Experts Say Sale of JEA Would Be Biggest Public Utility Transaction In The Industry
Selling Jacksonville’s public utility, JEA, to a private company would make the transaction the biggest in the industry, according to experts.
JEA’s board Tuesday approved exploring privatization in response to falling revenues as customers use less electricity. Next month, the city-owned water, sewer and electric utility will begin accepting bids from outside companies.
“Had you been paying attention, you would have seen the historic moment coming,” said Board Member Alan Howard, who added JEA must find new ways of making money.
Selling a municipal utility is rare, according to a 2018 report from the University of Florida’s Public Utility Research Center (PURC). The 100-page report — which assessed the value of JEA, as talks of privatization led to public outcry — was “unable to identify examples of public water system sales similar in size and scope to JEA’s water system.”
According to the report, there have been two high profile community-owned utilities sold to investor-owned utilities in Florida. The more recent of the two occurred in 2018 when the Florida Power & Light (FPL) acquired the Vero Beach electric utility.
The Vero Beach acquisition was one of the case-studies in the report. But University of Florida Energy Studies Director Ted Kury, one of the report’s researchers, said that example is an incomplete comparison.
“Because the various interrelationships that JEA has are a lot more complicated than what Vero Beach had, which is a really small utility,” he said.
JEA was created in 1968, but Jacksonville has been in the utility business since 1880. Today, JEA is the largest municipal electric utility in Florida and the eight largest in the country, serving about 459,000 electric customers, 341,000 water customers and 264,000 sewer customers.
JEA employs 2,000 workers and annually contributes $117 million to the city’s general fund budget.
That relationship between the city and the utility comes with benefits like being reimbursed by federal and state governments for a portion of expenses related to storm damage, said Kury.
JEA’s leadership said they would only consider offers north of $3 billion, but Kury thinks the 50-year-old municipal utility is likely worth much more.
“When we think about the idea of value for a utility that is owned, essentially by the people it serves, it goes beyond just the dollars and cents,” he said. “We have to kind of broaden our idea of what we mean by value.”
His report concluded JEA is worth between $6.3 billion to $7.5 billion. Kury said researchers arrived at that valuation by considering two factors: the financial commitments and assets of the current owners, and the value of the services provided by the utility.
Still, Kury said he understands the financial pressures that led JEA to consider privatization, as the industry’s growth has stagnated.
“In an industry where we used to see, you know, pretty regular 2-3% growth each year in the amount of electricity people were using… Now that’s starting to flatten out,” he said.
That decline is partly being caused by the greater emphasis being placed on conservation and energy efficiency. It is also a byproduct of people producing some of their own energy by putting solar panels on their roofs.
Kury said there isn’t a best ownership structure. Ultimately, he added, the decision should be left to the people of Jacksonville.
“A couple of utility geeks from Gainesville and Tallahassee shouldn’t be telling the people of Jacksonville what to do with their utility,” Kury said.
If the Board and City Council move forward with the plans to privatize, Duval County voters would have the final say in a referendum.
Contact Abukar Adan at 904-358-6319, email@example.com or on Twitter at @abukaradan17