Staff Report Item 17
Staff Report Item 17
To: Ava Community Energy Authority
From: Jason Bartlett, Senior Finance Manager
Subject: Fiscal Year 2023-2024 Annual Financial Audit
Date: November 20, 2024
__________________________________________________________________ Recommendation
Accept and file the audited financial statements for fiscal year 2023-2024.
Background and Discussion
Each year, Ava conducts an audit of the fiscal year end financial statements (the “audit”). The annual audit is conducted by an independent, external CPA and team.
In June of 2024, Ava completed a competitive RFP process and selected Pisenti & Brinker, LLP (P&B) as the Authority’s auditor. P&B has been Ava’s previous auditor and their familiarity with Ava’s finances and their experience across the CCA space made them the best selection.
The audit consists of four general sections—the Independent Auditor’s Report, the Management Discussion and Analysis (MD&A), the Basic Financial Statements, and Notes to the Basic Financial Statements. The following is a general discussion of each section and pertinent findings.
The Independent Auditor’s Report concludes their opinion of the financial statements as materially accurate with no significant deficiencies or material weakness in internal controls identified. They state focus on financial activities related to revenue recognition, cash, accrued costs, renewable energy expenses, Staff Report Item 17
supplier security deposits, and financial statement note disclosures among other areas of Ava’s financial operations. They propose no adjustments to the financial statements and found no unusual transactions or applications of accounting principles.
The Management Discussion and Analysis provides an overview of Ava’s financial activities for the fiscal years reported and gives information on financial position, reporting protocols, and overall economic factors that relate to Ava activities.
Specifically, this section provides a narrative of Ava’s operational history, a summary of financial position, a detailed analysis of financially relevant activities, and currently known facts and conditions of risk elements related to Ava’s operations.
The Basic Financial Statements provide an independently verified, accurate portrait of Ava’s financial position as of June 30, 2024. The three statements are the Statement of Net Position, Statement of Revenues, Expenses, and Changes in Net Position, and Statement of Cash Flow. Specific high-level details to these statements are:
• Annual Operating Revenues: $909,536,352
• Annual Operating Expenses: $749,162,050
• Annual Net Nonoperating Activities: $12,303,453
• Net position increase by $172,677,755 to $535,344,031 Notes to the Basic Financial Statements discuss several aspects of the Basic Financial Statements and provide greater details on areas such as accounting policies, cash and capital positions, risk management, commitments, and known subsequent events.
Fiscal Impact
This report has no financial impact
Committee Recommendation
The audited financial statements were presented to the Finance, Administrative, and Procurement Subcommittee on November 13, 2024, but without quorum.
Attachments
A. Presentation from the Auditor, Pisenti & Brinker
B. Ava Community Energy Audited Financial Statements for Fiscal Year 2023-2024 Ava Community Energy
Report to the Board of Directors
November 20, 2024
Attachment Staff Report Item 17A
Introduction
• Kellin Gilbert, CPA
• Audit Partner
• 17 years in public accounting and performing audits of government entities
• Currently working with several CCA’s throughout California • Aliandra Schaffer
• Engagement Manager
• 5 years in public accounting and performing audits of governments (CCA’s)
Attachment Staff Report Item 17A
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 17A
Audit of the year ended June 30, 2024
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 17A
Risk Assessment for the year ended
June 30, 2024
Our audit is a risk-based audit. Risk assessment procedures include:
• Gain understanding of the entity’s operating characteristics, practices, and procedures.
• Compare to our knowledge of similar entities, industry and professional guidance.
• Review procedures and controls surrounding significant transaction cycles and business processes.
Attachment Staff Report Item 17A
Risk Assessment for the year ended
June 30, 2024
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 17A
Risk Assessment for the year ended
June 30, 2024
Significant areas of focus
• Accrued Cost of Electricity
• Review subsequent bills from electricity providers and cash payments • Supplier Security Deposits
• Reviewed contracts and determined completeness of amounts recorded • Financial Statement Note Disclosures – Complete and without bias Attachment Staff Report Item 17A
Required Board Communications
• There were no new material accounting policies adopted by Ava Community Energy throughout the period audited.
• 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 17A
• 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 17A
Kellin Gilbert: 707-577-1511
Questions?
