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Ex-Progress chief called to appear before Utilities Commission

Posted July 12, 2012

— The man who was dismissed as president and chief executive of Duke Energy Corp. immediately after the company merged with Progress Energy Inc. last week will tell state regulators what he knows of the back-room dealings that cost him his job.

The North Carolina Utilities Commission on Thursday asked Bill Johnson, the former chief executive of Progress, to appear at a July 19 hearing.

The commission has asked four members of the new board of directors to appear as well next week. Marie McKee and Jim Hyler served on Progress' board before the merger and will testify July 19, and Ann Gray and Michael Browning, who were previous Duke directors, will testify July 20.

Duke's board forced Johnson out as the top executive of the combined company, replaced by Jim Rogers, who had been slated to be chairman of the utility. Rogers served as Duke's president and CEO before the merger.

In a four-hour hearing Tuesday, Rogers told the Utilities Commission that Duke's board lost confidence in Johnson's ability to lead the utility weeks before the $17.8 billion merger, which made Duke the nation's largest electric utility.

Board members were concerned about problems at Progress' nuclear power plants, Rogers said, including an estimated $2.5 billion price tag for repairing damage to the Crystal River plant in Florida, which has been out of commission since 2009. He said they also didn't like Johnson's leadership style, which he described as "autocratic," and were less than enthused about Progress' recent financial results.

"It isn't one single thing that led them to this view," he said.

The Utilities Commission didn't approve the merger until June 29, and some members were clearly irritated that they were never notified that Johnson's removal was being discussed. His role in the management of the combined utility was a consideration in the approval process.

Rogers insisted that he never misled commissioners, saying that Duke was bound by the merger agreement to appoint Johnson as CEO after the deal closed and couldn't make any move – or notify anyone of the possibility of a move – before that.

"The decision was made when it was made," he said. "It was just not possible to give that kind of heads-up because of the nature of the timing of the closing."

Duke was intent on closing the deal before July 8, when either side could have walked away from it without penalty, he said.

The commission has the power under state law to rescind or alter its approval. Commissioners indicated that they might impose more conditions on Duke, saying they couldn't trust the company's board to uphold the spirit of the merger agreement, which calls for the company to maintain a presence in Raleigh, Progress' longtime home base.

In addition to taking more testimony, the commission ordered Duke to turn over by the end of the month copies of Rogers' employment contracts, all emails between board members and Rogers since December and two years' worth of board meeting minutes and notes and letters, emails and other communication about Duke's CEO position.

North Carolina Attorney General Roy Cooper has launched a separate investigation into the merger, demanding all communication between Duke board members and executives leading up to the merger. Cooper has appealed to the North Carolina Supreme Court the Utilities Commission's award of a 7 percent rate increase to Duke.

Duke spokesman Tom Williams said the company is trying to move forward now that the merger is complete.

"Our focus at Duke Energy is on bringing our two companies together to harvest our merger’s savings for our customers and to deliver value to our shareholders," Williams said in a statement.

Under Johnson employment contract with Duke, he is due to receive up to almost $44.7 million in severance, pension benefits, deferred compensation and stock awards. The commission has ordered that Duke shareholders, not customers, pick up the tab.

Following Johnson's departure, three top Progress executives turned in their resignations – John McArthur, executive vice president of regulated utilities; Mark Mulhern, executive vice president and chief administrative officer; and Paula Sims, chief integration and innovation officer.

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  • JayBird Jul 17, 2012

    show your support for Bill Johnson
    http://mybilljohnsonstory.com/

  • KHawk Jul 13, 2012

    The story behind this link is interesting - the Duke CEO is a major Obama supporter and the merger is a "distraction" that is damaging his efforts to raise money for the DNC convention in Charlotte later this summer:
    http://www.southernstudies.org/2012/07/will-the-duke-energy-scandal-hurt-the-democrats-in-november.html

  • elcid liked Ike Jul 13, 2012

    Speaking as a Duke stockholder, this merger needs to be rescinded. The terms dictated by the Commission (which we need to acknowledge were aimed more at protecting jobs in Raleigh than any other concerns) make this deal badly flawed from Duke's financial perspective.

    The bottom line is that Duke is highly profitable and well managed. Progress has serious structural problems from a financial standpoint and desperately needs to be acquired by some other company with deep pockets in order to survive. In any realistic environment, Duke, as the far larger and more financially sound party, would have dictated the terms of the merger to Progress, and Johnson's departure (along with that of a good deal of his management team) post merger would have been a given. The Commission, in its scope locked desire to protect Raleigh at all costs, has screwed this deal up from the outset.

  • DontVote4LiarsCheatsOrThieves Jul 13, 2012

    "Rogers insisted that he never misled commissioners, saying that Duke was bound by the merger agreement to appoint Johnson as CEO after the deal closed and couldn't make any move – or notify anyone of the possibility of a move – before that.

    'The decision was made when it was made,' he said. 'It was just not possible to give that kind of heads-up because of the nature of the timing of the closing.'"

    Bound to do it, yet didn't do it.

    Does that sound like double talk to you?

  • Obamanation Jul 13, 2012

    So, has he said anything yet? Didn't think so.

  • oleguy Jul 13, 2012

    This is all a cooked up job,,, They are all in it to their eyes,, What would you do or say for 40 mil????

  • superman Jul 13, 2012

    If in fact the board had lost confidence, please explain the 3 year employment contract and the 44 million payout? Those chain of events do not make sense to me and I graduated from the 5th grade.

  • notodukpgnmerger Jul 13, 2012

    The investigation is going to quickly point to a circle of people beyond Rogers and the Board. It seems strange Rogers can't even name the Nuclear Plants of Duke or Progress yet he was so knowledgeable on the performance issues as it relates to Johnson. Seems to me that the Nuclear Executive at Duke was probably asked to funnel and participate in the conspiracy. I would guess there General Council was involved and others of his direct reports.

    Next week is going to full another thread holding up the veil of unethical and deceptive behavior embedded within Duke.

    If you can't rescind this merger hear are some options for the NCUC:
    - Order the corporate headquarters to be based in Raleigh
    - Order the maintenance of 40% of all corporate positions for all departments be maintained in Raleigh.
    - Declare all employees whose position was within the city limits of Raleigh or Wake County be allowed the option to maintain their existing employment (including pay and benefits) location for 25

  • OpinionatedGuy Jul 13, 2012

    I hope Bill tells the truth and still get to keep his 40+ million. I hope Duke Energy loses that plus more, if the util comm. votes to stop the merger... Stop the Merger!!!!!!!!

  • wufpaker Jul 13, 2012

    mindcrime, no electric utility in the US operates in a free market. This is a regulated monopoly and for very good reasons. In exchange for being required to serve every single business and resident in this state, the utilities are given an exclusive franchise area. For example if someone want to setup shop in a bug infestest swamp, the utility must serve. That cabin at the top of a mountain? Must serve them too. The analogy is similar to FedEx and Postal Service. By Law, Postal Service goes *everywhere*. FedEx only goes where they want to. To ensure everyone gets stable, relatively inexpensive power, the Utilites get a stable rate of return in exchange for providing power to anyone in their franchise area who knocks on their door.

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