Audit & Finance Committee
Wednesday, March 23, 2022
10:30 AM
Central Coast Community Energy
70 Garden Court, Suite 300
Monterey, CA 93940
IMPORTANT NOTICE REGARDING COVID-19 MEETING REQUIREMENTS The special procedures in place to minimize the spread of the COVID-19 virus may supersede general meeting procedures and delay distribution of materials to members, although every effort will be made to ensure comments and materials received prior to the meeting end will be made part of the record.
Based on guidance from the California Department of Public Health and the California Governor’s Office, in order to minimize the spread of the COVID-19 virus, please do the following:
1. You are strongly encouraged to observe the live stream of the CCCE Audit & Finance Committee meeting at:
https://3cenergy.hylandcloud.com/203agendaonline/Meetings/Search?dropid=4
2. The CCCE Committee Room remains open. If you attend the CCCE Audit & Finance Committee meeting in person:
a. You will be required to (i) wear a mask during the meeting and (ii) maintain appropriate social distancing, i.e., maintain a 6-foot distance between yourself and other individuals. b. Additional seating with audio of the CCCE Audit & Finance Committee meeting will be available in the CCCE Main Conference Room, located at 70 Garden Court, Suite 300, Monterey, CA 93940. 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 Heather Vowell, Committee Clerk, at 831-641-7216 or [email protected]. Requests should be made as soon as possible but at least 72 hours prior to the scheduled meeting.
3. If you choose not to attend the CCCE Audit & Finance Committee meeting but wish to make a comment on a specific agenda item, you may please submit your comment as set out below. The timing of public comment shall be at the discretion of the Chair. Options for public comment are as follows:
a. To have your comments distributed to the Committee prior to the meeting submit your comment via email by 5:00 p.m. on the Tuesday before the meeting. All comments received after 5:00pm on the Tuesday before the meeting will be retained as part of the record and distributed to the Committee after the meeting. Please submit your comment to the Clerk of the Committee at [email protected]. To assist the Clerk in identifying the agenda item relating to your public comment please indicate in the Subject Line, the meeting body (i.e., Audit & Finance Committee Agenda) and item number (i.e., Item No. 3).
You may participate through ZOOM. For ZOOM participation please join by computer audio at:
https://us02web.zoom.us/j/89130443641
OR the following phone number(s):
US: +1 669 900 6833 or +1 669 219 2599
Enter this Meeting ID number: 891 3044 3641 when prompted. Please note there is no Participant Code, you will just hit # again after the recording prompts you.
You will be placed in the meeting as an attendee; when you are ready to make a public comment if joined by computer audio, please Raise your Hand; and by phone please push *9 on your keypad.
If you have anything that you wish to be distributed to the Committee, please provide 15 copies and hand them to a member of CCCE staff or Heather Vowell, Committee Clerk, who will distribute the information to the Committee members and other staff.
The public may comment on a specific item listed on this agenda when the Committee considers that item. In addition, the members of the public may request and receive copies without undue delay of any documents that are distributed to the Committee, unless there is a specific exemption under the Public Records Act that prevents the disclosure of the record. (Cal. Gov’t Code Section 54957.5) In compliance with Government Code Section 54957.5, non-exempt writings that are distributed to a majority or all of the Committee in advance of a meeting and that relate to an agenda item will be made available at CCCE’s offices located at 70 Garden Court, Suite 300, Monterey, CA 93940 during normal business hours and are also available on the CCCE website located at: https://3cenergy.hylandcloud.com/203agendaonline AGENDA
. Welcome & Roll Call
. Public Comment on Matters Not Listed on the Agenda
The public may provide comments on any item within the AFC's jurisdiction but not on the Agenda.
The AFC may not take action at this meeting on any item not listed on the Agenda other than to refer the matter to staff or set it for a future meeting. Speakers are limited to 3 minutes each. . Corrections and Additions
The AFC Clerk will announce agenda corrections and proposed additions of emergency, urgency, or continued items, which will be acted on by the AFC as provided in Sections 54954.2 of the California Government Code.
CONSENT AGENDA
1. Approve Minutes from the August 4, 2021, Meeting of the Audit and Finance Committee (Action Item)
2. Consider Finding, Pursuant to AB 361 and in order for the Audit and Finance Committee to Continue Meeting Remotely, that the COVID-19 Pandemic State of Emergency Declared by Governor Newsom is Still In Effect; The Audit and Finance Committee has Reconsidered the Circumstances of the State of Emergency; and the Monterey County Health Officer Continues to Recommend Social Distancing Measures for Meetings of Legislative Bodies (Action Item)
REGULAR AGENDA
3. Appoint Chair and Vice Chair of the CCCE Audit and Finance Committee (Action Item)
4. Receive Oral Presentation from Pisenti & Brinker, LLP on CCCE's Fiscal Year 2020/2021 Audited Financial Report (Discussion Item)
Committee Member Reports & Comments (Information Only)
Adjournment
Wednesday, August 4, 2021
10:30 AM
Central Coast Community Energy
70 Garden Court, Suite 300
Monterey, CA 93940
MINUTES
. The meeting was called to order at 10:30 am with 4 members attending via teleconference pursuant to Governor Newsom’s Executive Order N-29-20 and a quorum established.