Attachment Staff Report Item 17A
Financial Statements
Years ended June 30, 2024 and June 30, 2023
with Independent Auditor’s Report
Contact us
[email protected]
1-833-699-3223
Visit and follow us
AvaEnergy.org
@PoweredbyAva
At right: Ava Community Energy’s Scott Haggerty
Wind Energy Center in Livermore, CA
Attachment Staff Report Item 17B
TABLE OF CONTENTS
Independent Auditor’s Report ………………………………………………….......... 1 Management’s Discussion and Analysis ……………………………………………... 4 Basic Financial Statements:
Statements of Net Position …………………………………………………… 10
Statements of Revenues, Expenses and Changes in Net Position …................ 11 Statements of Cash Flows ……………………………………………………. 12
Notes to the Basic Financial Statements ……………………………………… 14 Attachment Staff Report Item 17B
Independent Auditor's Report
To the Board of Directors
Ava Community Energy Authority
Opinion
We have audited the accompanying financial statements of Ava Community Energy Authority (Ava), which comprise the statements of net position as of June 30, 2024 and 2023, the related statements of revenue, expenses and changes in net position, and cash flows for the years then ended, and the related notes to the financial statements.
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of Ava as of June 30, 2024 and 2023, and the results of its operations 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 Audit of the Financial Statements section of our report. We are required to be independent of Ava 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 Ava’s ability to continue as a going concern within one year after the date that the financial statements are issued or available to be issued, including any currently known information that may raise substantial doubt shortly thereafter.
Attachment Staff Report Item 17B
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 Ava’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 Ava’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 17B
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
November 14, 2024
Attachment Staff Report Item 17B
AVA COMMUNITY ENERGY AUTHORITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEARS ENDED JUNE 30, 2024 AND 2023
4 The purpose of management’s discussion and analysis (MD&A) is to help stakeholders and other readers understand what the financial statements and notes in this report say about Ava Community Energy Authority’s (Ava) financial health and why it has changed since last year. It contains information drawn from other parts of the report, accompanied by explanations informed by the finance staff’s knowledge of Ava’s finances.
Background
The formation of Ava 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.
Ava 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.
In June 2018, Ava 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, Ava expanded their service territory by adding approximately 80,000 accounts. As of June 30, 2024, Ava had approximately 640,000 customers enrolled.
On October 31, 2023, East Bay Community Energy Authority changed its name to Ava Community Energy Authority to reflect its diversifying customer base from its expansion into the California central valley. Governed by a board of directors (Board) consisting of elected representatives from each jurisdiction, Ava has the rights and powers to set rates for the services it furnishes, incur indebtedness, and issue bonds or other obligations. Ava is responsible for the acquisition of electric power for its service area.
Attachment Staff Report Item 17B
AVA COMMUNITY ENERGY AUTHORITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEARS ENDED JUNE 30, 2024 AND 2023
5 Overview of the Financial Statements
Ava’s financial report contains basic financial statements, which include:
o The Statements of Net Position include all of Ava’s assets, liabilities, 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 Ava’s revenue and expenses for the years shown.
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 and investing activities. o The notes to the Basic Financial Statements provide additional details and information related to the basic financial statements.
Financial reporting
Ava 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 enterprise funds, as prescribed by the Governmental Accounting Standards Board (GASB).
Attachment Staff Report Item 17B
AVA COMMUNITY ENERGY AUTHORITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEARS ENDED JUNE 30, 2024 AND 2023
6 Financial Summary
AVA’S NET POSITION
2024 2023 2022
Current assets $ 729,240,319 $ 441,433,975 $ 319,677,508 Noncurrent assets:
Capital assets, net 10,367,342 9,600,031 8,760,016
Other noncurrent assets 58,952,539 54,436,185 16,356,858 Total noncurrent assets 69,319,881 64,036,216 25,116,874 Total assets 798,560,200 505,470,191 344,794,382
Current liabilities 179,709,182 85,012,415 96,450,766
Noncurrent liabilities 3,600,000 4,787,500 -
Total liabilities 183,309,182 89,799,915 96,450,766
Deferred inflows of resources 79,916,987 53,014,000 15,814,000 Net position
Net investment in capital assets 9,658,727 9,600,031 8,760,016 Restricted for collateral - 1,000,000 9,000,000
Unrestricted 525,675,304 352,056,245 214,769,600
Total net position $ 535,334,031 $ 362,656,276 $ 232,529,616 As of June 30, 2024, Ava’s total net position was approximately $535,000,000, an increase of $173,000,000 or 48% as compared to June 30, 2023. Most of the increase in net position was in an increase in cash, as a result of Ava’s operating surplus discussed below.
