DEPARTMENT
POSITIONS
FY26 Amended FY27 Proposed
Customer Operations 7.0 8.0
Department Organizational Structure
FIGURE 36. CUSTOMER OPERATIONS ORGANIZATIONAL STRUCTURE Customer Operations
Senior Director of Data Analytics and Customer
Operations
Account Services Manager
Key Account Services Manager
Rates and Strategy Manager
Senior Rates Analyst
Account Services Analyst
Key Account Services Analyst
Rates Analyst*
*Positions proposed in FY 2026–2027
367
SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Budget by Department 52 IT and Data Analytics
Creating a secure and efficient environment that supports collaboration and innovation The IT and Data Analytics Department empowers Community Power through secure, scalable and modern digital infrastructure. Led by the associate director of IT and Data Analytics, the department manages enterprise systems, data, analytics and cybersecurity.
The department ensures system reliability and operational continuity through secure, resilient and well-governed technology environments. It standardizes enterprise platforms and workflows to reduce fragmentation, improve efficiency and mitigate operational risk.
IT and Data Analytics develops centralized, cloud-based tools and governed data environments that enable real-time, data-informed decision-making across rate development, customer programs, communications and operations. These capabilities support performance tracking, planning and execution at all levels of the organization.
Through strong governance and accountability, the department establishes policies and controls for data, AI, cybersecurity and technology use. These efforts balance innovation with compliance and public trust while positioning the organization to scale effectively as programs expand and complexity increases.
Department Description: Mission and Services
• Strengthened system reliability, cybersecurity and vendor oversight through improved monitoring, incident response and standardized controls
• Standardized enterprise platforms and workflows, reducing duplicative tools and manual processes across departments • Expanded enterprise analytics and reporting by advancing data platform integration and delivering consistent
dashboards aligned to organizational KPIs
• Established data and AI governance frameworks, including data classification, defined ownership and accountability and policy guardrails
FY 2025–2026 Department Highlights
• Expand analytics capabilities to support strategic decision-making, including self-service analytics, predictive insights and executive reporting
• Strengthen cybersecurity and enterprise risk management through measurable, repeatable programs, training and
compliance validation
• Modernize and integrate core systems to improve
interoperability, reduce manual processes and support
organizational scale
• Advance data governance and technology standards to
ensure consistent, secure and compliant use of data, AI and enterprise tools
• Position IT and Data Analytics as a strategic enabler by supporting long-range planning, operational scalability and organizational readiness
FY 2026–2027 Priorities
368
SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Budget by Department 53 • Percentage of critical enterprise systems meeting uptime and availability targets (target: ≥ 99.9%)
• Percentage of IT incidents resolved within service level agreement (SLA) (target: ≥ 98%)
• Percentage of critical vulnerabilities remediated within target timeframe (target: ≥ 95%)
• Percentage of critical retail operations data systems integrated into the enterprise data platform (target: ≥ 98%) • Percentage of enterprise reports and dashboards sourced from governed data sets (target: ≥ 90%)
• Number of departments supported with internal analytics and reporting solutions (target: ≥ 4)
• Monthly active usage of priority dashboards and self-service analytics tools (target: year-over-year growth)
• Percentage reduction in duplicative tools and manual
workflows in targeted business processes (target: annual improvement)
• Percentage of critical systems, data domains, and
technology policies with assigned ownership and approved governance controls (target: ≥ 90%)
Key Performance Indicators (KPIs)
FIGURE 37. IT AND DATA ANALYTICS POSITIONS
DEPARTMENT
POSITIONS
FY26 Amended FY27 Proposed
IT and Data Analytics 13.0 13.0
Department Organizational Structure
FIGURE 38. IT AND DATA ANALYTICS ORGANIZATIONAL STRUCTURE IT and Data Analytics
Associate Director of IT and Data Analytics
Senior Data Analytics Manager
Senior Data Engineer
Senior Data Scientist
Information Systems Manager
IT Manager
Senior Cybersecurity Analyst
IT Systems Analyst
IT Systems Analyst
IT Systems Engineer
IT Systems Engineer
Data Engineer
Data Analyst
369
SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Budget by Department 54 Public Affairs
Building a trusted public agency through strategic outreach, education and engagement The Public Affairs Department connects Community Power with the people and communities it serves. Through strategic communications and engagement, the team builds awareness of Community Power’s mission, programs and benefits while supporting transparency and trust in all public-facing materials.
Led by the senior director of public affairs and reporting to the chief operating officer, the department's community engagement and strategic communications and marketing teams work together to inform, educate and engage customers, stakeholders and community partners across the region.
Community engagement focuses on building relationships with residents, community-based organizations and local partners through direct outreach, events and programs. Strategic communications and marketing advances the agency’s brand, messaging and public presence through marketing, media relations, partnerships and sponsorships, ensuring communication is clear, consistent and accessible.
The department also supports customer education, promotes participation in programs that help customers save energy and reduce costs, and provides communications support across the organization. It also manages the Community Advisory Committee (CAC) to ensure community perspectives and local priorities inform agency decisions.
