Finance Committee of the
Clean Power Alliance of Southern California
Regular Meeting
Wednesday, May 24, 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 90 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 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
REVISED
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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CALL TO ORDER & ROLL CALL
GENERAL PUBLIC COMMENT
CONSENT AGENDA
1. Approve Minutes from the April 26, 2023, Finance Committee Meeting
2. Receive and File April 2023 Risk Management Team Report
3. Receive and File April 2023 CPA Investment Report
4. Receive and File Fiscal Year Q3 Financial Report
REGULAR AGENDA
5. Report from the Chief Financial Officer
6. Recommend Approval of Draft Fiscal Year 2023/2024 Budget to the Board of Directors
7. Receive Bank Credit Agreement Update and Provide Feedback
COMMITTEE MEMBER COMMENTS
ADJOURN – NEXT MEETING ON JUNE 28, 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
REVISED
Finance Committee Item 1
MINUTES
Finance Committee of the
Clean Power Alliance of Southern California
Regular Meeting
Wednesday, April 26, 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
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
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
Thousand Oaks David Newman Committee Member Remote
All votes are unanimous unless otherwise stated.
GENERAL PUBLIC COMMENT
A written public comment was received.
CONSENT AGENDA
1. Approve Minutes from the March 22, 2023, Finance Committee Meeting Agenda Page 3
Clean Power Alliance Finance Committee Page 2 of 3
April 26, 2023 Minutes
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
Motion: Committee Member Calaycay, Calaycay
Second: Committee Member Zuckerman, Rolling Hills Estates Vote: The consent agenda was approved by a roll call vote.
Regarding Item 1, Committee Member Zuckerman asked about the status of CPA’s line of credit.
David McNeil, Chief Financial Officer, explained that staff is in negotiations to increase CPA’s credit line with JP Morgan. Committee Member Kulcsar asked about best practices for audit firms, Mr. McNeil confirmed that state guidelines recommend rotating the auditing partner every six-years.
REGULAR AGENDA
6. Report from the Chief Financial Officer
David McNeil, Chief Financial Officer, reported that CPA recorded a loss in February but remains $3 million ahead of budget. The interim rates will result in a higher revenue for the balance of fiscal 22/23, and staff expects to record an increase in CPA’s net position for the fiscal year. Staff is currently updating CPA’s financial modeling and will present results at the May meeting. CPA is heading into the summer months in sound financial health.
Responding to Committee Member Zuckerman’s inquiry about the second prepay transaction, Mr. McNeil explained that due to market volatility, staff may not move forward with it until late May or June.
7. Review Fiscal Year 2023/24 Budget Priorities and Draft Operating Expenses David McNeil presented the FY 2023/24 budget priorities and draft operating expenses budget. Mr. McNeil reviewed the timeline of the budget process, explained CPA’s framework for financial management and cost control, identified the FY 23/24 operational priorities, and provided operating expense and staffing context. The total operating expense increase of 23% reflects operational priorities including investments in staffing and customer programs.
In response to Committee Member Zuckerman’s question about renewable energy and storage project development delays, Mr. McNeil indicated that project online dates are incorporated into CPA’s financial projections. Responding to Committee Member Kulcsar’s questions concerning billing data management services, Ted Bardacke, CEO, indicated that the contract with Calpine for billing services will end in 2025. CPA will subsequently issue a Request for Proposals; the exact functions to be insourced versus remain with an outside manager is still to be determined. Responding to Committee Member Zuckerman’s question about account receivables trends, Mr. McNeil noted that CPA’s commercial accounts receivable have stabilized; residential customer past due accounts continue to be elevated. Committee Member Kulcsar thanked staff and commented on the transparency and clarity of the detailed customer programs budgeting.
In response to Committee Member Newman’s question about the source of customer program funding, Mr. McNeil explained that the budget reflects CPA’s contribution, with Agenda Page 4
Clean Power Alliance Finance Committee Page 3 of 3
April 26, 2023 Minutes
state funding for the CALeVIP program flowing directly to the customers and not through CPA.
Mr. McNeil provided the staffing budgets for FY 2022/23 and FY 2023/24. Staff projects the operating expenses for staffing to increase by 43%, from 1.2% of the total revenue in FY 2022/23 to a still industry-leading 1.3% of revenue in the upcoming year; 24% of the draft staffing budget increase is for new positions. Mr. McNeil provided metrics and comparisons to other Community Choice Aggregations (CCA). Mr. Bardacke added that there are some organizational policy questions surrounding the retention incentive, and they will be discussed with the Executive Committee. Committee Member Kulcsar suggested more context about customer accounts be added to the comparison chart.
COMMITTEE MEMBER COMMENTS
None.
ADJOURN
Committee Chair Santangelo adjourned the meeting at 11:55 p.m.
Agenda Page 5
Staff Report – Agenda Item 2
To: Finance Committee
From: Geoff Ihle, Director, Energy Risk Management
Approved by: Ted Bardacke, Chief Executive Officer
David McNeil, Chief Financial Officer
Subject: Risk Management Team Report
Date: May 24, 2023
April 2023 RMT REPORT
Key Actions
• Reviewed current counterparty credit exposure
• Reviewed March 2023 market performance
• Reviewed March 2023 generation and storage performance • Reviewed energy positions and approved 2023-2027 hedges • Reviewed January 2023 day-ahead load forecast performance • 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 • Reviewed Energy Risk Management (ERMP) compliance
• Review April 2023 CRR Allocations and Auction and 2023 YTD performance Policy Compliance
Policy Deviation Required Action
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 procured
additional supply to ensure it meets its
energy product content targets.
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 procurement activity, CPA
cured the July 2023 deviation. CPA is
running solicitations to buy August and
September 2023 Resource Adequacy.
ATTACHMENT
None.
Agenda Page 6
Staff Report – Agenda Item 3
To: Finance Committee
From: David McNeil, Chief Financial Officer
Approved by: Ted Bardacke, Chief Executive Officer
Subject: CPA Investment Report
Date: May 24, 2023
RECOMMENDATION
Receive and file.
