Agenda packet — San Diego Community Power Board of Directors, June 27, 2024 (part 1 of 2)

AGENDA – BOARD OF DIRECTORS – SAN DIEGO COMMUNITY POWER 1 AGENDA
Regular Meeting of the Board of Directors of
San Diego Community Power (SDCP)
Thursday, June 27, 2024
5:00 p.m.

City of San Diego Metropolitan Operations Complex (MOC II) Auditorium 9192 Topaz Way, San Diego, CA 92123
The meeting will be held in person at the above date, time and location. Board of Directors Members and members of the public may attend in person. Under certain circumstances, Directors may also attend and participate in the meeting virtually pursuant to the Brown Act (Gov. Code § 54953). As a convenience to the public, SDCP provides a call-in option and internet-based option for members of the public to virtually observe and provide public comments at its meetings. Additional details on in-person and virtual public participation are below. Please note that, in the event of a technical issue causing a disruption in the call-in option or internet-based option, the meeting will continue unless otherwise required by law, such as when a Board Member is attending the meeting virtually pursuant to certain provisions of the Brown Act.

Note: Any member of the public may provide comments to the Board of Directors on any agenda item. When providing comments to the Board, it is requested that you provide your name and city of residence for the record. Commenters are requested to address their comments to the Board of Directors as a whole through the Chair. Comments may be provided in one of the following manners:

1. Providing Oral Comments During Meeting. Anyone attending in person desiring to address the Board of Directors is asked to fill out a speaker’s slip and present it to the Clerk of the Board or the Secretary. To provide remote comments during the meeting, join the Zoom meeting by computer, mobile phone, or dial-in number. On Zoom video conference by computer or mobile phone, use the “Raise Hand” feature. This will notify the moderator that you wish to speak during a specific item on the agenda or during non-agenda Public Comment. Members of the public will not be shown on video but will be able to speak when called upon. If joining the meeting using the Zoom dial-in number, you can raise your hand by pressing *9. Comments will be limited to three (3) minutes.

2. Written Comments. Written public comments must be submitted prior to the start of the meeting by using this Web Comment Form. Please indicate a specific agenda item when submitting your comment. All written comments received prior to the meeting will be provided to the Board members in writing. In the discretion of the Chair, the first ten (10) submitted comments shall be stated into the record of the meeting. Comments read at the meeting will be limited to the first 400 words. Comments received after the start of the meeting will be collected, sent to the Board members in writing, and be part of the public record.

AGENDA – BOARD OF DIRECTORS – SAN DIEGO COMMUNITY POWER 2 If you have anything that you wish to be distributed to the Board, please provide it via [email protected] and it will be distributed to the Members.

The public may participate using the following remote options:

Teleconference Meeting Webinar https://zoom.us/j/94794075133 Telephone (Audio Only) (669) 900-6833 or (346) 248-7799 | Webinar ID: 947 9407 5133

WELCOME

CALL TO ORDER

ROLL CALL

PLEDGE OF ALLEGIANCE

SPECIAL PRESENTATIONS AND INTRODUCTIONS

ITEMS TO BE ADDED, WITHDRAWN, OR REORDERED ON THE AGENDA

PUBLIC COMMENTS
Opportunity for members of the public to address the Board on any items not on the agenda but within the jurisdiction of the Board. Members of the public may provide a comment in either manner described above.

CONSENT CALENDAR
All matters are approved by one motion without discussion unless a member of the Board of Directors requests a specific item to be removed from the Consent Calendar for discussion.

A member of the public may comment on any item on the Consent Calendar in either manner described above.

1. Approve May 23 and May 30, 2024, Meeting Minutes

2. Receive and File Treasurer’s Report for Period Ending April 30, 2024

3. Receive and File Update on Programs

4. Receive and File Update on Power Services

5. Receive and File Update on Human Resources

6. Receive and File Update on Customer Operations

7. Receive and File Update on Marketing, Public Relations, and Local Government Affairs

8. Receive and File Update on Community Advisory Committee AGENDA – BOARD OF DIRECTORS – SAN DIEGO COMMUNITY POWER 3 REGULAR AGENDA
The following items call for discussion or action by the Board of Directors. The Board may discuss and/or take action on any item listed below if the Board is so inclined.

9. Approval of IT Managed Services Contract with Tech Mahindra in the not-to-Exceed Amount of $300,000 over Twelve Months with Options for two, One-Year Extensions with not-to-exceed Amounts of $300,000 for each Subsequent Year Recommendation: Approve a contract in substantially similar form to Attachment A for Managed IT Services and Support with Tech Mahindra in the not-to-exceed amount of $300,000 over twelve months with options for two, one-year extensions with not-to-exceed amounts of $300,000 for each subsequent year.

10. Regulatory and Legislative Affairs Update
Recommendation: Receive and File Regulatory and Legislative Affairs Update.

11. Approval of Second Revision of Reserves Policy
Recommendation: Approve Second Revision to Financial Reserves Policy.

12. Approve Investment Policy Revision
Recommendation: Board Approval of Resolution No. 2024-04, adopting the first revision of the SDCP Investment Policy.

13. Approval of the FY 2024-25 Operating Budget, the FY 2024-25 Capital Budget, and the FY 2025-29 Capital Investment Plan
Recommendation: 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.

CHIEF EXECUTIVE OFFICER REPORT
SDCP Management may briefly provide information to the Board and the public. The Board may engage in discussion if the specific subject matter of the report is identified below, but the Board may not take any action other than to place the matter on a future agenda.

Otherwise, there is to be no discussion or action taken unless authorized by law.

DIRECTOR COMMENTS
Board Members may briefly provide information to other members of the Board and the public, ask questions of staff, request an item to be placed on a future agenda, or report on AGENDA – BOARD OF DIRECTORS – SAN DIEGO COMMUNITY POWER 4 conferences, events, or activities related to SDCP business. There is to be no discussion or action taken on comments made by Directors unless authorized by law.

CLOSED SESSION

1. PUBLIC EMPLOYEE PERFORMANCE EVALUATION PURSUANT TO GOVERNMENT CODE SECTION 54957
Title: Chief Executive Officer

2. CONFERENCE WITH LABOR NEGOTIATORS PURSUANT TO GOVERNMENT CODE SECTION 54957.6
Agency designated representative(s): General Counsel
Unrepresented employee: Chief Executive Officer

ADJOURNMENT
The San Diego Community Power Board of Directors will adjourn to a regular meeting scheduled on Thursday August 22, 2024.

Compliance with the Americans with Disabilities Act
SDCP Board of Directors meetings comply with the protections and prohibitions of the Americans with Disabilities Act. Individuals with a disability who require a modification or accommodation, including auxiliary aids or services, in order to participate in the public meeting may contact (888) 382-0169 or [email protected]. Requests for disability-related modifications or accommodations require different lead times and should be provided at least 72-hours in advance of the public meeting.

Availability of Board Documents
Copies of the agenda and agenda packet are available at https://sdcommunitypower.org/resources/meeting-notes/. Late-arriving documents related to a Board meeting item which are distributed to a majority of the Members prior to or during the Board meeting are available for public review as required by law. Public records, including agenda-related documents, can be requested electronically at [email protected] or by mail to SDCP, PO BOX 12716, San Diego, CA 92112. The documents may also be posted at the above website. Such public records are also available for inspection, by appointment, at San Diego Community Power, 2305 Historic Decatur Road, Suite 200, San Diego, CA 92106. Please contact [email protected] to arrange an appointment.

MEETING MINUTES – BOARD OF DIRECTORS – SAN DIEGO COMMUNITY POWER – MAY 23, 2024 1 SAN DIEGO COMMUNITY POWER (SDCP)

BOARD OF DIRECTORS
City of San Diego Metropolitan Operations Complex (MOC II) Auditorium 9192 Topaz Way
San Diego, CA 92123

REGULAR MEETING MINUTES
May 23, 2024
The Board minutes are prepared and ordered to correspond to the Board Agenda. Agenda Items can be taken out of order during the meeting.

The Agenda Items were considered in the order presented.

WELCOME

CALL TO ORDER
Chair LaCava (City of San Diego) called the SDCP Board of Directors regular meeting to order at 5:03 p.m.

ROLL CALL
PRESENT: Chair LaCava (City of San Diego), Director McCann (City of Chula Vista), Director Hinze (City of Encinitas), Director Aguirre (City of Imperial Beach), Director Parent (City of La Mesa), and Director Yamane (City of National City) ABSENT: Vice Chair Lawson-Remer (County of San Diego)
Also Present: Chief Executive Officer (CEO) Burns, Chief Financial Officer, (CFO) Dr.

Washington (virtual), Chief Operating Officer (COO) Clark, General Counsel Tyagi, La Mesa City Clerk Wiegelman, Assistant Clerk of the Board Vences

PLEDGE OF ALLEGIANCE
Chair LaCava (City of San Diego) led the Pledge of Allegiance.

MEETING MINUTES – BOARD OF DIRECTORS – SAN DIEGO COMMUNITY POWER – MAY 23, 2024 2 SPECIAL PRESENTATIONS AND INTRODUCTIONS
Chair LaCava (City of San Diego) acknowledged the Kumeyaay Nation and all the original stewards of the land.
• Proclamation for outgoing Community Advisory Committee member Anna Webb Chair LaCava (City of San Diego) presented a proclamation recognizing and thanking former Community Advisory Committee (CAC) Member Anna Webb (Imperial Beach).

Director Aguirre (City of Imperial Beach) thanked former CAC Member Anna Webb for her dedication and service to the CAC, SDCP, and community.

ITEMS TO BE ADDED, WITHDRAWN, OR REORDERED ON THE AGENDA There were no items added, withdrawn, or reordered on the agenda.

PUBLIC COMMENTS
There were no public comments.

CONSENT CALENDAR
(Items 1 through 9)
Motioned by Director McCann (City of Chula Vista) and seconded by Director Aguirre (City of Imperial Beach) to approve Consent Calendar Items 1 through 9. The motion carried by 6/0 as follows:

1. Approve April 25, 2024, Meeting Minutes
Approved.

2. Receive and File Treasurer’s Report for Period Ending March 31, 2024 Received and filed.

3. Receive and File Update on Programs
Received and filed.

MEETING MINUTES – BOARD OF DIRECTORS – SAN DIEGO COMMUNITY POWER – MAY 23, 2024 3 4. Receive and File Update on Power Services
Received and filed.

5. Receive and File Update on Human Resources
Received and filed.

6. Receive and File Update on Customer Operations
Received and filed.

7. Receive and File Update on Marketing, Public Relations, and Local Government Affairs
Received and filed.

8. Receive and File Update on Regulatory and Legislative Affairs Received and filed.

9. Receive and File Update on Community Advisory Committee Received and filed.

REGULAR AGENDA

10. Consideration and Approval of Community Advisory Committee (CAC) Appointment for the City of Imperial Beach
COO Clark provided a brief overview of the purpose of the CAC and described the application and appointment process. COO Clark introduced City of Imperial Beach CAC applicant, Kenneth Charles Hoyt.

Kenneth Charles Hoyt gave a brief overview of his professional background and expressed his desire to serve the community.

Board questions and comments ensued.

Motioned by Director Aguirre (City of Imperial Beach) and seconded by Director Yamane (City of National City) to approve the appointment of Kenneth Charles Hoyt to the CAC for the City of Imperial Beach. The motion carried 6/0 as follows:

YES: Chair LaCava (City of San Diego), Director McCann (City of Chula Vista), Director Hinze (City of Encinitas), Director Aguirre (City of Imperial Beach), Director Parent (City of La Mesa), and Director Yamane (City of National City) NO: None
ABSTAINED: None
ABSENT: Vice Chair Lawson-Remer (County of San Diego)
MEETING MINUTES – BOARD OF DIRECTORS – SAN DIEGO COMMUNITY POWER – MAY 23, 2024 4 11. Receive and File Update on IT and Data Analytics
Director of Data Analytics and IT Singh, provided an overview on the discovery and assessment of SDCP’s current state of IT and data analytics. The overview highlighted the discovery process, key systems, and essential capabilities that SDCP staff needs to succeed and deliver on clean energy goals. It also addressed issues impacting strategic value, and issues affecting operations and efficiencies. Director of Analytics and IT Sing reviewed the opportunities, technology strategies, solutions, and roadmap to enable SDCP to deliver on its commitment to the SDCP Board of Directors and to its communities
Following Board questions and comments, no action was taken.

12. Presentation of Draft FY2024-25 Budget
Senior Finance Manager Manglicmot provided an overview on the draft Fiscal Year (FY) 2024-25 Budget, highlighting the budget development schedule, budget principles, draft FY 2025-29 Capital Investment Plan (CIP), reserves, budget changes by category, personnel budget, and comparison to other Community Choice Aggregations.

Following Board questions and comments, no action was taken.

13. Approve the Contract for Professional Services for Marketing, Communications, Website Redesign and Website Maintenance with JSR Strategies in the Not-to-Exceed Amount of $500,000 Over Two Years with Options for Two, One-Year Extensions with Not-to-Exceed Amounts of $200,000 for Each Subsequent Year Senior Manager Marketing and Communications Monroe provided an overview of the professional services contract for marketing, communications, website redesign and website maintenance with JSR strategies, including the Request for Proposals (RFP) design and timeline.

Jessica Rhoades, JSR Strategies, shared information on JSR Strategies.

Board questions and comments ensued.

Motioned by Director McCann (City of Chula Vista) and seconded by Director Aguirre (City of Imperial Beach) to approve the contract for professional services for Marketing, Communications, Website Redesign and Website Maintenance with JSR Strategies in the not-to-exceed amount of $500,000 over two years with options for two, one-year extensions with not-to-exceed amounts of $200,000 for each subsequent year. The motion carried 6/0 as follows:

YES: Chair LaCava (City of San Diego), Director McCann (City of Chula Vista), Director Hinze (City of Encinitas), Director Aguirre (City of Imperial Beach), Director Parent (City of La Mesa), and Director Yamane (City of National City) NO: None
ABSTAINED: None
ABSENT: Vice Chair Lawson-Remer (County of San Diego)
MEETING MINUTES – BOARD OF DIRECTORS – SAN DIEGO COMMUNITY POWER – MAY 23, 2024 5 14. Approve Energy Storage Service Agreement with Euismod Project I, LLC Managing Director Power Services Vosburg provided an overview of the Energy Storage Service Agreement with Euismod Project I, LLC, including the project type, staff’s analysis of the project, and the project’s location, product, pricing timeline, deliverability, workforce development, and community benefits.

Board questions and comments ensued.

Motioned by Director McCann (City of Chula Vista) and seconded by Director Parent (City of La Mesa) to approve the Energy Storage Service Agreement with Euismod Project I, LLC for a 200 MW (4-hour) Battery Energy System Storage (BESS) facility. The motion carried 6/0 as follows:

15. Approve Financially Settled Toll and Energy Storage Agreement with MRP Pacifica Marketing LLC for Hybridization of Border Facility
Portfolio Manager Kanu provided an overview of the proposed Financially Settled Toll and Energy Storage Agreement with MRP Pacifica Marketing LLC, including the project type, staff’s analysis of the project, and the project’s location, product, pricing timeline, deliverability, workforce development, and community benefits.

Cristina Marquez, IBEW Local 569, spoke in support of the Financially Settled Toll and Energy Storage Agreement with MRP Pacifica Marketing LLC for hybridization of Border Facility.

Board questions and comments ensued.

Motioned by Director McCann (City of Chula Vista) and seconded by Director Parent (City of La Mesa) to approve the Financially Settled Toll and Energy Storage Agreement with MRP Pacifica Marketing LLC for a thermal resource including 51.25 MW of Resource Adequacy and a co-located 52 MWh Battery Storage (“Border Project”) and authorize execution by CEO. The motion carried 6/0 as follows:

YES: Chair LaCava (City of San Diego), Director McCann (City of Chula Vista), Director Hinze (City of Encinitas), Director Aguirre (City of Imperial Beach), Director Parent (City of La Mesa), and Director Yamane (City of National City) NO: None
ABSTAINED: None
ABSENT: Vice Chair Lawson-Remer (County of San Diego)
MEETING MINUTES – BOARD OF DIRECTORS – SAN DIEGO COMMUNITY POWER – MAY 23, 2024 6 16. Approve Financially Settled Toll and Energy Storage Agreement with MRP Pacifica Marketing II LLC for Hybridization of Enterprise Facility Portfolio Manager Kanu provided an overview of the proposed Financially Settled Toll and Energy Storage Agreement with MRP Pacifica Marketing II LLC, including the project type, staff’s analysis of the project, and the project’s location, product, pricing timeline, deliverability, workforce development, and community benefits.

Cristina Marquez, IBEW Local 569, spoke in support of the Financially Settled Toll and Energy Storage Agreement with MRP Pacifica Marketing II LLC for hybridization of Enterprise Facility.

Board questions and comments ensued.

Motioned by Director McCann (City of Chula Vista) and seconded by Director Parent (City of La Mesa) to approve the Financially Settled Toll and Energy Storage Agreement with MRP Pacifica Marketing II LLC for a thermal resource including 48.04 MW of Resource Adequacy and a co-located 52 MWh Battery Storage (“Enterprise Project”) and authorize execution by CEO. The motion carried 6/0 as follows:

CHIEF EXECUTIVE OFFICER REPORT
CEO Burns reported on SDCP’s ongoing efforts and recent activities and events.

DIRECTOR COMMENTS
Director Aguirre (City of Imperial Beach) and Director Hinze (City of Encinitas) requested that a workshop on Understanding Your Energy Bill be held in their respective cities.

ADJOURNMENT
Chair LaCava (City of San Diego) adjourned the meeting at 6:24 p.m. to a special meeting scheduled on Thursday, May 30, 2024, at 5:30 p.m.
____________________________
Maricela Hernandez, MMC, CPMC
Clerk of the Board
MEETING MINUTES – BOARD OF DIRECTORS – SAN DIEGO COMMUNITY POWER – MAY 30, 2024 1 SAN DIEGO COMMUNITY POWER (SDCP)

BOARD OF DIRECTORS

SPECIAL MEETING MINUTES
May 30, 2024
City of San Diego Metropolitan Operations Complex (MOC II) Auditorium 9192 Topaz Way
San Diego, CA 92123

The Board meeting minutes are prepared and ordered to correspond to the Board Agenda.

Agenda items can be taken out of order during the meeting.

Agenda items were considered in the order presented.

WELCOME

CALL TO ORDER
Chair LaCava (City of San Diego) called the special meeting of the SDCP Board of Directors meeting to order at 5:32 p.m.

ROLL CALL
PRESENT: Chair LaCava (City of San Diego), Director McCann (City of Chula Vista) via Zoom Teleconference, Director Hinze (City of Encinitas); via Zoom Teleconference, AB 2449 exemption; Director Aguirre (City of Imperial Beach), Director Parent (City of La Mesa), and Director Yamane (City of National City) ABSENT: Vice Chair Lawson-Remer (County of San Diego)
Staff Present: Chief Executive Officer (CEO) Burns, Chief Operating Officer (COO) Clark, Chief Financial Officer (CFO)/Treasurer Washington, General Counsel Tyagi, Clerk of the Board Clerk Hernandez, and Assistant Clerk of the Board Vences Director Hinze (City of Encinitas) reported that she was participating in today’s meeting via Zoom Teleconference under one of the exemptions allowed by AB 2449 and there were no individuals over the age of 18 present in the room with her.

MEETING MINUTES – BOARD OF DIRECTORS – SAN DIEGO COMMUNITY POWER – MAY 30, 2024 2 PLEDGE OF ALLEGIANCE
Chair LaCava (City of San Diego) led the Pledge of Allegiance.

REGULAR AGENDA

1. Adopt a Power100 Green-e Certified Product and Approve its Rate Ms. Burns introduced the item and turned it over to Mr. Lu and Mr. Utouh who provided an overview on Power100 Green-e Certified Product and its Rate.

There were no public comments on this item.

Following Board questions and comments, motioned by Director Parent (City of La Mesa) and seconded by Director McCann (City of Chula Vista) to Adopt a Power100 Green-e Certified Product and Approve its Rate. The motion carried 6/0 by Roll Call Vote as follows:

AYES: Chair LaCava (City of San Diego), Director McCann (City of Chula Vista), Director Hinze (City of Encinitas), Director Aguirre (City of Imperial Beach), Director Parent (City of La Mesa), and Director Yamane (City of National City)
NOES: None
ABSTAINED: None
ABSENT: Vice Chair Lawson-Remer (County of San Diego)

2. Adopt a PowerBase Service and Approve its Rates
Ms. Burns introduced the item and turned it over to Mr. Manglicmot and Mr. Utouh who provided an overview on PowerBase Service and its Rates.

There were no public comments on this item.

Director Hinze requested staff to provide the Board with performance reports on new PowerBase rate option.

Following Board questions and comments, motioned by Director Parent (City of La Mesa) and seconded by Director Aguirre (City of Imperial Beach) to Adopt a PowerBase Service and Approve its Rates. The motion carried 6/0 by Roll Call Vote as follows:

AYES: Chair LaCava (City of San Diego), Director McCann (City of Chula Vista), Director Hinze (City of Encinitas), Director Aguirre (City of Imperial Beach), Director Parent (City of La Mesa), and Director Yamane (City of National City)
NOES: None
ABSTAINED: None
MEETING MINUTES – BOARD OF DIRECTORS – SAN DIEGO COMMUNITY POWER – MAY 30, 2024 3 ABSENT: Vice Chair Lawson-Remer (County of San Diego)

ADJOURNMENT
Chair LaCava (City of San Diego) adjourned the meeting at 6:02 p.m. to the next regular Board meeting scheduled on Thursday, June 27, 2024.
_______________________________
Maricela Hernandez, MMC, CPMC
Clerk of the Board

SAN DIEGO COMMUNITY POWER
Staff Report – Item 2
-------------------------------------------------------------------------------------------------------------------- To: San Diego Community Power Board of Directors
From: Eric W. Washington, Chief Financial Officer
Via: Karin Burns, Chief Executive Officer
Subject: Review of Treasurer’s Report for Period Ending April 30, 2024 Date: June 27, 2024
--------------------------------------------------------------------------------------------------------------------

RECOMMENDATION
Receive and File Treasurer’s Report for Period Ending 4/30/24.

