Finance Committee of the
Clean Power Alliance of Southern California
Regular Meeting
Wednesday, May 29, 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
Carson City Hall
Executive Conference Room
701 East Carson Street
Carson, CA 90745
PUBLIC COMMENT: Members of the public may submit their comments by one of the following options:
• Email Public Comment: Members of the public are encouraged to submit written comments on any agenda item to [email protected] up to four hours before the meeting. Written public comments will be announced at the meeting and become part of the meeting record. Public comments received in writing will not be read aloud at the meeting. • Provide Public Comment During the Meeting: The General Public Comment item is reserved for persons wishing to address the Committee on any Clean Power Alliance-related matters not on today’s agenda. Public comments on matters on today’s Consent Agenda and Regular Agenda shall be heard at the time the matter is called. Comments on items on the Consent Agenda are consolidated into one public comment period. Members of the public who wish to address the Committee at CPA’s Office are requested to complete a comment card and provide it to staff. If you are attending from a remote location, please identify yourself to a CPA representative when your item is called. Each speaker is limited to two (2) minutes (in whole-minute increments) per agenda item with a cumulative total of five 5 minutes to be allocated between the General Public Comment, Agenda Page 1
the entire Consent Agenda, or individual items in the Regular Agenda. Please refer to Policy No. 8 – Public Comment for additional information.
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If the PDF is downloaded, the bookmark panel (ribbon icon) appears on the left side of the screen.
ACCESSIBILITY: Meetings are accessible to people with disabilities. Individuals who need special assistance or a disability-related modification or accommodation to participate in this meeting, or who have a disability and wish to request an alternative format for the meeting materials, should contact the Clerk of the Board at least two (2) working days before the meeting at [email protected] or (213) 713- 5995. Notification in advance of the meeting, while not required, will enable us to make reasonable arrangements to ensure accessibility to this meeting and the materials related to it.
CALL TO ORDER & ROLL CALL
GENERAL PUBLIC COMMENT
CONSENT AGENDA
1. Approve Minutes from the April 24, 2024, Finance Committee Meeting
2. Receive and File April 2024 Risk Management Team Report
3. Receive and File April 2024 Investment Report
4. Receive and File FY 2023/2024 Q3 Financial Report
REGULAR AGENDA
5. Report from the Chief Financial Officer
6. Recommend Approval of the Proposed FY 2024/2025 Budget to the Board of Directors
7. Recommend to the Board that Staff be Authorized to Open a Bank Dealer Account with US Bank National Association for the Purpose of Investing Funds in Securities Authorized under CPA’s Investment Policy
COMMITTEE MEMBER COMMENTS
ADJOURN – NEXT MEETING ON JUNE 26, 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 April 24, 2024 Finance Committee Meeting Date: May 29, 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, April 24, 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 Gabby Monzon, Clerk of the Board, conducted roll call.
Roll Call
Camarillo Susan Santangelo Committee Chair Remote
Carson Reata Kulcsar Committee Member Absent
Claremont Corey Calaycay Committee Member Remote
Rolling Hills Estates Steve Zuckerman Committee Member Remote Santa Monica Pam O’Connor Committee Member Present
Thousand Oaks David Newman Committee Member Remote
All votes are unanimous unless otherwise stated.
GENERAL PUBLIC COMMENT
There was no public comment.
CONSENT AGENDA
1. Approve Minutes from the February 28, 2024, Finance Committee Meeting Agenda Page 4
Finance Committee Item 1
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
Motion: Committee Member Zuckerman, Rolling Hills Estates Second: Committee Member Newman, Thousand Oaks
Vote: The consent agenda was approved by a roll call vote.
REGULAR AGENDA
6. Report from the Chief Financial Officer
David McNeil, Chief Financial Officer, provided an update on the February Financial Results, in which CPA closed ahead of budget, and for the year to date, CPA remained below budget, however, made a strong contribution to the net position. CPA’s cash position is strong, and the organization continues to have access to the line of credit, making solid financial progress through the year. CPA is experiencing exceptional energy market conditions, most notably with low energy prices in March and April 2024. CPA is assessing the financial impact of extreme daytime negative prices.
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 Mr. McNeil presented the recommendation for selecting Municipal Capital Markets and Chapman & Cutler for Municipal Financial Advisor and Legal Services, respectively.
Motion: Committee Member Newman, Thousand Oaks
Second: Committee Member O’Connor, Santa Monica
Vote: Item 7 was approved by a roll call vote.
8. Review FY 2024/25 Budget Priorities and Draft Operating Expenses Mr. McNeil presented the 2024/25 budget process timeline, operational priorities, operating expense context and overview, and operating expense increase drivers. Mr.
McNeil also reviewed how CPA compared to different CCAs, in which CPA compared favorably.
Committee Member Santangelo asked if the rate of increase in the staffing budget will continue to decline, to which Mr. McNeil responded that it would as turnover and hiring stabilize but noted that merit increases and cost-of-living adjustments would contribute to some continued growth in staffing expenses. Mr. Bardacke added that additional growth drivers include new positions and the full-year impacts of those positions filled mid-year.
In response to Committee Member Zuckerman’s question regarding the Customer Programs budget, Mr. Bardacke indicated there is significant growth related to communications to support the programs.
COMMITTEE MEMBER COMMENTS
None.
ADJOURN
Committee Chair Santangelo adjourned the meeting at 11:42 a.m.
Agenda Page 5
Staff Report – Agenda Item 2
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 April 2024 Risk Management Team Report Date: May 29, 2024
April 2024 RMT REPORT
Key Actions
• Reviewed the counterparty credit exposure summary
• Reviewed January 2024 day-ahead load forecast performance • Reviewed March 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 April 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 6
Finance Committee Item 2
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 7
Staff Report – Agenda Item 3
To: Finance Committee
From: David McNeil, Chief Financial Officer
Approved By: Ted Bardacke, Chief Executive Officer
Subject: Receive and File April 2024 Investment Report
Date: May 29, 2024
RECOMMENDATION
Receive and file.
