Central Coast Community Energy (3CE) Audit & Finance Committee
February 21, 2024

Audit and Finance Committee
February 21, 2024
9:00AM
Central Coast Community Energy
70 Garden Court, Suite 300
Monterey, CA 93940

REMOTE LOCATION VIA TELECONFERENCE
Any interested parties or community Committee Members may attend, and participate in, the meeting at the following addresses where Committee Members may also join the meeting from:

County of San Luis Obispo
County Administration Building
1055 Monterey Street, Ste D4300
San Luis Obispo, CA 93408
City of San Luis Obispo
City Hall
990 Palm Street, Hearing Room
San Luis Obispo, CA 93401
City of Goleta
City Hall
130 Cremona Drive, Ste B, Conference Room 1
Goleta, CA 93117
Public may participate through ZOOM. For ZOOM participation please join by computer audio at:
https://us02web.zoom.us/j/89130443641
Or join by phone:
+1 669 900 6833 or +1 669 219 2599
Enter this Webinar ID Number: 891 3044 3641 when prompted. Please note there is no Participant Code, you will press # again after the recording prompts you.

You will be placed in the meeting as an attendee. To make a public comment:
 If joined by computer, please press the button to raise your hand  If joined by phone, please push *9 on your keypad
If you have anything that you wish to be distributed to the Committee Members, please provide 15 copies to a member of 3CE staff or the Board Clerk, who will distribute the information to the Committee Members and staff.

The public may comment on the consent agenda and matters not listed on the agenda but within the Committee Members 's jurisdiction at the opening of the meeting. The Committee Members may not take action at this meeting on any item not listed on the agenda other than to refer the matter to staff or set it for a future meeting. The public may comment on a specific item listed on this agenda when the Committee Members consider that item. Speakers are limited to 3 minutes each.

In addition, Committee Members of the public may request and receive copies without undue delay of any documents that are distributed to the Committee Members, unless there is a specific exemption under the Public Records Act that prevents the disclosure of the record. (Cal. Gov’t Code Section 54957.5)
In compliance with Government Code Section 54957.5, non-exempt writings that are distributed to a majority or all of the Committee Members in advance of a meeting and that relate to an agenda item will be made available at 3CE’s offices located at 70 Garden Court, Suite 300, Monterey, CA 93940 during normal business hours and are also available on the 3CE website located at: https://pub-3ce.escribemeetings.com/

AGENDA

Welcome & Roll Call
Pledge of Allegiance
Corrections or Additions
The Clerk will announce agenda corrections or proposed additions of emergency, urgency, or continued items, which will be acted on by the Board as provided in Section 54954.2 of the California Government Code.

Public Comment on Items on the Consent Calendar and Items Not listed on the Agenda The public may address the Committee on the Consent Calendar and any matter within the jurisdiction of the Committee but not on the agenda.

CONSENT CALENDAR

1. Approve Minutes from the August 29, 2023 Meeting of the Audit and Finance Committee

2. Adopt a Regular Meeting Schedule for the 3CE Audit and Finance Committee

REGULAR AGENDA

3. Receive a presentation on 3CE's FY 2022-23 Audited Financial Statements

4. Receive a presentation on Investment Performance and Diversification

5. Receive a Report on status for Setting Rates Beginning FY 2024-25 Adjournment
Audit and Finance Committee
Special Meeting
August 29, 2023
2:00 P.M.

Central Coast Community Energy
70 Garden Court, Suite 300
Monterey, CA 93940
City of Watsonville
275 Main Street, 4th Floor
Watsonville, CA 95076
City of Pismo Beach
City Hall
760 Mattie Road
Pismo Beach, CA 93449
City of San Luis Obispo
City Hall
990 Palm Street, Hearing Room
San Luis Obispo, CA 93401

MINUTES
The meeting was called to order at 2:00 P.M. with 5 members attending from 4 noticed locations and a quorum established.

Members Present: 3CE HQ: Freeman, Hannah
City of Watsonville: Mendez
City of Pismo Beach: Waage
City of San Luis Obispo: Chair Johnson
Members Absent: None

REGULAR AGENDA

1. Supports 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
The Chair opened the public comment period.

There were no public comments.

The Chair closed the public comment period.

MOTION: Moved by Member Waage, seconded by Member Freeman to approve.

ACTION: The Motion Carried with a roll call vote: 5/0/0 AYES: Freeman, Hannah, Mendez, Waage, Chair Johnson
NOES: None
ABSENT: None
Adjourned at 9:21 A.M.

Staff Report Item 2
TO: 3CE Audit and Finance Committee
FROM: Robert M. Shaw, Chief Executive Officer
PREPARED BY: Heather Vowell, Board Clerk
SUBJECT: Adopt a Regular Meeting Schedule of the 3CE Audit and Finance Committee DATE: February 21, 2024
RECOMMENDATION:

This recommends the Audit and Finance Committee adopt a regular meeting schedule, conducting a quarterly meeting.

BACKGROUND:

Article VII, Section 4 of the 3CE Operating Rules and Regulations requires the Audit and Finance Committee to meet quarterly, and as needed.

DISCUSSION/ANALYSIS:

Staff proposes that the Audit and Finance Committee meet quarterly.

Regular Meeting Schedule
Example 2024 Dates
February 21, 2024, 9:00 A.M.

May 29, 2024, 10:30 A.M.

August 28, 2024, 10:30 A.M.

November 20, 2024 10:30 A.M.

Staff Report Item 3
TO: 3CE Audit and Finance Committee
FROM: Robert M. Shaw, Chief Executive Officer
PREPARED BY: Juan Lopez, Director of Finance
SUBJECT: Receive a Presentation on 3CE’s FY 2022-23 Audited Financial Statements DATE: February 21, 2024
RECOMMENDATION:

Receive a presentation on 3CE’s FY 2022-23 Audited Financial Statements.

BACKGROUND:
3CE is responsible for the preparation and fair presentation of financial statements. The independent auditor performs tests to ensure the financial statements are free from material misstatement. The Finance Department worked diligently with its accounting vendor and the external auditors, Pisenti & Brinker, over the past few months to ensure a proper review of 3CE’s financial controls and financial statements. The FY 2022-23 Financial Statements consist of the following:
• Independent Auditors’ Report
• Management’s Discussion and Analysis
• Financial Statements, including:
 Statements of Net Position
 Revenues and Expenses and Changes in Net Position
 Statements of Cash Flows
 Notes to the Financial Statements
DISCUSSION/ANALYSIS:

The Independent Auditors’ Report includes its opinion that 3CE’s FY 2022-23 Financial Statements present fairly, in all material respects, the financial position of 3CE as of September 30, 2022 and 2023, and the respective changes in financial position and cash. The Auditors’ Report contains what is generally regarded as an unqualified or “clean” audit opinion.

The auditor’s audit results letter states that they did not identify any internal control deficiencies that they consider a material weakness. Representatives from Pisenti & Brinker will be in attendance and available to answer questions during the Audit and Finance Committee meeting.

FY 2022-23 Financial Highlights
 The net position increased by $34.7 million, up from a $17.3 million increase in the prior year.

Cash, cash equivalents, and short-term investments grew by $71.5 million.  Operating revenues grew over $49.9 million, driven primarily by the rate adjustments to reflect the increased cost of energy.
 The cost of energy increased by approximately $32.1 million due to rising energy and resource adequacy costs and delays in new power projects resulting from interconnection delays, supply chain, and inflationary pressures.
 Operating expenses, excluding the cost of energy, increased year over year from $21.7 million in FY 2021-22 to $27.8 million in FY 2022-23, an increase of 28.3%.  Higher interest income from the increase in market interest rates stemming from rate hikes made by the Federal Reserve, resulting in $7.1 million in higher investment revenue than the prior year.  Cash was positively impacted by the increase in net position, higher accrued electricity costs, and lower energy market settlements and accounts receivable. Cash was negatively impacted by higher accrued revenue. Higher accrued revenue arose primarily from an increase in retail electricity rates. Higher accrued electricity costs resulted from higher electricity costs and delays in supplier invoicing for renewable energy. Security deposits from energy supplies increased as a result of delays with PPAs.
 The receipt and application of $1.5 million of California Arrearage Payment Program (CAPP) funds reduced eligible past-due accounts receivable.

FY 2022-23 Actuals Versus Budget
On May 10, 2023, the Operations Board received an update on the mid-year FY 2022-23 budget forecast.

The mid-year budget amendment sought to align expenditures and revenues resulting from external and internal factors, including higher energy costs and changes to electric generation rates.

Year-end actuals versus budget are favorable and speak to the value of the mid-year budget amendment.

Operating revenue was under budget by $3.4 million, a 0.8% variance. Investment revenue was $2.2 million over budget, thanks to higher-than-expected interest rates. The total revenue was $0.5 million under budget, a negligible variance supported by higher-than-estimated investment revenue. Operating expenditures were $17.7 million under budget, a 4.5% variance. Energy costs were $4.5 million under budget, a 1.1% variance. Non-energy operating costs were 33.1% under budget due to lower energy program current year expenditures, personnel, and administrative costs. Net income was $17.2 million over budget.

CONCLUSION:

For the year ending September 30, 2023, 3CE increased its net position and liquidity by $34.7 million and $71.5 million, respectively. These results and ongoing efforts by staff are strong indicators of 3CE’s sound financial health and positioned to serve its customers and deliver on its mission. A strong net position of $243.3 million supports 3CE’s newly adopted Financial Policies that established robust strategic reserves to sustain service delivery. Adequate reserves enable flexible financial planning to develop rate structures and future capital projects and deal with unforeseen emergencies.

FISCAL IMPACT:

There is no financial impact by receiving this report.

ATTACHMENTS:

1. FY 2022-23 Audited Financial Statements

2. FY 2022-23 Supplemental Budgetary Schedule, Investment Summary, and Dashboard

3. Presentation of FY 2022-23 Financial Results

Financial
Statements
Years Ended September 30, 2023 and 2022

INCLUDING REPORT OF INDEPENDENT AUDITORS

CENTRAL COAST COMMUNITY ENERGY
YEARS ENDED SEPTEMBER 30, 2023 AND 2022

TABLE OF CONTENTS
Independent Auditor’s Report ………………………………………………………................ 1 Management’s Discussion and Analysis ……………………………………………................ 3 Basic Financial Statements:

Statements of Net Position ……………………………………………………………. 10
Statements of Revenues, Expenses and Changes in Net Position ……………………. 11 Statements of Cash Flows …………………………………………………………….. 12
Notes to the Basic Financial Statements ……………………………………................ 14

SANTA ROSA  PETALUMA
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Santa Rosa, CA 95403
(707) 542-3343  Office
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pbllp.com
Independent Auditor's Report
To the Board of Directors
Central Coast Community Energy
Opinion
We have audited the accompanying financial statements of Central Coast Community Energy (3CE), as of and for the years ended September 30, 2023 and 2022, and the related notes to the financial statements, which collectively comprise 3CE’s basic financial statements as listed in the table of contents.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of 3CE as of September 30, 2023 and 2022, and the changes in financial position and cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinion
We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audits of the Financial Statements section of our report. We are required to be independent of 3CE and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about 3CE’s ability to continue as a going concern within one year after the date that the financial statements are issued or available to be issued.

Auditor's Responsibilities for the Audits of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

Independent Auditor's Report (continued)
Auditor's Responsibilities for the Audits of the Financial Statements (continued) In performing an audit in accordance with GAAS, we:
• Exercise professional judgment and maintain professional skepticism throughout the audits. • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. • Obtain an understanding of internal control relevant to the audits in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of 3CE’s internal control. Accordingly, no such opinion is expressed. • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
• Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about 3CE’s ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audits, significant audit findings, and certain internal control-related matters that we identified during the audits.

Required Supplementary Information
Accounting principles generally accepted in the United States of America require that management's discussion and analysis be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context.

We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Santa Rosa, California
February 13, 2024

CENTRAL COAST COMMUNITY ENERGY
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEARS ENDED SEPTEMBER 30, 2023 AND 2022
3 The Management’s Discussion and Analysis provides an overview of Central Coast Community Energy’s (3CE) financial activities as of and for the years ended September 30, 2023 and 2022. The information presented here should be considered in conjunction with the audited financial statements.

BACKGROUND
3CE’s formation was made possible in 2002 by the passage of California Assembly Bill 117, which enabled communities to purchase power on behalf of their residents and businesses as an alternative to legacy Investor-Owned Utilities (IOU).
3CE is a Community Choice Aggregator (CCA) established on February 21, 2017 pursuant to Public Utilities Code Section 366.2 and operating as a Joint Powers Authority (JPA) pursuant to Government Code section 6500 et seq. 3CE currently serves residential, commercial and agricultural/industrial customers in communities located within its service area. 1 3CE serves approximately 450,000 customer accounts. 3CE is committed to charging competitive retail generation rates, offering innovative energy programs to facilitate electrification, and reducing greenhouse gas (GHG) emissions through long-term contracts for existing and new utility-scale renewable electricity generation. 3CE has established an innovative procurement strategy to accelerate the reduction of GHG emissions, committing 3CE to developing a resource mix which delivers clean renewable energy for 60% of 3CE’s demand by the year 2025 and 100% of 3CE’s demand by the year 2030.
3CE is governed by a Policy Board and an Operations Board. The Policy Board consists of elected officials from member jurisdictions, while the Operations Board consists of senior staff from those jurisdictions. The Policy Board provides guidance and approval in strategic planning and goal setting, budgets, rates, large capital expenditures, and financing. The Operations Board provides guidance and approval on contracts, agreements, and policies that govern day-to-day operations. 3CE has the rights and powers to set rates for its services, incur debt, and issue bonds or other obligations. 1 As of September 30, 2023, 3CE’s members included the California Cities and Towns of Arroyo Grande, Atascadero, Buellton, Capitola, Carpinteria, Carmel-by-the-Sea, Del Rey Oaks, Goleta, Gonzales, Greenfield, Grover Beach, Guadalupe, Hollister, Marina, Monterey, Morro Bay, Pacific Grove, Paso Robles, Pismo Beach, Salinas, San Juan Bautista, San Luis Obispo, Sand City, Santa Cruz, Santa Maria, Scotts Valley, Seaside, Soledad, Solvang and Watsonville as well as the Counties of Monterey, San Benito, Santa Barbara, San Luis Obispo, and Santa Cruz. 3CE anticipates initiating service in the City of Atascadero and the County of San Luis Obispo in January 2025.

CENTRAL COAST COMMUNITY ENERGY
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEARS ENDED SEPTEMBER 30, 2023 AND 2022
4 Financial Reporting
3CE presents its financial statements as an enterprise fund under the economic resources measurement focus and accrual basis of accounting, in accordance with Generally Accepted Accounting Principles (GAAP) for proprietary funds, as prescribed by the Governmental Accounting Standards Board (GASB).

Contents Of This Report
This report is divided into the following sections:
 Management’s discussion and analysis.
 The Basic Financial Statements:
o The Statements of Net Position include all of 3CE’s assets, liabilities, and net position and provides information about the nature and amounts of resources and obligations at a specific point in time.
o The Statements of Revenues, Expenses, and Changes in Net Position report all of 3CE’s revenue and expenses for the years shown.
o The Statements of Cash Flows report the cash provided and used by operating activities, as well as other sources and uses, such as capital asset acquisitions and investing activities.
o The Notes to the Basic Financial Statements provide additional details and information related to the basic financial statements.