ATTACHMENT
1. April 2023 Investment Report
Agenda Page 7
Fund Name: Local Agency Investment Fund
Beginning Balance 15,874
Interest Paid (1) 107
Deposits -
Withdrawals -
Ending Balance 15,981
Interest Earned (2) 38
Average Monthly Effective Yield 2.870%
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)
April 2023
Agenda Page 8
Staff Report – Agenda Item 4
To: Finance Committee
From: David McNeil, Chief Financial Officer
Approved by: Ted Bardacke, Chief Executive Officer
Subject: Fiscal Year Q3 Financial Report
Date: May 24, 2023
RECOMMENDATION
Receive and file.
ATTACHMENTS
1. Third Quarter Financial Report
Agenda Page 9
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 inco76me, 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
Mar
2023
Financial Dashboard
Note: Numbers may not sum up due to rounding.
Active Accounts
1,004,523
Participation Rate
93.1%
YTD Sales Volume
8,535 GWh
Mar Sales Volume
838 GWh
21 20 5 9 21
0 -12 -14 -9
$129
-100
0 100
200
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
M…
Jun
Cash & Cash Equivalents
Unrestricted Restricted
in $000,000's Actual Budget Variance % Actual Budget Variance % Operating Revenues 79.9 76.7 3.2 4% 849.6 846.0 3.7 0%
Cost of Energy 75.0 68.3 6.8 10% 859.1 854.3 4.8 1%
Revenues Less Energy Cost 4.9 8.5 -3.6 -42% -9.4 -8.3 -1.1 13% Operating Expenses 3.0 3.7 -0.7 -20% 25.2 33.9 -8.6 -26% Operating Income 1.9 4.7 -2.8 -60% -34.6 -42.2 7.6 -18% Mar Year-to-Date
118
250
378 451 526
609
693
770
850
1186
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
In March 2023 CPA recorded an operating gain of $1.9 million, $2.8 million less than a budgeted operating gain of $4.7 million as provided for in the FY 2022/23 Amended Budget. March results were negatively impacted by customer electricity use that was 2.5% higher than forecast and higher wholesale market prices than assumed in the budget.
CPA recorded a loss of $17.8 million in the 3rd quarter and a fiscal year-to-date (YTD) loss of $34.6 million, which was $7.6 million less than the budgeted operating loss of $42.2 million. Financial 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 by yet to be assessed RA compliance penalty. Operating costs were 26% below budget for the YTD primarily as a result of lower spending on general administrative and other service costs and the non-utilization of contingencies.
As of March 31, 2023, CPA had $95.1 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. CPA remains on track to contribute $84 million to the net position in FY 2022/23 consistent with the FY 2022/23 Amended Budget.
Agenda Page 10
2023 2022
Current assets
Cash and cash equivalents $ 95,125,602 $ 85,085,627
Accounts receivable, net of allowance 102,442,948 94,222,512 Accrued revenue 44,010,961 35,819,365
Other receivables 3,624,420 2,835,722
Prepaid expenses 5,120,347 2,111,968
Deposits 19,709,451 11,064,754
Restricted cash 2,400,000 3,600,000
Total current assets 272,433,729 234,739,948
Noncurrent assets
Capital assets, net of depreciation 598,926 645,437
Intangible - right-to-use lease asset 2,297,470 2,680,378 Deposits 88,875 88,875
Total noncurrent assets 2,985,271 3,414,691
Total assets $ 275,419,000 $ 238,154,639
Current liabilities
Accounts payable $ 5,243,787 $ 4,975,049
Accrued cost of electricity 140,562,061 82,199,576
Other accrued liabilities 4,440,480 2,983,879
User taxes and energy surcharges due to other governments 7,837,616 5,996,396 Loans payable to County of Los Angeles - 20,000,000
Security deposits from energy suppliers 299,700 1,087,150 Unearned program funds 3,979,199 3,028,735
Lease liability, current 397,303 295,759
Total current liabilities 162,760,147 123,316,544
Noncurrent liabilities
Supplier security deposits 3,149,860 6,904,000
Lease liability, noncurrent 2,360,341 2,757,643
Total noncurrent liabilities 5,510,201 9,661,643
Total liabilities $ 168,270,348 $ 132,978,188
Investment in capital assets $ 138,753 $ 272,412
Restricted for collateral 2,400,000 3,600,000
Unrestricted 104,609,900 101,304,039
Total net position $ 107,148,653 $ 105,176,451
NET POSITION
AS OF MARCH 31, 2023 AND 2022
STATEMENT OF NET POSITION
CLEAN POWER ALLIANCE OF SOUTHERN CALIFORNIA
ASSETS
LIABILITIES
Agenda Page 11
2023 2022
OPERATING REVENUES
Electricity sales, net $ 848,032,202 $ 656,153,817
Other revenue 1,614,413 718,014
Total operating revenues 849,646,615 656,871,831
OPERATING EXPENSES
Cost of electricity 859,076,843 604,861,713
Contract services 13,785,029 13,068,850
Staff compensation 9,657,249 6,245,107
General and administration 1,775,827 1,278,669
Total operating expenses 884,294,948 625,454,339
Operating income (loss) (34,648,333) 31,417,492
NONOPERATING REVENUES (EXPENSES)
Interest income 1,071,529 35,091
Interest and related expenses (475,641) (483,917)
Interest expense - lease (52,131) -
Total nonoperating revenues (expenses) 543,757 (448,825) CHANGE IN NET POSITION (34,104,575) 30,968,667
Net position at beginning of period 141,253,228 74,207,784 Net position at end of period $ 107,148,653 $ 105,176,451 FOR YEARS ENDED MARCH 31, 2023 AND 2022
AND CHANGES IN NET POSITION
STATEMENT OF REVENUES, EXPENSES
CLEAN POWER ALLIANCE OF SOUTHERN CALIFORNIA
Agenda Page 12
2023 2022
RECONCILIATION OF OPERATING INCOME TO NET
CASH PROVIDED (USED) BY OPERATING ACTIVITIES
Net operating income (loss) $ (34,648,333) $ 31,417,492 Adjustments to reconcile operating income to net
cash provided (used) by operating activities
Depreciation expense 165,456 104,990
Amortization expense 287,181 287,181
Revenue adjusted for allowance for uncollectible accounts 13,850,740 14,361,784 (Increase) decrease in:
Accounts receivable (19,722,917) (20,360,396)
Other receivables 4,035,045 (422,670)
Accrued revenue 11,485,830 20,079,699
Prepaid expenses 1,018,057 2,076,236
