2075 Woodside Road | Redwood City, CA 94061
(650) 260-0005 | peninsulacleanenergy.com
Regular Meeting of the Executive Committee of the
Peninsula Clean Energy Authority (PCEA)
AGENDA
Tuesday, November 12, 2024
10:00 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
Zoom, Virtual Meeting Link: https://pencleanenergy.zoom.us/j/83252507093 Meeting ID: 832-5250-7093 Passcode: 2075 Phone: +1 (669) 444-9171 Introduction
This meeting of the Peninsula Clean Energy Executive 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/executive-committee following the meeting.
Public Participation
The PCEA Executive Committee meeting may be accessed through Zoom online at https://pencleanenergy.zoom.us/j/83252507093. The meeting ID is: 832 5250 7093 and the passcode is:
2075. The meeting may also be accessed via telephone by dialing +1(669) 444-9171. Enter the webinar ID: 832 5250 7093, 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 press *6 if you phoned into the meeting, to indicate that you would like to provide comment. 1 1. Approval of the 2025 Executive Committee Meeting Schedule
2. Approval of Minutes from the September 9, 2024 Executive Committee Meeting
3. Chair Report (Discussion)
4. CEO Report (Discussion)
5. Recommend to the Board of Directors Approval of the Updated Energy Risk Policy, replacing current Policies 7 and 15 (Action)
6. Committee Members' Reports (Discussion)
Please note that Peninsula Clean Energy Executive 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.
JOINING INSTRUCTIONS
2 Instructions for Joining a Zoom Meeting via Computer or Phone Best Practices:
Please mute your microphone when you are not speaking to minimize audio feedback If possible, utilize headphones or ear buds to minimize audio feedback If participating via videoconference, audio quality is often better if you use the dial-in option (option 2 below) rather than your computer audio
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:
Prior to the meeting, we recommend that you install the Zoom Meetings application on your computer by clicking here https://zoom.us/download.
If you want full capabilities for videoconferencing (audio, video, screensharing) you must download the Zoom application.
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/83252507093 The Zoom application will open on its own or you will be instructed to open Zoom.
After the application opens, the pop-up screen below will appear asking you to choose ONE of the audio conference options. Click on the Computer Audio option at the top of the pop-up screen.
Click the blue, "Join with Computer Audio" button.
In order to enable video, click on "Start Video" in the bottom left-hand corner of the screen. This menu bar is also where you can mute/unmute your audio.
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/83252507093 The Zoom Application will open on its own or you will be instructed to Open Zoom. 3 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: 832-5250-7093 followed by #.
You will be instructed to enter in your participant ID. Your participant ID is unique to you and is what connects your phone number to your Zoom account.
After a few seconds, your phone audio should be connected to the Zoom application on your computer.
In order to enable video, click on "Start Video" in the bottom left-hand corner of the screen. This menu bar is also where you can mute/unmute your audio.
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: 832-5250-7093 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 #. 4 DATE: November 8, 2024
MEETING DATE: November 12, 2024
VOTE REQUIRED: Majority Vote
TO: Honorable Peninsula Clean Energy Authority Board of Directors FROM: Brianna Arroyo, Interim Board Clerk
SUBJECT: Approval of the 2025 Executive Committee Meeting Schedule Item No. 1
PENINSULA CLEAN ENERGY AUTHORITY
JPA Board Correspondence
RECOMMENDATION
Approval of the 2025 Executive Committee Meeting Schedule
BACKGROUND
PCE's Executive Committee meets on the second Monday of each month with a few exceptions for Federal holidays. The 2025 Executive Committee Meeting schedule is attached for review and approval.
ATTACHMENTS:
2025 Executive Committee Meeting Schedule.pdf
5 2025 Executive Committee Meeting Schedule
Location: Video/Teleconference/PCEA Lobby/Check Agenda
Meeting Date: Time: Location:
January 13, 2025 10:00 am Video/Teleconference/PCEA Lobby/Check Agenda February 10, 2025 10:00 am Video/Teleconference/PCEA Lobby/Check Agenda March 10, 2025 10:00 am Video/Teleconference/PCEA Lobby/Check Agenda April 14, 2025 10:00 am Video/Teleconference/PCEA Lobby/Check Agenda May 12, 2025 10:00 am Video/Teleconference/PCEA Lobby/Check Agenda June 9, 2025 10:00 am Video/Teleconference/PCEA Lobby/Check Agenda July 14, 2025 10:00 am Video/Teleconference/PCEA Lobby/Check Agenda August 11, 2025 10:00 am Video/Teleconference/PCEA Lobby/Check Agenda September 8, 2024 10:00 am Video/Teleconference/PCEA Lobby/Check Agenda October 14, 2025 10:00 am Video/Teleconference/PCEA Lobby/Check Agenda November 10, 2025 10:00 am Video/Teleconference/PCEA Lobby/Check Agenda December 8, 2025 10:00 am Video/Teleconference/PCEA Lobby/Check Agenda 6 DATE: October 17, 2024
MEETING DATE: November 12, 2024
VOTE REQUIRED: Majority Vote
TO: Honorable Peninsula Clean Energy Authority Executive Committee FROM: Brianna Arroyo, Interim Board Clerk
SUBJECT: Approval of Minutes from the September 9, 2024 Executive Committee Meeting Item No. 2
PENINSULA CLEAN ENERGY AUTHORITY
JPA Board Correspondence
RECOMMENDATION
Approval of Minutes from the September 9, 2024 Executive Committee Meeting ATTACHMENTS:
09-09-2024 EC Minutes.pdf
7 Regular Meeting of the Executive Committee of the
Peninsula Clean Energy Authority (PCEA)
Minutes
Monday, September 9, 2024
10:00 a.m.
