Finance & Risk
Management
Committee
Meeting
June 20, 2024
Welcome
&
Call to
Order
Roll
Call
4 Items to
be Added,
Withdrawn
or
Reordered
on the
Agenda
6 Warm Welcome to Finance Intern!
Michelle Soto
Major: Environmental Econ.
and Policy San Diego Native Student at UC
Berkeley Minor: Data Science
Public
Comment
for Items
NOT
on the
Agenda
Consent
Agenda
1. Approval of May 16, 2024,
Meeting Minutes
Public
Comment on
Consent
Agenda
Regular
Meeting
Agenda
2. Review of Treasurer’s Report for Period
Ending April 30, 2024
3. Approval of Second Revision of
Reserves Policy Revision
4. Approval of Investment Policy Revision
5. Approval of the FY 2024-25 Operating
Budget, the FY 2024-25 Capital
Budget, and the FY 2025-29 Capital
Investment Plan
11 Item 2
Treasurer’s Report for Period Ending April 30,
2024
Recommendation: Receive and File Treasurer’s
Report for Period Ending April 30, 2024
Presenter:
Dr. Eric Washington, Chief Financial Officer
12 Results for the period underperformed overall
compared to the adopted budget:
• Net operating revenues 6.0 percentage
points under budget.
• Operating expenses came in 4.0
percentage points under budget
Financial results for the YTD FY24:
• $1,048.2M in net operating revenues
• $881.1M in total expenses (includes
energy costs of $859.09M or 82% of net
revenues)
• $167.2M change in YTD net position
Item 1: Treasurer’s Report
YTD FY24 Budget v. Actual
13 Item 1: Treasurer’s Report
$474M
Total Liquidity
FY 2023-24 YTD
$0M
Outstanding
Debt
FY 2023-24 YTD
$167M
Reserve
Contribution
FY 2023-24 YTD
69%
Percent Reserve
Goal Met
FY 2023-24
CONTRIBUTION RESERVES
GOAL DEBT
Reserve contribution
for the fiscal year
Outstanding loans
FY24 YTD
Total available liquidity
FY24 YTD
$525M 180-DCOH
Reserve Target FY24
$167M Actual
$202 Budget
$202M – Goal
FYTD
FYTD
Reserve Contribution
$M $20M $40M $60M
LOC $0
M
$M $200M $400M $600M
$361M
Cash
$113
LOC
Cash
69%
Unmet
Reserves
31%
$M $100M $200M $300M
14 Item 1: Treasurer’s Report
124
Days
Cash on Hand
163
Days
Cash on Hand with
Total Liquidity
$158.9M $159.7M $180.0M $237.1M
$318.7M
$382.7M
$432.2M $434.1M $462.8M
$482.6M $496.3M
$501.5M
$474.7M
23%
24%
35%
25%
40%
52%
67%
65%
71%
75%
78%
74%
69%
$0.0M
$100.0M
$200.0M
$300.0M
$400.0M
$500.0M
$600.0M
4/30/20235/31/20236/30/20237/31/20238/31/20239/30/2023
10/31/202311/30/202312/31/2023
1/31/20242/29/20243/31/20244/30/2024
Rolling 12 Month Reserves FY 2023-24
Unrestricted Cash Lines of Credit Reserve Goal Total Reserves 15 Item 1: Treasurer’s Report
Public
Comment
for Item 2
17 Item 2
Treasurer’s Report for Period Ending April 30,
2024
Recommendation: Receive and File Treasurer’s
Report for Period Ending April 30, 2024
Presenter:
Dr. Eric Washington, Chief Financial Officer
18 Item 3
Approval of Second Revision of Reserves Policy
Recommendation: Recommend Board Approval
of Reserve Policy Revision
Presenter:
Tim Manglicmot, Senior Finance Manager
20 9%9%
13%23%37%48%62%61%67%70%73%74%69%
$0.0M
$100.0M
$200.0M
$300.0M
$400.0M
$500.0M
$600.0M
$700.0M
$800.0M
$900.0M
$1000.0M
4/30/20235/31/20236/30/20237/31/20238/31/20239/30/2023
10/31/202311/30/202312/31/2023
1/31/20242/29/20243/31/20244/30/2024
90-Days
Cash on Hand Target
180-Days
Cash on Hand Target
SDCP has met its 90-days
cash on hand reserve policy
target and is approaching its
180-day strategic goal target.
