EBCE is committed to protecting our environment and is proud to be a Certified California Green Business
Finance, Administration, Procurement Subcommittee
Meeting
Friday, April 15, 2022
10:00 am
Please click the link below to join the webinar:
https://us02web.zoom.us/j/81690389009
Or join by phone by dialing: +1 669 900 6833
Webinar ID: 816 9038 9009
Consistent with the provisions of Assembly Bill 361, the East Bay Community Energy Board of Directors and standing committee meetings will be held via teleconference/videoconference only during the current State of Emergency. Any interested member of the public can participate via Zoom by utilizing the link listed above or telephonically by utilizing the dial-in information listed on this agenda.
Meetings are accessible to people with disabilities. Individuals who need special assistance or a disability-related modification or accommodation to participate in this meeting, or who have a disability and wish to request an alternative format for the meeting materials, should contact the Clerk of the Board at least 2 working days before the meeting at (510) 736-4981 or [email protected]
If you have anything that you wish to be distributed to the Committee, please email it to the clerk by 5:00 pm the day prior to the meeting.
1. Welcome & Roll Call
2. Public Comment
This item is reserved for persons wishing to address the Board on any EBCE-related matters that are not otherwise on this meeting agenda. Public comments on matters listed on the agenda shall be heard at the time the matter is called. As with all public comment, members of the public who wish to address the Committee are customarily limited to three minutes per speaker. The Board Chair may increase or decrease the time allotted to each speaker.
3. Approval of Minutes from November 12, 2021
Recommendation: Approve minutes by roll call vote
4. Overview of Project PPA Permitting Review
Recommendation: Review permitting process and Intersect Oberon permitting status (Informational)
East Bay Community Energy
Finance, Administration, Procurement Subcommittee Page | 2
5. Finance and Budget Development Schedule
Recommendation: Review of FAP schedule, budget development schedule, and upcoming items (Informational)
6. Q2 Unaudited Financial Statements
Recommendation: Review of October – December 2021 Unaudited Financials (Informational)
7. Fiscal Year (FY) 2022/2023 Draft Budget Review
Recommendation: Review the current draft of the FY 2022/2023 Budget
8. Energy Prepay Follow-on
Recommendation: Review a potential second energy prepay transaction
9. Board and CAC Stipends
Recommendation: Review and receive feedback in consideration of an increase in Board and CAC stipends (Informational)
10. Committee Member and Staff Announcements including requests to place items on future Board Agendas
11.Adjournment to Friday, June 10, 2022, at 10:00 am
EBCE is committed to protecting our environment and is proud to be a Certified California Green Business
Finance, Administration, Procurement Subcommittee
Meeting
Draft Minutes
Friday, November 12, 2021
12:00pm
https://us02web.zoom.us/j/81690389009
Or join by phone:
Dial(for higher quality, dial a number based on your current location):
US: +1 669 900 6833 or +1 253 215 8782 or +1 346 248 7799 or +1 929 205 6099 or +1 301 715 8592 or +1 312 626 6799 or 888 475 4499 (Toll Free) Webinar ID: 816 9038 9009
Meetings are accessible to people with disabilities. Individuals who need special assistance or a disability-related modification or accommodation to participate in this meeting, or who have a disability and wish to request an alternative format for the meeting materials, should contact the Clerk of the Board at least 2 working days before the meeting at (510) 906-0491 or [email protected].
If you have anything that you wish to be distributed to the Committee, please email it to the clerk by 5:00 pm the day prior to the meeting.
1. Welcome & Roll Call
Present: McCarthy (Piedmont), Narum (Pleasanton), and Chair Hannon (Newark) Excused: Directors Valle (Alameda County), Marquez (Hayward)
2. Public Comment
This item is reserved for persons wishing to address the Committee on any EBCE-related matters that are not otherwise on this meeting agenda. Public comments on matters listed on the agenda shall be heard at the time the matter is called. As with all public comment, members of the public who wish to address the Committee are customarily limited to three minutes per speaker and must complete an electronic speaker slip. The Board Chair may increase or decrease the time allotted to each speaker.
There were no speakers for public comment.
3. Approval of Minutes from September 10, 2021
Chair Hannon (Newark) motioned to approve the Minutes. Director East Bay Community Energy
Board of Directors Page | 2
Narum (Pleasanton) seconded the motion.
Director McCarthy abstained from voting, as she did not attend the meeting of 9/10/21.
Chair Hannon directed that Approval of Minutes would be heard at the end of the meeting, as there were currently not enough members to vote.
There were no speakers for public comments on the minutes.
4. PCIA and Rate Forecast (Informational Item)
Provide an informational update on the latest PCIA filing and forecast for 2022 Jim Lutz, on behalf of Local Clean Energy Alliance, stressed that EBCE should be challenging the PCIA rate calculations, PCIA exit fees to PG&E, and contracts applying PCIA to new loads that were not forecasted when the contracts were written.