Members Present via
teleconference:
Carbone, Richards, Vice Chair Huffaker, Chair Johnson
Members Absent: None
CONSENT AGENDA
The Chair opened the public comment period.
No public comment received.
The Chair closed the public comment period.
MOTION: Moved by Vice Chair Huffaker, seconded by Member Richards to approve the Consent Agenda.
ACTION: The motion carried with a roll call vote: 4/0/0 AYES: Carbone, Richards, Vice Chair Huffaker, Chair Johnson NOES: None
ABSENT: None
1. Approved Minutes from the March 24, 2021 Meeting of the Audit and Finance Committee as submitted.
REGULAR AGENDA
2. Receive Oral Presentation of CCCE’s Draft FY 2021/2022 Operating Budget and Approve Seeking the Operations Board's Recommendation that the Policy Board Adopt the Draft FY2021/2022 Operating Budget The Chair opened the public comment period.
The following individual(s) addressed the Committee
Kristen Liske
Seth Capron
Brett Garrett
Leslie Austin
The Chair closed the public comment period.
1/29
MOTION: Moved by Vice Chair Huffaker, seconded by Member Richards to move Staff’s recommendation with further review from the Operations Board including Public Comment.
ACTION: The motion carried with a roll call vote: 4/0/0 AYES: Carbone, Richards, Vice Chair Huffaker, Chair Johnson NOES: None
ABSENT: None
Adjourned at 11:59 am
2/29
Staff Report Item 2
TO: CCCE Audit & Finance Committee
FROM: Tom Habashi, Chief Audit and Finance Officer
SUBJECT: Consider Finding, Pursuant to AB 361 and in order for the Audit and Finance Committee to Continue Meeting Remotely, that the COVID-19 Pandemic State of Emergency Declared by Governor Newsom is Still In Effect; The Audit and Finance Committee has Reconsidered the Circumstances of the State of Emergency; and the Monterey County Health Officer Continues to Recommend Social Distancing Measures for Meetings of Legislative Bodies (Action Item) DATE: March 23, 2022
RECOMMENDATION:
This recommends the Audit and Finance Committee (“Committee”) find, pursuant to AB 361 and for the Committee to continue meeting remotely, that the COVID-19 pandemic State of Emergency declared by Governor Newsom is still in effect; the Committee has considered the circumstances of the State of Emergency; and the Monterey County Health Officer continues to recommend social distancing measures for meetings of legislative bodies.
BACKGROUND:
On September 16, 2021, Governor Newsom signed AB 361. This legislation amends the Brown Act to allow Brown Act bodies to meet via teleconference during a proclaimed state of emergency in accordance with teleconference procedures established by AB 361 rather than under the Brown Act's more narrow standard rules for teleconference meetings.
DISCUSSION/ANALYSIS:
AB 361 provides that if a state or local health official recommends social distancing, a legislative body may meet remotely after September 30, 2021, provided that the legislative body finds 1) the Governor's proclaimed state of emergency is still in effect; 2) the legislative body has reconsidered the circumstances of the state of emergency, and 3) either the Monterey County Health Officer continues to recommend social distancing measures for meetings of legislative bodies or the state of emergency continues to directly impact the ability of the members to meet in person. 3/29
The Monterey County Health Officer has recommended social distancing measures for meetings of legislative bodies. To continue meeting remotely, the Committee must make the findings outlined above.
Accordingly, staff recommends making the appropriate findings. This action will be required every 30 days to keep meeting remotely. A special meeting may be necessary for that purpose.
FISCAL IMPACT:
There is no fiscal impact associated with this action.
CONCLUSION:
The Committee’s consideration and finding that the COVID-19 pandemic State of Emergency declared by Governor Newsom is still in effect; the Committee has reconsidered the circumstances of the State of Emergency; and the Monterey County Health Officer continues to recommend social distancing measures for meetings of legislative bodies will allow the Committee to continue meeting remotely under the procedures established by AB 361.