Zoom Video Conference and Teleconference
CALL TO ORDER
Meeting was called to order at 10:05 a.m. in virtual teleconference and in the Peninsula Clean Energy Authority lobby.
ROLL CALL
Participating:
Ray Mueller, San Mateo County
Rick DeGolia, Atherton,
Coleen Mackin, Brisbane
Donna Colson, Burlingame, Chair
Betsy Nash, Menlo Park
Anders Fung, Millbrae
Jeff Aalfs, Portola Valley
Marty Medina, San Bruno, Vice Chair
Absent:
Dave Pine, San Mateo County
A quorum was established.
PUBLIC COMMENT
None
ACTION TO SET AGENDA AND TO APPROVE CONSENT AGENDA ITEMS Public Comment: None
MOTION: Director Medina moved, seconded by Director DeGolia to set the Agenda and approve Agenda Item Number 1.
1. Approval of the Minutes for the June 10, 2024 Executive Committee Meeting MOTION PASSED/FAILED: 8-0 (Absent: San Mateo County)
JURISDICTION BOARD MEMBER YES NO ABSTAIN ABSENT
San Mateo County Director Pine X
San Mateo County Director Mueller X
Atherton Director DeGolia X
8 Brisbane Director Mackin X
Burlingame Director Colson X
Menlo Park Director Nash X
Millbrae Director Fung X
Portola Valley Director Aalfs X
San Bruno Director Medina X
Totals 8 1
REGULAR AGENDA
2. Chair Report
Donna Colson, Chair gave a brief Chair report.
3. CEO Report
Shawn Marshall, Chief Executive Officer, gave a brief CEO Report.
4. Recommend Adoption by the Board of Directors Amendments to Peninsula Clean Energy Operating Rules and Regulations: "Policy 16, Policies and Procedures for Board of Directors, Committees and Advisory Groups" and Associated Amendment to Section 3.9.1 of Peninsula Clean Energy's Third Amended Joint Powers Authority (JPA) Agreement (Action)
Shawn Marshall, Chief Executive Officer, gave an overview of the updated made to “Policy 16, Policies and Procedures for Board of Directors, Committees and Advisory Groups”.
Public Comment: None
MOTION: Director Aalfs moved, seconded by Director Mackin, to change the meeting attendance threshold from three to two unexcused absences upon which staff will contact/notify the Board or Committee Member to resolve the issue. If more than three unexcused absences, the Board Chair will Direct staff to send a letter to the County or City Manager and Mayor with a request to designate a replacement Board representative. Unexcused absence shall be defined as not having submitted a written notification prior to the meeting.
MOTION PASSED: 8-0 (Absent: San Mateo County)
JURISDICTION BOARD MEMBER YES NO ABSTAIN ABSENT
San Mateo County Director Pine X
San Mateo County Director Mueller X
Atherton Director DeGolia X
Brisbane Director Mackin X
Burlingame Director Colson X
9 Menlo Park Director Nash X
Millbrae Director Fung X
Portola Valley Director Aalfs X
San Bruno Director Medina X
Totals 8 1
4f – Revolving Door Policy – Full time employment
MOTION: Director Aalfs moved, seconded by Director Nash, to move this item with no changes to the proposed amendments to Policy 16 section 4f – Employment and Contracting Restrictions for Former Board Members.
MOTION PASSED: 8-0 (Absent: San Mateo County)
JURISDICTION BOARD MEMBER YES NO ABSTAIN ABSENT
San Mateo County Director Pine X
San Mateo County Director Mueller X
Atherton Director DeGolia X
Brisbane Director Mackin X
Burlingame Director Colson X
Menlo Park Director Nash X
Millbrae Director Fung X
Portola Valley Director Aalfs X
San Bruno Director Medina X
Totals 8 1
4a – Chair and Vice Chair Term Limits
MOTION: Director Nash moved, seconded by Director Aalfs, to move this item with no changes to the proposed amendments to Policy 16 section 4a – Chair and Vice Chair Term Limits.
MOTION Carries with one Exception: 8-1-0 (Absent: San Mateo County)
JURISDICTION BOARD MEMBER YES NO ABSTAIN ABSENT
San Mateo County Director Pine X
San Mateo County Director Mueller X
Atherton Director DeGolia X
Brisbane Director Mackin X
Burlingame Director Colson X
Menlo Park Director Nash X
Millbrae Director Fung X
Portola Valley Director Aalfs X
San Bruno Director Medina X
Totals 7 1 1
Section 3.9 of the Third Amended JPA Agreement - Selection of Board Officers 10 MOTION: Director DeGolia moved, seconded by Director Mackin, to move item with no changes to the proposed amendments to Section 3.9.1 Selection of Board Chair and Vice Chair.
