Staff Report Item 10
Staff Report Item 10
TO: Ava Community Energy Authority
FROM: Jason Bartlett, Senior Finance Manager
SUBJECT: Audited Financial Statements for Fiscal Year 2022-2023 DATE: November 15, 2023
__________________________________________________________________ Recommendation
Accept and file the audited financial statements for fiscal year 2022-2023 Background and Discussion
EBCE hires an independent auditor to verify the annual financial statements each year. In June of 2019, EBCE selected Pisenti & Brinker, LLP (P&B) as the Authority’s auditor through a formal RFP. They were EBCE’s auditor the previous year and their familiarity with EBCE and CCA finance space made them the best choice.
This year’s audit focuses on EBCE’s financial activities of the fiscal year dating from July 1, 2022, to June 30, 2023.
P&B engaged with an ad-hoc committee of board members throughout the audit process and was assisted by EBCE staff.
The final audited financial statements provide and independently verified, accurate portrait of EBCE’s financial position as of June 30, 2023. These financial statements include EBCE’s financial activities related to:
• Net Position
• Revenues, Expenses, and Changes in Net Position
• Cash Flows
• Accompanying Notes and Subsequent Activities
Highlights from the Statements for the fiscal year include:
Staff Report Item 10
Auditor’s Report
The auditors were able to conclude the following about Ava’s financial statements:
• Free from material misstatement
• Present fairly, in all material respects, Ava’s financial position as of June 30, 2023
• Changes in financial position and cash flows are in accordance with generally accepted accounting principles (GAAP)
• Management operated within Ava’s defined internal controls.
Statements of Net Position (Balance Sheet)
• Total Assets increased from $344.8MM to $505.5MM
o Primarily as increase in cash and equivalents, accrued revenue, and account receivables
o GASB-62 fund was increased to $53.0MM of deferred revenues • Total Liabilities decreased from $96.5MM to $85.0MM primarily due to a reduction in security deposits held for energy suppliers • Total Net Position increased from $232.5MM to $362.7MM as driven by the changes mentioned above for assets and liabilities
o Net Position = Assets – Liabilities – Deferred Revenue • No debt was issued in the fiscal year
Statements of Revenue, Expenses, and Changes in Net Position (Income Statement)
• Net Operating Revenue was approximately $817.9MM, with $37.2MM deferred for rate stabilization, and $6.2MM from power purchase agreement reparations • Operating Expenses were approximately $693.8MM, with $658.2MM in Cost of Electricity (94.8% of total operating costs)
• EBCE received $5.98MM from non-operating activities as related to grant payment, interest earned on holdings, and interest paid on commitments • Change in Net Position was $130.1MM
o Change in Net Position = Total Operating Revenue – Total Operating Expenses + Net Non-operating Activities
Fiscal Impact
This report has no fiscal impact.
Committee Recommendation
The audited financial statements were reviewed by the Finance, Administrative, and Procurement subcommittee on November 8, 2023.
Staff Report Item 10
Attachments
A. EBCE Audited Financial Statements for Fiscal Year 2022-2023 B. Presentation from the Auditor, Pisenti & Brinker
Attachment Staff Report Item 10A
TABLE OF CONTENTS
Basic Financial Statements:
Statements of Revenues, Expenses
Attachment Staff Report Item 10A
SANTA ROSA PETALUMA
RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. 3562 Round Barn Circle, Suite 200
Santa Rosa, CA 95403
(707) 542-3343 Office
(707) 527-5608 Fax
pbllp.com
Independent Auditor's Report
To the Board of Directors
East Bay Community Energy Authority
Oakland, California
Report on the Audits of the Financial Statements
Opinion
We have audited the accompanying financial statements of East Bay Community Energy Authority (EBCE), as of and for the years ended June 30, 2023 and 2022, and the related notes to the financial statements, which collectively comprise EBCE’s basic financial statements as listed in the table of contents.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of EBCE as of June 30, 2023 and 2022, and the changes in financial position and cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audits of the Financial Statements section of our report. We are required to be independent of EBCE and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about EBCE’s ability to continue as a going concern for 12 months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.
Attachment Staff Report Item 10A
Independent Auditor's Report (continued)
Auditor's Responsibilities for the Audits of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with GAAS, we:
Exercise professional judgment and maintain professional skepticism throughout the audits.
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Obtain an understanding of internal control relevant to the audits in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of EBCE’s internal control. Accordingly, no such opinion is expressed.
Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about EBCE’s ability to continue as a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audits, significant audit findings, and certain internal control-related matters that we identified during the audits.
Attachment Staff Report Item 10A
Independent Auditor's Report (continued)
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that management's discussion and analysis be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Santa Rosa, California
October , 2023
Attachment Staff Report Item 10A
EAST BAY COMMUNITY ENERGY AUTHORITY
YEARS ENDED JUNE 30, 2023 AND 2022
4 ovides an overview of East Bay Community
ial activities as of and for the years ended June 30, 2023 and 2022. The information presented here should be considered in conjunction with the audited financial statements.