CENTRAL COAST COMMUNITY ENERGY
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEARS ENDED SEPTEMBER 30, 2023 AND 2022
5 FINANCIAL HIGHLIGHTS
The following table is a summary of 3CE’s assets, liabilities, and net position, and a discussion of significant changes for the years ended September 30:
2023 2022 2021
Current assets 324,238,888 $ 259,993,090 $ 229,102,332 $ Noncurrent assets
Capital and lease assets, net 2,008,218 219,319 328,942 Other noncurrent assets 1,543,979 1,731,180 79,280
Total noncurrent assets 3,552,197 1,950,499 408,222
Total assets 327,791,085 261,943,589 229,510,554
Current liabilities 54,996,528 45,601,781 32,490,845
Noncurrent liabilities 30,923,232 9,131,250 7,031,250
Total liabilities 85,919,760 54,733,031 39,522,095
Net position
Net investment in capital assets 520,678 219,319 328,942 Restricted for security collateral 294,000 294,000 294,000 Unrestricted 241,056,647 206,697,239 189,365,517
Total net position 241,871,325 $ 207,210,558 $ 189,988,459 $ Current Assets
Current assets were approximately $324,239,000 at the end of 2023 and consist of cash, accounts receivable, accrued revenue, investments, and deposits. Accrued revenue is revenue from energy delivered but not invoiced to customers at year-end. Accounts receivable represents energy delivered and invoiced but not paid for by customers. Total current assets increased each year as a result of 3CE’s operating surplus for each year.

CENTRAL COAST COMMUNITY ENERGY
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEARS ENDED SEPTEMBER 30, 2023 AND 2022
6 Noncurrent Assets
Capital assets are reported net of depreciation. Changes during the years include acquisition of furniture and equipment, leasehold improvements, and software, less depreciation and amortization. 3CE does not own assets used for electricity generation, transmission or distribution.

A lease asset is reported in accordance with Governmental Accounting Standards Board No. 87 (GASB 87). 3CE entered into a lease in October 2022 for its office space, which accounts for the increase in capital and lease assets.

Other noncurrent assets consist of the long-term portion ($1,521,000) of a $2,000,000 loan made in 2022 to the County of Santa Cruz regarding their acquisition of generator equipment.

Also included in other noncurrent assets are deposits for regulatory and other operating purposes.

Current Liabilities
Current liabilities of approximately $54,997,000 as of September 30, 2023 consist primarily of the cost of electricity delivered to customers that is due to be paid by 3CE after the fiscal year. Current liabilities also include amounts owed for trades payable, personnel costs, taxes and surcharges owed to other governments, and deposits received from suppliers.

Accrued cost of electricity increased each year compared to the prior year. This was a result of increased prices of electricity purchased as well as a small increase in the volume of purchased electricity outstanding. Additionally, current liabilities increased significantly in 2023 due to deposits received from energy suppliers.

Noncurrent Liabilities
The increase in noncurrent liabilities in 2023 is the result of several energy supply contracts entered into or negotiated during the year that required the suppliers to post collateral. These deposits are held by 3CE until certain contract milestones are met or contracts are completed. As part of its risk management policy, 3CE requires energy suppliers to post collateral deposits in some cases. Deposits are determined to be a noncurrent liability if they are not expected to be returned to the supplier within one year of the financial statement date.

CENTRAL COAST COMMUNITY ENERGY
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEARS ENDED SEPTEMBER 30, 2023 AND 2022
7 Summary of Revenues, Expenses, and Changes in Net Position The following table is a summary of 3CE’s results of operations and a discussion of significant changes for the years ended September 30:
2023 2022 2021
Operating revenues 451,619,272 $ 401,698,835 $ 287,931,441 $ Nonoperating revenues 9,635,091 3,800,219 702,036
Total income 461,254,363 405,499,054 288,633,477
Operating expenses 426,540,098 388,276,955 257,383,668
Nonoperating expenses 53,498 - -
Total expenses 426,593,596 388,276,955 257,383,668
Change in net position 34,660,767 $ 17,222,099 $ 31,249,809 $ Operating Revenues
Rate increases in effect during 2023 account for the majority of the increase in revenue compared to 2022.

Revenues from electricity sales increased from 2021 to 2022 by approximately $111,219,000 as a result of both 3CE’s customer base coming entirely online for the full year in 2022, and rate increases that went into effect during the year.

Nonoperating Revenues
The 2023 increase in nonoperating revenues is a result of increased investment returns related to an increase in market interest rates. The increase from 2021 to 2022 was primarily the result of grant income from the California Arrearage Payment Plan (CAPP) that was received in 2022.

Operating Expenses
3CE’s largest operating expense continues to be the purchase of electricity delivered to its customers. 3CE purchases energy products from markets and is developing a balanced and diversified renewable power portfolio. Operating expenses increased each year due to an increase in the number of customers and rising market prices.

CENTRAL COAST COMMUNITY ENERGY
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEARS ENDED SEPTEMBER 30, 2023 AND 2022
8 ECONOMIC OUTLOOK
The fiscal year ended September 30, 2023 was a year of stable operations and growing cost pressures from increased costs of energy and resource adequacy compliance. 3CE serves over 450,000 residential, commercial, and agricultural/industrial customer meters in a service area spanning five counties: Santa Cruz, Monterey, San Benito, San Luis Obispo, and Santa Barbara. 3CE serves approximately 94% of all eligible customers in the service area, and that rate of participation is expected to remain stable in 2024.

Operating revenues grew over $49,900,000, driven primarily by the rate adjustments to reflect the increased cost of energy. Operating expenses, comprised primarily of energy costs, increased by approximately $38,300,000 due to a combination of rising energy and resource adequacy (RA) costs, and delays in new power projects resulting from interconnection delays, supply chain, and inflationary pressures. Even with the rising energy and RA compliance costs, the net position grew by almost $34,700,000 over the prior year.

Over time, 3CE’s growing portfolio of renewable energy and storage is expected to lower the cost and volatility of the energy it supplies to customers, helping it maintain a robust financial position.

The portfolio continues to include Power Purchase Agreements (PPAs). Six projects supported by PPAs are online as of fiscal year 2022-23. 3CE’s non-energy administrative costs, including contract services, staffing, and general and administrative expenses, were 6% of revenue, reflecting 3CE’s focus on delivering value for customers.
3CE has implemented cost-based rates that ensure customers pay what it costs to serve them and keeps 3CE competitive with legacy Investor-Owned Utility (IOU) rates. Fiscal year 2022-23 was the second year with cost-based rates for the Pacific Gas and Electric (PG&E) service area. This approach led to significant average customer savings versus IOU rates and will continue to do so in 2024. These savings strengthen 3CE’s competitive position. 3CE will explore expanding the cost based rate approach to its Southern California Edison service area anticipated to start in 2025.

Investments from the Inflation Reduction Act, a renewed political focus on developing new renewable resources, and the significant compliance value in battery storage provide an opportunity for 3CE to continue providing new resources at cost competitive rates. 3CE will continue investing in renewable innovation and initiatives to reach 100% clean and renewable energy through the commitment to new, emerging, scalable technologies and programs.

Management intends to continue its conservative use of financial resources and continues to build credit capacity through increased cash reserves, complying with the energy risk management policy, and entering into favorable energy purchase commitments. As a result, 3CE’s financial position and foundation remain strong and positioned for continued success.

CENTRAL COAST COMMUNITY ENERGY
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEARS ENDED SEPTEMBER 30, 2023 AND 2022
9 REQUEST FOR INFORMATION
This financial report is designed to provide 3CE’s customers and creditors with a general overview of the organization’s finances and to demonstrate 3CE’s accountability for the funds under its stewardship.

Please address any questions about this report or requests for additional financial information to 70 Garden Court, Suite 300, Monterey, CA 93940.

Respectfully submitted,
Robert Shaw, Chief Executive Officer

BASIC FINANCIAL STATEMENTS

CENTRAL COAST COMMUNITY ENERGY
The accompanying notes are an integral part of these financial statements. 10

STATEMENTS OF NET POSITION
SEPTEMBER 30, 2023 AND 2022
2023 2022
Current assets
Cash and cash equivalents - unrestricted 195,739,869 $ 150,096,869 $ Accounts receivable, net of allowance 32,759,275 47,107,600 Accrued revenue 24,865,108 18,161,946
Other receivables 4,273,462 2,003,955
Loan receivable 187,201 292,002
Prepaid expenses 380,211 308,419
Deposits 6,494,094 8,293,930
Cash - restricted 294,000 294,000
Investments 59,245,668 33,434,369
Total current assets 324,238,888 259,993,090
Noncurrent assets
Deposits 23,182 23,182
Loan receivable 1,520,797 1,707,998
Lease asset, net of amortization 1,426,467 -
Capital assets, net of depreciation and amortization 581,751 219,319 Total noncurrent assets 3,552,197 1,950,499
Total assets 327,791,085 261,943,589
Current liabilities
Accrued cost of electricity 48,922,476 40,074,582
Accounts payable 2,777,101 1,589,211
Other accrued liabilities 741,801 1,996,024
User taxes and energy surcharges due to other governments 1,753,727 1,941,964 Lease liability 300,423 -
Security deposits - energy suppliers 501,000 -
Total current liabilities 54,996,528 45,601,781
Noncurrent liabilities
Security deposits - energy suppliers 29,756,280 9,131,250 Lease liability 1,166,952 -
Total noncurrent liabilities 30,923,232 9,131,250
Total liabilities 85,919,760 54,733,031
Net investment in capital assets 520,678 219,319
Restricted for security collateral 294,000 294,000
Unrestricted 241,056,647 206,697,239
Total net position 241,871,325 $ 207,210,558 $

NET POSITION
ASSETS

LIABILITIES

CENTRAL COAST COMMUNITY ENERGY
The accompanying notes are an integral part of these financial statements. 11

STATEMENTS OF REVENUES, EXPENSES

AND CHANGES IN NET POSITION
YEARS ENDED SEPTEMBER 30, 2023 AND 2022
2023 2022

OPERATING REVENUES
Electricity sales, net 450,713,404 $ 399,149,960 $
Liquidated damages 750,000 2,548,875
Other income 155,868 -
Total operating revenues 451,619,272 401,698,835

OPERATING EXPENSES
Cost of electricity 398,746,769 366,610,134
Contract services 10,820,099 9,288,170
Staff compensation 6,200,592 6,089,226
Program incentives 8,484,775 4,374,729
Other operating expenses 1,869,295 1,826,016
Depreciation and amortization 418,568 88,680
Total operating expenses 426,540,098 388,276,955
Operating income 25,079,174 13,421,880

NONOPERATING REVENUES (EXPENSES)
Interest and investment returns 8,184,122 1,040,759
Grant revenue 1,450,969 2,759,460
Financing costs (53,498) -
Nonoperating revenues 9,581,593 3,800,219
CHANGE IN NET POSITION 17,222,099 34,660,767
Net position at beginning of year 207,210,558 189,988,459 Net position at end of year 241,871,325 $ 207,210,558 $

CENTRAL COAST COMMUNITY ENERGY
The accompanying notes are an integral part of these financial statements. 12

STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 2023 AND 2022
2023 2022

CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers 466,288,740 $ 398,416,283 $
Receipts of liquidated damages 897,000 2,401,875
Other operating receipts 155,868 -
Receipts of deposits and collateral 53,684,900 11,219,952 Payments to suppliers for electricity (392,088,215) (345,208,662) Payments of deposits and collateral (30,759,035) (17,376,728) Payments for other goods and services (12,022,290) (10,922,374) Payments for program incentives (7,797,967) (4,196,754) Payments of staff compensation (6,467,227) (6,178,169)
Payments of taxes and energy surcharges to other governments (8,274,859) (6,812,737) Net cash provided by operating activities 63,616,915 21,342,686

CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES
Grant revenue 1,450,969 2,759,460

CASH FLOWS FROM CAPITAL AND RELATED

FINANCING ACTIVITIES
Payments of lease liability (264,318) -
Payments to acquire capital assets (509,105) (1,113)
Net cash used by capital and related financing activities (773,423) (1,113)

CASH FLOWS FROM INVESTING ACTIVITIES
Investment income received 7,060,790 970,035
Proceeds from investment sales 111,223,174 -
Principal payments received on loan receivable 292,002 - Purchase of investments (137,227,427) (32,418,822)
Loan issued - (2,000,000)
Net cash used by investing activities (18,651,461) (33,448,787) Net change in cash and cash equivalents 45,643,000 (9,347,754) Cash and cash equivalents at beginning of year 150,390,869 159,738,623 Cash and cash equivalents at end of year $ 150,390,869 196,033,869 $ Reconciliation to the Statement of Net Position
Cash and cash equivalents - unrestricted 195,739,869 $ 150,096,869 $ Cash - restricted 294,000 294,000
Cash and cash equivalents 196,033,869 $ 150,390,869 $

SUPPLEMENTAL CASH FLOW INFORMATION
Capital asset acquisitions included in accounts payable and other liabilities 20,165 $ -

CENTRAL COAST COMMUNITY ENERGY
The accompanying notes are an integral part of these financial statements. 13

STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 2023 AND 2022
2023 2022
Operating income 25,079,174 $ 13,421,880 $
Adjustments to reconcile operating income to net
cash provided by operating activities
Depreciation and amortization expense 418,568 88,680
(Increase) decrease in:

Accounts receivable, net of allowance 14,348,325 (9,731,301) Accrued revenue (6,703,164) 1,849,150
Energy settlements receivable - 7,856,108
Other receivables (1,913,221) (1,069,449)
Prepaid expenses (71,792) 1,251,830
Deposits 1,799,836 (6,575,149)
Increase (decrease) in:

Accrued cost of electricity 8,847,894 11,425,158
Accounts payable 1,167,725 357,493
Other accrued liabilities (294,223) (115,044)
User taxes and surcharges due to other governments (188,237) 483,330 Security deposits - energy suppliers 21,126,030 2,100,000 Net cash provided by operating activities 63,616,915 $ 21,342,686 $

RECONCILIATION OF OPERATING INCOME TO NET

CASH PROVIDED BY OPERATING ACTIVITIES

CENTRAL COAST COMMUNITY ENERGY

NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2023 AND 2022
14 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

REPORTING ENTITY
Central Coast Community Energy (3CE) is a Joint Powers Authority created on February 21, 2017, and its jurisdictions consist of the following local governments as of September 30, 2023:

Counties Cities and Towns
Monterey Arroyo Grande Morro Bay
San Benito Atascadero Pacific Grove
Santa Barbara Buellton Paso Robles
Santa Cruz Capitola Pismo Beach
Carpinteria Salinas
Carmel-by-the-Sea San Juan Bautista
Del Rey Oaks San Luis Obispo
Goleta Sand City
Gonzales Santa Cruz
Greenfield Santa Maria
Grover Beach Scotts Valley
Guadalupe Seaside
Hollister Soledad
Marina Solvang
Monterey Watsonville
3CE is separate from and derives no financial support from its members. 3CE is governed by two Boards, a Policy Board and an Operations Board. Each Board is comprised of 17 members with 17 alternates representing the participating communities. Some of the 17 members represent more than one jurisdiction. Policy Board Members are elected officials from 3CE member communities.

Operations Board Members are executives leading the member cities and counties. 3CE was formed to acquire retail electricity for the residents and businesses within its members’ jurisdictions, study, promote, conduct, operate, and manage energy and energy-related climate change programs, and to exercise all other powers necessary and incidental to accomplishing these objectives. A core function of 3CE is to provide electric service that includes the use of renewable sources under the Community Choice Aggregation Program under California Public Utilities Code Section 366.2.
3CE began its energy delivery operations in March 2018. Electricity is acquired from commercial suppliers and delivered through existing physical infrastructure and equipment managed by Pacific Gas and Electric Company (PG&E) and Southern California Edison (SCE).

CENTRAL COAST COMMUNITY ENERGY

NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2023 AND 2022
15 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

BASIS OF ACCOUNTING
3CE’s financial statements are prepared in accordance with Generally Accepted Accounting Principles (GAAP). The Governmental Accounting Standards Board (GASB) is responsible for establishing GAAP for state and local governments through its pronouncements. 3CE’s operations are accounted for as a governmental enterprise fund and are reported using the economic resources measurement focus and the accrual basis of accounting, similar to business enterprises. Accordingly, revenues are recognized when they are earned; and expenses are recognized at the time liabilities are incurred. Enterprise fund type operating statements present increases (revenues) and decreases (expenses) in total net position. Reported net position is segregated into three categories: investment in capital assets, restricted, and unrestricted.

When both restricted and unrestricted resources are available for use, it is 3CE’s policy to use restricted resources first, and then unrestricted resources as they are needed.

