Services of the San Francisco Public Utilities Commission 1 Nikolai J. Sklaroff,
Capital Finance Director
December 12, 2023
Approve Amending Ordinance for
Liquidity Facilities for the
CleanPowerSF Program
Services of the San Francisco Public Utilities Commission Agenda
• Background
• Continued Credit Support
• CPUC Requirement
• Proposed Ordinance and Commission Action
2 Services of the San Francisco Public Utilities Commission Background
• January 23 , 2018 - Board of Supervisors approved
Ordinance 8-18, delegating to the General Manager
authority to enter in credit agreement(s) for CleanPowerSF with a maximum term of six years and a maximum credit
commitment of up to $150,000,000.
• January 23 , 2018 - the Commission approved resolution number 18 -0012 authorizing the SFPUC to enter into a
credit agreement and associated fee agreement with JP
Morgan Chase Bank, with a not-to-exceed $150,000,000
commitment and term of up to six years.
• March 201 8 - CleanPowerSF entered into a 5- year credit agreement, subsequently extended for an additional year expiring in March 2024 in an initial amount of $75,000,000, but subsequently amended to $20,000,000.
3 Services of the San Francisco Public Utilities Commission Why was Credit Support Needed?
4 Services of the San Francisco Public Utilities Commission The Credit Agreement has provided and has been used
for ongoing needs including the following:
• one or more standby letters of credit to secure certain payment obligations of CleanPowerSF pursuant to one
or more Power Purchase Agreements;
• standby letters of credit to satisfy financial security requirements of interconnection agreements with PG&E
for CleanPowerSF solar projects;
• a revolving line of credit that can be drawn upon to meet other working capital needs of CleanPowerSF, if
needed, although the Credit Agreement to date has not
been drawn on for this purpose.
Services of the San Francisco Public Utilities Commission CPUC Requirement
• CleanPowerSF i s also required to post a standby letter of credit to satisfy financial security requirements of the California Public Utilities Commission (CPUC) for
Community Choice Aggregation (CCA) Programs to
provide assurance that costs associated with returning
customers to the incumbent utility provided can be paid. • This financial security requirement is expected to
r
emain in place indefinitely and a decision to
substantially increase the requirement may be made
by the end of the calendar year (December 2023).
• A formal extension of, and increase to, the existing
c
redit agreement will be requested and brought
before the Commission in January 2024 to meet this
requirement ahead of the March 2024 expiration.
5 Services of the San Francisco Public Utilities Commission 6 Form of Documents
Services of the San Francisco Public Utilities Commission
1. Form of Board of Supervisors Ordinance
A
mending Ordinance No. 8-18
Services of the San Francisco Public Utilities Commission 7 Requested Commission Action
Services of the San Francisco Public Utilities Commission • Approve Form of Board of Supervisors
O
rdinance Amending Ordinance No. 8-18
extending the authorization of the General
Manager to enter into agreements to
provide credit support of the CleanPowerSF
Program for a term of up to additional 10
years and not-to-exceed amount of $150
million.
Services of the San Francisco Public Utilities Commission 8 Services of the San Francisco Public Utilities Commission Questions?
AGENDA ITEM
Public Utilities Commission
City and County of San Francisco
DEPARTMENT
Financial Services
AGENDA NO.
10 MEETING DATE December 12, 2023
Approve a Form of Ordinance Amendment and Request its Advancement for Consideration by the Board of Supervisors: Regular Calendar
Project Manager: Nikolai J. Sklaroff
Approve Amending Ordinance for Liquidity Facilities for the CleanPowerSF Program Summary of
Proposed
Commission Action
Approve Proposed Ordinance Amendment extending the
authorization of the General Manager to continue to enter into agreements to obtain up to $150 million of credit support for an additional 10 years for the CleanPowerSF Program; and authorize the General Manager t o seek advancement of the Proposed Ordinance Amendment for consideration by the Board of Supervisors.
