Finance Committee of the
Clean Power Alliance of Southern California
Regular Meeting
Wednesday, April 24, 2024
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.
Clean Power Alliance
Executive Conference Room
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
Administrative Conference Room
601 Carmen Drive
Camarillo, CA 93010
Claremont City Hall
Citrus Room
207 Harvard Avenue
Claremont, CA 91711
Thousand Oaks City Hall
City Manager’s Office, Council Office #1
2100 Thousand Oaks Blvd.
Thousand Oaks, CA 91362
Rolling Hills Estates City Hall
Conference Room
4045 Palos Verdes Drive North
Rolling Hills Estates, CA 90274
PUBLIC COMMENT: Members of the public may submit their comments by one of the following options:
• Email Public Comment: Members of the public are encouraged to submit written comments on any agenda item to [email protected] up to four hours before the meeting. Written public comments will be announced at the meeting and become part of the meeting record. Public comments received in writing will not be read aloud at the meeting. • Provide Public Comment During the Meeting: The General Public Comment item is reserved for persons wishing to address the Committee on any Clean Power Alliance-related matters not on today’s agenda. Public comments on matters on today’s Consent Agenda and Regular Agenda shall be heard at the time the matter is called. Comments on items on the Consent Agenda are consolidated into one public comment period. Members of the public who wish to address the Committee at CPA’s Office are requested to complete a comment card and provide it to staff. If you are attending from a remote location, please identify yourself to a CPA representative when your item is called. Each speaker is limited to two (2) minutes (in whole-minute increments) per agenda item with a cumulative total of five 5 minutes to be allocated between the General Public Comment, the entire Consent Agenda, or individual items in the Regular Agenda. Please refer to Policy No. 8 – Public Comment for additional information.
Agenda Page 1
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CALL TO ORDER & ROLL CALL
GENERAL PUBLIC COMMENT
CONSENT AGENDA
1. Approve Minutes from the February 28, 2024, Finance Committee Meeting
2. Approve Selection of Baker Tilly to Continue as the Independent Financial Auditor of CPA’s FY 2023/24 Financial Statements
3. Receive and File March 2024 Risk Management Team Report
4. Receive and File February and March 2024 Investment Report
5. Receive and File February 2024 Financial Dashboard
REGULAR AGENDA
6. Report from the Chief Financial Officer
7. Recommend to the Board of Directors at its May 2024 Meeting the Selection of Municipal Capital Markets (MCM) to Serve as Municipal Financial Advisor and Chapman & Cutler to Provide Prepay Legal Services in Support of up to Three Additional Prepay Transactions
8. Review FY 2024/25 Budget Priorities and Draft Operating Expenses
COMMITTEE MEMBER COMMENTS
ADJOURN – NEXT MEETING ON MAY 22, 2024
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
Staff Report – Agenda Item 1
To: Finance Committee
Subject: Approve Minutes from February 28, 2024 Finance Committee Meeting
Date: April 24, 2024
RECOMMENDATION
Approve.
ATTACHMENT
1. Minutes
Agenda Page 3
Finance Committee Item 1
MINUTES
Finance Committee of the
Clean Power Alliance of Southern California
Regular Meeting
Wednesday, February 28, 2024, 11:00 a.m.
Meeting videos are available on CPA's YouTube Channel.
http://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
Clean Power Alliance
Executive Conference Room
801 S. Grand Ave., Suite 400
Los Angeles, CA 90017
Claremont City Hall
Conference 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 the Clerk of the Board 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
There was no public comment.
Agenda Page 4
Finance Committee Item 1
CONSENT AGENDA
1. Approve Minutes from the January 11, 2024, Finance Committee Meeting
2. Receive and File January 2024 Risk Management Team Report
3. Receive and File December 2023 and January 2024 Investment Report
4. Receive and File FY 202302924 Q2 Financial Report and December 2023 Financial Dashboard
Motion: Committee Member Newman, Thousand Oaks
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
Chief Financial Officer David McNeil provided an update on CPA’s banking agreement progress, investments in CAMP, and ongoing activities in preparation for the new budget, including FY 2023/24 financial performance.
In response to Committee Member Newman’s questions about forecasting and a potential government shut-down, staff noted that innovations in forecasting will improve CPA’s methodology and modeling; however, the challenge lies heavily on how to place parameters around increased volatility. Staff noted that a government shut-down would have minimal impact on CPA operations. Committee Member Zuckerman asked whether changes in hedging strategies are necessary; staff clarified that the Energy Risk Management team reviews hedging strategies and if changes are necessary they would be subtle and gradually implemented.