MOTION PASSED: 8-0 (Absent: San Mateo County)
JURISDICTION BOARD MEMBER YES NO ABSTAIN ABSENT
San Mateo County Director Pine X
San Mateo County Director Mueller X
Atherton Director DeGolia X
Brisbane Director Mackin X
Burlingame Director Colson X
Menlo Park Director Nash X
Millbrae Director Fung X
Portola Valley Director Aalfs X
San Bruno Director Medina X
Totals 8 1
5. Recommend to Board of Directors Approval to Execute a Prepay Transaction (Action)
Nick Bijur, Chief Financial Officer gave a presentation on executing a prepay transaction.
Public Comment: None
MOTION: Director Degolia moved, seconded by Director Medina to Recommend to the Approval to Execute a Prepay Transaction.
MOTION PASSED/FAILED: 9-0 (Absent: San Mateo County)
JURISDICTION BOARD MEMBER YES NO ABSTAIN ABSENT
San Mateo County Director Pine X
San Mateo County Director Mueller X
Atherton Director DeGolia X
Brisbane Director Mackin X
Burlingame Director Colson X
Menlo Park Director Nash X
Millbrae Director Fung X
Portola Valley Director Aalfs X
San Bruno Director Medina X
Totals 8
6. Discussion Regarding the 2025-2030 Diablo Canyon Nuclear Attribute Allocation (Discussion)
11 Shawn Marshall Chief Executive Officer, Jeremy Waen Senior Director, Regulatory Policy, and Roy Xu, Senior Director of Power Resources gave a presentation on options for the Diablo Canyon Nuclear Attribute Allocation.
7. Committee Members’ Reports
Coleen Mackin gave a brief Committee Member Report.
Betsy Nash gave a brief Committee Member Report
ADJOURNMENT
Meeting was adjourned at 12:01 p.m.
12 DATE: November 7, 2024
MEETING DATE: November 12, 2024
VOTE REQUIRED: Majority Vote
TO: Honorable Peninsula Clean Energy Authority Executive Committee FROM: Nicholas Bijur, Chief Financial Officer and Kelly Lew-Quintal, Risk Manager SUBJECT: Recommend to the Board of Directors Approval of the Updated Energy Risk Policy, replacing current Policies 7 and 15 (Action)
Item No. 5
PENINSULA CLEAN ENERGY AUTHORITY
JPA Board Correspondence
RECOMMENDATION
Recommend to the Board of Directors (Board) approval of the Energy Risk Policy (ERP or Policy), replacing existing Policy 7 (Risk Management Policy) and Policy 15 (Energy Supply Procurement Authority), including delegation to the newly formed Risk Oversight Committee (ROC) to implement the ERP and oversee energy procurement risks.
BACKGROUND
Peninsula Clean Energy (PCE) is committed to serving its local residents and businesses by providing low-cost, clean sources of electricity, thereby ensuring reliability and meeting all regulatory mandates. The energy procurement function is a pivotal component to achieving this goal through management of PCE’s supply portfolio. The procurement of energy entails significant risks which must be managed. Under the current authorization structure, which is detailed in PCE Policy 15 (Energy Supply Procurement Authority), the Board is required to approve all transactions with terms greater than five years. All transactions fewer than five years are delegated to the CEO for approval and are discussed informally through meetings between the CEO, CFO, COO and Power Resources. PCE Policy 7 (Risk Management Policy) includes language regarding the management of energy risk, among other risks, but does not include adequate detail nor has it been updated since 2020. An updated and more formal energy risk policy will maintain the Board’s current authorities while strengthening the internal operations framework around energy procurement to ensure energy risks are managed efficiently and effectively while achieving PCE’s goals.
DISCUSSION
The Energy Risk Policy (Policy or ERP) provides an updated and more formal framework for managing risks associated with PCE’s energy procurement function that includes governance, risk exposures, controls, objectives and authorizations, while creating a more streamlined process to execute transactions in a dynamic environment. A cadence and structure for reporting forecasts, procurement plans, positions, counterparties, exposure and collateral are also included as part of this enhanced policy structure. 13 The ERP does not change any of the existing Board approval authorities but establishes an internal Risk Oversight Committee (ROC) that is comprised of the CEO, CFO, COO, and Senior Director of Power Resources as voting members. PCE’s designated General Counsel will be a non-voting member of the ROC. The establishment of a ROC in mid-to-large size load serving entities is becoming more common and is considered a best practice energy risk management strategy. As the Board currently delegates authority to the CEO for certain transactions less than five years, the ERP now establishes delegation of authority to the ROC to implement and oversee the ERP, which includes establishing detailed processes, parameters, limits, and authorizations to effectively and efficiently manage risks associated with energy procurement. The ROC will meet on a quarterly basis to review and approve PCE’s procurement plan, strategies, and planned procurement, including transaction volumes and prices.
The Board will review and approve changes to the ERP as needed and will receive, at a minimum, bi-annual updates from the ROC on PCE’s energy risk management activities to ensure PCE is appropriately managing all energy procurement risks. Any Policy breaches will be reported to the Board on an annual basis.
