The Jacksonville Electric Authority (JEA) is grappling with a significant financial discrepancy that dates back decades. A recent report from the Jacksonville city council Auditor’s Office suggests that JEA may have underbilled its commercial customers for water capacity fees by $55 million since 2003. This issue has sparked a series of investigations and committee meetings aimed at understanding the extent of the problem and finding a solution.
The roots of this issue trace back to inconsistencies in JEA’s policy on collecting water capacity fees, which have been problematic since before the utility’s formation in 1986. The problem came to light when the Office of Inspector General requested assistance from council auditors to investigate the financial impact and legal recourse for recovering any losses.
Committee Formation and Initial Findings
The Jacksonville City Council formed a three-member Financial Audit and Oversight Committee to delve into the matter. This committee, which includes Chair Ron Salem, council Vice President Joe Carlucci, and council member Chris Miller, is tasked with understanding the cost implications of the unbilled fees and proposing policy changes to address the issue.
JEA’s Chief Water Systems Officer, Rob Zammataro, explained the purpose of capacity fees to the committee. “When you build a new plant, as people connect to it, they kind of purchase their portion of the plant, their little slice of the pie,” Zammataro stated. These fees are crucial for funding new water and wastewater treatment plants, as well as expanding and modernizing existing facilities. Importantly, these fees are independent of the rates charged for water consumption.
The Financial Impact and Legal Considerations
The auditors’ report highlighted that JEA has more than 25,000 business accounts, but the investigation focused on 1,697 meters with 3-inch or larger connections. Businesses that exceeded their daily water flow capacity by 20% or more were flagged for potential underbilling. The report estimated that JEA could have under-collected between $55 million and $75 million with $21 million of that amount attributed to multifamily residential complexes that have not expanded since their initial connection.
One notable example is the Mayo Clinic, which JEA’s then-chief legal counsel suggested could owe $18.9 million in back water and wastewater capacity fees due to its growth since 1995. However, the auditors emphasized that it is still unclear whether JEA is solely responsible for determining and billing for additional fees or if businesses have a reporting obligation.
Potential for Fee Recovery
Council President Nick Howland noted that if customers have a responsibility to report any plans that could exceed their capacity threshold, there might be legal recourse for JEA to collect some of the unbilled fees. JEA officials are currently working on a future water capacity policy and a retroactive policy to address the uncollected fees, which will be presented to the JEA board by early next year.
Despite the significant financial discrepancy, JEA officials pointed out that the utility has collected $9 billion in capacity fees since 1997, amounting to approximately $6 million to $10 million per year. However, the auditor’s office cautioned that JEA is still researching outstanding agreements and any legal limitations in recovering the uncollected fees.
The committee emphasized the importance of transparency and fairness in addressing this issue. “We don’t want the perception that we’ve got $55 million here that we’re not going to collect and we just raised the rates on the rank-and-file homeowners,” Salem stated. The committee is committed to ensuring that all parties are treated fairly and that the tariff is applied consistently.
