For Duke’s Jim Rogers, a green energy legacy with shades of gray
12/29/2013 8:56 PM
12/29/2013 9:01 PM
Jim Rogers’ seven-year run atop Duke Energy ends this month in a rush of industry tributes, legacy look-backs and, like a retiring Super Bowl champion, a trip to Disney World.
Rogers, 66, is as remarkable for his longevity as for the 12 percent annual shareholder return he claims over his career or the three major mergers he engineered. The last one made Duke the nation’s biggest electric utility.
He was a chief executive in the energy industry for 25 years; the average CEO lasts 5.5 years. He leaves Duke as chairman of the board.
Harder to measure is Rogers’ extraordinary influence – in a role he sought – over the air we breathe and the temperature of the planet he’ll leave to his 11 grandchildren. Newsweek magazine named him one of the 50 most powerful people in the world in 2009.
Electric utilities, by their scale and reliance on fossil fuels, are among the country’s largest polluters.
Coal-fired power plants like Duke’s release chemicals that are major components of the ozone that chokes asthmatic children. Sulfur compounds from coal blanket the Smokies in a fog of haze. Mercury poisons blackwater rivers on North Carolina’s coast.
Even as technology makes power plants cleaner, they billow billions of tons a year of carbon dioxide, the greenhouse gas linked to climate change.
Duke was the nation’s second-largest greenhouse gas emitter in 2011, behind Columbus, Ohio-based American Electric Power, according to the Political Economy Research Institute at the University of Massachusetts Amherst.
Rogers, perhaps more than any major utility leader, stands at the crossroads of energy and environment. The self-described “maverick” has been an early adopter of green measures for his industry, often while finding a way to make money from them. He also bred environmental skeptics along the way.
“When you approach stuff where you are compromising, you find yourself in the unenviable place where people who don’t want any environmental legislation don’t like you, and where people who don’t think you’ve done enough, the environmentalists, don’t like you,” he told the Observer in a recent interview. “But compromise is the way forward.”
At congressional hearings, industry meetings and global forums, Rogers has championed emission controls, energy efficiency and new technology leading to a low-carbon future. Sunny and self-confident, with experience as a federal regulator and as a lawyer in private practice, Rogers moves easily between overlapping worlds.
Duke University’s Tim Profeta, a former Senate staff member who worked on carbon legislation, says Rogers was the rare CEO willing to tackle utilities’ environmental footprint. Rogers, he says, has a knack for finding positions that benefit both the environment and shareholders.
“A single CEO cannot change the entire economic system and what it prioritizes – only policy can,” said Profeta, director of the Nicholas Institute for Environmental Policy Solutions, where Rogers serves on the board. “I think it could be fairly said that he made substantial effort, and more effort than many of his peers, to move the needle in the right direction.”
But Rogers’ high profile, and Duke’s growing size, led his toughest environmental critics to make him a personal target. Greenpeace, the international group known for its in-your-face tactics, opened a Charlotte office and regularly protests outside Duke’s uptown headquarters.
“All you really need to do to understand Rogers’ legacy is to look at the new coal-fired power plant that has been renamed in his honor,” said the group’s energy campaign director, Gabe Wisniewski, referring to the former Cliffside plant west of Charlotte. “The impacts of that investment and the millions that Duke has spent on fossil fuels is going to last a lot longer than the talking points that Rogers put out.”
Rogers says his approach, which he describes as based on collaboration and compromise, turns the extremes of opposing sides against him.
“I’ve always said to myself, run to the problem, embrace it, find a way to transform what appears to be a challenge or problem into an opportunity for your customers as well as your investors,” he said.
That pattern began in 1990, when Rogers became one of the few utility CEOs to embrace a market-based federal crackdown on power plant emissions that cause acid rain.
Then at Public Service Company of Indiana, Rogers shifted his power plants to low-sulfur coal and installed scrubbers. He took advantage of the program’s emissions-trading component to reduce costs.
Years later, at the start of President Barack Obama’s first term, Rogers was part of a business-environmental coalition that supported a similar market-driven plan to control carbon dioxide. The legislation known as cap-and-trade failed, but Rogers argued it would help utilities plan for the future, and smooth out costs, as they began to replace aging power plants.
In 2009, Duke won North Carolina’s approval of the innovative save-a-watt program. Save-a-watt was designed to boost energy efficiency among customers, but it also allowed Duke to earn a return on its investment in the program.
By this year, when an updated version was approved, save-a-watt had saved enough energy to equal the annual usage of 320,000 homes.
“You don’t find too many industries that go out and encourage customers to use less of their product, but that’s what we’ve done,” said Tom Kuhn, president of the Edison Electric Institute.
Kuhn called Rogers a “true visionary” who was able to gather consensus around thorny environmental issues. That included EEI’s changed position on carbon legislation when Rogers chaired the industry group in 2007.
The Platts Global Energy Awards, the Oscars of the energy world, honored Rogers for lifetime achievement at a swank ceremony in New York this month. In November, readers of the trade journal Power Engineering voted Rogers the most influential person in the industry.
Brookings Institution president Strobe Talbott calls Rogers a “substantive and passionate contributor” on the prominent think tank’s board, especially on climate change and access to energy in the developing world.
How to read Rogers?
Prompted by North Carolina’s 2002 Clean Smokestacks Act, Duke has slashed in-state emissions of two chronic pollutants, sulfur dioxide and nitrogen oxides, by 89 percent and 83 percent, respectively, from 1998 levels.
