Agenda packet — Central Coast Community Energy (3CE) Operations Board, June 30, 2022 (part 1 of 4)

Operations Board of Directors
Thursday, June 30, 2022
10:00 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 Operations Board of Directors meeting at: https://3cenergy.hylandcloud.com/203agendaonline/Meetings/Search?dropid=4

2. The CCCE Board Room remains open. If you attend the CCCE Operations Board of Directors 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 Operations Board of Directors 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, Board 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 Operations Board of Directors 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 Board 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 Board after the meeting. Please submit your comment to the Clerk of the Board 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., Policy Board 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/s/82380649701
Or join by phone:

Dial for higher quality, dial a number based on your current location):

US: +1 669 900 6833 or +1 669 219 2599
Enter this Webinar ID Number: 823 8064 9701 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 Board please provide 15 copies and hand them to a member of CCCE staff or Heather Vowell, Board Clerk, who will distribute the information to the Board members and other staff.

The public may comment on a specific item listed on this agenda when the Board 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 Board, 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 Board 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

CONSENT AGENDA

1. Approve Minutes from the May 11, 2022 Meeting of the Operations Board of Directors (Action Item)

2. Consider Finding, Pursuant to AB 361 and in order for the Operations Board of Directors to Continue Meeting Remotely, that the COVID-19 Pandemic State of Emergency Declared by Governor Newsom is Still In Effect; The Operations Board of Directors 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)

3. Approve an Increase of $75,000 to Hall Energy Law, PC for Additional Legal Services Support needed Extending Beyond the Contractual Not to Exceed Cap of $150,000 for the 2021-2022 Fiscal Year (Action Item)

4. Adopt Resolution No. OB-2022-02 Approving Amendments to CCCE’s Energy Risk Management Policy (Action Item)

REGULAR AGENDA

5. Authorize and Direct the Chief Executive Officer to Execute the Project Participation Agreement between California Community Power and Participating Community Choice Aggregators and other Ancillary Documents Necessary to Participate in a Power Purchase Agreement with Ormat Nevada Inc. for up to 27.98 MW of Renewable Geothermal Resources with a Term of 20 Years and a Not to Exceed Amount of $412,000,000 (Action Item)

6. Authorize and Direct the Chief Executive Officer to Execute the Project Participation Agreement between California Community Power and Participating Community Choice Aggregators and other Ancillary Documents Necessary to Participate in a Power Purchase Agreement with Open Mountain Energy LLC for up to 3.03 MW of Renewable Geothermal Resource with a Term of 20 Years and a Not to Exceed Amount of $43,000,000 (Action Item)

7. Authorize the Chief Executive Officer to Execute Investment Management Agreement with RBC Global Asset Management (U.S.) Inc. In a Form Substantially Similar to the Attached and Subject to Approval by CCCE General Counsel for a Term of 2 Years and a Not to Exceed amount of $400,000 (Action Item)

8. Authorize the Chief Executive Officer to Execute Custodial with Principal Bank for a Term of 2 Years and a Not to Exceed amount of $100,000. (Action Item) Adjournment

MINUTES
The meeting was called to order at 10:30am with 15 members attending via teleconference pursuant to AB 361 and a quorum established.

Directors Present: Pia, Espinosa, Greene, Hill, Lewis, McKee, Mendez, Miller, Miyasato, Norgaard, Rerig, Stilwell, McCloud, Vice Chair Goldstein, Chair Palacios
Directors Absent: Bradford, Huffaker
The Chair opened the public comment period for items not listed on the agenda or public comments on the consent agenda.

No public comment received.

The Chair closed public comment period.

Clerk announced that there were no corrections or additions to the agenda

CONSENT AGENDA
MOTION: Moved by Mendez Seconded by Lewis to approve the Consent Agenda.

ACTION: The Motion Carried with a roll call vote: 15/0/2 AYES: Pia, Espinosa, Greene, Hill, Lewis, McKee, Mendez, Miller, Miyasato, Norgaard, Rerig, Stilwell, McCloud, Vice Chair Goldstein, Chair Palacios
NOES: None
ABSENT: Bradford, Huffaker

1. Approved Minutes from the April 13, 2022, Meeting of the Operations Board with the addition of Member Norgaard’s Presence. Member Norgaard arrived at the April 13, 2022 meeting at 9:35am which is noted in the meeting minutes submitted in the packet.

2. Authorized CEO to Execute, in a Form Substantially Similar to the Attached and Approved by the CCCE General Counsel, 1) a Joint Community Choice Aggregation Cost-Sharing and Reimbursement Agreement Operations Board of Directors
Wednesday, May 11, 2022
10:30 AM
Central Coast Community Energy
70 Garden Court, Suite 300
Monterey, CA 93940
and 2) Addendum 1 for CCCE's Proportional Share of Joint Portfolio Management and Regulatory Services provided by The Energy Authority, Inc. in an Amount Not to Exceed $60,450 per year for a Three-Year Term

3. Authorized the CEO to 1) Execute an Agreement a Two-Year Agreement with Frontier Energy Inc. to Provide Technical Assistance and Program Implementation Services to Support CCCE Transportation Electrification Programs in an Amount Not to Exceed $239,378, and 2) Execute up to One (1) One (1) Year Amendment that Does Not Substantially Change the Scope of Services or Increase the Not to Exceed Amount

4. Found, Pursuant to AB 361 and in order for the Operations Board of Directors to Continue Meeting Remotely, that the COVID-19 Pandemic State of Emergency Declared by Governor Newsom is Still In Effect; The Operations Board of Directors 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

REGULAR AGENDA

5. CEO's Report
a) Potential Impacts of Market Volatility
b) Update on CAC Ad Hoc Committee
Chair opened public comment period.

The following individual(s) addressed the Board
 Jill ZamEk
 John Smigelski
 Beverly DesChaux
Chair closed public comment period.

ACTION: Discussion Item; No Action Required

6. Authorized the CEO to Execute A Municipal Financial Consultant Agreement with PFM Financial Advisors, LLC for a Two-Year Term and a Not to Exceed Amount of $350,000 Chair opened public comment period.

There was no public comment.

Chair closed public comment period.

MOTION: Moved by Director Miyasato, Seconded by Director Lewis to approve ACTION: The Motion Carried with a roll call vote: 16/0/1 AYES: Bradford (arrived at 11:14 am), Pia, Espinosa, Greene, Hill, Lewis, McKee, Mendez, Miller, Miyasato, Norgaard, Rerig, Stilwell, McCloud, Vice Chair Goldstein, Chair Palacios NOES: None
ABSENT: Huffaker

7. Support Policy Board Approval of CCCE Turnkey Ownership Model for Front of the Meter Energy Storage Assets
Chair opened public comment period.

The following individual(s) addressed the Board
 Beverly DesChaux
 John Smigelski
 Brett Garrett
Chair closed public comment period.

MOTION: Moved by Director Mendez, Seconded by Miyasato to approve ACTION: The Motion Carried with a roll call vote: 14/0/3 AYES: Pia, Espinosa, Greene, Hill, Lewis, McKee, Mendez, Miller, Miyasato, Norgaard, Rerig, Stilwell, McCloud, Vice Chair Goldstein, Chair Palacios
NOES: None
ABSENT: Bradford (left at 11:37am), Huffaker, McCloud (left at 11:28am)

8. Adopted Resolution No. OB-2022-01 Delegating to the CEO Certain Contract Administration Authority to Resolve Disputes and Potential Delays on Existing Power Purchase Agreement and to Enter Specialized Legal Services Agreements for Support
Chair opened public comment period.

There was no public comment.

Chair closed public comment period.

