Finance Committee of the
Clean Power Alliance of Southern California
Regular Meeting
Wednesday, April 23, 2025
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:
Calabasas City Hall
Council Conference Room
100 Civic Center Way
Calabasas, CA 91302
Camarillo City Hall
Administrative Conference Room
601 Carmen Drive
Camarillo, CA 93010
Rolling Hills Estates City Hall
Conference Room
4045 Palos Verdes Drive North
Rolling Hills Estates, CA 90274
Claremont City Hall
Council Office
207 Harvard Avenue
Claremont, CA 91711
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 26, 2025, Finance Committee Meeting
2. Receive and File February and March 2025 Risk Management Team Reports
3. Receive and File February and March 2025 Investment Reports
4. Receive and File February 2025 Financial Dashboard
REGULAR AGENDA
5. Report from the Chief Financial Officer
6. Receive Presentation on the J.P. Morgan (JPM) Credit Agreement and Provide the Board of Directors with the Following Recommendation:
A. Reduce the Size of the JPM Credit Facility from $160 Million to $120 Million B. Delegate Authority to Staff to Further Reduce the Size of the JPM Credit Facility to an Amount that does not go Below $80 Million
7. Receive Presentation on FY 2025/26 Budget Priorities and Operating Expense Highlights
COMMITTEE MEMBER COMMENTS
ADJOURN – NEXT MEETING ON MAY 28, 2025
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 the February 26, 2025, Finance Committee Meeting
Date: April 23, 2025
RECOMMENDATION
Approve.
ATTACHMENT
1. Minutes
Agenda Page 3
MINUTES
Finance Committee
of the Clean Power Alliance of Southern California
Regular Meeting
Wednesday, February 26, 2025, 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:
Carson City Hall
City Manager’s Conference Room
701 East Carson Street
Carson, CA 90745
Clean Power Alliance Office
Executive Conference Room
801 S. Grand Ave., Suite 400
Los Angeles, CA 90017
Calabasas City Hall
Council Conference Room
100 Civic Center Way
Calabasas, CA 91302
Camarillo City Hall
Administrative Conference Room
601 Carmen Drive
Camarillo, CA 93010
Claremont City Hall
Council Office
207 Harvard Avenue
Claremont, CA 91711
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
Chair Santangelo called the meeting to order at 11:00 a.m. and Annie Mendoza, Deputy Board Clerk, conducted roll call.
ROLL CALL
Camarillo Susan Santangelo Committee Chair Remote
Calabasas Ed Albrecht Committee Member Remote
Carson Reata Kulcsar Committee Member Remote
Claremont Corey Calaycay Committee Member Remote
Rolling Hills
Estates
Steve Zuckerman Committee Member Remote
Santa Monica Absent
Thousand Oaks David Newman Committee Member Remote
Finance Committee Item 1
Agenda Page 4
All votes are unanimous, unless otherwise stated.
GENERAL PUBLIC COMMENT
There was no public comment.
CONSENT AGENDA
1. Approve Minutes from the December 3, 2024, Finance Committee Meeting
2. Receive and File January 2025 Risk Management Team Report
3. Receive and File October 2024 Investment Report
4. Receive and File Quarterly Financial Report
Motion: Committee Member Albrecht, Calabasas
Second: Committee Member Calaycay, Claremont
Vote: The consent agenda was approved by a roll call vote.
REGULAR AGENDA
5. Report from the Chief Financial Officer
David McNeil, Chief Financial Officer, discussed results for the first half of the fiscal year. CPA is ahead of budget and has made significant progress toward its days liquidity on hand and reserve targets. Mr. McNeil noted that the January wildfires will not have a material financial or operational impact on CPA.
Committee Member Albrecht asked about future interest rates and whether CPA purchases international or domestic products. Mr. McNeil explained that estimates of interest rates vary. CPA buys only domestically produced electricity but has previously bought power from British Columbia.
6. Receive Presentation on FY 2024-25 Auditor Selection and Provide Staff with Direction
Hui Lisano, Senior Director of Finance and Accounting, presented options for selecting audit services for FY 2024/25 and subsequent years, and requested direction from the Finance Committee. Ms. Lisano requested direction from the Committee on which option to proceed with: Option 1 involves soliciting written quotes from qualified audit firms and Option 2 requests proposals from any auditors, including the big four international accounting firms and local accounting firms.
