Ex-Progress chief called to appear before Utilities Commission
Posted July 12, 2012
RALEIGH, N.C. — 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.