Finance & Risk
Management
Committee
Meeting
May 18, 2023
Welcome
&
Call to
Order
3 Roll
Call
Items to
be Added,
Withdrawn
or
Reordered
on the
Agenda
Public
Comment
for Items
NOT
on the
Agenda
Regular
Meeting
Agenda
Welcome
Roll Call
Items to be Added, Withdrawn or Reordered on the
Agenda
Public Comment for items Not on the Agenda
REGULAR AGENDA
1. Approval of April 13, 2023 Meeting Minutes
2. Treasurer’s Report for Period Ending 3/31/23
3. Recommend Board Approval of the SDCP Investment Policy
4. Presentation and Discussion of the FY 2023-24 Operating Budget Committee Member Announcements
Adjournment
8 Item 1
Approval of April 13, 2023 Meeting Minutes
Recommendation: Approve April 13, 2023
Meeting Minutes
Presenter:
Kimberly Isley
Clerk of the Board
Public
Comment
for Item #1
10 Item 2
Treasurer’s Report for Period Ending 02/28/23
Recommendation: Receive and File Treasurer’s
Report for Period Ending 02/28/23
Presenter:
Dr. Eric Washington,
Chief Financial Officer
11 Results for the period underperformed overall
compared to the adopted budget:
• Net operating revenues < 1.0 percentage
points under budget.
• Operating expenses came in 3.0
percentage points under budget
Financial results for the YTD FY23:
• $626.58M in net operating revenues
• $597.38M in total expenses (includes
energy costs of $578.67M or 92% of net
revenues)
• $29.2M change in YTD net position
Item 2: Treasurer’s Report
YTD FY23 Budget v. Actual
Budget Comparison
YTD FY23 as of
03/31/23 (9 mos)
FY23 YTD
Budget
Budget
Variance ($) Budget (%)
Net Operating Revenues $ 626,575,487 $ 626,873,096 $ (297,609) 100% Total Expenses $ 597,380,308 $ 615,328,166 $ (17,947,858) 97% Change in Net Position $ 29,195,179 $ 11,544,930 $ 17,650,249 153% $-
$100,000,000
$200,000,000
$300,000,000
$400,000,000
$500,000,000
$600,000,000
$700,000,000
Net Operating Revenues Total Expenses Change in Net Position YTD FY23 Results v. Budget
YTD FY23 as of 03/31/23 (9 mos) FY23 YTD Budget
12 Item 2: Treasurer’s Report
Year-to-date financial results compared to
projections:
• Net operating revenues were < 1% lower
than proforma projections
• Total expenses were 3% under the
proforma projections
• Change in net position was $15.3M over
the projected
YTD FY23 Proforma v. Actual
Proforma Comparison
YTD FY23 as of
03/31/23 (9 mos)
FY23 YTD
ProForma
ProForma
Variance ($)
Proforma
(%)
Net Operating Revenues $ 626,575,487 $ 626,873,096 $ (297,609) 0% Total Expenses $ 597,380,308 $ 612,975,166 $ (15,594,858) -3% Change in Net Position $ 29,195,179 $ 13,897,930 $ 15,297,249 110% $-
$100,000,000
$200,000,000
$300,000,000
$400,000,000
$500,000,000
$600,000,000
$700,000,000
Net Operating Revenues Total Expenses Change in Net Position YTD FY23 Results v. Proforma
YTD FY23 as of 03/31/23 (9 mos) FY23 YTD ProForma
13 Cash
37%
Unmet
180-Days Goal
63%
$196M
Total Liquidity
FY 2022-23 YTD
$24M
Outstanding
Debt
FY 2022-23 YTD
$M $20M $40M $60M
$29M
Reserve
Contribution
FY 2022-23 YTD
37%
Percent Reserve
Goal Met
FY 2022-23
Item 2: Treasurer’s Report CONTRIBUTION RESERVES GOAL DEBT Reserve contribution
for the fiscal year
Outstanding loans
FY23 YTD
City Loans
Total available liquidity
FY23 YTD
$29M - Actual
$12M - Budget
$24M - Budget
$107M - Goal
LOC
$196M