Background:
On January 23, 2018 the Board of Supervisors approved Ordinance 08- 18, delegating to the General Manager authority to enter credit agreement(s) for CleanPowerSF with a maximum term of six years and a maximum credit commitment of up to $150,000,000.
On January 23, 2018, the Commission approved resolution number 18- 0012 authorizing the SFPUC to enter into a credit agreement and associated fee agreement with JP Morgan Chase Bank, with a not-to- exceed commitment amount of up to $150,000,000 and term of up to six years, to provide credit support to the CleanPowerSF program. The Credit Agreement was issued and used for several purposes, including providing: a) one or more standby letters of credit to secure certain payment obligations of CleanPowerSF pursuant to one or more Power Purchase Agreements, including early termination payments and monthly payment obligations; b) standby letters of credit to satisfy financial security requirements of interconnection agreements with PG&E for CleanPowerSF solar projects; c) a standby letter of credit to satisfy financial security requirements of the California Public Utilities Commission (C
PUC) for Community Choice Aggregation (CCA)
Programs such as CleanPowerSF, to provide assurance that costs associated with returning customers to the incumbent utility can be paid; and d) a revolving line of credit that can be drawn upon to meet other CleanPowerSF needs, as needed, although the Credit Agreement to date has not been drawn on for this purpose.
History of Credit Support issued under existing authorization:
In March 2018, the SFPUC entered into its current Credit Agreement Execute Agreement: Approve the Form of Bank Credit Agreement in Support of the CleanPowerSF Program Commission Meeting Date: December 12, 2023
Page: 1
with JP Morgan Chase Bank for five years and $75,000,000.
Between July 2019 and May 2022, the SFPUC entered into several amendments to the original March 2018 Agreement:
• Amendment 1 (July 2019) The Credit Agreement was amended to incorporate revised reserve requirements as the
CleanPowerSF program fully expanded. There was no change to the agreement amount and terms.
• Amendment 2 (November 2021) The Credit Agreement was
amended to provide for a decrease in the amount from
$75,000,000 to $20,000,000 and to extend the agreement by one year from March 2023 to March 2024. Additional changes to the agreement included elimination of target reserve requirements, revisions to debt service coverage and rate - setting covenants, changes to on-going reporting requirements to JP Morgan Chase, and changes to events of default.
• Amendment 3 (May 2022) In May 2022, the SFPUC entered into amendments to eliminate and change certain financial covenants from the original Credit Agreement. Specifically, this amendment eliminated the covenant for CleanPowerSF to maintain a specified debt service ratio and changed such financial covenant to commit CleanPowerSF to maintain a specified level of days liquidity on hand.
• Amendment 4 ( anticipated March 2024) Subject to
Commission action today and subsequent Board of Supervisors approval, the SFPUC will enter into an amended and extended credit agreement that will be brought before the Commission for review on January 9, 2024, for CleanPowerSF to satisfy yet to be released revised financial security re
quirements of the
California Public Utilities Commission. The final terms are currently under negotiation.
The purpose of the action requested today is for Commission approval of the form of a Proposed Ordinance Amendment and authorization for the General Manager to seek its advancement for consideration by the Board of Supervisors. The Proposed Ordinance Amendment extends the current authorization of the General Manager to enter into agreements to obtain credit support for the CleanPowerSF Program for an
additional 10 years with no change to the maximum authorized amount of $150 million. The credit support is required for the CleanPowerSF Program to satisfy anticipated increases to financial security requirements of the California Public Utilities Commis sion, in addition to CleanPowerSF’s ongoing credit support needs.
Reasons for the Extension of Authorization:
The extension of the Ordinance is needed for the following reasons:
Pursuant to the on- going power purchase agreements and potentially future agreements, Standby letters of credit ( LOCs) can be issued Execute Agreement: Approve the Form of Bank Credit Agreement in Support of the CleanPowerSF Program Commission Meeting Date: December 12, 2023
Page: 2
under the credit agreements authorized by the ordinance to power providers as collateral if needed, in -lieu of the program posting cash.
