Right up to the last moment, the merger of North Carolina’s two big, multistate electric utilities – a merger that creates, in an expanded Duke Energy, the nation’s largest utility – was relatively routine, despite some slowdowns along the path to final approval. Then came that last moment.
Bill Johnson, surprisingly, was out, his resignation announced early Tuesday with no explanation. Contrary to announced plans and all expectations, the CEO of Progress Energy would not be chief executive of the combined company after all (Charlotte-based Duke essentially bought Raleigh-based Progress).
Instead, the new Duke Energy announced that its own CEO, Jim Rogers, will run the show. The plan, up to Tuesday, had been that Johnson, 58, would be CEO and that Rogers, 64, would be executive chairman.
Was there a rift? A change of heart? Some unrevealed business reason? Whatever its cause, Johnson’s departure fuels doubts about the merger, particularly in Raleigh and in Eastern North Carolina, home to the bulk of Progress Energy’s employees and customers.
Raleigh impact?
In particular, how will Progress employees, those who haven’t lost their jobs due to merger-related “efficiencies,” fare under the new setup? With Johnson at the helm, at least the remaining Progress employees could feel that they had an ally in Charlotte, where Johnson, as recently as last month, was looking for a new home. Now he’s out. (Johnson subsequently urged Progress employees to help make the merger work.)
Similarly, will the new Duke fulfill its stated intention to maintain a sizable presence in downtown Raleigh, even as Progress turns over its newer office tower here to a new tenant, the software maker Red Hat? With the merger, Raleigh knew it was losing the headquarters of a Fortune 500 corporation, but it’s been expecting a substantial part of the company to stick around – as it should, the better to serve its 3.1 million customers, many of them in Eastern North Carolina.
Those customers, for the most part, didn’t loudly object to the merger, which was announced in January 2011 and which finally closed at 4 p.m. Monday. Neither did the governor object, nor the legislature. The general feeling was that if Progress Energy was a likely takeover target for some larger utility – as it supposedly was – it was better that the buyer be based in North Carolina. That could only be Duke.
Second thoughts
The fact that the nation’s No. 1 utility would be Charlotte-based contributed to an atmosphere at the N.C. Utilities Commission, whose OK was needed, that allowed the deal to be done, and largely on the utilities’ preferred timetable. (The speed bumps along the way came mainly from the Federal Energy Regulatory Commission, in response to complaints that the merger would lead to a lack of wholesale power competition for New Bern and Rocky Mount.)
It was certainly a factor, as well, that the head of Progress, not Duke, would be CEO of the combined company. Notably, Robert Gruber, the state’s consumer advocate in utility matters (he heads the Utilities Commission’s Public Staff) supported the merger during the state’s approval process. With news of Johnson’s departure, however, he allowed that “If the Commission had known about this prior to the merger, it might have been a different result. The Public Staff has a lot of respect for Mr. Johnson and confidence in him. We’re not sure how this will work without him.” Edward Finley Jr., Utilities Commission chairman, made a similarly blunt assessment.
Duke’s Jim Rogers, sensibly enough, quickly made calls to reassure employees and regulators. But with even a hint of mystery in the air, the new leader among the nation’s electric utilities has a powerful lot of explaining to do, in addition to the long-run task of proving that this merger is really good for North Carolina. .