Deposits 6,406,079 2,262,088
Increase (decrease) in:
Accounts payable 717,473 190,902
Energy market settlements payable (8,815,110) (3,513,911) Accrued cost of electricity 65,747,964 (2,444,846)
Other accrued liabilities 2,041,593 946,384
User taxes due to other governments 1,811,258 667,297
Supplier security deposits (4,467,940) (42,471,250)
Unearned program funds 475,166 1,430,749
Counterparty collateral deposit - 2,750,000
Net cash provided (used) by operating activities 40,387,543 7,361,729
CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES
Loan proceeds 95,000,000 30,000,000
Principal payments on loan (95,000,000) (10,000,000)
Interest and related expense payments (480,333) (267,013) Net cash provided (used) by non-capital
financing activities (480,333) 19,732,987
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Payments to acquire capital assets (90,125) (260,514)
Payments on lease (for both principal and interest) (300,684) 9,366 Net cash provided (used) by capital and related financing activities (390,809) (251,148)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest income received 1,071,529 35,091
Net cash provided (used) by investing activities 1,071,529 35,091 Net change in cash and cash equivalents 40,587,930 26,878,659 Cash and cash equivalents at beginning of period 56,937,672 61,806,968 Cash and cash equivalents at end of period $ 97,525,602 $ 88,685,627 Reconciliation to the Statement of Net Position
Cash and cash equivalents (unrestricted) $ 95,125,602 $ 85,085,627 Restricted cash 2,400,000 3,600,000
Cash and cash equivalents $ 97,525,602 $ 88,685,627
FOR YEARS ENDED MARCH 31, 2023 AND 2022
STATEMENT OF CASH FLOWS
CLEAN POWER ALLIANCE OF SOUTHERN CALIFORNIA
Agenda Page 13
2022/23 YTD
Amended Budget
2022/23 YTD
Actual
2022/23 YTD
Budget Variance
(Under) Over
2022/23 YTD
Actual /
Budget %
2022/23
Amended
Budget
2022/23
Remaining
Budget
2022/23
Remaining
Budget %
Operating revenues
Revenue - electricity, net $ 844,059,431 $ 848,032,202 $ 3,972,771 100% 1,182,869,000 $ $ 334,836,798 28% Other revenues 1,910,268 1,614,413 (295,855) 85% 2,742,000 1,127,587 41% Total operating revenues 845,969,699 849,646,615 3,676,916 100% 1,185,611,000 335,964,385 28% Energy costs
Energy procurement 859,076,843 854,309,942 4,766,901 101% 1,056,282,000 197,205,157 19% Total energy costs 854,309,942 859,076,843 4,766,901 101% 1,056,282,000 197,205,157 19% Operating revenues less energy costs (8,340,243) (9,430,228) (1,089,985) 113% 129,329,000 138,759,228 107% Operating Expenditures
Staffing 10,303,370 9,657,249 (646,121) 94% 13,976,000 4,318,751 31% Technical services 1,137,050 896,062 (240,988) 79% 1,436,000 539,938 38% Legal services 1,037,450 442,428 (595,022) 43% 1,243,000 800,572 64% Other professional services 1,559,735 597,926 (961,809) 38% 1,902,000 1,304,074 69% Communications and outreach 1,510,995 680,666 (830,328) 45% 2,018,000 1,337,333 66% Mailers 1,171,441 581,106 (590,335) 50% 1,346,000 764,894 57% Billing data manager 7,867,868 7,851,637 (16,231) 100% 10,518,000 2,666,363 25% SCE services 1,586,995 1,440,000 (146,995) 91% 2,116,000 676,000 32% Customer programs 3,308,450 1,295,203 (2,013,247) 39% 4,663,000 3,367,797 72% General and administrations 4,384,073 1,775,827 (2,608,246) 41% 5,877,000 4,101,173 70% Total operating expenditures 33,867,426 25,218,105 (8,649,321) 74% 45,095,000 19,876,895 44% Operating income (42,207,669) (34,648,333) 7,559,336 82% 84,234,000 118,882,333 141%Non-operating revenues (expenditures)Interest income 364,500 1,071,529 707,029 294% 486,000 (585,529) -120% Finance and interest expense (554,393) (527,772) 26,622 95% (732,000) (204,228) 28% Total non-operating revenues (expenditures) (189,893) 543,757 733,651 -286% (246,000) (789,757) Change in net position (34,104,576) (42,397,563) 8,292,987 83,988,000 118,092,576 141% Other uses Capital outlay 168,750 90,125 (78,625) 53% 225,000 134,875 60% Depreciation and Amortization (467,580) (452,637) 14,943 97% (622,000) (169,363) 27% Total other uses (298,830) (362,513) (63,683) 121% (397,000) (34,487) 9% Change in fund balance $ (33,742,063) (42,098,733) $ 8,356,670 $ 80% 84,385,000 $ 118,127,063 $
CLEAN POWER ALLIANCE OF SOUTHERN CALIFORNIA
BUDGETARY COMPARISON SCHEDULE
FOR YEAR ENDED MARCH 31, 2023
Agenda Page 14
Note MarͲ22 JunͲ22 SepͲ22 DecͲ22 MarͲ23
1 Working Capital 111,423,404 147,468,653 180,312,395 126,977,470 109,673,582 2 Current Ratio 1.9 2.5 1.8 1.8 1.7
3 Days Sales Outstanding 39 41 38 34 33
4 Equity 105,176,451 141,253,228 137,907,020 124,519,649 107,148,653 5 Equity to Assets % 44% 56% 34% 44% 39%
6 Available Cash 85,085,627 54,537,672 98,830,346 49,457,464 95,125,602 7 Available Line of Credit 79,853,000 79,853,000 39,853,000 79,853,000 79,853,0008 Total Liquidity 164,938,627 134,390,672 138,683,346 129,310,464 174,978,602 9 Days Liquidity on Hand (TTM) 75 61 57 49 60
10 Gross Margin 8% 11% 1% Ͳ0.1% Ͳ1%
11 Net Margin 5% 8% Ͳ1% Ͳ3% Ͳ4%
Percentage Change from Prior Quarter
Working Capital 3% 32% 22% Ͳ30% Ͳ14%
Current Ratio 6% 29% Ͳ26% 0% Ͳ8%Days Sales Outstanding 1% 3% Ͳ8% Ͳ9% Ͳ4%Equity 4% 34% Ͳ2% Ͳ10% Ͳ14%Equity to Assets % 6% 27% Ͳ39% 28% Ͳ11%Available Cash 26% Ͳ36% 81% Ͳ50% 92%Available Line of Credit 0% 0% Ͳ50% 100% 0%Total Liquidity 12% Ͳ19% 3% Ͳ7% 35%Days Liquidity on Hand (TTM) 11% Ͳ18% Ͳ7% Ͳ14% 24% 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
Ͳ
50 100150200
MarͲ22 JunͲ22 SepͲ22 DecͲ22 MarͲ23
Millions ($)
Fiscal Quarter
Financial Indicators
Working Capital Equity Total Liquidity
Agenda Page 15
Staff Report – Agenda Item 5
To: Finance Committee
From: David McNeil, Chief Financial Officer
Subject: Report from the Chief Financial Officer
Date: May 24, 2023
The Chief Financial Officer will provide an oral report.