MOTION: Moved by Director Pia, Seconded by Director Norgaard to approve ACTION: The Motion Carried with a roll call vote: 14/0/3 AYES: Bradford (returned at 11:50am), Pia, Espinosa, Greene, Hill, Lewis, McKee, Mendez, Miller, Miyasato, Norgaard, Rerig, Stilwell, Vice Chair Goldstein, Chair Palacios NOES: None
ABSENT: Huffaker, Rerig (left at 11:40am), McCloud
Adjournment 11:52am
Staff Report Item 2
TO: CCCE Operations Board of Directors
FROM: Tom Habashi, Chief Executive Officer
SUBJECT: Consider Finding, Pursuant to AB 361 and in order for the Operations Board of Directors to Continue Meeting Remotely, that the COVID-19 Pandemic State of Emergency Declared by Governor Newsom is Still In Effect; The Operations Board of Directors 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: June 30, 2022
RECOMMENDATION:

This recommends the Operations Board (“Board”) find, pursuant to AB 361 and for the Board to continue meeting remotely, that the COVID-19 pandemic State of Emergency declared by Governor Newsom is still in effect; the Board 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.

The Monterey County Health Officer has recommended social distancing measures for meetings of legislative bodies, so the Board were able to meet remotely the first time after September 30, 2021. To continue meeting remotely, the Boards 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 Board’s consideration and finding that the COVID-19 pandemic State of Emergency declared by Governor Newsom is still in effect; the Board 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 Board to continue meeting remotely under the procedures established by AB 361.

Staff Report Item 3
TO: CCCE Operations Board of Directors
FROM: Tom Habashi, Chief Executive Officer
SUBJECT: Approve an Increase of $75,000 to Hall Energy Law, PC for Additional Legal Services Support needed Extending Beyond the Contractual Not to Exceed Cap of $150,000 for the 2021-2022 Fiscal Year (Action Item)
DATE: June 30, 2022
RECOMMENDATION:

This recommends the Operations Board of Directors approve an increase of $75,000 to Hall Energy Law, PC for additional legal services support needed extending beyond the contractual Not to Exceed Cap of $150,000 for the 2021-2022 Fiscal Year.

BACKGROUND:

CCCE engaged Hall Energy Law, PC for specialized legal services to support the negotiation of power and related product negotiations, energy supply agreements, coordinated operations agreements, and the administration and implementation of CCCE’s long-term power purchase agreements.

At its September 2020 meeting, the Operations Board approved a new engagement with Hall Energy Law, PC with a not to exceed cap of $150,000 per fiscal year (“Agreement”).

DISCUSSION/ANALYSIS:

During the prior fiscal year 2020-2021 and current fiscal year 2021-2022, Hall Energy Law, PC has supported several unplanned procurement negotiations and contract administration needs fueled primarily by the impacts related to the global supply chain disruptions and permitting delays.

The Agreement establishes a not to exceed cap of $150,000 per fiscal year, but also enables the parties to agree to additional services above the cap, should it be needed.

The current spending to date in fiscal year 2021-2022 has been higher than planned, and the anticipated legal support services needed from Hall Energy Law for the remaining months is expected to exceed the current cap by approximately $75,000. Therefore, CCCE is seeking Board approval for the increase.

FISCAL IMPACT:

The Board’s approval will increase Hall Energy Law’s budgeted annual $150,000 not to exceed cap by an additional $75,000 for the Fiscal Year 2021-2022.

CONCLUSION:

The Board’s approval and direction enables CCCE to obtain continued legal support from Hall Energy Law by increasing the current not to exceed cap of $150,000 by an additional $75,000 for the Fiscal Year 2021-2022.

ATTACHMENT(S):

1. Hall Energy Law Engagement Agreement
Hall Energy Law PC | www.hallenergylaw.com | 3 Monroe Pkwy. Ste. P #406, Lake Oswego, OR 97035

HALL ENERGY LAW PC
Stephen Hall | 503-313-0755 | [email protected]
November 20, 2020

VIA EMAIL
Central Coast Community Energy
Attention: Tom Habashi
70 Garden Court #300
Monterey, CA 93940
Re: Representation of Central Coast Community Energy
Dear Tom:

We are pleased that you have requested Hall Energy Law PC (the “Firm”) to continue providing legal services to Central Coast Community Energy, (formerly, Monterey Bay Community Power Authority ) and we thank you for the opportunity to be of assistance.

This engagement letter (the “Agreement”) sets forth the scope of our engagement, the financial terms of our engagement, and all other aspects of this engagement, as follows:

1. Scope of Engagement. By means of this Agreement, 3CE is engaging the Firm to continue to provide legal services in connection with 3CE’s procurement of energy, renewable energy and related products, including but not limited to the review, drafting, revision, negotiation, and finalization of, or amendments to, (i) EEI Master Agreements and Cover Sheets, amendments to the WSPP agreement, confirmations and any supporting credit documentation such as parent guarantees and letters of credit (collectively, the “Energy Supply Agreements”), (ii) deposit account control agreements, intercreditor and collateral agency agreements, and security agreements entered into by 3CE (the “Lockbox Agreements”), (iii) development of a Coordinated Operations Agreement (“COA”) for administration and implementation of long-term power purchase and sale agreements (“PPAs”), and (iv) follow-on support in connection with the PPAs already acquired, and additional negotiations, if any, and (v) procurement of additional renewable energy and miscellaneous legal advice and analysis, including but not limited to, advice related to any potential bankruptcy by Pacific Gas & Electric, or services related to any of the foregoing (“Other Services”). The Firm and MBCP acknowledge and anticipate that 3CE may, from time to time, engage in Joint RFO proceedings with other CCAs. The legal services relating to the Energy Supply Agreements, the Lockbox Agreements, Additional Follow-Up, and the Other Services are collectively referred to below as the “Engagement.”

2. Term. The term of this Agreement shall commence as of October 1, 2020 and shall continue indefinitely and at least until the completion of the case(s) or matter(s) assigned by CCA to FIRM hereunder, unless earlier terminated as set forth herein (the “Term”), or until terminated DocuSign Envelope ID: CE35727D-C5ED-473E-9F3B-E84C0EFC81DF Monterey Bay Community Power Authority
November 20, 2020
2 | P a g e
by either party by providing thirty (30) days’ written notice of its intent to terminate this Agreement, subject to payment of any amounts owed for services previously rendered and, if requested by 3CE, completion of any partially completed projects.

3. Fees and Hourly Rates. Our billing practice is to charge for our legal services, based primarily on the amount of time, including travel time, devoted to a matter at hourly rates for the particular professionals involved. These hourly rates are based upon these professionals’ experience, expertise, and standing. I will be the attorney responsible for the performance of the Engagement and my hourly rate for this work is $595/hr. Where appropriate, I may use junior attorneys on this Engagement and the hourly rates for their work would typically range from $375- $540/hr. These rates are modified by the Firm from time to time, and any new rates would be implemented on a prospective basis and would apply only to legal services rendered after the effective date of the new rates.

The Firm and 3CE agree that 3CE will be responsible for only a portion of the costs for legal services related to Joint RFO procurement efforts, the allocation of which will be determined and agreed to in writing before commencement of new work relating to the Joint RFO procurement efforts between the Joint RFO members. Notwithstanding the foregoing, existing arrangements between the Joint RFO members for allocation of costs for ongoing work that was commenced prior to, and which is still in progress as of, October 1, 2020 will remain in place, unless subsequently amended by the Joint RFO members in writing, and with notice to the Firm.

The total amount of legal services for the Engagement for the Term shall not exceed one hundred and fifty thousand dollars ($150,000.00) per fiscal year (the “NTE Cap”) without the written approval of 3CE, it being understood by 3CE that the NTE Cap does not necessarily represent the total fees to complete all of the matters in the Engagement because of the nature of such projects. 3CE will not be responsible for any fees incurred in excess of the NTE Cap unless expressly authorized by 3CE in writing. If additional legal services are required that extend beyond the NTE Cap, 3CE and the Firm shall agree in writing to the scope and cost of such additional services.

We believe that our hourly rates are comparable with the rates charged for the same kinds of work by lawyers and other professionals of similar experience, expertise and standing. We try to use associate and paralegal support on projects where appropriate, and we will be happy to discuss the staffing of 3CE’s project with you.

