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Jax Daily Record Wednesday, Sep. 21, 202203:30 PM EST

JEA says it expects fuel charges to remain high until next spring

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The Jacksonville city-owned electric and water utility said about 2,900 customers with unpaid bills are at risk of disconnection as of Sept. 20.
by: Mike Mendenhall Associate Editor

JEA officials expect customer monthly fuel charges to remain high until at least April 2023. 

But projections shown at JEA’s Sept. 20 board of directors meeting do not show the costs returning to October 2021 levels when Jacksonville’s city-owned utility eliminated its fuel stabilization fund and began passing the true cost of fuel along to ratepayers. 

In a presentation to the board, JEA Manager of Fuels Management Services Nancy Reinker said the average JEA residential customer who uses 1,000 kilowatt hours in a billing cycle will pay $79.03 for the monthly fuel charge in October. 

That’s down from the $100.15 initially projected and will dip further to $64.67 in November, according to a graph Reinker used to show forecasts for JEA’s 2023 fiscal year.

But JEA projects that reduction will evaporate in the colder winter months as customers use more electricity for heat. The charge is projected to increase to an average of $91.57 in February. 

JEA monitors and adjusts its fuel cost projections monthly based on market prices for natural gas and other fuel, so JEA CEO Jay Stowe says those numbers could change. 

Driven by events

Reinker said geopolitical events like Russia’s invasion of Ukraine, the lingering impacts from the pandemic and a natural gas pipeline outage have driven price volatility in LNG, coal and petroleum coke and, in turn, sent JEA customer bills higher.

The fuel charge data comes as JEA ended a moratorium Sept. 20 on disconnecting customers with unpaid balances. 

This JEA chart shows that the utility expects monthly fuel rates to decline by about 50% by April 2023.

Lines were long Sept. 19 at JEA’s Downtown Customer Care Center at 21 W. Church St. 

Stowe said the call center received 7,300 calls in the first hour, which caused a one-day delay in resuming disconnects. 

According to utility Chief Customer Officer Sheila Pressley, the 2,900 customers at risk of having their power shut off is lower than the average 12,000 disconnect notices JEA logs in a 20-day period every month. 

She said JEA expects to be able to avoid most shut-offs through payment arrrangements for customers.  

JEA Media Relations Manager Karen McAllister said in a Sept. 8 email that the utility relaxed the eligibility criteria for payment arrangements and is working with those affected to avoid shut-offs.

But it’s unclear how long the national and global economic issues impacting customers’ bills will persist. 

JEA predicts the average fuel charge will drop to $50.48 in April 2023 and bottom out at $47.31 in September 2023.

Stowe said during the meeting that although projections show the fuel charge going “in the right direction,” it will remain higher than what JEA customers were accustomed to for the 10 years the fuel charges were offset by the stabilization fund.

“I don’t think we should become numb to the idea that it remains high the entire time,” Stowe said.

The utility chief added that market volatility will create uncertainty in the fuel charge projections month-to-month. That led to reluctance among utility officials about how much rate detail to release to the public. 

“But we decided to err on the side of transparency and show what we think the forecast is going to be for the next 12 months,” Stowe said. “Even though next month it will be different again.” 

The JEA board voted in October 2021 to update the utility’s fuel charge monthly instead of annually. The fund kept customer fuel charges steady at an average of $31 per month and provided rebates if costs were lower than projected.

But rising natural gas prices risked depleting the fund and Stowe said JEA would have had to increase base rates to keep the fund solvent.

Climate and geopolitical causes  

World conflict has impacted LNG prices, but JEA officials said so have accidents in the U.S. 

An explosion at the Freeport LNG natural gas export facility in Texas in June affected supply. Reinker said the facility likely won’t be back online until November. 

She also noted an unplanned compressor station outage in the TransCo natural gas pipeline disrupted fuel transport into the Southeast.

JEA generates 57% of its power from natural gas.

JEA reports that natural gas prices hit a 14-year U.S. high Aug. 17 of $9.33 per MMBTU, a measurement of heat content and energy value. In July 2020, it was $1.50 per MMBTU. 

One of the European Union’s primary supplies of natural gas was largely cut off after Russia began its military invasion of Ukraine. JEA officials said prices there are between $40 and $60 per MMBTU.

Those levels make natural gas producers more likely to sell to European countries, Reinker said.

That was on top of higher-than-average temperatures in the Southeast U.S. this summer that Reinker said kept natural gas storage facilities from replenishing supply.

Coupled with low gas inventories, “we have a recipe for gas prices to be high and remain high through the winter,” Reinker said.

JEA’s primary coal source in Colombia also was diverting some shipments to Asia to make up for the lost Indonesian fuel in early 2022.  

Petroleum coke fuels about 10% of JEA’s power. Reinker said India and China’s push to buy cheaper Russian coal that’s no longer going to Europe increased the global supply of petroleum coke.

But as petroleum coke gets cheaper, JEA is experiencing a limestone shortage, used to remove some emissions from the Northside Generating Station, from its 21-year supplier. 

JEA is trying to find replacement suppliers in Canada, Jamaica, Miami and the Dominican Republic.

JEA has hedged about 70% of its fuel purchased for fiscal year 2023 to reduce risk and keep its costs free of market volatility. 

Utility officials say without those actions, customer fuel costs could have been much higher.

JEA says hedging, or locking in most of its natural gas purchase prices, has mitigated $474 million in costs over  five years. 

Stowe acknowledged Sept. 20 that JEA does not typically tout that number because those savings could be reduced if natural gas prices fall.

Board members walked a line at the Sept. 20 meeting of translating JEA’s actions to avoid the worst of fuel price increases while acknowledging the pain ratepayers are feeling

“While I think we all get it that doesn’t do anything to ameliorate the fact that the pieces are way higher. I think it’s important to know that JEA has not been sitting on their hands,” board member John Baker said.

“And they’ve done quite a bit to mitigate the impact of this.” 

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