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DukeEmployees.com - Duke Energy Employee Advocate

Duke - Page One - 2002


“As we are liberated from our own fear, our presence automatically liberates others.”
– Marianne Williamson


Bush, Duke, and Enron

L. A. Times – Senator Dianne Feinstein - January 31, 2002

Although prices for energy in California and the West have mostly returned to normal, the Enron bankruptcy continues to raise questions about the level of influence that energy companies had over the Bush administration during the California energy crisis and the formulation of President Bush's energy policy.

At this time last year, I wrote the first of three letters to the president requesting a meeting to discuss California's dire energy situation. These requests were denied. During this period, however, energy executives had access to senior administration officials, including Vice President Dick Cheney.

On the day I sent my first letter, Jan. 20, 2001, California was experiencing its sixth straight day of Stage 3 energy emergencies, meaning that energy reserves were less than 1.5% above demand. The streak would last 34 days and would involve several economically crippling and life-threatening blackouts. During this month, the average price for electricity was about 10 times higher than the typical price for energy in January. Natural gas prices in Southern California were six times higher than they were at the same time in 2000.

Meanwhile, energy companies--including ones that would help to craft the administration's energy policy--were reporting earnings for the year. Enron and its affiliates' earnings grew 97% in 2000 from 1999; Duke and its affiliates' earnings were up 226%; Reliant and its affiliates' earnings increased by 166%; and Williams and its affiliates' earnings grew 127%.

Most of these year-end profits were amassed in California, and first-quarter earnings for 2001 would prove to be even more impressive.

I sent a second letter to the White House on March 26 asking to speak with the president directly. Again, the request was denied.

With the onset of spring and reduced natural gas demand, gas prices in California had dropped from the beginning of the month but were still almost 2 1/2 times higher than the rest of the West.

The average cost of electricity for the month was as much as 20 times higher than usual. ,p> By this time the energy crisis had enveloped the West--from the Canadian border to Nevada and from the Pacific Ocean to Montana. In fact, prices for electricity in Oregon and Washington exceeded California's prices on a number of days.

I sent a third letter to Bush on April 19 requesting a meeting. This too was denied.

This was two weeks after Pacific Gas & Electric, California's largest utility, filed the then-largest bankruptcy in U.S. history, and California's second-largest utility, Southern California Edison, was on the verge of insolvency.

It was also two days after Duke announced that its first-quarter income had increased 465% from the year before and three days after Reliant reported that its income grew 202% in the same period from the previous year.

On April 19, natural gas prices still were exorbitantly high. What was striking about this was that prices in April for natural gas and electricity typically reach their lowest levels of the season. In fact, it was not until June 2001 that prices returned to near normal in the natural gas and electricity markets.

Throughout the crisis, I was not allowed a private interview with the president or vice president--even though such a talk may have helped California.

Now we learn that Kenneth Lay, then the chief executive of Enron, had several meetings with Cheney over that same span. He was not the only energy company executive who met with the vice president.

Something is wrong when a senator representing 35 million Californians is not able to talk personally to the president or vice president in the midst of a crisis, but executives from a company that contributed millions of campaign dollars have complete access and significant influence.

We need to enact safeguards to ensure that companies cannot use undue influence to reap extraordinary benefits during a crisis.



Duke Energy Under Scrutiny

Associated Press – by Brad Foss – January 30, 2002

NEW YORK –– Enron Corp. is not the only energy trader whose books are getting a closer look. Investors and regulators are increasingly concerned about a standard accounting procedure that allows companies to report the full estimated value of a multiyear contract as a profit, rather than booking the gains over time as the cash actually comes in.

Wall Street analysts and officials at the Securities and Exchange Commission have pinpointed this procedure, known as "mark-to-market" accounting, as a source of potentially misleading information in the financial reports of companies that sign long-term energy contracts. They are demanding more candid information on the issue.

The SEC warned last week that it was concerned about "a lack of transparency and clarity" in the financial reporting of public companies, and made a specific request of companies that trade commodities to disclose more details in the future.

Mark-to-market accounting is problematic for several reasons, analysts said: It can artificially inflate profits, there is no uniform formula used to calculate the value of long-term contracts and some companies refuse to disclose what percentage of earnings are derived this way.

"How are these guys making valuations?" ABN Amro analyst Paul Patterson said. "They're saying contracts are worth so much, but if you haven't realized it, you don't really have it."