ATTACHMENTS
1. April 2024 Investment Report
Agenda Page 8
Finance Committee Item 3
Agenda Page 9
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 FY 2023/24 Q3 Financial Report Date: May 29, 2024
RECOMMENDATION
Receive and file.
ATTACHMENTS
1. FY 2023/24 Q3 Financial Report
Agenda Page 10
CUSTOMERS
Summary of Financial Results
Definitions:
Accounts: Active Accounts represents customer accounts of active customers served by CPA per Calpine Invoice.
Participation Rate %: Participation Rate represents active accounts divided by eligible CPA accounts YTD Sales Volume: Year-to-date sales volume represents the amount of energy (in gigawatt hours) sold to retail customers Revenues: Retail energy sales less allowance for doubtful accounts Cost of energy: Cost of energy includes direct costs incurred to serve CPA’s load Operating expenses: Operating expenditures include general, administrative, consulting, payroll, and other costs required to fund operations Net operating income 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
Mar
2024
Financial Dashboard
Note: Numbers may not sum up due to rounding.
Active Accounts
1,007,868
Participation Rate
93.2%
YTD Sales Volume
8,130 GWh
Mar Volume
804 GWh
Agr
2% Com-Lg
21%
Com-Sm
30%
Res
47%
In March 2024, CPA recorded an operating gain of $28.6 million, 24% or $5.6 million more than the budgeted operating gain of $23 million. March financial results were positively impacted by the non-utilization of contingencies in the cost of energy budget.
For the year-to-date CPA recorded operating income of $120.3 million, 27% or $43.8 million below budget. CPA’s year to date financial results were negatively impacted by abnormally cool 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 24% below budget due to lower than budgeted spending on general and administrative expenses and other services, and the non-utilization of contingencies.
As of March 31,2024, CPA had unrestricted cash, cash equivalents and investments of $365.9 million and $159.8 million available on its bank line of credit representing 155 Days Liquidity on Hand.
CPA is financially sound and in compliance with its bank and other credit covenants.
Agenda Page 11
CLEAN POWER ALLIANCE OF SOUTHERN CALIFORNIA
STATEMENT OF NET POSITION
AS OF MARCH 31, 2024 AND 2023
2024 2023
ASSETS
Current assets
Cash and cash equivalents
Investments
Accounts receivable, net of allowance
Accrued revenue
Other receivables
Interest receivable
Prepaid expenses
$ 305,912,729
60,000,000
140,130,159
72,238,512
2,959,678
837,515
2,257,326
6,845,392
1,200,000
592,381,312
$ 95,125,602
-
102,442,948
44,010,961
3,509,058
115,361
5,120,347
19,709,451
2,400,000
272,433,729
Deposits
Restricted cash
Total current assets
Noncurrent assets
Capital assets, net of depreciation
Intangible - right-to-use lease asset
Deposits
641,524
1,914,562
88,875
598,926
2,297,470
88,875
Total noncurrent assets
Total assets
2,644,961
595,026,274
2,985,271
$ 275,419,000
$
$
$
LIABILITIES
Current liabilities
Accounts payable
Accrued cost of electricity
Other accrued liabilities
User taxes and energy surcharges due to other governments Security deposits from energy suppliers
Unearned program funds
6,992,789
215,151,488
3,349,131
10,982,146
1,363,500
4,222,565
420,871
5,243,787
140,562,061
4,440,480
7,837,616
299,700
3,979,199
Lease liability, current 397,303
Total current liabilities 242,482,490 162,760,147
Noncurrent liabilities
Supplier security deposits
Lease liability, noncurrent
Accrued Retention Incentive-N/C
Total noncurrent liabilities
2,526,015
1,939,470
399,904
3,149,860
2,360,341
-
4,865,389 5,510,201
Total liabilities $ 247,347,879 $ 168,270,348
NET POSITION
Investment in capital assets
Restricted for collateral
Unrestricted
$
$
195,745
1,200,000
346,282,649
347,678,394
$
$
138,753
2,400,000
104,609,900
Total net position 107,148,653
Agenda Page 12
CLEAN POWER ALLIANCE OF SOUTHERN CALIFORNIA
STATEMENT OF REVENUES, EXPENSES
AND CHANGES IN NET POSITION
FOR NINE MONTHS ENDED MARCH 31, 2024 AND 2023
2024 2023
OPERATING REVENUES
Electricity sales, net
Other revenue
$ 1,144,216,826
1,221,548
$ 848,032,202
1,614,413
Total operating revenues 1,145,438,374 849,646,615
OPERATING EXPENSES
Cost of electricity 995,012,916
14,892,267
13,281,643
1,976,300
859,076,843
13,785,029
9,657,249
Contract services
Staff compensation
General and administration
Total operating expenses
Operating income (loss)
1,775,827
1,025,163,125
120,275,249
884,294,948
(34,648,333)
NONOPERATING REVENUES (EXPENSES)
Interest income 6,355,262
(454,155)
(45,483)
1,071,529
(475,641)
(52,131)
543,757
Interest and related expenses
Interest expense - lease
Total nonoperating revenues (expenses) 5,855,625
CHANGE IN NET POSITION
Net position at beginning of period
Net position at end of period
126,130,874
221,547,520
347,678,394
(34,104,575)
141,253,228
$ $ 107,148,653
Agenda Page 13
CLEAN POWER ALLIANCE OF SOUTHERN CALIFORNIA
STATEMENT OF CASH FLOWS
FOR NINE MONTHS ENDED MARCH 31, 2024 AND 2023
2024 2023
RECONCILIATION OF OPERATING INCOME TO NET
CASH PROVIDED (USED) BY OPERATING ACTIVITIES
Net operating income (loss)
Adjustments to reconcile operating income to net
cash provided (used) by operating activities
Depreciation expense
$ 120,275,249 $ (34,648,333)
173,503
287,181
165,456
Amortization expense 287,181
Revenue adjusted for allowance for uncollectible accounts (Increase) decrease in:
25,507,342 13,850,740
Accounts receivable
Other receivables
Accrued revenue
Prepaid expenses
(42,378,447)
(2,364,476)
14,991,152
43,895,523
9,105,914
(19,722,917)
4,035,045
11,485,830
1,018,057
Deposits 6,406,079
Increase (decrease) in:
Accounts payable (16,172)
855,635
54,309,969
999,295
2,411,289
544,955
(129,919)
-
717,473
(8,815,110)
65,747,964