Committee Member Kulcsar noted that SCE is able to recover from undercollection while CPA is not able to do so; CPA’s hedging has worked and any changes should be gradual; and complemented staff for their forecasting efforts. Committee Member Zuckerman asked questions about contracted energy and SCE past due accounts. Mr. McNeil’s explained that as CPA’s long-term power purchasing grows that should reduce volatility in renewable energy costs. Regarding SCE past due accounts, Mr. McNeil clarified that all parties are working to reduce the backlog by the end of the year.
COMMITTEE MEMBER COMMENTS
None.
ADJOURN
Committee Chair Santangelo adjourned the meeting at 11:36 p.m.
Agenda Page 5
Staff Report – Agenda Item 2
To: Finance Committee
From: Hui Lisano, Senior Director of Finance and Accounting Approved By: David McNeil, Chief Financial Officer
Ted Bardacke, Chief Executive Officer
Subject: Approve Selection of Baker Tilly to Continue as the Independent Financial Auditor for CPA’s FY 2023/24 Financial Statements Date: April 24, 2024
RECOMMENDATION
Approve the selection of Baker Tilly to continue as the Independent Financial Auditor for CPA’s FY 2023/24 Financial Statements Audit.
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 Agenda Page 6
Finance Committee ITEM 2
audit CPA’s FY 2018/19 financial statements and subsequently selected Baker Tilly to audit the following four years’ financial statements.
Staff recommends engaging Baker Tilly for FY 2023/24 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’s Bethany Ryers has served as the lead audit partner/director since 2019 and therefore has one more year before she 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 duration. Such agreements allow continuity, 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 five 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.
Subject to input from the Finance Committee later this year, staff will recommend either rotating the lead audit partner at Baker Tilly for the FY 2024/25 audit or conducting a Agenda Page 7
Finance Committee ITEM 2
competitive solicitation for audit services once the 2023/24 audit is complete. By then, Bethany Ryers from Baker Tilly will have served as the lead audit partner on the CPA’s financial audit for six consecutive fiscal years.
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 this engagement as an examination to review the decommissioning costs for a nuclear facility that SCE partially owns and operates. SCE has renewed this engagement with Baker Tilly, and it is ongoing. To maintain its independence, Baker Tilly has segregated and will continue to segregate staff working on SCE and CPA engagements. These engagements have undergone Baker Tilly's internal review to ensure that independence is maintained.
FISCAL IMPACT
The estimated cost of the Baker Tilly audit engagement is $50,000. These costs are included in the FY 2024/25 Budget that will be presented to the Board for approval on June 6, 2024.
ATTACHMENT
None.
Agenda Page 8
Staff Report – Agenda Item 3
To: Finance Committee
From: Lyon Hardgrave, Director, Energy Risk Management
Approved By: Ted Bardacke, Chief Executive Officer
David McNeil, Chief Financial Officer
Subject: Receive and File March 2024 Risk Management Team Report Date: April 24, 2024
March 2024 RMT REPORT
Key Actions
• Reviewed the counterparty credit exposure summary
• Reviewed December 2023 day-ahead load forecast performance • Reviewed February 2024 market performance
• Reviewed energy positions and approved 2024-2028 hedges for monthly RFO • Reviewed positions for Resource Adequacy (RA), RPS and Carbon-Free energy • products (CF)
• Update provided on 2024 Long Term PPA deliveries
• Reviewed the 2025-2027 slice of day RA position
• Reviewed Energy Risk Management Policy (ERMP) compliance for RA, REC, CF, and energy
• Reviewed March 2024 CRR Allocations
• Reviewed and approved the Negative REC Price Strategy Policy Compliance
Policy Deviation Required Action
In December 2023, the
second quarter (April to
June) Energy Hedge
Position increased above
the maximum second
quarter hedge limit
starting in 2027 and
continuing in the second
None.
The policy deviations arise from CPA continuing to enter into long term contracts for renewable energy consistent with its objective to reduce exposure to the short-term renewable energy market. The deviations occur during
the second quarter because electricity consumption by
CPA customers is projected to be at its lowest level in this quarter. The deviations are expected to resolve
Agenda Page 9
Finance Committee Item 3
quarter of each year
through the end of the
measurement window in
2033.
themselves as the electricity production period nears and the corresponding policy hedge limit maximums increase
above the level of energy hedges under contract.