Historical Cash on Hand and Liquidity
21 Reserve Policy Updates
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.
Contribution:
15% Gross Revenue
Annually
Goal:
90-Days Operating
Expense
Current Policy
The contribution to Reserves is determined
through SDCP’s annual budget process as
defined in the agency’s Budget Policy and/or
SDCP’s rate setting process as defined in the
agency’s Rate Development Policy.
Contribution:
Discretionary
Goal:
180-Days Cash on
Hand
Proposed Policy
Use of Excess Reserves
Capital
Projects
Financing
Programs
Paying
Debt
Rate
Reductions
Strategic
Purposes
Stabilization
Reserve
Programmatic
Reserve
Use of Excess Reserves
Capital
Projects
Financing
Programs
Paying
Debt
Rate
Reductions
Strategic
Purposes
Definitions
Reserves: Net Position
Days cash on hand:
(unrestricted cash and cash
equivalents) x 365 /
(operating expenses for the
current fiscal year)
23 Benchmarking – CCA Reserve Targets
240-Days
MCE
180-Days
3CE
180-Days
PCE
120-Days
CPA
Days Cash on Hand Reserve Targets
S&P Credit Rating
A/Stable
MCE
A/Stable
3CE
A-/Stable
PCE
A-/Stable
CPA
90-Days
Reserve Goal
180-Days
Proposed Update
SDCP
Public
Comment
for Item 3
25 Item 3
Approval of Second Revision of Reserves Policy
Recommendation: Recommend Board Approval
of Reserve Policy Revision
Presenter:
Tim Manglicmot, Senior Finance Manager
26 Item 4
Approval of Investment Policy Revision
Recommendation:
Recommend Board Approval of Resolution No.
2024-04, adopting the first revision of
the SDCP Investment Policy.
Presenter:
Tim Manglicmot, Senior Finance Manager
27 Investment Policy Timeline
The timeline including Chandler Asset Management
process:
SDCP Board
approved
Investment Policy
permitting SDCP to
engage external
Investment Advisors
May 2023 December 2023
Issued RFP for
Financial and
Investment Portfolio
Management Services
January 2024
Selected Chandler
Asset Management
February 2024
SDCP Board Approval Investment Advisor
Transition
Review of
Investment Policy
28 Development of Investment Policy
Investment Policy
Peer CCAs
Member
Agencies
Reporting
Financial
Best
Practices
Investment
Objectives
Investment
Types
Prohibited
Investments
Controls
29 Investment Policy Revisions
The revised Investment Policy includes updated language from the recent passing of SB 1489:
Market
Benchmark
Added to Annual Report
Updated
Glossary
Clearer Glossary Terms
Collateralization
Language
Pursuant to State Code
Risk
Management
Renamed Diversification section to
include Risk Management
Prohibited
Investments
Securities with settlement date
exceeding 45 days
Acceptable
Investments
4 Additional Investment Types
30 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. Medium Term Notes Pass Thru Securities Municipal Securities Supranationals Added
Acceptable
Investments
Acceptable
Investments
31 Prohibited Investment Types
ₓ Inverse Floaters
ₓ Range Notes
ₓ Mortgage-derived Interest-only
Strips
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.
Pursuant to Section 53601.6, SDCP shall not invest in any fund or 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 Securities with settlement
date exceeding 45 days
(SB 1489 Requirement)
Added
Prohibited
Investments
Prohibited
Investments
32 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
Public
Comment
for Item 4
34 Item 4
Approval of Investment Policy Revision
Recommendation:
Recommend Board Approval of Resolution No.
