Finance Committee of the
Clean Power Alliance of Southern California
Regular Meeting
Wednesday, February 22, 2023
11:00 a.m.
Visit CPA’s YouTube Channel to view a Live Stream of the Meeting www.youtube.com/@CPApublicmeetings
*There may be a streaming delay of up to 60 seconds. This is a view-only live stream.
CPA Office
801 S. Grand Ave., Suite 400
Los Angeles, CA 90017
Members of the public may also participate in this meeting remotely at the following locations:
Camarillo City Hall
Mayor’s Office
601 Carmen Drive
Camarillo, CA 93010
Claremont City Hall
Citrus Room
207 Harvard Avenue
Claremont, CA 91711
Carson City Hall
Executive Conference Room
701 East Carson Street
Carson, CA 90745
Rolling Hills Estates City Hall
Conference Room
4045 Palos Verdes Drive North
Rolling Hills Estates, CA 90274
PUBLIC COMMENT: Members of the public may submit their comments by one of the following options:
• Email Public Comment: Members of the public are encouraged to submit written comments on any agenda item to [email protected] up to four hours before the meeting. Written public comments will be announced at the meeting and become part of the meeting record. Public comments received in writing will not be read aloud at the meeting. • Provide Public Comment During the Meeting: The General Public Comment item is reserved for persons wishing to address the Committee on any Clean Power Alliance-related matters not on today’s agenda. Public comments on matters on today’s Consent Agenda and Regular Agenda shall be heard at the time the matter is called. Comments on items on the Consent Agenda are consolidated into one public comment period. Members of the public who wish to address the Committee at CPA’s Office are requested to complete a comment card and provide it to staff. If you are attending from a remote location, please identify yourself to a CPA representative when your item is called. Each speaker is limited to two (2) minutes (in whole-minute increments) per agenda item with a cumulative total of five 5 minutes to be allocated between the General Public Comment, the entire Consent Agenda, or individual items in the Regular Agenda. Please refer to Policy No. 8 – Public Comment for additional information.
Agenda Page 1
ACCESSIBILITY: Meetings are accessible to people with disabilities. Individuals who need special assistance or a disability-related modification or accommodation to participate in this meeting, or who have a disability and wish to request an alternative format for the meeting materials, should contact the Clerk of the Board at least two (2) working days before the meeting at [email protected] or (213) 713- 5995. Notification in advance of the meeting, while not required, will enable us to make reasonable arrangements to ensure accessibility to this meeting and the materials related to it.
CALL TO ORDER & ROLL CALL
GENERAL PUBLIC COMMENT
CONSENT AGENDA
1. Approve Minutes from the January 25, 2023 Finance Committee Meeting
2. Receive and File January 2023 Risk Management Team Report
3. Receive and File January 2023 CPA Investment Report
4. Receive and File Fiscal Year Q2 Financial Report and December 2022 Financial Dashboard
REGULAR AGENDA
5. Report from the Chief Financial Officer
COMMITTEE MEMBER COMMENTS
ADJOURN – NEXT MEETING ON MARCH 22, 2023
Public Records: Public records that relate to any item on the open session agenda for a Committee Meeting are available for public inspection. Those records that are distributed less than 72 hours prior to the meeting are available for public inspection at the same time they are distributed to all, or a majority of, the members of the Committee. Public records are available for inspection at CPA’s Office at 801 S. Grand Ave., Suite 400, Los Angeles, CA 90017, or online at www.cleanpoweralliance.org/agendas.
Agenda Page 2
MINUTES
Finance Committee of the
Clean Power Alliance of Southern California
Regular Meeting
Wednesday, January 25, 2023, 11:00 a.m.
Meeting videos are available on CPA’s YouTube Channel.
www.youtube.com/@CPApublicmeetings
Committee Members participated in this meeting from the following locations:
Camarillo City Hall
Mayor’s Office
601 Carmen Drive
Camarillo, CA 93010
CPA Office
801 S. Grand Ave., Suite 400
Los Angeles, CA 90017
Claremont City Hall
Citrus Room
207 Harvard Avenue
Claremont, CA 91711
Carson City Hall
Executive Conference Room
701 East Carson Street
Carson, CA 90745
Rolling Hills Estates City Hall
4045 Palos Verdes Drive North
Rolling Hills Estates, CA 90274
CALL TO ORDER & ROLL CALL
Committee Chair Santangelo called the meeting to order at 11:00 a.m. and Gabriela Monzon, Board Clerk, conducted roll call.
Roll Call
Camarillo Susan Santangelo Committee Chair Remote
Carson Reata Kulcsar Committee Member Remote
Claremont Corey Calaycay Committee Member Remote
Rolling Hills Estates Steve Zuckerman Committee Member Remote Santa Monica Pam O’Connor Committee Member Present
All votes are unanimous unless otherwise stated.
GENERAL PUBLIC COMMENT
There was no public comment.
CONSENT AGENDA
1. Approve Minutes from the November 23, 2022 Finance Committee Meeting
2. Receive and File November and December 2022 Risk Management Team Reports
3. Receive and File November and October 2022 CPA Investment Reports Agenda Page 3
Clean Power Alliance Finance Committee Page 2 of 3
January 25, 2023 Minutes
4. Receive and File October and November 2022 Financial Dashboard Motion: Committee Member Zuckerman, Rolling Hills Estates Second: Committee Member Calaycay, Claremont
Vote: The consent agenda was approved by a roll call vote.
