Audit and Finance Committee
Special Meeting
February 27, 2025
3:30 PM
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:
City of Watsonville
275 Main Street, 4th Floor
Watsonville, CA 95076
Hollister City Hall
375 Fifth Street
City Manager Conference Room
Hollister, CA 95023
City of Buellton
541 Covelo Lane
Buellton, CA 93427
Public may participate through ZOOM. For ZOOM participation please join by computer audio at:
https://us02web.zoom.us/j/83507087702
Or join by phone:
+1 669 900 6833 or +1 669 219 2599
Enter this Webinar ID Number: 835 0708 7702 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/
Welcome & Roll Call
CONSENT CALENDAR
1. Approve minutes from the August 28, 2024 special meeting of the Audit and Finance Committee
2. Quarterly investment performance report for the period of October 1, 2023 through September 30, 2024
3. Quarterly investment performance report for the period of October 1, 2024 through December 31, 2024
4. Financial report for the period October 1, 2024 through December 31, 2024
REGULAR AGENDA
5. Receive a presentation on 3CE's FY 2023-24 audited financial statements
6. Consider supporting a recommendation that the Policy Board Adopt Adjustments to the Calendar Year 2025 cost-based generation rates
Adjournment
Audit and Finance Committee
Special Meeting
August 28, 2024
3:00pm
Central Coast Community Energy
70 Garden Court, Suite 300
Monterey, CA 93940
Capitola
City Hall
420 Capitola Ave
Capitola, CA 95010
City of Salinas
City Hall
200 Lincoln Ave
Salinas, CA 93901
County of San Luis Obispo
County Administration Building
1055 Monterey Street, Ste D430
San Luis Obispo, CA 93408
City of Goleta
City Hall
130 Cremona Drive, Suite B Conference Room 1
Goleta, CA 93117
MINUTES
The meeting was called to order at 3:00 PM with members attending from 4 noticed locations and a quorum established.
Members Present: 3CE HQ: Freeman
City of Goleta: Richards
County of San Luis Obispo: Campbell
City of Salinas: Mendez (arrived at 3:01pm)
City of Capitola: Chair Goldstein
Members Absent: None
CONSENT CALENDAR
Chair opened public comment period on the Consent Calendar.
No public comments received.
Chair closed public comment period.
MOTION: Moved by Member Mendez, seconded by Member Freeman to approve the Consent Calendar ACTION: The Motion Carried with a roll call vote: 5/0/0
AYES: Campbell, Freeman, Mendez, Richards, Chair Goldstein NOES: None
ABSENT: None
1. Approved minutes from the May 29, 2024, meeting of the Audit and Finance Committee as submitted.
2. Received a financial report for the period October 1, 2023, through June 30, 2024
REGULAR AGENDA
3. Investment Performance Report for the period of October 1, 2023 through June 30, 2024 The Chair opened the public comment period.
No public comment received.
The Chair Closed the public comment period.
ACTION: Discussion item; no action required
4. Supported seeking the Policy Board’s approval to adopt the Fiscal Year 2024-25 Recommended Budget
The Chair opened the public comment period.
No public comment received.
The Chair Closed the public comment period.
MOTION: Moved by Member Richards, seconded by Member Campbell to approve.
ACTION: The Motion Carried with a roll call vote: 5/0/0 AYES: Campbell, Freeman, Mendez, Richards, Chair Goldstein NOES: None
ABSENT: None
Adjourned at 4:18 PM
Staff Report Item 2
TO: 3CE Audit and Finance Committee
FROM: Robert M. Shaw, Chief Executive Officer
PREPARED BY: Thomas White, Accountant
SUBJECT: Quarterly investment performance report for the period of October 1, 2023 through September 30, 2024
DATE: February 27, 2025
RECOMMENDATION:
Receive the quarterly investment performance report for the period of October 1, 2023 through September 30, 2024.
BACKGROUND:
The 3CE staff, consistent with an Audit and Finance Committee (“Committee”) recommendation, diversified its operating and investment banking partners to mitigate the risk of holding assets in a few concentrated financial institutions. Following that diversification, staff has continued to present this investment performance report to the Committee quarterly and included the reports in the Operations and Policy board meetings.
DISCUSSION/ANALYSIS:
3CE ended the quarter on September 30, 2024, with investment holdings that followed the Investment Policy and the strategy of holding enough cash to meet operating costs, including counterparty collateral calls. The strategy consists of holding three different classes of funds: cash to meet ongoing operating costs, liquidity reserves to meet collateral calls and unforeseen costs, and short-term investments to meet reserves, including the strategic reserve and energy rate stabilization funds. As of September 30, 2024, 3CE held $214.7 million in operating and investment accounts. The table below lists the cash and investment balances by account type.
Cash and Investment Mix Holdings by Institution
Account Type Institution Balance Investment Mix
Operating
River City Bank $79,089,330
Cash (sweep) - $69.8M
money market - $4.3M
cash (operating) - $5.0M
Chase 10,490,963 cash (held for collaterals)
Investment
Schwab 62,047,026 Treasuries - $52.9M
cash (sweep) - $9.1M
Fidelity 63,071,879 Treasuries - $59.8M
money market - $3.3M
Total $214,699,198
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. As of September 30, 2024, 3CE served as investment manager of the $125.1 million held in the Schwab and Fidelity brokerage accounts.
The average annual percentage yield for Treasuries ranged from 4.97% to 5.35% over the fourth quarter.
Treasuries with a maturity date of less than one calendar year accounted for 94.4% of holdings. Two Treasuries with a combined market value of $7.6 million have a maturity date in Q3 of 2026. All investment holdings managed are high-grade rated investments or higher. 3CE’s investment mix aligns with the Investment Policy and California Government Code. As of September 30, 2024, 3CE held $94.5 million in cash and cash equivalents, $121.7 million in U.S.
Treasuries, and $7.5 million in money market funds. Aside from money market funds, all other investment types do not have state investment limits. The State code limits money market funds to 20% of the portfolio. 3CE is well within the State limit at 3.5%.
Cash and Investment Mix Holdings
Type Market Value
% of
Portfolio
Permitted by
CA Government Code
Cash and cash equivalents $94,452,996 44.0% 100%
Money Market Funds 7,524,715 3.5% 20%
U.S. Treasuries 112,721,487 52.5% 100%
Total $214,699,198 100.0%
The FY 2023-24 Adopted Budget, with appropriations of $562.8 million, included estimated investment revenues of $6.4 million. It is estimated that investment earnings from 3CE operating and investment accounts netted $11.7 million, $4.1 million from interest on cash and money market accounts, and $7.5 million from short-term investments, mostly from Treasuries. Interest earned on 3CE collateral held by counterparties is estimated at $1.1 million for total investment and interest earnings of $12.8 million.
The FY 2023-24 Mid-Year Budget Forecast estimated investment income of $10.0 million, 3CE surpassed this estimate due to a favorable interest environment.
FISCAL IMPACT:
There is no fiscal impact to receiving this report.
CONCLUSION:
3CE proactively diversified its financial institutional partners while putting cash and short-term investments to work to take advantage of a continued high-interest environment while retaining cash for ongoing operating costs and collateral calls. This report was included in the February 12, 2025 Operations Board meeting agenda and will be included in the March 19, 2025 Policy Board meeting agenda.
ATTACHMENT(S):
None.
Staff Report Item 3
TO: 3CE Audit and Finance Committee
FROM: Robert M. Shaw, Chief Executive Officer
PREPARED BY: Thomas White, Accountant
SUBJECT: Quarterly investment performance report for the period of October 1, 2024 through December 31, 2024
DATE: February 18, 2025
RECOMMENDATION:
Receive the quarterly investment performance report for the period of October 1, 2024 through December 31, 2024.
BACKGROUND:
3CE Staff, consistent with the Audit and Finance Committee (“Committee”) recommendation, diversified its operating and investment financial partners to mitigate the risk of holding assets in a few concentrated financial institutions. Since the diversification was accomplished, staff has presented the investment performance report to the Committee quarterly and included the reports in the Operations and Policy board meetings.
