Staff Report Item 11
Staff Report Item 11
TO: Ava Community Energy Authority
FROM: Jason Bartlett, Senior Finance Manager
SUBJECT: Budget Surplus & Reserve Allocation
DATE: November 15, 2023
__________________________________________________________________ Recommendation
Adopt a Resolution to confirm and finalize the approved amounts allocated to each waterfall component based on the 2022-2023 fiscal year budget surplus.
Background and Discussion
Budget Surplus
On June 15, 2022, the Board of Directors (BOD) approved the Fiscal Year 2022-2023 budget by resolution R-2022-19. This Resolution was passed based on the presentation given as Item 14 which provided the detailed plan on how to allocate the projected budget surplus. This proposed allocation is a waterfall approach that fills up priority needs first then continues to next priority items. The priority list and amounts presented are as follows:
• First $50MM is allocated to Working Capital
• Next $75MM is allocated to Reserve Funds
• Excess above $125MM is split 50/50 to:
o Incremental long-term renewable energy/clean storage investments o One-time on-bill credits to customers
These allocations were noted to be made after the end of the fiscal period ending June 30,2023. With the completion of the annual audit, the contributable amounts can now be confirmed as actual and accurate.
Staff Report Item 11
A summary comparison of the approved budget to actuals is shown below. This shows a decrease in the net expected surplus amount by about $10.2MM. In addition, only a portion of the Local Development allocation was actualized. For purposes of preserving the intent of funding local programs, the unrealized portion of the Local Development allocation is retained first before the waterfall allocations. The net budget surplus available for the waterfall is $146,009,674.
The allocations provided in the waterfall above are materially consistent with the presentation and intent of approval from the June 15, 2022 BOD Resolution of the fiscal year budget.
Reserve Fund Allocation
June 20, 2018, the BOD approved by resolution R-2018-26 to adopt a financial reserve policy. This policy established targets as well as minimum and maximum contribution limits based on revenues and made allocations to multiple reserve accounts.
January 20, 2021, the BOD approved by resolution R-2021-2 to amend the reserve policy to a single reserve account. In addition, this simplified methodology, aligned with industry standards and other CCA’s, and set a target of 50% of annual operating costs, with ranges of 25-75% to account for variation of need. This policy also formalized the use of reserves funds requires BOD approval.
BUDGET COMPARISON FY 2022-23 FY 2022-23 FY 2022-23
Budget Actual Variance
Operating Revenue
Total Revenue 769,953,000 857,683,762 87,730,762 A
Operating Expenses
Total Energy Operations 535,241,000 669,498,547 134,257,547 B Total Overhead Operations 27,432,000 20,625,089 (6,806,911) C Total Non-Operating Expenses 30,728,000 1,164,041 29,563,959 D Net Increase 176,552,000 166,396,085 (10,155,915) E = A-B-C-D Local Development Funding Retention - 20,386,411 20,386,411 F Net Increase Available for Waterfall 176,552,000 146,009,674 (30,542,326) G = E-F Waterfall
Working Capital 50,000,000 50,000,000 - H
Reserves 75,000,000 75,000,000 - I
Available for 50/50 Split 51,552,000 21,009,674 (30,542,326) J = G-H-I Investment in LT Renewables 25,776,000 10,504,837 (15,271,163) K = J/2 On-bill Credits 25,776,000 10,504,837 (15,271,163) L = K Staff Report Item 11
June 15, 2022, the BOD pre-established a contribution of $75 million in the surplus waterfall towards Reserves. With this contribution, the reserve fund is $230,873,400, which is 31.5.% of this year’s operating costs.
The chart below shows fiscal year reserve contributions and withdraws, account balance, operating expenses to cover, and the percent of operating expenses covered to relate to the 50% and ranged target. No contribution was made in 2020-2021 due to insufficient available net position.
Fiscal Impact
Approving this item formally allocates $75MM to the reserve fund, releases approximately $10.5MM to be redistributed to customers, and retains approximately $10.5MM for long-term renewable energy or clean storage investments. A recommendation with potential options for the renewable energy or storage investment will be brought forward to the board for approval in 2024.
These allocations will not impact normal operations and continues Ava’s firm commitment to financial security.