5. Energy Hedge Review
Provide an informational update on 2021 hedge performance and 2022 hedge levels The Committee discussed:
x Being mindful that limiting the sources of energy would impact EBCE’s capacity constraint and affect customers, and how to manage that. x Methods to ensure sufficient capacity when moving toward electrification and away from natural gas.
6. Committee Member and Staff Announcements including requests to place items on future Board Agendas
Director Hannon requested that Agenda Item 3, Approval of Minutes from September 10, 2021, be continued to the next FAP meeting on February 4, 2022,and requested Committee members convey agenda item requests for FAP’s February 4th meeting to staff within 30 days of the meeting.
7. Adjournment to Friday, February 18, 2021 from 10am-12pm.
Project
Permitting ReviewAPRIL 2022
Overview of RFO Project Review
• EBCE's RPS and Storage RFOs for long-term PPAs include diligence and review of development status that includes environmental review• EBCE weights development status at 20% of the total score, this includes the below with equal weighting:o Environmental Studieso Permit statuso Interconnection statuso Site Controlo Construction Status Permitting/Environmental Impacts Criteria
• Evaluation criteria for permitting and environmental impacts for project scoring
Project Requirements
• Project Review
o EBCE received bids from projects with a range of development statuso Projects that completed all applicable permitting or were advanced in the permitting process were scored more favorably than those in earlier stages of development • All projects in CA must comply with CEQA guidelines• Additionally, the Seller must obtain all necessary discretionary and ministerial permits and satisfy requirements from the respective Authority Having Jurisdiction (AHJ) to begin project development and construction. This is a requirement of the AHJ as well as a contractual obligation of all EBCE PPAs. • The pertinent AHJ may be the county, city, or BLM, which all maintain the appropriate depth of knowledge and expertise related to land use and permitting to make the appropriate environmental/permitting determinations 2EHURQ
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Finance and
Budget Development Schedule APRIL 2022
April 15, 2022
2 Items included in this meeting are:1. Current calendar year items (tentative) and scheduleAll meetings are on Friday at 10am to Noon• February 18• April 15• June 10• September 16• October 142. Presentation of Budget Development schedule 3 Additional Meetings & Expected Items
April Meeting:1. Preliminary Budget details2. Prepay Follow-onJune Meeting:1. Credit Facility RFO2. Budget Review3. Arrearage Management UpdateSeptember Meeting:1. Audit progress updateOctober Meeting:1. Audit preview prior to Board
3. Budget Development Schedule
4 EBCE Fiscal Years are from July 1st through June 30thBudget cycle includes Budget Approval, Quarterly Reports, Mid-Year Check In, and next year’s Budget Development Thank You!
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1 ACCOUNTANTS’ COMPILATION REPORT
Board of Directors
East Bay Community Energy Authority
Management is responsible for the accompanying special purpose statement of East Bay Community Energy Authority (a California Joint Powers Authority) which comprise the budgetary comparison schedule for the period ended December 31, 2021, and for determining that the budgetary basis of accounting is an acceptable financial reporting framework. We have performed a compilation engagement in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the AICPA. We did not audit or review the accompanying statement nor were we required to perform any procedures to verify the accuracy or completeness of the information provided by management. Accordingly, we do not express an opinion, a conclusion, nor provide any assurance on this special purpose budgetary comparison statement.
The special purpose statement is prepared in accordance with the budgetary basis of accounting, which is a basis of accounting other than accounting principles generally accepted in the United States of America. This report is intended for the information of the Board of Directors of the Authority.
Management has elected to omit substantially all of the note disclosures required by accounting principles generally accepted in the United States of America in these interim financial statements.
East Bay Community Energy Authority’s annual audited financial statements include the note disclosures omitted from these interim statements. If the omitted disclosures were included in these financial statements, they might influence the user’s conclusions about the Authority’s financial position, results of operations, and cash flows. Accordingly, these financial statements are not designed for those who are not informed about such matters.
We are not independent with respect to the Authority because we performed certain accounting services that impaired our independence.