AVA’S CHANGES IN NET POSITION
2024 2023 2022
Operating revenues $ 909,536,352 $ 817,931,312 $ 555,332,546 Nonoperating revenues - grants - 4,050,916 7,901,267
Nonoperating revenues - investments 13,149,786 2,609,002 221,757 Total income 922,686,138 824,591,230 563,455,570
Operating expenses 749,162,050 693,785,891 501,933,974
Nonoperating expenses 846,333 678,679 903,504
Total expenses 750,008,383 694,464,570 502,837,478
Change in net position 172,677,755 $ $ 130,126,660 $ 60,618,092 Attachment Staff Report Item 17B
AVA COMMUNITY ENERGY AUTHORITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEARS ENDED JUNE 30, 2024 AND 2023
7 Detailed Analysis
Increases in electricity sales accounted for most of the increase in total income. The cost of electricity, a component of operating expenses, increased approximately 7% from fiscal year 2023 to fiscal year 2024.
Current assets increased from $441,000,000 at the end of fiscal year 2023 to $729,000,000 at the end of fiscal year 2024. This increase was due to operating surpluses primarily driven by increased electricity rates charged to customers. Current assets at the end of fiscal year 2024 were primarily comprised of cash of $574,000,000, which includes $22,000,000 of cash held in a Rate Stabilization Fund, accounts receivable of $85,000,000, and accrued revenue of $61,000,000.
Capital assets are reported net of depreciation and amortization. Each year, the change represents the cost of capital assets acquired less depreciation and amortization expense for the year. Capital assets held by Ava include an office building, furniture and equipment, and a lease asset related to Ava’s office premises.
Other noncurrent assets include cash of $57,000,000 segregated in a Rate Stabilization Fund used to hold revenue that is to be deferred for recognition and use in later years in period when there is a need to supplement revenues. By postponing revenue recognition to future years, Ava is positioning itself to avoid sudden rate increases to address unanticipated spikes in energy costs and other unforeseen circumstances. Rate Stabilization Funds that are intended to be recognized in revenue within one year of these financial statements are included as cash in the current asset section.
The largest component of current liabilities is the cost of electricity delivered to customers that was not paid by Ava at fiscal year-end. Current liabilities for the cost of energy increased each year due to changes in payment terms of certain energy products, as well as the prices of those products.
Noncurrent liabilities consist of supplier security deposits held by Ava as collateral.
Operating revenues increased each year from fiscal years 2022 to 2024, primarily from increases in rates charged to customers. Ava also receives revenues from sources other than retail customer sales. These sources include liquidated damage revenue resulting from supplier noncompliance with contract provisions and grant income used to support various customer programs. Revenue from liquidated damages increased from fiscal year 2023 to fiscal year 2024 primarily due to delays in the operations of certain energy supplier facilities.
Attachment Staff Report Item 17B
AVA COMMUNITY ENERGY AUTHORITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEARS ENDED JUNE 30, 2024 AND 2023
8 Detailed Analysis (continued)
Grant income from the California Arrearage Payment Plan (CAPP) was included in nonoperating revenues for fiscal years 2022 and 2023. This grant was applicable for two years and did not recur in fiscal year 2024. Investment income increased each year due to changes in market interest rates as well as increases in invested assets.
Operating expenses increased each year primarily due to market forces that resulted in increases in the cost of electricity, Ava’s largest expense. Ava procures energy from a variety of sources to reduce market risk and to maintain a balanced renewable power portfolio. The primary driver of the increase in energy costs from 2023 to 2024 was the rising renewable energy and resource adequacy market.
Significant Capital Asset and Long-Term Financing Activity Included in capital assets are an office building and land, and furniture and equipment.
Office premises leased by Ava are reported in the Statement of Net Position as “lease asset.” The related future payments are reported as “lease liability.” Ava does not have any outstanding financing debt.
Currently Known Facts, Decisions, or Conditions
California Independent System Operator (CAISO) system power prices experienced volatility through the year ended June 30, 2024. 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 total energy prices above historical levels from the previous year.
Infrastructure supply development remains somewhat constrained. In previous years the driver of these constraints included lingering supply chain disruptions, but now interconnection bottlenecks plague California as well as the rest of the United States. These constraints are driven by the increased demand for renewable and other energy resources by urban electrification and the growth in technology data center and associated artificial intelligence processing needs.