Responding to Committee Member Zuckerman’s question, staff indicated that the California Arrearage Payment Program (CAPP) funding was received as anticipated.
REGULAR AGENDA
5. Report from the Chief Financial Officer
David McNeil, Chief Financial Officer, provided a presentation on the first five months of the fiscal year, recent market changes, and financial results. Mr. McNeil reviewed CPA’s income statements and the comparison of the adjusted summary results with the budgeted results. Mr. McNeil reviewed a chart depicting the budgeted fiscal year electricity prices compared to the actual/expected electricity prices. Mr. McNeil provided an update on residential rate comparisons between Southern California Edison’s (SCE) base rate and CPA’s rates. Staff anticipates that the increase in the JPMorgan line of credit and amendments to the credit agreement will provide CPA additional liquidity and support a future credit rating and will be discussing the proposals with the Finance Committee in February.
Committee Member Zuckerman asked several questions about JPMorgan, a credit rating, the rate change timeline, and delinquent accounts. Mr. McNeil clarified that although CPA has no current outstanding loans with JPMorgan, CPA drew on the line of credit in January. The suggested line of credit increase would provide CPA with additional liquidity and accommodate a possible increase in the Financial Security Requirement (FSR) as required by California Public Utilities Commission (CPUC). Staff added that the rating process is ongoing despite CPA’s projected lower operating income. Mr. McNeil indicated that presenting a recommendation to adjust rates to the Board at its March board meeting allows staff to make informed recommendations to the Board and ready Calpine to implement the rate change in April 2023. Lastly, staff clarified that CPA’s past due residential accounts continue to grow; CAPP2 funds will be applied in January 2023, but residential delinquencies are expected to remain high until the spring when SCE will resume disconnection noticing to customers. Committee Member Kulcsar asked several questions about California Independent System Operator (CAISO) invoice validation and recalculations, and use of the line of credit. Mr. McNeil clarified that recalculations of charges by the CAISO for a particular month of electric service continue over a three-year period. CPA contracts with Tenaska Energy Services, whose services include CAISO invoice validation; CPA is proposing a contract for settlements software to the Board at its February 2023 Board meeting, which will assist staff in doing its own validation of CAISO invoices, particularly relating to generation and storage assets. Lastly, Mr. McNeil indicated that staff seeks to balance the interest costs associated with using the line of credit with the need to have sufficient liquidity to operate and pay all invoices promptly; the cash balance is reported at each month-end on the balance sheet.
Committee Member Zuckerman asked questions on CPA’s hedging strategy, SCE’s hedging and rate setting strategies, and California Community Choice Association (CalCCA) suggested best practices. Staff clarified that Energy Risk Management policy parameters are in place to provide a hedging range, and staff is working on a strategy for Agenda Page 4
Clean Power Alliance Finance Committee Page 3 of 3
January 25, 2023 Minutes
the summer of 2023 but sees no current need for a change in CPA’s hedging range. Matt Langer, Chief Operating Officer, added that the primary motivation to add hedges is to reduce risk. Regarding SCE’s hedging and rate setting strategies, staff specified that SCE may hedge a lower percentage of their load than CPA, but their hedge strategy is not known to CPA; SCE publicly reported that in December 2022, they under-collected by $781 million; SCE sets their generation rates in January each year and may make adjustments through the year. Ted Bardacke, CEO, pointed out that CPA continues to focus on its competitive position and overall affordability for its customers; while CPA can afford some financial vulnerability, staff continues to monitor the need for market adjustments. CPA staff was involved in the development of the CalCCA Model Practice Guide published by CalCCA earlier in January. Mr. Bardacke added that as a condition of the L.A. County loan from 2021, L.A. County is reviewing CPA’s financial policies and procedures and have asked to interview the Board Chair, Chair of the Finance Committee, and potentially other members of the Finance Committee about CPA finance, governance, and processes.
COMMITTEE MEMBER COMMENTS
There were no committee member comments.
ADJOURN
Committee Member Santangelo adjourned the meeting at 11:54 a.m.
Agenda Page 5
Staff Report – Agenda Item 2
To: Clean Power Alliance (CPA) Finance Committee
From: Geoff Ihle, Director, Energy Market Risk Management Approved by: Ted Bardacke, Chief Executive Officer
David McNeil, Chief Financial Officer
Subject: Risk Management Team Report
Date: February 22, 2023
January 2023 RMT REPORT
Key Actions
• Reviewed current counterparty credit exposure
• Reviewed December 2022 market performance
• Reviewed December 2022 generation and storage performance • Reviewed energy positions and approved 2022-2027 hedges • Reviewed positions for RPS and carbon free products
• Reviewed Resource Adequacy (RA) positions, including CPA’s 2023 Year-Ahead open position and procurement strategy
• Review January 2023 CRR Allocations and Auction and CY 2022 performance.