DISCUSSION/ANALYSIS:
3CE ended the quarter on December 31, 2024, with investment holdings that followed the Investment Policy and the strategy of holding enough cash to meet operating costs, including counterparty collateral calls. The strategy consists of holding three different classes of funds: cash to meet ongoing operating costs, liquidity reserves to meet collateral calls and unforeseen costs, and short-term investments to meet reserves, including the strategic reserve and energy rate stabilization funds. As of December 31, 2024, 3CE held $216.4 million in operating and investment accounts. The table below lists the cash and investment balances by account type.
Cash and Investment Mix Holdings by Institution
Account Type Institution Balance Investment Mix
Operating
River City Bank $79,381,412
Cash (sweep) - $53.7M
money market - $20.4M
cash (operating) - $5.0M
Chase 10,385,434 cash (held for collaterals)
Investment
Schwab 62,694,171 Treasuries - $55.1M
cash (sweep) - $7.6M
Fidelity 63,958,041 Treasuries - $63.8M
money market - $0.1M
Total $216,419,059
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. As of December 31, 2024, 3CE served as investment manager of the $126.7 million held in the Schwab and Fidelity brokerage accounts.
The average annual percentage yield for Treasuries ranged from 3.87% to 5.00% over the first quarter.
Treasuries with a maturity date of less than one calendar year accounted for 94% of holdings. Two Treasuries with a combined market value of $7.6 million have a maturity date in Q3 of 2026. All investment holdings managed are high-grade rated investments or higher. 3CE’s investment mix aligns with the Investment Policy and California Government Code. As of December 31, 2024, 3CE held $77.0 million in cash and cash equivalents, $119.0 million in U.S.
Treasuries, and $20.5 million in money market funds. Aside from money market funds, all other investment types do not have state investment limits. The State code limits money market funds to 20% of the portfolio. 3CE was within the State limit at 9.5%.
Cash and Investment Mix Holdings
Type Market Value
% of
Portfolio
Permitted by
CA Government Code
Cash and cash equivalents $76,992,553 35.5% 100%
Money Market Funds 20,471,967 9.5% 20%
U.S. Treasuries 118,954,538 55.0% 100%
Total $216,419,059 100.0%
The FY 2024-25 Adopted Budget, with appropriations of $730.3 million, included estimated investment revenues of $7.0 million. In the first quarter, investment earnings from operating and investment accounts netted $2.4 million in income, $1.1 million from interest on cash and money market accounts, and $1.3 million from short-term investments. Interest earned on 3CE collateral held by counterparties is estimated at $66,735 for total investment and interest earnings of $2.5 million.
As of December 31, 2024, 3CE has 111 days of cash on hand. This is based on the total cash, cash equivalents, and investments of $216.4 million, divided by an average daily expense of $1.95 million.
FISCAL IMPACT:
There is no fiscal impact to receiving this report.
CONCLUSION:
3CE proactively diversified its financial institutional partners while putting cash and short-term investments to work to take advantage of a continued high-interest environment while retaining cash for ongoing operating costs and collateral calls.
ATTACHMENT(S):
None.
Staff Report Item 4
TO: 3CE Audit and Finance Committee
FROM: Robert M. Shaw, Chief Executive Officer
PREPARED BY: Gina Urmatan, Senior Accountant
SUBJECT: Financial report for the period October 1, 2024, through December 31, 2024 DATE: February 27, 2025
RECOMMENDATION:
Receive a financial report for the period of October 1, 2024, through December 31, 2024.
SUMMARY:
Over the three months ending December 31, 2024, operating revenues amounted to $136.1 million, and operating expenses totaled $106.1 million for a net operating income of $30.0 million. Non-operating revenue of $2.4 million, driven by interest and investment returns, netted the month with a net position increase of $32.4 million.
Year-to-date operating revenue is $15.8 million lower than budget, primarily due to lower-than-expected retail load. 3CE is actively monitoring retail load projections and will adjust the forecast downward as part of the proposed rate recommendation for Policy Board approval at its March 19 meeting. This adjustment is based on a comparison of the prior year's forecast versus actual results, as well as year-to-date actuals. Non-operating revenue from investment returns from assets held in operating and investment accounts and interest on collateral exceeded the budget with a positive variance of $0.7 million, resulting from a favorable short-term interest rate. Year-to-date total revenue is $15.1 million lower than budget, an unfavorable variance of 10%.
Year-to-date operating expenditures are lower than the budget by $27.8 million, a variance of 21%. The cost of energy was $22.8 million lower than the budget primarily due to the timing of invoicing for regulatory compliance for renewable energy attributes, Renewable Energy Certificates (RECs) and higher credits for effective participation in the congestion revenue rights (CRR) process managed by the California Independent System Operator (CAISO). Non-energy operating costs were $5.0 million lower
than budget due to less-than-planned costs for contracted services, energy programs, and staff vacancies.
The capital outlay was below budget by $4.3 million since capital projects are not recorded as direct expenditures. Instead, they are recorded as capital assets on the balance sheet and expensed over time through depreciation in accordance with accounting principles. Year-to-date total expenditures, including capital outlay, are $32.1 million lower than budget, a variance of 23%. These variances are expected to level out over the fiscal year as 3CE fulfills its energy obligations, including resource adequacy (RA) and renewable energy credits (RECs). Additionally, higher energy costs are anticipated due to the enrollment of the City of Atascadero and the County of San Luis Obispo that began in January 2025.
The net position at the end of December 31, 2024, totaled $250.6 million, a $32.4 million increase from the start of the fiscal year. The increase is primarily due to the increased cash and investments, collateral receipts from suppliers, and reduced accrued cost of electricity. Cash, cash equivalents, and short-term investments totaled $216.3 million, a $10.4 million decrease during the reporting period. The decrease corresponds to an increase in deposits held by energy counterparties from the posting of collateral on contracts. The need for increased collateral was driven by heightened exposure levels, leading to higher margin requirements.
FISCAL IMPACT:
There is no financial impact associated with receiving this report.
ATTACHMENT(S):
1. December 31, 2024 Financial Report
FINANCIAL REPORT
Fiscal Year to Date
As of December 31, 2024
1 ACCOUNTANTS’ COMPILATION REPORT
Board of Directors
Central Coast Community Energy
Management is responsible for the accompanying financial statements of Central Coast Community Energy (a California Joint Powers Authority) which comprise the statement of net position as of December 31, 2024, and the related statement of revenues, expenses, and changes in net position, and the statement of cash flows for the three months then ended in accordance with accounting principles generally accepted in the United States of America. We have performed a compilation engagement in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the AICPA. We did not audit or review the accompanying statements nor were we required to perform any procedures to verify the accuracy or completeness of the information provided by management. Accordingly, we do not express an opinion, conclusion, nor provide any assurance on these financial statements.
Management has elected to omit substantially all of the note disclosures required by accounting principles generally accepted in the United States of America in these interim financial statements.