BACKGROUND
San Diego Community Power (SDCP) maintains its accounting records on a full accrual basis in accordance with Generally Accepted Accounting Principles (GAAP) as applicable to governmental enterprise funds.

SDCP has prepared its year-to-date financial statements for the period ended April 30, 2024, along with budgetary comparisons.

SDCP additionally reports monthly metrics during its Board meetings as part of its Update on Back-Office Operations. As part of the Treasurer’s Report, certain key metrics related to risk are to be presented during Financial and Risk Management Committee (FRMC) meetings.

On February 22, 2024, the SDCP Board of Directors (Board) approved a mid-year budget amendment for Fiscal Year 2023-24 that included net operating revenues of $1,304,274,067, total expenses of $1,071,601,284, and a resulting net position of $232,672,783. Given that the Board approval occurred on February 22, 2024, the review of the Treasurer’s Report for period ending April 30, 2024, and reports for the remaining fiscal year will include a comparison against the mid-year budget amendment adopted by the Board.

ANALYSIS AND DISCUSSION
Actual financial results for the period ended 4/30/24: $1.05 billion in net operating revenues were reported compared to $1.12 billion budgeted for the period. $881.06 million in total expenses were reported (including $859.09 million in energy costs) compared to $918.53 million budgeted for the period (including $875.91 million budgeted for energy costs). After expenses, SDCP’s change in net position of $167.16 million was reported for Fiscal Year 2023-24. The following is a summary of the actual results compared to the Fiscal Year 2023-24 Amended Budget.

Table 1: Budget Comparison Versus Actual Result
• Net operating revenues finished $71.56 million (or 6.0 percentage points) under the budget primarily due to lower-than-expected customer load demand correlated with cooler weather in the summer months of 2023.
• Operating expenses finished $37.48 million (or 4.0 percentage points) lower than what was budgeted similarly due to lower-than-expected load demand attributed to cooler weather in the summer months of 2023.

Figure 1: Proforma versus Actual Results
For the period ending 4/30/24, SDCP cumulative net position was $167,163,592 compared to the $201,249,366 reflected in the Fiscal Year 2023-24 amended budget.

Total SDCP reserves at the end of the period were $361,722,614 based on unrestricted cash and cash equivalents and total available liquidity (including lines of credit availability) was $474,222,614. SDCP has a total Fiscal Year 2023-24 year-end reserve target of $524,984,866, which is equivalent to 180-days of total operating expenses as set in SDCP’s Strategic Goals.

Figure 2: Participation Rates as of 6/1/2024
Phase 4 mass enrollment process in National City and Unincorporated County of San Diego for Non-Net Energy Metering (NEM) customers was officially completed as of May 2023. The participation rate for SDCP reflects full enrollment of current member agencies.

We are reporting on the opt outs and eligible accounts associated with the phase based on those accounts that we have noticed for enrollment on a rolling basis as of the reporting month.

Staff are also presenting the state of SDCP Arrearages related to financial risk for FRMC consideration and for regular review. Additional metrics can be added by request. The below arrearage data includes SDCP’s Receivables aged 120+ Days as of 6/1/2024.

Figure 3: State of SDCP Arrearages as of 6/01/2024
Figure 4: State of SDCP Arrearages Residential vs Commercial as of 6/01/2024

COMMITTEE REVIEW
This item was presented Financial and Risk Management Committee reviewed on June 20, 2024.

FISCAL IMPACT
N/A

ATTACHMENTS
Attachment A: 2024 Year-to-Date Period Ended April 30, 24 Financial Statements 1 ACCOUNTANTS’ COMPILATION REPORT
Management
San Diego Community Power
Management is responsible for the accompanying financial statements of San Diego Community Power (a California Joint Powers Authority) which comprise the statement of net position as of April 30, 2024, and the related statement of revenues, expenses, and changes in net position, and the statement of cash flows for the period then ended in accordance with accounting principles generally accepted in the United States of America. We have performed a compilation engagement in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the AICPA. We did not audit or review the accompanying statements nor were we required to perform any procedures to verify the accuracy or completeness of the information provided by management. Accordingly, we do not express an opinion, conclusion, nor provide any assurance on these financial statements.

Management has elected to omit substantially all of the note disclosures required by accounting principles generally accepted in the United States of America in these interim financial statements. San Diego Community Power’s annual audited financial statements include the note disclosures omitted from these interim statements. If the omitted disclosures were included in these financial statements, they might influence the user’s conclusions about the Authority’s financial position, results of operations, and cash flows. Accordingly, these financial statements are not designed for those who are not informed about such matters.

We are not independent with respect to the Authority because we performed certain accounting services that impaired our independence.

Maher Accountancy
San Rafael, CA
May 29, 2024
1101 Fifth Avenue, Suite 200 San Rafael, CA 94901 415 459 1249 mahercpa.com Current assets
Cash and cash equivalents - unrestricted 361,722,614$
Cash and cash equivalents - restricted 500,000
Accounts receivable, net of allowance 54,568,558
Accrued revenue 33,005,097
Prepaid expenses 11,808,784
Other receivables 812,500
Deposits 2,263,984
Total current assets 464,681,537
Noncurrent assets
Cash and cash equivalents - restricted 1,147,000
Lease asset, net of amortization 1,276,939
Capital assets, net of depreciation 129,667
Total noncurrent assets 2,553,606
Total assets 467,235,143
Current liabilities
Accrued cost of electricity 103,856,846
Accounts payable 569,482
Other accrued liabilities 2,510,111
State surcharges payable 181,952
Deposits - energy suppliers 4,932,500
Interest and finance costs payable 93,125
Lease liability 954,824
Total current liabilities 113,098,840
Noncurrent liabilities
Supplier security deposits 624,000
Lease liability 490,730
Total noncurrent liabilities 1,114,730
Total liabilities 114,213,570
Restricted for collateral 1,647,000
Unrestricted 351,374,573
Total net position 353,021,573$

NET POSITION

SAN DIEGO COMMUNITY POWER

STATEMENT OF NET POSITION
As of April 30, 2024
ASSETS

LIABILITIES
See accountants' compilation report. 2

OPERATING REVENUES
Electricity sales, net $ 1,046,963,238
Grant revenue 983,500
Other income 323,135
Total operating revenues 1,048,269,873

OPERATING EXPENSES
Cost of electricity 859,088,133
Contract services 15,651,235
Staff compensation 9,258,338
Other operating expenses 2,716,922
Depreciation and amortization 579,804
Total operating expenses 887,294,432
Operating income 160,975,441

NON-OPERATING REVENUES (EXPENSES)
Interest income 7,523,548
Interest and financing expense (1,489,747)
Nonoperating revenues (expenses), net 6,033,801
CHANGE IN NET POSITION 167,009,242
Net position at beginning of year 186,012,331
Net position at end of year $ 353,021,573

SAN DIEGO COMMUNITY POWER

STATEMENT OF REVENUES, EXPENSES

AND CHANGES IN NET POSITION
Ten Months Ended April 30, 2024
See accountants' compilation report. 3

CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers 1,150,698,730$
Receipts of supplier security deposits 37,126,179
Receipts from wholesale sales 17,303,232
Other operating receipts 1,306,635
Payments to suppliers for electricity (842,658,390)
Payments for goods and services (20,545,523)
Payments of staff compensation and benefits (8,899,126) Payments for deposits and collateral (5,684,693)
Payments of state surcharges (2,321,269)
Net cash provided by operating activities 326,325,775

CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES
Principal payments - bank note (35,730,000)
Interest and related expense payments (1,909,624)
Net cash provided (used) by non-capital
financing activities (37,639,624)

CASH FLOWS FROM CAPITAL AND RELATED

FINANCING ACTIVITIES
Payments of lease liability (435,086)
Payments to acquire capital assets (71,550)
Net cash (used) by capital and related financing activities (506,636)

CASH FLOWS FROM INVESTING ACTIVITIES
Interest income received 7,359,219
Net change in cash and cash equivalents 295,538,734
Cash and cash equivalents at beginning of year 67,830,880 Cash and cash equivalents at end of year 363,369,614$
Reconciliation to the Statement of Net Position
Cash and cash equivalents (unrestricted) 361,722,614$
Restricted cash - current 500,000
Restricted cash - noncurrent 1,147,000
Cash and cash equivalents 363,369,614$

SAN DIEGO COMMUNITY POWER

STATEMENT OF CASH FLOWS
Ten Months Ended April 30, 2024
See accountants' compilation report. 4
Operating income 160,975,441$
Adjustments to reconcile operating income to net
cash provided by operating activities
Depreciation and amortization expense 579,804
(Increase) decrease in:

Accounts receivable, net 55,945,173
Accrued revenue 45,787,687
Prepaid expenses 18,718,714
Other receivables (414,456)
Deposits 15,392,366
Increase (decrease) in:

Accrued cost of electricity 26,511,504
Accounts payable 130,215
Other accrued liabilities (1,284,536)
State surcharges payable (318,637)
Supplier security deposits 4,302,500
Net cash provided by operating activities 326,325,775$

SAN DIEGO COMMUNITY POWER
STATEMENT OF CASH FLOWS (continued)
Ten Months Ended April 30, 2024

RECONCILIATION OF OPERATING INCOME TO NET

CASH PROVIDED BY OPERATING ACTIVITIES
See accountants' compilation report. 5
1 ACCOUNTANTS’ COMPILATION REPORT

Board of Directors
San Diego Community Power
Management is responsible for the accompanying special purpose operating fund budgetary comparison schedule of San Diego Community Power (SDCP), a California Joint Powers Authority, for the period ended April 30, 2024, and for determining that the budgetary basis of accounting is an acceptable financial reporting framework. We have performed a compilation engagement in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the AICPA. We did not audit or review the accompanying statement nor were we required to perform any procedures to verify the accuracy or completeness of the information provided by management. Accordingly, we do not express an opinion, a conclusion, nor provide any assurance on this special purpose budgetary comparison statement.

The special purpose statement is prepared in accordance with the budgetary basis of accounting, which is a basis of accounting other than accounting principles generally accepted in the United States of America. This report is intended for the information of the Board of Directors of SDCP.

Management has elected to omit substantially all of the note disclosures required by accounting principles generally accepted in the United States of America in these interim financial statements.

SDCP’s annual audited financial statements will include the note disclosures omitted from these interim statements. If the omitted disclosures were included in these financial statements, they might influence the user’s conclusions about the Authority’s financial position, results of operations, and cash flows.

Accordingly, these financial statements are not designed for those who are not informed about such matters.

We are not independent with respect to SDCP because we performed certain accounting services that impaired our independence.

Maher Accountancy
San Rafael, CA
May 29, 2024
1101 Fifth Avenue, Suite 200 San Rafael, CA 94901 415 459 1249 mahercpa.com 2023/24 YTD
Amended
Budget
2023/24 YTD
Actual
2023/24 YTD
Amended
Budget
Variance
(Under) Over
2023/24
YTD
Actual/
Amended
Budget %
2023/24 Annual
Amended Budget
2023/24
Amended Budget
Remaining
REVENUES AND OTHER SOURCES Gross Ratepayer Revenues 1,172,548,524 1,090,586,706$ (81,961,818) 93% 1,365,732,007$ 275,145,301$ Less: Uncollectible Customer Accounts (52,764,684) (43,623,468) 9,141,216 83% (61,457,940) (17,834,472) Grant Revenue - 983,500 983,500 - (983,500) Other Income 273,435 273,435 - (273,435) Total Revenues and Other Sources 1,119,783,840 1,048,220,173 (71,563,667) 1,304,274,067 256,053,894 OPERATING EXPENSES Cost of Energy 875,908,709 859,038,433 (16,870,276) 98% 1,020,844,552 161,806,119 Professional Services and Consultants 18,717,255 14,965,614 (3,751,641) 80% 22,250,657 7,285,043 Personnel Costs 9,740,686 9,258,338 (482,348) 95% 11,603,394 2,345,056 Marketing and Outreach 2,461,475 1,591,688 (869,787) 65% 2,925,978 1,334,290 General and Administration 5,735,316 1,982,788 (3,752,528) 35% 6,812,564 4,829,776 Programs 97,167 259,518 162,351 267% 115,500 (144,018) Total Operating Expenses 912,660,608 887,096,379 (25,564,229) 1,064,552,645 177,456,266 Operating Income (Loss) 207,123,232 161,123,794 (45,999,438) 239,721,422 78,597,628 NON-OPERATING REVENUES (EXPENSES) Investment Income - 7,523,548 7,523,548 - (7,523,548) Interest and Related Expenses (1,994,699) (1,483,750) 510,949 74% (2,393,639) (909,889) Transfer to Capital Investment Program (3,879,167) - 3,879,167 0% (4,655,000) (4,655,000) Total Non-Operating Revenues (Expenses) (5,873,866) 6,039,798 11,913,664 (7,048,639) (13,088,437) NET INCREASE (DECREASE) 201,249,366$ 167,163,592$ (34,085,774)$ 232,672,783$ 65,509,191$

SAN DIEGO COMMUNITY POWER

BUDGETARY COMPARISON SCHEDULE
Ten Months Ended April 30, 2024

OPERATING FUND
See accountants' compilation report.

SAN DIEGO COMMUNITY POWER
Staff Report – Item 3
-------------------------------------------------------------------------------------------------------------------- To: San Diego Community Power Board of Directors
From: Colin Santulli, Director of Programs
Via: Jack Clark, Chief Operating Officer
Subject: Update on Programs
Date: June 27, 2024
--------------------------------------------------------------------------------------------------------------------

RECOMMENDATION
Receive and file update on customer energy programs.

BACKGROUND
Staff will provide regular updates to the Board of Directors (“Board”) regarding the following SDCP customer energy programs: Building Electrification, Energy Education, Energy Efficiency, Flexible Load, Grant Programs, and Solar and Energy Storage.

ANALYSIS AND DISCUSSION
Updates on customer energy programs are detailed below.

Building Electrification
California Energy Commission (“CEC”) Equitable Building Decarbonization Program
Please refer to Item 3 of the May 2024 Board staff report for the most recent update on this program.

U.S. Environmental Protection Agency (“EPA”) Climate Pollution Reduction Grant (“CPRG”) Program
Please refer to Item 3 of the March 2024 Board staff report for the most recent update on this program.

Energy Education
Energy Education Website
Please refer to Item 3 of the February 2024 Board staff report for the most recent update on this program.

Energy Efficiency
California Department of Food and Agriculture (“CDFA”) Healthy Refrigeration Grant Program
Status: In July 2023, SDCP staff applied for grant funds under the CDFA Healthy Refrigeration Grant Program. The program provides energy-efficient refrigeration/freezer equipment to corner stores and small businesses in low-income or low-food access areas in the state to stock California-grown fresh produce, nuts, dairy, meat, eggs, and minimally processed and culturally appropriate foods. The purpose of the program is to improve access to healthy foods in underserved communities, while promoting California-grown agriculture.

In late December 2023, Staff were notified that SDCP received a $710,000 grant award to provide refrigeration/freezer equipment and additional technical assistance offerings to stores throughout SDCP’s service territory. At the January 2024 Board meeting, the Board adopted a Resolution that authorizes SDCP to accept, appropriate, and expend the CDFA grant funding. Staff received the grant agreement from CDFA in late May 2024 and executed it in early June 2024.

Next Steps: Staff anticipate launching the pilot program in Q4 CY 2024. Over the next few months, Staff will initiate procurement processes to subcontract with vendors necessary to implement the program and will develop program materials.

FLEXmarket Pilot
Please refer to Item 3 of the March 2024 Board staff report for the most recent update on this program.

Regional Energy Network (“REN”) Formation
Status: The approval of a REN in San Diego would bring California Public Utilities Commission (“CPUC”) energy efficiency funding to the region in the form of various program offerings, which can include residential and commercial energy efficiency, workforce education and training, and public sector codes and standards support. Since the San Diego Regional Energy Network (“SDREN”) Business Plan Application was submitted to the CPUC on January 5, 2024, Staff have been attending relevant statewide meetings and continuing to coordinate with SDG&E and other stakeholders. Upon CPUC approval, a SDREN Advisory Committee will be formed to advise SDCP and the County of San Diego, the co-leads of SDREN, on program outreach and enrollment, program evaluation reports, and recommendations on program improvements. A description of the SDREN governance structure can be found on pages 9-13 of the Business Plan Application.

To reduce any potential delays in launching SDREN upon CPUC approval, Staff have proactively formed an Inaugural SDREN Advisory Committee to convene regional stakeholders to inform the structure, functionality, and operation of the future SDREN Advisory Committee. The first Inaugural SDREN Advisory Committee meeting took place on May 22, 2024, and attendees included representatives of Clean Energy Alliance, Climate Action Campaign, MAAC, Port of San Diego, San Diego Association of Governments (“SANDAG”), San Diego Building Trades, San Diego Green Building Council (“SDGBC”), San Diego Regional Chamber of Commerce, and San Diego Regional Climate Collaborative (“SDRCC”). Discussion topics of the Inaugural SDREN Advisory Committee are not program related and are focused on the committee’s future operations and functionality such as committee role and responsibilities, potential Technical Subcommittees that SDREN could form, frequency of meetings, terms of participation, etc.

Next Steps: Staff will continue to attend relevant statewide meetings related to the SDREN Business Plan Application, continue coordination with SDG&E, and respond to any data requests, questions, or comments from the CPUC or stakeholders during the evaluation period (i.e., post-application submittal through when a CPUC decision is made).

Flexible Load
Flexible Load Strategy
Status: Staff have completed the development of a Request for Proposal (“RFP”) for the procurement of a Distributed Energy Resources Management System (“DERMS”) software solution that will support implementation of the Flexible Load Strategy. The DERMS Software RFP was released on June 10, 2024.

Next Steps: Staff anticipate having the DERMS software under contract by Q3/Q4 CY 2024.

Vehicle-Grid Integration (“VGI”) Strategy
Status: Staff are gathering requirements for a V1G management platform.

Next Steps: Following completion of the requirements gathering process, Staff will begin developing an RFP for release during Q3 CY 2024.

Grant Programs
Community Clean Energy Grant Program
Status: The FY 2023-24 grant cycle closed on April 5, 2024, and the grant evaluation process completed in May 2024. Staff anticipate the selected grantees to be notified in June 2024 and for grant agreements to be executed in July 2024.

Next Steps: Staff plan on holding a public announcement event in July or August 2024.

Member Agency Grant Program
Please refer to Item 3 of the May 2024 Board staff report for the most recent update on this program. Future updates on this program will be provided by SDCP’s Public Affairs team.

Solar and Energy Storage
Net Energy Metering (“NEM”) and Net Billing Tariff (“NBT”) Please refer to Item 2 of the December 2023 Board staff report for the most recent update on this program. Staff anticipate bringing back an item to the Board by Q4 CY 2024 to update the tariff with support for virtual and aggregation versions of NBT.

Solar Battery Savings Program
Status: The residential solar and storage program has been named the Solar Battery Savings Program. Staff have finalized the program design and released the program documentation to industry. Staff are holding two identical contractor training sessions on June 18 and 25, 2024 to prepare for the program launch. Staff are also scheduling a training session for battery manufacturers at the end of June. Staff presented an update on the program at the June 2024 CAC meeting.

Next Steps: SDCP plans on launching the program in July 2024. Staff anticipate presenting an update on the program at the August 2024 Board meeting.

Disadvantaged Communities–Single-Family Affordable Solar Homes (“DAC-SASH”) Readiness Pilot Please refer to Item 3 of the May 2024 Board staff report for the most recent update on this program.

Solar for Our Communities
Status: The Final Decision for the Green Access Program (“GAP”) was approved by the CPUC on May 30, 2024. The purpose of the GAP proceeding was to evaluate and potentially modify existing programs, including the Disadvantaged Communities Green Tariff (“DAC-GT”) and Community Solar Green Tariff (“CSGT”) programs, as well as potential new programs that allow Californians to access renewable energy sources. A list of how the Final Decision impacts SDCP’s DAC-GT and CSGT programs can be found in Item 10: Update on Regulatory and Legislative Affairs. Staff plan to reconvene the evaluation of the bids received from the initial solicitation.

Next Steps: Staff will submit the Annual Budget Advice Letter (“ABAL”) by June 29, 2024, or 30 days after the Final Decision. Staff will submit a Tier 2 Advice Letter updating SDCP's DAC-GT tariff schedule to incorporate the Final Decision's modifications within 120 days of the adoption of the Final Decision. Staff will present awarded bids to the Board for approval prior to submitting executed Power Purchase Agreements (“PPAs”) to the CPUC via a Tier 2 Advice Letter for approval no later than 180 days following the notification of selected bidders.

AD-HOC COMMITTEE AND/OR SUBCOMITTEE REVIEW
N/A

FISCAL IMPACT
N/A

ATTACHMENTS
N/A

SAN DIEGO COMMUNITY POWER
Staff Report – Item 4
------------------------------------------------------------------------------------------------------------------- To: San Diego Community Power Board of Directors
From: Byron Vosburg, Managing Director of Power Services Via: Karin Burns, Chief Executive Officer
Subject: Update on Power Resources
Date: June 27, 2024

RECOMMENDATION
Recommendation to receive and file update on Power Resources.

BACKGROUND
Staff provides the updates below to the Board of Directors regarding SDCP’s power energy procurement activities.

ANALYSIS AND DISCUSSION
Power Services Staffing
Building out a team of experienced, knowledgeable energy professionals has long been a top priority and allows SDCP not only to solicit, negotiate, and administer contracts for energy supply effectively, but also to monitor market activity, manage risk, bring in-house several activities that have historically been completed by consultants, and to dedicate additional resources to local and distributed energy procurement and development efforts. The SDCP Power Services team is now ten people strong, has recently added a Senior Energy Settlements Analyst who will be joining in July, and is excited to continue stable, prudent growth through 2024.

To help manage the risks associated with its growing power portfolio and financial & budget processes, staff issued an RFP for Professional Services for Energy Trading Risk Management (ETRM) in January 2024. The range of ETRM functions may include deal capture, position tracking and management, valuation, reporting, risk analysis, settlements, and budget integration. Staff is currently undergoing proof-of-concept trials with shortlisted submissions and is targeting board review of selected vendor(s) contracts in August 2024 for implementation by Q1 2025.