Maher Accountancy
San Rafael, CA
February 8, 2022
1101 Fifth Avenue, Suite 200 San Rafael, CA 94901 415 459 1249 mahercpa.com 2021/22 YTD
Budget
2021/22 YTD
Actual
2021/22 YTD
Budget
Variance
Over (Under)
2021/22 YTD
Actual/ Budget
%
2021/22 Annual
Budget
2021/22 Budget
Remaining
REVENUE AND OTHER SOURCES Electricity Sales 261,802,679 $ 243,106,862 $ (18,695,817) $ 93% 508,636,000 $ 265,529,138 $ Uncollectables (5,236,054) (4,862,137) 373,917 0% (8,939,000) (4,076,863) Investment Income 86,321 399,090 (312,769) 22% 798,000 711,679 Other Income - 325,324 325,324 0% 894,000 568,676 Total Revenue and Other Sources 256,965,715 238,656,370 (18,309,345) 93% 501,389,000 262,732,630EXPENDITURES AND OTHER USESCURRENT EXPENDITURES Cost of energy 235,928,658 247,406,034 (11,477,376) 95% 442,338,000 206,409,342 Data Management/Billing/Customer Service 4,072,814 4,703,315 (630,501) 87% 8,645,000 4,572,186 PG&E Service Fees 1,371,800 1,359,554 (12,246) 99% 2,752,000 1,392,446 Scheduling 332,928 339,588 6,660 102% 843,000 503,412 Personnel 4,710,500 3,614,198 (1,096,302) 77% 9,421,000 5,806,802 Marketing, Outreach, Communications 570,891 807,000 (236,109) 71% 1,614,000 1,043,109 Legal, Policy, & Regulatory Affairs 550,592 796,000 (245,408) 69% 1,592,000 1,041,408 Other Professional Services 425,000 483,163 58,163 114% 850,000 366,837 General & Administrative 1,516,500 1,115,057 (401,443) 74% 3,033,000 1,917,943 Local Development (Transfer to LD Fund Budget) 6,340,000 6,340,000 - 100% 8,475,000 2,135,000 Depreciation 30,000 27,149 (2,851) 90% 60,000 32,851 Total Current Expenditures 268,439,077 254,401,664 (14,037,413) 95% 479,623,000 225,221,336DEBT SERVICE Interest and Financing Costs 452,669 466,814 14,145 103% 898,000 431,186 Capital expeditures 5,500,000 8,523,207 3,023,207 155% 5,500,000 (3,023,207) Total Debt Service 5,952,669 8,990,021 3,037,352 151% 6,398,000 (2,592,021) Total Expenditures, Other Uses and Debt Service 274,391,746 263,391,685 (11,000,061) 96% 486,021,000 222,629,315 Net Increase (Decrease) in Available Fund Balance (17,426,031) $ (24,735,315) $ (7,309,284) $ 0% 15,368,000 $
EAST BAY COMMUNITY ENERGY AUTHORITY
OPERATING FUND
BUDGETARY COMPARISON SCHEDULE
Six Months Ended December 31, 2021
See accountants' compilation report. 2
1 ACCOUNTANTS’ COMPILATION REPORT
Board of Directors
East Bay Community Energy Authority
Management is responsible for the accompanying financial statements of East Bay Community Energy Authority (a California Joint Powers Authority) which comprise the statement of net position as of December 31, 2021, and the related statements of revenues, expenses, and changes in net position, and the statement of cash flows for the three months and year-to-date then ended in accordance with accounting principles generally accepted in the United States of America. We have performed a compilation engagement in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the AICPA.
We did not audit or review the accompanying statements nor were we required to perform any procedures to verify the accuracy or completeness of the information provided by management.
Accordingly, we do not express an opinion, conclusion, nor provide any assurance on these financial statements.
Management has elected to omit substantially all of the note disclosures required by accounting principles generally accepted in the United States of America in these interim financial statements.
East Bay Community Energy Authority’s annual audited financial statements include the note disclosures omitted from these interim statements. If the omitted disclosures were included in these financial statements, they might influence the user’s conclusions about the Authority’s financial position, results of operations, and cash flows. Accordingly, these financial statements are not designed for those who are not informed about such matters.
We are not independent with respect to the Authority because we performed certain accounting services that impaired our independence.
Maher Accountancy
San Rafael, CA
February 8, 2022
1101 Fifth Avenue, Suite 200 San Rafael, CA 94901 415 459 1249 mahercpa.com Current assets
Cash and cash equivalents 133,849,036 $
Accounts receivable, net of allowance 50,065,559
Accrued revenue 22,913,797
Other receivables 371,480
Prepaid expenses 2,352,909
Deposits 327,360
Restricted cash 2,000,000
Total current assets 211,880,141
Noncurrent assets
Unrestricted cash and cash equivalents in Rate Stabilization Fund 15,814,000 Restricted cash 7,000,000
Land and construction-in-progress 8,501,268
Capital assets, net of depreciation 117,016
Deposits 6,042,858
Total noncurrent assets 37,475,142
Total assets 249,355,283
Current liabilities
Accrued cost of electricity 52,637,186
Accounts payable 2,823,993
Other accrued liabilities 1,748,350
User taxes and energy surcharges due to other governments 4,309,267 Security deposits - energy suppliers 11,020,000