Department Description: Mission and Services
• Completed a community-informed rebuild of the
Community Power website, improving clarity for customers reviewing bills and service plans or seeking resources and programs
• Implemented a comprehensive brand refresh guided by
community feedback, strengthening consistency and
making Community Power more accessible and relatable for customers
• Developed the San Diego Regional Energy Network
(SDREN) brand and website, establishing a unified identity and leading portfolio-wide marketing and communications for regional energy efficiency programs
• Expanded the Power Network of local nonprofits to support program outreach, strengthen community relationships and reinvest in the community
• Maintained strategic relationships with local governments, JPAs, trade associations, the energy industry ecosystem and key businesses through sponsorships, presence and
collaborative projects
• Enhanced collaborative ties with the CAC and encouraged active participation through monthly meetings, tabling at events and networking activities
• Participated in 183 community outreach events in
FY 2025–2026, resulting in approximately 16,000 unique
interactions and nearly 650,000 impressions
FY 2025–2026 Department Highlights
• Develop and execute a targeted PowerBase campaign and general time-of-use rates education to increase customer awareness of service plans and opportunities to reduce
energy costs
• Advance customer education efforts to improve
understanding of electricity usage, rate structures and the availability of rebates, incentives and offers
• Expand community engagement initiatives, including the Power Network and the Community Clean Energy Grants,
to deepen relationships with community-based
organizations and local stakeholders
• Ensure consistency and alignment across all communications by continuing to transition materials to the updated brand and content standards
• Support agency-wide priorities by providing strategic communications, marketing and outreach support for
programs, initiatives and policy efforts, including all SDREN programs
• Strengthen media relations and earned media opportunities to increase awareness of Community Power’s impact,
programs and progress
FY 2026–2027 Priorities
370
SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Budget by Department 55 • Number of public events attended, hosted or sponsored (target: 200 annually)
• Information on PowerBase and Time-of-Use provided to
CARE/FERA customers (target: 100% by the end of calendar year 2026)
• Enroll eligible customers in energy-reducing Flex Load programs (target: 75% by 2028)
• Number of press releases or earned media opportunities and placements (target: 12 annually)
• External-facing materials in alignment with updated brand and content standards (target: full alignment across public materials)
Key Performance Indicators (KPIs)
FIGURE 39. PUBLIC AFFAIRS POSITIONS*
DEPARTMENT
POSITIONS
FY26 Amended FY27 Proposed
Public Affairs 12.0 14.0
Department Organizational Structure
FIGURE 40. PUBLIC AFFAIRS ORGANIZATIONAL STRUCTURE
Public Affairs
Senior Director of Public Affairs
Associate Director of Strategic Communications and
Marketing
Senior Community Engagement Manager
Marketing and Communications Projects Manager
Marketing Manager
SDREN Marketing Manager
Community Engagement Manager*
Communications Associate
Communications Associate
SDREN Communications Associate
SDREN Outreach Associate*
Community Engagement Associate
Community Engagement Coordinator
Community Outreach Representative (0.5 FTE)
Community Outreach Representative (0.5 FTE) *3.0 positions will be externally funded in FY 2026–2027 *Positions proposed in FY 2026–2027
371
SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Budget by Department 56 Programs
Implementing energy projects and programs that reduce emissions, align supply and demand, and deliver community benefits
The Programs Department designs and implements initiatives that reduce customer bills, increase energy resilience and expand access to clean energy. Under the guidance of the chief operating officer and the leadership of the senior director of programs, the team manages incentive programs, pilots and partnerships that serve residential, commercial and public agency customers across the region.
Program area focus and design are guided by Community Power’s Community Power Plan (CPP), Climate Action Plans from member agencies, and state and federal policy. From residential battery incentives to electric vehicle-charging management, the department supports scalable, equitable decarbonization across sectors. The department works closely with community-based organizations, industry stakeholders and internal departments to ensure program design is equitable, effective and scalable.
The department also leads the launch and administration of the San Diego Regional Energy Network (SDREN) in partnership with the County of San Diego, a transformative, multiyear effort to deliver energy-efficiency and demand-side management programs across San Diego County.
Department Description: Mission and Services
• Oversaw full program launch for Solar Battery Savings residential program
• Secured implementors for all 10 SDREN programs and
Equitable Building Decarbonization community partners
• Administered pilot projects to reduce peak load
consumption via aggregated management of enrolled
behind-the-meter customer devices, including smart
thermostats and managed EV charging
• Released Request for Offers for Solar Advantage and
continued work toward a Power Purchase Agreement
• Built the Distributed Energy Resources Management System (DERMS) platform and supported program infrastructure to scale the Virtual Power Plant (VPP) through Virtual Peaker FY 2025–2026 Department Highlights
• Enhance and expand the Solar Battery Savings program
• Develop and launch the nonresidential Solar Battery Savings pilot program for commercial and other nonresidential customers • Begin enrolling Solar Advantage customers and apply California Public Utility Commission-funded 20% bill discounts
• Continue demonstrating leadership and expertise in customer programs in and beyond Community Power’s territory
• Develop a framework to evaluate the success of all programs and pilots
• Ensure customer access to SDREN programs and continue supporting program implementation
FY 2026–2027 Priorities
372
SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Budget by Department 57 • Add additional capacity toward the 150 MW goal
(target: 15 MW in 2026)
• Create a process to enroll at least 75% of eligible
incentivized measures (target: enrollment by 2028)
• Achieve annual KPIs for the 10 SDREN programs
(target: 2026)
• Direct funding to Communities of Concern (target: 50%) Key Performance Indicators (KPIs)
FIGURE 41. PROGRAMS POSITIONS*
DEPARTMENT
POSITIONS
FY26 Amended FY27 Proposed
Programs 15.0 16.0
*7.0 positions will be externally funded in FY 2026–2027 Department Organizational Structure
FIGURE 42. PROGRAMS ORGANIZATIONAL STRUCTURE
Programs
Senior Director of Programs
Associate Director of Programs — SDREN
Associate Director of Programs — Flex Load
Senior Program Manager
Senior Program Manager
Senior Program Manager
Senior Program Manager
Program Manager
Program Manager
Program Manager
Program Manager
Senior Program Associate
Senior Program Associate
Senior Program Associate*
Program Associate
Program Associate
*Positions proposed in FY 2026–2027
373
SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Budget by Department 58 Regulatory and Legislative Affairs
Advocating for policies that advance Community Power’s mission and protect local decision-making The Legislative and Regulatory Affairs Department monitors and engages in regulatory proceedings and legislation that directly or indirectly impact Community Power’s operations and customers. Under the guidance of the chief operating officer and leadership of the senior director of Regulatory and Legislative Affairs, the department represents Community Power’s interests before the California Public Utilities Commission (CPUC), California Energy Commission (CEC), California Air Resources Board (CARB), California Independent System Operator (CAISO), the state Legislature and Congress. As needed, the department also supports engagement with relevant federal agencies, including but not limited to the U.S. Department of Energy and Federal Energy Regulatory Commission (FERC).
The department also supports compliance requirements across multiple state agencies, assists with agency-wide understanding of policy impacts and informs strategies for securing external funding and favorable regulatory outcomes. Community Power participates in trade associations such as the California Community Choice Association (CalCCA) and works collaboratively with member agencies, industry partners and stakeholders across the state to ensure community choice remains a resilient and effective tool for climate action, energy equity, grid reliability and customer affordability.
