Finance & Risk
Management
Committee
Meeting
June 12, 2025
Welcome
and
Call to
Order
Roll
Call
4 Items to
be Added,
Withdrawn
or Reordered
on the
Agenda
Public
Comment
on non-Agenda
Items
7 Consent Calendar
CONSENT
CALENDAR
1. Approve March 20, 2025, Meeting Minutes
Public
Comment
on Consent
Calendar
9 REGULAR
AGENDA
2. Treasurer’s Report for Period Ending April 30, 2025
3. Recommend Board Approval of Update to San Diego Community Power’s Energy Risk Management Policy: California Carbon Allowance and Carbon Offset Transactions and Obligations
4. Tariffs, Tax Credits and Executive Orders: New-Build Market Outlook Update
5. AB 2561 - Status of vacancies, recruitment and retention efforts
6. Recommend Board Approval and Discussion FY 2025-26
Operating Budget, FY 2025-26 Capital Budget, and FY 2026-30 CIP Review
7. Recommend Board Adoption of Resolution No. 2025-07,
Authorizing Execution of an Energy Prepayment Transaction, Related Documents, and ‘Form of’ Documents Subject to
Maximum Issuance Amount, Limitation on Fees, and Minimum Required Savings
10 Item No. 2
Recommendation:
Receive and File Treasurer's Report for Period Ending April 30, 2025.
Presenter:
Dr. Eric Washington, Chief Financial Officer
Treasurer’s Report for Period Ending April 30, 2025
11 Results for the period overperformed overall
compared to the amended budget:
• Net operating revenues 0.1 percentage
under budget.
• Operating expenses came in 2.0
percentage points under budget.
Financial results for the YTD FY25:
• $1,032.9M in net operating revenues
• $1,009.4M in total expenses (includes
energy costs of $968.7M or 94% of net
revenues)
• $23.6M change in YTD net position
Item 2: Treasurer’s Report
YTD FY25 Budget v. Actual
Budget Comparison
YTD FY25 as of
4/30/25 (10 months)
FY25 YTD Budget
Amended Budget Variance ($) Budget (%)
Net Operating Revenues $ 1,032,972,314 $ 1,033,560,599 $ (588,285) 99.9% Total Expenses $ 1,009,359,387 $ 1,034,085,870 $ (24,726,483) 98% Change in Net Position $ 23,612,927 $ (525,271) $ 24,138,198 $(200,000,000)
$-
$200,000,000
$400,000,000
$600,000,000
$800,000,000
$1,000,000,000
$1,200,000,000
Net Operating Revenues Total Expenses Change in Net Position YTD FY25 Results v. Budget
YTD FY25 as of 4/30/25 (10 months) FY25 YTD Budget Amended 12 Item 2: Treasurer’s Report
$576M 180-DCOH
Reserve Target FY25
$M $50M $100M $150M $200M
$M $200M $400M $600M
$23.6M
Reserve
Contribution
FY 2024-25 YTD
$535M
Total Liquidity
FY 2024-25 YTD
$0M
Outstanding
Debt
FY 2024-25 YTD
56%
Percent Reserve
Goal Met
FY 2024-25
CONTRIBUTION RESERVES
GOAL DEBT
Reserve contribution
for the fiscal year
Outstanding loans
FY25 YTD
Total available liquidity
FY25 YTD
$575M
$23M Actual
FYTD $(0.5)M Budget
FYTD
$323M
Cash
$212
LOC
Cash
56%
Unmet
Reserves
44%
$M $20M $40M $60M
13 Item 2: Treasurer’s Report
100
Days
Cash on Hand
167
Days
Cash on Hand with
Total Liquidity
14 Item 2: Treasurer’s Report
Public
Comment on
Item No. 2
16 ITEM NO. 2
COMMITTEE
MEMBER
COMMENTS
AND
QUESTIONS
Treasurer’s Report for Period Ending April 30,
2025
Recommendation:
Receive and File Treasurer's Report for Period
Ending April 30, 2025.