We will charge for all activities undertaken in providing legal services to 3CE under this Agreement, including but not limited to the following: conferences, including preparation and participation; preparation and review of correspondence and other documents; legal research; court and other appearances; including preparation and participation; and telephone calls, including calls with you, other attorneys or persons involved with this matter, and governmental agencies. The legal personnel assigned to 3CE’s matter will confer among themselves about the matter, as required. When they do confer, each person will charge for the time expended. Likewise, if more than one of our legal personnel attends a meeting, court hearing or other proceeding, each will charge for the time spent. We will charge for travel time, both local and out of town.

DocuSign Envelope ID: CE35727D-C5ED-473E-9F3B-E84C0EFC81DF Monterey Bay Community Power Authority
November 20, 2020
3 | P a g e

4. Additional Services and Outside Expenditures. If our legal representation requires additional services provided by vendors, we will obtain your advance approval before incurring any such additional services on 3CE’s behalf. 3CE will be required either to pay for these outside additional services directly, or to reimburse us if we make payment for these services on 3CE’s behalf. We sometimes will make payment for, and then bill 3CE for reimbursement of smaller items such as filing fees, photocopying by outside copying services, electronic discovery services, recording fees, messenger services, service of process, and court fees. When there are substantial expenditures involving vendors (such as for discovery management, document production, depositions, expert witnesses, exhibit preparation, or air fare) or substantial out-of-pocket expenditures (such as extended field expenses, large outside copying jobs, or jury fees), we will require either that 3CE pay those sums to us before we expend them, that 3CE provide an advance deposit for such expenditures, or that 3CE directly contract with and pay the vendor. 3CE will not be billed for any internal Firm costs incurred on 3CE’s behalf, such as telephone (including long distance charges), telecopy charges, word processing, secretarial overtime, firm couriers, postage (including FedEx, UPS or similar overnight delivery services), printing and photocopying performed in-house.

5. Monthly Statements and Payment Terms. Our practice will be to send a monthly statement of our charges for legal services and for reimbursement of payments made on our client’s behalf for outside additional services. The detail in the monthly statement will inform 3CE of the nature and progress of our work and of the charges and expenditures being incurred.

Unless otherwise agreed, each monthly statement is fully due and payable upon receipt, but in no event later than thirty (30) days after its issuance date.

We specifically reserve the right to withdraw from representation of 3CE and to cease performing immediately all services if we do not receive full payment of any amounts owed to us within forty-five (45) days of any statement.

6. Withdrawal From Representation. The attorney-client relationship is one of mutual trust and confidence. If you have any questions at all about the provisions of this Agreement, we invite your inquiries. We encourage our clients to inquire about any matter relating to our engagement agreements or monthly statements which may be in any way unclear or appear unsatisfactory. If 3CE does not meet its obligation of timely payments or deposits under this Agreement, we reserve the right to withdraw from 3CE’s representation on that basis alone, subject of course to any required judicial, administrative, or other approvals.

This Agreement is also subject to termination by either party upon reasonable notice for any reason. If there were to be such a termination, however, 3CE would remain liable for all unpaid charges for services provided and expenditures advanced or incurred.

7. Duties Upon Termination of Active Representation. Upon termination of our active involvement in a particular matter for which we had previously been engaged, we will have no further duty to inform you of future developments or changes in law which may be relevant to such matter in which our representation has terminated. Further, unless 3CE and the Firm agree in writing to the contrary, we will have no obligation to monitor renewal or notice dates or similar deadlines which may arise from the matters for which we had been engaged. If 3CE’s matter DocuSign Envelope ID: CE35727D-C5ED-473E-9F3B-E84C0EFC81DF Monterey Bay Community Power Authority
November 20, 2020
4 | P a g e
involves obtaining a judgment and such judgment is obtained, we will only be responsible for those post judgment services (such as recording abstracts, filing judgment liens, and calendaring renewals of judgments) as are expressly agreed to by 3CE and the Firm in writing and for which 3CE will be obligated to pay.

8. Document Storage Policies. The Firm’s policy with regard to documents and other materials at the conclusion of a matter is to maintain them in storage for a period of no more than ten (10) years. All documents and other materials in our file will then be destroyed or discarded without notice to 3CE. Accordingly, if there are any documents or other materials 3CE wish to have retrieved from 3CE’s file at the conclusion of a matter, it will be necessary for 3CE to advise us of that request to ensure that they are not destroyed.

9. Consent to Electronic Communications. In order to maximize efficiency in this matter, we intend to use state of the art communications devices to the fullest extent possible (e.g., Email, document transfer by computer, cellular telephones, and facsimile transfers). The use of such devices under current technology may place 3CE’s confidences and privileges at risk. However, we believe the effectiveness involved in use of these devices outweighs the risk of accidental disclosure. By signing this letter, you acknowledge your consent to the use of these devices.

10. Disclaimer of Guarantee. Nothing in this Agreement should be construed as a promise or guarantee about the outcome of any matter which we are handling on 3CE’s behalf. Our comments about the outcome of 3CE’s matter are expressions of opinion only.

If we should provide you with an estimate of the fees and costs which may be incurred in connection with our representation of 3CE, it is important that you understand and acknowledge that any such estimate is merely an estimate based on numerous assumptions which may or may not prove to be correct and that any estimate is not a guarantee or agreement of what the maximum amount of fees and/or costs will be.

11. Future Matters. Unless otherwise agreed in writing between us, all other matters referred to us for representation shall be governed by the terms of this Agreement.

12. Entire Agreement. This Agreement contains all terms of the agreement between us applicable to our representation of 3CE, and may not be modified except by a written agreement signed by both of us.

13. Future Conflict. Our undertaking to represent 3CE in the above matters will not act as a barso asto prevent usfrom representing any existing orfuture client with respect to a claim, litigation or transaction adverse to 3CE, so long as in the course of our representation of 3CE we have not obtained any information that would be adverse to 3CE’s interests with respect to such claim, litigation or transaction.

14. Client. The Firm’s clients for the purpose of our representation are only the persons and entities identified in this Agreement. Unless expressly agreed, we are not undertaking the representation of any related or affiliated person or entity, nor any of their shareholders, partners, officers, directors, agents, or employees.

DocuSign Envelope ID: CE35727D-C5ED-473E-9F3B-E84C0EFC81DF Monterey Bay Community Power Authority
November 20, 2020
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If this Agreement correctly sets forth your understanding of the scope of the services to be rendered to 3CE by the Firm and if all of the terms set forth in this Agreement are satisfactory, then please sign this Agreement and return it to me so that we will be engaged as 3CE’s legal counsel. If the scope of services described is incorrect, or if the terms set forth are not satisfactory to you, please let us know in order that we can discuss either aspect.

I look forward to continuing to work with you and thank you once again for the opportunity to be of service.

Sincerely,
Stephen Hall
Principal
I have read and understand the contents of this Agreement and consent to the Firm representing 3CE on the terms set forth in this Agreement.

CENTRAL COAST COMMUNITY
ENERGY (formerly, MONTEREY BAY
COMMUNITY POWER AUTHORITY), a
California joint powers authority
Dated: ________________, 2020 By:

Name: Tom Habashi
Title: CEO
Approve as to financial terms:

Dated: ________________, 2020 By:

Name: Tiffany Law
Title: CFTO
Approve as to form:

Dated: ________________, 2020 By:

Name: Robert M. Shaw
Title: COO/GC
DocuSign Envelope ID: CE35727D-C5ED-473E-9F3B-E84C0EFC81DF 11/21/2020
11/21/2020
11/21/2020
Staff Report Item 4
TO: CCCE Operations Board of Directors
FROM: Tom Habashi, Chief Executive Officer
SUBJECT: Adopt Resolution No. OB-2022-02 Approving Amendments to CCCE’s Energy Risk Management Policy (Action Item)
DATE: June 30, 2022
RECOMMENDATION:

This recommends the Operations Board adopt Resolution No. OB-2022-02 approving certain amendments to CCCE’s Energy Risk Management (ERM) Policy.