Total current liabilities 72,538,796
Rate Stabilization Fund 15,814,000
Investment in capital assets 8,618,284
Restricted for collateral 9,000,000
Unrestricted 143,384,203
Total net position 161,002,487 $
NET POSITION
EAST BAY COMMUNITY ENERGY AUTHORITY
STATEMENT OF NET POSITION
As of December 31, 2021
ASSETS
LIABILITIES
DEFERRED INFLOWS OF RESOURCES
See accountants' compilation report. 2
Quarter Year-to-Date
OPERATING REVENUES
Electricity sales, net 99,515,062 $ 238,244,725 $
Other revenue 162,924 325,324
Total operating revenues 99,677,986 238,570,049
OPERATING EXPENSES
Cost of electricity 104,877,920 235,928,658
Contract services 4,157,423 8,188,250
Staff compensation 1,740,980 3,614,198
General and administration 655,815 1,340,338
Depreciation 14,640 27,149
Total operating expenses 111,446,778 249,098,593
Operating income (loss) (11,768,792) (10,528,544)
NONOPERATING REVENUES (EXPENSES)
Interest income 32,918 86,321
Financing expense (235,917) (466,814)
Nonoperating revenues (expenses), net (202,999) (380,493) CHANGE IN NET POSITION (10,909,037) (11,971,791)
Net position at beginning of period 172,974,278 171,911,524 Net position at end of period 161,002,487 $ 161,002,487 $
EAST BAY COMMUNITY ENERGY AUTHORITY
STATEMENT OF REVENUES, EXPENSES
AND CHANGE IN NET POSITION
Six Months Ended December 31, 2021
See accountants' compilation report. 3
Quarter Year-to-Date
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers 116,623,552 $ 246,576,134 $
Other operating receipts 4,662,924 6,612,001
Payments to suppliers for electricity (103,979,797) (217,702,836) Payments for other goods and services (5,406,204) (11,253,528) Payments for staff compensation (1,939,214) (3,561,135) Tax and surcharge payments to other governments (4,417,431) (8,995,113) Net cash provided (used) by operating activities 5,543,830 11,675,523
CASH FLOWS FROM NON-CAPITAL
FINANCING ACTIVITIES
Financing expense payments - (230,897)
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Payments to acquire capital assets (39,973) (8,529,617)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest income received 32,918 86,321
Net change in cash and cash equivalents 5,536,775 3,001,330 Cash and cash equivalents at beginning of period 153,126,261 155,661,706 Cash and cash equivalents at end of period 158,663,036 $ 158,663,036 $ Reconciliation to the Statement of Net Position
Unrestricted cash and cash equivalents (current) 133,849,036 $ 133,849,036 $ Restricted cash and cash equivalents (current) 2,000,000 2,000,000 Unrestricted cash and cash equivalents (noncurrent) 15,814,000 15,814,000 Restricted cash and cash equivalents (noncurrent) 7,000,000 7,000,000 Cash and cash equivalents 158,663,036 $ 158,663,036 $
Six Months Ended December 31, 2021
STATEMENT OF CASH FLOWS
EAST BAY COMMUNITY ENERGY AUTHORITY
See accountants' compilation report. 4
Quarter Year-to-Date
Operating income (loss) (11,768,792) $ (10,528,544) $
Adjustments to reconcile operating income to net
cash provided (used) by operating activities
Depreciation expense 14,640 27,149
Revenue adjusted for allowance for
uncollectible accounts 2,030,917 4,862,135
(Increase) decrease in:
Accounts receivable 4,687,673 (11,016,371)
Market settlements receivable 1,841,016 5,025,941
Other receivables 703,696 336,708
Accrued revenue 6,094,669 5,038,410
Prepaid expenses 637,106 3,894,416
Deposits - (4,741,650)
Increase (decrease) in:
Accrued cost of electricity (2,144,451) 13,821,942
Accounts payable 79,353 (676,777)
Other accrued liabilities (198,234) 52,988
Deferred revenue 1,500 945,177
User taxes due to other governments (122,202) 452,121
Security deposits from energy suppliers 3,686,939 4,181,878 Net cash provided (used) by operating activities 5,543,830 $ 11,675,523 $
RECONCILIATION OF OPERATING INCOME TO NET
CASH PROVIDED (USED) BY OPERATING ACTIVITIES
Six Months Ended December 31, 2021
(continued)S
EAST BAY COMMUNITY ENERGY AUTHORITY
See accountants' compilation report. 5
EBCE Draft Budget Presentation—FAP Committee 1
April 15, 2022
EBCE DRAFT BUDGET FAP MEMO
FISCAL YEAR JULY 1, 2022 – JUNE 30, 2023
FY 2022/23 DRAFT BUDGET AND PREVIOUSLY APPROVED ANNUAL BUDGETS FY 2022-23 FY 2021-22 FY 2020-21 FY 2019-20
DRAFT BUDGET BUDGET BUDGET BUDGET
OPERATIONS
REVENUE & OTHER SOURCES
GASB 62 Unrecognized Revenue Balance 15,814,000 15,814,000 12,680,000 0 Operating Revenue
Electricity Sales 808,495,000 508,636,000 401,405,000 487,014,000 Uncollectables (10,350,000) (8,939,000) (9,902,000) (2,447,000) Other Operations Revenue 0 0 0 0
Total Operating Revenue 798,145,000 499,697,000 391,503,000 484,567,000
EXPENSES & OTHER USES
Energy Operating Expenses
Cost of Energy 521,668,000 442,338,000 358,078,000 386,904,000 Energy Operating Services 11,261,000 12,240,000 11,146,000 9,664,000 Total Energy Operating Expenses 532,929,000 454,578,000 369,224,000 396,568,000 Overhead Operating Expenses
Personnel 16,712,000 10,171,000 7,429,000 6,703,000