While industry watchers believe Enron may have been the most aggressive with mark-to-market accounting, leading energy traders such as Duke Energy, Dynegy Inc. and Williams Cos. have relied on it for years to varying degrees.

The industry is tentatively beginning to talk about the practice, under pressure from Wall Street analysts who have less tolerance for fuzzy financial reports in the wake of Enron's implosion.

When Duke Energy reported its fourth quarter earnings earlier this month, the company said roughly 37 percent of its $1.9 billion profit in 2001 was of the mark-to-market variety, meaning the gain was "unrealized" and existed only on paper.

Roughly 30 percent of Tulsa, Okla.-based Williams' profits are based on mark-to-market calculations, a spokeswoman said. Officials at Enron and Dynegy refused to discuss the issue in detail.

At Charlotte, N.C.-based Duke, unrealized gains ballooned to $700 million in 2001 from $140 million in 2000, while net profit grew just $120 million. Take away the profits based on mark-to-market accounting and Duke's profits actually declined by $440 million from one year to the next.

Booking profits up front from energy contracts longer than a few years is problematic, critics say, because trading volume for these types of deals is extremely low, causing volatility and uncertainty about their value over time.

"The accounting is complicated," Duke's chief financial officer Robert Brace conceded.

Yet Brace described the company's practice of booking projected future profits today as "conservative," since Duke is careful about hedging its bets and selecting creditworthy partners. Seventy percent of unrealized gains reported as profit by Duke Energy in 2001 will be booked by the end of 2005, the company said.

"We have tight risk-management controls around the mark-to-market accounting," Brace said. Nevertheless, Duke has $43 million in unsecured exposure to Enron and others energy traders are owed hundreds of millions of dollars combined.

Mark-to-market accounting has long been used, without controversy, by financial firms that trade everything from pork bellies to Treasury bonds. In these markets, trading volume is much higher and therefore quotes given on future prices are generally more trusted.

The practice was only marginally fashionable in the energy industry in the late 1980s when the trade in natural gas futures grew, although it soon became routine at Enron.

It wasn't until the second half of the 1990s – when both gas and power trading boomed in the United States – that accountants nationwide began seeking advice on how to report long-term contracts in quarterly financial statements.

The Financial Accounting Standards Board, which sets guidelines for the industry, endorsed mark-to-market as the preferred method in 1998 and stands by its decision. However, the organization's green light could turn yellow if the controversy continues to brew.

"I think there's the potential for improved disclosure," said Tim Lucas, director of research at the accounting standards board, whose task force on emerging issues meets in March. "We do not have this topic on our agenda yet," he said.

Robert Bayless, special adviser to the SEC's chief accountant, said the agency has two main concerns when it comes to mark-to-market accounting: that companies highlight in their financial statements those earnings that are based on predictions about future commodities prices and that they explain in detail how these valuations are arrived at.

"That's a particular bit of information that affects the quality of the reported results," Bayless said. Critics don't want mark-to-market calculations outlawed from earnings reports. They just want them broken out separately and explained.

"We hope to see an evolution of improved reporting requirements that make analysis of financial statements and valuation for this sector more straightforward in the future," said Jeff Dietert, an analyst at the Houston-based investment bank Simmons and Company International.

Indeed, enough pressure has mounted in recent weeks that a few energy traders specified for the first time ever what portion of annual reported gains – or losses – were actually based on future expectations. Some, including Duke and Williams, provided details about how many years it would take to fully realize the gains.

"Nothing we published is inconsistent with what we told people in the past," Brace, Duke's chief financial officer, said. "It's just more complete."

Employee Advocate note: The accounting is indeed complicated at Duke Energy! The utilities commissions from two states are now conducting an audit to attempt to decipher it. They are investigating a whistleblower's claim that Duke underreported $100 million or so.

Duke Power Investigation



Duke Energy Shareholder Audit Proposal

Associated Press – by Gary Gentile – January 30, 2002

LOS ANGELES –– Arthur Andersen's role in the Enron collapse is giving new urgency to a move by shareholders at some corporations to bar accounting firms from consulting for a company while also auditing its books.

Overseers of union pension funds representing about $220 billion in assets have launched a nationwide campaign to put the issue on shareholder agendas. Votes on the issue have been proposed at shareholder meetings for companies such as Apple Computer, Duke Energy, Albertson's and Pacific Gas & Electric.

