JEA sets August hearing for fee increase that will affect builders

The utility’s board of directors also is monitoring Plant Vogtle delays but expect a “neutral” impact on residential electric rates in 2022.

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The JEA board of directors scheduled a public rate hearing for Aug. 24 where it is expected to vote on the first water, sewer and irrigation capacity fee increases in 15 years, affecting builders and customers connecting to the city-owned utility’s system.

The board also will vote on adjustments to electric rates, but JEA CEO Jay Stowe said at the June 22 board meeting that the changes will have a “net neutral” impact and not raise the average residential customer’s bill in fiscal year 2022.

“As we move into next year, we should analyze and take a look at all of our rates, all of our fees, all of our charges and be sure they’re in line with where they need to be and not take a 15-year gap in any of these activities in the future,” Stowe said.

Board President John Baker, Vice President Bobby Stein and members Marty Lanahan, Joe DiSalvo, Leon Haley and Zachary Faison Jr. voted June 22 in favor of setting the hearing.

Board member Tom VanOsdol was absent.

The fees cover the cost to expand capacity at JEA’s water and wastewater plants for connections to new homes and apartment communities.

JEA staff proposed an increase to its one-time water capacity charge phased in over several months. The fees would rise from $339.50 per water line to $936 by April 2023, according to a presentation by JEA Director of Financial Planning and Analysis Juli Crawford.

Crawford said JEA staff also recommend the board increase the one-time sewer capacity fee from $1,274 to $5,114 and the irrigation fee from $339.50 to $1,053 by April 2023. 

The fees would be phased in with four incremental increases, according to the report.

JEA expects the combined fee increases for water and wastewater service will generate $36 million in annual revenue by fiscal year 2023.

Information provided in the board’s meeting packet shows $327.2 million in projects in JEA’s five-year capital improvement plan related to capacity growth. 

As of April 23, some of the projects were completed while others are in design.

JEA’s rate consulting firm, Stantec, reviewed the fee hikes and agreed with the assessment, according to Crawford.

The August hearing also will address likely increases to meter and tap fees paid by customers connecting to the utility’s water system. That increase is designed to recover JEA’s materials and labor costs for installation.

The report shows JEA will consider a $97.70 increase from $202.30 to $300 for a ¾-inch meter. A one-inch tap will increase $750 from $610 to $1,360 under the proposal.

JEA officials said the utility is under-collecting by about $1.6 million per year on ¾-inch meter sets and taps.

Crawford said JEA staff also recommends ending a water rate discount of 25 cents per 1,000 gallons for commercial customers using 10-inch or larger meters.

If approved in August, the rates would take effect Oct. 1.

Builders’ response

Greg Matovina, interim executive director of the Northeast Florida Builders Association, said June 17 that JEA’s proposed fee increases add another expense for builders and contractors at a time when labor and materials costs already have increased single-family house prices and multifamily rental rates.

JEA leadership met with NEFBA on April 14 about the fee increase and has communicated with other industry groups since the board began exploring raising the fees earlier this year.

Matovina said builders and contractors likely will pass the capacity and connection fee hikes along to the consumers in a market that already is pricing some houses out of range for some potential buyers. 

For now, Matovina said “demand is off the charts. We can’t build them fast enough.” 

He said NEFBA wants JEA to consider allowing capacity rates to be locked in at the beginning of subdivision and multifamily construction projects so builders can make cost projections with more certainty.

 “We recognize that the fees have not gone up in the last 15 years. In the future, JEA should not let it go up by so much at once. Introduce it gradually and don’t let it all be effective immediately. Do it in two to three stages to let the market absorb it,” he said.

NEFBA also wants to combine the plant capacity fee and JEA’s service line extension charge into one charge. 

“This is typical in many other utility areas. Both are critical to economic development and bringing customers into the JEA system,” says an April 9 talking points memo by NEFBA. 

Stowe said during the board meeting that JEA plans to review its fees linked to capacity and line extension costs more frequently.

The Vogtle effect 

Stowe told the board reducing JEA’s fuel charge for residential customers to keep bills stable in fiscal year 2022 is the right thing to do.

If approved by the board, JEA will increase the average residential customer’s monthly energy charge from $69.88 to $71.71 based on 1,000-kilowatt-hours per month.

Crawford and Stowe said that delays in construction and service of the South Georgia nuclear Plant Vogtle are the biggest reason for the base-rate hike.

JEA signed an agreement with the Municipal Electric Authority of Georgia in 2008 to use nuclear energy from the power plant under construction about 20 miles south of Augusta, Georgia, when the estimated $20 billion project is complete.

Since 2016, JEA officials said Vogtle construction delays have increased JEA’s costs by $900 million.

Despite electric system debt reductions and cutting costs by closing the St. Johns River Power Park, a purchase power agreement with Florida Power & Light and increased solar energy usage, JEA officials said the base rate increase was necessary.

JEA executives would offset that with a lower average fuel charge in fiscal year 2022, dropping from $32.50 to $30.50. 

The basic monthly charge of $5.50 and the 62-cent environmental charge per 1,000-kilowatt-hour will remain unchanged for the average user.

The report says the average JEA residential bill would remain unchanged at $123.34 after taxes and fees.

Even without an increase in residential energy bills, the report says JEA expects to generate $22 million in additional revenue in fiscal year 2022 with the changes. 

According to a June 8 report by The Augusta Chronicle, MEAG expects Southern Nuclear to begin Vogtle Unit No. 3 commercial operations Jan. 18, 2022.

An independent study by international management consulting firm Roland Berger presented to the board June 22 shows at least another six months of delays are likely before Vogtle’s unit three comes online and begins generating power for JEA’s system. 

Roland Berger Director Bill Kemp told the board delays also are likely on the plant’s Unit No. 4. 

Berger said the Georgia Public Service Commission, a power industry regulator, estimates longer delays.

Stowe said every month of delay costs JEA about $5.8 million, or 0.2% of JEA’s estimated $2.9 billion investment in Plant Vogtle.

The need for possible 1% to 2% rate increases in the three years following 2022 will be determined by a cost of service study, Stowe said.

However, Stowe said in the long term the low energy costs from plant Vogtle will have a positive impact on JEA’s budget.

Despite the leeway given by the board to adjust JEA’s proposed 2022 budget, Stowe said there are no plans to increase the fuel rate midyear and JEA will complete a cost-of-service study before his staff presents any recommendations to the board.

Baker said it is “wonderful” to pass along the neutral impact to electric bills but he said costs need to be monitored.

“We’ll be diligent in protecting our ratepayers but we also have to be equally diligent in protecting JEA and we’re passing on costs that we can,” Baker said.