Exhibit S - 4 4161-0745-8120.7
under the PPA with respect to CAISO revenues and costs. As used in this clause (h), the following terms have the meanings specified below.
“CAISO” means California Independent System Operator or its successor. “CAISO Tariff” means CAISO’s Federal Energy Regulatory Commission approved tariff, as modified, amended or supplemented from time to time. “Inter-SC Trade” or “IST” has the meaning set forth in the CAISO Tariff. “Scheduling Coordinator” means an entity certified by the CAISO as qualifying as a Scheduling Coordinator pursuant to the CAISO Tariff for the purposes of undertaking the functions specified in “Responsibilities of a Scheduling Coordinator,” of the CAISO. (h) The Assigned Prepay Quantity set forth in Appendix 2 relates to obligations by and between J. Aron and PPA Buyer and has no impact on PPA Seller’s rights and obligations under the PPA.
2. Assignment Early Termination.
(a) The Assignment Period shall be terminated early upon the occurrence of any of the following:
(1) delivery of a written notice of termination by either J. Aron or PPA Buyer to each of the other Parties hereto;
(2) delivery of a written notice of termination by PPA Seller to each of J. Aron and PPA Buyer following J. Aron’s failure to pay when due any amounts owed to PPA Seller in respect of any Delivered Product Payment Obligation and such failure continues for one business day following receipt by J. Aron of written notice thereof;
(3) delivery of a written notice by PPA Seller if any of the events described in Section [__] [Bankruptcy] of the PPA occurs with respect to J. Aron; or (4) delivery of a written notice by J. Aron if any of the events described in Section [__] [Bankruptcy] of the PPA occurs with respect to PPA Seller. (b) The Assignment Period will end at the end of last delivery hour on the date specified in the termination notice provided pursuant to Section 2(a), which date shall not be earlier than the end of the last day of the calendar month in which such notice is delivered if termination is pursuant to clauses (a)(1) or (a)(2) above. All Assigned Rights and Obligations shall revert from J. Aron to PPA Buyer upon the expiration or early termination of the Assignment Period, provided that (i) J. Aron and PPA Buyer shall be jointly and severally responsible for the Delivered Product Payment Obligation with respect to any Assigned Product delivered to J. Aron prior to the end of the Assignment Period, and (ii) any legal restrictions on the effectiveness of such reversion (whether arising under bankruptcy law or otherwise) shall not affect the expiration or early termination of the Assignment Period.
(c) The Assignment Period will automatically terminate upon the expiration or early termination of the PPA. All Assigned Rights and Obligations shall revert from J. Aron to PPA Buyer upon the expiration of or early termination of the PPA, provided that (i) J. Aron and PPA Buyer shall be jointly and severally responsible for the Delivered
Exhibit S - 5 4161-0745-8120.7
Product Payment Obligation with respect to any Assigned Product delivered to J. Aron prior to the end of the Assignment Period, and (ii) any legal restrictions on the effectiveness of such reversion (whether arising under bankruptcy law or otherwise) shall not affect the expiration or early termination of the Assignment Period. (d) The Assignment Period will automatically terminate upon delivery by Guarantor of a notice of termination of the Guaranty. All Assigned Rights and Obligations shall revert from J. Aron to PPA Buyer upon the termination of the Assignment Period, provided that (i) J. Aron and PPA Buyer shall be jointly and severally responsible for the Delivered Product Payment Obligation with respect to any Assigned Product delivered to J. Aron prior to the end of the Assignment Period, and (ii) any legal restrictions on the effectiveness of such reversion (whether arising under bankruptcy law or otherwise) shall not affect the expiration or early termination of the Assignment Period.
3. Representations and Warranties.
(a) Each Party represents and warrants to the others that (i) it is validly organized and existing and in good standing under the laws of the State of its organization and has full power and authority to enter into and perform its obligations under this Assignment Agreement, (ii) it has duly authorized, executed and delivered this Assignment Agreement, and this Assignment Agreement is fully enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency and other laws affecting creditors’ rights and remedies generally and subject, as to enforceability, to general principles of equity, and (iii) the execution, delivery and performance by it of this Assignment Agreement does not and will not contravene or conflict with any law, order, rule, regulation, writ, injunction or decree now in effect of any government, governmental instrumentality or court or tribunal having jurisdiction over it, or any contractual restriction binding on or affecting it.