17 Item No. 3
Recommendation:
Recommend Board Adoption of Resolution No. 2025-05, approving Addendum 2 to San Diego Community Power’s Energy Risk Management Policy: California Carbon Allowance and Carbon Offset Transactions and Obligations and authorize the CEO to approve procurement of California Carbon Allowance (CCA) and Carbon Offset (CO) to meet San Diego Community Power compliance obligations under California’s Cap-and-Trade Program.
Presenter:
Jennine Camara, Director of Portfolio Management
Recommend Board Approval of Update to San Diego Community Power’s Energy Risk Management Policy: California Carbon Allowance and Carbon Offset Transactions and Obligations
18 Addendum 2 Overview
• Goal – Meet Community Power’s compliance obligations under California’s Cap-and-Trade Program
• How – Approve update to Community Power’s Energy Risk Management Policy to allow the CEO to approve procurement of CCA and CO products in quarterly auctions, and secondary carbon allowance and carbon offset markets
• Background
• Under California’s Cap-and-Trade Program, electric importers, such as Community Power, have a compliance obligation to purchase carbon allowances or offsets • Community Power will consider the cost of carbon, renewable priorities, and overall benefit to ratepayers when evaluating use of electric imports to meet power supply needs and resource adequacy requirements
19 Procurement of California Carbon
Allowances and Carbon Offsets
• Carbon allowances are available for trade in CARB’s quarterly auctions, and secondary carbon offset and allowance markets
• Community Power will only acquire carbon allowances or offsets to meet obligations, consistent with established Energy Risk Management Policy principles prohibiting taking speculative positions
• The following transaction product volumetric and notional transaction limits are included in addendum 2:
Delegation of Authority per
Transaction by Position/Title
Product
Type
Volumetric Limit
(MTCO2e)
Notional Value
Limit
Chief Executive Officer CCA/CO 20,000 $1,000,000
Public
Comment on
Item No. 3
21 ITEM NO. 3
COMMITTEE
MEMBER
COMMENTS
AND
QUESTIONS
Recommend Board Approval of Update to San Diego
Community Power’s Energy Risk Management Policy:
California Carbon Allowance and Carbon Offset
Transactions and Obligations
Recommendation:
Recommend Board Adoption of Resolution No. 2025-
05, approving Addendum 2 to San Diego Community
Power’s Energy Risk Management Policy: California
Carbon Allowance and Carbon Offset Transactions
and Obligations and authorize the CEO to approve
procurement of California Carbon Allowance (CCA)
and Carbon Offset (CO) to meet San Diego
Community Power compliance obligations under
California’s Cap-and-Trade Program.
22 Item No. 4
Recommendation:
Receive and file the Community Power staff status report on federal policy and budget as it relates to clean energy procurement.
Presenter:
Jennine Camara, Director of Portfolio Management
Patrick Welch, Associate Director of Legislative Affairs Tariffs, Tax Credits and Executive Orders: New-Build Market Outlook Update
23 Potential Federal Policy Changes
Overview – Clean Energy Tax Credits
• A prior Congress and Administration
significantly expanded support for clean
energy through tax credits and funding
initiatives
• The current Congress is undertaking a
budget reconciliation process that could
result in reductions to energy tax credits
• The House of Representatives approved HR
1 (One Big Beautiful Bill) on May 22 that
would roll back residential clean energy and
utility scale tax credits
• It is a fluid situation, and the final outcome is
unclear
24 Federal Budget Reconciliation
Utility Scale Tax Credits in HR 1, The One Big Beautiful Bill Act Current Law
• The Investment and Production Tax Credits provide a 30% credit when a clean energy project starts construction
• It is available for wind, solar, energy storage, geothermal, and other technologies
• It sunsets on 2032 or when greenhouse gas emissions fall 25% below 2022 levels
The One Big Beautiful Bill Act
• New sunset: Projects must begin construction 60 days after enactment or be placed into service by December 31, 2028 • Foreign entity requirements: Projects could not receive “material assistance” and could not be “influenced by” foreign entities of concern
Pelicans Jaw Project (under construction)
25 Federal Budget Reconciliation
Residential Energy Tax Credits in HR 1, The One Big Beautiful Bill Act Current Law