CASH AND CASH EQUIVALENTS
For purposes of the Statements of Cash Flows, 3CE defines cash and cash equivalents to include cash on hand, demand deposits and short-term investments with an original maturity of three months or less. 3CE has cash that is restricted under various security agreements. This is reported as restricted cash on the Statements of Net Position and is included in cash and cash equivalents for the purpose of the Statements of Cash Flows.

PREPAID EXPENSES AND DEPOSITS
Contracts to purchase energy may require 3CE to provide the supplier with advanced payments or security deposits. Deposits are generally held for the term of the contract and are classified as current or noncurrent assets depending on the length of time the deposits will be outstanding. Also included are prepaid expenses and deposits for regulatory and other operating purposes.

INVESTMENTS
Investments are stated at fair value based on prices listed on a national exchange for debt securities.

Certificates of deposits are stated at cost. 3CE intends to hold its securities to maturity. Investments with a maturity of less than one year are shown as current assets in the Statement of Net Position. 3CE’s Investment Policy permits the investment of funds in depository accounts, certificates of deposit and the Local Agency Investment Fund (LAIF) program operated by the California State Treasury, United States Treasury obligations, Federal Agency Securities, commercial paper, and money market funds.

CENTRAL COAST COMMUNITY ENERGY

NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2023 AND 2022
16 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

LEASE ASSET AND LEASE LIABILITY
3CE recognizes an asset and liability when it enters into certain leasing arrangements. The leased asset is amortized over the term of the lease. The lease liability is the present value of payments expected to be paid to the lessor during the lease term. 3CE’s leased asset and liability relate to its office premises.

CAPITAL ASSETS AND DEPRECIATION
3CE’s policy is to capitalize furniture and equipment valued over $1,000 that is expected to be in service for over one year. Depreciation is computed according to the straight-line method over estimated useful lives of three years for electronic equipment and seven years for furniture and leasehold improvements. 3CE does not own any electric generation, transmission or distribution assets.

SECURITY DEPOSITS-ENERGY SUPPLIERS
Various energy contracts entered into by 3CE require the supplier to provide 3CE with a security deposit. These deposits are generally held for the term of the contract or until the completion of certain benchmarks. Deposits are classified as current or noncurrent depending on the length of time the deposits will be held.

NET POSITION
Net position is presented in the following components:

Net investment in capital assets: This component of net position consists of capital assets, lease asset, net of accumulated depreciation and amortization, and reduced by outstanding borrowings that are attributable to the acquisition, construction, or improvement of those assets.

Restricted for security collateral: This component of net position consists of constraints placed on net asset use through external constraints imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments or constraints imposed by law through constitutional provisions or enabling legislation.

Unrestricted: This component of net position consists of net position that does not meet the definition of “net investment in capital assets” or “restricted for security collateral.”

CENTRAL COAST COMMUNITY ENERGY

NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2023 AND 2022
17 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

OPERATING AND NONOPERATING REVENUES
Operating revenues include energy sales to retail and wholesale customers, and liquidated damages from suppliers that fail to meet delivery commitments.

Investment income includes interest earned on bank deposits as well as unrealized gains and losses on its investment holdings. Interest and investment income are considered nonoperating revenues.

REVENUE RECOGNITION
3CE recognizes revenue on the accrual basis. This includes invoices issued to customers during the reporting period and electricity estimated to have been delivered, but not yet billed at year-end.

Management estimates that a portion of the billed amounts will be uncollectible. Accordingly, an allowance for uncollectible accounts has been recorded.

OPERATING AND NONOPERATING EXPENSES
Operating expenses include the costs of electricity, staffing, contractor services, program incentives, and other operating expenses. Expenses not meeting this definition are reported as nonoperating expenses.

ELECTRICAL POWER PURCHASED
During the normal course of business, 3CE purchases electrical power from numerous suppliers.

Electricity costs include the cost of energy and capacity arising from contracts with energy suppliers as well as generation credits, and load and other charges arising from 3CE’s participation in the California Independent System Operator’s (CAISO) centralized market. The cost of electricity and capacity is recognized as “Cost of Electricity” in the Statements of Revenues, Expenses and Changes in Net Position.

To comply with the State of California’s Renewable Portfolio Standards (RPS), 3CE acquires RPS eligible renewable energy evidenced by Renewable Energy Certificates (Certificates) recognized by the Western Renewable Energy Generation Information System. 3CE obtains Certificates with the intent to retire them and does not sell or build surpluses of Certificates with a profit motive. An expense is recognized at the point that the cost of the Certificate is due and payable to the supplier. 3CE purchases capacity commitments from qualifying generators to comply with the California Public Utility Commission’s Resource Adequacy Program. The goals of the Resource Adequacy Program are to provide sufficient resources to the CAISO to ensure the safe and reliable operation of the grid in real-time and to provide appropriate incentives for the siting and construction of new resources needed for reliability in the future.

CENTRAL COAST COMMUNITY ENERGY

NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2023 AND 2022
18 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

STAFFING COSTS
3CE pays employees bi-weekly and fully pays its obligation for health benefits and contributions to its defined contribution retirement plan each month. 3CE is not obligated to provide post-employment healthcare or other fringe benefits, and accordingly, no related liability is recorded in these financial statements. 3CE provides compensated time off, and the related liability is recorded in these financial statements.

INCOME TAXES
3CE is a Joint Powers Authority under the provision of the California Government Code and is not subject to federal or state income or franchise taxes.

ESTIMATES
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

RECLASSIFICATIONS
Certain amounts in the prior-year financial statements have been reclassified for comparative purposes to conform to the presentation of the current-year financial statements. These reclassifications did not result in any change in previously reported net position or change in net position.

2. CASH AND CASH EQUIVALENTS
3CE maintains its cash in both interest-bearing and non-interest-bearing deposit accounts in several banks. 3CE’s deposits are subject to California Government Code Section 16521, which requires banks to collateralize public funds in excess of the Federal Deposit Insurance Corporation (FDIC) limit of $250,000 by 110%. Certain short-term investments with original maturities of less than three months are classified as cash and cash equivalents, which are not subject to the collateral requirement or FDIC coverage previously mentioned. Accordingly, the amount of risk is not disclosed. 3CE monitors its risk exposure on an ongoing basis.

CENTRAL COAST COMMUNITY ENERGY

NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2023 AND 2022
19 3. RECEIVABLES AND DEPOSITS

ACCOUNTS RECEIVABLE
Accounts receivable were as follows as of September 30:
2023 2022
Accounts receivable from customers 43,313,058 $ 55,979,470 $ Allowance for uncollectible accounts (10,553,783) (8,871,870) Net accounts receivable 32,759,275 $ 47,107,600 $
The majority of account collections occur within the first few months following customer invoicing. 3CE estimates that a portion of the billed accounts will not be collected. 3CE continues collection efforts on accounts in excess of de minimis balances regardless of the age of the account. Although collection success generally decreases with the age of the receivable, 3CE continues to have success in collecting older accounts. The allowance for uncollectible accounts at the end of a period includes amounts billed during the current and prior fiscal years. During 2023 and 2022, 3CE recorded $6,864,000 and $6,192,000, respectively, as an increase to the allowance in anticipation of uncollectible accounts. Bad debt expense is reported as a reduction in electricity sales on the Statement of Revenues, Expenses and Changes in Net Position. Other changes in the allowance for uncollectible accounts from year to year are the result of account write-offs. In 2023 and 2022, 3CE received CAPP funds (see Note 6) that helped recover for previously written off accounts receivable.

OTHER RECEIVABLES
Other receivables consists primarily of amounts due from energy suppliers, generally as a result of certain wholesale transactions for energy products.

DEPOSITS
Combined current and noncurrent deposits were approximately $6,517,000 and $8,317,000 as of September 30, 2023 and 2022, respectively. The majority of current deposits relate to collateral posted with the CAISO, which is determined based on 3CE’s market exposure at a given time. Also included in current assets are funds provided to an energy program implementer to issue customer incentive payments.

CENTRAL COAST COMMUNITY ENERGY

NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2023 AND 2022
20 4. INVESTMENTS
During the years ended September 30, 2023 and 2022, 3CE purchased investments with original maturities of three months or more. As of September 30, investments were as follows:
2023 2022
Investments at Fair Value:

Commercial paper 3,700,088 $ 2,435,226 $
U.S. government & agency obligations 45,545,580 14,584,200 Municipal obligations - 3,863,262
Total investments at fair value 49,245,668 20,882,688
Certificate of deposits 10,000,000 12,551,681
Total investments 59,245,668 $ 33,434,369 $

FAIR VALUE MEASUREMENT
GASB Statement No. 72, Fair Value Measurement and Application, sets forth the framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. Level 1 inputs are quoted prices in active markets for identical assets, Level 2 inputs are significant other observable inputs, and Level 3 inputs are significant unobservable inputs.

In instances where inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation. 3CE’s assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset or liability.

As of September 30, 2023 and 2022, 3CE’s investments are considered Level 1 inputs, except for certificates of deposits, which are based on the nominal value. Quoted prices in active markets were used for determining fair value measurement.

CREDIT RISK
Credit risk is the risk an issuer or other counterparty to an investment will not fulfill its obligations.

Certain investments, such as obligations of the U.S. government or obligations explicitly guaranteed by the U.S. government, are not considered to have credit risk. Credit risk for other investments is not available.
3CE’s investment policy addresses this risk. 3CE limits investments to those allowed by Section 53601 of the California Government Code that addresses the risk allowable for each investment.

CENTRAL COAST COMMUNITY ENERGY

NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2023 AND 2022
21 4. INVESTMENTS (continued)
CUSTODIAL CREDIT RISK – CERTIFICATE OF DEPOSITS
Custodial credit risk is the risk that in the event of a financial institution failure, 3CE’s deposits may not be returned to 3CE. 3CE’s deposits are subject to California Government Code Section 16521, which requires banks to collateralize public funds in excess of the Federal Deposit Insurance Corporation (FDIC) limit of $250,000 by 110%.

As of September 30, 2023 and 2022, none of 3CE’s bank balances are known to be individually exposed to custodial credit risk.

CUSTODIAL CREDIT RISK - INVESTMENTS
Custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, 3CE would not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. All of 3CE’s investments are exposed to custodial credit risk.

INTEREST RATE RISK
Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. Duration is a measure of the price sensitivity of a fixed income portfolio to changes in interest rates. It is calculated as the weighted average time to receive a bond’s coupon and principal payments. The longer the duration of a portfolio, the greater its price sensitivity to changes in interest rates. 3CE manages its exposure to declines in fair values by limiting the weighted average maturity of its investments.

All investments had a maturity of less than one year as of September 30, 2023 and 2022. 3CE intends to hold investments to maturity.

CENTRAL COAST COMMUNITY ENERGY

NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2023 AND 2022
22 5. CAPITAL ASSETS AND LEASE ASSET
Capital asset activity for the years ended September 30, 2023 and 2022 was as follows:

Furniture &
Equipment
Leasehold
Improvements Software
Accumulated
Depreciation
and
Amortization Total
Balances at September 30, 2021 598,432 $ 80,743 $ - $ (350,233) $ 328,942 $ Additions 1,113 - - (88,680) (87,567)
Dispositions - (22,056) - - (22,056)
Balances at September 30, 2022 599,545 58,687 - (438,913) 219,319 Additions 97,171 31,974 400,126 (166,838) 362,432
Balances at September 30, 2023 696,716 $ 90,661 $ 400,126 $ (605,751) $ 581,751 $ Lease asset activity for the years ended September 30, 2023 and 2022 was as follows:

Lease Asset
Accumulated
Amortization Total
Balances at September 30, 2021 - $ - $ - $
Additions - - -
Dispositions - - -
Balances at September 30, 2022 - - -
Additions 1,678,197 (251,730) 1,426,467
Dispositions - - -
Balances at September 30, 2023 1,678,197 $ (251,730) $ 1,426,467 $

6. GRANT REVENUE
3CE administers a grant from the California Arrearage Payment Program (CAPP) that offers financial assistance for California energy utility customers to help reduce past due energy account balances that increased during the COVID-19 pandemic. In 2022 this program was funded through the federal American Rescue Plan Act (ARPA) with Coronavirus State and Local Fiscal Recovery Funds. The program was funded by the State of California in 2023. Grant revenue recognized for the years ended September 30, 2023 and 2022 was $1,451,000 and $2,759,000, respectively.

CENTRAL COAST COMMUNITY ENERGY

NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2023 AND 2022
23 7. DEFINED CONTRIBUTION RETIREMENT PLAN
3CE provides retirement benefits to eligible employees through a 401(a) Retirement Plan (Plan). The Plan is a defined contribution (Internal Revenue Code 401(a)) retirement plan established to provide benefits at retirement to employees of certain qualified employers admitted by the Plan. The Plan is administered by the Public Agency Retirement System (PARS). As of September 30, 2022, there were 34 plan participants. 3CE is required to contribute 10% of covered payroll as a match to required employee contributions. 3CE contributed approximately $502,000 and $462,000 for the years ended September 30, 2023 and 2022, respectively. Plan provisions and contribution requirements as they apply to 3CE are established and may be amended by the Board of Directors. 3CE elected out of the Social Security system for employees eligible for the Plan. 3CE also provides a 457(b) Retirement Plan where employees can make tax deferred contributions.

8. RISK MANAGEMENT
3CE is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; and errors and omissions. During the year, 3CE purchased insurance policies from investment-grade commercial carriers to mitigate risks that include those associated with earthquakes, theft, general liability, errors and omissions, and property damage. 3CE has general liability coverage of $1,000,000, with a deductible of $1,000.
3CE maintains risk management policies, procedures and systems that help mitigate credit, liquidity, market, operating, regulatory and other risks that arise from participation in the California energy market.

Credit guidelines include a preference for transacting with investment-grade counterparties, evaluating counterparties’ financial condition and assigning credit limits as applicable. These credit limits are established based on risk and return considerations under terms customarily available in the industry. In addition, 3CE enters into netting arrangements whenever possible and, where appropriate, obtains collateral and other performance assurances from counterparties.

CENTRAL COAST COMMUNITY ENERGY

NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2023 AND 2022
24 9. PURCHASE COMMITMENTS

POWER AND ELECTRIC CAPACITY
In the ordinary course of business, 3CE enters into power purchase agreements to acquire energy and electric capacity. The price and volume of purchased power is largely fixed. Variable priced power, which is a small part of 3CE’s portfolio, is generally linked to the market price of either natural gas or power at the date of delivery. Variable volume is generally associated with contracts to purchase energy from resources with varying availability and production, such as solar, wind and hydroelectric facilities.
3CE enters into long-term power purchase agreements to ensure stable competitive rates for its customers and to comply with state law and voluntary targets for renewable and greenhouse gas (GHG) free products.

The following table represents the expected, undiscounted, contractual obligations outstanding as of September 30, 2023:

Year ending September 30,
2024 496,000,000 $
2025 344,000,000
2026 196,000,000
2027 191,000,000
2028 186,000,000
2029-2053 2,755,000,000
Total 4,168,000,000 $

CENTRAL COAST COMMUNITY ENERGY

NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2023 AND 2022
25 10. LEASES
A lease asset is reported in accordance with Governmental Accounting Standards Board No. 87 (GASB 87). According to GASB, the Statement aims to increase the usefulness of governments’ financial statements by requiring reporting of certain lease assets and liabilities that previously were not recognized on the statement of net position.

On October 27, 2022, 3CE entered into a 3-year non-cancelable lease commencing on January 1, 2023 for its office premises. The rental agreement includes an option to renew the lease for two additional one-year terms.

Rental payments under this lease were $330,000 for the year ended September 30, 2023.

