2075 Woodside Road | Redwood City, CA 94061
(650) 260-0005 | peninsulacleanenergy.com
Regular meeting of the Audit and Finance Committee of the Peninsula Clean Energy Authority (PCEA)
AGENDA
Monday, May 13, 2024
8:30 am
PLEASE NOTE: This meeting will be held in a hybrid format with both in-person and Zoom participation options for members of the public;
Board members shall appear in person.
In-Person Meeting Location:
PCEA Lobby, 2075 Woodside Road, Redwood City, CA 94061
Los Banos City Hall, Conference Room B, 520 J Street, Los Banos, CA 93635 M4R 08. CAN TORRES, PUERTO DE ALCUDIA
Garballons 5, Alcudia, Balearic Islands, 07400, ES
Zoom, Virtual Meeting Link:https://pencleanenergy.zoom.us/j/89514559357 Meeting ID: 895-1455-9357 Passcode: 2075 Phone: +1 (669) 444-9171
INTRODUCTION
This meeting of the Peninsula Clean Energy Audit and Finance Committee will be held at the Peninsula Clean Energy Lobby: 2075 Woodside Road, Redwood City, CA 94061 and by teleconference pursuant to California Assembly Bill 2449 and the Ralph M. Brown Act, CA Gov’t Code. Section 54950, et seq. Members of the Committee are expected to attend the meeting in person and should reach out to Assistant General Counsel for Peninsula Clean Energy, Jennifer Stalzer, with questions or accommodation information ([email protected]). For information regarding how to participate in the meeting remotely, please refer to the instructions at the end of the agenda. In addition, a video broadcast of the meeting can be viewed at https://www.peninsulacleanenergy.com/Audit and Finance-committee following the meeting.
Public Participation
The PCEA Audit and Finance Committee meeting may be accessed through Zoom online at https://pencleanenergy.zoom.us/j/89514559357. The meeting ID is: 895-1455-9357 and the passcode is:
2075. The meeting may also be accessed via telephone by dialing +1(669) 444-9171. Enter the webinar ID: 895-1455-9357, then press #. (Find your local number:
https://pencleanenergy.zoom.us/u/kTlH1Ocod). Peninsula Clean Energy uses best efforts to ensure audio and visual clarity and connectivity. However, it cannot guarantee the connection quality.
Members of the public can also attend this meeting physically at the Peninsula Clean Energy Lobby at 2075 Woodside Road, Redwood City, CA 94061.
Written public comments may be emailed to PCEA Board Clerk, Nelly Wogberg ([email protected]) and such written comments should indicate the specific agenda item on which the member of the public is commenting.
Spoken public comments will be accepted during the meeting in the Board Room(s) or remotely through Zoom at the option of the speaker. Please use the “Raise Your Hand” function in the Zoom platform, or 1 1. Approval of Minutes from the August 14, 2023 and September 11, 2023 Audit and Finance Committee Meetings
2. Chair Report
3. Staff Report
4. Appointment of Audit and Finance Committee Chair (Action)
5. Q3 Fiscal Year 2024 Financial Report (Quarter Ending March 31, 2024) (Discussion)
6. Recommend to the Board of Directors to Approve the Establishment of a Rate Stabilization Fund (Action)
7. Review Fiscal Year 2024-2025 Draft Budget (Discussion)
8. Committee Members' Reports (Discussion)
press *6 if you phoned into the meeting, to indicate that you would like to provide comment.
Please note that Peninsula Clean Energy Audit and Finance Committee meetings are a limited public forum, and all public comment must relate to something that is within the subject matter jurisdiction of the Committee. If comments do not relate to the subject matter jurisdiction of the Committee, we will stop the comment and move on to the next speaker. General Counsel will assist in identifying comments that are not related to the subject matter jurisdiction of the Committee.
ADA Requests
Individuals who require 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, should contact Nelly Wogberg, Board Clerk, by 10:00 a.m. on the day before the meeting at ([email protected]). Notification in advance of the meeting will enable PCEA to make reasonable arrangements to ensure accessibility to this meeting, the materials related to it, and your ability to comment.
Closed Captioning is available for all PCEA Board meetings. While watching the video broadcast in Zoom, please enable captioning.
CALL TO ORDER / ROLL CALL / APPROVE TELECONFERENCE PARTICIPATION UNDER AB 2449
This item is reserved to approve teleconference participation request for this meeting by Director pursuant to Brown Act revisions of AB 2449 due to an emergency circumstance to be briefly described.
PUBLIC COMMENT
This item is reserved for persons wishing to address the Committee on any PCEA-related matters that are not otherwise on this meeting agenda. Public comments on matters listed on the agenda shall be heard at the time the matter is called.
Members of the public who wish to address the Committee are customarily limited to two minutes per speaker. The Committee Chair may increase or decrease the time allotted to each speaker.
ACTION TO SET AGENDA AND TO APPROVE CONSENT AGENDA ITEMS
REGULAR AGENDA
ADJOURNMENT
Public records that relate to any item on the open session agenda are available for public inspection. The records are available at the Peninsula Clean Energy offices or on PCEA Website at:
https://www.peninsulacleanenergy.com.
2 JOINING INSTRUCTIONS
3 Instructions for Joining a Zoom Meeting via Computer or Phone Best Practices:
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Options for Joining
Videoconference with Computer Audio - see Option 1 below Videoconference with Phone Call Audio - see Option 2 below Calling in via Telephone/Landline - see Option 3 below
Videoconference Options:
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Option 1 Videoconference with Computer Audio:
From your computer, click on the following link that is also included in the meeting calendar invitation: https://pencleanenergy.zoom.us/j/89514559357 The Zoom application will open on its own or you will be instructed to open Zoom.