Providing such payment security to the power providers has resulted in more favorable power contract pricing and low er power costs for CleanPowerSF. The need for LOCs posted for this purpose has decreased since the CleanPowerSF received its current A2 issuer rating from Moody’s Investors Service in December 2020. However, there is a possibility that future power providers will require collateral postings.
CleanPowerSF has also been required to post financial security requirements to PG&E for certain interconnection agreements for CleanPowerSF solar projects on SFPUC facilities. Similar Standby LOCs for this purpose may be issued in the future for additional solar projects of CleanPowerSF.
The CleanPowerSF program also has posted a standby LOC to PG&E for a financial security requirement of the CPUC to pay for costs of customers returning to the incumbent utility. This financial security requirement is expected to remain in place indefinitely and is expected to increase substantially by the end of the calendar year (December 2023). While CleanPowerSF had anticipated a Proposed Decision to be released in October 2023, no decision has been issued; the SFPUC has proceeded with discussions with the bank without guidance on the new requirements. A formal increase to the existing credit agreement will be requested and brought before the Commission at its January 9,
2024 meeting.
In addition to the Standby LOCs, the Credit Agreement to be brought in January will continue to provide CleanPowerSF with a revolving line of credit that would allow it to meet other working capital program needs, if required.
Summary of
Documents
The following are brief summaries of the documents that the Commission is being asked to approve in form:
Form of Proposed Ordinance Amendment: Board of Supervisors Ordinance Amending Ordinance No. 8-18. The Ordinance extends the authorization of the General Manager to enter agreements to provide credit support for
the CleanPowerSF Program for an additional 10
years, with no change to the maximum allowable amount of $150 million.
Environmental
Review:
This action does not constitute a “project” under the California Environmental Quality Act Guidelines s ection 15378(b)(4) because approval of the Proposed Ordinance Amendment would constitute the creation of a government funding mechanism which does not involve any commitment to a specific project which may result in a potentially significant physical change in the environment.
Attachment: 1. Form of Board of Supervisors Ordinance Amending Ordinance No. 8-18
PUBLIC UTILITIES COMMISSION
City and County of San Francisco
RESOLUTION NO. __________
WHEREAS, The San Francisco Board of Supervisors (Board) established a community choice aggregation (CCA) program in 2004 (Ordinance 86-04) and has implemented the program, called CleanPowerSF, through the work of the San Francisco Public Utilities Commission (SFPUC) in consultation with the San Francisco Local Agency Formation Commission (Ordinances 146-07, 147-07, and 232-09); and
WHEREAS, In order to provide the services of CleanPowerSF, the SFPUC engages in a continual process of procuring power and simultaneously negotiating a mix of short -, medium-, and long-term contracts for a diverse supply of energy and energy -related products with multiple suppliers (Contracts), all in an expedited time frame consistent with regulatory deadlines in order to meet regulatory requirements, secure the best possible prices and terms, keep rates affordable and competitive, and manage procurement risk; and
WHEREAS, The SFPUC has an ongoing need for access to a bank credit facility to secure the obligations of CleanPowerSF to make authorized Contract payments, to meet regulatory requirements, and for other financial obligations for CleanPowerSF, through letters of credit or loans; and