(b) The PPA Seller and the PPA Buyer each represents and warrants to J. Aron that (a) the PPA is in full force and effect; (b) it has no current actual knowledge that any event or circumstance exists (or would exist with the passage of time or the giving of notice) that would give it the right to terminate the PPA or suspend performance thereunder; and (c) its obligations under the PPA required to be performed on or before the Assignment Period Start Date have been fulfilled in all material respects.
(c) J. Aron represents and warrants to PPA Seller that, in accordance with Section 1(e) of this Assignment Agreement, J. Aron will immediately resell all Assigned Products at wholesale to PPA Buyer through one or more intermediaries, and that J. Aron and each such intermediary entity has all requisite power and authority to perform such transactions and (to the extent applicable) has obtained authority from the Federal Energy Regulatory Commission under Section 205 of the Federal Power Act to make such sales of wholesale power at market-based rates.
4. Notices. Any notice, demand, or request required or authorized by this Assignment Agreement to be given by one Party to another Party shall be delivered in accordance with Section [__] of the PPA and to the addresses of each of PPA Seller and PPA Buyer specified in the PPA. PPA Buyer agrees to notify J. Aron of any updates to such notice information, including any updates provided by PPA Seller to PPA Buyer. Notices to J. Aron shall be provided to the following address, as such address may be updated by J. Aron from time to time by notice to the other Parties:
J. Aron & Company LLC
Exhibit S - 6 4161-0745-8120.7
200 West Street
New York, New York 10282-2198
Email: [email protected]
5. Miscellaneous. Sections [__] (Buyer’s Representations and Warranties), [___] (Limitation of Liability and Exclusion of Warranties), [__] (Confidential Information), Sections [__] (Severability), [__] (Amendments), [__] (No Agency, Partnership, Joint Venture or Lease), [__] (Mobile-Sierra), [__] (Counterparts; Electronic Signatures), Section [__] (Binding Effect) and [__] (No Recourse to Members of Buyer) of the PPA are incorporated by reference into this Agreement, mutatis mutandis, as if fully set forth herein.
6. U.S. Resolution Stay Provisions. The Parties hereby confirm that they are adherents to the ISDA 2018 U.S. Resolution Stay Protocol (“ISDA U.S. Stay Protocol”), the terms of the ISDA U.S. Stay Protocol are incorporated into and form a part of this Agreement, and for the purposes of such incorporation, (i) J. Aron shall be deemed to be a Regulated Entity, (ii) each of PPA Buyer and PPA Seller shall be deemed to be an Adhering Party, and (iii) this Agreement shall be deemed a Protocol Covered Agreement. In the event of any inconsistencies between this Agreement and the ISDA U.S. Stay Protocol, the ISDA U.S. Stay Protocol will prevail.
7. Governing Law, Jurisdiction, Waiver of Jury Trial.
(a) Governing Law. This Assignment Agreement and the rights and duties of the Parties under this Assignment Agreement will be governed by and construed, enforced and performed in accordance with the laws of the State of California, without reference to any conflicts of laws provisions that would direct the application of another jurisdiction’s laws; provided, however, that the authority of PPA Buyer to enter into and perform its obligations under this Assignment Agreement shall be determined in accordance with the laws of the State of California.
(b) Jurisdiction. Each Party submits to the exclusive jurisdiction of the federal courts of the United States of America for the Northern District of California sitting in the city and county of San Francisco.
(c) Waiver of Right to Trial by Jury. Each Party waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect of any suit, action or proceeding relating to this assignment agreement.
[Remainder of Page Intentionally Blank]
Exhibit S - 7 4161-0745-8120.7
IN WITNESS WHEREOF, the Parties have executed this Assignment Agreement effective as of the date first set forth above.
[PPA SELLER]
By:
Name:
Title:
CENTRAL COAST COMMUNITY ENERGY
By:
Name:
Title:
J. ARON & COMPANY LLC
By:
Name:
Title:
Execution and delivery of the foregoing Assignment Agreement is hereby approved.
CALIFORNIA COMMUNITY CHOICE FINANCING AUTHORITY
By:
Name:
Title:
Exhibit S - 8 4161-0745-8120.7
Appendix 1
Assigned Rights and Obligations
PPA: “PPA” means that certain Amended and Restated Renewable Power Purchase and Sale Agreement dated [____], by and between Central Coast Community Energy and [____], as amended from time to time.
