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Company Name: Great Plains Energy Inc. Document Sections: INQUIRY LETTER
[INQUIRY LETTER] VIA FEDERAL EXPRESS Office of Chief Counsel Re: Great Plains Energy Incorporated: Omission of Shareholder Proposal Submitted by Bartlett Naylor on Behalf of The Sierra Club Ladies and Gentlemen: On behalf of Great Plains Energy Incorporated (the "Company" or "Great Plains"), I have enclosed, pursuant to Rule 14a-8(j) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), five additional copies of this letter, along with six copies of a shareholder proposal and statement of support submitted on behalf of The Sierra Club (the "Proponent") by Mr. Bartlett Naylor, the Proponent's representative ("Mr. Naylor"), for inclusion in the Company's proxy materials for the 2006 Annual Meeting of Shareholders. The proposal and supporting statement are collectively referred to as the "Proposal." I respectfully request that the staff of the Division of Corporation Finance (the "Staff") confirm that it will not recommend any enforcement action to the Securities and Exchange Commission (the "SEC") if the Company omits the Proposal from its 2006 proxy materials. I am sending a copy of this letter to Mr. Naylor as formal notice of the Company's intention to exclude the Proposal from its 2006 proxy materials. The Proposal reads: THEREFORE, THE SHAREHOLDERS RESOLVE that Great Plains shall prepare a financial analysis, at reasonable cost and omitting proprietary information, of the impact of a $15 tax per ton of CO2 emitted on projected Great Plains financial results for a period of 10 years after such a tax is effective. The report should be made available to shareholders by July 15, 2006, and shall be included in the next Annual Report thereafter. Reasons for Excluding the Proposal Great Plains believes that the Proposal may properly be excluded from its 2006 proxy materials because (i) the Proponent has not demonstrated its eligibility to submit the Proposal and (ii) the Proposal relates to the ordinary business operations of the Company. I. The Proponent Has Not Demonstrated Its Eligibility to Submit the Proposal. Rule 14a-8(b) requires proponents to satisfy certain eligibility requirements in order to submit a proposal for inclusion in a company's proxy materials for a shareholder meeting. Rule 14a-8(b)(1) requires a proponent to be a security holder and to have continuously held at least $2,000 in market value, or 1%, of the company's securities entitled to be voted on the proposal at the meeting for at least one year on the date the proponent submits the proposal. Rule 14a-8(b)(2) provides that the proponent bears the burden of demonstrating compliance with the eligibility requirements in Rule 14a-8(b)(1). Mr. Naylor submitted the Proposal to the Company on behalf of the Proponent via e-mail on November 21, 2005. In a note preceding the Proposal, Mr. Naylor wrote that "[t]he proponent meets the federal requirements, intends to hold the requisite shares through the annual meeting, and appear through an agent at the 2006 annual meeting." See Exhibit A. Because this statement did not demonstrate the Proponent's eligibility to submit the Proposal, and because the name of the Proponent did not appear in the Company's records as a shareholder of record, the Company sent a timely notice to Mr. Naylor on December 2, 2005, requesting verification of the Proponent's eligibility. See Exhibit B. In particular, the Company requested information from the record holder of the Proponent's shares of Great Plains common stock in order to verify that the Proponent continuously held the required amount of common stock for at least one year as of November 21, 2005, the date the Proposal was submitted to the Company. The Company attached a copy of Rule 14a-8 to the notice. Mr. Naylor replied to the Company's notice via e-mail on December 5, 2005, stating that he had just faxed to the Company a letter from Charles Schwab & Co. Inc. ("Schwab") regarding the Proponent's ownership (the "Schwab Letter"). The Company did, in fact, receive the Schwab Letter on December 5, 2005 via facsimile transmission. A copy of the Schwab Letter, which is undated, is attached as Exhibit C, and a copy of Mr. Naylor's e-mail dated December 5, 2005 is attached as Exhibit D. The Schwab Letter, which is addressed to the Proponent and was faxed by Schwab on October 31, 2005, reads as follows: I am writing at your request of October 31, 2005, to confirm the number of shares of Great Plains Energy (GXP) held in the street name of Charles Schwab & Co. Inc., for the benefit of the Sierra Club. ... The Sierra Club purchased 107 shares of Great Plains Energy Inc (GXP) on 10-24-04. The Sierra Club has continuously held the 107 shares of GXP since 10-24-04. This information does not provide sufficient proof of the Proponent's eligibility to submit the Proposal. The Staff has made it abundantly clear in no-action letters and in the Staff Legal Bulletins addressing Rule 14a-8 that a shareholder must provide sufficient proof of its eligibility pursuant to Rule 14a-8(b)(2). See, e.g., Wal-Mart Stores, Inc. (Feb. 2, 2005) (granting relief where the proponent submitted proposal on December 6, 2004, but verifying letter from record holder was dated November 22, 2004); International Business Machines Corporation (Jan. 7, 2004) (granting relief where the proponent did not provide "support sufficiently