Policy Compliance
Policy Deviation Required Action
Renewables Attributes: As of December
1, 2022, PCC1 and PCC2 renewable
energy attributes under contract for 2023
were below the ERMP minimum of 65%;
as of January 1, 2023, PCC1 and PCC2
renewable energy attributes under
contract for 2024 were below the prompt
year ERMP minimum of 65%.
None. As a result of recent procurement
activity, CPA expects to be in
compliance with both 2023 and 2024
PCC1 and PCC2 Policy requirements by
the end of Q1 2023.
Carbon Free Energy: As of January 1,
2023, 2024 carbon free energy under
contract was below the prompt year ERMP
minimum of 75%.
CPA is running solicitations to buy
Carbon Free energy and expects to
reach compliance in Q1 2023.
Agenda Page 6
Finance Committee Item 2
Carbon Free Energy: As of December 1,
2022, carbon free energy under contract
for 2023 and 2025 was above the ERMP
maximums of 100% and 50%,
respectively*; as of January 1, 2023, 2026
carbon free energy purchases were above
the ERMP maximum of 50%.
None. As previously reported, due to
scarcity of carbon free energy
(hydroelectric power), CPA is procuring
additional supply in advance as it
becomes available.
Resource Adequacy: As of December 1,
2022, July, August and September 2023,
Resource Adequacy under contract was
below the ERMP minimum of 90%.*
As a result of recent procurement
activity, CPA has cured the July 2023
deviation. CPA is running solicitations to
buy August and September 2023
Resource Adequacy.
*This policy deviation was inadvertently omitted from the December RMT report.
ATTACHMENT
None.
Agenda Page 7
Staff Report – Agenda Item 3
To: Clean Power Alliance (CPA) Finance Committee
From: David McNeil, Chief Financial Officer
Subject: CPA Investment Report
Date: February 22, 2023
RECOMMENDATION
Receive and File.
ATTACHMENT
1. January 2023 Investment Report
Agenda Page 8
Fund Name: Local Agency Investment Fund
Beginning Balance 15,792
Interest Paid (1) 83
Deposits -
Withdrawals -
Ending Balance 15,874
Interest Earned (2) 33
Average Monthly Effective Yield 2.425%
1.This Investment Report does not include CPA deposits held at banks.
2. Interest is paid quarterly effective 15 days following the end of the quarter.
3. Interest earned is based on daily compounding, account balances and monthly effective yield published by LAIF.
Clean Power Alliance
Investment Report (1)
January 2023
Agenda Page 9
Staff Report – Agenda Item 4
To: Clean Power Alliance (CPA) Finance Committee
From: David McNeil, Chief Financial Officer
Approved by: Ted Bardacke, Chief Executive Officer
Subject: Receive and File Fiscal Year Q2 Financial Report and December 2022 Financial Dashboard
Date: February 22, 2023
RECOMMENDATION
Receive and file.
ATTACHMENTS
1. December 2022 Financial Dashboard
2. Second Quarter Financial Report
Agenda Page 10
CUSTOMERS
Summary of Financial Results
Definitions:
Accounts: Active Accounts represents customer accounts of active customers served by CPA per Calpine Invoice.
Participation Rate %: Participation Rate represents active accounts divided by eligible CPA accounts YTD Sales Volume: Year‐to‐date sales volume represents the amount of energy (in gigawatt hours) sold to retail customers Revenues: Retail energy sales less allowance for doubtful accounts Cost of energy: Cost of energy includes direct costs incurred to serve CPA’s load Operating expenses: Operating expenditures include general, administrative, consulting, payroll and other costs required to fund operations Net operating income, also known as earnings before interest, depreciation and amortization (EBIDA), represents the difference between revenues and expenditures before depreciation expense, interest income and expense, and capital expenditures Cash and Cash Equivalents: Includes cash held as bank deposits.
Year to date (YTD): Represents the fiscal period beginning July 1, 2022 YTD
Dec
2022
Financial Dashboard
Note: Numbers may not sum up due to rounding.
Active Accounts
1,005,336
Participation Rate
93.2%
YTD Sales Volume
6,022 GWh
Dec Sales Volume
879 GWh
In December 2022 CPA recorded an operating loss of $24.1 million which was $37 million less than the budgeted operating income of $13 million. December results were negatively impacted by higher than forecast wholesale electricity prices that resulted from price shocks in the natural gas market. December results were also negatively impacted by the recording of charges from prior periods in the month. Absent these prior period charges, the operating loss in December would have been $8.9 million, $21.9 million below budget. Prior period charges arose from higher than expected renewable and carbon free energy costs and higher CAISO load charges.
CPA recorded a loss of $13.5 million in the 2nd quarter and a fiscal year to date (YTD) loss of $16.9 million which was $89.6 million less than a budgeted YTD operating income of $72.7 million. Losses during the period resulted from an extreme heat event in September 2022, higher than budgeted electricity costs in the December resulting from a price shock in the natural gas market and by higher than budgeted renewable and carbon free costs. Operating costs were 27% below budget for the YTD primarily as a result of lower spending on general administrative and other service costs than budgeted and the non‐utilization of contingencies.
As of December 31, 2022, CPA had $49.5 million in unrestricted cash and cash equivalents, and $79.853 million available on its bank line of credit.
