Public power agencies are seeking input in a regulatory review of a Florida utility's nuclear energy purchase agreement, concerned that it will open a Pandora’s box of new oversight and business and financing risks.
Municipal utilities, wholesale agencies and electric cooperatives across the country have asked to intervene in a Sept. 18 case filed by JEA, formerly Jacksonville Electric Authority, a municipal utility in northeast Florida.
In the case, JEA has asked the Federal Energy Regulatory Commission — an agency that doesn’t oversee the nonprofit public power industry — to weigh in on its 20-year power purchase agreement to buy future electricity generated by nuclear reactors under construction at Plant Vogtle in Georgia.
JEA's power purchase agreement is with the Municipal Electric Authority of Georgia, which holds a 22.7% ownership interest in the twin reactors.
JEA wants the commission to determine if the agreement is “just and reasonable” because work on the reactors has been delayed and construction costs have nearly doubled.
FERC is taking comments and petitions to intervene in JEA’s case until 5 p.m. Wednesday.
“The public power concern about FERC review of the take-or-pay contract between MEAG Power and JEA is that hundreds of municipal utilities have the same type of contract that secures many billions of revenue bonds issued for generation projects,” Daniel Aschenbach, lead analyst of project finance for Moody's Investors Service, said Friday.
John McClure, vice president of government affairs and general counsel for the Nebraska Public Power District, told his board Thursday that the case has implications for the entire public power industry.
McClure said that JEA underwent a change in leadership that resulted in a “change of viewpoint” on its power purchase contract with MEAG.
“But they did something highly unusual,” he said. “They filed a pleading with FERC suggesting that FERC has jurisdiction over this contract and that they should nullify it.”
Under the Federal Power Act, McClure said there are clear provisions that exempt public power agencies and cooperatives from FERC’s oversight.
If federal regulators take jurisdiction in JEA’s case, it may open the door for FERC to oversee wholesale power contracts of other public utilities, include the Nebraska Public Power District, he said.
“It’s sent ripples through the entire public power community,” McClure said, adding that he thinks JEA has a low probability of prevailing but there would be “high consequences” if the case is successful.
The Nebraska Public Power District filed a motion asking to intervene in the case Oct. 3.
The motion says the district is concerned that the mere specter of FERC accepting JEA’s case may “pose meaningful immediate and ongoing business risk.” For that reason, the district said it will disclose the case in documents for an upcoming bond sale in December.
The district has about $1.5 billion of outstanding revenue bonds rated A-plus by Fitch Ratings and S&P Global Ratings, and A1 by Moody's Investors Service.
McClure said the district has asked several other utilities to share the cost of intervening in the JEA case. He also said trade organizations like the American Public Power Association are encouraging individual members to intervene as well.
APPA General Counsel Delia Patterson said the association is evaluating the potential impacts of a ruling by FERC that asserts its jurisdiction on members.
“We have informed our members of the filing and have encouraged them to evaluate possible impacts on their specific interests,” Patterson said.
MEAG President Jim Fuller said his agency has been in touch with other public power agencies about the case.
“Since JEA filed its petition, we have had contact with numerous organizations that have expressed concerns about JEA’s request for FERC intervention,” Fuller said in a statement to The Bond Buyer. “We have shared our point of view with them, and we welcome their participation in the discussion of this very important issue.”
The New York Power Authority filed a motion to intervene Tuesday, calling JEA’s petition to FERC “unprecedented.”
“The petition filed by JEA in this proceeding seeks relief that, if granted, would have deleterious and far-ranging effects for the entire public power community, including NYPA,” the authority said in its motion. “A commission order declaring its agreement with MEAG to be FERC-jurisdictional would immediately call into question the non-jurisdictional status of the wholesale power contracts between NYPA and its neighboring state customers.”
Other entities that have filed to intervene in the case include: Cooperative Energy in Mississippi; the National Rural Electric Cooperative Association: the Omaha Public Power District in Nebraska; the Orlando Utilities Commission in Florida; Public Utility District No. 1 of Chelan County in Washington; the Sacramento Municipal Utility District in California; and the Salt River Project Agricultural Improvement and Power District in Arizona.
