Finance Committee of the
Clean Power Alliance of Southern California
Regular Meeting
Wednesday, April 26, 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
Thousand Oaks City Hall
City Manager’s Office, Council Office #1
2100 Thousand Oaks Blvd.
Thousand Oaks, CA 91362
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, Agenda Page 1
the entire Consent Agenda, or individual items in the Regular Agenda. Please refer to Policy No. 8 – Public Comment for additional information.
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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 March 22, 2023, Finance Committee Meeting
2. Approve Selection of Baker Tilly (a) to continue as the Independent Financial Auditor for CPA’s FY 2022/23 Financial Statements Audit and (b) to perform CPA’s FY 2022/23 Single Audit of California Arrearage Payment Program (CAPP) Funds
3. Receive and File March 2023 Risk Management Team Report
4. Receive and File March 2023 CPA Investment Report
5. Receive and File February 2023 Financial Dashboard
REGULAR AGENDA
6. Report from the Chief Financial Officer
7. Review Fiscal Year 2023/2024 Budget Priorities and Draft Operating Expenses
COMMITTEE MEMBER COMMENTS
ADJOURN – NEXT MEETING ON MAY 24, 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
Finance Committee Item 1
MINUTES
Finance Committee of the
Clean Power Alliance of Southern California
Regular Meeting
Wednesday, March 22, 2023, 11:00 a.m.
Meeting videos are available on CPA’s YouTube Channel.
www.youtube.com/@CPApublicmeetings
Committee 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
Conference Room
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 Absent
All votes are unanimous unless otherwise stated.
GENERAL PUBLIC COMMENT
There was no public comment.
CONSENT AGENDA
1. Approve Minutes from the February 22, 2023, Finance Committee Meeting Agenda Page 3
Clean Power Alliance Finance Committee Page 2 of 4
March 22, 2023 Minutes
2. Receive and File February 2023 Risk Management Team Report
3. Receive and File February 2023 CPA Investment Report
4. Receive and File January 2023 Financial Dashboard
Motion: Committee Member Zuckerman, Rolling Hills Estates Second: Committee Member Kulcsar, Carson
Vote: The consent agenda was approved by a roll call vote.
REGULAR AGENDA
5. Report from the Chief Financial Officer
David McNeil, Chief Financial Officer, reported that CPA continues to maintain its treasury operations and liquidity at a healthy level, and staff is proceeding with its financial modeling and budgeting for the upcoming fiscal year. J.P. Morgan has confirmed its willingness to accommodate an increase to CPA’s line of credit to $160 million, an extension of the term, and some adjustments to language regarding an adverse material clause. Staff will share the proposed terms with S&P, the credit rating agency, and request S&P input on those terms. Mr. McNeil shared that CPA bank deposits are secured by California regulations which require that banks in possession of municipal agency deposits collateralize those deposits. Mr. McNeil indicated that staff receive collateral reports from River City Bank on a weekly basis, adding that CPA has another account at the Local Agency Investment Fund (LAIF) where CPA is likely to move more funds in the coming months as its cash position grows. CPA’s January financial results continue to be under budget, reflecting the electricity market price spike in December, January, and February.
Mr. McNeil stated that staff has updated the financial projections for the year, which include the rate increase approved by the Board, and staff is projecting a positive full-year contribution to the net position.
Responding to Committee Member Zuckerman’s questions concerning River City Bank’s collateral holding, Mr. McNeil indicated that the collateral is made up of a variety of different treasury and related securities and by a letter of credit from the Federal Home Loan Bank. Committee Member Kulcsar asked about ease of liquidity and bank account diversification. Mr. McNeil explained that the collateral is liquid; additionally, staff intends to diversify bank accounts in a controlled and strategic manner. Committee Member Kulcsar commented that an additional banking institution without ties to the Community Choice Aggregation (CCA) market may be useful.
6. (a) Review Proposed Fiscal Year (FY) 2022/23 Amended Budget; and (b) Recommend Approval of Proposed FY 2022/23 Amended Budget to the Board of Directors Mr. McNeil provided a presentation of the proposed FY 2022/23 amended budget. Mr.