• The Residential Clean Energy Credit provides a 30% credit for rooftop solar and storage systems
• The Home Energy Efficiency Investment Credit provides up to $3,200 for energy efficiency and electrification upgrades • It must be claimed by December 31, 2032, with step downs thereafter
• There is a $7,500 tax credit for electric vehicles
The One Big Beautiful Bill Act
• New sunset: December 31, 2025
Source: CalMatters
26 Federal Budget Reconciliation
Two Other Utility Scale Energy Tax Credit Legislative Proposals HR 2838 Ending Intermittent Energy Subsidies Act
• Would phase out tax credits for utility-scale wind and solar projects only based on a ”placed into service” standard • Starting with 80% credit value in 2026 and lowering by another 20% each year thereafter; fully eliminated in 2030
HR 3291 Certainty for Our Energy Future Act
• Would create a new December 31, 2030 sunset for utility-scale wind and solar projects only
• Would maintain the “start of construction” standard and provide safe harbor for projects currently under construction
• Neither would impact non-solar/wind technologies or residential clean energy tax credits
Brawley Project under construction
27 Federal Budget Reconciliation
Timeline and next steps
• The Senate may attempt to pass HR 1, or some
version thereof, by July 4
• If the Senate approves a modified version of the
legislation, then the House will need to vote on it
again
• It’s a fluid situation and the final outcome is unclear • Community Power continues to monitor
developments and stay in touch with our
Congressional representatives about operational and
customer impacts
28 Federal Energy Project Permitting
Executive Order Paused Bureau of Land Management (BLM) Processes • The Unleashing American Energy executive
order was issued on January 20
• It revoked Tackling the Climate Crisis at
Home and Abroad, an executive order issued
in 2021
• The Department of Interior issued a 60-day
moratorium on renewable energy permitting,
which has since been lifted
• BLM is not prioritizing renewable energy
permitting on federal lands
• The initial pause and de-emphasis on
prioritizing renewable energy impacts the
pace and scale of project approvals, including
Community Power’s Purple Sage project
29 Tariffs
Background
• U.S. imposed varying levels of tariffs on Chinese
goods during the first Trump administration and
during the Biden administration
• Extreme tariff volatility since January
• Varying % of tariffs applied to all countries
sourcing material supply for renewable energy and
storage projects. 10% is a baseline
• China is a dominant supplier of raw
materials/components along the PV supply chain,
but PV modules themselves are primarily
supplied by Vietnam, Thailand, Malaysia and
Cambodia, as well as South Korea, India and the
U.S.
• Steep tariffs have been imposed on aluminum and
steel (doubled this week to 50%), which have
impacted the cost of supply for renewable
energy, and across other construction industries
as well
Source: Solar Power World: https://www.solarpowerworldonline.com/2025/04/commerce-reveals-final-tariff-amounts-on-southeast-asian-solar-imports/ “AD” stands for “anti-dumping”; “CVD” stands for “countervailing duty” Vietnam Example
30 Tariffs
Legal challenges
• On May 28, the U.S. Court of International Trade
froze sweeping tariffs on the basis that the
Administration improperly used the International
Emergency Economic Powers Act of 1977
• Federal appeals court has since allowed the
Trump’s most sweeping tariffs to remain in effect
while it reviews a lower-court decision
31 Tariffs: a focus on China
Currently in a 90-
day pause starting
May 12th.
Source: Peterson Institute for International Economics: ://www.piie.com/research/piie-charts/2019/us-china-trade-war-tariffs-date-chart 32 Tariffs: a focus on China
• China is a dominant supplier
of raw materials for battery
storage including graphite,
cobalt, as well as BESS
module manufacturing
• Multiple points along the
BESS supply chain that tariffs
can affect
• To a lesser extent, China is
also a supplier of wind
turbines and generators, and
other energy high voltage
equipment
Source: https://troescorp.com/what-is-battery-energy-storage/ BESS component diagram
33 Impacts of Federal Actions on Portfolio
CONTRACTED NOT
YET UNDER
CONSTRUCTION
PIPELINE
RPS PORTFOLIO*: Community Power remains well positioned to meet its 75% clean energy target by 2027 with ten years to meet its 100% target by 2035.