evidencing that she satisfied the minimum ownership requirement continuously for the one-year period"); Pall Corporation (Sept. 20, 2005) (granting relief where proponent "failed to supply support sufficiently evidencing that it satisfied the minimum ownership requirement continuously for the one-year period as of the date it submitted the proposal"). In addition, in Staff Legal Bulletin No. 14 (July 13, 2001), the Staff made two statements that bear directly on the issue presented here. First, in making the point that a proponent's periodic account statements could not serve as adequate proof of ownership for one year as of the date the proponent submitted its proposal, the Staff stated as follows: "A shareholder must submit an affirmative written statement from the record holder of his or her securities that specifically verifies that the shareholder owned the securities continuously for the period of one year as of the time of submitting the proposal." Second, in the same Staff Legal Bulletin, the Staff stated that a proposal would be excludable where a proponent submitted a proposal on June 1 and provided a statement from the record holder of its securities verifying that the proponent owned the required amount of securities continuously for one year as of only May 30 of the same year. Both of these statements highlight the requirement in Rule 14a-8(b) that the required evidence of ownership from the record holder of the proponent's securities must relate precisely to the date the proponent submits a proposal. The Proponent submitted the Proposal on November 21, 2005. The Schwab Letter, which is not dated, at best only addresses the Proponent's share ownership as of the date it was faxed by Schwab, October 31, 2005. Thus, the Proponent has failed to demonstrate its eligibility to submit the Proposal because the Schwab Letter did not verify, as the Company explicitly requested and as Rule 14a-8(b) requires, that the Proponent continuously held the minimum amount of the Company's securities for the one-year period ended November 21, 2005. Under Rule 14a-8(b)(2), the burden of demonstrating eligibility to submit this Proposal is on the Proponent. Despite a clear notification from the Company regarding the need for the Proponent to provide sufficient information to demonstrate its eligibility, the Proponent failed to meet its burden. Accordingly, the Proposal is excludable under Rule 14a-8(f). II. The Proposal Relates to the Ordinary Business Operations of the Company. Rule 14a-8(i)(7) provides that a company may omit a proposal if it "deals with a matter relating to the company's ordinary business operations." Day-to-day business matters that do not involve significant social policy issues pertain to a company's ordinary business operations. The Proposal requests that Great Plains evaluate and report on the impact on its financial results, over a ten-year period, of a hypothetical tax related to CO2 emissions. The Proponent's supporting statement repeatedly stresses the need for utilities, such as the Company, "to explicitly account for the financial risk associated with greenhouse gas emissions," to take into account their "current and future financial exposure" to a carbon tax, and to "begin planning to mitigate the financial impacts" of such a tax. It is well established that proposals such as this, which seek an evaluation of risks or liabilities that a company faces, relate to ordinary business operations and, therefore, are excludable under Rule 14a-8(i)(7). See, e.g., The Dow Chemical Company (Feb. 23, 2005) (granting relief where the proposal sought a report describing the impacts that outstanding Bhopal issues could pose on the company, its reputation, its finances and its expansion in Asia and elsewhere); Xcel Energy, Inc. (Apr. 1, 2003) (granting relief where the proposal sought a report on the economic risks associated with past emissions of specified substances and the company's public stance regarding efforts to reduce such emissions and the economic benefits of committing to a substantial reduction of such emissions). Further, in Staff Legal Bulletin No. 14C (June 28, 2005), the Staff stated that: "[t]o the extent that a proposal and supporting statement focus on the company engaging in an internal assessment of the risks and liabilities that the company faces as a result of its operations that my adversely affect the environment or the public's health, we concur with the company's view that there is a basis for it to exclude the proposal under rule 14a-8(i)(7) as relating to an evaluation of risk." I believe that the Proposal falls clearly within the guidance of Staff Legal Bulletin No. 14C as well as the Xcel line of letters because it relates to the Company's internal assessment of certain financial risks or liabilities that it may facethe impact on its financial results of a possible CO2 tax resulting from the effects of its operations on the environment. Accordingly, the Proposal is excludable under Rule 14a-8(i)(7). * * * I would very much appreciate a response from the Staff on this no-action request as soon as practicable, so that the Company can meet its printing and mailing schedule for the 2006 Annual Meeting of Shareholders. If you have any questions or require additional information concerning this matter, please call me at (816) 556-2608. Very truly yours, /s/ Mark G. English Enclosures cc: Mr. Bartlett Naylor (w/enclo.)