Attachment Staff Report Item 17B
AVA COMMUNITY ENERGY AUTHORITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEARS ENDED JUNE 30, 2024 AND 2023
9 Currently Known Facts, Decisions, or Conditions (continued) Ava has certain contracts in place that mitigate exposure to price spikes in the CAISO markets, but currently CAISO market prices as well as electricity futures prices in liquid forward markets are declining. At the same time, the overall market for electricity and the related commodity products is experiencing a rising price environment. The rising price environment is driven by elevated costs to enter into long-term offtake agreements (e.g. power purchase agreements (PPAs) and energy storage offtake agreements), elevated prices for Resource Adequacy, and dramatically elevated costs for environmental attributes like Renewable Energy Certificates (RECs). Noting that both Resource Adequacy and RECs are required commodities for compliance with California legislative obligations.
Ava has in place a formal risk management policy that includes guidance on target levels of non-financial hedges. Energy hedging is intended to reduce the financial risk of unexpected price surges by contracting for a significant portion of future energy at fixed prices. Purchases made at fixed contractual prices reduce the need to purchase energy at the volatile daily open market. The target hedge percentages depend on factors including time and the hedge pricing relative to historical energy costs. In general, Ava 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. Ava has complied with its risk management policy and regulations.
Year-over-year, Ava has retained a strong customer and revenue base with low opt-out levels. Ava continues to be actively engaged on legislative and regulatory matters that can impact Ava's energy procurement requirements and, therefore, energy-related expenditures. This provides some level of additional certainty on Ava revenues.
Requests for information
This financial report is designed to provide Ava’s board members, stakeholders, customers, and creditors with a general overview of Ava’s finances and to demonstrate Ava’s accountability 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.
Attachment Staff Report Item 17B
BASIC FINANCIAL STATEMENTS
Attachment Staff Report Item 17B
AVA COMMUNITY ENERGY AUTHORITY
STATEMENTS OF NET POSITION
AS OF JUNE 30, 2024 AND 2023
10 The accompanying notes are an integral part of these financial statements. 2024 2023
Current assets
Cash and cash equivalents - unrestricted $ 574,113,778 $ 291,035,233 Accounts receivable, net of allowance 84,962,803 84,198,659 Accrued revenue 60,952,393 45,767,329
Market settlements receivable 807,102 -
Other receivables 242,447 90,568
Prepaid expenses 2,825,541 18,388,084
Deposits 6,143,357 147,000
Cash - restricted 1,000,000 -
Total current assets 729,240,319 441,433,975
Noncurrent assets
Cash in Rate Stabilization Fund - unrestricted 57,472,293 53,014,000 Deposits 1,193,774 931,164
Loan receivable 286,472 491,021
Capital assets, net of depreciation and amortization 10,367,342 9,600,031 Total noncurrent assets 69,319,881 64,036,216
Total assets 798,560,200 505,470,191
Current liabilities
Accrued cost of electricity 149,299,510 65,136,135
Accounts payable 5,352,155 4,295,566
Advances from grantors 9,052,151 -
Other accrued liabilities 3,523,316 5,930,936
User taxes and energy surcharges due to other governments 7,444,637 7,404,678 Lease liability 708,615 -
Security deposits - energy suppliers 4,328,798 2,245,100 Total current liabilities 179,709,182 85,012,415
Noncurrent liabilities
Security deposits - energy suppliers 3,600,000 4,787,500 Total liabilities 183,309,182 89,799,915
Rate Stabilization Fund 79,916,987 53,014,000
Net investment in capital assets 9,658,727 9,600,031
Restricted for collateral 1,000,000 -
Unrestricted 525,675,304 352,056,245
Total net position $ 535,334,031 $ 362,656,276
NET POSITION
DEFERRED INFLOWS OF RESOURCES
LIABILITIES
ASSETS
Attachment Staff Report Item 17B
AVA COMMUNITY ENERGY AUTHORITY
STATEMENTS OF REVENUES, EXPENSES
AND CHANGES IN NET POSITION
YEARS ENDED JUNE 30, 2024 AND 2023
11 The accompanying notes are an integral part of these financial statements. 2024 2023
OPERATING REVENUES
Electricity sales, net $ 919,222,939 $ 847,306,890
Revenue deferred to Rate Stabilization Fund, net (26,902,987) (37,200,000) Liquidated damages 15,330,202 6,150,378
Grant revenue 1,440,935 1,498,666
Other operating revenues 445,263 175,378
Total operating revenues 909,536,352 817,931,312
OPERATING EXPENSES
Cost of electricity 707,476,247 658,204,854
