Financial, Administrative and Procurement Subcommittee
Meeting
Wednesday, March 12, 2025
1:00 pm
In Person:
Conference Room 5
Ava Community Energy
1999 Harrison Street, Suite 2300
Oakland, CA 94612
Or from the following locations:
• Member Del Catancio – 35653 Scarborough Dr, Newark, CA 94560 • Member Kaur - Clipper Club, 5 Captain Drive, Emeryville, CA 94608 • Member Morada – Dublin Civic Center, City Manager's Office, 100 Civic Plaza Dublin, CA 94568
• Member Sakakihara – 34009 Alvarado-Niles Road, Union City, CA 94587 Via Zoom:
https://avaenergy-org.zoom.us/j/83599993289
Or join by phone:
Dial(for higher quality, dial a number based on your current location): US: +1 669 900 6833 or +1 346 248 7799 or +1 253 215 8782 or +1 929 205 6099 or +1 301 715 8592 or 888 475 4499 (Toll Free) or 877 853 5257 (Toll Free) Webinar ID: 835 9999 3289
Meetings are accessible to people with disabilities. Individuals who need special assistance or a disability-related modification or accommodation to participate in this meeting, or who have a disability and wish to request an alternative format for the meeting materials, should contact the Clerk of the Board at least 2 working days before the meeting at (510) 707-1764 or [email protected].
If you have anything that you wish to be distributed to the Finance, Administration and Procurement Subcommittee, please email it to the clerk by 5:00 pm the day prior to the meeting.
1. Welcome & Roll Call
2. Public Comment
Ava Community Energy
Board of Directors Page | 2
This item is reserved for persons wishing to address the FAP Subcommittee on any Ava-related matters that are not otherwise on this meeting agenda. Public comments on matters listed on the agenda shall be heard at the time the matter is called. As with all public comment, members of the public who wish to address the Board are customarily limited to three minutes per speaker. The FAP Chair may increase or decrease the time allotted to each speaker.
3. Approval of Minutes from September 11, 2024 (Action Item)
4. FAP Annual Agenda (Informational Item)
A presentation on known, upcoming FAP agenda items.
5. FY 2024-2025 Q2 Financial Statements (Informational Item) Financial Statements for Fiscal YTD and Q2 financial performance.
6. Reserve Fund Review (Informational Item)
Review the reserve fund processes and policies as well as best practices survey results.
7. Accounts Receivable Recovery Agency (Informational Item) Provide feedback on agency selection to implement the Accounts Receivable Recovery Policy.
8. Unclaimed Funds Policy (Informational Item)
Provide feedback on a Policy to manage Unclaimed Funds.
9. Committee Member and Staff Announcements including requests to place items on future Board Agendas
10. Adjourn
The next Financial, Administrative and Procurement Subcommittee meeting will be held on Wednesday, May 14, 2025 at 1pm.
Conference Room 5
Ava Community Energy
1999 Harrison Street, Suite 2300
Oakland, CA 94612
Draft Minutes
Financial, Administrative and Procurement Subcommittee
Meeting
Wednesday, September 11, 2024
1:00 pm
In Person:
Conference Room 5
Ava Community Energy
1999 Harrison Street, Suite 2300
Oakland, CA 94612
Or from the following locations:
• Member Kaur - Clipper Club, 5 Captain Drive, Emeryville, CA 94608 • Member Bedolla - 1755 Harvest Landing Lane, Tracy, CA 95376 • Member Cox - Fremont City Hall, Building B, HR Training Room 3300 Capitol Ave. Fremont, CA 94538
Via Zoom:
https://ebce-org.zoom.us/j/83599993289
Or join by phone:
Dial(for higher quality, dial a number based on your current location): US: +1 669 900 6833 or +1 346 248 7799 or +1 253 215 8782 or +1 929 205 6099 or +1 301 715 8592 or 888 475 4499 (Toll Free) or 877 853 5257 (Toll Free) Webinar ID: 835 9999 3289
Meetings are accessible to people with disabilities. Individuals who need special assistance or a disability-related modification or accommodation to participate in this meeting, or who have a disability and wish to request an alternative format for the meeting materials, should contact the Clerk of the Board at least 2 working days before the meeting at (510) 707-1764 or [email protected].
If you have anything that you wish to be distributed to the Finance, Administration and Procurement Subcommittee, please email it to the clerk by 5:00 pm the day prior to the meeting.
1. Welcome & Roll Call
Present: Directors: Andersen (Piedmont), Bedolla (Tracy), Gonzalez (San Leandro), Kaur (Emeryville), and Chair Cox (Fremont).
Ava Community Energy
Board of Directors Page | 2
Director Bedolla (Tracy) joined at 1:16pm.
2. Public Comment
This item is reserved for persons wishing to address the FAP Subcommittee on any Ava-related matters that are not otherwise on this meeting agenda. Public comments on matters listed on the agenda shall be heard at the time the matter is called. As with all public comment, members of the public who wish to address the Board are customarily limited to three minutes per speaker. The FAP Chair may increase or decrease the time allotted to each speaker.
There were no speakers for public comment.
3. Approval of Minutes from July 10, 2024
Director Gonzalez (San Leandro) motioned to approve the minutes. Director Kaur (Emeryville) seconded the motion, which passed 3/0/1/0/1.
Yes: Directors: Andersen (Piedmont), Gonzalez (San Leandro), and Kaur (Emeryville).