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
January 28, 2025
1101 Fifth Avenue, Suite 200 San Rafael, CA 94901 415 459 1249 mahercpa.com
Current assets
Cash and cash equivalents 113,175,025$
Accounts receivable, net of allowance 40,621,574
Accrued revenue 30,837,147
Other receivables 2,244,165
Investments 95,666,281
Prepaid expenses 1,494,774
Deposits 41,257,318
Loan receivable 192,501
Total current assets 325,488,785
Noncurrent assets
Investments 7,489,109
Deposits 23,182
Loan receivable 1,233,381
Capital assets, net of depreciation and amortization 3,723,735 Total noncurrent assets 12,469,407
Total assets 337,958,192
Current liabilities
Accrued cost of electricity 51,752,875
Accounts payable 1,635,357
Other accrued liabilities 1,571,003
User taxes and energy surcharges due to other governments 1,957,634 Security deposits - energy suppliers 19,089,299
Lease liability 331,665
Total current liabilities 76,337,833
Noncurrent liabilities
Security deposits - energy suppliers 10,303,125
Lease liability 757,373
Total noncurrent liabilities 11,060,498
Total liabilities 87,398,331
Net investment in capital assets 2,634,697
Unrestricted 247,925,164
Total net position 250,559,861$
NET POSITION
As of December 31, 2024
STATEMENT OF NET POSITION
CENTRAL COAST COMMUNITY ENERGY
ASSETS
LIABILITIES
See accountants' compilation report. 2 Page 13 of 64
OPERATING REVENUES
Electricity sales, net 136,052,467$
Other income 20,043
Total operating revenues 136,072,510
OPERATING EXPENSES
Cost of electricity 98,616,642
Contract services 3,394,486
Staff compensation 2,253,041
Other operating expenses 505,441
Program incentives 1,195,965
Depreciation and amortization 156,516
Total operating expenses 106,122,091
Operating income (loss) 29,950,419
NONOPERATING REVENUES (EXPENSES)
Investment income 2,456,836
Interest and financing costs (12,837)
Nonoperating revenues (expenses) 2,443,999
CHANGE IN NET POSITION 32,394,418
Net position at beginning of period 218,165,443
Net position at end of period 250,559,861$
Three Months Ended December 31, 2024
AND CHANGES IN NET POSITION
STATEMENT OF REVENUES, EXPENSES
CENTRAL COAST COMMUNITY ENERGY
See accountants' compilation report. 3 Page 14 of 64
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers 142,508,875$
Other operating receipts 5,458,367
Receipts of deposits and collateral 28,374,860
Payments to suppliers for electricity (125,882,645)
Payments for deposits and collateral (38,868,775)
Payments for other goods and services (4,240,163)
Payments for program incentives (3,483,300)
Payments for staff compensation (2,039,888)
Payments of taxes and energy surcharges to other governments (2,548,218) Net cash provided by operating activities (720,887)
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Payments of lease liability (90,749)
Purchases of capital assets (50,138)
Net cash provided (used) by capital and related financing activities (140,887)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment income received 1,509,918
Proceeds from sales and maturities of investments 21,209,000 Principal payments received of loan receivable 94,915
Purchase of investments (59,316,715)
Net cash provided (used) by investing activities (36,502,882) Net change in cash and cash equivalents (37,364,656)
Cash and cash equivalents at beginning of year 150,539,681 Cash and cash equivalents at end of period 113,175,025$ Three Months Ended December 31, 2024
STATEMENT OF CASH FLOWS
CENTRAL COAST COMMUNITY ENERGY
See accountants' compilation report. 4 Page 15 of 64
Operating income (loss) 29,950,419$
Adjustments to reconcile operating income (loss) to net cash provided by operating activities
Depreciation and amortization expense 156,516
(Increase) decrease in:
Accounts receivable, net of allowance 3,816,321
Accrued revenue 111,381
Other receivables 4,146,128
Prepaid expenses 334,450
Deposits (29,664,422)
Increase (decrease) in:
Accrued cost of electricity (25,020,371)
Accounts payable (3,241,869)
Other accrued liabilities 770,073
User taxes and energy surcharges due to other governments (19,514) Security deposits - energy suppliers 17,940,000
Net cash provided by operating activities (720,887)$
Unrealized appreciation (depreciation) and
timing differences in investment income 946,918$
NONCASH INVESTING ACTIVITES
CENTRAL COAST COMMUNITY ENERGY
STATEMENT OF CASH FLOWS (continued)
Three Months Ended December 31, 2024
RECONCILIATION OF OPERATING INCOME (LOSS) TO NET
CASH PROVIDED BY OPERATING ACTIVITIES
See accountants' compilation report. 5 Page 16 of 64
1 ACCOUNTANTS’ COMPILATION REPORT
Board of Directors
Central Coast Community Energy
Management is responsible for the accompanying special purpose budgetary comparison schedule of Central Coast Community Energy (a California Joint Powers Authority) for the three months ended December 31, 2024, 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
January 28, 2025
1101 Fifth Avenue, Suite 200 San Rafael, CA 94901 415 459 1249 mahercpa.com
Actual Budget Amount % Actual Budget Amount % Budget
Annual Budget
Less Actual
YTD
REVENUES AND OTHER SOURCES
Electricity sales, net $ 44,591,188 $ 52,272,708 $ (7,681,520) -15% $ 136,052,467 $ 151,856,282 $ (15,803,815) -10% $ 745,962,356 $ 609,909,889 Interest and investment returns 841,727 583,333 258,394 44% 2,456,836 1,749,999 706,837 40% 7,000,000 4,543,164 Other income 6,280 5,700 580 10% 20,043 17,100 2,943 17% 68,400 48,357 Total revenues and other sources 45,439,195 52,861,741 (7,422,546) -14% 138,529,346 153,623,381 (15,094,035) -10% 753,030,756 614,501,410 EXPENDITURES AND OTHER USESCurrent Expenditures
Cost of energy 24,971,691 45,746,192 20,774,501 45% 99,100,456 121,944,584 22,844,128 19% 665,267,116 566,166,660 Salaries and benefits 766,047 1,048,820 282,773 27% 2,253,041 3,146,460 893,419 28% 12,585,842 10,332,801 Services and supplies 1,777,551 2,931,483 1,153,932 39% 4,702,828 8,794,448 4,091,620 47% 35,177,798 30,474,970 Capital outlay 14,237 1,443,167 1,428,930 99% 63,219 4,329,500 4,266,281 99% 17,318,000 17,254,781 Total current expenditures 27,529,526 51,169,662 23,640,136 46% 106,119,544 138,214,992 32,095,448 23% 730,348,756 624,229,212 Surplus (deficit) 17,909,669$ 1,692,079$ 16,217,590$ 32,409,802$ 15,408,389$ 17,001,413$ 22,682,000$ (9,727,802)$ Annual
CENTRAL COAST COMMUNITY ENERGY
BUDGETARY COMPARISON SCHEDULE
Current Month and Three Months Ended December 31, 2024
Current Month
Variance
Favorable
(unfavorable)
Year-To-Date
Variance
Favorable
(unfavorable)
See accountants' compilation report. Page 18 of 64
CCA Program surplus/(deficit)
per budgetary comparison schedule: 32,409,802$
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 77,913 Subtract depreciation expense (156,516)
Add back capital asset acquisitions 63,219
Change in Net Position 32,394,418$
REVENUES, EXPENSES AND CHANGES IN NET POSITION
CENTRAL COAST COMMUNITY ENERGY
BUDGET RECONCILIATION TO STATEMENT OF
Three Months Ended December 31, 2024
See accountants' compilation report. Page 19 of 64
Budget Item YTD Variance Comment
Electric Sales Revenue (10.6%) 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 (18.7%) 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 (28.4%) Staffing expenses are under budget due to the timing of new hires.
Professional Services (48.2%) This category includes accounting, IT, technical and other consultants.
Legal Costs (18.5%) This category includes outside legal costs for regulatory and energy procurement needs.
Marketing and customer enrollment (12.1%) Variance is mostly due to the lower than anticipated costs of recent customer enrollments.
Data Management Services (8.5%) These fees non-discretionary and are charged on a per customer basis.
Utility Service Fees (14.0%) These are PG&E and SCE fees charged on a per customer basis.
Other General & Administrative (63.3%) This category includes occupancy costs, industry membership dues, and other general and administrative costs.
Energy and Related Programs (63.9%) Programs expenses have generally been delayed until future periods Budget Commentary for significant items
CENTRAL COAST COMMUNITY ENERGY
October 1, 2024 through December 31, 2024
Return of Investments YTD Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep CASH AND CASH EQUIVALENTSRiver City Bank/ Chase - Money Market and other Interest Earning AccountsFunds Invested - Average Balance 99,664,821$ 114,669,913$ 87,375,820$ Gains/Losses/Interest 1,126,035$ 380,768$ 421,162$ 324,104.99 Average APY 4.58% 4.41% 4.45%INVESTMENTSRBC GAM / Principal Financal/ Schwab/FidelityFunds Invested - Average Balance 125,703,797$ 126,158,519$ 126,652,212$ Gains/Losses/Interest 1,264,066$ 451,482.54 308,267.24 504,316.11 Average APY 4.31% 2.93% 4.78%
CENTRAL COAST COMMUNITY ENERGY
Investment Summary
October 1, 2024 through December 31, 2024
Current 0 - 30 Days 31 - 60 Days 61 - 90 Days > 91 Days A/R Balance 18,466,339$ 12,603,886$ 1,694,390$ 1,208,221$ 6,648,738$ 40,621,574$
CENTRAL COAST COMMUNITY ENERGY
Summary of Accounts Receivable, Net of Bad Debt Allowance As of December 31, 2024
Staff Report Item 5
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 2023-24 audited financial statements DATE: February 27, 2025
RECOMMENDATION:
Receive a presentation on 3CE’s FY 2023-24 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. 3CE worked diligently with its accounting vendor and external auditors over the past few months to ensure a proper review of financial controls and financial statements. The FY 2023-24 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 (Report) affirms that 3CE’s financial statements fairly present, in all material respects, the organization’s financial position as of September 30, 2023, and 2024, along with the respective changes in financial position and cash flows. The report includes an unqualified, or "clean," audit opinion, indicating that the financial statements are free from material misstatements and comply with applicable accounting standards.