BACKGROUND
The formation of EBCE was made possible in 2002 by the passage of California Assembly Bill 117, enabling communities to purchase power on behalf of their residents and businesses and creating competition in power generation.
EBCE was created as a California Joint Powers Authority (JPA) effective December 1, 2016, and was established to provide electric power at competitive costs as well as provide other benefits within Alameda County, including reducing greenhouse gas emissions related to the use of power, procuring energy with a priority on the use and development of local renewable resources, stimulating local job creation through various programs and development, promoting personal and community ownership of renewable resources, as well as promoting long-term electric rate stability and energy reliability for residents and businesses. Governed by a board of directors (Board) consisting of elected representatives from each jurisdiction, EBCE has the rights and powers to set rates for the services it furnishes, incur indebtedness, and issue bonds or other obligations. EBCE is responsible for the acquisition of electric power for its service area.
In June 2018, EBCE began providing service to its first approximately 55,000 customer accounts as part of its initial enrollment phase. This initial phase included municipal and business accounts.
The next major enrollment of residential accounts began in November 2018, which added approximately 500,000 accounts. In April 2021, EBCE expanded its service territory by adding approximately 80,000 accounts. As of June 30, 2023, EBCE had approximately 640,000 customers enrolled.
Attachment Staff Report Item 10A
EAST BAY COMMUNITY ENERGY AUTHORITY
YEARS ENDED JUNE 30, 2023 AND 2022
5 Financial reporting
EBCE presents its financial statements as an enterprise fund under the economic resources measurement focus and accrual basis of accounting, in accordance with Generally Accepted Accounting Principles (GAAP) for proprietary funds, as prescribed by the Governmental Accounting Standards Board (GASB).
Contents of this report
This report is divided into the following sections:
h provides an overview of the financial
operations.
The basic financial statements:
o The Statements of Net Position
inflows, and net position, and provides information about the nature and amount of resources and obligations at a specific point in time.
o The Statements of Revenues, Expenses, and Changes in Net Position report all of o The Statements of Cash Flows report the cash provided and used by operating activities, as well as other sources and uses, such as capital asset acquisitions and non-capital financing activities.
o The notes to the Basic Financial Statements provide additional details and information related to the basic financial statements.
Attachment Staff Report Item 10A
EAST BAY COMMUNITY ENERGY AUTHORITY
YEARS ENDED JUNE 30, 2023 AND 2022
6 FINANCIAL HIGHLIGHTS
The following table is a summary of and net position, and a discussion of significant changes for the years ended June 30:
2023 2022 2021
Current assets $ 441,433,975 $ 319,677,508 $ 218,280,050 Noncurrent assets
Capital assets, net of depreciation 9,600,031 8,760,016 115,816 Other noncurrent assets 54,436,185 16,356,858 22,855,208 Total noncurrent assets 64,036,216 25,116,874 22,971,024 Total assets 505,470,191 344,794,382 241,251,074
Current liabilities 85,012,415 96,450,766 53,525,550
Noncurrent liabilities 4,787,500 - - Total liabilities 89,799,915 96,450,766 53,525,550 Deferred inflows of resources 53,014,000 15,814,000 15,814,000 Net position
Invested in capital assets 9,600,031 8,760,016 115,816
Restricted for collateral 1,000,000 9,000,000 10,000,000 Unrestricted 352,056,245 214,769,600 161,795,708
Total net position $ 362,656,276 $ 232,529,616 $ 171,911,524 Current Assets
Current assets were approximately $441,434,000 at the end of 2023 and are mostly comprised of cash of $291,035,000, accounts receivable of $84,199,000, accrued revenue of $45,767,000, and prepaid expenses of $18,388,000. The current asset accounts increased in 2023 as a result of operating surpluses generated from customer rate increases.
Capital Assets
Capital assets are reported net of depreciation. EBCE does not own assets used for electricity generation or distribution. In September 2021, EBCE purchased an office building at 251 8th Street in Oakland with the original intent to use it as its future headquarters. The cost of the building and land was approximately $8,500,000. Presently, the cost of the building and land is classified on Attachment Staff Report Item 10A
EAST BAY COMMUNITY ENERGY AUTHORITY
YEARS ENDED JUNE 30, 2023 AND 2022
7 Other Noncurrent Assets
Other noncurrent assets include $53,014,000 as of June 30, 2023, in its Rate Stabilization Fund to defer revenue for later years when financial results may not be as strong or are stressed. By postponing revenue recognition to future years, EBCE will be positioned to avoid sudden rate increases to address unanticipated spikes in energy costs and other unforeseen circumstances.
EBCE contributed $37,200,000 to this fund for the year ended June 30, 2023.
Current Liabilities
Current liabilities consist mostly of the cost of electricity delivered to customers that is not due to be paid by EBCE until after year-end. Other components include trade accounts payable, taxes and surcharges due to other governments, and various other accrued liabilities.
Current liabilities decreased from 2022 to 2023 primarily due to a decrease in security deposits.