Contract services 18,980,445 18,104,240
Staff compensation 16,269,116 12,950,359
Other operating expenses 5,736,911 4,435,677
Depreciation and amortization 699,331 90,761
Total operating expenses 749,162,050 693,785,891
Operating income 160,374,302 124,145,421
NONOPERATING REVENUES (EXPENSES)
Grant revenue 4,050,916 -
Investment income 13,149,786 2,609,002
Financing costs (846,333) (678,679)
Nonoperating revenues (expenses), net 12,303,453 5,981,239 CHANGE IN NET POSITION 172,677,755 130,126,660
Net position at beginning of year 362,656,276 232,529,616 Net position at end of year $ 535,334,031 $ 362,656,276
Attachment Staff Report Item 17B
AVA COMMUNITY ENERGY AUTHORITY
STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 2024 AND 2023
12 The accompanying notes are an integral part of these financial statements. 2024 2023
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers $ 939,057,618 $ 878,374,195
Receipts from grantors 4,564,468 -
Receipts of supplier security deposits 6,804,858 8,602,600 Other operating receipts 17,226,004 12,650,524
Payments to suppliers for electricity (611,040,073) (618,685,214) Payments for other goods and services (22,702,802) (21,223,125) Payments of staff compensation (15,937,300) (12,694,993) Payments for deposits and collateral (7,212,418) (51,689,464) Tax and surcharge payments to other governments (35,743,923) (32,070,485) Net cash provided by operating activities 275,016,432 163,264,038
CASH FLOWS FROM NON-CAPITAL
FINANCING ACTIVITIES
Grant revenue 4,050,916 -
Payments of financing costs (675,281) (899,099)
Net cash provided (used) by non-capital
financing activities (675,281) 3,151,817
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Payments under lease obligation (433,780) -
Payments to acquire capital assets (359,262) (1,011,413) Net cash used by capital and related financing activities (793,042) (1,011,413)
CASH FLOWS FROM INVESTING ACTIVITIES
Principal payments received of loan receivable 204,549 8,979 Investment income received 12,784,180 2,606,751
Net cash provided by investing activities 12,988,729 2,615,730 Net change in cash and cash equivalents 286,536,838 168,020,172 Cash and cash equivalents at beginning of year 345,049,233 177,029,061 Cash and cash equivalents at end of year $ 631,586,071 $ 345,049,233 Reconciliation to the Statement of Net Position
Cash and cash equivalents - unrestricted (current) $ 574,113,778 $ 291,035,233 Cash and cash equivalents - restricted (current) 1,000,000 - Cash and cash equivalents - unrestricted (noncurrent) 57,472,293 53,014,000 Cash and cash equivalents $ 631,586,071 $ 345,049,233
Attachment Staff Report Item 17B
AVA COMMUNITY ENERGY AUTHORITY
STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED JUNE 30, 2024 AND 2023
13 The accompanying notes are an integral part of these financial statements. 2024 2023
Operating income $ 160,374,302 $ 124,145,421
Adjustments to reconcile operating income to net
cash provided by operating activities
Depreciation and amortization expense 699,331 90,761
(Increase) decrease in:
Accounts receivable (764,144) (4,384,259)
Market settlements receivable 807,102 (807,102)
Other receivables (50,198) 6,214,035
Accrued revenue (15,185,064) 1,822,681
Prepaid expenses 15,562,543 (9,659,760)
Deposits (5,995,042) 14,992,053
Increase (decrease) in:
Accrued cost of electricity 84,163,375 4,852,765
Accounts payable 1,025,455 1,772,053
Other accrued liabilities 254,156 313,794
Advances from grantors 4,564,468 -
Deferred revenue 1,721,004 3,985,600
User taxes due to other governments 39,959 1,558,396
Security deposits from energy suppliers 896,198 (18,832,400) Rate Stabilization Fund 26,902,987 37,200,000
Net cash provided by operating activities $ 275,016,432 $ 163,264,038
RECONCILIATION OF OPERATING INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES
Attachment Staff Report Item 17B
AVA COMMUNITY ENERGY AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2024 AND 2023
14 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REPORTING ENTITY
Ava Community Energy Authority (Ava), formerly East Bay Community Energy, is a California joint powers authority created on December 1, 2016. As of June 30, 2024, 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 Newark
Berkeley Oakland
Dublin Piedmont
Emeryville Pleasanton
Fremont San Leandro
Hayward Stockton
Lathrop Tracy
Livermore Union City
Ava is separate from and derives no financial support from its members. Ava is governed by a Board of Directors (Board) whose membership is composed of elected officials representing the member governments.