The report confirms that the auditors did not identify any internal control deficiencies classified as material weaknesses. Representatives from Kosmatka Donnelly & Co. LLP, the external auditors, will attend the Audit and Finance Committee meeting to provide insights and address any questions regarding their review.
FY 2023-24 Financial Highlights
The net position decreased by $23.7 million, down from a $34.7 million increase in the prior year. Cash, cash equivalents, and short-term investments decreased by $28.5 million over the prior year.
Operating revenues grew over $92.8 million from the prior year, driven primarily by the rate adjustments that occurred on October 1, 2023 and January 1, 2024 to reflect the increased cost of energy.
Growth in non-operating revenues resulting from higher interest income from a favorable rate environment and engaged investment management, resulting in $3.3 million in higher investment revenue than the prior year.
The cost of energy increased by approximately $148.5 million due to rising energy attribute costs, with $122.4 million for Resource Adequacy (RA) and $55.3 million in Renewable Energy Certificates (RECs) offset by lower energy generation costs of $19.3 million. Non-energy operating costs increased $6.0 million from the prior year, mainly from increased costs for higher participation in energy programs, personnel due to increased FTEs from the prior year, data manager fees, and increased community outreach. Total assets decreased by $0.6 million from the prior year from an increase in accounts receivable, accrued revenue from increases in retail electricity rates, deposits held by counterparties for collateral, and capital assets from the purchase of the San Luis Obispo office building, offset by lower cash and cash equivalents.
Liabilities increased by $23.2 million from the prior year primarily due to higher accrued cost of electricity, accounts payable, and funds held for executed Treasury trades, offset by a drop in deposits held for development security deposits.
FY 2023-24 Actuals Versus Budget
On May 29, 2024, the Audit and Finance Committee received the FY 2023-24 Mid-Year Budget Forecast.
The Forecast estimated expenditures of $574.1 million, 2% over the $562.8 million adopted budget. The increase in expenditures resulted from higher RA costs, partially offset by lower non-energy operating costs. The Forecast projected a $12.7 million decrease in net position by the end of the fiscal year.
However, actual results showed expenditures reaching $581.4 million, with revenues totaling $557.4 million, leading to a larger-than-anticipated operating shortfall of $24.0 million.
FY 2023-24 Actuals Versus Budget Highlights
Revenue vs. Budget
Total revenue of $557.4 million reached 99% of the budget, $5.5 million short of the $562.8 million budget.
Operating revenue from net electricity sales was $12.1 million below budget, primarily due to lower-than-expected retail volume, offset by reduced uncollectible accounts. Non-operating income of $13.0 million exceeded budget by $6.6 million, driven by favorable interest rates and active investment management.
Expenditures vs. Budget
Total expenditures of $581.4 million exceeded the budget by 3%, coming in $18.5 million above the $562.8 million budget.
Cost of energy of $548.8 million was higher than budget by $28.5 million, a 5% variance. The increase is mainly attributed to a $15.1 million higher-than-budgeted cost for RECs to meet Renewables Portfolio Standard (RPS) compliance for the 2021-2024 multi-year compliance period.
Of the $15.1 million, $6.0 million were for RECs allocated for the two last months of Fiscal Year 2022-23 that were not recorded in that year due to the timing of the contract execution and invoicing. RA compliance costs exceed the budget by $13.4 million. Non-energy operating costs of $32.5 million were 23% under budget due to lower spending on energy programs, unspent contingencies, contracted services, and personnel vacancies.
CONCLUSION:
As of September 30, 2024, 3CE’s net position decreased by $23.7 million, primarily due to higher-than-forecasted costs for energy attributes. Like other load-serving entities, 3CE faced delays in Power Purchase Agreements (PPAs) due to interconnection issues, supply chain disruptions, rising project costs, and contract negotiations. These challenges led to a less robust renewable energy portfolio, requiring increased market REC purchases. Additionally, regulatory changes further tightened RA supply by restricting the RA value of renewables, introducing delivery requirements for imported RA, and increasing supply obligations.
FISCAL IMPACT:
There is no financial impact by receiving this report.
ATTACHMENT(S):
1. FY 2023-24 Audited Financial Statements
2. FY 2023-24 Supplemental Budgetary Schedule, Investment Summary, and Dashboard
FINANCIAL
STATEMENTS
YEARS ENDED SEPTEMBER 30, 2024 AND 2023
INCLUDING REPORT OF INDEPENDENT AUDITORS
CENTRAL COAST COMMUNITY ENERGY
YEARS ENDED SEPTEMBER 30, 2024 AND 2023
TABLE OF CONTENTS
Independent Auditor’s Report ………………………………………………………................ 1 Management’s Discussion and Analysis ……………………………………………................ 4 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
Pisenti & Brinker LLP has joined practices with Kosmatka, Donnelly & Co., LLP (dba, KDP Certified Public Accountants, LLP). The former Pisenti & Brinker LLP Partners are now Partners of KDP Certified Public Accountants, LLP (KDP). KDP Certified Public accountants, LLP is a licensed CPA firm that provides attest services to its clients. Pisenti & Brinker Management LLC provides professional tax and business consulting services to its clients. Pisenti & Brinker Management, LLC and KDP Certified Public Accountants, LLP practice as an alternative practice structure in accordance with the AICPA Code of Professional Conduct and applicable laws, regulations, and professional standards. 3562 Round Barn Circle, Suite 200
Santa Rosa, CA 95403
(707) 542-3343 Office
(707) 527-5608 Fax
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), which comprise the statements of net position as of September 30, 2024 and 2023, the related statements of revenue, expenses and changes in net position, and cash flows for the years then ended, and the related notes to the financial statements.
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of 3CE as of September 30, 2024 and 2023, and the results of its operations 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 Audit 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, including any currently known information that may raise substantial doubt shortly thereafter.
Independent Auditor’s Report (continued)
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.
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.
Kosmatka, Donnelly & Co., LLP
Santa Rosa, California
February 12, 2025
CENTRAL COAST COMMUNITY ENERGY
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEARS ENDED SEPTEMBER 30, 2024 AND 2023
4 The purpose of management’s discussion and analysis (MD&A) is to help stakeholders and other readers understand what the financial statements and notes in this report say about Central Coast Community Energy’s (3CE) financial health and why it has changed since last year. It contains information drawn from other parts of the report, accompanied by explanations informed by the finance staff’s knowledge of 3CE’s finances.
Overview of the Financial Statements
3CE’s financial report contains basic financial statements, which include:
o The Statements of Net Position include all of 3CE’s assets, liabilities, and net position and provides information about the nature and amount of resources and obligations at a specific point in time.
o The Statements of Revenues, Expenses, and Changes in Net Position report 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 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, 2024 AND 2023
5 Financial Summary
3CE’s Net Position
2024 2023 2022
Current assets $ 314,501,404 $ 324,238,888 $ 259,993,090 Noncurrent assets
Capital assets, net 3,817,033 2,008,218 219,319
Other noncurrent assets 8,916,927 1,543,979 1,731,180
Total noncurrent assets 12,733,960 3,552,197 1,950,499
Total assets 327,235,364 327,791,085 261,943,589
Current liabilities 97,925,104 54,996,528 45,601,781
Noncurrent liabilities 11,144,817 30,923,232 9,131,250
Total liabilities 109,069,921 85,919,760 54,733,031
Net position
Net investment in capital assets 2,650,082 520,678 219,319 Unrestricted 215,515,361 241,350,647 206,991,239
Total net position $ 218,165,443 $ 241,871,325 $ 207,210,558 As of September 30, 2024, 3CE’s total net position was approximately $218,000,000, a decrease of $24,000,000 as compared to September 30, 2023.