Committee Member Zuckerman asked about the importance of CCA and municipal electric utility experience and whether staff know which auditors other CCA’s use.
Staff responded that auditors’ experience in both areas is important, and that staff are aware of which auditors are used by CCAs in California. Committee Member Newman asked about the drawbacks of Option 2. Ms. Lisano replied that CPA would receive numerous bids, and reviewing them could take up to 60 days, while the first option would yield three bids, resulting in a shorter processing time.
Committee Member Kulcsar noted support for Option 2, stating that CPA has grown as an organization and may benefit from various proposals. Committee Member Kulcsar suggested that a review committee could be created to help staff review bids.
Committee Member Calaycay asked for staff’s input on reviewing multiple proposals; Mr. McNeil stated that it would take some effort to get auditing firms to Finance Committee Item 1
Agenda Page 5
submit bids. The last time CPA went through this process, seven firms were contacted and only two bids were submitted. Committee Member Newman expressed support for casting a wider net to include different auditing firms, while also being cautious about collaborating with a firm that has no CCA experience.
Committee Member Albrecht expressed support for Option 2, while also noting that with a larger firm, CPA may not receive as much attention or quality customer service.
Chair Santangelo indicated preference for an auditor with experience in electric utilities and CCAs that can also provide the quality of customer service that CPA received from Baker Tilly.
Motion: Committee Member Calaycay, Claremont for Option 2 Second: Committee Member Kulcsar, Carson
Vote: Option 2 of Item 6 was approved by a roll call vote.
COMMITTEE MEMBER COMMENTS
Committee Member Zuckerman asked if CPA still requires a Letter of Credit, even though the organization has been building reserves. Mr. McNeil replied that a Letter of Credit is essential in CPA operations, particularly regarding Resource Adequacy. The alternative would be to post cash, which is not beneficial. In the future, CPA may reduce its total line of credit.
ADJOURN
Chair Santangelo adjourned the meeting at 11:58 a.m.
Finance Committee Item 1
Agenda Page 6
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 February and March 2025 Risk Management Team Reports
Date: April 23, 2025
February 2025 RMT REPORT
Key Actions
• Reviewed the counterparty credit exposure summary
• Reviewed November 2024 day-ahead load forecast performance • Reviewed January 2025 market performance
• Reviewed energy positions and approved 2025-2028 hedge proposal for monthly RFO
• Reviewed positions for Resource Adequacy (RA), RPS and Carbon-Free energy products (CF)
• Reviewed 2025 LT PPA Deliveries
• Reviewed 2025 COD impacts on RA compliance
• Reviewed the 2025-2027 slice of day RA position
• Reviewed 2025 RA Purchase and Sale strategy
• Reviewed a proposal for IST Sales strategy
• Reviewed Energy Risk Management Policy (ERMP) compliance for RA, REC, CF, and Energy
• Reviewed long-term energy contract amendments and terminations • Reviewed February 2025 CRR Allocations
• Reviewed the Negative REC Price Strategy
Agenda Page 7
Policy Compliance
Policy Deviation Required Action
Beginning in June 2024, the renewable
energy hedge ratio exceeded the
maximum hedge ratio limit for 2027
due to the addition of new renewable
energy supply from a PPA. Due to a
calculation error, the exceedance
was not identified until November
2024.
In November 2024, the renewable
energy hedge ratio exceeded the
maximum hedge ratio limit for 2028-
2030 due to a reduction in the
renewable energy product targets
that are used for long-term power
planning and position management.
None.
The deviations for 2027-2030 will resolve
themselves as CPA nears these years and the
maximum hedge ratio limits increase.
In the July 2025 annual ERMP update process,
CPA will consider increasing the maximum hedge
ratio limit for the Prompt Calendar Year (PY) +2 and
beyond to allow for a planning margin to
accommodate volumetric uncertainty associated
with electric consumption and generation. This
will align PY+2 and beyond with the existing
approach to maximum hedge ratio limits in the
current calendar year, PY and PY+1. Adoption of
higher hedge ratio limits in PY+2 and beyond by the
Board in July 2025 would cure the 2027-2030
renewable energy hedge ratio deviations. CPA will
also consider long-term renewable energy product
targets are part of the 2025 Integrated Resources
Plan (IRP).
Beginning in April 2024, the energy
hedge position for the third quarter of
2027 (July to September) exceeded
the maximum hedge limit for that
period.
None.
This policy deviation arises 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.
