Buying locally produced goods has become a fast-growing trend, leading to many small businesses finding their niche.
JEA has found a niche, but bucking the local tend. It’s buying electricity from other utilities, all with a goal of keeping electric rates down.
At almost $1.8 billion in revenue, JEA is one of Northeast Florida’s largest businesses. It also has a need to maintain low rates.
That led to the creation of a local business that’s grown from 30 employees and three customers to 196 employees (including 140 in Jacksonville) and 50 customers in 17 years.
Like stock traders on Wall Street, The Energy Authority is in the trading business. Just with electricity and natural gas.
The company has its offices and operations facility on the 26th floor of EverBank Center. Its staff trades electricity and natural gas among 50 public utilities, referred to as members, from Florida to Washington state.
Founded in 1997 as a not-for-profit corporation, The Energy Authority reported more than $1.3 billion in revenue for 2013. In that period, it gave nearly $93 million back to its members. The annual payroll for its employees is more than $23.2 million.
In addition to being a founding partner and owning 16.6 percent of the business, JEA also is a client with the ability to sell excess electricity it generates. At times, it also purchases electricity generated by other members. When JEA buys electricity, it’s at a cost lower than what it would be to generate it.
The combination of ownership interest and participation in the energy market as an authority client allowed JEA to realize a net benefit of $4 million in fiscal year 2013-14, said JEA Chief Financial Officer Melissa Dykes.
“We pass that along to our customers in the form of reduced fuel and purchased-power costs. It’s part of the reason we were able to do the fuel refund,” she said, referring to the pro-rated rebate all of JEA’s more than 400,000 electric customers saw on their bills this past summer.
Before 1997, utilities were isolated from each other, producing power as needed only for their customers. Then, the Federal Energy Regulatory Commission changed the rules governing local and interstate transmission lines, often referred to as the “grid.”
The rules changes made the lines available to all utilities — for a fee — and created new infrastructure that made it possible for electricity to be transferred.
Utilities could then buy and sell electricity like any other commodity.
“That enabled wholesale trading. Utilities don’t deal directly with each other. They sell into the market and buy out of the market,” said Jamie Mahne, Energy Authority vice president of client services and chief client officer.
“It leveled the playing field,” said JEA Chief Compliance Officer Ted Hobson. “We’re all connected. We all have generators and we all have a load.”
If one utility’s customers don’t need all of the electricity a member utility is generating at a given time, the electricity can be sold through The Energy Authority to another utility that needs more electricity than it can generate at that given time.
Being able to trade electricity like other commodities also can reduce the cost of electricity.
Mahne said the authority is in constant communication with its members 24/7, 365 days a year. The traders monitor usage, generation and cost and set up trades that benefit the utilities and ultimately, their customers, since the organization is a not-for-profit corporation.
“If we were to set up an operation to do something similar, we couldn’t do it for what it costs us to participate in (The Energy Authority). We also wouldn’t have the depth of market access that they can get,” said Dykes. “It’s a double benefit for us.”
With 3.7 million megawatts of installed capacity, JEA can generate all the electricity needed by its more than 400,000 customers. Being a member of the authority provides an advantage that isn’t readily apparent when a customer flips a switch and gets electricity.
“It makes JEA a player in the entire energy market,” said Hobson.
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