JEA Bill

[ChriswUfGator]

JEA has been forced to increase what it charges for water and electricity during the past few years because of its tremendous debt per customer.  The higher than normal debt caused its bond rating to fall,  which meant JEA had to pay higher interest rates on new bond issues. 

This was the result of poor management over many years, not a recent decision to reward bondholders at the expense of customers.  JEA doesn't have a choice:  it has to borrow money to pay capital expenses and the market dictates rates paid on its bonds.

Our recent higher electric bills are caused by BOTH rate increases and historically low temperatures.

Don't buy into the party line. That's got nothing to do with it, their bond rating has gone nowhere but up.

[ChriswUfGator]

Their debt position has only decreased. I mean, let's put this in perspective. At the height of the credit crisis JEA's ratings outlook was still "stable" and they disclosed that even if "doomsday" came to fruition and the rating was lowered (to A+ from AA-...I know, a real catastrophe) the resulting increase in interest costs would only be about $5mm a year;

http://jacksonville.com/tu-online/stories/090908/met_330004550.shtml

So how, then, does fear of that benign outcome warrant several hundred million dollars worth of rate increases?

[Non-RedNeck Westsider]

JEA has been forced to increase what it charges for water and electricity during the past few years because of its tremendous debt per customer.  The higher than normal debt caused its bond rating to fall,  which meant JEA had to pay higher interest rates on new bond issues.  

This was the result of poor management over many years, not a recent decision to reward bondholders at the expense of customers.  JEA doesn't have a choice:  it has to borrow money to pay capital expenses and the market dictates rates paid on its bonds.

Our recent higher electric bills are caused by BOTH rate increases and historically low temperatures.

Actually it happened because the former director decided to go into the investments and securities market in order to make a bunch of money.  I was around when that happened.  While the market was high, he was considered both a titan and a genius.  So much so that he was invited to join the new Peyton Administration and institute the same practices in the City Finances.  He did this over the dead body and resignation of Sam Mousa, who had instituted an extremely conservative, secure method of intelligent financial stewardship that left the city with surpluses ever year.

The City followed JEA's example (at the time it was a rosy one) and lost a substantial chunk of change in the first two years.  Of course that trend deepened, and the resulting shocking losses put the City and JEA in a debt position.

It wasnt as a result of an accruing debt per customer.

So you have ansers for everyone but me?  That's cool.  I really didn't expect anything from you, just more rhetoric that you can't substantiate, just 'something you were around on.'  Typical SD.

Now I expect you to igore this post or answer it with another question.

[Non-RedNeck Westsider]

So how, then, does fear of that benign outcome warrant several hundred million dollars worth of rate increases?

Was it a rate increase or a passing-along-of-doing-business increase?  As much as you'd like to believe it, they're not one in the same.

[Non-RedNeck Westsider]

The expert says it pretty clearly.  Its out of character for a public utility.

Going just a step lower, he said, could boost annual debt payments by $5 million to $7 million, but increasing the bond rating - while a good business move - would cause problems for customers.

McElroy said it would take heavier cash flow to get a higher rating, most likely calling for rate increases on top of those authorized already for this year. While the analysts - who serve as advocates for municipal bond investors - might like the look of the balance sheet, the business model would seem a bit out of touch, at least for a public utility.

But possibly right in line with a privately-owned-utililty?  One of those profit generating engines that you'd know nothing about.

[Non-RedNeck Westsider]

I guess your point, other than my 'mom' which you referenced so poetically, is that publicly owned companies should never operate or perform like privately owned companies, which is a long way of saying operate at a loss in leiu of a profit.

[Miss Fixit]

"To many people, the difference between "AA-" and "A+" may seem trivial, even too abstract to worry about.

But to JEA, the difference could mean millions of dollars in additional interest payments, costs that would trickle down to customers."

These sentences are from the same article quoted earlier.  Unfortunately, the drop from A+ to AA- occurred several years ago and was a significant reason for the increases we've seen in our utility bills.

