Duke Energy CEO Jim Rogers will step down sometime next year as part of a settlement announced late yesterday that would resolve an investigation of the company's merger with Progress Energy. Angry North Carolina utility regulators launched the investigation when Duke's board abruptly fired the man they'd promised would lead the merged company - Progress CEO Bill Johnson.
WFAE's Julie Rose joined Morning Edition Host Duncan McFadyen to sort through the settlement.
MCFADYEN: So Julie, is Duke admitting it was wrong to fire Johnson like that and keep Rogers on as CEO?
ROSE: No. The settlement agreement says that Duke admits no wrongdoing or illegal act. When I talked to Duke Energy spokesman Tom Williams last evening he made that very clear. So, of course, I asked him what the point was:
WILLIAMS: "The primary thing that Duke wanted to accomplish through this settlement is to really improve relationships with the state commission. I mean they were very upset after the merger and the change of CEOS. It was a surprise to them and it was a regrettable one from our perspective. And we told them that in the hearing process. And what this settlement does is it allows us to resolve the matter and move forward in a positive manner."
MCFADYEN: So this settlement is about making nice with the utilities commission? Why does that matter to Duke?
ROSE: Because the utilities commission approves rate increases and Duke's got one in the works right now for its Progress customers and another coming early next year for Duke customers. And frankly the company's investors are really eager for the investigation to go away because it means ongoing legal costs, the possibility of more ugly public hearings and an investigation report that might be unflattering. It behooves Duke to be on good terms with its main regulator.
MCFADYEN: Does forcing Jim Rogers to retire do that?
ROSE: Well that's just part of the settlement. It also stipulates that the search for a new CEO will be done by a committee consisting of an equal number of Duke and former Progress board members. That committee will also be responsible for finding two new board members that aren't tangled up in any of this mess. And in the name of "improving relationships" Duke's board promises to have regular meetings with the commission – presumably to avoid any unpleasant surprises for regulators like the CEO switch was.
Another interesting part of the settlement is a requirement that Duke promote a former Progress executive, re-hire the company's General Counsel and maintain a workforce of at least 1000 people in Raleigh where Progress was headquartered. That promise is good for 5 years, by the way. Basically, Duke is agreeing to some pretty substantial personnel changes – which is not the sort of thing you typically see in a settlement like this.
MCFADYEN: So what do the company's critics think?
ROSE: Those I've heard from since the news came out last night aren't terribly impressed. Jim Warren may be one of the most vocal – he's with the environmental group NCWARN.
WARREN: "We're really concerned about this settlement – extremely weak and very little in this for the public. And there's no indication at all that they've even looked at the several billion dollars in charges to customers that we believe Duke Energy hid during the merger process."
ROSE: Now I should say that the settlement actually does require Duke to guarantee an additional $25 million in merger-related savings for customers – on top of the $650 million it already promised. But what Warren is referring to are substantial costs related to Progress Energy's nuclear fleet – including a damaged reactor in Florida. It wasn't until after the merger was complete that Duke Energy admitted it may have to spend several billion dollars fixing that plant. NCWARN alleges Duke and Progress hid that information from regulators so they'd approve the merger.
MCFADYEN: Are those nuclear problems addressed in this settlement?
ROSE: No. And they'll remain a dark cloud over Duke for some time yet. But resolving this merger investigation mess with the utilities commission was one of the company's main short-term priorities. So if this settlement is approved by the utilities commission, it'll be a big weight off Duke's back and welcome news to investors.
MCFADYEN: You're saying the settlement's not yet final?
ROSE: Duke negotiated it with the staff of the utilities commission and the state agency that advocates for utility customers. But the commissioners themselves won't formally vote on it until their regular meeting on Monday. It'd be pretty unusual for them to reject a settlement like this – but they certainly could tweak it.
MCFADYEN: Okay, Julie. Thanks.