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Option 2 Videoconference with Phone Call Audio
From your computer, click on the following link that is also included in the Meeting Calendar Invitation: https://pencleanenergy.zoom.us/j/89514559357 The Zoom Application will open on its own or you will be instructed to Open Zoom. 4 After the application opens, the pop-up screen below will appear asking you to choose ONE of the audio conference options. Click on the Phone Call option at the top of the pop-up screen.
Please dial +1 (669) 444-9171.
You will be instructed to enter the meeting ID: 895-1455-9357 followed by #.
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Audio Only Options:
Please note that if you call in/use the audio only option, you will not be able to see the speakers or any presentation materials in real time.
Option 3: Calling in via Telephone/Landline:
Please dial +1 (669) 444-9171.
You will be instructed to enter the meeting ID: 895-1455-9357 followed by #.
You will be instructed to enter your Participant ID followed by #. If you do not have a participant ID or do not know it, you can press # to stay on the line.
You will be instructed to enter the meeting passcode 2075 followed by #. 5 DATE: May 6, 2024
MEETING DATE: May 13, 2024
VOTE REQUIRED: Majority Vote
TO: Honorable Peninsula Clean Energy Authority Executive Committee FROM: Nelly Wogberg, Board Clerk
SUBJECT: Approval of Minutes from the August 14, 2023 and September 11, 2023 Audit and Finance Committee Meetings
Item No. 1
PENINSULA CLEAN ENERGY AUTHORITY
JPA Board Correspondence
RECOMMENDATION
Approve minutes from the August 14 and September 11, 2023 Audit and Finance Committee Meetings.
ATTACHMENTS:
08-14-2023 A&FC Final Draft Minutes.docx
09-11-2023 A&FC Final Draft Minutes.docx
6 Regular Meeting of the Audit and Finance Committee of the Peninsula Clean Energy Authority (PCEA)
Minutes
Monday, August 14, 2023
8:30 a.m.
Zoom Video Conference and Teleconference
CALL TO ORDER
The meeting was called to order at 8:30 a.m. in virtual teleconference and in the Peninsula Clean Energy Authority lobby.
ROLL CALL
Participating:
Donna Colson, Burlingame
Leslie Ragsdale, Hillsborough
Marty Medina, San Bruno
Absent: Carlos Romero, East Palo Alto
Jeff Aalfs, Portola Valley
A quorum was established.
PUBLIC COMMENT
None
ACTION TO SET AGENDA AND TO APPROVE CONSENT AGENDA ITEMS MOTION: Director Medina moved, seconded by Director Ragsdale to set the Agenda.
MOTION PASSED: 3-0 (Absent: East Palo Alto, San Bruno)
JURISDICTION BOARD MEMBER YES NO ABSTAIN ABSENT
Burlingame Director Colson X
East Palo Alto Director Romero X
Hillsborough Director Ragsdale X
Portola Valley Director Aalfs X
San Bruno Director Medina X
Totals 3 2
REGULAR AGENDA
1. Chair Report
Chair Colson shared that Peninsula Clean Energy is working with a recruiting firm for the Chief Financial Officer Recruitment.
7 2. Staff Report
Andy Stern, Interim Chief Financial Officer, provided an update to the Committee including an audit update with Picenti & Brinker including the audit schedule, and a potential special Audit and Finance Committee Meeting on September 11, 2023. They would target the October 26th Boardmember to approve the final audited financials. Andy noted that Peninsula Clean Energy is out of compliance with the investment policy at the moment as they are not allowed to have more than 20% of their assets in money market funds and he began discussions with Schwab and Fidelity.
Chair Colson explained that this cap on the money market fund might have to do with fees and active management fees and she asked if it makes sense to hire PFM to actively manage the portfolio and then they hire someone to put money into their money market fund.
Andy explained that the recommendation is that Peninsula Clean Energy go into a camp fund, which is a pool of purchased money market investments and the earning is 4.75% or 5.5% now, so rates are good. This allows them to get around the rule by basically investing in an investment vehicles. For example, Silicon Clean Energy has all of their money in this camp fund, but this is because they have been slow to implement what they agreed is their policy.
Chair Colson commented that the ladder approach is not the most optimal investment strategy because of volatility on securities. Andy suggested scheduling this for discussion at a special meeting in September.
3. Review Financial Reports and Investment Summary for 4th Quarter Fiscal Year (FY) 2022-2023 (Discussion)
Andy Stern, Interim Chief Financial Officer, gave a presentation on the preliminary Fiscal Year (FY) 2022-2023 Quarter 4 and End of Year Financial Report including load performance, the quarterly and monthly trend for revenue, the quarterly and monthly trend for cost of energy, financial performance year-to-date actual versus budget, the change in net position, days cash on hand, and the quarterly trend in cash and investment summary.
Chair Colson asked if the numbers are higher and she asked what for the percentage. Andy said they budgeted much higher Resource Adequacy for this coming fiscal year and explained the monthly trends driven by gas prices spiking. He pointed to 3 highlights regarding total costs and energy costs, year to date increases because of revenues, and total operating expenses.
Public Comments: None
Chair Colson asked about the $14.7 million cash with the California Independent System Operator (CAISO) not being included on the summary. Andy explained it is not required, but the total collateral would be between $6 and $8 million. Peninsula Clean Energy has collateral of $18 million because they were given $3 or $4 million of unsecured credit and then they have $14.7 million with CAISO. They are probably over-deposited by about $8 or $10 million at the moment; however, in the summer, when collateral requirements will increase, they pay interest on it and there is not much reason in moving it back and forth, so they have been leaving it there.
