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FirstEnergy's CEO generates praise for work under pressure

09/14/03

Tom Breckenridge
Plain Dealer Reporter

With the game on the line and the crowd in a frenzy, Pete Burg was the guy with the ball.

Burg was the consummate team leader and basketball point guard, picking the right time and place to deliver deft passes to his University of Akron teammates in the late 1960s.

Thirty-five years later, H. Peter Burg is the focus of a different frenzy. This time, there's no one to pass the ball to.

Burg, 57, is sitting on the hottest corporate seat in Northeast Ohio: He is chairman and chief executive officer of FirstEnergy Corp., the Akron-based utility giant that one U.S. congressman has branded as the "culprit" for the Aug. 14 outage that left 50 million people powerless.

A binational investigation of the blackout has yet to establish any cause but has identified events beyond FirstEnergy's control as factors in the outage that spanned from New York to Michigan to Canada.

But multiple mishaps in FirstEnergy territory - including tripped transmission lines and balky control-room computers - have made the utility a focus of blackout investigators.

These are rough times for Burg and FirstEnergy, already struggling with fallout over last year's shocking discovery of a hole in the reactor head at the Davis-Besse nuclear power plant.

The troubles have pushed Burg into the spotlight, a place where critics of his leadership are taking aim, a place where the hard-working, unassuming executive does not want to be.

He declined to be interviewed for this story. His first public comments came 21 days after the blackout, during a Sept. 4 hearing in the U.S. House. Burg granted half-hour interviews to local newspapers the next day.

Colleagues describe Burg as unflappable, a leader who sees himself as part of a team rather than an autocrat. He is a quick study with numbers and with people. Community leaders hail Burg as a behind-the-scenes civic powerhouse in Northeast Ohio, particularly in his hometown of Akron.

Burg, who earned $1.79 million last year, also gives generously to his favorite causes, and to politicians who could affect his company's bottom line. He considers his civic pursuits a payback to the community and institutions that influenced his formative years in the working-class neighborhood of Goodyear Heights.

Lifelong buddy Frank Jessie, the former athletic director at Tallmadge High School, said Burg was a sports nut and mature beyond his years growing up.

As a fourth-grader at Annunciation parish school, Burg got to ring the lunchtime bell, an honor bestowed on the most responsible students, Jessie said.

Burg and Jessie attended St. Vincent High School, now called St. Vincent-St. Mary. Burg starred in basketball and football, hung out with friends, screeched rock 'n' roll from transistor radios and started dating his future wife, Eileen.

Even when "it was sort of not cool to study," Burg hit the books, too, Jessie said.

"His character was beyond reproach," said Jessie. "Pete wouldn't break a 20 mile-per-hour speed limit in the desert at 4 o'clock in the morning."

At the University of Akron, Burg came off the bench as an underclassman to play a role in several championship basketball teams.

He started at guard his senior year on a squad known as "Tony's Tots," because no one was taller than Burg's own 6-foot-2 on head coach Tony LaTerza's team, recalled Ken MacDonald, retired sports information director for the university.

At crunch time, Burg had the ball. "He didn't make a mistake; he could handle it," MacDonald said. "That was Pete."

Burg's achievements caught the eye of the local electric utility, then known as Ohio Edison Co., and Burg started work as a financial-analyst trainee before he had graduated with his business degree.

His ascent was steady. He was elected treasurer in 1974 and by 1989 was the company's chief financial officer.

Burg cut his teeth on day-to-day utility operations when he served as interim president of an Ohio Edison subsidiary, Pennsylvania Power Co., in the mid-'90s, said Willard Holland, Burg's predecessor as FirstEnergy's chairman and CEO.

"Pete's an excellent manager," said Holland. "He accomplished his goals with and through people, as opposed to giving orders."

Burg succeeded Holland as CEO in April 1999 and added the chairman of the board title in January 2000.

During his rise to the top, Burg took on a number of civic pursuits.

He has presided over the University of Akron's national alumni association and has helped raise money for a $250 million makeover of the urban campus, college President Luis Proenza said.

"He's a sterling human being," Proenza said. "Pete's somewhat low-key, and that belies a great intellect."

Serving the community has been a hallmark of FirstEnergy's top managers, and not just because it builds good will for the company, said William Considine, president of Akron Children's Hospital. He has known Burg for 30 years.

"There's a component of good citizenship that companies should embrace," Considine said. "Pete doesn't have to be sold on that. He believes in it."

He is Gov. Bob Taft's regional appointee to Akron Reads, a program encouraging businesses to supply volunteer tutors to their local grade schools, and serves as chairman of Team NEO, a collaboration of Northeast Ohio chambers of commerce.

Akron Mayor Don Plusquellic said Burg has pitched in during the city schools' last three money-issue campaigns.

"He's been a home-grown guy," Plusquellic said. "A lot of CEOs are just passing through, especially in medium-sized cities. He's really had a great love for this community."