CPA is in sound financial health and in compliance with its bank and other credit covenants.
Agr/Oth
2%
Com‐Lg
20%
Com‐Sm
29%
Res
49%
118
250
378
451
526
609
1114
0 200
400
600
800
1000
1200
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
in 000,000's
Operating Revenue
Actual Budget
21 20
5 9
21 ‐1
$243
‐12
38 88
138
188
238
288
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Revenue Less Energy Cost
Actual Budget
0 20
40 60
80 100
120
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Cash & Cash Equivalents
Unrestricted Restricted
in $000,000's Actual Budget Variance % Actual Budget Variance % Operating Revenues 82.9 84.1 ‐1.1 ‐1% 609.2 607.7 1.5 0% Cost of Energy 104.3 67.6 36.7 54% 609.7 512.6 97.1 19% Revenues Less Energy Cost ‐21.4 16.4 ‐37.8 ‐230% ‐0.5 95.1 ‐95.5 ‐100% Operating Expenses 2.7 3.5 ‐0.8 ‐22% 16.4 22.4 ‐5.9 ‐27% Operating Income ‐24.1 13.0 ‐37.0 ‐286% ‐16.9 72.7 ‐89.6 ‐123% Dec Year‐to‐Date
Agenda Page 11
2022 2021
Current assets
Cash and cash equivalents $ 49,457,464 $ 67,450,194
Accounts receivable, net of allowance 114,647,063 103,408,024 Accrued revenue 53,579,027 44,419,776
Market settlements receivable - -
Other receivables 20,717,137 7,578,663
Prepaid expenses 4,869,439 2,193,981
Deposits 34,849,518 13,903,151
Restricted cash 2,400,000 3,614,700
Total current assets 280,519,647 242,568,489
Noncurrent assets
Capital assets, net of depreciation 653,517 628,115
Intangible - right-to-use lease asset 2,393,197 -
Deposits 88,875 88,875
Total noncurrent assets 3,135,589 716,991
Total assets $ 283,655,236 $ 243,285,480
Current liabilities
Accounts payable $ 4,245,080 $ 3,329,969
Accrued cost of electricity 134,730,208 84,693,265
Other accrued liabilities 2,748,289 2,917,480
User taxes and energy surcharges due to other governments 8,045,585 6,460,038 Loans payable to County of Los Angeles - 30,000,000
Security deposits from energy suppliers 297,915 5,522,400 Unearned program funds 3,094,669 1,750,941
Lease liability, current 380,430 -
Counterparty collateral deposit - -
Total current liabilities 153,542,177 134,674,093
Noncurrent liabilities
Loans payable to County of Los Angeles - -
Bank Loan - -
Supplier security deposits 3,132,849 7,142,000
Deferred rent - 291,167
Lease liability, noncurrent 2,460,561 -
Total noncurrent liabilities 5,593,410 7,433,167
Total liabilities $ 159,135,587 $ 142,107,261
Fiscal Stabilization Fund - -
Investment in capital assets $ 205,723 $ 628,115
Restricted for collateral 2,400,000 3,614,700
Unrestricted 121,913,926 96,935,404
Total net position $ 124,519,649 $ 101,178,219
NET POSITION
CLEAN POWER ALLIANCE OF SOUTHERN CALIFORNIA
STATEMENT OF NET POSITION
AS OF DECEMBER 31, 2022
ASSETS
LIABILITIES
DEFERRED INFLOWS OF RESOURCES
Agenda Page 12
2022 2021
OPERATING REVENUES
Electricity sales, net $ 608,016,496 $ 483,626,589
Revenue transferred from/(to) Fiscal Stabilization Fund - - Other revenue 1,197,332 480,116
Total operating revenues 609,213,828 484,106,706
OPERATING EXPENSES
Cost of electricity 609,676,090 443,359,386
Contract services 9,369,926 8,844,581
Staff compensation 5,930,953 3,843,067
General and administration 1,119,257 835,379
Total operating expenses 626,096,226 456,882,414
Operating income (loss) (16,882,397) 27,224,292
NONOPERATING REVENUES (EXPENSES)
Interest income 520,945 17,963
Interest and related expenses (336,877) (293,335)
Interest expense - lease (35,251) -
Total nonoperating revenues (expenses) 148,818 (275,372) CHANGE IN NET POSITION (16,733,580) 26,948,920
Net position at beginning of period 141,253,228 74,207,784 Net position at end of period $ 124,519,648 $ 101,156,704
CLEAN POWER ALLIANCE OF SOUTHERN CALIFORNIA
STATEMENT OF REVENUES, EXPENSES
AND CHANGES IN NET POSITION
FOR YEARS ENDED DECEMBER 31, 2022
Agenda Page 13
2022 2021
RECONCILIATION OF OPERATING INCOME TO NET
CASH PROVIDED (USED) BY OPERATING ACTIVITIES
Net operating income (loss) $ (16,882,397) $ 27,222,100 Adjustments to reconcile operating income to net
cash provided (used) by operating activities
Depreciation expense 110,866 63,220
Amortization expense 191,454 -
Revenue adjusted for allowance for uncollectible accounts 10,601,906 10,431,641 (Increase) decrease in:
Accounts receivable (28,678,197) (25,615,765)
Other receivables (13,057,672) (5,165,610)
Accrued revenue 1,917,764 11,479,288
Prepaid expenses 1,268,965 1,994,223