In 2000, the Securities and Exchange Commission adopted disclosure rules to address such concerns. The rules require companies to give a breakdown of how much they paid their accountants for auditing and other services.

But some shareholders contend that the disclosure rules do not go far enough to protect investors and employee pension plans.

A study by the Investor Responsibility Research Center revealed that as much as 75 percent of fees paid to accounting firms in 2000 were related to non-audit consulting services.

"People were shocked at the high proportion of non-audit fees," said Carol Bowie, director of governance research services for the center.

The first such vote will come at the annual meeting of The Walt Disney Co. on Feb. 19. In 2001, Disney paid PriceWaterhouse Coopers $8.6 million for its auditing and $32 million for other services.

Disney management is asking shareholders to vote against the proposal. The company argues that it already has strict guidelines on the hiring of accounting firms as consultants, and that the SEC's disclosure rules protect investors.

"We believe there is little chance for abuse and no benefit to the company or its shareholders from an arbitrary limitation on the power of management and the board of directors to exercise business judgment in the selection of auditors or other outside vendors," Disney said.

The independence of Enron's auditing firm, Arthur Andersen, has been questioned after it was revealed that Andersen was paid millions in consulting fees while the energy giant was reporting misleading financial results.

Most shareholder proposals usually garner little support the first year they appear on proxy statements. It generally takes several years to gain enough steam to either pass or force companies to negotiate with the people making the proposals.

But Enron may have changed all that.

"I think there's steam from day one," said Ed Durkin, director of special programs for the United Brotherhood of Carpenters, which is sponsoring the bulk of the proposals. "I think we'll see votes that will send pretty good messages."



Duke Energy Fails to Make List

Employee Advocate – DukeEmployees.com – January 27, 2002

Duke Energy, once again, failed to make the Fortune “100 Best Companies to work for” list. The only reason this is mentioned is, because if Duke had made the list, we would never hear the end of it. Skywriters would be hired to proclaim “Duke is Great.”

In 1999, Duke employees began to file age discrimination charges with the Equal Employment Opportunity Commission, because of the cash balance pension plan. Duke’s defense was that they had been mentioned favorably in a "Money" magazine article! It seems that no matter how many promises the company breaks, or how much money the employees lose, it will be alright if the get mentioned in a magazine article!

Duke did not bring up the “Money” article just once. A spokesperson mentioned it in a newspaper article, the vice president of nuclear generation brought it up in his newsletter, and Rick Priory boasted of the article. Each time, mentioning the article was supposed to quell any concerns about the employee’s lost pension money!

Since Duke Energy sets such great store by magazine articles, we feel compelled to point out when they do not get mentioned. There were 100 slots. That is a wide door. Duke did not even make number 100.

Since we began tracking the “100 Best Companies” list in 1999, Duke has never made it. Of course, Enron did not make it this time either. IBM, Verizon, GE, and Boeing did not make the list. Is there a pattern here? All of above companies have played games with the pension funds.

The Fortune article (2/4/02 issue) mentioned some of the traits of the winning companies. They treat their employees with respect and dignity. 80 of the companies had zero lay offs last year, and 47 of them have policies prohibiting layoffs! At least one company offered voluntary leaves of absence at 25% of pay.

“Business Ethics” Omits Duke Energy Corporation



Rick Priory’s “Fun Ride”

Employee Advocate – DukeEmployees.com - January 22, 2002

Business Week recently included Rick Priory in the article, “Top 25 Managers.” Remember that business magazines rated Enron through the roof - until the bankruptcy.

“After taking over in 1997, Priory set out to overhaul Duke's bureaucratic culture. Eventually, he replaced one-third of the top executives with more entrepreneurial outsiders.”

In throwing out “bureaucracy,” it seems that a few other items got tossed. Prior to 1997, Duke had a reputation for integrity, reliability, and fair dealing. It only took five years to trash it.

You’ll remember 1997. It was the year of the infamous cash balance pension plan at Duke Energy. Were the executives that were replaced the ones who recognized the mistake of destroying the employees promised benefits? Were these executives uncomfortable wearing the label “liar”? If one is surrounded by “yes” men, no problems will ever be seen.

After the cash balance fiasco, all other benefits went downhill. Health coverage has been constantly chipped away. Promised retirement health coverage was eliminated for many.

“ ‘It has been a fun ride,’ he (Rick Priory) says with a smile.”

