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A Response to the Community from Jim Dickenson, JEA Chief Executive Officer
At their February Board meeting, JEA Board members reviewed the financial status of the water and sewer business and discussion centered on the potential of having a budget shortfall at the end of our fiscal year, September 30. This was reported in the media. Some customers concluded that JEA is going to raise rates because customers conserved. That is not accurate. First of all, growth is the main driver of the need for conservation. More people put a greater demand on our systems. To help offset the effects of growth, JEA’s regulators require us to educate customers about conservation practices, but we also do it because it is the right thing to do. Water conservation is vital for the protection of our water source for future generations.
For the past decade, our customer base has grown at about three percent per year. So each year we have had more customers to share the cost of system improvements as well as our operating costs. Through the last two years, the economy has slowed down dramatically and our customer growth has for all intents stopped. We have even experienced a decline in the number of water and sewer customers. In addition, environmental regulations have increased. And climate change, concerns about the St. Johns River, required water and sewer system operating efficiencies as well as required expansion of reclaimed water will continue to add to our costs for the foreseeable future. Lack of customer growth and increased regulatory requirements have both put a big strain on our operating budget. Now, that strain is being exacerbated because of an unusually extreme reduction in water consumption.
Most people are not aware of the costs that go into running a utility nor do they realize that JEA is a not-for-profit utility. That means that the rates we charge are to cover our operating costs and the costs to build and maintain the electric, water and sewer systems. Operating costs include people and materials, but they also include costs to meet environmental requirements such as reducing nitrogen that goes into the river and reducing emissions from our power plants. When our costs to operate go up, we must pass that cost on to our customers.
We have just begun our budget process for our next fiscal year. Last October, when the financial crisis took hold, we reduced our operating budget for this fiscal year by about 10 percent. To make that reduction, we cut to a bare bones operating budget by removing dollars for all system operating improvements, by letting eight percent of our workforce go and by freezing pay for all management employees. Even with all those cuts, we continue to have a goal to further reduce where possible. Our real goal is to not raise water rates in the current year. But the cuts that were made for this year are not sustainable. The improvements that we have deferred this year must be made in the future to prevent deterioration of our systems.
No final decision has been made about a water rate increase. This winter, we will complete a cost of service study which will provide a detailed analysis of our rate structure. Over the next few months we will be looking at additional financial data, including the metrics important to our bond rating agencies, and our Board will most likely make a decision on this in the spring. It is important to us that you know we are doing everything we can to keep rates stable for the current year.
Want to know more about the need for water conservation in our area?
Want to know what you can do to conserve?
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