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JEA wants to keep customer rates flat despite previous leadership’s warnings they would increase

JEA’s leadership team on Monday presented a proposed budget that includes no rate increases.

JACKSONVILLE, Fla. — JEA’s new interim leader Paul McElroy wants to keep customer rates stable next year, despite his predecessors’ repeated warnings that customers would likely pay more for electricity as soon as next year to help the utility prepare for a looming budget crunch related to Plant Vogtle.

McElroy’s leadership team on Monday presented an overview of their proposed budget for next year to a subcommittee of JEA’s board of directors. While the budget is subject to change before the board approves it later this year and submits it to the City Council for final approval, the presentation revealed an alternative path to the gloomy financial outlook presented by now-fired chief executive officer Aaron Zahn.

The proposed budget forecasts modest revenue increases from both the energy and water side of the utility. Despite cost increases related to Plant Vogtle, JEA plans to keep electric and water rates stable and contribute $120 million to the city’s general fund budget.

As JEA was courting bidders to buy JEA and Zahn made the case to the public that the utility needed to be sold, JEA officials told the board in late 2019 they were considering hiking rates in 2021 and 2022 to deal with the “substantial expense increases” expect from its contract with Plant Vogtle.

Indeed, JEA’s budget will take a major hit in years to come because of its 2008 decision to help build and purchase power from Plant Vogtle, a project that has been riddled with delays and and price increases. JEA will pay $36 million next year to pay off debt JEA took to help construct the facility, a $14 million increase from this year’s amount.

JEA has set aside money in a special account to cover the construction costs of the plant without raising rates, including this year’s $36 million debt payments. JEA officials do not expect to begin buying electricity from the plant until at least November 2021, which falls outside the window of next year’s budget.

JEA’s portion of the construction costs have doubled from the original estimate of $14.8 billion to nearly $30 billion, which has also increased what JEA must pay for electricity from the plant under its “hell or high water” contract, a common agreement in the utility industry that prevents a buyer from escaping a contract.

The power plant was supposed to be completed several years ago, although now Georgia Power, the majority owner of the plant, has said it expects to complete one reactor by November 2021 and the second by November 2022. Despite construction delays caused by the COVID-19 outbreak, Georgia Power expects the total cost and timeline to remain on track.

JEA’s annual cost to purchase power from the plant is expected be about $200 million when both new reactors are up and running. JEA is required to purchase power for 20 years.

Although next year’s budget wouldn’t account for buying power from Plant Vogtle, Zahn’s leadership team was exploring a double-digit rate increase that could have been implemented as early as this October, which Zahn said was necessary to prepare for future Vogtle costs.

Zahn spent $5 million in legal fees for JEA to wage an uphill court battle to void its purchase agreement with Plant Vogtle. Next year’s budget includes an additional $5 million in legal fees for the lawsuit.

Monday’s meeting was mostly an informational session for the three-member subcommittee. The full board will review and vote on the budget as early as June 23.

Plant Vogtle or customer rates didn’t generate significant discussion. McElroy, who was hired earlier this month as an interim leader while JEA finds a permanent CEO, said he may need 15 additional days beyond the July 1 deadline for JEA to submit a budget to the City Council. He said the budget may also change between now and this summer because of impacts related to the COVID-19 outbreak.

Read the original version of this story from the Florida Times-Union.

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