32. Power Company Business Models Are Evolving - Aaron Zahn - JEA

Power Company Business Models Are Evolving The power industry is changing and power companies must evolve to stay competitive. Many businesses are transitioning from vertically integrated, centralized utility structures to more-distributed models. JEA offers a good case in point. JEA is a not-for-profit, community-owned utility located in Jacksonville, Florida. It serves an estimated 466,000 electric, 348,000 water, 271,000 sewer, and 11,000 reclaimed water customers. Aaron Zahn, managing director and CEO with JEA, was a recent guest on The POWER Podcast. He explained some of the challenges not only facing his company, but also investor-owned utilities (IOUs) and other power providers across the country. “Whether you’re municipally owned or an IOU, ultimately, you’re in competition to make sure you’re providing the best service to the customer, because now there are disruptive providers of solar, and battery, and microturbines, and others, that don’t even fall into either of those two classes,” Zahn said. “For the last 100 to 125 years, those were the only two predominant providers, and that’s just no longer the case.” As a public utility, JEA found it hard to gauge value. It didn’t have a stock price to measure the company’s performance against, so it needed specific metrics that it could use in decision-making processes. To gain some perspective, JEA established its CCEF benchmark, which identified four basic measures of value. The acronym stands for customer, community, environmental, and financial values. “We now tie metrics to each one of them and cascade them throughout the organization and throughout the community to let people know what direction—where we are today—and actually what direction we’re headed and where we expect to be in the future. And I think that’s enabled us to have very deliberate and methodical conversations about our strategies and tactics on how to move forward,” said Zahn. JEA’s power mix has evolved over the years too. In the early 1970s, its power was predominantly produced from oil-fired generation. It shifted more toward solid fuels as the price of oil escalated. It has since added more natural gas-fired generation, and in 2008, it signed an agreement with Municipal Electric Authority of Georgia (MEAG) to purchase nuclear power from the Plant Vogtle expansion. There is pending litigation on the validity of that contract, however; JEA is seeking to void the agreement. One of the underlying reasons is that solar energy is seen as a more-cost-effective solution for its customers. “Today, we’ve executed 250 MW of power purchase agreements for solar at a price almost 20-plus-percent cheaper than our current cost of dispatch of our fleet. And that will be a long-term hedge for us for about 20, 25 years, and completely emission-free,” Zahn said. Zahn talked about several other changes taking place at JEA and touched on some of the company’s recent accomplishments, including a 2019 Best Practices Award in Outage Communications. The company was recognized by Chartwell Inc. for its multi-channel Restoration 1-2-3 process, which goes into effect during major storm events. Restoration 1-2-3 focuses on actions during each phase of storm restoration and acknowledges the key role customers play in efforts to restore power safely and quickly when massive outages occur.