“Assignment Period” means the period beginning on [___________] and extending until [___________], provided that in no event shall the Assignment Period extend past the earlier of (i) the termination of the Assignment Period pursuant to Section 2 of the Assignment Agreement and (ii) the end of the Delivery Term under the PPA; provided that applicable provisions of this Agreement shall continue in effect after termination of the Assignment Period to the extent necessary to enforce or complete, duties, obligations or responsibilities of the Parties arising prior to the termination.
Assigned Product: “Assigned Products” mean all (i) PV Energy and (ii) Green Attributes (PCC1) produced by the Generating Facility. For clarity, the Assigned Products and Assigned Product Rights mean solely (a) the right under PPA Section 4.2(a) to receive and take title to PV Energy at the Delivery Point and (b) the right under PPA Section 4.2(b) and to receive and take title to all Green Attributes as and when delivered to a designated WREGIS account in accordance with WREGIS.
Further Information: PPA Seller shall continue to transfer the WREGIS Certificates associated with all Renewable Energy Credits corresponding to all PV Energy under the PPA pursuant to Section [__] of the PPA, provided that the transferee of such WREGIS Certificates may be changed from time to time in accordance with the written instructions of both J. Aron and PPA Buyer upon twenty (20) Business Days’ notice, which change shall be effective as of the first day of the next calendar month, unless otherwise agreed. All Assigned Product delivered by PPA Seller to J. Aron shall be a sale made at wholesale, with J. Aron reselling all such Assigned Product.
Exhibit S - 9 4161-0745-8120.7
Appendix 2
Assigned Prepay Quantity
[NOTE: This Appendix 2 is solely for the convenience of reference of PPA Buyer and J. Aron and shall have no impact on the obligations of the parties under the PPA or the Assignment Agreement.]
[NOTE: To be set forth in a monthly volume schedule.]
Exhibit S - 10 4161-0745-8120.7
Appendix 3
Form of GSG Guaranty
, 20[__]
NAME
ADDRESS
Attention:
Ladies and Gentlemen:
For value received, The Goldman Sachs Group, Inc. (the “Guarantor”), a corporation duly organized under the laws of the State of Delaware, hereby unconditionally guarantees the prompt and complete payment when due, whether by acceleration or otherwise, of all obligations and liabilities, whether now in existence or hereafter arising, of J. Aron & Company LLC, a subsidiary of the Guarantor and a limited liability company duly organized under the laws of the State of New York (the “Company”), to COUNTERPARTY NAME (the “Counterparty”) arising out of or under the Limited Assignment Agreement (the “Assignment”) among the Company, the Counterparty and Central Coast Community Energy dated as of [ ], 20[__]. This Guaranty is one of payment and not of collection.
The Guarantor hereby waives notice of acceptance of this Guaranty and notice of any obligation or liability to which it may apply, and waives presentment, demand for payment, protest, notice of dishonor or non-payment of any such obligation or liability, suit or the taking of other action by Counterparty against, and any other notice to, the Company, the Guarantor or others.
The Guarantor hereby waives any defense arising by reason of any disability, bankruptcy or insolvency of the Company, including by reason of any lack of authorization or due execution or delivery of the Assignment or guaranteed obligations.
Counterparty may at any time and from time to time without notice to or consent of the Guarantor and without impairing or releasing the obligations of the Guarantor hereunder:
(1) agree with the Company to make any change in the terms of any obligation or liability of the Company to Counterparty, (2) take or fail to take any action of any kind in respect of any security for any obligation or liability of the Company to Counterparty, (3) exercise or refrain from exercising any rights against the Company or others, or (4) compromise or subordinate any obligation or liability of the Company to Counterparty including any security therefor. Any other suretyship defenses are hereby waived by the Guarantor.
This Guaranty shall continue in full force and effect until the opening of business on the fifth business day after Counterparty receives written notice of termination from the Guarantor. It is understood and agreed, however, that notwithstanding any such termination this Guaranty shall continue in full force and effect with respect to the obligations and liabilities set forth above
Exhibit S - 11 4161-0745-8120.7
which shall have been incurred prior to such termination. The Guarantor agrees that its guarantee hereunder shall continue to be effective if at any time payment, or any part thereof, of any obligation is rescinded or must otherwise be restored by the Counterparty upon the bankruptcy or reorganization of the Company (or Guarantor) or otherwise.