The department’s work is guided by Community Power’s Board-approved Regulatory and Legislative Platform, which outlines the agency’s values-based approach to policy and advocacy, anchored in accelerating deep decarbonization, promoting local development and stabilizing community choice energy. The platform provides clear guidance for consistent engagement at the local, state and federal levels and ensures that policy advocacy reflects Community Power’s mission and customer priorities. View the platform here.
Department Description: Mission and Services
• Actively supported legislation at the state level that will reduce wholesale power costs, increase reliability, reduce transmission costs and help keep down costs for distributed solar
• Supported efforts to obtain or sustain external funding for customer programs, including $700,000 to support the
Charging Harmonization and Analysis for Resilient, Grid-Efficient Utilization and Planning (CHARGE UP) pilot and Public Purpose Program funding for the San Diego Regional Energy Network
• Provided analysis for three legislative proposals that affect all Community Choice Aggregators, issued 11 letters of
support on legislation, as well as two letters of opposition to bills that would have had negative consequences for
operations and customers (all legislative letters issued by Community Power can be viewed here)
• Coordinated with other CCAs to educate key members of Congress about renewable energy cost impacts in their
districts from H.R. 1 and assisted the Community Choice Energy Alliance, a new national trade association of CCAs, in forming its first Federal Affairs Committee; developed its initial policy platform to help nationwide CCAs increase our federal policy presence
• Co-led a coalition of 39 organizations to educate state lawmakers and their staff about the importance of energy efficiency program funding and to successfully oppose
legislation that would have undermined the funding
• Advanced SDREN’s regulatory position by leading and
coordinating joint REN filings in the CPUC’s energy
efficiency oversight proceeding, successfully elevating equity, non-energy benefits, and funding continuity
considerations in the Commission’s policy framework
• Intervened in Energy Resource Recovery Account
(ERRA) proceedings to reduce cost pressure on Power
Charge Indifference Adjustment (PCIA) rates that impact Community Power customers
FY 2025–2026 Department Highlights
374
SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Budget by Department 59 • Advance policy solutions that focus on affordability, including the advancement of legislation and regulations that protect customers, reduce PCIA volatility, create market efficiencies in the CPUC’s resource adequacy framework and re-establish customer tax credits
• Support state and federal legislation that reduces barriers to reliable renewable and clean energy deployment, including equitable deployment of local clean energy that enables an affordable path to 100% renewable energy
• Advance regulatory and legislative outcomes that uphold procurement and rate-making authority for Community Power • Identify applicable grant and funding opportunities that benefit customers and member agencies
• Actively participate in trade associations and multiagency coalitions to shape the policy landscape
• Track and manage participation in regulatory proceedings to ensure timely and accurate engagement
FY 2026–2027 Priorities
• Number of regulatory proceedings tracked (target: 40+) • Number of bills analyzed (target: 100+)
• Legislative positions advanced in alignment with platform (target: 10+)
• Number of unique interactions with state and federal
policymakers (target: 50+)
Key Performance Indicators (KPIs)
FIGURE 43. REGULATORY AND LEGISLATIVE AFFAIRS POSITIONS
DEPARTMENT
POSITIONS
FY26 Amended FY27 Proposed
Regulatory and
Legislative Affairs
5.0 5.0
Department Organizational Structure
FIGURE 44. REGULATORY AND LEGISLATIVE AFFAIRS
ORGANIZATIONAL STRUCTURE
Regulatory and Legislative Affairs
Senior Director of Regulatory and Legislative Affairs
Associate Director of Legislative Affairs
Senior Policy Manager
Senior Strategic Policy Manager
Regulatory Manager
375
SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Budget by Department 60 Human Resources and Administration
Fostering a high-performing, inclusive workplace through strategic talent development and operational excellence The Human Resources and Administration Department serves as a strategic partner for leadership and staff, building the internal systems needed to support a high-performing, mission-aligned organization. The department integrates human resources and administrative operations into a unified function that enables employee success and ensures consistency and efficiency across the agency.
Human Resources leads compensation, recruitment, onboarding, benefits administration, compliance, professional development and performance management, aligning workforce strategies with Community Power’s mission, values and organizational priorities.
The administrative team supports agency-wide operations through coordination of internal processes, executive support, facilities and scheduling. Together, these functions ensure organizational effectiveness, reinforce accountability and support the agency’s ability to scale and operate efficiently.
Department Description: Mission and Services
• Trained all employees in workplace violence prevention and emergency preparedness and held additional safety
meetings
• Hired top talent in accordance with plan and budget
• Evolved into a learning organization, emphasizing
professional development for staff and people leaders
• Measured and ensured high employee engagement through consistent improvement, onboarding survey metrics and
annual baseline surveys with Nash Consulting
• Designed and launched a summer intern program for local college students interested in the clean energy industry • Integrated Administration into the larger People Operations team and developed a cadence for internal and external
team events and activities
FY 2025–2026 Department Highlights
• Align workforce planning, hiring, onboarding and succession planning with agency priorities
• Strengthen employee engagement, development and
leadership capacity
• Institutionalize HR programs and administrative processes to support performance, compliance and consistency
• Continue implementation of employee safety and
emergency preparedness programs
• Standardize administrative systems and processes to
improve efficiency
• Strengthen internal communication to support alignment and coordination
FY 2026–2027 Priorities
• Headcount: 95
• Hired: 19 FTE FY 2025–2026 and an additional 4 Interns for a total of 23
• Departed: 3 FY 2025–2026
• Turnover Rate (target 3.16%)
• Time-to-fill for key positions (target: 60 days)
Key Performance Indicators (KPIs)
FIGURE 45. HUMAN RESOURCES AND ADMINISTRATION POSITIONS
DEPARTMENT
POSITIONS
FY26 Amended FY27 Proposed
Human Resources
and Administration
8.0 8.0
Department Organizational Structure
FIGURE 46. HUMAN RESOURCES AND ADMINISTRATION
ORGANIZATIONAL STRUCTURE
Human Resources and Administration
Senior Director of People Operations and
Administration
Senior Human Resources Manager
Senior Executive Assistant
Talent Acquisition and Learning Specialist
Human Resources Analyst
Executive Assistant
Executive Assistant
Facilities Manager
376
SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Budget by Department 61 Legal
Providing legal guidance, ensuring compliance, transparency and accountability to support organizational integrity The Legal Department is led by Community Power’s general counsel, who reports directly to the Board of Directors and serves as a member of the Executive team. Under the leadership of the general counsel, the department provides legal guidance across a range of areas, including public agency governance, regulatory compliance, contract law, employment law and risk management.
