Duke Energy (NYSE: DUK) hopes that a proposed settlement with the North Carolina Utilities Commission (NCUC) can help it move on from fallout over the July merger with Progress Energy, but North Carolina Attorney General Roy Cooper has not agreed to any settlement yet.
“Our office has not agreed to this settlement and our investigation is ongoing,” a spokesperson for Cooper and the North Carolina Justice Department said Nov. 30.
Cooper announced in July that his office had issued a “civil investigative demand” to Duke to determine if Duke had misled the state regarding the merger. The attorney general’s effort was also aimed at deciding if customers were hurt by Duke’s actions.
A Duke spokesperson said the attorney general’s office was not a party to the settlement talks with the NCUC and suggested Duke was “open” to talks with the attorney general.
Duke and NCUC announced Nov. 29 a proposed settlement of the commission investigation. Members of the North Carolina commission are expected to vote on the proposed settlement Dec. 3.
Duke acknowledges no wrongdoing in the proposed settlement.
In addition to ensuring Duke gets a new CEO by 2014, the NCUC settlement proposal will ensure that former Progress Energy officials will retain a role in top management over the next few years.
Under the deal, Duke Chairman, President and CEO Jim Rogers will resign by Dec. 31, 2013, and his successor will be identified by a search panel with representatives from both the legacy Duke and Progress Energy boards.
Rogers, 65, was originally scheduled to give up day-to-day management of Duke in July when the Charlotte-based company sealed its merger with cross-state utility Progress Energy. But Progress CEO Bill Johnson, who had previously been slated to become CEO of the new Duke, was forced out by Duke board members only hours after the merger closed.
Various post-merger testimony before the NCUC suggested that Duke board members developed buyer’s remorse about the Progress deal and misgivings about Johnson’s leadership style, including as it related to the troubled and currently shut Crystal River 3 nuclear plant.
Johnson was recently selected to lead the Tennessee Valley Authority (TVA) as of January 2013.
The North Carolina commission, and state attorney general, were caught off guard by the ouster of Johnson and immediately launched investigations.
NCUC settlement would address staffing, management issues
The NCUC settlement proposal would keep at least 1,000 employees for five years in Raleigh, N.C. In addition to being the state capital, Raleigh was also Progress Energy’s headquarters. The president of Duke Energy North Carolina will continue to be based in Raleigh.
The settlement also calls for:
- Creation of a Regulatory Policy and Operations Committee that will advise the Duke board in its discussions with the commission.
- Duke will guarantee Duke’s North Carolina retail ratepayer receive an additional $25m in fuel-related cost savings “over and above” what was called for in the merger. Likewise Duke will contribute an additional $5m to workforce development and low-income assistance in North Carolina.
- Duke Energy Carolinas will defer filing a general rate case until February 2013. This is with the understanding that Duke will be allowed to defer depreciation and operating costs of new generation incurred from the commercial operation of new generation until the effective date of new base rates. In addition, Duke Energy Carolinas will be allowed to level out its nuclear costs over the appropriate refueling cycle.
- Duke will retain the former general counsel for Progress Energy to advise Duke for two years on legislative and regulatory matters in the state. Duke will also hire a new general counsel by Dec. 31 of this year, who can be a legacy Duke official – but not one who participated in merger-related activity.
- Some other management and board moves are also identified. Evidently James Rhodes is the only board member that will be allowed to serve two years beyond Duke’s mandatory retirement age of 71. That’s because of the needs of the company’s nuclear generation fleet. Rhodes is a former chief executive with the Institute of Nuclear Power Operations (INPO). He was also a top executive at Virginia Electric and Power.
- The proposal spells out that the new board chairman, CEO or president selected by Jan. 1, 2014, should not have previously served in any of those roles.
“This settlement agreement is an important step forward for the company because it resolves one of our key near-term priorities: bringing closure to the NCUC merger review process,” Rogers said.
The settlement says Rogers will retire from Duke by Dec. 31, 2013, which marks the end of his contract anyway. Duke has also said that Rogers had never planned to stay into 2014, even as chairman.
The agreement was reached between Duke, the NCUC staff and the North Carolina Public Staff. The NCUC had retained the Jenner & Block law firm to assist it in the investigation. Duke has agreed to pay the NCUC fees for this law firm.
Following approval, the agreement would resolve all issues related to the matters under review by the NCUC regarding Duke Energy’s change in president and CEO following the close of the merger between Duke and Progress on July 2, 2012.