2,041,593
1,811,258
(4,467,940)
475,166
Energy market settlements payable
Accrued cost of electricity
Other accrued liabilities
User taxes due to other governments
Supplier security deposits
Unearned program funds
Counterparty collateral deposit
Net cash provided (used) by operating activities
-
228,467,992 40,387,543
CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES
Loan proceeds -
-
95,000,000
(95,000,000)
(480,333)
Principal payments on loan
Interest and related expense payments
Net cash provided (used) by non-capital
financing activities
(478,698)
(478,698) (480,333)
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Payments to acquire capital assets
Payments on lease (for both principal and interest)
Net cash provided (used) by capital and related financing activities (270,054)
(344,351)
(614,405)
(90,125)
(300,684)
(390,809)
CASH FLOWS FROM INVESTING ACTIVITIES
Investments (60,000,000)
Interest income received 5,750,961 1,071,529
Net cash provided (used) by investing activities (54,249,039) 1,071,529 Net change in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
173,125,850
133,986,879
307,112,729
40,587,930
56,937,672
$ $ 97,525,602
Reconciliation to the Statement of Net Position
Cash and cash equivalents (unrestricted)
Restricted cash
$
$
305,912,729
1,200,000
307,112,729
$
$
95,125,602
2,400,000
Cash and cash equivalents 97,525,602
Agenda Page 14
CLEAN POWER ALLIANCE OF SOUTHERN CALIFORNIA
BUDGETARY COMPARISON SCHEDULE
FOR NINE MONTHS ENDED MARCH 31, 2024
2023/24 YTD
Budget Variance Actual / Budget
(Under) Over
2023/24 YTD 2023/24
Remaining
Budget
2023/24
Remaining
Budget %
2023/24 YTD
Budget
2023/24 YTD
Actual % 2023/24 Budget
Operating revenues
Revenue - electricity, net
Other revenues
$ 1,202,490,745
2,414,944
$ 1,144,216,826
1,221,548
$ (58,273,919)
(1,193,397)
(59,467,315)
95%
51%
95%
$ 1,576,284,820
3,238,179
$ 432,067,994
2,016,632
27%
62%
Total operating revenues 1,204,905,689 1,145,438,374 1,579,523,000 434,084,626 27% Energy costs
Energy procurement
Total energy costs
1,001,133,347
1,001,133,347
995,012,916
995,012,916
(6,120,431)
(6,120,431)
99%
99%
1,243,338,000
1,243,338,000
248,325,084
248,325,084
20%
20%
Operating revenues less energy costs 203,772,342 150,425,458 (53,346,885) 74% 336,185,000 185,759,542 55% Operating Expenditures
Staffing 14,843,000
1,323,450
790,495
13,281,643
898,631
(1,561,357)
(424,819)
(266,014)
(932,251)
(651,438)
(348,985)
(317,099)
(2,474)
89%
68%
66%
40%
60%
62%
96%
100%
30%
61%
76%
20,072,000
1,809,000
1,054,000
1,975,000
2,157,000
1,023,000
11,262,000
2,165,000
9,643,000
4,501,000
55,661,000
6,790,357
910,369
34%
50%
50%
68%
55%
45%
28%
26%
83%
56%
46%
Technical services
Legal services 524,481 529,519
Other professional services
Communications and outreach
Mailers
1,565,530
1,623,420
909,720
633,279 1,341,721
1,185,018
462,265
971,982
560,735
Billing data manager
SCE services
8,390,880
1,597,400
5,370,740
3,250,409
39,665,044
8,073,781
1,594,926
1,634,452
1,976,300
30,150,209
3,188,219
570,074
Customer programs
General and administrations
Total operating expenditures
(3,736,288)
(1,274,110)
(9,514,836)
8,008,548
2,524,700
25,510,791
Operating income 164,107,298 120,275,249 (43,832,049) 73% 280,524,000 160,248,751 57% Non-operating revenues (expenditures)
Interest income 2,695,140
(1,345,760)
1,349,380
6,355,262
(499,638)
5,855,625
3,660,122
846,122
236%
37%
4,314,000
(1,563,000)
2,751,000
(2,041,262)
(1,063,363)
(3,104,625)
-47%
Finance and interest expense 68%
Total non-operating revenues (expenditures) 4,506,245 434% Change in net position 165,456,678 126,130,873 (39,325,804) 76% 283,275,000 157,144,126 55% Agenda Page 15
Select Financial Indicators
Note MarͲ23 JunͲ23 SepͲ23 DecͲ23 MarͲ24
1 2
3 4
5 Working Capital
Current Ratio
Days Sales Outstanding
Equity
ꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀ109,673,582 ꢀꢀꢀꢀ224,117,857 ꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀ231,661,922 ꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀ277,941,452 ꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀ349,898,822 ꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀ1.7 ꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀ2.2 ꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀ1.8 ꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀ2.4 ꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀ2.4 ꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀ33 ꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀ39 ꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀ34 ꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀ32 ꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀ34 ꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀ107,148,653 ꢀꢀꢀꢀ221,547,520 ꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀ228,949,840 ꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀ275,996,512 ꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀ347,678,394 Equity to Assets % 39% 54% 45% 57% 58%
6 7
Adjusted Unrestricted Cash
Available Line of Credit
ꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀ91,676,042 ꢀꢀꢀꢀ129,442,319 ꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀ210,880,080 ꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀ235,264,684 ꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀ362,023,214 ꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀ79,853,000 ꢀꢀꢀꢀ159,853,000 ꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀ159,853,000 ꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀ159,853,000 ꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀ159,853,000 8 9
Total Liquidity
Days Liquidity on Hand (TTM)