We suppose so, considering a 75% increase in salary one year, a 100% salary bonus one year, a 200% salary bonus one year, over a third of a million dollars added to his “executive cash balance plan,” and millions of dollars worth of stock options exercised. Yes, Mr. Priory smiles all the way to the bank.

The ride has not been quite as much fun for the employees. The employees who were laid off, had their wages frozen, or were put on “standby time" have little to smile about. Benefits that had been promised for decades suddenly disappeared. Needless to say, employees did not get hundreds of thousands of dollars added to their cash balance plans; the money went in the other direction.

Many employees are stuck in the “wear away” period – they will get no new retirement benefits for years. The promised early retirement subsidy vanished. Many employees will never enjoy the retirement that they were promised. Some will have to work ten years longer than they anticipated.

Some will die on the job. The only “fun ride” for these betrayed employees will be to the morgue.



Another Suit for Duke

L. A. Times – by Elizabeth Shogren – January 17, 2002

WASHINGTON -- After an eight-month review, the Bush administration announced Tuesday it will proceed with lawsuits filed by the Clinton administration against polluting power companies because the lawsuits are consistent with the Clean Air Act.

"The department takes seriously its obligation to enforce the laws protecting our nation's environment," Attorney General John Ashcroft said.

However, a senior Justice Department official acknowledged the 10 power companies are unlikely to settle the cases before the Environmental Protection Agency announces its expected weakening of the rules central to the lawsuits.

At issue is whether the utilities broke the law by making modifications to facilities that significantly increased pollution.

The so-called new-source review provision of the 1970 Clean Air Act requires companies to install modern pollution-control devices when building plants or modifying ones. The Bush administration, however, has been working on changes to the rules that would make them more acceptable to industry.

"Today's announcement only reinforces my puzzlement over why the administration is about to undermine the very same laws they are prosecuting," said John Walke, director of the clean air program for Natural Resources Defense Council, an environmental organization.

The fate of these highly technical regulations and the lawsuits filed to enforce them could have immense implications for air quality, particularly in the Northeast. Changes to the rules will be viewed by environmentalists as a measure of how far the administration is willing to go to satisfy the concerns of industry.

A weakening of the regulations, which dictate what changes businesses must make to their facilities to reduce pollution, is unlikely to render the lawsuits moot, but it could result in settlements more favorable for the utilities.

Settlement terms are likely to be based on the requirements of rules in force when the settlement is reached, rather than when the lawsuit was filed, according to a senior Justice Department official, who spoke on condition of anonymity.

The utilities targeted in the lawsuits include Duke Energy Corp., Illinois Power Co. and Dynegy Midwest Generation, Southern Indiana Gas and Electric Co., American Electric Power Service Corp., Ohio Edison Co., Georgia Power and Savannah Electric & Power Co.; and Alabama Power Co.

In May, the administration ordered the Justice Department to review the lawsuits and told the EPA to reassess the new-source review regulation in the context of the administration's energy policy. Utilities and manufacturing companies complain the program discourages them from making changes that would increase efficiency.

Since then, most of the lawsuits have been in limbo. The lawsuit involving Duke is in federal court. Clinton's Justice Department and EPA sued Duke Energy in December 2000 for modifying eight coal-fired plants without installing new pollution controls. Duke described the work as routine maintenance.

staff writer Bruce Henderson contributed to this article.



Duke Energy “Consultant” Resigns

The Charlotte Observer – by Charles Hurt – January 9, 2002

WASHINGTON -- A San Diego port commissioner has resigned amid accusations that he got paid by Duke Energy Corp. at the same time his commission was regulating the company.

The commissioner resigned shortly after it became public that the Charlotte energy company had entered into a contract with him that required him to put the company's interest ahead of all others, including even the San Diego Unified Port District.

Port Commissioner David Malcolm, through his company Public Benefit Power, worked as a consultant to Duke from May 2000 to April 2001. The contract's terms had him earning $20,000 per month in fees.

During that time, Malcolm also served on the San Diego Port board of commissioners. The commission in 1999 voted to lease a port power plant to Duke over 101/2 years for $115 million.

Pat Mullen, a spokesman for Duke Energy, said the contract the company had with Malcolm was not influenced by his position on the port board. Mullen said the company's negotiations to lease the plant had ended by the time Malcolm was hired.

Malcolm, who didn't answer messages left on his company office answering machine Monday, denied in his resignation letter that he did anything wrong.