Burg carries political clout, too, and not just because he leads a Fortune 500 company.

He and his wife have contributed more than $38,000 to politicians and political action committees on the national level since 2001, according to Political Money Line, which tracks money in politics.

The Burgs aren't hard-liners, at least when it comes to personal donations: Recipients include former Akron-area Rep. Tom Sawyer and Rep. Sherrod Brown, both Democrats, and the Bush-Cheney campaign committee.

At the state level, Burg has donated $21,000, mostly to Republicans, since 1999, according to Ohio Citizen Action.

Considering his pay, Burg and his wife do not live extravagantly. The couple, who raised three children, have a home in Stow valued at more than $300,000, records showed.

Burg is the kind of neighbor who will swap tools and work in his yard, said neighbor Don Vought.

"He's a conservative, down-to-earth guy," Vought said. "You'd have no guess he was head of a major corporation."

FirstEnergy, with Burg at the helm, produced a record amount of electricity, and healthy earnings, in 2001.

Navigating a deregulated and more competitive industry, FirstEnergy bought GPU Inc. of New Jersey, an $11 billion deal that doubled the utility's customers to 4.3 million in Ohio, Pennsylvania and New Jersey.

The company took on lots of debt in the deal, not necessarily a problem given annual sales of $12 billion.

But in March 2002, workers discovered a hole in the reactor head at Davis-Besse, and FirstEnergy has not been the same. The utility is approaching $500 million in costs at the idled nuclear power plant.

Adding to FirstEnergy's woes, a deal to sell four Ohio plants for $1.5 billion fell through. And FirstEnergy recently stunned the investment community by announcing it would restate earnings for the last five quarters, because of recommended accounting changes.

Financial analyst Dot Matthews believes bad management, and not bad luck, is the problem.

She and fellow CreditSights analyst Andy DeVries have called for new management at FirstEnergy.

"The way to repair relationships with regulators, investors and Wall Street is to start from scratch," Matthews said.

She believes FirstEnergy's problems go back to its creation in 1997, when Ohio Edison bought Centerior Energy Corp., the holding company for Cleveland Electric Illuminating Co. and Toledo Edison.

Energy analyst James Halloran with National City Wealth Management agreed that Ohio Edison bought a lot of problems with Centerior, including Davis-Besse.

"It was a utility in severe need of a management upgrade and got it through Ohio Edison," Halloran said.

Halloran said Burg should be credited for not taking the troubled paths of other utilities since deregulation. That includes energy trading, investing overseas and building expensive power plants.

FirstEnergy, like other utilities trying to cut costs in a deregulated market, may have cut too far, Halloran said.

Since the blackout, union leaders have said the company has cut too deeply into the ranks of skilled workers who oversee transmission lines and power plants, a charge the company disputes.

The Aug. 14 blackout raised many questions about FirstEnergy. Burg refused to answer any of them, letting his public-relations department do the talking until his cable-broadcast appearance before a U.S. House committee on Sept. 4.

Burg's prolonged silence was a mistake, according to Jeffrey Christian, the chief executive at Christian & Timbers in Cleveland, an executive-search firm.

Burg should have been fielding questions and reassuring customers as soon as the power came back on, Christian said. The hands-on approach - displayed expertly by former New York Mayor Rudolph Giuliani on Sept. 11, 2001 - calms fears and helps rebuild public confidence, Christian said.

But that's not what utility executives are trained to do, Christian said. "He has to spend more time with government and regulators than with his customers," Christian said.

When Burg did appear in public, before the House Energy and Commerce Committee, the balding, bespectacled CEO gave cordial, cautious answers.

Burg looked grim, however, when Rep. Ed Markey, Democrat of Massachusetts, grilled him on cybersafety at FirstEnergy plants and accused him of shifting the blame for the blackout.

"FirstEnergy should not have a license to drive a car, much less" operate nuclear power plants and transmission systems, Markey scolded.

Burg shifted uncomfortably in his seat and looked down during Markey's critique. Burg raised his hand to respond, but the hearing quickly came to an end.

Back in Akron, Burg's friends were furious. "It was a low blow, political grandstanding," said Proenza, the University of Akron president.

Holland, the retired FirstEnergy CEO, said Burg and his management team are doing a good job handling the crisis.

"They are dealing with highly technical kinds of issues," he said. "They want to be careful about what they say. They probably still don't have as much information as they need to be totally forthright."

Those who watched Burg on the basketball court said he's displaying the same traits now.

"Being a leader, being a cool head in a frenzy, that's Pete," said Considine, of Akron Children's Hospital. "Pete's a stand-up guy. He's not dodging anything and he's not pointing the finger of blame."

To reach this Plain Dealer reporter:

tbreckenridge@plaind.com, 216-999-4695


2003 The Plain Dealer. Used with permission.
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