Upcoming federal air standards led Duke to retire seven of its 14 N.C. coal plants as part of a $9 billion modernization program. Its two N.C. utilities have raised rates a total of four times since 2009 to pay for six new plants.
Duke’s rapid move to natural gas, a cleaner-burning fuel whose price has plummeted, helped it meet an internal carbon-reduction goal eight years early. Carbon emissions could climb again if electric demand goes up and natural gas prices rise.
Of the seven new power plants built on Rogers’ watch, two were fueled by coal, although they were far cleaner than the units they replaced. Duke got 70 percent of its U.S. generation from fossil fuels in 2012.
“The reality is that I embraced the issues and tried to create a benefit for both customers and investors,” Rogers said.
Green-energy advocates say the billions spent on the new power plants could have been spent on solar power, whose costs are plummeting, and wind energy.
“All of Jim Rogers’ many talking points about ‘passing the grandchildren test’ and ‘moving at China speed’ move the hearts of investors and environmentalists alike,” said Greenpeace’s Wisniewski, “and he just utterly failed to deliver.
“I don’t think he didn’t mean them. I think he believed in climate change and wanted to be part of the solution. But I don’t think, for whatever reason, that he had the courage or the acumen to flex all of his might to make it happen.”
At least not at the scale or speed Greenpeace and its allies expect.
Duke launched a program to install solar arrays on North Carolina rooftops in 2009, and this month won state approval to sell green energy to large customers such as data centers. It will meet the tiny solar portion of the state’s 2007 green-energy mandate years ahead of schedule.
Duke Energy Renewables, a nonregulated business that operates mostly outside of North Carolina, is among the nation’s largest wind and solar developers. Illustrating the downside of renewable energy, Duke agreed in November to pay $1 million for the 14 golden eagles killed by spinning turbines at its Wyoming wind farms.
“I put more than $3.5 billion into solar and wind, but I built it where the wind blows and the sun shines and sold it to other utilities and municipals around the country,” Rogers said. “So I haven’t done it here, but I have done it.”
After years of butting heads with Duke, Jim Warren of the Durham green-energy group NC WARN still isn’t sure how to read Rogers.
“My best guess is that Jim Rogers is someone who wanted to do more toward clean energy than he ever found a way to make happen during his time,” Warren said. “I favor that over a more cynical approach that he was more a figment of corporate PR or greenwashing.”
Warren acknowledges the problems in refocusing a company of Duke’s $49 billion bulk while growing stock dividends and meeting state demands for cheap electricity. He also points out the political and financial clout the nation’s largest utility can wield – the heft, Warren maintains, to reshape the industry.
“To his credit, he’s patient, he listens, I think he’s thoughtful,” said Warren, who was among green-energy advocates who met privately with Rogers last year. “He said, ‘I hear you, I keep thinking about it, but we can only move so quickly.’ I have a pretty good BS meter and I don’t think he was BS-ing us.”
“I certainly don’t dislike him as a person. I would have to say that I’m still rooting for him to do something heroic.”
A CEO reinvents himself
Rogers envisions a different energy industry than the one he rose through.
New technologies and policies, such as North Carolina’s green energy law, will continue to erode utility monopolies. Ever-cheaper solar arrays will steal market share from billion-dollar power plants. Mergers and acquisitions will continue to shrink the number of companies like Duke. Demand for power, flat in recent years, could continue to wobble or shrink.
Rogers says Duke is positioned to adapt because of its mergers, cost-cutting and internal streamlining. After combining five companies into one since 1988, Duke says its workforce is 40 percent smaller but generates 130 percent more electricity per worker.
“I feel like I’m really leaving the company in a good place, a strong place,” he said. “It’s a leader in the industry, and a lot of that 12 percent in (annual shareholder) value I’ve created has really come from doing these combinations along the way.”
The last merger, which folded Progress Energy into Duke last year, was hard-won. Duke’s directors ditched Progress CEO Bill Johnson as Duke’s new chief executive, leading to a pair of state investigations and rattling investors.
“In the utility industry it can take 18 months or longer to close a deal, and in this world a lot can change in 18 months,” Rogers said. “And a lot did.”
Duke learned too late, he said, of growing troubles with Progress’ nuclear fleet as its earnings stumbled. Directors “dealt with those issues.”
Now he’s ready to reinvent himself. After a Christmas Day visit to Disney World with four of his grandchildren, followed by a family cruise in the Caribbean, Rogers will turn to the rest of his life.
He and wife Mary Anne will stay in Charlotte, keeping the house in Linville that overlooks Grandfather Mountain. He will also maintain, for three years, his office in Duke’s former Church Street headquarters.
“My life has been a series of reinventions,” he said. “So I sit here today saying I’m excited. I’m kind of curious as to what comes and I’m excited about the possibilities.”
Rogers has been paid solely in stock throughout his time at Duke. He and his wife own about 1 million shares, according to securities filings, that are worth $72 million. More stock awards will vest in future years.
He serves on a half-dozen boards and is weighing offers to teach at two universities. A former newspaper reporter, Rogers jokes about raising money to buy the Observer. He’s also researching a book, on the 1.2 billion people worldwide who don’t have electricity, that he says could lead to a collaboration to address the problem.
“The most interesting thing about Jim,” said Duke University’s Tim Profeta, “is what he’s going to do from here.”
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