CONTRACTED
UNDER
CONSTRUCTION All of Community Power’s
developing RPS + storage
portfolio is expected to come
online prior to the end of 2028
with approximately 2/3 of
SDCP’s contracted volume
under development having
started construction with major
equipment procured or having
met safe harbor requirements,
mitigating the risk of both tax
credit eligibility losses or tariff
increases.
Community Power is
monitoring project
development closely. It is
too soon to accurately
quantify the risks to project
costs and viability from tax
credits eligibility losses or
tariff increases. The cost of
capital could increase due
to both the volatility of tariff
risk and the loss of tax
credits.
Tariffs: Community Power is
prioritizing projects that are
better positioned to mitigate
tariff exposure due to
developer-specific
procurement and project
financing strategies.
Tax credits: Procurement
costs may increase for projects
that don’t meet the criteria
*Note: The majority of our standalone energy storage tolling portfolio is not yet under construction and therefore more exposed to tariff and tax credit risk.
Public
Comment on
Item No. 4
35 ITEM NO. 4
COMMITTEE
MEMBER
COMMENTS
AND
QUESTIONS
Tariffs, Tax Credits and Executive Orders: New-Build
Market Outlook Update
Recommendation:
Receive and file the Community Power staff status
report on federal policy and budget as it relates to
clean energy procurement.
36 Item No. 5
Recommendation:
Recommend the Board hold a public hearing, receive comments, and accept a report on the status of Community Power employee vacancy rates and recruitment and retention efforts.
Presenter:
Chandra Pugh, Senior Director of People Operations and Administration AB 2561 - Status of vacancies, recruitment and retention efforts 37 Background
Assembly Bill (AB) 2561 (McKinnor) amended the Myers-Milias-Brown Act (MMBA) to add Government Code Section 3502.3, which created a new obligation for public agencies to present the status of vacancies and recruitment and retention efforts. The public hearing must be held at least once per fiscal year prior to adopting an annual budget. During the hearing, the public agency shall identify any necessary changes to policies, procedures, and recruitment activities that may lead to obstacles in the hiring process. The law also allows recognized employee organizations, which Community Power does not have, an opportunity to present at the public hearing. The new law took effect on January 1, 2025, and applies to all public agencies.
38 Requirements
• "Status" of vacancies - 31 vacancies of which 27 were new positions
• Recruitment and retention efforts
• Present findings and make any recommendations, if needed, to recruitment and retention efforts
39 Current Vacancies
Status:
Chief Commercial Officer: In-Person interviews. Using
outside Executive recruiter to source candidates. No foreseen obstacles to hiring.
Community Outreach Representative (part-time):
Virtual interview. High number of application submitted.
No foreseen obstacles to hiring.
Senior Origination Associate: Reposting anticipated.
40 Findings
For the Fiscal Year 2024-2025, thirty-one vacancies have been filled, three are currently open, and three were not filled. The three current vacancies are: Chief Commercial Officer and Community Outreach Representative (Part-Time) and Senior Origination Associate. For the three positions that were not filled, the hiring managers determined at the time that other operational needs took priority over filling those positions.
Community Power did encounter difficulties in filling the Rates Analyst and Origination Manager positions. Due to the specification of these roles, the candidates that applied did not meet the role requirements which resulted in a limited qualified applicant selection for the positions. Human Resources (HR) recommended that both positions be reposted with either a lower or higher salary grade. The Origination Manager position was reposted as a Senior Origination Associate. For the Rates Analyst position, the position was reposted as a Senior Rates Analyst and the candidate has been selected and is in the final hiring stage.
Very low turnover rate of 5.06%
41 Table 1
42 Recruitment Efforts: Candidate Survey
Public
Comment on
Item No. 5
44 ITEM NO. 5
COMMITTEE
MEMBER
COMMENTS
AND
QUESTIONS
AB 2561 - Status of vacancies, recruitment and
retention efforts
Recommendation:
Recommend the Board hold a public hearing, receive
comments, and accept a report on the status of
Community Power employee vacancy rates and
recruitment and retention efforts.