"I will have my day in court and I will be cleared of any accusations," he said in the letter submitted Friday to the mayor and city council of Chula Vista, the San Diego suburb he represented on the port board.

"My resignation is necessary only because it is now clear that I can no longer effectively represent the City of Chula Vista at this critical time at the Port of San Diego."

Under particular scrutiny has been the clause in Malcolm's contract that prohibited him from helping any other organization, specifically the San Diego Unified Port District, in any way that might hurt the company. In other words, he was barred by contract with Duke from making any decisions as a commissioner that could hurt the company whose contract the board oversaw.

"Obviously, we don't want a person working for us to be working against us," said Duke's Mullen. "It's incumbent upon him not to have any conflicts of interest with any board he would be serving on."

The resignation comes a week after specific details about Malcolm's relationship with Duke were made public in the California press. The San Diego Union-Tribune reported the fees, the dates and the exclusivity terms of the Duke-Malcolm contract after they were disclosed in a lawsuit filed against Malcolm by a Sacramento lawyer.

Tony Miller, the lawyer and former California deputy secretary of state, filed in July 2000 a 48-count complaint in court accusing Malcolm of ethical violations in part stemming from his relationship with Duke Energy.

The lawsuit doesn't accuse Duke of wrongdoing, and Duke denies the relationship was improper, but a consumer activist and other critics wonder if, by hiring Malcolm, Duke was attempting to buy influence. Malcolm was a consultant to Duke even as he remained a member of the commission responsible for monitoring Duke's adherence to the lease on the bay-front power plant.

Duke Silent About Paid Commissioner



Money to Burn

The Charlotte Observer – by R. Bonnell, L. Markoe, T. Whitmire – January 9, 2002

Three of the city's most powerful business leaders pledged $100 million Monday to jumpstart efforts to build a new arena and keep the Hornets in Charlotte.

Seven months after voters rejected another arena proposal, the chief executives of Charlotte's two largest banks told the City Council that they and Duke Energy will help make a new arena a reality.

"I think it's a proposal that's exactly what we asked for," said Mayor Pat McCrory, who also worked on the plan. "They stepped up to the plate to lower the risk" to the city.

Bank of America chief Ken Lewis and Wachovia head Ken Thompson made the presentation, adding that they also spoke for Duke Energy Chief Executive Rick Priory. They said their companies are prepared to pay the $100 million upfront during the construction process.

In return, they would receive the Charlotte Coliseum property and the old convention center, both owned by the city and valued at about $50 million.

They would take financial responsibility for marketing the naming and beverage license rights at the new arena, and would assume the risk of renting the arena's luxury suites and club seats. Those pieces could help the businesses recoup up to $50 million more.

The Hornets say they need a new arena filled with those lucrative amenities to compete financially in the NBA. Such an arena is expected to cost about $200 million.

The bank executives told the city it must agree to the plan and decide on an arena location by the council's Feb. 11 meeting.

"There's a lot of pressure as far as what the Hornets are proposing to do - leave for another city. So time is of the essence," said Lewis. "What we know is that if we do nothing the team will go and we will continue this negative momentum."

To play elsewhere next season, the Hornets would have to apply to the NBA for permission to move by the first week of March.

Under the proposal:

The city would own and operate the arena.

The arena would open no earlier than fall of 2004.

The city would need to come up with another $100 million or so, which it might largely pay with its hotel-motel tax. The city might also add a ticket surcharge on arena events. The city and county would also need to provide land and infrastructure.

There would be no referendum to approve public funding.

Many council members said after the referendum there was little or no city money to spend on an arena. Monday the reaction ranged from guarded optimism to enthusiasm.

"We're definitely going to show new leadership from what we've seen before with the last council," said council member James Mitchell.

The mayor emphasized that the deal would involve no local property tax increase and no increase in the local car rental tax. The business leaders pointed out the plan would return land to the city tax rolls that would immediately generate $500,000 annually.

McCrory said a new arena is essential not only to retain the Hornets but to bring in more tourism dollars. The mayor, who had avoided the issue after voters rejected an arena plan on June 5, for the first time in months stressed a new arena's importance to the city.

Conspicuously absent Monday: Hornets owners George Shinn and Ray Wooldridge. The Hornets would be expected to sign a long-term lease.

The owners had grated on both city and business leaders in negotiations last year, and were informed of the bankers' plan only hours before it was presented.