[APPENDIX] From: bartnaylor@aol.com [mailto:bartnaylor@aol.com] Sent: Monday, November 21, 2005 10:31 AM To: barbara.curry@kcpl.com; gloria.rodriguez@kcpl.com; deo@gendlermann.com Cc: mcmulw@socket.net; tanya.tolchin@sierraclub.org Subject: shareholder resolution, Great Plains Barbara Curry Dear Secretary Curry: The Sierra Club hereby submits the following resolution in accordance with SEC Rule 14a for publication in the company's proxy statement in conjunction with the company's 2006 annual meeting. The proponent meets the federal requirements, intends to hold the requisite shares through the annual meeting, and appear through an agent at the 2006 annual meeting. Please confirm receipt by return email. --Bartlett Naylor Whereas, Great Plains Energy, by operating coal burning power plants, is emitting millions of tons of CO2 annually, which is a greenhouse gas, and Whereas scientific evidence of global warming has become increasingly accepted, and, Whereas public understanding of global warming has become increasingly heightened in recent years, and Whereas public concern pertaining to global warming has been greatly increased by the severity of hurricanes Katrina and Rita, and Whereas the CEO of Duke Energy Corporation, Paul Anderson, has publicly called for a mandatory national carbon tax in order to ensure that financial impacts are distributed appropriately as the nation take steps to reduce the carbon intensity of our economy, in his keynote speech to about 700 civic and business leaders at the Charlotte Business Journal's annual Power Breakfast April 7, 2005, and Whereas the Public Utilities Commission of the State of California has issued a ruling requiring large electric utilities to explicitly account for the financial risk associated with greenhouse gas emissions by incorporating costs of between $8 and $25 per ton of CO2 emissions in their long range planning for electric generation capacity decisions to ensure that California will be fully appraised of the potential costs associated with carbon emissions, and Whereas extensive legislation has been introduced at the state and federal level aimed at reducing emissions of CO2 from US corporations. THEREFORE, THE SHAREHOLDERS RESOLVE that Great Plains shall prepare a financial analysis, at reasonable cost and omitting proprietary information, of the impact of a $15 tax per ton of CO2 emitted on projected Great Plains financial results for a period of 10 years after such a tax is effective. This report should be made available to shareholders by July 15, 2006, and shall be included in the next Annual Report thereafter. Discussion: We believe that incorporating a carbon tax estimate in the long range electric generation capacity planning of the company is in the financial interest of Great Plains Energy's shareholders, who will be well served by a rigorous analysis of the company's current and future financial exposure to enactment of a carbon tax. We also believe that Great Plains Energy must begin planning to mitigate the financial impacts of a carbon tax on the company. Contingency planning for a carbon tax is critical for Great Plains Energy's financial future, and full coverage of the carbon tax exposure should be required in the company's annual reports. Great Plains shareholders deserve no less. We urge you to vote FOR this resolution. Bartlett Naylor David E. Ortman Office of Chief Counsel January 13, 2006 RE: Great Plains Energy Incorporated: Opposition to Omission of Shareholder Proposal Submitted by the Sierra Club: Dear SEC: The following is a response to the December 29th letter from Great Plains Energy requesting that no action be taken by the Securities and Exchange Commission if they omit the Sierra Club's shareholder resolution (see enclosed). We appreciate the opportunity to respond. First, Sierra Club has owned stock in Great Plains Energy continuous for a year from our filing of the resolution (see enclosed). By copy of this letter we have provided Great Plains with the most recent verification from Schwab as well. We believe this should resolve the question of our eligibility to submit a proposal. Second, Great Plains Energy argues that day-to-day business matters that do not involve significant social policy issues pertain to a company's ordinary business operations. We believe that global warming and related carbon emissions are significant social policy issues (see enclosed list of recent global warming studies). The supporting statement merely reports that the PUC in California has issued a ruling requiring large electric utilities to explicitly account for the financial risk associated with greenhouse gas emissions. The Sierra Club resolution calls for a straight forward financial analysis of the impact to the company of a $15 tax per ton of CO2. Corporations should be prepared to analyze the impacts of emerging significant