Staff Writer
Residential customers aren’t the only ones who will feel the pinch when electric rates increase Oct. 1.
For some of the largest energy users that purchase power from the JEA, including one that spent more than $21 million during the fiscal year that ended in September 2009, the increase could send it shifting production elsewhere in the Southeast while continuing to defer capital expenditures in North Florida.
Each possibility was outlined in a memo sent to JEA board members Monday on behalf of Lad Daniels, president of the First Coast Manufacturers Association, that further delved into the economics of the increase.
Large energy users are defined as accounts with electrical charges above 15 percent of the cost of goods sold, with many identified as manufacturers.
The FCMA is seeking to develop different pricing structures and tax policies to ensure the 25 businesses identified as larger users could remain competitive. The companies’ combined electricity bills were close to $64 million in 2009, said Daniels, almost 4 percent of JEA’s total electrical billing.
The 25 industries also accounted for just more than 3 percent of the public service tax and 5 percent of the JEA’s contribution to the City’s operating budget, the memo said.
The largest user of the group, Gerdau Ameristeel, is highlighted throughout the memo, as rate increases since 2008 (from $.05 per kilowatt hour to more than $.08) and another increase in October (to more than $.09) have forced the company to shift production and reduce utilization to operating at around 60 percent of capacity from 80 percent, the memo states, largely due to the increase in utility rates.
In addition, the company, which manufactures concrete reinforcing rods, deferred capital expenditures of $200 million, which would expand capacity in its steel rolling operation.
The steel company employs 300 people at its local plant, said Daniels.
“The bigger issue is all of the (large-energy user) companies,” said Daniels. “It has an indirect job effect to all the mom-and-pop shops.”
Daniels cited Gerdau’s 20 percent reduction in utilization as affecting small businesses delivering steel scrap to its plant and a reduction in freight volume shipped through the Jacksonville Port Authority.
Gerdau is also a finalist to supply steel to widen the Panama Canal and Daniels said he wanted to see the materials produced in Jacksonville.
“We want JEA to be a part of economic development,” said Daniels.
FCMA officials have met with several JEA board members individually to discuss the matter in addition to sending the memo, he said.
The JEA board meets today. The issue is not on the published agenda, but Daniels hopes it is added.
The best case, he said, would be for the board to agree today on a special rate for Gerdau Ameristeel, with a more realistic expectation being for JEA staff to present a proposal to the board to address the issue and for City Council to support it. Daniels is a former council president.
Support from the City, he said, could come in the form of approving a reduction in JEA’s annual general fund contribution based on electric rate reductions for large users and possibly reducing Gerdau Ameristeel’s public service tax liability.
The JEA board meets today at 9:30 a.m., with a preboard meeting at 8:30 a.m.
356-2466