Long-term Renewable Energy RFPs
As SDCP strives to meet its environmental, financial, and regulatory compliance goals and requirements, long-term power purchase agreements (PPAs) are becoming integral components of its energy supply portfolio. Long-term PPAs provide renewable generation facility developers with the certain revenue stream against which they can finance up-front capital requirements, so each long-term PPA that SDCP signs with a developing facility will underpin a new, incremental renewable energy project. In addition, long-term PPAs lock in renewable energy supply around which SDCP can build its power supply portfolio while also providing power supply cost certainty around which SDCP can develop its pro forma financial model. Moreover, the California Renewable Portfolio Standard (RPS), as modified in 2015 by Senate Bill 350, requires that SDCP provide 65% of its RPS-required renewable energy from contracts of at least ten years in length.

Finally, in D.21-06-025, the California Public Utilities Commission (CPUC) required each Load Serving Entity (LSE) in California to make significant long-term purchase commitments for resource adequacy from new, incremental generation facilities that will achieve commercial operation during 2023 through 2026 for purposes of “Mid Term Reliability” (MTR). These requirements have been augmented and extended into 2026 and 2027 via D.23-02-040.

In pursuit of long-term contracts for renewable energy, over the past 18 months, staff released two RFPs for eligible Renewable Energy resources, an RFP for Stand Alone Storage projects, and evaluated other contracting opportunities to meet SDCP’s procurement goals. The SDCP Board has approved resulting contracts for over 1,600 MW of renewable generation and over 1,000 MW of storage capacity. Staff remain in negotiations with several other developers for additional resources that are expected to be online between 2025 and 2029. Staff and the Energy Contracts Working Group (ECWG) evaluate all RFP submissions prior to entering negotiations with selected participants. Assuming that Staff and shortlisted developer(s) are able to agree to mutually agreeable contracts consistent with terms authorized by the ECWG, Staff then review draft terms with the SDCP Board for approval and authorization to execute the relevant documents.

Local Development
SDCP’s rolling Local RFI remains open and, in the last twelve months, has yielded eight board-approved contracts for local generation and storage facilities. SDCP also released an RFO for distributed renewable energy resources (DERs) which focuses on a broad range of distribution-level renewable projects within San Diego County. Staff have notified shortlisted participants and hope to present the resulting PPAs to the Board in the coming months. Additional ongoing local initiatives include a Feed-in-Tariff Program revamp and expansion, expected later this year, and continued collaboration with member agency staff to identify strategic opportunities to further infill development in 2024.

As Program Administrators of the CPUC’s Disadvantaged Communities Green Tariff (DAC-GT) and Community Solar Green Tariff (CSGT) programs, SDCP launched the RFP solicitation for respective program resources on August 26th, proposals for which were due February 24, 2024. Staff is currently reviewing all submitted offers as well as reviewing a recent Proposed Decision by the CPUC that has potential impacts to the existing programs.

SDCP’s Local RFI and Feed-in Tariff remain open. More information is available about each at the links below.
• https://sdcommunitypower.org/resources/solicitations/ • https://sdcommunitypower.org/programs/feed-in-tariff/ Short-Term RPS Procurement
SDCP staff continues to actively manage its environmental portfolio and closely monitor the market for opportunities to optimize its renewable and carbon-free portfolios. SDCP will continue to prioritize environmental targets while also ensuring value for our customers.

Market Update
Due to limited resource availability in the broader Western Interconnection, lingering supply chain impacts that have delayed development of new-build energy resources, and recent implementation of tariffs and duties on foreign imports, the market for renewable energy and resource adequacy (RA) resources continues to be exceptionally tight and expensive. Staff are working with developers, industry groups, the CPUC, and CA Governor’s Office and legislators to i) develop near-term solutions while also actively procuring short-term energy and capacity products and long-term energy resources to meet SDCP's portfolio needs practically and cost-effectively, and ii) to establish a portfolio of resources that will provide value to SDCP and California's clean, reliable energy needs into the future.

Near-term California power markets continue to soften due to declining power and gas markets throughout the US, a mild California winter, significant Sierra snowpack, and robust spring-time renewable generation, all of which have so far offset the impacts of drought in the Pacific Northwest and resource scarcity throughout WECC.

COMMITTEE REVIEW
N/A

FISCAL IMPACT
N/A

ATTACHMENTS
N/A

SAN DIEGO COMMUNITY POWER
Staff Report – Item 5
-------------------------------------------------------------------------------------------------------------------- To: San Diego Community Power Board of Directors
From: Chandra Pugh, Director of People
Via: Karin Burns, Chief Executive Officer
Subject: Update on Human Resources
Date: June 27, 2024
------------------------------------------------------------------------------------------------------------------

RECOMMENDATION
Receive and File the Update on Human Resources.

BACKGROUND
Human Resources (HR) has been working on the following priorities:

Hiring
This month, SDCP welcomed our new Finance Intern Michelle Soto. Michelle is a San Diego native, hailing from the South Bay, and is currently a third-year student at UC Berkeley majoring in Environmental Economics and Policy with a minor in Data Science.

Open Positions:

Data Engineer
Data Scientist
IT Systems Engineer
Project Operations and Proposal Manager
Strategic Policy Manager / Sr. Strategic Policy Manager Updates:

SDCP is currently developing a rewards and recognition program to recognize outstanding contributions by our employees. Employees may be nominated by leadership and peers on an annual basis. We look forward to providing guidance on this policy in the next few weeks.

Our new Mercer study salary grades took effect on April 1st. These new salary grades help us to ensure we are communicating transparently regarding internal and external salary recommendations. An additional review of existing job titles aligned with career tracks is underway. Upon completion, this project will be available to all employees and will serve as guidance for leadership and staff to discuss individual development plans, professional development, and growth opportunities.

The table below is located on our internal HR website:

Lastly, SDCP has developed a Work Place Violence Prevention (WPVP) plan as required by CalOSHA. The plan will be implemented effective July 1st and will be included with our existing Injury & Illness Protection Plan (IIPP) to keep our safety guidelines all in one place.

HR will make the plan document available to all employees on our HR website. The plan will also be reviewed periodically to ensure relevant revisions and updates are captured accordingly.

DISCUSSION AND ANALYSIS
N/A

COMMITTEE REVIEW
N/A

FISCAL IMPACT
N/A
ATTACHMENTS:

N/A

SAN DIEGO COMMUNITY POWER
Staff Report – Item 6
-------------------------------------------------------------------------------------------------------------------- To: San Diego Community Power Board of Directors
From: Lucas Utouh, Senior Director of Data Analytics and Customer Operations

Via: Karin Burns, Chief Executive Officer

Subject: Update on Customer Operations

Date: June 27, 2024
--------------------------------------------------------------------------------------------------------------------

RECOMMENDATION

Receive and file an update on various customer operations.

BACKGROUND

Staff will provide regular updates to the Community Advisory Committee (CAC) centered around tracking opt actions (i.e., opt outs, opt ups and opt downs) as well as customer engagement metrics. The following is a brief overview of items pertaining to customer operations.

ANALYSIS AND DISCUSSION

A) Mass Enrollment Update

Phase 4:

As of May 31, 2024, SDCP is serving a cumulative total count of 955,323 active accounts.

There are 174,925 active accounts currently enrolled in Unincorporated County of San Diego and 19,236 in National City.

Customers with newly established accounts or who have moved into a new service address within any and all of our member jurisdictions receive 2 post-enrollment notices through the mail at their mailing address on file within 60 days of their account start date to notify them that they have defaulted to SDCP electric generation service.

B) Customer Participation Tracking
Staff and Calpine have worked together to create a reporting summary of customer actions to opt out of SDCP service, opt up to Power100, or opt down from Power100 to PowerOn. The below charts summarize these actions accordingly as of May 31, 2024:
*Historical opt outs including inactive accounts of 5/31/2024.

The Phase 4 mass enrollment process in National City and the Unincorporated County of San Diego for Non-Net Energy Metering (NEM) customers completed in May 2023.

Net Energy Metering (NEM) customers were enrolled from April 2023 through March 2024 based on their true-up date. Mass enrollment for all customer accounts within National City and the Unincorporated County of San Diego concluded on April 1, 2024.

C) Contact Center Metrics
Call volumes have continued to decrease with the completion of mass enrollment and pre-enrollment noticing. We expect call volumes to rise as summer rates come into effect as of June 1, 2024, through October 31, 2024 and customers start seeing increased bills as a function of the Winter to Summer price differential. Our Public Affairs Team is putting out Summer season and bill saving tips’ communication that should help provide our customers with resources and tips to reduce higher bills.

The chart below summarizes contact made by customers into the Contact Center broken down by month through May 31st, 2024:

Similar to other CCAs’ service territories, SDCP anticipates the trend of customers calling into the Contact Center’s Interactive Voice Response (IVR) system tree and being able to self-serve their opt actions using the recorded prompts as well as utilizing SDCP’s website for processing opt actions to continue accounting for over 65% of all instances.

The remaining portion of customer calls are connected to Customer Service Representatives to answer additional questions, assist with account support, or process opt actions.

D) Customer Service Email Trends

As of this latest reporting month, SDCP has a total of 10 Dedicated Customer Service Representatives staffed at the Contact Center and 1 Supervisor. Robust Quality Assurance (QA) procedures are firmly in place to ensure that customers are getting a world-class customer experience when they contact SDCP.

AD-HOC COMMITTEE AND/OR SUBCOMITTEE REVIEW
N/A

FISCAL IMPACT
N/A

ATTACHMENTS
N/A

SAN DIEGO COMMUNITY POWER
Staff Report – Item 7
-------------------------------------------------------------------------------------------------------------------- To: San Diego Community Power Board of Directors
From: Jen Lebron, Director of Public Affairs
Via: Karin Burns, Chief Executive Officer
Subject: Marketing, Public Relations, and Local Government Affairs Date: June 27, 2024
--------------------------------------------------------------------------------------------------------------------

RECOMMENDATION
Receive and file an update on marketing, public relations, and local government affairs activities for San Diego Community Power (SDCP).

BACKGROUND
SDCP has engaged in a variety of public relations, marketing, community outreach, and local government affairs activities to drive awareness, spark community engagement, and maintain high customer enrollment.

ANALYSIS AND DISCUSSION
SDCP’s Public Affairs Department has been participating in events across our member agencies as it aims to increase general awareness and answer questions in a friendly, helpful manner.

Recent and Upcoming Public Engagement Events
San Pascual Earth Day
Surfrider’s Ocean Beach Cleanup
Encinitas Library
Uplift Institute’s Sustainable ‘Hood’ Education Expo
La Jolla Library
Nipaquay Elementary STEAM Fest
Understanding Your Bill Energy Workshop at Logan Heights Library 2024 California Efficiency + Demand Management Council Spring Symposium Logan Heights Library
California Green Business Network
Equality California Awards
Rotary District 5340 Environmental Solutions Summit
Cyclovia Encinitas
Malcolm X Library
Mission Valley Library
Chula Vista Chamber of Commerce
National City Library
San Diego Pride
San Diego Regional Chamber of Commerce
North Park Main Street Music Festival
EcoFest Encinitas
Skyline Hills Library Summer Reading Program Kick-Off
Jackie Robinson YMCA Community Health and Resource Fair Community Climate Action Day
Ramona Library
Summer Garden Palooza
San Diego Regional Economic Development Corporation
Chula Vista Library Civic Branch
Imperial Beach Neighborhood Food Pantry
I Love a Clean San Diego’s Sustainable Solutions Fair
California Climate and Energy Collaborative Forum
Chula Vista Library South Branch
UC San Diego Community Stakeholder Forum
National City Library
North San Diego Chamber of Commerce
Marketing, Communications and Outreach
SDCP has been working with local media to provide the public with information about the new rate products the Board of Directors approved on May 30. It is also working with partner organizations on press releases regarding long-term power purchase agreements that will provide customers with reliable, affordable power when new projects come online within the next few years.

The Community Engagement division of the Public Affairs Department hosted its first in-person “Understanding Your Bill” workshop on Thursday, May 16 at the Logan Heights Library in the City of San Diego. This builds on SDCP’s first webinar that it held in March.

These events are the first in a series of online and in-person workshops that are aimed at answering questions and connecting customers with programs and practices that can save them money. Additional workshops are being planned for the remainder of the year that will focus on topics including solar customer billing and the benefits of SDCP service for large commercial and industrial customers.

The Public Affairs team has been working diligently behind the scenes to support soon-to-be-launched programmatic efforts, including rooftop solar and battery storage incentives, a program that helps customers repair their roofs to be ready for solar installations, and another that will distribute grants to small businesses that would benefit from more efficient refrigerators. The Public Affairs team is working closely with internal and external stakeholders to encourage participation in these programs and leveraging relationships with community partners to amplify our marketing and outreach efforts.

SDCP has continued its efforts to connect with local leaders through meetings and at community events.

The Public Affairs team will continue to develop new strategies, processes and capacity over the next several months to conduct more community outreach, expand marketing and brand awareness efforts, and provide timely, accurate information across multiple channels.

AD-HOC COMMITTEE AND/OR SUBCOMITTEE REVIEW
N/A

FISCAL IMPACT
N/A

ATTACHMENTS
N/A

SAN DIEGO COMMUNITY POWER
Staff Report – Item 8
-------------------------------------------------------------------------------------------------------------------- To: San Diego Community Power Board of Directors
From: Xiomalys Crespo, Community Engagement Manager
Via: Karin Burns, Chief Executive Officer
Subject: Receive and File Community Advisory Committee Monthly Report Date: June 27, 2024
--------------------------------------------------------------------------------------------------------------------

RECOMMENDATION
Receive and file the Community Advisory Committee (CAC) monthly report.

BACKGROUND
Per Section 5.10.3 of the San Diego Community Power (SDCP) Joint Powers Authority (JPA) Agreement:

The Board shall establish a Community Advisory Committee comprised of non-Board members. The primary purpose of the Community Advisory Committee shall be to advise the Board of Directors and provide for a venue for ongoing citizen support and engagement in the strategic direction, goals, and programs of the Authority.

At the direction of the Chief Executive Officer, the CAC provides quarterly presentations to the Board of Directors in the regular agenda, and monthly reports in the consent agenda. The next quarterly presentation will take place during the July 25, 2024 Board of Directors meeting.

ANALYSIS AND DISCUSSION
During the June 13, 2024, regular CAC meeting:
• After approving the consent agenda, members received an update on SDCP’s Strategic Plan, discussing interim goals to get to 100% renewable energy by 2035 and commending SDCP’s ability to scale up operations while working towards fiscal stability.
• The CAC heard a presentation on SDCP’s PowerBase Service. Members asked questions about its power mix and cap for enrollment. Members also expressed concern about energy of lower renewable content potentially exacerbating environmental justice issues, and staff emphasized that this temporary product’s intent is to provide customers with choice and to retain those who may otherwise leave SDCP service.
• After receiving presentations on the preliminary proposed FY 2024-25 budget and on Regulatory and Legislative Affairs updates, members engaged in a robust discussion on the Solar Battery Savings Program, asking if materials would be offered in multiple languages, clarifying questions around dispatch times and penalties for underperforming batteries, and the timing in which upfront incentives would be disbursed.
• Committee members had no recommendations for items to be heard by the Board of Directors. Announcements included community events.

As of June 14, 2024, the CAC has three vacancies representing the County of San Diego (unincorporated), the City of San Diego, and the City of Chula Vista. Members of the public must be residents, community leaders, and/or business owners of the respective jurisdictions and may submit their applications electronically. The vacancies continue to be advertised at meetings, community events, and through SDCP’s social media.

COMMITTEE REVIEW
N/A

FISCAL IMPACT
There is no fiscal impact associated with this item.

ATTACHMENTS
N/A

SAN DIEGO COMMUNITY POWER
Staff Report – Item 9
--------------------------------------------------------------------------------------------------------------------- To: San Diego Community Power Board of Directors
From: Kiran Singh, Director of IT and Analytics
Via: Karin Burns, Chief Executive Officer
Subject: Approve a contract in substantially similar form to Attachment A for Managed IT Services and Support with Tech Mahindra in the not-to-exceed amount of $300,000 over twelve months with options for two, one-year extensions with not-to-exceed amounts of $300,000 for each subsequent year
Date: June 27, 2024
---------------------------------------------------------------------------------------------------------------------

RECOMMENDATIONS
Approve a contract in substantially similar form to Attachment A for the Managed IT Services and Support with Tech Mahindra in the not-to-exceed amount of $300,000 over twelve months with the options for two, one-year extensions with not-to-exceed amounts of $300,000 for each subsequent year.

BACKGROUND
As San Diego Community Power (SDCP) continues to grow its footprint of clean energy operations, services and products offerings for its customers, it is important that it has adequate technology, tools and processes that empower SDCP staff and operations. The SDCP Data Analytics and IT team continues to work on the technology roadmap and right-sourcing. While SDCP decided to hire internal IT staff to transition to internal IT services and support; to ensure the transition from third-party vendor to internal IT it’s imperative to continue with use of the third-party vendor for IT Services to bridge the transition. The SDCP technology team is building core competencies and strategic technology capabilities to support SDCP staff and its projected growth. The current internal IT team is supporting several internal initiatives such as ETRM platform selection & setup, SDREN discovery, Board of Director and council meetings, setting up new Chula Vista Chamber for FRMC meetings, legal support and user software issues. With IT Managed Service provider, the SDCP IT team expects to develop automation and streamline support processes to gain efficiencies and become self-sufficient.

Through a competitive bidding process, SDCP has enlisted Tech Mahindra to provide IT Managed Services for the next fiscal year starting as of July 1, 2024. These services are sought to directly support SDCP’s strategic plan to right-sourcing and insourcing of technology capabilities.

Since 2020 Brentech has supported SDCP IT systems and has provided user desktop support.

ANALYSIS AND DISCUSSION
On April 4, 2024, SDCP issued a Request for Proposals (RFP) for Professional Services for IT Managed Services Provider. Proposers were able to submit their proposal for IT services and support that includes desktop support, Office 365 (“O365”) infrastructure, network and security administration, software, hardware tracking & management, IT life cycle management, backup and restoration support & administration, network management & issue troubleshooting, database administration, intranet employee website and specific project development, implementation, and support.

The proposers were requested to showcase their competencies, strengths and successes to demonstrate their capabilities. Each proposer was given a dedicated time to present their capabilities, introduce their teams and opportunities to ask questions from SDCP staff.

Following the interviews, Tech Mahindra was identified as the proposer able to bring the greatest value to SDCP. Tech Mahindra demonstrated strong domain and functional knowledge of the landscape across Energy & Utilities businesses in the IT and Infrastructure managed Services.

COMMITTEE REVIEW
N/A

FISCAL IMPACT
SDCP estimates no more than $300,000 in expenditures according to the proposed budget and scope over the initial contract term. This is a fixed cost contract. The proposed costs for IT Managed Service provider are included in the proposed FY 2024-25 operating budget planned to be reviewed by the Board June 27, 2024. This brings savings of approximately $143,040 YoY from incumbent vendor.

ATTACHMENTS
Attachment A: Draft Agreement for Managed IT Services and Support with Tech Mahindra.
1 SAN DIEGO COMMUNITY POWER PROFESSIONAL SERVICES AGREEMENT This Professional Services Agreement (“Agreement”) is made and entered into this June 27, 2024, by and between SAN DIEGO COMMUNITY POWER, a California joint powers agency (“SDCP”) and Tech Mahindra Limited, an Indian corporation (“Vendor”). SDCP and Vendor are sometimes individually referred to as “Party” and collectively as “Parties.”

RECITALS
A. Vendor desires to perform and assume responsibility for the provision of certain professional services required by SDCP on the terms and conditions set forth in this Agreement and/or agreed in applicable exhibits. Vendor represents that it is experienced in providing Professional Services related to Information Technology Managed Services, is licensed in the State of California, and is familiar with the plans of SDCP as set forth in the Information Technology (“IT”) Managed Services RFP issued on April 4, 2024.

B. SDCP desires to engage Vendor to render such Professional Services for IT Managed Services (“Project”) as set forth in this Agreement.

AGREEMENT

1. Scope of Services and Term.

1.1 General Scope of Services. Vendor promises and agrees to furnish to SDCP all labor, materials, tools, equipment, services, and incidental and customary work necessary to fully and adequately supply the services necessary for the Project (“Services”) as mutually agreed under this Agreement. The Services are more particularly described and agreed in Exhibit A attached hereto,. All Services shall be subject to, and performed in accordance with, this Agreement, the exhibits attached hereto, and all applicable local, state and federal laws, rules and regulations.

1.2 Term. The term of this Agreement shall be from May 23, 2024 to May 23, 2025 (“Term”). SDCP reserves the right to extend the Agreement for up to two additional one-year extensions for these services, unless earlier terminated as per Section 5.1 as provided herein, (“Renewal Term”). Unless otherwise agreed, Vendor shall complete the Services within the term of this Agreement and shall meet any other established schedules and deadlines as mutually agreed in the exhibits attached hereto.

2. Responsibilities of Vendor.

2.1 Control and Payment of Subordinates; Independent Contractor. The Services shall be performed by Vendor or under its supervision. Vendor will determine the means, methods and details of performing the Services subject to the requirements of this Agreement.

SDCP retains Vendor on an independent contractor basis and not as an employee. Vendor retains 2 the right to perform similar or different services for others during the Term of this Agreement. Any additional personnel performing the Services under this Agreement on behalf of Vendor shall also not be employees of SDCP and shall at all times be under Vendor’s exclusive direction and control.

Vendor shall pay all wages, salaries, and other amounts due such personnel in connection with their performance of Services under this Agreement and as required by law. Vendor shall be responsible for all reports and obligations respecting such additional personnel, including, but not limited to: social security taxes, income tax withholding, unemployment insurance, disability insurance, and workers’ compensation insurance.

2.2 Schedule of Services. Vendor shall perform the Services expeditiously, within the Term of this Agreement or the applicable exhibits, and in accordance with the Schedule of Services set forth in Exhibit B attached hereto. Vendor represents that it has the professional and technical personnel required to perform the Services in conformance with such conditions stipulated hereunder. In order to facilitate Vendor’s conformance with the Schedule, SDCP shall respond to Vendor’s submittals in a timely manner. Upon request of SDCP, Vendor shall provide a more detailed schedule of anticipated performance to meet the Schedule of Services.