$190M Reserve
Target FY23
$M $100M $200M
Unrestricted
Cash LOC
$M $50M $100M
14 Item 2: Treasurer’s Report
$75.7M
$85.9M
$54.4M $61.6M
$73.2M
$56.5M
$73.9M
$190.8M $196.0M
30% 26% 17% 24% 25% 16% 25%
34% 37%
$0.0M
$50.0M
$100.0M
$150.0M
$200.0M
$250.0M
7/31/20228/31/20229/30/2022
10/31/202211/30/202212/31/2022
1/31/20232/28/20233/31/2023
Year-to-Date Reserves FY 2023
Unrestricted Cash Lines of Credit Reserve Goal Total Reserves Percent of Unrestricted Cash to Reserve Target RESERVE GOAL: $190.1M 15 Item 2: Treasurer’s Report
Public
Comment
for Item #2
17 Item 2
Recommendation: Receive and File Treasurer’s
Report for Period Ending 03/31/23
18 Item 3
Approval of SDCP Investment Policy
Recommendation: Recommend board approval of
the SDCP Investment Policy.
Presenter:
Dr. Eric Washington, Chief Financial Officer
19 Development of Investment Policy
Investment Policy
Peer CCAs
Member
Agencies
Reporting
Financial
Best
Practices
Investment
Objectives
Investment
Types
Prohibited
Investments
Controls
20 Investment Objectives (Safety, Liquidity, Return,
Standard of Care)
Safety
Ensure the preservation of
principal.
Liquidity
Remain sufficiently liquid to
meet operating needs.
Return
Portfolio shall be designed to
attain a market rate of return.
Care
SDCP will manage investments
accordance with the “Prudent
Investor Standard”.
SDCP will manage investments pursuant to California Government Code 53600.3
21 Acceptable Investment Types
Deposits at Banks
Local Agency Investment Fund (LAIF)
US Treasury Obligations
Federal Agency Securities
Bankers’ Acceptances
Negotiable Certificates of Deposit
Placement Service Deposits
Money Market Funds
Commercial Paper
All Authorized investment types for SDCP are pursuant to California Government Code 53601. 22 Acceptable Investment Types
All Authorized investment types for SDCP are pursuant to California Government Code 53601.
Acceptable Investment Types Maximum Maturity Maximum % of Portfolio Maximum % with One Issuer Minimum Rating Gov. Code SDCP Policy Gov. Code SDCP Policy Gov. Code SDCP Policy Gov. Code SDCP Policy Bankers' Acceptances 180 Days 180 Days 40% 40% 30% 5% None A-1 Local Agency Investment Fund N/A N/A None None None None None None US Treasury Obligations 5 Years 5 Years None None None None None None Federal Agency Securities 30 Years 30 Years 25% 25% None None None None Deposits at Banks 2 Years 2 Years 10% 10% None None A A Negotiable Certificate of Deposit 2 Years 2 Years 10% 10% None None None None Placement Service Deposits 2 Years 2 Years 10% 10% None None A A Money Market Funds N/A N/A 20% 20% 10% 10% AAAm AAAm
Commercial Paper 270 Days 270 Days 40% 40% 10% 10% A-1 A-1 23 Prohibited Investment Types
Pursuant to Section 53601.6, SDCP shall not invest Funds in any security that could result in a zero-interest accrual, or less, if held to maturity. These prohibited investments include, but are not limited to:
ₓ Inverse Floaters
ₓ Range Notes
ₓ Mortgage-derived Interest-only Strips
In addition SDCP will prohibit the following investment types:
ₓ Foreign Currency
ₓ Crypto Asset Securities
ₓ Trading securities for the sole purpose of speculating on the future direction of interest rates.
ₓ Purchasing or selling securities on margin.
