MINUTES
Finance Committee of the
Clean Power Alliance of Southern California
Regular Meeting
Wednesday, May 24, 2023, 11:00 a.m.
Meeting videos are available on CPA's YouTube Channel.
http://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
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 Remote
Thousand Oaks David Newman Committee Member Remote
All votes are unanimous unless otherwise stated.
GENERAL PUBLIC COMMENT
There was no public comment.
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May 24, 2023 Minutes
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
Motion: Committee Member Calaycay, Calaycay
Second: Committee Member Zuckerman, Rolling Hills Estates 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 recorded a loss of $34 million in FYQ3 primarily due to the September 2022 heat wave and the subsequent electricity market price spike. Staff anticipates recording significant gains in FYQ4, which will contribute substantially to the net position. Staff is currently collaborating with Goldman Sachs on the second prepay transaction, and they have selected CoreMark, a life insurance subsidiary of AIG, as the funding recipient. JP Morgan agreed to the amended credit agreement.
6. Recommend Approval of Draft Fiscal Year 2023/2024 Budget to the Board of Directors David McNeil presented the draft FY 23/24 budget. Revenues reflect the Board-approved rate approach, default rate changes in 2022 and 2023, and new community enrollments in 2024. Mr. McNeil noted that Southern California Edison (SCE) recently increased their rates by approximately 3.5%; staff will issue customer communication about rate differentials to CPA customers. The budget includes a 1.25% increase for bad debt expense, which is budgeted at 1.77% of revenue or $28.4 million. Energy costs reflect increased costs of system energy, Resource Adequacy (RA), and renewable energy.
Proposed operating expenses are budgeted to increase by $10.6 million or 23% and reflect investments in staffing and customer programs. CPA’s FY 23/24 draft budget compares favorably with other Community Choice Aggregations (CCAs). The budgeted increase in the net position would bring CPA’s reserve percentage to 40% by the end of June 2024, which is the midpoint of the target range outlined in the reserve policy. The Days Liquidity on Hand (DLOH) would increase to approximately 150 days.
Regarding Committee Member Zuckerman’s inquiry about including monthly aged Accounts Receivable (AR) updates in committee reports, Mr. McNeil noted that CPA’s access to SCE data via Calpine currently includes large unapplied balances, which can impact the accuracy of bad debt reporting.
Motion: Committee Member Newman, Thousand Oaks
Second: Committee Member Zuckerman, Rolling Hills Estates Vote: Item 6 was approved by a roll call vote.
7. Receive Bank Credit Agreement Update and Provide Feedback Kate Freeman, Financial Strategy & Initiatives Manager, presented the update on the JP Morgan Credit Agreement. The current $80 million credit agreement between CPA and JP Morgan expires on October 31, 2023. Staff have negotiated proposed terms to amend the credit agreement, aiming to increase the facility size to $160 million. The amendment would provide CPA with greater liquidity, increase CPA’s DLOH by approximately 27 days, and offer greater assurance of the credit facility’s availability when needed. Ms. Freeman compared the proposed terms of the current JP Morgan agreement with those of the amendment.
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May 24, 2023 Minutes
Committee Member Kulcsar asked about the 27-day increase in DLOH and the costs associated with reducing the total credit agreement in the future. Ms. Freeman explained that if the Board does not adopt the credit agreement amendment, the DLOH would drop to 124 days. Regarding costs, staff indicated that the amendment extends the terms for only six months, and if a longer agreement is established in the future, it would include CPA’s ability to change the credit amount as needed. Chair Santangelo asked about negative consequences of the amended credit agreement. Mr. McNeil explained that the amendment prevents CPA from negotiating with other banks until the end of March 2024.
Staff intends to achieve a favorable credit rating outcome by that time, which would put CPA in a better position to negotiate lower costs.
The Committee reached a consensus to recommend the JP Morgan credit agreement amendment to the Board of Directors.
COMMITTEE MEMBER COMMENTS
Committee Member O’Connor mentioned the inauguration of the Regional Connector Transit Project on June 16, 2023, which will establish connections between various regions of Los Angeles.
ADJOURN
Committee Chair Santangelo adjourned the meeting at 11:53 p.m.