The department plays a critical role in supporting internal policy development, mitigating organizational risk and maintaining transparency in all agency actions. As Community Power expands in scale and complexity, the department ensures the agency’s decisions and operations remain aligned with local, state and federal legal requirements and uphold public trust.
Department Description: Mission and Services
• Supported the execution of two bond prepayment
agreements, which generated continued power cost savings • Provided legal guidance on long-term Power Purchase
Agreements (PPAs) and related procurement efforts
• Provided legal support for the launch of major customer programs, including Solar Battery Savings and the San
Diego Regional Energy Network (SDREN)
• Reviewed and updated nine Board and two internal policies FY 2025–2026 Department Highlights
• Continue to support the execution of three to five clean energy prepay transactions and associated legal review
• Continue to provide legal guidance on long-term PPAs and related procurement efforts
• Continue to develop new and revised Community Power
policies and provide legal support for procedures
• Update and improve on Community Power contract forms, including provisions for insurance, cybersecurity and
intellectual property
• Provide legal support for Community Power Initiatives, including tribal projects, Community Power-owned assets and data centers
• Develop and provide a regular cadence of training to
committees and agency staff on public agency governance (including the Brown Act and Public Records Act)
FY 2026–2027 Priorities
FIGURE 47. LEGAL POSITIONS
DEPARTMENT
POSITIONS
FY26 Amended FY27 Proposed
Legal 3.0 3.0
Department Organizational Structure
FIGURE 48. LEGAL ORGANIZATIONAL STRUCTURE
Legal
General Counsel
Assistant General Counsel
Senior Counsel
Paralegal
377
08 Budget by Level 2
and Level 3
378
SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Budget by Level 2 and Level 3 63 Budget by Level 2 and Level 3
Operating Revenue
Community Power’s sole source of revenue currently is the retail sale of electricity to its customers. Revenue budgeted for FY 2026–2027 reflects a full fiscal cycle of retail sales to our commercial and industrial customer base, as well as the majority of the residential customer base.
Generally, operating revenue through the retail sale of electricity is derived by: 1) estimating Community Power’s energy load for the upcoming fiscal year; 2) applying the Board-approved generation rates to the energy load; and 3) applying a 1.5% uncollectible rate based on revenue that Community Power does not expect to collect — the result is Community Power’s operating revenue for the fiscal year.
Community Power offers four service levels to its customers, which, taken together, ultimately comprise the source of ratepayer funds for the agency:
• PowerBase, our most affordable service option, with a renewable content that is intended to meet or exceed
SDG&E’s whenever possible and provides customers with a 10% discount compared with SDG&E’s rates.
• PowerOn, our standard service offering that provides 53% renewable power and offers a 4% discount compared with
SDG&E’s rates.
• Power100, our premium service that provides customers with 100% renewable energy. It is currently priced at an additional $0.01/kWh more than PowerOn.
• Power100 Green+ is our stand-alone 100% renewable and carbon-free service that is Green-e® Certified, available only to commercial and industrial customers. It is currently priced at $0.02/kWh more than PowerOn.
Additional assumptions for net operating revenue include:
• Enrollment of customers is complete for all member
jurisdictions
• A 95% participation rate across all jurisdictions
• A 1.5% uncollectible rate that is a decrease from the 1.75% uncollectible rate assumed in the prior year budget
• Trifurcation of rates continues to ensure a fair, equitable and balanced rate structure across customers with differing vintage years
• Rates remain at the levels adopted by the Board on May 1, 2026. Any rate changes are subject to Board approval
FY25 Amended FY26 Amended FY27 Proposed
Gross Ratepayer Revenues 1,243.0 1,194.8 932.8
Uncollectible Customer Accounts; FY25 and
FY26 Less 1.75%, FY27 Less 1.5%
(21.8) (19.4) (14.0)
Net Operating Revenues 1,221.2 1,175.4 918.8
*Amounts displayed in millions of dollars
FIGURE 49. OPERATING REVENUE BY BUDGET LEVEL 2 AND LEVEL 3* 379
SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Budget by Level 2 and Level 3 64 Cost of Energy
The cost of energy is Community Power’s largest expense.
Generally, the cost of energy is derived by: 1) estimating Community Power’s energy load for the upcoming fiscal year; 2) applying energy already contracted for to the projected energy load; and 3) applying forward market prices to the remaining energy load that Community Power has not yet
contracted for — the result is Community Power’s cost of energy for the fiscal year.
Community Power prioritizes purchasing electricity that is generated from renewable sources like solar or wind. The agency purchases enough electricity to cover the needs of our customers. SDG&E delivers this electricity through its existing power lines and continues to provide meter reading, billing and line maintenance to customers.
While Community Power emphasizes its commitment to clean energy, various factors can influence the cost of this energy for Community Power, impacting the overall cost of energy for the agency. The following factors are key considerations:
• Market Fluctuations — Unlike traditional energy sources with more stable pricing, renewable energy sources like solar and wind are subject to fluctuations in the electricity market.
This means that during periods of lower renewable energy production or higher demand, Community Power may need
to purchase additional power from the market, potentially at a higher cost. These costs can then be passed on to customers. • Seasonal Variations — San Diego could experience
significant heat waves in the summer months. During these periods, peak electricity demand rises due to increased air conditioning use. This can put a strain on renewable energy sources, forcing Community Power to supplement with
power from the market, potentially at a premium, similar to the impact of market fluctuations.
• Increased Load — Community Power’s customer base is
projected to remain steady; however, the overall electricity demand (load) is projected to increase as California
transitions to sourcing from more renewable energy. To
maintain grid reliability, Community Power may need to
secure additional power sources, potentially impacting the cost of energy.
Beyond market-driven factors, regulations such as Resource Adequacy (RA) requirements play a role in Community Power’s energy costs. The California Public Utilities Commission (CPUC) mandates RA requirements. These require Community Power to procure a predetermined amount of electricity based on its projected load. This ensures a consistently reliable grid with sufficient energy available. Meeting these RA requirements might necessitate purchasing additional power, especially during peak demand periods, potentially at higher costs.