ꢀꢀꢀꢀꢀꢀꢀꢀ171,529,042 ꢀꢀ289,295,319 ꢀꢀꢀꢀꢀꢀꢀꢀ370,733,080 ꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀ395,117,684 ꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀ521,876,214 ꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀ59 ꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀ97 ꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀ114 ꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀ118 ꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀꢀ155 10 11
Gross Margin
Net Margin
Ͳ1%
Ͳ4%
10%
7%
3%
2%
9%
7%
13%
10%
Percentage Change from Prior Quarter
Working Capital
Current Ratio
Days Sales Outstanding
Equity
Equity to Assets %
Adjusted Unrestricted Cash
Available Line of Credit
Total Liquidity
Ͳ14%
Ͳ8%
Ͳ4%
Ͳ14%
Ͳ11%
98%
0%
36%
Ͳ48%
104%
33%
17%
107%
39%
41%
100%
69%
64%
3%
Ͳ17%
Ͳ13%
3%
Ͳ17%
63%
0%
20%
29%
Ͳ5%
21%
28%
12%
0%
26%
3%
4%
26%
2%
54%
0%
28%
18%
7%
3%
32%
Days Liquidity on Hand (TTM) 32%
Financial Indicators
600
500
400
300
200
100
ꢀͲ
MarͲ23 JunͲ23 SepͲ23 DecͲ23 MarͲ24
Fiscal Quarter
Working Capital Equity Total Liquidity
Note Description Description
1 2
3 4
5 6
Current Assets less Current Liabilities
Current Assets divided by Current Liabilities
Accounts receivable divided by Sales divided by 365
Net Position plus Fiscal Stabilization Fund
Equity (Net Position + FSF) divided by Total Assets
Total Line of Credit less Borrowing and Letters of Credit Sum of Available Cash and Line of Credit
Total Liquidity divided by trailing 12 month expenses divided by 365 Operating revenue less energy cost divided by operating revenue Change in net position divided by operating revenue
Unrestricted cash and cash equivalents less supplier deposits Agenda Page 16
Staff Report – Agenda Item 5
To: Finance Committee
From: David McNeil, Chief Financial Officer
Subject: Report from the Chief Financial Officer
Date: May 29, 2024
The CFO will provide an oral update on the financial results for the nine months ending March 31, 2024.
Agenda Page 17
Staff Report – Agenda Item 6
To: Finance Committee
From: David McNeil, Chief Financial Officer
Approved By: Ted Bardacke, Chief Executive Officer
Subject: Proposed FY 2024/2025 Budget
Date: May 29, 2024
RECOMMENDATION
Recommend approval of the proposed FY 2024/25 Budget to the Board of Directors at its June 6, 2024 meeting.
BACKGROUND
Each year CPA develops an annual budget to govern the receipt of revenues, the incurrence of expenses, and capital expenditures made during the upcoming fiscal year.
The Proposed Fiscal Year 2024/25 Budget is provided in Attachment 2.
The Proposed FY 2024/25 Budget revenues incorporate the rate-setting approach approved by the Board at its May 2, 2024 meeting.
Staff will present the Proposed FY 2024/25 Budget to the Board for approval on June 6, 2024.
DISCUSSION
The Proposed 24/25 Budget revenues reflect the rate setting approach approved by the Board at its May 2, 2024 Board meeting, an allowance for bad debt, and the full year effect of default product changes in October 2023 and new community enrollments in March 2024.
Agenda Page 18
Finance Committee Item 6
The cost of energy reflects increased costs of energy, resource adequacy, and renewable energy and a contingency equal to 6% of cost of energy.
The increase in operating expenses reflect investments in staffing, marketing & communications, and customer programs. All other operating expense items increase by $2.5 million or 10.3% year-over-year.
The budgeted increase in the net position would bring CPA’s reserve percentage to 40% by June 30, 2025 or the mid-point of the target range described in the Reserve Policy.
Days liquidity on hand is expected to reach 143 days consistent with the Reserve Policy target.
The Proposed Budget sets forth changes to the following budget line items:
Revenue – electricity net (+$6,070,000; 0.4% 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 2, 2024.
Budgeted revenues include an allowance for doubtful accounts equal to 1.9% of revenues or $30.6 million. Revenues are budgeted to be slightly higher than FY 23/24 budgeted revenues due to product default changes and new community enrollments offset by slightly lower average rates as reflected in the rate approach approved by the Board at its May 2024 meeting and an increase in the allowance for doubtful accounts.
Other revenue (-$299,000; 9% decrease): 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 renewable energy power purchase agreements. Other revenues offset expenses budgeted in the Customer Programs, Staffing, Technical Services, Other Services, Mailers, Data Manager, and Communications budget line items.
Cost of energy (+$149,957,000; 12% 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 Agenda Page 19
Finance Committee Item 6
services performed by the CAISO. CAISO charges for load are based on electricity consumed by CPA customers and related line losses and prices at the Default Load Aggregation Point (DLAP). 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 is expected to increase year over year due to increases in energy, renewable energy, and resource adequacy costs.
Staffing (+$4,004,000; 20% increase): Staffing costs include salaries and benefits payable in accordance with CPA’s Board-approved Employee Handbook and salary grades and ranges approved by the Board on December 1, 2022. 60% of the increase is driven by the full-year impact of FY 2023/24 new hires, merit increases, a cost of living adjustment (COLA), and retention incentives. 40% of the increase is due to new positions and potential mid-year hires. CPA is continuing with its retention program incentive through FY2024/25, based on the board’s direction at its December 1, 2022 board meeting. The staffing budget includes an allowance for paid internships and an intern-to-employment fellowship program currently under development.