No: none.
Abstain: Chair Cox (Fremont).
Recuse: none.
Excused: Director Bedolla (Tracy).
There were no speakers for public comment.
Please note that the meeting did not start recording until after Item 3. Approval of Minutes at 1:08pm due to technical difficulties. The minutes record was noted and retrieved from the internal clerk roll call and tally spreadsheet.
4. Audit Progress Report (Informational Item)
Report on the status and timeline of the fiscal audit.
The Committee Discussed:
• (2:45) Director Gonzalez (San Leandro) sought clarification on whether there is a delivery obligation for Ava to provide audit documents to counterparties. He also expressed a preference for using the auditor’s exact language when describing the audit in any public presentation.
(1:01) Public Comment – Ayla Peters inquired whether the audit will be available and accessible to the public for reading.
5. Ava Participation in Hourly Flex Pricing Pilots (Informational Item) Staff seeking approval to participate in hourly flex pricing pilots with PG&E.
The Committee Discussed:
• (25:11) Director Andersen (Piedmont) inquired about differences between this pilot and PG&E time-of-use plans, how they will be communicated to current participants, and the possibility of an app for real-time pricing adjustments. She Ava Community Energy
Board of Directors Page | 3
also suggested adding more context to the presentation before the board meeting to show Ava’s awareness of time-of-use pricing. • (30:29) Director Gonzalez (San Leandro) questioned why daytime electricity prices are lowest despite high demand and expressed concerns about potential long-term behavioral impacts from this. He also asked if the pilot is limited to non-residential customers and noted that, unlike real-world scenarios, there are no financial consequences for participants.
• (39:29) Director Andersen (Piedmont) voiced concern that limiting the pilot to 200 opt-in participants may create a non-representative sample, attracting mainly highly motivated customers. She questioned if the pilot primarily serves internal goals rather than providing broader insights for a wider rollout. • (42:33) Chair Cox (Fremont) inquired if there is a specific target area or city for the 200 customers participating in the pilot.
(18:48) Public Comment – Ayla Peters sought clarification on whether there is currently a way for the public to enroll in the Hourly Flex Pricing Pilots program. (20:44) Public Comment – Jim Lutz asked if energy usage for residential customers will be automated to adjust settings like air conditioner temperatures. He also asked whether shadow bills will show spending or savings, and if there will be incentives or notifications for participation during extreme peak pricing.
6. Committee Member and Staff Announcements including requests to place items on future Board Agendas
There were no Committee Member or Staff Announcements.
7. Adjourned at 1:52pm.
The next Financial, Administrative and Procurement Subcommittee meeting will be held on Wednesday, November 13, 2024 at 1pm.
Conference Room 5
Ava Community Energy
1999 Harrison Street, Suite 2300
Oakland, CA 94612
Minutes written by Raïssa Ngoma
Current 2025 FAP Schedule
2 Five meetings are scheduled for this calendar year. All meetings are currently scheduled at 1pm every other month on the second Wednesday. These events may be adjusted. The Clerk is currently taking a survey for dates and times that work with this committee.
• March 12
• May 14
• July 9
• September 10
• November 12
Additional Meetings & Expected Finance Items
• Review Draft Budget for Fiscal Year 2025-
2026
• Review recommendations for funding
reserve and rate stabilization funds as well
as possible policy adjustments
• Discussion of expectations regarding Ava’s
credit facility, scheduled to renew in
October
• Review prepay #4 for Board approval
3 May 14, 2025
• Further discussion of expectations and any
possible related cofactors regarding Ava’s
credit facility
July 9, 2025
Additional Meetings & Expected Finance Items
• Review for Board approval new credit
facility
• Progress report on annual financial audit
4 September 10, 2025
• (Expected) Presentation of annual audited
financial statements
• Fiscal Year 2024-2025 Surplus Waterfall
Allocation Report
• Presentation on reserve and rate
stabilization fund levels and targets
November 12, 2025
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Renewables Solar energy Wind energy Solar + storage Rooftop solar Community solar Geothermal Transmission Induction Heating + cooling Water heating EV fleet Electric vehicles EV charging E-bikes Home battery Medical Baseline Application Residential Apartment Business Municipal Public Meeting Event Environment Energy bill Savings Choice Community Grants, sponsorships Local Benefits Discussion / Contact Select / Action Marketing / Outreach Data analysis Health Time of use Operations VPP Using a Premade Slide
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9 1
ACCOUNTANTS’ COMPILATION REPORT
Board of Directors
AVA Community Energy
Management is responsible for the accompanying financial statements of AVA Community Energy (a California Joint Powers Authority) which comprise the statement of net position as of December 31, 2024, and the related statements of revenues, expenses, and changes in net position, and the statement of cash flows for the three months and six months then ended in accordance with accounting principles generally accepted in the United States of America. We have performed a compilation engagement in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the AICPA. We did not audit or review the accompanying statements nor were we required to perform any procedures to verify the accuracy or completeness of the information provided by management. Accordingly, we do not express an opinion, conclusion, nor provide any assurance on these financial statements.
Management has elected to omit substantially all of the note disclosures required by accounting principles generally accepted in the United States of America in these interim financial statements.
AVA Community Energy’s annual audited financial statements include the note disclosures omitted from these interim statements. If the omitted disclosures were included in these financial statements, they might influence the user’s conclusions about the Authority’s financial position, results of operations, and cash flows. Accordingly, these financial statements are not designed for those who are not informed about such matters.