Accrued cost of electricity increased in 2023 due to rising prices fueled by volatility in the energy market. Current liabilities increased significantly from 2021 to 2022 due and increase in security deposits received and an increase in accrued cost of electricity. Changes in both these items were a result of the increased customer load and contracts required to serve that load.
Deferred Inflows of Resources
Included in deferred inflows of resources as of June 30, 2023, is $53,014,000 in a Rate Stabilization Fund. The contribution to the Rate Stabilization Fund was $37,200,000 during 2023, which accounts for the increase compared to 2022. No contribution was made for the year 2022.
Attachment Staff Report Item 10A
EAST BAY COMMUNITY ENERGY AUTHORITY
YEARS ENDED JUNE 30, 2023 AND 2022
8 Revenues and expenses
The following table is a summary of EBCE nd a discussion of significant changes for the years ended June 30:
2023 2022 2021
Operating revenues $ 817,931,312 $ 555,332,546 $ 423,502,860 Nonoperating revenues 4,050,916 7,901,267 - Investment income 2,609,002 221,757 636,395 Total income 824,591,230 563,455,570 424,139,255
Operating expenses 693,785,891 501,933,974 401,160,053
Nonoperating expenses 678,679 903,504 869,612
Total expenses 694,464,570 502,837,478 402,029,665
Change in net position 130,126,660 $ $ 60,618,092 $ 22,109,590 Operating Revenues
In April 2021, EBCE expanded its service territory to include an additional 80,000 customer accounts. The year ended June 30, 2022, is the first full year with the expanded customer accounts and is the main reason for the increase in operating revenues in that year. The customer base held fairly stable from 2022 to 2023. The increase in revenue during 2023 was the direct result of increases to customer rates.
Nonoperating Revenues
The nonoperating revenue increase is primarily the result of grant income from the California Arrearage Payment Plan (CAPP) that was received in 2023 and 2022. This grant first became available in 2022.
Investment Income
Investment income fluctuated each year due to changes in market interest rates as well as the amount available to be invested.
Attachment Staff Report Item 10A
EAST BAY COMMUNITY ENERGY AUTHORITY
YEARS ENDED JUNE 30, 2023 AND 2022
9 Operating Expenses
of electricity delivered to customers. EBCE
procures energy from a variety of sources and focuses on maintaining a balanced renewable power portfolio at competitive costs to its customers. Expenses for staff compensation, contract services, and other general and administrative expenses increased each year as the organization continued to grow to support its business demands. EBCE had sufficient revenues each year to meet its operating expense obligations.
The cost of electricity increased each year as a result of service territory expansion and overall higher market prices.
Nonoperating expenses
Nonoperating expenses represent interest and fees related to letters of credit and the unused portion of the credit facility.
ECONOMIC OUTLOOK
California Independent System Operator (CAISO) system power prices experienced volatility through the year ended June 30, 2023. Intra-year variability was somewhat consistent with year-to-year historical variability that occurs due to seasonal and annual weather changes and was also characterized by carrying over a marked increase in energy prices above historical levels from the previous year. This was due to more extreme weather events, energy infrastructure capacity constraints in CAISO, and geopolitical considerations in the natural gas industry. inued to cause an increase in global energy prices. Although occurring in Europe, this conflict disrupts global natural gas distribution, supply, and demand, and as such influenced California markets, where high volatility and prices persisted in the second half of 2022 since the conflict began in February 2022. In 2023, we have seen natural gas prices revert to historical averages.
Infrastructure supply development remain somewhat constrained due to lingering supply chain disruptions and California interconnection bottlenecks. These constraints are driven by the increased demand for renewable resources as urban electrification processes compete with technology data center artificial intelligence processing needs.
Hedges EBCE has in place offset much of the immediate price spike impacts, but we are currently experiencing a rising energy price environment for the foreseeable future. As rates are currently set as a discount to PG&E, EBCE expects to continue to remain competitive, and is seeing a significant increase in revenues.
Attachment Staff Report Item 10A
EAST BAY COMMUNITY ENERGY AUTHORITY
YEARS ENDED JUNE 30, 2023 AND 2022
10 ECONOMIC OUTLOOK (continued)
While the COVID-19 pandemic is still considered ongoing, energy loads were in line with forecasts and budget and in general energy use activity has returned to pre-pandemic patterns.
Customer account aging has stabilized and recovery efforts through State and Federal funding have reduced overall aging impacts from shelter-in-place policies.
We closely monitored the banking sector disruptions due to the collapse of Silicon Valley Bank. have diversified where we hold deposits and are
actively evaluating our treasury management practices and investment policy in light of rising interest rates.
EBCE has in place a formal risk management policy that includes guidance on target hedge levels.
Energy hedging is intended to reduce the financial risk of unexpected price surges by procuring a significant portion of future energy at fixed prices. The target hedge percentages depend on factors including time and the hedge pricing relative to historical energy costs. In general, EBCE targets hedging 60-100% of its exposure in energy products on a short-duration basis of under a year and aims to hedge greater than 80% of its exposure going into any particular month. EBCE has complied with its risk management policy and regulations.
Year-over-year, EBCE has retained a strong customer and revenue base with low opt-out levels.