BACKGROUND:

The ERM Policy was first approved in March 2018, revised in September 2018 and November 2020.

The Risk Management Committee reviewed and supported the Operations Board’s adoption of Resolution No. OB-2022-02 and approving the proposed amendments at its June 27, 2022 meeting.

DISCUSSION/ANALYSIS:

The ERM Policy establishes CCCE’s risk management functions and procedures to identify, quantify, and manage the risks associated with power procurement activities. The EMR Policy establishes management responsibilities, organizational structures, risk management standards, and operating controls and limits necessary to properly identify and manage CCCE’s risk to support meeting its procurement goals.

The ERM Policy requires that it be reviewed at least annually to ensure it evolves to address potential market, regulatory, or business changes that impact CCCE’s procurement of energy and energy related products.

The amendments to the prior Board-approved ERM Policy are summarized in the table below:

Section Change
Overall: Replaced all references to 3CE with CCCE
Section 1: No Substantive Changes
Section 2: Updated CCCE’s policy goals to be more strategic than prescriptive Updated risk catalog and definitions to align with industry best practices and CCCE’s actual risks
Section 3: Organizational Structure section moved up from section 4 to this section 3 Clarified organizational structure to define department responsibilities Updated RMC structure and better-defined responsibilities Section 4: Business Practices section moved down from section 3 to this section 4 Added language to define and prohibit speculative trading Clarified business practices and general conduct for staff involved in hedging and trading
Eliminated unassociated business practices such as stress testing Section 5: Moved delegation of authority matrix to Exhibit D Section 6: Simplified credit policy to better define responsibilities and processes to limit credit risk
Sections 7-8: No Substantive Changes
Appendix A Added one more product to increase market liquidity and allow financial transactions
Appendix B Better defined process to add new transactions to the ERMP Appendix C No Substantive Changes
Appendix D Delegation of authority moved from Section 5 Clarified personnel’s abilities under the authority delegation to them by the Policy and Operations Boards of Directors
FISCAL IMPACT:

One additional Full-time Equivalent (FTE) Position and specialized technical software and subscriptions will be required to support this change. The costs will be funded from the FY21/22 Budget and included in the FY22/23 budget.

CONCLUSION:

Amending the CCCE ERM Policy allows CCCE to respond to changed market, regulatory, and business needs to ensure operations continue while still identifying, quantifying, and managing risk associated with energy product procurement.

ATTACHMENT(S):

1. DRAFT Resolution No. OB-2022-02

2. Revised Energy Risk Management Policy (Clean)

3. Revised Energy Risk Management Policy (Redline)
DRAFT RESOLUTION NO. OB-2022-02

A RESOLUTION OF THE OPERATIONS BOARD OF DIRECTORS OF CENTRAL COAST

COMMUNITY ENERGY APPROVING AMENDMENTS TO THE ENERGY RISK MANAGEMENT POLICY
WHEREAS, Central Coast Community Energy ("Authority") is a Joint Powers Authority established and operated pursuant to California Government Code section 6500 et seq. to study, promote, develop, conduct, operate, and manage energy programs in the California Central Coast region of Santa Cruz, Monterey, San Benito, Santa Barbara Counties, and certain cities within San Luis Obispo County; and
WHEREAS, CCCE's Energy Risk Management Policy ("ERM Policy") was originally adopted by the Policy Board of Directors on March 7, 2018; and WHEREAS, the ERM Policy was revised and amended on September 5, 2018 and November 4, 2020 by the Operations Board of Directors; and WHEREAS, the ERM Policy requires that it be reviewed at least annually to ensure it evolves to address potential market, regulatory, or business changes that impact CCCE’s procurement of energy and energy related products; and
NOW, THEREFORE, the Operations Board of Directors of Central Coast Community Energy does hereby resolve, determine, and order as follows:

1. The amended Central Coast Community Energy, Energy Risk Management Policy, which is attached hereto as Attachment A, is hereby approved.

2. This Resolution shall take effect immediately upon adoption.

PASSED AND ADOPTED by the Operations Board of Central Coast Community Energy this 30th day of June 2022 by the following vote:

AYES:

NOES:

ABSENT:
_____________________________
Chair, Carlos Palacios
Attest:
_____________________________
Board Clerk, Heather Vowell
1 Energy Risk
Management Policy
Initial Version March 2018 –Policy Board of Directors Approved First Revision September 2018 –Operations Board of Directors Approved Second Revision November 2020 –Operations Board of Directors Approved 2 Table of Contents
Table of Contents
SECTION 1: POLICY OVERVIEW .....................................................................................................................4 1:1 Background and Purpose....................................................................................................................4

1.2 Scope ..................................................................................................................................................5

1.3 Energy Risk Management Objective...................................................................................................5

1.4 Policy Administration..........................................................................................................................5 SECTION 2: STRATEGY/GOALS AND RISK EXPOSURES ..................................................................................6

2.1 Policy Goals.........................................................................................................................................6

2.2 Risk Catalog.........................................................................................................................................7

2.2.1 Attrition: Customer Opt-Out Risk ................................................................................................7

2.2.2 Market Risk..................................................................................................................................7

2.2.3 Liquidity Risk................................................................................................................................7

2.2.4 Regulatory Risk ............................................................................................................................8

2.2.5 Volumetric Risk............................................................................................................................8

2.2.6 Model Risk ...................................................................................................................................8

2.2.7 Operational Risk...........................................................................................................................8

2.2.8 Counterparty & Generalized Credit Risk......................................................................................8 SECTION 3: ORGANIZATIONAL STRUCTURE AND RESPONSIBILITIESSECTION ..............................................9

3.1 Risk Management Organizational Structure.......................................................................................9

3.2 Risk Management Committee (RMC) .................................................................................................9

3.3 Segregation of Duties .......................................................................................................................10

3.3.1 Front Office................................................................................................................................10

3.3.2 Middle Office .............................................................................................................................11

3.3.3 Back Office .................................................................................................................................11 SECTION 4: BUSINESS PRACTICES ...............................................................................................................12

4.1 General Conduct...............................................................................................................................12

4.2 Hedging & Trading Activities; Prohibition on Speculation................................................................12

4.3 Trading for Personal Accounts..........................................................................................................12

4.4 Conflict of Interest ............................................................................................................................12

4.5 Adherence to Statutory Requirements.............................................................................................13 3 4.6 Authorized Products, Markets & Terms ...........................................................................................13

4.7 System of Record..............................................................................................................................14

4.8 Transaction Valuation.......................................................................................................................14

4.9 Policy Compliance.............................................................................................................................14 SECTION 5: TOLERANCES ............................................................................................................................15

5.1 Hedging Tolerances.........................................................................................................................15

5.1.1 Energy Procurement Tolerances................................................................................................15

5.1.2 Renewable Energy Procurement Tolerances.............................................................................15

5.1.3 Capacity Procurement Tolerances ...........................................................................................15

5.2 Monitoring, Reporting and Instances of Exceeding Risk Limits ........................................................16 SECTION 6: CREDIT POLICY .........................................................................................................................17 SECTION 7: POSITION TRACKING AND MANAGEMENT REPORTING ..........................................................18 SECTION 8: POLICY REVISION PROCESS ......................................................................................................19

8.1 Acknowledgement of Policy .............................................................................................................19

8.2 Policy Interpretations .......................................................................................................................19 Appendix A: AUTHORIZED TRANSACTION TYPES, REGIONS, AND MARKETS .............................................20 Appendix B: NEW TRANSACTION APPROVAL FORM ..................................................................................21 Appendix C: DEFINITIONS ...........................................................................................................................22 Appendix D: DELEGATION OF FINANCIAL AUTHORITY ...............................................................................24 4 SECTION 1: POLICY OVERVIEW
1:1 Background and Purpose
Central Coast Community Energy (“CCCE”), formerly Monterey Bay Community Power Authority, is a public joint powers agency located within the geographic boundaries of Monterey, Santa Cruz San Benito, San Luis Obispo, and Santa Barbara Counties. Member agencies of CCCE include the Counties of Monterey, Santa Cruz, San Benito, and Santa Barbara, as well as certain incorporated cities located within the member counties and San Luis Obispo County. Presently, CCCE’s CCA Members include the following local government entities:

County of
Santa Cruz
County of
Monterey
County of
San
Benito
City of
San Luis
Obispo
County of
Santa
Barbara
City of
Santa Cruz
City of
Salinas
City
Hollister
Morro
Bay
Santa Maria
City of
Watsonville
City of
Monterey
City of
San Juan
Bautista
Paso
Robles
Solvang
City of
Capitola
City of
Pacific
Grove
Pismo Beach Goleta
City of
Scotts
Valley
City of
Carmel
Grover Beach Carpinteria
City of
Seaside
Arroyo Grande Guadalupe
City of
Marina
Buellton
Sand City
Soledad
Greenfield
Gonzales
Del Rey
Oaks
5 CCCE members elected to implement and administer a community choice aggregation (“CCA”) program. The CCA program will give its members an opportunity to procure electricity supplies and implement local programs that meet the goals of the local communities. Electricity procured to serve customers will continue to be delivered over the Investor-Owned Utilities’ (PG&E & SCE) transmission and distribution systems.