3CE’s Change in Net Position
2024 2023 2022
Operating revenues $ 544,456,634 $ 451,619,272 $ 401,698,835 Nonoperating revenues 12,893,661 9,635,091 3,800,219
Total income 557,350,295 461,254,363 405,499,054
Operating expenses 580,996,244 426,540,098 388,276,955
Nonoperating expenses 59,933 53,498 -
Total expenses 581,056,177 426,593,596 388,276,955
Change in net position (23,705,882) $ $ 34,660,767 $ 17,222,099 Electricity sales increased in 2024 as a result of price increases. Despite the increase in revenues, there was a decrease in net position in 2024 due to significant increases in the cost of electricity incurred by 3CE which were driven by market price increases for renewable energy and regulatory resource adequacy.
CENTRAL COAST COMMUNITY ENERGY
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEARS ENDED SEPTEMBER 30, 2024 AND 2023
6 Detailed Analysis
Current assets decreased from $324,000,000 at the end of fiscal year 2023 to $315,000,000 at the end of fiscal year 2024. The decrease was primarily due to cash outflows to cover increasing energy costs. Current assets at the end of fiscal year 2024 were primarily comprised of cash and investments of $219,000,000, accounts receivable of $44,000,000, and accrued revenue of $31,000,000.
Capital assets are reported net of depreciation and amortization. Each year, the change is mostly due to capital asset acquisitions less depreciation and amortization expense. Capital assets include construction in progress, land, software, leasehold improvements, furniture, equipment, a vehicle, building and a leased asset. The increase from 2023 to 2024 was primarily the result of an office building purchased during the current year in the City of San Luis Obispo.
Other noncurrent assets consist of the long-term portion ($1,330,000) of a $2,000,000 loan made in 2022 to the County of Santa Cruz to acquire electric generation equipment.
The largest component of current liabilities is the cost of electricity delivered to customers that was not paid by 3CE at the end of the fiscal year. Current liabilities for the cost of energy increased each year due to changes in payment terms of certain energy products, as well as the prices of those products. Accrued cost of electricity was approximately $77,000,000 and $49,000,000 at the end of fiscal years 2024 and 2023, respectively. The primary driver of the increased cost of electricity was market price increases for renewable energy and resource adequacy resulting from constrained supply.
Noncurrent liabilities consist of supplier security deposits and the long-term portion of lease liability related to 3CE’s office premises. The reduction in noncurrent liabilities was a result of repayment of security deposits to suppliers that had been held by 3CE.
Operating revenues increased each year from fiscal years 2022 to 2024, primarily from increases in rates charged to customers. 3CE also receives revenues from sources other than retail customer sales. These sources include liquidated damage revenue resulting from electricity suppliers’ noncompliance with contract provisions and grant income used to assist with various customer programs.
CENTRAL COAST COMMUNITY ENERGY
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEARS ENDED SEPTEMBER 30, 2024 AND 2023
7 Detailed Analysis (continued)
Grant income from the California Arrearage Payment Plan (CAPP) was included in nonoperating revenues for fiscal years 2022 and 2023. This grant was applicable for two years and did not recur in fiscal year 2024. Investment income increased each year due to changes in market interest rates as well as increases in invested assets.
Operating expenses increased each year primarily due to market forces that resulted in increases in the cost of electricity, 3CE’s largest expense. 3CE procures energy from a variety of sources to reduce market risk and to maintain a balanced renewable power portfolio. The primary driver of the increase in energy costs from 2023 to 2024 was the rising costs in the resource adequacy market and the timing of certain contracts that were executed to comply with the State’s Renewable Portfolio Standards (RPS) through its acquisition of Renewable Energy Certificates (RECs).
Significant Capital Asset and Long-Term Financing Activity Capital assets include office equipment, such as computers, furniture, a vehicle, leasehold improvements and a leased asset for 3CE’s office premises. Additionally, during fiscal year 2024, 3CE purchased real estate to be used for future office operations in the San Luis Obispo region.
Assets that are leased by 3CE, such as office premises, are recorded in the Statement of Net Position with a related liability for future obligations.
CENTRAL COAST COMMUNITY ENERGY
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEARS ENDED SEPTEMBER 30, 2024 AND 2023
8 Currently Known Facts, Decisions, or Conditions
The fiscal year ended September 30, 2024 was a year of stable operations and growing cost pressures from increased costs of energy (COE), resource adequacy (RA) compliance and environmental attributes. Total revenue of $557.3 million is estimated at 99.0% of budget. Total expenditures of $581.1 million were over budget, representing a 3.3% variance. RA compliance and meeting Renewable Portfolio Standard (RPS) requirements for Compliance Period 4 contributed to higher COE. Like other load-serving entities (LSEs), 3CE faced delays in long-term PPAs caused by interconnection issues, supply chain disruptions, rising project costs, and contractual negotiations.
Infrastructure supply development remains constrained. These constraints are driven by the increased demand for renewable and other energy resources by urban electrification and the growth in technology data centers and associated artificial intelligence processing needs. 3CE views interconnection delays to existing or planned new build clean and renewable projects as the largest risk. The average wait time for projects entering the interconnection queue has increased to 5-8 years before becoming operational, whereas in the past, it took 2-3 years. Furthermore, a recent report indicated only 15% of projects within the California Independent System Operator (CAISO) queue were successful at coming online. CAISO, in coordination with the CPUC and CEC, has been endeavoring to reform the interconnection process, 3CE has a deep understanding of this challenging environment and will adjust business strategies as necessary to succeed. 3CE holds a portfolio of contracts that mitigate exposure to price spikes in the CAISO markets.
However, in the past fiscal year, CAISO market prices, as well as electricity futures prices in liquid forward markets, declined, leading to cost pressures for counterparty suppliers. At the same time, the overall market for electricity and related commodity products is experiencing a rising price environment. The rising price environment is driven by elevated costs to enter into long-term offtake agreements such as power purchase agreements (PPAs) and energy storage offtake agreements, elevated prices for RA, and environmental attributes such as Renewable Energy Certificates (RECs).
While the forward prices for energy indicate higher-than-normal wholesale prices for the foreseeable future, with every new fixed-price PPA project to come online, 3CE limits its exposure to these spot market prices.
3CE is working towards a 100% clean and renewable energy portfolio and is currently negotiating several agreements to add generation and energy storage to move closer to that goal. While the targeted timeline for achieving this goal is 2030, 3CE may choose to extend it to a later date, if interconnection wait times do not improve or customer affordability becomes a concern. 3CE has also taken steps to mitigate the elevated prices for RA. 3CE’s RA procurement strategy seeks long-term fixed-price contracts for RA that will help reduce our exposure to the spot market RA prices.
Beginning in 2026, 3CE has long-term contracts with two hybrid natural gas resources paired with energy storage that will provide valuable dispatchable energy and an RA benefit at fixed prices.
CENTRAL COAST COMMUNITY ENERGY
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEARS ENDED SEPTEMBER 30, 2024 AND 2023
9 Currently Known Facts, Decisions, or Conditions (continued) 3CE is regularly reviewing its Energy Risk Management Policy (ERMP) to ensure it continues to meet 3CE’s business needs while maintaining sufficient risk tolerances. Purchases made at fixed contractual prices reduce the need to purchase energy in the volatile daily open market. Fixed price energy purchases provide for suppliers to deliver to 3CE at a fixed price. They are used to manage the electricity commodity price risk that 3CE faces as an LSE. Specific to 3CE’s customers, fixed price energy hedges are used to provide cost certainty and rate stability. The target hedge percentages depend on time and the hedge pricing relative to historical energy costs. In general, 3CE targets hedging 63-110% of its exposure in energy products on a short-duration basis of under a year. 3CE continues to comply with its ERMP and regularly updates its Energy Risk Committee on hedging.