Deposits (8,733,988) (576,309)
Increase (decrease) in:
Accounts payable (281,235) (1,454,179)
Energy market settlements payable 11,928,247 1,116,385
Accrued cost of electricity 39,172,754 (4,579,261)
Other accrued liabilities 355,205 1,150,128
User taxes due to other governments 2,019,228 1,130,939 Supplier security deposits (4,486,736) (37,798,000)
Unearned program funds (409,364) 152,955
Net cash provided (used) by operating activities (4,963,200) (20,448,245)
CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES
Loan proceeds 60,000,000 30,000,000
Principal payments on loan (60,000,000) -
Interest and related expense payments (347,372) (110,370) Net cash provided (used) by non-capital
financing activities (347,372) 29,889,630
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Payments to acquire capital assets (90,125) (201,423)
Payments on lease (for both principal and interest) (200,456) - Net cash provided (used) by capital and related financing activities (290,581) (201,423)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest income received 520,945 17,963
Net cash provided (used) by investing activities 520,945 17,963 Net change in cash and cash equivalents (5,080,207) 9,257,925 Cash and cash equivalents at beginning of period 56,937,672 61,806,968 Cash and cash equivalents at end of period $ 51,857,464 $ 71,064,894 Reconciliation to the Statement of Net Position
Cash and cash equivalents (unrestricted) $ 49,457,464 $ 67,450,194 Restricted cash 2,400,000 3,614,700
Cash and cash equivalents $ 51,857,464 $ 71,064,894
CLEAN POWER ALLIANCE OF SOUTHERN CALIFORNIA
STATEMENT OF CASH FLOWS
FOR YEARS ENDED DECEMBER 31, 2022
Agenda Page 14
2022/23 YTD
Budget
2022/23 YTD
Actual
2022/23 YTD
Budget Variance
(Under) Over
2022/23 YTD
Actual /
Budget % 2022/23 Budget
2022/23
Remaining
Budget
2022/23
Remaining
Budget %
Operating revenues
Revenue - electricity, net $ 606,600,040 $ 608,016,496 $ 1,416,456 100% $ 1,110,781,000 $ 502,764,504 45% Other revenues 1,078,536 1,197,332 118,796 111% 2,742,000 1,544,668 56% Total operating revenues 607,678,576 609,213,828 1,535,252 100% 1,113,523,000 504,309,172 45% Energy costs
Energy procurement 512,596,544 609,676,090 97,079,545 119% 870,533,000 260,856,910 30% Total energy costs 512,596,544 609,676,090 97,079,545 119% 870,533,000 260,856,910 30% Operating revenues less energy costs 95,082,032 (462,261) (95,544,293) 0% 242,990,000 243,452,261 100% Operating Expenditures
Staffing 6,630,740 5,930,953 (699,787) 89% 13,976,000 8,045,047 58% Technical services 755,800 612,306 (143,494) 81% 1,436,000 823,694 57% Legal services 730,900 281,826 (449,074) 39% 1,243,000 961,174 77% Other professional services 1,132,102 372,822 (759,280) 33% 1,902,000 1,529,178 80% Communications and outreach 1,013,990 432,096 (581,894) 43% 2,018,000 1,585,903 79% Mailers 1,071,142 578,005 (493,137) 54% 1,346,000 767,995 57% Billing data manager 5,226,490 5,228,418 1,928 100% 10,474,000 5,245,582 50% SCE services 1,057,990 960,000 (97,990) 91% 2,116,000 1,156,000 55% Customer programs 1,828,425 904,454 (923,972) 49% 4,663,000 3,758,547 81% General and administrations 2,905,689 1,119,257 (1,786,432) 39% 5,877,000 4,757,743 81% Total operating expenditures 22,353,268 16,420,136 (5,933,132) 73% 45,051,000 28,630,864 64% Operating income 72,728,764 (16,882,397) (89,611,161) -23% 197,939,001 214,821,398 109% Non-operating revenues (expenditures)
Interest income 243,200 520,945 277,745 214% 486,400 (34,545) -7% Finance and interest expense (346,005) (372,128) (26,123) 108% (562,000) (189,872) 34% Total non-operating revenues (expenditures) (102,805) 148,818 251,623 -145% (75,600) (224,418) Change in net position 72,625,959 (16,733,579) (89,359,539) 197,863,401 214,596,980 108% Other uses
Capital outlay 112,250 90,125 (22,125) 80% 224,500 134,375 60% Depreciation and Amortization (313,170) (302,320) 10,850 97% (622,000) (319,680) 51% Total other uses (200,920) (212,195) (11,275) 106% (397,500) (185,305) 47% Change in fund balance $ 72,826,879 $ (16,521,384) $ (89,348,264) -23% $ 198,260,901 $ 214,782,285
CLEAN POWER ALLIANCE OF SOUTHERN CALIFORNIA
BUDGETARY COMPARISON SCHEDULE
FOR YEAR ENDED DECEMBER 31, 2022
Agenda Page 15
Note Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22
1 Working Capital 89,731,305 107,892,204 111,423,404 147,468,653 180,312,395 126,977,470 2 Current Ratio 1.5 1.8 1.9 2.5 1.8 1.8