Providing retail electric generation service to customers enrolled in the CCA program exposes CCCE to risks such as customer opt-out risk, market risk, regulatory risk, volumetric risk, model risk, operational risk, counterparty credit risk and reputation risk.

This Energy Risk Management Policy (“Policy”) establishes CCCE’s Energy Risk Management Program (“Program”) including risk management functions and procedures to manage the risks associated with power procurement activities.

The ultimate purpose of this Policy is to help CCCE manage its risks by specifying management responsibilities, organizational structures, risk management standards, and operating controls and limits necessary to properly identify and manage CCCE’s exposure to risk.

1.2 Scope
Unless otherwise explicitly stated in this Policy, or other policies approved by the Board, this Policy applies to all power procurement and related business activities that may impact the risk profile of CCCE. This Policy documents the framework by which management and staff will:
 Identify and quantify risk
 Develop and execute procurement strategies
 Create a framework of controls and oversight
 Monitor, measure, and report on the effectiveness of the Program

1.3 Energy Risk Management Objective
The objective of the Energy Risk Management Policy is to provide a framework for conducting procurement activities that will manage risks to support CCCE meeting the goals.

Pursuant to this Policy, CCCE will identify and measure the magnitude of the risks and take the necessary steps to manage and reduce that risk to acceptable levels.

1.4 Policy Administration
This Policy document shall be routinely reviewed and approved by the CCCE Operations Board of Directors (“Board”). The Risk Management Committee (“RMC”) and Operations Board must approve amendments to this Policy, except for the appendices, which may be amended with approval of only the RMC. The RMC must give notice to the Board of any amendment it makes to an appendix or a reference policy or procedure document.
6 SECTION 2: STRATEGY/GOALS AND RISK EXPOSURES

2.1 Policy Goals
CCCE operates in a dynamic, volatile environment and market. Prices for energy and its underlying drivers, such as natural gas, are susceptible to unpredictable and sometimes significant changes in short intervals. Regulatory and legislative changes can structurally change markets, market price levels, and procurement requirements. Low liquidity and financial dislocations may lead to counterparty distress. CCCE’s Energy Risk Management Policy (ERM) is designed to address these challenges. Its overarching goals are the following:
 Preserving the financial health and stability of CCCE  Providing rate stability
 Ensuring the long-term viability of CCCE
In furtherance of these goals CCCE strives to:
 Maintain a credit rating of A- or equivalent, as defined by S&P Global Ratings or an equivalent ratings agency
 Limit power supply cost variance to the annual budget to 10%, barring extraordinary circumstances
 Fund its Rate Stabilization Fund at levels that buffer customers from rate shock and maintain a 3-year rate trajectory which is competitive with Investor-Owned Utilities (IOUs) The ERM Policy is a strategic document, not a prescriptive manual. The metrics, limits, and products used to measure and manage risk must continuously evolve to reflect industry best practices and ensure relevance and alignment with the policy’s goals. CCCE is responsible for designing and executing specific plans, metrics, limits, hedging plans, and processes in accordance with the ERM Policy CCCE will report regularly to the Risk Management Committee (RMC).

CCCE aims to achieve these goals by managing the key risks identified in the Risk Catalog at section 2.2 below. More specifically, the goals will be incorporated into the specific limits and metrics used to govern hedging activities and long-term procurement. It is important to note these goals are not intended to be a comprehensive list of CCCE’s goals.

To ensure CCCE is implementing best practices for an energy supplier of its size and scope, CCCE will engage an outside third-party energy risk management expert to conduct an annual audit and benchmark CCCE’s risk policy and internal processes. The results of audit will be presented to the RMC. 7 2.2 Risk Catalog
This Energy Risk Management Policy addresses the following key risks:
a) Attrition: Customer Opt-Out risk
b) Market risk
c) Liquidity Risk
d) Regulatory risk
e) Volumetric risk
f) Model risk
g) Operational risk
h) Counterparty & Generalized Credit risk

2.2.1 Attrition: Customer Opt-Out Risk
Customer opt-out risk includes any condition or event that creates the potential for significant reductions in the CCA’s customer base, leading to the potential on higher retail rates, uncompetitive position, and further loss of customer base. Customer opt-out risk remains a primary risk for the CCA industry. Managing Opt-out risk requires the establishment of, and adherence to, certain metrics to limit optout risks, such as:
 Retail rate competitiveness
 Rate Stability Reserves Fund

2.2.2 Market Risk
Market (Energy Price) volatility risk of losses due to the movements in power market prices, interest rates, and credit market prices. Power market price risk includes the risk of adverse price movements in energy, capacity, power basis, renewable attributes, and underlying drivers such as natural gas market prices. Interest rate and credit market price risks are considered when evaluating financing structures associated with long-term hedges or contracts. CCCE will deploy a range of metrics to measure market risk, such as forward-looking stress tests based on multiple factors and Value-at-Risk (VaR) over multiple time periods. Limits – such as those on position size, tenor, product type and VaR - will be set based on market conditions and alignment with this policy’s goals.

2.2.3 Liquidity Risk
Liquidity Risk is the risk of a lack of enough creditworthy buyers and sellers in a market to execute transactions at prices which reasonably reflect underlying fundamentals. This risk can make it difficult for CCCE to execute hedging transactions, such as exits, that reduce risk and maximize value. CCCE will monitor liquidity in markets and, where applicable, set limits on product types, tenor, and position size to reduce the risk of stranded positions. 8 2.2.4 Regulatory Risk
Legislative and regulatory policy decisions, including technical market rule changes can have far-reaching impacts on prices, procurement requirements, asset values, and cash flows. CCCE will actively monitor and, where possible, shape legislative and regulatory policy to mitigate risk. CCCE will also quantify and forecast the financial impacts of proposed regulatory actions through scenario analysis. CCCE will mitigate potential regulatory risk by structuring procurement strategies and contracting practices to minimize potential policy change related impacts.

2.2.5 Volumetric Risk
Volumetric risk is the risk of variance in the expected quantity of load served by CCCE. Volumetric risk may be driven by factors such as attrition, weather, and behind-the-meter generation.

Attrition risk is explicitly modeled under this policy. Weather is the biggest short-term driver of volumetric risk. CCCE will develop load distributions that account for a wide range of weather outcomes and size positions accordingly. CCCE may set limits on open positions by tenor, as appropriate, to reduce volumetric risk.

2.2.6 Model Risk
Model risk is variance from modeled or forecasted outcomes due to fundamental deficiencies in models and/or information systems. CCCE will validate models on an ongoing basis for robustness, update and/or patch models frequently, collaborate regularly with vendors, and exchange information & best practices with peers bilaterally or in trainings and conferences.

2.2.7 Operational Risk
Operational risk is variance in financial performance due to weaknesses or failures in the quality, scope, content, and/or execution of hedging, procurement, and risk management functions.