Marketing & Communications 1,476,000 1,686,000 1,544,000 2,263,000 Legal, Policy, & Regulatory Affairs 1,752,000 1,592,000 1,297,000 1,586,000 Other Professional Services 936,000 850,000 1,345,000 1,214,000 General & Administrative 3,256,000 2,961,000 2,146,000 2,290,000 Depreciation 180,000 60,000 60,000 61,000
Total Overhead Operating Expenses 24,312,000 17,320,000 13,821,000 14,117,000 Total Operating Expenses 557,241,000 471,898,000 383,045,000 410,685,000
NON-OPERATIONS
Total Non-Operating Revenue 229,000 1,692,000 1,506,000 578,000
NON-OPERATING EXPENSES
Borrowing Interest 1,440,000 898,000 804,000 1,229,000
Local Development Funding 22,000,000 8,475,000 6,340,000 6,275,000 Capital Expenditures 6,000,000 5,500,000 0 0
Total Non-Operating Expenses 29,440,000 14,873,000 7,144,000 7,504,000 NET NON-OPERATING POSITION (29,211,000) (13,181,000) (5,638,000) (6,926,000) TOTAL REVENUES 798,374,000 501,389,000 393,009,000 485,145,000 TOTAL EXPENSES 586,681,000 486,771,000 390,189,000 418,189,000 NET INCREASE(DECREASE) IN POSITION 211,693,000 14,618,000 2,820,000 66,956,000
RESERVE BALANCE
Beginning Reserve Balance TBD 90,218,000 90,218,000 40,514,000 FY Contribution TBD TBD 0 49,704,000
Reserve Balance TBD 90,218,000 90,218,000 90,218,000
Percent of Expenses 18.5% 23.1% 21.6%
# Minimum Target (25%) 146,670,000 121,693,000 97,547,000 104,547,000 # Operating Target (50%) 293,341,000 243,386,000 195,095,000 209,095,000 # Maximum Target (75%) 440,011,000 365,078,000 292,642,000 313,642,000
EBCE Draft Budget Presentation—FAP Committee 2
April 15, 2022
EXECUTIVE SUMMARY
The base case budget for Fiscal Year July 1, 2022 to June 30, 2023 is forecasted to reflect very strong financial performance. This is primarily driven by a rising energy cost environment. In a rising cost environment, PG&E rates generally increase and PCIA decreases, creating more operating headroom for EBCE given that we index our rates to PG&E. There is an additional effect from calendar year 2021 that also compounds this effect, because actual energy prices significantly exceeded forecasted levels. The effect is that while calendar year 2021 resulted in a net loss, there is a favorable PCIA adjustment that further reduces calendar year 2022 PCIA levels, which further strengthens calendar 2022 operating headroom. Because of our mid-year fiscal cycle our annual financials are able to offset some of this year-to-year volatility.
Calendar 2022 financials will perform very strongly to offset calendar 2021 losses based on the current rates and PCIA levels that are in place. The high energy cost environment is currently forecasted to persist in calendar year 2023. Energy cost increases are driven by a combination of drought conditions, a significant increase in natural gas prices, more extreme weather patterns driving increased loads in CAISO, supply chain disruptions, and retirements of dispatchable generation. Because 2022 and 2023 hedges were executed in a softer energy price environment, this results in very strong financial performance for FY 22-23. However, the calendar 2023 rates and PCIA are subject to significant volatility as we’ve seen energy prices increase over 80% on average between 2020 and 2022. One of the risks that we will need to manage is that as we put on higher priced energy hedges in the current environment, if prices soften in 2023 and onwards, we may face tight operating headroom, similar to calendar year 2021. While we strive to lower energy costs as a whole for our customers, this is a financial risk.
With this as background, the current financial outlook is very strong for FY 22-23 which will require significant discussion on what reserve levels to target, how to adjust the customer value proposition, what level of renewables to procure, and how to invest further in local programs.
Staff is proposing allocating budget to all of these areas in a fiscally prudent manner, which would include:
1) An increase to the customer value proposition in the form of a customer rebate at the end of the fiscal year. This would allow for certainty on how our financial performance is realized in light of energy price volatility/uncertainty. 2) A significant contribution to the operating reserve of $100-150MM that would allow EBCE to approach the target level of 50% of operating expenses. 3) An increase in renewable energy procurement – but to primarily do so by reserving funds towards long-term procurement, which invests in incremental resources rather than just short-term procurement of existing resources. This would be done in conjunction with our current evaluation of an active renewables and storage RFO that is in process.
4) An increase in local development budget by ~$13MM for the fiscal year and to establish a separate local development capital investment fund that can provide debt, equity, or performance guarantees towards establishing long-term programs.