Chair Colson asked if it is held as a reclassified asset and not as cash. Andy explained it could be actively managed but when they make a collateral call, it needs to be paid in two days. Chair Colson noted that it is important to know we have a hedge there. 8 4. Recommend to the Board of Directors Approval of an Update to Policy 14, Delegation of Authority Policy (Action)
Andy Stern, Interim Chief Financial Officer, explained the reasoning behind updating Policy 14 which is delegation of authority, and the proposed changes.
Director Ragsdale commented that she thinks the updates make sense.
Director Medina asked after the approval is completed, who is informed that it happened. Andy explained that the revised policy requires a monthly written report upon request. This policy does not authorize payment but instead authorizes signing the contract or commitment. The payment is handled on multiple levels. Director Medina noted that at the City level, he has seen contracts deliberately kept under $100,000 and repeated.
Chair Colson asked if it is cumulative or individual. Andy explained that the language in the agreement says “CEO/CFO may approve and enter into any contract agreement if the total amount payable under the agreement is less than $100,000 in any fiscal year.” This does not preclude separate agreements so there is no policy that will be foolproof.
Shawn Marshall, Chief Executive Officer, noted that it may be important internally if they are going to expand who is able to approve, that they keep a monthly record which should come as part of a report.
Chair Colson said the report should be monthly and cumulative to see what has been paid. She asked if $100,000 is enough as this gets used up quickly. Andy explained that he believes the Joint Powers Authority (JPA) might hold that $100,000 limit and if changed, the JPA would need to be updated.
Chair Colson suggested it may be important to look at the JPA for updating that could be needed.
Andy asked if the report should be monthly and if “upon request” be removed from the policy.
Shawn explained that her intention would be an internal operating policy that requires weekly and monthly reports and a cumulative report that goes to the CEO. Andy said this would enable them to easily respond to requests.
Director Ragsdale noted it should be shared internally among the c-suite.
Chair Colson emphasized this does not need to be codified in Board policy but should be an internal policy.
MOTION: Director Medina moved, seconded by Director Ragsdale to Recommend approval by the full Board of Directors approve a revised Policy number 14 at its meeting on August 22, 2023.
MOTION PASSED: 3-0 (Absent: East Palo Alto, Portola Valley) 9 JURISDICTION BOARD MEMBER YES NO ABSTAIN ABSENT
Burlingame Director Colson X
East Palo Alto Director Romero X
Hillsborough Director Ragsdale X
Portola Valley Director Aalfs X
San Bruno Director Medina X
Totals 3 2
5. Recommend to the Board of Directors Approval of an Update to Policy 17, disbursement and Invoice Payment Policy (Action)
Andy Stern, Interim Chief Financial Officer, explained the reasoning behind updating Policy 17 and the proposed changes including the 3 categories of approval levels:
1. Invoices not related to Power Resources
2. Invoices related to Power Resources administration activities
3. Invoices related to Energy/Electricity procurement
Chair Colson asked and confirmed examples include:
1. Rent, program expenses, rebates to customers
2. Administrative services, forecasting services, hiring legal review, scheduling coordinators, and
3. Payments to Wright Energy and different power providers Andy continued explaining that for 1, it would be reviewed by a Manager, Director, and then the CEO/CFO.
Chair Colson asked if things have been running smoothly. Andy explained that there have been no issues, but sometimes wrong invoices have been caught.
Shawn Marshall, Chief Executive Officer, explained this is a checks and balances policy. They have had some internal meetings about deadlines to get approvals in and make sure everything is flowing, but also it allows them to review things to conduct a checks and balance.
Andy shared that the change for Area 3 for Level 1 and 2 would change to increase to $3,000,000 sharing that 378 payments fall into these categories and only 13 fell into this range. He further explained that the review is done by two Managers, the Director, and the CEO does a final check for anomalies. Shawn added that this was a bottleneck previously.
Director Ragsdale asked what if the change is $3 million, and Andy said before, the prior CEO was approving every single invoice, and said he always approves every single invoice.
Chair Colson explained that at the start of Peninsula Clean Energy there were fewer contracts, but at this level, it has become unmanageable. Andy explained there is an additional check, and any payment sent in a wire must be released by Shawn.
Chair Colson noted that the process by which money was wired and transferred, noting the training around phishing, and that there was a situation which was rectified which resulted in these policies being put in place. She asked if training was included for Staff, and Shawn confirmed. 10 Andy shared that all wire transfers are set up with 3 levels of scrutiny, which he described.
Director Ragsdale asked if there has been any problem where some minor vendor insists on a wire for a small amount, and Andy explained they would resist that and they also do a verbal check of the wire instructions with the contact, so they make a phone call, through an email to verify.
Public Comment: David Mauro
MOTION: Director Ragsdale moved, seconded by Director Medina to Recommend approval by the full Board of Directors approve a revised Policy number 17 at its meeting on August 22, 2023 MOTION PASSED: 3-0 (Absent: East Palo Alto, Portola Valley)
JURISDICTION BOARD MEMBER YES NO ABSTAIN ABSENT
Burlingame Director Colson X
East Palo Alto Director Romero X
Hillsborough Director Ragsdale X
Portola Valley Director Aalfs X
San Bruno Director Medina X
Totals 3 2
6. Committee Members’ Reports
Chair Colson shared a report from the second meeting of the Surplus Fund Ad-hoc Subcommittee, noting that everyone has been collaborative and thoughtful and they are on track to come up with an overall strategy. She added that the Committee has been discussing ways to broadly impact clients and create structural ways to reduce carbon and structural ways to reduce the cost of electricity as opposed to one-time benefits.
Shawn and Directors acknowledged Andy for his expertise and time, and thanked him.
ADJOURNMENT
The Meeting was adjourned at 9:43 a.m.