45 Item No. 6
Recommendation:
Recommend Board Approval of Resolution No. 2025-06, adopting the FY 2025-26 Operating Budget, FY 2025-26 Capital Budget, and FY 2026-30 Capital Investment Plan.
Presenter:
Karin Burns, Chief Executive Officer
Recommend Board Approval of FY 2025-2026 Operating Budget, FY 2025-2026 Capital Budget, and FY 2026-2030 Capital Investment Plan 46 Budget Development for FY 2025-2026
The Board adopted schedule for budget development is
the following:
Develop Operating
Revenue Estimate
Develop Operating
Expense Estimate
Develop financial
plan for credit rating
in 3 years
February March-April
Strategic planning
sessions with
Community Power
Board
Staff develop
operating budgets
Baseline budget is
developed
May
Community Power
Board Preview
June
Financial and Risk
Management
Committee Review
Community Power
Board Approval
July 1 Budget
Implemented
Midyear budget
review (February)
Budget amendments
as necessary
47 Budget Priorities
Community Power’s guiding budget principles
1. Fiscal Responsibility. Making budget decisions that allow for the short- and long-term success and stability of the agency
2. Ensuring Sufficient Funding. Understanding the risks of a volatile market and setting rates appropriately while prioritizing affordability
3. Building Reserves. Hitting reserve targets creates opportunities to lower rates and make them more stable for customers
4. Ensuring Transparency. Providing accurate information and noting changes to plans allows for informed decision making from our Board of Directors
5. Keeping the Public Informed. Hosting public meetings and making documents public as early as possible allows for the public to better understand where Community Power is investing ratepayer dollars and outside funding to advance renewable power, adopt clean energy technologies, and prioritize competitive rates
48 Budget Highlights
Fiscal Responsibility. Continuing to work toward our reserve goals to ensure long-term financial strength
Organizational Sustainability. Strengthening our internal capacity to support long-term strategy and service delivery Stable, Competitive Rates. Maintaining affordability through disciplined operations, long - term procurement and financial foresight
Programs and Incentives. Scaling Solar Battery Savings and launching the SDREN portfolio to support clean energy adoption, equity and resilience
Capital Investment Plan. Advancing our Capital Investment Plan to guide infrastructure development and ensure transparency
49 FY 2025-2026 Operating Budget
Item
FY 2024-2025
Amended Budget,
$M
FY 2025-2026
Proposed Budget,
$M
Gross Revenue 1,243.0 1,221.0
Less Uncollectible Accounts (21.8) (21.4)
Net Revenue 1,221.3 1,199.6
Cost of Energy 1,116.8 956.7
Non-Energy Costs 50.8 54.3
Subtotal Operating Expense 1,167.6 1,010.9
Debt Service 1.3 1.9
Capital Investment Plan 18.2 22.2
Total Expense 1,187.1 1,035.0
Net Position 34.2 164.6
(3.0%)
PowerOn
Discount
Approved 2/7/25
(5.0%)
PowerBase
Discount
Approved 2/7/25
($160.1M)
Cost of Energy
Decrease
+$3.5M
Non-Energy
Increase
+$4.0M
CIP Contribution
+$164.6
Net Position
50 Budget – Non-Energy Costs
Budget Changes by Category
Professional
Services
Personnel
Marketing and
Outreach
General and
Administrative
Professional Services remains relatively
even.
FY 2025
$24.3m
FY 2026
$24.6m
Recruitment strategy of 7 new staff.
Current staffing: Hired (80), previously
authorized (7), new requests (7).
FY 2025
$18.6m
FY 2026
$21.1m
Marketing and Outreach budget slightly
lower.
FY 2025
$3.0m
FY 2026
$2.6m
Increase as Community Power has
scaled in staffing.
FY 2025
$4.9m
FY 2026
$5.9m
Capital Transfer Continued Solar Battery Savings
proposed funding of $18.8 million.
