After listening to the hours of hearings probing the 20-minute tenure of former Progress Energy CEO Bill Johnson at the merged Duke Energy, I can’t escape this conclusion: The new Duke Energy board is much better at protecting its shareholders than the state Utilities Commission is at protecting North Carolina’s ratepayers.
The longer the hearings went, the more evident it became that Duke didn’t hoodwink the commission into approving the merger with Progress, as some had speculated. The only meaningful question remaining is whether commissioners are wise enough to realize that fact and allow Duke to focus on a merger we now know is more complicated and costly than first thought.
That’s the central point being missed. Had commissioners been more than bobbleheads during the lengthy approval process, we probably would have known beforehand this merger wasn’t such a good idea for North Carolina after all.
Goodness knows the commission had numerous opportunities to revisit the wisdom of the merger based on Johnson’s own testimony. He waved a huge red flag when he testified that Duke’s leadership got a case of buyer’s remorse after learning more about Progress Energy’s debt load and lackadaisical earnings, not to mention its significant nuclear generation problems.
If Duke were concerned these problems would hurt its stakeholders, why didn’t the commission show equal concern about whether these problems would hurt even more people, particularly those who were never Progress customers? Instead the commission, to my ears, was clearly biased toward Johnson and Progress Energy. And, sadly, some of the questioning during the Johnson hearings bordered on the sophomoric.
I think the commission failed to probe deeply and seriously because its members are more concerned about image than duty. Apparently, much of the commission’s approval was based on Johnson’s leading the merged company. Now it’s miffed the Duke board decided otherwise.
But if the Duke-Progress merger made sense for North Carolina only with Johnson at the helm, then the merger never made sense in the first place. CEOs come and go. Mergers are forever.
Progress Energy’s substantial problems aside, both current CEO Jim Rogers and Duke Lead Director Ann Gray testified that it was ultimately Johnson’s leadership style that cost him the gig. No doubt, Johnson’s performance at Progress has earned him a deserved reputation as one of the top utility executives in the country. But during his testimony, the man didn’t know when to use a period.
Contrast that to other testimony of Rogers and of Gray, who fired Johnson. Their words before the commission were direct, measured and rarely wasted. The more Johnson talked, however, the easier it was to discern he was not a natural fit with the Duke board.
Naively, some commissioners suggested this stylistic mismatch could be mitigated by simply talking it out. That tactic may work on the playground. It rarely works inside a boardroom.
Going forward, the commission has two realistic choices. It can save face by levying a meager fine and telling Duke that following any future merger, it should give the CEO at least a week in the corner office. Or, it can rescind its approval at great cost to Duke and North Carolina ratepayers.
I was never a fan of this merger, and for a simple reason. Duke’s argument that reduced operating costs post-merger would mitigate future rate hikes comes at a high price: consolidated political and economic power in a single entity not afraid to exercise its substantial clout.
But, approval was granted, so Duke should be allowed to get on with it.
If, however, the commission decides to rescind approval, it must justify its decision with an openness, fair-mindedness and preparation that was woefully absent during the approval process. Specifically, the commission needs to hear more from Jim Warren of NC WARN and others on matters outside of North Carolina that could affect this state’s ratepayers.
Ultimately, the Utilities Commission performs serious work on behalf of the people of North Carolina. The state deserves commissioners who take this work seriously.
Contributing columnist Rick Martinez (rickjmartinez2@gmail.com) is news director at WPTF, NC News Network and SGRToday.com