11 Regular Meeting of the Audit and Finance Committee of the Peninsula Clean Energy Authority (PCEA)
Minutes
Monday, September 11, 2023
8:30 a.m.
Zoom Video Conference and Teleconference
CALL TO ORDER
Meeting was called to order at 8:41 a.m. in virtual teleconference and in the Peninsula Clean Energy Authority lobby.
ROLL CALL
Participating:
Donna Colson, Burlingame
Carlos Romero, East Palo Alto
Leslie Ragsdale, Hillsborough
Jeff Aalfs, Portola Valley
Marty Medina, San Bruno, arrived at 9:31 a.m.
Absent: None
A quorum was established.
PUBLIC COMMENT
None
ACTION TO SET AGENDA AND TO APPROVE CONSENT AGENDA ITEMS MOTION: Director Aalfs moved, seconded by Director Ragsdale to set the Agenda.
MOTION PASSED: 4-0 (Absent: San Bruno)
JURISDICTION BOARD MEMBER YES NO ABSTAIN ABSENT
Burlingame Director Colson X
East Palo Alto Director Romero X
Hillsborough Director Ragsdale X
Portola Valley Director Aalfs X
San Bruno Director Medina X
Totals 4 1
REGULAR AGENDA
1. Chair Report
None
12 2. Staff Report
Andy Stern, Interim Chief Financial Officer, provided an update to the Committee on the audit update and the audit schedule, including an offer for 2 Committee Members to join in a meeting with the auditors.
3. Investment Management and Investment Policy Review (Discussion) Andy Stern, Interim Chief Financial Officer, gave a presentation including content and the status on cash and investment management, including the status relative to Peninsula Clean Energy (PCE) Investment Policy 19, noting PFM has helped PCE write their last investment policy when they went to an investment management firm, and Monique Spyke from PFM will provide a slide presentation.
Andy described investments with Schwab and Fidelity which have been added, with the bulk in money market institutional funds which exceeds the 25% maximum investment policy as well as exceedance in the up to 10% policy in any one money market fund. He is looking for input from the committee about revisions to the investment policy, whether they want a reduction in the number of institutions, whether they want limitations on amounts with any one institution, and noted $125 million is actively managed by PFM and First Republic, and they could broach Fidelity and Schwab to do the same thing as PFM and First Republic.
Chair Colson asked for clarification on the 10%. Andy explained that that with a total cash/investment balance of $266 million, it is hard to argue that Fidelity and Schwab are not over the 10% rule.
Monique Spyke, PFM Asset Management, gave a presentation on Peninsula Clean Energy’s investment portfolio, with a market value portfolio of about $241 million which does not include the operating accounts at First Republic. She discussed securities at 51% of the total, money market fund allocation at 49%, noting they are limited by the California Government Code Section 53601-L which states money market fund investments are limited to 20% of the portfolio. She then spoke about the money market fund breakdown, the limitation for PCE of 10% per fund which is an additional restriction they have flexibility to change, Chair Colson added that if they have an actively managed portfolio, Peninsula Clean Energy did not want the money manager to use more than 10%, noting that the 10% policy was around the actively managed portfolios and not PCE’s pool portfolio.
Monique suggested that the 10% restriction can be removed on money market funds to give more flexibility if PCE decides to use money market funds as a place to hold larger sums of cash outside of the portfolios. The asset managers also have guidance around their use of money market funds, whether it be the duration strategies are longer or others. The reason they broke this out by dollar value is so PCE can see where the opportunity set is to move cash. The two funds out of compliance are Fidelity and Schwab because there are large sums of cash there.
Andy added the biggest Local Government Investment Pool (LGIP) is the County pool and they would not let PCE in as they did not want to expand any longer.
Chair Colson asked why it must be a ladder portfolio and not actively managed. Andy explained that these have been used interchangeably and referred to them as being used as multiple term investments. Andy shared that at the same time in the Surplus Funds Committee Meeting there 13 is an expectation currently that $20 to 30 million will come out of the $70 million allocation in the form of a rebate or something similar.
Monique added that the California Asset Management Program (CAMP) is an option. PFM is the investment advisor and government administrator for CAMP. They would not charge any fees associated with any funds PCE would have in CAMP. The current yield is 5.54% so it is the highest among all options described and they have been the highest levels they have been in the past 15 years.
Chair Colson asked where risk is being added to yield higher returns. Monique explained that the funds are in government funds, with additional yield because they can use commercial paper and other investments. CAMP is restricted to CA Government Codes.
Chair Colson asked if there is a BOD for CAMP. Monique confirmed that PFM is hired by CAMP which has a BOD which oversees the program and higher advisors. Chair Colson asked about the fees. Monique explained there are no fees to join and are incorporated into the yield. CAMP has overnight liquidity and noted that Silicon Valley Clean Energy uses CAMP.
Chair Colson asked if yields drop, they will depreciate the value, so they would make up some of the losses they have experienced when the yields rose. Monique confirmed and concluded her options for the $70 million and she can next talk about the investment policy changes.
Chair Colson shared that the options are asset allocation reduction and decide if we want to move to a fund or an actively managed portfolio, and how many managers they want. They have PFM, First Republic which is a separate legal entity, and 2 money market Schwab accounts. Chair Colson shared she thinks PCE would want to reduce, change the structure, or they can consolidate.
Shawn Marshall, Chief Executive Officer, asked if they need to maintain Schwab and Fidelity.
Chair Colson said she thinks the question is how many managers PCE should have. Director Aalfs noted Schwab and Fidelity are not actively managed. Chair Colson shared that they are actively managed, though not in particular for PCE. Shawn noted that once the allocation is figured out, the question is whether PCE needs 4 actively managed accounts.
