What's Next for JEA

JEA is evolving to meet the ever-changing needs of our customers.

JEA Rates are Rising as Energy Use Declines

JEA revenue has decreased for years as customer energy use declined, which led to:

  • Rate increases of more than 71%, as usage declined because energy efficiencies have improved.
  • More than 400 employee positions eliminated in order to generate cost-savings.

JEA's increase in customers is not enough to offset declining energy usage.

  • JEA's increasing customers have not overcome decreasing sales per customer.
  • Sales per customer were 29% higher in 2006 (33.42 Mwh) compared to 2019 (25.99Mwh).

If JEA doesn't change its financial structure soon, customers will be affected by the following:

  • Rate increases up to 52%
  • Staff layoffs and cuts in capital investments
  • Fewer technology and infrastructure improvements
  • Slower customer service
  • A gradual decrease in the value of JEA over time

JEA could gain flexibilities under a non-government structure that would allow the company to grow and thrive in a dynamic energy marketplace with new opportunities.

How could JEA change?

As we look at ways to make JEA better and pave a path to new growth, there are several paths to consider.

Community Ownership
  • Conversion of JEA to an organization which is owned and run jointly by its customers as members, who share the profits or benefits
Initial Public Offering
  • Conversion of JEA to a corporation and an offering of shares to the public in a new stock issuance
Private Placement
  • Conversion of JEA to a corporation and a placement of equity shares with private sector investors
Technology Conversion
  • Conversion of JEA to a corporation and a tech focused company purchases controlling interest in JEA
Oil and Gas Conversion
  • Conversion of JEA to a corporation and a vertically integrated O&G focused company purchases controlling interest in JEA
Utility Conversion
  • Conversion of JEA to a corporation and a utility company purchases controlling interest in JEA

What would this change mean?

Value to the City

Minimum $3 billion to Jacksonville

Customer Rebates

Cash rebates of $350 to $1,400 per customer

Rate Stability

Guaranteed base rate stability

Environmental Commitments

Commitments to renewable energy sources and water supply goals

Employee Protections

Protections to JEA employee compensation, health benefits and retirement plans

Downtown Presence

Commitment to a new Downtown Jacksonville headquarters

FAQ's

We know you have questions, and we want to help you understand how we got here and what we're doing. Together, we can create the best possible future, for JEA and Jacksonville.

"Recapitalization event" means the closing and funding of a transaction or a series of related transactions in accordance with Article 21 of the Charter of the City of Jacksonville and any other applicable law that results in at least 50 percent of the net depreciated property, plant and equipment value of either JEA's electric system or JEA's water and wastewater system being transferred, assigned, sold or otherwise disposed of.

A potential recapitalization could take one of many forms. The concept of recapitalization doesn't necessarily mean selling entire assets to an investor-owned entity. The options are varied and may include community ownership, an initial public offering, a private placement offering equity shares, or a conversion to a corporation with controlling interest purchased by a tech-focused company, oil and gas-focused company or utility company. The key words are 'not government-affiliated.' For instance, the Clay Electric Cooperative, in the community adjacent to Duval County, is a utility co-op—a private, non-profit business owned and governed by the community and customers it serves.

JEA's value will only diminish if it relies on the status quo or traditional utility response—Scenarios 1 and 2—to guide its path forward. As the data clearly show, neither of these scenarios are serving or have served JEA favorably. By advancing an ITN process now, JEA can not only start to begin the process of exploring alternative, non-governmental options, but also ensure its employees, the community, its financial health and the environment are taken care of in the best possible way.

