The JEA board is hiring an outside consultant to scrutinize the city-owned utility’s operations and maintenance costs and to provide the board with advice on plans to spend billions of dollars on capital projects over the next several years.
In a move with echoes back to a leadership shake-up in April, the board voted 5-0 on Aug. 27 to select K3 Strategies LLC of Sarasota as its “business excellence consultant.”
A board vote in March to seek invitations from consultants prompted questions about whether the board had lost confidence in CEO Jay Stowe. Three weeks later, Stowe resigned and the board named Vickie Cavey as interim managing director and CEO.
JEA Chief of Staff Kurt Wilson said that in hiring the consultant, the board was examining “what we spend on projects and people.” That includes comparing JEA with other similar-size utilities to see if its headcount needs to be reduced or increased.
“In essence, are we doing things right at the right size? Are we best in class? Are there areas of opportunity?” Wilson said.
K3 was among seven consultants who competed for the contract with JEA. A scoring committee named K3 and Deloitte Consulting LLP as the finalists. The board chose K3 after hearing presentations from both.
Board Chair Joseph DiSalvo ranked Deloitte above K3, while board members Rick Morales, John Baker, MG Orender and Robert Stein ranked K3 first.
After a motion to select K3, DiSalvo voted with the majority. Board members Kawanza Humphrey and Zachary Faison Jr. were not present.
JEA will negotiate a contract price with K3.
Projects ahead
The consultant will evaluate plans put into motion under Stowe to spend as much as $4 billion over the next several years to help JEA meet increasing demand for utility service in Northeast Florida and adhere to environmental regulations.
The list of projects includes a $2.3 billion upgrade and expansion of the water and sewer system and a high-tech natural gas electric-generation plant with an estimated cost of about $1 billion. The proposed gas plant would allow JEA to close one of its three units at the Northside Generating Station.
“This is the board’s due diligence of making sure that the numbers coming out of staff are accurate,” Wilson said. “If there’s an opportunity to save money, we want to make sure we identify that.”
Wilson said the goal was to insulate customers from rate increases.
“We think we’re doing a great job looking at the numbers,” he said. “It would be really nice if a third party came in and either agreed with us. If they disagree, then that’s an area of opportunity, and in the end, it’s a win for our customers in our community.”
Due diligence
In March, then-board Chair Stein likened a consultant to a doctor giving a second opinion. Stein said he suggested bringing in the third party to show the community and City Council that the board was exercising due diligence in its decision-making.
Stein made those remarks weeks after former JEA CEO Aaron Zahn was found guilty of conspiracy and wire fraud during a weekslong trial that raised questions about whether JEA board members who were in place during Zahn’s time as the utility’s leader were too compliant in following recommendations from Zahn and his executive team to explore privatization.
Prosecutors alleged that Zahn and JEA CFO Ryan Wannemacher conspired on a scheme to fleece the utility of tens of millions of dollars in undeserved bonuses through an incentive plan that would have been triggered by the sale of JEA.
Wannemacher was found not guilty. Zahn was sentenced July 30 to four years in prison and was given 90 days to voluntarily report for incarceration.
Stein suggested that the high-profile trial had influenced the board’s decision to seek a consultant, saying the trial had put the board under “a bright light in a dark room.”