FY 2024/25 budgeted staffing costs increase is composed of the following:
FY 2024/25 Staffing Cost Detail Amount ($) % of Increase A 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 (Mid-year New Hires) 308,000 8%
B YOY net $$ Increase 4,004,000 100%
% of YOY Increase
C=A+B FY 2024/25 Budget Total 24,076,000 20%
Agenda Page 20
Finance Committee Item 6
$412,000 of staffing expenses are reimbursable via CPUC customer program funding (Power Share).
Technical services (+$127,000; 7% 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.
FY 2024/25 budgeted technical services are composed of the following:
Legal services (+$35,000; 3% increase): 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 provided by the firms listed in the following table:
Legal Service Major Providers
Energy Contracting Hall Energy Law
Clean Energy Counsel
Keyes & Fox
Buchalter
Perkins Coie
Regulatory Compliance and CPUC Proceeding
Advocacy
Braun Blaising Smith Wynne
Keyes & Fox
FY 2023/24 FY 2024/25 Diff $ Diff %
Scheduling Coordinator 1,269,000 1,392,000 123,000 10%
Middle Office & Load Forecasting Support 33,000 66,000 33,000 100% Procurement planning & Support 221,000 247,000 26,000 12% Other 286,000 231,000 (55,000) -19%
Technical Services 1,809,000 1,936,000 127,000 7%
Agenda Page 21
Finance Committee Item 6
Customer Programs Support Shute, Mihaly, & Weinberger
Banking and Finance Chapman
Employment Law and Compliance Polsinelli
Jackson Lewis
General Liability and Governance Burke Williams & Sorensen Coleman Frost
Swanson, Martin, Bell
Shute, Mihaly, & Weinberger
Other services (+$282,000; 14% 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 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 services to support accounting staff & various audit preparations, a placeholder to seek federal lobbyist to support CPA’s applications for federal funds and enhance CPA’s national profile, and hiring a contractor to support customer programs with grant applications.
FY 2024/25 budgeted other services expenses are composed of the following:
Communications and marketing services (+$1,825,000; 85% increase):
Communications and related services include costs associated with customer outreach, marketing, branding, website management, translation, advertising, special events, and FY 2023/24 FY 2024/25 Diff $ Diff %
Audit & Accounting Services 120,000 196,000 76,000 63%
Prof - Collection Services (NEW) 297,000 297,000 - 0%
Prof - HR & Payroll Consulting 214,000 214,000 - 0%
Prof - IT Services 497,000 472,000 (25,000) -5%
Prof - Legislative/Lobbying 166,000 352,000 186,000 112% Prof - Strategic Planning 363,000 247,000 (116,000) -32% Prof - REC Audit and Registry 51,000 54,000 3,000 6%
Prof - Customer Programs Services - 118,000 118,000 0%
Prof - Regulatory Services 201,000 202,000 1,000 0%
Prof - Rate Setting Support 66,000 105,000 39,000 59%
Prof - Other Consultants - - - 0%
Total 1,975,000 2,257,000 282,000 14%
Agenda Page 22
Finance Committee Item 6
sponsorships. The increase in marketing expenses reflects investments in consultants to support customer acquisition for CPA’s customer programs through advertising, sponsorship, social media, and branding efforts.
FY 2024/25 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 (-$181,000; 18% decrease): Notices and mailing services support required communication with CPA customers and include printing and postage costs. Costs are decreasing primarily due to greater use of email and the absence of new community enrollments in FY2024/25.
FY 2024/25 budgeted customer notices and mailing services are composed of the following:
Marketing & Communications Budget FY 2023/24 FY 2024/25 Difference in
$
Difference
in %
Advertising 644,000 2,014,000 1,370,000 213%
Communication Consultants 932,000 1,499,000 567,000 61% Sponsorships 147,000 142,000 (5,000) -3%
Website 238,000 227,000 (11,000) -5%
Communication - Others 32,000 - (32,000) -100%
Special Events 132,000 47,000 (85,000) -64%
CBO Grants 32,000 53,000 21,000 66%
Marketing & Communications - Total 2,157,000 3,982,000 1,825,000 85% Marketing & Communications to support Programs
Reach Code Technical Assistance 11,000 - (11,000) -100% EV Charger Rebate (Program closed to new applicants) 14,000 - (14,000) -100% Workforce Development 11,000 - (11,000) -100%
Other 97,000 - (97,000) -100%
Energized Communities 16,000 21,000 5,000 31%
Power Share (CPUC Funding) 106,000 43,000 (63,000) -59% Power Ready 26,000 13,000 (13,000) -50%
Power Response 299,000 602,000 303,000 101%
Sun Storage Rebate 11,000 336,000 325,000 2955%
Low to Moderate Income Solar & Storage - 276,000 276,000 0% Energy Advisor - 389,000 389,000 0%
Hard to Reach EV Technical Assistance - 46,000 46,000 0% Efficient Cooling for Low Income Tenants - 24,000 24,000 0% Managed EV Charging - 287,000 287,000 0%
Total Marketing & Communications to support Programs 591,000 2,037,000 1,446,000 245% Total Non-Programs Marketing & Communications 1,566,000 1,945,000 379,000 24% * * i.e: Branding, Media, Social Media, Sponsorships, Web, etc.
Contingency is excluded
Agenda Page 23
Finance Committee Item 6
Billing data management services (+$779,000; 7% increase): Billing data manager costs are based on the number of customer meters served by CPA and monthly 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 full year impact new customers enrolled in three new communities that began in March 2024.
Service fees – SCE (+$85,000; 4% 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 (+$3,565,000; 37% 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 2024/25 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, Reach Code programs, Energized Communities, Sun Storage Rebate, LMI Solar and Storage, Energy Advisor, Hard to reach EV Technical Assistance, workforce development (funded through long term renewable energy power purchase agreements), and two new programs, Efficient Cooling for Low Income Tenants and Managed EV Charging.
