Jacksonville, FL — JEA is road mapping how to get past the charter, statute, and other constraints that they say are impacting their ability to innovate as a company. While they explore that, they’re moving ahead with planning for some drastic cuts, in order to meet the industry challenges they will face in the next decade.
For months, JEA has been working with experts and consultants on strategic planning for the future. The picture that’s been painted is grim, not only for them, but the industry more broadly. JEA says changing energy policy, resulting energy efficiency and declining sales, and emerging technologies are just a few of the things that have fundamentally changed how consumers are using water and electric services, and how JEA provides them. The Senior Leadership Team and Board have now been publicly discussing what to do in the face of those challenges.
“Now is the time for change for JEA. Confront new challenges boldly and head on, and as a utility, we do have the opportunity to prosper. We can start figuring out how to grow and remain relevant and become the center of our customer’s energy and water utility experience,” says JEA’s Managing Director and CEO Aaron Zahn.
The Board voted today to move forward with putting together a plan for a scenario that would mean hundreds of layoffs, scrapping a new Downtown headquarters, reducing capital investments, and more in the next decade. This vote does not mean these changes are guaranteed to take place, but Zahn and his team will finalize a plan for what the short- and long-term implementation would involve, to present to the Board next month.
The Board made that vote reluctantly, with the caveat that they want to lean more about how to pursue a different path toward innovation. That later path is a challenging one in its own right, though, because JEA says they face roadblocks in the law and charter.
Three scenarios for the future
WOKV first told you last month, when JEA outlined what they call the "status quo" response. Under that projection, if JEA continues to operate in the status quo, it would mean electric rates would have to climb 52% by 2030, with water rates up 16% in the same time frame. This scenario could actually see even steeper changes, since JEA says many of their top customers, including the Navy Public Works Center, Anheuser Busch, Publix, and others, have publicly stated goals to increase sustainability.
During Tuesday’s Board meeting, the Senior Leadership Team presented two more scenarios- the “traditional” response and the “non-traditional” path.
The “traditional” response puts JEA on a path for planning toward an “organized decline”. JEA says the only tools available to them- given the current constraints in statue, charter, and related rules- are to manage with cost reduction and rate increases. In order to reduce the impact on customer rates, JEA theorizes maximizing cost cuts through a roughly 30% reduction in JEA’s headcount, which means getting rid of 574 full-time equivalent employees by 2030, including cutting down their Senior Leadership Team.
"Those headcount reductions are not without significant consequences for our customers. With fewer employees, customers will experience a substantial reduction in service, degradation in reliability, environmental impacts, and less community engagement,” says JEA President and COO Melissa Dykes.
They would also throw out plans for a new Downtown headquarters building, and instead move to rented space on the Southside, while also reducing capital investments. Even with those cost-cutting measures, JEA says they would not make up the entire cash gap, so a 26% hike in energy utility rates is projected by 2030, or a 13% hike if coupled with no city contribution once the existing agreement expires. Water rates would not have to increase.
The third scenario, or “non-traditional” path, is the one that offers the most optimism, but its own challenges, according to JEA.
JEA says this option will increase their value now and in the future, by embracing emerging technology, incentivizing employees to drive the utility forward, identifying innovative investments, and improving the customer experience. Dykes says they’ve been able to launch some small revenue generating ventures, but bigger ones have met regulatory roadblocks. Zahn says truly embracing this option means changing the law, JEA’s charter, and related areas, in order to be able to diversify and implement creative profit generating initiatives. But that also means aligning external stakeholders to cooperate in approving those changes.
The decision
JEA’s Board made their distaste for both the “status quo” and “traditional” paths clear.
“I reject that the ‘traditional’ utility response is the right response,” says Board Member Alan Howard.
But they gave Zahn what he asked for, in terms of the next steps.
“I ask that you instruct staff to finalize a ‘traditional’ utility response, in the event that we don’t have an opportunity to grow change. Second, I ask that you consider allowing us the opportunity to look at our constraints and consider charter changes, so that we can finalize a plan and bring it back to you in the future,” Zahn asked, and the Board approved.
Zahn says JEA has exhausted the tools they have in the status quo, so he will come back with an implementation plan for a “traditional” response next month, while also providing more insight on how to potentially change some of the regulatory friction points.
“At this point, as a Board Member, I’m willing to do whatever is necessary to make sure that JEA moves to a healthier road, because this is our community, and the impact that it’s going to have is on the people that we serve,” says Board Vice Chair Frederick Newbill.
The leadership made it clear that human impact has continually been on the front of their minds.
“This was a terrible process to go through. It’s a very human process. It’s one that recognizes the realities of the challenges that we’re facing, but especially when you start touching your team members, it’s a very painful process, even to paint a scenario that looks like this one,” Dykes says.
Howard says he knows they may not be able to change limits set in the Florida Constitution, but he believes they can effectively lobby state and local government to create some of the changes they need, in order to commit to the ‘non-traditional’ path of innovation.
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