According to Bloomberg, North Carolina's Attorney General opened an investigation to determine if Duke lied to get merger approval and win a rate increase. In addition, Standard & Poor's put Duke on negative credit watch after the firm learned about "the abrupt change in executive leadership."

Adding to the regulatory concerns are the outspoken concerns raised by Progress Energy's board members. John Mullin was one of those members, and he writes in The Wall Street Journal:

The surprise decision to change CEOs as its takeover closed was deceitful. I do not believe that a single director of Progress would have voted for this transaction with the knowledge that Jim Rogers would remain as the CEO of the combined company.

Duke Energy is damaged. The question is how bad and can it be fixed.

The numbers indicate how bad it can get. Last Friday, Duke had the second highest a P/E ratio in its peer group, at approximately 19.82 -- Southern Company ( SO) was 18.79, NextEra Energy ( NEE) was 13.49, and Exelon ( EXC) was 12.33. Looking at the range suggests Duke's market capitalization could easily drop 10% to 20% if investors lose confidence in the company's ability to grow earnings.

There are at least three reasons why investors could lose confidence.

The first is trust. Can investors trust Duke's executive team to manage the new company?

The second is damage control. Can investors rely on state and financial regulators to provide Duke with necessary revenue and margins?

The third is Duke's board. Will they represent the interests of all their shareholders, including former Progress Energy shareholders? Or will they continue to support a charismatic CEO?

How Duke's board deals with its self-inflicted crisis will determine the company's future. Historically, when a nuclear utility such as Duke becomes cross-threaded with the Nuclear Regulatory Commission, the board's first step is to replace nuclear leadership in a bid to restore public and regulatory trust.

Such is the case with Duke. To restore shareholder, regulatory and public trust, Duke's board must do as other boards have done before and require Rogers to leave. The company should also consider asking Bill Johnson to return and lead.

In the event Duke's board hesitates, shareholders should consider replacing their positions with safer bets. Two solid peers are Southern and NextEra. Both companies have lower P/Es, solid management teams, and each earned the trust and confidence of their stakeholders.

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At the time of publication, Glenn Williams had no positions in any stocks mentioned.

Glenn Williams has more than 30 years of experience in power and fuels, including design, engineering, construction, startup and operations of large-scale power projects. He has had direct involvement with coal plants, natural gas facilities, and approximately half of the nation's nuclear power facilities and designs energy strategies for regulated and unregulated energy organizations. He received a bachelor's degree in electrical engineering from Northeastern University and a master's degree in technology management from the University of Maryland.

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