As noted, the Board retains its current authority to approve all transactions with terms greater than five years. Under the current structure, the CEO is authorized to execute energy transactions with terms of five years or fewer, whereas under the ERP such transactions will be delegated to the ROC for approval. For shorter-term transactions that typically require quick execution and processing, authorizations have been delegated to Power Resources staff, including the Senior Director of Power Resources and other Power Resources staff upon approval by the ROC. These additional authorizations will be managed and monitored through quarterly reporting to the ROC that details forecasted procurement against executed transactions. Authorizations to execute contract amendments with material changes will continue to be provided to the Board for approval. Contract amendments with minor changes will be delegated to the CEO for execution. All contract amendments will continue to go through the process of legal review prior to execution.
The ERP is based on detailed analysis and benchmarking of other CCAs, Investor-Owned Utilities, and Publicly Owned Utilities. The ERP also adheres to the directives currently established by the Board, industry best practices, contractual obligations, and all relevant laws and regulations. The attached ERP will integrate and replace PCE’s Policy 7 (Risk Management Policy) and Policy 15 (Energy Supply Procurement Authority). If approved, it is anticipated that the aforementioned ROC will begin meeting in Q1 2025 and quarterly thereafter.
FISCAL IMPACT
While there is no immediate fiscal impact, implementation of the ERP is intended to reduce energy-related financial risks through additional controls.
ATTACHMENTS:
Energy Risk Policy - Final.pdf
14 Policy Number: XX
Board Adoption: MMMM DD, YYYY
Peninsula Clean Energy Authority
Energy Risk Policy
Contents
1. Introduction ........................................................................................................................... 2
2. Governance ............................................................................................................................ 4
3. Energy Risk Exposures ............................................................................................................ 7
4. Internal Energy Risk Controls ................................................................................................. 9
5. Energy Procurement Objectives .......................................................................................... 13
6. Energy Procurement Plan .................................................................................................... 14
7. Authority to Transact for Energy Procurement .................................................................... 16
8. System of Record ................................................................................................................. 20
9. Risk Reporting ...................................................................................................................... 21
15 Energy Risk Policy
1. Introduction
1.1. Background and Purpose
Peninsula Clean Energy (PCE) is committed to serving its local government members, as well as the residents and businesses within their respective communities. PCE's mission is to reduce greenhouse gas emissions by expanding access to sustainable and affordable energy solutions.
The Energy Risk Policy (ERP or Policy) is designed to ensure that PCE achieves its mission while adhering to the directives established by its Board of Directors (Board), industry best practices, its contractual obligations, and relevant laws and regulations.
PCE’s energy procurement function is responsible for developing a supply portfolio that serves its customers’ needs and preferences. PCE’s Board and management acknowledge that certain risks are inherent in energy procurement operations.
To minimize risks, PCE procures energy in accordance with its Energy Procurement Objectives along with certain Board and Risk Oversight Committee (ROC) approved documents. In addition to this, PCE’s energy procurement activities are bound by established limits and processes considered appropriate within the normal course of PCE’s business.
1.2. Scope
The ERP is intended to govern transactions related to PCE’s energy portfolio in order to meet customer needs and optimize energy transactions within applicable laws and regulations. The Policy administers the parameters for energy, capacity, Congestion Revenue Rights, and environmental attributes. The Policy applies to the Board, PCE staff, and consultants engaging in or supporting PCE’s energy procurement activities.
1.3. Goals
As a not-for-profit organization, PCE does not engage in the risk-taking activities typical of for-profit organizations. However, certain risks are inherent to serving load. The ERP provides a framework for effectively managing risks associated with energy procurement and sales activities, to facilitate PCE meeting its strategic goals.
The goals and objectives of the ERP are as follows:
Empower PCE to procure a portfolio of cost-effective and clean electricity sources, as outlined in its Integrated Resource Plan (IRP). This includes establishing guidelines to secure 16 Energy Risk Policy
competitive prices for power supply, efficiently managing assets, and reducing exposure to market changes.
Ensure that PCE’s procured electricity sources align with its environmental goals and meet regulatory mandates, reinforcing a robust brand reputation and ensuring customer satisfaction and retention.
Leverage PCE’s existing organizational excellence to develop a compliance and risk culture.
Use effective business practices and controls to identify, evaluate, and manage risks, maintaining transparency in PCE’s risk management processes.
17 Energy Risk Policy
2. Governance
This section defines the overall roles and responsibilities for PCE’s implementation of the ERP.
2.1. Risk Oversight Structure
Below is a high-level organization chart describing PCE’s energy risk management governance.
2.1.1. Board of Directors
The Board understands and acknowledges that there is inherent risk in energy procurement. The ERP serves as a method to manage those risks. The Board is responsible for reviewing and approving the ERP. The ERP describes and quantifies PCE’s risk exposure as a Community Choice Aggregator (CCA). The policies outlined in this document help PCE manage the associated risks with energy procurement.
The Board delegates the implementation and authority of the ERP and creation of the ROC to the Chief Executive Officer (CEO) and delegates the authority to the ROC to develop, implement, manage, and oversee the ERP.