24 Internal Controls and Reporting
Annual Policy Review
Annual Audits
Reporting
Annually
Quarterly
Monthly
Control of Collusion
Clear Delegation of Authority to Subordinate Staff Members Delivery-Versus-Payment (DVP)
Safekeeping and Custody
Avoidance of Physical Delivered Bearer Securities
Written Confirmation of Telephone Wire Transfers
Custodian
= SDCP imposed controls
The Treasurer is responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the entity are protected from loss, theft or misuse. Accordingly, the Treasurer shall establish and maintain internal controls that shall address the following points:
The internal control structure shall be
designed to provide reasonable
assurance that these objectives are met.
The concept of reasonable assurance
recognizes that:
1. The cost of a control should not
exceed the benefits likely to be
derived; and
2. The valuation of costs and benefits
requires estimates and judgments by
management.
Public
Comment
for Item #3
26 Item 3
Recommendation: Recommend board approval of
the SDCP Investment Policy.
27 Item 4
Presentation and Discussion of the FY 2023-24
Operating Budget
Recommendation: Receive staff presentation and
preliminary draft of the FY 2023-24 Operating
Budget
Presenter:
Dr. Eric Washington, Chief Financial Officer
28 Budget Principles for FY 2023-24
• Maintain a fiscally responsible and sustainable
budget.
• Ensure sufficient funding to continue to grow
and deliver the level of service needed for the
public.
• Build SDCP reserves and develop policies that
consider future economic conditions.
• Provide an easier to understand and user-friendly operating budget for both internal and external users.
• Engage the SDCP Board, constituent groups,
and the public in the budget process and inform
them about sustainable energy needs.
• Keep the SDCP Board of Directors and Executive
Team informed on the fiscal condition of SDCP.
• Develop a budget that will ultimately prioritize
people, transparency, and our communities.
29 • First full fiscal year of full enrollment
from Phase 1, 2, 3 and 4.
• Thoughtfully scale the agency by adding
23 staff to grow to 59 total staff.
• Continued outreach through community
events, sponsorships and advertising
to inform customers about SDCP.
• Addition of Capital Investment Plan
(CIP) to shift programs and projects over
multi-year periods.
Budget - Highlights
Budget Development for FY 2023-24
The Board adopted schedule for budget development is
the following.
Develop Operating
Revenue Estimate
Develop Operating
Expense Estimate
Develop financial
plan for credit rating
in 3-years
February March-April
Strategic planning
sessions with SDCP
Board
Staff develop
operating budgets
Baseline budget is
developed
May
Financial and Risk
Management
Committee Review
SDCP Board Preview
(Information Item)
June
SDCP Board Approval July 1st Budget
Implemented
Mid-year budget
review (February)
Budget amendments
as necessary
31 75%
Cost of
Energy
FY24 Cost of Energy /
Net Revenue
Budget – Summary
Item FY 23 Amended
Budget, $M
FY 24 Proposed
Budget, $M
Gross Revenue 939.2 1,346.3
Less Uncollectible Accounts (9.4) (53.9)
Net Revenue 929.8 1,292.4
Cost of Energy 738.8 971.6
Non-Energy Costs 32.0 47.1
Subtotal Operating Expense 770.8 1,018.7
Debt Service 1.3 2.4
Capital Investment Program 0.0 4.2
Total Expense 772.1 1,025.3
Net Position 157.7 267.1
Cumulative Net Position 200.2 467.3
Days Cash on Hand 94.8 167.4
32 FY 2024-28 Capital Investment Plan (CIP)
Planning
Document
