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Jax Daily Record Friday, Jun. 26, 202012:40 PM EST

JEA plans to retire ownership in Georgia coal-fired power plant

The city-owned utility would buy power from FPL in a deal it says will save money.
by: Mike Mendenhall Associate Editor

JEA plans to retire one unit of the coal-fired Plant Scherer in Juliette, Georgia, and enter a 20-year power purchase agreement with Florida Power & Light Co.

The city-owned utility’s board of directors voted 5-0 on June 26 to approve the transaction and enter final negotiations with FPL on a deal that JEA officials say will have a 20-year, $191 million net value savings and reduce the utility’s carbon emissions by 1.3 million tons per year by 2024.

According to JEA officials, Scherer is the largest coal-fired power facility in the U.S. with four power generating units. 

JEA owns a 23.64% stake in the unit 4 with the NextEra Energy Inc subsidiary FPL controlling the remaining 76.36%. That’s a $122 million capital asset to JEA, according to utility officials, or 5% of its electric system value. 

The cooperation agreement with FPL would close Unit 4 on Jan. 1, 2022.

JEA has been part owner of Scherer Unit 4 since 1989, according to a June 26 memorandum from Interim CEO Paul McElroy. 

The other three generating units are co-owned by Georgia Power Co., Oglethorpe Power Corp., MEAG Power, NextEra Energy Inc. subsidiary Gulf Power Co., and the city of Dalton, Georgia.

JEA board Vice Chair Bobby Stein said June 26 he met with FPL President and CEO Eric Silagy to help utility leadership negotiate terms of the deal. 

Stein said part of the meeting was to communicate to the FPL executive that “JEA was not for sale.” The  Juno Beach-based power company was one of 16 private companies to bid on buying JEA in the utility’s failed push to privatize last year. 

“But we’ve had a long relationship with Florida Power & Light, and we want to work with them on projects that make sense,” Stein said. “... This was an area that made sense because the option was to sell this to a hedge fund. We’d be a minority party with a hedge fund and their interests would not be in line with us.” 

The cooperation agreement allows JEA to replace the plant’s 198 megawatt-per-year generating capacity with power from an FPL natural gas-fired facility for 10 years. The deal includes an option to switch to solar power in the second 10 years.

A financial breakdown presented to the board states JEA’s 20-year cost to operate Scherer Unit 4 would be $1.08 billion compared to the $783 million purchase power agreement.

FPL also offered JEA a $100 million payment up front. Although the unit will be retired, it will not be demolished while the other three generators are operating. 

JEA will be responsible for the idle Unit 4’s maintenance costs and remediation of the coal ash ponds that JEA CFO Joe Orfano estimates will cost $49.4 million from 2021-69.

Officials said closing the unit allows JEA to avoid paying for an estimated $8.2 million in environmental upgrades from 2021-24.

The June 26 presentation states the agreement’s natural gas and solar power sources will reduce JEA’s carbon dioxide emissions by 64% from the plant’s peak in 2007.

McElroy say the deal locks in JEA’s natural gas fuel price for 10 years. The utility CEO called the purchase power agreement “a good diversity of risk.”

“I think we’ve isolated and removed the big risks and that was the gas price and operation price,” McElroy said. “I will tell you that it is more risky to operate an isolated coal plant in this environment than taking energy of a slice-of-system which comes from all the units of FPL.”

Stein said FPL and JEA are working toward reducing the “legacy costs” from Scherer on a more accelerated timeline.

“Don’t count on it, but there is a possibility. They have a bigger piece of this deal, and they’re more committed to reduce these costs than we are,” Stein said.

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