3CE is participating in a joint procurement effort with CC Power (California Community Power), a joint action agency made up of member CCAs, to explore the possibility of entering into a build-transfer agreement. Currently, in its early stages, CC Power is soliciting developer bids for build-transfer projects and evaluating offers. If CC Power identifies a potential project, 3CE would have the option to participate in a portion of the project, the remainder of which would be shared by other CC Power members who opted to participate in the project. 3CE retains a strong customer and revenue base with low opt-out levels. 3CE will start serving the City of Atascadero and the County of San Luis Obispo beginning January 1, 2025. These two enrollments will add around 70,000 customer accounts, bringing the total customer count to about 515,000. 3CE continues prioritizing community outreach and communication efforts to ensure a strong local presence, establishing 3CE as the preferred renewable energy provider. 3CE serves approximately 94% of all eligible customers in the service area and that rate of participation is expected to remain stable.
3CE continues to actively engage in legislative and regulatory matters that can impact its energy procurement requirements and energy-related expenditures.
Requests for Information
This financial report is designed to provide 3CE’s board members, stakeholders, customers, and creditors with a general overview of 3CE’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 the finance department at 70 Garden Court, Suite 300, Monterey, CA 93940.
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, 2024 AND 2023
2024 2023
ASSETS
Current assets
Cash and cash equivalents $ 150,539,681 $ 196,033,869
Accounts receivable, net of allowance 44,437,895 32,759,275 Accrued revenue 30,948,530 24,865,108
Other receivables 6,363,531 4,273,462
Investments 68,632,549 59,245,668
Prepaid expenses 1,829,224 380,211
Deposits 11,559,276 6,494,094
Loan receivable 190,718 187,201
Total current assets 314,501,404 324,238,888
Noncurrent assets
Investments 7,563,666 -
Deposits 23,182 23,182
Loan receivable 1,330,079 1,520,797
Capital assets, net of depreciation and amortization 3,817,033 2,008,218 Total noncurrent assets 12,733,960 3,552,197
Total assets 327,235,364 327,791,085
LIABILITIES
Current liabilities
Accrued cost of electricity 76,773,246 48,922,476
Accounts payable 4,864,146 2,777,101
Due to broker 12,035,076 -
Other accrued liabilities 800,930 741,801
User taxes and energy surcharges due to other governments 1,977,148 1,753,727 Security deposits - energy suppliers 1,149,299 501,000
Lease liability 325,259 300,423
Total current liabilities 97,925,104 54,996,528
Noncurrent liabilities
Security deposits - energy suppliers 10,303,125 29,756,280 Lease liability 841,692 1,166,952
Total noncurrent liabilities 11,144,817 30,923,232
Total liabilities 109,069,921 85,919,760
NET POSITION
Net investment in capital assets 2,650,082 520,678
Unrestricted 215,515,361 241,350,647
Total net position $ 218,165,443 $ 241,871,325
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, 2024 AND 2023
2024 2023
OPERATING REVENUES
Electricity sales, net $ 544,358,419 $ 450,713,404
Liquidated damages - 750,000
Other income 98,215 155,868
Total operating revenues 544,456,634 451,619,272
OPERATING EXPENSES
Cost of electricity 547,248,240 398,746,769
Contract services 13,387,839 10,820,099
Staff compensation 7,830,528 6,200,592
Other operating expenses 1,695,758 1,869,295
Program incentives 10,248,121 8,484,775
Depreciation and amortization 585,758 418,568
Total operating expenses 580,996,244 426,540,098
Operating income (loss) (36,539,610) 25,079,174
NONOPERATING REVENUES (EXPENSES)
Investment income 12,893,661 8,184,122
Grant revenue 1,450,969 -
Interest and financing costs (59,933) (53,498)
Nonoperating revenues (expenses) 12,833,728 9,581,593
CHANGE IN NET POSITION (23,705,882) 34,660,767
Net position at beginning of year 241,871,325 207,210,558 Net position at end of year $ 218,165,443 $ 241,871,325
CENTRAL COAST COMMUNITY ENERGY
The accompanying notes are an integral part of these financial statements. 12
STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 2024 AND 2023
2024 2023
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers $ 536,022,766 $ 466,288,740
Other operating receipts 23,814,719 1,052,868
Receipts of deposits and collateral 49,873,965 53,684,900 Payments to suppliers for electricity (550,573,743) (392,088,215) Payments of deposits and collateral (69,256,483) (30,759,035) Payments for other goods and services (15,088,564) (12,022,290) Payments for program incentives (8,250,194) (7,797,967) Payments of staff compensation (7,654,438) (6,467,227)
Payments of taxes and energy surcharges to other governments (9,199,968) (8,274,859) Net cash provided (used) by operating activities (50,311,940) 63,616,915
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Grant revenue 1,450,969 -
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Payments of lease liability (360,354) (264,318)
Payments to acquire capital assets (2,413,580) (509,105) Net cash used by capital and related financing activities (2,773,934) (773,423)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment income received 10,981,615 7,060,790
Proceeds from investment sales 127,312,461 111,223,174
Principal payments received of loan receivable 187,201 292,002 Purchase of investments (130,889,591) (137,227,427)
Net cash provided (used) by investing activities 7,591,686 (18,651,461) Net change in cash and cash equivalents (45,494,188) 45,643,000 Cash and cash equivalents at beginning of year 196,033,869 150,390,869 Cash and cash equivalents at end of year $ 150,539,681 $ 196,033,869
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, 2024 AND 2023
2024 2023
Operating income (loss) $ (36,539,610) $ 25,079,174
Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities
Depreciation and amortization expense 585,758 418,568
(Increase) decrease in:
Accounts receivable, net of allowance (11,678,620) 14,348,325 Accrued revenue (6,083,425) (6,703,164)
Other receivables (1,775,892) (1,913,221)
Prepaid expenses (1,449,013) (71,792)
Deposits (4,805,654) 1,799,836
Increase (decrease) in:
Accrued cost of electricity 27,850,770 8,847,894
Accounts payable 2,106,052 1,167,725
Other accrued liabilities 59,129 (294,223)
User taxes and energy surcharges due to other governments 223,421 (188,237) Security deposits - energy suppliers (18,804,856) 21,126,030 Net cash provided (used) by operating activities $ (50,311,940) $ 63,616,915 Acquisition of lease asset $ 1,678,196 - $
Unrealized appreciation and timing differences in investment income 1,912,046 $ $ 1,123,332
NONCASH INVESTING ACTIVITES
RECONCILIATION OF OPERATING INCOME (LOSS) TO NET
CASH PROVIDED (USED) BY OPERATING ACTIVITIES
NONCASH CAPITAL AND RELATED FINANCING ACTIVITES
CENTRAL COAST COMMUNITY ENERGY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2024 AND 2023
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, 2024:
Counties Cities and Towns
Monterey Arroyo Grande Morro Bay
San Benito Atascadero Pacific Grove
San Luis Obispo Buellton Paso Robles
Santa Barbara Capitola Pismo Beach
Santa Cruz Carmel-by-the-Sea Salinas
Carpinteria 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 Governing Boards, a Policy Board and an Operations Board. Each Board is comprised of 19 members with 19 alternates representing the participating communities. Some of the 19 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 (CPUC) 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, 2024 AND 2023
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: Net 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.
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.
Investments with a maturity of one year or more are shown as noncurrent assets in the Statement of Net Position.
3CE’s Investment Policy permits the following types of investments:
U.S. Treasury obligations
Obligations of the State of California
Obligations of any local agency within California
Registered treasury notes or bonds of the other 49 states Commercial paper
Repurchase agreements
Local Agency Investment Fund (State Pool)
County Investment Fund (County Pool)
CENTRAL COAST COMMUNITY ENERGY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2024 AND 2023
16 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
PREPAID EXPENSES
Payments made to vendors that will benefit periods beyond the end of the current fiscal year are recorded as prepaid expenses.
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.
LEASE ASSET AND LEASE LIABILITY
3CE recognizes an asset and liability when it enters into certain leasing arrangements. The cost of 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 only 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, seven years for furniture, and six years for leasehold improvements. Buildings and improvements are depreciated over 30 years. 3CE does not own any electric generation, transmission or distribution assets.