McNeil reviewed various budget amendment highlights including the operating expenses, non-operating expenses and revenue, and net position.
Responding to Committee Member Zuckerman’s question about Board approval, staff indicated the budget amendment will be a consent item and will be included in the staff report. Committee Member Zuckerman expressed support for the adoption of the amended budget and suggested that summary language be used to express that CPA will still experience a positive net position increase at the end of the year.
Motion: Committee Member Zuckerman, Rolling Hills Estates Second: Committee Member Calaycay, Claremont
Vote: Item 6 was approved by a roll call vote.
Agenda Page 4
Clean Power Alliance Finance Committee Page 3 of 4
March 22, 2023 Minutes
7. Preview of Proposed Clean Energy Prepayment Transaction Kate Freeman, Financial Strategy & Initiatives Manager, provided a presentation on a preview of the proposed clean energy prepayment transaction. Ms. Freeman reviewed the details of the February 2023 prepay transaction, provided a summary of the proposed Board action, explained the structure of the prepay transaction, and identified the documents included in the upcoming Board resolution.
Responding to Committee Member Zuckerman’s inquiry about the role of Deutsche Bank, Ms. Freeman clarified that the savings from a prepay transaction are generated between the spread on municipal bond rates and the rates at which a large corporate borrower, such as Deutsche Bank, would be able to borrow money. Borrowers such as Deutsche Bank are the source of savings for CPA, as they are the corporations taking the proceeds for the first 8-year period of the bonds and making interest payments on them every year.
Committee Member Zuckerman asked about the second loan agreement after the 8-year period, and Ms. Freeman explained that after seven years, Deutsche Bank has the option to tender the bonds and can offer terms of extension of their loan after eight years. CPA is not locked into using Deutsche Bank after the initial 8-year period and can solicit alternate bids in the market at that point. Committee Member Kulcsar inquired about the agreement to indemnify California Community Choice Financing Authority (CCCFA) for the rating agency and Green Bond opinion fees in the event the prepay bonds are not issued. Ms. Freeman explained that the agreement to indemnify CCCFA involves the last steps of the transaction, and the fees only arise if the bond market is closed for prepays for a duration in excess of six months; staff indicated the at-risk amount is estimated to be $180,000. Committee Member Zuckerman asked several questions regarding language indicating that the payment of the bond is not guaranteed by Goldman Sachs. Staff specified that Goldman Sachs issues a credit guarantee for all payments to be made by J. Aron under the transaction structure; the bonds holders benefit from reserve fund accounts.
Ms. Freeman reviewed the selection of the prepay service providers that staff will recommend to the Board and outlined the prepay cost of issuance and service provider fees and expenses. Mr. McNeil noted that MCM, Chapman & Cutler, and Goldman Sachs agreed to reduce their transaction fees for the second transaction.
Committee Member Zuckerman inquired about the amount borrowed for the second prepay transaction, and Ms. Freeman indicated that amount would depend on market interest rates as of the day of pricing. Responding to Committee Member Zuckerman’s question about the first prepay transaction, Ms. Freeman clarified that all funds have been received into the prepay estate and that CPA will begin to receive monthly discounts on energy costs in July. Chair Santangelo inquired about the amount of detail that will be presented to the Board. Mr. McNeil indicated that the presentation will be similar to the one made to the Board in October, adding that staff has reached out to provide new Board members with further orientation on prepay transactions prior to the April Board meeting.
The Committee expressed support for the second prepay transaction.
COMMITTEE MEMBER COMMENTS
Committee Member Zuckerman commented that the RMT report may need an amendment, as it indicates that CPA is in full compliance; however, CPA fell short of its 2023 year ahead Resource Adequacy (RA) compliance requirement. Mr. McNeil clarified that the RMT report is focused on Agenda Page 5
Clean Power Alliance Finance Committee Page 4 of 4
March 22, 2023 Minutes
compliance with CPA’s Energy Risk Management Policy (ERMP), which will undergo its annual review process; staff will engage the Finance Committee in the review of the ERMP.
