Executive Committee Meeting
This meeting will begin shortly.
November 12, 2024
Peninsula Clean Energy
Agenda
• Call to Order / Roll Call
• Public Comment (for items not on the Agenda)
• Action to set the Agenda and Approve Consent Agenda Items Consent Items o Public Comment
• Regular Agenda
• Committee Members Reports
• Adjourn
2 Chair Report
CEO Report
Peninsula Clean Energy
Legislative Update – 2024 Election
• Federal Offices
o CD 13: John Duarte (51.2) / Adam Gray (48.7)
o CD 15: Kevin Mullin (72.3) / Anna Cheng Kramer (27.7) o CD 16: Sam Liccardo (58.8) / Evan Low (41.2)
• State Offices
o SD 11: Scott Wiener (78.1) / Yvette Corkrean (21.9)
o SD 13: Josh Becker (71.7) v. Alex Glew (28.3)
o SD 14: Anna Caballero
o AD 19: David Lee (38.3) / Catherine Stefani (61.7)
o AD 21: Diane Papan (72.8) / Mark Gilham (27.2)
o AD 23: Marc Berman (60.4) / Lydia Kou (39.6)
o AD 27: Esmerelda Soria (52.5) / Joanna Garcia Rose (47.5) • County of San Mateo
o BOS District 1: Jackie Speier
o BOS District 4: Lisa Gauthier (57.81) / Antonio Lopez (42.19) • State Proposition 4: Climate Bond (58.9 Yes / (41.1) No 5 Peninsula Clean Energy
PCE Directors Update
• PCE Directors Whose Current Term Ends in 2024; Send off at November Board Meeting • Jeff Aalfs
• TygarjasBigstyck
• Ned Fluet
• Sam Hindi
• Dave Pine
• PCE Directors Whose Current Term Ends in 2024; Running in a Contested Race:
• James Coleman
• Donna Colson
• Ken Gonzalez
• Paul Llanez
• Coleen Mackin – too close to call (5 votes)
• Tom McCune
• Harvey Rarback – too close to call (44.97 v. 55.03)
• Carlos Romero
• PCE Directors Running Unopposed:
• John Dugan
• Anders Fung
• Elmer Martinez Saballos
6 Energy Risk Policy
Overview
Executive Committee
November 12, 2024
| 7
Peninsula Clean Energy
Energy Procurement Risks
Market Risk
Counterparty Risk
Concentration Risk
Operational Risk Liquidity Risk
Regulatory Risk Volumetric Risk
8 Peninsula Clean Energy
Background
• The procurement of energy entails significant risks which must be managed • As Peninsula Clean Energy’s load and supply portfolio has increased, so too have the risks • The new Energy Risk Policy (ERP) would replace current Policies 7 and 15 o Policy 7 (Risk Management Policy) includes language regarding the management of energy risk, among other risks, but does not include adequate details nor has it been updated since 2020
o Policy 15 (Energy Supply Procurement Authority) details current authorization to execute energy procurement transactions, but will benefit from additional clarity and structure o The Board is required to approve all transactions with terms greater than five years o All transactions less than five years are delegated to the CEO for approval; such decisions are discussed informally among Senior Staff
• The new ERP retains all existing Board authorities
9 Peninsula Clean Energy
Energy Risk Policy Overview
PCE's Energy Risk Policy (ERP) provides an updated and more formal framework for managing risks associated with PCE’s energy procurement function
• Governance structure and reporting cadence to identify, evaluate, and manage energy risks • Streamlined process to execute transactions in a dynamic environment • Authorizations and limits were determined based on benchmarking and best practices • Importantly, the Board’s current authorities (> 5 years and material contract amendments) does not change
• The Board will be provided updates on energy risk management activities at least every two years, and any Policy breaches will be reported to the Board on an annual basis 10 Peninsula Clean Energy
Governance Structure • Board delegates authority to the newly formed Risk Oversight Committee (ROC) to implement
and oversee the ERP
• The ROC will establish detailed processes,
parameters, limits and authorizations (ROC
Procedures)
• The ROC will meet quarterly to review, discuss,
and approve energy procurement activities and
manage energy risks
• Reports will be produced to review the market
outlook, net open positions, executed
transactions, procurement targets vs. actuals,
counterparty exposures and policy exceptions
• Establishment of a ROC is best-in-class risk
management
11 Peninsula Clean Energy
Risk Management Policy Changes
The Energy Risk Policy will supersede
Risk Management Policy 7
• Policy 7 only covers CAISO
transactions, whereas the ERP will
cover all energy transactions currently
being executed
• Replacement of current Enterprise Risk