The plan however, does not assume that the team would be sold.

While neither the Hornets nor the NBA commented on Monday night's presentation, McCrory said he spoke with Shinn. "We had a very, very good discussion."

After Charlotte voters rejected an arena proposal in June, Shinn and Wooldridge began looking for an alternative home. They have negotiated with representatives of Louisville, Ky.; Norfolk, Va.; New Orleans, St. Louis and Anaheim, Calif. Shinn and Wooldridge hope to make a decision by the end of the month. The business leaders said their offer would apply to the Hornets - or another NBA or National Hockey League team that moves to Charlotte. McCrory said he won't support building an arena without a major-league tenant.

Since June's referendum, City Council leaders have been reluctant to talk publicly about resurrecting a deal. The Hornets are likely to consider the deal carefully. Their efforts in other markets, most smaller than Charlotte, have hit obstacles. Also, NBA Commissioner David Stern has said his first choice is to keep the team in Charlotte with a new arena.

Merely by presenting an arena plan, Charlotte could boost its chances of keeping the team. The proposal could help convince Shinn and Wooldridge to stay, or give the league reason to oppose a move.

"We believe if we build it, a lot of dominos will fall, that we will have a lot of friends in the NBA (urging the Hornets to stay)," said Charlotte Chamber President Carroll Gray. "We've got this within our grasp if we have the will to do it." Priory



Duke Silent About Paid Commissioner

10News, San Diego – January 8, 2002

SAN DIEGO -- A member of the San Diego Port Commission who resigned amid criticism for his work as a consultant to an energy company reportedly had ties to the firm that began earlier than he has disclosed.

David Malcolm who resigned from the commission last week, may have violated state law by not abstaining from votes that related to the company, Duke Energy, according to a report Sunday in The San Diego Union-Tribune.

Malcolm, who was appointed to the Port Commission in 1995, has said he earned $20,000 a month as a consultant to Duke Energy from May 2000 to April 2001. He abstained from any votes related to Duke during that time.

But the Union-Tribune reported that court records show that Malcolm was president of a company, Public Benefit Power Co., that signed a contract with Duke Energy in July 1999 to obtain a lease from the city of Alexandria, Va., to operate the Potomac River Generating Station.

As one of seven members of the Port Commission, Malcolm took three official actions October 1999 and March 2000 that related to Duke, which has a lease to operate the South Bay Power Plant on port-controlled tidelands in Chula Vista, the newspaper reported.

Malcolm requested information about the demolition of fuel storage tanks at the plant. He later voted with fellow commissioners to approve an environmental report on the removal of the tanks. And in March 2000, he made a successful motion to initiate development on tidelands that include the area under contract to Duke, the paper reported.

Malcolm did not respond to messages left by the newspaper and the Associated Press. A Duke spokeswoman declined to comment.

Some of the information about the alleged conflict of interest came from depositions in a lawsuit filed against Malcolm by Tony Miller, who once served on the board of the Fair Political Practices Commission and was acting California Secretary of State in 1994.

Miller's lawsuit alleges Malcolm violated state law by failing to report financial interests. He filed suit after the Fair Political Practices Commission and San Diego County District Attorney took no action after he made the allegations.

The lawsuit is scheduled to go to trial Jan. 25.

Duke’s Commissioner Resigns Amid Controversy



Duke’s Commissioner Resigns Amid Controversy

10News, San Diego – January 5, 2002

Port Commissioner Received $20,000 A Month From Duke Energy

CHULA VISTA, Calif. -- David Malcolm, under increasing fire for a consulting contract he had with Duke Energy, resigned from the San Diego Port Commission Friday.

"It is with great reluctance, but with firm conviction that I offer my resignation from the San Diego Port Commission," Malcolm stated in a letter to the Port Commission and officials from the city of Chula Vista, which he represented.

Malcolm's dealings with Duke Energy, which operates the South Bay Power Plant on tidelands controlled by the Port District, came under fire after 10News revealed last week that his contract required him to put Duke's interests above all others.

"When I found out that he did have a contract with Duke Energy, and that contract called for him to place the interests of Duke Energy before that of the port or the city of Chula Vista, I felt that that was -- in the least -- very unethical and a breech of the public trust," City Councilwoman Mary Salas said. "I felt that it was imperative that Mr. Malcolm resign."

Salas had called for Malcolm's resignation in July because of a perceived conflict of interest.