Director Ragsdale asked how the custodial account at US Bank works. Chair Colson explained that US Bank makes sure securities are held in Peninsula Clean Energy’s name. PCE always has a direct relationship with the bank to freeze accounts and hire a new manager.
Public Comments: None
Andy noted PFM is a subsidiary of US Bank and if they do not like PFM, they can hire a paper money manager with funds still held at US Bank.
Director Romero asked if Peninsula Clean Energy were to move money into CAMP if it would be managed by PFM. Monique explained that CAMP has a 3rd party custodian which is also US Bank, so PFM is not holding any of the assets and they could not move money in and out of CAMP. Because PFM is the program administrator of CAMP, they can do consolidated reporting, see CAMP balances, and take that into account for compliance purposes, but they would never be able to move funds.
Chair Colson asked what would be the benefit of having CAMP and CAMP-M as an active manager. Monique explained that PCE knows their process, they think PCE is confident in their 14 ability to manage assets, there is consolidated reporting, and they have the ability to see CAMP accounts.
Chair Colson said their overall philosophy will be similar between PCE’s actively managed portfolio and the CAMP portfolio. She thinks the environmental, social, and governance (ESG) would be slightly different. Monique said the ESG overlay is not necessarily applicable to the CAMP portfolio.
Chair Colson clarified that if they put it in CAMP, they cannot have the ESG overlay and they may not want to. Andy added that PFM has a robust ESG management and oversight. The First Republic site does not. They have asked First Republic not to invest in energy-related stocks or bonds, but they do not have the same level of ESG overlay.
Chair Colson said she is trying to explain the difference between the pooled CAMP account and PCE’s. To her, they would either consolidate and have one or the other, so she does not understand why they would have both accounts. Andy shared they do not have fees on them, and right now Staff does not have to keep track of them, but they do with Fidelity and Schwab.
Director Romero shared that he thinks there are benefits to CAMP, but it may be a hassle for Staff. Andy explained it is no more hassle than having Fidelity and Schwab the way they are set up now. Director Romero shared that CAMP has had decent performance, but suggested looking at this more seriously.
Chair Colson said she is assuming that PFM has an investment philosophy. Monique shared that what is the same between the CAMP portfolio and the PCE portfolio is their credit philosophy which does not change. The CAMP program is a very short duration fund. The maximum maturity is 60 days. It is an overnight investment pool and managed very differently.
Chair Colson said personally, as much as she likes the CAMP fund, she would like someone actively managing this the fund. Monique said she would advise it is time to move funds, and there are also options to join CAMP as an investor and where you have no say over what goes on, or joint as a participant where you are able to vote on the Board of Trustees or investment policy changes and things like that. Chair Colson said she would likely not suggest that given how small they are.
Director Aalfs said they could ask Fidelity and Schwab to be active money managers, and Chair Colson said yes. Most likely what they would do is they might pull out their securities and set them up into a separate account so they would not have transaction fees.
Director Romero asked if PCE can keep First Republic Bank. Chair Colson explained you could use CAMP with First Republic Bank because their operating account is there and put $20 million in there, and she would use PFM for actively managed piece as a secondary overlay.
Chair Colson added that they can keep First Republic Bank’s actively managed team. Her issue is that she has been working with them a lot and she thinks the bankruptcy destroyed a lot of wealth in that organization, and they did not do a great job managing the whole Silicon Valley problem. They were actively talking with their internal people but did not do a good job of stemming the problem, and they were overleveraged at that bank so she worries about the lack of stability at that organization as they transition over to Chase. Her choice would be Fidelity because Schwab is a different entity.
15 Chair Colson shared that they should do no more than 3 organizations other than operating banks.
Director Romero agreed, but he asked if Staff would feel overburdened with 4 organizations. Andy shared that this is not overburdensome.
Chair Colson asked Andy to check on options and highlight restrictions on the CAMP, what fees would look like, yields, and understanding costs.
Public Comments: None
Shawn Marshall referred to the CFO interview process, and she is personally in favor of fewer than 4 organizations. She thinks the CFO should wear multiple hats because they have such a small team. The CFO will really have to understand the breadth and depth of this, and right now, she would be in favor of fewer than 4 organizations.
Chair Colson said if it is set in a way where there is 280 of cash on hand, it is untouchable. The question is one or two managers, and then taking the overage of $70 million or whatever it is and putting it in a CAMP fund, which is a short-term duration, less volatility, unlikely to have huge changes.
Monique continued the presentation with the Peninsula Clean Energy investment policy review, given changes in the Government Code.
Chair Colson asked for a super national example, and Monique shared this would be World Bank.
Andy asked why they decided not to include it, and Monique said it was not clear that all managers would be able to properly investigate or monitor for these investments.
Chair Colson asked if PFM feels comfortable working with them, and Monique confirmed and said PFM has a separate committee for asset backed securities.
Monique added that they will use the 10% money market in the policy, and this is something they could strike if needed.
Chair Colson said she thinks this will be Board level decisions, appreciates the opportunity to work with PFM, said Monique has been a great partner, and they all appreciate her guidance and the opportunity to work with her.
4. Committee Members’ Reports
None
ADJOURNMENT
The Meeting was adjourned at 9:50 a.m.
16 DATE: April 30, 2024
MEETING DATE: May 13, 2024
VOTE REQUIRED: None
TO: Honorable Peninsula Clean Energy Authority Audit and Finance Committee FROM: Nicholas Bijur, Chief Financial Officer
SUBJECT: Q3 Fiscal Year 2024 Financial Report (Quarter Ending March 31, 2024) (Discussion)
Item No. 5
PENINSULA CLEAN ENERGY AUTHORITY
JPA Board Correspondence
RECOMMENDATION
Receive report and provide any feedback. This is a discussion item only.