During the 2024 ERMP review, staff will consider
proposing an amendment to the ERMP, increasing the
maximum hedge limit in the second quarter of years that are four and more years in the future to eliminate policy deviations caused by load and generation patterns
specific to the second quarter.
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: Receive and File February and March 2024 Investment Report Date: April 24, 2024
RECOMMENDATION
Receive and file.
ATTACHMENTS
1. February 2024 Investment Report
2. March 2024 Investment Report
Agenda Page 11
Finance Committee Item 4
Agenda Page 12
Finance Committee Item 4
Agenda Page 13
Staff Report – Agenda Item 5
To: Finance Committee
From: David McNeil, Chief Financial Officer
Approved By: Ted Bardacke, Chief Executive Officer
Subject: Receive and File February 2024 Financial Dashboard Date: April 24, 2024
RECOMMENDATION
Receive and File February 2024 Financial Dashboard.
ATTACHMENTS
1. Receive and File.
Agenda Page 14
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 represents the difference between revenues and expenditures before interest income and expense, and capital expenditures
Cash and Cash Equivalents: Includes bank accounts and marketable securities with maturities of less than 90 days.
Year to date (YTD): Represents the fiscal period beginning July 1, 2023 YTD
Feb
2024
Financial Dashboard
Note: Numbers may not sum up due to rounding.
Active Accounts
1,008,023
Participation Rate
93.4%
YTD Sales Volume
7,326 GWh
Feb Volume
777 GWh
Agr
2% Com-Lg
20%
Com-Sm
29%
Res
49%
In February 2024, CPA recorded an operating gain of $21.8 million, 27% or $4.7 million more than the budgeted operating gain of $17.1 million.
February 2024 revenues were $108.3 million or 1% lower than FY 2023/24 budget. The February cost of energy was $83.1 million or 5% lower than the FY 2023/24 budget due to the non-utilization of contingencies. For the year-to-date CPA recorded operating income of $91.6 million, 35% or $49.4 million below budget. CPA’s year to date financial results were negatively impacted by abnormal weather for much of the first half of the FY 2023/24 and an increase in the 2023 Market Price Benchmark promulgated by CPUC in early October 2023 which increased certain renewable energy costs. Operating costs were 23% below budget for the year to date due to lower than budgeted spending on general and administrative expenses, customer programs and other services, and the non-utilization of contingencies.
As of February 29, 2024, CPA had unrestricted cash, cash equivalents, and investments of $343.3 million, and $159.853 million available in its bank line of credit representing 148 Days Liquidity on Hand.
CPA is financially sound and in compliance with its bank and other credit covenants.
Agenda Page 15
Staff Report – Agenda Item 6
To: Finance Committee
From: David McNeil, Chief Financial Officer
Subject: Report from the Chief Financial Officer
Date: April 24, 2024
The CFO will provide an update on February financial results, treasury operations and current energy market conditions. The update will include a discussion of the following chart illustrating a significant drop in daytime whole electricity prices in March and April 2024.
ATC (Around the clock) are average daily wholesale prices. Avg. 7-14 represents the average prices from 6am to 2pm. Avg. 15-22 represents average prices from 2pm to 10pm.
Staff are assessing the financial impact of extremely low and on average negative daytime prices.
Agenda Page 16
Staff Report – Agenda Item 7
To: Finance Committee
From: David McNeil, Chief Financial Officer
Approved By: Ted Bardacke, Chief Executive Officer
Subject: Recommendation for Prepay Transactions
Date: April 24, 2024
RECOMMENDATION
Recommend to the Board at its May 2024 meeting the selection of Municipal Capital Markets (MCM) to serve as Municipal Financial Advisor (MFA) and Chapman & Cutler (Chapman) to provide prepay legal services in support of up to three additional prepay transactions.
