A draft of a report valuing community-owned utility JEA was released Wednesday.
The 26-page report, authored by Public Financial Management’s Michael Mace, lays out the utility’s history and details the vast network of sewage and water piping and electric lines that blanket much of the First Coast. It doesn’t provide any high-level estimates of how much JEA is worth, which is expected in the final draft.
The report makes clear that “work on the study and draft is incomplete and remains ongoing,” and that the “information contained in this draft is subject to change, could be added to or subtracted from and may contain errors.”
Mace’s analysis seems generally supportive of a JEA sale, although the report does include the caveat that a potential sale would be complicated and take years to complete. According to the draft, prices paid for similar utility companies are trending upward, and “stockholders and asset purchasers are paying more now than ever for utility assets.”
Broadly explaining how a utility valuation works, Mace writes that to determine JEA’s value, you must subtract capital costs from the company’s expected earnings. Mace goes on to say capital costs “are near all-time lows for most potential buyers of utility assets.”
Still, a complete valuation isn’t exactly simple, according to Mace. For-profit companies evaluate several factors when deciding whether to purchase utilities, including what electric and water rates the Florida Public Service Commission regulatory body may approve. The PSC governs what privately owned utilities can charge customers, among other things.
Furthermore, Mace warned, new “owners are likely to make changes that impact utility customers and the city” and that “some of these changes may be necessary to generate earnings required to justify a high purchase price for JEA.”
A big fear among skeptical customers who showed up to recent City Council meeting is that a private company would raise rates to increase profit. JEA employees packed the same meeting, worried that privatization may mean they'd lose benefits, see cuts in pay or lose their jobs altogether.
Though Mace added that in most nonprofit to for-profit utility sales, the PSC requires sale conditions designed to protect ratepayers and employees. The report offers some examples like utility rate guarantees, which set current rates in place for a period of time immediately following the sale.
Mace also wrote that guaranteed employment agreements are also common, providing “employment guarantees for existing employees for a period of time to be negotiated among the parties.”
But Mace also warned that too many of those kinds of conditions could also affect what a private entity is willing to pay for JEA.
The report was drafted at the request of board chair Alan Howard after his former colleague Tom Petway, a political contributor of Mayor Lenny Curry, announced his retirement and his hope JEA would consider privatization.
Spokeswoman Gerri Boyce told WJCT the final draft is not expected to be released before the board's Feb. 20 meeting.
This story will be updated when a final draft of the report is released.
Contact Ryan Benk at RBenk@wjct.org.