3 Days Sales Outstanding 40 39 39 41 38 34
4 Equity 83,341,183 101,176,027 105,176,451 141,253,228 137,907,020 124,519,649 5 Equity to Assets % 31% 42% 44% 56% 34% 44%
6 Available Cash 53,357,388 67,450,194 85,085,627 54,537,672 98,830,346 49,457,464 7 Available Line of Credit 80,000,000 79,853,000 79,853,000 79,853,000 39,853,000 79,853,000 8 Total Liquidity 133,357,388 147,303,194 164,938,627 134,390,672 138,683,346 129,310,464 9 Days Liquidity on Hand (TTM) 60 67 75 61 57 49
10 Gross Margin 5% 8% 8% 11% 1% -0.1%
11 Net Margin 3% 6% 5% 8% -1% -3%
Percentage Change from Prior Quarter
Working Capital 12% 20% 3% 32% 22% -30%
Current Ratio -4% 20% 6% 29% -26% 0%
Days Sales Outstanding 0% -4% 1% 3% -8% -9%
Equity 12% 21% 4% 34% -2% -10%
Equity to Assets % -6% 35% 6% 27% -39% 28%
Available Cash -8% 26% 26% -36% 81% -50%
Available Line of Credit 117% 0% 0% 0% -50% 100%
Total Liquidity 40% 10% 12% -19% 3% -7%
Days Liquidity on Hand (TTM) 37% 12% 11% -18% -7% -14%
Note Description Note Description
1 Current Assets less Current Liabilities 7 Total Line of Credit less Borrowing and Letters of Credit 2 Current Assets divided by Current Liabilities 8 Sum of Available Cash and Line of Credit 3 Accounts receivable divided by Sales divided by 365 9 Total Liquidity divided by trailing 12 month expenses divided by 365 4 Net Position plus Fiscal Stabilization Fund 10 Operating revenue less energy cost divided by operating revenue 5 Equity (Net Position + FSF) divided by Total Assets 11 Change in net position divided by operating revenue 6 Unrestricted cash and cash equivalents
Select Financial Indicators
-
25 50
75 100
125
150
175
Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 ($) Millions
Fiscal Quarter
Financial Indicators
Working Capital Equity Total Liquidity
Agenda Page 16
Staff Report – Agenda Item 5
To: Clean Power Alliance (CPA) Finance Committee
From: David McNeil, Chief Financial Officer
Subject: Report from the Chief Financial Officer
Date: February 22, 2023
The Chief Financial Officer will provide verbal updates on treasury operations and liquidity, negotiations with JPMorgan regarding an amendment to CPA’s Credit Agreement, issuance of prepayment bonds, and presentations regarding FY 2022/23 Financial Performance and Outlook (see Attachment 1) and CPA customer accounts receivable (see Attachment 2).
ATTACHMENTS
1. FY 2022/23 Financial Performance and Outlook
2. Accounts Receivable Update
Agenda Page 17
Item 5.1 -
FY 2022/23 Financial Performance
and Outlook
February 22, 2023
Agenda Page 18
Summary of YTD Financial Results
CPA recorded a net loss of $16.7 million through the first six months of FY 2022-23, $89.4 million below budgeted net income of $72.6 million. The following factors impacted year-to-date results:
• Revenue was $609.2 million, $1.5 million (0.3%) higher than budget. • Cost of energy was $609.7 million or 19% higher than budget primarily as results of the following:
1. Extreme heat event in September 2022 caused customer electricity usage, higher prices in the California Independent System Operator (CAISO) administered markets and higher charges imposed by the CAISO to operate the grid during the heat event
2. Higher costs to serve customer in December 2022 arising from higher than budgeted wholesale electricity prices driven by increases in natural gas prices. Natural gas prices were significantly higher than normal due to repairs to pipelines serving Southern California (CA) from the Permian Basin, low gas storage levels in CA, cold temperatures hitting the West earlier than usual, and coal plant retirements outside the state creating increased competition for natural gas, which determine the marginal cost of electricity.
3. $12.7 million of charges arising from prior fiscal years recorded in FY 2022/23. These charges relate to higher load charges levied by the CAISO and higher than expected calendar 2022 renewable and carbon-free energy costs. • Operating costs were lower than budgeted primarily as a result of lower spending in general administrative and other service costs than budgeted and the non-utilization of contingencies.
As of December 31, 2022, CPA had $49.5 million in unrestricted cash and cash equivalents, and $79.853 million available in its bank line of credit. CPA is in sound financial health and in compliance with its bank and other credit covenants.