ATTACHMENT
1. Prepay Transactions Presentation
Agenda Page 17
Prepay Update and Recommendation to
Select Municipal Financial Advisor and
Prepay Legal Counsel
April 24, 2024
Agenda Page 18
Recommend to the Board at its May 2024 meeting the selection of Municipal Capital Markets (MCM) to serve as Municipal Financial Advisor (MFA) and Chapman & Cutler (Chapman) to provide prepay legal services in support of up to three additional prepay transactions Recommendation
Agenda Page 19
Background
3 CPA completed two prepay transactions with Goldman Sachs in 2023 locking in ~$98M in energy cost savings over the next 8 years (13% savings on prepaid cash flows)
Based on its long-term PPA portfolio and assuming favorable market conditions staff believe CPA can complete 2-3 additional prepay transactions before March 31, 2025
In March 2024, Staff issued solicitations for Municipal Financial Advisory (MFA) services and Underwriter & Prepaid Supplier services to help structure and execute one or more CPA prepay transactions. Staff also spoke with legal service providers regarding the role of Prepay Counsel.
Agenda Page 20
4 MFA - select MCM
MCM supported CPA on Prepays 1-2 and CPA had a positive experience with them MCM offers industry-leading expertise having supported the completion of 60 prepayments, totaling over $40 billion, since 2016
MCM offered competitive pricing at a discount to pricing offered on prepays 1 and 2 Payment to MCM is expected to occur from bond proceeds and no fee is due if a prepay transaction is not completed. Only in the unlikely event that MCM performs services for CPA and CPA drops MCM prior to the closing of a prepay would CPA incur liability for services rendered by MCM. These terms are similar to the first contract with MCM.
Legal Services – select Chapman & Cutler
Chapman supported CPA for Prepays 1-2 and CPA had a positive experience with them Chapman’s counsel, Doug Bird, has industry-leading expertise with prepays having supported the completion of over 60 prepayments since 2016, including 11 CCA prepays Chapman offered pricing at a discount to pricing offered on prepays 1 and 2 Payment to Chapman is expected to occur from bond proceeds and primarily contingent on a successful prepay transaction (only a minimal fee is due if a prepay transaction is not completed). These terms are similar to the first contract with Chapman.
Discussion: MFA & Legal Services
Agenda Page 21
5 CPA continues to perform due diligence on proposals from Underwriters & Prepaid Suppliers
Goldman Sachs (GS) underwrote CPA’s first two prepays and CPA had a favorable experience with them
Morgan Stanley (MS) and RBC are both well-regarded bond underwriters with strong track records of structuring, executing and administering prepay transactions The prepay structures utilized by MS and RBC contrasts with that offered by GS and may reduce risk and provide additional savings benefits Staff plan to submit prepay contracts to the Board in July and/or September 2024 and request authorization to execute up to three prepay transactions using one or more of GS, MS and/or RBC
Enabling with more than one bank may stimulate competition between the banks allowing for greater costs savings and faster time to market for CPA Staff plan to recommend and discuss Underwriter & Prepaid Supplier options with the Finance Committee prior to making a recommendation to the Board Discussion: Underwriter & Prepaid Supplier Services
Agenda Page 22
Recommend Board approval of service contracts with MCM and Chapman as MFA and Prepay Counsel, respectively, at its May 2024 meeting With support from MCM and Chapman, continue due diligence of GS/MS/RBC Underwriter & Prepaid Supplier proposals
Subject to the outcome of CPA’s due diligence and negotiation with the aforementioned banks, prepare prepay contracts for approval by the Board at its July and / or September 2024 meetings and request authorization to execute up to 3 prepay transactions with one or more banks, subject to minimum savings and/or other conditions
Discuss and recommend options for prepay underwriter/supplier services with the Executive and Finance Committees prior to making a recommendation to the Board
Next Steps
Agenda Page 23
Questions?
Agenda Page 24
Staff Report – Agenda Item 8
To: Finance Committee
From: David McNeil, Chief Financial Officer
Approved By: Ted Bardacke, Chief Executive Officer
Subject: Budget Priorities & Draft Operating Expenses FY 2024/25 Budget Date: April 24, 2024
RECOMMENDATION
Review Fiscal Year 2024/2025 Budget Priorities and Draft Operating Expenses.
