Staff Report Item 22
Staff Report Item 22
TO: Ava Community Energy Authority Board of Directors
FROM: Howard Chang, Chief Operating Officer
SUBJECT: Renewable Surplus Allocation and GASB 62 Methodology DATE: March 20, 2024
__________________________________________________________________ Recommendation
Approve the release of $10,504,837, which is the board approved Fiscal Year 2022-23 budget surplus allocation to long-term renewable energy and clean storage investments. The amount should be released from the GASB62 retained revenues into the General Fund in 2027.
Background and Discussion
With the approval of the Fiscal Year 2022-23 budget (the “Budget”), the Board of Directors (the “Board”) approved a portion of the surplus revenues to be allocated to long-term renewable energy and clean storage investments. Following the completion of the annual financial audit, this amount was determined to be $10,504,837 (the “Allocation”). This amount was presented to the Board at the November 15, 2023 meeting as Item 11. The allocation has been held as retained earnings in the GASB 62 Rate Stabilization fund.
The GASB 62 fund is an accounting treatment that permits the reporting of revenues earned in one period to be diverted to a later period to balance against planned recognition of specific costs. This treatment stabilizes budgets, financial net positions, and rates against fluctuations of large, planned expenses. The application of GASB 62 is in accordance with GAAP standards and is used regularly with public utilities. The Board has full discretion on how and when to recognize deferred revenues.
Staff Report Item 22
Ava intends to procure incremental generation and storage capacity from the 2023 Request for Offers (RFO) and apply the Allocation to this additional procurement.
Currently in the 2023 RFO Ava has received board approval and executed contracts for 475 MW of renewable generating capacity and 75MW of storage capacity. This is estimated to generate between 685-887GWh annually once projects are fully operational. Ava is in continued negotiations on additional renewable generation and storage projects in CA that are estimated to generate between 735-950GWh annually, starting as early as 2027. To the extent additional capacity is procured, Ava would apply the Allocation to the entire portfolio inclusive of incremental procurement. The surplus would be applied regardless of potential project fall-out due to project development risks, such as permitting, interconnection, and construction risks. Staff does anticipate some portion of project failure throughout the project portfolio. To the extent additional projects are not procured from this 2023 RFO, staff would recommend deferring the release of these surplus funds to a future RFO.
While the Board can recognize the Allocation in any manner it chooses, Staff is recommending a release of the surplus funds in its entirety in calendar year 2027, which will allow for a simple accounting procedure and administratively straight forward operating requirements.
Fiscal Impact
Release of GASB 62 retained revenues will increase Ava’s net financial position in the fiscal year that it is released.
Committee Recommendation
This item was reviewed by the FAP subcommittee and received approval of this recommendation by a unanimous vote.
Attachments
A. Resolution Approving Release of GASB 62 Long-Term Renewable Allocation into the General Fund in calendar year 2027.
B. Presentation – 2022-23 Surplus Allocations to Long-Term Renewables Attachment Staff Report Item 22A
RESOLUTION NO. R-2024-xx
A RESOLUTION OF THE BOARD OF DIRECTORS
OF AVA COMMUNITY ENERGY AUTHORITY TO RELEASE $10,504,837 FROM THE FY2022-23 SURPLUS TOWARDS LONG-TERM RENEWABLE ENERGY AND CLEAN STORAGE INVESTMENTS IN 2027
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 with the approval of the 2022-23 fiscal year budget, the Board of Directors (the “Board”) approved a portion of surplus revenues to be allocated for long-term renewable energy and clean storage investments (the “Allocation”).
WHEREAS following the completion of the audit, the Allocation is $10,504,837 and is held as retained earnings in the GASB 62 Rate Stabilization Fund.
WHEREAS Ava is seeking to procure local, incremental generation and capacity from the 2023 RFO and intends to apply the Allocation to this portfolio of projects as they start delivery in 2027.
NOW, THEREFORE, THE BOARD OF DIRECTORS OF AVA COMMUNITY ENERGY AUTHORITY DOES HEREBY RESOLVE AS FOLLOWS:
Section 1. Release the Allocation to the General Fund in 2027 at staff discretion of the exact date.
Attachment Staff Report Item 22A
ADOPTED AND APPROVED this 20th day of March 2024.
Jack Balch, Chair
ATTEST:
Adrian Bankhead, Clerk of the Board
2022-23 Surplus
Allocation to Long-Term
Renewables
March, 2024
Attachment Staff Report Item 22B
Background: Total Surplus Available
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Attachment Staff Report Item 22B
2023 RFO Procurement Update
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Attachment Staff Report Item 22B
Surplus Allocation Recommendation
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Attachment Staff Report Item 22B
Portfolio Summary
Attachment Staff Report Item 22B
GASB62 Accounting Treatment
oOnce contracts are signed, for accounting purposes we would set the accounting treatment regardless of project development outcomes.
oStaff recommends the release of $10,504,837, which is the board approved Fiscal Year 2022-23 budget surplus allocation to long-term renewable energy and clean storage investments. The amount should be released from the GASB62 retained revenues into the General Fund in 2027 based on the forecasted project online dates
oOther alternatives were considered in terms of timing and amounts for this GASB62 release
oThe FAP Subcommittee voted in approval of this staff recommendation in the March 13, 2024 FAP meeting
Attachment Staff Report Item 22B
Attachment Staff Report Item 22B