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NC utility probe of Duke merger to detail CEO move

Posted July 9, 2012
Updated July 10, 2012

— Wall Street observers and consumers will be looking for an explanation from the new, surprise CEO of Duke Energy Corp. when he is grilled by North Carolina regulators investigating last week's takeover of Progress Energy Inc.

The commission is demanding testimony on Tuesday from Jim Rogers, the Duke CEO who wound up as the top executive of the largest U.S. electric utility.

State law allows the utilities commission to rescind or alter its June 29 decision approving the merger. Duke is based in Charlotte and Progress is based in Raleigh.


Watch coverage of the Utilities Commission hearing LIVE on WRAL.com, starting at 2 p.m. Tuesday.


Duke Energy has refused to explain a last-minute decision by its board of directors to reverse its longstanding plans to name Progress Energy CEO Bill Johnson head of the expanded company. Johnson is due to receive up to almost $44.7 million in severance, pension benefits, deferred compensation and stock awards.

One of the conditions of his separation agreement is that neither he nor the company speak ill of the other, even if they're telling the truth. But legal proceedings are an exception, meaning that Rogers could reveal new details about what happened to sway Duke Energy's board when he testifies on Tuesday.

"Jim will be able to speak more fully" about the move, Duke Energy spokesman Tom Williams said Monday.

Florida media have pointed to ongoing problems at the Crystal River nuclear plant as a possible reason for Johnson's sudden departure. The Progress Energy plant on the Gulf Coast has been out of service since 2009, when reactor walls were damaged during upgrades, and the estimated cost for repairs has reached $2.5 billion.

The utilities commission and North Carolina Attorney General Roy Cooper launched separate investigations after Progress Energy board members said they felt misled about the merger plans.

Rogers' testimony could be important in helping Duke Energy soothe investors' anxiety after the company's share price lost 6 percent in the week after the merger closed, Wall Street analysts said.

Duke Energy CEO Jim Rogers Duke CEO to be questioned by NC utility regulators

A top concern for many investors is that North Carolina regulators could act on their misgivings by responding negatively to rate increase requests by Duke and Progress later this year, Credit Suisse analyst Dan Eggers said in a report to investors Monday. Duke and Progress will continue operating as separate electricity providers. Both operate in parts of North Carolina and South Carolina.

"The question is, therefore, what could happen in the coming rate cases if the commission is in fact upset with the change or feels misled," Eggers said. "A well-supported and reasonable explanation for the board's decision to switch CEOs will end the conspiracy fears in the market and give confidence the Carolinas regulators will not be out to 'get them.'"

Deutsche Bank Securities analyst Jonathan Arnold said one of the main benefits of the merger for Duke Energy is the opportunity to turn a new page with North Carolina regulators, who had given Duke "a challenging time" when considering rate requests.

"Judging by some of the comments from NCUC commissioners, the abrupt change in leadership versus what was laid out in the merger agreement which they approved may have had the opposite effect," Arnold said.

Because Duke Energy plans to retire old electricity power plants and invest in cleaner generation technology, the company will need to ask regulators more frequently for permission to pass along costs to consumers through higher rates, Morningstar analyst Andrew Bischof said.

Johnson, 58, signed a three-year employment contract days before the merger took effect July 2. But hours after the merger closed, the new company announced he had decided to leave by "mutual agreement." Instead, Rogers, 64, is remaining to run the expanded company.

Rogers also is expected to speak to Progress Energy employees in Raleigh later in the week.

The combined company will serve more than 7 million customers in North Carolina, Kentucky, Ohio, Indiana, Florida and South Carolina. Duke Energy's more than $100 billion in assets include power plants in Central America and South America and a portfolio of wind and solar renewable energy projects in the U.S.

119 Comments

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  • tmccargo9114 Jul 10, 2012

    Shocking!

  • Rhino Jul 10, 2012

    $45MM Wow, and they need a rate hike? American greed at its finest right here at home.

  • arfamr1007 Jul 10, 2012

    I think that the amount of $45 billion that they are paying the CEO to retire/get out of Progress Engergy is ludicrous. There is no man or woman worth that amount of money to just "step down". This money should go to the people that are having problems paying their electric bills. It is friolously using our money to pad their pockets. No wonder our electric bills are so high.

    its $45 million and no, the money should be distributed to ALL accounts who pay power bills, NOT to help "those in need"...sorry but the government collects enough charity from me already, I don't need the power company doing it too!!

  • Lamborghini Mercy Jul 10, 2012

    44.7 million is really not that surprising folks. The average congressman net worth is $13 million and that's just the figures we know about.

  • pipcolt Jul 10, 2012

    This was a bad move and should not have been allowed to happen. The same thing would have happened if Wake Med. had taken over Rex. Listen to the people of this State. We the people of NC are the ones that supposedly have the power to say yes or no. It's time to tell the ones we put into office to step down because they are not listening to the people that put them into power.

  • ncrebel Jul 10, 2012

    Progress Energy or Duke - as a customer, DO NOT come to me with a rate hike, particularly with the recent heat wave or even in December, for that matter, after hearing this. Obviously, you have the money, you just need to look internally for it and NOT from your customers. This really makes me mad!

  • delilahk2000 Jul 10, 2012

    IT IS SO RIDICULIOUS AT THE AMOUNT OF MONEY THEY JUST HAND OUT TO THESE OVER PAID FIGURE HEADS NOT TO DO THEIR JOBS.....TOO BAD WE ALL CAN'T GET THIS KIND OF PAYOUT NOT TO WORK......NO WONDER COMPANIES ARE HURTING WHEN THEY GIVE THIS KIND OF MONEY TO OVER PAID MANAGERS JUST FOR THE USELESS TITLE OF CEO.......

  • rroadrunner99 Jul 10, 2012

    I hope the Commission will rescind the merger OR charge such a high fine that stock in both comapnies will be worthless. Then these exceutives and other one's will sit up and takr notice maybe!

  • macy Jul 10, 2012

    rescind your order NCUC - Show Duke who has the power!

  • Offshore Jul 10, 2012

    NCPictures: Utilities became a monopoly because people did not want power/telephone/cable lines from multiple companies hanging on telephone poles. If you had competition, there would be 9times as many wires.

    Having worked with Duke engineers, I know for a fact that there will be little or no electric wires run underground from this point forward, that is Duke Powers stance on the subject. So prepare yourself for new neighborhoods with phone poles all over the place. Most times, if you have competitive power companies, they use one set of wires (co-op type situation)and lease them and pass the cost to the customer. much like cell companies share towers.

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