Staff Report Item 18
Staff Report Item 18
To: Ava Community Energy Authority
From: Jason Bartlett, Senior Finance Manager
Subject: Fiscal Year 2023-2024 Budget to Actuals and Surplus Allocations Date: November 20, 2024
__________________________________________________________________ Recommendation
Receive a report on Ava’s actual financial performance to approved budget for the fiscal year ending June 30, 2024, reconciliation of net revenues from the budget to net position from the audit, and the resulting surplus revenue allocations.
Background and Discussion
June 21, 2023, the Board of Directors (the “Board”) approved the fiscal year budget for July 1, 2023 through June 30, 2024 by resolution R-2023-37.
Budget to Actuals Comparison
Overall, performance of the actual revenues and expenses were within 1.6% of budgeted amounts. General highlights are as follows:
• Operating revenues were slightly under by 2%
• Operating expenditures were slightly higher by 1.6%
• Interest returns on cash holdings were higher than expected due to high interest rates through the year
• Recovered damages from undelivered contracts also contributed to net revenues • ~$10.5MM was recognized from GASB 62 Rate Stabilization Fund (RSF) for customer on-bill credits from the previous fiscal year (FY2022-2023) net revenues
Staff Report Item 18
• ~$37.4MM was deferred to GASB 62 RSF in accordance with Board approved waterfall (discussed later in this memo)
• Actual net revenues were $176.9MM compared to budgeted $179.8MM Table 1 provides the line item details on the actual performance compared to budget Budget Net Revenues to Audit Net Position Reconciliation The Budget is an internal proforma document set at the discretion of the Board. The financial statements in the Audit are standardized by generally accepted accounting REVENUES Budget Actuals
Electricity Sales 950,386,000 927,809,610 -2.4%
Uncollectable (12,095,000) (8,586,671) -29.0%
Total Revenue and Other Sources 938,291,000 919,222,939 -2.0%
EXPENDITURES & OTHER USES
OPERATING EXPENDITURES
Cost of Energy 682,367,000 707,476,247 3.7%
Data Management/Customer Service 7,769,000 7,729,768 -0.5% PG&E Service Fees 2,719,000 2,723,416 0.2%
CAISO Scheduling Coordinator 731,000 708,964 -3.0%
Personnel 21,911,000 16,269,116 -25.7%
Marketing & Communications 5,303,000 2,582,110 -51.3%
Legal, Policy, & Regulatory Affairs 3,509,000 1,368,407 -61.0% Other Professional Services 2,505,000 1,383,794 -44.8%
General & Administrative 5,711,000 4,332,803 -24.1%
Total Current Expenditures 732,525,000 744,574,625 1.6%
OTHER SOURCES & USES
Investment Income 1,680,000 13,149,786 682.7%
Other Income 48,000 445,263 827.6%
Liquidated Damages - 15,330,202 100.0%
Interest & Financing Costs (1,650,000) (780,181) -52.7% Local Development Transfer (25,500,000) (25,500,000) 0.0% Capital Expenditures * (500,000) (390,397) -21.9%
Total Other Sources & Uses (25,922,000) 2,254,673 -108.7% GROSS INCREASE (DECREASE) 179,844,000 176,902,987 -1.6% Revenue Recognized from Rate Stabilization Fund** - 10,504,837 100.0% Revenue Deferred to Rate Stabilization Fund (29,844,000) (37,407,824) 25.3% NET INCREASE (DECREASE) *** 150,000,000 150,000,000 0.0% * Depreciation has been removed and is expressed as Capital Expenditures ** Amount not determinable at time of budget approval
*** Net Increase is allocated to working capital and reserves Staff Report Item 18
principles (GAAP) and have additional rules set forth by the Governmental Accounting Standards Board (GASB)
Ava drafts each budget in accordance with industry best practices and does best efforts to align with GAAP and GASB standards, but fundamental differences exist and reconciliation should be defined.
As presented in the audited financial statements, the change in net position was approximately $172.7MM, and the net revenues from budget actuals is $176.9MM.
Table 2 provides the reconciliation by line item between the audited net position and the budget actuals net revenues.
The remaining $150MM balance is allocated to reserve funds and working capital and is described in further details in the next section of this report.
