RALEIGH Progress Energy CEO Bill Johnson condoned a culture that clashed with the one he was intended to lead at Duke Energy, Jim Rogers said Tuesday. Johnson wasn’t clear about the status of insurance coverage for a crippled nuclear plant. Progress’ earnings had slumped.

Under skeptical questioning by a clearly irritated N.C. Utilities Commission, the Duke CEO depicted a cascade of events leading to Johnson’s surprise ouster hours after the $32 billion merger closed July 2.

The hearing lasted four hours, and Rogers needed every bit of it to try to assuage commissioners who felt misled after being told for more than a year that the Raleigh-based Johnson would lead Duke.

“When I boil all this down, it was a loss of confidence in Bill, and each director had different reasons, and this accumulated over time,” the 64-year-old Rogers, sitting erect in a dark blue suit and red tie, told the commission.

A corporation reserves the right to choose its leaders, he repeated throughout the afternoon.

Commissioners hammered Rogers on when and how the Duke board decided to oust Johnson, 58, with a separation package, pension and stocks worth up to $44.7 million. They probed Rogers’ relations with Duke and Progress board members.

They demanded to know why commission members got no warning of the change.

“The decision was not made until it was made,” Rogers replied.

Rogers said Duke’s board felt legally obligated to close the merger by July 8, after which either company could walk away from the deal. Directors first clued him to their concerns about Johnson on June 23, he said, but felt they couldn’t ask for Johnson’s resignation until the merger was sealed.

“Our intention was entirely consistent with what we told this commission, ” Rogers said.

Rogers was to become the new Duke’s executive chairman, focused on strategy as Johnson ran the combined companies. Duke’s old board gave him a retirement gift as CEO in December, he said, and Rogers joined several nonprofit boards.

But in May, he said, the board began holding closed sessions without Rogers. Those meetings were about growing doubts over Johnson, Rogers said he later learned.

Rogers described a corporate culture at Progress under Johnson that didn’t square with Duke’s. He said Johnson’s leadership style had been described as autocratic and discouraging of other points of view.

There was also concern, he said, about a lack of transparency from Progress and access to information.

“The behavior of Progress executives, the behavior and comments of Bill Johnson, had a chilling impact on many of the top executives at Duke in terms of whether they were free to speak out on their concerns for fear of retaliation,” he said.

Johnson defended

Raleigh lawyer Wade Smith, representing Johnson, issued a statement highlighting Johnson’s record at Progress.

“Bill Johnson has a distinguished record of leadership at Progress Energy and was looking forward to the opportunity to lead the nation’s largest utility,” Smith said. “The fact that he is held in the highest regard by his peers in the utility industry and in the North Carolina business community speaks volumes about his leadership and business capabilities.”

Alfred Tollison Jr. and John Mullin III, two former Progress Energy directors who voted for the merger last year and were outraged by Johnson’s ouster, decried Rogers’ depiction of Johnson.

Mullin derided the issues raised by Rogers as “completely bogus.”

Tollison said: “I would not describe him...as an autocratic leader. He really was beloved by employees of Progress Energy.”

Rogers told the commission it eventually became clear that the smaller Progress “saw this as a takeover by Progress.”

Commissioner Susan Rabon said she struggled to “do the math” with that depiction. Duke has about 18,000 employees, Progress 11,000. Eleven Duke directors will sit on the new board, seven from Progress. Of the top 70 executives, about 25 will come from Progress.

Rogers said that Duke directors became worried that Progress had decided to repair, rather than potentially retire, the crippled Crystal River nuclear plant in Florida. Progress has estimated repairs would cost up to $1.3 billion, and Rogers said Duke learned late that negotiations were still under way with insurers.

He noted that the operation of three of Progress’ five nuclear reactors has resulted in heightened levels of regulatory scrutiny.

On June 24, in a meeting with lead director Ann Maynard Gray and director Michael Browning, Rogers said he was asked to stay as CEO and agreed.

The merger closed at 4:02 p.m. July 2, after the stock market closed. After another closed session, the board asked for Johnson’s resignation in a 10-5 vote.

While both Johnson and Rogers testified earlier before the board about their new roles at Duke, those were not spelled out in the commission’s order approving the merger.

“It is solely in the discretion of a corporation to decide the leadership of that corporation,” Rogers said.

3 ex-Progress execs resign

Duke announced late Tuesday the resignation of three senior executives from Progress: John McArthur, executive vice president of regulated utilities, chief administrative officer Mark Mulhern and Paula Sims, chief integration and innovation officer. That leaves just two Progress executives, fossil and hydro generation chief Jeff Lyash and Progress Carolinas president Lloyd Yates, joining Duke’s top ranks.

Commissioners pressed Rogers on Duke’s commitment to maintain a “substantial presence” in Raleigh by the Progress Carolinas utility, which will continue to operate for some time under the Duke umbrella. Rogers said he envisioned 800 to 1,000 employees in Raleigh.

“Have we as the commission been misled or, as others have said, duped in this process to get approval of this merger?” Rabon asked. “I hope you an understand that I may not find your commitment as reassuring as I would have several weeks ago.”

Commissioner ToNola Brown-Bland asked about Duke’s commitment to Raleigh: “Do we have your word that this area does not need to be concerned about a great sucking sound of jobs leaving?” Rogers promised there would be no such scenario.

“I strongly believe this commission has not been misled,” he said later. “We have been open and crystal clear every step of the way.”

Commission chairman Edward Finley noted that Duke will be back before the commission this year asking for rate increases. “We have to maintain an element of trust,” the chairman said.

Rogers repeatedly emphasized that the CEO change won’t affect the expected financial benefits of the merger, including the $650 million in fuel savings to be passed to Carolinas customers.

State law allows the commission to amend or even rescind past decisions, including its June 29 approval of the Duke-Progress merger. Legal experts say it’s unlikely the seven-member panel would try to take back its approval, but could add new conditions such as a more explicit guarantee of a large business presence in Raleigh.

Rogers is scheduled to address Progress employees Wednesday morning in a downtown Raleigh Marriot hotel.

After the hearing, chairman Finley said Rogers’ responses were “informative.”

“We learned a lot – raised some questions, answered some questions,” Finley said.

The state attorney general has opened a separate investigation, directing Duke to turn over memos, emails and other documents.

Johnson could be called next

Finley hinted after the hearing that the commissioners will mull directing Johnson to take the stand to tell his version of events.

Such a decision would prolong the public drama that drew national media and an overflow crowd to the commission hearing room, requiring redirecting several dozen people into a side room to watch the hearing on a live video feed.

“We got part of the story,” Finley said after the meeting. “Stay tuned.” (Raleigh) News & Observer staff writer John Murawski and Observer staff writer Ely Portillo contributed.