The Board will review and approve changes to the Policy as needed. Additionally, the Board shall receive, at a minimum, bi-annual updates from the ROC on PCE’s energy risk management activities.
18 Energy Risk Policy
2.1.2. Chief Executive Officer
The CEO holds overall responsibility for implementing the ERP. This responsibility includes ensuring the compliance of all affected PCE employees and contractors, communicating energy procurement identified risks and other relevant issues to the Board, establishing a ROC comprised of PCE staff, and delegating duties to the Risk Manager or other staff, as necessary.
2.1.3. Risk Oversight Committee
Under the ERP, the PCE Board of Directors (Board) delegates the formation and implementation of the Risk Oversight Committee (ROC) to the PCE CEO.
The ROC serves as the highest level of organizational risk management within PCE, and is responsible for developing, implementing, and maintaining the ERP. The ROC provides oversight of policy compliance and ensures that staff follow and integrate the ERP within PCE’s programs, policies, and practices.
The CEO acts as the chair of the ROC. The voting members of the ROC include the CEO, Chief Financial Officer (CFO), Chief Operating Officer (COO), and the Senior Director of Power Resources, as shown in Error! Reference source not found.. PCE’s General Counsel will be designated as a non-voting member of the ROC and their attendance to the ROC meetings is optional. The ROC meets quarterly, or as determined by the Risk Manager. The agenda and minutes for each meeting will be maintained by the Risk Manager. Each voting member of the ROC has one vote. A minimum of three voting members constitutes a quorum of the ROC and is required to hold a meeting and/or vote on any matter. Decisions will be made by majority vote.
In addition to the voting members, the Risk Manager may serve as a voting member of the ROC as required in tie-breaker situations.
ROC voting and approval may be obtained via email. For email decisions, all voting members must submit their vote via email and decisions will be made by majority vote.
2.1.4. Risk Manager
The Risk Manager is the primary staff delegee of the CEO with responsibility for implementing the ERP. This includes educating PCE staff on energy risk management, overseeing internal controls and processes for energy procurement activities, and ensuring the compliance of all affected PCE employees and contractors with the ERP.
19 Energy Risk Policy
The Risk Manager’s responsibilities also extend to communicating energy risk management issues to the Board, Executive Team1, and division Directors; administrative and scheduling duties related to ROC meetings; and ensuring the timely provision of reports and review of metrics in compliance with this Policy.
The Risk Manager is also responsible for scheduling, creating agendas, and taking minutes for the ROC meetings.
2.1.5. Power Procurement and Finance Teams
The CFO and Senior Director of Power Resources, and their respective staff teams, are responsible for implementing the ERP at the operational level in PCE’s Front Office, Middle Office, and Back Office, following the guidelines set out by the ERP, and reporting to the ROC as required.
2.2. Policy Administration
2.2.1. Policy Approval and Implementation
The Board is responsible for reviewing and approving the ERP. The Board delegates authority to the CEO to create a staff committee, the ROC, to implement the ERP under the supervision of the CEO.
2.2.2. Policy Review
An effective ERP requires responsiveness to dynamic market conditions and technology changes.
The Board shall review and approve the ERP as needed to ensure the Policy aligns with PCE’s energy risk management needs and energy procurement objectives.
2.2.3. Policy Distribution and Acknowledgement
This Policy shall be distributed to all PCE employees and third-party contractors participating in any activity or transaction within the scope of the ERP, and to other PCE employees providing oversight and support for these activities. The ERP will be posted and available on the Peninsula Clean Energy public website.
All identified PCE staff participating in any activity or transaction within the scope of the ERP, or in the case of a consultant, a delegated representative authorized to bind the consultant regarding ERP obligations, shall review and sign an acknowledgement of the ERP.
1 PCE’s Executive team consists of the CEO, CFO, and COO. 20 Energy Risk Policy
3. Energy Risk Exposures
3.1. Market Risk
The term Market Risk, as applied in this Policy, specifically pertains to the risk categories associated with PCE's involvement in wholesale and retail markets as a Load Serving Entity (LSE), as well as its stakes in long-term contracts. Market Risk includes fluctuation in market prices, locational prices, congestion, market liquidity, and line losses.
3.2. Counterparty Risk
Counterparty risk is defined as the potential for economic loss to PCE due to a counterparty’s failure to meet contractual obligations. Counterparty risk affects both contracts requiring physical settlement and those specifying monetary settlement. Counterparty credit risk is the potential that a counterparty to PCE will fail to fulfill its obligations, causing an adverse effect to PCE’s cash flow and operations. This includes the risk of a counterparty failing to pay for energy products delivered, and the risk that a counterparty refuses to extend credit to PCE, requiring PCE to allocate additional resources to meet collateral posting requirements, straining its cash reserves and lines of credit.
3.3. Concentration Risk
Concentration Risk occurs when heavily reliance on a small pool of counterparties or single counterparty increases an entity’s vulnerability to counterparty non-performance or price fluctuations.