2024-04, adopting the first revision of
the SDCP Investment Policy.
Presenter:
Tim Manglicmot, Senior Finance Manager
35 Item 5
Approval of the FY 2024-25 Operating Budget, the
FY 2024-25 Capital Budget, and the FY 2025-29
Capital Investment Plan
Recommendation:
Recommend Board Approval of Resolution No. 2024-03,
adopting the FY 2024-2025 Operating Budget, the FY 2024- 2025 Capital Budget, and the FY 2025-2029 Capital
Investment Plan.
Presenter:
Dr. Eric Washington, Chief Financial Officer
Budget Development for FY 2024-25
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
Financial and Risk
Management
Committee Review
SDCP Board Approval
July 1st Budget
Implemented
Mid-year budget
review (February)
Budget amendments
as necessary
37 Budget Principles for FY 2024-25
• Maintain a fiscally responsible and sustainable
budget.
• Maintain sufficient funds and reserves to
sustain operations while considering future
economic conditions.
• Provide an easier to understand and user-friendly operating budget for both internal and external users.
• Develop budget within framework of public-agency guidelines and best practices. • 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.
38 • Thoughtfully scale the agency by
growing to 80 total staff.
• Continued outreach through community
events, sponsorships and advertising
to inform customers about SDCP.
• Projects added into Capital Investment
Plan (CIP) for non-recurring costs.
• Reducing Professional Service
Agreement costs by in-housing
services.
Budget - Highlights
39 Budget – Summary
Item FY 24 Amended
Budget, $M
FY 25 Draft Budget,
$M
Gross Revenue 1,365.7 1,233.4
Less Uncollectible Accounts (61.5) (55.5)
Net Revenue 1,304.3 1,177.9
Cost of Energy 1,020.8 1,073.6
Non-Energy Costs 43.8 53.8
Subtotal Operating Expense 1,064.6 1,127.5
Debt Service 2.4 1.3
Capital Investment Plan 3.9 15.2
Total Expense 1,071.0 1,143.9
Net Position 232.7 34.0
Cumulative Net Position 418.7 452.7
95% Cost of Energy
40 Budget – Changes since May Meeting
Category 5/25 Board Meeting 6/20 FRMC Meeting FY25 Budget Change % Change
Revenue
Gross Ratepayer Revenues $ 1,223,897,182 $ 1,233,430,250 $ 9,533,068 1% (Less 4.5%* Uncollectible ) $ 55,075,373 $ 55,504,361 $ 428,988 1% Total $ 1,168,821,809 $ 1,177,925,889 $ 9,104,080 1%
Expenditures
Cost of Energy $ 1,059,154,955 $ 1,073,648,137 $ 14,493,182 1% General and Administration $ 7,734,163 $ 7,440,416 $ (293,747) -4% Marketing and Outreach $ 3,274,454 $ 3,010,404 $ (264,050) -8% Personnel Costs $ 17,854,012 $ 18,570,043 $ 716,031 4%
Professional Services and Consultants $ 25,087,218 $ 24,799,232 $ (287,986) -1% Programs $ 100,000 $ - $ (100,000)
Total $ 1,113,204,802 $ 1,127,468,231 $ 14,263,430 1%
Debt Service $ 2,551,069 $ 1,276,000 $ (1,275,069) -50% CIP $ 10,275,030 $ 15,175,030 $ 4,900,000 48%
Net Position $ 42,790,908 $ 34,006,627 $ (8,784,281) -21% 41 FY 2025-29 Capital Investment Plan (CIP)
Solar Battery Savings
Program
Regional
Energy
Network
CPUC Green
Tariffs
Solar/Storage
Feasibility Study
C&I Incentive
Program Community Grants
42 Draft CIP – Summary
Item Carryforward,
$M
FY 25 Draft Budget,
$M
CIP - Operating Transfer In 3.2 15.2
DAC-GT CSGT - 0.5
Regional Energy Network - 0.7
CDFA Healthy Ref. Grant 0.7 -
Total CIP Revenue 3.9 16.4
Total CIP Expense 3.9 16.4
5-year planning document for tracking program spending over multiple years and non-recurring project costs
Leverages state and federal funding
Inform region of community anticipated needs
43 Draft FY 2024-25 Budget
Budget Changes by Category
Revenue
Cost of Energy
Enrollment complete. Board approved
rate change in January 2024.