Malcolm was being paid $20,000 a month, under a contract in which he agreed to "act in the best interests of Duke" and "not assist any competitor of Duke, specifically including the Port District," according to the San Diego Union-Tribune.

"My resignation is necessary only because it is now clear that I can no longer effectively represent the city of Chula Vista at this critical time at the Port of San Diego," Malcolm stated in the letter.

He said that while the city "needs an active and viable representative now more than ever," his focus "must be on protecting my family from the unfair and untrue claims publicly laid before me."

"Even port attorney David Chapman in his sworn statement has cleared me of any conflict," Malcolm went on. "I will have my day in court and I will be cleared of any accusations.

The port called the resignation unexpected.

"Commissioner Malcolm has served as a commissioner for more than seven years and has been actively involved in achieving many of the port's accomplishments," said commission Chairman Stephen Cushman.

Malcolm himself cited leading the effort to acquire the South Bay Power Plant as one of his proudest accomplishments.

"In the process of doing so, the lease we structured for the operation of the plant earned the port millions of dollars," he said, referring to the deal with Duke.

The port bought the plant from San Diego Gas & Electric in 1998 for $110 million. Malcolm was then instrumental in negotiating the lease -- signed in 1999 -- of the plant to Duke Energy for $115 million over 10 1/2 years.

Malcolm was a consultant to Duke from May 2000 until late April of last year.

Commissioner on Duke Payroll May Resign



Green Power for North Carolina

Employee Advocate – DukeEmployees.com – January 3, 2002

Bruce Henderson (The Charlotte Observer) reports that all utilities in North Carolina should offer “green power” this year. Green power, of course, comes from environmentally friendly sources, such as solar.

Duke Power, CP&L, and Dominion North Carolina Power are to request permission from the N.C. Utilities Commission to charge higher rates for this energy.

The green power is expected to cost customers an extra $3 to $5 per month. Don’t panic – it’s voluntary.

There is no difference in the electricity supplied to homes, regardless of how it is produced. Green power is not really green, nuclear is not radioactive, coal is not dirty, hydro is not wet, and gas power does not smell "funny." If fact, those who pay extra for green power may not actually get green power!

So what’s the extra charge for? A proportionate amount of green power would be added to the electrical grid for the extra amount charged. So, one customer pays for green power, but anyone could get it. But they would never know the difference anyway.

One could look at it as a subsidy for the power companies. With today’s technology, renewable power costs more that “dirty” power. The companies will be getting paid to do the right thing. Hey, how’s this for a slogan: “We’ll do the right thing – IF we are paid to do it.”

The program is not necessarily bad. Many people have very strong feelings about protecting the environment, and would be willing to pay more to promote green power. The customer who does not care where his power comes from is not obligated to pay anything extra. There are bound to be technological advances in the future to reduce the cost of environmentally friendly power, as it is promoted more.

Fortunately, there will be an outside agency that verifies that the extra charges are actually spent on renewable energy. History proves that some of these cats cannot be audited enough!

“John Noyes of Sherrills Ford lives about a mile upwind of Duke's coal-fired Marshall plant, and he worries about air pollution. But he notes that green power won't make Marshall's emissions go away. ‘If rates went up to clean the plant that's already there, I'd be willing to talk about that,’ he said. ‘There would be more benefit to pay more.’ ”



Welcome to 2002

Employee Advocate – DukeEmployees.com – January 1, 2002

If your are reading this, it means that you survived the year 2001. Congratulations are in order. All in all, it’s shaping up to be a tough decade (century?, millennium?).

Everyone’s life was changed forever on September 11, 2001, though some may not have realized it yet. Some good always comes out of every disaster. The attack galvanized America into taking action against those who live only to promote terrorism. President Bush found something that he was good at.

The Enron meltdown is just beginning to be sorted out. Many people, including employees, suffered a financial catastrophe due to the bungling of Enron’s management. Being nearly penniless at retirement age is the equivalent of a slow death. Trying to survive on merely Social Security will be even more bitter for those who thought that they had a decent retirement future.

Those, who promoted switching employees from the promised defined benefits pension plans into 401(k)’s and cash balance plans, never mentioned the down side. Markets never grow to the sky. The new pension proponents knew this all along. They were just looking for any means to sell the dubious pension plans. They were a windfall for the employers who forced the plans on the workers.