4/29
Staff Report Item 3
TO: CCCE Audit & Finance Committee
FROM: Tom Habashi, Chief Executive Officer
SUBJECT: Appoint Chair and Vice Chair of the CCCE Audit and Finance Committee (Action Item)
DATE: March 23, 2022
RECOMMENDATION:
Consider and appoint the CCCE Audit and Finance Committee’s 2022 Chair and Vice Chair. 5/29
Staff Report Item 4
TO: CCCE Audit & Finance Committee
FROM: Tom Habashi, Chief Executive Officer
SUBJECT: Receive Oral Presentation from Pisenti & Brinker, LLP on CCCE's Fiscal Year 2020/2021 Audited Financial Report (Discussion Item)
DATE: March 23, 2022
RECOMMENDATION:
Receive oral presentation from Pisenti & Brinker, LLP on MBCP’s Fiscal Year 2020/2021 audited financial report.
DISCUSSION:
CCCE is required to perform an annual financial audit at the conclusion of each fiscal year. CCCE’s fourth year of operation was concluded on September 30, 2021 and the attached report is the audit performed Pisenti & Brinker, LLP.
ATTACHMENT:
1. CCCE Audited Financial Report for the Years Ended September 30, 2021 6/29
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CENTRAL COAST COMMUNITY ENERGY
YEARS ENDED SEPTEMBER 30, 2021 AND 2020
TABLE OF CONTENTS
Independent Auditor’s Report ………………………………………………………... 1 Management’s Discussion and Analysis ……………………………………………... 3 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 8/29
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CENTRAL COAST COMMUNITY ENERGY
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEARS ENDED SEPTEMBER 30, 2021 AND 2020
3 The Management’s Discussion and Analysis provides an overview of Central Coast Community Energy’s (CCCE) financial activities as of and for the years ended September 30, 2021 and 2020.
The information presented here should be considered in conjunction with the audited financial statements.
BACKGROUND
CCCE’s formation was made possible in 2002 by the passage of California Assembly Bill 117, which enabled communities to purchase power on behalf of their residents and businesses as an alternative to legacy Investor-Owned Utilities (IOU).
CCCE is a Community Choice Aggregator (CCA) established on February 21, 2017 pursuant to Public Utilities Code Section 366.2 and operating as a Joint Powers Authority (JPA) pursuant to Government Code section 6500 et seq. CCCE currently serves residential, commercial and agricultural/industrial customers in communities located within its service area. 1 CCCE serves approximately 430,000 customer accounts forecast to consume 5,000 gigawatt hours (GWh) per year. CCCE is committed to charging competitive retail rates, offering innovative energy programs to facilitate electrification and reducing greenhouse gas (GHG) emissions through long-term contracts for existing and new utility scale renewable electricity generation. CCCE has established an innovative procurement strategy to accelerate the reduction of GHG emissions, committing CCCE to developing a resource mix which delivers clean renewable energy for 60% of CCCE demand by the year 2025 and 100% of CCCE demand by the year 2030.
CCCE is governed by a Policy Board and an Operations Board. The Policy Board consists of elected officials from member jurisdictions, while the Operations Board consists of senior staff from those jurisdictions. The Policy Board provides guidance and approval in strategic planning and goal setting, budgets, rates, large capital expenditures, and financing. The Operations Board provides guidance and approval on contracts, agreements, and policies that govern day-to-day operations. CCCE has the rights and powers to set rates for its services, incur debt, and issue bonds or other obligations.
1 As of September 30, 2021, CCCE’s members included the Cities of Arroyo Grande, Capitola, Carmel-by-the-Sea, Del Rey Oaks, Gonzales, Greenfield, Grover Beach, Guadalupe, Hollister, Marina, Monterey, Morro Bay, Pacific Grove, Paso Robles, Pismo Beach, Salinas, San Juan Bautista, San Luis Obispo, Sand City, Santa Cruz, Santa Maria, Scotts Valley, Seaside, Soledad Solvang and Watsonville as well as the Counties of Monterey, San Benito and Santa Cruz and parts of Santa Barbara County. 9/29
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CENTRAL COAST COMMUNITY ENERGY
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEARS ENDED SEPTEMBER 30, 2021 AND 2020
4 Financial Reporting
CCCE 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 proprietary funds, as prescribed by the Governmental Accounting Standards Board (GASB).
Contents Of This Report
This report is divided into the following sections:
Management’s discussion and analysis, which is an overview of the financial operations The Basic Financial Statements:
o The Statements of Net Position include all of CCCE’s assets, liabilities, and net position and provide 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 CCCE’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 asset acquisitions and investing activities.
o Notes to the Basic Financial Statements provide additional details and information related to the basic financial statements.
