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Mike Barrett and Mike Pattillo, both of Ernst & Young, provide an industry update Monday to the JEA Finance and Audit Committee.
Photo by Joe Wilhelm Jr.
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JEA board could cancel water, sewer rate hike

by Joe Wilhelm Jr., Staff Writer

A dip in fuel costs and lower debt service are two factors contributing to savings the JEA could pass on to its customers through its fiscal 2013 budget.

The finance committee for the JEA board of directors met Monday to begin discussion of its 2013 fiscal year budget. The proposed budget is about $1.8 billion and is $88 million less than the current budget.

That proposal presented by JEA staff included lowering the current variable fuel rate charge of $47.74 to $43.60 per megawatt hour effective July 1.

This will lower the monthly electric charges by $5.18 for residential customers who use an average of 1,250 Kilowatt-hour per month. Also included in the budget was a recommendation that the board rescind a previously approved water and sewer rate increase scheduled to begin Oct. 1.

”We have been able to hold costs down through the reduction of debt service. We’ve taken every opportunity to refinance bonds when we can and we’ve deferred some capital projects,” said Jim Dickenson, JEA managing director and CEO.

The costs for fuels used for electric generation have recently declined and JEA has benefited from lower natural gas prices. By 2012, JEA plans to have 63 percent of its electric generation fueled by natural gas. In 2007, coal was 60 percent of the JEA fuel budget.

While a water and sewer rate increase was scheduled to take effect Oct. 1, staff recommended the board forgo the increase of service availability and environmental rates while maintaining volumetric, or water usage, rates because of numerous factors. They include reducing its five-year capital costs by 30 percent, adhering to a “pay-go” plan where no new borrowed money will be used for projects over the next five years, taking advantage of lower interest rates and creating savings from refunding of several bonds.

If staff recommendations are approved by the board, there will be no rate increase for more than 67 percent of JEA customers. Volumetric rate increases will apply to 33 percent of residential customers and all commercial customers. That percentage normally represents customers who use more than 6,000 gallons per month, said Gerri Boyce, JEA media relations coordinator.

The committee also met with external auditors from Ernst & Young to discuss the state of the energy industry. Mike Barrett and Mike Pattillo, partners with Ernst & Young, discussed the factors driving natural gas pricing.

“What we are seeing driving the prices of natural gas is shale gas. (The) interesting part about shale gas is that the EPA (Environmental Protection Agency) is supposed to come out with new rules for shale gas in the next week or two. The rules are supposed to focus on how to drill, requirements around drilling and what to do with the wastewater,” said Barrett.

“That could drive prices up in shale gas,” said Barrett.

Other drivers of natural gas prices are demand for liquid by-products of natural gas.

“A lot of liquid byproducts that come out of gas, like benzene and propane, all have high prices, so they are producing the gas and then dumping it and making the money on the byproducts,” said Barrett.

jwilhelm@baileypub.com

356-2466

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