We are not independent with respect to the Authority because we performed certain accounting services that impaired our independence.
Maher Accountancy
San Rafael, CA
February 7, 2025
1101 Fifth Avenue, Suite 200 San Rafael, CA 94901 415 459 1249 mahercpa.com Current assets
Cash and cash equivalents - unrestricted 388,231,317 $
Cash and cash equivalents - restricted 8,015,906
Accounts receivable, net of allowance 84,866,701
Accrued revenue 45,632,247
Other receivables 3,119,744
Prepaid expenses 4,667,967
Deposits 4,212,125
Investments 31,960,980
Total current assets 570,706,987
Noncurrent assets
Cash and cash equivalents in Rate Stabilization Fund - unrestricted 57,472,293 Deposits 1,090,907
Investments 286,256,555
Loan receivable 2,336,589
Capital assets, net of depreciation and amortization 9,952,531 Total noncurrent assets 357,108,875
Total assets 927,815,862
Current liabilities
Accrued cost of electricity 164,818,978
Accounts payable 3,194,335
Advances from grantors 8,015,906
Other accrued liabilities 1,791,160
User taxes and energy surcharges due to other governments 8,122,890 Lease liability 252,660
Security deposits - energy suppliers 5,746,750
Total current liabilities 191,942,679
Noncurrent liabilities
Security deposits - energy suppliers 3,600,000
Total liabilities 195,542,679
Rate Stabilization Fund 79,916,987
Net investment in capital assets 9,699,871
Unrestricted 642,656,325
Total net position 652,356,196 $
NET POSITION
AVA COMMUNITY ENERGY
STATEMENT OF NET POSITION
As of December 31, 2024
ASSETS
LIABILITIES
DEFERRED INFLOWS OF RESOURCES
See accountants' compilation report. 2
Three Months Year-to-Date
OPERATING REVENUES
Electricity sales for resale
Electricity sales, net 211,785,121 $ 483,412,777 $
Liquidated damages 3,262,500 9,577,500
Grant revenue 1,077,421 1,486,448
Other operating revenues 16,906 118,637
Total operating revenues 216,141,948 494,595,362
OPERATING EXPENSES
Cost of electricity 182,338,646 359,938,505
Contract services 5,778,818 11,831,766
Staff compensation 4,606,365 9,645,632
Other operating expenses 2,394,232 3,889,842
Depreciation and amortization 226,822 458,306
Total operating expenses 195,344,883 385,764,051
Operating income (loss) 20,797,065 108,831,311
NONOPERATING REVENUES (EXPENSES)
Investment income 4,116,483 8,215,210
Interest expense (9,544) (24,356)
Nonoperating revenues (expenses), net 4,106,939 8,190,854 CHANGE IN NET POSITION 117,022,165 24,904,004
Net position at beginning of period 627,452,192 535,334,031 Net position at end of period 652,356,196 $ 652,356,196 $
AVA COMMUNITY ENERGY
STATEMENT OF REVENUES, EXPENSES
AND CHANGE IN NET POSITION
Three Months and Year-to-Date Ended December 31, 2024
See accountants' compilation report. 3
Three Months Year-to-Date
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers 233,039,266 $ 517,428,566 $
Receipts of supplier security deposits 3,932,252 3,932,252 Other operating receipts 3,366,566 10,161,737
Payments to suppliers for electricity (155,166,501) (340,806,306) Payments for other goods and services (11,456,259) (17,551,396) Payments for staff compensation (4,788,384) (9,577,762) Payments for deposits and collateral (3,894,000) (8,894,000) Payments of taxes and surcharges to other governments (8,679,853) (17,921,289) Net cash provided by operating activities 56,353,087 136,771,802
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Payments of lease liability (243,705) (480,312)
Purchases of capital assets (41,881) (87,745)
Net cash (used) by capital and related financing activities (285,586) (568,057)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales and maturities of investments 4,363 4,363 Principal payments received of loan receivable 3,638 7,226 Investment income received 3,019,027 7,147,896
Purchase of investments (319,172,441) (319,172,441)
Loan issued (2,057,344) (2,057,344)
Net cash provided (used) by investing activities (318,202,757) (314,070,300) Net change in cash and cash equivalents (262,135,256) (177,866,555) Cash and cash equivalents at beginning of period 715,854,772 631,586,071 Cash and cash equivalents at end of period 453,719,516 $ 453,719,516 $ Reconciliation to the Statement of Net Position
Cash and cash equivalents - unrestricted (current) 388,231,317 $ 388,231,317 $ Cash and cash equivalents - restricted (current) 8,015,906 8,015,906 Cash and cash equivalents (noncurrent) 57,472,293 57,472,293 Cash and cash equivalents 453,719,516 $ 453,719,516 $
Three Months and Year-to-Date Ended December 31, 2024
STATEMENT OF CASH FLOWS
AVA COMMUNITY ENERGY
See accountants' compilation report. 4
Three Months Year-to-Date
Operating income (loss) 20,797,065 $ 108,831,311 $
Adjustments to reconcile operating income to net
cash provided (used) by operating activities
Depreciation and amortization expense 226,822 458,306
(Increase) decrease in:
Accounts receivable 6,131,976 96,104
Market settlements receivable 1,534,027 -
Other receivables 283,095 (756,574)
Accrued revenue 6,644,550 15,320,146
Prepaid expenses (2,091,890) (1,842,426)
Deposits 6,931,232 1,931,232
Increase (decrease) in:
Accrued cost of electricity 18,734,321 15,519,469
Accounts payable (3,925,836) (2,218,473)
Other accrued liabilities (181,825) 59,725
Advances from grantors (1,005,657) (1,036,245)
