Duke Energy to seek new CEO to settle merger investigation
Posted November 29, 2012
Raleigh, N.C. — Duke Energy Corp. and the staff of the North Carolina Utilities Commission have agreed to settle a state investigation into Duke's ouster of its new chief executive immediately after its acquisition of Progress Energy Inc.
The settlement agreement, which will be presented Monday to the commission for its approval, also calls for added savings for electric customers and job commitments in Raleigh, which had been Progress' headquarters.
"We’ve worked with the staff of the N.C. Utilities Commission and the Public Staff for several months to reach this agreement, which we believe is in the best interests of our customers, shareholders and employees. This is a positive step forward," Duke spokesman Mike Hughes said.
Progress Chief Executive Bill Johnson, who the companies had promised for 18 months would lead the combined utility, was forced to resign hours after the merger deal was done July 2 and was replaced by Duke Chief Executive Jim Rogers, who had been slated to be company chairman.
The move came three days after the Utilities Commission approved the $35 billion merger, which created the nation's largest electric utility. Irate commissioners held several days of hearings in July to determine whether Duke officials misled them about their plans for company management, and they have been reviewing thousands of pages of internal documents in recent weeks.
Rogers and other Duke officials defended the management shift, saying they were uncomfortable with Johnson's leadership style and abilities. Johnson, who has since become chief executive of the Tennessee Valley Authority, told commissioners that Duke had "buyer's remorse" over the merger because of escalating costs and that he became a scapegoat.
But, in a statement Thursday night, Johnson said he wished Rogers well and hoped a new CEO would focus on nurturing employees.
"The company created by the merger has the potential to produce great results for customers, investors and employees," he said. "I wish them all much success."
Under state law, the commission has the power to rescind its approval or require Duke to meet additional conditions, such as those proposed in the settlement.
The conditions include Rogers retiring as chief executive by the end of next year and Duke's board creating a search committee for a new CEO that includes an equal number of members from the previous Duke board and the old Progress board, as well as a new board member who wasn't affiliated with either company before the merger.
"My continuing focus for the remainder of my tenure will be on positioning Duke Energy as a stronger, more efficient organization for many years to come, while continuing to fully realize the significant benefits of the merger for our customers and investors," Rogers said in a statement.
As part of the settlement, Duke's North Carolina customers will receive an extra $25 million in fuel and fuel-related cost savings beyond the $650 million the company initially promised, and Duke will up its $15 million contribution to workforce development and low-income assistance in North Carolina by another $5 million.
Duke raised its electric rates by 7 percent in February, and Progress is seeking its own rate increase next year.
The company also will maintain at least 1,000 employees, in Raleigh for at least five years, including the president of its North Carolina operations and the senior vice president of delivery operations for North and South Carolina.
During merger negotiations, Duke officials said they would shed at least 700 of the 2,000 Progress jobs in Raleigh, but no commitments were made beyond that.
Other management changes mandated by the settlement include Duke hiring a new general counsel and naming a former Progress executive as executive vice president for regulated utilities.
Duke's board also will appoint a committee to meet with the commission periodically to review board actions.
The North Carolina Attorney General's Office is conducting its own investigation into the merger, and spokeswoman Noelle Talley said that isn't affected by Duke's proposed settlement with the Utilities Commission.
Jim Warren with watchdog group NC WARN said Thursday's announcement would do little to prevent rate increases.
"This is a gift to Duke Energy. There is little penalty in this for them," Warren said. "It looks like the merger is a net public soaking instead of a savings."