JEA electric customers could see 1.5% rate hike in 2023

High natural gas and fuel costs will continue to make monthly fee uncertain at least through 2023.

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JEA officials say electric customers likely will see a 1.5% base rate increase beginning in April 2023. 

The city-owned electric and water utility included the estimated rate hike in its 2023 fiscal year budget approved May 24 by the JEA board.

JEA also expects a 17% rise in 2023 in the cost of fuel to generate power, an expense that is passed directly to utility customers. 

JEA CFO Ted Phillips said that base rate increase would be across the board for both commercial and residential customers. 

According to projects in the board documents, there are factors driving the need for more revenue: the cost of JEA’s power purchase agreement with MEAG from the nuclear Plant Vogtle near Augusta, Georgia; increasing operating expenses; and a need to sustain liquidity levels to maintain its credit rating.

Utility officials expect all customers will see some base rate increase. Phillips said JEA is waiting for the results of a cost-of-service study to determine if different customer classes — residential, industrial and commercial — should have a smaller or larger hike. 

“I don’t think everyone will have an exact 1.5% increase,” Phillips said. 

“Some may be a little bit more, some may be a little bit less depending on the customer class. We’re waiting to get the cost of service study wrapped up.”

In May, the typical JEA residential customer paid a base rate of $77.83 per 1,000 kilowatt hours. A 1.5% increase would raise the average bill by nearly $1.17 per month. 

The JEA board is required by city code to hold a public rate hearing before officially raising the rates. A meeting has not been scheduled. 

Fuel charge uncertainty 

What JEA customers can expect to see on their bill on the fuel charge is more complicated, but utility officials said they expect to see natural gas prices remain high in 2023 before possibly dropping in fiscal year 2023 and fiscal year 2024. 

What JEA customers will pay depends partially on the market price for natural gas, coal, oil and other fuels in JEA’s mix.

JEA data shows from December 2021 through May 2022, JEA residential customers’ fuel costs have fluctuated from $36.60 per 1,000 kilowatt hour in December, hitting a high of $49.97 in February and reaching $40.25 in May. 

Board Chair Bobby Stein noted geopolitical conflicts like the Ukraine war have removed Russian gas from many markets. 

Utilities also are dealing with supply chain delays in shipping coal and natural gas.

In October, the JEA board decided to eliminate its stabilization fund that kept customers’ fuel charges steady as spiking natural gas prices began to drain the fund. 

The move allowed JEA to pass fuel prices directly to customers, causing the charge to rise and fall with the price the utility pays in the market.

Phillips says that volatility will continue. 

JEA officials said the utility paid less than $3 per unit for natural gas in September 2021 and that spiked to $8.73 per unit as of May 24. 

JEA has hedged two-thirds of its natural purchasing at a lower-than-market price through 2023, meaning it bought the fuel in advance expecting continued increases. 

“It will all depend on how much the cost of fuel is,” Phillips said. 

“I don’t have a crystal ball so I can’t tell you what the cost of natural gas is going to be in December of (20)22 or January of (20)23. These are based on our best forecast of what’s going on in the market.” 

Vogtle impact 

JEA is putting $124 million in a rate stabilization fund to ease increased costs when Plant Vogtle Unit 3 goes online, scheduled for the end of 2023. 

But costs on that project continue to rise. JEA officials said May 24 that the utility’s total power purchase agreement in Vogtle is about $3.4 billion. 

JEA hopes to use the emission-free nuclear power from Vogtle to reduce its carbon footprint. 

Capital needs 

JEA has budgeted $275.1 million for capital projects in 2023 for the electric system. 

On the water side, the utility plans to invest $400 million in capital improvements. 

JEA is not planning a water rate increase next year.

These improvements are driving the need for more revenue. JEA documents show the utility projects $6 million in new revenue for electrical system’s fiscal 2023. 

A chart in the board materials shows that trending higher in fiscal years 2024 and 2025 to $32 million and $33 million, respectively. 

In 2026, the utility projects a need for $40 million in new revenue. 

JEA officials told news reporters after the meeting there could be a need for more rate increases in the coming years, but only the 1.5% hike for 2023 would be determined by the April rate hearing.

The budget also continues the annual trend of increasing JEA’s contribution to the city’s general fund. 

In 2023, JEA budgeted a $122.4 million contribution to the city. That is up from $121.2 million in 2022. 

In total, the JEA 2023 fiscal year consolidated operating budget is $2.132 billion.