As of September 30, 2023, future minimum lease payments under this lease were as follows:

Year ending September 30, Principal Interest Total
2024 300,423 $ 59,931 $ 360,354 $
2025 325,259 45,905 371,164
2026 351,568 30,731 382,299
2027 379,426 14,342 393,768
2028 110,699 878 111,577
Total 1,467,375 $ 151,787 $ 1,619,162 $

26 CENTRAL COAST COMMUNITY ENERGY

NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2023 AND 2022

11. JOINT VENTURE
3CE participates in a joint powers agreement (JPA) through the California Community Choice Financing Authority (CCCFA). CCCFA was formed as a conduit issuer to assist its members by undertaking the financing or refinancing of energy prepayments that can be financed with tax advantaged bonds on behalf of one or more of the members by, among other things, issuing or incurring bonds and entering into related contracts with its members. Any debt or liability incurred by CCCFA on behalf of a member to prepay for renewable energy is not a debt or liability of that member. Furthermore, the assets of CCCFA in the form of prepaid energy or reserves held by the respective bond trustees for any prepayment transaction undertaken on behalf of a member does not constitute an asset or reserve of that member.

In December 2023, CCCFA issued bonds in the amount of $647,750,000, excluding original issue premium, the proceeds of which to be used to finance energy purchases that will be delivered to 3CE.

No debt, liability, or obligation of CCCFA is a debt, liability, or obligation of 3CE. 3CE will purchase energy from CCCFA in the same manner as it purchases energy from other suppliers. 3CE did not purchase any energy from CCCFA during fiscal year 2023. The outstanding purchase commitments related to these financing facilities are included in Note 9.

Each member of CCCFA is responsible for paying an equal portion of CCCFA’s general and administrative operating costs as determined by its board. During the years ended September 30 2023, and 2022, 3CE contributed approximately $18,000 and $28,000, respectively, to CCCFA to assist in its operating activities.

The financial statements of CCCFA are available online at http://www.cccfa.org/key-documents.html.

12. FUTURE GASB PRONOUNCEMENTS
The requirements of the following GASB Statements are effective for years ending after September 30, 2023:

GASB has approved GASB Statement No. 100, Accounting Changes and Error Corrections – An Amendment of GASB Statement No. 62, and GASB Statement No. 101, Compensated Absences. Management is evaluating the effect of implementation of these statements.

1 ACCOUNTANTS’ COMPILATION REPORT
Board of Directors
Central Coast Community Energy
Management is responsible for the accompanying special purpose statements of Central Coast Community Energy (a California Joint Powers Authority) which comprise the budgetary comparison schedule and a supplemental budgetary comparison schedule for the period ended September 30, 2023, and for determining that the budgetary basis of accounting is an acceptable financial reporting framework. We have performed a compilation engagement in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the AICPA. We did not audit or review the accompanying statement nor were we required to perform any procedures to verify the accuracy or completeness of the information provided by management. Accordingly, we do not express an opinion, a conclusion, nor provide any assurance on this special purpose budgetary comparison statement.

The special purpose statement is prepared in accordance with the budgetary basis of accounting, which is a basis of accounting other than accounting principles generally accepted in the United States of America. This report is intended for the information of the Board of Directors of the Authority.

Management has elected to omit substantially all of the note disclosures required by accounting principles generally accepted in the United States of America in these interim financial statements.

Central Coast Community Energy’s annual audited financial statements include the note disclosures omitted from these interim statements. If the omitted disclosures were included in these financial statements, they might influence the user’s conclusions about the Authority’s financial position, results of operations, and cash flows. Accordingly, these financial statements are not designed for those who are not informed about such matters.

We are not independent with respect to the Authority because we performed certain accounting services that impaired our independence.

Maher Accountancy
San Rafael, CA
November 13, 2023
1101 Fifth Avenue, Suite 200 San Rafael, CA 94901 415 459 1249 mahercpa.com

2022/23 YTD
Budget (Amended)
2022/23 YTD
Actual
2022/23 YTD
Budget Variance
(Under) Over
2022/23 YTD
Actual / Budget %
2022/23 Annual
Budget (Amended)
2022/23 Budget
Less Actual
2022/23 Budget
Remaining /
Budget %

REVENUES AND OTHER SOURCES
Electricity sales 463,110,000 $ 459,028,029 $ (4,081,971) $ 99% 463,110,000 $ 4,081,971 $ 1% Uncollectible accounts (7,500,000) (6,863,656) 636,344 92% (7,500,000) (636,344) 8% Net revenue - electricity 455,610,000 452,164,373 (3,445,627) 99% 455,610,000 3,445,627 1% Investment and miscellaneous income 6,187,000 8,339,990 2,152,990 n/a 6,187,000 (2,152,990) n/a Total revenues and other sources 461,797,000 461,254,363 (542,637) 100% 461,797,000 542,637 0% EXPENDITURES AND OTHER USESCurrent Expenditures
Cost of energy 398,884,224 403,427,000 (4,542,776) 99% 403,427,000 4,542,776 1% Energy programs (incentives and grants) 15,920,000 9,266,438 (6,653,562) 58% 15,920,000 6,653,562 42% Data manager 2,967,678 2,975,000 (7,322) 100% 2,975,000 7,322 0% Utility service fees 1,808,000 1,831,586 23,586 101% 1,808,000 (23,586) -1% Staffing 9,191,000 6,200,593 (2,990,407) 67% 9,191,000 2,990,407 33% Professional services 3,317,000 2,151,323 (1,165,677) 65% 3,317,000 1,165,677 35% Legal services 1,860,000 1,223,252 (636,748) 66% 1,860,000 636,748 34% Marketing and customer enrollment 717,428 951,000 (233,572) 75% 951,000 233,572 25% Other general & administration 3,599,000 2,133,615 (1,465,385) 59% 3,599,000 1,465,385 41% Total current expenditures 443,048,000 425,376,137 (17,671,863) 96% 443,048,000 17,671,863 4% Other Uses
Capital outlay 203,000 129,142 (73,858) n/a 203,000 73,858 n/a Total other uses 203,000 129,142 (73,858) n/a 203,000 73,858 Total expenditures and other uses 443,251,000 425,505,279 (17,745,721) 96% 443,251,000 17,745,721 4% Surplus (Deficit) 18,546,000 $ 35,749,084 $ 17,203,084 $ 18,546,000 $ (17,203,084) $ -93% Reserves at end of reporting period: Held for working capital 50,200,000 $ Held for reserves - cash and cash equivalents 140,839,869 Held for reserves - investments 59,245,668 Total 250,285,537 $

CENTRAL COAST COMMUNITY ENERGY

SUPPLEMENTAL BUDGETARY COMPARISON SCHEDULE
Year Ended September 30, 2023
See accountants' compilation report. Page 36 of 89 3
CCA Program Surplus/(Deficit)
per budgetary comparison schedule: 35,749,084 $
Adjustments needed to reconcile to the
changes in net position in the
Statement of Revenues, Expenses
and Changes in Net Position:

Add back GASB 87 lease amortization not in operating budget 210,822 Subtract depreciation expense (418,568)
Add back capital asset acquisitions 529,270
Change in Net Position 36,070,608 $

REVENUES, EXPENSES AND CHANGES IN NET POSITION

CENTRAL COAST COMMUNITY ENERGY

BUDGET RECONCILIATION TO STATEMENT OF
Year Ended September 30, 2023
See accountants' compilation report. 4 Page 37 of 89
Budget Item YTD Variance Comment
Electric Sales Revenue (0.9%) Sales revenue includes revenues actually billed to customers as well as estimated customer usage during the reporting period that is not yet billed.

Cost of Energy (1.1%) Variances in this category are typically due to (1) timing difference between projected and actual REC deliveries, (2) variance from actual to anticipated market prices, and (3) variance from actual to expected volume used by customers. Cost of energy includes scheduling coordinator fees for budget purposes only.

Staffing (32.5%) Staffing expenses are under budget due to the timing of new hires.

Professional Services (35.1%) This category includes accounting, IT, technical and other consultants.

Legal Costs (34.2%) This category includes outside legal costs for regulatory and energy procurement needs.

Marketing and customer enrollment (24.6%) Variance is mostly due to the lower than anticipated costs of recent customer enrollments.

Data Management Services (0.2%) These fees non-discretionary and are charged on a per customer basis.

Utility Service Fees 1.3% These are PG&E and SCE fees charged on a per customer basis.

Other General & Administrative (40.7%) This category includes occupancy costs, industry membership dues, and other general and administrative costs.

Energy and Related Programs (41.8%) Programs expenses have generally been delayed until future periods Budget Commentary for significant items

CENTRAL COAST COMMUNITY ENERGY
October 1, 2022 through September 30, 2023

-$17.5
-$3.0
Act
Bud
$53.3
$52.2
$0.0
$10.0
$20.0
$30.0
$40.0
$50.0
$60.0
$70.0
$80.0
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
Actual
$452.2 Budget
$455.6
$0.0
$100.0
$200.0
$300.0
$400.0
$500.0
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
Actual
Budget
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
Actual (T48/T8) 415 407 429 406 370 383 362 399 389 424 442 409 Budget 453 425 424 431 393 432 396 419 426 442 456 435
0 50
100
150
200
250
300
350
400
450
500

CUSTOMERS

SALES VOLUME
409 GWh

STD MARGIN
-$17.5M (45%)
Δ in NET ASSETS
-$20.4M

REVENUE
$39.8M
Cumulative YTD Electricity Sales
Cumulative YTD Direct Margin
(Electricity Sales less Cost of Energy)
Data Definitions:

CUSTOMERS: Count of active customers from Calpine.

REPORTED / SALES VOLUME: Best available estimate of actual meter volume. Currently based on T+8 SQMD Report and T+48 when available.

REVENUE: Total Operating Revenue, net of uncollectible, (excludes Miscellaneous and Interest income).

NON-OP REV: Other uses, primarily Interest Income
ELECTRICITY SALES: Sales from electricity (net of uncollectible).

STD MARGIN: Electricity Sales less cost of energy (Forecasting & scheduling included in Cost of Energy to match budget) ACTUAL: Same as sales volume above
BUDGET: Volumes from FY22/23 budget (no update for amended budget) Monthly Sales Volume (GWh)
Financial Dashboard: September 2023
Margin %

CUSTOMERS
457,000
ACTIVE
September revenue of $39.8M accounts for
409 GWh in net retail consumption.

Fiscal Year electricity revenue is $452M
compared to an amended budget of $456M.

YTD Direct Margin (defined as Electricity
Sales less Cost of Energy) of $53M is ahead
of amended budget by $1.1M.

The chart to the right shows volume
comparison to budgeted volume.

The charts below display cumulative
revenue and margin $ vs budget.
31%
48%
21%
37%
46%
16%
Res
Com
Ag
YTD Month
33%
47%
19%
39%
44%
16%
Res
Com
Ag
YTD Month
Revenue $39.8
C.O.E. $56.4
OpEx $3.9
Net Income -
-44.9% $20.4
-7.5%
Act
Bud
Margin $
10 Page 39 of 89
Return of Investments YTD Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep CASH AND CASH EQUIVALENTSRiver City Bank - Money Market and other Interest Earning AccountsFunds Invested - Average Balance $ 70,230,463 68,793,882 $ 70,636,473 $ 68,570,477 $ 76,819,998 $ 92,274,506 $ 104,647,869 $ 105,080,118 $ 111,614,272 $ 114,000,514 $ 119,614,629 $ 126,865,152 $ Gains/Losses/Interest $ 85,008 2,528,887 $ 94,651 $ 119,286 $ 123,533 $ 137,627 $ 205,218 $ 240,392 $ 257,694 $ 273,188 $ 302,124 $ 332,859 $ 357,308 Average APY 1.48% 1.62% 2.03% 2.16% 2.15% 2.67% 2.76% 2.94% 2.94% 3.18% 3.34% 3.38%INVESTMENTSRiver City Bank - Treasury-indexed productsFunds Invested - Average Balance $ 45,259,882 40,162,814 $ 55,127,902 $ 47,699,367 $ 47,828,254 $ 42,893,075 $ 42,856,284 $ 42,594,899 $ 42,768,287 $ 32,732,944 $ 47,754,493 $ 40,000,000 $ Gains/Losses/Interest $ 67,213.37 2,052,288 146,549.22 207,805 214,163 186,551 167,504 148,003 185,195 177,344 206,535 224,925 $ 120,500 Average APY 2.01% 3.89% 4.52% 5.39% 4.68% 4.69% 4.14% 5.22% 4.98% 7.57% 5.65% 3.62%RBC GAM / Principal Financal/ Schwab/ ChaseFunds Invested - Average Balance $ 75,641,706 75,380,564 $ 75,948,593 $ 76,212,285 $ 76,458,827 $ 76,851,697 $ 77,101,019 $ 77,341,109 $ 77,675,387 $ 77,988,923 $ 78,339,918 $ 78,686,011 $ Gains/Losses/Interest $ 143,733.97 3,461,134 261,142.30 306,886.17 266,301.86 246,542.46 392,869.54 252,509.11 240,089.34 334,278.08 316,486.41 350,995 $ 349,299 Average APY 2.29% 4.14% 4.85% 4.19% 3.87% 6.13% 3.93% 3.73% 5.16% 4.87% 5.38% 5.33%

CENTRAL COAST COMMUNITY ENERGY
Investment Summary
October 1, 2022 through September 30, 2023

Current 0 - 30 Days 31 - 60 Days 61 - 90 Days > 91 Days A/R Balance 9,802,764 19,424,430 2,510,135 608,982 412,964 32,759,275

CENTRAL COAST COMMUNITY ENERGY
Summary of Accounts Receivable, Net of Bad Debt Allowance As of September 30, 2023

Presentation of the
FY 2022-23 Financial Results
February 21, 2024

Summary
• 3CE received a clean audit opinion of its FY 2022-23 financial results from its auditor, Pisenti & Brinker.
• 3CE was within appropriations and on target with estimated revenues. • FY 2022-23 Highlights:
• The net position increased by $34.7 million, up from a $17.3 million increase in the prior year. Cash, cash equivalents, and short-term investments grew by $71.5 million.
• Operating revenues grew over $49.9 million, driven primarily by the rate adjustments to reflect the increased cost of energy.
• The cost of energy increased by approximately $32.1 million due to rising energy and resource adequacy costs and delays in new power projects resulting from interconnection delays, supply chain, and inflationary pressures.
• Operating expenses, excluding the cost of energy, increased year over year from $21.7 million in FY 2021-22 to $27.8 million in FY 2022-23, an increase of 28.3%.

Budget vs Actuals
• Year-end actuals versus budget are favorable and speak to the value of the mid-year budget amendment.
• Operating revenue was under budget by $3.4 million, a 0.8% variance. • Investment revenue was $2.2 million over budget, thanks to higher-than-expected interest rates. The total revenue was $0.5 million under budget, a negligible variance supported by higher-than-estimated investment revenue.
• Operating expenditures were $17.7 million under budget, a 4.5% variance.
• Energy costs were $4.5 million under budget, a 1.1% variance. • Non-energy operating costs were 33.1% under budget due to lower energy program current year expenditures, personnel, and administrative costs.
• Net income was $17.2 million over budget

Questions
Representatives from Pisenti & Brinker are on Zoom and available to answer questions.
4

Staff Report Item 3
TO: 3CE Audit and Finance Committee
FROM: Robert M. Shaw, Chief Executive Officer
PREPARED BY: Juan Lopez, Director of Finance
SUBJECT: Receive a Presentation on 3CE’s FY 2022-23 Audited Financial Statements DATE: February 21, 2024
RECOMMENDATION:

Receive a presentation on 3CE’s FY 2022-23 Audited Financial Statements.

BACKGROUND:
3CE is responsible for the preparation and fair presentation of financial statements. The independent auditor performs tests to ensure the financial statements are free from material misstatement. The Finance Department worked diligently with its accounting vendor and the external auditors, Pisenti & Brinker, over the past few months to ensure a proper review of 3CE’s financial controls and financial statements. The FY 2022-23 Financial Statements consist of the following:
• Independent Auditors’ Report
• Management’s Discussion and Analysis
• Financial Statements, including:
 Statements of Net Position
 Revenues and Expenses and Changes in Net Position
 Statements of Cash Flows
 Notes to the Financial Statements
DISCUSSION/ANALYSIS:

The Independent Auditors’ Report includes its opinion that 3CE’s FY 2022-23 Financial Statements present fairly, in all material respects, the financial position of 3CE as of September 30, 2022 and 2023, and the respective changes in financial position and cash. The Auditors’ Report contains what is generally regarded as an unqualified or “clean” audit opinion.