Budget Surplus Waterfall Allocations
On January 17, 2024, the Board approved resolution R-2024-2 to more clearly define how to allocate the budget surplus. The final allocation waterfall of surplus budget revenues is to be contributed in the following manner:
• The first $50 million is to be retained for working capital needs • The next $100 million is to be allocated to reserve funds • The remaining balance is to be allocated as:
o 60% dedicated to on-bill credits to customers with some portion specifically applied to CARE and FERA customers (recommendations will be presented in Item 18 in this meeting)
o 40% dedicated to incentives for clean storage investment for net-billing tariff projects with an emphasis on resilience development Table 3 shows the budgeted and actual allocations of the waterfall items Reconciled Item Details Amount Balance
Audited Net Position Includes GASB 62 Net Deferral 172,677,755 Depreciation Accrued depreciation of assets 173,377,086 (699,331) LD Budget Allocation Budgeted capital transfer to Programs 25,500,000 147,877,086 LD Revenue from Grants FY 23/24 grant revenue in Programs 1,440,935 146,436,151 LD Actual Expenses Actual FY 23/24 Program expenses (4,321,877) 150,758,028 Capital Outlay Capital reconcilliation 150,367,631 390,397 GASB 87 Lease Lease obligations outstanding as of 6/30/2024 150,000,000 367,631 Staff Report Item 18
Reserve Fund Balance
The Reserve Fund, as established by R-2021-2 and governed by policy P10.1, works to provide a suitable cash balance to guard against expense shocks. The fund balance is set to meet annual operating expense targets. These targets meet Ava financial objectives, including but not limited to:
• Securing favorable commercial terms with vendors and power providers • Maintain Ava’s “A Stable” credit rating
• Provide funds for unanticipated expenditures
• Maintain long-term Ava financial independence and rate stability Table 4 shows the annual contributions and withdraws to reserve funds, reserve balances, annual operating expenses, and percent of operating expense coverage provided by the reserve fund balance.
Fiscal Impact
There is no net impact on the current budget. There will be the recognition of the amount to cover on-bill credits from the RSF as revenue to offset the reduced revenues provided by the on-bill credit to customers.
Committee Recommendation
This was reviewed by the Finance, Administrative, & Procurement subcommittee on November 13, 2024 as an informational item. All matters raised in that meeting have been addressed in this memorandum.
Allocation Budget Actuals % Change
Revenues After Operations & Other Uses 179,484,000 176,902,987 -1.4% GASB 62 RSF Recognition 10,504,837 - 100.0%
Net Revenues 179,484,000 187,407,824 4.4%
Contributions
Working Capital 50,000,000 129,484,000 137,407,824 6.1% Reserve Funds 100,000,000 29,484,000 37,407,824 26.9%
Remaining
On-Bill Credits 60% 17,690,400 22,444,694 26.9%
Net Billing Tariff Program 40% 11,793,600 14,963,130 26.9% Contribution Year Contribution Withdraws Balance Operating Expenses PctCoverage 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 - 330,873,400 810,350,000 40.8%
Staff Report Item 18
Attachment
A. Presentation
FY 2023-2024 Budget Surplus,
Waterfall Allocations, and
Reserve Fund Balance
Board of Directors
November 20, 2024
Attachment Staff Report Item 18A
FY 2024 Budget to Actuals
2 Overall, actuals came in very much aligned with net
budget expectations: • Revenue slightly under by 2% • Overall Operating Expenditures higher by 1.6% • Other Sources & Uses had largest variance due to elevated interest rates through the year and
damages recovered from undelivered contracts
• ~$10.5MM was recognized from GASB 62 Rate
Stabilization Fund for customer On-Bill Credits
from FY 2022-2023 net revenues
• ~$37.4MM deferred to GASB 62 Rate Stabilization
Fund in accordance with Board approved waterfall
(discussed further)
REVENUES Budget Actuals
Electricity Sales 950,386,000 927,809,610 -2.4%
Uncollectable (12,095,000) (8,586,671) -29.0%
Total Revenue and Other Sources 938,291,000 919,222,939 -2.0%
EXPENDITURES & OTHER USES
OPERATING EXPENDITURES
Cost of Energy 682,367,000 707,476,247 3.7%
Data Management/Customer Service 7,769,000 7,729,768 -0.5% PG&E Service Fees 2,719,000 2,723,416 0.2%
CAISO Scheduling Coordinator 731,000 708,964 -3.0%
Personnel 21,911,000 16,269,116 -25.7%
Marketing & Communications 5,303,000 2,582,110 -51.3%
Legal, Policy, & Regulatory Affairs 3,509,000 1,368,407 -61.0% Other Professional Services 2,505,000 1,383,794 -44.8%
General & Administrative 5,711,000 4,332,803 -24.1%
Total Current Expenditures 732,525,000 744,574,625 1.6%
OTHER SOURCES & USES
Investment Income 1,680,000 13,149,786 682.7%
Other Income 48,000 445,263 827.6%
Liquidated Damages - 15,330,202 100.0%
Interest & Financing Costs (1,650,000) (780,181) -52.7% Local Development Transfer (25,500,000) (25,500,000) 0.0% Capital Expenditures * (500,000) (390,397) -21.9%
Total Other Sources & Uses (25,922,000) 2,254,673 -108.7% GROSS INCREASE (DECREASE) 179,844,000 176,902,987 -1.6% Revenue Recognized from Rate Stabilization Fund** - 10,504,837 100.0% Revenue Deferred to Rate Stabilization Fund (29,844,000) (37,407,824) 25.3% NET INCREASE (DECREASE) *** 150,000,000 150,000,000 0.0% * Depreciation has been removed and is expressed as Capital Expenditures ** Amount not determinable at time of budget approval
*** Net Increase is allocated to working capital and reserves Attachment Staff Report Item 18A
Budget Net Revenues to Audit Net Position Reconciliation 3 The Budget is an internal proforma document set at the discretion of the Board. The financial statements in the Audit are standardized by Generally Accepted Accounting Principles (GAAP) and have additional rules set forth by the Governmental Accounting Standards Board (GASB).