A core function of Ava 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.
Ava 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 17B
AVA COMMUNITY ENERGY AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2024 AND 2023
15 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
BASIS OF ACCOUNTING
Ava’s financial statements are prepared in 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.
Ava’s operations are accounted for as a governmental enterprise fund and are reported using the economic resources measurement focus and the accrual basis of accounting – similar to 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 is segregated into three categories – investment in capital assets, restricted and unrestricted.
When both restricted and unrestricted resources are available for use, it is Ava’s policy to use restricted resources first, and then unrestricted resources as they are needed.
CASH AND CASH EQUIVALENTS
For purposes of the Statements of Cash Flows, Ava defines 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
Ava receives generation scheduling and other services from a registered California Independent System Operator (CAISO) scheduling coordinator.
PREPAID EXPENSES
Payments made to vendors that will benefit periods beyond the end of the current fiscal year are recorded as prepaid expenses.
DEPOSITS
Contracts to purchase energy may require Ava to provide the supplier with advanced payments or security deposits. Deposits are generally held for the term of the contract and are classified as current or noncurrent assets depending on the length of time the deposits will be outstanding.
Attachment Staff Report Item 17B
AVA COMMUNITY ENERGY AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2024 AND 2023
16 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
LEASE ASSET AND LEASE LIABILITY
Ava recognizes an asset and liability when it enters into certain leasing arrangements. The leased asset is amortized over the term of the lease. The lease liability is the present value of payments expected to be paid to the lessor during the lease term. Ava’s only leased asset and liability relate to its office premises.
CAPITAL ASSETS AND DEPRECIATION
Ava’s policy is to capitalize furniture and equipment 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 leasehold improvements, unless limited by the length of the original lease term. Ava does not own any electric generation assets.
ADVANCES FROM GRANTORS
Ava received grant funding from various grantors. The amount in this category represents funds received by Ava, but not yet expended to carry out specific goals. See Note 6 for additional information related to grants administered by Ava.
SECURITY DEPOSITS – LIABILITY
Various energy contracts entered into by Ava require the supplier to provide Ava with a security deposit. Security deposits are held by Ava 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
Ava created a Rate Stabilization Fund to allow Ava 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.
Ava directed revenue of $37,408,000 and $37,200,000 to the Rate Stabilization Fund for the years ended June 30, 2024 and 2023, respectively. Ava removed $10,500,000 and $0 from the Rate Stabilization Fund for the years ended June 30, 2024 and 2023, respectively. The removal of funds resulted in a recognition of revenue in the same amount. The accumulated balance in the Rate Stabilization Fund at June 30, 2024 and 2023 was approximately $79,917,000 and $53,014,000, respectively. Cash held for Rate Stabilization Fund purposes that are intended to be recognized as revenue within one year of these financial statements are included as cash in the current asset section. Otherwise, the related cash is included in the noncurrent asset section.
Attachment Staff Report Item 17B
AVA COMMUNITY ENERGY AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2024 AND 2023
17 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
NET POSITION
Net position is presented in the following components:
Net Investment in capital assets: This component of net position consists of capital assets, net of accumulated depreciation and amortization and is reduced by outstanding borrowings that are attributable to the acquisition, construction, or improvement of those assets. Ava did not have any such borrowings outstanding as of June 30, 2024 and 2023.
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 definition of “investment in capital assets” or “restricted.”
OPERATING AND NONOPERATING REVENUES
Operating revenues include revenues derived from the provision of energy to retail customers and grant revenue related to the delivery of program activities. Operating revenues are affected by amounts directed to or from the Rate Stabilization Fund.
Investment income is considered “nonoperating revenue.” Certain grant revenue that is not subject to performance obligations, such as from the California Arrearage Payment Program (CAPP), is also considered “nonoperating revenue.”
REVENUE RECOGNITION
Ava 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 invoiced.
Management estimates that a portion of the invoiced 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.
Attachment Staff Report Item 17B
AVA COMMUNITY ENERGY AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2024 AND 2023
18 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
ELECTRICAL POWER PURCHASED
During the normal course of business, Ava 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 Ava’s participation in CAISO’s centralized market. The cost to acquire electricity and capacity is recognized as “Cost of Electricity” in the Statements of Revenues, Expenses and Changes in Net Position.