The auditor’s audit results letter states that they did not identify any internal control deficiencies that they consider a material weakness. Representatives from Pisenti & Brinker will be in attendance and available to answer questions during the Audit and Finance Committee meeting.

FY 2022-23 Financial Highlights
 The net position increased by $34.7 million, up from a $17.3 million increase in the prior year.

Cash, cash equivalents, and short-term investments grew by $71.5 million.  Operating revenues grew over $49.9 million, driven primarily by the rate adjustments to reflect the increased cost of energy.
 The cost of energy increased by approximately $32.1 million due to rising energy and resource adequacy costs and delays in new power projects resulting from interconnection delays, supply chain, and inflationary pressures.
 Operating expenses, excluding the cost of energy, increased year over year from $21.7 million in FY 2021-22 to $27.8 million in FY 2022-23, an increase of 28.3%.  Higher interest income from the increase in market interest rates stemming from rate hikes made by the Federal Reserve, resulting in $7.1 million in higher investment revenue than the prior year.  Cash was positively impacted by the increase in net position, higher accrued electricity costs, and lower energy market settlements and accounts receivable. Cash was negatively impacted by higher accrued revenue. Higher accrued revenue arose primarily from an increase in retail electricity rates. Higher accrued electricity costs resulted from higher electricity costs and delays in supplier invoicing for renewable energy. Security deposits from energy supplies increased as a result of delays with PPAs.
 The receipt and application of $1.5 million of California Arrearage Payment Program (CAPP) funds reduced eligible past-due accounts receivable.

FY 2022-23 Actuals Versus Budget
On May 10, 2023, the Operations Board received an update on the mid-year FY 2022-23 budget forecast.

The mid-year budget amendment sought to align expenditures and revenues resulting from external and internal factors, including higher energy costs and changes to electric generation rates.

Year-end actuals versus budget are favorable and speak to the value of the mid-year budget amendment.

Operating revenue was under budget by $3.4 million, a 0.8% variance. Investment revenue was $2.2 million over budget, thanks to higher-than-expected interest rates. The total revenue was $0.5 million under budget, a negligible variance supported by higher-than-estimated investment revenue. Operating expenditures were $17.7 million under budget, a 4.5% variance. Energy costs were $4.5 million under budget, a 1.1% variance. Non-energy operating costs were 33.1% under budget due to lower energy program current year expenditures, personnel, and administrative costs. Net income was $17.2 million over budget.

CONCLUSION:

For the year ending September 30, 2023, 3CE increased its net position and liquidity by $34.7 million and $71.5 million, respectively. These results and ongoing efforts by staff are strong indicators of 3CE’s sound financial health and positioned to serve its customers and deliver on its mission. A strong net position of $243.3 million supports 3CE’s newly adopted Financial Policies that established robust strategic reserves to sustain service delivery. Adequate reserves enable flexible financial planning to develop rate structures and future capital projects and deal with unforeseen emergencies.

FISCAL IMPACT:

There is no financial impact by receiving this report.

ATTACHMENT(S):

1. FY 2022-23 Audited Financial Statements

2. FY 2022-23 Supplemental Budgetary Schedule, Investment Summary, and Dashboard

Financial
Statements
Years Ended September 30, 2023 and 2022

INCLUDING REPORT OF INDEPENDENT AUDITORS

CENTRAL COAST COMMUNITY ENERGY
YEARS ENDED SEPTEMBER 30, 2023 AND 2022

TABLE OF CONTENTS
Independent Auditor’s Report ………………………………………………………................ 1 Management’s Discussion and Analysis ……………………………………………................ 3 Basic Financial Statements:

Statements of Net Position ……………………………………………………………. 10
Statements of Revenues, Expenses and Changes in Net Position ……………………. 11 Statements of Cash Flows …………………………………………………………….. 12
Notes to the Basic Financial Statements ……………………………………................ 14

SANTA ROSA  PETALUMA
RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. 3562 Round Barn Circle, Suite 200
Santa Rosa, CA 95403
(707) 542-3343  Office
(707) 527-5608  Fax
pbllp.com
Independent Auditor's Report
To the Board of Directors
Central Coast Community Energy
Opinion
We have audited the accompanying financial statements of Central Coast Community Energy (3CE), as of and for the years ended September 30, 2023 and 2022, and the related notes to the financial statements, which collectively comprise 3CE’s basic financial statements as listed in the table of contents.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of 3CE as of September 30, 2023 and 2022, and the changes in financial position and cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinion
We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audits of the Financial Statements section of our report. We are required to be independent of 3CE and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about 3CE’s ability to continue as a going concern within one year after the date that the financial statements are issued or available to be issued.

Auditor's Responsibilities for the Audits of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

Independent Auditor's Report (continued)
Auditor's Responsibilities for the Audits of the Financial Statements (continued) In performing an audit in accordance with GAAS, we:
• Exercise professional judgment and maintain professional skepticism throughout the audits. • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. • Obtain an understanding of internal control relevant to the audits in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of 3CE’s internal control. Accordingly, no such opinion is expressed. • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
• Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about 3CE’s ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audits, significant audit findings, and certain internal control-related matters that we identified during the audits.

Required Supplementary Information
Accounting principles generally accepted in the United States of America require that management's discussion and analysis be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context.

We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Santa Rosa, California
February 13, 2024

CENTRAL COAST COMMUNITY ENERGY
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEARS ENDED SEPTEMBER 30, 2023 AND 2022
3 The Management’s Discussion and Analysis provides an overview of Central Coast Community Energy’s (3CE) financial activities as of and for the years ended September 30, 2023 and 2022. The information presented here should be considered in conjunction with the audited financial statements.

BACKGROUND
3CE’s formation was made possible in 2002 by the passage of California Assembly Bill 117, which enabled communities to purchase power on behalf of their residents and businesses as an alternative to legacy Investor-Owned Utilities (IOU).
3CE is a Community Choice Aggregator (CCA) established on February 21, 2017 pursuant to Public Utilities Code Section 366.2 and operating as a Joint Powers Authority (JPA) pursuant to Government Code section 6500 et seq. 3CE currently serves residential, commercial and agricultural/industrial customers in communities located within its service area. 1 3CE serves approximately 450,000 customer accounts. 3CE is committed to charging competitive retail generation rates, offering innovative energy programs to facilitate electrification, and reducing greenhouse gas (GHG) emissions through long-term contracts for existing and new utility-scale renewable electricity generation. 3CE has established an innovative procurement strategy to accelerate the reduction of GHG emissions, committing 3CE to developing a resource mix which delivers clean renewable energy for 60% of 3CE’s demand by the year 2025 and 100% of 3CE’s demand by the year 2030.
3CE is governed by a Policy Board and an Operations Board. The Policy Board consists of elected officials from member jurisdictions, while the Operations Board consists of senior staff from those jurisdictions. The Policy Board provides guidance and approval in strategic planning and goal setting, budgets, rates, large capital expenditures, and financing. The Operations Board provides guidance and approval on contracts, agreements, and policies that govern day-to-day operations. 3CE has the rights and powers to set rates for its services, incur debt, and issue bonds or other obligations. 1 As of September 30, 2023, 3CE’s members included the California Cities and Towns of Arroyo Grande, Atascadero, Buellton, Capitola, Carpinteria, Carmel-by-the-Sea, Del Rey Oaks, Goleta, Gonzales, Greenfield, Grover Beach, Guadalupe, Hollister, Marina, Monterey, Morro Bay, Pacific Grove, Paso Robles, Pismo Beach, Salinas, San Juan Bautista, San Luis Obispo, Sand City, Santa Cruz, Santa Maria, Scotts Valley, Seaside, Soledad, Solvang and Watsonville as well as the Counties of Monterey, San Benito, Santa Barbara, San Luis Obispo, and Santa Cruz. 3CE anticipates initiating service in the City of Atascadero and the County of San Luis Obispo in January 2025.

CENTRAL COAST COMMUNITY ENERGY
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEARS ENDED SEPTEMBER 30, 2023 AND 2022
4 Financial Reporting
3CE presents its financial statements as an enterprise fund under the economic resources measurement focus and accrual basis of accounting, in accordance with Generally Accepted Accounting Principles (GAAP) for proprietary funds, as prescribed by the Governmental Accounting Standards Board (GASB).

Contents Of This Report
This report is divided into the following sections:
 Management’s discussion and analysis.
 The Basic Financial Statements:
o The Statements of Net Position include all of 3CE’s assets, liabilities, and net position and provides information about the nature and amounts of resources and obligations at a specific point in time.
o The Statements of Revenues, Expenses, and Changes in Net Position report all of 3CE’s revenue and expenses for the years shown.
o The Statements of Cash Flows report the cash provided and used by operating activities, as well as other sources and uses, such as capital asset acquisitions and investing activities.
o The Notes to the Basic Financial Statements provide additional details and information related to the basic financial statements.

CENTRAL COAST COMMUNITY ENERGY
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEARS ENDED SEPTEMBER 30, 2023 AND 2022
5 FINANCIAL HIGHLIGHTS
The following table is a summary of 3CE’s assets, liabilities, and net position, and a discussion of significant changes for the years ended September 30:
2023 2022 2021
Current assets 324,238,888 $ 259,993,090 $ 229,102,332 $ Noncurrent assets
Capital and lease assets, net 2,008,218 219,319 328,942 Other noncurrent assets 1,543,979 1,731,180 79,280
Total noncurrent assets 3,552,197 1,950,499 408,222
Total assets 327,791,085 261,943,589 229,510,554
Current liabilities 54,996,528 45,601,781 32,490,845
Noncurrent liabilities 30,923,232 9,131,250 7,031,250
Total liabilities 85,919,760 54,733,031 39,522,095
Net position
Net investment in capital assets 520,678 219,319 328,942 Restricted for security collateral 294,000 294,000 294,000 Unrestricted 241,056,647 206,697,239 189,365,517
Total net position 241,871,325 $ 207,210,558 $ 189,988,459 $ Current Assets
Current assets were approximately $324,239,000 at the end of 2023 and consist of cash, accounts receivable, accrued revenue, investments, and deposits. Accrued revenue is revenue from energy delivered but not invoiced to customers at year-end. Accounts receivable represents energy delivered and invoiced but not paid for by customers. Total current assets increased each year as a result of 3CE’s operating surplus for each year.

CENTRAL COAST COMMUNITY ENERGY
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEARS ENDED SEPTEMBER 30, 2023 AND 2022
6 Noncurrent Assets
Capital assets are reported net of depreciation. Changes during the years include acquisition of furniture and equipment, leasehold improvements, and software, less depreciation and amortization. 3CE does not own assets used for electricity generation, transmission or distribution.

A lease asset is reported in accordance with Governmental Accounting Standards Board No. 87 (GASB 87). 3CE entered into a lease in October 2022 for its office space, which accounts for the increase in capital and lease assets.

Other noncurrent assets consist of the long-term portion ($1,521,000) of a $2,000,000 loan made in 2022 to the County of Santa Cruz regarding their acquisition of generator equipment.

Also included in other noncurrent assets are deposits for regulatory and other operating purposes.

Current Liabilities
Current liabilities of approximately $54,997,000 as of September 30, 2023 consist primarily of the cost of electricity delivered to customers that is due to be paid by 3CE after the fiscal year. Current liabilities also include amounts owed for trades payable, personnel costs, taxes and surcharges owed to other governments, and deposits received from suppliers.

Accrued cost of electricity increased each year compared to the prior year. This was a result of increased prices of electricity purchased as well as a small increase in the volume of purchased electricity outstanding. Additionally, current liabilities increased significantly in 2023 due to deposits received from energy suppliers.

Noncurrent Liabilities
The increase in noncurrent liabilities in 2023 is the result of several energy supply contracts entered into or negotiated during the year that required the suppliers to post collateral. These deposits are held by 3CE until certain contract milestones are met or contracts are completed. As part of its risk management policy, 3CE requires energy suppliers to post collateral deposits in some cases. Deposits are determined to be a noncurrent liability if they are not expected to be returned to the supplier within one year of the financial statement date.

CENTRAL COAST COMMUNITY ENERGY
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEARS ENDED SEPTEMBER 30, 2023 AND 2022
7 Summary of Revenues, Expenses, and Changes in Net Position The following table is a summary of 3CE’s results of operations and a discussion of significant changes for the years ended September 30:
2023 2022 2021
Operating revenues 451,619,272 $ 401,698,835 $ 287,931,441 $ Nonoperating revenues 9,635,091 3,800,219 702,036
Total income 461,254,363 405,499,054 288,633,477
Operating expenses 426,540,098 388,276,955 257,383,668
Nonoperating expenses 53,498 - -
Total expenses 426,593,596 388,276,955 257,383,668
Change in net position 34,660,767 $ 17,222,099 $ 31,249,809 $ Operating Revenues
Rate increases in effect during 2023 account for the majority of the increase in revenue compared to 2022.

Revenues from electricity sales increased from 2021 to 2022 by approximately $111,219,000 as a result of both 3CE’s customer base coming entirely online for the full year in 2022, and rate increases that went into effect during the year.

Nonoperating Revenues
The 2023 increase in nonoperating revenues is a result of increased investment returns related to an increase in market interest rates. The increase from 2021 to 2022 was primarily the result of grant income from the California Arrearage Payment Plan (CAPP) that was received in 2022.

Operating Expenses
3CE’s largest operating expense continues to be the purchase of electricity delivered to its customers. 3CE purchases energy products from markets and is developing a balanced and diversified renewable power portfolio. Operating expenses increased each year due to an increase in the number of customers and rising market prices.

CENTRAL COAST COMMUNITY ENERGY
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEARS ENDED SEPTEMBER 30, 2023 AND 2022
8 ECONOMIC OUTLOOK
The fiscal year ended September 30, 2023 was a year of stable operations and growing cost pressures from increased costs of energy and resource adequacy compliance. 3CE serves over 450,000 residential, commercial, and agricultural/industrial customer meters in a service area spanning five counties: Santa Cruz, Monterey, San Benito, San Luis Obispo, and Santa Barbara. 3CE serves approximately 94% of all eligible customers in the service area, and that rate of participation is expected to remain stable in 2024.

Operating revenues grew over $49,900,000, driven primarily by the rate adjustments to reflect the increased cost of energy. Operating expenses, comprised primarily of energy costs, increased by approximately $38,300,000 due to a combination of rising energy and resource adequacy (RA) costs, and delays in new power projects resulting from interconnection delays, supply chain, and inflationary pressures. Even with the rising energy and RA compliance costs, the net position grew by almost $34,700,000 over the prior year.

Over time, 3CE’s growing portfolio of renewable energy and storage is expected to lower the cost and volatility of the energy it supplies to customers, helping it maintain a robust financial position.

The portfolio continues to include Power Purchase Agreements (PPAs). Six projects supported by PPAs are online as of fiscal year 2022-23. 3CE’s non-energy administrative costs, including contract services, staffing, and general and administrative expenses, were 6% of revenue, reflecting 3CE’s focus on delivering value for customers.
3CE has implemented cost-based rates that ensure customers pay what it costs to serve them and keeps 3CE competitive with legacy Investor-Owned Utility (IOU) rates. Fiscal year 2022-23 was the second year with cost-based rates for the Pacific Gas and Electric (PG&E) service area. This approach led to significant average customer savings versus IOU rates and will continue to do so in 2024. These savings strengthen 3CE’s competitive position. 3CE will explore expanding the cost based rate approach to its Southern California Edison service area anticipated to start in 2025.

Investments from the Inflation Reduction Act, a renewed political focus on developing new renewable resources, and the significant compliance value in battery storage provide an opportunity for 3CE to continue providing new resources at cost competitive rates. 3CE will continue investing in renewable innovation and initiatives to reach 100% clean and renewable energy through the commitment to new, emerging, scalable technologies and programs.