10/29
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CENTRAL COAST COMMUNITY ENERGY
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEARS ENDED SEPTEMBER 30, 2021 AND 2020
5 FINANCIAL HIGHLIGHTS
Summary of Assets, Liabilities and Net Position
The following table is a summary of CCCE’s assets, liabilities, and net position, and a discussion of significant changes for the years ended September 30:
2021 2020 2019
Current assets $ 194,879,069 229,102,332 $ 157,058,261 $ Noncurrent assets
Capital assets, net 328,942 314,877 226,242
Other noncurrent assets 79,280 123,182 121,055
Total noncurrent assets 408,222 438,059 347,297
Total assets 229,510,554 195,317,128 157,405,558
Current liabilities 32,490,845 36,578,478 37,708,844
Noncurrent liabilities 7,031,250 - -
Total liabilities 39,522,095 36,578,478 37,708,844
Net position
Investment in capital assets 328,942 314,877 226,242
Restricted for security collateral 294,000 1,500,000 3,100,000 Unrestricted 189,365,517 156,923,773 116,370,472
Total net position $ 158,738,650 189,988,459 $ 119,696,714 $ Current Assets
Current assets were approximately $229,102,000 at the end of 2021, and consist of cash, accounts receivable, accrued revenue, and energy settlements receivable. Accrued revenue is revenue from energy delivered but not invoiced to customers. Accounts receivable reflects energy delivered and invoiced but not paid for by customers. Total current assets increased in 2021 and in 2020 as a result of CCCE’s operating surplus for the year.
Capital Assets
Capital assets were approximately $329,000, net of accumulated depreciation, primarily reflecting the acquisition of furniture and equipment for employees. The changes each year represent furniture and equipment and leasehold improvement acquisitions, reduced by depreciation expense.
CCCE does not own generation, transmission or distribution assets. 11/29
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CENTRAL COAST COMMUNITY ENERGY
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEARS ENDED SEPTEMBER 30, 2021 AND 2020
6 Other Noncurrent Assets
Other noncurrent assets of $79,000 as of September 30, 2021 consist of deposits for regulatory and other operating purposes.
Current Liabilities
Current liabilities of $32,491,000 as of September 30, 2021 consist primarily of the cost of electricity delivered to customers that is not yet due to be paid by CCCE. Current liabilities also include amounts owed for trades payables, personnel costs, taxes and surcharges owed to other governments, and deposits received from suppliers. Current liabilities remained stable year-over-year.
Noncurrent Liabilities
Some contracts require the supplier to provide CCCE with a security deposit. These deposits are held by CCCE until certain contract milestones are met or contracts are completed. As part of its risk management policy, CCCE requires energy suppliers to post collateral deposits in some cases. During 2021, noncurrent liabilities increased due to CCCE held collateral deposits with terms exceeding one year.
12/29
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CENTRAL COAST COMMUNITY ENERGY
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEARS ENDED SEPTEMBER 30, 2021 AND 2020
7 Summary of Revenues, Expenses, and Changes in Net Position The following table is a summary of CCCE’s results of operations and a discussion of significant changes for the years ended September 30:
2021 2020 2019
Operating revenues $ 233,915,415 287,931,441 $ 238,322,420 $ Nonoperating revenues 702,036 2,417,363 1,320,685
Total income 288,633,477 236,332,778 239,643,105
Operating expenses 257,383,668 197,290,842 160,425,423
Change in net position $ 31,249,809 $ 39,041,936 $ 79,217,682 Operating Revenues
Operating revenue from electricity sales increased approximately $59,400,000 from 2020 to 2021 due primarily to the January 2021 addition of approximately 100,000 new customer accounts in the cities of Del Rey Oaks, Arroyo Grande, Grover Beach, Paso Robles, Pismo Beach, Guadalupe, Santa Maria, and Solvang. In 2020, CCCE recognized $5,400,000 in revenue from damages that did not recur in 2021. Total operating revenue increased approximately $54,000,000 from 2020 to 2021.
Operating Expenses
Operating expenses increased approximately $60,100,000 from 2020 to 2021. CCCE’s largest operating expense continues to be the purchase of electricity delivered to its customers. CCCE purchases energy products from markets and is developing a balanced diversified renewable power portfolio. The cost of energy market purchases increased from 2020 to 2021 due to an increase in the number of customers and rising market prices.
Change in Net Position
CCCE’s change in net position was $31,250,000 in 2021, a decrease from $39,042,000 in 2020.
The decrease was driven by a combination of lower average customer rates and higher costs for energy products.
13/29
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CENTRAL COAST COMMUNITY ENERGY
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEARS ENDED SEPTEMBER 30, 2021 AND 2020
8 ECONOMIC OUTLOOK
2021 was a year of continued growth and resilience in the face of the COVID-19 pandemic. In 2021, CCCE began service to 8 new cities and portions of Santa Barbara County. It now serves over 430,000 residential, commercial and agricultural/industrial customers in an 8,000 square mile service area spanning five counties: Santa Cruz, Monterey, San Benito, San Luis Obispo, and Santa Barbara.
