State

JEA Utilities in Jacksonville Seeks Privatization Despite Public, Political Concerns

A company statement​ has promised that no new negotiations on the sale of the City of Jacksonville’s utility JEA are scheduled as the Florida Commission on Ethics reviews post-employment packages for the company’s executives while public opinion on the sale trends downward.

JEA is the 8th largest community-owned utility in the country and the largest in Florida. It is currently a non-profit company administered by a board of directors that is appointed by the mayor and confirmed by the Jacksonville City Council.

Although the sale has been discussed since City Councilman Matt Schellenberg proposed the idea to then-Mayor Alvin Brown in 2012, it has accelerated since Jan. 2018, when JEA sent a ​memo to employees​ asking them to remain with the company during a “possible acquisition or change of control.”

Since then, JEA has worked with consultants and strategists to organize and anticipate the impacts of the sale. The sale process has suffered several setbacks such as ​an abrupt change​ of the company’s CEO and some city councilmembers moving to ​hire a lawyer​ to challenge the legality of the sale.

However, JEA was still able to close qualifying bids on Oct. 7 of this year. The company initially received 16 bids, though the names of the bidders were not released at the time.

Later that month, JEA advanced nine of the bidders and released their names. The bidders included Duke Energy and Emera Incorporated, the company that ​purchased Tampa’s utility company TECO Energy in 2016. The prices of the bids will not be released until Feb. 2020.

As of this week, the sale of JEA has again been stagnated by legal concerns, though the company insists privatization will proceed.

On Nov. 13, the Jacksonville Office of General Counsel requested that the Florida Commission on Ethics review possible conflicts of interest related to the proposed post-employment contracts of top JEA executives.

This request came after City Ethics Director Carla Miller notified the Office of General Counsel about the possible ethical conflicts that could prevent top officials from participating in negotiations.

The post-employment contracts of JEA CEO Aaron Zahn and the 12 other members of the company’s senior leadership would be worked out during the negotiations with bidders, creating the potential for personal incentives to affect the details of the sale. Zahn’s current consulting contract offers him total payment of $520,000 for the year after he is replaced as CEO.

JEA has so far declined to share the names of those on its negotiating team, though a company attorney announced that the makeup of the team had been finalized by Nov. 1.

In response to the state inquiry, a company lawyer has stated “that barring any emergency circumstances, [JEA] would not proceed with substantive action unless and until such time that the review was completed.”

Sometime around the start of the review, the ​utility company hired​ The Southern Group, ​a strategy consulting firm​, to aid JEA in working with the governments of Duval, St. Johns and Nassau Counties, all of which are areas where JEA serves customers.

The State Ethics Commission’s review has renewed criticism of the attempt to privatize JEA. While company officials argue that the current structure of the company is unsustainable and that rates could rise by 52% if no changes are made, ​many have disputed​ JEA’s claims about the financial future of the public utility.

Earlier this month, the Jacksonville Civic Council, a group of over 80 local business leaders, ​sent a letter​ to city officials objecting to both the reasoning behind the privatization effort and JEA’s opaque sale process.

The letter was based on an 18-month analysis of the sale conducted by the Civic Council, which concluded that, although the utility is facing several challenges, the situation is nowhere near as dire as JEA executives have framed it.

Jacksonville Mayor Lenny Curry ​has praised​ the privatization effort for its potential to reduce or eliminate the city’s debt, but many other politicians and public figures ​have raised concerns​ about the sale.

In response to the Florida Commission on Ethics inquiry, Sen. Audrey Gibson expressed approval of the state’s involvement, adding, “The whole process [of JEA’s sale] has been a concern for me.”

The leader of the city’s finance committee, Aaron Bowman, remains open to the possibility of privatization. However, he admitted frustration around the company’s recent actions, stating, “This has not been a textbook case on how to go about on what they’re doing right now… And I think we’ve lost a lot of the public that has been watching this,” WJXT reported.

Public opinion has remained decidedly against the sale.

In an ​early November poll​, 59% of respondents disapproved of the sale, including 63% of Republicans surveyed. Seventy-three percent of respondents were unsure of a fair price for the utility or would not want to sell at any price. These polling figures reflect widespread concerns about JEA employee layoffs, ​the effect on JEA’s customers​ outside of Jacksonville, and uncertainty about privatization’s effect on utility rates.

While it is unclear how long the state ethics commission inquiry will take, JEA VP Kerri Stewart insists, ​“The [sale process] is not paused. We are moving forward, and we are on track with our timeline.”

If the post-employment contracts of the company’s negotiating officials are cleared, JEA will resume negotiations with its bidders, moving the now community-owned company towards privatization.

Featured photo: Downtown Jacksonville (Used under a Creative Commons license: https://bit.ly/2DdOv2b.)

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