EBCE continues to be actively engaged on legislative and regulatory matters that can impact EBCE's energy procurement requirements and, therefore, energy-related expenditures. This provides some level of additional certainty on EBCE revenues.
REQUEST FOR INFORMATION
This financial report is designed to provide EBCE
ability for the funds under its
stewardship.
Please address any questions about this report or requests for additional financial information to 1999 Harrison Street, Suite 2300, Oakland, CA 94612.
Respectfully submitted,
Nick Chaset, Chief Executive Officer
Attachment Staff Report Item 10A
BASIC FINANCIAL STATEMENTS
Attachment Staff Report Item 10A
EAST BAY COMMUNITY ENERGY AUTHORITY
STATEMENTS OF NET POSITION
AS OF JUNE 30, 2023 AND 2022
11 The accompanying notes are an integral part of these financial statements. 2023 2022
Current assets
Cash and cash equivalents - unrestricted $ 291,035,233 $ 152,215,061 Accounts receivable, net of allowance 84,198,659 79,814,399 Accrued revenue 45,767,329 47,590,010
Market settlements receivable 807,102 -
Other receivables 90,568 6,302,352
Prepaid expenses 18,388,084 8,728,326
Deposits 147,000 16,027,360
Restricted cash 1,000,000 9,000,000
Total current assets 441,433,975 319,677,508
Noncurrent assets
Unrestricted cash and cash equivalents in Rate Stabilization Fund 53,014,000 15,814,000 Deposits 931,164 42,858
Loan receivable 491,021 500,000
Capital assets:
Land and construction-in-progress 9,386,864 8,605,533
Capital assets, net of depreciation 213,167 154,483
Total capital assets 9,600,031 8,760,016
Total noncurrent assets 64,036,216 25,116,874
Total assets 505,470,191 344,794,382
Current liabilities
Accrued cost of electricity 65,136,135 60,283,371
Accounts payable 4,295,566 2,824,571
Other accrued liabilities 5,930,936 1,631,542
User taxes and energy surcharges due to other governments 7,404,678 5,846,282 Security deposits - energy suppliers 2,245,100 25,865,000 Total current liabilities 85,012,415 96,450,766
Noncurrent liabilities
Supplier security deposits 4,787,500 -
Total liabilities 89,799,915 96,450,766
Rate Stabilization Fund 53,014,000 15,814,000
Investment in capital assets 9,600,031 8,760,016
Restricted for collateral 1,000,000 9,000,000
Unrestricted 352,056,245 214,769,600
Total net position $ 362,656,276 $ 232,529,616
NET POSITION
ASSETS
LIABILITIES
DEFERRED INFLOWS OF RESOURCES
Attachment Staff Report Item 10A
EAST BAY COMMUNITY ENERGY AUTHORITY
STATEMENTS OF REVENUES, EXPENSES
AND CHANGES IN NET POSITION
YEARS ENDED JUNE 30, 2023 AND 2022
12 The accompanying notes are an integral part of these financial statements. 2023 2022
OPERATING REVENUES
Electricity sales, net $ 847,306,890 $ 538,713,401
Revenue deferred to Rate Stabilization Fund (37,200,000) - Liquidated damages 6,150,378 14,658,400
Grant revenue 1,498,666 1,614,597
Other operating revenues 175,378 346,148
Total operating revenues 817,931,312 555,332,546
OPERATING EXPENSES
Cost of electricity 658,204,854 474,633,255
Contract services 18,104,240 16,611,808
Staff compensation 12,950,359 7,887,849
Other operating expenses 4,435,677 2,738,461
Depreciation 90,761 62,601
Total operating expenses 693,785,891 501,933,974
Operating income 124,145,421 53,398,572
NONOPERATING REVENUES (EXPENSES)
Grant revenue 4,050,916 7,901,267
Interest income 2,609,002 221,757
Financing expense (678,679) (903,504)
Nonoperating revenues (expenses), net 5,981,239 7,219,520 CHANGE IN NET POSITION 130,126,660 60,618,092
Net position at beginning of year 232,529,616 171,911,524 Net position at end of year $ 362,656,276 $ 232,529,616 Attachment Staff Report Item 10A
EAST BAY COMMUNITY ENERGY AUTHORITY
STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 2023 AND 2022
13 The accompanying notes are an integral part of these financial statements. 2023 2022
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers $ 878,374,195 $ 503,810,291
Other operating receipts 12,650,524 18,603,247
Receipts from supplier security deposit 8,602,600 26,123,000 Payments to suppliers for electricity (618,685,214) (451,271,876) Payments for other goods and services (21,223,125) (21,925,338) Deposits and collateral paid (51,689,464) (25,901,650)
Payments for staff compensation (12,694,993) (7,748,575) Tax and surcharge payments to other governments (32,070,485) (18,648,636) Net cash provided by operating activities 163,264,038 23,040,463
CASH FLOWS FROM NON-CAPITAL
FINANCING ACTIVITIES
Principal payments received on loan receivable 8,979 - Grant revenue 4,050,916 7,901,267 Financing expense payments (899,099) (683,084)
Net cash provided by non-capital
financing activities 3,160,796 7,218,183
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Payments to acquire capital assets (1,011,413) (8,613,048)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest income received 2,606,751 221,757
Loan issued (500,000) - Net cash provided (used) by investing activities 2,606,751 (278,243) Net change in cash and cash equivalents 168,020,172 21,367,355 Cash and cash equivalents at beginning of year 177,029,061 155,661,706 Cash and cash equivalents at end of year $ 345,049,233 $ 177,029,061 Reconciliation to the Statement of Net Position