Operating revenues from electricity sales grew approximately $60,000,000 driven primarily by the addition of 100,000 new members. The cost of energy, CCCE’s dominant cost, increased approximately $56,000,000, a combination of rising energy market prices and higher volumes to serve new members.
CCCE has invested significantly in developing a portfolio of clean renewable energy resources at competitive prices. Exposure to energy market price fluctuations is expected to decrease over the next five years as these projects begin commercial operations.
CCCE’s non-energy costs which include contract services, staff compensation, general & administrative expenses, were under 6% of operating revenues, reflecting its focus on delivering value for customers.
CCCE’s growing power portfolio is expected to lower the cost and volatility of the energy it supplies to customers - helping it maintain a robust financial position. In keeping with its mission, CCCE will be passing through these benefits to customers in the form of lower rates – which should keep CCCE competitive with legacy Investor-Owned Utility (IOU) Rates. To effectuate this, in 2021 CCCE’s Policy Board approved a transition to a Cost of Service (COS) rate model. Historically, CCCE followed the standard CCA practice of setting its rates as a percentage discount to IOU rates. The COS approach sets rates based on CCCE’s revenue requirements and factors in its growing power supply portfolio. COS-based rates will go into effect in CCCE’s PG&E service area in March 2022. A COS study will be conducted in 2022 for CCCE’s SCE service area.
CCCE has not been immune to the impact of the pandemic. Supply chain and inflationary challenges have delayed power projects and increased costs. The cost of living continues to increase rapidly in CCCE’s Monterey headquarters region, which has historically been attractive due to its natural beauty, temperate climate, recreational opportunities, and proximity to the San Francisco Bay Area. This makes it challenging to continue attracting and retaining the staff necessary to deliver the value customers expect.
Despite these challenges, the financial position and foundation remains strong and CCCE is positioned for continued success.
14/29
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CENTRAL COAST COMMUNITY ENERGY
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEARS ENDED SEPTEMBER 30, 2021 AND 2020
9 REQUEST FOR INFORMATION
This financial report is designed to provide CCCE’s customers and creditors with a general overview of the organization’s finances and to demonstrate CCCE’s accountability for the funds under its stewardship.
Please address any questions about this report or requests for additional financial information to 70 Garden Court, Suite 300, Monterey, CA 93940.
Respectfully submitted,
Tom Habashi, Chief Executive Officer
15/29
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BASIC FINANCIAL STATEMENTS
16/29
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CENTRAL COAST COMMUNITY ENERGY
The accompanying notes are an integral part of these financial statements. 10
STATEMENTS OF NET POSITION
SEPTEMBER 30, 2021 AND 2020
2021 2020
Current assets
Cash and cash equivalents $ 159,444,623 $ 146,400,665
Accounts receivable, net of allowance 37,376,299 27,579,594 Accrued revenue 20,011,097 17,158,246
Energy settlements receivable 7,856,108 10,391
Other receivables 919,329 235,305
Prepaid expenses 1,538,193 861,060
Deposits 1,662,683 1,133,808
Restricted cash 294,000 1,500,000
Total current assets 229,102,332 194,879,069
Noncurrent assets
Capital assets, net of depreciation 328,942 314,877
Deposits 79,280 123,182
Total noncurrent assets 408,222 438,059
Total assets 229,510,554 195,317,128
Current liabilities
Accrued cost of electricity 28,649,424 32,123,426
Accounts payable 1,231,718 478,731
Other accrued liabilities 844,778 976,743
Customer rebate liabilities 306,291 315,719
User taxes and energy surcharges due to other governments 1,458,634 1,497,359 Security deposits - energy suppliers 1,186,500 -
Total current liabilities 32,490,845 36,578,478
Noncurrent liabilities
Security deposits - energy suppliers 7,031,250 -
Total liabilities 39,522,095 36,578,478
Investment in capital assets 328,942 314,877
Restricted for security collateral 294,000 1,500,000
Unrestricted 189,365,517 156,923,773
Total net position $ 189,988,459 $ 158,738,650
NET POSITION
ASSETS
LIABILITIES
17/29
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CENTRAL COAST COMMUNITY ENERGY
The accompanying notes are an integral part of these financial statements. 11
STATEMENTS OF REVENUES, EXPENSES
AND CHANGES IN NET POSITION
YEARS ENDED SEPTEMBER 30, 2021 AND 2020
2021 2020
OPERATING REVENUES
Electricity sales, net $ 287,931,441 $ 228,515,415
Liquidated damages - 5,400,000
Total operating revenues 287,931,441 233,915,415
OPERATING EXPENSES
Cost of electricity 241,714,336 185,543,815
Contract services 7,125,240 6,077,542
Staff compensation 5,875,005 4,368,744