DUE TO BROKER
Investments purchased before the end of the fiscal year, but settled after the fiscal year, are recorded as due to broker.
SECURITY DEPOSITS-ENERGY SUPPLIERS
Various energy purchase 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.
CENTRAL COAST COMMUNITY ENERGY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2024 AND 2023
17 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
NET POSITION
Net position is presented in the following components:
Net investment in capital assets: This component of net position consists of capital assets, net of accumulated depreciation and amortization, and reduced by outstanding borrowings that are attributable to the acquisition, construction, or improvement of those assets.
Unrestricted: This component of net position consists of net position that does not meet the definition of “net investment in capital assets”.
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 according to 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. Revenue is presented net of estimated uncollectible amounts.
OPERATING AND NONOPERATING EXPENSES
Operating expenses include the costs of electricity, contractor services, staffing, other operating expenses, program incentives, and depreciation and amortization of capital assets. Expenses not meeting this definition are reported as nonoperating expenses.
COST OF ELECTRICITY
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 and 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.
CENTRAL COAST COMMUNITY ENERGY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2024 AND 2023
18 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
ELECTRICAL POWER PURCHASED (CONTINUED)
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 electricity generators to comply with the CPUC’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 electricity grid in real-time and to provide appropriate incentives for the siting and construction of new resources needed for reliability in the future.
STAFFING COSTS
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.
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 the previously reported net position or change in net position.
CENTRAL COAST COMMUNITY ENERGY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2024 AND 2023
19 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.
3. RECEIVABLES AND DEPOSITS
ACCOUNTS RECEIVABLE
Accounts receivable was as follows as of September 30:
2024 2023
Accounts receivable from customers $ 54,437,895 $ 43,313,058 Allowance for uncollectible accounts (10,000,000) (10,553,783) Net accounts receivable $ 44,437,895 $ 32,759,275
The majority of account collections occur within the first few months following customer invoicing. 3CE estimates that a portion of the invoiced 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 reserves for amounts invoiced during the current and prior fiscal years. During 2024 and 2023, 3CE recorded $7,233,000 and $6,864,000, respectively, as an increase to the allowance in anticipation of uncollectible accounts. Amounts estimated to be uncollectible are reported as a reduction in electricity sales in 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.
OTHER RECEIVABLES
Other receivables consist 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 $11,582,000 and $6,517,000 as of September 30, 2024 and 2023, 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 and 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, 2024 AND 2023
20 4. INVESTMENTS
During the years ended September 30, 2024 and 2023, 3CE purchased investments with original maturities of three months or more. As of September 30, investments, presented at fair value, were as follows:
2024 2023
Current Investments:
U.S. Treasury Securities $ 68,632,549 $ 45,545,580
Commercial paper 3,700,088 -
Certificate of deposits 10,000,000 -
Total current investments $ 68,632,549 $ 59,245,668
2024 2023
Noncurrent Investments:
U.S. Treasury Securities $ 7,563,666 $ -
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, 2024 and 2023, 3CE’s investments are considered Level 1 inputs, except for certificates of deposits, which are based on the nominal value which is materially consistent with fair value. Quoted prices in active markets were used for determining fair value measurement.
CENTRAL COAST COMMUNITY ENERGY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2024 AND 2023
21 4. INVESTMENTS (continued)
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 information for other investments is not available.
3CE’s investment policy addresses this risk. 3CE limits investments to those allowed by Section 53600 of the California Government Code that addresses the risk allowable for each investment.
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, 2024 and 2023, 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.
3CE’s investment policy addresses custodial credit risk. All investments owned by 3CE shall be held in safekeeping by a third-party custodian, acting as an agent for 3CE under the terms of a custody agreement.
CENTRAL COAST COMMUNITY ENERGY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2024 AND 2023
22 4. INVESTMENTS (continued)
INTEREST RATE RISK - INVESTMENTS
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. 3CE intends to hold investments to maturity.
Following is a summary of investment maturities as of September 30, 2024:
Investment Maturities
Investment Type Fair Value Less Than 1 Year 1-5 Years
U.S. Treasury Securities $ 76,196,215 $ 68,632,549 $ 7,563,666 All investments had a maturity of less than one year as of September 30, 2023.
5. CAPITAL ASSETS
Capital asset activity for the year ended September 30, 2024 was as follows:
Beginning
balance Increases
Ending
balance
Capital assets not being depreciated:
Building - construction in progress $ - $ 74,068 $ 74,068 Land - 898,658 898,658
Capital assets being depreciated and amortized:
Furniture and equipment 696,716 13,873 710,589
Leasehold improvements 90,661 90,661 -
Software 400,126 400,126 -
Building 1,407,974 - 1,407,974
Lease asset 1,678,196 1,678,196 -
Total capital assets being depreciated and amortized 2,865,699 1,421,847 4,287,546 Less accumulated depreciation and amortization:
Furniture, equipment and leasehold improvements (539,063) (116,743) (655,806) Software (66,688) (133,376) (200,064)
Lease asset (251,730) (335,639) (587,369)
Total accumulated depreciation and amortization (857,481) (585,758) (1,443,239) Total capital assets, net of depreciation and amortization 2,008,218 $ $ 1,808,815 $ 3,817,033
CENTRAL COAST COMMUNITY ENERGY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2024 AND 2023
23 5. CAPITAL ASSETS (continued)
Capital asset activity for the year ended September 30, 2023 was as follows:
Beginning
balance Increases
Ending
balance
Capital assets being depreciated and amortized:
Furniture and equipment $ 599,545 $ 97,171 $ 696,716
Leasehold improvements 58,687 31,974 90,661
Software 400,126 - 400,126
Lease asset 1,678,196 - 1,678,196
Total capital assets being depreciated and amortized 658,232 2,207,467 2,865,699 Less accumulated depreciation and amortization:
Furniture, equipment and leasehold improvements (438,913) (100,150) (539,063) Software (66,688) - (66,688)
Lease asset (251,730) - (251,730)
Total accumulated depreciation and amortization (438,913) (418,568) (857,481) Total capital assets, net of depreciation and amortization 219,319 $ $ 1,788,899 $ 2,008,218
6. LEASE
A lease asset is reported in accordance with GASB No. 87.
On October 27, 2022, 3CE entered into a 3-year non-cancelable lease for its office premises for a term commencing on January 1, 2023. The lease agreement includes an option to renew the lease for two additional one-year terms.
Rental payments under this lease were $360,000 and $330,000 for the years ended September 30, 2024 and 2023, respectively.
As of September 30, 2024, future minimum lease payments under this lease were projected as follows:
Principal Interest Total
Year ending September 30,
2025 $ 325,259 $ 45,905 $ 371,164
2026 351,568 30,731 382,299
2027 379,426 14,342 393,768
2028 110,698 878 111,576
Total $ 1,166,951 $ 91,856 $ 1,258,807
CENTRAL COAST COMMUNITY ENERGY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2024 AND 2023
24 7. GRANT REVENUE
3CE administered 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. This program concluded in 2023.
8. 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). The number of Plan participants was 41 and 34 as of September 30, 2024 and 2023, respectively. 3CE is required to contribute 10% of covered payroll as a match to required employee contributions. 3CE contributed approximately $591,000 and $502,000 for the years ended September 30, 2024 and 2023, respectively. Plan provisions and contribution requirements as they apply to 3CE are established and may be amended by the Governing Board. 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.
9. 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 $1,000.
3CE maintains risk management policies, procedures and systems that help mitigate credit, liquidity, market, operating, regulatory and other risks that arise from participation in the California energy market.
Credit guidelines include a preference for transacting with investment-grade counterparties, evaluating counterparties’ financial condition and assigning credit limits as applicable. These credit limits are established based on risk and return considerations under terms customarily available in the industry. In addition, 3CE enters into netting arrangements whenever possible and, where appropriate, obtains collateral and other performance assurances from counterparties.