Using JEA's four corporate measures of value (customer, community impact, financial and environmental) as a guide, the senior leadership team recommended—and the board of directors approved—a list of "minimum requirements" that any outside entity responding to JEA’s ITN would have to meet to even be considered as an option by the board:

  • Financial
    • At least $3 billion of net cash proceeds provided to the City of Jacksonville.
  • Customer
    • At least $400 million of value distributed to customers ($350+ paid to each JEA account - $1,400+ for customers with electric, water, sewer and irrigation accounts).
    • At least three years of contractually guaranteed base rate stability.
  • Environmental
    • Commitment to fund and provide City of Jacksonville and Duval County Public Schools with 100 percent renewable electricity by 2030.
    • Commitment to fund and provide 40 million gallons per day of alternative water capacity for Northeast Florida by 2035.
  • Community Impact
    • Protection of certain employee retirement benefits.
    • Guarantee of employee compensation and benefits for three (3) years.
    • Retention payments to all full-time employees at 100 percent current base compensation.
    • Commitment to new headquarters and employees in downtown Jacksonville contributing to the economic development of the community.

The overall purpose of exploring recapitalization is to give JEA the strategic flexibility to adapt to an industry-wide transformation and help it achieve its vision to improve service and enhance quality of life in Northeast Florida.

One of the minimum requirements for a potential recapitalization event is a guarantee from the successful bidder that customers would receive more than $400 million in rebates ($350 per account, or $1400 for customers with all four accounts – electric, water, wastewater and reclaimed water). Base rates for customers would remain stable for at least three years after a recapitalization, contrasted with no rebates to customers and base rate increases under a status quo or traditional utility response. Above all, customers would continue to receive the same high-quality, reliable utility services they have come to expect from JEA with a recapitalization event.

The utilities industry is changing rapidly and JEA and its peers face new market realities, including more engaged homeowners and businesses, connected "smart" technologies, data analytics and distributed energy resources (e.g. solar, battery storage and electric vehicles). JEA is leading the way to proactively understand and embrace these forces. Its value will only diminish over time if it does not explore opportunities afforded now as a non-governmental entity.

For decades, the electric and water utilities sector has been driven by two values: reliability and affordability. As long as the lights and water were kept on without breaking the bank, utilities were winning. Today, while still focused on reliability and affordability, forces including more engaged homeowners and businesses, connected "smart" technologies, data analytics and distributed energy resources (e.g., solar, battery storage and electric vehicles) are changing and reshaping the sector as we know it. At the same time, the laws and regulations that govern municipal utilities neither reward innovation nor incentivize the infrastructure or business models needed to create long-term value.

JEA, as the primary deliverer of electricity in Northeast Florida, is facing many challenges. The number of customers JEA serves is increasing, but revenues are decreasing due to forces shaping the overall electric and water utilities sector.

  1. JEA has increased its electric customer base by 112,000 since 2000. That's equivalent to the population of West Palm Beach.
  2. Catalyzed by the Energy Policy Act of 2005, which promoted more widespread adoption of renewable energy and energy efficiency standards, JEA has seen a 10 percent decline in revenue since 2007-and revenue continues to decline.
  3. Each new customer is projected to add approximately $2,500 in energy capital costs and $100-200/year in ongoing operating costs. By 2030, it is estimated that JEA will have 16 percent more electric customers.
  4. Within about seven years, alternative forms of energy like solar with battery backup may be cheaper than JEA's rates.
  5. Technology innovation is lowering competitive barriers to entry (e.g., Nest, Google, Amazon), while also giving customers more choice outside of JEA.
  6. JEA, as a municipally-owned (i.e., government-affiliated) utility, is governed by regulations that limit its ability to grow in today's dynamic marketplace.

In the past, JEA was able to take a traditional approach to strategic planning because the electric and water utilities sector was a predictable, low-uncertainty business environment. A sufficiently precise plan to operate the municipal utility the way it's "always been done" worked. In fact, it has worked for nearly 125 years. Today, the way it's "always been done" will no longer work. Therefore JEA's approach to strategic planning evolved from traditional responses such as employee layoffs and rate increases to "scenario strategic planning" to reflect this new, uncertain business reality.

For the past several months, JEA has been undergoing a scenario-based strategic planning process to determine how the utility can continue to meet the demands of and stay relevant to its customers in the face of industry-wide challenges. At its core, this process introduced a critical community conversation: Does JEA want to eventually become irrelevant to its customers (shrink), or stay relevant (and even innovative) now and into the future (grow)?