WHEREAS, In order to provide liquidity support, as needed, for authorized power purchase Contracts, to meet regulatory requirements and to enable CleanPowerSF to enter into working capital loans as part of conducting its normal business activities, in Board of Supervisors Ordinance No. 8-18, the Board authorized the General Manager to enter into a bank facility credit agreement with JPMorgan Chase Bank, National Association (JPMorgan) or another entity, subject to the conditions specified in Board of Supervisors Ordinance No. 8-18, including that the total credit commitment under the bank credit facility agreement not exceed $150 million over the term of the agreement, and that the term of the agreement not exceed six years; and WHEREAS, The six-year term authorized under Ordinance No. 8- 18 currently expires at the end of March 2024.T o ensure that the desired essential liquidity support continues to be available on an uninterrupted basis, the SFPUC now seeks to submit to the Board of Supervisors a proposed amendment to Board of Supervisors Ordinance No. 8- 18 (the Proposed Ordinance Amendment) to authorize the General Manager to enter into amendments to or an amended and restated credit agreement with JPMorgan or a replacement bank credit facility with another entity, with a total credit commitment under the bank credit facility agreement not exceeding $150 million and for an additional period or periods not exceeding ten years; and WHEREAS, This action does not constitute a “project” under the California Environmental Quality Act Guidelines section 15378(b)(4) because approval of the Proposed Ordinance Amendment would constitute the creation of a government funding mechanism which does not involve any commitment to a specific project which may result in a potentially significant physical change in the environment; now, therefore, be it
RESOLVED, the Commission hereby approves the form of the Proposed Ordinance Amendment and authorizes the General Manager to direct its advancement for consideration by the Board of Supervisors, with any non- material changes that the General Manager deems necessary to accomplish the purposes of this resolution; and be it FURTHER RESOLVED, The General Manager is authorized to delegate any of the responsibilities or duties authorized in this resolution to the Assistant General Manager, Business Services and Chief Financial Officer of the Commission; and be it FURTHER RESOLVED, This resolution shall take effect from and after its adoption.
I hereby certify that the foregoing resolution was adopted by the Public Utilities Commission at its meeting of December 12, 2023.
Secretary, Public Utilities Commission
FILE NO. ORDINANCE NO.
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25 [Amending Ordinance No. 8-18 Authorizing Agreements - Bank Credit Facility for CleanPowerSF – Public Utilities Commission]
Ordinance amending Ordinance No. 8-18 to authorize the General Manager of the San Francisco Public Utilities Commission to enter into amendments and extensions of, or replacements for, the bank credit facility agreement authorized under Ordinance No. 8-18 to provide liquidity support, as needed, for power purchases, regulatory requirements, and other financial obligations of San Francisco’s CleanPowerSF community choice aggregation program for an additional term or terms not exceeding ten years.
Be it ordained by the People of the City and County of San Francisco:
Section 1. Background and Findings. The Board of Supervisors (the Board) of the City hereby finds and declares as follows:
A. State law allows cities and counties to develop Community Choice Aggregation (CCA) programs, through which local governments supply electricity to serve the needs of participating customers within their jurisdictions while the existing utility continues to provide services such as customer billing, transmission and distribution.
B. The City elected to implement a CCA program, CleanPowerSF, through the San Francisco Public Utilities Commission (PUC), to provide San Francisco residents and businesses the option to receive cleaner, more sustainable electricity at rates comparable to PG&E’s rates. See Ordinance Nos. 86-04,147-07, 232-09, 45-10, 200-12, 78-14 and 75-15; and Resolution Nos. 348-12 and 331-13.
C. I n Ordinance Nos. 75-15, 223-15, 8-18, 11-20, and pursuant to the provisions of Section 21.43 of the Administrative Code as added by Ordinance No. 176-22, and for the
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25 reasons stated therein, to provide the services of CleanPowerSF, the Board of Supervisors has authorized the PUC to use certain standardized industry form contracts, PUC pro forma contracts, and form contracts developed by the joint powers authority California Community Power, for procurement of energy and energy-related products and to deviate from certain otherwise applicable contracting requirements, subject to specified conditions. The Board also delegated authority to the PUC General Manager (General Manager) to enter into agreements with terms in excess of ten years or requiring expenditures of $10,000,000 or more, subject to specified conditions.