2.3 Conformance to Applicable Requirements. All work prepared by Vendor shall be subject to the approval of SDCP as per the acceptance criteria agreed between the Parties.

Unless otherwise agreed in exhibit, SDCP shall approve or reject such work within fifteen (15) days from the date of submission, failing which the work shall be deemed accepted.

2.4 Substitution of Key Personnel. Vendor has represented to SDCP that certain key personnel will perform and coordinate the Services under this Agreement. Should one or more of such personnel become unavailable, Vendor may substitute other personnel of at least equal competence upon written approval of SDCP which shall not be unreasonably withheld. As discussed below, any personnel who fail or refuse to perform the Services in a manner acceptable to SDCP, or who are determined by the SDCP to be uncooperative, incompetent, a threat to the adequate or timely completion of the Project, or a threat to the safety of persons or property, with competent evidence of such determination by SDCP, shall be promptly removed from the Project by the Vendor at the request of the SDCP subject to a notice period of thirty (30) days for onsite and forty-five (45) days for offshore resources.

2.5 SDCP’s Representative. SDCP hereby designates Karin Burns, CEO, or her designee, to act as its representative for the performance of this Agreement (“SDCP’s Representative”). SDCP’s Representative shall have the power to act on behalf of SDCP for all purposes under this Agreement. Vendor shall not accept direction or orders from any person other than SDCP’s Representative, or designee.

2.6 Vendor’s Representative. Vendor hereby designates Amit Waghmare, or his or her designee, to act as its Representative for the performance of this Agreement (“Vendor’s Representative”). Vendor’s Representative shall have full authority to represent and act on behalf of the Vendor for all purposes under this Agreement. The Vendor’s Representative shall supervise 3 and direct the Services, using his or her best skill and attention, and shall be responsible for all means, methods, techniques, sequences and procedures and for the satisfactory coordination of all portions of the Services under this Agreement.

2.7 Coordination of Services. Vendor agrees to work closely with SDCP staff in the performance of Services and shall be available to SDCP’s staff, Vendors and other staff at all times agreed in Exhibit A.

2.8 Standard of Care; Performance of Employees. Vendor shall perform all Services under this Agreement in a skillful and competent manner, consistent with the industry standards generally recognized as being employed by professionals in IT industry. Vendor represents and maintains that it is skilled in the professional calling necessary to perform the Services. Vendor warrants that all employees and sub- contractors shall have sufficiently necessary skill and experience to perform the Services assigned to them. Finally, Vendor represents that it, its employees and subcontractors have all licenses, permits, qualifications and approvals of whatever nature that are legally required to perform the Services, and that such licenses and approvals shall be maintained throughout the Term of this Agreement. As provided for in the indemnification provisions of this Agreement, Vendor shall perform, at its own cost and expense and without reimbursement from SDCP, any services necessary to correct errors or omissions which are caused by the Vendor’s failure to comply with the terms and conditions provided for herein. Any employee of the Vendor or its subcontractors who is determined by SDCP to be uncooperative, incompetent, a threat to the adequate or timely completion of the Project, a threat to the safety of persons or property, or any employee who fails or refuses to perform the Services in a manner acceptable to SDCP, shall be promptly removed from the Project by the Vendor subject to a prior written notice and shall not be re-employed to perform any of the Services or to work on the Project.

2.9 Laws and Regulations. Vendor shall keep itself fully informed of and in compliance with all local, state and federal laws, rules and regulations in any manner affecting the performance of the Project or the Services, including all Cal/OSHA requirements, and shall give all notices required by law. Vendor shall be liable for all violations of such laws and regulations in connection with Services. If the Vendor performs any work knowing it to be contrary to such laws, rules and regulations and without giving written notice to SDCP, Vendor shall be solely responsible for all costs arising therefrom. Vendor shall defend, indemnify and hold SDCP, its officials, directors, officers, employees and agents free and harmless, pursuant to the indemnification provisions of this Agreement, from any claim or liability arising out of any failure or alleged failure to comply with such laws, rules or regulations.

2.10 Insurance.

2.10.1 Time for Compliance. Vendor shall not commence the Services under this Agreement until it has provided evidence satisfactory to SDCP that it has secured all insurance required under this section, in a form and with insurance companies acceptable to SDCP. In 4 addition, Vendor shall not allow any subcontractor to commence work on any subcontract until it has provided evidence satisfactory to SDCP that the subcontractor has secured all insurance required under this section.

2.10.2 Requirements. Vendor shall, at its expense, procure and maintain for the duration of the Agreement insurance against claims for injuries to persons or damages to property which may arise from or in connection with the performance of the Agreement by the Vendor, its agents, representatives, employees or subcontractors. Vendor shall also require all of its subcontractors to procure and maintain the same insurance for the duration of the Agreement. Such insurance shall meet at least the following minimum levels of coverage:

(A) Scope of Insurance. Coverage shall be at least as broad as the latest version of the following: (1) General Liability: Insurance Services Office Commercial General Liability coverage (occurrence form CG 0001 or exact equivalent); (2) Automobile Liability: Insurance Services Office Business Auto Coverage (form CA 0001, code 1 (any auto) or exact equivalent); and (3) Workers’ Compensation and Employer’s Liability: Workers’ Compensation insurance as required by the State of California and Employer’s Liability Insurance.

(B) Limits of Insurance. Vendor shall maintain limits no less than: (1) General Liability: $1,000,000 per occurrence for bodily injury, personal injury and property damage. If Commercial General Liability Insurance or other form with general aggregate limit is used, either the general aggregate limit shall apply separately to this Agreement/location or the general aggregate limit shall be twice the required occurrence limit i.e. $,2000,000 in aggregate; (2) Automobile Liability: $1,000,000 per accident for bodily injury and property damage; and (3) Workers’ Compensation and Employer’s Liability: Workers’ Compensation limits as required by the Labor Code of the State of California. Employer’s Liability limits of $1,000,000 per accident for bodily injury or disease.

2.10.3 Professional Liability. Vendor shall procure and maintain, and require its subcontractors to procure and maintain, for a period of five (5) years following completion of the Services, errors and omissions liability insurance appropriate to their profession. Such insurance shall be in an amount not less than $2,000,000 per claim and in aggregate.

2.10.4 Insurance Endorsements. The insurance policies shall contain the following provisions, or Vendor shall provide endorsements:

(A) General Liability.
(i) Commercial General Liability Insurance must include coverage for (1) Bodily Injury and Property Damage; (2) Personal Injury/Advertising Injury; (3) Premises/Operations Liability; (4) Products/Completed Operations Liability; (5) Aggregate Limits that Apply per Project; (6) Explosion, Collapse and Underground (UCX) exclusion deleted; (7) 5 Contractual Liability with respect to this Agreement; (8) Broad Form Property Damage; and (9) Independent Vendors Coverage.
(ii) The policy shall contain no endorsements or provisions limiting coverage for (1) contractual liability; (2) cross liability exclusion for claims or suits by one insured against another; or (3) contain any other exclusion contrary to the Agreement. (iii) The policy shall give SDCP, its directors, officials, officers, employees, and agents insured status using ISO endorsement forms 20 10 10 01 and 20 37 10 01, or endorsements providing the exact same coverage.
(iv) The additional insured coverage under the policy shall be “primary and non-contributory” and will not seek contribution from SDCP’s insurance or self-insurance and shall be at least as broad as CG 20 01 04 13, or endorsements providing the exact same coverage. (B) Automobile Liability. The automobile liability policy shall be endorsed to state that: (1) SDCP, its directors, officials, officers, employees, agents and volunteers shall be covered as additional insureds with respect to the ownership, operation, maintenance, use, loading or unloading of any auto owned, leased, hired or borrowed by the Vendor or for which the Vendor is responsible; and (2) the insurance coverage shall be primary insurance as respects SDCP, its directors, officials, officers, employees, agents and volunteers, or if excess, shall stand in an unbroken chain of coverage excess of the Vendor’s scheduled underlying coverage. Any insurance or self-insurance maintained by SDCP, its directors, officials, officers, employees, agents and volunteers shall be excess of the Vendor’s insurance and shall not be called upon to contribute with it in any way.
(C) Workers’ Compensation and Employers Liability Coverage. (i) Vendor certifies that it is aware of the provisions of Section 3700 of the California Labor Code which requires every employer to be insured against liability for workers’ compensation or to undertake self-insurance in accordance with the provisions of that code, and Vendor will comply with such provisions before commencing work under this Agreement. (ii) The insurer shall agree to waive all rights of subrogation under commercial general liability and professional indemnity insurance
against SDCP, its directors, officials, officers, employees, agents and volunteers for losses paid under the terms of the insurance policy which arise from work performed by the Vendor. (iii) The limits of insurance required in this Agreement may be satisfied by a combination of primary and umbrella or excess insurance. Any umbrella or excess insurance shall contain or be endorsed to contain a provision that such coverage shall also apply on a primary and non-contributory basis for the benefit of SDCP (if agreed to in a written contract or agreement) before SDCP’s own insurance or self-insurance shall be called upon 6 to protect it as a named insured. The umbrella/excess policy shall be provided on a “following form” basis with coverage at least as broad as provided on the underlying policy(ies).

(iv) Vendor shall provide SDCP at least thirty (30) days prior written notice of cancellation of any policy required by this Agreement, except that the Vendor shall provide at least ten (10) days prior written notice of cancellation of any such policy due to non-payment of premium. If any of the required coverage is cancelled or expires during the term of this Agreement, the Vendor shall deliver renewal certificate(s) including the General Liability Additional Insured Endorsement to SDCP at least fifteen (15) days post date of cancellation or expiration.

(v) The retroactive date (if any) of each policy is to be no later than the effective date of this Agreement. Vendor shall maintain such coverage continuously for a period of at least three years after the completion of the work under this Agreement. Vendor shall purchase a one (1) year extended reporting period A) if the retroactive date is advanced past the effective date of this Agreement; B) if the policy is cancelled or not renewed; or C) if the policy is replaced by another claims-made policy with a retroactive date subsequent to the effective date of this Agreement.

(vi) The foregoing requirements as to the types and limits of insurance coverage to be maintained by Vendor, and any approval of said insurance by SDCP, is not intended to and shall not in any manner limit or qualify the liabilities and obligations otherwise assumed by the Vendor pursuant to this Agreement, including but not limited to, the provisions concerning indemnification.

(vii) If at any time during the life of the Agreement, any policy of insurance required under this Agreement does not comply with these specifications or is canceled and not replaced, SDCP has the right but not the duty to obtain the insurance it deems necessary and any premium paid by SDCP will be promptly reimbursed by Vendor or SDCP will withhold amounts sufficient to pay premium from Vendor payments. In the alternative, SDCP may cancel this Agreement. SDCP may require the Vendor to provide complete copies of all insurance policies in effect for the duration of the Project.

(viii) Neither SDCP nor any of its directors, officials, officers, employees or agents shall be personally responsible for any liability arising under or by virtue of this Agreement.

2.10.5 Acceptability of Insurers. Insurance is to be placed with insurers or re-insured with a current A.M. Best’s rating of no less than A:VII, licensed to do business in California, and satisfactory to SDCP.

2.10.6 Verification of Coverage. Vendor shall furnish SDCP with original certificates of insurance and endorsements effecting coverage required by this Agreement. The certificates and endorsements for each insurance policy shall be signed by a person authorized by that insurer to bind coverage on its behalf. All certificates and endorsements must be received and approved by SDCP before work commences.
7 2.10.7 Subcontractor Insurance Requirements. Vendor shall not allow any subcontractors to commence work on any subcontract until they have provided evidence satisfactory to SDCP that they have secured all insurance required under this section. Policies of commercial general liability insurance provided by such subcontractors shall be endorsed to name SDCP as an additional insured using ISO form CG 20 38 04 13 or an endorsement providing the exact same coverage. If requested by Vendor, SDCP may approve different scopes or minimum limits of insurance for particular subcontractors.

2.10.8 Safety. Vendor shall execute and maintain its work so as to avoid injury or damage to any person or property. In carrying out its Services, the Vendor shall at all times be in compliance with all applicable local, state and federal laws, rules and regulations, and shall exercise all necessary precautions for the safety of employees appropriate to the nature of the work and the conditions under which the work is to be performed. Safety precautions as applicable shall include, but shall not be limited to: (A) adequate life protection and life-saving equipment and procedures; (B) instructions in accident prevention for all employees and subcontractors, such as safe walkways, scaffolds, fall protection ladders, bridges, gang planks, confined space procedures, trenching and shoring, equipment and other safety devices, equipment and wearing apparel as are necessary or lawfully required to prevent accidents or injuries; and (C) adequate facilities for the proper inspection and maintenance of all safety measures.

3. Fees and Payments.

3.1 Compensation. Vendor shall receive compensation, including authorized reimbursements, for all Services rendered under this Agreement at the rates set forth in Exhibit C, attached hereto. The total compensation shall not exceed THREE HUNDRED THOUSAND DOLLARS ($300,000) without written approval of SDCP’s CEO. Extra Work may be authorized, as described below, and, if authorized, said Extra Work will be compensated at the rates and manner set forth in this Agreement and/or exhibits. Notwithstanding the foregoing, SDCP agrees that after the Original Term of this Agreement and annually thereafter, unless otherwise agreed to between the Parties in writing, Vendor shall be entitled to revise the Fees set out under the Exhibit C, based on the prevailing Consumer Price Index of India or the applicable country (and in absence of such index, any other similar inflation measurement index) subject to maximum increase of eight percent (8%) per annum for resources based in India/ offshore, and three percent (3%) per annum for resources based onsite.

3.2 Payment of Compensation. Vendor shall submit to SDCP a monthly itemized statement which indicates work completed and hours of Services rendered by Vendor. The statement shall describe the amount of Services and supplies provided since the initial commencement date, or since the start of the subsequent billing periods, as appropriate, through the date of the statement. SDCP shall, within 45 days of receiving such statement, review the statement and pay all approved charges thereon.
8 3.4 Reimbursement for Expenses. Vendor shall not be reimbursed for any expenses unless authorized in writing by SDCP.

3.5 Extra Work. At any time during the term of this Agreement, SDCP may request that Vendor perform Extra Work. As used herein, “Extra Work” means any work which is determined by SDCP to be necessary for the proper completion of the Project, but which the Parties did not reasonably anticipate would be necessary at the execution of this Agreement.

Vendor shall not perform, nor be compensated for, Extra Work without written authorization from SDCP’s Representative.

4. Accounting Records. Vendor shall maintain complete and accurate records with respect to all costs and expenses incurred under this Agreement. All such records shall be clearly identifiable. Vendor shall allow a representative of SDCP during normal business hours to examine, audit, and make transcripts or copies of such records and any other documents created pursuant to this Agreement. Vendor shall allow inspection of all work, data, documents, proceedings, and activities related to the Agreement for a period of three (3) years from the date of final payment under this Agreement.

5. General Provisions.

5.1 Termination of Agreement.

5.1.1 Grounds for Termination. SDCP may, by written notice to Vendor, terminate the whole or any part of this Agreement at any time and without cause by giving written notice to Vendor of such termination, and specifying the effective date thereof, at least ninety (30) days before the effective date of such termination subject to payment of fee due till the date of termination. Upon termination, Vendor shall be compensated only for those services which have been adequately rendered to SDCP including the incurred, committed and non-cancellable fee.

Vendor may not terminate this Agreement except for cause.

5.1.2 Either Party may terminate the whole or any part of this Agreement forthwith on giving notice in writing to the other Party if that other Party: (i) commits any material breach including failure to pay any Fees payable under this Agreement and, in the case of a breach capable of being remedied, shall have failed within thirty (30) calendar days after the receipt of a request in writing from the first Party to do so, to remedy the breach; (ii) shall convene any meeting of creditors or pass a resolution for winding up or suffer a petition for winding up; or (iii) shall have an administrative receiver or receiver appointed over the whole or part of its assets or suffer the appointment of an administrator.

5.1.3 Effect of Termination. If this Agreement is terminated as provided herein, SDCP may require Vendor, upon payment of non-defaulting deliverable or work including 9 incurred, no-cancellable, and committed cost, to provide all finished or unfinished Documents and Data and other information of any kind prepared by Vendor in connection with the performance of Services under this Agreement. Vendor shall be required to provide such documents and other information within thirty (30) days of the request.

5.1.4 Additional Services. In the event this Agreement is terminated in whole or in part as provided herein, subject to charges agreed mutually, SDCP may procure, upon such agreed terms and in such manner as it may determine appropriate, services similar to those terminated.

5.2 Delivery of Notices. All notices permitted or required under this Agreement shall be given to the respective Parties at the following address, or at such other address as the respective parties may provide in writing for this purpose:

Vendor:

Tech Mahindra Limited
Attention: Amit Waghmare
With a Copy To: Group General Counsel
Email Id: [email protected]
Fax: 972 991 3776
SDCP: San Diego Community Power
Attn: Chief Executive Officer
815 E Street, Suite 12716
San Diego, CA 92112

Such notice shall be deemed made when personally delivered or when mailed, forty-eight (48) hours after deposit in the U.S. Mail, first class postage prepaid and addressed to the Party at its applicable address. Actual notice shall be deemed adequate notice on the date actual notice occurred, regardless of the method of service.

5.3 Ownership of Materials and Confidentiality.

5.3.1 Documents & Data; Licensing of Intellectual Property. This Agreement creates a non-exclusive license for SDCP to use any and all copyrights, designs, and other intellectual property of Vendor embodied in plans, specifications, studies, drawings, estimates, and other documents or works of authorship fixed in any tangible medium of expression, including but not limited to, physical drawings or data magnetically or otherwise recorded on computer diskettes, which are prepared or caused to be prepared by Vendor under this Agreement (“Documents & Data”). Vendor shall require all subcontractors to agree in writing that SDCP is granted a non-exclusive license for any Documents & Data the subcontractor prepares under this Agreement. In case any pre-existing Vendor property or third-party software is to be embedded in the Documents and Data as disclosed to SDCP in writing in the applicable exhibits, it shall be dealt with in accordance with the terms of any license agreement relating to that software. Vendor represents 10 and warrants that Vendor has the legal right to license any and all Documents & Data. Vendor makes no such representation and warranty in regard to Documents & Data which were prepared by design professionals other than Vendor or provided to Vendor by SDCP. To the extent permitted under this Agreement, SDCP shall not be limited in any way in its use of the Documents & Data at any time, provided that any such use not within the purposes intended by this Agreement shall be at SDCP’s sole risk.

5.3.2 Intellectual Property. In addition and subject to second paragraph of section

5.3.2 of this Agreement, SDCP shall have and retain all right, title and interest (including copyright, patent, trade secret and other proprietary rights) in all plans, specifications, studies, drawings, estimates, materials, data, computer programs or software and source code, enhancements, documents, and any and all works of authorship fixed in any tangible medium or expression, including but not limited to, physical drawings or other data magnetically or otherwise recorded on computer media (“Intellectual Property”) prepared or developed by or on behalf of Vendor under this Agreement subject to receipt of payment by the Vendor.

SDCP shall have and retain all right, title and interest in Intellectual Property developed or modified under this Agreement upon receipt of full payment by Vendor. Vendor will execute separate written assignments of any and all rights to the above referenced Intellectual Property upon request of SDCP.

Vendor shall also be responsible to obtain in writing separate written assignments from any subcontractors or agents of Vendor of any and all right to the above referenced Intellectual Property. Should Vendor, either during or following termination of this Agreement, desire to use any of the above-referenced Intellectual Property, it shall first obtain the written approval of the SDCP.

All materials and documents which were developed or prepared by the Vendor for general use prior to or during the execution of this Agreement and which are not the copyright of any other party or publicly available and any other computer applications, shall continue to be the property of the Vendor.

SDCP further is granted by Vendor a non-exclusive license to, use, any and all Intellectual Property otherwise owned by Vendor which is embedded in the work and is the basis or foundation for any derivative, collective, insurrectional, or supplemental work created under this Agreement.

5.3.3 Confidentiality.
(A) Defined. “Confidential Information” means all proprietary, confidential or otherwise nonpublic information of or relating to SDCP, including its officials, officers, employees, volunteers, and agents, in any form whether written, electronic, visual or oral, 11 and all notes, analyses, compilations, studies, reports, interpretations, or other material prepared by or belonging to SDCP, its officials, officers, employees, volunteers, and agents. (B) Exclusions. Confidential Information does not include information (i) that is or becomes generally known to the public other than as a result of disclosure by Vendor or any of its Representatives (as defined below) in violation of the terms of this Agreement; (ii) that becomes known to Vendor through disclosure by sources other than SDCP which, to the knowledge of Vendor, are not subject to any obligation of confidentiality or other duty not to disclose such information; or (iii) that is independently developed by Vendor without reference to the Confidential Information and through persons who have not had, either directly or indirectly, access to or knowledge of such Confidential Information, as reasonably evidenced in writing by Vendor.
(C) Obligation of Confidentiality. Vendor will not use or disclose any Confidential Information of SDCP, including its officials, officers, employees, volunteers, and agents, except as may be directed by SDCP or as Vendor may be required to disclose such Confidential Information pursuant to a legal or regulatory obligation. Subject to the foregoing, without the prior written consent of SDCP, Vendor will not disclose any portion of the Confidential Information to any person, other than to employees, directors, officers, consultants, members, managers, Affiliates and their Representatives (as defined below), advisors, attorneys, auditors, lenders, financial investors or agents of Vendor who have a need to know in connection with the Agreement (collectively, to the extent Vendor discloses, or provides access to, Confidential Information to any of the foregoing, its “Representatives”), provided such Representatives are informed of this Agreement and agree to be bound by the terms hereof or are otherwise bound by obligations of confidentiality with regard to the Confidential Information which are at least as protective as the confidentiality obligations set forth herein. Vendor shall be responsible for any breach of this Agreement by any of its Representatives.

5.3.4 Infringement Indemnification. Vendor shall defend, indemnify and hold SDCP, its directors, officials, officers, employees, harmless, pursuant to the indemnification provisions of this Agreement, for any third party claims arising from infringement of any patent, copyright, trade secret, trade name, trademark, or any other proprietary right of any person or entity in consequence of the use on the Project by SDCP of the Documents & Data, including any method, process, product, or concept specified or depicted. Provided, however, that Vendor shall not have any responsibility to indemnify SDCP if: (i) any infringement arising from the combination of SDCP software with other products not supplied by Vendor; or (ii) the modification of the Documents & Data unless the modification was made or approved expressly by Vendor; or (iii) supplying the SDCP with any information, data, service or applications assistance not associated with the Documents & Data.

