Jacksonville City Council members questioned senior JEA leaders Dec. 9 about a “widening credibility gap” and its yearlong strategic planning process that led the utility to research a sale.
During the third in a series of Council fact-finding hearings into the process, members questioned the speed at which the JEA board and management moved from exploring city Charter and state Constitutional changes that could allow the public utility to add new business and sources of revenue to releasing an invitation to negotiate with potential buyers.
Council Vice President Tommy Hazouri said that during the call to privatize JEA in 2018, JEA CEO Aaron Zahn spoke with him about the need for Charter changes, but those conversations did not materialize into firm proposals from JEA officials.
Zahn and other JEA senior leaders have said local and state regulations prohibit the city-owned utility from entering certain markets, such as direct residential solar generation.
Hazouri and other Council members said Monday that Zahn had not approached them or the state Legislature’s Duval delegation with specific laws or regulatory changes to help JEA compete with private sector companies.
“I can’t speak for the Council, but if it was going to make a difference in giving them more ability to expand the JEA, to help the ratepayers ... I think they would have known we would have been supportive of anything to help the JEA. Instead, they’ve hurt themselves and they continue to do that,” Hazouri said in an interview after the meeting.
JEA Board Chair April Green asked Council to “press the restart button” on the process. She used the public comment section of the meeting to make her first appearance in front of the Council to speak about the possible sale.
She told Council she was “a little taken aback” by the knowledge that JEA officials did not approach city policymakers about the Charter changes
“To hear Councilman Hazouri say there were conversations about Charter changes and things like that and he did not hear back to thoroughly flesh that out is very disappointing,” Green said.
Hazouri replied, “it’s true, though.”
The scenarios
JEA COO Melissa Dykes and CFO Ryan Wannemacher appeared at Council to detail five scenarios that are being explored by JEA and to explain the utility’s financial outlook.
Dykes said that despite negotiations with nine companies interested in buying JEA, other possible structural changes, such as a community-owned cooperative, a publicly traded company or leaving JEA in its current form, are being considered.
Council member Aaron Bowman, who had previously suggested the Council reserve judgment on the process until the JEA board makes a recommendation, asked Dykes why the other scenario research was not completed before exploring the sale.
“Why did we jump to the ITN so quickly, and what is the plan when we have an offer?” Bowman said.
Dykes said privatization “takes the longest” to develop and JEA senior staff will continue to present the other options to the JEA board in the coming months.
JEA’s Dec. 17 meeting agenda states an overview of the community-owned co-op is planned.
Council member Brenda Priestly Jackson added that changing the JEA board’s July 23 meeting agenda to include a vote on the invitation to negotiate without prior notice added to the Council’s questions of the process’s credibility.
“It does not mean your ideas were bad, but it was not timely noticed,” Priestly Jackson said. “We don’t know what you did from the end of the meeting in June to the meeting in July. We don’t. It’s not reflected in the minutes. We can’t check because you left with one guidance — pursue Charter changes — which would have had a level of transparency and openness. But you decided to forgo that for purposes of expediency, I believe.”
Financial outlook
Wannemacher and Dykes said that despite JEA’s ability to pay down nearly $800 million in debt since 2018 and plans to reduce by an additional $600 million between 2020 and 2026, any outcome in the strategic planning process likely will include base rate increases for customers.
Wannemacher said the utility would have increased the base rate in 2020 had the utility not paid down the debt.
Council member Randy DeFoor questioned the positive financial outlook Wannemacher and JEA officials presented to bond rating agencies in contrast to the strained 10-year outlook presented in the utility’s strategic planning process.
“In the spring of 2018 when we had the same sales issues, the same debt concerns, the same Plant Vogtle, you represented to Wall Street a 10-year financial projection that showed a very healthy future with normal industry challenges,” DeFoor said. “Then just a few months later, all of the sudden, there’s a death spiral. What happened?”
Wannemacher said JEA updated its sales forecast with its contracted auditor McKinsey & Co. to include industry trends and technology that will add energy efficiencies and declining sales.
He said the projections provided to the rating agencies did include rate increases, but they looked at the data and JEA did not “see a path to growing our way out of this from a sales standpoint.”
Plant Vogtle
Dykes and Wannemacher said the financial impact of JEA’s 20-year contract to use energy from Plant Vogtle 20 miles south of Augusta, Georgia, also plays a role in the need for restructuring.
JEA signed a 20-year power purchase agreement with Municipal Electric Authority of Georgia in 2008 to use nuclear energy after the estimated $20 billion power plant expansion is complete.
Wannemacher said the nuclear plant is scheduled to come online in 2021 and is expected to add $200 million to JEA’s annual debt service liability. The JEA board will discuss a possible rate increase related to Plant Vogtle on Dec. 17.
Council member LeAnna Cumber said she’s open to exploring privatization of JEA, but she wants the nuclear facility’s financial liability to go with it.
A draft presentation on JEA’s assets and financial health released last week that will be presented to representatives from the nine companies during negotiations did not mention Vogtle. That concerned Cumber and could be a sticking point for support.
“I want it to be clear that if we’re presented with an ITN winner, and part of that deal is leaving the city with the Plant Vogtle liability, then that’s not something I’ll be able to support,” Cumber said.
Green’s “restart”
In her prepared remarks, Green said that she would only support a plan that “protects the ratepayers and the employees” and that is “crafted in an open and transparent manner.”
“Because my profile has been low and because my style is to work not to be outspoken on the controversy of today, nobody should mistake that for a lack of attention to the matters of JEA,” she said.
Green recommended what she deemed “positive steps forward,” calling for an end to conversations around the JEA’s failed Long-Term Performance Plan. It would have allowed employees to invest in JEA, but could have cost the utility more than $600 million if it is sold.
She suggested adding Council member Danny Becton — the Council’s JEA liaison — to the negotiation process to improve transparency.
Green also recommended two resolutions. One keeps JEA from spending ratepayer dollars on flyers, brochures and advertisements to deliver information on the strategic planning process and possible sale. The other would create a one-year ban on any JEA board member being considered for employment or contractual working by the utility.
Former board member Alan Howard signed a contact Aug. 28 to provide special legal counsel to JEA, one month after stepping down.
It’s unclear if or when Green intends to file the two resolutions. She did not take questions from reporters following her appearance.
JEA CEO Gina Kyle said in an email Dec. 9 that she would raise those questions to the JEA board chair.