The Guarantor may not assign its rights nor delegate its obligations under this Guaranty, in whole or in part, without prior written consent of the Counterparty, and any purported assignment or delegation absent such consent is void, except for (i) an assignment and delegation of all of the Guarantor’s rights and obligations hereunder in whatever form the Guarantor determines may be appropriate to a partnership, corporation, trust or other organization in whatever form that succeeds to all or substantially all of the Guarantor’s assets and business and that assumes such obligations by contract, operation of law or otherwise, and (ii) the Guarantor may transfer this Guaranty or any interest or obligation of the Guarantor in or under this Guaranty, or any property securing this Guaranty, to another entity as transferee as part of the resolution, restructuring or reorganization of the Guarantor upon or following the Guarantor becoming subject to a receivership, insolvency, liquidation, resolution or similar proceeding. Upon any such delegation and assumption or transfer of obligations, the Guarantor shall be relieved of and fully discharged from all obligations hereunder, whether such obligations arose before or after such delegation and assumption or transfer.
THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
GUARANTOR AGREES TO THE EXCLUSIVE JURISDICTION OF COURTS
LOCATED IN THE STATE OF NEW YORK, UNITED STATES OF AMERICA, OVER ANY DISPUTES ARISING UNDER OR RELATING TO THIS GUARANTY.
In the event the Guarantor becomes subject to a proceeding under the Federal Deposit Insurance Act or Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (together, the “U.S. Special Resolution Regimes”), the transfer of this Guaranty, and any interest and obligation in or under, and any property securing, this Guaranty, from the Guarantor will be effective to the same extent as the transfer would be effective under such U.S. Special Resolution Regime if this Guaranty, and any interest and obligation in or under this Guaranty, were governed by the laws of the United States or a state of the United States. In the event the Company or the Guarantor, or any of their affiliates, becomes subject to a U.S. Special Resolution Regime, default rights against the Company or the Guarantor with respect to this Guaranty are permitted to be exercised to no greater extent than such default rights could be exercised under such U.S. Special Resolution Regime if this Guaranty was governed by the laws of the United States or a state of the United States.
Very truly yours,
THE GOLDMAN SACHS GROUP, INC.
By: _______
Authorized Officer
Staff Report Item 14
TO: 3CE Operations Board of Directors
FROM: Robert M. Shaw, Chief Executive Officer
PREPARED BY: Dewayne Woods, Chief Financial Officer
SUBJECT: Support seeking the Policy Board's approval to adopt the Fiscal Year 2023-24 Recommended Budget for Central Coast Community Energy (3CE) including updated Financial Policies and cost-based rate adjustments
DATE: September 13, 2023
RECOMMENDATION:
This memorandum recommends the Operations Board consider supporting the Policy Board approve and adopt Fiscal Year 2023-24 Recommended Budget for 3CE, including the Financial Policies and cost-based rate adjustments on October 1, 2023, and January 1, 2024.
BACKGROUND:
3CE adopts an annual budget for the fiscal year that runs from October 1st through September 30th.
Attached is the Executive Summary providing detailed information on the Fiscal Year (FY) 2023-24 Recommended Budget including the major cost drivers and corresponding cost-based rate adjustments required to maintain a balanced budget.
DISCUSSION/ANALYSIS:
The Recommended Budget for FY 2023-24 totals $562.8 million and funds 52 Full- Time Equivalent (FTE) positions. Significant changes since the adoption of the FY 2022-23 budget include: increases in Cost of Energy (COE) by $116.9 million or 29%, increases in Salary and Benefits by $346,541 (3.8%), and increases in Services and Supplies of $2.6 million (8.5%), for an overall increase in appropriations of $119.6 million (27%).
The COE accounts for 92.4% of all expenditures and drives 3CE’s rates, outpacing all other expenditures, which total a mere 7.6% of overall costs combined. The 7.6% is comprised of 1.7% related to staffing,
and the remaining 5.9% is allocated for services and supplies, including all energy incentive programs.
Salary and benefit increases reflect annual salary increases and the expected filling of vacancies.
The two major cost increases in Services and Supplies are a contracted increase in Data Manager fees of $1.7 million and an increase in the agency’s operational contingency by $900,000. The increase in Data Manager fees was expected due to the FY 2022-23 transition to a single data and customer billing operations provider. The increase in contingency reflects a policy recommendation to budget 5% of operational appropriations for contingencies, excluding COE.
The increase in COE and other expenditures is financed by a recommended adjustment to electricity generation rates as follows: increases by an average of $0.025 per kilowatt-hour (kWh) in the PG&E service area and maintaining the 2%-minus per kWh rate in the Southern California Edison (SCE) service area, resulting in a $101 million increase in revenue collection. The COS rate increases will be effective October 1, 2023, and January 1, 2024, to provide a phased in approach to minimize overall increases to customers.