ADJOURN
Committee Chair Santangelo adjourned the meeting at 12:01 p.m.
Agenda Page 6
Staff Report – Agenda Item 2
To: Finance Committee
From: Hui Lisano, Controller
Approved by: Ted Bardacke, Chief Executive Officer
Subject: Approve Selection of Baker Tilly to Continue as the Independent Financial Auditor for CPA’s FY 2022/23 Financial Statements and CPA’s Required Single Audit of CAPP Funds
Date: April 26, 2023
RECOMMENDATION
Approve selection of Baker Tilly (a) to continue as the Independent Financial Auditor for CPA’s FY 2022/23 Financial Statements Audit and (b) to perform CPA’s FY 2022/23 Single Audit of California Arrearage Payment Program (CAPP) funds.
BACKGROUND/DISCUSSION
Pursuant to its Joint Powers Agreement, CPA is required to complete an audit of its annual financial statements by an independent auditor. CPA’s Bylaws authorize the Finance Committee to:
select an Independent Auditor who shall perform a financial audit of the accounts of the Alliance on an annual basis. The Independent Auditor shall be accredited in the State of California and provide independent, accurate, and timely assessments of the Alliance’s financial activities in compliance with generally accepted government auditing standards.
In the spring of 2019, CPA staff undertook a competitive process that included a request for proposals to provide audit services. The Finance Committee selected Baker Tilly to audit CPA’s FY 2018/19 financial statements. The Finance Committee subsequently selected Baker Tilly to audit the following three years’ financial statements.
Agenda Page 7
Finance Committee Item 2
Staff recommends engaging Baker Tilly for FY 2022/23 as an auditor for the following reasons:
• While there is no requirement for government entities to change audit firms, Assembly Bill 1345 requires local governments to rotate the lead audit partner after six consecutive fiscal years. CPA is not a local government but recognizes this as a pertinent guideline. Baker Tilly has two more years, inclusive of the proposed FY 2022/23 engagement before it reaches the six-year threshold. https://www.sco.ca.gov/aud_auditor_rotation_requirements.html • The Government Finance Officers Association (GFOA) recommends that government entities enter into multi-year agreements with independent auditors of at least five years in duration. Such agreements allow continuity, help to minimize the potential for disruptions in connection with the independent audit and help to reduce audit startup costs as compared with single-year contracts. https://www.gfoa.org/materials/audit-procurement
• Baker Tilly has a nationwide practice auditing electric utilities and has deep electric utility industry expertise.
• Baker Tilly has performed CPA’s independent financial audit for the last three years, is familiar with CPA’s books, and has deep institutional knowledge about CPA.
• Baker Tilly has CCA experience beyond CPA, having also served as the auditor of Moody’s rated Marin Clean Energy.
• Baker Tilly has extensive knowledge of California energy markets. It performs audit services for Sacramento Municipal Utilities District, Northern California Power Agency, and Modesto Irrigation District.
Staff plans to conduct a competitive solicitation for its Independent Financial Auditor in Spring 2025 following the FY 2023/24 audit. By then, Baker Tilly will have performed the previous six financial audits for CPA, consistent with industry best practices.
In 2020, Baker Tilly disclosed to the Finance Committee that they have a small-scope attestation engagement with Southern California Edison (SCE). Baker Tilly describes the Agenda Page 8
Finance Committee Item 2
SCE engagement as an examination to review the nuclear decommissioning costs of a facility that SCE partially owns and operates. This engagement with SCE has been renewed for another three years. To maintain its independence, Baker Tilly has segregated and will continue segregating staff working on SCE and CPA engagements.
These engagements have undergone Baker Tilly internal review to ensure that independence is maintained.
In early 2023, CPA received a total of $10.2 million in 2022 California Arrearage Payment Program (CAPP) funds. A single audit is required for any entity that expends $750k or more in federal award funds during its fiscal year. The federal government funds the CAPP, and the State of California considers utilities that receive the funds as sub-recipients. Therefore, CPA is subject to Single Audit for FY 2022/23.
