Nuclear: California: Who Is PG&E’s New CEO, Bill Johnson?

Photo Credit: Bill Johnson, president and CEO of TVA, announces that the Watts Bar Unit 2 is now commercially operational. PAUL EFIRD/NEWS SENTINEL

Editor: Maggie Gundersen

Written by: Sue Prent and Patrick Moore

California’s largest utility, Pacific Gas & Electric (PG&E), has a dubious safety record. PG&E customers have already seen their fair share of environmental threats, mismanagement and costly drama. PG&E has contaminated the groundwater at Hinkley (you remember Erin Brokovich), was on legal probation for killing eight people when one of its gas lines exploded in San Bruno in 2010, and then last year PG&E’s high voltage transmission line likely failed in high winds causing the Camp Fire that killed more than eighty others. The impacts of that wildfire are still felt to this day. In May 2019, NPR reported that, due to the Camp Fire, more than 1,000 families are homeless with most still searching for housing (temporary or otherwise).

“Even before the fire, there was already a severe housing shortage and a growing homelessness crisis in rural northern California. The November disaster peeled back the band aid, says Ed Mayer, director of the Butte County Housing Authority, exposing just how vulnerable rural communities can be.”

Now PG&E has declared bankruptcy in order to protect itself from more legal claims. And unfortunately, it is also the owner of California’s last nuclear power plant at Diablo Canyon, which is next to the San Andreas Fault. What more could possibly go wrong?  

In April 2019, PG&E hired a new CEO to turn their ship around: Ex-CEO Geisha Williams steered PG&E into bankruptcy, and still got a big raise, according to Michael Hiltzik of the Los Angeles Times (LA Times). PG&E’s Board of Directors must have their reasons for hiring Bill Johnson as the new CEO, but in our book, his abysmal record as an executive at other utilities certainly casts a long shadow on the PG&E Board’s hiring decision. In two previous roles as a CEO elsewhere, Bill Johnson has found himself at the center of some mighty questionable episodes within the nuclear power industry. 

Canadian sociologist and educational scholar Dr. Laurence J. Peter created The Peter Principle in his 1968 book with the same title. Dr. Peter believed that “an employee's inability to fulfill the requirements of a given position that he is promoted to may not be the result of general incompetence on the part of the employee as much as it is due to the fact that the position simply requires different skills than those the employee actually possesses.” Moreover, he believed that within corporations, as every employee rises in the hierarchy through promotion, they will continue to be promoted until they reach a level of respective incompetence. What rung has Mr. Johnson already reached in the Peter Principle hierarchy?

Early Days

With degrees in history and law, Bill Johnson came to the utility industry as a legal partner in a law firm where he represented utilities in rate cases as they worked to raise electric rates. Johnson therefore brought no scientific credentials nor particular environmental insight to his helmsmanship of a series of hapless utilities during the past twenty years. 

Crystal River 3 and Levy County

Mr. Johnson settled into the corporate end of the utility business in 1995 when he joined Carolina Power & Light. In 2005, he became President of its successor, Progress Energy and then to chairman and finally CEO in 2007. This placed him at the helm for two of Progress Energy’s signature atomic power industry failures: Crystal River 3 and Levy County. At Crystal River, a nuclear power plant that had operated for 36-years, the aging steam generators needed to be replaced. Rather than hire an expert firm experienced in performing this monumental repair, Mr. Johnson’s Progress Energy management team decided to do it themselves. Why? Well, perhaps because they had slept at a Holiday Inn Express! 

When Johnson’s inexperienced team cut into the containment, they cracked and delaminated the 130-foot-wide containment cylinder like an old Firestone 500 tire. The Progress team tried to fix the crack for five years, billing ratepayers for its 600+ person staff while Crystal River produced no power, until they finally threw in the towel and closed the plant forever in 2013. Then Mr. Johnson’s Progress Management team stuck the ratepayers with their huge write-off, according to The Post and Courier:    

“Electric customers paid for the mistakes: They’ve paid $381 million for the failed construction project. And they’re paying another $1.3 billion to shut down the plant. They’ll keep paying for the next two decades.”

The second Johnson/Progress Energy story occurred at a newly proposed reactor in Levy County. That fiasco really began with a piece of 2006 Florida legislation supported by Progress Energy that was intended to reduce the state’s dependence on foreign oil. Tucked away in the bill was a provision that allowed Florida utilities to pass along to ratepayers, in advance, the cost of building new atomic power plants. 

The scheme was allegedly supposed to “flatten the cost of increases over time ”in order to ease the shock of the anticipated higher utility bills resulting from the always costly new nuclear construction.

The Post and Courier reported

“The nuclear cost recovery clause, as it came to be known, would spur enormous interest in building new power plants and expanding reactors that were already producing power. That’s because the clause let utilities charge their customers for power plants before they produce a watt of electricity. This would lead to billions in utility spending, virtually all of which Florida electric customers will pay for.