The potential for cost increases due to these factors is a trade-off inherent in pursuing renewable energy. While costs may fluctuate, Community Power’s commitment to clean energy aligns with California’s sustainability goals.
It’s important to note Community Power strives to offer competitive rates compared with traditional energy providers.
The agency achieves this through various strategies, including long-term power purchase agreements and a diverse
renewable energy portfolio to mitigate market fluctuations.
FY25 Amended FY26 Amended FY27 Proposed
Cost of Energy 1,116.8 969.9 872.3
*Amounts displayed in millions of dollars
FIGURE 50. COST OF ENERGY BY BUDGET LEVEL 2 AND LEVEL 3* 380
SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Budget by Level 2 and Level 3 65 Professional Services and Consultants
Professional Services and Consultants includes SDG&E fees, data management fees from Calpine, technical support, legal/ regulatory services and other general contracts related to IT services, audits and accounting services.
• Legal/Regulatory Services – Community Power retains
outside legal counsel to assist with complex legal and
regulatory matters. This line item will also allow for the retention of both a state and federal lobbyist to support Community Power’s legislative and regulatory efforts.
• Technical Support – Community Power engages consultants to assist with rate setting, policies, joint-rate comparisons with SDG&E, load analysis and a scheduling coordinator.
After electric power is scheduled for delivery to customers and consumed by those customers, the actual electric
consumption must be trued up against the forecasted
and scheduled energy. This true-up occurs through the
settlement process. Settlements also entail addressing
several other market and regulatory requirements. As
Community Power grows its internal staff, it will look to continue performing portions of this service in-house.
• Other Services – Community Power contracts or plans to contract for audit services (data and financial), accounting services and other services as needed. Community Power
continues to examine whether these services are more cost-effective or efficient to bring in-house. As Community Power expands its in-house functions, it expects a reduction in the related professional services support areas.
• SDG&E Service Fees – Service fees paid to SDG&E consist of a charge of a fixed fee per account per month. The fees cover SDG&E’s costs associated with meter reading, additional data processing and bill coordination as mandated and regulated by the CPUC. Numerous small fees are also associated with data requests.
• Data Management – This is a broad scope of services
that includes all “back office” billing data validation, bill coordination with SDG&E, call center services and
billing technical support, customer enrollment database management, move-in/move-out services, customer
research for enrollment support, and many support
functions related to data reporting.
FY25 Amended FY26 Amended FY27 Proposed
Data Management 14.6 13.8 12.9
SDG&E Fees 3.4 3.8 3.5
Legal/Regulatory 2.1 1.2 1.5
Other Services 2.1 2.3 2.9
Technical Support 2.1 2.3 3.0
Professional Services and Consultants 24.3 23.4 23.8
*Amounts displayed in millions of dollars
FIGURE 51. PROFESSIONAL SERVICES AND CONSULTANTS BY BUDGET LEVEL 2 AND LEVEL 3* 381
SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Budget by Level 2 and Level 3 66 Personnel Costs
Personnel costs include salaries, payroll taxes, benefits, and excused absence and paid time off for staff. In addition, costs include assumptions from the Board-adopted compensation policy, including potential merit and cost-of-living increases.
The recruitment strategy includes adding approximately five new staff members during the FY 2026–2027 budget cycle, growing the agency to 106 FTE.
FY25 Amended FY26 Amended FY27 Proposed
Salaries 14.1 14.4 17.2
Benefits (retirement/health) 2.6 3.8 4.1
Payroll Taxes 1.0 0.5 0.6
Accrued PTO 0.9 0.9 1.5
Personnel Costs Total 18.6 19.6 23.4
FY25 Amended FY26 Amended FY27 Proposed
Printing 1.1 0.7 0.6
Partnerships/Sponsorships/Local Memberships 1.2 1.0 0.0 Marketing and Communications 0.7 0.6 0.0
Strategic Communications and Outreach 0.0 0.0 1.6
Memberships 0.0 0.0 0.2
Strategic Communications and Outreach Total 3.0 2.3 2.4 *Amounts displayed in millions of dollars
*Amounts displayed in millions of dollars
FIGURE 52. PERSONNEL COSTS BY BUDGET LEVEL 2 AND LEVEL 3* FIGURE 53. STRATEGIC COMMUNICATION AND OUTREACH BY BUDGET LEVEL 2 AND LEVEL 3* Strategic Communications and Outreach
Strategic Communications and Outreach includes expenses for mandatory rate mailers, communication consultants,
mailers, printing, sponsorships, and partnerships to inform the community of Community Power. Strategic communication
and outreach are further broken down into the following Budget Level 3 categories:
• Printing — The agency is periodically required to send mailers to its customers notifying the community about
several aspects of rates, including changes to rates through Joint Rate Comparisons.
• Strategic Communications and Outreach — An important
focus of Community Power is ensuring the community
is informed about Community Power, that we build
professional-level name recognition and trust and provide education. This also covers the design of all required
notifications sent to customers, including opt-out procedures and rate comparisons, as well as other notices or educational or marketing information.
• Partnerships/Sponsorships/Local Memberships —
This legacy category has been folded into the Strategic Communications and Outreach section to better reflect
the interconnected work of the department. In addition to required noticing, Community Power engages with local
stakeholder groups to educate the community on the
benefits of community choice and to encourage awareness of our mission. This comes in the form of media advertising, sponsorships of community events and organizations, and mailers, as well as targeted customer communications.
• Memberships – These local, regional and statewide
memberships support community Power’s objectives
related to legislative and regulatory engagement, workforce development, sector leadership, and external visibility. 382
SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Budget by Level 2 and Level 3 67 General and Administration
General and Administration includes costs needed to conduct daily business. These expenses are divided into four categories:
1. CalCCA membership dues
2. Rent for leased office space
3. Agency insurance
4. Other, which reflects the cost of daily business operations. This includes office supplies, banking fees, IT equipment, human resources infrastructure, subscriptions to technical platforms and payroll services. The category also encompasses regulatory fees and the cost of governance-related activities, such as Board and committee expenses and Board stipends.