ATTACHMENTS
1. Budget Priorities & Draft Operating Expenses FY 2024-25 Budget.
Agenda Page 25
FY 2024/25 Budget Priorities and
Draft Operating Expenses Budget
April 24, 2024
Agenda Page 26
FY 2024/25 Budget Process
January – April 2024 (Staff) – FY 2024/25 Goal Setting, Departmental Budgeting, Rate Design Planning, Energy Cost Projections & Consolidated Budget Planning (ongoing) April 18, 2024 (Executive Committee) – Budget Priorities April 24, 2024 (Finance Committee) – Budget Priorities & Draft FY 2024/25 Operating Expenses Budget May 2, 2024 (Board) – Budget Priorities
May 16, 2024 (Community Advisory Committee) – Budget Priorities and Draft FY 2024/25 Budget May 16, 2024 (Executive Committee) – Draft FY 2024/25 Budget May 22, 2024 (Finance Committee) – Draft FY 2024/25 Budget June 6, 2024 (Board) – Proposed FY 2024/25 Budget
Agenda Page 27
2 FY 2024/2025 Operational Priorities
1. Achieve financial targets, including
progress toward maximum reserve target
2. Meet renewable procurement and GHG
emissions targets
3. Invest in and support development of
high-performing and diverse staff
4. Comply with or surpass all regulatory and
legal obligations
5. Deliver impactful customer programs
6. Increase customer awareness while
maintaining customer participation rates
3 7. Lead and shape regulatory and policy
discussions on reliability and
affordability
8. Streamline processes and leverage
technology for efficiency and
productivity
9. Develop and track organization-wide
DEI metrics
10. Cultivate next generation of Board
leadership
11. Prepare for future growth and new
market opportunities and challenges
Agenda Page 28
Operating Expense Context
4 CPA manages ~$1.4 billion of annual energy costs representing over 95% of total costs. In addition, CPA contracts for and operationalizes long-term renewable and storage projects involving billions of dollars of financial commitments
Energy market volatility and risks remain high amidst constrained renewable/low-carbon energy supply and increasing frequency of extreme weather events As the 3rd largest LSE in CAISO and the largest supplier of green energy in the country, CPA faces significant regulatory, political and PR risks and opportunities CPA can help mitigate rising electricity bills by appropriately managing these risks and pursue its decarbonization mission by developing and delivering customer programs that save customers money and reduce peak load
Staffing cost increases are decelerating as
CPA matures and new hires provide primarily
professional / technical support
Agenda Page 29
FY 2024/25 Operating Expense Overview
Total operating expense increase of 21% reflects operational priorities including investments in Staffing (+20%), Communications & Marketing (+85%), Customer programs (+37%), and General & Administration (+29%) (refer to row 8, 12, 16, and 17). $15 million, or 22% of operating expenses (rows 13-15), are fixed by regulation, contract, or policy.
The increase in billing data management services includes costs associated with new rates per contract agreement.
5 A B C D E F G H
FY 2023/24 Budget FY 2024/25 Budget
Budget
Difference ($)
Budget
Difference (%)
% of
Revenue
Contingency
($)
Contingency
(%)
7 OPERATING EXPENSES
8 Staffing 20,072,000 24,076,000 4,004,000 20% 1.5% - 0% 9 Technical services 1,809,000 1,936,000 127,000 7% 0.1% 176,030 10% 10 Legal services 1,054,000 1,089,000 35,000 3% 0.1% 98,975 10% 11 Other services 1,975,000 2,097,000 122,000 6% 0.1% 190,659 10% 12 Communications and marketing services 2,157,000 3,982,000 1,825,000 85% 0.2% 189,637 5% 13 Customer notices and mailing services 1,023,000 842,000 (181,000) -18% 0.1% 76,558 10% 14 Billing data management services 11,262,000 12,041,000 779,000 7% 0.7% 350,722 3% 15 Service fees - SCE 2,165,000 2,250,000 85,000 4% 0.1% 107,122 5% 16 Customer programs 9,643,000 13,208,000 3,565,000 37% 0.8% - 0% 17 General and administration 4,501,000 5,828,000 1,327,000 29% 0.4% 529,832 10% 18 TOTAL OPERATING EXPENSES 55,661,000 67,349,000 11,688,000 21% 4.1% 1,719,535 3% Agenda Page 30
FY 2024/25 Operating Expense Increase Drivers
Drivers of increased operating expenses:
• Staffing – 61% of increase is for full year impacts of FY 2023/24 new hires, COLA, and merit, 40% of the increase is for new hires and contingency (see slides 11-14 for details) • Coms & Marketing – increased support for customer programs and CPA branding (see slide 15 for details)
• Customer Programs – increased investment in existing programs and support for new programs focused on managed electric vehicle charging and efficient cooling for CARE customers (see slides 16-18 for details)
• General & Administration – increased investment in software licensing and implementation to improve efficiency and manage complexity
6 A B C D E
FY 2023/24
Budget
FY 2024/25
Budget
Budget
Difference ($)
Budget
Difference (%)
Staffing 20,072,000 24,076,000 4,004,000 20%
Communications and marketing services 2,157,000 3,982,000 1,825,000 85% Customer programs 9,643,000 13,208,000 3,565,000 37%
General and administration 4,501,000 5,828,000 1,327,000 29% Other Operating Expenses 19,288,000 20,255,000 967,000 5% Total Operating Expenses 55,661,000 67,349,000 11,688,000 21% Agenda Page 31
Select CCA Metrics and Comparisons
CPA’s metrics for operating expenses and staffing costs compare favorably with industry averages Agenda Page 32
7 Operating expenses are less than 5% of total costs
Increases to operating costs are driven by increases in programs/communications, staffing and software/technology costs
Staffing cost increases are decelerating but consolidating the benefits of staffing progress is dependent on continuing to invest in staff retention and talent acquisition CPA can help mitigate rising electricity bills by developing and delivering customer programs that save customers money and reduce peak load CPA continues to compare favorably with other CCAs on operating and staffing expenses
8 Summary
Agenda Page 33
Questions?