Agenda Page 16
Staff Report – Agenda Item 6
To: Finance Committee
From: David McNeil, Chief Financial Officer
Antony Sugiarto, Manager, Financial Planning and Analysis Approved By: Ted Bardacke, Chief Executive Officer
Subject: Draft FY 2023/2024 Budget
Date: May 24, 2023
RECOMMENDATION
Recommend approval of the draft FY 2023/24 budget to the Board of Directors at its June 1, 2023 meeting.
BACKGROUND
Each year CPA develops an annual budget to govern the receipt of revenues, the incurrence of expenses, and capital expenditures during the upcoming fiscal year. The Draft Fiscal Year 2023/24 Budget is provided in Attachment 2.
The Draft FY 2023/24 Budget revenues incorporate the rate-setting approach approved by the Board at its May 4, 2023 Board meeting.
Staff will present the proposed FY 2023/24 Budget to the Board for approval on June 1, 2023.
DISCUSSION
The Draft 23/24 Budget revenues reflect the rate approach approved by the Board at its May 4, 2023 Board meeting, CPA member community default product changes in 2022 and 2023, new community enrollments in 2024, and an allowance for bad debt as described below.
Agenda Page 17
REVISED
Finance Committee Item 6
The cost of energy reflects increased costs of energy, resource adequacy, and renewable energy and a contingency equal to 7% of cost of energy.
The increase in operating expenses reflect investments in staffing and customer programs. Operating expenses excluding staffing and customer programs are budgeted to decrease by 2% year-over-year.
The budgeted increase in the net position would bring CPA’s reserve percentage to 40% by June 30, 2024 or the mid-point of the target range described in the Reserve Policy.
Days liquidity on hand is expected to reach approximately 150 days consistent with the Reserve Policy target.
The Draft Budget sets forth changes to the following budget line items:
Revenue – electricity net (+$396,899,000; 34% increase): Budgeted electricity revenues are based on estimates of customer electricity usage and retail electricity rates.
Budgeted revenues incorporate the rate approach approved by the Board on May 4, 2023. Budgeted revenues include an allowance for doubtful accounts equal to 1.77% of revenues or $28.4 million. Revenues are budgeted to be higher than FY 22/23 budgeted revenues due to an increase in rates as reflected in the rate approach approved by the Board at its May 2023 meeting, the full-year impact of changes in default products in Beverly Hills, Camarillo, Claremont, Hawthorne, and residential customers in Los Angeles County not on CARE, FERA or Medical Baseline rates, commercial customers in Rolling Hills Estates, Redondo Beach and South Pasadena to 100% Green in October 2022, changes in default products in Alhambra, Paramount, and Los Angeles County commercial accounts in October 2023, and the enrollment of three new communities, Hermosa Beach, Monrovia, and Santa Paula, in March 2024.
Other revenue (+$496,000; 18% increase): Other revenue includes operating revenue from sources other than retail electricity sales. Other revenue includes funding from the California Public Utilities Commission (CPUC) to support the Power Share program and workforce development funding provided through a renewable energy power purchase Agenda Page 18
Finance Committee Item 6
agreement. Other revenue offset expenses budgeted in the Customer Programs, Staffing, Technical Services, Other Services, Mailers, Data Manager, and Communications budget line items.
Cost of energy (+$188,820,000; 18% increase): Cost of energy includes expenses associated with the purchase of system energy, renewable energy, resource adequacy, and charges by the California Independent System Operator (CAISO) for load, and services performed by the CAISO. CAISO charges for load are based on forecasts of electricity consumption by CPA customers and related line losses and prices at the Default Load Aggregation Point (DLAP). Forecasted credits for energy generation scheduled into the CAISO market and revenues arising from Congestion Revenue Rights (CRRs) are netted from the cost of energy. CRRs are financial instruments created by the CAISO which enable load serving entities, such as CPA, to manage price differences between wholesale energy delivery locations and retail use points. CAISO credits for energy generation are based on wholesale energy deliveries and Locational Margin Prices (LMPs). The budgeted cost of energy increased year over year due to increases in energy, renewable energy, and resource adequacy costs and the inclusion of an $83.9 million (7% of cost of energy) contingency to address potentially higher expenses arising from increasing energy market volatility.
Staffing (+$6,096,000; 44% increase): Staffing costs include salaries and benefits payable in accordance with CPA’s Board-approved Employee Handbook and salary grades and ranges approved by the Board on December 1, 2022. A third of the increase is driven by the full-year impact of new hires, previous merit increases, and a COLA awarded in the middle of the current fiscal year. Based on the board’s direction at its December 1, 2022 board meeting, a $1.1 million dollar retention program incentive has been included in the staffing budget per basic program parameters recommended by the Executive Committee at its May 17, 2023 meeting. The staffing budget also includes an allowance for paid internships and an intern-to-employment fellowship program currently under development.
Agenda Page 19
Finance Committee Item 6
FY 2023/24 budgeted staffing costs is composed of the following:
$432k of staffing expenses are reimbursable via CPUC customer program funding (Power Share).