D. In Ordinance No. 8-18, and following the solicitation by the PUC for a bank credit facility to provide credit support for purchases of electricity products for CleanPowerSF services and for other program requirements, the Board further authorized the General Manager, subject to the conditions specified in Ordinance No. 8-18, to enter into a bank facility credit agreement with JPMorgan Chase Bank, N.A. (JPMorgan), the selected provider, or another entity, and to waive certain standard City contract provisions and make modifications to the standard City agreements so long as such modifications, in the judgment of the General Manager and the City Attorney, did not materially decrease the City’s rights or materially increase its liabilities, all as specified in Ordinance No. 8-18. Among the conditions applicable to such bank credit facility agreement as provided in Ordinance No. 8-18 was that the total credit commitment under the bank credit facility agreement not exceed $150 million over the term of the agreement, and that the term of the agreement not exceed six years.
E. Under the authority granted by Ordinance No. 8-18, and authorized and approved by Resolution No. 18-0012 adopted by the PUC on January 23, 2018, the PUC has previously entered into a Credit Agreement dated as of March 29, 2018 as amended, and a fee agreement as amended and restated, with JPMorgan (collectively, the Existing Bank
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25 Credit Agreement), which Existing Bank Credit Agreement has a stated expiration date of March 29, 2024.
F. The PUC anticipates having an ongoing need for uninterrupted access to a bank credit facility to provide liquidity support, as needed, for authorized power purchases, regulatory requirements, and other financial obligations for CleanPowerSF through letters of credit or loans.
Section 2. Authorization to Amend, Extend or Replace Bank Credit Facility. The Board hereby amends Ordinance No. 8-18 to extend the limitation on the term of the bank credit facility agreement authorized to be entered into under Ordinance No. 8-18 for an additional period or periods not exceeding ten years. The Board authorizes the General Manager to enter into amendments and/or an amended and restated credit agreement with JPMorgan for the extension of the Existing Bank Credit Agreement and/or a replacement bank credit facility agreement with another entity; provided that (i) the total principal amount of the credit commitment available under the bank credit facility agreement shall not at any time exceed $150 million, (ii) the term of bank credit facility agreement as amended or extended shall not exceed ten years from the current stated expiration date of the Existing Bank Credit Agreement; (iii) the agreements shall be approved by the PUC acting through its Commission in a public meeting, which approval authority may be delegated by the Commission to the General Manager, subject to conditions specified by the Commission in a public meeting; (iv) the provider(s) of future replacement bank credit facilities as undertaken from time-to-time shall be selected in accordance with City procurement processes as then in effect, and (v) all other conditions established by the PUC Commission in its approval of such amendments and/or amended and restated credit agreement or replacement bank credit facility agreements shall be met.
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25 All other terms and conditions of Ordinance No. 8-18 relating to the authorization of the bank credit facility thereunder are hereby incorporated by reference as if set forth in full herein, and except as amended by the terms of this Ordinance, Ordinance No. 8-18 remains in full force and effect with respect thereto.
Section 3. General Authority. The Controller of the City, the Treasurer of the City, the City Attorney, and all other appropriate officers, employees, representatives and agents of the City, the PUC, and all other appropriate officers, employees, representatives and agents of the PUC are hereby authorized and directed, jointly and severally, to take such actions and to execute and deliver such certificates, agreements, requests and other documents, as they may deem necessary or desirable to facilitate and carry out the provisions of this Ordinance.
Section 4. Ratification of Prior Actions. All actions authorized and directed by this Ordinance in connection with the bank credit facility agreement and the amendment, extension or replacement thereof, and heretofore taken are hereby ratified, approved, and confirmed by this Board.
Section 5. Effective Date. This Ordinance shall become effective 30 days after enactment. Enactment occurs when the Mayor signs the ordinance, the Mayor returns the ordinance unsigned or does not sign the ordinance within ten days of receiving it, or the Board of Supervisors overrides the Mayor’s veto of the ordinance.
APPROVED AS TO FORM:
DAVID CHIU, City Attorney
By: __________________________
KATHERINE ORTEGA
Deputy City Attorney