Management Committee with ROC,
which has broader representation and
enhanced oversight
12 Policy 7 Energy Risk Policy Change
Product Types CAISO transactions
Energy, CAISO
products, RA,
Environmental
Attributes, Emissions
Reduction products,
Transmission
Added product types
Committee
Enterprise Risk
Management
Committee
(CEO and CFO)
Risk Oversight
Committee
(CEO, CFO, COO,
Senior Director of
Power Resources)
Enhanced oversight
Peninsula Clean Energy
Transaction Authorization Changes
Authorization
Policy 15
Energy Risk Policy Change
Short-Term Medium- and Long-Term
Board of
Directors None Greater than 5 years Greater than 5 years No change CEO
12 months or less,
except Local RA up
to 36 months
Greater than 12
months, but no more
than 5 years
None Reallocated
authority
CFO 12 months or less
for RA None None Reallocated authority
Risk Oversight
Committee (ROC) n/a
5 years or less,
except CAISO
products with terms 10
years or less
Added authority
Sr Director of
Power Resources None
2 years or less, except
CAISO products with
terms 1 year or less
Added authority
Power Resources
Manager None 1 year or less Added authority
The Energy Risk Policy will
supersede transaction
approval authorizations in
Policy 15
13 Peninsula Clean Energy
Amendment Authorization Changes
The Energy Risk Policy will supersede
authorizations for agreement
amendments in Policy 15
Authorization Policy 15 Energy Risk Policy Change
Board of
Directors None
Amendments with material
changes to be approved by
Board
Added authority
CEO
Amendments to
agreements previously
approved by Board
Amendments where there is no
material change to terms of the
agreement
Refined
authority
14 Peninsula Clean Energy
ROC Authorization
• The Board maintains the current authority to approve all transactions with terms greater than 5 years
• The Board delegates to the ROC authority to approve transactions with terms 5 years or less Product Type Term (years) Maturity (years)
Power Products <= 5 <= 6
Resource Adequacy Products <= 5 <= 6
Environmental Attribute Products <= 5 <= 6
Other Approved Products <= 5 <= 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. 15 Peninsula Clean Energy
CEO Authorization
• CEO has authority to execute minor contract amendments o Minor amendments are defined as those 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 o Examples: implementing project financing, consent to collateral assignment, assignments, changes to forms, notice provisions, subcontractors, insurance obligations, changes to commercial operation date, other administrative actions
Product Type Term (years) Maturity (years)
Contract Amendments (minor) any any
16 Peninsula Clean Energy
CEO and Sr Director of Power Resources Authorization
• The ROC delegates to the CEO and Senior Director of Power Resources authority to execute transactions with terms 2 years or less
Product Type Term (years) Maturity (years)
Power Products <= 2 <= 3
Resource Adequacy Products <= 2 <= 3
Environmental Attribute Products <= 2 <= 3
CAISO Products <= 1 <= 2
Other Approved Products <= 2 <= 3
“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. 17 Peninsula Clean Energy
Authorized Traders Authorization
• The ROC delegates to certain Front Office Staff authority to execute transactions with terms 1 year or less
o Authorized traders are approved by the ROC; list of approved traders is maintained by the Risk Manager
“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.
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
18 Peninsula Clean Energy
ROC Procedures
The ROC will establish and approve “ROC Procedures” that shall include the following:
• Consultation with Legal on all contracts
• Approved transaction platforms, contract forms, delivery points, and product types • Procurement Plan and Forward Strategy Sheet with pre-approved terms • Procurement and concentration limits
• Approved traders and transaction limits
• Counterparty credit and collateral
• Metrics and reporting
19 Peninsula Clean Energy
Next Steps
• Review of the Energy Risk Policy with the Executive Committee and recommend approval to the Board (today)
• Review and approval of the Energy Risk Policy by the Board (November 21, 2024) • First Risk Oversight Committee meeting (January 2025) • Return to the Board in 2025 for approval of a comprehensive Enterprise Risk Management Policy
20 Questions
21 Committee Members’ Reports
Adjournment