Today’s appointment of former Progress Energy CEO William Johnson as the new CEO of the Tennessee Valley Authority (TVA) is raising the eyebrows of clean energy advocates across the region, including here at SACE. Though willing to maintain an open mind, I’m surprised that TVA’s Board would hire Mr. Johnson with his controversial past.
Of course, I’m referring to the sudden removal of Johnson by the Duke Energy Board in July just hours after his appointment as CEO of the company following the merger with Progress Energy. This highly unusual series of events sent shockwaves through the utility industry, setting off regulatory hearings and triggering considerable back and forth between the two companies. While we may never know the full story of why Johnson was so abruptly dismissed, there are some known facts which would make one question whether or not he is the best fit to lead TVA.
Under Johnson’s leadership, Progress Energy Florida (PEF) chose to self-manage an upgrade project at its troubled Crystal River 3 (CR3) nuclear reactor located north of Tampa, FL as opposed to bringing in outside experts. Progress chose a “do it yourself” approach to a complex steam generator upgrade that led to major cracks in the containment vessel. Progress Energy’s attempts to repair the cracks have led to further damage to the containment structure. Duke Energy had such a lack of confidence in the numbers that Progress Energy reported, the utility commissioned an independent report itself to evaluate the costs, which was recently released to the Florida Public Service Commission — you can find the full report here.
The reactor has been offline since September 2009 and, if successfully repaired, will cost at least $1.5 billion to repair and won’t be back in service until 2016. Customers are already paying $300 million per year for replacement power. The critically damaged reactor is now commonly referred to as the “Humpty Dumpty” reactor. Johnson oversaw the company’s failed decision to “self-manage” the steam generator upgrade, rather than have experienced vendors execute the upgrade. He has been accused of failing to communicate the seriousness of the reactor’s problems leading up to the Duke-Progress merger, low balling the cost to make needed repairs and doggedly wanting to repair the reactor despite mounting evidence that shutting it down may be the better fiscal decision for ratepayers in Florida.
Moreover, Progress Energy has spent over $1 billion on developing the proposed Levy County nuclear reactors in Florida that may never be built. Its questionable management of the project includes pursuing an overly aggressive construction schedule and imprudently relying upon the assumption that a Limited Work Authorization would be granted to it by the Nuclear Regulatory Commission. It was not granted, thereby derailing fundamental contracting, and scheduling and driving up cost and uncertainty for Progress Energy customers. Delays in construction and spiking cost estimates forced the company into a recent settlement agreement that allows Progress Energy to charge customers $3.45 per month through 2017 to cover the cancellation costs of its engineering and procurement contract for the development of the reactor project.
To get the full extent of the nuclear problems at Progress Energy Florida under Johnson’s leadership, all one has to do is search the Tampa Bay Times for some hard-hitting reporting on these issues.
Progress Energy Florida’s energy savings in 2011 through its energy efficiency programs trails leading utilities in the Southeast. For instance, Duke Energy saved 0.70 percent of its sales in 2011 through energy efficiency while Progress Energy Florida saved less than half that amount – only 0.30 percent of its sales through efficiency programs in that same year. Additionally, Progress Energy Florida’s cost (cents per lifetime kWh saved) for achieving its tepid energy savings is significantly higher than peer utilities in the Southeast. Based on the above mismanagement of its energy portfolio, it should come as no surprise that Progress Energy Florida ranks dead last in the latest JD Power and Associates Residential Customer Satisfaction Survey of large utilities in the South.
For more information on our concerns about Johnson’s past with efficiency and renewable energy, please see below.
To his credit, Johnson’s ouster has lead to an outpouring of support by some of his former employees. It appears that he was well liked.
SACE has had extensive experience with Progress Energy under Johnson’s leadership in regulatory proceedings in North and South Carolina and Florida, and has generally found Progress Energy is not a leader on energy efficiency nor is eager to embrace renewable energy in those proceedings.