Management intends to continue its conservative use of financial resources and continues to build credit capacity through increased cash reserves, complying with the energy risk management policy, and entering into favorable energy purchase commitments. As a result, 3CE’s financial position and foundation remain strong and positioned for continued success.

CENTRAL COAST COMMUNITY ENERGY
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEARS ENDED SEPTEMBER 30, 2023 AND 2022
9 REQUEST FOR INFORMATION
This financial report is designed to provide 3CE’s customers and creditors with a general overview of the organization’s finances and to demonstrate 3CE’s accountability for the funds under its stewardship.

Please address any questions about this report or requests for additional financial information to 70 Garden Court, Suite 300, Monterey, CA 93940.

Respectfully submitted,
Robert Shaw, Chief Executive Officer

BASIC FINANCIAL STATEMENTS

CENTRAL COAST COMMUNITY ENERGY
The accompanying notes are an integral part of these financial statements. 10

STATEMENTS OF NET POSITION
SEPTEMBER 30, 2023 AND 2022
2023 2022
Current assets
Cash and cash equivalents - unrestricted 195,739,869 $ 150,096,869 $ Accounts receivable, net of allowance 32,759,275 47,107,600 Accrued revenue 24,865,108 18,161,946
Other receivables 4,273,462 2,003,955
Loan receivable 187,201 292,002
Prepaid expenses 380,211 308,419
Deposits 6,494,094 8,293,930
Cash - restricted 294,000 294,000
Investments 59,245,668 33,434,369
Total current assets 324,238,888 259,993,090
Noncurrent assets
Deposits 23,182 23,182
Loan receivable 1,520,797 1,707,998
Lease asset, net of amortization 1,426,467 -
Capital assets, net of depreciation and amortization 581,751 219,319 Total noncurrent assets 3,552,197 1,950,499
Total assets 327,791,085 261,943,589
Current liabilities
Accrued cost of electricity 48,922,476 40,074,582
Accounts payable 2,777,101 1,589,211
Other accrued liabilities 741,801 1,996,024
User taxes and energy surcharges due to other governments 1,753,727 1,941,964 Lease liability 300,423 -
Security deposits - energy suppliers 501,000 -
Total current liabilities 54,996,528 45,601,781
Noncurrent liabilities
Security deposits - energy suppliers 29,756,280 9,131,250 Lease liability 1,166,952 -
Total noncurrent liabilities 30,923,232 9,131,250
Total liabilities 85,919,760 54,733,031
Net investment in capital assets 520,678 219,319
Restricted for security collateral 294,000 294,000
Unrestricted 241,056,647 206,697,239
Total net position 241,871,325 $ 207,210,558 $

NET POSITION
ASSETS

LIABILITIES

CENTRAL COAST COMMUNITY ENERGY
The accompanying notes are an integral part of these financial statements. 11

STATEMENTS OF REVENUES, EXPENSES

AND CHANGES IN NET POSITION
YEARS ENDED SEPTEMBER 30, 2023 AND 2022
2023 2022

OPERATING REVENUES
Electricity sales, net 450,713,404 $ 399,149,960 $
Liquidated damages 750,000 2,548,875
Other income 155,868 -
Total operating revenues 451,619,272 401,698,835

OPERATING EXPENSES
Cost of electricity 398,746,769 366,610,134
Contract services 10,820,099 9,288,170
Staff compensation 6,200,592 6,089,226
Program incentives 8,484,775 4,374,729
Other operating expenses 1,869,295 1,826,016
Depreciation and amortization 418,568 88,680
Total operating expenses 426,540,098 388,276,955
Operating income 25,079,174 13,421,880

NONOPERATING REVENUES (EXPENSES)
Interest and investment returns 8,184,122 1,040,759
Grant revenue 1,450,969 2,759,460
Financing costs (53,498) -
Nonoperating revenues 9,581,593 3,800,219
CHANGE IN NET POSITION 17,222,099 34,660,767
Net position at beginning of year 207,210,558 189,988,459 Net position at end of year 241,871,325 $ 207,210,558 $

CENTRAL COAST COMMUNITY ENERGY
The accompanying notes are an integral part of these financial statements. 12

STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 2023 AND 2022
2023 2022

CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers 466,288,740 $ 398,416,283 $
Receipts of liquidated damages 897,000 2,401,875
Other operating receipts 155,868 -
Receipts of deposits and collateral 53,684,900 11,219,952 Payments to suppliers for electricity (392,088,215) (345,208,662) Payments of deposits and collateral (30,759,035) (17,376,728) Payments for other goods and services (12,022,290) (10,922,374) Payments for program incentives (7,797,967) (4,196,754) Payments of staff compensation (6,467,227) (6,178,169)
Payments of taxes and energy surcharges to other governments (8,274,859) (6,812,737) Net cash provided by operating activities 63,616,915 21,342,686

CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES
Grant revenue 1,450,969 2,759,460

CASH FLOWS FROM CAPITAL AND RELATED

FINANCING ACTIVITIES
Payments of lease liability (264,318) -
Payments to acquire capital assets (509,105) (1,113)
Net cash used by capital and related financing activities (773,423) (1,113)

CASH FLOWS FROM INVESTING ACTIVITIES
Investment income received 7,060,790 970,035
Proceeds from investment sales 111,223,174 -
Principal payments received on loan receivable 292,002 - Purchase of investments (137,227,427) (32,418,822)
Loan issued - (2,000,000)
Net cash used by investing activities (18,651,461) (33,448,787) Net change in cash and cash equivalents 45,643,000 (9,347,754) Cash and cash equivalents at beginning of year 150,390,869 159,738,623 Cash and cash equivalents at end of year $ 150,390,869 196,033,869 $ Reconciliation to the Statement of Net Position
Cash and cash equivalents - unrestricted 195,739,869 $ 150,096,869 $ Cash - restricted 294,000 294,000
Cash and cash equivalents 196,033,869 $ 150,390,869 $

SUPPLEMENTAL CASH FLOW INFORMATION
Capital asset acquisitions included in accounts payable and other liabilities 20,165 $ -

CENTRAL COAST COMMUNITY ENERGY
The accompanying notes are an integral part of these financial statements. 13

STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 2023 AND 2022
2023 2022
Operating income 25,079,174 $ 13,421,880 $
Adjustments to reconcile operating income to net
cash provided by operating activities
Depreciation and amortization expense 418,568 88,680
(Increase) decrease in:

Accounts receivable, net of allowance 14,348,325 (9,731,301) Accrued revenue (6,703,164) 1,849,150
Energy settlements receivable - 7,856,108
Other receivables (1,913,221) (1,069,449)
Prepaid expenses (71,792) 1,251,830
Deposits 1,799,836 (6,575,149)
Increase (decrease) in:

Accrued cost of electricity 8,847,894 11,425,158
Accounts payable 1,167,725 357,493
Other accrued liabilities (294,223) (115,044)
User taxes and surcharges due to other governments (188,237) 483,330 Security deposits - energy suppliers 21,126,030 2,100,000 Net cash provided by operating activities 63,616,915 $ 21,342,686 $

RECONCILIATION OF OPERATING INCOME TO NET

CASH PROVIDED BY OPERATING ACTIVITIES

CENTRAL COAST COMMUNITY ENERGY

NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2023 AND 2022
14 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

REPORTING ENTITY
Central Coast Community Energy (3CE) is a Joint Powers Authority created on February 21, 2017, and its jurisdictions consist of the following local governments as of September 30, 2023:

Counties Cities and Towns
Monterey Arroyo Grande Morro Bay
San Benito Atascadero Pacific Grove
Santa Barbara Buellton Paso Robles
Santa Cruz Capitola Pismo Beach
Carpinteria Salinas
Carmel-by-the-Sea San Juan Bautista
Del Rey Oaks San Luis Obispo
Goleta Sand City
Gonzales Santa Cruz
Greenfield Santa Maria
Grover Beach Scotts Valley
Guadalupe Seaside
Hollister Soledad
Marina Solvang
Monterey Watsonville
3CE is separate from and derives no financial support from its members. 3CE is governed by two Boards, a Policy Board and an Operations Board. Each Board is comprised of 17 members with 17 alternates representing the participating communities. Some of the 17 members represent more than one jurisdiction. Policy Board Members are elected officials from 3CE member communities.

Operations Board Members are executives leading the member cities and counties. 3CE was formed to acquire retail electricity for the residents and businesses within its members’ jurisdictions, study, promote, conduct, operate, and manage energy and energy-related climate change programs, and to exercise all other powers necessary and incidental to accomplishing these objectives. A core function of 3CE is to provide electric service that includes the use of renewable sources under the Community Choice Aggregation Program under California Public Utilities Code Section 366.2.
3CE began its energy delivery operations in March 2018. Electricity is acquired from commercial suppliers and delivered through existing physical infrastructure and equipment managed by Pacific Gas and Electric Company (PG&E) and Southern California Edison (SCE).

CENTRAL COAST COMMUNITY ENERGY

NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2023 AND 2022
15 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

BASIS OF ACCOUNTING
3CE’s financial statements are prepared in accordance with Generally Accepted Accounting Principles (GAAP). The Governmental Accounting Standards Board (GASB) is responsible for establishing GAAP for state and local governments through its pronouncements. 3CE’s operations are accounted for as a governmental enterprise fund and are reported using the economic resources measurement focus and the accrual basis of accounting, similar to business enterprises. Accordingly, revenues are recognized when they are earned; and expenses are recognized at the time liabilities are incurred. Enterprise fund type operating statements present increases (revenues) and decreases (expenses) in total net position. Reported net position is segregated into three categories: investment in capital assets, restricted, and unrestricted.

When both restricted and unrestricted resources are available for use, it is 3CE’s policy to use restricted resources first, and then unrestricted resources as they are needed.

CASH AND CASH EQUIVALENTS
For purposes of the Statements of Cash Flows, 3CE defines cash and cash equivalents to include cash on hand, demand deposits and short-term investments with an original maturity of three months or less. 3CE has cash that is restricted under various security agreements. This is reported as restricted cash on the Statements of Net Position and is included in cash and cash equivalents for the purpose of the Statements of Cash Flows.

PREPAID EXPENSES AND DEPOSITS
Contracts to purchase energy may require 3CE to provide the supplier with advanced payments or security deposits. Deposits are generally held for the term of the contract and are classified as current or noncurrent assets depending on the length of time the deposits will be outstanding. Also included are prepaid expenses and deposits for regulatory and other operating purposes.

INVESTMENTS
Investments are stated at fair value based on prices listed on a national exchange for debt securities.

Certificates of deposits are stated at cost. 3CE intends to hold its securities to maturity. Investments with a maturity of less than one year are shown as current assets in the Statement of Net Position. 3CE’s Investment Policy permits the investment of funds in depository accounts, certificates of deposit and the Local Agency Investment Fund (LAIF) program operated by the California State Treasury, United States Treasury obligations, Federal Agency Securities, commercial paper, and money market funds.

CENTRAL COAST COMMUNITY ENERGY

NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2023 AND 2022
16 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

LEASE ASSET AND LEASE LIABILITY
3CE recognizes an asset and liability when it enters into certain leasing arrangements. The leased asset is amortized over the term of the lease. The lease liability is the present value of payments expected to be paid to the lessor during the lease term. 3CE’s leased asset and liability relate to its office premises.

CAPITAL ASSETS AND DEPRECIATION
3CE’s policy is to capitalize furniture and equipment valued over $1,000 that is expected to be in service for over one year. Depreciation is computed according to the straight-line method over estimated useful lives of three years for electronic equipment and seven years for furniture and leasehold improvements. 3CE does not own any electric generation, transmission or distribution assets.

SECURITY DEPOSITS-ENERGY SUPPLIERS
Various energy contracts entered into by 3CE require the supplier to provide 3CE with a security deposit. These deposits are generally held for the term of the contract or until the completion of certain benchmarks. Deposits are classified as current or noncurrent depending on the length of time the deposits will be held.

NET POSITION
Net position is presented in the following components:

Net investment in capital assets: This component of net position consists of capital assets, lease asset, net of accumulated depreciation and amortization, and reduced by outstanding borrowings that are attributable to the acquisition, construction, or improvement of those assets.

Restricted for security collateral: This component of net position consists of constraints placed on net asset use through external constraints imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments or constraints imposed by law through constitutional provisions or enabling legislation.

Unrestricted: This component of net position consists of net position that does not meet the definition of “net investment in capital assets” or “restricted for security collateral.”

CENTRAL COAST COMMUNITY ENERGY

NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2023 AND 2022
17 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

OPERATING AND NONOPERATING REVENUES
Operating revenues include energy sales to retail and wholesale customers, and liquidated damages from suppliers that fail to meet delivery commitments.

Investment income includes interest earned on bank deposits as well as unrealized gains and losses on its investment holdings. Interest and investment income are considered nonoperating revenues.

REVENUE RECOGNITION
3CE recognizes revenue on the accrual basis. This includes invoices issued to customers during the reporting period and electricity estimated to have been delivered, but not yet billed at year-end.

Management estimates that a portion of the billed amounts will be uncollectible. Accordingly, an allowance for uncollectible accounts has been recorded.

OPERATING AND NONOPERATING EXPENSES
Operating expenses include the costs of electricity, staffing, contractor services, program incentives, and other operating expenses. Expenses not meeting this definition are reported as nonoperating expenses.

ELECTRICAL POWER PURCHASED
During the normal course of business, 3CE purchases electrical power from numerous suppliers.

Electricity costs include the cost of energy and capacity arising from contracts with energy suppliers as well as generation credits, and load and other charges arising from 3CE’s participation in the California Independent System Operator’s (CAISO) centralized market. The cost of electricity and capacity is recognized as “Cost of Electricity” in the Statements of Revenues, Expenses and Changes in Net Position.

To comply with the State of California’s Renewable Portfolio Standards (RPS), 3CE acquires RPS eligible renewable energy evidenced by Renewable Energy Certificates (Certificates) recognized by the Western Renewable Energy Generation Information System. 3CE obtains Certificates with the intent to retire them and does not sell or build surpluses of Certificates with a profit motive. An expense is recognized at the point that the cost of the Certificate is due and payable to the supplier. 3CE purchases capacity commitments from qualifying generators to comply with the California Public Utility Commission’s Resource Adequacy Program. The goals of the Resource Adequacy Program are to provide sufficient resources to the CAISO to ensure the safe and reliable operation of the grid in real-time and to provide appropriate incentives for the siting and construction of new resources needed for reliability in the future.

CENTRAL COAST COMMUNITY ENERGY

NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2023 AND 2022
18 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

STAFFING COSTS
3CE pays employees bi-weekly and fully pays its obligation for health benefits and contributions to its defined contribution retirement plan each month. 3CE is not obligated to provide post-employment healthcare or other fringe benefits, and accordingly, no related liability is recorded in these financial statements. 3CE provides compensated time off, and the related liability is recorded in these financial statements.

INCOME TAXES
3CE is a Joint Powers Authority under the provision of the California Government Code and is not subject to federal or state income or franchise taxes.

ESTIMATES
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

RECLASSIFICATIONS
Certain amounts in the prior-year financial statements have been reclassified for comparative purposes to conform to the presentation of the current-year financial statements. These reclassifications did not result in any change in previously reported net position or change in net position.

2. CASH AND CASH EQUIVALENTS
3CE maintains its cash in both interest-bearing and non-interest-bearing deposit accounts in several banks. 3CE’s deposits are subject to California Government Code Section 16521, which requires banks to collateralize public funds in excess of the Federal Deposit Insurance Corporation (FDIC) limit of $250,000 by 110%. Certain short-term investments with original maturities of less than three months are classified as cash and cash equivalents, which are not subject to the collateral requirement or FDIC coverage previously mentioned. Accordingly, the amount of risk is not disclosed. 3CE monitors its risk exposure on an ongoing basis.