General and administration 2,565,883 1,193,093
Depreciation 103,204 107,648
Total operating expenses 257,383,668 197,290,842
Operating income 30,547,773 36,624,573
NONOPERATING REVENUES
Interest income 702,036 2,356,175
Miscellaneous income - 61,188
Total nonoperating revenues 702,036 2,417,363
CHANGE IN NET POSITION 31,249,809 39,041,936
Net position at beginning of year 158,738,650 119,696,714 Net position at end of year $ 189,988,459 $ 158,738,650 18/29
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CENTRAL COAST COMMUNITY ENERGY
The accompanying notes are an integral part of these financial statements. 12
STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 2021 AND 2020
2021 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers $ 281,231,391 $ 235,640,742
Receipts from liquidated damages 5,400,000 -
Receipts from suppliers and energy settlements 16,752,388 4,494,836 Other operating receipts - 61,188
Payments to suppliers for electricity (184,974,504) (265,819,342) Payments for other goods and services (9,339,942) (7,776,318) Payments for staff compensation (5,559,337) (4,131,027) Payments of taxes and energy surcharges to other governments (5,997,661) (5,818,435) Net cash provided by operating activities 11,267,497 42,896,482
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Payments to acquire capital assets (131,575) (184,554)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest income received 702,036 2,356,175
Net change in cash and cash equivalents 11,837,958 45,068,103 Cash and cash equivalents at beginning of year 147,900,665 102,832,562 Cash and cash equivalents at end of year 159,738,623 $ 147,900,665 $ Reconciliation to the Statements of Net Position
Cash and cash equivalents (unrestricted) 159,444,623 $ 146,400,665 $ Restricted cash 294,000 1,500,000
Cash and cash equivalents 159,738,623 $ 147,900,665 $
19/29
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CENTRAL COAST COMMUNITY ENERGY
The accompanying notes are an integral part of these financial statements. 13
STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 2021 AND 2020
2021 2020
Operating income $ 30,547,773 $ 36,624,573
Adjustments to reconcile operating income to net
cash provided by operating activities:
Depreciation expense 103,204 107,648
Revenue adjusted for allowance for uncollectible accounts 2,108,070 2,478,816 Revenue from miscellaneous income - 61,188
(Increase) decrease in:
Accounts receivable (11,904,775) 7,575,312
Accrued revenue (2,852,851) (1,431,478)
Energy settlements receivable (7,845,717) 32,876
Other receivables (684,024) (228,253)
Prepaid expenses (677,133) (520,670)
Deposits (484,973) (754,110)
Increase (decrease) in:
Accrued cost of electricity (3,474,002) 6,459,348
Accounts payable 767,293 (685,273)
Other accrued liabilities (131,965) 473,086
Customer rebate liabilities (9,428) (7,371,551)
User taxes and energy surcharges due to other governments (38,725) 55,795 Security deposits - energy suppliers 5,844,750 19,175
Net cash provided by operating activities $ 11,267,497 $ 42,896,482
RECONCILIATION OF OPERATING INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES
20/29
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CENTRAL COAST COMMUNITY ENERGY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2021 AND 2020
14 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REPORTING ENTITY
Central Coast Community Energy (CCCE) is a Joint Powers Authority created on February 21, 2017, and its jurisdictions consist of the following local governments as of September 30, 2021:
Counties Cities and Towns
Monterey Arroyo Grande Pacific Grove
San Benito Capitola Paso Robles
Santa Barbara Carpinteria Pismo Beach
Santa Cruz Carmel Salinas
Del Rey Oaks San Juan Bautista
Goleta San Luis Obispo
Gonzales Sand City
Greenfield Santa Cruz
Grover Beach Santa Maria
Guadalupe Scotts Valley
Hollister Seaside
Marina Soledad
Monterey Solvang
Morro Bay Watsonville
CCCE is separate from and derives no financial support from its members. CCCE is governed by two Boards, a Policy Board and an Operations Board. Each Board is comprised of 17 members with 17 alternates representing the participating communities. Some of the 17 members represent more than one jurisdiction Policy Board Members are elected officials from CCCE member communities. Operations Board Members are executives leading the member cities and counties.
CCCE was formed to acquire retail electricity for the residents and businesses within its members’ jurisdictions, study, promote, conduct, operate, and manage energy and energy-related climate change programs, and to exercise all other powers necessary and incidental to accomplishing these objectives. A core function of CCCE 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.
CCCE began its energy delivery operations in March 2018. Electricity is acquired from commercial suppliers and delivered through existing physical infrastructure and equipment managed by Pacific Gas and Electric Company (PG&E).