Committee Recommendation
This item was reviewed in the Finance, Administrative, and Procurement subcommittee on November 8, 2023
Attachments
A. Presentation
B. Resolution to Approve Allocation of Funds from the Fiscal Year 2022-2023 Budget Surplus
Fiscal Year Contribution Withdraws Balance OpEx to Cover PctOps 2018-2019 40,513,687 - 40,513,687 410,686,000 9.9%
2019-2020 49,704,640 - 90,218,327 383,045,000 23.6%
2020-2021 - - 90,218,327 471,897,000 19.1%
2021-2022 65,655,073 - 155,873,400 562,667,000 27.7%
2022-2023 75,000,000 - 230,873,400 732,885,000 31.5%
2023-2024* 100,000,000 - 330,873,400 912,066,000 36.3%
*Approved contribution with projected operating expenses to cover as of 10/1/2023 Budget Surplus &
Reserve Allocation
from 2022-23 FY
Board of Directors
November 15, 2023
Attachment Staff Report Item 11A
Background & Discussion
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Attachment Staff Report Item 11A
Budget Performance Comparison
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BUDGET COMPARISON FY 2022-23 FY 2022-23 FY 2022-23
Budget Actual Variance
Operating Revenue
Total Revenue 769,953,000 857,683,762 87,730,762 A
Operating Expenses
Total Energy Operations 535,241,000 669,498,547 134,257,547 B Total Overhead Operations 27,432,000 20,625,089 (6,806,911) C Total Non-Operating Expenses 30,728,000 1,164,041 29,563,959 D Net Increase 176,552,000 166,396,085 (10,155,915) E = A-B-C-D Local Development Funding Retention 20,386,411 - 20,386,411 F Net Increase Available for Waterfall 176,552,000 146,009,674 (30,542,326) G = E-F Waterfall
Working Capital 50,000,000 50,000,000 - H
Reserves 75,000,000 75,000,000 - I
Available for 50/50 Split 51,552,000 21,009,674 (30,542,326) J = G-H-I Investment in LT Renewables 25,776,000 10,504,837 (15,271,163) K = J/2 On-bill Credits 25,776,000 10,504,837 (15,271,163) L = K Attachment Staff Report Item 11A
Budget Surplus & Reserve Allocation
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BUDGET COMPARISON FY 2022-23 FY 2022-23
Budget Actual
Net Increase Available for Waterfall 176,552,000 146,009,674 Waterfall
Working Capital 50,000,000 50,000,000
Reserves 75,000,000 75,000,000
Available for 50/50 Split 51,552,000 21,009,674
Investment in LT Renewables 25,776,000 10,504,837
On-bill Credits 25,776,000 10,504,837
Attachment Staff Report Item 11A
Reserve Fund Discussion
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Attachment Staff Report Item 11A
Annual Contributions
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Fiscal Year Contribution Withdraws Balance OpEx to Cover PctOps 2018-2019 40,513,687 40,513,687 - 410,686,000 9.9%
2019-2020 49,704,640 90,218,327 - 383,045,000 23.6%
2020-2021 - - 90,218,327 471,897,000 19.1%
2021-2022 65,655,073 155,873,400 - 562,667,000 27.7%
2022-2023 75,000,000 230,873,400 - 732,885,000 31.5%
2023-2024* 100,000,000 330,873,400 - 912,066,000 36.3%
*Approved contribution with projected operating expenses to cover as of 10/1/2023 Attachment Staff Report Item 11A
Thank you!
Attachment Staff Report Item 11A
RESOLUTION NO. R-2023-xx
A RESOLUTION OF THE BOARD OF DIRECTORS
OF AVA COMMUNITY ENERGY AUTHORITY APPROVING THE ALLOCATION OF FUNDS FROM THE FISCAL YEAR 2022-2023 BUDGET SURPLUS
WHEREAS The Ava Community Energy Authority (“Ava”) was formed as a community choice aggregation agency (“CCA”) on December 1, 2016, Under the Joint Exercise of Power Act, California Government Code sections 6500 et seq., among the County of Alameda, and the Cities of Albany, Berkeley, Dublin, Emeryville, Fremont, Hayward, Livermore, Piedmont, Oakland, San Leandro, and Union City to study, promote, develop, conduct, operate, and manage energy-related climate change programs in all of the member jurisdictions. The cities of Newark and Pleasanton, located in Alameda County, along with the City of Tracy, located in San Joaquin County, were added as members of Ava and parties to the JPA in March of 2020. The city of Stockton, located in San Joaquin County was added as a member of Ava and party to the JPA in September of 2022. The city of Lathrop, located in San Joaquin County, was added as a member to Ava and party to the JPA in October of 2023. On October 24, 2023, the Authority legally adopted the name Ava Community Energy Authority, where it had previously used the name East Bay Community Energy Authority since its inception.
WHEREAS on June 15, 2022, the Board of Directors approved the Fiscal Year 2022-2023 Budget by Resolution R-2022-19 based on the presentation with the proposed allocations of the budget surplus,
WHEREAS the presented allocations were a waterfall approach of budget surplus that resourced the first $50 million to be retained for working capital for the next fiscal year, the next $75 million to be allocated to the reserve fund balance, and the excess above $125 million to be split fifty-fifty with investments in long-term renewable or clean energy projects and a one-time on-bill credit return to customers, and
WHEREAS with the completion of the annual audit, the budget surplus amount is known to be actual and accurate and after retention of local program funding intentions, the amount of budget surplus available for the waterfall allocations is $146,009,674.
NOW, THEREFORE, THE BOARD OF DIRECTORS OF AVA COMMUNITY ENERGY AUTHORITY DOES HEREBY RESOLVE AS FOLLOWS:
Section 1. The Board of Directors hereby approves the retention of $50 million from budget surplus for working capital purposes.
Section 2. The Board of Directors hereby approves the contribution of $75 million from budget surplus to the reserve fund balance.
Section 3. The Board of Directors hereby approves the investment of $10,504,837 from budget surplus for long-term renewable and clean energy projects.
Attachment Staff Report Item 11B
Section 4. The Board of Directors hereby approves the return of $10,504,837 from budget surplus to customers as on-bill credits.
ADOPTED AND APPROVED this 15th day of November, 2023.
Elisa Márquez, Chair
ATTEST:
Adrian Bankhead, Clerk of the Board
Attachment Staff Report Item 11B