficiency is a low-lifecycle-cost method to reduce greenhouse gas (GHG) emissions, because less electricity needs to be generated to provide the same end-use energy services. Utilities can promote energy efficiency and conservation among their customers. Such strategies may include offering rebates for energy-efficient appliances, weatherising customers’ homes, educating customers on energy-saving methods, offering incentives to customers to curb electricity use during times of peak demand (‘demand response’), or investing in technology such as smart meters, which allow customers to track their energy use. While saving consumers money, these efforts also may reduce operating costs for electric utilities by decreasing peak demand. Furthermore, depending on the utility regulatory framework, local jurisdictions may mandate that entities develop energy efficiency plans before permitting new builds. Companies with effective strategies to reduce the downside risks from demand fluctuations, may gain adequate and timely returns on needed investments. Furthermore, reducing costs through efficiency initiatives may earn higher, long-term risk-adjusted returns.
Critical Incident Risk Management
  • Nuclear Safety & Emergency Management

    Although rare, nuclear accidents can have significant human health and environmental consequences because of their severity. Owners of nuclear power plants in many regions have operated for decades without any major public safety incidents, but the occurrence of infrequent but large-magnitude incidents anywhere in the world can have major effects on the entire nuclear power industry. Entities that own and operate nuclear plants may lose their licence to operate, as well as face many other financial consequences in the event of an accident—though entities carry insurance and may have legal protections from some liabilities. Failure to comply with the safety regulations can be expensive to nuclear power operators; in extreme circumstances it may make the continued operation of the plant uneconomical. Facing potentially significant financial repercussions, both from ongoing safety compliance as well as tail risk incidents, entities that own or operate nuclear plants must be vigilant in the safety compliance, best practices and upgrades of their facilities. They also must maintain robust emergency preparedness training for their staff and a strong safety culture. These measures can reduce the probability that accidents will occur and enable an entity to effectively detect and respond to such incidents.
Systemic Risk Management
  • Grid Resiliency

    Electricity is critical for the continued function of most elements of modern life, from medicine to finance, creating a societal reliance on continuous service. Major disruptions to electricity infrastructure may result in potentially high societal costs. Disruptions can be caused by extreme weather events, natural disasters and cyberattacks. As the frequency and severity of extreme weather events associated with climate change continues to increase, all segments of electric utilities entities—and especially major transmission and distribution (T&D) operations—will face increasing physical threats to their infrastructure. Extreme weather events could result in frequent or significant service disruptions, outages and require upgrade or repair of damaged or compromised equipment, all of which may add substantial costs and damage brand reputation among regulators and customers. The increased use of smart grid technology has several benefits, including strengthening the resiliency of the grid to extreme weather events. However, this technology may make the grid more vulnerable to cyberattacks, because it provides hackers more entryways into infrastructure systems. Entities must implement strategies that minimise the probability and magnitude of impacts from extreme weather events and cyberattacks. To remain competitive in the face of increasing external competition, entities must improve the reliability, resilience and quality of their infrastructure.

Select up to 4 industries

Current Industry: Electric Utilities & Power Generators

Consumer Goods
Extractives & Minerals Processing
Food & Beverage
Health Care
Renewable Resources & Alternative Energy
Resource Transformation
Technology & Communications

Tell Us About Yourself

While it’s free to download SASB Standards, we request the following information to better understand how the Standards are being used.

Content Use Policy

The SASB Standards are made available for free for non-commercial use, such as corporate disclosure. The content in the SASB Standards is copyrighted. All rights reserved. Commercial use of the content in the SASB Standards – including for investment analysis, data services, and product development - is not permitted without consent. To request more information, please contact us at: [email protected].

Stay Informed: Please tick the below boxes to subscribe to specific email updates. The IFRS Foundation is committed to protecting and respecting your privacy, and we’ll only use your personal information to administer your account and to provide the products and services you requested from us.

You can unsubscribe from these communications at any time. For more information on how to unsubscribe, our privacy practices, and how we are committed to protecting and respecting your privacy, please review our Privacy Policy.

By clicking submit below, you consent to allow the IFRS Foundation to store and process the personal information submitted above to provide you the content requested.

We encourage you to visit the IFRS Foundation notification dashboard to register for an account and sign up for additional email subscriptions you may be interested in, such as notifications about the ISSB and the IFRS Sustainability Disclosure Standards.