Technical services (+$373,000; 26% increase): Technical services comprise professional services for scheduling coordination, short and long-term energy contracting, risk and portfolio management, and support for customer programs where engineering or other technical expertise is required. Scheduling coordinators provide a variety of services including scheduling generating and storage assets and customer energy use into the CAISO markets, managing CRR purchases and sales, validating CAISO invoices, and providing risk management and energy contract management software. The increase in technical services arises primarily from a provision for a new or amended agreement for scheduling coordinator services that is expected to be negotiated later this year and would come into effect in January 2024.
Agenda Page 20
Finance Committee Item 6
FY 2023/24 budgeted technical services are composed of the following:
Legal services (-$189,000; 15% decrease): Legal services support CPA’s contracting, including energy contracting for short-term and long-term energy, resource adequacy, and non-energy contracting, including banking, finance, and local programs. Legal services also include support for specific regulatory proceedings (e.g., SCE’s ERRA Applications, SCE General Rate Case, and other compliance obligations), employment matters, governance, and general liability management. The majority of the budget in this section is projected to be provided by the firms listed in the following table:
Legal Service Major Providers
Energy Contracting Hall Energy Law
Clean Energy Counsel
Keyes & Fox
Buchalter
Regulatory Compliance and CPUC Proceeding
Advocacy
Braun Blaising Smith Wynne
Keyes & Fox
Customer Programs Support Shute, Mihaly, & Weinberger
Banking and Finance Chapman
Employment Law and Compliance Polsinelli
General Liability and Governance Burke Williams & Sorensen Other services (+$73,000; 4% increase): Other services represent professional services not budgeted under Technical or Legal services and include costs associated with energy compliance auditing, financial audits and audit support, rate setting, lobbying 2022/23 2023/24 Diff $ Diff %
Scheduling Coordinator 969,000 1,269,000 300,000 31%
Middle Office & LF Support - 33,000 33,000 0%
Energy planning & Risk Management 108,000 - (108,000) -100% Procurement planning & Support 165,000 221,000 56,000 34% Other 194,000 286,000 92,000 47%
Technical Services 1,436,000 1,809,000 373,000 26%
Agenda Page 21
Finance Committee Item 6
services, non-technical assistance for local programs, and staff support services including recruitment, payroll, and benefits administration, IT support, and labor compliance.
The proposed budget increase is due primarily to budgeting for additional HR services (retention incentive design and the development of a Management Training Program) and increased information technology (IT) services.
FY 2023/24 budgeted other services expenses are composed of the following:
Communications and marketing services (+$139,000; 7% increase):
Communications and related services include costs associated with customer outreach, marketing, branding, website management, translation, advertising, special events, and sponsorships. The increase in marketing expenses reflects investments in CPA’s website, enhanced digital communications, customer outreach, and outreach to increase brand awareness and reputation enhancement, and other costs for events related to CPA’s 5th anniversary, ribbon cutting events for local projects, and inflation costs for advertising.
CBO grants, approximately $275,000 in FY2023/24, are now almost exclusively funded through a separate grant program administered by Calpine Energy Services. 2022/23 2023/24 Diff $ Diff %
Audit & Accounting Services 138,000 120,000 (18,000) -13% Prof - Collection Services (NEW) 297,000 297,000 - 0%
Prof - HR & Payroll Consulting 125,000 214,000 89,000 71% Prof - IT Services 414,000 497,000 83,000 20%
Prof - Legislative/Lobbying 152,000 166,000 14,000 9%
Prof - Strategic Planning 370,000 363,000 (7,000) -2%
Prof - REC Audit and Registry 44,000 51,000 7,000 16%
Prof - Regulatory Services 213,000 201,000 (12,000) -6% Prof - Rate Setting Support 149,000 66,000 (83,000) -56% Prof - Other Consultants - - - 0%
Total 1,902,000 1,975,000 73,000 4%
Agenda Page 22
Finance Committee Item 6
FY 2023/24 budgeted communications expenses and offsetting revenue (the latter recorded in the other revenue budget line item) are composed of the following:
Customer notices and mailing services (-$323,000; 24% decrease): Notices and mailing services support required communication with CPA customers and include printing and postage costs. Costs are decreasing primarily due to a decrease in default change notice mailing from 6 to 3 cities and the annual NEM True-up letter mailing that is now being conducted in-house.
FY 2023/24 budgeted customer notices and mailing services are composed of the following:
2022/23 2023/24 Diff $ Diff %
Advertising 435,000 644,000 209,000 48%
Communication Consultants 1,126,000 932,000 (194,000) -17% Sponsorships 100,000 147,000 47,000 47%
Website 144,000 239,000 95,000 66%
Communication - Others 18,000 31,500 13,500 75%
Special Events 25,000 132,000 107,000 428%
CBO Grants 170,000 31,500 (138,500) -81%
Communication & Outreach 2,018,000 2,157,000 139,000 7% Third Party Funding
Power Share (CPUC Funding) (366,500) (106,000) 260,500 -71% Workforce Development (25,900) - 25,900 -100%
Communication Costs net of Funding 1,625,600 2,051,000 425,400 26% 2022/23 2023/24 Diff $ Diff %
Enrollment Notices/All mailers 129,000 183,000 54,000 42% Customer Letters 595,000 42,000 (553,000) -93%
Joint Rate Comparison Mailer 220,000 242,000 22,000 10% Power Content Label Mailer 273,000 328,000 55,000 20%
Mailers - Other 129,000 228,000 99,000 77%
Total Mailers costs 1,346,000 1,023,000 (323,000) -24%
Agenda Page 23
Finance Committee Item 6
Billing data management services (+$744,000; 7% increase): Billing data manager costs are based on the number of customer meters served by CPA and per-meter rates charged by CPA’s billing data manager, Calpine Energy Services. Increased costs reflect a 2.5% inflation escalator on per-meter charges included in the Calpine contract approved by the Board on April 1, 2021 and the enrollment of new customers planned for March 2024.
Service fees – SCE (+$49,000; 2% increase): Service fees are charged by SCE for a variety of customer billing and administrative services. The increase in service fees results from adding in contingencies to cover unforeseen costs from SCE.
