Wednesday, July 18, 2018
Business

Westinghouse CEO is key witness in suit against Duke

Westinghouse Electric CEO Daniel L. Roderick might be the company's best weapon in its lawsuit against Duke Energy over the cancellation of the Levy County nuclear project.

Why? Roderick used to work for Progress Energy Florida, now part of Duke, when the two companies crafted the Levy contract.

His job: vice president of nuclear projects and construction.

"I am responsible for the management and oversight of all large, capital nuclear projects" for Progress Energy, Roderick stated in 2008 in written testimony to the Florida Public Service Commission. "These include … the development, siting, engineering, and construction of two new nuclear generating facilities at the company's Levy County site."

Now Roderick runs Westinghouse, which is suing his former employer for $512 million, alleging breach of contract and unjust enrichment over the agreement he helped develop.

A win for Westinghouse could bring Duke's customers' tab for the failed Levy project to $2 billion. That is mainly because the state Legislature passed an "advance fee" law in 2006 that allows utilities to collect money from customers for new nuclear projects, whether they get built or not.

Critics fear the same will apply if Westinghouse wins its case against Duke — and that Roderick is taking advantage of the advance fee to get money from utility customers.

"He's an insider's insider," said state Rep. Dwight Dudley, D-St. Petersburg. "If not for the utility tax, the advance fee, they wouldn't be able to do this. That's shameful."

• • •

Roderick began working for Progress Energy at the Crystal River nuclear plant in 1996.

He told state regulators in his 2008 testimony that the utility in January 2006 made a preliminary decision to use Westinghouse's AP1000 nuclear reactor design to build a new facility.

That decision came months ahead of the Legislature's passage of the advance fee law.

By the close of 2008, with the deal between the utility and Westinghouse all but in hand, Roderick left Progress Energy and joined GE-Hitachi as senior vice president for nuclear energy.

Then in September 2012, Westinghouse hired Roderick as president and CEO, touting his work on the Levy project in a news release: "As the company's vice president of nuclear projects and construction, he also managed a multibillion-dollar new-nuclear expansion program."

Last August, Duke, after inheriting the Levy project in its merger with Progress in 2012, canceled the plans for the two Westinghouse reactors citing projected costs that had ballooned to $24.7 billion and delays in getting a federal license.

That left Duke customers with bills totaling $1.5 billion, for which they will get nothing.

In January, more than five months after publicly abandoning Levy, Duke canceled its contract with Westinghouse, touching off a legal battle.

Westinghouse issued Duke an invoice in March for terminating the contract, seeking $512 million dollars.

Duke sued, denying it owed any money. Westinghouse countersued, seeking the full amount it said it was owed — money that could be tacked onto what Duke's 1.7 million Florida customers already owe.

• • •

As it stands, advantage Westinghouse.

During discovery, Roderick could point lawyers to memos, letters and other documents that could benefit Westinghouse's case.

"He already knows a lot of the facts that you will be looking for in discovery," said Peter Fitzgerald, a professor at Stetson University College of Law. "Is it an advantage to know the facts going into a dispute? Sure."

In the publicly available version of the contract between Duke and Westinghouse, the parties have redacted termination costs and other details, which makes it difficult to understand which facts are in dispute.

Neither Westinghouse nor Duke would comment because of the pending litigation.

Nicole LeBeau, a Duke spokeswoman, said Roderick's positions with the two companies and his role in the case would have to be evaluated by the attorneys.

Charles Rehwinkel, deputy public counsel, who represents consumers before the Public Service Commission, said there are some protections that would prevent Roderick from providing some secrets to Westinghouse, even as its CEO.

They include general agreements that bar executives from sharing some information when they leave a company. But Roderick's knowledge of the Levy contract from the perspective of the utility could have an impact, Rehwinkel said.

"If employment and personnel contracts are honored, there shouldn't be a problem with confidential information being used inappropriately," Rehwinkel said. "It's just too early to tell whether there is a general issue that affects customers."

Dudley, himself a lawyer, said he is troubled by how the Levy project continues to play out, costing consumers hundreds of millions of dollars.

"This is going to come out of the consumers' pocket and they know this," Dudley said. "It's a feedbag. It's just all about the money."

Ivan Penn can be reached at [email protected] or (727) 892-2332.

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