Unrestricted cash and cash equivalents (current) $ 291,035,233 $ 152,215,061 Restricted cash and cash equivalents (current) 1,000,000 9,000,000 Unrestricted cash and cash equivalents (noncurrent) 53,014,000 15,814,000 Cash and cash equivalents $ 345,049,233 $ 177,029,061
Attachment Staff Report Item 10A
EAST BAY COMMUNITY ENERGY AUTHORITY
STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED JUNE 30, 2023 AND 2022
14 The accompanying notes are an integral part of these financial statements. 2023 2022
Operating income $ 124,145,421 $ 53,398,572
Adjustments to reconcile operating income to net
cash provided by operating activities
Depreciation expense 90,761 62,601
(Increase) decrease in:
Accounts receivable (4,384,259) (35,903,077)
Market settlements receivable (807,102) 5,025,941
Other receivables 6,214,035 (5,594,164)
Accrued revenue 1,822,681 (19,637,803)
Prepaid expenses (9,659,760) (2,480,999)
Deposits 14,992,053 (14,441,650)
Increase (decrease) in:
Accrued cost of electricity 4,852,765 21,468,127
Accounts payable 1,772,053 (754,456)
Other accrued liabilities 313,794 139,274
Deferred revenue 3,985,600 742,083
User taxes due to other governments 1,558,396 1,989,136 Security deposits from energy suppliers (18,832,400) 19,026,878 Rate Stabilization Fund 37,200,000 -
Net cash provided by operating activities $ 163,264,038 $ 23,040,463
RECONCILIATION OF OPERATING INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES
Attachment Staff Report Item 10A
EAST BAY COMMUNITY ENERGY AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2023 AND 2022
15 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REPORTING ENTITY
East Bay Community Energy Authority (EBCE) is a California joint powers authority created on December 1, 2016. As of June 30, 2023, parties to its Joint Powers Agreement consist of the following local governments, plus one representative (non-voting) from the Community Advisory Committee (CAC):
County Cities
Alameda Albany Oakland
Berkeley Piedmont
Dublin Pleasanton
Emeryville San Leandro
Fremont Stockton
Hayward Tracy
Livermore Union City
Newark
EBCE is separate from, and derives no financial support from, its members. EBCE is governed by a Board of Directors whose membership is composed of elected officials representing the member governments.
A core function of EBCE is to provide electric service that includes the use of renewable sources under the Community Choice Aggregation Program under California Public Utilities Code Section 366.2.
EBCE began its energy delivery operations in June 2018. Electricity is acquired from electricity suppliers and delivered through existing physical infrastructure and equipment managed by Pacific Gas and Electric Company.
Attachment Staff Report Item 10A
EAST BAY COMMUNITY ENERGY AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2023 AND 2022
16 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
BASIS OF ACCOUNTING
accordance with generally accepted accounting
principles (GAAP). The Governmental Accounting Standards Board (GASB) is responsible for establishing GAAP for state and local governments through its pronouncements. mental enterprise fund and are reported using
the economic resources measurement focus and
business enterprises. Accordingly, revenues are recognized when they are earned, and expenses are recognized at the time liabilities are incurred. Enterprise fund-type operating statements present increases (revenues) and decreases (expenses) in total net position. Reported net position in capital assets, restricted and unrestricted.
When both restricted and unrestricted resources ar
restricted resources first, and then unrestricted resources as they are needed.
CASH AND CASH EQUIVALENTS
For purposes of the Statements of Cash Flows, EBCE has defined cash and cash equivalents to include cash on hand, demand deposits, and short-term investments with an original maturity of three months or less. For the purpose of the Statements of Net Position, restricted cash balances are presented separately. Restricted cash reported on the Statements of Net Position includes collateral on a credit facility, as well as a required minimum balance to be maintained in one of its bank accounts.
MARKET SETTLEMENTS RECEIVABLE
EBCE receives generation scheduling and other services from a registered California Independent System Operator (CAISO) scheduling coordinator.
PREPAID ENERGY PURCHASES AND DEPOSITS
Various energy contracts entered into by EBCE require EBCE to provide the supplier with a security deposit. The deposits are generally held for the term of the contract. Deposits are classified as current or noncurrent assets depending on the length of the time the deposits will be held. While these energy contract-related deposits make up the majority of this item, other components include deposits for regulatory and other operating purposes.