This Florida experiment would launch a frenzy for nuclear power from Miami to South Carolina. It would also write the first chapter of a cautionary tale about the political power wielded by utilities, the financial risks of building nuclear power plants and the enormous costs they could leave electric customers with.” 

Bill Johnson’s Progress Energy was quick to take his utility to the ratepayer trough. 

In its hurry to cash-in on the anticipated nuclear power bonanza and with Johnson at the helm, Progress Energy committed Florida ratepayers to financing another new atomic power facility at Levy County, even though the power was not needed, and while Florida utilities blocked installation of solar power in the so-called “sunshine state”.

Progress Energy’s problems then became those of Duke Energy

When the “nuclear cost recovery clause” was revised in 2013, it was bad news for Duke Energy, which had acquired Progress; and it was bad news for the people of Levy County.

Thad Moore of The Post and Courier wrote:

“Duke said at the time: It was a tweak to the law that got the project started in the first place. Florida’s nuclear clause was changed that year to require that utilities prove their plants were still a good idea before construction started.

 A press release from Duke Energy only served to prove just how detrimental the legislative changes were for the issue of “cost recovery.” In other words, without the original clause intact, this translates to: it might get harder to charge customers. 

The Levy County project was abandoned

Progress Energy then merged with Duke Energy in 2012. As reported by Ivan Penn of the Tampa Bay Times, Duke seemed to have had second thoughts about completing the merger and even cited the failures by Progress Energy with Crystal River as one of its reasons for concern. While the merger went through, Johnson was let go within hours of the acquisition, although he received a $40+ million severance package just to go away. 

After recognizing Crystal River 3 for the albatross that it was, Duke shuttered the facility, once and for all, passing its loss along to its ratepayers. Duke also canceled Bill Johnson’s Levy County project, sticking ratepayers with another $1 billion in “advanced fees” with nothing to show for the effort. In the end, it is always the ratepayers who lose, first on Crystal River, then on Levy County, and finally via the $40+ million severance package to make Johnson go away.

At this point, the Florida Public Service Commission (PSC) got involved. Robert Trigaux of the Tampa Bay Times reported:

“the PSC endorsed a settlement that let Progress Energy $288 million refund to customers in exchange for ending a public investigation of how the utility brokethe nuclear plant. Now we'll never know for sure what happened at CR3.”

As part of the settlement agreement, Duke abandoned plans for the Levy County project, which had already burned through a billion dollars of public money without even a shovel in the ground!

Interestingly, on Feb. 6, 2013, Jim White gave some other verified details about Johnson on a blog site called Empty Wheel:

“Johnson was a sitting board member of the insurance group Nuclear Electric Insurance Limited when it began considering whether and how much to compensate Progress for its losses in the repair fiasco.”

A shroud of corporate mist surrounds the problems with Progress Energy’s Crystal River 3 plant and with the Levy County project. How much was Duke Energy told about the problems before its acquisition of Progress Energy, and how did this factor into Duke Energy’s apparently sudden decision to oust Bill Johnson from the helm only hours after Progress Energy was under Duke’s control? All we do know is that Johnson personally walked away $40+ million richer from the debacle he created.

The Chattanooga Times Free Press reported:

“Jim Warren, director of NC WARN in North Carolina, filed legal papers this week with the North Carolina Utilities Commission claiming that an April memo from Johnson to his Progress board shows he and Duke merger officials may have withheld information about the rising costs at the crippled Crystal River Nuclear Plant in Florida … In ousting Johnson, Duke officials cited "lack of transparency.” (in the aftermath of CR3)

 Though the exact details of Duke’s issues with Johnson are cloaked in corporate smoke and mirrors, the kind of “gentlemen’s agreement” that shields the reputation of feckless super-CEOs is all too familiar. Unlike lesser mortals who screw-upon the job, the men and women at the top are given fat severance packages, then, catapulted into the helm of some other unsuspecting entity, just so the corporate record can be wiped clean of their toxic imprint. It’s like a giant game of dystopian Monopoly, where everyone loses except those in charge.

Photo Credit: Monopoly Go With Top Hat

Suffice it to say that the situation at Crystal River 3 was the nexus of discord between Duke Energy and Johnson, whom, they seem to suggest, seduced Duke into what may have been an unfortunate merger with Progress Energy.

Despite his “lack of transparency,” Duke Energy was apparently prepared to pay Johnson handsomely to exit without fanfare.‘Your bad decision damages the business. Do pass ‘go.’ Do collect your salary, plus a fat bonus!’

Johnson’s Golden Parachute into the cockpit at TVA

Monopoly 'Top-Hat' Token

Monopoly 'Top-Hat' Token

Mr. Johnson’s Monopoly token next landed on the Tennessee Valley Authority (TVA), a public utility. As CEO of TVA, Johnson enjoyed all kinds of opportunity to dip his ladle in the endless trough of gravy that seemed to be there for the tasting.