CENTRAL COAST COMMUNITY ENERGY

NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2023 AND 2022
19 3. RECEIVABLES AND DEPOSITS

ACCOUNTS RECEIVABLE
Accounts receivable were as follows as of September 30:
2023 2022
Accounts receivable from customers 43,313,058 $ 55,979,470 $ Allowance for uncollectible accounts (10,553,783) (8,871,870) Net accounts receivable 32,759,275 $ 47,107,600 $
The majority of account collections occur within the first few months following customer invoicing. 3CE estimates that a portion of the billed accounts will not be collected. 3CE continues collection efforts on accounts in excess of de minimis balances regardless of the age of the account. Although collection success generally decreases with the age of the receivable, 3CE continues to have success in collecting older accounts. The allowance for uncollectible accounts at the end of a period includes amounts billed during the current and prior fiscal years. During 2023 and 2022, 3CE recorded $6,864,000 and $6,192,000, respectively, as an increase to the allowance in anticipation of uncollectible accounts. Bad debt expense is reported as a reduction in electricity sales on the Statement of Revenues, Expenses and Changes in Net Position. Other changes in the allowance for uncollectible accounts from year to year are the result of account write-offs. In 2023 and 2022, 3CE received CAPP funds (see Note 6) that helped recover for previously written off accounts receivable.

OTHER RECEIVABLES
Other receivables consists primarily of amounts due from energy suppliers, generally as a result of certain wholesale transactions for energy products.

DEPOSITS
Combined current and noncurrent deposits were approximately $6,517,000 and $8,317,000 as of September 30, 2023 and 2022, respectively. The majority of current deposits relate to collateral posted with the CAISO, which is determined based on 3CE’s market exposure at a given time. Also included in current assets are funds provided to an energy program implementer to issue customer incentive payments.

CENTRAL COAST COMMUNITY ENERGY

NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2023 AND 2022
20 4. INVESTMENTS
During the years ended September 30, 2023 and 2022, 3CE purchased investments with original maturities of three months or more. As of September 30, investments were as follows:
2023 2022
Investments at Fair Value:

Commercial paper 3,700,088 $ 2,435,226 $
U.S. government & agency obligations 45,545,580 14,584,200 Municipal obligations - 3,863,262
Total investments at fair value 49,245,668 20,882,688
Certificate of deposits 10,000,000 12,551,681
Total investments 59,245,668 $ 33,434,369 $

FAIR VALUE MEASUREMENT
GASB Statement No. 72, Fair Value Measurement and Application, sets forth the framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. Level 1 inputs are quoted prices in active markets for identical assets, Level 2 inputs are significant other observable inputs, and Level 3 inputs are significant unobservable inputs.

In instances where inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation. 3CE’s assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset or liability.

As of September 30, 2023 and 2022, 3CE’s investments are considered Level 1 inputs, except for certificates of deposits, which are based on the nominal value. Quoted prices in active markets were used for determining fair value measurement.

CREDIT RISK
Credit risk is the risk an issuer or other counterparty to an investment will not fulfill its obligations.

Certain investments, such as obligations of the U.S. government or obligations explicitly guaranteed by the U.S. government, are not considered to have credit risk. Credit risk for other investments is not available.
3CE’s investment policy addresses this risk. 3CE limits investments to those allowed by Section 53601 of the California Government Code that addresses the risk allowable for each investment.

CENTRAL COAST COMMUNITY ENERGY

NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2023 AND 2022
21 4. INVESTMENTS (continued)
CUSTODIAL CREDIT RISK – CERTIFICATE OF DEPOSITS
Custodial credit risk is the risk that in the event of a financial institution failure, 3CE’s deposits may not be returned to 3CE. 3CE’s deposits are subject to California Government Code Section 16521, which requires banks to collateralize public funds in excess of the Federal Deposit Insurance Corporation (FDIC) limit of $250,000 by 110%.

As of September 30, 2023 and 2022, none of 3CE’s bank balances are known to be individually exposed to custodial credit risk.

CUSTODIAL CREDIT RISK - INVESTMENTS
Custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, 3CE would not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. All of 3CE’s investments are exposed to custodial credit risk.

INTEREST RATE RISK
Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. Duration is a measure of the price sensitivity of a fixed income portfolio to changes in interest rates. It is calculated as the weighted average time to receive a bond’s coupon and principal payments. The longer the duration of a portfolio, the greater its price sensitivity to changes in interest rates. 3CE manages its exposure to declines in fair values by limiting the weighted average maturity of its investments.

All investments had a maturity of less than one year as of September 30, 2023 and 2022. 3CE intends to hold investments to maturity.

CENTRAL COAST COMMUNITY ENERGY

NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2023 AND 2022
22 5. CAPITAL ASSETS AND LEASE ASSET
Capital asset activity for the years ended September 30, 2023 and 2022 was as follows:

Furniture &
Equipment
Leasehold
Improvements Software
Accumulated
Depreciation
and
Amortization Total
Balances at September 30, 2021 598,432 $ 80,743 $ - $ (350,233) $ 328,942 $ Additions 1,113 - - (88,680) (87,567)
Dispositions - (22,056) - - (22,056)
Balances at September 30, 2022 599,545 58,687 - (438,913) 219,319 Additions 97,171 31,974 400,126 (166,838) 362,432
Balances at September 30, 2023 696,716 $ 90,661 $ 400,126 $ (605,751) $ 581,751 $ Lease asset activity for the years ended September 30, 2023 and 2022 was as follows:

Lease Asset
Accumulated
Amortization Total
Balances at September 30, 2021 - $ - $ - $
Additions - - -
Dispositions - - -
Balances at September 30, 2022 - - -
Additions 1,678,197 (251,730) 1,426,467
Dispositions - - -
Balances at September 30, 2023 1,678,197 $ (251,730) $ 1,426,467 $

6. GRANT REVENUE
3CE administers a grant from the California Arrearage Payment Program (CAPP) that offers financial assistance for California energy utility customers to help reduce past due energy account balances that increased during the COVID-19 pandemic. In 2022 this program was funded through the federal American Rescue Plan Act (ARPA) with Coronavirus State and Local Fiscal Recovery Funds. The program was funded by the State of California in 2023. Grant revenue recognized for the years ended September 30, 2023 and 2022 was $1,451,000 and $2,759,000, respectively.

CENTRAL COAST COMMUNITY ENERGY

NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2023 AND 2022
23 7. DEFINED CONTRIBUTION RETIREMENT PLAN
3CE provides retirement benefits to eligible employees through a 401(a) Retirement Plan (Plan). The Plan is a defined contribution (Internal Revenue Code 401(a)) retirement plan established to provide benefits at retirement to employees of certain qualified employers admitted by the Plan. The Plan is administered by the Public Agency Retirement System (PARS). As of September 30, 2022, there were 34 plan participants. 3CE is required to contribute 10% of covered payroll as a match to required employee contributions. 3CE contributed approximately $502,000 and $462,000 for the years ended September 30, 2023 and 2022, respectively. Plan provisions and contribution requirements as they apply to 3CE are established and may be amended by the Board of Directors. 3CE elected out of the Social Security system for employees eligible for the Plan. 3CE also provides a 457(b) Retirement Plan where employees can make tax deferred contributions.

8. RISK MANAGEMENT
3CE is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; and errors and omissions. During the year, 3CE purchased insurance policies from investment-grade commercial carriers to mitigate risks that include those associated with earthquakes, theft, general liability, errors and omissions, and property damage. 3CE has general liability coverage of $1,000,000, with a deductible of $1,000.
3CE maintains risk management policies, procedures and systems that help mitigate credit, liquidity, market, operating, regulatory and other risks that arise from participation in the California energy market.

Credit guidelines include a preference for transacting with investment-grade counterparties, evaluating counterparties’ financial condition and assigning credit limits as applicable. These credit limits are established based on risk and return considerations under terms customarily available in the industry. In addition, 3CE enters into netting arrangements whenever possible and, where appropriate, obtains collateral and other performance assurances from counterparties.

CENTRAL COAST COMMUNITY ENERGY

NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2023 AND 2022
24 9. PURCHASE COMMITMENTS

POWER AND ELECTRIC CAPACITY
In the ordinary course of business, 3CE enters into power purchase agreements to acquire energy and electric capacity. The price and volume of purchased power is largely fixed. Variable priced power, which is a small part of 3CE’s portfolio, is generally linked to the market price of either natural gas or power at the date of delivery. Variable volume is generally associated with contracts to purchase energy from resources with varying availability and production, such as solar, wind and hydroelectric facilities.
3CE enters into long-term power purchase agreements to ensure stable competitive rates for its customers and to comply with state law and voluntary targets for renewable and greenhouse gas (GHG) free products.

The following table represents the expected, undiscounted, contractual obligations outstanding as of September 30, 2023:

Year ending September 30,
2024 496,000,000 $
2025 344,000,000
2026 196,000,000
2027 191,000,000
2028 186,000,000
2029-2053 2,755,000,000
Total 4,168,000,000 $

CENTRAL COAST COMMUNITY ENERGY

NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2023 AND 2022
25 10. LEASES
A lease asset is reported in accordance with Governmental Accounting Standards Board No. 87 (GASB 87). According to GASB, the Statement aims to increase the usefulness of governments’ financial statements by requiring reporting of certain lease assets and liabilities that previously were not recognized on the statement of net position.

On October 27, 2022, 3CE entered into a 3-year non-cancelable lease commencing on January 1, 2023 for its office premises. The rental agreement includes an option to renew the lease for two additional one-year terms.

Rental payments under this lease were $330,000 for the year ended September 30, 2023.

As of September 30, 2023, future minimum lease payments under this lease were as follows:

Year ending September 30, Principal Interest Total
2024 300,423 $ 59,931 $ 360,354 $
2025 325,259 45,905 371,164
2026 351,568 30,731 382,299
2027 379,426 14,342 393,768
2028 110,699 878 111,577
Total 1,467,375 $ 151,787 $ 1,619,162 $

26 CENTRAL COAST COMMUNITY ENERGY

NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2023 AND 2022

11. JOINT VENTURE
3CE participates in a joint powers agreement (JPA) through the California Community Choice Financing Authority (CCCFA). CCCFA was formed as a conduit issuer to assist its members by undertaking the financing or refinancing of energy prepayments that can be financed with tax advantaged bonds on behalf of one or more of the members by, among other things, issuing or incurring bonds and entering into related contracts with its members. Any debt or liability incurred by CCCFA on behalf of a member to prepay for renewable energy is not a debt or liability of that member. Furthermore, the assets of CCCFA in the form of prepaid energy or reserves held by the respective bond trustees for any prepayment transaction undertaken on behalf of a member does not constitute an asset or reserve of that member.

In December 2023, CCCFA issued bonds in the amount of $647,750,000, excluding original issue premium, the proceeds of which to be used to finance energy purchases that will be delivered to 3CE.

No debt, liability, or obligation of CCCFA is a debt, liability, or obligation of 3CE. 3CE will purchase energy from CCCFA in the same manner as it purchases energy from other suppliers. 3CE did not purchase any energy from CCCFA during fiscal year 2023. The outstanding purchase commitments related to these financing facilities are included in Note 9.

Each member of CCCFA is responsible for paying an equal portion of CCCFA’s general and administrative operating costs as determined by its board. During the years ended September 30 2023, and 2022, 3CE contributed approximately $18,000 and $28,000, respectively, to CCCFA to assist in its operating activities.

The financial statements of CCCFA are available online at http://www.cccfa.org/key-documents.html.

12. FUTURE GASB PRONOUNCEMENTS
The requirements of the following GASB Statements are effective for years ending after September 30, 2023:

GASB has approved GASB Statement No. 100, Accounting Changes and Error Corrections – An Amendment of GASB Statement No. 62, and GASB Statement No. 101, Compensated Absences. Management is evaluating the effect of implementation of these statements.

1 ACCOUNTANTS’ COMPILATION REPORT
Board of Directors
Central Coast Community Energy
Management is responsible for the accompanying special purpose statements of Central Coast Community Energy (a California Joint Powers Authority) which comprise the budgetary comparison schedule and a supplemental budgetary comparison schedule for the period ended September 30, 2023, and for determining that the budgetary basis of accounting is an acceptable financial reporting framework. We have performed a compilation engagement in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the AICPA. We did not audit or review the accompanying statement nor were we required to perform any procedures to verify the accuracy or completeness of the information provided by management. Accordingly, we do not express an opinion, a conclusion, nor provide any assurance on this special purpose budgetary comparison statement.

The special purpose statement is prepared in accordance with the budgetary basis of accounting, which is a basis of accounting other than accounting principles generally accepted in the United States of America. This report is intended for the information of the Board of Directors of the Authority.

Management has elected to omit substantially all of the note disclosures required by accounting principles generally accepted in the United States of America in these interim financial statements.

Central Coast Community Energy’s annual audited financial statements include the note disclosures omitted from these interim statements. If the omitted disclosures were included in these financial statements, they might influence the user’s conclusions about the Authority’s financial position, results of operations, and cash flows. Accordingly, these financial statements are not designed for those who are not informed about such matters.

We are not independent with respect to the Authority because we performed certain accounting services that impaired our independence.

Maher Accountancy
San Rafael, CA
November 13, 2023
1101 Fifth Avenue, Suite 200 San Rafael, CA 94901 415 459 1249 mahercpa.com

2022/23 YTD
Budget (Amended)
2022/23 YTD
Actual
2022/23 YTD
Budget Variance
(Under) Over
2022/23 YTD
Actual / Budget %
2022/23 Annual
Budget (Amended)
2022/23 Budget
Less Actual
2022/23 Budget
Remaining /
Budget %

REVENUES AND OTHER SOURCES
Electricity sales 463,110,000 $ 459,028,029 $ (4,081,971) $ 99% 463,110,000 $ 4,081,971 $ 1% Uncollectible accounts (7,500,000) (6,863,656) 636,344 92% (7,500,000) (636,344) 8% Net revenue - electricity 455,610,000 452,164,373 (3,445,627) 99% 455,610,000 3,445,627 1% Investment and miscellaneous income 6,187,000 8,339,990 2,152,990 n/a 6,187,000 (2,152,990) n/a Total revenues and other sources 461,797,000 461,254,363 (542,637) 100% 461,797,000 542,637 0% EXPENDITURES AND OTHER USESCurrent Expenditures
Cost of energy 398,884,224 403,427,000 (4,542,776) 99% 403,427,000 4,542,776 1% Energy programs (incentives and grants) 15,920,000 9,266,438 (6,653,562) 58% 15,920,000 6,653,562 42% Data manager 2,967,678 2,975,000 (7,322) 100% 2,975,000 7,322 0% Utility service fees 1,808,000 1,831,586 23,586 101% 1,808,000 (23,586) -1% Staffing 9,191,000 6,200,593 (2,990,407) 67% 9,191,000 2,990,407 33% Professional services 3,317,000 2,151,323 (1,165,677) 65% 3,317,000 1,165,677 35% Legal services 1,860,000 1,223,252 (636,748) 66% 1,860,000 636,748 34% Marketing and customer enrollment 717,428 951,000 (233,572) 75% 951,000 233,572 25% Other general & administration 3,599,000 2,133,615 (1,465,385) 59% 3,599,000 1,465,385 41% Total current expenditures 443,048,000 425,376,137 (17,671,863) 96% 443,048,000 17,671,863 4% Other Uses
Capital outlay 203,000 129,142 (73,858) n/a 203,000 73,858 n/a Total other uses 203,000 129,142 (73,858) n/a 203,000 73,858 Total expenditures and other uses 443,251,000 425,505,279 (17,745,721) 96% 443,251,000 17,745,721 4% Surplus (Deficit) 18,546,000 $ 35,749,084 $ 17,203,084 $ 18,546,000 $ (17,203,084) $ -93% Reserves at end of reporting period: Held for working capital 50,200,000 $ Held for reserves - cash and cash equivalents 140,839,869 Held for reserves - investments 59,245,668 Total 250,285,537 $

CENTRAL COAST COMMUNITY ENERGY

SUPPLEMENTAL BUDGETARY COMPARISON SCHEDULE
Year Ended September 30, 2023
See accountants' compilation report. Page 79 of 89 3
CCA Program Surplus/(Deficit)
per budgetary comparison schedule: 35,749,084 $
Adjustments needed to reconcile to the
changes in net position in the
Statement of Revenues, Expenses
and Changes in Net Position:

Add back GASB 87 lease amortization not in operating budget 210,822 Subtract depreciation expense (418,568)
Add back capital asset acquisitions 529,270
Change in Net Position 36,070,608 $

REVENUES, EXPENSES AND CHANGES IN NET POSITION

CENTRAL COAST COMMUNITY ENERGY

BUDGET RECONCILIATION TO STATEMENT OF
Year Ended September 30, 2023
See accountants' compilation report. 4 Page 80 of 89
Budget Item YTD Variance Comment
Electric Sales Revenue (0.9%) Sales revenue includes revenues actually billed to customers as well as estimated customer usage during the reporting period that is not yet billed.