Attachment Staff Report Item 10A
EAST BAY COMMUNITY ENERGY AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2023 AND 2022
17 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
CAPITAL ASSETS AND DEPRECIATION
pment valued over $1,000 that is expected to be
in service for over one year. Depreciation is computed according to the straight-line method over estimated useful lives of three years for electronic equipment, seven years for furniture and seven years for leasehold improvements, unless limited by the length of the original lease term. EBCE does not own any electric generation assets.
SECURITY DEPOSITS LIABILITY
Various energy contracts entered into by EBCE require the supplier to provide EBCE with a security deposit. Often this security is held by EBCE for the duration of the contract or until certain milestones are met. Deposits are classified as current or noncurrent depending on the length of time the deposits will be held.
RATE STABILIZATION FUND
EBCE created a Rate Stabilization Fund to allow EBCE to defer revenue in years when financial results are strong to be used in future years when financial results are stressed. In accordance with GASB Statement No. 62 and GASB Statement No. 65, the amount recognized as an addition to the fund is shown as a reduction of operating revenues and reported on the statements of net position as a deferred inflow of resources.
EBCE directed revenue of $37,200,000 and $0 to the Rate Stabilization Fund for the years ended June 30, 2023 and 2022, respectively.
NET POSITION
Net position is presented in the following components:
Investment in capital assets: This component of net position consists of capital assets, net of accumulated depreciation and reduced by outstanding borrowings that are attributable to the acquisition, construction, or improvement of those assets. EBCE did not have any such borrowings outstanding as of June 30, 2023 and 2022.
Restricted: This component of net position consists of constraints placed on net asset use through external constraints imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments or constraints imposed by law through constitutional provisions or enabling legislation.
Unrestricted: This component of net position consists of net position that does not meet the Attachment Staff Report Item 10A
EAST BAY COMMUNITY ENERGY AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2023 AND 2022
18 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
OPERATING AND NONOPERATING REVENUES
Operating revenues include revenues derived from the provision of energy to end-use retail customers and grant revenue earned from the delivery of program activities. Operating revenues are affected by amounts directed to or from the Rate Stabilization Fund.
Investment income is consider n grant revenue, such as from the California Arrearage Payment Program (CAPP), is also cons
REVENUE RECOGNITION
EBCE recognizes revenue on an accrual basis. This includes invoices issued to customers during the reporting period and electricity estimated to have been delivered but not yet billed.
Management estimates that a portion of the billed amounts will be uncollectible. Accordingly, an allowance for uncollectible accounts has been recorded.
OPERATING AND NONOPERATING EXPENSES
Operating expenses include the costs of sales and services, administrative expenses, and depreciation on capital assets. Expenses not meeting this definition are reported as nonoperating expenses.
ELECTRICAL POWER PURCHASED
During the normal course of business, EBCE purchases electrical power from numerous suppliers. Electricity costs include the cost of energy and capacity arising from bilateral contracts with energy suppliers as well as generation credits, and load and other charges arising from centralized market. The cost to acquire electricity and capacity atements of Revenues, Expenses and Changes in
Net Position.
ble Portfolio Standards (RPS) and self-imposed
benchmarks, EBCE acquires RPS eligible renewable energy evidenced by Renewable Energy Certificates (Certificates) recognized by the Western Renewable Energy Generation Information System. EBCE obtains Certificates with the intent to retire them and does not sell or build surpluses of Certificates with a profit motive. EBCE recognizes an expense on a monthly basis that corresponds to the volume sold to its customers for its various renewable and carbon-free products. This expense recognition increases accrued cost of electricity reported on the Statements of Net Position until the time the payment has been made to the supplier.
Attachment Staff Report Item 10A
EAST BAY COMMUNITY ENERGY AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2023 AND 2022
19 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) ELECTRICAL POWER PURCHASED (continued)
EBCE purchases capacity commitments from qualifying electricity generators to comply with the ogram. The goals of the Resource Adequacy Program are to provide sufficient resources to CAISO to ensure the safe and reliable operation of the electrical grid in real-time and to provide appropriate incentives for the siting and construction of new resources needed for reliability in the future.
STAFFING COSTS
EBCE pays employees semi-monthly and fully pays its obligation for health benefits and contributions to its defined contribution retirement plan monthly. EBCE is not obligated to provide post-employment healthcare or other fringe benefits, and accordingly, no related liability is recorded in these financial statements. EBCE provides compensated absences, and the related liability is recorded in these financial statements.
INCOME TAXES
EBCE is a joint powers authority under the provision of the California Government Code and is not subject to federal or state income or franchise taxes.
ESTIMATES
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
RECLASSIFICATIONS
Certain amounts in the prior-year financial statements have been reclassified for comparative purposes to conform to the presentation of the current-year financial statements. These reclassifications did not result in any change in previously reported net position.
Attachment Staff Report Item 10A
EAST BAY COMMUNITY ENERGY AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2023 AND 2022
20 2. CASH AND CASH EQUIVALENTS
EBCE maintains its cash in both interest-bearing and non-interest-bearing accounts at River City Bank headquartered in Sacramento, California as well as U.S. Bank headquartered in ect to California Government Code Section
16521, which requires that banks collateralize public funds in excess of the Federal Deposit Insurance Corporation limit of $250,000 by 110%. EBCE has no deposit or investment policy that addresses a specific type of risk that would impose restrictions beyond this code.