Community
Power Plan
Short-Term
Program
Types
Leverage
Funds
Helps Community
Anticipate Needs
Distributed
Resource
Planning
33 Budget 5-Year CIP
Program, $000 FY24 FY25 FY26 FY27 FY28 Total
(Proposed)
CPUC Green Tariffs 335.23 212.50 212.50 212.50 212.50 1,062.50 Member Agency Grants 380.00 380.00 380.00 380.00 380.00 1,900.00 Building Electrification Education 0.01 0.01 0.01 0.01 0.01 0.05 Customer Education 350.00 350.00 350.00 350.00 350.00 1,750.00 Building and Housing Stock 250.00 250.00 250.00 250.00 250.00 1,250.00 Community Grants 500.00 500.00 500.00 500.00 500.00 2,500.00 PUC Energy Efficiency Program 250.00 250.00 250.00 250.00 250.00 1,250.00 Customer Program Pilots 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00 10,000.00 Local Dev. Feasibility Studies 100.00 100.00 100.00 100.00 100.00 500.00 Total 4,175.2 4,042.5 4,042.5 4,042.5 4,042.5 20,122.55 FY 2024-28 Capital Investment Plan (CIP)
FY 2024-28 CIP:
First year is appropriated in the budget process
Years two through five are planned and not
appropriated
Projects and Programs are considered multi-year
efforts
Funds appropriated in the budget will be in a continuing fund to be available in subsequent budget years
34 Item FY 24 Proposed Budget,
$M
FY 23 Amended,
$M
Gross Revenue 1,346.3 939.2
Net Revenue 1,292.4 929.8
Subtotal Operating Expense 1,018.7 770.8
Total Expense 1,025.3 772.1
Net Position 267.1 157.7
Days Cash on Hand 167.4
Budget – Reserves
SDCP will allocate up to 15% of gross
revenue annually toward building an
Operating/Working Capital Reserve
equivalent to 90 days of total operating
expenses held as unrestricted cash.
90-Day Total Reserve Goal
Goal
Goal
(90-Days)
$201.9 m FY22
$56.6 m
FY23
$157.7 m
Total
(212.7 days cash on hand w/ LOC)
$467.3 m
FY 24
$267.1 m
FY 21/22
($14.1 m)
FY24 Reserves
Year-end
35 Proposed FY 2023-24 Budget
Budget Changes by Category
Revenue
Cost of Energy
Phase 1-4 enrollment for entire FY24
included, Board approved rate change on 1/23/23.
Increased energy load with full Phase 1- 4 enrollment. All forward energy prices updated.
FY24
$1,292.4m
FY24
$971.6m
Professional
Services
Personnel
Marketing and
Outreach
General and
Administrative
FY23
$929.8m
FY23
$738.8m
Calpine and SDG&E fees higher with
increased enrollment.
FY24
$22.9m
FY23
$17.3m
Recruitment strategy of 23 new staff
growing the agency to 59 total staff.
FY24
$13.4m
FY23
$7.4m
Reduction primarily due to lower printing
costs related to mandatory enrollment
mailers.
FY24
$3.0m
FY23
$4.2m
Increased G&A budget to support
operating and staff growth anticipated for
FY24.
FY24
$7.5m
FY23
$1.9m
Programs Programs budgeted included in CIP as
continuing projects. Overall admin in
operating.
FY24
$0.3m
FY23
$1.3m
36 56.6
157.7
267.1 92.4 124.1
0 200
400
600
800
1,000
1,200
1,400
1,600
FY22 FY23 FY24 FY25 FY26
90-Day Threshold
Jun 2023
$M
Operating Budget, $M FY22 FY23 FY24 FY25 FY26
Net Revenue 383.8 929.8 1,292.4 1,189.5 1,232.1
Total Expense 327.2 772.1 1,025.3 1,106.6 1,105.9
Annual Reserve (Net Income) 56.6 157.7 267.1 92.4 124.1 Reserves (Cumulative Net Surplus) 42.5 200.2 467.3 559.7 683.8 90-Day Expense Target 81.8 193.0 256.3 276.7 276.5
180-Day Expense 163.6 386.1 512.7 553.3 553.0
180-Day Threshold
Aug 2024
Updated ProForma Projections
37 Budget Context – Reserve Comparison
CCCE
S&P (‘A’ Issuer Credit
Rating)
MBCP minimum target is 30% of total,
with a goal of 50% of total operating
budget expenditures. The max reserve
is 75% of total op. budget expenditures.