EBCE Draft Budget Presentation—FAP Committee 3
April 15, 2022
BASE CASE ASSUMPTIONS
Revenues
x Assumes current rates and PCIA are unchanged through 2022 x Rates and PCIA for 2023 are set to non-stressed, or forecasted energy rates as of 4/1/22 x 1.5% uncollectable rate for remainder of 2022 then 1.0% in 2023 x No recognition of GASB 62 revenue ($15,814,000)
x Non-operating revenue Assumes 0.25% interest earned in cash balances in accounts Energy Costs
x Consists of all costs related to serving load including hedges, open position, CAISO management, capacity, carbon free procurement, renewable energy, long-term PPA’s, and other additional attributes
x Significant increase in costs is due primarily to rising energy rates and premiums on attributes Energy Service Costs
x Data Management fees are lower due to negotiation of new contract with provider Overhead Costs
x No significant change most overhead functional areas
x Increase in Depreciation is due to expected residence in the new building in January, 2023 x Increase in personnel due to hiring of eighteen additional positions in local programs, marketing, technology, and backfilling two existing positions, as well as COLA, retention incentives, and other increases and adjustments.
Non-Operating Costs
x Borrowing interest increased due to expected upsizing of credit facility cost with commitment fee
x $6M for capital expenditures is for necessary operating improvements on the new building x Program funding increased 42% to $12M
Reserve Funds
x In the current year, EBCE is operating with about 18.6% of projected operating expenses held in reserves
x In FY 2020-21, EBCE did not contribute to operating reserves. Staff is expecting net position will be available this year for contribution to reserves, the exact amount is TBD at this time x To reach the Board approved operating target for next year, an additional $198M is required x To reach the Board approved minimum target for next year, an additional $54M is required
EBCE Draft Budget Presentation—FAP Committee 4
April 15, 2022
RISKS DISCUSSION
EBCE is exposed to a variety of risks in this coming fiscal year. Below is a representative list of key risks, though it is not comprehensive in reflecting all risks.
Energy Market Risk:
x EBCE currently has approximately 30-35% of its energy portfolio with some exposure to the market. Short term energy prices can see volatility of 10-20% on a regular basis based on typical supply/demand dynamics that are heavily influenced by weather and electricity infrastructure.
With volatility we estimate that energy costs could increase reasonably as much as $50-65MM, though this could also result in a similar reduction in energy costs. We are in a rising cost environment with increased volatility relative to historical periods. Energy prices in 2022 and 2023 are forecasted to be approximately 80% above the historical avg over since 2010. x PCIA and rate impacts from energy market volatility are also necessary to consider. The PCIA actually serves as a form of risk mitigation based on the portfolio of resources under PG&E. An increase in energy market prices is partially offset by a decrease in PCIA the following calendar year. A decrease in prices would conversely result in an increase in PCIA which could materially reduce revenues in 2023 as EBCE experienced in the 2021 calendar year. Should prices revert to historical averages, net revenues are expected to be significantly reduced in 2023 resulting in net negative position in 2023, as show in the following table.
Q1 Q2 Q3 Q4 FY 2022-23
Jul-Sep Oct-Dec Jan-Mar Apr-Jun BUDGET
OPERATIONS
REVENUE & OTHER SOURCES
Total Operating Revenue 246,823,000 201,010,000 103,908,000 97,632,000 649,373,000
EXPENSES & OTHER USES
Total Energy Operating Expenses 139,082,000 119,457,000 113,416,000 95,498,000 467,453,000 Total Overhead Operating Expenses 6,048,000 6,048,000 6,108,000 6,108,000 24,312,000 Total Operating Expenses 145,130,000 125,505,000 119,524,000 101,606,000 491,765,000
NON-OPERATIONS
Total Non-Operating Revenue 26,000 28,000 45,000 45,000 144,000 Total Non-Operating Expenses 8,860,000 8,860,000 5,860,000 5,860,000 29,440,000 NET NON-OPERATING POSITION (8,834,000) (8,832,000) (5,815,000) (5,815,000) (29,296,000) TOTAL REVENUES 246,849,000 201,038,000 103,953,000 97,677,000 649,517,000 TOTAL EXPENSES 153,990,000 134,365,000 125,384,000 107,466,000 521,205,000 NET INCREASE(DECREASE) IN POSITION 92,859,000 66,673,000 (21,431,000) (9,789,000) 128,312,000
EBCE Draft Budget Presentation—FAP Committee 5
April 15, 2022
Uncollectables/Write-offs:
x EBCE increased expected exposure to uncollectable accounts from 0.5% to 2.5% of revenue for the COVID crisis in the 2020-2021 fiscal year. During the current fiscal year, staff has reduced the expected exposure to 2.0% in the first half of the 2022 calendar year. Staff is expecting this risk to reduce in the coming year. However, it will not dissipate entirely. EBCE is reducing the uncollectable estimation from 2.0% to 1.5% for the first half of the fiscal year, then to 1.0% for the second half. These estimates are at the higher end of the range compared to other CCAs based on our regional income demographics. To mitigate this risk, we are pursuing an increase in CARE/FERA enrollments, Arrearage Management Plan (AMP) enrollments, other community programs efforts, such as DAC-GT and community solar, and other forms of debt relief that are currently under analysis. Staff is monitoring true uncollectable rates closely, upon which these recommendations are based.
x As of April 1, EBCE has received about 81% of eligible CAPP money. The remaining amount is expected to be delivered before the end of the fiscal year.