Operational risk also incorporates fraudulent actions by employees or third parties, particularly due to inadequate or ineffective controls. CCCE manages operational risk through a variety of methods, including regular reporting, segregation of functions, layered oversight, external audits, and staff training. Additional methods will be proposed to the RMC as appropriate.

2.2.8 Counterparty & Generalized Credit Risk
Counterparty risk is the risk that a counterparty will fail to perform or adequately remedy its obligations in accordance with contractual and transactional terms. Generalized credit risk is the risk of a generalized reduction in credit to a sector, a set of counterparties, or a specific counterparty that results in an increase in counterparty risk. The impact of counterparty failure on CCCE’s financials can be significant. CCCE will monitor counterparty risk based on a variety of metrics and analyses, including but not limited to an in-depth review of counterparty financials, exposure by credit rating, exposure by tenor and product type. 9 SECTION 3: ORGANIZATIONAL STRUCTURE AND RESPONSIBILITIESSECTION

3.1 Risk Management Organizational Structure
CCCE risk management is organizationally structured to ensure effective segregation of duties and multiple layers of oversight using a waterfall approach. Risk approval limits are contained in Exhibit D, the Risk Management Delegation of Financial Authority (DOFA).

The CCCE Operations Board of Directors (“Operations Board”) is responsible for approving the energy risk management policy. It reviews and approves this policy and approves risk exposures above those delegated to the RMC in the DOFA.

The Risk Management Committee (RMC) is responsible for overseeing strategic compliance with this policy and approving risk exposures above those delegated to the CEO.

The Front Office is responsible for energy short-term trading function and long-term negotiations of power supply contracts, mindful of the ERMP limits.

The Middle Office is responsible ensuring compliance with the policy and monthly reporting of risk exposure to RMC. This segregates the monitoring from trading functions ensure adherence to risk limits and provides an important check and balance.

The Back Office is responsible for processing payments ensuring adherence to contract terms and provide appropriate reporting regulatory agencies.

3.2 Risk Management Committee (RMC)
The CEO shall establish the RMC, set the agenda, and serve as its Chair. The RMC consists of the following voting members:
 Chief Executive Officer (CEO)
 Up to five (5) Members of CCCE’s Policy and/or Operations Board of Directors, selected by the CEO
 Chief Financial Officer
 Chief Operating Officer
 Director of Regulatory and Legislative Affairs
The RMC is responsible for overseeing strategic compliance with this policy and approving major risk exposures above those delegated to the CEO. This includes ensuring procurements and hedging are consistent with CCCE’s strategic goals.

Specifically, the RMC maintains the authority and responsibility to:
 Ensure that procurements are consistent with this policy and hedging plans based on CCCE’s 10 financial objectives and situation.
 Approve procurements and risk exposures above those delegated to the CEO and up to the limits specified in the DOFA, based on the strategic goals of this ERM Policy and CCCE’s financial situation
 Understand and approve the limits, metrics, and product types necessary to ensure compliance with this policy
 Review risk management reports as described in this Policy.  Review actual and projected risks and financial outcomes and review summaries of violations of this policy
 Refer to the Operations Board those exposures and risks above those delegated to the RMC in the DOFA

3.3 Segregation of Duties
CCCE shall maintain a segregation of duties, also referred to as "separation of function” to help manage and control the risks outlined in this Policy.

3.3.1 Front Office
The Front Office is responsible for the procurement and hedging activities necessary to manage CCCE’s wholesale power market positions and obligations. Specific responsibilities include:
 Develop long-term procurement strategies to reliably meet CCCE’s load-serving obligation using a least-cost best-fit approach
 Develop annual, quarterly, and monthly hedge plans to prudently meet CCCE’s load-serving obligation using a mix of market transactions and CCCE power assets, such as dispatchable generation
 Optimize CCCE’s load-supply balance and asset management strategies to prudently maximize value for CCCE customers while adhering to all risk management processes and limits
 Develop and use fundamental and probabilistic analysis – such as power market supply-demand balances and transmission outages – to guide optimization, procurement, and hedging decisions
 Accurately record all transactions in the system of record  Accurately track open positions and hedge performance across tenors  Execute transactions and negotiate or amend contracts as needed to meet the above goals in accordance with the limits set out in the DOFA. Restructure previously approved transactions and contracts as needed in accordance with the DOFA limitations 11 3.3.2 Middle Office
The Middle Office is responsible for implementing, administering, and monitoring compliance with this policy. Specific responsibilities include:
 Developing market and transaction analytics that inform risk analyses of CCCE’s hedging and procurement activities; providing Front Office with an independent view as needed  Developing metrics and risk management processes for the risks identified in the Risk Catalog in this policy
 Designing and setting hedging and procurement limits, including but not limited to product types, tenors, delivery points, counterparties, and markets.  Monitoring risk exposures and policy compliance on an ongoing basis, with monthly reporting to the RMC
 Developing limits with exchanges, brokers, and trading venues  Analyzing risk of the hedging and procurement plans developed by the Front Office.  Developing and maintaining demand forecasts
 Independently maintaining forward price curves for use in valuation, pricing, and monitoring. Developing internal estimates of forward prices where credible liquid data is not available
 Valuing CCCE positions and contracts
 Validating settlements
 Reporting limit violations to the CEO and the RMC
 Calculating and maintaining the net forward power positions of CCCE  Assist Back Office in calculating Counterparty Credit Exposure

3.3.3 Back Office
The Back Office is responsible for the administrative activities necessary to execute and settle transactions and contracts and to support the Middle Office where necessary to monitor compliance with this Policy.

Specific responsibilities include:
 Confirming all transaction details (physical and financial) and reconciling differences with the trading counterparties
 Reviewing transaction confirmations for adherence to approved limits  Validating trade entry and flow through the system of record  Validating and reconciling physical and financial transaction flows  Settling trades and calculating revenues and profit & loss  Providing settlement, credit, and other data as needed to the Middle Office and Finance to support monitoring of risk exposures and budget processes 12 SECTION 4: BUSINESS PRACTICES

4.1 General Conduct
All personnel, including Members of the Operational and Policy Board of Directors, staff, and agents, adhere to standards of integrity, ethics, conflicts of interest, compliance with statutory law and regulations and with applicable CCCE standards of personal conduct while employed by, contracted by, or affiliated with CCCE.

4.2 Hedging & Trading Activities; Prohibition on Speculation CCCE contracts and trades in energy markets to hedge positions, reduce risk, and, in compliance with this policy, prudently optimize the value of its portfolio of assets and market positions. Speculative trading is explicitly prohibited under this policy. Examples of speculative trading include trading a commodity where CCCE does not have an underlying position or risk, trading a product based solely on personal judgement about market direction, taking positions in volumes that deviate significantly from CCCE’s underlying need etc. Should a question arise about speculative trading activities, CCCE’s Middle Office will make an initial finding based on an analysis of the situation and present a written report to the CEO and the RMC. The RMC will make a final determination based on the situation.

4.3 Trading for Personal Accounts
All CCCE staff and agents are prohibited from trading the power and environmental products traded by CCCE.

4.4 Conflict of Interest
CCCE staff are expected to meet the highest standards for ethical conduct, beyond just the specific matters discussed in this section.

CCCE staff responsible for negotiating, reviewing, and/or approving hedging activities and procurements are obligated to provide written notice to CCCE of any real or potential conflict of interest in the matter.

An example of such a conflict of interest may be negotiating with a counterparty while seeking employment for oneself or a relative with that counterparty.

CCCE staff are prohibited from trading on information gained during hedging and procurement activities. An example of such an activity would be a CCCE employee directly or indirectly purchasing stock in a developer prior to the announcement of CCCE awarding that developer a significant contract.

Purchases of pooled vehicles such as broadly diversified mutual funds and ETFs are exempted from this policy.