Customer Programs (+$4,980,000; 107% increase): Customer programs represent direct costs associated with providing energy programs to CPA customers and other related services. Direct costs include both incentives for participation and payments to third parties for program implementation. The FY 2023/24 customer programs budget supports the CPA Power Share program (100% reimbursable from CPUC), CPA’s EV charger rebate program which provides matching funds for electric vehicle charger incentives administered by the Center for Sustainable Energy/CALeVIP program, ongoing Power Response, Power Ready, and Electrification Reach Code programs, new Local Government, Customer Energy Storage and Electrification programs, and workforce development funded through a long term renewable energy power purchase agreement.
Agenda Page 24
Finance Committee Item 6
FY 2023/24 budgeted customer programs expenses are composed of the following:
General and administration (-$1,376,000; 23% decrease): General and administration costs include office supplies, phone, insurance, internet, travel, dues and subscriptions, professional development, software licenses, and other related expenses. The majority of the budget decrease in G&A arises because the FY 2022/23 Budget included $2 million for Surety Bond costs to support CPA’s Financial Security Requirement. With notification from SCE that the FSR would remain at the administrative minimum over the summer of 2023, Surety Bond costs are not included in the FY 2023/24 Budget. Excluding Surety Bond costs from the FY 2022/23 Budget, FY 2023/24 “Other operating expenses” would have increased by 6%.
Program Expense Type 2022/23 2023/24 Diff $ Diff %
CalEVIP (LA) Implementation 28,000 35,000 7,000 25%
CalEVIP (Ventura) Implementation 11,000 11,000 - 0%
Power Response Implementation 483,000 831,000 348,000 72% Building Electrification Implementation 275,000 201,000 (74,000) -27% Local Government Program Implementation - 1,160,000 1,160,000 0% Electrification Advisor Implementation - 230,000 230,000 0% Solar + Storage Program Implementation - 150,000 150,000 0% Sub total Implementation 797,000 2,618,000 1,821,000 228% CalEVIP (Ventura) Incentives 533,000 338,000 (195,000) -37% CalEVIP (LA) Incentives 300,000 857,000 557,000 186%
Building Electrification Incentives 125,000 150,000 25,000 20% Power Response Incentives 1,144,000 596,000 (548,000) -48% Workforce Development Incentives 349,000 516,000 167,000 48% Power Share Incentives 1,415,000 2,065,000 650,000 46%
Local Government Program Incentives - 1,550,000 1,550,000 0% Electrification Advisor Incentives - 140,000 140,000 0% Solar + Storage Program Incentives - 813,000 813,000 0% Sub total Incentives 3,866,000 7,025,000 3,159,000 82%
Grand Total 4,663,000 9,643,000 4,980,000 107%
Agenda Page 25
Finance Committee Item 6
Finance and interest expense (+$831,000; 114% increase): Finance and interest expenses represent fees, borrowing and letter of credit costs associated with CPA’s loan facility. Costs include increased fees associated with an increase in CPA’s credit facility with JPMorgan from $80 million to $160 million. Staff plan to discuss an amended credit agreement with the Finance Committee on May 24, 2023 and present an amended credit agreement to the Board for approval on June 1, 2023. Finance and interest expenses also include a contingency for unexpected interest and borrowing costs.
Interest income (+$3,840,000; 790% increase): Interest income represents income earned on funds in savings accounts held by River City Bank and other investment accounts. An increase in interest income arises from an expected increase in cash and cash equivalents and an increase in short term interest rates.
Capital outlay (+$153,000; 68% increase): Expenditures associated with capital outlay will support and accommodate equipment purchases and office improvements as staff use the office on a regular basis for a full year and the Board room is occupied more often.
ATTACHMENTS
1. Draft FY 2023/24 Budget Presentation
2. Draft FY 2023/24 Budget
2022/23 2023/24 Diff $ Diff %
Office Operating Expenses 282,000 244,000 (38,000) -13% Software 1,094,000 1,315,000 221,000 20%
Prof. Development 512,000 610,000 98,000 19%
HR 135,000 178,000 43,000 32%
Insurance/Surety Bond 2,309,000 139,000 (2,170,000) -94% Phone & Internet 172,000 167,000 (5,000) -3%
Industry Membership Dues 498,000 562,000 64,000 13%
Depreciation & Amortization 622,000 719,000 97,000 16%
Others 253,000 567,000 314,000 124%
Total 5,877,000 4,501,000 (1,376,000) -23%
Agenda Page 26
REVISED
Item 6 – Draft FY 2023/24 Budget
May 24, 2023
Agenda Page 27
Recommendation:
Recommend approval of the Draft Fiscal Year (FY) 2023/24 Budget to the Board of Directors Agenda Page 28
FY 2023/24 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
Agenda Page 29
3 FY 2023/24 Budget – Key Takeaways
4 Revenues reflect the rate approach approved by the Board at its May 2023 Board meeting, default product changes in 2022 and 2023, new community enrollments in 2024 and an allowance for bad debt
Cost of energy reflects increased costs of system energy, resource adequacy, and renewable energy and a contingency equal to 7% of cost of energy. Increases to operating expenses reflect investments in staffing and customer programs
The budgeted increase in the net position would bring CPA’s reserve percentage to 40% by June 30, 2024 or the mid-point of the target range outlined in the reserve policy Agenda Page 30
Net Energy Revenue
5 Budgeted revenues include the FY 2023/24 Rate Approach approved by the Board on May 4, 2023 (Lean -2%, Clean -1%, 100% Green +3% compared to Residential/Small Business SCE base rates), default rate changes in 2022 and 2023 and new customer enrollments planned for March 2024 Bad debt expense is budgeted at 1.77% of revenue or $28.4 million up from 1.25% of revenue included in the FY 2022/23 Budget
Energy costs (+18%) reflect higher energy, renewable energy and capacity costs arising from increasing market prices and constrained energy supply in the western United States and an energy cost contingency equal to 7% of cost of energy