Agenda Page 34
Financial Stewardship and Cost Control Framework
10 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 35
Staffing - Context
11 2023/24: Budgeted headcount of 79. Current headcount = 77 (see slide 13 for current org chart) Turnover rates are improving
Jan 2021 to March 2022 – Hired 35/Net gain of 14
April 2022 to March 2023 – Hired 20/Net gain of 14
April 2023 to March 2024 - Hired 18/Net gain of 15
Initial budget shows 20% budget increase in staffing costs. 61% of increase is due to full year impact of this year’s new hires, plus next year’s COLA and other retention efforts. Growth rate in staffing budget is decelerating
Budgeting 7 new positions in FY 2024/25 (down from 9 in FY 2023/24). New positions address growth in customer programs, communications, energy contracting, data and systems, and accounting areas.
Adding a contingency for new positions starting in calendar year 2025 Agenda Page 36
Initial Staffing Budget Projection
12 Initial budget projects staffing costs to increase 20%, increasing from
1.3% of total revenue in FY2023/24 to a still industry-leading 1.5% of revenue in the upcoming year.
FY 2024/25 Staffing Cost Detail Amount ($) % of Increase FY 2023/24 Budget 20,072,000
Full Year Impact New Hires 605,000 15%
COLA 845,000 21%
Merit 958,000 24%
Retention Incentive 39,000 1%
New Positions 1,249,000 31%
Contingency 308,000 8%
YOY net $$ Increase 4,004,000 100%
% of YOY Increase
FY 2024/25 Budget Total 24,076,000 20%
Staffing Budget Breakdown
Agenda Page 37
Agenda Page 38
13 Current Staff Headcount with Proposed Positions
Department Current Positions Proposed New Positions Total Executive (including Board Office) 7
(one open)
0 7
Legal 3 0 3
Coms & Marketing 8 2 10
Customer Care 3 1 4
Customer Programs 7 1 8
Data & Systems 6 1 7
Finance (including Accounting, FP&A, Load Forecasting, Risk Management, Strategic Initiatives, Treasury)
12 (one open)
1 13
Government Affairs 5 0 5
Operations (including Non-Energy Procurement, Strategic Accounts) 3 0 3 People & Culture/Admin 4 0 4
Power Supply 14 1 15
Rates & Strategy 3 0 3
Regulatory Affairs 4 0 4
Unallocated (mid-year hires based on need) - Up to 4 TBD Total 79 7-11 86-90
Agenda Page 39
Communications & Marketing Budget Detail
15 Increased spending to support
programs, including
advertising, drives large
budget increase
Branding efforts (plus hiring of
PR manager) complements
customer acquisition activities
and program spending and
increases activities with media
and key stakeholders
Marketing & Communications Budget FY 2023/24 FY 2024/25 Difference
in $
Difference
in %
Advertising 613,000 1,919,000 1,306,000 213%
Communication Consultants 888,000 1,428,000 540,000 61% Sponsorships 140,000 135,000 (5,000) -4%
Website 227,000 216,000 (11,000) -5%
Communication - Others 30,000 - (30,000) -100%
Special Events 126,000 45,000 (81,000) -64%
CBO Grants 30,000 50,000 20,000 67%
Marketing & Communications - Total 2,054,000 3,793,000 1,739,000 85% Marketing & Communications to support Programs
Reach Code Technical Assistance 10,000 - (10,000) -100% EV Charger Rebate (Program closed to new applicants) 13,000 - (13,000) -100% Workforce Development 10,000 - (10,000) -100%
Others 92,000 - (92,000) -100%
Energized Communities 15,000 20,000 5,000 33%
Power Share (CPUC Funding) 101,000 41,000 (60,000) -59% Power Ready 25,000 12,000 (13,000) -52%