This deviation is expected to be resolved by Q3
2025 as the electricity production period nears and
the corresponding policy hedge limit maximums
increase above the level of energy hedges under
contract.
Finance Committee Item 2
Agenda Page 8
March 2025 RMT REPORT
Key Actions
• Reviewed the counterparty credit exposure summary
• Reviewed December 2024 day-ahead load forecast performance • Reviewed February 2025 market performance
• Reviewed energy positions and approved 2025-2029 hedge proposal for monthly RFO
• Reviewed positions for Resource Adequacy (RA), RPS and Carbon-Free energy products (CF)
• Reviewed 2025 LT PPA Deliveries
• Reviewed a deal entry issue with an energy sale transaction • Reviewed the 2025-2027 slice of day RA position
• Reviewed 2025 RA Purchase and Sale strategy
• Reviewed Energy Risk Management Policy (ERMP) compliance for RA, REC, CF, and Energy
• Reviewed long-term energy contract amendments and terminations • Reviewed March 2025 CRR Allocations
• Reviewed the Negative REC Price strategy
Finance Committee Item 2
Agenda Page 9
Policy Compliance
Policy Deviation Required Action
Beginning in June 2024, the renewable
energy hedge ratio exceeded the
maximum hedge ratio limit for 2027
due to the addition of new renewable
energy supply from a PPA.
Beginning in November 2024, the
renewable energy hedge ratio
exceeded the maximum hedge ratio
limit for 2028-2030 due to a reduction
in the renewable energy product
targets that are used for long-term
power planning and position
management.
None.
The deviations for 2027-2030 will resolve
themselves as CPA nears these years and the
maximum hedge ratio limits increase.
In the July 2025 annual ERMP update process, CPA
will consider increasing the maximum hedge ratio
limit for the Prompt Calendar Year (PY) +2 and
beyond to allow for a planning margin to
accommodate volumetric uncertainty associated
with electric consumption and generation. This
will align PY+2 and beyond with the existing
approach to maximum hedge ratio limits in the
current calendar year, PY and PY+1. Adoption of
higher hedge ratio limits in PY+2 and beyond by the
Board in July 2025 would cure the 2027-2030
renewable energy hedge ratio deviations. CPA will
also consider long-term renewable energy product
targets as part of the 2025 Integrated Resources
Planning (IRP) process.
Beginning in April 2024, the energy
hedge position for the third quarter of
2027 (July to September) exceeded
the maximum hedge limit for that
period.
None.
This policy deviation arises 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.
This deviation is expected to be resolved by Q3
2025 as the electricity production period nears and
the corresponding policy hedge limit maximums
increase above the level of energy hedges under
contract.
ATTACHMENT
None.
Finance Committee Item 2
Agenda Page 10
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 February and March 2025 Investment Reports Date: April 23, 2025
RECOMMENDATION
Receive and file.
ATTACHMENT
1. February and March 2025 Investment Reports
Agenda Page 11
Agenda Page 12
Clean Power Alliance Investment Report
March 2025
(in USD unless otherwise noted)
Local Agency
Investment
Fund (LAIF)
Certificates of Deposit
(CDs)
California Asset
Management Program
(CAMP)
US Bank Custodial
Account
US Treasury Securities Total
Beginning Balance 17,174 70,000,000 362,584,941 396,822 69,576,411 502,575,348 Deposits & Purchases 0 20,000,000 1,210,689 40,954,025 0 62,164,714 Maturities & Withdrawals 0 20,000,000 97,000,000 0 0 117,000,000 Ending Balance 17,174 70,000,000 266,795,630 41,347,127 69,571,079 447,731,011 Interest Earned* 62 279,718 1,210,689 1,613 266,036 1,758,119 Yield** 4.31% 4.47% 4.47% 4.22% 3.89% 3.97%
Weighted Average Term to Maturity (Months) 7.0 6.9 2.0 1.0 57.0 11.1 **Yield for LAIF & CAMP is reported on a monthly average basis; yield for CDs is determined based on a weighted average annual basis; yield for US Treasuries is equivalent to the coupon rate divided by month-end bond price; total yield is the weighted average yield for the whole portfolio Transaction Type Maturity Maturity Deposit Deposit
Depository River City Bank River City Bank River City Bank River City Bank Par Amount 10,000,000 10,000,000 10,000,000 10,000,000
Rate 5.10% 4.46% 4.36% 4.19%
Placement Date 3/28/2024 9/26/2024 3/27/2025 3/27/2025
Maturity Date 3/27/2025 3/27/2025 9/25/2025 3/26/2026
Term (weeks) 52 26 26 52
Interest Earnings (Total) 521,721 224,866 219,770 426,680 * Interest earned on LAIF is based on daily compounding, account balances and monthly effective yield published by LAIF. Interest earned on CDs is based on the fixed interest rate of each CD and is paid out in full at maturity. Interest earned on UST is based on the yield of each UST and is paid out at maturity (for terms <6mo) or biannually (for terms >6mo) Summary of Transactions (CDs)
Agenda Page 13
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 2025 Financial Dashboard Date: April 23, 2025
RECOMMENDATION
Receive and file.