FISCAL IMPACT
The estimated cost of the Baker Tilly audit engagement is $35,000, and the single audit is $15,000. These costs are included in the FY 2023/24 Budget that will be presented to the Board for approval on June 1, 2023.
ATTACHMENT
None.
Agenda Page 9
Staff Report – Agenda Item 3
To: 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: April 26, 2023
March 2023 RMT REPORT
Key Actions
• Reviewed current counterparty credit exposure
• Reviewed February 2023 market performance
• Reviewed February 2023 generation and storage performance • Reviewed energy positions and approved 2023-2027 hedges • Reviewed December 2022 day-ahead load forecast performance and March 2023 long-term load forecast update
• Reviewed positions for RPS and carbon free products
• Reviewed Resource Adequacy (RA) positions, including CPA’s 2023 Month-Ahead and 2024 Year-Ahead open position and procurement strategy. • Review March 2023 CRR Allocations and Auction and 2023 YTD performance Policy Compliance
Policy Deviation Required Action
Energy Hedges: As of March 27, 2023, Q1
2024 was hedged at 84%, one percent
less than the ERMP minimum.
CPA cured the deviation by purchasing
additional Q1 2024 energy hedges in
April 2023.
Carbon Free Energy: As of December 1,
2022, carbon free energy under contract
for 2023 was above the ERMP maximum
of 100%
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 Month-Ahead 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.
ATTACHMENT
None.
Agenda Page 10
Staff Report – Agenda Item 4
To: Finance Committee
From: David McNeil, Chief Financial Officer
Approved by: Ted Bardacke, Chief Executive Officer
Subject: CPA Investment Report
Date: April 26, 2023
RECOMMENDATION
Receive and File.
ATTACHMENT
1. March 2023 Investment Report
Agenda Page 11
Fund Name: Local Agency Investment Fund
Beginning Balance 15,874
Interest Paid (1) -
Deposits -
Withdrawals -
Ending Balance 15,874
Interest Earned (2) 38
Average Monthly Effective Yield 2.831%
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)
March 2023
Agenda Page 12
Staff Report – Agenda Item 5
To: Finance Committee
From: David McNeil, Chief Financial Officer
Approved by: Ted Bardacke, Chief Executive Officer
Subject: Financial Dashboard
Date: April 26, 2023
RECOMMENDATION
Receive and file.
ATTACHMENT
1. February 2023 Financial Dashboard
Agenda Page 13
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
Feb
2023
Financial Dashboard
Note: Numbers may not sum up due to rounding.
Active Accounts
1,005,336
Participation Rate
93.2%
YTD Sales Volume
7,697 GWh
Feb Sales Volume
789 GWh
In February 2023 CPA recorded an operating loss of $5.4 million which was $3.3 million less than an operating loss of $8.8 million projected in the FY 2022/23 Amended Budget. For the year to date, CPA recorded an operating loss of $36.5 million, $10.4 million less than the budgeted operating loss of $46.9 million through February.
February results were negatively impacted by a continuing price spike in natural gas and wholesale electricity prices in February and the impact of recording charges for prior months levied by the California Independent System Operator. Absent these prior period charges, the operating loss in February would have been $3.3 million, $5.4 million less than budgeted.
Year-to-date (YTD) revenue was $769.7 million and the cost of energy was $784 million in line with the Amended Budget. YTD results were negatively impacted by the September 2023 heat wave, gas and energy price shocks beginning in December 2022, higher than budgeted renewable energy costs, prior period costs that were recorded in the current fiscal year, and an expected but still not assessed RA compliance penalty. Operating costs were lower than budgeted primarily as a result of lower spending in general administrative and other service costs and the non-utilization of contingencies.
As of February 28, 2023, CPA had $66.2 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 and remains on track to contribute $84.9 million to the net position consistent with the FY 2022/23 Amended Budget.