BACKGROUND
Staff will review financial results for the quarter ending March 31, 2024 and year-to-date.
ATTACHMENTS:
3Q 2024 Finanical Package.pdf
17 Fiscal Year Actual/Budget Amount Fiscal Year Actual/Budget Amount June 30, 2016 Audited ($1,044) June 30, 2016 Audited $3,833 June 30, 2017 Audited $21,711 June 30, 2017 Audited $18,882 June 30, 2018 Audited $85,365 June 30, 2018 Audited $64,689 June 30, 2019 Audited $140,139 June 30, 2019 Audited $114,069 June 30, 2020 Audited $189,072 June 30, 2020 Audited $177,629 June 30, 2021 Audited $180,717 June 30, 2021 Audited $165,652 June 30, 2022 Audited $167,671 June 30, 2022 Audited $135,090 June 30, 2023 Audited $307,626 June 30, 2023 Audited $254,074 March 31, 2024 Actual $392,015 March 31, 2024 Actual $366,044 June 30, 2024 Updated Forecast $404,352 June 30, 2024 Updated Forecast $381,949 June 30, 2024 Budget $425,043 June 30, 2024 Budget $377,162 Fiscal Year Actual/Budget Amount Fiscal Year Actual/Budget Amount FY2015-2016 Audited ($1,044) FY2015-2016 Audited $0
FY2016-2017 Audited $22,755 FY2016-2017 Audited $64,501 FY2017-2018 Audited $63,655 FY2017-2018 Audited $170,135 FY2018-2019 Audited $54,774 FY2018-2019 Audited $194,035 FY2019-2020 Audited $48,933 FY2019-2020 Audited $216,066 FY2020-2021 Audited ($8,355) FY2020-2021 Audited $213,834 FY2021-2022 Audited ($13,046) FY2021-2022 Audited $226,678 FY2022-2023 Audited $139,955 FY2022-2023 Audited $265,208 FY2023-2024 Updated Forecast $96,726 FY2023-2024 Updated Forecast $333,945 FY2023-2024 Budget $124,612 FY2023-2024 Budget $311,261 Fiscal Year Actual/Budget Amount Fiscal Year Actual/Budget Amount FY2015-2016 Audited $0 FY2015-2016 Audited $1,041
FY2016-2017 Audited $93,129 FY2016-2017 Audited $5,603
FY2017-2018 Audited $244,738 FY2017-2018 Audited $10,836 FY2018-2019 Audited $259,782 FY2018-2019 Audited $12,877 FY2019-2020 Audited $278,093 FY2019-2020 Audited $15,272 FY2020-2021 Audited $228,101 FY2020-2021 Audited $22,469 FY2021-2022 Audited $237,899 FY2021-2022 Audited $19,861 FY2022-2023 Audited $428,218 FY2022-2023 Audited $25,946 FY2023-2024 Updated Forecast $453,691 FY2023-2024 Updated Forecast $35,668 FY2023-2024 Budget $474,624 FY2023-2024 Budget $39,396
Peninsula Clean Energy
Performance at a Glance
Results for the Fiscal Quarter Ended
March 31, 2024
($000s)
Net Position Balance Unrestricted Cash/Investments Balance Revenues Total Other Operating Expenses
Change in Net Position Cost of Electricty
18 Peninsula Clean Energy
Performance at a Glance
Results for the Fiscal Quarter Ended
March 31, 2024
($000s)
YTD Revenues YTD Expenses
Customer Accounts Energy Used
283,346 , 91%
28,845 , 9%
Customer Accounts
Residential Commercial/Industrial
1,075,134 ,
42%
1,487,294 ,
58%
YTD Energy Usage (MWh)
Residential Commercial/Industrial
$343,942
$365,807
$0 $50,000 $100,000$150,000$200,000$250,000$300,000$350,000$400,000 YTD Revenues - Actual vs. Budget
Actual Revenues - YTD Budget Revenues - YTD
$272,038
$270,003
$0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 YTD Expenses - Actual vs. Budget
Actual Expenses - YTD Budget Expenses - YTD
19 1
ACCOUNTANTS’ COMPILATION REPORT
Board of Directors
Peninsula Clean Energy Authority
Management is responsible for the accompanying financial statements of Peninsula Clean Energy Authority (PCE), a California Joint Powers Authority, which comprise the statement of net position as of March 31, 2024, and the statement of revenues, expenses, and changes in net position, and the statement of cash flows for the period then ended, in accordance with accounting principles generally accepted in the United States of America. We have performed a compilation engagement in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the AICPA. We did not audit or review the accompanying statements nor were we required to perform any procedures to verify the accuracy or completeness of the information provided by management. Accordingly, we do not express an opinion, conclusion, nor provide any assurance on these financial statements.
Management has elected to omit substantially all of the note disclosures required by accounting principles generally accepted in the United States of America in these interim financial statements.
PCE’s annual audited financial statements will include the note disclosures omitted from these interim statements. If the omitted disclosures were included in these financial statements, they might influence the user’s conclusions about the Authority’s financial position, results of operations, and cash flows. Accordingly, these financial statements are not designed for those who are not informed about such matters.
We are not independent with respect to PCE because we performed certain accounting services that impaired our independence.