FY25 Amended FY26 Amended FY27 Proposed
Other General and Administration 3.6 2.8 4.3
CalCCA Dues 0.5 0.6 0.6
Rent 0.7 0.9 0.9
Insurance 0.1 0.3 0.4
General and Administration Total 4.9 4.6 6.1
*Amounts displayed in millions of dollars
FIGURE 54. GENERAL AND ADMINISTRATION BY BUDGET LEVEL 2 AND LEVEL 3* 383
09 Debt Financing
384
SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Debt Financing 69 Debt Financing
Credit Facility
On January 23, 2023, the Community Power Board approved a new credit agreement to establish a $150 million line of credit under a JPMorgan credit facility. Subsequently, on October 25, 2024, the Community Power Board approved an amendment
to increase the credit facility to $250 million.
The credit agreement with JPMorgan provides for a $250
million multiuse revolving line of credit. This credit facility includes a term of up to five years from the date of renewal.
The funds are available for general corporate purposes, including line-of-credit draws, collateral postings and postings for the provider of last resort collateral requirements.
Debt Considerations
The Community Power Board has taken several important
steps to achieve an investment-grade credit rating that includes among many items:
• Developing and updating a Reserve Policy in December
2025 to increase liquidity by establishing a minimum
reserve requirement of 180 days cash on hand, a reserve target of 225 days’ cash on hand, and a maximum
reserve of 270 days cash on hand.
• Establishing a Rate Stabilization Reserve (RSR) that
includes a Target RSR Balance that may be an amount
up to or equivalent to 45 days cash on hand
• Approving rates effective April 1, 2026, that allowed Community Power to achieve its 225 days cash on hand
reserve target in calendar year 2026
Ultimately, on March 9, 2026, Community Power earned its first public credit rating from S&P Global Ratings, receiving an investment-grade “A” issuer credit rating with a stable outlook; a milestone that positions the agency to negotiate more favorable energy contracts and credit terms that can reduce costs for customers.
Community Power does not anticipate needing to use its
credit facility to finance operations in FY 2026–2027 but may periodically access the credit facility for one-time needs. In FY 2024–2025, Community Power accessed $47.0 million from
the credit facility and satisfied the loan payment in December 2024. Currently, Community Power has zero debt. However, Community Power still pays debt service fees to maintain its $250 million credit facility and to satisfy fees related to standby letters of credit.
With this investment-grade credit rating, Community Power has an enhanced ability to issue tax-exempt or taxable bonds to finance ownership in energy generation or energy-storage assets. Direct asset ownership may provide the opportunity to control energy costs.
Community Power’s ability to issue tax-exempt debt to
finance an ownership interest in a generating or storage facility is a distinct advantage over investor-owned utilities and direct access providers. No specific asset purchases are currently under consideration by staff.
The Debt Policy enables Community Power to issue bonds
that will ultimately be subject to Board approval as a separate action. The Debt Policy will help Community Power take
advantage of ownership opportunities that may arise,
especially in conjunction with state or federal funding that might be available. To date, Community Power has not issued debt.
FIGURE 55. DEBT PAYMENTS*
Year ended June 30, 2025 Beginnings Additions Payments Ending Bank note payable - 47.0 47.0 -
Loans payable - - - -
Total - 47.0 47.0 -
*Amounts displayed in millions of dollars
385
SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Debt Financing 70 The Debt Policy articulates:
• The situations and steps necessary for the issuance of debt • The types of debt that may be issued
• How the debt fits into Community Power’s strategic plan and potential capital investment program
The Debt Policy also includes sections to:
• Facilitate decision making
• Establish basic parameters and principles
• Articulate and clarify other related aspects to guide future Boards, staff and consultants
FIGURE 56. DEBT FY 2021–2025 FIGURE 57. DEBT BY MONTH
2025
$40,000,000
$35,000,000
$30,000,000
$25,000,000
$20,000,000
$15,000,000
$10,000,000
$5,000,000
$0
$5,000,000
2021
$31,340,082
2022
$35,730,080
2023 2024
NOV-24 DEC-24 JAN-25
$40,000,000
$45,000,000
$35,000,000
$30,000,000
$25,000,000
$20,000,000
$15,000,000
$10,000,000
$5,000,000
$0
$8,500,000$8,500,000$8,500,000
JUL-24 AUG-24 SEP-24
$47,000,000
OCT-24
• Green Bonds — To the extent possible, Community Power bond issuances shall be green bonds. A green bond is a type of fixed-income instrument specifically earmarked to raise money for climate and environmental projects. • 1.5x Max Annual Debt Service — While the specific formulation of the Additional Bonds Test may vary depending on the type of bonds being contemplated, Community Power will utilize an Additional Bonds Test that establishes a limitation on new issuances such that the pledged revenues are no less than one and a half times (1.5x) the maximum annual principal and interest and debt service for the aggregate outstanding senior lien bonds, including the debt service for the new issuance. • 5% Annual Debt Service Limit — Community Power will also seek to maintain aggregate annual debt service on long-term debt at a level not to exceed 5% of Community Power’s annual total operating expenses. The actual terms and conditions specific to each debt issue will be controlled by the applicable documents.
The Community Power Debt Policy also includes additional requirements as follows:
386
10 Financial Policies
387
SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Financial Policies 72 Financial Policies
San Diego Community Power’s financial policies establish the long-term framework for prudent fiscal management, financial stability and accountability. These policies are intended to protect the agency’s financial position and ratepayer interests by guiding key budgetary and financial decisions, including reserves, rate stabilization, investments, debt and overall financial oversight. A balanced budget is defined as one in which ongoing revenues and other available resources are sufficient to fund planned expenditures. The FY 2026- 2027 Budget has been developed in accordance with these policies and reflects the agency’s commitment to disciplined, transparent and sustainable financial management. These policies are summarized below and the full Board-approved policies can be found in Financial Policies – Attachment 1.
Budget Policy
The Budget Policy establishes a transparent and structured framework for the development, approval and management
of the agency’s annual budget, ensuring alignment with the Joint Powers Agreement and Board governance requirements.
It requires the preparation of a comprehensive annual budget that reflects all anticipated revenues, expenditures and program activities, and mandates that the Board of Directors review and adopt the budget in a public meeting prior to the start of each fiscal year. It additionally requires a balanced budget whereby the total projected revenues are greater than or equal to total projected expenditures.