Agr/Oth
2%
Com-Lg
19%
Com-Sm
28%
Res
51%
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 77.0 76.5 0.5 1% 769.7 769.2 0.5 0%
Cost of Energy 79.5 81.5 -2.0 -2% 784.0 786.0 -2.0 0%
Revenues Less Energy Cost -2.5 -5.0 2.5 50% -14.3 -16.8 2.5 15% Operating Expenses 2.9 3.8 -0.9 -23% 22.2 30.1 -7.9 -26% Operating Income -5.4 -8.8 3.3 38% -36.5 -46.9 10.4 22% Feb Year-to-Date
118
250
378 451 526
609
693 770
1183
0 200
400
600
800
1000
1200
1400
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
0 -12 -14
$129
-100
-50
0 50
100
150
200
250
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Revenue Less Energy Cost
Actual Budget
Agenda Page 14
Staff Report – Agenda Item 6
To: Finance Committee
From: David McNeil, Chief Financial Officer
Subject: Report from the Chief Financial Officer
Date: April 26, 2023
The Chief Financial Officer will provide verbal updates on treasury operations and liquidity, and February 2023 financial results.
ATTACHMENT
None.
Agenda Page 15
Staff Report – Agenda Item 7
To: Finance Committee
From: David McNeil, Chief Financial Officer
Approved by: Ted Bardacke, Chief Executive Officer
Subject: FY 2023/24 Budget Priorities and Draft Operating Expenses Date: April 26, 2023
RECOMMENDATION
Review FY 2023/24 budget priorities and draft operating expenses.
ATTACHMENT
1. FY 2023/2024 Budget Priorities & Operating Expenses Presentation Agenda Page 16
Item 7 – FY 2023/24 Budget Priorities
& Draft Operating Expenses Budget
April 26, 2023
Agenda Page 17
FY 2022/23 Budget Process
January – April 2023 (Staff) – FY 2023/24 Goal Setting, Departmental Budgeting, Rate Design Planning, Energy Cost Projections & Consolidated Budget Planning (ongoing) April 19, 2023 (Executive Committee) – Budget Priorities April 20, 2023 (Community Advisory Committee) – Budget Priorities April 26, 2023 (Finance Committee) – Budget Priorities & Draft FY 2023/24 Operating Expenses Budget May 4, 2023 (Board) – Budget Priorities
May 17, 2023 (Executive Committee) – Draft FY 2023/24 Budget May 24, 2023 (Finance Committee) – Draft FY 2023/24 Budget June 1, 2023 (Board) – Proposed FY 2023/24 Budget
2 Agenda Page 18
Financial Stewardship and Cost Control Framework
3 Budget authorization to collect revenues and incur expenses Managerial prioritization and decision making within budget and policy limits Competitive hiring and board-approved salary ranges provide a strong framework for attracting top talent and managing staffing costs
Competitive solicitation processes for goods and services consistent with Board approved contracting policies.
Contract approval by the board or in accordance with delegated authorities and Non-Energy Contracting Policy Reporting and transparency – enhanced quarterly financial reporting implemented in Q4 2020 at Finance Committee’s recommendation; monthly Financial Dashboard, quarterly Financial Report and audited Financial Statements are presented to Board and are public documents
Agenda Page 19
2023/24 Operational Priorities
4 1. Achieve financial targets, including Investment
Grade Credit Rating
2. Meet renewable procurement and GHG
emissions targets
3. Attract, retain and develop high-performing
and diverse staff
4. Comply with or surpass regulatory and legal
obligations
5. Develop and deliver impactful customer
programs, including mid-term strategic review
6. Implement DEI plan
7. Establish and improve processes
8. Update and Implement Data and Systems
Strategic Plan
9. Lead and shape regulatory and policy
discussions
10. Maintain customer participation rates, with
particular emphasis on agencies changing their
default rates
11. Plan for future success, including long-term rate
product strategy
Agenda Page 20
Operating Expense Context
5 Energy market risks continue to be elevated as California continues to experience significant heat events and available electricity supply in California remains constrained.