FY 2025
$18.2m
FY 2026
$22.2m
51 Finance Highlights
Practice fiscal strategies to promote long-term sustainability • Affordability.Execute clean prepayment transactions aimed at generating significant annual savings on power costs • Middle-Office Risk. Building controls and oversight for Community Power’s largest cost center given potential regulatory and legislative changes • Adding Two Positions. Additional support to build the middle-risk office and to support expanded customer programs
• Enterprise Resource Planning Software. Implementation of Enterprise Resource Planning (ERP) to streamline processes and enhance efficiency, leading to reduced costs, better customer service, and improved decision-making in support of the enterprise-wide data platform 52 Power Services Highlights
Procuring renewable energy for our customers
• Adjusting Assumptions. Managing risk to account as best as possible for volatile energy markets • Adding Two Key Analyst Roles. Both roles support the goal to reach 100% renewable energy by 2035 while keeping rates competitive • Cost-effective Compliance. Budgeting appropriately to meet requirements for resource adequacy and renewable portfolio standards • Advanced Analytics to Mitigate Risk. Implementing and integrating an Energy Trading and Risk Management system • Implementing the Solar Advantage Program. Getting Disadvantaged Communities Green Tariff (DAC-GT) contracts in place advances local procurement targets while providing significant bill discounts for working families • Portfolio Diversity. A variety of energy sources allows for more stable pricing and enhanced reliability 53 Operations Highlights
Advancing operational efficiency
IT, Data
Analytics and
Customer
Operations
Legislative and
Regulatory
Affairs
Customer
Programs Public Affairs
Project Management Office
54 IT, Data Analytics and Customer Operations
Highlights
Making data-driven decisions to provide world-class service externally and internally
• Cybersecurity Enhancements. Protecting customer data and streamlining internal IT functions • Enterprise-wide Data Platform. Centralizing and standardizing data to enhance internal collaboration and to better serve our customers • Improve Communications with SDG&E. Aiming to resolve issues that affect customer experience • Contact Center Improvements. Supporting training and performance monitoring to provide high- quality service • Customer Education and Awareness of Service Options. Collaborating with the Public Affairs team to inform customers about their electricity choices • Implementing Competitive Rates. Providing customers with the lowest rates possible while creating sustainable, equitable rate structures 55 Legislative and Regulatory Affairs Highlights
Advocating for local control at the State and Federal level • Participating in Trade Associations and Organizations. Engaging and partnering with organizations such as CalCCA (California Community Choice Association) elevates Community Power’s voice in legislative and regulatory advocacy
• Maintaining Staffing. The current team of five monitored or engaged with over 60 regulatory proceedings and approximately 150 pieces of legislation in FY2025 • Promoting Affordability. Advocating in Sacramento and at the California Public Utilities Commission to shape the legislative and regulatory landscape to better meet customer needs 56 Customer Programs Highlights
Advancing the clean energy transition for all
• Launching the San Diego Regional Energy Network. Launching 10 programs focused on energy efficiency with the goal of reducing customer energy use and generating bill savings • Expanding Solar Battery Savings. An allocation of $18.8 million nearly doubles the investment of the pilot program that incentivizes the adoption of solar plus storage systems and reduces Community Power resource adequacy requirements
• Integrating a Distributed Energy Resource Management System and Flex Load Strategies.
Making it easier for customers to use electricity when it is least expensive, shifting consumption off of peak
• Implementing the Solar Advantage Program. Approving projects can provide bill discounts of 20% to nearly 10,000 low-income households • Adding Two Positions. Six out of 14 total programs positions are funded externally through the San Diego Regional Energy Network and other grants 57 Public Affairs Highlights
Connecting with community
• Scaling Back Costs. Embracing digital tools to move away from printed materials and shifting marketing dollars from the operating budget to outside funding sources, saving $800,000 from FY2025 • Enhancing Strategic Communications. Adding a strategic communications associate to increase earned media opportunities and develop more cohesive messaging • Maintaining Funding to Reinvest in Communities.Partnerships, sponsorships and outreach activities that build trust with community stakeholders and create educational opportunities for the public
• Utilizing the Power Network. Working with local Community-Based Organizations to assist with translation, outreach and advocacy to lift their voices and provide value to Community Power customers
• Educating the Public. The marketing and outreach budget, along with external funding through SDREN, aims to encourage stakeholders to take advantage of programmatic and service offerings, engage in the clean energy transition, and save money
Public
Comment on
Item No. 6
59 ITEM NO. 6
COMMITTEE
MEMBER
COMMENTS
AND
QUESTIONS
Recommend Board Approval of FY 2025-26 Operating
Budget, FY 2025-26 Capital Budget, and FY 2026-30 Capital Investment Plan
Recommendation:
Recommend Board Approval of Resolution No. 2025-
06, adopting the FY 2025-26 Operating Budget, FY
2025-26 Capital Budget, and FY 2026-30 Capital
Investment Plan.