The policy outlines a defined annual budget development process led by the chief financial officer, including preparing financial forecasts, coordinating with staff and leadership to develop budget proposals and refining the budget through internal review and Board committee input to ensure alignment with organizational goals and financial planning. It further establishes that all expenditures must be made in accordance with the adopted budget and authorized approvals, reinforcing strong fiscal controls and accountability.
The policy provides controlled flexibility, allowing the Board to revise the budget as needed to address contingencies, and authorizes limited administrative adjustments within defined thresholds to support operational efficiency. This approach maintains a transparent, Board-approved budgeting process, ensuring all financial activities are governed by adopted budget parameters and upholding responsible stewardship of public funds.
Financial Reserves Policy
Community Power’s Financial Reserves Policy defines an
approach for accumulating and managing reserves to support long-term financial stability, maintain liquidity and ensure the agency can meet its financial obligations. The policy is designed to support strategic objectives, maintain creditworthiness, satisfy contractual requirements, provide working capital and respond to unanticipated expenses while supporting rate stability.
The policy establishes a target reserve level based on days cash on hand, with contributions determined through the annual budget and rate-setting processes. Reserve levels are reviewed regularly through the budget cycle and annual audit to ensure alignment with financial conditions, operational needs and organizational priorities.
The policy also defines how reserves may be used and
managed, including clear conditions for use and Board oversight.
When reserves exceed target levels, funds may be strategically allocated for capital investments, program funding, debt reduction or rate stabilization, and may be designated for specific purposes such as stabilization or programmatic reserves to address cost variability and unforeseen needs.
This approach ensures reserve levels are maintained, integrated into financial processes and managed in a transparent and disciplined manner.
Rate Stabilization Reserve Policy
This policy governs the use of reserves to mitigate the impact on rates and the budget caused by short-term market and operational variability. It reflects the agency’s exposure to wholesale energy market volatility, including fluctuations in power and capacity prices, weather-driven demand and regulatory changes, and is designed to support stable and predictable customer rates over time.
The policy defines the purpose and structure of a Rate
Stabilization Reserve, providing a Board-adopted mechanism to maintain adequate liquidity and support financial
commitments while smoothing the financial effects of
changing market conditions. It establishes guidelines for how reserves are funded and incorporated into the agency’s rate-setting process, ensuring alignment with broader financial planning and reserve policies.
388
SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Financial Policies 73 The policy also outlines parameters for the use and governance of the reserve, including Board oversight, approval requirements and reporting expectations. These provisions ensure that the use of stabilization reserves is transparent, controlled and aligned with the agency’s financial objectives while preserving long-term fiscal stability.
Non-Energy Procurement Policy
The Non-Energy Procurement Policy outlines procedures for procuring goods and services and establishes competitive requirements based on contract value. Allowable exceptions are defined, including noncompetitive procurement, emergency procurements and sole-source awards, each with clear criteria and approval requirements.
The policy authorizes cooperative and piggyback procurement methods to improve efficiency and reduce costs. It also establishes evaluation criteria for solicitations, including qualifications, cost competitiveness and alignment with workforce and supplier diversity policies.
The policy further defines requirements for contract
amendments, written agreements and delegated authority
as well as ethical standards, protest procedures and
nondiscrimination provisions. These ensure procurement
activities are conducted with integrity and in accordance with regulatory and reporting requirements.
Debt Policy
The Debt Policy guides the issuance and management of
debt to support capital investments and strategic objectives.
It defines the circumstances in which debt may be issued, the types of debt permitted and how debt aligns with the agency’s capital investment program and long-term financial strategy.
The policy is designed to ensure prudent financial management by maintaining cost-effective access to capital markets, managing financial risk and preserving future financial flexibility.
It emphasizes the use of debt to finance capital projects, acquisitions and improvements in a timely and efficient manner while supporting the agency’s broader financial planning goals.
The policy also establishes guiding principles for debt management, including maintaining strong credit ratings, fostering positive investor relations and adhering to all applicable legal, disclosure and reporting requirements.
It reinforces the agency’s commitment to full and timely repayment of obligations and responsible stewardship of borrowed funds.
The policy incorporates governance and oversight provisions for debt issuance and administration, including Board approval requirements and integration with the agency’s budget and rate-setting processes to ensure sufficient revenues are available to meet operating costs and debt service obligations.
Investment Policy
Investment activities, including cash reserves, deposits and investments, are guided by objectives and priorities for managing the agency’s funds as outlined in the Investment Policy to ensure assets are protected while producing a reasonable rate of return.
The policy defines the objectives and priorities for investment activities, consistent with California Government Code
requirements, and establishes the types of permitted and prohibited investments along with the controls needed to safeguard funds.
The policy is guided by core investment objectives, including preservation of principal, maintenance of sufficient liquidity to meet operational needs and attainment of an appropriate return on invested funds. Safety of principal is the foremost priority, followed by liquidity, return on investment, and standard of care, with all investments managed under a prudent standard of care.
The policy also establishes oversight and governance
for investment activities, including Board authority and coordination with financial and risk management functions, to ensure funds are managed in accordance with established controls and regulatory requirements.
Rate Development Policy
The Rate Development Policy governs the design, development and implementation of customer rates, ensuring the process remains transparent, fiscally responsible and centered on customer value. Rates must recover all costs associated with power procurement, operations and debt service
while supporting the development of prudent reserves and maintaining long-term financial sustainability.
Rate-setting decisions are based on requirements for cost recovery, reserve development, competitiveness, stability and equitable treatment of customers. The policy emphasizes the need for simple, understandable rate structures and allows for the development of pilot rates to support evolving programs and customer needs.
Customer value considerations are also incorporated, which include providing competitive alternatives to the incumbent utility and supporting higher renewable energy offerings.
The policy recognizes the role of reserves and stabilization mechanisms in mitigating rate volatility over time.
Transparency is maintained through Board review and approval of rates in publicly noticed meetings, ensuring accountability and consistent engagement with customers and stakeholders. 389
11 Glossary of Terms
390
SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Glossary of Terms 75 Glossary of Terms
AB – Assembly Bill: An Assembly Bill is a piece of
legislation that is introduced in the Assembly. In other words, the Assembly (rather than the Senate) is the bill’s house of origin in the Legislature. In California, it is common for legislation to be referred to by its house of origin number even after it becomes law. However, because bill numbers “reset” and start again from 1 in each legislative session, it is less confusing to include chapter and statute information when referring to a bill that has become law; for example, SB 350 (Chapter 547, Statutes of 2015).