Accordingly, the amount of risk is not disclosed. EBCE monitors its risk exposure to its banks on an ongoing basis.
3. ACCOUNTS RECEIVABLE
Accounts receivable were as follows as of June 30:
2023 2022
Accounts receivable from customers 117,017,715 $ $ 101,011,756 Allowance for uncollectible accounts (32,819,056) (21,197,357) Net accounts receivable $ 84,198,659 $ 79,814,399
The majority of account collections occur within the first few months following customer invoicing. EBCE estimates that a portion of the billed accounts will not be collected. EBCE continues collection efforts on accounts in excess of de minimis balances regardless of the age of the account. Although collection success generally decreases with the age of the receivable, EBCE continues to have success collecting older accounts. The allowance for uncollectible accounts at the end of a period includes amounts billed during the current and prior fiscal years.
During the year ended June 30, 2023, EBCE received CAPP funds (see Note 6) that helped offset previously written off accounts receivable.
4. CAPITAL ASSETS
Capital asset activity for the years ended June 30, 2023 and 2022, was as follows:
Furniture &
Equipment
Land and
Construction-in- Progress
Accumulated
Depreciation Total
Balances at June 30, 2021 231,105 $ $ (115,289) - $ $ 115,816 Additions 101,268 8,605,533 (62,601) 8,644,200
Balances at June 30, 2022 332,373 8,605,533 (177,890) 8,760,016 Additions 149,445 781,331 (90,761) 840,015
Balances at June 30, 2023 481,818 $ $ 9,386,864 $ (268,651) $ 9,600,031 Attachment Staff Report Item 10A
EAST BAY COMMUNITY ENERGY AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2023 AND 2022
21 5. DEBT
In January 2020, EBCE entered into an amended revolving credit agreement with Barclays Bank.
The available credit line under this agreement is $80,000,000. The credit agreement enhances ng capital needs and collateral requirements.
In October 2022, EBCE closed its revolving credit agreement with Barclays Bank and entered into a new agreement with Union Bank. The available credit line under the new agreement is capital needs and collateral requirements. This agreement terminates in October 2025. The borrowing rate on the credit facility is 1.4%.
EBCE had no debt outstanding under either line of credit agreement at June 30, 2023 or 2022.
However, EBCE did issue Standby Letters of Credit secured by the line of credit agreement. At June 30, 2023 and June 30, 2022, these Letters of Credit reduce the available portion of the line by approximately $39,770,000 and $13,147,000, respectively, but are not considered debt to EBCE.
In February of 2023, Union Bank was acquired by US Bank. Under the deal of the acquisition, all established promissory agreements would be upheld and unaltered through their maturity.
6. GRANTS
EBCE administers a grant from the California Arrearage Payment Program (CAPP) that offers financial assistance for California energy utility customers to help reduce past due energy bill balances that increased during the COVID-19 pandemic. In 2022 this program was funded through the federal American Rescue Plan Act (ARPA) with Coronavirus State and Local Fiscal Recovery Funds. The program was funded by the State of California in 2023.
EBCE also administers a grant from the California Public Utilities Commission (CPUC) for the Disadvantaged Communities Green Tariff (DAC-GT). This grant provides for bill discounts to eligible customers.
In addition to the two grants mentioned above, EBCE also administers several small grants generally aimed at energy efficiency measures.
The following is a summary grant revenue for the years ended June 30:
2023 2022
CAPP $ 4,050,916 $ 7,901,267
DAC-GT 1,228,613 1,614,597
Miscellaneous 270,053 -
Total grant revenue 5,549,582 $ $ 9,515,864
Attachment Staff Report Item 10A
EAST BAY COMMUNITY ENERGY AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2023 AND 2022
22 7. DEFINED CONTRIBUTION RETIREMENT PLAN
The East Bay Community Energy Authority 401(a) Plan (the Plan) is a defined contribution retirement plan administered by LT Trust. As of June 30, 2023, there were 88 plan members.
EBCE is required to contribute a match up to 6% of annual covered payroll to the Plan and contributed $1,456,000 and $929,000 during the years ended June 30, 2023 and 2022, respectively. EBCE has elected out of the Social Security system for employees eligible for the Plan. As part of this election, EBCE makes requir
provisions are established and may be amended by the Board of Directors.
8. RISK MANAGEMENT
EBCE is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; and errors and omissions. During the year, EBCE purchased insurance policies from investment-grade commercial carriers to mitigate risks that include those associated with earthquakes, theft, general liability, errors and omissions, and property damage. Deductible limits range from $0 to $1,000. Settled claims have not exceeded coverage in the last two years. There were no significant reductions in coverage compared to the prior year. From time to time, EBCE may be party to various pending claims and legal proceedings. Although the outcome of such matters cannot be forecasted with certainty, it is the opinion of counsel that the likelihood is remote that any such claims or proceedings will have a material position or results of operations.