60 Item No. 7
Recommendation:
Recommend Board adoption of Resolution No. 2025-07, approving parameters under which an energy prepayment transaction can be completed; authorizing and approving documents or “form of” documents supporting the prepay transaction; and directing California Community Choice Financing Authority (CCCFA) to make payments to service providers for issuance costs from prepay bond proceeds.
Presenter:
Dr. Eric Washington, Chief Financial Officer
Jeb Spengler, Strategic Finance Manager
Recommend Board Adoption of Resolution No. 2025-07, Authorizing Execution of an Energy Prepayment Transaction, Related Documents, and ‘Form of’ Documents Subject to Maximum Issuance Amount, Limitation on Fees, and Minimum Required Savings
61 Prepayment Transaction Overview
• Goal – Reduce cost of power purchases by 8% or more to enhance affordability • How – Leverage use of tax-exempt bonding capacity to secure long-term supply • Background
• Codified in the U.S. tax law
• Used since the 1990s largely for natural gas transactions • Over 100 transactions totaling over $75 billion completed in the U.S. – mostly for gas • 20 energy prepayment transactions totaling $18 billion completed since 2021 for California Community Choice Aggregators
• SDCP (through CCCFA) sold it’s first prepayment bond issue in November 2024 62 Parties involved in 2024 Prepay Transaction
• Prepay Supplier/Bond Underwriter: Morgan Stanley
• Funding Recipient Counterparty: Large taxable organizations such as Insurance Companies and Banks (Pacific Life Insurance)
• Municipal Financial Advisor: PFM Financial Advisors LLC & PFM Swap Advisors LLC • Counsel: Orrick, Herrington & Sutcliffe (Bond & Tax Counsel) | Chapman & Cutler LLP (Disclosure & Issuer’s Counsel)
• Bond Issuer: California Community Choice Financing Authority (CCCFA) • Trustee/Custodian: U.S. Bank
• Commodity Swap Counterparty: Royal Bank of Canada (RBC) • Credit Rating Agency: Moody’s
• Green Bond Opinion: Kestrel
63 Benefits of a Prepay Transaction
• ~$4.5 million+ in anticipated annual cashflow savings are generated per transaction • 2024 transaction generated $53.2 million in total savings (average annual savings of $6.9 million through November 2032)
• CCCFA issues tax-exempt bonds to pay the upfront prepayment at a lower interest cost ~ 4.25% versus the counterparty’s funding rate of ~5%
• CCCFA bond payments ~$40 million annually are lower than the existing ~$45 million PPA payments
• Savings over the 30-year term expected to be 8% or higher per year on power quantities delivered under the prepay structure compared to spot market purchases and/or current contracts • Debt is non-recourse to SDCP
• Established precedent with 20 transactions having been completed by other CCAs 64 Potential Risks of a Prepay Transaction
• Transaction Terminates, loss of savings, reverts back to original contract terms • Mitigated by selecting an investment grade credit-rated Prepaid Supplier • Opportunity cost in lost staff time
• Out of Pocket Costs
• Most consultant fees are contingent on successful bond sale (with the exception of Green Bond designation and Rating Agency Fees)
• Market timing risks
• Mitigated by being ready to price the bonds when the market is favorable • Load loss or inability to assign a PPA into the prepay • Mitigated by volume of SDCP PPAs and Prepaid Supplier’s ability to source energy from the market for delivery to Bond Issuer / SDCP if needed
• Tax and Regulatory risk – loss of tax-exemption financing would eliminate future prepay issuance