FY 2024/25 budgeted customer programs expenses are composed of the following:
FY 2023/24 FY 2024/25 Diff $ Diff %
Enrollment Notices/All mailers 183,000 112,000 (71,000) -39% Customer Letters 42,000 121,000 79,000 188%
Joint Rate Comparison Mailer 242,000 147,000 (95,000) -39% Power Content Label Mailer 328,000 168,000 (160,000) -49% Mailers - Other 228,000 294,000 66,000 29%
Total Mailers costs 1,023,000 842,000 (181,000) -18%
Agenda Page 24
Finance Committee Item 6
General and administration (+$1,327,000; 29% increase): General and administration costs include office supplies, phone, internet, travel, dues and subscriptions, professional development, software licenses, and other related expenses. 72% of the budget increase in G&A arises due to growth investments in software licensing and implementation to improve CPA systems efficiency and managing complexity.
Program FY 2023/24 FY 2024/25 Diff $ Diff %
CalEVIP (LA) 35,000 - (35,000) -100%
CalEVIP (Ventura) 11,000 - (11,000) -100%
Power Ready - 375,000 375,000 0%
Power Response 831,000 579,000 (252,000) -30%
Reach Code Technical Assistance 201,000 179,000 (22,000) -11% Electrification Advisor 230,000 - (230,000) -100%
Energized Communities 1,160,000 700,000 (460,000) -40%
Sun Storage Rebate 150,000 150,000 - 0%
Low to Moderate Income Solar & Storage - 50,000 50,000 0% Energy Advisor - 192,000 192,000 0%
Hard to Reach EV Technical Assistance - 275,000 275,000 0% Efficient Cooling for Low Income Tenants - 100,000 100,000 0% Managed EV Charging - 200,000 200,000 0%
Sub total 2,618,000 2,800,000 182,000 7%
CalEVIP (Ventura) 338,000 240,000 (98,000) -29%
CalEVIP (LA) 857,000 213,000 (644,000) -75%
Reach Code Technical Assistance 150,000 113,000 (37,000) -25% Power Response 596,000 480,000 (116,000) -19%
Workforce Development 516,000 305,000 (211,000) -41%
Power Share 2,065,000 2,482,000 417,000 20%
Electrification Advisor 140,000 - (140,000) -100%
Energized Communities 1,550,000 2,125,000 575,000 37%
Sun Storage Rebate 813,000 1,600,000 787,000 97%
Low to Moderate Income Solar & Storage - 1,000,000 1,000,000 0% Energy Advisor - 100,000 100,000 0%
Hard to Reach EV Technical Assistance - 150,000 150,000 0% Efficient Cooling for Low Income Tenants - 1,400,000 1,400,000 0% Managed EV Charging - 200,000 200,000 0%
Sub total 7,025,000 10,408,000 3,383,000 48%
Grand Total 9,643,000 13,208,000 3,565,000 37%
Agenda Page 25
Finance Committee Item 6
Finance and interest expense (-$918,000; 59% decrease): Finance and interest expenses represent fees, borrowing and letter of credit costs associated with CPA’s loan facility. Finance and interest expenses are projected to decrease due to lower fees included in the amended credit agreement with JPMorgan that went into effect in April 2024.
Interest income (+$5,189,000; 120% increase): Interest income represents income earned on funds in Certificates of Deposits and savings accounts held by River City Bank and other investment accounts with the California Asset Management Program (CAMP) and the Local Agency Investment Fund (LAIF). An increase in interest income arises from an expected increase in funds to invest.
Capital outlay (+$100,000; 44% increase): Expenditures associated with capital outlay will support and accommodate equipment purchases and office improvements as they age and need to be replaced.
ATTACHMENTS
1. Proposed FY 2024/25 Budget Presentation
2. Proposed FY 2024/25 Budget
FY 2023/24 FY 2024/25 Diff $ Diff %
Office Operating Expenses 244,000 262,000 18,000 7%
Software 1,315,000 2,267,000 952,000 72%
Prof. Development 611,000 610,000 (1,000) 0%
HR 178,000 211,000 33,000 19%
Insurance 139,000 198,000 59,000 42%
Phone & Internet 167,000 135,000 (32,000) -19%
Industry Membership Dues 562,000 668,000 106,000 19%
Depreciation & Amortization 719,000 794,000 75,000 10%
Others 566,000 683,000 117,000 21%
Total 4,501,000 5,828,000 1,327,000 29%
Agenda Page 26
Proposed FY 2024/25 Budget
May 29, 2024
Agenda Page 27
Recommendation:
Recommend approval of the Proposed Fiscal Year (FY) 2024/25 Budget to the Board of Directors
Agenda Page 28
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 29, 2024 (Finance Committee) – Proposed FY 2024/25 Budget June 6, 2024 (Board) – Proposed FY 2024/25 Budget
Agenda Page 29
3 Key FY 2024/25 Budget Takeaways
4 Budgeted revenues are projected to increase by $6 million year over year and reflect the rate setting approach approved by the Board at its May board meeting, an allowance for bad debt, and the full year effect of default product changes and new community enrollments Budgeted cost of energy is up by 12% year over year reflecting increased costs of Resource Adequacy and Renewable Energy. Increases to operating expenses reflect CPA’s FY 2024/25 budget priorities presented at the May Board meeting
The budgeted increase in the net position of $133 million is lower than the prior year but would bring CPA’s reserve percentage to 40% by June 30, 2025 consistent with CPA’s Reserve Policy
Agenda Page 30
Net Energy Revenue
5 Budgeted revenues include the FY 2024/25 rate approach approved by the Board on May 2, 20241 which would result in a small rate and revenue decrease offset by increased revenue from new CPA member agency enrollments in March 2024 and default product changes in October 2023 Bad debt expense is budgeted at 1.9% of revenue or $30.6 million up from 1.77% of revenue included in the FY 2023/24 Budget
Energy costs (+12%) reflect higher Resource Adequacy and Renewable Energy costs arising from increasing market prices/constrained supply and a contingency equal to 6% of energy costs
1. 2024/25 Rate Approach: Lean -1%, Clean 0%, 100% Green +5% compared to Residential/Small Business SCE base rates Agenda Page 31
FY 2024/25 Operating Expense Highlights
Proposed operating expenses are budgeted to increase by $11.8 million or 21% (see next slide for CCA comparisons) One-fourth of budgeted operating expenses are fixed by regulatory, contractual, or policy obligations Increase in Staffing expense reflects budget priorities presented to the Board at its May Board meeting. 60% of the increase reflects full year impacts of FY 2023/24 new hires, COLA, merit, and retention incentives; 40% of the increase is for new positions and potential mid-year hires Increase in Communications expense is associated with customer outreach, marketing, branding, website management, translation, advertising, special events, and sponsorships. Increase in marketing expense is associated with investments in consultants to market CPA’s customer programs through advertising, sponsorship, social media, and branding efforts.