ATTACHMENT
1. February 2025 Financial Dashboard
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
Non-Operating Income: interest income arising from deposits and investments net of borrowing costs and fees Investments: liquid and high-quality securities with maturities of 91 days or more Cash and Cash Equivalents: Includes bank deposits and high quality and liquid securities with maturities of less than 90 days Year to date (YTD): Represents the fiscal period beginning July 1, 2024 YTD
February
2025
Financial Dashboard
Note: Numbers may not sum up due to rounding.
Active Accounts
1,042,909
Participation Rate
92.9%
YTD Sales Volume
7,488 GWh
Feb Volume
744 GWh
Agr/Oth
2% Com-Lg
18%
Com-Sm
29%
Res
51%
Feb Year-to-Date
in $000,000's Actual Budget Variance % Actual Budget Variance % Energy Revenues 98.0 109.7 -11.7 -11% 1072.3 1106.8 -34.5 -3% Cost of Energy 85.1 92.5 -7.3 -8% 987.5 1072.5 -85.1 -8% Net Energy Revenue 12.9 17.2 -4.3 -25% 84.8 34.3 50.5 147% Operating Expenses 4.4 5.8 -1.4 -24% 31.5 43.9 -12.4 -28% Operating Income 8.5 11.5 -3.0 -26% 53.3 -9.6 62.9
Non-Operating Income 1.5 0.6 0.8 130% 14.1 6.4 7.8 122% Change in Net Position 10.0 12.1 -2.1 -18% 67.4 -3.2 70.7 In February 2025 CPA’s net position increased by $10 million, $2.1 million or 18% less than the budgeted increase in net position of $12.1 million. February 2025 results were negatively impacted by cooler than normal temperatures and lower energy consumption and revenue than budgeted.
For the year-to-date, CPA’s net position increased by $67.4 million, $70.7 million more than the budgeted reduction in net position of $3.2 million. YTD revenues were $1072.3 million, $34.5 million or 3% less than budgeted revenues primarily due to generally cooler weather in the second quarter and lower energy consumption than budgeted. YTD energy cost was $987.5 million, $85.1 million or 8% less than budget primarily due to the non-utilization of contingencies and lower than budgeted renewable energy and capacity costs. Absent contingencies, energy costs were $24.1 million or
2.4% less than budget. Operating expenses were $31.5 million, $12.4 million or 28% less than budget primarily due to lower than budgeted spending on customer programs, communications, and administrative expenses. Non-operating income, primarily made up of interest income, was $14.1 million, $7.8 million or 122% higher than budget.
As of February 28th, 2025, CPA had unrestricted cash, cash equivalents, and investments of $487.2 million, and $154.4 million available in its bank line of credit representing 174 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 5
To: Finance Committee
From: David McNeil, Chief Financial Officer
Subject: Report from the Chief Financial Officer
Date: April 23, 2025
The CFO will provide an oral update on CPA’s financial operations.