180 days
Of Operating
Expense
$209.1m
Based on FY23
Operating Expense
CPA
Non-Investment Grade
Credit Rating
CPA minimum reserve target equal to
30%, with a maximum reserve target of
50% of total op. budget expenditures.
Reserves shall not exceed 60%.
180 days
Of Operating
Expense
$457.8m
Based on FY23
Operating Expense
MCE
Fitch (BBB+/Stable)
MCE’s goal of securing 240 days
liquidity on hand (includes lines of
credit).
240 days
Of Operating
Expense
$463.0m
Based on FY24
Operating Expense
PCE
Fitch (BBB+/Stable)
PCE’s goal of securing one hundred
eighty (180) days of total operating
expenses.
180 days
Of Operating
Expense
$150.6m
Based on FY24
Operating Expense
SDCP
Non-Investment Grade
Credit Rating
SDCP will allocate up to 15% of gross
revenue annually toward building an
Operating/Working Capital Reserve
equivalent to 90 days of total operating
expenses.
90 days
Of Operating
Expense
$256.3m
Based on FY24
Proposed Expense
Contingencies • Power supply shocks
• Maintain rate competition
• economic downturns
Reserves help with:
Cash Availability
• Used to bridge temporary low
levels of cash
Interest • Avoids interest expense with
borrowing debt
Credit Rating • Favorable terms with vendors
• Helps with issuing debt
(bonds, commercial paper…)
38 Budget – Personnel
Department
SDCP
(Existing/
Proposed)
Marin Clean
Energy
Clean Power
Alliance
East Bay
Community
Energy
Peninsula
Clean Energy
Central Coast
Com. Energy
Existing SDCP Staff 36 - - - - -
Data Analytics and
Account Services 6 16 12 11 8 7
Executive Team - 5 6 2 3 8
Finance 3 4 9 3 2 3
Human Resources 1 5 3 3 6 6
Operations 1 6 1 4 7 3
Power Services 4 7 15 8 7 4
Programs 1 16 4 7 8 2
Regulatory and
Legislative 3 10 11 8 8 2
Public Affairs 4 16 5 8 3 7
Total 59 85 66 54 41 35
39 Budget – CCA Comparison
Community Choice
Aggregator
Years Est.
(JPA eff.
Date)
Customer
Accounts*
Cost of
Energy, $M**
Non-Energy
Costs, $M
Net
Ratepayer
Revenue, $M
Energy
Costs/Net
Revenue (%)
Clean Power Alliance Jun 2017 1,005,000 1,238.00 55.56 1,498.00 83% San Diego Community
Power Oct 2019 897,445 971.61 54.06 1,292.47 75%
East Bay Community Energy Dec 2016 635,000 523.99 38.67 769.94 68% Marin Clean Energy Dec 2008 580,000 495.31 36.51 628.69 79% Central Coast Community
Energy Mar 2018 430,000 377.92 40.23 429.00 88%
Peninsula Clean Energy Feb 2016 310,919 264.21 30.22 367.78 72% *Customer accounts citations: CPA: May 2023 Board Meeting Agenda, EBCE: Press Release 11/17/22, MCE: Website “FAQ” What is MCE?, 3CE: Website “About 3CE”, PCE: Board Meeting April 2023. **Cost of energy, non-energy costs and ratepayer revenue are from FY23 adopted budgets. CPA from 4/26/23 Finance Committee FY24 draft budget. SDCP from proposed FY24 budget. ***SDCP includes CIP and debt service costs whereas most other CCAs do have minimal or zero debt service costs.
Public
Comment
for Item #4
41 Item 4
Recommendation: Receive staff presentation and
preliminary draft of the FY 2023-24 Operating
Budget
Committee
Member
Announcements
Adjournment
Next Regular
Finance & Risk
Management
Committee
Meeting
June 8, 2023