Duke Energy has begun settlement talks with the N.C. Utilities Commission, which is investigating its abrupt change of CEOs following the merger with Progress Energy.
“Our goal is to continue to work closely with them to try to resolve these issues,” chief executive Jim Rogers said Thursday.
Rogers spoke after earnings reports in which Duke beat analysts’ expectations for the second quarter as Progress posted a 64 percent profit drop. He also revealed that repair costs for a shut-down Progress nuclear plant in Florida – a factor in the Duke board’s ouster of former Progress CEO Bill Johnson – are rising.
Rogers, who was reinstated to lead Duke after Johnson’s exit, wouldn’t comment on whether he might be replaced as CEO as part of a settlement.
The commission’s public staff, which advocates for customers, has said a CEO change could be part of a settlement. Two former Progress directors who resigned from Duke’s board last week called for a new chief executive.
“I’m not going to speculate about what will be in or out of that settlement,” Rogers said. The veteran CEO turns 65 this fall; his contract runs through 2013.
The utilities commission’s general counsel, Sam Watson, confirmed that “we have had some discussions with Duke.” He wouldn’t comment further.
The commission has hired a veteran federal prosecutor to oversee the investigation. Anton Valukas of the Chicago-based law firm Jenner & Block is expected to seek internal documents and interview Duke officials.
Duke reported quarterly earnings that rose 2 percent from the previous year to $444 million on $3.5 billion in revenue.
The results don’t include those of Progress. Combined results of the two companies will be reported beginning with the third quarter.
Duke’s earnings of 99 cents a share, adjusted to reflect the one-for-three stock split after the merger, beat the 97 cents analysts surveyed by Thomson Reuters had predicted.
Duke said rate increases in the Carolinas and lower storm-repair costs drove the results, which were offset by milder weather and higher financing costs. Residential sales in the Carolinas were down 8.2 percent. International earnings, due in part to unfavorable exchange rates, also lagged.
Before the merger, Duke had said its Carolinas utility would seek another rate increase, its third since 2009, this summer. Progress had planned to file a rate case, its first since 1988, in the fall.
Rogers says only that both will be filed by the end of the year. “It’s clear we have turmoil swirling around us from the N.C. Utilities Commission investigation,” Rogers said, “but one of the things that is clear to me as I talk to our leaders is that they are really focused on obtaining the savings from the integration of these companies.”
Duke asked regulators in both Carolinas Wednesday to approve rate adjustments that would pass $89 million in merger-related savings to customers over the next 12 months. Most customers would save less than $1 a month if the changes are approved.
Rogers told analysts Thursday that Duke has delayed the scheduled startup of a new power plant, Edwardsport in Indiana, from September to early 2013. Edwardsport is projected to cost $3.3 billion, more than $1 billion over budget. Hearings before Indiana’s utilities commission on how much customers should pay ended last month, and a decision is expected this fall or winter.
Progress’ down quarter
Progress’ earnings for the quarter fell to $63 million, or 21 cents a share, a 64 percent drop from the $176 million in the same period last year.
Duke chief financial officer Lynn Good attributed the results largely to refuelings that took units at three Carolinas nuclear plants out of service and to unfavorable weather.
Repair estimates for the shut-down Crystal River nuclear plant in Florida, Rogers told analysts Thursday, are “trending higher” than the $900 million to $1.3 billion Progress had estimated last year.
Rogers and Duke directors testified before the N.C. commission last month that lack of transparency about the plant by Progress officials contributed to the board’s loss of confidence in Johnson.
The plant has been shut down since 2009, when concrete in the containment structure around its reactor began separating after a component-replacement project. Its insurer withheld a $70 million payment to Progress to buy replacement power and has not made a payment on a second incident of separating concrete, Rogers said.
Mediation with the insurer, Nuclear Electric Insurance Limited, will begin later this year, Rogers said. He said Duke expects to decide whether to repair or retire the plant by the end of the year.
Repairing the plant “appears to be technically feasible,” he said, but Duke is awaiting an independent review its board commissioned in May.
Rogers will appear before Florida’s Public Service Commission to talk about Crystal River and other merger issues on Aug. 13.