Maher Accountancy
San Rafael, CA
April 24, 2024
1101 Fifth Avenue, Suite 200 San Rafael, CA 94901 415 459 1249 mahercpa.com 20 ASSETS
Current assets
Cash and cash equivalents 156,867,266$
Accounts receivable, net of allowance 29,639,650
Accrued revenue 22,284,844
Investments 16,451,888
Other receivables 4,821,365
Prepaid expenses 1,258,741
Deposits and other assets 5,300,858
Total current assets 236,624,612
Noncurrent assets
Investments 191,389,376
Other receivables 3,609,149
Deposits and other assets 190,212
Lease asset, net of amortization 1,231,792
Construction in progress 3,946,385
Capital assets, net of depreciation 348,738
Total noncurrent assets 200,715,652
Total assets 437,340,264
LIABILITIES
Current liabilities
Accrued cost of electricity 30,655,613
Accounts payable 2,705,851
Other accrued liabilities 1,120,797
Deferred revenue 4,598,252
User taxes and energy surcharges due to other governments 1,167,982 Deposits - energy suppliers 1,889,999
Lease liability 524,012
Total current liabilities 42,662,506
Noncurrent liabilities
Deposits - energy suppliers 1,799,451
Lease liability 862,826
Total noncurrent liabilities 2,662,277
Total liabilities 45,324,783
NET POSITION
Net investment in capital assets 3,997,364
Unrestricted 388,018,117
Total net position 392,015,481$
As of March 31, 2024
STATEMENT OF NET POSITION
PENINSULA CLEAN ENERGY AUTHORITY
See accountants' compilation report. 2 21
OPERATING REVENUES
Electricity sales, net 337,382,797$
Green electricity premium 2,263,595
Liquidated damages revenue 2,090,711
Grant revenue 2,205,076
Other income 1,602,792
Total operating revenues 345,544,971
OPERATING EXPENSES
Cost of electricity 245,240,444
Contract services 9,292,846
Staff compensation 7,022,892
Other operating expenses 10,016,504
Depreciation and amortization 428,680
Total operating expenses 272,001,366
Operating income (loss) 73,543,605
NONOPERATING REVENUES (EXPENSES)
Interest and investment returns 10,882,981
Finance costs (37,097)
Nonoperating revenues (expenses), net 10,845,884
CHANGE IN NET POSITION 84,389,489
Net position at beginning of period 307,625,992
Net position at end of period 392,015,481$
PENINSULA CLEAN ENERGY AUTHORITY
STATEMENT OF REVENUES, EXPENSES
AND CHANGES IN NET POSITION
Nine Months Ended March 31, 2024
See accountants' compilation report. 3 22
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers 353,366,262$
Receipts from grantors 2,205,076
Receipts of supplier security deposits 13,369,438
Other operating receipts 1,598,003
Payments to suppliers for electricity (227,955,749)
Payments for other goods and services (21,433,749)
Payments for deposits and collateral (2,238,725)
Payments of staff compensation (6,962,570)
Payments of taxes and surcharges to other governments (4,871,929) Net cash provided (used) by operating activities 107,076,057
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Payments of lease obligation (410,185)
Payments to acquire capital assets (3,653,463)
Net cash provided (used) by capital and related financing activities (4,063,648)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from investment sales 39,936,072
Investment income received 6,160,211
Purchase of investments (122,466,715)
Net cash provided (used) by investing activities (76,370,432) Net change in cash and cash equivalents 26,641,977
Cash and cash equivalents at beginning of period 130,225,289 Cash and cash equivalents at end of period 156,867,266$
SUPPLEMENTAL CASH FLOW INFORMATION
Capital acquisitions included in accounts payable and other liabilites 142,713$ Nine Months Ended March 31, 2024
STATEMENT OF CASH FLOWS
PENINSULA CLEAN ENERGY AUTHORITY
See accountants' compilation report. 4 23
RECONCILIATION OF OPERATING INCOME (LOSS) TO NET
CASH PROVIDED (USED) BY OPERATING ACTIVITIES
Operating income (loss) 73,543,605$
Adjustments to reconcile operating income to net
cash provided (used) by operating activities
Depreciation and amortization expense 428,680
(Increase) decrease in:
Accounts receivable 7,585,149
Accrued revenue (60,284)
Other receivables 671,189
Prepaid expenses 7,307,468
Deposits and other assets 11,998,813
Increase (decrease) in:
Accrued cost of electricity 5,009,044
Accounts payable 1,544,736
Other accrued liabilities 233,883
Deferred revenue (245,811)
User taxes and energy
surcharges due to other governments (72,314)
Deposits - energy suppliers (868,100)
Net cash provided (used) by operating activities 107,076,057$ Nine Months Ended March 31, 2024
STATEMENT OF CASH FLOWS (continued)
PENINSULA CLEAN ENERGY AUTHORITY
See accountants' compilation report. 5 24
Cash Receipts .00 40,000,000.00
Taxable Interest 95,207.98 1,101,430.64Realized Gain/Loss - 143,640.23 - 1,208,636.63 Change In Unrealized Gain/Loss 320,822.25 2,245,677.24Change In Accrued Income 165,871.93 540,500.05 PENINSULA CLEAN ENERGY - PFM Page 3 of 56
Period from March 1, 2024 to March 31, 2024
CURRENT PERIOD YEAR TO DATE
03/01/2024 TO 03/31/2024 07/01/2023 TO 03/31/2024
Beginning Market Value 106,579,036.71 64,338,327.34ReceiptsTotal Receipts .00 40,000,000.00Asset ActivityTotal Asset Activity 438,261.93 2,678,971.30Net Change In Market Value 438,261.93 42,678,971.30Ending Market Value 107,017,298.64 107,017,298.64
MARKET VALUE RECONCILIATION
25 Cash And Equivalents 31,443.43 0.03
U.S. Government Issues 81,232,187.55 75.90Corporate Issues 18,253,323.20 17.06Foreign Issues 957,105.30 0.89Municipal Issues 5,690,465.10 5.32Accrued Income 852,774.06 0.80PENINSULA CLEAN ENERGY - PFM Page 5 of 56 Period from March 1, 2024 to March 31, 2024
03/31/2024 % OF
ASSETS MARKET VALUE MARKET
Total Assets 106,164,524.58 99.20Grand Total 107,017,298.64 100.00
ASSET SUMMARY
BONDS 99.17%
26 27
Cash And Equivalents 119,790.41 0.12
U.S. Government Issues 60,522,983.03 59.01Corporate Issues 38,456,042.33 37.50Foreign Issues 2,729,157.50 2.66Accrued Income 732,787.34 0.71PENINSULA CLEAN ENERGY - CHANDLER Page 5 of 31 Period from March 1, 2024 to March 31, 2024
03/31/2024 % OF
ASSETS MARKET VALUE MARKET
Total Assets 101,827,973.27 99.29Grand Total 102,560,760.61 100.00
ASSET SUMMARY
BONDS 99.17%
28 29
30 DATE: May 2, 2024
MEETING DATE: May 13, 2024
VOTE REQUIRED: Majority Vote
TO: Honorable Peninsula Clean Energy Authority Audit and Finance Committee FROM: Nicholas Bijur, Chief Financial Officer
SUBJECT: Recommend to the Board of Directors to Approve the Establishment of a Rate Stabilization Fund (Action)
Item No. 6
PENINSULA CLEAN ENERGY AUTHORITY
JPA Board Correspondence
RECOMMENDATION
Recommend to the Board of Directors establishment of a Rate Stabilization Fund under Government Accounting Standard Board (GASB) Standard 62 for the purpose of stabilizing customer electric generation charges.