CPA manages ~$1.24 billion of annual energy costs representing 96% of total costs. In addition, CPA contracts for and operationalizes long-term renewable and storage projects involving billions of dollars of financial commitments.
As the 3rd largest LSE in California Independent System Operator (CAISO) balancing area and significant supplier of renewable energy, regulatory, political and public relations opportunities and scrutiny are multiplying.
Expanding suite of customer programs requires CPA to enhance its ability to acquire and retain customers and develop technical expertise in new and innovative areas.
CPA has limited ability to impact rates in the short term through adjustments to budgeted energy or operating expenses but can increase impact and reduce risk through these investments Agenda Page 21
Staffing - Context
6 2022/23: Budgeted headcount of 70 (including one mid-year add). Current headcount = 62 Turnover rates are improving but remain disproportionately high within mid-level management
Jan 2021 to March 2022 – Hired 35/Net gain of 14
April 2022 to March 2023 – Hired 20/Net gain of 14
Consolidating the benefits of staffing progress is dependent on continuing to invest in staff retention and talent acquisition
New positions address growth areas and reflect the increasing complexity brought on by success (see slide 17)
Continue to have favorable/leading comps within CCA industry (see slide 11) Agenda Page 22
FY 2023/24 Operating Expense Overview
Total operating expense increase of 23% reflects operational priorities including investments in staffing (+43%), and customer programs (+107%) (rows 9, and 17). $14.5 million, or 26% of operating expenses (rows 14-16), are fixed by regulation, contract, or policy. The increase in billing data management services includes costs associated with new customer enrollments scheduled for March 2024
7 A B C D E F G H
FY 2022/23
Amended Budget
FY 2023/24
Budget
Budget
Difference ($)
Budget
Difference
(%)
% of
Revenue
Contingency
($)
Contingency
(%)
8 OPERATING EXPENSES
9 Staffing 13,976,000 19,972,000 5,996,000 43% 1.3% - 0% 10 Technical services 1,436,000 1,809,000 373,000 26% 0.1% 164,418 10% 11 Legal services 1,243,000 1,054,000 (189,000) -15% 0.1% 30,705 3% 12 Other services 1,902,000 1,975,000 73,000 4% 0.1% 179,535 10% 13 Communications and marketing services 2,018,000 2,240,000 222,000 11% 0.1% 106,669 5% 14 Customer notices and mailing services 1,346,000 1,023,000 (323,000) -24% 0.1% 92,990 10% 15 Billing data management services 10,518,000 11,262,000 744,000 7% 0.8% 274,688 3% 16 Service fees - SCE 2,116,000 2,165,000 49,000 2% 0.1% 196,800 10% 17 Customer programs 4,663,000 9,643,000 4,980,000 107% 0.6% - 0% 18 General and administration 5,877,000 4,419,000 (1,458,000) -25% 0.3% 401,718 10% 19 TOTAL OPERATING EXPENSES 45,095,000 55,562,000 10,467,000 23% 3.7% 1,447,521 3% Agenda Page 23
FY 2023/24 Operating Expense Summary
Increased operating expenses arise primarily from increased spending on customer programs and staffing Operating expense costs for areas other than staffing and customer programs (“Other operating expenses”, see the table above) are 2% lower than the prior year.
