A long-time Duke Energy Corp. director who led the surprise CEO ouster at the country’s largest electric company said Friday that reasons for the move included a long-delayed update on insurance payments for a troubled Florida nuclear power plant and personal meetings that went poorly.
Ann Maynard Gray and six members of the North Carolina Utilities Commission exchanged steely questions and answers about plans developing for months to scrap long-promised CEO Bill Johnson, formerly of Progress Energy Inc. Johnson had been identified as taking over from the time the merger was announced in January 2011.
Repeating testimony from stand-in CEO Jim Rogers last week, Grey said Duke Energy had no duty to inform regulators of plans to change leadership until after the merger was done July 2 and the board voted Johnson out of the job hours later. Grey called the regulatory body’s inquiry “unwarranted” in a prepared statement.
“Do you understand one of the purposes of this proceeding is to find out whether the commission was intentionally misled during the merger proceedings?” Commissioner Bryan Beatty asked.
“I understand that that’s your concern,” answered Gray, a former chief financial officer of the company that owned the ABC television network. “It’s actually regrettable, but Duke paid about $32 billion for Progress. So for us to have a CEO in whom we do not have confidence is just not the right choice for Duke.”
The commission can rescind or alter its approval of the merger creating a power company serving 7 million homes and businesses in North Carolina, South Carolina, Florida, Indiana, Ohio and Kentucky. The commission also approves requests for rate increases, and Duke’s operating companies are expected to file two rate requests later this year.
The autopsy of what happened in Duke Energy’s corporate suites returned again to the pending multi-billion-dollar decision of whether to repair or try replacing the troubled Crystal River nuclear power plant in central Florida.
The merged company inherited the plant’s problems from Progress Energy. The nuclear plant has been shut down since 2009 when cracks appeared in a containment building during an upgrade and maintenance project. Since then, Progress Energy has spent hundreds of millions of dollars to buy replacement power and tussled with Florida regulators about how much of the costs can to be passed along to rate payers.
Further cracks in the radiation-deadening concrete scrapped plans to restart Crystal River in 2011 and led to ongoing wrangling with the plant’s insurer over who will pay. In February, Duke directors asked Rogers to join with Johnson for an update meeting with the insurer, Gray said. That didn’t happen until the day before Duke Energy’s May 3 annual meeting, she said.
Gray called it an example of Johnson failing to keep Duke’s board fully informed about the problem.
“You’d never go radio-silent for nine weeks like that,” she said. “His style is controlling — not only controlling of the flow of information but of the content of the information.”
Grey said Duke Energy’s board kept Johnson at arm’s length after two early personal meetings went poorly. At the first, get-to-know-you meeting months before the merger was announced, Johnson made a comment that rubbed Gray the wrong way.
“He said he was a person who liked to learn but not be taught,” Gray said. “I thought it was a curious thing for a new, incoming CEO to say to his or her new board, if you interpret it that it means, `I don’t really care about your feedback.”’
Johnson testified Thursday that Duke Energy executives sought to back out of the merger after federal energy regulators refused to allow the deal unless the companies did more to protect competition for wholesale electricity customers in their Carolinas home territories. The total cost of meeting those conditions is $225 million, Johnson said, degrading the economic rationale for the combination.
Grey said she had no knowledge of whether Rogers was telling industry analysts this spring that the merger wouldn’t be completed and Duke would be better off. Johnson said he was told by analysts involved in those conversations about Rogers’s comments and became more determined than ever to close the deal.