3.4. Operational Risk
Operational risk is the potential for loss or disruption caused by weaknesses in PCE’s internal processes, people, or systems. It may include failures in internal business operations such as inadequate internal controls; personnel issues; the lack or failure of systems; human error; or internal fraudulent actions. Operational risk can lead to financial losses, reputational damage, or legal liabilities for the organization.
3.5. Liquidity Risk
Liquidity risk occurs when an entity struggles to meet its financial obligations, particularly on a short-term basis, due to a shortage of liquid assets or it being unable to quickly convert other assets into cash without significant loss. Potential effects of liquidity risk include the entity failing to make on-time payments or comply with collateral calls, a credit rating downgrade, the breach of credit covenants and thresholds, or declaration of default under a contract. 21 Energy Risk Policy
3.6. Regulatory Risk
Regulatory and legislative risks pose significant challenges to CCAs, driven by fluctuating state and federal regulations, legislative actions, and CAISO market developments. These risks include potential changes in market structure, threats to autonomy, increases in exit fees, and impacts on customer bases. Additionally, CCAs face competition with traditional utilities, potential stranded asset costs, and uncertainties regarding the allocation of these costs.
3.7. Volumetric Risk
Volumetric risk represents the risk of unforeseen changes in either the quantity of MWh that PCE may generate or procure to meet our customer’s needs, or unforeseen changes in the quantity of MWh that our customers use.
Volumetric risk may occur on a short- or long-term basis, resulting in the over or under procurement of energy, which in turn may cause PCE financial harm. PCE faces a larger exposure to volumetric risk in its generation portfolio, compared with similarly sized and resourced CCAs, because of its focus on procurement from variable renewable assets, such as solar and wind.
Volumetric risk can be created by factors such as weather risk, hourly demand profile risk, technology risk, demographic risk, development risk, economic risk, and environmental risk.
22 Energy Risk Policy
4. Internal Energy Risk Controls
PCE’s internal energy risk controls provide a framework for ensuring processes and procedures manage risk and prevent fraud. Controls are used in preventing errors and improprieties; identifying, measuring, monitoring, controlling, and tracking risk exposures; and ensuring accurate and timely reporting of results of energy portfolio positions, transactions, and other information pertinent to management. These processes and procedures provide critical information to inform actions and decisions that balance risks, costs, and benefits for PCE.
PCE’s energy procurement processes and control systems are currently and shall remain fully integrated into all PCE activities and its strategic objectives, and are consistent with the following risk management control principles:
Segregation of duties;
Defined procurement authority and delegations;
Ensuring adequate human and technological resources;
Prevention of conflicts of interest;
Accurate, timely, and effective energy procurement and risk reporting; Monitoring of compliance with and effectiveness of controls; Preserve integrity in PCE’s procurement and contracting procedures; Complete and precise capture of transactions and other data; and Appropriate consultation with legal counsel.
4.1. Segregation of Duties
Segregation of duties is a key internal control which sets out to minimize error or fraud by ensuring that no person has the ability to both commit and conceal errors or fraud in the normal course of their duties. In PCE’s case, segregation of duties ensures that no person responsible for engaging in a transaction on behalf of PCE is also responsible for reviewing or settling the same transaction.
PCE maintains a strong segregation of duties, with energy procurement and risk management functions segregated as detailed below. This structure provides independent and regular management oversight for both risk-taking and risk-control activities and allows for a clear separation of duties between the Front-Office transacting and Middle Office risk-control functions.
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4.1.1. Front Office
PCE’s Front Office is overseen by the Senior Director of Power Resources. Front Office activities include:
Ensuring all transactions and activities adhere to the ERP; Forecasting PCE’s load and generation;
Preparing the energy procurement budget and Procurement Plan, IRP preparation, and hedging strategy development;
Implementing procurement plans within approved parameters, including solicitation management, contract negotiation, recommendation, structuring and pricing, and contract execution;
Oversight of SC functions and development of CAISO bidding and scheduling strategies; Recording transactions and maintaining accurate records per the ERP; and Compliance reporting.
4.1.2. Middle Office
PCE’s Middle Office is overseen by the Chief Financial Officer. The Middle Office provides independent oversight of the risks assumed by the Front Office when transacting energy products and services. Middle Office activities include:
Maintaining and managing the ERP;
Scheduling and facilitating ROC meetings;
Procurement and risk monitoring, measurement, and reporting; Onboarding new counterparties, including Edison Electric Institute (EEI) & Western Systems Power Pool (WSPP) Agreements, in coordination with Front Office staff; Credit risk oversight, issuance of collateral, maintenance of posted collateral, monitor and maintain collateral held, and counterparty credit review; Maintaining and managing approved counterparty list;
Risk oversight and analysis to support the ROC;
Investigating and reporting ERP breaches; and
Compliance reporting.
4.1.3. Back Office
PCE’s Back Office is overseen by the Senior Director of Power Resources and provides support with a wide range of administrative activities necessary to execute and settle transactions and support risk control efforts consistent with the ERP. Back Office activities include:
Contract administration and counterparty management;
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Monitoring and enforcing counterparty performance;
Onboarding developing and new projects;
Recording and confirming new and amended contracts and transactions; Invoicing and settlement of energy procurement transactions; and Compliance reporting.