Cost of Energy (1.1%) Variances in this category are typically due to (1) timing difference between projected and actual REC deliveries, (2) variance from actual to anticipated market prices, and (3) variance from actual to expected volume used by customers. Cost of energy includes scheduling coordinator fees for budget purposes only.

Staffing (32.5%) Staffing expenses are under budget due to the timing of new hires.

Professional Services (35.1%) This category includes accounting, IT, technical and other consultants.

Legal Costs (34.2%) This category includes outside legal costs for regulatory and energy procurement needs.

Marketing and customer enrollment (24.6%) Variance is mostly due to the lower than anticipated costs of recent customer enrollments.

Data Management Services (0.2%) These fees non-discretionary and are charged on a per customer basis.

Utility Service Fees 1.3% These are PG&E and SCE fees charged on a per customer basis.

Other General & Administrative (40.7%) This category includes occupancy costs, industry membership dues, and other general and administrative costs.

Energy and Related Programs (41.8%) Programs expenses have generally been delayed until future periods Budget Commentary for significant items

CENTRAL COAST COMMUNITY ENERGY
October 1, 2022 through September 30, 2023

-$17.5
-$3.0
Act
Bud
$53.3
$52.2
$0.0
$10.0
$20.0
$30.0
$40.0
$50.0
$60.0
$70.0
$80.0
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
Actual
$452.2 Budget
$455.6
$0.0
$100.0
$200.0
$300.0
$400.0
$500.0
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
Actual
Budget
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
Actual (T48/T8) 415 407 429 406 370 383 362 399 389 424 442 409 Budget 453 425 424 431 393 432 396 419 426 442 456 435
0 50
100
150
200
250
300
350
400
450
500

CUSTOMERS

SALES VOLUME
409 GWh

STD MARGIN
-$17.5M (45%)
Δ in NET ASSETS
-$20.4M

REVENUE
$39.8M
Cumulative YTD Electricity Sales
Cumulative YTD Direct Margin
(Electricity Sales less Cost of Energy)
Data Definitions:

CUSTOMERS: Count of active customers from Calpine.

REPORTED / SALES VOLUME: Best available estimate of actual meter volume. Currently based on T+8 SQMD Report and T+48 when available.

REVENUE: Total Operating Revenue, net of uncollectible, (excludes Miscellaneous and Interest income).

NON-OP REV: Other uses, primarily Interest Income
ELECTRICITY SALES: Sales from electricity (net of uncollectible).

STD MARGIN: Electricity Sales less cost of energy (Forecasting & scheduling included in Cost of Energy to match budget) ACTUAL: Same as sales volume above
BUDGET: Volumes from FY22/23 budget (no update for amended budget) Monthly Sales Volume (GWh)
Financial Dashboard: September 2023
Margin %

CUSTOMERS
457,000
ACTIVE
September revenue of $39.8M accounts for
409 GWh in net retail consumption.

Fiscal Year electricity revenue is $452M
compared to an amended budget of $456M.

YTD Direct Margin (defined as Electricity
Sales less Cost of Energy) of $53M is ahead
of amended budget by $1.1M.

The chart to the right shows volume
comparison to budgeted volume.

The charts below display cumulative
revenue and margin $ vs budget.
31%
48%
21%
37%
46%
16%
Res
Com
Ag
YTD Month
33%
47%
19%
39%
44%
16%
Res
Com
Ag
YTD Month
Revenue $39.8
C.O.E. $56.4
OpEx $3.9
Net Income -
-44.9% $20.4
-7.5%
Act
Bud
Margin $
10 Page 82 of 89
Return of Investments YTD Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep CASH AND CASH EQUIVALENTSRiver City Bank - Money Market and other Interest Earning AccountsFunds Invested - Average Balance $ 70,230,463 68,793,882 $ 70,636,473 $ 68,570,477 $ 76,819,998 $ 92,274,506 $ 104,647,869 $ 105,080,118 $ 111,614,272 $ 114,000,514 $ 119,614,629 $ 126,865,152 $ Gains/Losses/Interest $ 85,008 2,528,887 $ 94,651 $ 119,286 $ 123,533 $ 137,627 $ 205,218 $ 240,392 $ 257,694 $ 273,188 $ 302,124 $ 332,859 $ 357,308 Average APY 1.48% 1.62% 2.03% 2.16% 2.15% 2.67% 2.76% 2.94% 2.94% 3.18% 3.34% 3.38%INVESTMENTSRiver City Bank - Treasury-indexed productsFunds Invested - Average Balance $ 45,259,882 40,162,814 $ 55,127,902 $ 47,699,367 $ 47,828,254 $ 42,893,075 $ 42,856,284 $ 42,594,899 $ 42,768,287 $ 32,732,944 $ 47,754,493 $ 40,000,000 $ Gains/Losses/Interest $ 67,213.37 2,052,288 146,549.22 207,805 214,163 186,551 167,504 148,003 185,195 177,344 206,535 224,925 $ 120,500 Average APY 2.01% 3.89% 4.52% 5.39% 4.68% 4.69% 4.14% 5.22% 4.98% 7.57% 5.65% 3.62%RBC GAM / Principal Financal/ Schwab/ ChaseFunds Invested - Average Balance $ 75,641,706 75,380,564 $ 75,948,593 $ 76,212,285 $ 76,458,827 $ 76,851,697 $ 77,101,019 $ 77,341,109 $ 77,675,387 $ 77,988,923 $ 78,339,918 $ 78,686,011 $ Gains/Losses/Interest $ 143,733.97 3,461,134 261,142.30 306,886.17 266,301.86 246,542.46 392,869.54 252,509.11 240,089.34 334,278.08 316,486.41 350,995 $ 349,299 Average APY 2.29% 4.14% 4.85% 4.19% 3.87% 6.13% 3.93% 3.73% 5.16% 4.87% 5.38% 5.33%

CENTRAL COAST COMMUNITY ENERGY
Investment Summary
October 1, 2022 through September 30, 2023

Current 0 - 30 Days 31 - 60 Days 61 - 90 Days > 91 Days A/R Balance 9,802,764 19,424,430 2,510,135 608,982 412,964 32,759,275

CENTRAL COAST COMMUNITY ENERGY
Summary of Accounts Receivable, Net of Bad Debt Allowance As of September 30, 2023

Staff Report Item 4
TO: 3CE Audit and Finance Committee
FROM: Robert M. Shaw, Chief Executive Officer
PREPARED BY: Juan Lopez, Director of Finance
SUBJECT: Receive a Presentation on Investment Performance and Diversification DATE: February 21, 2024
RECOMMENDATION:

Receive a presentation on 3CE’s investment performance and diversification.

BCKGROUND:

The Audit and Finance Committee received an update on banking diversification on June 21, 2023, in response to the series of bank failures and bankruptcies that affected mid-size financial institutions in early 2023. Staff took guidance from the Committee to add additional financial and investment diversification to mitigate the potential risk of holding assets in a few concentrated financial institutions.

Since June 2023, staff have worked on diversifying 3CE’s cash and investment holdings while taking advantage of favorable interest rates to increase investment returns.

DISCUSSION/ANALYSIS:

Staff evaluated the fiscal position of 3CE’s current institutional banking and investment partners and found that they were appropriately collateralized and did not present an immediate risk. 3CE’s deposits are subject to California Government Code Section 16521, which requires banks to collateralize public funds in excess of the Federal Deposit Insurance Corporation (FDIC) limit of $250,000 by 110%. Certain short-term investments with original maturities of less than three months are not subject to the collateral requirement or FDIC coverage. 3CE monitors its risk exposure on an ongoing basis for those short-term investments. Although the funds held for operations are either FDIC-insured or collateralized, staff sought diversification efforts to minimize risks. Staff opened an operating account with JP Morgan Chase and two brokerage accounts with Schwab and Fidelity. Below is a breakdown of funds held as of January 31, 2024.

Investment Strategy
The Finance Department has spent the past months right sizing its portfolio to make its money work while keeping enough liquidity to meet operating costs. The investment strategy consists of holding three different “classes” of funds to right-size its portfolio:
 cash to meet ongoing operation costs;
 liquidity reserves to meet collateral calls and unforeseen costs; and  core investment portfolio comprised of short-term investments.

The investment strategy is passive, where fixed-income holdings such as Treasury notes and bills are held to maturity, and 3CE receives the coupon income and discount. Royal Bank of Canada (RBC) is the investment manager for $80.1 million of 3CE’s investments, while 3CE is the investment manager of the $30.2 million held in the Schwab brokerage account. 3CE has instructed RBC to let investments mature to free up liquidity reserves to ensure that deposits held from energy suppliers are readily available should they provide letters of credit to free up their collateral. An alternative option to using an investment manager or self-investing isto utilize a local government or state investment pool such as the Local Agency Investment Fund (LAIF) or California Asset Management Program (CAMP). 3CE researched these investment options and found the investment fees costly compared with self-investment, with little to no significant increased investment performance compared to 3CE’s current investment holdings because of a high-interest environment.

Investment Vehicles
3CE’s investment mix aligns with the Investment Policy and California Government Code. As of January 31, 2024, 3CE held $101.7 million in cash, $102.4 million in U.S. Treasuries, $40.2 million in certificates of deposit, $11.7 million in money market funds, and $4.5 million in federal agency notes. Aside from money market funds, all other investment types do not have state investment limits. State code limits money market funds to 20% of the portfolio and 3CE’s money market funds were at about 5%. All holdings managed by RBC and 3CE are high-grade rated investments or higher. Below is the breakdown of the cash and investment balances held by institution and investment mix as of January 31, 2024:

River City Bank $144,922,284
Chase 5,321,209
sub-total 150,243,494
Royal Bank of Canada $ 80,080,243
Schwab 30,230,860
sub-total 110,311,103
Total $260,554,597
Cash and Investment Balances
Operating Accounts
Investment Accounts Page 86 of 89
Investment Performance in a High-Interest Environment
The federal funds target rate has remained at 5.25% to 5.5% since last summer, following 11 increases that began in March 2022. After a long period of near-zero yields, yields on the three-month Treasury bill have been as high as 5.5%, their highest level since December 2000, per Morningstar. In Fiscal Year 2022- 23, 3CE put its cash to work in the various investment vehicles outlined in the prior section to take advantage of the high-interest environment. As a result, investment income totaled $8.2 million, an increase of $7.2 million from the prior fiscal year.

Of that $8.2 million, $3.5 million came from short-term investments in RBC and Schwab with monthly yields ranging from 2.3% to 6.1%, $2.5 million from money market funds and cash interest earnings held at River City Bank (RCB) with monthly yields ranging from 1.5% to 3.4%, and $2.1 million from certificates of deposits held at RCB with month yields ranging from 2.0% to 7.6%.

The first quarter of FY 2023-24 netted investment earnings of $3.0 million, made up of $1.3 million from short-term investments, $1.1 million from money market funds, and $0.6 million from certificates of deposits. 3CE anticipates seeing similar investment earnings in future quarters as long as the federal funds target rate remains consistent over the coming months.

FISCAL IMPACT:

There is no fiscal impact to receiving this report.

CONCLUSION:

Since its presentation to the Audit and Finance Committee on June 21, 2023, 3CE has been proactive in diversifying its financial institutional partners while putting cash and short-term investments to work to take advantage of a high-interest environment. This investment performance and diversification will right-size the portfolio to meet short and long-term obligations while mitigating investment risks.

Attachment(s):

1. Presentation on Investment Performance and Cash Diversification Institution Balance Investment Mix
River City Bank $144,922,284
Cash (sweep) - $89M
CDs - $40M
Money Market - $10M
cash (operating) - $5M
Chase 5,321,209 cash (operating)
Royal Bank of Canada 80,080,243
Treasuries - $74M
Federal Agencies - $5M
Money Market - $1M
Schwab 30,230,860
Treasuries - $28M
cash (sweep) - $2M
Total $260,554,597

Staff Report Item 5
TO: 3CE Audit and Finance Committee
FROM: Robert M. Shaw, Chief Executive Officer
PREPARED BY: Mary Federico, Billing Operations and Rates Analyst SUBJECT: Receive a Report on status for Setting Rates Beginning FY 2024-25.

DATE: February 21, 2024
RECOMMENDATION:

Receive a report on status for setting rates beginning FY 2024-25.

BACKGROUND:

On August 21, 2023, 3CE issued a Request for Proposal (RFP) to contract a rate design consultant to complete a territory-wide Cost of Service (COS) study for the 3CE rate design process for calendar years (CYs) 2025 through 2027 and provide operational and rate support. In November 2023, the contract was executed with NewGen Strategies and Solutions, LLC.

DISCUSSION/ANALYSIS:

There are five larger steps involved in the rate-setting process. These steps include developing a revenue requirement, functionalizing costs, classifying costs, allocating costs, and rate design. 3CE is working with NewGen to complete a draft COS study that incorporates the first four of the five steps. The results of the study will provide information important to the analyses that will flow through to the rate design and inform the recommendation to be brought to the Policy Board at the June 2024 meeting.

Revenue Requirement
The revenue requirement is established by first forecasting all expenses and costs incurred in the service of 3CE customers. This forecast is based on the 2024 Fiscal Year (FY) Approved Budget and the 3CE forecasted load. From this base information, a forecasted test year is established. The test year incorporates known and measurable adjustments to the base year to approximate the financial and operational conditions expected in CYs 2025 through 2027. Moving forward, 3CE will evaluate the selection of the test year as either an average of the three years or a single year and bring a recommendation to the Policy Board at the June 2024 meeting.

Functionalized and Classified Costs
The test year is then functionalized and classified. Typically, costs are functionalized into four categories:
production, transmission, distribution, and customer costs. As a CCA, 3CE does not have transmission or distribution categorized costs, so costs are functionalized into either production, associated with the cost of energy (COE), or customer costs, associated with all other non-COE costs.

Next, the functionalized costs are classified as fixed or variable. Fixed costs do not vary from customer to customer and are made up of customer costs and the portion of COE related to demand. For CCAs, the demand portion of COE comprises of Resource Adequacy (RA) costs. Variable costs are associated with COE costs related to the hourly purchase of energy and will vary from customer to customer depending on their usage patterns. After functionalizing and classifying the draft test year, it was preliminary found that 37% of 3CE’s costs are related to fixed costs, and 63% of 3CE’s costs are related to variable costs.

Allocating Costs
The functionalized and classified costs are then allocated to various customer classes based on their share of the fixed costs and their annual load profiles. Nine distinct customer classes have been identified, grouped by their load profiles. These include Residential, Small Commercial, Medium Commercial, Large Commercial, Small and Medium Agricultural, Large Agricultural, Business Electric Vehicle, Standby, and Lighting. 3CE will continue to examine the load profiles throughout the entirety of the service territory to determine a recommendation for any appropriate updates to the current rate classes.

Next Steps
The final step in the 3CE rate-setting process is rate design. 3CE expects to bring recommendations related to the following items to the June 2024 Policy Board Meeting:
 Use of a single or averaged test year;
 Definition of distinct customer classes;
 Proposed future rate changes to meet the revenue requirements.

FISCAL IMPACT:

Receiving this report does not have any fiscal impact.

CONCLUSION:

The 3CE rate design process uses the COS methodology to inform the building of rate values that will recover the necessary revenue requirements from each customer class. Designing rates with this methodology will maintain 3CE’s strong financial position while providing competitive and fairly allocated rates to its customers.

ATTACHMENT(S):

None.