Agenda Page 16
Staff Report – Agenda Item 6
To: Finance Committee
From: Kate Freeman, Strategic Finance Manager
Reviewed by: David McNeil, Chief Financial Officer
Nancy Whang, General Counsel
Approved By: Ted Bardacke, Chief Executive Officer
Subject: Receive a Presentation on the J.P. Morgan Credit Agreement and Provide the Board with a Recommendation
Date: April 23, 2025
RECOMMENDATION
Receive presentation on the J.P. Morgan (JPM) credit agreement and provide the Board of Directors with the following recommendation:
A. Reduce the size of the JPM credit facility from $160 million to $120 million B. Delegate authority to staff to further reduce the size of the JPM credit facility to an amount that does not go below $80 million
ATTACHMENT
1. Credit Agreement Update Presentation
Agenda Page 17
Credit Agreement Update
April 23, 2025
Agenda Page 18
Recommend the following to the Board:
A. Reduce the size of the JPM credit facility from $160 million to $120 million
B. Delegate authority to staff to further reduce the size of the JPM credit facility to an amount that does not go below $80 million 2 Recommendation
Agenda Page 19
In September 2021, CPA entered into credit and fee agreements with JPMorgan Chase (together “JPM Credit Agreement”) in an amount of $80 million In June 2023, CPA amended the JPM Credit Agreement to increase the size of the credit facility from $80 million to $160 million to provide additional liquidity In Q4 2023, staff solicited quotes from four banks, including JPMorgan. The JPM Credit Agreement was subsequently amended in December 2023 (to decrease CPA's facility fees) and in February 2024 (to extend the term of the credit agreement from 03/31/24 to 03/31/26)
The amended Credit Agreement includes provisions that allows CPA to reduce the size of the facility. As non-utilization fees are paid based on the unutilized portion of the facility size, a reduction in the size of the facility would reduce non-utilization fees paid by CPA to JPMorgan.
The amended Credit Agreement expires on March 31, 2026
3 Background - Credit Agreement
Agenda Page 20
The JPMorgan credit facility is primarily used for the issuance of letters of credit to support certain regulatory obligations and energy contracts The unused portion of the facility serves as available liquidity to address unexpected and adverse financial events. Cash, investments and the unused portion of the facility together comprise “liquidity” and in sum are used to calculate days liquidity on hand (DLOH)
CPA currently targets a minimum of 150 DLOH to align with the top end of the range S&P describes as “Strong” corresponding with CPA’s A- credit rating 4 Background - Liquidity and DLOH
Highly
Vulnerable Vulnerable Adequate Strong Very Strong
Extremely
Strong
Total Day's
Liquidity (Days) <=15 15 – 45 45 – 90 90 – 150 150 – 270 270+ Agenda Page 21
CPA builds reserves and liquidity pursuant to its board approved Reserve Policy Since 2023, cash and investments represent a growing share of liquidity, while the relative importance of the credit facility to CPA’s liquidity and DLOH is diminishing. This trend is expected to continue into FY 25/26 and beyond 5 Liquidity and DLOH Outlook
Absent an adjustment
to the credit facility
size, CPA’s DLOH is
projected to remain
well above the 150-
day target (see dotted
yellow line)
Agenda Page 22
As CPA’s unrestricted cash and investments continue to increase, staff propose to reduce the size of the credit facility. An initial reduction from $160 million to $120 million is proposed for later this spring
Reducing the facility by $40 million would reduce the monthly non-utilization fee by $11,000, or a total of $110,000 by the end of the JPM Credit Agreement term.
Additional savings could be achieved by further reductions to the credit facility size Staff view reductions in the size of the JP Credit Agreement as consistent with maintaining CPA’s A- credit rating. The resulting cost savings, though modest initially, could contribute to broader efforts to improve affordability Staff will assess the timing and amount for additional credit facility size adjustments in the future with the objective of maintaining CPA's DLOH at or above the 150-day target. Staff will also assess factors to maintaining CPA’s A- credit rating when considering a further reduction in the facility amount
Were CPA to request an increase in the facility size in the future, to for instance support a larger than expected letter of credit issuance, staff expects JPMorgan to be supportive. Increases in facility size can typically be accomplished in 30-60 days 6 Discussion
Agenda Page 23
7 Recommendation
Recommend the following to the Board:
A. Reduce the size of the JPM credit facility from $160 million to $120 million
B. Delegate authority to staff to further reduce the size of the JPM credit facility to an amount that does not go below $80 million Agenda Page 24
Staff Report – Agenda Item 7
To: Finance Committee
From: David McNeil, Chief Financial Officer
Approved By: Ted Bardacke, Chief Executive Officer
Subject: Receive Presentation on FY 2025/26 Budget Priorities and Operating Expense Highlights
Date: April 23, 2025
Staff will provide a presentation on the item.
