RALEIGH, N.C. — The head of the newly merged Duke/Progress Energy utility said his board lost confidence in the leadership of Progress CEO Bill Johnson and ousted him partly because of poor stewardship of his company's nuclear plants.
Duke's board of directors had "an accumulation of concerns and observations" that began surfacing in May, Duke CEO James Rogers testified Tuesday before the North Carolina Utilities Commission. That prompted the board to remove Johnson as CEO of the combined utility and replace him with Rogers immediately after the $32 billion merger closed last week, he said.
The testimony before a standing-room crowd marked the first time Duke officials have publicly given any reasons for Johnson's abrupt departure. The unusual boardroom maneuver has triggered outrage from Progress insiders and regulators who felt misled about Duke's intentions.
Rogers, 64, told commissioners his intent Tuesday was "not to disparage Bill."
Nonetheless, he rattled off several criticisms of Johnson's management capability and lack of transparency in revealing problems with the utility. In particular, he cited ongoing troubles at the Crystal River nuclear plant in Florida, under performance of the overall nuclear fleet and Progress' weaker financial status.
Among the Duke board's concerns was that three out of five Progress Energy nuclear plants are under increased federal oversight. "We will pour money into those plants to bring them back to excellence," Rogers said.
In Florida, where Progress Energy has 1.6 million customers, the utility has been under severe scrutiny because of its botched handling of a maintenance and repair project to replace old steam generators at Crystal River. The utility has estimated it will cost as much as $2.5 billion to repair the plant, which went offline in 2009, and purchase alternative energy.
"We really need to decide whether to fix or retire the plant," Rogers told the commissioners, noting that his board had been reading news stories about it. The Tampa Bay Times has chronicled how Progress' mistakes have added billions to the cost of the Crystal River project.
He disclosed that Duke has entered into mediation with the nuclear plant's insurer.
Rogers' statements put the Utilities Commission in a difficult position, because it had declined to hear concerns about Crystal River that critics raised before the merger.
Jim Warren, executive director of NC WARN, an environmental watchdog group, asked the commission to question Duke and Progress about Crystal River a week before the merger closed. "Now the question is, what is the commission going to do?" he asked. "It had the opportunity to examine the repercussions of Crystal River and disallowed it. It was very clear that Crystal River was the biggest problem."
Utilities Commissioner Bryan Beatty asked Rogers why Duke downplayed mounting concerns about Crystal River right before the merger. Rogers said that was because the plant's condition itself did not change; only the company's perception of it was changed. Beatty's response: It apparently was significant enough to change CEOs.
Beyond missteps within Progress, board members were also concerned that Johnson would not be able to cohesively blend the cultures of the two companies. Duke has 18,000 employees, and Progress has 11,000.
Each director had a different reason he or she wanted Johnson to go, Rogers said, peppering his statements with frequent pauses. "When I boil all this down," he said, "it was a loss of confidence in Bill."
Johnson's Raleigh lawyer, Wade Smith, could not be reached for comment. In a statement released to some media, he defended his client.
"Bill Johnson has a distinguished record of leadership at Progress Energy and was looking forward to the opportunity to lead the nation's largest utility," Smith said. "The fact that he is held in the highest regard by his peers in the utility industry and in the North Carolina business community speaks volumes about his leadership and business capabilities."
Duke-affiliated board members of the combined company outnumber those affiliated with Progress 11 to 7. Utilities Commissioner ToNola Brown-Bland asked whether the company would consider adding another Progress-connected member to the board for more balance. Rogers hesitantly said the board could consider it, but noted the board was large already.
Rogers said Duke board members first raised concerns about Johnson in mid-May and approached Rogers June 23, asking him if he would be willing to become the merged utility's CEO.
The company was under a contractual obligation to bring Johnson on as CEO under terms of the merger and could not dismiss him until afterward, Rogers said. Asked why Johnson's tenure was less than a day instead of months, Rogers said he's learned after more than 20 years as CEO that it's best to act quickly "when you find you have lost confidence in one of your team."
Since the announcement of Johnson's departure, three top Progress executives have said they would leave the company.
Vinny Dolan, who heads Progress Energy Florida, remains in his role. "I don't have any reason to believe that he wouldn't be in that position," said Duke spokesman Tom Williams. The board's vote to oust Johnson was 10-5.
After the hearing, Utilities Commission chairman Edward Finley Jr. said regulators had many options to consider but was not specific.
"Obviously, Crystal River was discussed at great length today as the rationale for what they did," Finley said.
North Carolina's attorney general has launched a separate investigation and has asked Duke to submit merger-related documents from both companies going as far back as January 2011 when the deal was announced.
The Florida Public Service Commission has a previously scheduled status hearing on Crystal River Aug. 13. However, the agency has not called on Duke executives to testify about the merger or sudden CEO switch, in part because it had no regulatory authority over Duke until after the merger, PSC spokeswoman Cynthia Muir said.
Charles Rehwinkel, deputy public counsel, who represents customers before the state PSC, issued a statement Tuesday evening saying the public counsel was "gravely concerned about statements made before the North Carolina Commission" regarding the Crystal River nuclear plant.
"Any statements arising out of a CEO power struggle in North Carolina . . . we view with growing alarm. We fully expect Duke to put the interests of Florida's customers — who have been suffering for three years now — above the boardroom squabbles that are at the center of today's hearing."
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