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For new Duke CEO, 2 busy months of merger, regulators

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T.ORTEGA GAINES - ogaines@charlotteobserver.com
Duke Energy CEO Lynn Good

Duke Energy chief executive Lynn Good took office on July 1, capping a busy year for the nation’s biggest utility. Duke merged with Progress Energy, survived two state investigations, retired a Florida nuclear plant and settled costs of an over-budget Indiana power plant.

In a talk last week with the Observer’s editorial board and reporter Bruce Henderson, Good discussed her first priorities on the job, the coal ash pollution that has prompted state lawsuits and the future of electric service. Her comments have been edited for brevity and clarity.

Q: What’s life been like as CEO?

A: It’s really been a fast pace for the first nearly 60 days. I’ve been focused primarily on employees and stakeholders here in the Carolinas, and I’ve been in the Midwest. I’ve also spent a fair amount of time with the board, meeting with them individually. It’s been a lot of outreach and I would see that continuing for another month to month and a half, and then I expect we would be out of the official transition phase.

Q: Are relations with the N.C. Utilities Commission frayed after its (2012) investigation of the Progress Energy merger?

A: I think 2012 was a tough period for both the company and the commissioners, but I believe both organizations have worked through this in a professional way. I feel like the closure of that investigation and then the activities in 2013 have been more routine. The relationship feels constructive, it feels professional the way you would expect it to be. Building and regaining trust and confidence is not something you do overnight, and that’s going to be a high priority of mine.

Q: What do you see happening with the coal-ash ponds at the power plants Duke will retire?

A: Our interests are consistent with the interests of others, that we have safe, high-quality drinking water and that we are good custodians of the environment. There’s a lot of diligent compliance that goes on to ensure that is the case. We’re monitoring physical stability and discharges from these ponds so that we handle it in an absolutely appropriate way. As we think about closing these plants, we will take the steps necessary to close these ponds in accordance with state and federal requirements.

Q: The Riverbend plant is on Mountain Island Lake, Charlotte’s water supply. Will Duke remove the ash from those ponds?

A: That’s certainly something we’ll consider along with other options. We recognize the placement of Riverbend and the importance of that water supply, so ensuring the water supply is safe is a high priority for us.

Q: Is that decision a matter of cost?

A: We do have regulations we have to comply with, but cost is a consideration. The cost of the ash ponds becomes a cost to customers, because these are ponds that (operated) at the time that electricity was generated for the benefit of customers. Trying to find the right balance becomes a priority.

Q: What sort of federal carbon regulation does Duke expect?

A: The president has set a timeframe for new greenhouse gas sources, with regulations by September, and then existing sources by 2014. We’ll have to see what the regulations say, but we expect the regulations for new sources will make it very difficult, if not impossible, to build any new coal plants in the United States. The issue for existing plants is that there is no proven technology to capture carbon.

Q: Would that mean another round of coal-plant retirements?

A: The timeline will be important. The longer the time frame, the more flexibility we have to address it to bring on other resources. Then you potentially have something you could work with. When you think about Duke as an enterprise, all of our (six) states, about a third of the electricity we generate is from coal. In certain states like Indiana, it’s 90 percent. When we were looking at this before, in 2007-2008, the (rate) increase to Indiana customers would have been in excess of 50 percent to address carbon.

Q: With pressure on coal from environmental regulations and nuclear power very expensive, how will Duke generate electricity in the next generation?

A: I’m not sure I know. What the industry has enjoyed historically is a diverse set of assets – some gas, some nuclear, some renewables. That makes a lot of sense to me, because anytime we have chosen one over the other and tried to pick what’s perfect we’ve never been right. Earlier in this decade, the most profitable thing we owned were coal plants. Gas was $10 to $12 (per million Btu), very expensive. Today gas is $3.50, so gas plants are very valuable and coal is not very valuable. Just in the space of five years we’ve gone from feast to famine on the kind of resource – and no one predicted that.

Q: How will Duke deal with solar-panel owners who want to make their own electricity?

A: Very few people can make their own electricity 24/7 for 365 days of the year. Our peak (demand) in the winter is at 7 a.m., and so how much sun do you think there would be at 7 a.m.? We need to be available to get people up in the morning – off to work, heat coming on – and we need to be paid for that. Not just the customers who don’t have the solar panel need to pay us, but the customers who do have the solar panels need to pay us. We have to get the rules right so customers can have the flexibility to produce their own power when the sun is shining.

We think (solar) is a good idea, but it needs to work for all of our customers and the investments we make need to make sense to support that flexibility. We have been able to place generation around the system where we want it and we build infrastructure around it. When we have capacity coming up everywhere – you build it where you want it – we can’t control it and that puts a strain on the grid. We have to have the ability to make the investments and adjust the grid so its capable of accepting these resources.

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