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Jax Daily Record Tuesday, Nov. 27, 201804:52 PM EST

JEA board selects Aaron Zahn as the utility's next CEO and managing director

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Zahn, who has been serving as the utility's interim CEO, will enter contract negotiations immediately.
by: David Cawton Associate Editor

The JEA board of directors on Tuesday unanimously named Aaron Zahn as the public utility’s next chief executive officer and managing director.

He will enter contract negotiations immediately.

Zahn will lead the nation’s eighth-largest municipally owned electric, water and wastewater utility despite having no experience leading a utility of any size.

He was not available for comment after the meeting.

Zahn, 38, ascends to the permanent role over a field of experienced utility executives including Cris Eugster, the chief operating officer of San Antonio-based CPS Energy and Pamela Hill, the former CEO of Bahamas Power and Light. 

The three were named finalists out of a field of nine candidates identified by executive search firm Heidrick & Struggles.

While Eugster was considered the most experienced of the three, pushback from board members April Green and John Campion over his unwillingness to accept the job on the spot essentially disqualified him from further consideration.

Campion took exception that Eugster only spent one day in Jacksonville, and that he was unwilling to drive through a hurricane to interview in person during an earlier round of the recruitment process.

Eugster and Hill received combined scores of 381 from the seven JEA board members. Zahn scored 420.5 points and was named to the role shortly after.

“The board chose a candidate they believe can do the job, who scored very highly in all the categories,” said JEA board Chair Alan Howard.

“I can’t speak to the individual board members’ decision to discount their scoring for Mr. Eugster who is obviously very qualified as was Ms. Hill,” he said.

Zahn first came to JEA in February as a board member to replace departing board member Tom Petway.

Controversial appointment

The JEA board named Zahn interim CEO after former executive Paul McElroy announced he was stepping away from the day-to-day operations. His contract expired at the end of September, triggering a search for a permanent replacement.

The appointment was not without controversy.

Zahn stepped down from the board to offer his services and was selected as the interim CEO with little public debate during an April 17 meeting. He also replaced CFO Melissa Dykes, who Howard placed in the role a week before.

After being selected for the interim role, Zahn made Dykes chief operating officer, splitting McElroy’s role.

Dykes maintained day-to-day operations of the utility while Zahn focused on the strategic vision and managing external relationships with stakeholders like Mayor Lenny Curry and City Council.

Council member Matt Schellenberg and other critics asserted that despite JEA spending $190,000 on the executive search contract and conducting months of interviews with multiple candidates, the job already was Zahn's.

Howard offered a rebuttal, saying it was disrespectful to the board, the candidates and the JEA workforce that the “fix was already in.”

Howard called the process open and transparent.

“It was a national search. We had very qualified candidates and I can’t say that result might not have been different had Mr. Eugster come in and said, ‘I’ll take the job if offered to me today’,” said Howard.

“It was not predetermined.”

Zahn said he’s OK with those who are unsure of his performance or those who do not trust him.

“The only way I know how to overcome trust is to communicate,” he said.

Another issue is Zahn’s lack of utility industry experience, which Howard said he took into consideration.

“I’ve been impressed with him the last seven months,” Howard said.

To become CEO, Zahn resigned as managing partner and CEO of Pascal Partners, an energy storage company much smaller than JEA’s multibillion-dollar operation with more than 2,000 employees. 

Zahn acknowledged Tuesday that his career has been different from his competitors.

Eugster has a doctorate in electrical engineering from the Massachusetts Institute of Technology and in his role at CPS Energy, he is part of an executive team that leads the nation’s largest municipally owned gas and electric utility company.

Hill has decades of utility industry experience and currently is senior vice president at PowerSecure, an energy consultant firm.

In her role as CEO of Bahama Power and Light, Hill handed storm-related crises and other challenges unique to running a utility company in the Caribbean.

“It is true what people say about me, I don’t have decades of traditional utility experience,” Zahn said.

He highlighted a career that includes time in the financial world, the telecom sector and in the waste industry.

“My resume speaks for itself,” he said.

The future for JEA

Zahn takes over a utility company dealing with internal issues against a backdrop of uneasiness in the electric industry.

JEA executives and board members spent the better part of 2017 and 2018 debating whether to privatize parts or the entire utility operation.

The discussion led to voters approving a nonbinding referendum during the Nov. 6 midterm elections, and council legislation requiring that voters approve a sale of more than 10 percent of the utility.

A third-party report issued on Valentine’s Day estimated JEA’s value between $2.9 billion and $6.4 billion after retiring debt and other obligations.

Zahn has said the discussion was premature and tabled it during recent months.

“I desire to see JEA overcome these obstacles,” he said. “Because Jacksonville is the city of bridges, we reach out and build bridges not walls.”

Also hovering over JEA is a legal battle waged by Zahn this summer to remove the company from an expensive power purchase agreement it has with the Municipal Electric Authority of Georgia to build and eventually buy nuclear energy from the expansion of the Plant Vogtle power plant.

MEGA, along with other utilities, is building two reactors at the existing plant. Construction costs, estimated at $27 billion, continue to increase. As that price rises, so does JEA’s contribution to the project.

It’s estimated that JEA ratepayers will be responsible for about $2 billion, even if the reactors are not completed.

JEA and MEGA are suing one another in federal court over the dispute. The legal battle resulted in credit rating agencies downgrading JEA’s bonds, something Howard and Zahn have publicly denounced. 

Zahn said one of the successful outcomes with Vogtle includes making sure the industry and the financial markets understand JEA is committed to fulfilling its obligations. 

“I believe that success would be that our customers and our city receive the benefit of clean renewable power upon the same construction that was discussed and executed in 2008,” he said.

 

 

 

 

 

 

 

 

 

 

 

 

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