social and environmental policies on the corporation and shareholders. This should include being prepared to analyze the impacts of new emerging tax polices. In the past, the SEC staff have refused to allow corporations to hide behind Rule 14a-8(i)(7) (a company may omit a proposal if it "deals with a matter relating to the company's ordinary business operations"). SEC staff have previously refused to allow a company to omit a resolution calling for a postponement in the expansion of a gold/copper milling operations, ending a corporation's cooperation with a foreign government's military, and allowing independent environmental monitoring of the corporations operations by non-governmental organizations. See Freeport-McMoRan Copper & Gold (Feb. 10, 1997)(refusing to allow company to omit the proposal under [then] rule 14a-8(c)(7) as ordinary business). Similarly, a new energy tax would not be the company's ordinary business, it would be something new, something outside its ordinary business. We believe that we meet the requirements to file a shareholder proposal and that our proposal does not fall within ordinary business operations. We believe the Great Plains shareholders have the right to review cast an advisory ballot on this resolution. Sincerely, /s/ David E. Ortman Encl. Sierra Club Resolution Schwab letter of verification cc: Great Plains Energy
[APPENDIX] Whereas, Great Plains Energy, by operating coal burning power plants, is emitting millions of tons of CO2 annually, which is a greenhouse gas, and Whereas scientific evidence of global warming has become increasingly accepted, and, Whereas public understanding of global warming has become increasingly heightened in recent years, and Whereas public concern pertaining to global warming has been greatly increased by the severity of hurricanes Katrina and Rita, and Whereas the CEO of Duke Energy Corporation, Paul Anderson, has publicly called for a mandatory national carbon tax in order to ensure that financial impacts are distributed appropriately as the nation take steps to reduce the carbon intensity of our economy, in his keynote speech to about 700 civic and business leaders at the Charlotte Business Journal's annual Power Breakfast April 7, 2005, and Whereas the Public Utilities Commission of the State of California has issued a ruling requiring large electric utilities to explicitly account for the financial risk associated with greenhouse gas emissions by incorporating costs of between $8 and $25 per ton of CO2 emissions in their long range planning for electric generation capacity decisions to ensure that California will be fully appraised of the potential costs associated with carbon emissions, and Whereas extensive legislation has been introduced at the state and federal level aimed at reducing emissions of CO2 from US corporations. THEREFORE, THE SHAREHOLDERS RESOLVE that Great Plains shall prepare a financial analysis, at reasonable cost and omitting proprietary information, of the impact of a $15 tax per ton of CO2 emitted on projected Great Plains financial results for a period of 10 years after such a tax is effective. This report should be made available to shareholders by July 15, 2006, and shall be included in the next Annual Report thereafter. Discussion: We believe that incorporating a carbon tax estimate in the long range electric generation capacity planning of the company is in the financial interest of Great Plains Energy's shareholders, who will be well served by a rigorous analysis of the company's current and future financial exposure to enactment of a carbon tax. We also believe that Great Plains Energy must begin planning to mitigate the financial impacts of a carbon tax on the company. Contingency planning for a carbon tax is critical for Great Plains Energy's financial future, and full coverage of the carbon tax exposure should be required in the company's annual reports. Great Plains shareholders deserve no less. We urge you to vote FOR this resolution.
[STAFF REPLY LETTER] Response of the Office of Chief Counsel Division of Corporation Finance Re: Great Plains Energy Incorporated Incoming letter received December 29, 2005 The proposal relates to carbon tax. There appears to be some basis for your view that Great Plains Energy may exclude the proposal under rule 14a-8(f). We note that the proponent appears to have failed to supply, within 14 days of receipt of Great Plains Energy's request, documentary support evidencing that it satisfied the minimum ownership requirement for the one-year period as of the date that it submitted the proposal as required by rule 14a-8(b). Accordingly, we will not recommend enforcement action to the Commission if Great Plains Energy omits the proposal from its proxy materials in reliance on rules 14a-8(b) and 14a-8(f). Sincerely, /s/ Ted Yu |
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