Duke Energy CEO Jim Rogers laughed off speculation Thursday that he could become President Barack Obamas second-term energy secretary.
Since 1990, people have been trying to promote me out of this (CEO) job to government, and theyve failed, he told financial analysts after the Politico news site listed him as a possible candidate. I have a mission to complete here.
As Duke reported third-quarter earnings that for the first time included results of its new Progress Energy subsidiaries, Rogers and other Duke officials confronted an imposing to-do list:
• Wrangle three rate increases from Carolinas regulators between now and early 2013.
• Decide whether to repair or retire a crippled nuclear plant in Florida, and upgrade low-performing plants inherited in its July 2 merger with Progress.
• Settle ballooning costs and mismanagement claims at a new power plant in Indiana.
• Mesh employees from Duke and Progress into one 26,000-member workforce.
• Resolve two investigations of the post-merger firing of former Progress CEO Bill Johnson.
Analyst Hugh Wynne of Bernstein Research, in a research note last week, cautioned investors over the high degree of regulatory uncertainty Duke faces.
The merger investigation by the N.C. Utilities Commission, he wrote, has created an adversarial regulatory relationship with Duke Energys most important regulator that could slow Dukes forward progress.
Early in the inquiry, Duke and commission staff held talks aimed at settling the perception that Duke misled the panel after saying Johnson would lead the combined companies.
Its still ongoing, and we still have lines of communication open with the commission, Rogers said Thursday. We continue to talk and walk through it. Our goal line is to try to resolve it as soon as practicable.
But the talks apparently bore little fruit. Attorneys hired by the commission are expected to spend November interviewing Duke officials and others linked to the investigation.
Dukes stock dropped 10 percent between the merger and Wednesday, when markets slid sharply after the elections. The stock rebounded 27 cents Thursday, closing at $63.21.
Rate increase request
As the investigation continues, Dukes Progress Energy Carolinas is asking the commission for an 11 percent rate increase.
Duke Energy Carolinas will ask for higher rates early next year to pay for its Cliffside coal-fired plant expansion, a new gas unit at its Dan River plant and upgrades at the Oconee nuclear plant in South Carolina.
Third-quarter earnings also included a $180 million charge from cost overruns at its new Edwardsport power plant in Indiana, now in the testing phase, pushing a plant initially expected to cost less than $2 billion to $3.5 billion including financing.
Its my judgment that we are at the end of the line in terms of increased costs at the plant, Rogers said. Duke hopes for an Indiana Utility Regulatory Commission order settling final costs and resolving complaints about Dukes management by years end.
In an update to utilities commissions this week, Rogers said post-merger staffing changes are essentially done, with the proportion of Progress employees at the same 40 percent it was before the deal. About half the 1,153 employees who took buyouts are expected to leave by years end.
Duke is on track to reach the guaranteed $650 million in merger savings it promised Carolinas customers, Rogers said.
Refund in Florida
Last week, Duke revealed that it would set aside $100 million to refund to Florida customers, under terms of an agreement reached in March, because repair work isnt likely to begin at its Crystal River plant by the end of the year.
The plant has been shut down since 2009 because of concrete problems in its reactor containment building. Mediation with its insurer begins later this month.
A resolution of insurance claims will help Duke decide whether to repair it, at worst-case costs estimated at $3.4 billion, or retire the plant. Progress and Duke have spent nearly $900 million on repairs and replacement power but received only $305 million in insurance.
Rogers said no decision has been made, but he gave a cautious response on the likelihood of fixing the 35-year-old plant.
We will proceed with repairing the unit only, I underscore only, if there is a high degree of confidence that the reply can be completed within our estimated costs and time schedule, he said.
When the merger closed, both units at Progress Brunswick nuclear plant near Southport were under heightened federal oversight because of problems discovered there. Progress also shuffled management at its Robinson nuclear plant near Hartsville, S.C., in 2010 after a series of incidents forced the plant to shut down.
Dukes executives carefully monitored performance at Progress nuclear plants before the merger closed, with directors getting regular reports on Crystal River, internal documents released this week show.
Problems at Progress Robinson plant resulted from a lack of effective leadership that starts with me, Johnson wrote the president of the Institute of Nuclear Power Operations in mid-2010, according to internal emails released by former Progress directors.
Duke said its working to improve the performance of Brunswick and Robinson, hiring 158 new employees at Robinson and beefing up oversight. Rogers said Duke will increase spending at the plants, but offered no estimate of how much that will cost.
Weve stepped in and staffed them what we think is properly and increased investment so we can return those plants to excellence, he said.
Henderson: 704-358-5051 Twitter: @bhender
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