21/29
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CENTRAL COAST COMMUNITY ENERGY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2021 AND 2020
15 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
BASIS OF ACCOUNTING
CCCE’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.
CCCE’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 CCCE’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, CCCE defines cash and cash equivalents to include cash on hand and demand deposits. CCCE has cash that is restricted under various security agreements. This is reported as restricted cash on the Statements of Net Position and is included in cash and cash equivalents for the purpose of the Statements of Cash Flows.
PREPAID EXPENSES AND DEPOSITS
Contracts to purchase energy may require CCCE 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. While these energy contract-related deposits make up most of this item, other components of prepaid expenses and deposits include those for regulatory and other operating purposes.
CAPITAL ASSETS AND DEPRECIATION
CCCE’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 and seven years for furniture and leasehold improvements. CCCE does not own any electric generation, transmission or distribution assets.
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CENTRAL COAST COMMUNITY ENERGY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2021 AND 2020
16 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
NET POSITION
Net position is presented in the following components:
Investment in capital assets: This component of net position consists of capital assets, net of accumulated depreciation and reduced by outstanding borrowings that are attributable to the acquisition, construction, or improvement of those assets. CCCE did not have any outstanding borrowings as of September 30, 2021 or 2020.
Restricted for Security Collateral: 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 for security collateral.”
OPERATING AND NONOPERATING REVENUE
Operating revenues include revenue derived from the provision of energy to customers. Interest income and miscellaneous income are considered non-operating revenue.
REVENUE RECOGNITION
CCCE 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 billed.
Management estimates that a portion of the billed amounts will be uncollectible. Accordingly, an allowance for uncollectible accounts has been recorded and revenues are reported net of this allowance.
OPERATING AND NON-OPERATING EXPENSES
Operating expenses include the cost of electricity, data management expenses, IOU service fees, consultant and other professional fees, legal, staff compensation and benefits, general and administrative expenses and depreciation on capital assets. Expenses not meeting this definition are reported as nonoperating expenses.
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DRAFT
CENTRAL COAST COMMUNITY ENERGY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2021 AND 2020
17 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
ELECTRICAL POWER PURCHASED
During the normal course of business, CCCE purchases electrical power from numerous suppliers. Electricity costs include the cost of energy and capacity arising from contracts with energy suppliers as well as generation credits, and load and other charges arising from CCCE’s participation in the California Independent System Operator’s (CAISO) centralized market. The cost of 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), CCCE acquires RPS eligible renewable energy evidenced by Renewable Energy Certificates (Certificates) recognized by the Western Renewable Energy Generation Information System (WREGIS).
CCCE obtains Certificates with the intent to retire them and does not sell or build surpluses of Certificates with a profit motive. An expense is recognized at the point that the cost of the Certificate is due and payable to the supplier.
CCCE purchases capacity commitments from qualifying generators to comply with the California Public Utility Commission’s Resource Adequacy Program. The goals of the Resource Adequacy Program are to provide sufficient resources to the CAISO to ensure the safe and reliable operation of the 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
CCCE pays employees semi-monthly and fully pays its obligation for health benefits and contributions to its defined contribution retirement plan each month. CCCE is not obligated to provide post-employment healthcare or other fringe benefits, and accordingly, no related liability is recorded in these financial statements. CCCE provides compensated time off, and the related liability is recorded in these financial statements.
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DRAFT
CENTRAL COAST COMMUNITY ENERGY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2021 AND 2020
18 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
INCOME TAXES
CCCE 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.
ESTIMATES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (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 previously reported net position or change in net position.
2. CASH AND CASH EQUIVALENTS
CCCE maintains its cash in interest and non-interest-bearing accounts. California Government Code Section 16521 requires that banks collateralize amounts of public funds in excess of the Federal Deposit Insurance Corporation (FDIC) limit of $250,000 by 110% of the amount of the deposit. CCCE’s investment policy permits the investment of funds in depository accounts, certificates of deposit, the California Local Agency Investment Funds (LAIF), United States Treasury obligations, and other investments provided in the general guidelines of California Government Code sections 53600, et seq. As of September 30, 2021, all of CCCE’s cash and cash equivalents were held in depository accounts or certificates of deposit. 25/29
DRAFT
CENTRAL COAST COMMUNITY ENERGY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2021 AND 2020
19 3. ACCOUNTS RECEIVABLE AND ENERGY SETTLEMENTS RECEIVABLE
ACCOUNTS RECEIVABLE
Accounts receivable was as follows as of September 30:
2021 2020
Accounts receivable from customers $ 43,825,791 $ 31,921,016 Allowance for uncollectible accounts (6,449,492) (4,341,422) Net accounts receivable $ 37,376,299 $ 27,579,594
The majority of account collections will occur within the first few months following customer invoicing. CCCE estimates that a portion of the billed accounts will not be collected. CCCE continues collection efforts on delinquent accounts in excess of de minimis balances regardless of the age of the account. The allowance for uncollectible accounts at the end of a period includes amounts billed during the current and prior fiscal years.