4.1.4. PCE Scheduling Coordinator Agent
PCE partners with experienced consultants to provide Scheduling Coordinator Agent (SC) services which support PCE’s CAISO operations. The activities of the SC are managed, directed and held accountable by PCE’s Front Office, and overseen by a combination of the Front, Middle, and Back Office teams.
PCE’s SC is required to adhere to this ERP when providing services to PCE. In addition, the Scheduling Coordinator’s activities executed on PCE’s behalf will be governed by its own risk management policies and procedures, and prudent industry practices.
4.1.5. Auxiliary Functions
The Finance group is responsible for establishing the necessary financial reserves to support PCE’s load and generation portfolio, and buffer PCE against credit risks related to counterparty credit.
4.2. Conflict of Interest
PCE Representatives are prohibited from personally participating in any transaction or similar activity that is within the coverage of this Policy and that is directly or indirectly related to the trading of energy products. In addition, PCE Representatives must also comply with PCE’s Conflict of Interest Code.
Any voting member of the ROC must declare if a conflict of interest exists on a voting item(s) and abstain from voting on that specific item.
If there is any doubt as to whether a conflict of interest exists, it is the voting member’s responsibility to document and discuss the possible conflict of interest with legal counsel prior to participation in discussions, meetings, or votes related to the transaction at issue.
4.3. Speculation Prohibited
Speculative buying and selling of any products in the ERP or maintenance of open positions that do not conform with the ERP is prohibited.
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4.4. Contracting Procedures
PCE strives to use open and competitive solicitations where possible. With respect to energy transactions, this may include using Requests for Offer (RFOs) to collect and evaluate offers for short- and long-term transactions.
PCE’s Board and management recognize that open solicitations are not a practical means for engaging in all energy transactions, and accordingly permits energy transactions through other channels.
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5. Energy Procurement Objectives
The following objectives are prioritized by PCE in its energy procurement:
Providing stable and affordable rates to PCE’s customers; Meeting PCE’s Renewable Energy Goals;
Limiting exposure to risk;
Complying with regulatory requirements; and
Maintaining PCE’s investment grade credit rating.
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6. Energy Procurement Plan
The Energy Procurement Plan (Procurement Plan) is developed by PCE’s Front Office annually, guided by certain documents and Board decisions which inform PCE’s energy procurement strategy, as commercially feasible under current market conditions. Once approved by the ROC, PCE’s compliance with the Procurement Plan is monitored by the Middle Office and included in periodic risk reports to the Board.
The following sections outline the documents in question, and the stakeholders responsible for approving those documents.
6.1. External documents governing PCE’s Energy Procurement Document Frequency
CPUC Mid-Term Reliability Program Per CPUC
CPUC Resource Adequacy Program Per CPUC
CAISO Resource Adequacy Program Per CAISO
CPUC Renewables Portfolio Standard Program (RPS) Per CPUC Senate Bill 100 (SB 100) Per CEC
Other CPUC Mandated Procurement Programs2 Per CPUC
2 State- or Fed-mandated procurement requirements, for example the CPUC’s Mid-Term Reliability Procurement mandate and Resource Adequacy Program.
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6.2. Board-Approved Documents Governing PCE’s Energy Procurement Document Frequency
Integrated Resource Plan (IRP) Bi-Annually
PCE’s Strategic Plan3 As required
Annual Budget Annually, or as required
Energy Risk Policy As required
Board decisions prohibiting certain procurement As required
6.3. ROC-Approved Documents Governing PCE’s Energy Procurement Document Frequency
Forward Strategy Sheet Quarterly, or as required
3 Strategic Plan and associated Board documents.
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7. Authority to Transact for Energy Procurement
To ensure proper controls for executing energy transactions and to facilitate the efficient operation of PCE in its ordinary course of business, the Board delegates authority to transact that is commensurate with responsibility and capability. Accordingly, by approving this Policy, the Board retains certain authority to transact, and delegates the following authorities to transact by product type, term, maturity, volume, and notional value to its ROC, staff, and Scheduling Coordinator (SC).
Authority delegated by the Board is subject to the transactions compliance with the limits, policies, and requirements outlined in the ERP.
7.1. Authority to Transact Retained by PCE’s Board
Authority to transact retained by PCE’s Board is detailed below:
Product Type Term (years)4
Electricity Products > 5
Resource Adequacy Products > 5
Environmental Attribute Products > 5
Other Approved Products > 5
Contract Amendments (major)5 n/a
In addition to the above, the Board retains authority to approve any transactions not delegated to the CEO, ROC, and staff in this Policy.
4 “Term” represents the number of years during which energy products will be delivered under the contract. When calculating the term of part-year contracts, PCE rounds up to the nearest full year. 5 Amendments to a Board-approved contract that makes material changes to the terms of the contract including but not limited to, changes to price, volume, project size, counterparty security requirements, or other amendments that impact the evaluation criteria upon which a project was approved. 30 Energy Risk Policy
7.2. Authority to Transact Delegated to the ROC
Authority to transact delegated to PCE’s ROC is detailed below:
Product Type Term (years) Maturity6
(years)
Electricity Products <= 5 <= 6
Resource Adequacy Products <= 5 <= 6
Environmental Attribute Products <= 5 <= 6
Other Approved Products <= 5 <= 6
7.3. Authority to Transact, as Delegated to the CEO
The Board and ROC may delegate transaction authority to the CEO, as shown in Table 7 above.