All contracts updated. Forward energy
prices updated for open positions.
FY24
$1,365.7m
FY24
$1,020.8m
Professional
Services
Personnel
Marketing and
Outreach
General and
Administrative
FY25
$1,223.9m
FY25
$1,073.6m
Calpine higher with full enrollment.
ETRM included. IT managed services,
procurement counsel increased.
FY24
$22.3m
FY25
$24.8m
Recruitment strategy of 10 new staff
growing the agency to 80 total staff.
FY24
$11.7m
FY25
$18.6m
Customer interface improvements, slight
increases to Partnerships and Events &
Sponsorships.
FY24
$2.9m
FY25
$3.0m
Increased G&A budget to support
operating and staff growth anticipated for
FY25.
FY24
$6.8m
FY25
$7.4m
Programs Programs budget included in CIP as
continuing projects. Overall admin in
operating.
FY24
$0.1m
FY25
$0.0m
44 Draft Budget – Personnel
Department SDCP MCE CPA AVA PCE 3CE
Power Services 16 7 14 12 9 5
Data Analytics, IT & Customer Ops. 14 21 15 17 9 9
Public Affairs 12 16 8 9 8 4
Programs 11 19 6 12 7 4
Finance 7 5 12 5 2 5
Legal/Regulatory and Legislative 6 11 11 8 6 2
Executive Team 5 5 8 4 6 4
Operations 5 6 1 3 7 -
Human Resources 4 5 3 5 1 1
Total 80 95 78 75 49 38
45 Budget – Personnel Operating Funding External Funding Authorized in FY24 Proposed in FY25
69 FTEs
authorized
through FY24
13 FTEs vacant
1 FTE funded
externally in
FY24
4.8 FTEs funded
by operating
proposed in FY25
69 FTEs
authorized
through FY24
5.2 FTEs funded
externally proposed
in FY25
46 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 1,006,961 1,393.30 67.51 1,585.29 88% San Diego Community
Power Oct 2019 921,471 1,073.60 53.80 1,177.90 91%
East Bay Community Energy Dec 2016 643,275 753.52 56.62 962.74 78% Marin Clean Energy Dec 2008 586,296 688.76 45.55 787.86 87% Central Coast Community
Energy Mar 2018 445,377 520.30 42.54 562.83 92%
Peninsula Clean Energy Feb 2016 309,994 437.86 56.71 466.93 94% *Source: CalCCA as of December 2023
**CPA from 5/16/24 Community Advisory Committee FY25 draft budget. SDCP from proposed FY25 budget. EBCE from 5/8/24 Finance Subcommittee FY25 draft budget. MCE from 3/21/24 Board meeting FY25 proposed budget. PCE from 5/13/14 Audit and Finance Committee FY25 draft budget. 3CE from FY24 adopted budget.
Public
Comment
for Item 5
48 Item 5
Approval of the FY 2024-25 Operating Budget, the
FY 2024-25 Capital Budget, and the FY 2025-29
Capital Investment Plan
Recommendation:
Recommend Board Approval of Resolution No. 2024-03,
adopting the FY 2024-2025 Operating Budget, the FY 2024- 2025 Capital Budget, and the FY 2025-2029 Capital
Investment Plan.
Presenter:
Dr. Eric Washington, Chief Financial Officer
Committee Member
Announcements
Adjournment
Next Regular
Finance & Risk
Management
Committee
Meeting
August 15, 2024