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Power Struggle
Jacksonville's public utility JEA and the fight to privatize it
In the dark
In April 2018, Curry relented and vowed he wouldn’t submit a privatization plan to the city council, which would have to approve a sale. But the fight reignited last July when the JEA board passed a resolution inviting companies to bid on it. The utility even assigned a code name to the negotiation process — “Project Scampi” — and conducted its sales talks via “shade meetings” that were held behind closed doors with the promise that transcripts would be released after the JEA board recommended a purchaser.
Adding to the cloak of secrecy was a “cone of silence” policy that prohibited any possible decision-makers in a sale (including the mayor, city council members and JEA board members) from discussing the sales terms with the media, the public or the bidders. Such language is common in competitive bidding processes — and is intended to insulate those involved in negotiations from allegations of backroom dealing. But as negotiations proceeded, many in the city felt they were being left in the dark. JEA spokeswoman Gina Kyle said the discussions followed state law and JEA policy and were intended to “protect the process from third-party tampering.”
Sixteen companies responded to Project Scampi with offers, and in December, JEA executives traveled to Atlanta to meet with a group of suitors, including NextEra Energy, the parent company of Florida Power & Light, and Emera, the Canadian company that bought TECO. Other bidders included American Public Infrastructure, American Water Works, Duke Energy, JEA Public Power Partners (a consortium of Bernhard Capital Partners, Emera, SUEZ and Provident Resources Group), IFM Investors PTY, MIRA, and E&W Development.
Around the same time, JEA began promoting a “non-governmental ownership path” to customers. A brochure mailed in tandem with October bills warned that the utility was headed for a “financial cliff” that could lead to rate increases as high as 52% by 2030 despite a 16% growth in customers. Curry spoke favorably of a potential sale, noting that it could allow the city to pay off $2.2 billion in debt.
Polling indicated voters in Duval County — who would have to approve the sale of JEA via a public referendum — disapproved of the plan, however. Nearly 60% of those polled by researchers at the University of North Florida last fall said they opposed selling JEA, and 47% disapproved of the job performance of Zahn.
The business community wasn’t sold on it either. The Jacksonville Civic Council, a group of about 80 local CEOs, hired its own experts to assess a possible sale. Their conclusion: JEA was “not in a death spiral” and that the sales exploration process was “flawed” and lacked transparency.
“The exercise currently being conducted by the JEA appears to have as its objective the provision of at least $3 billion in funds to the city of Jacksonville,” but the administration had failed to answer “fundamental questions” about whether the city needed the funding and, if so, how much it needed and “for what purpose,” the council wrote in a Nov. 5 letter to City Council President Scott Wilson and Mayor Curry.
Within weeks, public opposition to privatization coalesced amid a series of controversies involving Zahn. Among them: A bonus scheme, now canceled, that would have produced a windfall for Zahn and other JEA executives if the utility had been sold, and an undisclosed land deal involving Zahn and a JEA lobbyist. Also raising eyebrows were $1.8 million worth of contracts JEA awarded to various investment advisers, law firms and lobbying firms. One contract was with the law firm where Howard, the former JEA board chairman, works.
At the end of November, Councilman Carlucci called on Zahn to resign; in mid-December, the JEA board ousted Zahn from his $520,000-a-year post and at Curry’s request pulled the plug on the sales negotiations on Christmas Eve.
The imbroglio has resulted in departures of other top staff and sparked calls for investigations by a grand jury and city council. And it didn’t come cheap. At the end of the day, JEA spent more than $10 million exploring a sale.
What’s next?
As fallout from the privatization push continues — State Attorney Melissa Nelson referred the matter to federal investigators — questions about the utility’s future remain.
At an emergency board meeting in December, Melissa Dykes, JEA’s interim managing director and CEO, said the company would “continue to look at and refine” several other strategic planning scenarios the company has been exploring. Those include remaining a government-owned utility; converting the utility into a co-op, where customers would be co-owners; or converting JEA into a corporation and pursuing an initial public offering.