Increase in Customer Programs expense represent direct costs associated with providing energy programs to CPA customers and other related services. Direct costs include both incentives for participation and payments to third parties for program implementation. 72% of the budget increase in G&A arises due to growth investments in software licensing and implementation to improve CPA systems efficiency and managing complexity.
Agenda Page 32
6 FY 2024/25 Operating Income and Reserves
7 The budgeted increase in the net position would bring CPA’s reserve percentage to 40% by June 30, 2025 or the mid-point of the target range outlined in the Reserve Policy. Reserves are the sum of the Net Position and Fiscal Stabilization Fund (also known as balance sheet equity) and are not equivalent to or held as cash Days liquidity on hand (DLOH) would increase to 143 days consistent with the Reserve Policy target. DLOH is equal to the sum of cash, investments and available line of credit divided by average daily expenses
A B C D E
FY 2023/24 Budget FY 2024/25 Budget
Budget
Difference ($)
Budget
Difference (%)
TOTAL OPERATING EXPENSES 55,661,000 67,509,000 11,848,000 21% OPERATING INCOME 280,524,000 124,489,000 (156,035,000) -56% NON OPERATING REVENUE (EXPENSE) 2,751,000 8,858,000 6,107,000 222% CHANGE IN NET POSITION 283,275,000 133,347,000 (149,928,000) -53% NET POSITION BEGINNING OF PERIOD 221,547,520 504,822,520 283,275,000 128% NET POSITION END OF PERIOD 504,822,520 638,169,520 133,347,000 26%
FISCAL STABILIZATION FUND - - -
RESERVES END OF PERIOD (Net Position + FSF) 504,822,520 638,169,520 133,347,000 26% Agenda Page 33
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.” Agenda Page 34
8 Select CCA Metrics and Comparisons
9 CPA’s metrics for operating expenses and staffing costs compare favorably with industry averages Agenda Page 35
Revenues are budgeted at $1.58 billion
• an increase of $6 million or 0.4% year over year
• includes an average rate decrease, increase in bad debt reserve and prior fiscal year new community enrollments and default product changes
Costs of energy are budgeted at $1.39 billion
• an increase of $149.9 million or 12% year over year
• due to ongoing supply constraints and elevated prices for resource adequacy and renewable energy Operating costs are budgeted at $67.5 million
• an increase of $11.8 million or 21% year over year
• reflects the operational priorities presented to the Board in May and are driven by investments in programs and communications, staffing and software and technology
The budgeted increase in the net position of $133 million is 53% lower than the prior year however CPA would still make significant progress towards meeting its Reserve Policy targets
CPA financial metrics continue to compare favorably with peer CCAs 10 Summary
Agenda Page 36
Recommendation:
Recommend approval of the Proposed Fiscal Year (FY) 2024/25 Budget to the Board of Directors
Agenda Page 37
Questions?
Agenda Page 38
A BC D E
FY 2023/24 Budget FY 2024/25 Budget
Budget
Difference ($)
Budget
Difference (%)
Revenue ‐ Electricity net 1,576,284,000 1,582,354,000 6,070,000 0.4% Transfer from Fiscal Stabilization Fund ‐ ‐ ‐ 0% Other revenue 3,238,000 2,939,000 ‐ (299,000) 9% TOTAL REVENUE 1,579,523,000 1,585,293,000 5,772,000 0.4% TOTAL ENERGY COSTS 1,243,338,000 1,393,295,000 149,957,000 12% NET ENERGY REVENUE 336,185,000 191,998,000 ‐ (144,185,000) 43%
OPERATING EXPENSES
Staffing 20,072,000 24,076,000 4,004,000 20% Technical services 1,809,000 1,936,000 127,000 7% Legal services 1,054,000 1,089,000 35,000 3% Other services 1,975,000 2,257,000 282,000 14% Communications and marketing services 2,157,000 3,982,000 1,825,000 85% Customer notices and mailing services 1,023,000 842,000 (181,000) ‐18% Billing data management services 11,262,000 12,041,000 779,000 7% Service fees ‐ SCE 2,165,000 2,250,000 85,000 4% 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% TOTAL OPERATING EXPENSES 55,661,000 67,509,000 11,848,000 21% OPERATING INCOME 280,524,000 124,489,000 ‐ (156,035,000) 56% Finance and interest expense 1,563,000 645,000 ‐ (918,000) 59% TOTAL NON OPERATING EXPENSES 1,563,000 645,000 ‐ (918,000) 59% Interest Income 4,314,000 9,503,000 5,189,000 120% TOTAL NON OPERATING REVENUE 4,314,000 9,503,000 5,189,000 120% NON OPERATING REVENUE (EXPENSE) 2,751,000 8,858,000 6,107,000 222% CHANGE IN NET POSITION 283,275,000 133,347,000 ‐ (149,928,000) 53% NET POSITION BEGINNING OF PERIOD 221,547,520 504,822,520 283,275,000 128% NET POSITION END OF PERIOD 504,822,520 638,169,520 133,347,000 26% FISCAL STABILIZATION FUND ‐ ‐ ‐ RESERVES END OF PERIOD (Net Position + FSF) 504,822,520 638,169,520 133,347,000 26% Other Uses
Capital Outlay 225,000 325,000 100,000 44% Depreciation & Amortization (622,000) (794,000) (172,000) 28% CHANGE IN FUND BALANCE 283,672,000 133,816,000 ‐ (149,856,000) 53% Note: Funds may not sum precisely due to rounding
CLEAN POWER ALLIANCE of SOUTHERN CALIFORNIA
Fiscal Year 2024/2025 Budget
Proposed
Agenda Page 39
Staff Report – Agenda Item 7
To: Finance Committee
From: Kate Freeman, Strategic Finance Manager
David McNeil, Chief Financial Officer
Approved By: Ted Bardacke, Chief Executive Officer
Subject: Bank Dealer Account Proposal
Date: May 29, 2024
RECOMMENDATION
Recommend to the Board that staff be authorized to open a bank dealer account with US Bank National Association (“US Bank”) for the purpose of investing funds in securities authorized under CPA’s Investment Policy.