If the Services becomes subject of any claim or if a Court judgement is made that any Documents & Data does infringe, or if the use of licensing of any part of any Documents & Data is restricted, Vendor at its option and expense will: (i) obtain for the SDCP the right under the 12 patent, design right, trade secret or copyright to continue to use the Documents & Data or (ii) replace or modify the Documents & Data so that it becomes non-infringing.

5.4 Cooperation; Further Acts. The Parties shall fully cooperate with one another and shall take any additional acts or sign any additional documents as may be necessary, appropriate or convenient to attain the purposes of this Agreement.

5.5 Attorney’s Fees. If either Party commences an action against the other Party, either legal, administrative or otherwise, arising out of or in connection with this Agreement, the prevailing party in such litigation shall be entitled to have and recover from the losing party reasonable attorney’s fees and all other costs of such action.

5.6 Indemnification and Limitation of Liability.

5.6.1 To the fullest extent permitted by law, Vendor shall defend (with counsel of SDCP’s choosing), indemnify and hold the SDCP, its officials, officers, employees, volunteers, and agents free and harmless from any and all claims, demands, causes of action, costs, expenses, liability, loss, damage or injury of any kind, in law or equity, to property or persons, including wrongful death, in any manner arising out of, pertaining to, or incident to any acts, errors or omissions, or willful misconduct of Vendor, its officials, officers, employees, subcontractors, Vendors or agents in connection with the performance of the Vendor’s services, the Project or this Agreement, including without limitation the payment of all damages, expert witness fees and attorney’s fees and other related costs and expenses. Vendor shall defend, at Vendor’s own cost, expense and risk, any and all such aforesaid suits, actions or other legal proceedings of every kind that may be brought or instituted against SDCP, its directors, officials, officers, employees, agents or volunteers. Vendor shall pay and satisfy any judgment, award or decree that may be rendered against SDCP or its directors, officials, officers, employees, agents or volunteers, in any such suit, action or other legal proceeding. Vendor shall reimburse SDCP and its directors, officials, officers, Vendors, employees, agents and/or volunteers, for any and all legal expenses and costs, including reasonable attorneys’ fees, incurred by each of them in connection therewith or in enforcing the indemnity herein provided. Vendor's obligation to indemnify shall not be restricted to insurance proceeds, if any, received by Vendor, the SDCP, its officials, officers, employees, agents, or volunteers. This section shall survive any expiration or termination of this Agreement.

5.6.2 If Vendor’s obligation to defend, indemnify, and/or hold harmless arises out of Vendor’s performance of “design professional” services (as that term is defined under Civil Code § 2782.8), then, and only to the extent required by Civil Code § 2782.8, which is fully incorporated herein, Vendor’s indemnification obligation shall be limited to claims that arise out of, pertain to, or relate to the negligence, recklessness, or willful misconduct of the Vendor, and, upon Vendor obtaining a final adjudication by a court of competent jurisdiction, Vendor’s liability for such claim, including the cost to defend, shall not exceed the Vendor’s proportionate percentage of fault.
13 5.7 Entire Agreement. This Agreement along with its exhibits contains the entire Agreement of the Parties with respect to the subject matter hereof, and supersedes all prior negotiations, understandings or agreements. This Agreement may only be modified by a writing signed by both Parties.

5.8 Governing Law. Governing Law. This Agreement shall be governed by the laws of the State of California. Venue shall be in San Diego County.

5.9 Time of Essence. Time is of the essence for each and every provision of this Agreement.

5.10 SDCP’s Right to Employ Other Vendors. SDCP reserves right to employ other Vendors for unrelated Services in connection with this Project.

5.11 Successors and Assigns. This Agreement shall be binding on the successors and assigns of the Parties.

5.12 Assignment or Transfer. Either Party shall not assign, hypothecate, or transfer, either directly or by operation of law, this Agreement or any interest herein without the prior written consent of the other Party. Any attempt to do so shall be null and void, and any assignees, hypothecates or transferees shall acquire no right or interest by reason of such attempted assignment, hypothecation or transfer.

5.13 Construction; References; Captions. Since the Parties or their agents have participated fully in the preparation of this Agreement, the language of this Agreement shall be construed simply, according to its fair meaning, and not strictly for or against any Party. Any term referencing time, days or period for performance shall be deemed calendar days and not work days.

All references to Vendor include all personnel, employees, agents, and subcontractors of Vendor, except as otherwise specified in this Agreement. All references to SDCP include its elected officials, officers, employees, agents, and volunteers except as otherwise specified in this Agreement. The captions of the various articles and paragraphs are for convenience and ease of reference only, and do not define, limit, augment, or describe the scope, content, or intent of this Agreement

5.14 Amendment; Modification. No supplement, modification, or amendment of this Agreement shall be binding unless executed in writing and signed by both Parties.

5.15 Waiver. No waiver of any default shall constitute a waiver of any other default or breach, whether of the same or other covenant or condition. No waiver, benefit, privilege, or service voluntarily given or performed by a Party shall give the other Party any contractual rights by custom, estoppel, or otherwise.

5.16 No Third Party Beneficiaries. There are no intended third party beneficiaries of any right or obligation assumed by the Parties.
14 5.17 Invalidity; Severability. If any portion of this Agreement is declared invalid, illegal, or otherwise unenforceable by a court of competent jurisdiction, the remaining provisions shall continue in full force and effect.

5.18 Prohibited Interests. Vendor maintains and warrants that it has not employed nor retained any company or person, other than a bona fide employee working solely for Vendor, to solicit or secure this Agreement. Further, Vendor warrants that it has not paid nor has it agreed to pay any company or person, other than a bona fide employee working solely for Vendor, any fee, commission, percentage, brokerage fee, gift or other consideration contingent upon or resulting from the award or making of this Agreement. For breach or violation of this warranty, SDCP shall have the right to rescind this Agreement without liability. For the term of this Agreement, no member, officer or employee of SDCP, during the term of his or her service with SDCP, shall have any direct interest in this Agreement, or obtain any present or anticipated material benefit arising therefrom.

5.19 Equal Opportunity Employment and Subcontracting. Vendor represents that it is an equal opportunity employer and it shall not discriminate on the basis of race, gender, gender expression, gender identity, religion, national origin, ethnicity, sexual orientation, age, or disability in the solicitation, selection, hiring, or treatment of applicants, employees, subcontractors, vendors, or suppliers. Such non-discrimination shall include, but not be limited to, all activities related to initial employment, upgrading, demotion, transfer, recruitment or recruitment advertising, layoff or termination. Further, Vendor shall provide equal opportunity for subcontractors to participate in subcontracting opportunities.

5.20 Labor Certification. By its signature hereunder, Vendor certifies that it is aware of the provisions of Section 3700 of the California Labor Code which requires every employer to be insured against liability for Workers’ Compensation, or to undertake self- insurance in accordance with the provisions of that Code, and agrees to comply with such provisions before commencing the performance of the Services.

5.21 Authority to Enter Agreement. Vendor has all requisite power and authority to conduct its business and to execute, deliver, and perform the Agreement. Each Party warrants that the individuals who have signed this Agreement have the legal power, right, and authority to make this Agreement and bind each respective Party.

5.22 Counterparts. This Agreement may be signed in counterparts, each of which shall constitute an original.

5.23 Subcontracting. Vendor shall not subcontract any portion of the work required by this Agreement, except as expressly stated herein, without prior written approval of SDCP. Subcontracts, if any, shall contain a provision making them subject to all provisions stipulated in this Agreement.
15 SIGNATURE PAGE TO SAN DIEGO COMMUNITY POWER PROFESSIONAL

SERVICES AGREEMENT
IN WITNESS WHEREOF, the Parties have made and executed this Agreement as of the date first written above.

SAN DIEGO COMMUNITY POWER
By : _________________________________
Karin Burns
SDCP Chief Executive Officer
Tech Mahindra Limited, an Indian
corporation
By : _________________________________
Name: _______________________________
Title: ________________________________
ATTEST: APPROVED AS TO FORM:
_______________________________ _________________________________ Maricela Hernandez, MMC, CPMC Veera Tyagi
SDCP Clerk of the Board SDCP General Counsel
Exhibit A

EXHIBIT A

SCOPE OF SERVICES
Vendor will provide technical labor for any computer related service needed during normal business hours, defined as Monday-Friday, 8:30am-5:00pm (Pacific Time), excluding nationally recognized holidays, including but not limited to:
• Software and/or hardware support, both on-site and over modem or Internet lines; • Onsite service calls;
• Remote Access support;
• Monthly Board & Committee Meeting Support
• Telephone support;
• Equipment purchasing, and equipment and system configuration.

At SDCP’s request, review, and approval, Vendor will procure any equipment, parts, supplies, and/or other ancillary services. SDCP will provide Vendor access to equipment and all technical information held by SDCP on computers and peripherals covered under this agreement.

Exhibit B

EXHIBIT B

COMPENSATION
Vendor will provide a monthly fixed price of $19,835 for a total of $238,000 over the Term of the Agreement (Base Annual Rate). Subsequent Renewal Terms will be the Base Annual Rate, plus the rate increases discussed in Section 3.1 (Compensation) of the Agreement. An additional amount of $62,000 has been allocated to this agreement as a contingency to provide approximately 3 additional months of support, if needed.

Any equipment, parts, supplies, and/or other ancillary costs requested by SDCP for procurement by Vendor will be sent to SDCP for approval before being purchased by Vendor and invoiced to SDCP as a pass-through cost.

The services provided by Vendor are inclusive of staff time, equipment, materials, travel, administrative/clerical, overhead, and other out-of-pocket expenses, if applicable to this Agreement. The monthly expenses for this Agreement cover all the expenses and deployment of the Onsite End-User Computing lead at SDCP as well as the rest of the team that will be based out of offshore India.

SAN DIEGO COMMUNITY POWER
Staff Report – Item 10
-------------------------------------------------------------------------------------------------------------------- To: San Diego Community Power Board of Directors
From: Laura Fernandez, Director of Regulatory & Legislative Affairs Aisha Cissna, Senior Policy Manager
Patrick Welch, Senior Legislative Manager
Stephen Gunther, Senior Regulatory Analyst
Via: Karin Burns, Chief Executive Officer
Subject: Update on Regulatory and Legislative Affairs
Date: June 27, 2024
--------------------------------------------------------------------------------------------------------------------

RECOMMENDATION
Receive and file the update on regulatory and legislative affairs.

BACKGROUND
Staff will provide regular updates to the Board of Directors regarding SDCP’s regulatory and legislative engagement.

ANALYSIS AND DISCUSSION
A) Regulatory Updates
SDG&E Energy Resource Recovery Account Forecast Application On May 15, 2024, SDG&E submitted its Application for Approval of its 2025 Electric Procurement Revenue Requirement Forecasts, 2025 Electric Sales Forecast, and GHG-Related Forecasts (“Application”). In its Application, SDG&E requests Commission approval of a total 2025 forecasted ERRA revenue requirement of $469.4 million. The 2025 revenue requirement forecasts sought in this Application result in a total revenue requirement decrease of $284.99 million compared to the amounts currently effective in rates.

On June 17, 2024, SCDP along with Clean Energy Alliance filed a protest to the Application. The protest requests that the CPUC not consider SDG&E’s potential proposal to continue the use of the 2024 System Resource Adequacy (RA) Market Price Benchmark (MPB) for 2025 rate setting purposes. The protest also requests that the CPUC not consider SDG&E’s proposal to modify its methodology for recovery of operation and maintenance (O&M) costs tied to its utility-owned generation (UOG) in this proceeding, and should instead consider that proposal in a separate rulemaking or consolidated application proceeding.

The CPUC has scheduled a prehearing conference for July 12, 2024.

Green Access Programs
On May 30, 2024, the California Public Utilities Commission (CPUC) approved a Final Decision that modifies the current Green Access Program (GAP) tariffs as well as adopts a new community renewable energy program. A Proposed Decision was issued on March 5, 2024 (see the regulatory and legislative staff report for the March 2024 meeting of the Board of Directors, pages 49-51), and was subsequently held for two CPUC voting meetings. During that time, SDCP staff worked with a group of Joint Community Choice Aggregators (CCAs) that administer the Disadvantaged Communities Green Tariff (DAC-GT) and Community Solar Green Tariff (CSGT) programs within their service areas on filing opening comments and holding two Ex Parte meetings with Commissioner offices to request clarifications and recommend additional improvements to the DAC-GT program. Several revisions were adopted in the Final Decision, which are included in bold in the summary below:
• Modifications to DAC-GT and CSGT Programs
o Discontinues the CSGT program and transfers remaining capacity to DAC-GT program  Permits Utilities and CCAs the option to move legacy CSGT projects to the modified DAC-GT successor.
 Utilities and CCAs may also allow the transfer of previously enrolled customers to the modified DAC-GT, unless there is no remaining capacity.
o Modifications to the DAC-GT program include but are not limited to:
 Expands DAC-GT site requirement from within a DAC to no more than 5 miles from DACs.
 Updates the project cost containment cap, which will be revised through an Advice Letter process and include CCA input.  Revises the submission date of the DAC-GT annual budget advice letter from February 1 to April 1.
 Decreases DAC-GT program solicitations to a minimum of once a year.
 Allows the voluntary inclusion of storage in solicitations.  Removes Green-e certification requirement; in lieu of the Green-e certifications, CCAs must include additional details in their quarterly California Distributed Generation Statistics
(DGStats) reporting after the retirement of renewable energy certificates (RECs) and list specific data to be included in quarterly reports to DGStats.
• Rejects the Net Value Billing Tariff proposal
o The Commission finds that the NVBT proposals do not meet the requirements of AB 2316 to minimize impacts to nonparticipating customers by prohibiting the program’s costs from being paid by nonparticipating customers in excess of avoided costs.
• Adopts a new community renewable energy program
o Utilizes an existing foundational tariff (such as the Renewable Market Adjusting Tariff (ReMAT) or Standard-Offer-Contract) and allows customers to subscribe to the program and receive a flat monetary credit on their monthly bill based on a percentage of each project’s overall revenue share (no less than 20% for low-income customers).
 Clarifies that CCAs are permitted to participate in the new community renewable energy program; foundational tariffs will need to be revised to accommodate this participation via a future ruling.
o Adopts $33 million appropriated to the Commission as a subsidy to subscribing low-income customers who enroll or are enrolled in the program.
o Confirms the Commission anticipates using some portion of the recently awarded $249,800,000 Solar for All grant funding to California from the US Environmental Protection Agency (EPA) to support the community renewable energy program.
 The method for dispersing external funding to the projects and participating customers of Utilities and CCAs will be addressed in a future ruling.
o An evaluation of stranded legacy Green Tariff costs, including SDG&E’s Green Tariff Shared Renewables program that impact SDCP customers, and appropriate cost recovery mechanisms will be addressed in a future ruling.

Next steps for updating SDCP’s DAC-GT program (referred to as “Solar for Our Communities”) to incorporate the modifications adopted in the Final Decision are outlined in Item 3: Update on Programs. In addition, on June 5, 2024, the CPUC issued a Ruling seeking party input on implementation details for the modified and new programs resulting from the Decision, including questions on how CCAs can participate in the new Community Renewable Energy Program. Opening comments are due July 10 with reply comments due July 28. SDCP staff will continue to coordinate with the Joint CCAs to file comments.

Resource Adequacy
Track 1 Proposed Decision
On May 17, 2024, the CPUC issued a Proposed Decision within Track 1 of the Resource Adequacy (RA) proceeding (R.23-10-011) adopting Local Capacity Requirements for 2025-2027, Flexible Capacity Requirements for 2025, and making refinements to the Slice-of-Day (SOD) framework for the 2025 RA compliance year. The Proposed Decision declined to adopt several of the CalCCA Track 1 proposals and revised proposals filed on January 19 and February 23, 2024, respectively, and reinforced via opening and reply comments filed on March 8 and 22, respectively.

Specifically, the Proposed Decision adopts the following, among additional implementation details:
• Does not address CalCCA’s hourly load transaction proposal. • Declines to delay SOD implementation beyond the 2025 compliance year. • Adopts a 17 percent planning reserve margin, rather than the 15.43 percent planning reserve margin resulting from the SOD calibration. • Rejects several party proposals to include a temporary system RA waiver. • Allows new resources with a commercial operation date after T-30 and before the start of the RA compliance month (T-1) to count towards that month’s RA compliance, on an interim basis during the summer months of July and September. • Declines to adopt system-wide storage charging sufficiency test under SOD. • Beginning with the 2025 RA compliance year, for resource-specific solar and wind import resources, a load-serving entity (LSE) must have import allocation rights equal to the RA value shown to the Commission at the peak hour of the month, unless the value at the peak hour is zero, in which case the LSE should have import allocation rights equal to the minimum value of 0.01. • Encouraged Parties to discuss the UCAP framework in Track 2 workshops. • LSEs must show all deliverable resources on SOD RA plans to California Independent System Operator (CAISO) even if they are not shown in the peak hour the CAISO will validate.

On June 6, 2024, CalCCA filed opening comments, making the following recommendations:
• The Proposed Decision puts customer affordability at risk by failing to adopt hourly transactability and dismissing proposals to delay SOD implementation and implement system RA waivers;
• The CPUC should revise the Proposed Decision to adopt hourly load obligation trading such that it is in place for the first SOD compliance year; • If the CPUC fails to adopt hourly load obligation trading, it must delay SOD implementation or allow for system RA waivers to provide guardrails against excessive RA costs to customers.
• The Proposed Decision errs by maintaining the 17 percent planning reserve margin under a SOD compliance framework.

Subsequently, CalCCA reiterated these points in reply comments, which were filed on June 11, 2024.

Track 2 Proposals
Track 2 of the RA proceeding will address structural changes to the central procurement entity framework, consideration of a revised Loss of Load Expectation (LOLE) Study and Planning Reserve Margin (PRM) for the 2026 and 2027 RA compliance years, and topics related to coordination with the Integrated Resource Planning (IRP) proceeding to better align with the IRP proceeding’s work on the Reliable and Clean Power Procurement Program (RCPPP). However, on June 4, 2024, the CPUC issued a Ruling that modified the Track 2 scope to defer coordination with the IRP Proceeding until after the Commission issues a decision on the RCPPP proposal in the IRP proceeding. A proposed decision on the RCPPP is expected in December 2024 with a final decision in January or February 2025. As such, CalCCA limited its Track 2 proposals to recommendations on the central procurement framework for Local RA, which does not directly impact SDCP as this framework is not implemented within SDG&E’s territory.

Integrated Resource Planning
CalCCA Comments on AB 1373 Implementation Ruling
On April 26, 2024, the CPUC issued a Ruling seeking party comments regarding the need for central procurement of long lead time resources by the Department of Water Resources (DWR), as directed by Assembly Bill 1373. The Ruling consisted of 31 questions that ask parties about the eligibility of resources, need determination, relationship to LSE procurement, allocation of costs and benefits from resources that may be centrally procured, and the procurement process timeline. Via the Ruling, the CPUC initially proposed to parties that offshore wind, geothermal, out-of-state wind, and long duration energy storage be considered for DWR central procurement.

On May 24, 2024, CalCCA filed extensive opening comments in response to the Ruling’s questions. Below is a high-level summary of CalCCA’s recommendations:
• The Commission must adhere to Public Utilities Code sections 454.51 and 454.52 when establishing the central procurement process and making central procurement decisions, including the right of self-procurement by CCAs. • Eligible Resources: The Commission should use central procurement sparingly since many of the resources described are either being procured by an LSE or do not have a lead time greater than five years. If the Commission pursues any central procurement, it must focus on emerging technologies and prioritize affordability. • Cost-Benefit Analysis: The Commission must use the most up-to-date information from LSEs on their procurement activity and account for planned procurement that would result in LSEs contracting at a later time and still bringing those resources to commercial operation in time to meet their needs. Such analysis is likely to demonstrate that the only opportunity for central procurement is for a small amount of offshore wind.
• Integration: The Commission must carefully proceed with central procurement decisions to avoid central procurement simply serving as competition to LSE procurement. This is particularly important given the upcoming Reliable and Clean Power Procurement Program.
• Cost and Benefit Allocation: The Commission must ensure that its allocations do not disincentivize LSEs from procuring independently and do not penalize early actors. Benefits (e.g., Resource Adequacy, Renewable Portfolio Standard, green-house gas-free) should be allocated consistent with the allocation of costs. • Timeline: The Commission must be as transparent as possible so that LSEs have a clear understanding of the central procurement process and its costs. This process should occur within the defined Integrated Resource Plan (IRP) process so that it is fully informed by the most recent activities in the IRP which plan for LSE-based procurement and also allow for CCA self-procurement of the CCA share of any identified need. The Commission should also make clear that any need determination made by September 1, 2024, will not necessarily result in any procurement authorization.

On June 5, 2024, CalCCA filed reply comments. A Proposed Decision on these issues is expected to be issued on July 19, 2024.

Disconnections
On March 22, 2024, the Administrative Law Judge (ALJ) issued a Ruling on disconnection caps and past-due payment allocation. This ruling requested party comments on how to handle the expiration of disconnection caps and the allocation of payments between utilities and CCAs. Opening comments were filed on April 19th and reply comments were filed on May 3rd.

ALJ Ruling on Disconnection Caps and Past-Due Payment Allocation The Ruling revisits Decision 20-06-003, which established disconnection rate caps for major utilities: 3.5% for Pacific Gas and Electric Company (PG&E), 3% for San Diego Gas and Electric Company (SDG&E), 4% for Southern California Edison Company (SCE), and 2% for Southern California Gas Company. These caps, set to expire at the end of 2024, were intended to reduce disconnections compared to 2017 rates. The ruling seeks comments on whether these caps should be extended or modified and whether a universal cap for all large utilities should be established.

Current investor-owned utility (IOU) tariffs prioritize the payment of arrearages first to the IOU portion of the bill, until the customer account is no longer subject to disconnection for delinquency, then credit the CCA portion of the bill. This is known as the waterfall method.