To comply with the State of California’s Renewable Portfolio Standards (RPS) and self-imposed benchmarks, Ava acquires RPS eligible renewable energy evidenced by Renewable Energy Certificates (Certificates) recognized by the Western Renewable Energy Generation Information System. Ava obtains Certificates with the intent to retire them and does not sell or build surpluses of Certificates with a profit motive. Ava recognizes an expense 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.
Ava purchases capacity commitments from qualifying electricity generators to comply with the California’s Resource Adequacy Program. 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
Ava pays employees semi-monthly and fully pays its obligation for health benefits and contributions to its defined contribution retirement plan monthly. Ava is not obligated to provide post-employment healthcare or other fringe benefits, and accordingly, no related liability is recorded in these financial statements. Ava provides compensated absences, and the related liability is recorded in these financial statements.
INCOME TAXES
Ava 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.
Attachment Staff Report Item 17B
AVA COMMUNITY ENERGY AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2024 AND 2023
19 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 the previously reported net position.
2. CASH AND CASH EQUIVALENTS
Ava maintains its cash in both interest-bearing and non-interest-bearing accounts. Ava’s deposits are subject 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%.
Ava 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. Ava monitors its risk exposure to its banks on an ongoing basis.
3. ACCOUNTS RECEIVABLE
Accounts receivable were as follows as of June 30:
2024 2023
Accounts receivable from customers 110,562,803 $ $ 117,017,715 Allowance for uncollectible accounts (25,600,000) (32,819,056) Net accounts receivable $ 84,962,803 $ 84,198,659
The majority of account collections occur within the first few months after a customer is invoiced.
Ava estimates that a portion of the billed accounts will not be collected. Ava 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, Ava 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, Ava received CAPP funds (see Note 6) that helped Ava recover funds for previously written off accounts receivable.
Attachment Staff Report Item 17B
AVA COMMUNITY ENERGY AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2024 AND 2023
20 4. CAPITAL ASSETS
Capital asset activity for the year ended June 30, 2024, was as follows:
Beginning
balance Increases
Ending
balance
Capital assets not being depreciated:
Building - not in service $ 5,131,484 $ - $ 5,131,484
Land 4,255,380 - 4,255,380
Total capital assets not being depreciated 9,386,864 - 9,386,864 Capital assets being depreciated and amortized:
Furniture and equipment 481,818 318,485 800,303
Leasehold improvements 71,911 - 71,911
Lease asset 1,076,246 - 1,076,246
Total capital assets being depreciated and amortized: 481,818 1,466,642 1,948,460 Less accumulated depreciation and amortization:
Furniture, equipment and leasehold improvements (268,651) (161,208) (429,859) Lease asset (538,123) - (538,123)
Total accumulated depreciation and amortization (268,651) (699,331) (967,982) Total capital assets, net of depreciation and amortization 9,600,031 $ $ 767,311 $ 10,367,342 Capital asset activity for the year ended June 30, 2023, was as follows:
Beginning
balance Increases
Ending
balance
Capital assets not being depreciated:
Building - not in service $ 4,350,153 $ 781,331 $ 5,131,484 Land 4,255,380 4,255,380 - Total capital assets not being depreciated 8,605,533 781,331 9,386,864 Capital assets being depreciated and amortized:
Furniture and equipment 332,373 149,445 481,818
Less accumulated depreciation and amortization:
Furniture, equipment and leasehold improvements (177,890) (90,761) (268,651) Total capital assets, net of depreciation and amortization 8,760,016 $ $ 840,015 $ 9,600,031 Attachment Staff Report Item 17B
AVA COMMUNITY ENERGY AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2024 AND 2023
21 5. DEBT
In October 2022, Ava closed its revolving credit agreement with Barclays Bank and entered into a new agreement with U.S. Bank (formerly Union Bank). The available credit line under the new agreement is $200,000,000. The credit agreement enhances Ava’s overall liquidity for potential working capital needs and collateral requirements. This agreement terminates in October 2025.
The borrowing rate on the credit facility is 1.4%.
Ava had no debt outstanding under either line of credit agreement as of June 30, 2024 or 2023.
However, Ava did issue standby letters of credit secured by the line of credit agreement. As of June 30, 2024 and 2023, these letters of credit reduce the available portion of the line by approximately $34,000,000 and $39,770,000, respectively, but are not considered debt to Ava.