The FY 2022/23 Budget included $2 million for surety bond costs to support CPA’s Financial Security Requirement. CPA’s FSR remained at the minimum in FY 2022/23 and these funds were unspent. Surety bond costs are not included in the FY 2023/24 Budget. Excluding surety bond costs from the FY 2022/23 Budget, FY 23/24 “Other operating expenses” would have increased by $1.49 million or 6%. 8 A B C D E
FY 2022/23
Amended Budget
FY 2023/24
Budget
Budget
Difference ($)
Budget
Difference
(%)
Staffing 13,976,000 19,972,000 5,996,000 43%
Customer programs 4,663,000 9,643,000 4,980,000 107%
Other operating expenses 26,456,000 25,947,000 (509,000) -2% TOTAL OPERATING EXPENSES 45,095,000 55,562,000 10,467,000 23% Agenda Page 24
Customer Programs Detail
9 A B C D E F G H I J K
Staffing Customer Programs Communications Mailers Data Manager Other Services Technical
Services Total % of Total
Reimbursable costs
/ 3rd party Funding
Customer
Program
Expenses,
Net
100% Reimbursable
Power Share/Community Solar (CPUC) 432,000 2,065,000 106,000 14,000 74,000 32,000 2,723,000 25% 2,723,000 - Workforce Development 516,000 11,000 527,000 5% 516,000 11,000 Leverage State Resources
Electric Vehicle Charging (CALeVIP LA & Ventura) 1,241,000 26,000 1,267,000 12% - 1,267,000 Strategic with long-term ROI or community benefits potential Power Response/Demand Response 1,427,000 300,000 35,000 1,762,000 16% - 1,762,000 Power Ready/Backup Power 26,000 66,000 92,000 1% - 92,000 Building Electrification Code Incentives 351,000 11,000 362,000 3% - 362,000 Electrification Advisor (new) 370,000 7,000 377,000 3% - 377,000 Local Government Program (new) 2,710,000 26,000 7,000 2,743,000 25% - 2,743,000 Solar + Storage program (new) 963,000 11,000 7,000 981,000 9% - 981,000 Others 108,000 55,000 163,000 1% - 163,000
Total 432,000 9,643,000 625,000 70,000 74,000 32,000 121,000 10,997,000 100% 3,239,000 7,758,000 Budget Line Item
Expenses related to customer programs fall into Customer Programs (customer incentives and implementer costs), Staffing, Communications, Mailers, Data Manager, Technical Services and Other services budget line items.
Costs associated with Workforce development and the PowerShare/Community Solar programs are funded by third parties Agenda Page 25
Staffing Detail
10 Draft operating expense budget projects staffing costs to increase by 43%, from 1.2% of total revenue in FY2022/23 to a still industry-leading 1.3% of revenue in the upcoming year. 24% of the draft staffing budget increase is for new positions. The remaining 76% covers full year impacts of current year new hires/merit increases for current staff/mid-year 6% COLA, a 2024 COLA, budget for merit/promotion salary increases, and a retention incentive.
Pursuant to Board direction, staff engaged Mercer to assist with the development of a retention incentive. The parameters of a retention incentive are under development.
The staffing budget does not include an allowance for staff turnover and as in previous years, actual staffing expenses are expected to come in under budget.
$432k of staffing expenses are reimbursable via CPUC customer program funding (Powershare) FY 2023/24 Staffing Cost Increase - Detail $ % of Increase A FY 2022/23 Budget 13,976,000
Full Year Impact of 22/23 Mid year merit increases
and New Hires 1,939,000 32%
COLA (5%) 734,000 12%
Merit/Promotion 890,000 15%
Retention Incentive 1,000,000 17%
New Positions 1,433,000 24%
B Subtotal Increase 5,996,000 100%
C=A+B FY 2023/24 Budget Total 19,972,000
D=B/A YOY % Increase 43%
Agenda Page 26
Select CCA Metrics and Comparisons
11 CPA’s metrics for operating expenses and staffing costs compare favorably with industry averages FY2023/24 Budget ($000) CPA (Draft) CCA Avg
MCE (Draft)
FY2023/24
Sonoma
(Draft)
FY2023/24 3CE FY2022/23
EBCE
FY2022/23
Total Revenue 1,498,000 563,000 800,000 253,000 429,000 770,000 Total Energy Cost 1,238,000 440,000 666,000 194,000 378,000 524,000 Net Energy Revenue 259,000 123,000 134,000 59,000 51,000 246,000 Staffing 19,972 13,000 19,000 8,000 9,000 16,000