Deferred revenue 97,958 (1,686,978)
User taxes due to other governments (202,233) 678,253
Security deposits from energy suppliers 2,379,482 1,417,952 Net cash provided (used) by operating activities 56,353,087 $ 136,771,802 $
NONCASH INVESTING ACTIVITIES
Unrealized appreciation (depreciation) and
timing differences in investment income 1,097,456 $ 1,067,314 $
RECONCILIATION OF OPERATING INCOME TO NET
CASH PROVIDED (USED) BY OPERATING ACTIVITIES
Three Months and Year-to-Date Ended December 31, 2024
STATEMENT OF CASH FLOWS (Continued)
AVA COMMUNITY ENERGY
See accountants' compilation report. 5
Background and History of Ava’s Reserve Policy
2 June 10, 2018, the Board of Directors (BOD) approved by resolution (R-2018-26) a financial reserve policy (P-2018-10) to allow Ava to contribute surplus revenues to reserves. ▪ This policy consisted of a waterfall allocation to four separate funds • General Operating/Credit Reserve
• Rate Credit Reserve
• Collateral Reserve
• Local Development Reserve
Negotiations with Ava’s credit facility, restructuring Local Development as a separate fund, and in preparation for a credit rating review, the BOD approved by resolution (R-2021-2) to update the financial reserve policy on January 20, 2021
▪ This update consolidated the remaining reserves into a single reserve fund and discussions also led to creation of a Local Development Fund that was used to accumulate and track budget allocations to Local Development activities
• Target funding percentage was set to 50% of operating expenses for the fiscal year, with a range set to a minimum of 25% and a maximum of 75%
Survey of Comparable Best Practices
In considering the relevance of Ava’s reserve policy, staff has completed a broad survey of 23 public agencies to discover comparable best practices for reserve fund policy and management The goals of the survey were as follows:
• Test for generally accepted targets and ranges, if applicable, for reserve fund levels
• Discover best approaches on funding reserve funds
• Discover best practices for use discretion
3 Agencies Surveyed
• AC Transit
• Alameda Municipal Power
• Ava Community Energy
• Central Coast Community Energy
• City of Burbank Water & Power
• Clean Energy Alliance
• Clean Power Alliance
• Clean Power SF
• Desert Community Energy
• EBMUD
• LADWP
• MCE
• Orange County Power Authority
• Peninsula Clean Energy
• Pico Rivera IME
• Pioneer Community Energy
• Redwood Coast Energy Authority
• SMUD
• San Diego Community Power
• Silicon Valley Clean Energy
• Sonoma Clean Power
• South Placer MUD
• Valley Clean Energy
Results of Survey of Comparable Best Practices
Statistics of Respondents:
• 22 (96%) have a target reserve that averages at 48% (stdev = 17%) of annual operating expenses (OpEx) or gross revenues ▪ One (4%) respondent had no target identified, but did have min and max range tied to gross revenues ▪ Two respondents had reserve targets dependent upon gross revenues, the rest were operating expenses ▪ One respondent had a fixed dollar amount not seemingly dependent upon financial aspect ▪ Ava has a target of 50% of annual OpEx
• 12 (52%) have a minimum reserve target averaging 29% (stdev = 10%) of OpEx, one of which was tied to gross revenues. ▪ 11 (48%) had no mention of minimum reserve targets
▪ Ava has a minimum target of 25% of OpEx
• 10 (43%) have a maximum reserve target averaging 73% (stdev = 27%) of OpEx, one of which was tied to gross revenues. ▪ 13 (57%) had no mention of maximum reserve targets
▪ Ava has a maximum target of 75% of OpEx
More than half (15) funded reserves from net revenues, 2 funded from gross revenues, and the rest (6) did not specify funding mechanism. Ava funds its reserves from net revenues.
10 allow CEO discretion for use of reserves, 8 require board approval, and 5 do not specify. Ava currently requires BOD approval for use of reserves.
4 Current Reserve Fund Levels & Upcoming Needs
• Currently, Ava has $330,873,400 allocated to reserves which covers approximately 40% of current fiscal year’s operating expenses.
• Stockton and Lathrop are only active in the last quarter of this current fiscal year • Next fiscal year (FY 2025-2026) will be a full operating year with Stockton and Lathrop • San Juaquin County will only be active in the last quarter of FY 2025-2026 • The following fiscal year (FY 2026-2027) will be the first year with full participation of all new communities
• Keeping to the reserve policy, Ava will expect to require a material increase to the 50% target • Staff is intending to present a reserve funding plan with the upcoming budget development session this year
5 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 - 330,873,400 826,473,000 40.0%
2024-2025** 65,668,500 - 396,541,900 1,076,267,000 36.8% *Operating Expenses are fiscal year ahead for coverage purposes **Proposed contribution with projected operating expenses to cover for FY 25-26 as of 1/28/2025 Reserve Policy Funding Plan
Ava min/max/target reserve levels are in line with the averages of surveyed agencies. The min/max ranges are intended to allow flexibility to build reserves over time, swing with any market volatility that would impact the annual operating expenses levels, and provide guidelines for potential future utilization.