Additionally, Conflicts of Interest shall be identified and defined as set forth in the CCCE Conflict of Interest Code, as amended from time to time by the Policy Board, which incorporates the Political Reform Act requirements for all employees advising CCCE. 13 If there is any doubt as to whether a prohibited condition exists, then it is the employee’s responsibility to discuss the possible prohibited condition with her/his manager or supervisor. Employees may seek an advisory position from the California Fair Political Practices Commission.

4.5 Adherence to Statutory Requirements
Compliance is required with rules promulgated by the state of California, California Public Utilities Commission, California Energy Commission, Federal Energy Regulatory Commission (FERC), Commodity Futures Trading Commission (CFTC), and other regulatory agencies.

Congress, FERC, and CFTC have enacted laws, regulations and rules that prohibit, among other things, any action or course of conduct that actually or potentially operates as a fraud or deceit upon any person in connection with the purchase or sale of electric energy or transmission services. These laws also prohibit any person or entity from making any untrue statement of fact or omitting to state a material fact where the omission would make a statement misleading. Violation of these laws can lead to both civil and criminal actions against the individual involved, as well as CCCE. This Policy is intended to comply with these laws, regulations, and rules and to avoid improper conduct on the part of anyone employed by CCCE. These procedures may be modified from time to time by legal requirements, auditor recommendations, RMC requests and other considerations.

In the event of an investigation or inquiry by a regulatory agency, CCCE may provide legal counsel to employees. However, CCCE, with the consent of the Operations Board, will not appoint legal counsel to an employee if CCCE determine that representation of the employee will create an actual conflict between the employee and CCCE, or that the employee was not acting in good faith within the scope of employment.

New products, tenors, markets, delivery points, and transaction types can be authorized by the RMC.

When seeking such approval, a New Product Approval Form, as shown in Appendix C, should be drafted describing all significant elements of the proposed product. This should include, at a minimum:
 A description of the benefit to CCCE, such as decreasing costs, managing volatility etc  The role of the new product in CCCE’s overall portfolio and risk management strategies  Risk analysis that identifies the specific risks mitigated by the new product and illustrates its application
 Transaction process, initial risk limits and settlement process  Proposed valuation methodology (including pricing model, where appropriate)  Proposed accounting methodology
14 CCCE’s CEO or their designee is responsible for requesting the RMC’s approval. If approved, Appendix A to the Policy will be updated to reflect the new transaction type.

4.7 System of Record
CCCE will maintain a set of records for all transactions executed in association with CCCE procurement activities. The records will be maintained in US dollars and transactions will be separately recorded and categorized by type of transaction. This system of record shall be auditable

4.8 Transaction Valuation
Transaction valuation and reporting of positions shall be based on objective, market-observed prices.

Whenever possible, mark-to-market valuations should be based on independent, publicly available market information and data sources. The Middle Office will be responsible for independently validating and reporting marks, valuations, and settlements.

4.9 Policy Compliance
The Middle Office will provide a monthly report monitoring compliance with the limits established by this Policy.
15 SECTION 5: TOLERANCES

5.1 Hedging Tolerances
Hedging tolerances for Energy, renewable attributes, and capacity (Resource Adequacy) are shown below. From time to time, the middle office, in response to market conditions, may recommend adjustments to these ranges.

5.1.1 Energy Procurement Tolerances
Period Minimum Tolerance Maximum Tolerance Target
Year 1 (Current Year) 90% of Load 110% of Demand 100% of Demand Year 2 70% of Load 110% of Demand 85% of Demand
Year 3 50% of Load 90% of Demand 70% of Demand
Year 4 30% of Load 60% of Demand 50% of Demand
Year 5 20% of Load 50% of Demand 30% of Demand

5.1.2 Renewable Energy Procurement Tolerances
Period Minimum Tolerance Maximum Tolerance Target
Year 1 (Current Year) 90% of mandate 100% of demand 100% of mandate Year 2 70% of mandate 100% of demand 85% of mandate
Year 3 50% of mandate 90% of demand 70% of mandate
Year 4 50% of mandate 75% of CCCE demand 65% of mandate Year 5
50% of CCCE RPS Procurement
Strategy 75% of demand 65% of mandate

5.1.3 Capacity Procurement Tolerances
Period Minimum Tolerance Maximum Tolerance Target
Prompt Month 100% of required 100% of required 100% of required Prompt Quarter 90% of required 100% of required 100% of required Year 1 (Current Year) 90% of required 100% of required 100% of required Year 2 80% of required 100% of required 90% of required Year 3 50% of required 100% of required 70% of required Year 4 20% of required 70% of required 50% of required
Year 5 0% of required 50% of required 40% of required
16 5.2 Monitoring, Reporting and Instances of Exceeding Risk Limits The Middle Office is responsible for monitoring, and reporting compliance with, all limits within this Policy. If a limit or control is violated, the Middle Office will notify the CEO and the RMC. The RMC will discuss the cause and potential remediation of the exceedance to determine next steps for curing the exceedance.
17 SECTION 6: CREDIT POLICY
Counterparty and generalized credit risk are significant risks to CCCE’s financial operations. The Middle Office will conduct a thorough analysis of all candidate counterparties prior to approving them to transact. This analysis will include but not be limited to analyzing the proposed counterparty’s financial statements, credit rating, liquidity, hedge levels, market sensitivity, and business operations. The Middle Office will determine whether to extend an unsecured or secured credit line to the candidate counterparty, as appropriate. The maximum unsecured credit line that can be extended to any counterparty is $50 Million.

In addition to individual counterparty limits, the Middle Office will set limits by credit rating, tenor, product, and, where appropriate, transaction type and delivery type. For example, it may set an overall limit of $50 million for counterparties rated BB+ that supersedes the BB+ counterparties’ individual credit approvals of $100 million. This will limit concentration of credit risk.

Counterparty credit health and generalized credit conditions will be monitored on an ongoing basis.

Individual counterparty limits or aggregate credit limits by tenor/product/credit rating may be adjusted up or down to reflect current conditions. Counterparties who exceed limits must promptly post enough collateral to come into compliance or have their positions liquidated. 18 SECTION 7: POSITION TRACKING AND MANAGEMENT REPORTING Minimum reporting requirements are shown below. The reports outlined below will be made available to RMC members:
 Monthly Financial Model Forecast
Latest projected financial performance, marked to current market prices, and shown relative to financial goals
 Monthly Net Position Report
Prepare a forward net position report and report the results to the RMC  Monthly Counterparty Credit Exposure
This report will show credit exposures for transactions executed by CCCE  Monthly Risk Analysis
This will include a stress test of financial forecast relative to financial goals 19 SECTION 8: POLICY REVISION PROCESS
CCC’s Energy Risk Management Policy will evolve over time as market and business factors change. At least on an annual basis, the RMC will review this Policy and associated procedures to determine if they should be amended, supplemented, or updated to account for changing business and/or regulatory requirements. If an amendment is warranted, the Policy amendment will be submitted to the CCCE Board for approval. Changes to appendices to this Policy may be approved by the RMC.

8.1 Acknowledgement of Policy
Any CCCE employee participating in any activity or transaction within the scope of this Policy shall sign on an annual basis or upon any revision, a statement approved by the RMC that such employee:
 Read CCCE’s Energy Risk Management Policy
 Understands the terms of said Policy
 Will comply with said Policy
 Understands that any violation of said Policy shall be subject to employee discipline up to and including termination of employment.

