by Max Marbut
Staff Writer
At the beginning of Tuesday’s meeting of JEA’s board of directors, City Council liaison Stephen Joost made a plea for a reduction in the price that Gerdau Ameristeel, a steel mill in Baldwin, pays for electricity.
He echoed points made in a memo sent by First Coast Manufacturers Association President Lad Daniels to JEA board members Monday and reported Tuesday in the Daily Record.
“I view JEA as an electric company able to help with economic development,” said Joost.
He also told the board that Gerdau Ameristeel might secure a contract to produce materials for the Panama Canal expansion project that could mean as much as $200 million in increased production.
If that happens, said Joost, the company would make an additional $16 million capital investment in its Jacksonville steel mill and would also require more oxygen, which could lead to another $30 million in capital investment for an oxygen generation plant next to the mill.
“I think it’s a tremendous opportunity to develop jobs,” said Joost.
Gerdau Ameristeel Director of Communications Philip Bell said the contract for the materials might be divided among several vendors and would not comment on the specifics of future investments the company might make after the contract is awarded.
Joost said Gerdau is the utility’s largest single user and he thinks concessions in terms of rates are in order.
“They’re the No. 1 customer,” said Joost.
An hour before the board’s regular monthly meeting, the issue was added to the agenda at the “preboard meeting.”
JEA Managing Director and CEO Jim Dickenson presented data to board members detailing Gerdau’s current rate structure and consumption history. He told the board that Gerdau had been granted a discount per kilowatt hour based on the cost of service.
“Their load is the same as 20,000 residential accounts,” although it costs less to service large commercial accounts, said Dickenson. “But everybody pays the same fuel rate. A ton of coal is a ton of coal.”
Dickenson said part of the discount is based on JEA’s ability to interrupt service to the steel mill during periods of peak electrical consumption throughout the system, as in the case of very hot or very cold days.
“We are able to interrupt those customers instead of building more capacity or buying more electricity” from other utilities, said Dickenson.
He said Gerdau’s concept in requesting the additional rate reduction is that the mill is using electricity that JEA doesn’t need and the company doesn’t want to contribute to fixed costs, including debt service.
According to Dickenson’s report, Gerdau accounts for 3 percent of JEA’s electrical load but its payment for electricity accounts for 9 percent of JEA’s debt service.
“If they’re not paying their portion of that cost, someone else is,” said Dickenson.
Dickenson also said he has had conversations with other members of the First Coast Manufacturers Association and related one communication he had last week with Haskell CEO Steve Halverson.
Dickenson said Haskell also operates a steel fabrication facility and if JEA were to approve an additional rate reduction for Gerdau, Halverson told him Haskell would be “the next one in the door.”
JEA CFO Paul McElroy said he has been in talks with Gerdau for six months and that JEA “made a conscious decision to see if there is a way to holistically as a utility” improve the company’s rate structure.
“We came to the conclusion there’s not much we could do,” said McElroy.
Ron Townsend, JEA board chair, said, “It seems to me this is not only a JEA issue. It’s also the City, the Chamber of Commerce and the JEDC (Jacksonville Economic Development Commission).”
Townsend directed Dickenson to set up a meeting with Cornerstone, the economic development division of the Jacksonville Regional Chamber of Commerce.
“I think we can have this discussion every month for 15 years but I don’t see us making any changes,” said Townsend.
Daniels said Tuesday that JEA is a member of FCMA, as are the Jacksonville Port Authority and the Jacksonville Aviation Authority.
356-2466