N.C. hearings begin into controversial Duke/Progress merger

Update 4:50 p.m.: E. Marie McKee, a long-time Progress Energy board member and now Duke Energy board member, said the initial board meeting of the merged utilities lasted 20 minutes before going into executive session.

McKee said the lead director of the new combined board said there was an important matter to discuss. McKee said she began wondering whether something was wrong.

McKee said lead director Ann Gray said, "they were going to ask for Mr. Johnson's resignation. His was not a good fit for the new Duke... And they were prepared to be very generous with his severance because they knew this was a shock."

McKee said the former Progress board members who now sat on the combined company board began questioning the decision.

"Between each one of us we kept asking, 'Why? Why is he being removed?' Ms. Gray kept saying, 'He isn't a good fit.'"

McKee said: "I didn't know whether to cry or throw up."

McKee then told the commission the former Progress Energy board members tried to move from simply defending Johnson to evaluating the decision itself.

"Is this good governance?" McKee said they asked.

"What response was made by Ms Gray?" asked Commissioner William Thomas Culpepper.

"None," McKee said.

Update: 4:00 p.m.: E. Marie McKee, a Progress Energy board member since 1999 who became a member of the combined Progress and Duke Energy board, began her testimony before the North Carolina Utilities Commission. McKee described ousted CEO Bill Johnson as "an outstanding communicator... and a very transparent person," sharply contrasting the characterization of him by Duke CEO Jim Rogers.

McKee said through the 18 month merger process the Progress board understood that Johnson would be CEO of the new combined company. She said there was never an indication of a problem from the Duke board.

"It was immediate from the beginning. Bill Johnson will be CEO," McKee told the commission.

Update 3:35 p.m.: Former Progress Energy CEO Bill Johnson told the North Carolina Utilities Commission that his skepticism about the motivations behind the Duke board's decision to fire him as CEO of the combined Progress and Duke Energy is "pretty high."

"Do you know in your heart that you were intended to be the CEO or are you skeptical?" asked Commissioner ToNola D. Brown-Bland.

"I'm skeptical about everything at this point," Johnson replied.

Update 3:30 p.m.: Progress Energy CEO Bill Johnson said he repeatedly tried to meet with the Duke Energy board in the months before the two companies merged, but Duke CEO Jim Rogers declined the offer.

"I kept offering to go to the Duke board," Johnson told the North Carolina Utilities Commission. But Johnson said Rogers, who also was chairman of Duke's board, told him, "No need to. Everything's fine. There's no need to come to the board."

Update 3:25 p.m.: North Carolina Utilities Commission Chairman Edward Finley gave former Progress Energy CEO Bill Johnson some final comments after the opening series of questions. Johnson said he didn't have much to say, but became emotional as he made the one comment he did give: "I existed quickly and didn't get to say goodbye to a lot of people. So I'll take the opportunity here. Thanks."

Update 3 p.m.: Duke Energy's lead independent director Ann Gray called former Progress CEO Bill Johnson before the July 2 board meeting ended and told him she wanted to meet with him at the conclusion of an executive session, Johnson said.

Johnson was excluded from the executive session.

"I thought she was probably coming to congratulate me for getting the merger done," Johnson told the North Carolina Utilities Commission.

Gray arrived with a New York lawyer and said, " 'the board has decided you're not the right man,' " Johnson said she told him. " 'The reason the board made this decision is because of your leadership... It's not the right leadership style for Duke.' "

Johnson never saw it coming. He was told to give his resignation by 7 a.m. the next morning.

Johnson got on a flight from Charlotte to Raleigh. "It was a pretty grim flight," he said.

When he arrived in Charlotte, he called his wife. "Before I could say I had been fired, she congratulated me," Johnson said.

Johnson said the board had the authority to remove him so he didn't fight it. He said he was concerned about Progress' employees and customers and believed that the merger was still good for everyone.

"There's no appeal here," Johnson told the commission.

"Well, maybe, maybe not," Edward Finley, the commission's chairman said in response, surprising many in the hearing.

Update 12:43 p.m.: On the day the Progress Energy and Duke Energy merger closed, former Progress CEO Bill Johnson put on a new tie his wife bought him. Duke CEO Jim Rogers later met Johnson in his office, where they talked about the merger and politics before going into a board meeting.

The board, most of whom attended via conference call, voted Johnson in as the new CEO of the combined company.

Johnson said there were "back pats and handshakes." Two hours later he was out. The board voted to replace Johnson with Rogers.

Johnson had no idea of the plan.

"My wife rarely buys me a tie," Johnson told the North Carolina Utilities Commission. "It ended in a way that was a surprise."

Update 12:30 p.m.: If Duke Energy had informed Progress Energy that it did not intend to retain Bill Johnson as CEO of the new combined company, it faced a breach of contract, Johnson told the North Carolina Utilities Commission.

Update 12:17 p.m.: Former Progress Energy CEO Bill Johnson said if the current troubles with the merger and the combining the two companies get resolved, he believes the merger deal is "really good for everybody."

"I continue to believe to this day that it will be good for everybody," Johnson told the North Carolina Utilities Commission.

Update 12:08 p.m.: The Crystal River nuclear plant was one of five primary reasons cited for the reasons Duke Energy's board ousted CEO Bill Johnson.

In addition to Crystal River, the board also pointed to Johnson's management of the Progress nuclear program, his oversight of the corporate culture, an autocratic style and the utility's finances.

"I disagree with all of them," Johnson to the North Carolina Utilities Commission. He said no one ever raised these concerns to him as problems for the merger. "I'm not a rookie. If I had heard any of these things, I would have done something about it."