To keep rates as low as possible for our customers, this year’s Recommended Budget does not anticipate adding to the agency’s Net Position given that reserves are within an acceptable range as defined by the Recommended Financial Policies.
This year 3CE’s Recommended Financial Policies are completely updated with new reserve policies to reflect the complexity of our overall business. Reserves are structured with a Strategic Reserve equal to 25 percent of budgeted appropriations, an Energy Rate Stabilization Reserve equal to 20 percent of budgeted COE, a Renewable Energy Innovation and Initiatives Reserve equal to five percent of COE, a Capital Infrastructure Reserve to be based on a Capital Improvement and Replacement Plan, and an increase of the Operational Contingency to five percent of appropriations excluding COE.
FISCAL IMPACT:
Adoption of the Recommended Budget funds $562.8 million in expenditures and allows 3CE to continue operations with a balanced budget while minimizing costs to customers.
CONCLUSION:
It is recommended to support the Policy Board approve and adopt the Fiscal Year 2023-24 Recommended Budget for 3CE including updated Financial Policies and cost-based rate adjustments.
ATTACHMENT(S):
1. Executive Summary of the Budget Book
Executive Summary
14 Fiscal Year (FY) 2023-24 is 3CE’S sixth year of operation, and over this short period, much has been accomplished. The Recommended Budget for FY 2023-24 totals $562.8 million and funds 52 Full-Time Equivalent (FTE) positions. Significant changes since the adoption of the FY 2022-23 budget include: increases in Cost of Energy (COE) by $116.9 million or 29%, increases in Salary and Benefits by $346,541 (3.8%), and increases in Services and Supplies of $2.6 million (8.5%), for an overall increase in appropriations of $119.6 million (27%). The COE accounts for 92.4% of all expenditures and drives 3CE’s rates, outpacing all other expenditures, which total a mere 7.6% of overall costs combined.
The above chart reflects the importance of COE to the agency’s forecasted expenditures. After accounting for the COE, the remaining 7.6% is comprised of 1.7% related to staffing, and the remaining
5.9% is allocated for services and supplies, including all energy incentive programs. Salary and benefit increases reflect annual salary increases and the expected filling of vacancies.
The two major cost increases in Services and Supplies are a contracted increase in Data Manager fees of $1.7 million and an increase in the agency’s operational contingency of $900,000. The increase in Data Manager fees was expected due to the FY 2022-23 transition to a single data and customer billing operations provider. In FY 2023-24, this transition will be complete. The increase in contingency reflects a policy recommendation to budget 5% of operational appropriations for contingencies.
Customers’ electric generation rates in Pacific Gas & Electric’s (PG&E’s) service area are based solely on 3CE’s actual costs. With only 7.6% of budgeted costs related to non-energy procurement, cost-based rates in combination with prudent financial management provide substantial benefits to our customers.
The increase in COE and other expenditures is funded by a recommended adjustment to electricity generation rates as follows: increases by an average of $0.025 per kilowatt-hour (kWh) in the PG&E service area and maintenance of a 2%-minus per kWh rate in the Southern California Edison (SCE) service area, resulting in a $101 million increase in revenue collection.
To keep rates as low as possible for our customers, this year’s Recommended Budget does not anticipate adding to the agency’s Net Position given that reserves are within an acceptable range as defined by 3CE’s Financial Policies.
15 The chart below provides a summary of the FY 2023-24 Recommended Budget:
Maintaining competitive rates is a core goal and key component of 3CE’s stated aims of achieving 100% renewable energy, local control of our energy decisions, local economic stimulation, and decarbonization through electrification. This Recommended Budget provides rates that range on average between 3% to 22% below PG&E’s estimated rates (see chart below).