A B C D E
FY 2022/23
Amended Budget
FY 2023/24
Budget
Budget
Difference ($)
Budget
Difference
(%)
1 Revenue - Electricity net 1,182,869,000 1,579,768,000 396,899,000 34% 2 Transfer from Fiscal Stabilization Fund - -
3 Other revenue 2,742,000 3,238,000 496,000 18%
4 TOTAL REVENUE 1,185,611,000 1,583,006,000 397,395,000 34% 5 TOTAL ENERGY COSTS 1,056,282,000 1,245,102,000 188,820,000 18% 6 NET ENERGY REVENUE 129,329,000 337,904,000 208,575,000 161% DRAFT
Agenda Page 31
FY 2023/24 Operating Expense Highlights
Proposed operating expenses are budgeted to increase by $10.6 million or 23% (see next slide for CCA comparisons) Increase in Staffing expense reflects budget priorities presented to the Board at its May Board meeting. COLA assumption is 5% based on April 2023 annual inflation rate, investments in staff retention and talent acquisition, and new positions address growth areas and reflect the increasing complexity brought on by success One-fourth of budgeted operating expenses are fixed by regulatory, contractual, or policy obligations Increase in Customer programs expenses (+107%) arises from an expanding suite of customer programs which requires CPA to enhance its ability to acquire and retain customers and develop technical expertise in new and innovative areas The 23% increase in operating expenses reflect investments in staffing and customer programs. Operating expenses other than staffing and customer programs are budgeted to decrease by 2% year- over-year 6 A B C D E F G
FY 2022/23
Amended Budget
FY 2023/24
Budget
Budget
Difference ($)
Budget
Difference
(%)
% of
Revenue
% of
Operating
Expenses
8 OPERATING EXPENSES
9 Staffing 13,976,000 20,072,000 6,096,000 44% 1.3% 36% 10 Technical services 1,436,000 1,809,000 373,000 26% 0.1% 3% 11 Legal services 1,243,000 1,054,000 (189,000) -15% 0.1% 2% 12 Other services 1,902,000 1,975,000 73,000 4% 0.1% 4% 13 Communications and marketing services 2,018,000 2,157,000 139,000 7% 0.1% 4% 14 Customer notices and mailing services 1,346,000 1,023,000 (323,000) -24% 0.1% 2% 15 Billing data management services 10,518,000 11,262,000 744,000 7% 0.7% 20% 16 Service fees - SCE 2,116,000 2,165,000 49,000 2% 0.1% 4% 17 Customer programs 4,663,000 9,643,000 4,980,000 107% 0.6% 17% 18 General and administration 5,877,000 4,501,000 (1,376,000) -23% 0.3% 8% 19 TOTAL OPERATING EXPENSES 45,095,000 55,661,000 10,566,000 23% 3.5% 100% Agenda Page 32
Select CCA Metrics and Comparisons
7 CPA’s metrics for operating expenses and staffing costs compare favorably with industry averages FY2023/24 Budget
(in thousands) CPA (Draft) CCA Avg
MCE (Draft)
FY2023/24
Sonoma (Draft)
FY2023/24
EBCE (Draft)
FY2023/24
3CE
FY2022/23
Total Revenue 1,583,000 604,000 800,000 253,000 935,000 429,000 Total Energy Cost 1,245,000 481,000 666,000 194,000 685,000 378,000 Net Energy Revenue 338,000 123,000 134,000 59,000 249,000 51,000 Staffing 20,072 15,000 19,000 8,000 21,000 9,000
Other Operating Expenses 36,000 36,000 21,000 21,000 73,000 31,000 Total Operating Expenses 56,000 51,000 40,000 29,000 94,000 40,000 Net Income 282,000 72,000 94,000 30,000 155,000 11,000
Staffing (% of…)
Revenue 1.3% 2.5% 2.4% 3.2% 2.2% 2.1%
Cost of Energy 2% 3% 3% 4% 3% 2%
Net Energy Revenue 6% 12% 14% 14% 8% 18%
Total Operating Expenses 36% 29% 48% 28% 22% 23%
Net Income 7% 21% 20% 27% 14% 82%
Total Operating Expenses (% of…)
Revenue 3.5% 8.4% 5.0% 11.5% 10.1% 9.3%
Cost of Energy 4% 11% 6% 15% 14% 11%
Net Energy Revenue 17% 41% 30% 49% 38% 78%
Net Income 20% 71% 43% 97% 61% 364%
Gross Margin 21% 20% 17% 23% 27% 12%
Net Margin 18% 12% 12% 12% 17% 3%
Customer Accounts Served 1,005,000 482,000 581,000 231,000 672,000 444,000 Agenda Page 33
FY 2023/24 Operating Income and Reserves
8 The budgeted increase in the net position would bring CPA’s reserve percentage to 40% by June 30, 2024 or the mid-point of the target range outlined in the Reserve Policy. Days liquidity on hand would increase to approximately 150 days consistent with the Reserve Policy target
A B C D E
FY 2022/23
Amended Budget
FY 2023/24
Budget
Budget
Difference ($)
Budget
Difference
(%)
TOTAL OPERATING EXPENSES 45,095,000 55,661,000 10,566,000 23% OPERATING INCOME 84,234,000 282,243,000 198,009,000 235% NON OPERATING REVENUE (EXPENSE) (246,000) 2,763,000 3,009,000 -1223% CHANGE IN NET POSITION 83,988,000 285,006,000 201,018,000 239% NET POSITION BEGINNING OF PERIOD 141,253,000 225,241,000 83,988,000 59% NET POSITION END OF PERIOD 225,241,000 510,247,000 285,006,000 127%
FISCAL STABILIZATION FUND - - -
RESERVES END OF PERIOD (Net Position + FSF) 225,241,000 510,247,000 285,006,000 127% Agenda Page 34
Reserve Policy Targets
CPA Reserve Policy
“CPA shall grow reserves to maintain a minimum reserve target equal to 30% of total operating budget expenditures, with a goal of increasing the reserve to a maximum reserve target of 50% of total operating budget expenditures. Reserves shall not exceed 60% of total operating budget expenditures. Reserves shall support the goal of securing 120 days liquidity on hand.” 9 A B C D E
Table A FY 2021/22
FY 2022/23
(Projected)
FY 2023/24
(Projected)
A Reserve target % 30% 30% 30%
B Reserve target maximum 50% 50% 50%
C=AxM Reserve target minimum ($) 239,976,000 328,486,000 390,229,000 D=BxM Reserve target maximum 399,960,000 547,476,000 650,382,000 E Net Position 141,253,000 236,317,000 521,323,000
F Fiscal Stabilization Fund - - -
G=E+F Reserves 141,253,000 236,317,000 521,323,000
H=E/M Reserves % 18% 22% 40%
I Unrestricted cash and investments 54,537,672 127,336,000 379,639,000 J Unused bank lines of credit 79,853,000 159,853,000 159,853,000 K=I+J Total Liquidity 134,390,672 287,189,000 539,492,000 L=Kx365/M Days Liquidity on Hand (Goal: 120 Days) 61 96 151 M Annual operating expenses 799,920,707 1,094,952,000 1,300,763,000 Agenda Page 35
Recommendation:
Recommend approval of the Draft Fiscal Year (FY) 2023/24 Budget to the Board of Directors
Agenda Page 36
Questions?