ENERGY SETTLEMENTS RECEIVABLE
CCCE receives generation scheduling and other services from a scheduling coordinator registered with the CAISO. Energy settlements due from the scheduling coordinator for the years ended September 30, 2021 and 2020 were approximately $7,856,000 and $10,000, respectively.
4. CAPITAL ASSETS
Capital asset activity for the years ended September 30, 2021 and 2020 was as follows:
Balances at:
Furniture &
Equipment
Leasehold
Improvements
Accumulated
Depreciation Total
September 30, 2019 362,800 $ 2,823 $ (139,381) $ 226,242 $ Additions 125,837 70,446 (107,648) 88,635
September 30, 2020 488,637 73,269 (247,029) 314,877
Additions 109,795 7,474 (103,204) 14,065
September 30, 2021 598,432 $ 80,743 $ (350,233) $ 328,942 $ 26/29
DRAFT
CENTRAL COAST COMMUNITY ENERGY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2021 AND 2020
20 5. DEFINED CONTRIBUTION RETIREMENT PLAN
CCCE provides retirement benefits to eligible employees through a 401(a) Retirement Plan (Plan). The Plan is a defined contribution (Internal Revenue Code 401(a)) retirement plan established to provide benefits at retirement to employees of certain qualified employers admitted by the Plan. The Plan is administered by the Public Agency Retirement System (PARS). As of September 30, 2021, there were 37 plan participants. CCCE is required to contribute 10% of covered payroll as a match to required employee contributions. CCCE contributed approximately $439,000 and $331,000 for the years ended September 30, 2021 and 2020, respectively. Plan provisions and contribution requirements as they apply to CCCE are established and may be amended by the Board of Directors. CCCE has elected out of the Social Security system for employees eligible for the Plan. CCCE also provides a 457(b) Retirement Plan where employees can make tax deferred contributions.
6. RISK MANAGEMENT
CCCE is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; and errors and omissions. During the year, CCCE 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. CCCE has general liability coverage of $1,000,000, with a deductible of $1,000.
CCCE 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, CCCE enters into netting arrangements whenever possible and, where appropriate, obtains collateral and other performance assurances from counterparties.
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DRAFT
CENTRAL COAST COMMUNITY ENERGY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2021 AND 2020
21 7. PURCHASE COMMITMENTS
POWER AND ELECTRIC CAPACITY
In the ordinary course of business, CCCE enters into power purchase agreements to acquire energy and electric capacity. The price and volume of purchased power is largely fixed. Variable priced power, which is a small part of our portfolio, is generally linked to the market price of either natural gas or power at the date of delivery. Variable volume is generally associated with contracts to purchase energy from resources with varying availability and production, such as solar, wind and hydroelectric facilities.
CCCE enters into long-term power purchase agreements ensure stable competitive rates for its customers and to comply with state law and voluntary targets for renewable and greenhouse gas (GHG) free products.
The following table represents the expected, undiscounted, contractual obligations outstanding as of September 30, 2021:
Year ending September 30,
2022 277,000,000 $
2023 184,000,000
2024 139,000,000
2025 117,000,000
2026 133,000,000
2027-2055 2,305,000,000
Total 3,155,000,000 $
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DRAFT
CENTRAL COAST COMMUNITY ENERGY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2021 AND 2020
22 8. OPERATING LEASE
CCCE entered into non-cancelable leases for its satellite and primary office premises that terminate on March 31, 2022 and on December 31, 2022, respectively. Rental expense for CCCE’s office space was $279,000 and $271,000 for the years ended September 30, 2021 and 2020, respectively.
Future minimum lease payments under these leases are as follows:
Year ending September 30,
2022 266,000 $
2023 63,000
Total $ 329,000
9. FUTURE GASB PRONOUNCEMENTS
The requirements of the following GASB Statements are effective for years ending after September 30, 2021:
GASB has approved GASB Statement No. 87, Leases; GASB Statement No. 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangements; GASB Statement No. 96, Subscription-Based Information Technology Arrangements; and GASB Statement No. 97, Certain Component Unit Criteria and Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans. When they become effective, application of these standards may restate portions of these financial conditions.
10. SUBSEQUENT EVENTS
EXPANSION PLAN
In October 2021, CCCE enrolled the following 3 jurisdictions in the Southern California Edison service area: The cities of Carpinteria, Goleta as well as the southern portion of unincorporated Santa Barbara County.
In early 2022, CCCE will enroll the City of Buellton (Santa Barbara County) in the PG&E service area.
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