Other Operating Expenses 36,000 24,000 21,000 21,000 31,000 23,000 Total Operating Expenses 56,000 37,000 40,000 29,000 40,000 39,000 Net Income 204,000 86,000 94,000 30,000 11,000 207,000
Staffing (% of…)
Revenue 1.3% 2.3% 2.4% 3.2% 2.1% 2.1%
Cost of Energy 1.6% 3.0% 2.9% 4.1% 2.4% 3.1%
Net Energy Revenue 8% 11% 14% 14% 18% 7%
Total Operating Expenses 36% 35% 48% 28% 23% 41%
Net Income 10% 15% 20% 27% 82% 8%
Total Operating Expenses (% of…)
Revenue 3.7% 6.6% 5.0% 11.5% 9.3% 5.1%
Cost of Energy 4.5% 8.4% 6.0% 14.9% 10.6% 7.4%
Net Energy Revenue 22% 30% 30% 49% 78% 16%
Net Income 27% 43% 43% 97% 364% 19%
Gross Margin 17% 22% 17% 23% 12% 32%
Net Margin 14% 15% 12% 12% 3% 27%
Agenda Page 27
Increased operating expenses arise primarily from increased spending on customer programs and staffing
Increases in operating expense costs for areas other than staffing and customer programs will be nominal in sum
Expanding customer programs and local assistance is an organizational priority while consolidating the benefits of staffing progress requires continued investments in staff retention and talent acquisition
Accounting for past year staffing and turnover improvement plus continuing to invest in retention/development is 76% of the proposed staffing increase; new positions are remaining 24%
CPA continues to compare favorably with other CCAs on operating expenses and staffing
12 Summary
Agenda Page 28
Questions?
Agenda Page 29
14 Current Org Chart
Agenda Page 30
15 Current Org Chart
w/ Proposed New
Positions
Agenda Page 31
Communications Detail
16 Program Marketing Support
Customer Program marketing represents approximately 45% of expected communications expenses Power Share (100% reimbursable) and Power Response require customer acquisition investments Brand Awareness and Reputation Enhancement
Assists with program marketing (customers), recognition among stakeholders, and expansion efforts Event, organizational sponsorships, and CBO Grants for hard-to-reach populations (CAC priority) Communications Consultants will be reduced if new positions are approved and new staff can be hired in a timely manner 2022/23 2023/24
2023/24
Diff $
2023/24
Diff %
Advertising 435,000 694,000 259,000 60%
Communication Consultants 1,126,000 965,000 (161,000) -14% Sponsorships 100,000 147,000 47,000 47%
Website 144,000 239,000 95,000 66%
Communication - Others 18,000 32,000 14,000 78%
Special Events 25,000 132,000 107,000 428%
CBO Grants 170,000 31,000 (139,000) -82%
Communication & Outreach 2,018,000 2,240,000 222,000 11% Third Party Funding
AMP - - - 0%
Power Share (CPUC Funding) (366,500) (106,000) 260,500 -71% Power Ready (38,800) (26,000) 12,800 -33%
Power Response (363,800) (300,000) 63,800 -18%
Building Electrification (25,900) (11,000) 14,900 -58%
CalEVIP (LA & Ventura) (85,000) (26,000) 59,000 -69%
Local Government Program - (26,000) (26,000) 0%
Storage & Battery - (11,000) (11,000) 0%
Workforce Development (25,900) (11,000) 14,900 -58%
Others - (108,000) (108,000) 0%
Communication Costs net of Funding 1,112,100 1,615,000 502,900 45% Agenda Page 32
Staffing – New Positions Detail
17 2022/23: Budgeted headcount of 70 (including one mid-year add). Current headcount = 62 Staffing Priorities
New positions address growth areas (customer programs/communications/marketing/community & board engagement) and reflect the increasing complexity brought on by success (PPA and prepay settlements/data & load management)
FY 2023/24 New Positions
Work Area Count Position Title
Communication & Mktg 2 Marketing Project Manager, Web Administrator Customer Programs 1 Program Manager, Resiliency & Grants Data & System 1 Analyst, Data and Systems
Executives 1 Deputy Clerk of Board
Finance 2 Senior Load Forecast Analyst, Financial Analyst Government Affairs 1 Legislative and Government Affairs Manager Procurement 1 Analyst, Power Supply
Total 9
- Settlements
Agenda Page 33