65 Risk Mitigants of Bond Pricing Activities
• The Prepaid Supplier’s fees and benefits must be measured and controlled • Structuring fees
• Underwriting fees for selling the prepay bonds if the bond underwriter is a related party • Fees added to the prepay price for the delivery of physical electricity • Electricity remarketing fees
• Future structuring and underwriting fees for future bond re-pricings • Lower funding costs
• Municipal Financial Advisor (MFA)
• Works for SDCPto ensure that the Prepaid Supplier fees and implicit funding costs are fair, reasonable and consistent with market pricing
• Owes a fiduciary responsibility to SDCP with contractual risk mitigations, MSRB oversight, and SEC enforcement
• SDCP manages additional risks by engaging in competitive solicitation processes for services 66 Prepayments That Have Been Completed by
CCAs in California
Date Amt. ($000) Issuer Description Beneficiary
09/2021 1,234,720 CCCFA (21A) Elec (Green) SVCE, EBCE
11/2021 602,655 CCCFA (21B) Elec (Green) MCE
06/2022 931,120 CCCFA (22A) Elec (Green) EBCE
12/2022 459,640 CCCFA (23A) Elec (Green) Pioneer
01/2023 841,550 CCCFA (23B) Elec (Green) SVCE
02/2023 998,780 CCCFA (23C) Elec (Green) CPA
06/2023 958,290 CCCFA (23D) Elec (Green) CPA
08/2023 997,895 CCCFA (23E) Elec (Green) EBCE
10/2023 647,750 CCCFA (23F) Elec (Green) CCCE
12/2023 1,038,285 CCCFA (23G) Elec (Green) MCE
01/2024 1,101,625 CCCFA (24A) Elec (Green) SVCE
08/2024 1,524,180 CCCFA (24B) Elec (Green) CPA
10/2024 959,825 CCCFA (24C) Elec (Green) PCE
10/2024 1,152,995 CCCFA (24D) Elec (Green) CPA
Date Amt. ($000) Issuer Description Beneficiary
10/2024 1,152,995 CCCFA (24D) Elec (Green) CPA
11/2024 1,243,210 CCCFA (24E) Elec (Green) SJCE
11/2024 1,000,500 CCCFA (24F) Elec (Green) SDCP
11/2024 775,590 CCCFA (24G) Elec (Green) SCPA
12/2024 1,290,750 CCCFA (24H) Elec (Green) CPA
01/2025 493,345 CCCFA (25A) Elec (Green) VCEA
Total 18,252,705
67 Prepayment Timeline
• May 22, 2025: Board approves VAMO Swap with Clean Power alliance • June 11, 2025: Kestrel Green Bond certification interview • June 12, 2025: FRMC – Presentation and potential recommendation for Board approval of a second prepay transaction setting parameters using the same project participants as first transaction and a similar form of prepay structure
• June 26, 2025: Board – Presentation and potential Board adoption of a Resolution authorizing a second prepay transaction setting transaction parameters and approving form of documents • July 8, 2025: (Tentative) Bond Pricing (subject to change based on market conditions) • July 18, 2025: (Tentative) Estimated bond closing date (subject to change based on bond pricing date) • September 2025: (Tentative) Energy cost savings begin Public
Comment on
Item No. 7
69 ITEM NO. 7
COMMITTEE
MEMBER
COMMENTS
AND
QUESTIONS
Recommend Board Adoption of Resolution No. 2025-
07, Authorizing Execution of an Energy Prepayment
Transaction, Related Documents, and ‘Form of’
Documents Subject to Maximum Issuance Amount,
Limitation on Fees, and Minimum Required Savings
Recommendation:
Recommend Board adoption of Resolution No. 2025-
07, approving parameters under which an energy
prepayment transaction can be completed;
authorizing and approving documents or “form of”
documents supporting the prepay transaction; and
directing California Community Choice Financing
Authority (CCCFA) to make payments to service
providers for issuance costs from prepay bond
proceeds.
Committee Member
Announcements
Adjournment
Next Regular
Finance & Risk
Management
Committee
Meeting
August 21, 2025