Is Lynn Good the smartest (new) CEO in the energy industry? by Shawn Tully @FortuneMagazine November 8, 2014, 11:05 AM EST E-mail Tweet Facebook Google Plus Linkedin Share icons On the first Sunday in February, Lynn Good was just sitting down to watch the Super Bowl in her family room when she received the email that would upend her world. A drainage pipe under an earthen storage pond at a defunct coal plant in North Carolina’s border with Virginia had ruptured, sending thousands of tons of toxic coal ash into the scenic Dan River. By the next day, the Dan River spill was battling for attention with the Seahawks’ win on local and national news, as millions watched video of gray sludge spewing into an artery that furnishes drinking water for towns in Virginia. Until that day, Good, the newly named CEO of Duke Energy, had been working methodically to ensure the company remained stable, profitable and boringly free of surprises. “Suddenly, it was all about crisis management,” she says. “It’s something that never should have happened. That’s not what Duke Energy is about.” In the months ahead, Good—a former CFO who had never spent much time in the spotlight—would suffer a storm of criticism as the new face of Duke Energy. The disaster quickly became a hot election issue in fiercely competitive U.S. senate race in North Carolina. The eventual victor, Republican Thom Tillis, accused his opponent, Democratic Senator Kay Hagan, of scuttling environmental regulations because of a “cozy” relationship with Duke. (All the while, an environmental group in TV ads charged Tillis with much the same thing.) Good didn’t exactly excel at P.R. in the weeks following the spill. She mainly shunned public appearances, and ineptly told the Wall Street Journal, “I might have looked like I was hiding, but it doesn’t feel like I’m hiding.” Though it took five long days to stop the leak, the worst of the damage seems to be behind the company now. The EPA has declared the Dan River’s drinking water safe, based on their latest tests. But the controversy continues to swirl, with Good, 55, at the center. “Instead of taking action to remove coal ash, Lynn Good appointed a committee,” says Frank Holleman, a senior attorney at the Southern Environmental Law Center, a group that’s suing Duke over the spill. “She’s a conspicuous laggard in dealing with what’s an embarrassing, catastrophic problem.” The disaster is also the subject of a forthcoming “60 Minutes” segment, in which Good reportedly undergoes sharp questioning from reporter Lesley Stahl. But dramatic as it was, the Dan River spill has overshadowed the largely untold story of how this petite, soft-spoken, female executive has thrived in a famously macho, male-dominated industry, whose culture is epitomized by an annual roughhouse event called the “Lineman’s Rodeo.” Duke (2013 sales: $24.6 billion) is the nation’s largest utility, providing most of the electricity to North and South Carolina, and also serving Indiana, Ohio, Kentucky and Florida, where it helps power Disney World. Since becoming CEO on July 1, 2013, Good has proven almost visionary for a utility chief, throwing Duke’s weight behind a new pipeline that will fuel the Carolinas with huge new quantities of cheap natural gas, shedding underperforming plants in a business where adding assets is the norm, and investing heavily in solar projects. Behind the scenes, Good is adopting inspection protocols from her nuclear facilities—long considered the most safety conscious in the broad energy industry, for obvious reasons—and applying them to Duke’s coal plants. It’s a pioneering effort to ensure that a Dan River spill won’t happen again. “You can imagine a situation where a crisis stalled a company,” says Marc Feigen, a veteran advisor to top business leaders. “Rare in my experience have I seen a CEO face so much so soon and deliver outstanding results so quickly.” Investors have apparently come to the same conclusion. In her year-and-a-half as CEO, Duke DUK has provided a total return of 32%, beating the S&P 500 by almost four points. Good’s career trajectory is among the more improbable in corporate America. She grew up in a tiny ranch-style home in the small town of Fairfield, Ohio, where her father was a math teacher, and later a high school principal. Her parents would put spare cash in a jar for Lynn’s piano lessons. An empty jar meant no lesson that week. In 1981, she graduated from Miami University of Ohio with a degrees in accounting and systems analysis, and joined Arthur Andersen & Co. as an auditor in the Cincinnati office. “It was a male-driven business,” recalls Valerie Newell, a senior manager when Good arrived. Women were rarely, if ever, allowed a major role auditing perhaps Andersen’s most prestigious account, Cincinnati Gas & Electric. “It was supposed to be a tough male industry where women couldn’t handle the audit work,” Newell recalls. But Good broke the barrier, rising to supervise that audit, and by 1992, ascending to become one of Andersen’s few female partners. In 2002, Arthur Andersen famously shattered after the Department of Justice indicted the firm for its role in the collapse of Enron. “It was a case of professional heartbreak,” recalls Good. “I didn’t know if my career could recover.” She’d been investing her own cash in the Andersen partnership for years; the debacle erased virtually all of her savings. In 2003, Good joined her old audit client, by then renamed Cinergy—at around half the salary she’d been making at Andersen. After Duke bought Cinergy in 2006, she advanced to head the unregulated commercial business, where she made large investments in wind and solar facilities that sell power to towns and utilities. At age 48, she was making her belated debut running a P&L. It was also the first time she saw herself as CEO material. “I had a seat at the senior table, and I thought, ‘I fit here,’” recalls Good. “It was exciting putting hundreds of millions of dollars to work buying and building wind farms in Texas.” It took an odd twist of fate, however, to make her a candidate for CEO. In 2011, Duke of Charlotte agreed to merge with its cross-state