Progess Energy generates fresh optimism among employees and reliability for customers three years after the synthesis of Florida Progress and Florida Power.
By ROBERT TRIGAUX
Published November 30, 2003
By the late 1990s, Dick Korpan, chief of St. Petersburg's Florida Progress Corp., had grown so disconnected from his power company's increasingly unhappy employees that he shunned community involvement. Extra security appeared in the executive suite. He appeared at some functions with personal guards. He started driving an armored BMW. For awhile, it was widely rumored he carried a gun.
A few months ago, Bill Cavanaugh - chief of Progress Energy, the North Carolina owner of Florida Progress since Nov. 30, 2000 - flew to St. Petersburg for one of his regular face-to-face employee meetings, called "2 C's," to hear "compliments" and "concerns."
What a difference in corporate culture is emerging at Progress Energy. Today marks the three-year anniversary of the acquisition of Florida Progress and its utility Florida Power by Carolina Power & Light. The combined company is now known as Progress Energy.
Other than making sure customers' lights stay on, Progress Energy's No. 1 goal these past three years has been to forge a fresh and more optimistic corporate culture.
It was desperately needed. By 2000, Florida Progress viewed its glass as half empty, its executives doubtful their company had a future. To Carolina Power & Light, a company that actually had smaller revenues and fewer employees, its glass appeared half full. That difference in company attitudes pretty much separated the buyer from seller.
Building a new culture does not mean forcing Florida Progress to mimic how things work at the Carolina power company, though it may seem like it at times. Both the Florida and the old Carolina corporations are evolving, trying to create a single sense of values and outlook for a merged company feeling its way in the turbulent power industry.
By 1999, when Carolina Power first began sniffing around Florida Progress, the St. Petersburg company's culture was in tatters. Demoralized employees mistrusted their top executives after years of aggressive job layoffs and cost cutting. Even as Florida Progress CEO Korpan preached that the company could be a contender on the national level, the company was privately wooing potential buyers.
Progress Energy now boasts things are getting better. And they are. But almost anything would be an improvement.
"It's like turning a battleship," said Bill Habermeyer, a retired Navy rear admiral and Progress Energy Florida's top executive in the state.
Among many Florida employees, especially those in administrative and managerial positions, morale is up. They say they like the openness of top executives, the emphasis on training and career opportunities, and a feedback system that helps measure performance and determine pay. Most of all, they like a newfound sense that Progress Energy really wants to grow and compete.
Little of that vision existed in the last days of Florida Progress and its Florida Power utility. All those roughshod years of cuts in people and services were supposedly intended to make the Florida company leaner and more competitive. In hindsight, it seems company executives and directors were more focused on prettying up the Florida Progress bottom line for a top-dollar sale.
Since the sale, there have been tangible improvements. For its Sunshine State customers, Progress Energy Florida points to slow but steady gains in reliability and service. Both the average time and number of power outages are declining, according to figures reported to state regulators.
Along with the successes came some notable stumbles. Shortly after buying Florida Progress, Progress Energy hinted it would showcase its friendlier style by slashing the high electricity rates that Florida Power charged its residential customers. Instead, state regulators later rejected Progress Energy's proposed refund and insisted on a bigger cut in rates. The company looked as if it had tried to wriggle out of its promises and shortchange its customers.
In a May 2002 deal, rates dropped from a pricey $91.65 to a far more competitive $81.62 for 1,000 kilowatts of electricity. (It was nice while it lasted. With higher costs for fuels used to run its power plants, Progress Energy Florida's electricity rates are rising again and will reach $89.11 in January.)
In an even more embarrassing matter, the upscale town of Winter Park - fed up with years of unreliable electric service - voted two months ago to oust Progress Energy as its long-time power provider. That just isn't supposed to happen to the second largest utility in modern-day Florida, even if Progress Energy claims it lost Winter Park's trust because of the "old" Florida Power's lousy service.
And while Progress Energy earns points for improving the attitude of many of its employees, not everyone is happy with the regime change of November 2000. Some workers feel Florida Power and its workers could have survived and prospered if only top management wasn't so eager to cash out.
"Florida Power was a company that was about the same size as the buyer," said employee W.O. "Butch" Enyard, business manager for System U-8 of the International Brotherhood of Electrical Workers, which represents about 1,900 union linemen at Progress Energy Florida. "Our employees wanted to know why we did not purchase them."
An intriguing question. But one that by 2003 is no longer worth a kilowatt. From its soon-to-be-completed, $100-million headquarters in downtown Raleigh, N.C., Progress Energy now controls the profits, the direction of corporate economic development and the fate of the dominant electric utility in central Florida.
It's not easy to get nostalgic about a power company. Still, Florida Power had headquarters in St. Petersburg and operated independently for more than 100 years. For much of that time, it was the largest business in the Tampa Bay area and a key driver of the regional economy. To honor its century in business, Florida Power even promoted itself not long before its sale with a new slogan: Count on Us. How ironic.
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If Florida Progress ultimately lacked vision, there was a time when Carolina Power & Light was a close cousin.
In the late 1990s - before Florida Progress was acquired - Carolina Power showed little drive to become a big player in the coming era of power deregulation. Duke Energy, a hotshot and aggressive competitor in North Carolina, routinely cuffed Carolina Power in profits, initiative and Wall Street favor.
It seemed almost out of character for Carolina Power to pursue a large and distant Florida deal and take on heavy debts, which it is still struggling to pay off, in order to buy Florida Progress.
Then a series of industry events rapidly altered the pecking order of power companies.
California power blackouts spurred a national backlash against both industry deregulation and those power companies pushing for change. Houston's Enron, the company most identified with deregulation, collapsed into bankruptcy amid allegations of massive fraud. And the recent record power blackout, blanketing the Northeast from Ohio to New York and parts of Canada, reminded everyone how badly the nation's aging electricity grid needs serious attention.