The bond rating is only one of the problems JEA has faced - water quality problems and increased fuel prices haven't helped, and many years of undercharging developers and builders for new lines and connections contributed too - but it IS an important part of the problem. 

[ChriswUfGator]

The interest cost increase for the much-threatened drop from AA- to A+ was a whopping $5mm-$7mm a year, and they decided to charge customers another several hundred million annually to avoid paying that $5mm-$7mm in additional interest costs. This created a windfall of cash, which they have proceeded to invest (and lose) in a number of harebrained schemes so preposterous you wouldn't believe me if I told you.

Mismanagement is causing the increasing costs, plain and simple. Nota bene: Stephen has a different take on the mismanagement, he has some evidence that the problem is that funds are being 'mismanaged' right back into management's and management's friends pockets via conflicts of interest in JEA's outside investment portfolio (which it shouldn't have to begin with...it's a public utility not an investment bank).

Markets and fuel prices fluctuate. JEA jacked the rates up in 2007 and 2008 to cover increased fuel costs. When the market cratered and fuel prices plummeted back down in 2009 and 2010 what happened? Well naturally despite a 70% decrease in the price of a barrel of oil, they actually RAISED the rates again. Lol

I mean come on, that's not market fluctuation, that game is just rigged.

[Non-RedNeck Westsider]

...This created a windfall of cash, which they have proceeded to invest (and lose) in a number of harebrained schemes so preposterous you wouldn't believe me if I told you.

Try us.

Please, without links, just post the material.

[Non-RedNeck Westsider]

I thought you werent interested in this kind of stuff, redneck?

After all, with your two businesses, and your high stepping life of just paying for stuff without worrying about the costs, surely this is beneath your radar, right?

I don't worry about costs, Stephen, I pass them along to my customers.

[Non-RedNeck Westsider]

maybe you should have.....

[Non-RedNeck Westsider]

I can't walk too fast or my courd's catch fire, but I'm doing well enough, thanks.


BTW, do you have any idea what electricity should cost?

[Non-RedNeck Westsider]

Lil ole me?  Why Shucks redneck, my lil ole brain would just bust trying to think about all that.

Tell us about your racing car, redneck!  I like racing cars.!

Failure to answer the first question posed to you in this thread, and you have no idea.

Why don't I just repost what you said about my mom, that should do it.

[ChriswUfGator]

...This created a windfall of cash, which they have proceeded to invest (and lose) in a number of harebrained schemes so preposterous you wouldn't believe me if I told you.

Try us.

Please, without links, just post the material.

It's truly stranger than fiction, and is quite the long and sordid tale. JEA's improper dabbling in private equities with resulting spectacular losses stretches back nearly three decades. As early as the early 80s JEA had signed a billion dollar deal to buy floating nuclear generating stations from a joint venture owned primarily by the chairman of JEA's own board of directors. After JEA had advanced some $200mm in upfront payments to outside companies controlled by its own management, the coast guard declined to certify the harebrained floating nuclear reactors because the first hurricane over a category 2 would have caused a meltdown and wiped out the eastern seaboard.

More recently, circa 2004-2007 how's about a computer system that cost $100mm+ installed by a contractor with similar conflicts of interests with JEA management. The system never worked properly despite the company having been paid upfront, and had to be replaced within 2 years. JEA's mainframe they charged to rip and replace with a nonfunctional system had worked fine for 15+ years. Very recently (around 2005) JEA began dabbling in the derivatives market. It started by, paradoxically, writing default/downgrade insurance on its own bonds, something that makes little sense and is very unusual. It then expanded into buying/selling credit default swaps on other companies, with predictable results considering what happened in that market from 2008-forward. Losses were hidden but likely catastrophic.

At this point we're funding a black hole.

[Non-RedNeck Westsider]

I didnt even realized that you had 'posed to me.  Its all so sudden.

I guess the english language has failed you tonight....

posed â€" verb (used with object)
4. to place in a suitable position or attitude for a picture, tableau, or the like: to pose a group for a photograph.
5. to assert, state, or put forward: That poses a difficult problem.
6. to put or place.