25 CENTRAL COAST COMMUNITY ENERGY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2024 AND 2023
10. PURCHASE COMMITMENTS
POWER AND ELECTRIC CAPACITY
In the ordinary course of business, 3CE enters into power purchase agreements to acquire energy and electric capacity. The price and volume of purchased power is largely fixed. Variable priced power, which is a small part of 3CE’s portfolio, is generally linked to the market price of either natural gas or power at the date of delivery. Variable volume is generally associated with contracts to purchase energy from resources with varying availability and production, such as solar, wind and hydroelectric facilities.
3CE enters into long-term power purchase agreements to ensure stable competitive rates for its customers and to comply with state law and voluntary targets for renewable and greenhouse gas (GHG) free products.
The following table represents the expected, undiscounted, contractual obligations outstanding as of September 30, 2024:
Year ending September 30,
2025 554,000,000$
2026 329,000,000
2027 265,000,000
2028 248,000,000
2029 270,000,000
2030-2053 3,299,000,000
Total $ 4,965,000,000
26 CENTRAL COAST COMMUNITY ENERGY
NOTES TO THE BASIC FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2024 AND 2023
11. JOINT VENTURE
3CE participates in a joint powers agreement (JPA) through the California Community Choice Financing Authority (CCCFA). CCCFA was formed as to assist its members by undertaking the financing or refinancing of energy prepayments through 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.
CCCFA issued the following bonds, excluding original issue premium, which are to be used to finance energy purchases that will be delivered to 3CE. No debt, liability, or obligation of CCCFA is a debt, liability, obligation of 3CE.
Deal Date issued Amount
2023F December 2023 647,750,000 $
3CE will purchase energy from CCCFA in the same manner as it purchases energy from other suppliers. 3CE purchased approximately $22,579,000 and $0 from CCCFA during fiscal years 2024 and 2023, respectively. The outstanding purchase commitments related to these financing facilities of $463,011,000 are included in Note 10. This amount represents executed energy contracts assigned to CCCFA at September 30, 2024. Additional contracts will be assigned throughout the full bond period.
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, 2024, and 2023, 3CE contributed approximately $30,000 and $18,000, 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, 2024:
GASB has approved GASB Statement No. 102, Certain Risk Disclosures, GASB Statement No. 103, Financial Reporting Model Improvements, and GASB Statement No. 104, Disclosure of Certain Capital Assets.
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 56 of 64 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 57 of 64
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 59 of 64
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 6
TO: 3CE Audit and Finance Committee
FROM: Robert M. Shaw, Chief Executive Officer
PREPARED BY: Juan Lopez, Director of Finance
SUBJECT: Consider supporting a recommendation that the Policy Board Adopt Adjustments to the Calendar Year 2025 cost-based generation rates DATE: February 27, 2025
RECOMMENDATION:
Consider supporting a recommend that the Policy Board adopt adjustments to the Calendar Year 2025 cost-based generation rates.
BACKGROUND:
Since adopting a cost-of-service rate methodology in 2022, the Policy Board has approved generation rates designed to recover costs while working to maintaining stable and competitive pricing compared to the investor-owned utilities (IOUs), Pacific Gas and Electric (PG&E) and Southern California Edison (SCE).
At its September 2024 meeting, where the Policy Board adopted the FY 2024-25 budget and 2025 calendar year rates, 3CE projected continued competitiveness across all customer classes due to lower estimated generation rates compared to the IOUs and anticipated reductions in Power Charge Indifference Adjustment (PCIA) rates. However, staff shared at that time that certain regulatory proceedings could impact 3CE’s cost recover assumptions and competitive position which may require further adjustment by the Board. Following the budget’s approval, those proceedings and other market developments did, in fact, impact 3CE’s cost recovery and rate competitiveness.
Due to the accelerated timeline of the annual Energy Resource Recovery Account (ERRA) proceeding, where the California Public Utilities Commission (CPUC) finalizes IOU rates and PCIA charges, 3CE was unable to fully evaluate the impact on competitiveness until final IOU rates were approved in late
December 2024. As a result, the agency could not address these changes before budget development or the December Policy Board meeting.
DISCUSSION/ANALYSIS:
Impact of PCIA Rates Changes on Competitiveness
After adoption of 3CE’s 2025 generation rates, staff continued to assess the impact of significant PCIA rate changes implemented through the ERRA proceeding. While variances were expected, the magnitude of the final changes materially affected 3CE’s competitive position in PG&E and SCE service areas. These shifts stemmed from:
Late Adjustments to Market Price Benchmarks (MPB): The MPB determines the market value of IOU legacy power contracts. Unexpected regulatory decisions and methodology changes contributed to a higher-than-anticipated PCIA for CCA customers. PG&E’s Overhead Cost Allocation Change: In its May 15, 2024 ERRA filing, PG&E proposed shifting a greater share of its Energy Supply Administration overhead costs to Community Choice Aggregators (CCAs) like 3CE and Direct Access providers. 3CE’s PCIA forecasts in the fall did not anticipate CPUC approval of this proposal. However, the CPUC ultimately approved the revised cost allocation for 2025, increasing PCIA rates for 3CE customers. SCE’s Recategorization of Resource Adequacy (RA): In its October 21, 2024 ERRA filing, SCE proposed recategorizing RA from System to Local while applying a lower MPB to mitigate rate increases for its bundled customers. The CPUC’s approval of this change increased PCIA rates for CCA customers, as Local RA is valued lower than System RA, thereby shifting additional costs to departing load customers like 3CE.
These ERRA-related adjustments collectively increased PCIA rates for 3CE customers, negatively affecting rate competitiveness relative to the IOUs. In PG&E service areas, the PCIA rate increased on average by about half a cent per kWh compared to the projected rate, while in the SCE service area, the rate increased by two cents per kWh. In addition, lower generation rates approved by the CPUC resulted from overcollections in the IOU balancing accounts, resulting in lower generation rates than initially estimated. At a system level, 3CE maintained a 5.2% competitive advantage over IOU rates.
Impact of Revised Load Volume
3CE’s cost-of-service rate design is based on assumptions regarding customer energy consumption. A reassessment of the forecasted retail load revealed a downward adjustment:
The projected retail load for FY 2024-25 was revised from 5.7 million MWh to 5.5 million MWh. Lower-than-expected energy consumption requires cost recovery over a smaller base, increasing per-unit costs.
Without rate adjustments, 3CE is projected to fall $12.4 million short of its goal to add $40.0 million to reserves for fiscal year-end.
Proposed Rate Adjustments
To maintain financial stability and competitiveness, 3CE must adjust generation rates across all customer classes while continuing to monitor changes in IOU rates and PCIA charges. Staff recommends that the Audit and Finance Committee support the Policy Board’s approval of a rate adjustment effective April 1, 2025.
The proposed rate increase would average $0.004 per kWh, generating an additional $12.4 million in revenue across all customer classes over the last six months of FY 2024-25. While considering the impact of final PCIA rates on competitiveness, this adjustment would ensure that 3CE remains competitive with IOU rates on average while meeting its cost recovery efforts. On average, adjusting the 2025 rates will see residential customers 1.0% lower than the IOU generation rates, incorporating PCIA rates. On average, commercial, and agricultural customers will see rates 2.2% lower than the IOUs, while standby and streetlight customers will see rates at parity. Details on rate increases by class and the average competitiveness will be presented during the meeting.
CONCLUSION:
To sustain financial health, cost recovery, and competitiveness rates, 3CE must adjust generation rates in response to lower-than-projected energy volumes and recent regulatory and market changes affecting PCIA charges. By approving these adjustments, the Policy Board will ensure that 3CE remains competitive, financially stable, and aligned with its goal to meet customers' energy demand with reliable and clean energy. The Policy Board will consider the proposed rate adjustments at its March 19, 2025 meeting.
FISCAL IMPACT:
Adjusting 2025 generation rates will allow 3CE to recover costs based on revised load forecasts while ensuring that FY 2024-25 ends with $40.0 million in additional net position. This aligns with the agency’s three-year financial plan to meet reserve targets, as outlined in its Financial Policies.
Maintaining a strong net position provides financial stability amid potential PCIA and market fluctuations, helps sustain a competitive rate structure that minimizes customer attrition, and supports a strong credit rating, reinforcing 3CE’s long-term financial resilience.