This method was suspended during the COVID-19 pandemic in favor of proportional allocation between utilities and CCAs. The ruling asks if the proportional allocation method should be extended beyond September 2024 or made permanent. While SDG&E’s current tariff dictates the proportional allocation method, they advocated for the CPUC to adopt the “waterfall” method on a permanent basis in their Ruling comments.

CalCCA Opening Comments
CalCCA argues that the proportional allocation method should be made permanent. They highlight that the waterfall method disproportionately shifts financial risk to CCAs, which is against the public interest. Key points from their comments include:
• Public Interest
o CalCCA argues that CCAs are in the public interest and should not bear disproportionate financial risk from unpaid bills. The proportional allocation method supports the financial health of CCAs, which benefit customers by providing lower rates and local initiatives to help struggling customers. • Legislative and Commission Preference
o The California Legislature and Commission have shown a preference for proportional distribution of revenues in analogous situations. Examples include the California Arrearage Payment Program (CAPP) and the Arrearage Management Plan (AMP).
• Customer Benefits
o Proportional allocation prevents customers from being reverted to IOUs for nonpayment, allowing them to benefit from CCA initiatives, potentially lower rates, and local outreach. CalCCA highlights initiatives by several CCAs, including SDCP, which offers significant savings compared to SDG&E rates.

CalCCA Reply Comments
In their reply comments, CalCCA reiterates their support for the permanent adoption of the proportional allocation method and responds to arguments made by utilities and other parties. They emphasize:
• Rejection of the Waterfall Method
o CalCCA rejects the arguments by PG&E and SDG&E that the waterfall method reduces disconnection risks. They assert that the Commission’s findings in D.21-11-014, which suspended the waterfall method, still apply and should be made permanent to support the public interest and financial health of CCAs.
• Support from SCE
o SCE supports the proportional allocation method, acknowledging that it ensures equitable treatment for all customers and prevents confusion.

CalCCA agrees and notes that this method results in system efficiencies and aligns with the Commission's previous findings.
• Disproportionate Risk
o CalCCA argues that SDG&E’s claim that CCAs can return customers to IOUs for nonpayment ignores the financial risk already incurred by CCAs.

They point out that arrearages have significantly increased, making the waterfall method even more untenable.
• Unsupported Assertions
o CalCCA challenges the unsupported assertions by PG&E, SDG&E, and Cal Advocates that the waterfall method reduces disconnection risks. They argue that these parties have not provided adequate evidence to support their claims.

B) State Legislative Activities Update
May 24th marked the house of origin deadline in the Legislature, meaning bills must have been approved by the house they were introduced in to continue to move forward in the legislative process. Bills must be passed by both houses and sent to the Governor for his consideration by August 31.

House of Origin Outcomes on SDCP Supported Legislation
Below are outcomes on bills that SDCP has taken a support position on. SDCP is not currently opposing any legislation.
• SB 1006 (Padilla) would help unlock the potential of existing transmission infrastructure through grid-enhancing technologies such as dynamic line rating systems, advanced power flow control systems, and topology optimization software that could potentially defray the need for investments in larger transmission projects like entirely new lines. Incorporating these technologies will ultimately help SDCP achieve its renewable energy goals and reduce costs for ratepayers.

Outcome: Approved by the Senate 39-0.
• SB 1165 (Padilla) would allow transmission developers to elect the California Energy Commission (CEC) to conduct a California Environmental Quality Act (CEQA) review instead of the CPUC. SB 1165 is a reintroduction of SB 619 (Padilla) from last year. SDCP supported SB 619, which was ultimately vetoed by Governor Newsom over concerns about agency coordination.

Outcome: Held by the Senate Appropriations Committee.
• AB 817 (Pacheco) would modify Brown Act teleconferencing rules for public subsidiary bodies that serve in an advisory capacity to a legislative body, such as the CAC. Specifically, the bill would streamline agenda posting requirements to make it more practical for advisory bodies to meet in a hybrid or virtual format.

Outcome: Failed passage in the Senate Local Government Committee. • AB 1834 (Garcia) is ratepayer protection clean up legislation to AB 1373 (Garcia) from last year. Specifically, AB 1834 (Garcia) clarifies that the CPUC should consider mitigating factors, such as resource scarcity and above market costs, when determining the amount of a capacity payment assessed on an LSE – like SDCP – in any given month when the state Strategic Reliability Reserve is used to maintain grid reliability and the LSE was deficient on their resource adequacy obligations.

Outcome: Approved by the Assembly 72-0.
• AB 2329 (Muratsuchi) would create the California Affordable Decarbonization Authority to provide non-ratepayer dollars to fund building and transportation electrification, distributed energy resources, equity initiatives to assist customers in disadvantaged communities, and to provide direct bill credits for customers.

Outcome: Held by the Assembly Appropriations Committee. • AB 2891 (Friedman) would direct the CEC to set up technical requirements and load automation protocols to provide an option for CCAs and other LSEs to reduce or modify their electric demand forecast through flexible load strategies.

This would aid SDCP’s flexible load strategy.

Outcome: Held by the Assembly Appropriations Committee. • AB 2672 (Petrie-Norris) would make Project Home Key sites eligible for the CPUC’s 30% CARE rate discount. Home Key is a state program that provides grants for local entities to purchase hotels, motels, and other buildings to transition them into affordable housing. There are four Home Key projects in San Diego. The San Diego Housing Commission and SDG&E are both supporting the bill.

Outcome: Approved by the Assembly 71-0.
• AB 3238 (Garcia) would streamline the CPUC’s approval process for certain transmission lines, cutting the approval timeline from over 1,700 days to just over 900 days. This, in turn, will help new transmission projects come online faster, something that is critical to a timely, reliable, and cost-effective clean energy transition. It is sponsored by SDG&E.

Outcome: Approved by the Assembly 62-0
State Budget Update – Potential Impacts to Programs
As noted in Item 8 of the May 23 staff report to the Board of Directors, Governor Newsom released his May Revise budget proposal last month. It reflects changes in the state budget condition since his original January budget proposal was introduced. The release of the May Revise marks the beginning of final negotiation on the state budget. The Legislature is required to adopt a balanced budget by June 15.

Below is additional information on proposed cuts to energy programs relevant to SDCP that the Governor has put on the table to close the remaining estimated $27.6 billion budget deficit. The Governor’s May Revise proposal, if approved, would reduce funding three programs that SDCP is actively monitoring:
• Distributed Electricity Backup Assets (DEBA) program. This program was created in 2022 to incentivize the construction of clean grid assets that can serve as on-call supply during grid emergencies. The Governor’s proposes a reduction from $595 million to $532 million, an 11% reduction. However, $380 million would be shifted to the Greenhouse Gas Reduction Fund (GGRF) between 2025-27. The GGRF contains revenues from quarterly Cap & Trade carbon allowance auctions.

Revenues would have to be realized from auctions between 2025-27 to fund the proposed amount.
• Equitable Building Decarbonization (EBD) program. This program was also created in 2022 and provides incentives to retrofit homes with low-carbon technologies. The Governor’s May Revise proposes a 46% cut, leaving $571 million out of $922 million originally appropriated, however some of the remaining funds would be shifted to GGRF in 2027-28, which could limit their availability depending on Cap & Trade allowance auction outcomes.
• Self-Generation Incentive Funds (SGIP). This program largely pays for residential batteries. The Governor’s May Revise includes a reduction from $630 million to $280 million and shifts the funding source to GGRF.

The Governor’s May Revise proposed cuts and fund shifts are not set in stone. The Legislature adopted their version of the Governor’s budget in AB 107 (Gabriel). They accept the Governor’s proposed cuts to DEBA and SGIP but is positioning to reject his proposed cuts to the EBD program. A description of the Legislature’s budget is here.

C) Federal Legislative Activities Update
Recognizing the need for a robust and reliable transmission system that can support the clean energy transition, SDCP is currently supporting the Building Integrated Grids With Inter-Regional Energy Supply (BIG WIRES) Act by Representative Scott Peters and the Clean Electricity and Transmission Acceleration (CETA) Act by Representative Mike Levin. Collectively, the two bills would update federal processes to better support the buildout of transmission lines needed to deliver renewable and clean energy, and to maintain grid reliability. BIG WIRES would establish transfer requirements between grid regions and CETA would create a 30% transmission investment tax credit, direct the Federal Energy Regulatory Commission (FERC) to improve rules on transmission planning, and would require transmission owners to consider deploying grid enhancing technologies (GETs) that can help increase transmission capacity without the need to build new lines. GETs may include power control devices, analytical tools, and importantly, advanced conductors made of composite material instead of steel that can be reconductored on existing transmission powerlines (i.e. reconductor an existing line) to double the capacity of the existing transmission right of way at a lower cost compared to building an entirely new transmission powerline.

While it’s unlikely either of the bills will advance in the 2024 Congress, there has been discussion of a global transmission reform bill being developed in the U.S. Senate led by Senator Joe Manchin (D-WV) and Senator John Borrasso (R-WY). It is possible that elements of both BIG WIRES and CETA could be included in such a legislative package.

However, after recent regulatory developments on transmission reform – more on this in the next paragraph – the possibility of crafting a bipartisan bill on transmission reform is unclear. U.S. Senate Majority Leader Chuck Schumer said publicly that transmission legislation would not pass this Congress. Senator’s Manchin and Borrasso have stated they are still working on a legislative deal.

Notwithstanding legislative action on transmission issues, there are recent regulatory and White House transmission developments that align with a number of the provisions of BIG WIRES and CETA, and with SDCP’s support for transmission reform more generally.

There have been three major developments:
• The U.S. Department of Energy (DOE) announced a list of National Interest Electric Transmission Corridors (NIETCs) – high-priority transmission expansion areas – including one that stands to benefit California. The May 8th announcement includes a list of 10 transmission lines that are of national interest. One of the proposed lines would run from central Oregon to southern Nevada. While it would not cross into California, the line would be valuable to maintaining reliability in the CAISO balancing authority area, which SDCP serves load in. California gets roughly 30% of its power from imports and roughly half of the imports come from the Northwest through transmission lines known as the California-Oregon Intertie (COI), which experiences congestion, meaning the transmission lines are often maxed out even if more energy or capacity is available to be imported into California. The proposed transmission line would provide an alternative pathway around the COI and would “improve reliability and resilience, reduce system congestion, meet future generation and demand growth, and increase clean energy integration” (Preliminary List of Potential NIETCs, page 37).

The 2005 Energy Policy Act established the NIETC processes, but until the program was updated by the President’s Bipartisan Infrastructure Law in 2021, it has never been used. A NIETC designation means that DOE has determined there is a lack of adequate transmission capacity that harms consumers. A NIETC designation allows for the FERC to issue permits if state siting authorities have not acted and makes the proposed lines eligible for Federal financing mechanisms.

Now that the preliminary list of NEITCs has been released, there is a public comment period before the designations are finalized.
• FERC approves an historic long-term transmission planning rule. Known as Order No. 1920, the new FERC rule approved on May 13 will help the transition to renewable and clean energy sources while maintaining grid reliability. The rule requires entities like CAISO to conduct 20-year regional transmission plans, something that CAISO already began to do over two years ago. As part of this long-term transmission planning, there must be consideration of the need to connect new resources to the transmission system and of GETs. The rule also updates cost-allocation rules and institutes news transparency requirements on local transmission buildout, which is important because lower-voltage transmission lines that are critical for grid reliability and energy delivery (and which account for 63% of transmission spending in California in recent years) have historically not been included in a public transmission planning process. • White House announces Federal-State partnership, including California, to make progress on transmission. The Federal-State Modern Grid Deployment Initiative announced on May 28 includes state government commitments to prioritize the adoption of GETs to increase transmission capacity, to explore policy changes to address capacity constraints, and to help communicate the benefits of modern grid technologies. California is part of the commitment. According to the press release, “Deploying these tools means that renewables and other clean sources of power can be integrated sooner and more cost-effectively than waiting for new transmission construction, which will address load growth challenges more rapidly, create good-paying jobs, and lower Americans’ utility bills.” Related, the U.S. Senate this month confirmed three nominees to FERC, a five-member body that oversees bulk grid reliability, energy market rules, transmission build out, and more. Two appointees fill vacancies, and one fills the seat of an outgoing commissioner.

FERC has been operating without a full complement of commissioners since the end of 2022. With the confirmation of the three new commissioners, Democratic commissioners now hold the majority at FERC for the next several years. More can be read about the commissioners here.

AD-HOC COMMITTEE AND/OR SUBCOMITTEE REVIEW
N/A

FISCAL IMPACT
N/A

ATTACHMENTS
N/A

SAN DIEGO COMMUNITY POWER
Staff Report – Item 11
-------------------------------------------------------------------------------------------------------------------- To: San Diego Community Power Board of Directors
From: Eric W. Washington, Chief Financial Officer
Via: Karin Burns, Chief Executive Officer
Subject: Second Revision to Financial Reserves Policy
Date: June 27, 2024
--------------------------------------------------------------------------------------------------------------------

RECOMMENDATION
Recommend Board of Directors Approval of the Second Revision to the Financial Reserves Policy.

BACKGROUND
On October 1, 2019, the Founding Members of San Diego Community Power (SDCP) adopted the Joint Powers Agreement (JPA) which was amended and restated on December 16, 2021. Section 4.6.2 of the JPA specifies that the SDCP Board of Directors (Board) shall adopt an annual budget with a fiscal year that runs from July 1 to June 30.

Section 3.2.12 of the JPA specifies that the SDCP Board of Directors (Board) adopt rules, regulations, policies, bylaws and procedures governing the operation of SDCP.

Additionally, section 4.5.5 of the JPA states that one of the general purposes of the Board is to set policy.

Even further, section 5.10.2.c of the JPA states that the one of the primary purposes of the Finance and Risk Management Committee (FRMC) is to review and recommend to the Board financial policies and procedures to ensure equitable contributions by Parties.

On June 24, 2021, the Board originally reviewed and approved SDCP’s Financial Reserves Policy. Subsequently, on February 24, 2022, the Board Approved a revision to the Financial Reserves Policy.

The Financial Reserves Policy states that staff will complete an annual review of the Financial Reserve Policy to ensure that the policy meets the needs of the organization.

Given the growth in operating expenses and that the agency has exceeded the reserve target set in its Financial Reserves Policy, staff recommend a second revision to the Financial Reserves Policy to account for the growth in expenses.

ANALYSIS AND DISCUSSION
In FY 2022-23, when the Financial Reserve Policy was revised, SDCP had operating expenses of $329.0 million. Since then, the agency has grown substantially. In particular, in FY 2024-25, SDCP is projected to have operating expenses of $1,113.2 million as presented to the Board on May 23, 2024.

Additionally, the Financial Reserves Policy states that 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 (including power supply expenses) to be held as unrestricted cash.

On September 14, 2023, staff reported to the FRMC that the agency achieved its goal of 90-days of total operating expenses to be held as unrestricted cash. More currently, on May 23, 2024, SDCP reported to the Board that the agency currently has 133-days of total cash on hand and has therefore surpassed the goal set in the Financial Reserves Policy.

However, on June 23, 2022, the Board also approved SDCP’s Mission, Vision, Core Values and Goals for 2023-2027 which included a plan to increase reserves to 90-days cash on hand by October 2023 and to 180-days cash on hand by October 2025.

Staff are therefore recommending a second revision to the Financial Reserves Policy that will update the financial reserve goal from 90-days of cash on hand to 180-days cash on hand to align with the goals set by the Board and to align with SDCP’s growth in days cash on hand.

Upon review and benchmarking of similar community choice aggregators, SDCP’s peer agencies have similar cash-on hand targets:
• Marin Clean Energy: 240 days
• Central Coast Community Energy: 180 days
• Peninsula Clean Energy: 180 days
• Clean Power Alliance: 120 days
The policy revision also includes definitions for the measurement of ‘days cash on hand’ and ‘reserves’ to provide clear, consistent, and transparent metrics for measurement. • Days cash on hand: unrestricted cash and cash equivalents x 365 / (operating expenses for the current fiscal year)
• Reserves: Net position
Finally, the policy revision includes updates for reserve distribution should the agency exceed its 180-days cash on hand target. In particular, in addition to strategic uses, staff propose adding a stabilization reserve and a programmatic reserve to the proposed reserve distribution section.

The stabilization reserve mitigates financial and cost of energy risk due cyclical cost of energy fluctuations and rate shocks and may maintain compliance with financial covenants. The purpose of this reserve would be to provide budgetary stabilization and not to serve as an alternative funding source for new programs.

The programmatic reserve could fund unforeseen and unexpected needs such as cost overruns, local leveraging or matching for external funds, or other programmatic needs as required.

COMMITTEE REVIEW
This item was presented to and the Financial and Risk Management Committee reviewed it on June 20, 2024.

FISCAL IMPACT
N/A

ATTACHMENTS
Attachment A: Draft of Second Revision to the Financial Reserves Policy Attachment B: Draft Redline Version of Second Revision to the Financial Reserves Policy
Policy Number: F21_001
Original Adoption Date: June 24, 2021
Revision Date: TBD
Subject: Financial Reserves Policy
Purpose: San Diego Community Power (SDCP) will maintain Financial Reserves (Reserves) as described in this policy to:
• Meet SDCP’s strategic objectives
• Secure, maintain, and/or improve a standalone investment grade credit rating • Secure favorable terms with vendors, including power producers • Satisfy working capital requirements
• Adhere to contractual covenants
• Provide funds to cover unanticipated expenditures
• Support rate stability
Policy Guidelines:

SDCP’s financial reserve goal is to secure 180-days of cash on hand.

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. To the extent SDCP is able to meet operational expenses and maintain competitive rates, SDCP will establish rates and adopt budgets with the goal of building and maintaining Reserves at or above the 180- days of cash on hand target level.

Definitions
• Days cash on hand: unrestricted cash and cash equivalents x 365 / (operating expenses for the current fiscal year)
• Reserves: Net position
• Use of Reserves: A projected or estimated reduction in the amount of reserves by the end of a fiscal year below the sum of the balance of the reserves at the commencement of the fiscal year plus the projected addition to the Reserves in the budget for the current fiscal year.

Reserve Review: Reserves and annual contributions will be reviewed on an annual basis as part of SDCP’s budget process. Reserves will also be reviewed at the completion of SDCP’s annual audit to reconcile the Reserve balance.

Reserve Distribution: If reserves exceed the 180-days of cash on hand target level established in this policy, the Board may authorize reserve distributions as follows. • Strategic Uses: Use excess funds for capital projects, financing programs, paying down existing debt, rate reductions, or other strategic purposes. • Stabilization Reserve: Use excess funds to fund a Rate Stabilization Reserve.

A Stability Reserve mitigates financial and cost of energy risk due cyclical cost of energy fluctuations and rate shocks and may maintain compliance with financial covenants. The purpose of this reserve would be to provide budgetary stabilization and not to serve as an alternative funding source for new programs. • Programmatic Reserve: Use excess funds to establish a contingency for programs and projects. Specifically, this Reserve could fund unforeseen and unexpected needs such as cost overruns, local leveraging or matching for external funds, or other programmatic needs as required.

Conditions for Use of Reserves
• Temporary reductions in Reserves for cash flow purposes to even out the expected peaks or dips in revenues and expenditures are normal cyclical occurrences to be expected during the fiscal year, and do not constitute a use of reserves. Transfers to and from Reserves to account for such temporary cash flow fluctuations is within the discretion of the CFO. • The CEO will have the discretion to authorize the use of reserves during the fiscal year up to the lesser of 10% of the year’s total budgeted costs, or $100 million, for the following purposes:

1. Cover increases in power supply expenses due to spikes in costs and/or due to higher customer demand;

2. Provide necessary funds to make up for unanticipated revenue shortfalls;

3. Meet any margin or collateral posting requirements under energy supply contracts; and

4. Provide resources to meet emergency expenditures.
• Any further use of reserves as necessary or desirable, must be recommended by CEO to the Board for approval of such use.
• Any use of the reserves under the CEO’s authority shall be reported to the Board at the next regularly scheduled meeting.

Policy Review: SDCP staff will complete a periodic review of this Financial Reserve Policy to ensure that the policy meets the needs of the organization.

Policy Number: F21_001
Original Adoption Date: June 24, 2021
Revision Date: February 24, 2022XXX
Subject: Financial Reserves Policy
Purpose: San Diego Community Power (SDCP) will maintain Financial Reserves (Reserves) as described in this policy to:
• Meet SDCP’s strategic objectives
• Secure, maintain, and/or improve a standalone investment grade credit rating • Secure favorable terms with vendors, including power producers • Satisfy working capital requirements
• Adhere to contractual covenants
• Secure a standalone investment grade credit rating
• Provide funds to cover unanticipated expenditures
• Support rate stability
Policy Guidelines:

SDCP’s financial reserve goal is to secure 180-days of cash on hand.

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 PolicySDCP will allocate up to 15% of gross revenue annually toward building an Operating/Working Capital Reserve equivalent to 90 days of total operating expenses (including power supply expenses) to be held as unrestricted cash. To the extent SDCP is ability to meet operational expenses and maintain competitive rates, Unrestricted cash is defined as total cash less restricted cash held in accounts that are restricted from use due to collateral requirements or by covenant requirements. SDCP will establish rates and adopt budgets that with the goal of building and maintaining Reserves at or above the 180-days of cash on hand target level. , subject to SDCP’s ability to meet operational expenses and maintain competitive rates.provide for a growing Operation/Working Capital Reserve that meets the above target funding levels.

Definitions
• Days cash on hand: unrestricted cash and cash equivalents x 365 / (operating expenses for the current fiscal year)
• Reserves: Net position
• Use of Reserves: For purposes of this policy, the “use of reserves” is defined as aA projected or estimated reduction in the amount of thereserves Operating/Working Capital Reserve by the end of a fiscal year below the sum of the balance of the Operating/Working Capital Reservethe reserves at the commencement of the fiscal year plus the projected addition to the Operating/Working Capital ReserveReserves in the budget for the current fiscal year.

Fund BalanceReserve Review: The fund balanceReserves and annual contributions will be reviewed on an annual basis as part of SDCP’s budget process. The fund balanceReserves will also be reviewed at the completion of SDCP’s annual audit to reconcile the fund balanceReserve balance.