Update 11:58 a.m.: The Progress Energy and Duke Energy merger nearly derailed in the months before it closed July 2, former Progerss CEO Bill Johnson told the North Carolina Utilities Commission.

Johnson said part of the trouble was a statement Duke CEO Jim Rogers made to the Charlotte Business Journal that there was a benefit to Johnson in becoming the CEO of the merged company more than even for Progress employees and shareholders.

"My board was furious," Johnson said. "I was furious."

Johnson said he was asked, "Did you do that? Did you seel the company cheap so you could get CEO" position?

"It infuriated me and infuriated my board."

Update 11:35 a.m.: Former Progress CEO Bill Johnson said Duke Energy was kept informed about issues at the Crystal River nuclear plant.

"I did not fail to inform anybody about anything," Johnson told the North Carolina Utilities Commission.

Johnson said Progress included a Duke Employee on the Crystal River repair team.

Johnson said Duke informed Progress that it wanted to be involved in the decision whether to repair or retire the Crystal River nuclear plant.

When the merger of the two companies was expected to close in December 2011, Johnson said Progress slowed discussions with its insurer, the Nuclear Electric Insurance Limited, about repairing Crystal River. But when the mereger did not close at that time, Johnson said he tried to speed up the process with NEIL, to no avail.

"I certianly wish that the NEIL coverage issue had been resolved," Johnson said. "I did have some expectation that we would be done by now."

But Johnson said until Progress had its engineering plan largely completed in May 2012, it was difficult to get a final decision from the insurance company.

"NEIL has zigged and zagged throughout this process, Johnson said.

Update 11:18 a.m.: In the six months prior to the close of Progress Energy and Duke Energy merger "tension... was very high... tempers flared," former Progress CEO Bill Johnson told the North Carolina utilities Commission.

Johnson said Duke sought a way out of the merger, including citing the troubles at the Crystal River nuclear plant.

Update 10:39 a.m.: Although the new combined Duke Energy and Progress Energy board voted to oust CEO Bill Johnson because of a "loss of confidence," he testified Thursday that he "never had a bad or critical performance review."

Johnson, speaking before the North Carolina Utilities Commission, said part of the reason Progress Energy's board agreed to merge with Duke was because he would be the CEO of the new company.

"They were very interested in that part of the transaction," Johnson said. Progress board members told him, "We like the way you run a regulated business."

Johnson's testimony sharply contrasts the view painted of him a week ago. Jim Rogers, who replaced Johnson as the CEO of the combined company, told the commission that Duke board members were concerned about his management style and oversight of Progress' nuclear fleet, the broken Crystal River nuclear plant in particular.

In response to criticism about the oversight of Crystal River, Johnson said before he was removed from the company, the engineering repair plan for Crystal River — which has been offline since September 2009 because of a botched maintenance and upgrade project — was 85 percent complete.

•••

Dozens packed the North Carolina Utilities Commission hearing room this morning, awaiting testimony from ousted utility CEO Bill Johnson, who commissioners summoned to give his version of why he no longer sits as the head of the newly merged Progress Energy and Duke Energy.

The commission called the hearing as part of its ongoing investigation into Duke Energy's decision to oust Johnson within a day of becoming CEO of the merged company.

Some of North Carolina's most powerful and prominent lawyers lined up in the front row of North Carolina Utilities Commission hearing room, including former state Supreme Court Justice Burley Mitchell, whom Duke Energy has hired as the investigation into the ouster of Bill Johnson continues to unfold.

Other top lawyers include Johnson's attorney Wade Smith and another Duke lawyer Jim Cooney.

Duke and Progress merged on July 2, ending 18 months of planning and regulatory wrangling.

From the time Duke and Progress announced the merger in January 2011, Johnson, who was CEO and president of Progress Energy, was slated to become the CEO of the combined company. Duke's CEO Jim Rogers was expected to become executive chairman.

But just after the merger closed, Duke's new board moved in as little as 20 minutes to remove Johnson as CEO of the combined company and gave him a severance package worth $44 million. The board then replaced him with Rogers, setting off a fire storm of criticism.

Some Duke-Progress utility customers called on the North Carolina commission to rescind the merger and at least one Duke shareholder later filed a lawsuit against the combined utility, alleging the directors conspired to oust Johnson in violation of their responsibilities to the company.

The North Carolina Commission and the state's attorney general launched investigations into the decision, questioning whether Duke's board had conspired throughout the merger deal or at some point early in the process to plan a coup against Johnson.

The commission summoned Rogers to testify at a hearing July 10 to explain Duke's decision to oust Johnson. Rogers said Duke's board had lost confidence in Johnson but was bound by the terms of the merger agreement to appoint him CEO, even if it was only for a very short time.

Rogers said Johnson's management style and his oversight of Progress' nuclear fleet troubled the board. In particular, Rogers cited the problems at the Crystal River nuclear plant, which has not produced a kilowatt of power since September 2009.

Progress took Crystal River offline for a maintenance and upgrade project to replace old steam generators. During the repair project, the buildings' 42-inch-thick concrete containment building cracked. An attempt to repair the crack led to two more cracks.

The 36-year-old plant may have to be shut down permanently because repair and related costs are expected to run in the billions of dollars.

Ivan Penn can be reached at ipenn@tampabay.com or (727) 892-2332.

N.C. hearings begin into controversial Duke/Progress merger 07/19/12 [Last modified: Thursday, July 19, 2012 6:23pm]

© 2014 Tampa Bay Times

Join the discussion: Click to view comments, add yours

Loading...