PR blitz aimed at restoring Duke's credibility

Duke Energy Corp. is trying to reassure customers as state regulators prepare to hear more about a management shake-up at the utility following its recent merger with Progress Energy Inc.

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RALEIGH, N.C. — Duke Energy Corp. is trying to reassure customers as state regulators prepare to hear more about a management shake-up at the utility following its recent merger with Progress Energy Inc.

The North Carolina Utilities Commission is expected to hear Thursday from Bill Johnson, the former chief executive of Progress, whom Duke's board of directors forced out as the top executive of the combined company immediately after the July 2 merger.

Duke board members Marie McKee and Jim Hyler, who both served on Progress' board before the merger and voted against Johnson's ouster, also are expected to testify to the commission.

Two Duke directors slated to appear before the Utilities Commission on Friday had asked the agency to delay the hearing until August, after the company produces emails and other merger-related documents the commission has requested.

Ann Maynard Gray and Michael Browning, who were on the Duke board before the merger, also said they weren't given enough notice to travel to Raleigh from their respective homes in Connecticut and Indiana.

The commission denied the request late Wednesday.

Commissioners last week questioned Jim Rogers, the man who replaced Johnson, about the unexpected management change. Rogers had served as Duke's president and chief executive before the merger and had been slated to serve as board chairman after the deal.

Since then, outraged customers have lit up social media sites about what they see as Duke's duplicity, and at least one investor has filed a lawsuit, alleging a conspiracy by the company's board.

To begin repairing its public image, Duke took out a full-page ad Wednesday in The News & Observer newspaper in Raleigh, which has been Progress' home base for decades.

Under the banner "The New Duke Energy: Powering and Empowering Our Communities," Duke pledged in the ad to retain a presence in Raleigh, where at least 700 former Progress jobs are expected to be eliminated; maintain support for local groups; and deliver on $650 million in promised savings to consumers.

All three issues were conditions the Utilities Commission placed on Duke before approving the merger on June 29.

During last week's hearing, several commission members were clearly irked when Rogers informed them that the board was discussing removing Johnson before it had obtained state approval for the merger. Johnson's position at the combined company also was a condition of the merger.

Rogers told the commission that Duke's board lost confidence in Johnson's ability to lead the utility weeks before the $17.8 billion merger, which made Duke the nation's largest electric utility.

Board members were concerned about problems at Progress' nuclear power plants, Rogers said, including an estimated $2.5 billion price tag for repairing damage to the Crystal River plant in Florida, which has been out of commission since 2009. He said they also didn't like Johnson's leadership style, which he described as "autocratic," and were less than enthused about Progress' recent financial results.

Still, Rogers insisted that no one ever misled commissioners, saying that Duke was bound by the merger agreement to appoint Johnson as CEO after the deal closed and couldn't make any move – or notify anyone of the possibility of a move – before that.

Duke was intent on closing the deal before July 8, when either side could have walked away from it without penalty, he said.

The commission has the power under state law to rescind or alter its approval. Commissioners indicated that they might impose more conditions on Duke, saying they couldn't trust the company's board to uphold the spirit of the merger agreement.

The agency also approves electricity rate increase requests, and both Duke and Progress, which remain separate operating companies in the Carolinas, are expected to seek rate increases later this year.

"How can the commission trust the board – truly trust the board if they're going to do things like that – going forward?" said Robert Gruber, executive director of the Public Staff, which represents consumers in utility cases before the commission.

Gray, the Duke director, said in a statement to the commission on Tuesday that she believes the "line of inquiry is unwarranted."

"I respectfully request that the commission accept the decision that the board has made, even if the commission disagrees with it, and allow Duke to move forward," she wrote. "I am concerned that the inquiries and investigations that have now been launched may delay Duke's ability to accomplish" the task of integrating the companies.

Gray said she would not publicly discuss the reasons Duke directors dropped Johnson unless required to do so by the commission, but she emphasized that Rogers didn't seek out the CEO job.

North Carolina Attorney General Roy Cooper has launched a separate investigation into the merger, demanding copies of communication between Duke board members and executives. Cooper has appealed to the North Carolina Supreme Court the Utilities Commission's award of a 7 percent rate increase to Duke.


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