When things get too cozy – the travails of Duke Energy and DENR

I have been a customer and shareholder of Duke Energy for over thirty years. I have also been a North Carolina taxpayer for the same length of time. For the most part, Duke Energy has been a good company and recognized as such in its industry. Yet it has had a few moments when it got involved with some accounting irregularities in South Carolina and it bought into the gas transmission industry before it exited it with much egg on its face. With that context, I want to share my disappointment in Duke on the coal ash spill that could have been avoided along with their response. I also want to add that criticism of too cozy a relationship between Duke, the NC Department of Energy and Natural Resources (DENR) and our governor is well placed.

As many of you know, Duke Energy is responsible for coal ash leaks on the North Carolina and Virginia border which have spilled coal ash into the Dan River. The “Dan” provides water to several communities in Rockingham County, which ironically is the seat of the Senate Leader in NC, Phil Berger. Rightfully so, Senator Berger has expressed outrage at Duke and their failure to notify people timely and their poor response.  However, the senator is also responsible for helping defang the environmental protections in our state and promoting fracking with an industry loaded committee to study the issue, so he has contributed to our lackluster environmental protection.

Duke is concerned about fixing the problem, but what troubles me is the issue of the coal ash ponds in our state was raised by several environmental groups last year in a lawsuit. They shared many concerns over the dozens of coal ash ponds, but the DENR decided to make it easier by consolidating the lawsuits into one and then settling with Duke for a fine of $99,000 and a commitment to clean things up on Duke’s timetable. That number is correct – a Fortune 500 company was fined the amount of $99,000, which cannot even count as being a slap on the wrist. As of this post, DENR has been sued by the Environmental Protection Agency and copies of emails have been requested to discern any foul play.

I would be remiss if I did not mention that our governor, Pat McCrory was an employee of Duke Energy before winning the governor’s race. However, this cozy relationship has been fairly cozy for some time, predating McCrory’s tenure. But, under the guise of reducing so-called burdensome regulations on industry, the environmental restrictions have been greatly loosened in our state, especially the past three years. Our General Assembly has passed some questionable legislation as well as considering rolling back a requirement to do more alternative energy, before it was beaten back when they realized late how successful the solar energy industry has been here. The Speaker of the House, Thom Tillis, noted his surprise that NC was the 5th most prolific solar energy state in the country at the time.

As a Duke shareholder, I have sent two emails to the previous and current CEOs about cleaning up the coal ash ponds. The first one was last spring to Jim Rogers and the second one was this past week to Lynn Good, the new CEO.  She came out in the paper saying the clean-up of the Dan River spill is on Duke (shareholders) while the clean up of other coal ash ponds will be on the customers. This last statement has not sat well with customers. Good is thinking too much like she was still in her old job of CFO and not like someone whose company screwed up and people were harmed. I understand her rationale, but by failing to act last year, Duke threw away the last shred of goodwill on this subject. The governor is banging on the lid of a trash can now, but he is a little behind on the issue in most people’s minds, as well.

Duke Energy, you are better than this. You have done some nice things in alternative energy and shut down some coal plants. That is good and you should be commended. Now, do the right thing and clean up the ponds before the next accident. Do what you should have done last year when you were apprised of the concerns. You should also be thinking about more creative ways to pay for this and not place the lion’s share of the burden on customers. And, please continue decommissioning the coal-fired plants as you have been doing. We need to divorce ourselves from coal at a faster clip as there is no such thing as clean coal and it does not get cleaner sitting in a coal ash pond.

I would also encourage you to link to a much more thorough post in Amaya’s blog called The Brabble Rabble.  Amaya includes greater detail about the defanging of the DENR and other environmental groups in North Carolina. Here is a link: http://thebrabblerabble.wordpress.com/2014/03/12/politics-north-carolina-style-coal-ash-pollutes-nc-waters-as-regulatory-body-endures-job-and-funding-cuts-duke-energy-promises-to-pass-clean-up-costs-on-to-customers/#comment-2251

Promoting Lynn Good is good for two reasons

You may be asking who is Lynn Good? She is the new CEO of Duke Energy Corporation, the largest utility in the United States. She was promoted from her position as Chief Financial Officer having worked with Duke Energy and the company Duke acquired for over 20 years after being an auditor of utilities. As reported by The Charlotte Observer today, she is only the 7th female to head one of the nation’s 200 utilities. This is good news from two major fronts.

The obvious one is a very credible candidate who happened to be a woman was promoted to CEO. I use this phrasing as her credentials would make her a great candidate irrespective of her gender. In addition to her job at Duke, she has also been one of Duke’s champions to the community, serving as Board Treasurer for the Arts and Science Council in Charlotte, Duke’s headquarter city. Plus, she has a depth of financial knowledge about utilities based on her experience and per The Charlotte Observer loves her job due to its complexity of financial and regulatory challenges. I know we should all love our jobs, but when someone publicly marries reasons like this for her joy at working for Duke, that says a lot, as running a publicly traded utility has many moving parts.

Yet, to see a woman justifiably achieve a promotion like this makes you feel progress is being made toward reducing the gender deficit at the top. Good was a computer science major, so she has always been one of the few women in her class or field. I hope and believe that is changing, but having some lightning rods like her can only help in more girls pursuing STEM degrees.

The other reason her promotion is important is due to her promotion from within. I say this as a shareholder of Duke Energy. One of my favorite business books is called “Built to Last” by Jim Collins. His team looked at the best companies in industry over time and how these companies dwarfed the results of their nearest competitor. They were built to last. One of the several tenets for their success was called “homegrown management.” I won’t quote this statistic exactly, but the book said out of the 500 leaders these 18 companies had in their histories, 495 of them were promoted from within the ranks. I wrote a post last April about this book which defines the key tenets for their success, so if interested, here is the link:

https://musingsofanoldfart.wordpress.com/2012/04/29/built-to-last-lessons-still-endure-for-all/

The key to this success is there are two types of knowledge about your job – one is extrinsic and the other is intrinsic. The former is what you know about the job that is portable and is of value to a new employer. The latter is what you know about getting your job done at your company. You know how to navigate the company – whom to call upon and whom to avoid. This knowledge is less valuable to a new employer, which is why some folks don’t succeed when they change jobs.

My old company made a habit of hiring people from outside. The new CEOs did not have this intrinsic knowledge and often brought in others from outside who they trust, but these newbies did not have the intrinsic knowledge either. So, they may not know a new idea of theirs was tried and failed. They may not know that the person who merchandises themselves best to the new leaders is part of the problem. They may be overlooking the folks who are quiet but very effective. So, they usually do not succeed. My old company eventually would fire these leaders and go get new ones who did not have this intrinsic knowledge either. This is a key reason I am glad I know longer work there.

So, I am very happy for Lynn Good and Duke Energy. Both women and the company have a great standard-bearer. I think both will be well served. And, as a shareholder, I like that. Well done.