And TVA needs a CEO that can lead the agency into the 21st century, bringing an open, clear-headed approach to TVA’s significant nuclear troubles. The new CEO must work successfully with many stakeholders with diverse interests and needs. But based on our past experiences with companies under his direction, we have real concerns about whether he will support TVA’s efforts to grow energy efficiency and clean renewable energy and if he can work effectively with stakeholders across the Valley.
Please Note: This is a developing story, and we will continue to update this blog with additional information and resources as they are made available.
Update 11/05/12 at 2:00 p.m.: Johnson’s Past with Energy Efficiency and Renewable Energy Also Raises Concerns
SACE Director of Research, John Wilson, has been deeply involved with utilities in the Southeast and is well-versed in Progress Energy’s energy efficiency and renewable energy policies and Johnson’s history with these issues.
When it comes to clean, safe energy options, Bill Johnson’s legacy at Progress Energy did not leave a record of leadership. Perhaps the most charitable interpretation of his tenure there is that he did not particularly care what his staff did – good or ill – about energy efficiency and renewable energy.
In some cases, his staff cared. Progress Energy supported the of the North Carolina law that has been driving up renewable energy and energy efficiency in the Carolinas. For example, the role of solar energy in utility generation is greater in North Carolina than in sunny Florida. Privately, many people give senior Progress Energy executive John McArthur, not Bill Johnson, credit for bringing Progress Energy to support Senate Bill 3 – the North Carolina Renewable Energy and Energy Efficiency Portfolio Standard – in 2007.
Just a few years later, when Progress Energy Florida was challenged to step up on energy efficiency, the Progress Energy Florida message was characterized by inflammatory rhetoric. The utility’s Florida team “backed up” that rhetoric with error-ridden and confusing plans. While cordial in person, Progress Energy Florida staff demonstrated ill-will towards energy efficiency programs by shopping an energy efficiency plan with bloated costs to regulators, legislators and the media.
Even when we exposed the bloated costs, Progress Energy Florida staff unashamedly continued to claim that energy efficiency program costs were too costly for Florida, suggesting that energy savings could cost 8, 9 or even 10 cents per kWh. Yet Duke Energy Carolinas has recently achieved much the same level of efficiency at 1-2 cents per kWh, and both Progress Energy utilities are achieving middling levels of energy efficiency impacts at actual costs of 2-3 cents per kWh.
The relentless propaganda about high energy efficiency costs has since carried the day, with the Florida Public Service Commission not only agreeing to cancel new energy efficiency program development for Florida, but to effectively restore a policy which, according to national experts, “is overly narrow, ignores many of the benefits of energy efficiency programs, is inconsistent with the assessment of supply-side resources, does not necessarily reflect the actual impact on rates, and deprives customers of the opportunity to lower their bills through energy efficiency measures.” This is a policy that Progress Energy Florida has endorsed with little difficulty.
It seems to us that the merger with Duke Energy offers an opportunity for Progress Energy Florida to demonstrate more leadership on energy efficiency. And with this in mind, it is difficult to draw any positive experience from Bill Johnson’s record in Florida. Never did he personally intervene to improve the quality of the debate on energy efficiency or renewable energy issues. Never did he or his staff show the slightest remorse for their error-filled, yet sadly effective record of trashing energy efficiency’s prospects in the state.
Yet when it comes to actual program operations, Progress Energy (across its entire system) demonstrated an ability to execute reasonably well. A brief review of 2011 energy efficiency program data demonstrates that Progress Energy Florida outperformed most of its peers in Florida in terms of energy savings impact and keeping costs low. Progress did better in the Carolinas, perhaps to avoid suffering so much in comparison with regional energy efficiency leader Duke Energy.
So while there is no evidence that, in practice, Bill Johnson was hostile to energy efficiency programs, there is also no evidence that he particularly valued those results or claimed that success. While we know that both Progress Energy and Duke Energy are finding it easier to obtain and use renewable energy in the Carolinas, we have yet to see Progress Energy speak up and correct the renewable energy misinformation propagated in Florida. Considering what a struggle it is to organize a system of 155 distribution utilities across TVA to engage customers on energy efficiency, and how slowly TVA’s renewable energy programs have evolved, Bill Johnson seems singularly ill-prepared to overcome these challenges.