2 Agenda Page 19
Income Statement and Budget to Actual Comparison -
Summary (GAAP)
3 Rows A-F represent a summary of CPA’s income statement.
Rows G-L represent a summary of Income Statement results minus Budgeted results for the applicable line item
Income Statement Jul 22 Aug 22 Sep 22 Oct 22 Nov 22 Dec 22 YTD A Energy Revenues 117,652,000 132,448,000 127,438,000 73,666,000 75,068,000 82,942,000 609,214,000 B Cost of Energy 96,757,000 132,867,000 143,263,000 69,568,000 62,919,000 104,302,000 609,676,000 C Net Energy Revenue 20,895,000 (419,000) (15,825,000) 4,098,000 12,149,000 (21,360,000) (462,000) D Operating Expenses 2,395,000 2,680,000 2,968,000 2,822,000 2,843,000 2,711,000 16,419,000 E Non Operating Revenues (Expenses) - 30,000 16,000 (45,000) 68,000 78,000 147,000 F Net Income (GAAP) 18,500,000 (3,069,000) (18,777,000) 1,231,000 9,374,000 (23,993,000) (16,734,000) Budget to Actual Jul 22 Aug 22 Sep 22 Oct 22 Nov 22 Dec 22 YTD G Energy Revenues 503,000 5,027,000 11,825,000 (11,385,000) (3,296,000) (1,139,000) 1,535,000 H Cost of Energy (7,111,000) 13,641,000 42,326,000 2,112,000 9,454,000 36,658,000 97,080,000 I Net Energy Revenue 7,614,000 (8,614,000) (30,501,000) (13,497,000) (12,750,000) (37,797,000) (95,545,000) J Operating Expenses (852,000) (1,210,000) (1,364,000) (650,000) (1,098,000) (761,000) (5,935,000) K Non Operating Revenues (Expenses) (39,000) (9,000) (22,000) (41,000) 73,000 82,000 44,000 L Net Income 8,504,000 (7,335,000) (29,083,000) (12,895,000) (11,588,000) (36,962,000) (89,359,000) Agenda Page 20
Income Statement and Budget to Actual Comparison -
Summary (Adjusted)
4 Rows A-F represent a summary of the adjusted CPA’s income statement. Adjustments reflect updated monthly revenue estimates, reallocation of CAISO charges billed after month end close to the flow month, and updates to calendar 2022 renewable and carbon free costs and a reallocation of those costs to the calendar month of use
Rows G-L represent adjusted Income Statement summary results minus Budgeted results for the applicable line item All the gains of $45.4 million in July, October, and November were offset by losses of $49.4 million in August, September, and December due to the extreme summer weather in the western United States and an increase in natural gas prices toward the end of 2022.
Income Statement (Adjusted) FY2021 - 2022 & Priors Jul 22 Aug 22 Sep 22 Oct 22 Nov 22 Dec 22 YTD FY2022-23 Total A Energy Revenues (Adjusted) 114,578,000 130,448,000 120,782,000 85,396,000 75,068,000 82,942,000 609,214,000 609,214,000 B Cost of Energy (Adjusted) 12,652,000 97,711,000 129,112,000 157,090,000 69,577,000 54,350,000 89,184,000 597,024,000 609,676,000 C Net Energy Revenue (Adjusted) (12,652,000) 16,867,000 1,336,000 (36,308,000) 15,819,000 20,718,000 (6,242,000) 12,190,000 (462,000) D Operating Expenses 2,395,000 2,680,000 2,968,000 2,822,000 2,843,000 2,711,000 16,419,000 16,419,000 E Non Operating Revenues (Expenses) - 30,000 16,000 (45,000) 68,000 78,000 147,000 147,000 F Net Income (Adjusted) (12,652,000) 14,472,000 (1,314,000) (39,260,000) 12,952,000 17,943,000 (8,875,000) (4,082,000) (16,734,000) Budget to Actual (Adjusted) FY2021 - 2022 & Priors Jul 22 Aug 22 Sep 22 Oct 22 Nov 22 Dec 22 YTD FY2022-23 Total G Energy Revenues (Adjusted) (2,571,000) 3,027,000 5,169,000 345,000 (3,296,000) (1,139,000) 1,535,000 1,535,000 H Cost of Energy (Adjusted) (6,157,000) 9,886,000 56,153,000 2,121,000 885,000 21,540,000 84,428,000 84,428,000 I Net Energy Revenue (Adjusted) 3,586,000 (6,859,000) (50,984,000) (1,776,000) (4,181,000) (22,679,000) (82,893,000) (82,893,000) J Operating Expenses (852,000) (1,210,000) (1,364,000) (650,000) (1,098,000) (761,000) (5,935,000) (5,935,000) K Non Operating Revenues (Expenses) (39,000) 69,000 54,000 (49,000) 73,000 82,000 190,000 190,000 L Net Income (Adjusted) 4,476,000 (5,580,000) (49,566,000) (1,174,000) (3,019,000) (21,844,000) (76,707,000) (76,707,000) Agenda Page 21
Budget to Actual Analysis
5 Energy costs were higher
than budget due to the
extreme heat event in
September 2022 and the
price shock in December 2022
Operating expenses were
lower than budget primarily
because of:
• lower spending in general
administrative expenses,
• the performance of services
later in the year than
budgeted, and
• the non-utilization of
contingencies
2022/23 YTD
Budget
2022/23 YTD
Actual
2022/23 YTD
Budget Variance
(Under) Over
2022/23 YTD
Actual /
Budget %
Operating revenues
Revenue - electricity, net $ 606,600,040 $ 608,016,496 $ 1,416,456 100% Other revenues 1,078,536 1,197,332 118,796 111%
Total operating revenues 607,678,576 609,213,828 1,535,252 100% Energy costs
Total energy costs 512,596,544 609,676,090 97,079,545 119% Operating revenues less energy costs 95,082,032 (462,261) (95,544,293) 0% Operating Expenditures
Staffing 6,630,740 5,930,953 (699,787) 89%
Technical services 755,800 612,306 (143,494) 81%
Legal services 730,900 281,826 (449,074) 39%
Other professional services 1,132,102 372,822 (759,280) 33% Communications and outreach 1,013,990 432,096 (581,894) 43% Mailers 1,071,142 578,005 (493,137) 54%