8.2 Policy Interpretations
Questions about the interpretation of any matters of this Policy should be referred to the CEO. All legal matters stemming from this Policy will be referred to General Counsel. 20 Appendix A: AUTHORIZED TRANSACTION TYPES, REGIONS, AND MARKETS All transaction types listed below must be executed within the limits set forth in this Policy. (The following transaction types can be ‘nonstandard’ at CCCE subject to RMC approval) Over the Counter Products
 CAISO Market Products
o Day-ahead and Real-time Energy
o Congestion Revenue Rights
o Convergence bids
o Inter Scheduling Coordinator Transactions
o Tagging into and out of CAISO
 Physical Power Products
o Power
o Physical Over-the-counter Options
o Physical Resource Adequacy Capacity
 Physical Transmission Products
o Physical WECC transmission
 Physical Environmental Products
o Renewable Energy Credits
o Specified Source Power
o Carbon Allowances and Obligations
 Financial Power Products
o Power
o Financial Over-the-counter Options
21 Appendix B: NEW TRANSACTION APPROVAL FORM
New or Non-Standard Transaction Approval Form
Prepared By: Date:

New or Non-Standard Transaction Name:

Business Rationale and Risk Assessment:
 A description of the benefit to CCCE, such as decreasing costs, managing volatility etc.  The role of the new product in CCCE’s overall portfolio and risk management strategies  Middle Office risk analysis that identifies the specific risks mitigated by the new product and illustrates its application
 Transaction process, initial risk limits and settlement process  An assessment of the legal, tax, and regulatory aspects of the product  Proposed valuation methodology (including pricing model, where appropriate)  Proposed reporting requirements, including any changes to existing procedures and system requirements necessary to support the new transaction type  Proposed accounting methodology
Reviewed by:

Chief Operating Officer Date
Chief Financial Officer Date
General Counsel Date
Chief Executive Officer Date
22 Appendix C: DEFINITIONS
Back Office: That part of a trading organization which handles transaction accounting, confirmations, management reporting, contract administration and working capital management, which reports to the Chief Operating Officer.

Bilateral Transaction: Any physical or financial transaction between two counterparties, neither of whom is an Exchange or market entity such as CAISO.

Cash Flow at Risk: A measure of the potential shortfall in cash flow from a specified level during a specified period of time at a specified confidence level.

CAISO: California Independent System Operator. CAISO operates a California bulk power transmission grid, administers the State’s wholesale electricity markets, and provides reliability planning and generation dispatch.

California Energy Commission (CEC): CEC is the primary energy policy and planning agency for California.

California Fair Political Practices Commission (FPPC): FPPC is a five-member independent, non-partisan commission that has primary responsibility for the impartial and effective administration of the Political Reform Act.

Community Choice Aggregator (CCA): CCAs allow local government agencies such as cities and/or counties to purchase and/or develop generation supplies on behalf of their residents, businesses, and municipal accounts.

Commodity Futures Trading Commission (CFTC): The CFTC is a U.S. federal agency that is responsible for regulating commodity futures and swap markets. It goals include the promotion of competitive and efficient futures markets and the protection of investors against manipulation, abusive trade practices and fraud.

Clearing: Clearing is the process of reconciling purchases and sales of a commodity, as well as the direct transfer of funds from one financial institution to another. The process validates the availability of funds, records the transfer, and in the case of financial securities, ensure the delivery to the buyer.

Commodity: A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often used as inputs in the production of other goods or services. The quality of a given commodity may differ slightly, but it is essentially uniform across producers. When they are traded on an exchange, commodities must also meet specified minimum standards, also known as a basis grade.

Confirmation Letter: A letter agreement between two counterparties that details the specific commercial terms (e.g., price, quantity and point of delivery) of a transaction.

Congestion Revenue Right: A point-to-point financial instrument in the Day-Ahead Energy Market that entitles the holder to receive compensation for or requires the holder to pay certain congestion related transmission charges that arise when the transmission system is congested.

Counterparty Credit Risk: The risk of financial loss resulting from a counterparty to a transaction failing to fulfill its obligations.
23 Counterparty Credit Exposure: This measures the known exposures and is represented by the sum of both (a)Realized exposure and (b) Forward exposure, as those terms are defined below:

Realized exposure: payable or receivable amount owed between counterparties, is a measurement of cash flow for billed and unbilled transactions.

Forward exposure: measure of current unrealized exposure and includes the measure of a counterparty’s incentive to fulfill contractual obligations. Forward exposure measures the risk associated with having a payment default or the need to replace a transaction in the event of delivery default.

Edison Electric Institute (EEI): EEI is an association that represents all U.S. investor-owned electric companies.

Day-ahead Market: The short-term forward market for efficiently allocating transmission capacity and facilitating purchases and sales of energy and scheduled bilateral transactions; conducted by CAISO prior to the operating day.

Delivery point: the point at which a commodity will be delivered and received.

Federal Energy Regulatory Commission (FERC): FERC is a federal agency that regulates the interstate transmission of electricity, natural gas, and oil. FERC also reviews proposals to build liquefied natural gas terminals, interstate natural gas pipelines, as well as licenses hydroelectric generation projects.

Front Office: That part of a trading organization which solicits customer business, services existing customers, executes trades and ensures the physical delivery of commodities, which reports to the Chief Operating Officer.

Hedging products: Hedging products means capacity, energy, renewable energy credits or other products related to a specific transaction.

Hedging Transaction: A transaction designed to reduce the financial exposure of a specific outstanding position or portfolio; “fully hedged” equates to complete elimination of the targeted risk and “partially hedged” implies a risk reduction of less than 100%.

InterContinental Exchange (ICE): ICE s an American company formed in 2000 that operates global financial exchanges, clearing houses and provides mortgage technology, data and listing services.

Investor Owned Utility (IOU): An IOU is a business organization providing electrical and/or natural gas services to both retail and wholesale consumers and is managed as a private enterprise. Pacific Gas & Electric Company (PG&E) and Southern California Edison (SCE) are examples of IOUs.

Middle Office: That part of a trading organization that measures and reports on market risks, develops risk management policies and monitors compliance with those policies, manages credit, and keeps management and the Board informed on risk management issues, which reports to the Chief Financial Officer.

Speculation: Speculation is the act of trading an asset with the expectation of realizing financial gain resulting from a change in price in the asset being transacted.

Value-at-Risk (VaR): VaR is a risk tolerance metric that quantifies the extent of possible financial losses within a firm, portfolio, or position over a specific time frame.

Western Systems Power Pool (WSPP): WSPP is an organization of electrical wholesale market entities that have developed and utilize a standardized agreement (WSPP Agreement) to execute trading opportunities, allowing WSPP members to manage power delivery and price risk. 24 Appendix D: DELEGATION OF FINANCIAL AUTHORITY
The Policy and Operations Boards of Directors (“Boards”) explicitly delegate approval of transactions to the CEO, RMC as outlined in the following table
Position Maturity Limit Term Limit Value Limit ($)2
Risk Management Committee 72 Months 60 Months 110,000,000 Chief Executive Officer 48 Months 36 Months 65,000,000
These delegated authorities may be further delegated and used to set hedging and procurement limits necessary to manage CCCE’s portfolio. For example, the CEO could authorize the Front Office to trade up to 250 MW of Next-Week Heavy Load Hour Day-Ahead Power at NP15 on ICE.

Additionally, to adapt to changing market conditions and to facilitate the daily operations of CCCE, the Boards are delegating authority to CEO (or designee) to execute administrative amendments to duly approved transactions where such amendment does not exceed the CEO’s delegated authority as set forth above (for clarity, amendments exceeding Maturity, Term or Value limits shall require Operations Board approval) and further reduces CCCE’s risk in furtherance of this Policy. Such administrative amendments must be reported during the next RMC meeting and Operations Board meeting.

These authorities will be applied to wholesale power activity executed outside of the California Independent System Operator (“CAISO”) markets. These limits provide CCCE needed authorities to manage risks as they arise. Transactions falling outside the delegations above require Board approval prior to execution. Activity with CAISO is excluded from this table due to the nature of the market, where prices for activity may not be known until after transactions are committed.

All procurement executed under the delegation above, must align with the CCCE’s underlying risk exposure (locational, volume and temporal) that is being hedged consistent with the approved Procurement Strategy.

The point of delivery for all products must be at a location on the CAISO transmission grid.

Energy Risk
Management Policy
Initial Version March 2018 –Policy Board of Directors Approved First Revision September 2018 –Operations Board of Directors Approved Second Revision November 2020 –Operations Board of Directors Approved 1 Table of Contents
2 Table of Contents
SECTION 1: POLICY OVERVIEW .....................................................................................................................4 1:1 Background and Purpose....................................................................................................................4