Yesterday, Duke Energy CEO Jim Rogers admitted that he'd known as early as June 24 that his counterpart at Progress Energy, Bill Johnson, wouldn't lead the merged company after Duke and Progress completed their merger last week. And yet, when the North Carolina Utilities Commission formally approved the merger on June 29 after more than a year of clearing regulatory hurdles in North Carolina and elsewhere, Johnson and Rogers told the commission that Johnson would be running the new Duke. So why couldn't anyone be bothered to tell the commission about those concerns? Well, to hear Rogers tell it, they had no other choice but to play it this way.
Rogers said Duke’s board felt legally obligated to close the merger by July 8, after which either company could walk away from the deal. Directors first clued him to their concerns about Johnson on June 23, he said, but felt they couldn’t ask for Johnson’s resignation until the merger was sealed.
“Our intention was entirely consistent with what we told this commission, ” Rogers said.
Rogers was to become the new Duke’s executive chairman, focused on strategy as Johnson ran the combined companies. Duke’s old board gave him a retirement gift as CEO in December, he said, and Rogers joined several nonprofit boards.
But in May, he said, the board began holding closed sessions without Rogers. Those meetings were about growing doubts over Johnson, Rogers said he later learned.
Specifically, Rogers said, Duke directors were concerned about the escalating cost of repairs to Progress' crippled Crystal River nuclear plant, which has been offline since 2009. They were also concerned that Johnson had been a martinet at Progress and would be the same with the new Duke.
All valid concerns--and the first concern confirms the suspicions the Tampa Bay Times raised in its editorial last Saturday. But somewhere down the line, Rogers and the board forgot Rule #1 of running a public utility--don't mislead your regulators.
I may not be a lawyer, but even I know you don't hide concerns like that from the people who have the final say about whether a merger will go through. Instead, even though he knew he was essentially going to get his old job back, Rogers was telling the world Johnson would be running the company--a decision made in part to allay concerns about Raleigh losing a Fortune 500 company. And yet, on June 24, two of Duke's directors asked him to take the top post of the merged company, and Rogers agreed.
Rogers said that a corporation has the right to choose its leaders. That may be true, but it also has an obligation to be truthful to the public--and if applicable, to its regulators. Somewhere down the line, Duke's board forgot that it was running a regulated utility. If I were on the commission, I'd be giving some serious thought to insisting that the entire board, or at least a good portion of it, needs to go.