BACKGROUND
The financial strength of Peninsula Clean Energy (PCE or the Agency) is one of the necessary pillars of the Agency if it is to deliver on its mission to reduce greenhouse gas emissions by expanding access to sustainable and affordable energy solutions. The Board of Directors sets rates as necessary to provide sufficient revenues to pay all operating expenses and all other financial obligations of the Agency. While expenses, specifically the cost of energy, can vary significantly, PCE customers value rate affordability and stability. Since PCE’s inception, staff has worked to minimize rate changes while ensuring PCE has the resources necessary to meet its financial commitments.
A Rate Stabilization Fund is an accounting tool available to government entities under GASB 62 to mitigate rate changes and more importantly, rate spikes. The primary purpose of GASB 62 is to recognize expenses and the revenues from rates designed to recover those costs in the same period. This standard recognizes that rate regulated utilities and other Load Serving Entities (LSEs) often have to consider rate stability, and thus recover costs over different periods than those costs would be recognized as expenses under Generally Accepted Accounting Principles (GAAP).
MCE Energy, Clean Power Alliance, Ava Community Energy and Sonoma Clean Power have implemented Rate Stabilization Funds under GASB 62.
DISCUSSION
Staff proposes the establishment of a Rate Stabilization Fund to allow PCE to defer revenues in years when financial results are strong to be used in future years when financial results are 31 not as strong or are stressed. Deferring revenues to be used in future years would allow PCE to avoid sudden rate increases to address unanticipated spikes in energy costs, or conversely, to offset reductions in rate levels (and net revenues) to address large increases in the Power Charge Indifference Adjustment. Using deferred revenues in a future year would allow PCE to minimize the near-term impact on rates and net revenues. In addition, if in the future PCE decides to access the tax-exempt capital markets, the Agency will need to agree to several covenants. These covenants would be required to protect (and attract) bond investors in the offering and would require that PCE produces net revenues sufficient to pay debt service costs. The Rate Stabilization Fund could be drawn upon to allow PCE to meet its covenants if needed.
From an accounting standpoint, a deferral of revenues into the Rate Stabilization Fund would result in a reduction in PCE’s reported revenues in that fiscal year, and an increase in reported revenues for the years withdrawals from the Rate Stabilization Fund are made. By deferring revenues into the Rate Stabilization Fund before it is recognized as revenues, PCE would effectively “bank” revenues for use in a future fiscal year. Staff have been working with PCE’s accounting firm, Maher Accounting, in development of the Rate Stabilization Fund to ensure it conforms with the standards of GASB 62.
Staff will consider deferral of revenues into the Rate Stabilization Fund in a fiscal year when the projected addition to Net Position is greater than 3% of total budgeted revenues. Deposits can be made into the Rate Stabilization Fund until the balance equals 15% of the total budgeted revenues in the then-current fiscal year. Staff will consider withdrawals of revenues from the Rate Stabilization Fund in a fiscal year where net revenues are projected to be negative or as necessary to satisfy any covenants, contractual obligations, or to maintain investment grade credit ratings. Staff will notify the Board of Directors after a transfer is made.
FISCAL IMPACT
Establishment of the Rate Stabilization Fund would have no immediate fiscal impact. Deferring revenues into the Rate Stabilization Fund would have a commensurate negative effect on net revenues in that fiscal year. Withdrawals from the Rate Stabilization Fund would have commensurate positive effect on net revenues in that fiscal year. 32 DATE: April 30, 2024
MEETING DATE: May 13, 2024
VOTE REQUIRED: None
TO: Honorable Peninsula Clean Energy Authority Audit and Finance Committee FROM: Nicholas Bijur, Chief Financial Officer
SUBJECT: Review Fiscal Year 2024-2025 Draft Budget (Discussion) Item No. 7
PENINSULA CLEAN ENERGY AUTHORITY
JPA Board Correspondence
RECOMMENDATION
Receive report and provide any feedback. This is a discussion item only.
BACKGROUND
Staff will present a preliminary look at the Fiscal Year 2024-2025 budget. 33