rival, Progress Energy of Raleigh. As part of the deal, Progress CEO Bill Johnson was slated to replace Duke’s CEO Jim Rogers. But the day the deal closed in June of 2012, the board fired Johnson and reinstated Rogers. Shocked by the outcome, North Carolina regulators gave Duke a deadline to choose a new CEO. In mid-2013, Good won the job. Even months before then, Good who was serving as CFO, was essentially running the company day-to-day. “She was effectively the internal CEO,” says Swati Daji, the chief of fuel purchasing and trading. In that period, the directors closely observed how Good handled a series of big problems, along with her unflappable style of dealing with her lieutenants. The image she projects is one of almost zen-like calm, in a black suit, pearl earrings and a floral or checked silk scarf. Her brunette helmet of hair stays perfectly in place. And don’t expect her to swear. “I’ve never heard an undignified word come out of her mouth,” says Alma Helpling, who worked with Good at Andersen. The board was especially impressed by Good’s knack for eliciting strong opinions from her executives, without letting contrasting viewpoints sway her from making quick decisions. “She wants you to bring her all the facts,” says Daji. “But she also wants you to bring a solution. She calls it POV for point of view. If you just bring a problem, the meeting doesn’t go well.” Good then peppers her executives with detailed questions, often following up with weekend emails for more information. “But once she has all the facts and the viewpoints, there is no dithering,” says John Elnitsky, who heads the teams putting the post-Dan River safety initiatives in place. While serving as CFO, the role Good played in deciding the future of a nuclear plant in Florida—probably Duke’s biggest problem following the close of the merger—helped win her the top job. The Crystal River facility in rural Florida had been closed since 2009, because of a crack in the containment wall surrounding the reactor. While it owned the plant, Progress had been assuring residents, politicians and regulators that it would repair the wall and get the plant running again. Progress estimated the cost at $900 million to $1.3 billion. But as CFO, Good was both highly skeptical of that forecast, and worried about the enormous risks of trying to fix the 35-year old facility. Duke commissioned its own study of the potential costs. The estimates were as much as double those made by Progress. Local politicians were pressing Duke to repair the plant, but Good resisted. “Lynn is always worried about ‘tail risk,’ unlikely events that can prove incredibly expensive,” says Daji. “The engineers all said it could be done, but Lynn saw the risks differently.” Good worried that there was no precedent for such a challenging repair. And even if it appeared effective, the nuclear authorities might not renew the plant’s license. She told lieutenants, “We’re not wearing that risk now, and it’s our choice alone to wear it.” In February of 2013, Duke retired the nuclear plant; it’s now extending the life of coal plants it had foreseen closing in order to meet the region’s needs for electricity. It’s also planning a giant new natural gas facility to eventually replace them, and serve new customers. Good has also shown a willingness to unload power plants, something uncommon in the utility industry. “Utilities fall in love with their assets, and that’s a danger we need to avoid,” she says. In recent years, Duke’s profits had been dinged by 11 coal and gas plants it owned in Ohio. Margins there were far below industry norms due to a glut of cheap energy supplied by competitors. Duke was earning only around 3.5% on those assets. Early this year, Good struck a deal to sell the Ohio plants to Dynegy for $2.8 billion. At the same time, she’s plowing capital into new, high-yielding ventures—including the types of renewable projects she championed in her earlier years at Duke. She’s investing $500 million in solar facilities in Duke’s home state of North Carolina. Solar, she notes, has become increasingly attractive, in part because the cost of solar panels has dropped by more than half in the past five years. Hence, Duke can provide power for less than competing gas-fired utilities, when the tax subsidies are included. One project will provide electricity for American and George Washington Universities in Washington, D.C. The rates are so favorable that both clients have signed on for 20-year contracts. Good says the rates of returns match the 8% to 10% in its non-renewables businesses. Her most ambitious venture is a pipeline that will bring the Carolinas an abundant supply of the low-cost energy Duke now favors, natural gas. In September, it formed a partnership with fellow utilities Dominion, Piedmont, and AGL to run a pipeline that taps the shale-gas rich Utica and Marcellus regions in Pennsylvania, West Virginia and neighboring states 550 miles into North Carolina. Duke is investing $2 billion for a 40% equity stake in the approximately $5 billion project. The pipeline should counter one of the challenges of this generally efficient (and, compared with coal: cleaner) source of energy: supply bottlenecks. In the past, natural gas has been vulnerable to major supply issues (and price swings)—during last winter’s deep freeze, prices soared from $3.50 per BTU to over $100. But Good says the pipeline will ensure a steady supply. From a financial standpoint, it’s also a smart transaction: Duke’s return on investment should reach the low double-digits, an excellent figure for a utility. This reporter asked Good if she’d suffered slights as a female leader in the once, and largely still, ultra-male world of utilities. She was seated in her 48th floor office in Charlotte, where on a clear day rising smoke and vapor from no less than three Duke plants can be seen in the distance. “On two occasions,” she says, “utility executives I’d never met had looked at me and said, ‘I thought you’d be bigger!’ In a way, I took that as a compliment!” As the Dan River controversy subsides, it’s likely that Lynn Good’s stature will keep growing.