Ava drafts each budget in accordance with industry best practices and does best efforts to align with GAAP and GASB standards, but fundamental differences exist and reconciliation should be defined.
The table below reconciles the audited Net Position increase to the budget actuals Net Revenues The remaining $150MM balance is allocated to reserve funds and working capital and is described in further details in the next two slides. Reconciled Item Details Amount Balance Audited Net Position Includes GASB 62 Net Deferral 172,677,755 Depreciation Accrued depreciation of assets 173,377,086 (699,331) LD Budget Allocation Budgeted capital transfer to Programs 25,500,000 147,877,086 LD Revenue from Grants FY 23/24 grant revenue in Programs 1,440,935 146,436,151 LD Actual Expenses Actual FY 23/24 Program expenses (4,321,877) 150,758,028 Capital Outlay Capital reconcilliation 150,367,631 390,397 GASB 87 Lease Lease obligations outstanding as of 6/30/2024 150,000,000 367,631 Attachment Staff Report Item 18A
Waterfall Discussion
4 June 21, 2023, the Board of Directors (BOD) approved the fiscal year budget for July 1, 2023 through June 30, 2024 by Resolution R-2023-37.
This resolution allocated surplus revenues to abide by a waterfall of contributions in the following manner:
• The first $50 million to be retained for working capital needs • The next $100 million to be allocated to reserve funds • The remaining balance was to be split with 50% being allocated to long-term renewable energy and/or clean storage investments and 50% to be determined at a future date January 17, 2024, the BOD approved Resolution R-2024-2, to restructure and more clearly define the remaining balance allocations as:
• 60% to be dedicated to on-bill credits with some portions specifically applied to CARE and FERA customers
• 40% to be dedicated to incentives for clean storage investments as incentives for net-billing tariff projects with an emphasis on resilience development.
Attachment Staff Report Item 18A
Waterfall Distribution
5 In accordance with Board resolutions R-2023-37 and R-2024-2, the allocation of net revenues is as follows:
• The first $50 million is recognized and retained for working capital needs • The next $100 million is recognized and added to the reserve fund balance • The remaining amount is deferred to the GASB 62 Rate Stabilization Fund to be recognized in the following manner:
• $22,444,694 to be applied to customer bills as a credit in the current fiscal year • $14,963,130 to be applied as program incentives for net billing tariff solar & storage program Allocation Budget Actuals % Change
Revenues After Operations & Other Uses 179,484,000 176,902,987 -1.4% GASB 62 RSF Recognition 10,504,837 - 100.0%
Net Revenues 179,484,000 187,407,824 4.4%
Contributions
Working Capital 50,000,000 129,484,000 137,407,824 6.1% Reserve Funds 100,000,000 29,484,000 37,407,824 26.9%
Remaining
On-Bill Credits 60% 17,690,400 22,444,694 26.9%
Net Billing Tariff Program 40% 11,793,600 14,963,130 26.9% Attachment Staff Report Item 18A
Reserve Fund Balance
6 The Reserve Fund, as established by resolution R-2021-2 and governed by policy P10.1, works to provide a suitable cash balance to guard against expense shocks. The fund balance is set to meet annual operating expense targets. These targets meet Ava financial objectives, including but not limited to:
• Securing favorable commercial terms with vendors and power providers • Maintain Ava’s “A Stable” credit rating
• Provide funds for unanticipated expenditures
• Maintain long-term Ava financial independence and rate stability Contribution 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 - 330,873,400 810,350,000 40.8%
Attachment Staff Report Item 18A
Thank you!
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7 Attachment Staff Report Item 18A