The combined effect on Progress Energy? The once stuffy power company looked almost brilliant for avoiding many of the industry problems that damaged such over-extended competitors as Duke and even Tampa's TECO Energy.
In a late summer interview at the St. Petersburg Times, Progress Energy chairman and CEO Bill Cavanaugh talked about reshaping his company's corporate culture. It is a task the Raleigh executive and former Navy officer calls his "biggest challenge." A few excerpts:
Q. What did you find at Florida Progress and Florida Power after you bought the company?
Well, one issue with Florida Progress employees was that trust and credibility of management was not there.
Q. How did you deal with that?
A change in culture takes a lot of face time with employees. I am down here a lot. People started by asking, "What's in this for me?" And we told them good performance will mean rewards and recognition. Some of the Carolina Power employees also seemed surprised by some changes in culture. We're getting a lot closer to becoming one culture.
Q. How did Florida Power workers respond?
Before, they had been told they were the best in the business. So I asked them: How do you know? For example, in the area of safety, the Florida company was not a leader. We had to set some benchmarks. My understanding is that when Florida Power surveyed its employees in the early 1990s it did not like the results. So it simply threw them away.
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That was not the way things used to be. Florida Progress once had great aspirations. Its employees were dedicated. Its leaders were among the most respected and influential in the region.
By the early 1990s, a shakeup began. Industry experts warned deregulation of the monopoly-structured electricity business was coming. Entrenched utilities with high costs would be swept away by high-performing rivals.
At the time, Jack Critchfield ran Florida Progress. Like other industry CEOs, he started preaching the need to streamline. He warned employees that the business was no longer one big, comfy family. Jobs were no longer guaranteed for life. He recruited the tougher Dick Korpan from a San Diego power company. His job as the No. 2 guy was to handle the nastier cuts in jobs and company expenses that began in earnest by the mid '90s.
Change came at a heavy price. While layoffs and job insecurity soared, Critchfield and Korpan fended off shareholder and employee criticism of their bigger paychecks. By the late 1990s, Korpan took over as CEO from the retiring Critchfield. With management credibility already weak, Korpan pitched the idea that Florida Progress could be a survivor of the coming industry consolidation.
Out of the blue, Florida Progress became a friendly takeover target of Scottish Power. The deal, rejected by the corporation from Scotland, shook the faith of many. Employees thought they had been hoodwinked by management. Korpan, never big on mixing with employees or the community, adopted a bunker mentality.
(After selling Florida Progress, Korpan retired with a cash bonus of $15-million, plus retirement pay of more than $700,000 a year.)
Is that any way to run a public corporation? It certainly set the tone for the August 1999 announcement that Carolina Power would acquire the Florida company for $5.3-billion. Fifteen months later - three years ago today - the deal was completed.
By late 2000, just eight of the combined company's top 51 positions would be filled by managers from Florida Progress or Florida Power. At that time, Carolina Power vice president Bill Habermeyer relocated and took charge of the Florida operation.
Habermeyer may be the imported point man for Florida, but he is making a serious effort to be involved at many levels of the community, region and state. And unlike predecessors who grew too defensive at Florida Progress, Habermeyer spends a lot of time with his employees.
Last week in St. Petersburg, he sat down to talk about the company. He has relocated his office from the posh and remote top floors of the Bank of America tower to Progress Energy Florida's more modest headquarters one block away. When I was ushered into his office, the executive was sipping coffee from a St. Petersburg Times mug. On his coffee table was a copy of A Sacred Trust, a book about this newspaper. Habermeyer grinned at his props. Who says ex-Navy guys lack a sense of humor? Some excerpts of our interview:
Q. What issues did you focus on after you first arrived?
I chose the area of safety. It's important to people. The Florida company did not rank in the top industry quartile by safety measures. We provided training. We sent drivers to driving school. We introduced "preflight" measures so drivers would inspect their vehicles before using them. Some injuries occurred when vehicles were backing up. When two people are in a vehicle, one now gets out and helps guide the vehicle. When there is only one person, the employees must first get out, circle the vehicle and check the area before backing up.
Q. So safety is improved?
We are always pushing the bar up. Once we reach the top quartile, we'll aim for the top quintile, and so on. We want to avoid complacency. You will typically start going the wrong way if you level off your performance. Like the Bucs.
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When Florida Progress was sold three years ago, the company employed 5,000. Today, Progress Energy Florida employs 4,770. That's a difference of only 230 workers, reflecting mostly cuts in administrative jobs now handled in Raleigh.
Still, union leader Butch Enyard suggests there's more to those numbers than meets the eye.
"We have just about the same number of people in the field as we did in 1990, but we've added about 400,000 customers," Enyard said.
That means more demanding field work to keep up the level of service. And more overtime. Late last year, Florida Power's unionized workers accepted a three-year contract that provides for raises of at least 3 percent each year.
The nearly stable number of employees in Florida might suggest the acquisition three years did not cause much turnover. But many employees of the old Florida Progress and Florida Power have left the company, and even the industry.
Other veterans of the old Florida Progress have relocated to the company's headquarters in Raleigh. Greg Beuris spent 17 years with the St. Petersburg company in financial and investor relations work. When the deal was completed on Nov. 30, 2000, a Friday, Beuris learned he would be working in Raleigh the following Monday.
At 47, he's stayed on as Progress Energy director of financial operations because, he said, the company is committed to training and career development. He's also a fan of the company's focus on performance and feedback.
"Those are the kinds of things I see here that are different from what I saw in Florida," Beuris said. "That's a good example of the difference in culture."