ATTACHMENTS
1. FY 2025/26 Budget Priorities and Operating Expense Highlights Presentation Agenda Page 25
FY 2025/26 Budget Priorities and
Draft Operating Expenses Budget
April 23, 2025
Agenda Page 26
FY 2025/26 Budget Process
April 23, 2025 (Finance Committee) – Budget Priorities & Draft FY 2025/26 Operating Expenses
May 1, 2025 (Board) – Budget Priorities
May 15, 2025 (Community Advisory Committee) – Draft FY 2025/26 Budget May 15, 2025 (Executive Committee) – Draft FY 2025/26 Budget May 28, 2025 (Finance Committee) – Draft FY 2025/26 Budget June 5, 2025 (Board) – Proposed FY 2025/26 Budget
2 January – April 2025 (Staff) – FY 2025/26 Goal Setting, Departmental Budgeting, Rate Design Planning, Energy Cost Projections & Consolidated Budget Planning (ongoing) April 17, 2025 (Executive Committee) – Budget Priorities Agenda Page 27
Clean Energy Portfolio Delivery and
Competitiveness
1. Approach or reach maximum reserve target
and position CPA for long-term
competitiveness
2. Meet renewable procurement and GHG
emissions targets and develop long-term
rate product strategy
Customer Benefits and Impact
3. Deliver bill savings, environmental
benefits, and enhance grid resiliency via
customer, community and member agency
programs
4. Increase customer engagement while
maintaining customer participation
rates
3 FY 2025/26 Organizational Priorities
Organizational Effectiveness
5. Continuously improve internal systems and
processes
6. Support an engaged, effective Board
7. Invest in and support development of high-performing and diverse staff
8. Track and communicate organization-wide
performance metrics
9. Update processes to minimize
cybersecurity and legal risks
Industry Leadership
10. Comply with or surpass all regulatory and
legal obligations
11. Provide regional and statewide leadership
on addressing issues of reliability,
resiliency, and affordability
Agenda Page 28
4 CPA projects ~$1.2 billion in energy costs for FY 2025/26 representing 94% of total costs.
In addition, CPA contracts for and operationalizes long-term renewable and storage projects involving billions of dollars of financial commitments Short-term energy, resource adequacy and renewable energy costs have fallen, and all eyes are on a possible SCE generation rate reduction and PCIA increase effective January 1, 2026
Federal trade, tariff, and tax policies may increase future renewable energy project costs Electricity affordability has emerged as a key issue in California at the same time that transmission constraints, wildfires, and increased electricity demand are placing pressure on the grid
Staffing cost increases are decelerating as CPA matures and new hires provide primarily professional / technical support
Energy and Operating Expenses Context
CPA Staffing Budget
Budget Budget Budget Budget
FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26
41% 44% 20% 16%
Agenda Page 29
FY 2025/26 Operating Expense Overview
Total operating expense increase of 14% reflects operational priorities including investments in Staffing (+16%), Communications & Marketing (+53%), and Customer programs (+9%) (refer to rows 8, 12, and 16)
$16 million, or 21% of operating expenses (rows 13-15), are fixed by regulation, contract, or policy.
The increase in billing data management services includes costs associated with new rates per contract agreement
5 A B C D E F G H I
FY 2024/25
Budget
FY 2025/26
Budget
Budget
Difference ($)
Budget
Difference (%) % of Revenue
% of
Operating
Expenses
Contingency
($)
Contingency
(%)
7 OPERATING EXPENSES