Staff recommends maintaining the current min/max/target levels and consider adjustments in the future as Ava
approaches its target level.
With expansion to San Joaquin County current forecasted annual operating expenditures for a full year are estimated at approximately $1.2 billion, which translates to a 50% reserve target of $600 million. From the previous slide, current reserves are at $330 million and anticipates approaching $400MM af the end of FY 2025.
Staff is developing a funding plan to meet target levels in 5 to 10 years.
6 Reserve Funding Options:
• Prioritize with full net revenues until
50% target met
▪ Estimated time: 3 – 6 years
▪ Pros: Low risk to value proposition to meet
target. Clear to public.
▪ Cons: Limits surplus options.
• Five years to target
▪ Allocate ~$54 million per year
▪ Pros: Clear to public. Clear budget line
item. Retains flexibility with surplus
options.
▪ Cons: Risk to value proposition to meet
target in lean years.
• Ten years to target
▪ Allocate ~$27 million per year
▪ Pros & Cons are same as 5 years but with
reduced risk to value proposition
Purpose & Utilization of Ava’s Reserve Policy
7 Although not explicit in the policy, the operating intent of the reserve fund is to provide resources in cases of extreme need, such as local natural catastrophes (earthquakes, tsunamis, fires, etc…) or significant energy market events that lead to price volatility and financial risk to Ava. Examples include but are not limited to climate event driven extreme supply shortages or demand spikes, market manipulation (ala 2000-2001), global pandemics, geopolitical economic events, etc. In consideration of power resource ownership, such reserves will also be maintained for unplanned outages and other unplanned investments/costs.
Ava’s reserve policy was established to hold a suitable cash balance to meet targeted levels of operating expenses with the objectives of:
• Maintain long-term financial independence and rate stability • Secure favorable commercial terms with vendors and power providers • Support the maintenance of a credit rating
• Provide liquidity for unanticipated expenditures
• Meet Ava’s strategic objectives, and
• Have cash available for other operational needs as approved by the Board Rate Stabilization Fund Policy Considerations
Ava has a GASB 62 Revenue Deferral Fund in which budget surplus allocations have been made. This fund has primarily been maintained to allow matching of timing for on-bill credits, the solar & storage incentive program, and a one-time allocation towards long-term renewable energy & clean energy storage investments.
Staff is evaluating a more formalized Rate Stabilization Fund Policy in order to lay out a funding plan and intended utilization for review with the board.
The policy recommendation will include disbursements for specific programmatic purpose and in order to maintain stable rate discounts in response to cyclical and short-term market volatility, anticipated 1-2 times each decade.
8 Waterfall of Liquidity Resources
1. Working Capital
2. Rate Stabilization Fund
3. Credit Facility
4. Reserve Fund
Conclusion & Next Steps
• Ava's Reserve Policy is in line with industry norms for similar agency operations • Staff is seeking feedback from the board on funding plan duration • Staff will present an information item to the full board on March 19, 2025 • Staff will provide a formal recommendation on a Reserve Policy funding plan for board action in May 2025
• Staff will bring forward a draft Rate Stabilization Fund Policy for consideration in the coming months
9 Staff Report Item 7
To: Ava Community Energy Authority
From: Chris Davis, Customer Operations Manager
Subject:
Seeking feedback from the Board on a proposal to contract an accounts receivable recovery agent.
Date: March 12, 2025
__________________________________________________________________ Recommendation
Staff is seeking feedback on a proposal to implement account receivable recovery through an agreement with Sacramento Municipal Utility District (SMUD) in partnership with IC System (ICS) for their cost-effective pricing, positive customer feedback, and existing integration. ICS was selected by SMUD, through a formal Request for Proposals (RFP) process, to manage collections for their customer debt. Staff recommends contracting with SMUD in partnership with ICS until December 2026, with a performance assessment after 12 months, aligning the contract with Ava’s current SMUD agreement.
Summary
The initial policy regarding Delinquent Accounts and Collections (Accounts Receivable Recovery Process) was adopted as part of the February 7, 2018, staff report covering Administrative and Operational Policies. The Board of Directors (the “Board”) received an informational review of this policy at the November 20, 2019 meeting. At that time, staff planned to implement the policy into operation by the end of the 2019-2020 fiscal year. However, the policy was put on hold in response to the State’s emergency customer protections, which were introduced to support customers impacted by the COVID-19 pandemic. The State’s COVID-19 State of Emergency terminated on February 28, 2023.
Staff updated the Accounts Receivable Recovery Policy, and the Board of Directors approved it on March 20, 2024. Staff then took steps to implement the policy, starting with issuing a request for proposals for collection agencies in September 2024.
Ava is able to collect unpaid bills after the customer’s Ava account has closed, or terminated, and the debt is at least 61 days old. After this period, the debt being collected by PG&E on Ava’s behalf is reversed, and it becomes eligible for Ava’s own collection activities. Over the past four years, Ava has accumulated nearly $20 million in uncollected billings eligible for recovery, with approximately $5 million becoming eligible for recovery annually, stemming from over 300,000 customer accounts. Residential customers account for 59% of the total outstanding bills ($11.5 million) and 95% of total accounts (~287,000). Approximately $400,000 becomes eligible for collections each month.