Energy
Staffing, Salaries and Benefits
Services and Supplies
FY 2023-24 Forecasted Expenses
AS A PERCENT OF TOTAL
Customer Classes Average Difference
3Cchoice to PG&E
Rates
Residential -16%
Small Commercial -17%
Medium Commercial -22%
Large Commercial -21%
Agricultural -18%
Streetlights -3%
3Cchoice Rate Comparison
to PG&E
PG&E Average $/kWh $0.138
3Cchoice
(PG&E Territory) $/kWh $0.116
FY 2023-24 Budget Summary
FY 22-23 Final
Adopted
FY 23-24 Baseline FY 23-24
Recommended
Augmentation
FY 23-24
Recommended Budget
FY 23-24 Variance
Prior Year Budget
REVENUE
Total $461,797,031 $455,128,399 $107,705,049 $562,833,447 $101,036,416
COST OF ENERGY SOLD
Subtotal $403,427,380 $520,297,514 $520,297,514 $116,870,134
SALARIES & BENEFITS
Subtotal $9,190,535 $9,537,076 $9,537,076 $346,541
SERVICES & SUPPLIES
Subtotal $30,416,173 $29,968,253 $3,030,605 $32,998,858 $2,582,685
CAPITAL
Subtotal $202,779 ($202,779)
Total Appropriations $443,236,867 $559,802,843 $3,030,605 $562,833,448 $119,596,581 Total Financing Sources $461,797,031 $455,128,399 $107,705,049 $562,833,448 $101,036,416 Total Budgeted Change to
Net Position $18,560,164 ($104,674,444) $104,674,444 ($0) ($18,560,164)
92.4%
5.9%
1.7%
Executive Summary (continued)
16 The 3CE service area overlapping with SCE’s service territory is planned to transition to cost-based rates as part of our next three-year rate-setting cycle covering years 2025-2027. Rates for our customers in this area are currently set to follow SCE’s generation rates minus 2%, maintaining 3CE’s competitiveness in the market.
In September 2020, 3CE’s Policy Board voted to serve 60% of retail sales with clean and renewable energy by the end of 2025, with the larger goal of being 100% clean and renewable by 2030. Today we are on our way toward meeting those goals while maintaining competitive electricity rates and providing innovative services for our community.
In recent years 3CE has increased our number of long-term PPAs, which serve to stabilize rates in addition to growing our renewable energy portfolio. 3CE currently has six renewable projects online that are producing energy that meets more than a quarter of retail sales. Six more projects are in development with anticipated commercial operation dates prior to 2026. Assuming the on-time delivery of these projects, 3CE will meet its goal of 60% clean and renewable energy in 2025.
While 3CE has demonstrated success bringing new clean and renewable resources online, the electricity generation sector, including 3CE, faces several challenges that could impact 3CE’s aggressive renewable goals.
Project Delays
Developers continue to claim impacts to contractual online dates from supply chain disruptions, inflation, the Russian War in Ukraine, and mounting interconnection issues. Delays to 3CE’s new generation projects jeopardize our ability to meet compliance obligations, and to stabilize the cost of energy with fixed low-cost contracts. 3CE is working with developers to help address these impacts, ensure value for customers, and bring resources online as fast and cost-effectively as possible.
Wholesale Market Volatility
Natural gas storage and distribution constraints, a colder-than-usual winter, prolonged summer heat events throughout California and the western United States, and many of the same macroeconomic conditions impacting developers, continue to fuel unprecedented wholesale market volatility. A strategic and layered procurement approach in accordance with 3CE’s Energy Risk Management Policy, maintenance of a strong credit rating, and disciplined fiscal management by our Boards has enabled 3CE to minimize the cost impacts to date.
Resource Adequacy
Resource Adequacy (RA) is not energy and does not create additional capacity for the grid. Rather, RA is a compliance product that commits generators to be available to dispatch when needed.
Regulatory changes have increased the amount of RA that Load Serving Entities (LSEs) are required to purchase, while the retirement of fossil-burning generators and limitations on qualifying imports have decreased the supply of available RA resources. The imbalance of supply and demand has spiked RA prices by over 200% year over year to levels that exceed price caps set by many regulatory commissions across the country. While California has no resource adequacy price cap, states that do generally set the cap below what officials deem excessive. 17 The impact on 3CE has been dramatic. RA constituted 11% of the budgeted FY 2022-23 COE.
That number is anticipated to be 17.5% of COE at the current fiscal year close. In the FY 2023-24 Recommended Budget, RA accounts for 29% of the total COE and 93% of the total increase in COE.
The current environment presents many challenges to bringing new renewable electricity projects to 3CE’s energy portfolio. Developing PPAs will need to be expanded to bring pricing stability and ensure the attainment of our renewable goals in the years ahead.
Regardless of the increased COE and an ever-changing regulatory environment, 3CE’s rates remain extremely competitive on average when benched to those of Investor-Owned Utilities (IOUs) like PG&E and SCE. This Recommended Budget strives to balance increased costs with our mission to provide renewable energy at affordable rates. We present this budget as a step in the right direction to serve our communities while meeting the challenges associated with a highly competitive energy procurement market and heavily regulated industry.