EBCE maintains risk management policies, procedures and systems that help mitigate credit, liquidity, market, operating, regulatory and other risks that arise from participation in the California energy market. Credit guidelines include a preference for transacting with investment-financial condition and assigning credit limits as applicable. These credit limits are established based on risk and return considerations under terms customarily available in the industry. In addition, EBCE enters into netting arrangements whenever possible and where appropriate obtains collateral and other performance assurances from counterparties.
Attachment Staff Report Item 10A
EAST BAY COMMUNITY ENERGY AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2023 AND 2022
23 9. PURCHASE COMMITMENTS
In the ordinary course of business, EBCE enters into various power purchase agreements in order to acquire renewable and other energy and electric capacity. The price and volume of purchased power may be fixed or variable. Variable pricing is generally based on the market price of either natural gas or electricity at the date of delivery. Variable volume is generally associated with contracts to purchase energy from as-available resources such as solar, wind, and hydroelectric facilities.
The following table details the obligations on existing energy, renewable, and resource adequacy (RA) contracts as of June 30, 2023:
Year ending June 30,
2024 $ 724,800,000
2025 798,400,000
2026 897,100,000
2027 1,005,400,000
2028 1,031,500,000
2029-2043 18,392,900,000
Total $ 22,850,100,000
10. LEASE
In July 2023, EBCE entered into two lease agreements, one a sublease and one a main lease, for its office premises. Both agreements are for the same office space and each lease runs in succession over the period September 1, 2023 through October 31, 2032. The sublease will be in effect until April 2025 when the main lease becomes active. Rental space was $519,000 and $442,000 for the years ended June 30, 2023, and 2022, respectively.
Attachment Staff Report Item 10A
EAST BAY COMMUNITY ENERGY AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2023 AND 2022
24 11. FUTURE GASB PRONOUNCEMENTS
The requirements of the following GASB Statements are effective for years ending after June 30, 2023:
GASB has approved GASB Statement No. 100,
Amendment of GASB Statement No. 62, and GASB Statement No. 101, Compensated Absences.
When they become effective, application of these standards may restate portions of these financial statements.
12. SUBSEQUENT EVENTS
NEW MEMBER
In September 2023, EBCE approved the City of Lathrop as a member. EBCE anticipates electric deliveries in this new territory will begin in 2025.
NAME CHANGE
In October 2023, EBCE changed its name to Ava Community Energy (Ava).
Attachment Staff Report Item 10A
East Bay Community Energy
Report to the Board of Directors
November 15, 2023
Attachment Staff Report Item 10B
Introduction
• Brett Bradford, CPA
• Audit Partner
• 20 years in public accounting and performing audits of government entities
• Currently working with several CCA’s throughout California • Aliandra Schaffer
• Engagement Manager
• 4 years in public accounting and performing audits of governments (CCA’s)
Attachment Staff Report Item 10B
Results of current year audit:
• The audit is complete. We have reported the following:
• Unmodified opinion – Based on our audit, the financial statements are materially accurate.
• No significant deficiencies or material weakness in
internal control have been identified.
Attachment Staff Report Item 10B
Audit of the year ended June 30, 2023
Financial Statements
Relative Roles & Responsibilities
• Management is responsible for preparing the Financial Statements and establishing a system of internal control.
• Auditor is responsible for auditing the Financial Statements • Considering risks of material misstatement in the Financial Statements
• Considering internal controls relevant to the Financial Statements • Performing tests of year-end balances based on risk assessment • Evaluating adequacy of disclosures
Attachment Staff Report Item 10B
Risk Assessment for the year ended
June 30, 2023
Significant areas of focus
• Revenue recognition
• Accounts receivable and accrued revenue
• Test a sample of customer billings
• Relate total cash received during the year to revenue • Review revenue recognition through year-end and method for determining (accrued revenue)
• Cash
• Confirmations sent to financial institutions
Attachment Staff Report Item 10B
Risk Assessment for the year ended
June 30, 2023
Significant areas of focus
• Accrued Cost of Electricity
• Review subsequent bills from electricity providers and cash payments • Accrued REC expense
• Supplier Security Deposits
• Reviewed contracts and determined completeness of amounts recorded • Financial Statement Note Disclosures – Complete and without bias Attachment Staff Report Item 10B
Required Board Communications
• The significant accounting
policies adopted by EBCE
throughout the periods audited
appeared appropriate and
consistently applied.
• No alternative treatments of
accounting principles for material
items in the financial statements
were discussed with management.
Attachment Staff Report Item 10B
Required Board Communications
(continued)
• We did not identify any significant
or unusual transactions or
applications of accounting
principles where a lack of
authoritative guidance exists.
• We did not propose any adjustments
to the financial statements.
Attachment Staff Report Item 10B
• There were no disagreements with management concerning the scope of our audit, the application of accounting principles, or the basis for management’s judgments on any significant matters.
• We did not encounter any difficulties in dealing with management during the performance of our audit.
Required Board Communications
(continued)
Attachment Staff Report Item 10B
Brett Bradford: 707-577-1582
Questions?
Attachment Staff Report Item 10B