8 Staffing 24,076,000 27,950,000 3,874,000 16% 2.0% 36% - 0% 9 Technical services 1,936,000 2,465,000 529,000 27% 0.2% 3% 224,134 10% 10 Legal services 1,089,000 1,476,000 387,000 36% 0.1% 2% 134,175 10% 11 Other services 2,257,000 2,802,000 545,000 24% 0.2% 4% 254,733 10% 12 Communications and marketing services 3,982,000 6,079,000 2,097,000 53% 0.4% 8% - 0% 13 Customer notices and mailing services 842,000 1,425,000 583,000 69% 0.1% 2% 67,868 5% 14 Billing data management services 12,041,000 12,279,000 238,000 2% 0.9% 16% 357,653 3% 15 Service fees - SCE 2,250,000 2,403,804 153,804 7% 0.2% 3% 114,467 5% 16 Customer programs 13,208,000 14,425,000 1,217,000 9% 1.1% 19% - 0% 17 General and administration 5,828,000 5,836,000 8,000 0% 0.4% 8% 507,806 10% 18 TOTAL OPERATING EXPENSES 67,509,000 77,140,804 9,631,804 14% 5.6% 100% 1,660,836 2% DRAFT
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FY 2025/26 Operating Expense Increase Drivers
Drivers of increased operating expenses:
• Staffing – 64% of the increase is due to the full-year impact of this year’s new hires, next year’s COLA, and other retention efforts. The growth rate in the staffing budget continues to decelerate (see slides 11-12 for details)
• Coms & Marketing – increased support for customer programs and customer acquisition through website enhancements, market research and CBO-led outreach efforts (see slide 14 for details) • Customer Programs – increased investment in existing programs focused on Power Share, EV SmartCharge, and Energy Advisor (see slide 15-16 for details) 6 A B C D E F
FY 2024/25
Budget FY 2025/26 Budget
Budget
Difference ($)
Budget
Difference (%) % of Revenue
OPERATING EXPENSES
Staffing 24,076,000 27,950,000 3,874,000 16% 2.0%
Communications and marketing services 3,982,000 6,079,000 2,097,000 53% 0.4% Customer programs 13,208,000 14,425,000 1,217,000 9% 1.1% Other Operating Expenses 26,243,000 28,686,804 2,443,804 9% 2.1% TOTAL OPERATING EXPENSES 67,509,000 77,140,804 9,631,804 14% 5.6% Agenda Page 31
Select CCA Metrics and Comparisons
CPA’s metrics for operating expenses and staffing costs compare favorably with industry averages 7 Fiscal Year Budget ($000)
CPA FY2025/26
(Draft) CCA Avg MCE FY2024/25 Sonoma FY2024/25 3CE FY2024/25 Ava FY2024/25 Total Revenue 1,372,000 671,000 788,000 276,000 746,000 873,000 Total Energy Cost 1,228,000 578,000 689,000 187,000 665,000 772,000 Net Energy Revenue 144,000 92,000 99,000 89,000 81,000 101,000 Staffing 28,000 18,000 23,000 11,000 13,000 27,000
Other Operating Expenses 49,000 24,000 23,000 20,000 35,000 19,000 Total Operating Expenses 77,000 43,000 46,000 32,000 48,000 45,000 Net Income 67,000 50,000 54,000 57,000 33,000 56,000
Staffing (% of…)
Revenue 2.0% 2.7% 2.9% 4.0% 1.7% 3.1%
Cost of Energy 2.3% 3.1% 3.3% 5.9% 2.0% 3.5%
Net Energy Revenue 19% 20% 23% 12% 16% 27%
Total Operating Expenses 36% 42% 50% 34% 27% 60%
Net Income 42% 36% 43% 19% 39% 48%
Other Operating Expense (% of…)
Revenue 3.6% 3.6% 2.9% 7.2% 4.7% 2.2%
Cost of Energy 4.0% 4.2% 3.3% 10.7% 5.3% 2.5%
Net Energy Revenue 34% 26% 23% 22% 43% 19%
Net Income 73% 48% 43% 35% 106% 34%
Total Operating Expenses (% of…)
Revenue 5.6% 6.4% 5.8% 11.6% 6.4% 5.2%
Cost of Energy 6.3% 7.4% 6.7% 17.1% 7.2% 5.8%
Net Energy Revenue 53% 47% 46% 36% 59% 45%
Net Income 115% 86% 85% 56% 145% 80%
Gross Margin 10% 14% 13% 32% 11% 12%
Net Margin 5% 7% 7% 21% 4% 6%
Agenda Page 32
Operating expenses are 6% of total costs and are expected to increase by $9.3 million (14%) relative to FY 2024/25, driven mostly by increased spending on Staffing (+$3.9 million), Communications (+$2.1 million), and Customer Programs (+$1.2 million). All other operating expense line items collectively increase by $2.1 million (8%) Staffing cost increases are decelerating, but consolidating the benefits of staffing progress – notably reduced turnover and increased capacity - is dependent on continuing to invest in staff retention and talent acquisition CPA can help mitigate customer's rising electricity bills by developing and delivering customer programs supported by effective marketing and communications CPA continues to compare favorably with other CCAs on operating and staffing expenses
8 Summary
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Questions?