Power Response 285,000 573,000 288,000 101%
Sun Storage Rebate 10,000 320,000 310,000 3100%
Low to Moderate Income Solar & Storage - 263,000 263,000 0% Energy Advisor - 370,000 370,000 0%
Hard to Reach EV Technical Assistance - 44,000 44,000 0% Efficient Cooling for Low Income Tenants - 23,000 23,000 0% Managed EV Charging - 273,000 273,000 0%
Total Marketing & Communications to support Programs 561,000 1,939,000 1,378,000 246% Total Non-Programs Marketing & Communications 1,493,000 1,854,000 361,000 24% * * i.e: Branding, Media, Social Media, Sponsorships, Web, etc.
Contingency is excluded
Agenda Page 40
Customer Programs Budget Detail
16 Launch Year Funding Source Staffing Customer Programs Communications Mailers Data Manager Total % of Total Reimbursable costs /
3rd party Funding
Customer Program
Expenses, Net
100% Reimbursable
Workforce Development 2020 PPA Developers 305,000 305,000 2% 305,000 - Power Share/Community Solar (CPUC) 2021 CPUC 412,000 2,482,000 41,000 16,000 72,000 3,023,000 19% 3,023,000 - Leverage State Resources
Electric Vehicle Charging (CALeVIP LA & Ventura) 2021 453,000 453,000 3% - 453,000 Strategic with long-term ROI or community benefits potential Power Response/Demand Response 2019 1,059,000 573,000 53,000 1,685,000 11% - 1,685,000 Power Ready/Backup Power 2021 375,000 12,000 387,000 2% - 387,000 Reach Code Program 2023 292,000 292,000 2% - 292,000
Energy Advisor 2024 292,000 370,000 27,000 689,000 4% - 689,000 Energized Communities 2024 2,825,000 20,000 2,845,000 18% - 2,845,000 Sun Storage Rebates 2024 1,750,000 320,000 7,000 2,077,000 13% - 2,077,000 Low to Moderate Income Solar & Storage 2025 1,050,000 263,000 27,000 1,340,000 9% - 1,340,000 Hard to Reach EV Technical Assistance 2025 425,000 44,000 469,000 3% - 469,000 Managed EV Charging New 400,000 273,000 673,000 4% - 673,000 Efficient Cooling for Low Income Customers New 1,500,000 23,000 1,523,000 10% - 1,523,000 Total 412,000 13,208,000 1,939,000 130,000 72,000 15,761,000 100% 3,328,000 12,433,000 * Contingency is excluded
Cost Center Budget
Agenda Page 41
Two New Customer Programs
Managed Electric Vehicle Charging
Challenge: EV charging is expected to have a
significant impact on CPA’s load, increasing from
2% of CPA load in 2023 to 12.5% by 2030 and
35% by 2040. (See Slide 18). Much of this load
is currently in high price/high GHG hours of the
day
Opportunity: Supporting customers to optimize
their charging around low-cost TOU periods can
reduce costs for customers and CPA
Program approach: Incentivize customers to
shift their EV charging to off-peak times
leveraging car telematics and combine with
offering new rate EV-dominant rates
Efficient Cooling for CARE Customers
Challenge: Extreme heat poses significant risk
of heat-related illness, however the cost to install
air conditioning (or operate inefficient AC) is
prohibitive to low-income households and/or
property owners who rent to them
Opportunity: Increasing access to energy-efficient air conditioning promotes public health and decreases the cost of installation and/or
operation
Program approach: Provide tenants and
landlords access to reduced cost equipment or
incentives to add efficient air conditioning
17 $1.9 million projected in FY 2024/25 for these two programs Agenda Page 42
Forecast Electric Vehicle Load (MWh and % of CPA Load)
Agenda Page 43
18