Residential C&I Total
Monthly Average
Uncollectibles $241,050 $167,840 $408,890
Monthly Average
Customer Count 5,970 315 6,285
Average Uncollectibles
per Customer $40 $533 $65
Yearly Average
Uncollectibles $2,892,600 $2,014,080 $4,906,680
Table 1: Average Uncollectibles, 2020-2024
Financial Impact
SMUD will assess both an initial set up and an ongoing fee to administer recovery services. The initial setup includes integrating systems and processes across agencies configuring, compiling and updating reporting's and data, and customer service representative training. The initial fee is $100,000. The monthly administrative fee, $5,000, will support researching and responding to customer inquiries and disputes, managing and analyzing data and resolution of data discrepancies. Additionally, SMUD’s partner, ICS, will retain 10% of the recovered amount. Ava anticipates the monthly administration fees will be covered by ongoing past-due payments received through the recovery efforts.
Based on other CCA collections activities, Staff estimates 2-15% of past due balances will be recovered., Based on $400,000 in past-due balances eligible for collections monthly, staff expects to recover $8,000- $60,000.
Collections Rate
Total
Collected Net to Ava
2% $8,000 $7,200
10% $40,000 $36,000
15% $60,000 $54,000
Table 2: Estimated range of monthly recoveries
Analysis and Context
Following Board approval for Ava’s Accounts Receivable Recovery Policy, Ava issued an RFP in September 2024 for an Accounts Receivable Recovery Agent to implement the approved policy.
Three agencies responded to the RFP; none are local to Ava’s service territory. The top two agencies were selected for interviews: SMUD, in partnership with ICS, and Harris & Harris (H&H). These agencies were evaluated based on the following key criteria: experience, recovery rates, cost, and customer communications and recovery methodology. Both agents had extensive experience, but SMUD was deemed more suitable due to costs and its existing relationship with Ava and managing this same process with another CCA, Valley Clean Energy.
Recovery rates for both agencies are expected to be similar, given the unique challenges of CCAs such as low brand recognition, the inability to have debt affect customers credit rating due to lack of having key customer information such as social security number and complex billing structure. Regarding costs, SMUD proposed a $100,000 initial setup fee and a $5,000 monthly management fee to cover ongoing administrative costs. Due to the role SMUD plays in Ava’s ongoing billing operations, SMUD would be involved in both the data integration and ongoing administrative work; therefore, the fees described earlier in this memo apply to both agencies.
Although proposals were comparable, SMUD presented a more cost-effective option due to its lower primary recovery fee of 10%. SMUD's lower primary recovery fee and customer-centric approach—offering multilingual support, customizable here-to-help outreach letter, longer duration engagement, and flexible payment options—align more closely with Ava’s priorities.
Staff will collaborate with SMUD to develop standardized language for use across all customer communication channels. H&H, while effective, takes a more data-driven approach, a shorter engagement period, and focuses less on person-to-person interaction.
Ava has contracted with SMUD since 2018 to handle our billing operations and customer service duties. SMUD is the nation's sixth largest community-owned electric utility, committed to sustainability, innovation, and exceptional customer service. SMUD is well-regarded for its customer service; their team is praised for being knowledgeable and friendly, often going above and beyond to assist customers with billing inquiries, service issues, and energy-saving tips.
SMUD also reinvests profits back into their local area, funding programs for low-income residents, energy efficiency initiatives, and education around sustainability.
Staff recommends contracting with SMUD, in partnership with ICS, through December 2026, with a performance assessment at 12 months.
Attachments
Accounts Receivable Recovery Policy
PowerPoint
Attachment Consent Item 15B
ACCOUNTS RECEIVABLE RECOVERY PROCESS
Policy Number: P-2024-4.1
Approval Date: March 20, 2024
Agenda Item: Consent Item 15
Approved by Resolution: R-2024-22
Delinquent Accounts:
Pursuant to Electric Rules 8 and 11, Pacific Gas & Electric (PG&E) uses the following process to determine past due accounts and the necessary action:
Residential Accounts Non-Residential Accounts
Day 0 Bill is completed and
issued. Day 0 Bill is completed and issued.
Day 21 Bill is due Day 17 Bill is due
Day 22 Past due Day 18 Past due
Day 27-
34 A new bill is issued for
current charges and a 15-
day notice is included for
past due charges.
Day 21-
34 A new bill is
completed for new
charges and any
unpaid charges and a 7-day
notice is issued for past due
charges.
Day 42 96-hour notification sent
Day 44-47 48-hour notice via mail
Day 48 Outbound phone call
Day 51 Account is eligible for
disconnection Day 43 Account is eligible for disconnection Day 60 Final letter is sent Day 52 Final letter is sent Day 95 Reverse debt to CCA Day 87 Reverse debt to CCA
Aging Accounts:
All Ava Community Energy accounts, whether Residential or Non-Residential, identified in the month aging accounts receivable report, as provided by PG&E, are eligible to be returned to PG&E for continued non-payment.
Accounts Receivable Recovery Process:
Closed Ava accounts with overdue amounts may be recovered by Ava or referred to a collection agency and are subject to the recovery process established by this policy.
This policy replaces the existing policy for Delinquent Accounts and Collections (P-2018-4).
Accounts Receivable
Recovery Process
Chris Davis | March 12, 2025
Recommendation:
Staff recommends contracting with SMUD in partnership with ICS until December 2026, with a performance assessment after 12 months, aligning the contract with Ava’s current SMUD agreement.