In addition to this, authority to approve contract amendments is delegated to PCE’s CEO as detailed below:
Product Type Term (years) Maturity (years)
Contract Amendments (minor)7 any any
6 “Maturity” represents the number of years between the date on which a contract is signed, and the date on which a contract term ends. When calculating the term of part-year contracts, PCE rounds up to the nearest full year. For example: A contract is signed in January 2024 for delivery of power during calendar years 2025 and 2026.
The contract term is two years, ending on December 31, 2026. The contract maturity is three years. 7 Amendments or additional agreements to a Board-approved contract that are administrative in nature or arising from the counterparties effectuating their obligations related to the project under normal course of business and do not materially affect the terms of the agreements (e.g. implementing project financing, consent to collateral assignment, assignments, changes to forms, notice provisions, or subcontractors, insurance obligations, changes to commercial operation date, and other such administrative actions). 31 Energy Risk Policy
7.4. Authority to Transact, as Delegated to the CEO and Senior Director of Power Resources
Authority to transact delegated to PCE’s CEO and Senior Director of Power Resources is detailed below:
Product Type Term (years) Maturity (years)
Electricity Products <= 2 <= 3
Resource Adequacy Products <= 2 <= 3
Environmental Attribute Products <= 2 <= 3
CAISO Products <= 1 <= 2
Other Approved Products <= 2 <= 3
7.5. Authority to Transact Delegated to Authorized PCE Front Office Staff Authority to transact delegated to authorized PCE Front Office staff is detailed below:
Product Type Term (years) Maturity (years)
Resource Adequacy Products <= 1 <= 2
Electricity Products Balance of the
month (BOM), M+1 <= 2
CAISO Products <= 1 <= 2
7.6. Delegation of Authority
The transaction authority detailed above may be sub-delegated in accordance with the following principles:
The ROC may delegate transaction authority to the CEO. The CEO may delegate the approval of Minor Contract Amendments to the CFO or Senior Director of Power Resources.
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Each instance of delegation of authority must be documented by the Front Office. The use of sub-delegations of authority will be considered by the ROC in its periodic review of the ERP, to ensure PCE’s proper and efficient operation.
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8. System of Record
PCE is required to capture complete and precise transaction data and maintain a set of records for all transactions executed in association with its procurement activities. All transaction records will be maintained in US dollars, and separately recorded and categorized by type of transaction and other characteristics, in line with standard industry practice.
PCE’s System of Record shall be auditable and audited as appropriate, and records shall be retained by PCE consistent with its approved Records Retention Policy.8
8 PCE Policy Number 20 d. See www.peninsulacleanenergy.com/key-documents. 34 Energy Risk Policy
9. Risk Reporting
Risk reports are provided in accordance with the procedures detailed below.
9.1. Reporting Breaches of the ERP
An ERP breach represents an event in which PCE staff or its Consultant failed to follow the conditions of the Policy, regardless of whether the breach was intentional. The proper reporting and resolution of breaches of the ERP are crucial to PCE’s energy procurement risk monitoring and management processes. Breaches of the ERP are reported as follows:
Report Name Reported
By
Reported
To Timeline
Initial Breach Report:
Reports occurrence of breach and known facts.
Initial Breach Report to contain the following
information:
Brief description of the breach
Who made the breach
How the breach was discovered
Why the breach was made
Cognizant
party
Risk
Manager
Within 2
business days
of knowledge
of the breach
Follow-up Breach Report:
Middle Office collaborates with PCE staff and
prepares report for the ROC.
Follow-up Breach Report to contain the
following information:
Description of the breach, including who
made the breach, how the breach was
discovered, and why the breach was
made
Is there anything that could have
prevented the breach
Corrective action to ensure the type of
breach does not occur again (i.e.,
training, changes to internal processes
and procedures, updates to the ERP)
Middle
Office ROC Middle Office
to schedule
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Board Breach Report:
Summary of breaches and resolutions, including
breaches already escalated to the Board by the
ROC.
Middle
Office Board At a minimum, annually
9.2. Reporting Exceptions to the ERP
The ROC has the authority to make exceptions to the ERP in limited circumstances. Exceptions are requested and reported as follows:
Report Name Provided By Provided To Resolution
Needed
Completion
Timeline
Exception Request:
Details the exception being
requested and the business case
for approving the exception. The
business case should include any
potential costs, potential credit
exposure, potential increase to the
budget, and potential avoidance of
penalties/fines by approving the
exception.
Requesting
party
ROC,
through
Middle
Office
Not
applicable
Not
applicable
Exception Review:
Review and analysis of exceptions
requested, granted, and/or
denied.
Middle
Office ROC Yes
<= 5
Business
Days
Report to the Board:
Summary of approved exceptions
to the ERP, including exceptions
already escalated to the Board.
Middle
Office Board No
At a
minimum,
annually
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