Ousted Duke Energy CEO Bill Johnson testified before the North Carolina Utilities Commission on July 19 that he never withheld information about the repair and insurance issues regarding the Crystal River nuclear plant in Florida.
Johnson testified further that Duke officials began looking at ways to get out of the pending combination with Progress Energy—“short of violating the merger agreement”—and that Crystal River was one item reviewed as a possible legitimate cause for cancelling the deal.
The former Progress Energy chief said Duke reviewed the situation at Crystal River as a potential “material adverse event,” or MAE. Johnson described an MAE as when “something so bad happens you can walk away.” But a quick review found that “(Crystal River) didn’t amount to an MAE,” he said.
Johnson further testified, essentially, that the recent claims made by current CEO James Rogers did not accurately reflect the situation at the Florida nuclear plant, which has been shut down since 2009 due to problems with a regeneration project. Repairs related to that project have been estimated to cost as much as $1.3 billion, and are the subject of a January 2012 agreement with the state of Florida.
Additionally, Johnson testified that he “absolutely” kept Duke fully informed about every detail related to the repair situation at the plant.
“I did not fail to inform anybody about anything,” he said, adding: “It was certainly in my interest and the company’s interest to tell everybody about everything.”
Moreover, he said Duke should not have been surprised to find out that the company was still discussing the repair issues with its insurer, Nuclear Electric Insurance Ltd, or NEIL.
On July 10, Rogers told the North Carolina commission that Duke “had been led to believe” that Progress was close to a resolution with the insurer, and that the utility had been surprised to find out that NEIL had “growing concern about … the future of that plant.”
In fact, Johnson said he actually slowed down the discussions with NEIL at the behest of Duke officials, who wanted to have the final decision on whether to repair or retire the 914-MW nuclear plant. Further, Progress never discussed with NEIL whether repairing or retiring the plant was the best option.
Adding that the Crystal River claim is “the biggest one (NEIL has) ever had,” Johnson said a resolution with NEIL required an accurate cost estimate for repairs. “You can’t really come to a final conclusion with the insurer until you have a plan to tell them what the cost is,” Johnson testified, which wasn’t available until May.
Personally, Johnson felt that repair made the most sense economically for customers.
“For the customers in Florida, the best economic answer is to repair the plant if you can,” he testified. “The impact to customers is highest if you don’t repair the plant, because you have to pay for decommissioning, and a lot of other things.”
Nevertheless, Johnson said he “scrupulously adhered” to Duke’s request to “preserve the option” to retire the plant for the board of the new company. “That’s part of the reason (negotiations with NEIL are) still going on.”
As for Rogers’ implications that an engineering analysis initiated by the Duke board added to the new company’s concerns about Crystal River, Johnson said that was never communicated to him. Instead, he testified that he was told in late June that the study wasn’t complete yet and that the board had not been shown the findings.
The merger closed July 2. Duke Energy spokespersons have told Engineering News-Record that the study is not complete.
In reaction to Johnson’s testimony, Duke spokesman David Scanzoni would not comment, but stated that director Ann Maynard Gray would address the issues during her July 20 testimony before the commission.