But some good will come from the Enron episode. Congress will be forced to look under the pension “rock.” Many slimy things have been breeding there for years. This will be a great opportunity for Congress to look deeper in the cash balance pension plan issue. (The time has never been better to write the members of Congress.) Maybe the Justice Department will finally take the action that it should have taken long ago. The pension losses were not oversights or mistakes. They were deliberate, cold, and calculated maneuvers. Everyone thought that employees would be too naive to notice.

Enron was Duke Energy on steroids. What activity is Duke obsessed with? Energy trading. Rick Priory said: "With about half of our revenues now derived from commodity positions..." And what company was right along side Enron in the California energy debacle? What company is also facing problems with auditors?

Duke is ever ready to close the door on problems, before they are ever resolved. In the December, 2001 Noon Report, Mr. Priory said: “We’ve seen the most extreme version of how things can go awry in California, where we worked hard to keep the lights on – and were falsely accused of price gouging and market manipulation. We have since been completely exonerated of those charges…”

But the issue is still boiling:

Noon Report - December, 2001

In fact, the Duke Energy Form 10-Q, filed with the Securities and Exchange Commission on 11/14/01, states: “California Issues. Duke Energy, certain of its subsidiaries, and three current or former executives have been named as defendants, among numerous other corporate and individual defendants, in one or more of a total of six lawsuits brought by or on behalf of electricity consumers in the State of California who seek damages as a result of the defendants' alleged unlawful manipulation of the California wholesale electricity markets…” (Link at bottom of page.)

Do you think that Mr. Priory suddenly had amnesia about this tidbit? Hardly! Do you think that he is convinced that the employees are so gullible that they will believe anything that he tells them? Very likely! He evidently thinks that employees are totally ignorant of current events, and must depend upon him to “explain” things to them. The explanations are always the same: “We didn’t do it.”

And what about the charge of $3,880.00 per megawatt hour in California (the highest rate charged by any company)? No amount of explaining will make this go away. The fact that some of the charges had to be reduced, only verifies that they were bogus charges.

What Duke senior management expects from the employees, they have yet to deliver. They have steadfastly refused to accept accountability for repeated bungles!

They have not learned that some things just cannot be “spun” away. Some of these matters are so putrid that no amount of sugar dumped on them will turn them into a sweet roll. But, yet, they keep trying.

We reported on the 2001 Meeting of Shareholders. Reverend Douglas Moore had a notable question for the Duke auditors. He wanted to know “what they do to make sure that there are no bribes being given or taken.” This was before it was known that Duke was paying a commissioner in California or the secret offer to the California governor came to light.

2001 Meeting of Shareholders

Duke Paid Commissioner $20,000 a Month

Duke Energy Offers California a Secret Deal

We reported on the MOX Fuel Hearing, conducted by the Nuclear Regulatory Commission, in Charlotte, North Carolina. One interesting comment from a speaker from South Carolina was: “Does anybody know that the Savannah River Site is right on a fault line?”

NRC MOX Fuel Hearing

We reported on meetings with the Nuclear Regulatory Commission on the renewal of McGuire Nuclear Station’s operating license:

NRC Nuclear License Renewal Meetings

At least some Duke employees received a small benefit increase last year. They will no longer have to pay tax on company award gifts valued at over twenty-five dollars. (Many employees were passing on the gifts, rather than being liable for the taxes.)

No guarantees have ever been made on the possible outcome of the cash balance age discrimination charges filed by many employees with the Equal Employment Opportunity Commission. But the charges are still active. This is another issue that the company keeps trying to prematurely close the door on. The universal number for the EEOC is 1-800-669-4000.

The EEOC has recently filed an age discrimination lawsuit against Allstate Insurance:

EEOC Sues Allstate Insurance

Employees of various companies have been winning private pension lawsuits:

Onan Gives it Up; Employees Win

Court Strikes Down Xerox's Cash Balance

Cash Balance Whipsaw Victories

IBM Pension Lawsuit

Court Issues Pension Restraining Order

Employer Violated ERISA by Cutting Benefits

AT&T Lawsuit Status

The only guaranteed losers are those who refuse to take any action. The action does not necessarily require superhuman effort. A simple letter to Congress is an action that could be well worth the small effort taken.

Happy New Year to all.

Duke Form 10-Q SEC Filing of 11/14/01 (Outside Link)

Happy New Year!

Welcome to 2001


Duke - Page 4 - 2001