Opt-out risk:
x Customer opt-outs are generally an ongoing risk to EBCE. However, we do not anticipate an increased risk of opt-outs for the fiscal year for established communities under normal conditions. There is currently no active discussion of DA expansion that would take effect in 2023, beyond what has already been in process.
x Change of product decisions may increase opt-outs, but this is difficult to estimate at this time based on the discussions among cities to opt up customers to Renewable 100.
SURPLUS OPTIONS
Given the potentially large net position in this next fiscal year, and after understanding the risks, it is important to discuss the various ways in which the surplus can be put to work. Some of the key areas of focus are:
x Reserve Contribution: EBCE has recently received an A-Stable credit rating from S&P. This rating is premised upon establishing strong reserves in the near term. Contributing to reserves should be considered in conjunction with other options presented. x Increasing Renewable Content: Clean energy is part of EBCE’s mandate. EBCE can procure more renewable energy to reach targets quicker.
x Increasing the Value Proposition for Customers: EBCE tightened the value proposition when the PCIA was high and reducing revenues, and COVID was expected to incur more uncollectables.
EBCE can increase the Value Proposition and provide methods to lower consumer costs. x Increase funding to Local Development: The current draft budget already has a historically large contribution to the Local Development Fund. Increasing funding has its trade-offs which are discussed.
RENEWABLE CONTENT DISCUSSION
Providing clean energy is part of EBCE’s mandate. Currently about 21% of EBCE’s customer load is on the Renewable 100 (R100) product which is comprised of 100% renewable energy content. The remaining 79% of load is on the Bright Choice (BC) product. The renewable content for total BC is planned at 45%
EBCE Draft Budget Presentation—FAP Committee 6
April 15, 2022
for the 2022 calendar year and 49% for 2023. To increase both these values by 1% costs approximately $635,000 in renewable content purchases.
VALUE PROPOSITION DISCUSSION
Providing a value proposition to customers with rates less than PG&E is another part of EBCE’s mandate. EBCE tightened this value proposition to a 1% discount to PG&E from a 1.5% discount in fiscal year 2020-2021 to keep a positive net position for the year as PCIA rates were at all time highs. With the lowering of PCIA in 2022 and expected moderate increase in PCIA in 2023, it may be prudent to increase the value proposition. The large net position for the year provides the opportunity to give back to the community. Staff is currently working on a number of possible options revolving around a combination of increasing the value proposition now to recognize projections and bill credits later to recognize the results as they occur.
LOCAL DEVELOPMENT DISCUSSION
Local Development was established as a fund separate from the general operating fund by the Board in the 2019-2020 fiscal year. Programs are currently expected to carry a balance forward this year of approximately $13.8M. Additional funding for next fiscal year is increased from the current year by 42% to $12M. Carry-over funds from previous years are required for established programs and are ear-marked for specific purposes but have not yet had costs actualized. These costs may occur in this coming fiscal year and should not be seen as above budget spending, but as pre-approved carry-over spending. The total approved spending requested is the total beginning balance plus transfers from the operating fund.
FY 2022-23 FY 2021-22 FY 2020-21 FY 2019-2020
BEGINNING BALANCE 10,067,572 13,821,067 4,870,737 0
REVENUE & OTHER SOURCES
Transfer from Operating Fund 22,000,000 8,475,000 6,340,000 6,275,000 Grants/Credits - - 395,000 -
Total Revenues & Other Sources 22,000,000 8,475,000 6,735,000 6,275,000
EXPENSES & OTHER USES
Actual Program Expenses - 1,221,504 1,538,165 1,404,263 Expected Remaing Expenses 35,821,067 3,500,000 - -
Total Expenses & Other Uses 35,821,067 4,721,504 1,538,165 1,404,263 ENDING BALANCE 13,821,067 - 10,067,572 4,870,737
Prepay Energy
UpdateAPRIL 2022
Existing Prepay Overview
Recap:
Ɣ Closed: Sept. 23, 2021Ɣ Total Bond Proceeds: $1.48 BillionƔ Rating: A1, “Green Bond” CertifiedƔ Volume to EBCE: 59 MW Around-the-Clock Carbon-Free EnergyƔ Power Supply Start: January 1, 2022Ɣ Savings, Years 1-10: $2 Million / year In progress / Ongoing:
Ɣ Settlements and invoicing were initiated on January 1, 2022Ɣ Assessing future PPAs to be put through prepay structure 2 Current Market Conditions
Ɣ Conditions are suitable for prepays
when the taxable and tax-exempt spreads are wide
Ɣ Spreads have been volatile in
recent years and conditions have been suitable for the last 9-12 months Ɣ With an expectation for increasing
interest rates, this may improve spreads in the near term Ɣ 8 prepay deals have priced since
EBCE's transaction in September -
primarily gas deals
3 Proposed Prepay Transaction
Ɣ Standalone EBCE Prepay transaction issuing through CA Community Choice Financing Authority (CCCFA), the JPA in which EBCE is a member