 His six years at TVA were distinguished most by a taste for luxury travel at the ratepayer/taxpayer’s expense; a predilection that opened him up to more than mere criticism. From his earliest days at TVA, Johnson argued that the utility’s older helicopter posed potential “risks” and directed TVA to spend $6.95 million for an executive “Mercedes Benz-style” helicopter that previously belonged to Dallas Cowboys owner, Jerry Jones. That, however, is just the tip of the iceberg when it comes to Johnson’s taste for expensive aircraft. 

Dave Flessner of the Chattanooga Times Free Press uncovered

“TVA has spent more than $29 million on executive jets and helicopters to expand its corporate aircraft fleet under Johnson's leadership. An earlier audit by the Inspector General in March concluded that TVA's purchase of an $11.2 million corporate jet four years ago has not been cost effective.”  

Aside from his penchant for expensive helicopters and jets, Johnson had a noteworthy intersection with renewables during his time at TVA. Stephen Smith, executive director for the Southern Alliance for Clean Energy, was quoted in the Chattanooga Times Free Press as saying:

“Bill Johnson killed what could have been one of the biggest and most important renewable energy projects in America…”

The Chattanooga Times Free Press continued:

“The Houston-based Clean Line Energyhad proposed building a $2.5 billion transmission line to carry 3,500 megawatts of wind energy generated in the windy parts of Oklahoma and Texas to the Tennessee Valley and other parts of the Southeast.

But the developers ultimately had to give up on the 700-mile-long project when TVA refused to agree to buy the power, even though Clean Line claimed it would be priced lower than TVA's rates.”

Photo Credit: Mr. Moneybags

Despite the fact that, under Johnson’s supervision, TVA lagged behind other Southeast U.S. utilities in the move to renewables, Johnson pulled down a salary of $8.1 million in 2018, earning him the dubious distinction of being the highest compensated government employee in the entire country. And then there was the $12.8 million retirement package!

Out of the TVA frying pan, into the PG&E fire

What in Johnson’s long and less than illustrious career in energy makes him the right person to shepherd Pacific Gas and Electric through the minefield of bankruptcy,Camp Fire clean-up, and the overall ongoing safety challenges that lay before that horribly troubled utility?

Without disclosing the amount of Johnson’s compensation at PG&E, the company says that his pay will be comparable to what other utilities are paying their CEO’s, and that, according to Jim Gaines from Knox News Sentinel, the majority of his incentive pay “will be directly tied to safety performances and metrics.” Are those like the metrics PG&E held for his predecessor Ex-CEO Geisha Williams? 

That’s all fine and good, but California has higher environmental expectations of its corporate citizens than does the Coal Belt that is home to the TVA and Progress Energy; and how can California ratepayers, already paying for PG&E’s past mistakes, be expected to stretch to Mr.Johnson’s taste in luxury travel by helicopter and private jet, during his tenure at TVA? A little creativecost-cutting, perhaps? Let’s just hope those costs are not cut by reducing repair costs at Diablo Canyon like Mr. Johnson tried to do at Crystal River 3!

Duke Energy and the late Progress Energy know all too well about how expensive Mr.Johnson’s brand of “cost-cutting” can prove to be. And, it’s not as though PG&E doesn’t already have its own recent CEO compensation scandal going on. Outgoing PG&E CEO, Geisha J. Williams, who only took the reins in March 2017, resigned on January 13 of this year, after piloting the company into bankruptcy, following California’s deadliest wildfires (Camp Fire) that were the result of PG&E’s negligence of basic maintenance issues.

For her trouble, Williams walked away with quite the cash accumulation:

“…according to a corporate disclosurePG&E filed last week, Williams received a handsome raise for 2018 — 8.1% overall, and nearly 9% in base salary, outside of incentive pay.The utility said that almost all of Williams’ compensation — about 90% of it — was “tied to corporate performance.”

But the LA Times also observed,

“PG&E lost $6.9 billion on revenue of $16.8 billion in 2018, compared with a profit of $1.7 billion on revenue of $17.1 billion the year before. Its shares closed out the year at $23.75, down more than 46.5% from their price when the year opened.”

In light of that performance history, Johnson’s resume seems made-to-order for PG&E’s “drop-the-ball-grab-the-money-and run” corporate culture.

Why would anyone think that PG&E can be trusted to do the right thing, with their history of running in the wrong direction? The Johnson pick for CEO is even more reason to question PG&E’s competence to manage such a vast utility conglomerate with so much deadly potential.

It’s a highly questionable choice that other utilities have made before. Unfortunately, as we know all too well: the nuclear power industry is encouraged to work in mysterious ways. Heads they win; tails we lose.

… Third Time’s A Charm?