March 28, 2024

Power Struggle

Jacksonville's public utility JEA and the fight to privatize it

Amy Keller | 2/26/2020

REASONS NOT TO SELL

  • JEA is financially healthy, offers good service and is appreciated by consumers
  • JEA delivers a steady revenue stream to the city — $116 million in 2018 and $138.2 million in 2019
  • Questions about political motives and the use of funds from a sale of JEA beyond paying off the city’s debt
  • Questions about the sale process and contracts involving Zahn and other JEA executives
  • The ability of other municipal utilities to adapt to market conditions and modernize their business plans

Why put it on the auction block?

In public, the biggest cheerleaders in the privatization discussion have been the utility’s own executives and board members, including former JEA board Chairman Alan Howard, a transactional attorney who ordered the evaluation of JEA shortly after Petway’s exit

Jacksonville’s mayor, Lenny Curry, has been seen as a proponent of a sale but has played coy with the issue. He has said a sale could make the city debt-free and noted that privatization appealed to him “philosophically.” The mayor, a Republican, told the city council that a “government-run utility monopoly” isn’t in the best interests of the community over the long run and that “less government is better for the people.”

Curry avoided taking a firm yea-ornay stance on the issue — saying only that he supported “exploration” of a sale, leaving many to speculate about who exactly was driving the sale.

Curry did, however, appoint the man who came to spearhead privatization — Aaron Zahn, a former wastewater treatment company executive whom the city council approved as a JEA board member in February of 2018 to replace Petway. The board unanimously voted to name Zahn JEA’s CEO a few months later — even though he had no experience running a utility.

Once in the job, Zahn mounted a “strategic planning initiative” that accentuated the virtues of a sale and painted JEA as a “declining business” with few desirable ways out other than privatizing. Private ownership, Zahn suggested, was a better business model for dealing with challenges, including declines in electric use, that all utilities face in the coming years.

Over the past year, Zahn and other top JEA executives have said that electric sales are shrinking — despite a steady growth in customers — because so many consumers have adopted energy-efficient technologies such as LED lighting and rooftop solar. They argued that governmental and regulatory constraints are limiting their ability to get into new lines of business, such as residential solar installation or electric vehicle financing. In the long run, they said, JEA would have few options besides raising rates, slashing staff or possibly eliminating its financial contribution to the city.

Pro-privatization forces also cited the sizzling market for power companies. Howard noted at a March 2018 meeting that a Canadian energy firm’s 2016 purchase of TECO energy for $10.4 billion was an “eye-opener” for company executives. The Emera-TECO transaction indicated a “tremendous amount of locked-in value at JEA,” he said — and an advisory firm’s estimate that a JEA sale could net “ $6 billion or more” made it a discussion worth having.

But opponents — ranging from former Jacksonville Mayor Jake Godbold to City Councilman Matt Carlucci to former CSX CEO Michael Ward — railed against privatization, arguing that the city would regret giving up ownership of JEA. “The mayor has suggested we would pay off our debt — and who knows what else we would use the money for,” Carlucci said. “There’s really been no clear end-game given.”

As the board explored a sale in early 2018, the forces opposed to a sale mobilized, with the discussion quickly devolving into a political melee. Union leaders and some city council members accused Curry of secretly spearheading a sale — a charge the mayor denied. The backlash grew as some Jacksonville heavyweights, including Jaguars owner Shad Khan and Preston Haskell (founder of the Haskell construction company and a former JEA board chairman), weighed in against privatization.

Tags: Energy & Utilities, Feature

Florida Business News

Florida News Releases

Florida Trend Video Pick

Bitter-to-swallow cocoa costs force chocolate shops to raise prices
Bitter-to-swallow cocoa costs force chocolate shops to raise prices

Central Floirda chocolate shops are left with a bitter taste as cocoa prices hit an all-time high earlier this week.

Video Picks | Viewpoints@FloridaTrend

Ballot Box

Should Congress ban the popular social media app TikTok in the U.S.?

  • Yes
  • No
  • Need more details
  • What is TikTok?
  • Other (Comment below)

See Results

Florida Trend Media Company
490 1st Ave S
St Petersburg, FL 33701
727.821.5800

© Copyright 2024 Trend Magazines Inc. All rights reserved.