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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 Dashboards, quarterly Financial Reports and audited Financial Statements are presented to Board and are public documents
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Staffing - Context
11 FY 2024/25 budgeted headcount of 90 (including budget for 4 unallocated positions). Current headcount = 86 (with 4 open positions) (see slide 17 for current org chart) Turnover rates have leveled off following high turnover rate experienced during COVID:
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
April 2024 to March 2025 – Hired 14/Net gain of 11
Budgeting 6 new positions in FY 2025/26 (down from 7 in FY 2024/25). New positions address growth in customer programs, communications, energy contracting, data and systems, rates & strategy, risk management and data analytics. (see slide 18 for details) The initial FY 2025/26 staffing budget also includes 4 unallocated positions for potential mid-year and/or “rotational” hires Agenda Page 36
Initial Staffing Budget Projection
12 Initial budget projects staffing costs to increase by 16%, increasing from 1.5% of total revenue in FY 2024/25 to ~2% of revenue in FY 2025/26 (depending on rate approach selected by the Board)
Staffing Budget Breakdown
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Mobile Education Unit Examples
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13 Communications Budget – YOY Comparison
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Proposed $1.2 million increase in Customer Programs budget to fund high-impact programs.
Primary drivers for the increased budget request include:
Budget for some programs decreased relative to FY2024/25 due to lower-than-expected administrative costs (Solar and Battery Access Program), better alignment between program budget and timing of spend (Energized Communities), and timing shifts (Instant AC Savings) Overall long-term spend commitments on Energized Communities and Low-Income AC have not changed but implementation time frames have been extended due to expected velocity of customer and member agency signups
Investing in Existing Programs
Power Share (+$1.4M)
Building off initial success of
~1,000 customer sign-ups in
first 6 weeks of outreach with
85% of charging occurring off-peak
Target enrollment of 9,900
electric vehicles by end of
FY2025/-26
Increase driven by additional
funding capacity from CPUC
combined with completion of
Community Solar projects
Expanding enrollment to 10,450
(from 6,500)
EV SmartCharge (+$1.1M) Energy Advisor (+$300K)
15 Continue to promote services
and newly launched online tools
through expanded marketing
and CBO outreach
Expanding service to include
advice on fire resiliency
measures
Agenda Page 40
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
Power Share/Community Solar (CPUC) 2021 CPUC 403,000 3,865,000 41,000 14,800 4,323,800 24% 4,323,800 - Leverage State Resources
Electric Vehicle Charging (CALeVIP LA & Ventura) 2021 216,000 216,000 1% - 216,000 Strategic with long-term ROI or community benefits potential Power Response/Demand Response 2019 958,000 510,000 113,000 1,581,000 9% - 1,581,000 Power Ready/Backup Power 2021 651,000 10,000 661,000 4% - 661,000 Reach Code Program 2023 525,000 525,000 3% - 525,000
Energy Advisor 2024 624,000 410,000 106,000 1,140,000 6% - 1,140,000 Energized Communities 2024 3,002,000 25,000 3,027,000 17% - 3,027,000 Sun Storage Rebate 2024 1,700,000 260,000 1,960,000 11% - 1,960,000 Instant AC Savings 2024 611,000 377,000 40,000 1,028,000 6% - 1,028,000 Solar and Battery Access 2025 47,000 235,000 143,000 425,000 2% - 425,000 EV SmartCharge 2025 1,500,000 670,000 117,000 2,287,000 13% - 2,287,000 Hard to Reach EV Technical Assistance (new) New 135,000 50,000 185,000 1% - 185,000 Wildfire Recovery (new) New 200,000 165,000 365,000 2% 365,000 Low Income Efficient Cooling - Landlord (new) New 390,000 390,000 2% 390,000 *Total 403,000 14,424,000 2,753,000 533,800 - 18,113,800 100% 4,323,800 13,790,000 *Numbers may not tie out due to rounding
Cost Center Budget
Customer Programs Budget Detail
Agenda Page 41
Agenda Page 42
17 Current Staff Headcount + Proposed Positions
Department Current Positions Proposed New Positions Total Executive (including Board Office) 7 0 7
Legal 3 0 3
Coms & Marketing 11 1 12
Customer Care 4 0 4
Customer Programs 9 1 10
Data & Systems 7 1 8
Finance (including Accounting, FP&A, Load Forecasting, Risk Management, Strategic Initiatives, Treasury)
13 (two open)
2 15
Government Affairs 5 0 5
Operations (including Non-Energy Procurement, Strategic Accounts) 3 0 3 People & Culture/Admin 5
(one open)
0 5
Power Supply 16
(one open)
0 16
Rates & Strategy 3 1 4
Regulatory Affairs 4 0 4
Unallocated (mid-year hires based on need) - Up to 4 TBD Total 90 6-10 96-100
Agenda Page 43