Incoming TVA CEO ready to listen

Incoming TVA CEO ready to listen

November 6th, 2012 by Pam Sohn in News

TVA CEO Tom Kilgore, left, talks about new CEO William "Bill" D. Johnson on Monday at TVA in Knoxville.

Photo by The Knoxville News Sentinel /Times Free Press.

Document: TVA board practices

TVA board practices

Bill Johnson, the tall, incoming president and CEO of the Tennessee Valley Authority, walked through the halls of the Knoxville and Chattanooga headquarters buildings Monday to meet employees and shake hands.

Just hours earlier, as he was introduced via streaming video from the Knoxville TVA auditorium, he told listeners that his values as a utility leader are simple.

"People are important. How we treat customers, how we treat employees, how we treat each other really matters," he said. "How we conduct our business matters, and how we spend money. Thirdly, safety matters. And integrity is important -- perhaps the most important."

Johnson -- the controversial former chairman, president and CEO of Progress Energy who helped orchestrate the merger of two large electrical utilities, Progress and Duke Energy, only to be ousted as its new CEO after one day -- will replace TVA's retiring Tom Kilgore, beginning Jan. 1. Kilgore headed TVA for six years.

The federal utility generates enough electricity for 9 million people, which it sells to 155 distributors and 57 directly served industries and federal facilities in seven states.

Johnson told his audience in Knoxville that he plans to spend the first couple of months in his new job "listening."

"We have to keep the rates down; we have to keep the lights on. We have to improve nuclear performance. We have to complete projects on time and on budget."

Johnson's annual compensation will consist of $950,000 in salary and potential compensation of $3 million which will be "at-risk and may be awarded based on short-term and long-term incentives tied to performance," TVA Board Chairman William B. Sansom said.

Kilgore earned nearly $4 million in 2011, according to TVA documents.

Sansom said TVA had many good candidates, but Johnson stood out because of his seasoned experience at a utility with a diverse range of power generation: coal, gas, nuclear, hydro and renewables.

"You wonder how good you are," Sansom said of TVA's reputation and draw for quality candidates. "But we found out this was a very attractive job and a big challenge."

No public discussion

Sansom said Johnson, 58, was the unanimous choice of the board, which approved the new CEO without a board meeting.

"We did it with notations, which we can do," Sansom told the Chattanooga Times Free Press on Monday after the announcement. He said board members, separately, met and interviewed about 10 "serious" candidates for the job.

TVA General Counsel Ralph Rodgers said the board's nonpublic action was completely within the law because its governance and practices rules allow votes without a public meeting.

"The board voted individually under our 'notational approval' process," he said.

Rodgers said the board's rules allow votes "notationally" without a public meeting.

"They followed that practice, and they were careful to follow all the rules, and obviously they wanted to keep the search process as confidential as they could for the benefit of the candidates," Rodgers said.

Confidentiality is one of the criteria for notational approvals.

Sansom said the board "started out with a group of 70, and the board probably interviewed more than 10, individually. We actually started about a year ago, knowing Tom was going to step down. But we really worked hard for the last three months," he said.

Kilgore did not announce publicly that he would retire until the August board meeting.

Who is Bill Johnson?

Johnson told reporters his strong point is caring about the business of energy and electrical generation and the people who make the business run.

Some observers from his previous job have differing views of his people skills.

The Raleigh News and Observer on Monday wrote: "He was regarded by employees as the antithesis of the starchy utility CEO, a laid-back, easy-going regular guy who drove a Toyota and lived in the same suburban home without falling prey to the temptation to upgrade to a gilded executive lifestyle."

But the Charlotte Business Journal in July reported that Johnson's replacement, Duke Energy CEO Jim Rogers, told the North Carolina Utilities Commission that he was concerned about what the Progress-Duke merger board saw as Johnson's "autocratic" leadership style and decisions that seemed to be imposing Progress procedures and culture on Duke.

Duke officials also had concerns about transparency.

The Wall Street Journal, also in July, reported that Duke lead director Ann Gray told the North Carolina Utilities Commission that the utility lost confidence in Johnson, in part, because he "had withheld information from the board about rising repair costs at Progress's troubled Crystal River, Fla., nuclear plant."

The Crystal River Plant has been idle since being damaged by a 2009 generator replacement like the one being made right now at Sequoyah Nuclear Plant's Unit 2 reactor near Soddy-Daisy. A recent story in the Charlotte Observer reported the repair bill at Crystal River could run from $1.5 billion to $3.4 billion, and the reactor could be off-line until 2016.

At Johnson's Monday introduction to TVA workers and Tennessee media, he declined to talk about his ouster after the Progress-Duke merger except to say that he has learned that he is a resilient and positive person and "the sun comes up every day."

Announcement reaction

Kilgore, who will retire at the end of the year, heaped praise on Johnson and joked, "I've been told already that I'm smiling too much today."

Kilgore said he has known Johnson since 1998.

"Bill has a way of cutting through a whole lot of complexity to ask the right question -- the simple question that just gets right to the heart of the matter," Kilgore said.

Beyond TVA, Johnson's new appointment drew mixed reviews.

U.S. Sen. Lamar Alexander, R-Tenn., praised his selection and called him "one of the nation's most experienced and respected utility executives."

But the Southern Alliance for Clean Energy, a Knoxville-based environmental group often critical of nuclear power, questioned the hire.

"While we will maintain an open mind, I'm surprised that TVA's board would hire Mr. Johnson with his controversial past," said Stephen Smith, executive director for the Alliance.

Under Johnson's leadership, Progress Energy Florida chose to self-manage the generator upgrade project at Crystal River's Unit 3 reactor, located north of Tampa, rather than bring in outside experts. The complex work led to major cracks in the reactor's containment vessel, which forced the plant's shut down.

"Johnson oversaw the company's failed decision to 'self-manage' the steam generator upgrade, rather than have experienced vendors execute the upgrade," Smith said in a statement released Monday. "He has been accused of failing to communicate the seriousness of the reactor's problems leading up to the merger, low-balling the cost to repair and doggedly wanting to fix the reactor despite mounting evidence that shutting it down may be the better fiscal decision for ratepayers in Florida."

Sen. Bob Corker, R-Tenn., offered no praise or criticism -- just a request.

"TVA is at an important crossroads, and I hope that as Bill Johnson takes the helm, he will focus his efforts on tightly managing the operation and focusing on the strategic decisions and investments that need to be made -- all with the knowledge that the economic future of the Tennessee Valley is tied to keeping rates low and ensuring our citizens have access to safe and reliable power," Corker said.

Contact staff writer Pam Sohn at psohn@timesfree or 423-757-6346.