Executive Summary
● Ava has accumulated $20M in uncollected billings over the past 4 years ● $400k in eligible collections per month from 300K+ customers ● The Board adopted new write-off and collections policies in 2024; staff seeks to implement these into operations
● Recommended Vendor: SMUD (partnership with ICS)
● Key Benefits of SMUD: Cost-effective, positive client feedback, seamless integration with our billing system
2 Background
Uncollected Billings:
• $20M in total, with $5M becoming eligible for recovery annually • 300,000+ customers with eligible accounts (61+ days overdue) • 59% of debt is residential
Ava’s Policy History:
• 2018 policy adopted, paused in 2020 due to COVID-19 protections • The State’s COVID-19 state of emergency terminated on February 28, 2023 • Staff issued an RFP September 2024 for debt collection services 3 Accounts Receivable Recovery Process Policy
• Delinquent Accounts:
▪ Pursuant to Electric Rules 8 and 11, Pacific Gas & Electric (PG&E) uses the following process to determine past due accounts and the necessary action: (Refer to the chart on the following slide for more details.)
• Aging Accounts:
▪ All Ava Community Energy accounts, whether Residential or Non-Residential, identified in the month aging accounts receivable report, as provided by PG&E, are eligible to be returned to PG&E for continued non-payment.
• Accounts Receivable Recovery Process:
▪ Closed Ava accounts with overdue amounts may be recovered by Ava or referred to a collection agency and are subject to the recovery process established by this policy. 4 Accounts Receivable Recovery Process Policy
5 Residential Accounts Non-Residential Accounts
Day 0 Bill is completed and issued. Day 0 Bill is completed and issued.
Day 21 Bill is due Day 17 Bill is due
Day 22 Past due Day 18 Past due
Day 27- 34 A new bill is issued for current charges and a 15-day notice is included for past due charges.
Day 21-34 A new bill is completed for new charges and
any unpaid charges and a 7-day notice is
issued for past due charges.
Day 42 96-hour notification sent
Day 44-47 48-hour notice via mail
Day 48 Outbound phone call
Day 51 Account is eligible for disconnection Day 43 Account is eligible for disconnection Day 60 Final letter is sent Day 52 Final letter is sent Day 95 Reverse debt to CCA Day 87 Reverse debt to CCA
Customer Timeline - PG&E Delinquencies:
RFP Process
In September 2024, Ava issued an RFP for Debt Collection Services. Three agencies responded to the RFP. Proposals were evaluated by a team, and the top two agencies were selected for interviews:
Vendors Considered:
• SMUD- Partnered with ICS
• Harris & Harris (H&H)
6 Comparison of Collection Methodology
SMUD vs. H&H Key Differences:
• ICS: 24/7 inbound IVR, manual skip tracing, persistent communication even after 90 days • H&H: Focus on analytics, text campaigns, credit score filtering, more frequent call attempts for smaller balances
Customer Journey Highlights:
• SMUD prioritizes customer experience through multiple communication channels, a "here-to-help" letter, and longer recovery timeframes • H&H utilizes advanced analytics and quicker outreach but lacks long-term engagement tools 7 Average Uncollectibles Breakdown, 2020-2024
8 Residential C&I Total
Monthly Average
Uncollectible $241,050 $167,840 $408,890
Monthly Average Customer
Count 5,970 315 6,285
Average Uncollectible per
Customer $40 $533 $65
Yearly Average
Uncollectibles $2,892,600 $2,014,080 $4,906,680
Vendor: SMUD
Determining Factors:
• Lower primary recovery fee (10%)
• Integration with SMUD will streamline implementation
• Favorable customer feedback and cost-effectiveness
Recommendation:
Staff recommends contracting with SMUD in partnership with ICS until through December 2026, with a performance assessment at 12 months.
Recommended Vendor
9 AvaEnergy.org
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AvaEnergy.org
+1 833.699.3223
[email protected]
PoweredWithAva
Online
Phone
Email
Social
AvaEnergy.org
+1 833.699.3223
[email protected]
PoweredWithAva
Online
Phone
Email
Social
10 Staff Report Item 8
To: Ava Community Energy Authority
From: Chris Davis, Customer Operations Manager
Subject: Seeking feedback on Draft Unclaimed Funds Policy Date: March 12, 2025
__________________________________________________________________ Summary
Staff is requesting feedback on the Draft Unclaimed Funds Policy. “Unclaimed funds” is a term used to describe money that an entity has attempted to pay, or refund to a customer, but the customer has not yet received, or claimed, typically unclaimed due to an uncashed check. Ava sends checks to customers to compensate for Net Energy Metering over-generation and occasionally to fix a billing issue that has been identified after the customer has closed their account.
The Draft Policy described in this Staff Report outlines the process Ava will undergo to notify customers that they are owed money from Ava, and the steps they may take to receive due payment.
Financial Impact
Unclaimed funds reside on Ava’s balance sheet as a liability. As of August 2024, Ava’s liability includes $2,218,1802 owed to 6,970 customers. Clearing these funds will reduce Ava’s liability.
Staff does not anticipate any additional fiscal impact to implementing this process. Any funds that expire and are no longer owed to the customer will return to Ava’s budget.
