On Tuesday afternoon, in a basement meeting room in Raleigh, Duke Energy chief executive Jim Rogers slid his glasses on, sat on the edge of his chair, and explained how Duke’s board of directors did pretty much all the bad things people had suspected of them in the past four days.
The board, Rogers affirmed, deliberated for weeks about firing former Progress CEO Bill Johnson without telling Progress directors, shareholders or members of the N.C. Utilities Commission that approved a merger of Progress and Duke on June 29. That merger officially closed on July 2. Twenty minutes later, Johnson was gone.
But all of that was OK, Rogers told the commission Tuesday, because Duke had fulfilled its part of the $32 billion merger agreement.
“We had a contractual commitment to appoint Bill as CEO upon closing,” said Rogers, “and we did.”
It was a corporate bait-and-switch that betrayed the spirit of the agreement, the Progress directors and shareholders who signed off on it, and the commissioners who might not have given it their nod had Duke and Rogers let them know that the more they got to know Johnson, the less they liked him.
Those misgivings had accumulated over time, according to Rogers, who said the Duke board began deliberating officially about Johnson’s future in mid-May. By June 23, the board had made up its mind enough to have two representatives ask Rogers if he would stay on as CEO.
The concerns over Johnson included Progress’ unsatisfactory financial performance and problems with Progress’ Crystal River nuclear plant in Florida, which has been shut down since 2009. The board also thought Johnson’s autocratic style wouldn’t be a good fit for the merged company, Rogers said.
Those might be valid worries, but they also seem to be issues Duke should have known about before agreeing last year to have Johnson lead the new utility. At the least, board members should have told commission members about their misgivings in the final days before the merger was approved.
Rogers’ excuse: Because there wasn’t a merged board until the actual merger, there was no official decision on Johnson that the merged board could make or announce. And besides, says Rogers, the merger was good for both companies and their customers. Why mess it up?
None of which seemed to persuade a justifiably peeved Utilities Commission. Commissioners reiterated Tuesday that they approved the merger in part because Johnson would be CEO of the new Duke, a leadership structure that would ensure Progress’ interests wouldn’t be diminished. The utilities commission now will decide if it wants to extract new concessions from the utility – or even rescind the deal.
Only the commission knows how much their approval hinged on Johnson being CEO of the new company. We hope that calculation, and not anger at Duke, shapes whether the deal is scuttled or merely changed.
Already, though, Duke’s deceit has undermined its relationship with regulators – something the merger was supposed to help smooth. At the least, the commission will look at rate increase requests with more skeptical eyes, a probability that has worried investors. In the end, this leadership blunder could cost the company hundreds of millions of dollars.
On Tuesday, Rogers began a substantial repair effort, trying to ease commissioners’ worries that the new company wouldn’t be as committed to Raleigh as it once said it would be.
“We made a commitment,” Rogers said. “We keep a commitment.”
Unless, of course, they change their mind.