ATTACHMENTS
1. Presentation - Bank Dealer Account Proposal
Agenda Page 40
Bank Dealer Account Proposal
May 29, 2024
Agenda Page 41
Recommendation: Recommend to the Board that staff be authorized to open a bank dealer account with US Bank National Association (“US Bank”) for the purpose of investing funds in securities authorized under CPA’s Investment Policy at its June Board meeting
The Board will be presented with a Resolution as required by US Bank.
Staff also intends to open broker-dealer accounts Morgan Stanley Wealth Management (“MS”) and Royal Bank of Canada Wealth Management (“RBC”) and a custody account with US Bank Trust Company, National Association ("US Bank Trust") as authorized under CPA’s Investment Policy. Opening these accounts does not require Board approval.
Recommendation and Summary
Agenda Page 42
2 Background
3 Staff manage cash balances and invest surplus funds consistent with California state law and CPA’s Board-approved Investment Policy ensuring (in order of priority) the safety of funds, the availability of funds, and investment returns CPA has growing levels of cash and current interest rates offer attractive returns CPA’s investable funds are currently held in the following:
Investment Type CPA balance
(at 04/30/24)
Average
Term
Current Interest
Rates / Yields
California Asset Management Program (“CAMP”) $191,854,139 ~1.9 months 5.44% Certificates of Deposit (“CDs”) $100,000,000 ~6.5 months 5.30% Savings accounts $81,523,828 4.32%
Local Agency Investment Fund (“LAIF”) $16,591 ~7.5 months 4.27% Portfolio Total $373,394,558 ~2.7 months 5.16%
CPA’s Investment Policy permits investment in instruments with a maximum term to maturity of five years; CPA’s current investment accounts offer limited ability to invest in securities with a term greater than 12 months
Agenda Page 43
Background – Yield Curve
The US Treasury yield curve is currently inverted, with short-term interest rates exceeding longer-term rates, demonstrating that investors expect interest rates to decrease in the future.
The Federal Reserve has signaled rate cuts later in 2024, contingent on progress towards its 2% inflation target and other economic signals.
CPA’s current investment portfolio takes advantage of higher short-term yields, but leaves CPA exposed to heightened risk of a decrease in interest earnings if yields decrease by more than expected in the future
Staff plan to begin investing in longer-term securities (1-5 year terms) to “lock-in” yields and interest income and reduce CPA’s exposure to decreases in interest rates Agenda Page 44
5 Bank Dealers and Broker/Dealers
Bank dealers and broker/dealers offer CPA the ability to buy and sell high-quality securities
Bank dealers buy and sell securities and bank products on behalf of their customers.
Bank dealers are regulated by the Federal Deposit Insurance Corporation (“FDIC”), the Federal Reserve, and the Office of the Comptroller of the Currency (“OCC”) Broker/dealers buy and sell securities for their own accounts and/or on behalf of their customers. Broker/dealers are regulated by the U.S. Securities and Exchange Commission (“SEC”) and the Financial Industry Regulatory Authority (“FINRA”) CPA’s Investment Policy permits the selection and use of broker/dealers to execute the purchase and sale of investments at CPA’s direction
Custodian
CPA’s Investment Policy recommends the use of a third-party custodian to take delivery of securities purchased by the bank dealer or broker/dealer to ensure the delivery and safekeep of the securities on CPA’s behalf Bank Dealer and Broker/Dealer Accounts
Agenda Page 45
CPA's Investment Policy authorizes staff to select broker/dealers and to utilize a third-party custodian for the delivery and safekeeping of securities.
Under this authority, staff plan to open:
Broker/dealer accounts with Morgan Stanley Wealth Management (“MS”) and Royal Bank of Canada Wealth Management (“RBC”) A custody account with US Bank Trust
US Bank requires a standalone Board Resolution authorizing the opening of a bank dealer account.
Investment Policy & Relevant Authorization
Agenda Page 46
7 Staff plan to open the bank dealer, broker/dealer, and custody accounts for the following reasons:
The dealers will provide CPA with the ability to purchase US Treasury securities and other high-quality instruments with longer terms than its current investments A third-party custodian will ensure safekeeping of CPA investments All the prospective banks and the trust are well-regarded institutions with investment-grade credit ratings Enabling CPA to invest through multiple dealers permits Staff to compare interest rates and seek the highest returns; incentivizing banks to offer the best rates Fees are minimal; the dealers’ primary (or sole) source of compensation is the bid/ask spread on the securities purchased by their customers
CPA would pay no fees to utilize broker/dealer services with RBC and MS CPA would pay de minimis trade and clearance fees on the US Bank bank dealer account The US Bank Trust custody account fees are equal to the greater of .01% (1 basis point) of CPA’s portfolio value (equivalent to $10,000 per $100 million) and $15,000 per annum Discussion and Analysis
Agenda Page 47
Recommendation: Recommend to the Board that staff be authorized to open a bank dealer account with US Bank National Association (“US Bank”) for the purpose of investing funds in securities authorized under CPA’s Investment Policy.
Recommendation
Agenda Page 48
8 Questions?
Agenda Page 49