The mega-merger between Duke Energy and Progress Energy — which has resulted in the largest electric utility company in the United States — was completed July 2. By the start of the next day controversy had already erupted.
During the long process of gaining approval for the merger from the boards of directors of both utilities, as well as the North Carolina Utilities Commission, the two firms had put forth the plan that Progress CEO Bill Johnson would take over as CEO of the new company, even though the majority of the new board of directors seats would be filled with Duke board members and retain the name Duke Energy.
After the close of business on July 2, the new board of directors apparently ousted Johnson, and installed Rogers as CEO.
Now, many are crying foul. And with good reason.
Prior to yesterday, neither Johnson nor officials with the new firm would talk, other than a short statement sent out by Jim Rogers, who had been CEO of the previous incarnation of Duke Energy and was appointed to the same position by the new board within minutes of Johnson’s departure. The statement claims Johnson left by mutual agreement, and various media reports have put his severance package at $44 million to $65 million.
Yesterday, compelled to give a little more information during a hearing by the utilities commission, Rogers said the company had fulfilled its agreement — Johnson was CEO for a few minutes, and Rogers said the company had promised the commission only that Johnson would be CEO, not how long that tenure would last.
While speaking before the commission, Rogers said some of the employees at Duke, along with some of the board members, were not comfortable with Johnson’s management style.
We do believe the new company owes its customers, shareholders, and state regulators more of an explanation. As many of the former Progress board members have alleged, this sure seems like it was a done deal in advance of the close of the merger, and those behind the shenanigans may very well have misled state regulators in order to receive a favorable vote on the merger request.
This is important because the merger has already cost 1,800 jobs in North Carolina, and there is the real possibility that credit rating services may lower their scores for Duke in light of what’s happened. Apparently, Johnson is held in fairly high esteem by regulators, financing institutions, and others in the electric service industry. Not so much so for Rogers. The commission approved the merger, at least in part, because it felt comfortable with Johnson at the helm.
With lower credit scores come higher finance costs, and Duke has already made clear it plans some aggressive changes in how it generates power, moves that will require lender financing and will result in customer rate increases. Now, the company might find it needs even more rate increases to pay higher finance costs, and that can affect customers all across the state, including those living in Surry County.
While much of the damage has been done so far as trust to be extended to the new management team in place at Duke Energy, at the very least the firm should come clean with the reasons it acted as it did. The company owes the public that much.