March 29, 2024

Power Struggle

Jacksonville's public utility JEA and the fight to privatize it

Amy Keller | 2/26/2020

However, an update that JEA provided to credit rating agencies last August stated that the utility would pursue a “traditional utility response” if its privatization efforts failed. In that case, JEA would continue to deleverage its balance sheet, aiming to make the utility’s electric system debt-free by 2030, while also pursuing “all applicable and possible revenue-generating initiatives.”

Under the “traditional” response scenario, the utility might have to raise electric rates 26% and cut 574 jobs by 2030 to continue making its contribution to the city — or raise rates by 13% and eliminate its contribution to the city, the document stated.

Amy Zubaly, executive director of Florida Municipal Electric Association, says her group has no position on JEA’s future business model but “objects strongly” to JEA’s assertion that public power entities are “ill-suited to function as sustainable modern electric utilities” because of governmental constraints.

"We have utilities providing community solar programs. Utilities can get into providing rooftop solar if they want. We’ve got member utilities — in Gainesville and Ocala — that provide broadband service. There’s electric vehicle charging stations going up, and utilities are coordinating that. So I’m not sure what they’re being hamstrung from,” says Zubaly, who represents 32 of Florida’s 33 public power utilities. (She says JEA dropped its membership in the group last October after FMEA’s board sent Zahn a letter asking him to set the record straight on his “mischaracterization” of public power.)

Across the county, other municipal utilities are pursuing innovative programs to strengthen their bottom line. New York Power Authority, for instance, is moving forward with a plan to become the nation’s first fully digitized utility. In California, Sacramento’s public power company has been focused on transportation and spurring the adoption of electric vehicles by offering customers a choice of cash incentives or free electric car chargers.

Closer to home, the Orlando Utilities Commission, Florida’s second-largest municipal utility, has partnered with Orlando International Airport to install more than five dozen electric vehicle charging stations and build a floating solar array on airport property. The Orlando utility is also the anchor tenant in a 1,200-acre solar project with the Florida Municipal Power Agency (FMPA) and NextEra Florida Renewables that when finished will provide clean electric energy to its own Central Florida customers and to customers of 11 smaller municipal utilities across the state.

“Most U.S. cities that own their electric utility are making progress to meet changing dynamics while maintaining their strong financial position. So the JEA effort to privatize was unique,” observes Dan Aschenbach, a clean-energy consultant who spent 36 years evaluating the electric industry for Moody’s Investors Service.

Like Zubaly, Aschenbach doesn’t view the public utility business structure as a stumbling block. “The municipal business model is actually seen as a strength to tackle the industry challenges because of its easier ability to change rate policies, promote energy efficiency and maintain lower cost. Municipal electric utilities are about 12% lower cost than the private sector,” he says.

Issues remain

Going forward, JEA’s biggest hurdle may prove to be its debt obligation to Plant Vogtle, a troubled nuclear expansion project in Georgia. JEA projected its portion of construction costs would be about $1.4 billion when it first invested in the project in 2008. Delays and cost overruns have swelled JEA’s current projected tab to about $2.47 billion through 2043.

So far JEA has been unsuccessful in its efforts to get the courts to void its agreement with the Municipal Electric Authority of Georgia, which is building Plant Vogtle. Litigation between JEA and MEAG is ongoing.

Meanwhile, some suspect the battle over selling JEA may not be over yet.

“This popped up once a couple years ago, and when it got put down, it popped back up,” Al Ferraro, a Jacksonville City Council member, said at JEA’s emergency board meeting on Christmas Eve. “I feel like this is a rerun that I’ve been through, except this has gotten worse, and I’m just afraid that if we continue on the path, then it’s going to be more money, more everything. We want to fix this problem.”

 

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