6. GRANTS
Ava administered a grant from the California Arrearage Payment Program (CAPP) that offered 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.
Ava 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, Ava also administers several small grants generally aimed at energy efficiency measures.
The following is a summary grant revenue for the years ended June 30:
2024 2023
CAPP $ 4,050,916$ -
DAC-GT 1,241,704 1,228,613
Miscellaneous 199,231 270,053
Total grant revenue 1,440,935 $ 5,549,582$
Attachment Staff Report Item 17B
AVA COMMUNITY ENERGY AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2024 AND 2023
22 7. DEFINED CONTRIBUTION RETIREMENT PLAN
The Ava 401(a) Plan (the Plan) is a defined contribution retirement plan administered by LT Trust. As of June 30, 2024, there were 81 plan members. Ava is required to contribute a match up to 6% of annual covered payroll to the Plan and contributed $1,697,000 and $1,456,000 during the years ended June 30, 2024 and 2023, respectively. Ava has elected out of the Social Security system for employees eligible for the Plan. As part of this election, Ava makes required “replacement” contributions to the Plan. Plan provisions are established and may be amended by the Board.
8. RISK MANAGEMENT
Ava is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; and errors and omissions. During the years, Ava 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, Ava 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 management and Ava’s legal counsel that the likelihood is remote that any such claims or proceedings will have a material adverse effect on Ava’s financial position or results of operations.
Ava 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-grade counterparties, evaluating counterparties’ 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, Ava enters into netting arrangements whenever possible and where appropriate obtains collateral and other performance assurances from counterparties.
Attachment Staff Report Item 17B
AVA COMMUNITY ENERGY AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2024 AND 2023
23 9. PURCHASE COMMITMENTS
In the ordinary course of business, Ava 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, 2024:
Year ending June 30,
2025 $ 730,300,000
2026 634,000,000
2027 454,100,000
2028 403,700,000
2029 361,200,000
2030-2048 4,180,700,000
Total $ 6,764,000,000
10. LEASE
A lease asset is reported in accordance with GASB No. 87.
In July 2023, Ava 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 expense for Ava’s office space was $618,000 and $519,000 for the years ended June 30, 2024, and 2023, respectively.
As of June 30, 2024, future minimum lease payments under the sublease were projected to be $709,000.
Attachment Staff Report Item 17B
AVA COMMUNITY ENERGY AUTHORITY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2024 AND 2023
24 11. JOINT VENTURE
AVA participates in a joint powers agreement (JPA) through the California Community Choice Financing Authority (CCCFA). CCCFA was formed as a conduit issuer to assist its members by undertaking the financing or refinancing of energy prepayments that can be financed with tax advantaged bonds on behalf of one or more of the members by issuing or incurring bonds and entering into related contracts with its members. Any debt or liability incurred by CCCFA on behalf of a member to prepay for renewable energy is not a debt or liability of that member.
Furthermore, the assets of CCCFA in the form of prepaid energy or reserves held by the respective bond trustees for any prepayment transaction undertaken on behalf of a member does not constitute an asset or reserve of that member.
CCCFA has issued bonds whose proceeds are to being used to finance energy purchases that will be delivered to AVA. No debt, liability, or obligation of CCCFA is a debt, liability, or obligation of AVA. AVA will purchase energy from CCCFA in the same manner as it purchases energy from other suppliers. The outstanding purchase commitments related to these financing facilities are included in Note 9. AVA purchased approximately $56,436,000 and $49,243,000 from CCCFA during fiscal years 2024 and 2023, respectively. The financial statements of CCCFA are available online at http://www.cccfa.org/key-documents.html.
12. FUTURE GASB PRONOUNCEMENTS
The requirements of the following GASB Statements are effective for years ending after June 30, 2024:
GASB has approved GASB No. 102, Certain Risk Disclosures, and GASB No. 103, Financial Reporting Model Improvements.
Management is evaluating the effect of implementation of these statements.
13. SUBSEQUENT EVENTS
NEW MEMBERS
Ava anticipates beginning electric deliveries to recently admitted members of the cities of Stockton and Lathrop in 2025. Service to these communities is expected to increase Ava total load by approximately 13% when fully incorporated.
The County of San Joaquin has voted to join Ava Community Energy, and Ava’s Board of Directors has approved the County’s admission. An implementation plan has been filed with the CPUC and is currently being evaluated. If certified, service to the County would be expected to begin sometime in the 2026 calendar year.
Attachment Staff Report Item 17B