Billing data manager 5,226,490 5,228,418 1,928 100%
SCE services 1,057,990 960,000 (97,990) 91%
Customer programs 1,828,425 904,454 (923,972) 49%
General and administrations 2,905,689 1,119,257 (1,786,432) 39% Total operating expenditures 22,353,268 16,420,136 (5,933,132) 73% Operating income 72,728,764 (16,882,397) (89,611,161) -23% Non-operating revenues (expenditures)
Interest income 243,200 520,945 277,745 214%
Finance and interest expense (346,005) (372,128) (26,123) 108% Total non-operating revenues (expenditures) (102,805) 148,818 251,623 -145% Change in net position 72,625,959 (16,733,579) (89,359,539) Agenda Page 22
FY 2022-23 Financial Outlook
CPA’s active residential customers received approximately $10.4 million of 2022 CAPP funding in January 2023.
Absent a rate change, staff estimate a contribution to the net position in FY 2022-23 of ~$40-60 million, with gains concentrated towards the end of the fiscal year. The board is scheduled to consider an interim rate increase at the March 2023 board meeting which if implemented, would go into effect for the April-June 2023 period.
Staff will be updating its financial projections in February and March 2023 and plan to present a Draft Amendment to the FY 2022-23 Budget to the Finance Committee in March and to the Board at its April meeting.
6 Agenda Page 23
Thank You! Questions?
Agenda Page 24
Item 5.2 – CFO Report
February 22, 2023
Agenda Page 25
Accounts Receivable - Overview
Residential accounts represent approximately 51% of electricity revenue and over 75% of 90+days past due accounts receivable.
Residential past due balances continue to trend upward despite the application of 2022 CAPP funding in January 2022
Commercial accounts represent 49% of electricity revenue and 25% of 90+day past due balances. Commercial past due balances fell when disconnection noticing resumed in May 2022 and have remained stable, albeit at higher levels than seen in the pre-pandemic period CPA’s Bad Debt Reserve is conservatively estimated and, at the time of estimation, represents CPA’s best estimate of customer non-payment 2 Agenda Page 26
CAPP Update
3 2021 CAPP Funding
The State Budget Act of 2021 provided financial assistance to active and inactive residential and commercial customer accounts reflecting delinquent balances incurred during the COVID-19 pandemic relief period covering March 4, 2020 through June 15, 2021.
Residential and small business customers received approximately $15.8 million of 2021 CAPP. The payment was applied to customer accounts in early 2022 2022 CAPP Funding
The State Budget Act of 2022 appropriated additional funds for CAPP (CAPP2). CAPP2 extended the eligibility period to cover electric bills issued between March 4, 2020 and December 31, 2021 for active residential accounts only. Commercial and inactive residential accounts are not eligible to receive CAPP2 funds.
CPA’s active residential customers received approximately $10.4 million of CAPP2 funding in January 2023.
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Bad Debt Reserve
4 • Bad Debt Reserve as of December 31, 2022 ($30.6m) represented approximately 98% of 150+ days past due residential and commercial AR, up from 86% from June 2022. • CPA adjusted the Bad Debt Reserve to reflect expected CAPP payments in June 2021 and 2022, the most recent months for which the two CAPP payment amounts could be reasonably estimated.
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Gross AR Aging – Total
5 • Gross aged accounts receivable do not include i) bad debt reserves, ii) future CAPP payments or iii) customer payments received by CPA but not yet applied to AR balances in Calpine’s shadow billing system ("unapplied funds", see in red). • Unapplied fund balances arise from a variety of data issues and can result in an overstatement of Gross AR aging.
Unapplied funds balances rarely impact customer bills.
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6 • The 2021 and 2022 CAPP payments were applied in February 2022 and January 2023 respectively, which had a significant impact on residential past due balances.
• Past due residential balances have been increasing since February 2022. Following the application of CAPP2 in January 2023, 90+ days residential AR is 60% higher than February 2022 AR after the first CAPP payment was applied. • The next potential impact on Residential AR will be customer response to the resumption of disconnection and late fees by SCE planned for April 2023.
Gross AR Aging - Residential
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Gross AR Aging - Commercial
7 • Past due commercial AR balances fell beginning in May 2022 when SCE resumed issuing disconnection notices and have stabilized since then, albeit at higher levels than the pre-pandemic period. • 150+ past due represented 23% of commercial AR at the end of January 2023. CPA plans to contract with a collection agent to collect past due accounts for inactive commercial customers later in 2023.
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Questions
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