Scenario 1, status quo (presented at the May 28, 2019 board meeting - agenda and package, meeting video)

Assumes JEA will continue to operate as if it is still working within a predictable, low-uncertainty environment. By ignoring market and industry disruptions and opportunities, this scenario leads to steep revenue declines, rate increases and growing insignificance.

Scenario 2, traditional utility response (presented at June 25, 2019 board meeting - agenda and package, meeting video)

Assumes a focus only on stabilizing profitability in order to pay down debt and maintain standard electric, water and wastewater services for customers. Scenario 2 also includes significant headcount reductions, along with negative impacts to service quality and rate increases.

Although no board members commented that Scenario 2 is the right path for JEA in the June Board meeting, they asked that JEA produce an implementation plan for the scenario, including a timeline for headcount reductions (Scenario 2a). The board also requested senior leadership work with McKinsey and other specialized consultants to create a plan that reduces or eliminates JEA's constraints to growth (Scenario 2b). The Board reviewed presentations focused on Scenarios 2a and 2b at the July 23, 2019 board meeting.

Scenario 3, non-traditional utility response (presented at July 23, 2019 board meeting - agenda and package, meeting video)

Assumes proactive approach to innovation, focusing on growth, new business models and public-private partnerships with extension of core service offerings and removal of government-affiliated constraints. This would require changes to JEA's operating model, which would allow JEA to proactively create the circumstances to enable it to grow and remain relevant today, tomorrow and in the future.

At the July 23, 2019 board meeting, JEA's board of directors unanimously voted to approve a resolution authorizing JEA's senior leadership team to explore options outlined in Scenario 3-the unconstrained, non-traditional utility response. This approval essentially permits the senior leadership team to explore any and all options, including non-governmental options, to allow JEA to grow and remain relevant to its customers now and in the future. This approval required JEA to issue its ITN.

Transitioning JEA from a government-owned utility to a non-governmental entity could take one of several different forms-community ownership, an initial public offering, private placement offering equity shares, or a conversion to a corporation with controlling interest purchased by a tech-focused company, oil and gas-focused company or utility company. JEA is calling any such option a "recapitalization event" because it would re-cast JEA's entire capital structure under the alternatives outlined (formal definition of "recapitalization event" above). If any of the recapitalization events discussed should occur, the board of directors also approved a set of minimum requirements to protect employees' pensions and benefits, customers and the community.

Out of the 16 organizations that submitted proposals by the ITN submission deadline of October 7, 2019, nine have met the mandatory requirements of the ITN to move forward to the negotiation phase. They are:

  1. American Public Infrastructure LLC
  2. American Water Works Company Inc.
  3. Duke Energy
  4. Emera Inc.
  5. JEA Public Power Partners: A consortium of Bernhard Capital Partners, Emera Inc. and Suez
  6. IFM Investors PTY LTD
  7. Macquarie Infrastructure and Real Assets Inc. (MIRA Inc.)
  8. NextEra Energy Inc.

One respondent has not consented to release of its name.

The ITN is currently in the negotiation phase. We anticipate that the ITN negotiation team will make a recommendation to JEA's board of directors in early 2020. A potential approval by JEA's board would then send the proposal to the City Council for consideration. Based on a city charter amendment approved in 2018, Duval County citizens would ultimately provide the final vote on any potential recapitalization event through a voter referendum. See slide 190 of the July 2019 JEA Board meeting package for additional details.

Any potential recapitalization event would first require approval by JEA's board before going to City Council for consideration. Based on a city charter amendment approved in 2018, Duval County voters would need to approve any recapitalization event through a voter referendum following the City Council approval of such a proposal.

The JEA board may, at its discretion, determine that if options related to Scenario 3 (the non-traditional utility response) do not achieve JEA's stated minimum requirements, it may no longer pursue this approach and could select Scenario 2 for implementation.

Construction of JEA's new downtown Jacksonville headquarters is included as one of JEA's minimum requirements in the ITN. Given the timing whether to proceed with the new headquarters with Ryan Companies, JEA opted to proceed with the project and remain downtown. JEA decided going forward was the right thing to do for customers, employees and for downtown development.