Ɣ Anticipate utilizing the prior RFPs issued/awarded in 2020 and 2021 to renew various counsel and advisory roles to gain efficiencies
Ɣ Prior transactions required >1.5yrs to complete and targeting 3 to 6 months for the second transaction
Ɣ Anticipate $500M to $1bn total sizeNext Steps:Ɣ April: Seek board approval to be enabled with legal counsel and advisors Ɣ May/June: Seek EBCE board and CCCFA board approval to transactƔ June onwards: Go out to market and determine optimal timing to price 4 • An energy prepayment is a long-term non-recourse financial transaction between a tax-exempt Load Serving Entity (LSE) and a taxable financial counterparty (bank, called “Prepay Supplier") utilizing the municipal bond market. o Typically 30-year term, LSE committing ~$350MM-$850MM of energy supply contracts (combined contract notional values)
o LSE utilizes in order to lower customer energy costs• Prepay Supplier is assigned an existing energy supply contract, pays the contract price to PPA Seller and immediately transfers all electricity and attributes to LSE. LSE pays the Prepay Supplier. • Municipal utilities (and tax-exempt entities such as CCAs) in the US can prepay for a supply of electricity or natural gas from a taxable entity and fund that prepayment with tax-exempt municipal bonds. The LSE must sell the commodity to their retail end-users residing within their traditional service area. o This structure is well known and regularly used for gas and is now being applied towards renewables PPAso Codified in US Tax Law. Since first prepayments of natural gas were done in the early 1990’s, the IRS issued rules allowing tax-exempt prepayments and Congress enacted legislation specifically allowing the transactions (National Energy Policy Act of 2005; Section 1327) 5 Appendix - Prepay Overview
Power Contract Assignment:
• Existing renewable PPAs are assigned to the taxable Prepay Supplier. The LSE continues to take and pay for energy and attributes delivered through the contract.
• All other terms of the PPA are unchanged• If the prepay program terminates early, prepaid supplier fails to perform, or LSE fails to perform, the LSE forgoes the future savings and the assigned PPA contract is put back to the original LSE • Active Suppliers: Goldman Sachs, Morgan Stanley, Royal Bank of Canada, Citi, Bank of America are all investment grade rated financial institutions
Debt:
• Non-Recourse: Prepays utilize non-recourse municipal bonds and are not secured or guaranteed by the referenced entity (i.e. the CCA). Rather the debt is recourse to the Prepay Supplier (i.e. the bank receiving the prepayment). This significantly protects the CCA and mitigates risk related to the payment of power contracts novated through the prepay. • Off Balance sheet for LSE: Bonds are issued by a municipal bond conduit and arranged by the Prepay Supplier 6 Appendix - Key Elements of a Prepay Transaction
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Board and CAC
Stipend ReviewAPRIL 2022
Introduction
2 • EBCE provides a stipend to participating Board members and Committee members
• The stipend for Board members was established in section 4.7 of the JPA at $100 per meeting attended, and may be adjusted for inflation but has been unchanged. “Directors shall receive a stipend of $100 per meeting, as adjusted to account for inflation, as provided for in the Authority's Operating Rules and Regulations.” • A stipend for the Community Advisory Committee is permitted by the JPA and was established at $50 per meeting through Board resolution R-2018-17 in April of 2018, and been in place and unchanged since.
Surveyed CCA’s and Other Public Agencies
3 CCA's Surveyed Stipend Provided Amount Other NotesCentral Coast Community Energy N - - Disbanded in 2019 Clean Power Alliance N - -
Clean Power San Francisco N - - Governed by SFPUC Board Marin Clean Energy N - -
Orange County Power Authority Y 212.50 - Up to 6 per month Peninsula Clean Energy N - -
San Diego Clean Power N - - To be determined
San Jose Clean Energy N - - Governed by City of San Jose Board Silicon Valley Clean Energy N - -
Sonoma Clean Power N - -
Other Agencies SurveyedAC Transit Y 1,000.00 - Monthly
BART Y 18,037.00 15.00 Annual plus transportation per meeting SMUD Y 275.00 - Meeting
Stop Waste Y 150.00 - Meeting
Proposed Options – Board
4 Board Director Stipend Options• Increase stipend to $200 per meeting. An increase of this nature would likely require JPA amendment
• Increase stipend to inflation adjusted amount. Would require Board guidance on adjustments and resolution. Depending upon guidance, an example of retroactive adjustments from 2018 at 2.5% would increase the stipend to $110.38. • Leave stipend unchanged at $100. No additional action required.
Proposed Options - CAC
5 CAC Member Stipend Options• Increase stipend to $100 per meeting. An increase of this nature would require the adoption of a new resolution at a board meeting. • Increase stipend to inflation adjusted amount. Would require Board guidance on adjustments and resolution.
• Leave stipend unchanged at $50. No additional action required.
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