Exceeding Target Fund BalanceReserve Distribution: If reserves funds exceed target the 180-days of cash on hand target level established in this policys, the Board may authorize reserve distributions as follows.
• Strategic Uses: uUse excess funds for capital projects, financing programs, paying down existing debt, rate reductions, or other strategic purposes. • Stabilization Reserve: The Board may also authorize the uUse of excess funds to fund additional Reserves such as a Rate Stabilization Reserve. A Stability Reserve mitigates financial and cost of energy risk due cyclical cost of energy fluctuations and rate shocks and may maintain compliance with financial covenants. The purpose of this reserve would be to provide budgetary stabilization and not to serve as an alternative funding source for new programs. • Programmatic Reserve: UThis Reserve would use excess funds to establish a contingency for programs and projects. Specifically, this Reserve could fund unforeseen and unexpected needs such as cost overruns, local leveraging or matching for external funds, or other programmatic needs as required.

Conditions for Use of Reserves
• For purposes of this policy, the “use of reserves” is defined as a projected or estimated reduction in the amount of the Operating/Working Capital Reserve by the end of a fiscal year below the sum of the balance of the Operating/Working Capital Reserve at the commencement of the fiscal year plus the projected addition to the Operating/Working Capital Reserve in the budget for the current fiscal year.
• Temporary reductions in the Operating/Working Capital ReserveReserves for cash flow purposes to even out the expected peaks or dips in revenues and expenditures are normal cyclical occurrences to be expected during the fiscal year, and do not constitute a use of reserves. Transfers to and from the Operating/Working Capital ReserveReserves to account for such temporary cash flow fluctuations is within the discretion of the CFO. • The CEO will have the discretion to authorize the use of reserves during the fiscal year up to the lesser of 10% of the year’s total budgeted costs, or $40 100 million, for the following purposes:

1. Cover increases in power supply expenses due to spikes in costs and/or due to higher customer demand;

2. Provide necessary funds to make up for unanticipated revenue shortfalls;

3. Meet any margin or collateral posting requirements under energy supply contracts; and

4. Provide resources to meet emergency expenditures.
• If Any further use of reserves as necessary or desirable, must be recommended by CEO to the Board for approval of are necessary or desirable to manage the operations of SDCP, the CEO must present recommendations to the Board and the Board must authorize such use.
• Any use of the reserves under the CEO’s authority shall be reported to the Board at the next regularly scheduled meeting.

Policy Review: SDCP staff will complete a periodic review of this Financial Reserve Policy annually to ensure that the policy meets the needs of the organization.

SAN DIEGO COMMUNITY POWER
Staff Report – Item 12
--------------------------------------------------------------------------------------------------------------------- To: San Diego Community Power Board of Directors
From: Eric W. Washington, Chief Financial Officer
Via: Karin Burns, Chief Executive Officer
Subject: Board Approval of Resolution No. 2024-03 Adopting the First Revision to the SDCP Investment Policy
Date: June 27, 2024
---------------------------------------------------------------------------------------------------------------------

RECOMMENDATION
Recommend Board Approval of Resolution No. 2024-03 Adopting the First Revision to the SDCP Investment Policy

BACKGROUND
On October 1, 2019, the Founding Members of San Diego Community Power (SDCP) adopted the Joint Powers Agreement (JPA) which was amended and restated on December 16, 2021.

Section 3.2.12 of the JPA specifies that the SDCP Board of Directors (Board) may at its discretion adopt rules, regulations, policies, bylaws and procedures governing the operation of SDCP.

Further, Section 4.5.5 of the JPA states that one of the general purposes of the Board is to set policy.

Section 5.10.2(C) of the JPA finally states one of the primary purposes of the Financial and Risk Management Committee (FRMC) is to review and recommend to the Board financial policies and procedures to ensure equitable contributions by Parties consistent with a recommendation for Board approval of the Investment Policy herein. Further, this section states the FRMC may have such other responsibilities as may be approved by the Board, including but not limited to advising the Chief Executive Officer on fiscal and risk management policies and procedures, rules and regulations governing investment of surplus funds, audits to achieve best practices in corporate governance and selection and designation of financial institutions for deposit of SDCP funds, and credit/depository matters.

On May 25, 2023, Board Approved the SDCP Investment Policy. The policy requires an annual review. In addition, the policy allowed SDCP to engage the services from an investment adviser, who are registered under the Investment Advisers Act of 1940, to assist in the management of SDCP’s investment portfolio in a manner consistent with the SDCP’s objectives.

On February 15, 2024, the SDCP Board approved a professional services agreement with Chandler Asset Management. Subsequently, SDCP initiated a transition process that involved a review of SDCP’s Investment Policy by Chandler Asset Management, which identified possible revisions.

ANALYSIS AND DISCUSSION
Chandler Asset Management made recommendations for the following revisions to the SDCP Investment Policy to update language to better serve SDCP’s investment objectives.

Changes to Acceptable Investment Types has been expanded to include Medium Term Notes, Pass-Thru Securities, Municipal Securities, and Supranationals. Additionally, the policy includes updated issuer limitations for existing options like Agency securities, Negotiable CDs, Money Market Funds, and Commercial Paper. To manage exposure to callable bonds, has been reduced to not exceed 20% of the total portfolio.

In accordance with the recent passing of SB 1489, the policy now prohibits purchasing securities with a settlement date exceeding 45 days. The report section has been updated to include language on selecting a market benchmark for performance evaluation.

SDCP would rename the relevant section to "Risk Management and Diversification" to better reflect its content. This section now includes Supranationals on the list of securities exempt from the 5% issuer limitation. Additionally, language has been added regarding managing the portfolio's duration within a 20% band of the chosen market benchmark to mitigate portfolio interest rate risk.

The glossary has been updated to ensure all terms are clearly defined. We encourage you to reach out with any questions or if you’d like to discuss these changes further. We’re happy to provide additional information or clarification on any aspect of the revised Investment Policy.

All changes or updates to the SDCP Investment Policy will require Board approval.

COMMITTEE REVIEW
This item was reviewed by Financial and Risk Management Committee on June 20, 2024.

FISCAL IMPACT
There are no fiscal impacts to recommend Board approval of the Investment Policy Revision.

ATTACHMENTS
Attachment A: Resolution No. 2024-03 Adopting the First Revision to the SDCP Investment Policy
Exhibit A: SDCP Investment Policy First Revision
Exhibit B: Redline Version of SDCP Investment Policy First Revision RESOLUTION NO. 2024-03

A RESOLUTION OF THE BOARD OF DIRECTORS OF

SAN DIEGO COMMUNITY POWER ADOPTING THE FIRST REVISION TO THE

SDCP INVESTMENT POLICY
A. San Diego Community Power (“SDCP”) is a joint powers authority formed pursuant to the Joint Exercise of Powers Act, Cal. Gov. Code § 6500 et seq., California Public Utilities Code § 366.2, and a Joint Powers Agreement effective on October 1, 2019, and amended on December 16, 2021, (“JPA Agreement”).

B. The JPA Agreement provides that the SDCP Board of Directors (“Board”) may at its discretion adopt rules, regulations, policies, bylaws, and procedures governing the operation of SDCP.

C. The Board has determined that an Investment Policy that comports with the requirements of California Government Code Sections 53600-53608 is in the best interests of SDCP to ensure assets are protected.

D. The purpose of the Investment Policy is to identify (1) the objectives and priorities for SDCP investments; (2) the types of investments that are permitted and prohibited; and (3) the controls SDCP will implement to ensure assets are protected.

E. The SDCP Board proposes to adopt the First Revision to the SDCP Investment Policy, attached hereto as Exhibit A.

NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of San Diego Community Power as follows:

Section 1. The Board of Directors hereby adopts the First Revision to the SDCP Investment Policy.

Section 2. This resolution shall take effect immediately upon its adoption.

PASSED AND ADOPTED at a meeting of the Board of Directors of San Diego Community Power held on ___________________.
__________________________________________
Joe LaCava Chair
Board of Directors
San Diego Community Power
ATTEST: APPROVED AS TO FORM:
__________________________________ _______________________________ Maricela Hernandez, MMC, CPMC Veera Tyagi, General Counsel Secretary, Board of Directors San Diego Community Power San Diego Community Power
SDCP Investment Policy | 1
Subject: Investment Policy
Purpose: The San Diego Community Power (“SDCP”) Investment Policy (“Policy”) establishes investment guidelines for protecting SDCP’s cash reserves, deposits, and investments (“Funds”) while producing a reasonable rate of return on investments.

The Policy articulates: (1) the objectives and priorities for SDCP investments; (2) the types of investments that are permitted and prohibited; and (3) the controls SDCP will implement to ensure assets are protected.

This Policy is adopted pursuant to California Government Code Section (“Section”) 53600-53608 and must be adopted or amended by resolution. The SDCP Board of Directors (“Board”) is not required to adopt a formal Investment Policy by statute, however, it is in the best practice to ensure agency assets are protected.

Background
On October 1, 2019, the Founding Members of San Diego Community Power (SDCP) adopted the Joint Powers Agreement (JPA) which was amended and restated on December 16, 2021.

Section 3.2.12 of the JPA specifies that the SDCP Board of Directors (Board) may at its discretion adopt rules, regulations, policies, bylaws and procedures governing the operation of SDCP.

Further, Section 4.5.5 of the JPA states that one of the general purposes of the Board is to set policy.

Policy Number: 2023-07
Original Adoption Date: May 25, 2023
Revision Date: TBD
SDCP Investment Policy | 2
Investment Objectives
To the extent possible, investments will align with SDCP’s mission, vision, value, and goals.

When managing Funds, SDCP’s primary objectives shall be to (1) safeguard the principal of the Funds, (2) meet the liquidity needs of SDCP, (3) achieve a return on funds invested, and (4) exercise a high standard of care on Funds within SDCP’s control. 1) Safety: Safety of principal is the foremost objective of cash and investment management activities. The investment of Funds shall be undertaken in a manner that seeks to ensure the preservation of principal.
2) Liquidity: The Funds of SDCP shall remain sufficiently liquid to meet all operating needs that may be reasonably anticipated. Since all possible cash demands cannot be anticipated, the investment of Funds in deposits or instruments that are available on demand is recommended.
3) Return on Investments: SDCP’s deposit and investment portfolio shall be designed with the objective of attaining a market rate of return throughout the economic cycle while considering investment risk and liquidity constraints. The return on deposits and investments is of secondary importance compared to the safety and liquidity objectives described in Investment Objectives, Section A and Investment Objectives, Section B, above.
4) Standard of Care: SDCP will manage Funds in accordance with the “Prudent Investor Standard” pursuant to California Government Code Section 53600.31 as follows:
“All governing bodies of local agencies or persons authorized to make investment decisions on behalf of those local agencies investing public funds are trustees and therefore fiduciaries subject to the prudent investor standard. When investing, reinvesting, purchasing, acquiring, exchanging, selling or managing public funds, a trustee shall act with care, skill, prudence and diligence under the circumstances then prevailing, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the agency. Within the limitations of this section and considering individual investments as part of an overall strategy, investments may be acquired as authorized by law.”
1 All further statutory references are to the California Government Code unless otherwise stated.

SDCP Investment Policy | 3
Delegation of Authority
Pursuant to Section 53607, the Board has the authority to delegate the responsibility to manage SDCP’s funds to the Treasurer. The Treasurer has authority to appoint Deputy Treasurer(s) as the Treasurer deems necessary to carry the duties in accordance with the Investment Policy.

SDCP may engage the services from one or more external investment advisers, who are registered under the Investment Advisers Act of 1940, to assist in the management of SDCP’s investment portfolio in a manner consistent with the SDCP’s Policy. External investment advisers may be granted discretion to purchase and sell investment securities in accordance investment objective set forth in this Policy.

Scope
This Investment Policy applies to all funds and investment under the direct authority of SDCP.

This Policy does not apply to the investment of bond proceeds, which would be governed by any applicable bond documents and any other funds specifically exempted by SDCP’s Board of Directors.

Acceptable Investment Types: To the extent possible, investments will align with SDCP’s mission, vision, value, and goals.

1. Deposits at Bank(s): Funds may be invested in non-interest-bearing depository accounts to meet SDCP’s operating and collateral needs and grant requirements. Funds not needed for these purposes may be invested in interest-bearing depository accounts or Federal Deposit Insurance Corporation (FDIC) insured certificates of deposit with maturities not to exceed five (5) years. Banks eligible to receive deposits will be federally or state chartered and will conform to Section 53635.2 which requires that banks “have received an overall rating of not less than ‘satisfactory’ in its most recent evaluation by the appropriate federal financial supervisory agency of its record of meeting the credit needs of California's communities, including low- and moderate-income neighborhoods, pursuant to Section 2906 of Title 12 of the United States Code.” As per Section 53652, banks must collateralize the deposits of public agencies in an amount equal to no less than 110% of as currently stated in the value of the deposits. The Treasurer will monitor the credit quality of eligible banks holding SDCP deposits that exceed FDIC insurance limits to ensure the safety of SDCP deposits.

2. Local Agency Investment Fund (LAIF): Funds may be invested in the Local Agency Investment Fund established by the California State Treasurer for the benefit of local agencies. LAIF’s investments in instruments prohibited by or not specified in SDCP’s policy do not exclude the investment in LAIF itself from SDCP list of allowable investments, provided LAIF’s reports allow the Treasurer to adequately judge the risk inherent in LAIF’s portfolio.

SDCP Investment Policy | 4

3. US Treasury Obligations: Funds may be invested in United States Treasury obligations with a term to maturity not exceeding five (5) years and subject to the limitations set forth in Sections 53601 et seq. and 53635 et seq.

4. Federal Agency Securities: Funds may be invested in Federal Agency Securities or Government-Sponsored Enterprise (GSE) obligations with a term to maturity not exceeding five (5) years and subject to the limitations set forth in Sections 53601 et seq. and 53635 et seq. No more than 20% of the total portfolio may be invested in callable agency securities and no more than 30% of the total portfolio may be invested in any single Agency/ GSE issuer.

5. Bankers’ Acceptances: Funds may be invested in Banker’s Acceptances provided that they are issued by institutions which have short-term debt obligations rated “A-1” or its equivalent of better by at least one NRSRO (Nationally Recognized Statistical Rating Organization). Not more than 40% of the portfolio may be invested in Bankers’ Acceptances, and no more than 5% of the portfolio may be invested in any single issuer.

The maximum maturity shall not exceed 180 days.

6. Negotiable Certificates of Deposit: Funds may be invested in negotiable certificates of deposit in accordance with the requirements of Section 53601 and 53601.8, and subject to the following limitations:

A. Issued by an entity as defined in Section 53601(i); and B. No more than 30% of the total portfolio shall be invested in certificates of deposit, no more than 5% of the total portfolio may be invested in any single issuer, and the maximum maturity does not exceed 5 years.

7. Placement Service Deposits: Funds may be invested in deposits placed with a private sector entity that assists in the placement of deposits with eligible financial institutions located in the United States (Section 53601.8). The full amount of principal and the interest that may be accrued during the maximum term of each deposit shall at all times be insured by federal deposit insurance. The maximum portfolio exposure to the deposits placed pursuant to this section shall be limited by Section 53601.8.

8. Money Market Funds: Funds may be invested in money market funds pursuant to Section 53601(l)(2) and subject to Section 53601(l)(4). No more than 20% of the portfolio may be invested in the shares of any one Money Market Fund. No more than 20% of the total portfolio may be invested in these securities.

9. Commercial Paper: of “prime” quality of the highest ranking or of the highest letter and number rating as provided for by a NRSRO. The entity that issues the commercial paper must meet all of the following conditions in either paragraph A or paragraph B:

SDCP Investment Policy | 5
A. The entity meets the following criteria: (i) is organized and operating in the United States as a general corporation, (ii) has total assets in excess of five hundred million dollars ($500,000,000), and (iii) has debt other than commercial paper, if any, that is rated in a rating category of “A” or its equivalent or higher by an NRSRO.

B. The entity meets the following criteria: (i) is organized within the United States as a special purpose corporation, trust, or limited liability company, (ii) has program-wide credit enhancements including, but not limited to, over collateralization, letters of credit, or surety bond, and (iii) has commercial paper that is rated “A-1” or higher, or the equivalent, by an NRSRO.
• No more than 10% of the outstanding commercial paper of any single issuer. • No more than 25% of SDCP’s investment assets under management may be invested in Commercial Paper. Under a provision sunsetting on January 1, 2026, no more than 40% of the total portfolio may be invested in Commercial Paper if SDCP’s investment assets under management are greater than $100,000,000. • No more than 5% of the total portfolio may be invested in any single issuer. The maximum maturity does not exceed 270 days.

10. Medium Term Notes (MTN): The issuer is a corporation organized and operating within the United States or by depository institutions licensed by the United States or any state and operating within the United States. (Section 53601 et seq). The securities are rated in a rating category of “A” or its equivalent or better by at least one NRSRO. No more than 30% of the total portfolio may be invested in MTNs, no more than 5% of the total portfolio may be invested in any single issuer and the maximum maturity does not exceed five (5) years.

11.Pass Thru Securities: Asset-Backed, Mortgage-Backed, Mortgage Pass-Through Securities, and Collateralized Mortgage Obligations (Section 53601 et seq) from issuers not defined in sections 3 and 4 of the Acceptable Investment Types section of this policy, provided that: The securities are rated in a rating category of “AA” or its equivalent or better by a NRSRO, no more than 20% of the total portfolio may be invested in these securities, no more than 5% of the total portfolio may be invested in any single Asset-Backed or Commercial Mortgage security issuer and the maximum maturity does not exceed five (5) years.

12. Municipal Securities: include obligations of SDCP, the State of California and any local agency within the State of California,(Section 53601) provided that: The securities are rated in a rating category of “A” or its equivalent or better by at least one nationally recognized statistical rating organization (“NRSRO”)., no more than 5% of the total portfolio may be invested in any single issuer, no more than 30% of the total portfolio may be in Municipal Securities and the maximum maturity does not exceed five (5) years.

SDCP Investment Policy | 6

13. Municipal Securities; (Registered treasury notes or bonds) of any of the other 49 states in addition to California, including bonds payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by a state or by a department, board, agency, or authority of any of the other 49 states, in addition to California (Section 53601). The securities are rated in a rating category of “A” or its equivalent or better by at least one NRSRO, no more than 5% of the total portfolio may be invested in any single issuer, no more than 30% of the total portfolio may be in Municipal Securities and the maximum maturity does not exceed five (5) years.

14.Supranationals: Issues are US dollar denominated senior unsecured unsubordinated obligations issued or unconditionally guaranteed by the International Bank for Reconstruction and Development, International Finance Corporation, or Inter-American Development Bank. (Section 53601).The securities are rated in a rating category of “AA” or its equivalent or better by a NRSRO, no more than 30% of the total portfolio may be invested in these securities, no more than 10% of the total portfolio may be invested in any single issue and the maximum maturity does not exceed five (5) years.

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, inverse floaters, range notes, or mortgage-derived interest-only strips. The purchase of foreign currency denominated securities is prohibited. The purchase of Crypto Asset Securities is prohibited. The purchase of a security with a forward settlement date exceeding 45 days from the time of the investment is prohibited. Trading securities for the sole purpose of speculating on the future direction of interest rates is prohibited. Purchasing or selling securities on margin is prohibited. The use of reverse repurchase agreements, securities lending or any other form of borrowing or leverage is prohibited. SDCP is prohibited from investing in any company or organization whose business do not align with SDCP’s mission, vision, value, and goals.

Investment Portfolio Management
The term to maturity of any Funds invested shall not exceed five (5) years pursuant to Section 53601. The Treasurer will allocate Funds among authorized investments consistent with the objectives and standards of care outlined in this Policy.

Collateralization
Certificates of Deposit (CDs). SDCP shall require any commercial bank or savings and loan association to deposit eligible securities with an agency of a depository approved by the State Banking Department to secure any uninsured portion of a Non-Negotiable Certificate of Deposit.

The value of eligible securities as defined pursuant to California Government Code, Section 53651, pledged against a Certificate of Deposit shall be equal to 150% of the face value of the SDCP Investment Policy | 7
CD if the securities are classified as mortgages and 110% of the face value of the CD for all other classes of security.

Bank Deposits. This is the process by which a bank or financial institution pledges securities, or other deposits for the purpose of securing repayment of deposited funds. SDCP shall require any bank or financial institution to comply with the collateralization criteria defined in California Government Code, Section 53651.

Risk Management and Diversification
SDCP’s investment portfolio will be diversified to avoid incurring unreasonable and avoidable risks associated with concentrating investments in specific security types, maturity segment, or in individual financial institutions. No more than 5% of the investment portfolio shall be in securities of any one issuer except for U.S. Treasuries, U.S. Government Agency issues, Supranationals and investment pools such as LAIF, and money market funds.

A. Credit Risk: Credit risk, defined as the risk of loss due to failure of the insurer of a security, shall be mitigated by investing in those securities with an “A” or above rating and approved in the Investment Policy and by diversifying the investment portfolio so that the failure of any one issuer would not unduly harm SDCP’s cash flow.

B. Market Risk: Market risk or interest rate risk, defined as the risk of market value fluctuations due to overall changes in the general level of interest rates, shall be mitigated by implementing a short term and long-term investment strategies. It is explicitly recognized herein, however, that in a diversified portfolio, occasional measured losses are inevitable and must be considered within the context of overall investment return.

The duration of the portfolio will generally be approximately equal to the duration (typically, plus or minus 20%) of a Market Benchmark, an index selected by SDCP based on SDCP’s investment objectives, constraints and risk tolerances. Credit Rating This Investment Policy sets forth minimum credit ratings for each type of security. These credit ratings apply to the initial purchase of a security and do not automatically force the sale of a security if the credit ratings of the security fall below the policy limits.

Minimum credit ratings:

A. For securities with maturities of 13 months or less, the rating must be in the highest short-term rating category (without regard to qualification of such rating symbol such as “+” or “- “) by at least one nationally recognized statistical rating organization (the “NRSRO”).

B. For securities with maturities greater than 13 months, the rating must be “A” or higher by at least one NRSRO.

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The monitoring of credit ratings consists of the following procedures:

1. When a credit rating downgrade occurs which results in a rating below the minimum credit requirement, SDCP’s Finance Department or external investment adviser will analyze and evaluate the credit rating to determine whether to hold or sell the investment.

2. In the event a security in the Fund receives a credit rating downgrade which results in a rating below the minimum credit rating requirement, SDCP’s Treasurer will report the rating change to the Finance and Risk Management Committee in the monthly public report. In the same manner, the Finance and Risk Management Committee will be informed on the decision to hold or sell a downgraded security.