Analysis and Context
California’s Unclaimed Property Law requires financial institutions, insurance companies, corporations, businesses, and certain other entities to report and submit their customers’ property to the State Controller’s Office when there has been no activity for a period of time (generally three years).
The statutes of the Unclaimed Property Law provide a list of exemptions. Exemptions include (1) Any property in the official custody of a municipal utility district, and (2) Any property in the official custody of a local agency if such property may be transferred to the general fund of such agency under the provisions of Sections 50050-50053 of the Government Code. Ava falls under exemption 2 of the Code, so unclaimed funds may be removed from Ava’s liability and returned to the budget. The amount of funds expected to return to Ava’s budget is minimal compared to overall annual operating income and expenses.
To provide the best customer experience, staff will make additional attempts to contact the customer prior to the 36-month (3 year) deadline.
Current Process
Following a Net Energy Metering true-up, or a billing issue that results in a credit on a closed account, staff currently takes the following actions:
1. Ava issues a check to the mailing address on file, including a cover letter that indicates that the check will expire after 90 days and a method of contacting Ava to receive an updated check,
2. After 90 days, the checks expire and become void,
3. The customer may contact Ava to request a new check,
4. The customer must confirm their mailing address or provide an updated mailing address, after which,
5. Ava will send the customer a new check with a 90-day expiration date,
Proposed Process Updates
The Customer Operations team would like to continue the process as outlined above, and in addition; compile a list of all customers who have unclaimed funds to list them on our website and attempt to contact the customer via email.
At least annually, Ava will remove customers with unclaimed funds over 36 months and their associated funds from both the website and the liability section of the Ava balance sheet.
After 36 months (3 years)
The funds will become property of Ava and, per the statute referenced above, will be transferred back to Ava’s general funds.
Attachments
DRAFT Unclaimed Funds Policy
Power Point
Draft Unclaimed Funds Policy
Policy Number: TBD
Approval Date: TBD
Agenda Item: TBD
Approved by Resolution: TBD
Following a Net Energy Metering true-up, or a billing issue that results in a credit on a closed account, staff will take the following actions:
1. Ava issues a check to the mailing address on file, including a cover letter that indicates that the check will expire after 90 days and a method of contacting Ava to receive an updated check,
2. After 90 days, the checks expire and become void,
3. The customer may contact Ava to request a new check,
4. The customer must confirm their mailing address or provide an updated mailing address, after which,
5. Ava will send the customer a new check with a 90-day expiration date.
6. Ava will, at least annually, compile a list of all customers who have unclaimed funds, attempt to contact via email, and list them on our website,
7. Ava will remove customers with unclaimed funds over 36 months and their associated funds from both the website and the liability section of the Ava balance sheet.
After 36 months (3 years)
The funds will become property of Ava and, per the State statute, will be transferred back to Ava’s general funds.
Unclaimed Funds Policy
Chris Davis | March 12, 2025
Summary
Staff is requesting feedback on an Unclaimed Funds Policy Unclaimed funds is a term used to describe money that an entity has attempted to pay, or refund to a customer, but the customer has not yet received, or claimed, typically unclaimed due to an uncashed check. Examples: Net Energy Metering over-generation credits & billing issues for closed accounts
Ava sends checks to customers to compensate for Net Energy Metering over-generation and occasionally to fix a billing issue that has been identified after the customer has closed their account.
2 Financial Impact
Current Liability:
$2,218,180 owed to 6,970 customers (as of August 2024)
Impact:
• Reduction in Ava’s liability by clearing unclaimed funds • Minimal fiscal impact on operations as funds expire and return to Ava's budget 3 Legal Context
California’s Unclaimed Property Law:
• Requires entities to report unclaimed funds to the State Controller after 3 years of inactivity.
Exemptions:
(2) Any property in the official custody of a local agency if such property may be transferred to the general fund of such agency under the provisions of Sections 50050-50053 of the Government Code.
• Ava qualifies under exemption 2 (local agency property) to return funds to its budget after 36 months.
4 Current Process
Current Process:
Following a Net Energy Metering true-up, or a billing issue that results in a credit on a closed account, staff will take the following actions:
• Ava issues a check to the mailing address on file, including a cover letter that indicates that the check will expire after 90 days and a method of contacting Ava to receive an updated check.
• After 90 days, the checks are stale and void,
• The customer may contact Ava to request a new check,
▪ The customer must confirm their mailing address or provide an updated mailing address, and then
• Ava sends the customer a new check with a 90 day expiration date. 5 Proposed Process Updates
Continue the process as outlined on the previous slide, then:
• Ava will, at least annually, compile a list of all customers who have unclaimed funds and list them on our website.
• After the website is updated, Ava will also attempt to contact the customer via email.
After 36-Months:
• Funds are transferred back to Ava’s general fund.
• Funds are removed from Ava’s liability.
• The customer is removed from the list of unclaimed funds. 6 Benefits of Proposed Updates
Improved Transparency:
• Customers can easily find and claim unclaimed funds.
Streamlined Process:
• Reduced administrative burden for Ava with clearer guidelines for handling unclaimed funds.
Alignment with State Law:
• Customers may be familiar with the law; Ava’s policy follows the first 36-month requirements of California’s Unclaimed Property Law
7 Conclusion
Summary:
• Proposed updates to the Unclaimed Funds Policy will reduce liability and improve customer experience.
Next Steps:
• Requesting feedback from stakeholders to finalize the policy. 8