Agenda Page 37
FY 2022/23
Amended Budget
FY 2023/24
Budget
Budget
Difference ($)
Budget
Difference
(%)
Revenue ‐ Electricity net 1,182,869,000 1,579,768,000 396,899,000 34% Transfer from Fiscal Stabilization Fund ‐ ‐ Other revenue 2,742,000 3,238,000 496,000 18% TOTAL REVENUE 1,185,611,000 1,583,006,000 397,395,000 34% TOTAL ENERGY COSTS 1,056,282,000 1,245,102,000 188,820,000 18% NET ENERGY REVENUE 129,329,000 337,904,000 208,575,000 161%
OPERATING EXPENSES
Staffing 13,976,000 20,072,000 6,096,000 44% Technical services 1,436,000 1,809,000 373,000 26% Legal services 1,243,000 1,054,000 ‐ (189,000) 15% Other services 1,902,000 1,975,000 73,000 4% Communications and marketing services 2,018,000 2,157,000 139,000 7% Customer notices and mailing services 1,346,000 1,023,000 ‐ (323,000) 24% Billing data management services 10,518,000 11,262,000 744,000 7% Service fees ‐ SCE 2,116,000 2,165,000 49,000 2% Customer programs 4,663,000 9,643,000 4,980,000 107% General and administration 5,877,000 4,501,000 ‐ (1,376,000) 23% TOTAL OPERATING EXPENSES 45,095,000 55,661,000 10,566,000 23% OPERATING INCOME 84,234,000 282,243,000 198,009,000 235% Finance and interest expense 732,000 1,563,000 831,000 114% TOTAL NON OPERATING EXPENSES 732,000 1,563,000 831,000 114% Interest Income 486,000 4,326,000 3,840,000 790% TOTAL NON OPERATING REVENUE 486,000 4,326,000 3,840,000 790% NON OPERATING REVENUE (EXPENSE) (246,000) 2,763,000 3,009,000 ‐1223% CHANGE IN NET POSITION 83,988,000 285,006,000 201,018,000 239% NET POSITION BEGINNING OF PERIOD 141,253,000 225,241,000 83,988,000 59% NET POSITION END OF PERIOD 225,241,000 510,247,000 285,006,000 127% FISCAL STABILIZATION FUND ‐ ‐ ‐ RESERVES END OF PERIOD (Net Position + FSF) 225,241,000 510,247,000 285,006,000 127% Other Uses
Capital Outlay 225,000 378,000 153,000 68% Depreciation & Amortization (622,000) (719,000) (97,000) 16% CHANGE IN FUND BALANCE 84,385,000 285,347,000 200,962,000 238% Note: Funds may not sum precisely due to rounding
CLEAN POWER ALLIANCE of SOUTHERN CALIFORNIA
Fiscal Year 2023/2024 Budget
DRAFT
Agenda Page 38
Staff Report – Agenda Item 7
To: Finance Committee
From: Kate Freeman, Financial Strategy and Initiatives Manager David McNeil, Chief Financial Officer
Approved by: Ted Bardacke, Chief Executive Officer
Subject: Credit Agreement Update
Date: May 24, 2023
RECOMMENDATION
Receive an update on the bank credit agreement and provide feedback to staff.
ATTACHMENT
1. Bank Credit Agreement Presentation
Agenda Page 39
Item 7 – Bank Credit Agreement
Update
May 24, 2023
Agenda Page 40
Summary
2 CPA’s current $80 million Credit Agreement with JPMorgan Chase (JPM) expires on October 31, 2023
Staff have negotiated proposed terms of an amendment to the credit agreement with JP Morgan that would increase the size of the facility to $160 million, and to remove credit-negative clauses in the current Credit Agreement. All other terms of the agreement would remain unchanged The amendment to the credit agreement would provide CPA with greater liquidity at a time that energy market risks are increasing, increase CPA's days liquidity on hand by approximately 27 days and provide greater assurance that the credit facility will be available when CPA needs it Staff plan to present an amended credit agreement with JPM to the Board at its June 1, 2023 meeting and today seeks Finance Committee’s input Agenda Page 41
Background
3 CPA uses its Credit Agreement with JPM to provide letters of credit and to borrow funds to provide working capital
Maintenance of a credit facility is important to:
Demonstrate financial strength to market participants
Provide additional liquidity and support the days liquidity on hand target described in CPA’s Reserve Policy
Agenda Page 42
Proposed Terms
4 Estimated legal fees: $20,000
Projected costs associated with the amended Agreement are included in the FY 2023/24 Budget that will be presented to the Board for approval on June 1, 2023.
Current
JP Morgan Agreement
Amended
JP Morgan Agreement
Amount $80 million $160 million
Expiry 10/31/2023 10/31/2023
Borrowing Rate (1) 1.90% 1.90%
Letter of Credit Fee 1.65% per annum 1.65% per annum
Loan Fee None None
Non utilization fee 0.45% of unused Amount 0.45% of unused Amount Annualized cost before
borrowing and LC Fees $360,000 $720,000
Agenda Page 43
Proposed Agreement
5 Staff recommends the proposed agreement for the following reasons; $80 million increase in the size of the facility will add 27 days to the Days Liquidity on Hand ratio as described in CPA’s Reserve Policy. CPA had 60 Days Liquidity on Hand as of March 31, 2023
JP Morgan is investment-grade rated (S&P AA, Moody’s A2) The increased credit facility will improve market perception of CPA’s financial strength
The proposed amendment modifies the “Material Adverse Change” and "Material Adverse Effect" provisions of the agreement to CPA's benefit, providing greater assurance that the facility will be available when CPA needs it Agenda Page 44
Questions?
Agenda Page 45