published Saturday, December 1st, 2012

TVA's leader questioned

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    William D. Johnson, who will become president and CEO of TVA on Jan. 1, 2013, speaks at a news conference in Knoxville.
    Photo by Staff File Photo /Chattanooga Times Free Press.

TVA's newly designated CEO and president, William D. (Bill) Johnson, is not scheduled to assume his new position until Jan. 1. Yet he already has questions to answer about his transparency regarding a multibillion-dollar nuclear plant repair issue that apparently prompted his termination last July, after a one-day stint as CEO of the merged Progress Energy/Duke Energy electric power companies.

The latest memorandum to surface on that issue is an embarrassment for TVA board members, as well as for Johnson, who had previously been CEO and president of Raleigh-based Progress Energy. The TVA board designated Johnson as head of the agency on Nov. 5 in secrecy, in disregard of board members' own burden for public transparency. Their decision may now be seen also as a failure to do due diligence before appointing Johnson.

TVA officials refused Tuesday to comment on Johnson's current controversy on the grounds that, since he hasn't yet assumed his duties as TVA's new CEO, the agency has nothing to say. That is a weak and sadly telling response.

TVA board members of course were aware that Johnson was sacked in July as head of the newly combined Progress Energy/Duke Energy company on the day the $32 billion merger closed. The big news then was that Johnson was walking away with a $44 million golden parachute. TVA board members should be able now to say how they viewed Johnson's termination from his former position, and to what extent they did due diligence before they hired him.

If they did their homework, they should be able now to say, at least, that they still have confidence in Johnson. So are they caught flat-footed? Indeed, how did they come to hire him in secret after he was so abruptly dumped from new and bigger Duke Energy after one day into his tenure as president and CEO of the merged Progress Energy with Charlotte-based Duke Energy?

Progress then owned the damaged Crystal River nuclear plant in Florida that has surfaced as a possibly under-estimated burden on the new Duke Energy.

That issue surfaced Tuesday after a search of legal documents by NC WARN, a North Carolina nuclear watchdog group, led to its filing with the North Carolina Utilities Commission questioning the merger. The filing claimed discovery of a Johnson memorandum rendered in April, months before the Progress-Duke merger was consummated, in which Johnson skirted the probable cost of repairing a cracked reactor at Progress-Florida's Crystal River nuclear plant.

Johnson's memorandum noted that Progress was accommodating Duke Energy's insistence on an independent review of the cost of repairing Crystal River Unit 3, and had retained Zapata Engineering, which had 25 team members conducting a plant review to ready a final repair-cost estimate by late June.

But it wasn't until after the merger was approved by the commission on June 29, the Charlotte (N.C.) Observer reported, that Zapata's review and estimated repair bill came in on Aug. 1. It apparently showed that a repair of the Unit 3 reactor, idled since 2009, would be $3.4 billion, and that the reactor could be out of service until 2016. The bill would be more than double the initially estimated $1.5 billion.

Jim Warren, director of the NC WARN group, claimed it was "impossible to believe" that there wasn't a preliminary estimate of the bill, and that it should have been presented before the merger. Duke Energy's lead director reportedly told the commission that the company lost confidence in Johnson, in part, because he "had withheld information from the board about rising repair cost" of the reactor.

That's the sort of issue that should have been crucial to TVA board members. The agency has a long history of trouble with nuclear plant completion and costly repairs. It revealed in April that work to complete the Watt's Bar Unit 2 nuclear reactor -- which was restarted in 2007 and was to have been finished this year at a cost of $2.5 billion -- would not be completed until the end of 2015, and its cost would jump from the current $4.5 billion to $6.5 billion.

As a result, it's now planning to refurbish an excessively polluting Gallatin, Tenn., coal-fired plant with sulfur dioxide scrubbers at a cost of at least $1.2 billion. It had planned to mothball the plant. And it should be investing in conservation and renewable energy before it makes this costly renovation.

TVA clearly needs strong, effective and principled leadership in a new CEO to replace the outgoing Tom Kilgore. The question now is whether Johnson, who may have been fired in July for suspicion of withholding a crucial nuclear plant cost estimate in order to conclude a merger than immensely enriched him, is the leader TVA wants. The board owes the public an explanation of its intentions.

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GarryMorgan said...

The "burden for public transparency" is codified by The Federal Sunshine Act; it is the law of the land and the TVA Board of Directors has a history of trampling the Sunshine Act. Notational processes and committee meetings are two processes in which the TVA Board has abused their responsibility to public transparency.

The TVA OIG on November the 8th was asked to assist the TVA Board of Directors in realizing their responsibility as stated in the Federal Sunshine Act's requirement for public transparency.

The 'notational process appointment' of Mr. Bill Johnson as CEO to replace Mr. Kilgore was a gross abuse of the boards procedural processes and the Federal Sunshine Act.

December 1, 2012 at 10:20 p.m.
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