3. The Investment Officials or authorized employees involved in the investment process and external investment advisers shall meet at least quarterly to review and update the approved list of securities and establish credit criteria for each category of security.

To ensure that the Fund maintains the highest overall credit rating with the contracted NRSRO, the asset allocation and portfolio holdings will be provided to the contracted NRSRO on a monthly basis.

Brokers
The Treasurer shall endeavor to complete investment transactions in accordance with Section 53601.5, institutions eligible to transact investment business with SDCP include:

A. Institutions licensed by the state as a broker-dealer.

B. Institutions that are members of a federally regulated securities exchange.

C. Primary government dealers as designated by the Federal Reserve Bank and non-primary government dealers.

D. Nationally or state-chartered banks.

E. The Federal Reserve Bank.

F. Direct issuers of securities eligible for purchase.

Broker/dealers shall be approved by the Chief Executive Officer upon recommendation by the Treasurer. Selection of broker/dealers shall be based upon the following criteria: the reputation and financial strength of the company or financial institution, the reputation and expertise of the individuals employed, and pursuant to the requirements of Section 53601.5. The Treasurer shall require any selected broker, brokerage firm, dealer, or securities firm to affirm that it has not, within any 48-consecutive month period, made a political contribution to any member of the SDCP Board, or any candidate who may join the SDCP Board in an amount exceeding the limitations contained in Rule G-37 of the Municipal Securities Rulemaking Board, the Political Reform Act, including section 84308, or any applicable SDCP Policy, as amended from time to time. The selected broker or dealers shall be provided with and acknowledge receipt of this Policy.

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Losses
Losses are acceptable on a sale before maturity and may be taken if required to meet the liquidity needs of SDCP or if the reinvestment proceeds will earn an income flow with a present value higher than the present value of the income flow that would have been generated by the original investment, considering any investment loss or foregoing interest on the original investment.

Delivery and Safekeeping
The delivery and safekeeping of all securities shall be made through a third-party custodian when practical and cost effective as determined by the Treasurer, or a duly appointed Deputy Treasurer, and in accordance with Section 53608.

The Treasurer shall review all transaction confirmations for conformity with the original transaction and monitor for excessive trading.

Ethics and Conflict of Interest
The Investment Officials or authorized employees involved in the investment process, shall act as custodians of the public trust and will refrain from personal business activities that could conflict with proper execution of the investment program, or which could impair their ability to make impartial decisions. Investment Officials and any external investment advisers acknowledge that all direct SDCP investments are subject to public review and evaluation.

SDCP Investment Officials involved in the investment process shall refrain from personal business activity that could create a conflict of interest or the appearance of a conflict with proper execution of the investment program, or which could impair their ability to make impartial investment decisions.

SDCP Investment Officials shall disclose to General Counsel or designee i) any material interests in financial institutions with which they conduct business, and ii) disclose any personal investments with a direct, indirect or beneficial interest totaling $2,000 or more. Investment Officials shall refrain from undertaking any personal investment transactions with the same individual from the external investment adviser with whom business is conducted on behalf of SDCP.

Investment Officials, pursuant with all applicable laws, shall not accept honoraria, gifts, and gratuities from advisers, brokers, dealers, bankers, or other entity with whom SDCP conducts business.

Any external investment adviser contracted by SDCP will comply with Municipal Securities Rulemaking Board Rule G-37 and shall follow the Investment Adviser Fiduciary Standard established by the U.S. Securities and Exchange Commission.

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Internal 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. The internal control structure shall be designed to provide reasonable assurance that these objectives are met.

Accordingly, the Treasurer shall establish and maintain internal controls that shall address the following points:

A. Control of Collusion: Collusion is a situation where two or more employees are working in conjunction to defraud their employer. To achieve a segregation of duties, individuals who authorize investment transactions shall not also record or reconcile said transactions.

B. Clear Delegation of Authority to Subordinate Staff Members: Subordinate staff members must have a clear understanding of their authority and responsibilities to avoid improper actions. Clear delegation of authority also preserves the internal control structure that is contingent on the various staff positions and their respective responsibilities.

C. Delivery-Versus-Payment (DVP): All investment transactions shall be conducted on a delivery-versus-payment basis.

To protect against potential losses due to failure of individual securities dealers, and to enhance access to securities, interest payments and maturity proceeds, all cash and securities in SDCP’s portfolio shall be held in safekeeping in SDCP’s name by a third-party custodian, acting as agent for SDCP under the terms of a custody agreement executed by the bank and SDCP. All investment transactions will require a safekeeping receipt or acknowledgment generated from the trade. A monthly report will be received by SDCP from the custodian listing all securities held in safekeeping with current market data and other information. The only exceptions to the foregoing shall be depository accounts and securities purchases made with: (1) local government investment pools; (2) time certificates of deposit, (3) Local Agency Investment Fund, and (4) mutual funds and money market mutual funds, since these securities are not deliverable.

E. Avoidance of Physical Delivered Bearer Securities: Book entry securities are much easier to transfer and account for since actual delivery of a document never takes place.

Bearer securities must be properly safeguarded against loss or destruction. The potential for fraud and loss increases with such securities.

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F. Written Confirmation of Telephone Wire Transfers: Due to the potential for error and improprieties arising from telephone transactions, all telephone transactions should be supported by written or electronic communications and approved by the appropriate person. Development of a Wire Transfer Agreement with the Lead Bank or Third-Party.

G. Audits: SDCP’s Funds shall be subject to a process of independent review by its external auditors. SDCP’s external auditors shall review the investment portfolio in connection with SDCP’s annual audit for compliance with the Policy pursuant to Section 27134. The results of the audit shall be reported to the Treasurer.

Reports
A. Monthly: The Treasurer will perform a monthly review of the investment function.

Following the commencement of investment transactions, the Treasurer shall submit a monthly report of all investment transactions to the Finance and Risk Management Committee. Investment transactions are defined as the purchase, sale or exchange of securities.

B. Annually: The Treasurer will submit an annual report to the Finance and Risk Management Committee within 60 days of the end of a fiscal year providing the following:
• A list of individual securities by investment type, issuer, credit risk rating, CUSIP number, settlement date of purchase, date of maturity, par value and dollar amount invested on all securities, the market value and source of the market value information; • A statement that the portfolio is in compliance with this Policy and in accordance with Section 53646 or the manner in which the portfolio is not in compliance; and • A statement of SDCP’s ability to meet anticipated cash requirements for the upcoming 12 months.
• The Treasurer shall monitor and evaluate the portfolio’s performance relative to the chosen market benchmark(s), which will be included in the Treasurer’s annual report.

The Treasurer shall select an appropriate, readily available index to use as a market benchmark. Benchmarks may change over time based on changes in market conditions or cash flow requirements.

C. Annual Review: This Policy will be reviewed annually by the Treasurer. The Board is authorized to approve changes to this Policy following the review of proposed changes by the Finance Risk Management Committee.

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Glossary of Investment Terms
ASSET BACKED SECURITIES. Securities supported by pools of installment loans or leases or by pools of revolving lines of credit.

BANKERS’ ACCEPTANCES. A short-term, negotiable, unconditional, and time draft drawn on and accepted by a bank. It is typically used in trade to finance the purchase and sale of goods.

BENCHMARK. A comparison security or portfolio. A performance benchmark is a partial market index, which reflects the mix of securities allowed under a specific investment policy.

BROKER. A broker brings buyers and sellers together for a transaction for which the broker receives a commission. A broker does not sell securities from his own position.

CALLABLE. A callable security gives the issuer the option to call it from the investor prior to its maturity. The main cause of a call is a decline in interest rates. If interest rates decline, the issuer will likely call its current securities and reissue them at a lower rate of interest.

CERTIFICATE OF DEPOSIT (CD). A time deposit with a specific maturity evidenced by a certificate. Large denomination CDs may be marketable.

CERTIFICATE OF DEPOSIT ACCOUNT REGISTRY SYSTEM (CDARS). A private placement service that allows local agencies to purchase more than $250,000 in CDs from a single financial institution (must be a participating institution of CDARS) while still maintaining FDIC insurance coverage. CDARS is currently the only entity providing this service. CDARS facilitates the trading of deposits between the California institution and other participating institutions in amounts that are less than $250,000 each, so that FDIC coverage is maintained.

COLLATERAL. Securities or cash pledged by a borrower to secure repayment of a loan or repurchase agreement. Also, securities pledged by a financial institution to secure deposits of public monies.

COLLATERALIZED MORTGAGE OBLIGATIONS (CMO). Classes of bonds that redistribute the cash flows of mortgage securities (and whole loans) to create securities that have different levels of prepayment risk, as compared to the underlying mortgage securities.

COMMERCIAL PAPER. The short-term unsecured debt of corporations.

COUPON. The rate of return at which interest is paid on a bond.

CREDIT RISK. The risk that principal and/or interest on an investment will not be paid in a timely manner due to changes in the condition of the issuer.

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CRYPTO ASSET. Digital assets that use public ledgers over the internet to prove ownership.

They use cryptography, peer-to-peer networks and a distributed ledger technology (DLT) – such as blockchain – to create, verify and secure transactions.

CUSIP. Committee on Uniform Securities Identification Procedures. A CUSIP number identifies most financial instruments, including: stocks of all registered U.S. and Canadian companies, commercial paper, and U.S. government and municipal bonds.

DEALER. A dealer acts as a principal in security transactions, selling securities from and buying securities for his own position.

DELIVERY vs PAYMENT (DVP). A securities industry procedure whereby payment for a security must be made at the time the security is delivered to the purchaser’s agent.

DISCOUNT. The difference between the par value of a bond and the cost of the bond, when the cost is below par. Some short-term securities, such as T-bills and banker’s acceptances, are known as discount securities. They sell at a discount from par, and return the par value to the investor at maturity without additional interest. Other securities, which have fixed coupons, trade at a discount when the coupon rate is lower than the current market rate for securities of that maturity and/or quality.

DIVERSIFICATION. Dividing investment funds among a variety of investments to avoid excessive exposure to any one source of risk.

DURATION. The weighted average time to maturity of a bond where the weights are the present values of the future cash flows. Duration measures the price sensitivity of a bond to changes in interest rates. (See modified duration).

FEDERAL FUNDS RATE. The rate of interest charged by banks for short-term loans to other banks. The Federal Reserve Bank through open-market operations establishes it.

ISSUER. The entity identified as the counterparty or obligator related to a security trade.

INVERSE FLOATER. A bond or other type of debt whose coupon rate has an inverse relationship to a benchmark rate.

INVESTMENT OFFICIALS. This includes any applicable SDCP staff participating in the investment process; SDCP Treasurer; SDCP Deputy Treasurer(s); and SDCP Board of Directors.

LEVERAGE. Borrowing funds in order to invest in securities that have the potential to pay earnings at a rate higher than the cost of borrowing.

LIQUID. Term for securities that can be converted to cash quickly.

LIQUIDITY. The speed and ease with which an asset can be converted to cash.

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LOCAL AGENCY INVESTMENT FUND (LAIF). A voluntary investment fund open to government entities and certain non-profit organizations in California that is managed by the State Treasurer’s Office.

LOCAL GOVERNMENT INVESTMENT POOL. Investment pools that range from the State Treasurer’s Office Local Agency Investment Fund (LAIF) to county pools, to Joint Powers Authorities (JPAs). These funds are not subject to the same SEC rules applicable to money market mutual funds.

MARGIN. The difference between the market value of a security and the loan a broker makes using that security as collateral.

MARKET RISK. The risk that the value of securities will fluctuate with changes in overall market conditions or interest rates.

MARKET VALUE. The price at which a security can be traded.

MATURITY. The final date upon which the principal of a security becomes due and payable.

MEDIUM TERM NOTES. Unsecured, investment-grade senior debt securities of major corporations which are sold in relatively small amounts on either a continuous or an intermittent basis. MTNs are highly flexible debt instruments that can be structured to respond to market opportunities or to investor preferences.

MODIFIED DURATION. The percent change in price for a 100 basis point change in yields.

Modified duration is the best single measure of a portfolio’s or security’s exposure to market risk.

MONEY MARKET. The market in which short-term debt instruments (T-bills, discount notes, commercial paper, and banker’s acceptances) are issued and traded.

MORTGAGE BACK SECURITY. Debt obligations that represent claims to the cash flows from pools of mortgage loans, most commonly on residential property.

MORTGAGE-DERIVED INTEREST-ONLY STRIPS. A financial product created by separating the interest and principal payments of a mortgage-backed security.

MORTGAGE PASS-THROUGH SECURITIES. A securitized participation in the interest and principal cash flows from a specified pool of mortgages. Principal and interest payments made on the mortgages are passed through to the holder of the security.

MUNICIPAL SECURITIES. Securities issued by state and local agencies to finance capital and operating expenses.

MUTUAL FUND. An entity which pools the funds of investors and invests those funds in a set of securities which is specifically defined in the fund’s prospectus. Mutual funds can be invested in various types of domestic and/or international stocks, bonds, and money market SDCP Investment Policy | 15
instruments, as set forth in the individual fund’s prospectus. For most large, institutional investors, the costs associated with investing in mutual funds are higher than the investor can obtain through an individually managed portfolio.

NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATION (NRSRO). A credit rating agency that the Securities and Exchange Commission in the United States uses for regulatory purposes. Credit rating agencies provide assessments of an investment's risk. The issuers of investments, especially debt securities, pay credit rating agencies to provide them with ratings. The three most prominent NRSROs are Fitch, S&P, and Moody's.

NEGOTIABLE CD. A short-term debt instrument that pays interest and is issued by a bank, savings or federal association, state or federal credit union, or state-licensed branch of a foreign bank. Negotiable CDs are traded in a secondary market and are payable upon order to the bearer or initial depositor (investor).

PREMIUM. The difference between the par value of a bond and the cost of the bond, when the cost is above par.

RANGE NOTES. A structured investment where the coupon is linked to the performance of a reference index
REPURCHASE AGREEMENT. Short-term purchases of securities with a simultaneous agreement to sell the securities back at a higher price. From the seller’s point of view, the same transaction is a reverse repurchase agreement.

SAFEKEEPING. A service to bank customers whereby securities are held by the bank in the customer’s name.

SUPRANATIONAL. A Supranational is a multi-national organization whereby member states transcend national boundaries or interests to share in the decision making to promote economic development in the member countries.

TOTAL RATE OF RETURN. A measure of a portfolio’s performance over time. It is the internal rate of return, which equates the beginning value of the portfolio with the ending value; it includes interest earnings, realized and unrealized gains, and losses in the portfolio.

U.S. TREASURY OBLIGATIONS. Securities issued by the U.S. Treasury and backed by the full faith and credit of the United States. Treasuries are considered to have no credit risk, and are the benchmark for interest rates on all other securities in the US and overseas. The Treasury issues both discounted securities and fixed coupon notes and bonds.

TREASURY BILLS. All securities issued with initial maturities of one year or less are issued as discounted instruments, and are called Treasury bills. The Treasury currently issues three- and six-month T-bills at regular weekly auctions. It also issues “cash management” bills as needed to smooth out cash flows.

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TREASURY NOTES. All securities issued with initial maturities of two to ten years are called Treasury notes, and pay interest semi-annually.

TREASURY BONDS. All securities issued with initial maturities greater than ten years are called Treasury bonds. Like Treasury notes, they pay interest semi-annually.

VOLATILITY. The rate at which security prices change with changes in general economic conditions or the general level of interest rates.

YIELD TO MATURITY. The annualized internal rate of return on an investment which equates the expected cash flows from the investment to its cost.

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Subject: Investment Policy
Purpose: The San Diego Community Power (“SDCP”) Investment Policy (“Policy”) establishes investment guidelines for protecting SDCP’s cash reserves, deposits, and investments (“Funds”) while producing a reasonable rate of return on investments.

Background
On October 1, 2019, the Founding Members of San Diego Community Power (SDCP) adopted the Joint Powers Agreement (JPA) which was amended and restated on December 16, 2021.

Section 3.2.12 of the JPA specifies that the SDCP Board of Directors (Board) may at its discretion adopt rules, regulations, policies, bylaws and procedures governing the operation of SDCP.

Further, Section 4.5.5 of the JPA states that one of the general purposes of the Board is to set policy.

Policy Number: 2023-07
Original Adoption Date: May 25, 2023
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Investment Objectives
To the extent possible, investments will align with SDCP’s mission, vision, value, and goals.

Scope
This Investment Policy applies to all funds and investment under the direct authority of SDCP.

This Policy does not apply to the investment of bond proceeds, which would be governed by any applicable bond documents and any other funds specifically exempted by SDCP’s Board of Directors.

Acceptable Investment Types: To the extent possible, investments will align with SDCP’s mission, vision, value, and goals.

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5. Bankers’ Acceptances: Funds may be invested in Banker’s Acceptances provided that they are issued by institutions which have short-term debt obligations rated “A-1” or its equivalent of better by at least one NRSRO (Nationally Recognized Statistical Rating Organization). Not more thant 40% of the portfolio may be invested in Bankers’ Acceptances, and no more than 5% of the portfolio may be invested in any single issuer.

The maximum maturity shall not exceed 180 days.

The maximum maturity does not exceed 270 days.

11. Pass Thru Securities: Asset-Backed, Mortgage-Backed, Mortgage Pass-Through Securities, and Collateralized Mortgage Obligations (Section 53601 et seq) from issuers not defined in sections 3 and 4 of the Acceptable Investment Types section of this policy, provided that: The securities are rated in a rating category of “AA” or its equivalent or better by a NRSRO, no more than 20% of the total portfolio may be invested in these securities, no more than 5% of the total portfolio may be invested in any single Asset-Backed or Commercial Mortgage security issuer and the maximum maturity does not exceed five (5) years.

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The securities are rated in a rating category of “A” or its equivalent or better by at least one NRSRO, no more than 5% of the total portfolio may be invested in any single issuer, no more than 30% of the total portfolio may be in Municipal Securities and the maximum maturity does not exceed five (5) years.

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The value of eligible securities as defined pursuant to California Government Code, Section 53651, pledged against a Certificate of Deposit shall be equal to 150% of the face value of the CD if the securities are classified as mortgages and 110% of the face value of the CD for all other classes of security.

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the list of securities permitted with more than 5% issuer limitation
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Credit Rating
This Investment Policy sets forth minimum credit ratings for each type of security. These credit ratings apply to the initial purchase of a security and do not automatically force the sale of a security if the credit ratings of the security fall below the policy limits.

Minimum credit ratings:

B. For securities with maturities greater than 13 months, the rating must be “A” or higher by at least one NRSRO.

The monitoring of credit ratings consists of the following procedures:

To ensure that the Fund maintains the highest overall credit rating with the contracted NRSRO, the asset allocation and portfolio holdings will be provided to the contracted NRSRO on a monthly basis.

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Brokers
The Treasurer shall endeavor to complete investment transactions in accordance with Section 53601.5, institutions eligible to transact investment business with SDCP include:

A. Institutions licensed by the state as a broker-dealer.

B. Institutions that are members of a federally regulated securities exchange.

C. Primary government dealers as designated by the Federal Reserve Bank and non-primary government dealers.

D. Nationally or state-chartered banks.

E. The Federal Reserve Bank.

F. Direct issuers of securities eligible for purchase.

Losses
Losses are acceptable on a sale before maturity and may be taken if required to meet the liquidity needs of SDCP or if the reinvestment proceeds will earn an income flow with a present value higher than the present value of the income flow that would have been generated by the original investment, considering any investment loss or foregoing interest on the original investment.

The Treasurer shall review all transaction confirmations for conformity with the original transaction and monitor for excessive trading.

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Ethics and Conflict of Interest
The Investment Officials or authorized employees involved in the investment process, shall act as custodians of the public trust and will refrain from personal business activities that could conflict with proper execution of the investment program, or which could impair their ability to make impartial decisions. Investment Officials and any external investment advisers acknowledge that all direct SDCP investments are subject to public review and evaluation.

Investment Officials, pursuant with all applicable laws, shall not accept honoraria, gifts, and gratuities from advisers, brokers, dealers, bankers, or other entity with whom SDCP conducts business.

Internal 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. The internal control structure shall be designed to provide reasonable assurance that these objectives are met.

Accordingly, the Treasurer shall establish and maintain internal controls that shall address the following points:

B. Clear Delegation of Authority to Subordinate Staff Members: Subordinate staff members must have a clear understanding of their authority and responsibilities to avoid SDCP Investment Policy | 11
improper actions. Clear delegation of authority also preserves the internal control structure that is contingent on the various staff positions and their respective responsibilities.

C. Delivery-Versus-Payment (DVP): All investment transactions shall be conducted on a delivery-versus-payment basis.

E. Avoidance of Physical Delivered Bearer Securities: Book entry securities are much easier to transfer and account for since actual delivery of a document never takes place.

Bearer securities must be properly safeguarded against loss or destruction. The potential for fraud and loss increases with such securities.

F. Written Confirmation of Telephone Wire Transfers: Due to the potential for error and improprieties arising from telephone transactions, all telephone transactions should be supported by written or electronic communications and approved by the appropriate person. Development of a Wire Transfer Agreement with the Lead Bank or Third-Party.

Reports
A. Monthly: The Treasurer will perform a monthly review of the investment function.

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B. Annually: The Treasurer will submit an annual report to the Finance and Risk Management Committee within 60 days of the end of a fiscal year providing the following:
• A list of individual securities by investment type, issuer, credit risk rating, CUSIP number, settlement date of purchase, date of maturity, par value and dollar amount invested on all securities, the market value and source of the market value information; • A statement that the portfolio is in compliance with this Policy and in accordance with Section 53646 or the manner in which the portfolio is not in compliance; and • A statement of SDCP’s ability to meet anticipated cash requirements for the upcoming 12 months.
• The Treasurer shall monitor and evaluate the portfolio’s performance relative to the chosen market benchmark(s), which will be included in the Treasurer’s annual report.

The Treasurer shall select an appropriate, readily available index to use as a market benchmark. Benchmarks may change over time based on changes in market conditions or cash flow requirements.

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Glossary of Investment Terms
ASSET BACKED SECURITIES. Securities supported by pools of installment loans or leases or by pools of revolving lines of credit.