AL - Advice Letter: An Advice Letter is a request by a
California Public Utilities Commission (CPUC) jurisdictional entity for Commission approval, authorization or other relief.
ALJ – Administrative Law Judge: ALJs preside over
CPUC cases to develop the evidentiary record and draft
proposed decisions for Commission action.
ARB – Air Resources Board: The California Air
Resources Board (CARB or ARB) is the “clean air agency” in the state government of California. CARB is charged
with protecting the public from the harmful effects of air pollution and developing programs and actions to fight climate change.
AReM – Alliance for Retail Energy Markets:
A not-for-profit corporation that advocates for continued development of successful customer choice in retail energy markets and provides a focused voice for competitive energy retailers and their customers in select public policy forums at the state level. AReM represents direct access providers such as Constellation NewEnergy and Direct Energy.
BayREN – Bay Area Regional Energy Network:
BayREN offers regionwide energy programs, services and
resources to members of the public by promoting energy
efficient buildings, reducing carbon emissions and building government capacity.
CAISO – California Independent System
Operator: A nonprofit public benefit corporation that
oversees the operation of the California bulk electric power system, transmission lines and electricity market generated and transmitted by its members (approximately 80% of
California’s electric flow). Its stated mission is to “operate the grid reliably and efficiently, provide fair and open transmission access, promote environmental stewardship and facilitate effective markets and promote infrastructure development.” CAISO is regulated by the Federal Energy Regulatory
Commission (FERC) and governed by a five-member
governing board appointed by the governor.
CalCCA – California Community Choice
Association: A statewide association, made up of
Community Choice Aggregators (CCAs), that represents the interests of California’s community choice electricity providers.
CALSEIA – California Solar Energy Industries
Association: CALSEIA represents more than 200
companies doing solar-related business in California,
including manufacturers, distributors, installation contractors, consultants and educators. Members’ annual dues support professional staff and a lobbyist who represents the common interests of California’s solar industry at the Legislature, Governor’s Office and state and local agencies.
CALSLA – California City-County Street Light
Association: A statewide association representing cities, counties and towns before the CPUC that is committed to maintaining fair and equitable streetlight electricity rates and facilities charges and disseminating streetlight-related information.
CAM – Cost Allocation Mechanism: The cost recovery
mechanism to cover procurement costs incurred in serving the central procurement function.
CARB – California Air Resources Board: The CARB
is charged with protecting the public from the harmful effects of air pollution and developing programs and actions to fight climate change in California.
CARE – California Alternative Rates for Energy:
A state program for low-income households that provides a 30% discount on monthly energy bills and a 20% discount on natural gas bills. CARE is funded through a rate surcharge paid by all other utility customers.
CBE – Communities for a Better Environment: An
environmental justice organization that was founded in 1978.
The mission of CBE is to build people’s power in California’s communities of color and low-income communities to
achieve environmental health and justice by preventing and reducing pollution and building green, healthy and sustainable communities and environments.
391
SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Glossary of Terms 76 CCA – Community Choice Aggregator: A community
choice aggregator, sometimes referred to as community choice aggregation, is an entity of local governments that procure power on behalf of their residents, businesses and municipal accounts from an alternative supplier while still receiving transmission and distribution service from their existing utility provider. CCAs are an attractive option for communities that want more local control over their electricity sources, more green power than is offered by the default utility, and/or lower electricity prices. By aggregating demand, communities gain leverage to negotiate better rates with competitive suppliers and choose greener power sources.
CCSF – City and County of San Francisco: The City
and County of San Francisco often engage in joint advocacy before the CPUC. San Francisco operates CleanPowerSF, a CCA.
CEC – California Energy Commission: The CEC is
the primary energy policy and planning agency for California, whose core responsibilities include advancing state energy policy, achieving energy efficiency, investing in energy innovation, developing renewable energy, transforming
transportation, overseeing energy infrastructure and preparing for energy emergencies.
CEE – Coalition for Energy Efficiency: CEE is a
nonprofit composed of U.S. and Canadian energy-efficiency administrators working together to accelerate the development and availability of energy-efficient products and services.
CLECA – California Large Energy Consumers
Association: CLECA is an organization of large, high-load factor industrial customers located throughout the state; its members are in the cement, steel, industrial gas, pipeline, beverage, cold storage, food packaging and mining industries and their electricity costs comprise a significant portion of their costs of production. Some members are bundled customers, others are Direct Access (DA) customers, and some are served by Community Choice Aggregators (CCAs); a few members
have onsite renewable generation.
CPUC – California Public Utility Commission: The
CPUC is a state agency that regulates privately owned electric, natural gas, telecommunications, water, railroad, rail transit and passenger transportation companies, in addition to authorizing video franchises.
C&I – Commercial and Industrial: C&I customers
are business customers who generally consume much higher volumes of electricity and gas. Many utilities segment their C&I customers by energy consumption (small, medium and large).
CP – Compliance Period: A Compliance Period is the
time period to become Renewables Portfolio Standard (RPS) compliant, set by the California Public Utilities Commission (CPUC).
DA – Direct Access: Direct Access is an option that allows eligible customers to purchase their electricity directly from third-party providers known as Electric Service Providers (ESPs).
DA Cap: The DA Cap is the maximum amount of electric
usage that may be allocated to Direct Access customers in California or, more specifically, within an investor-owned utility service territory.
DACC – Direct Access Customer Coalition: DACC
is a regulatory advocacy group composed of educational, governmental, commercial and industrial customers that
utilize direct access for all or a portion of their electrical energy requirements.
DA Lottery: The DA Lottery is a random drawing by which DA waitlist customers become eligible to enroll in DA service under the currently applicable Direct Access Cap.
DA Waitlist: The DA Waitlist consists of customers that have officially registered their interest in becoming a DA customer but are not yet able to enroll in service because of DA cap limitations.
DAC – Disadvantaged Community: “Disadvantaged
communities” refers to the areas throughout California that most suffer from a combination of economic, health and
environmental burdens. These burdens include poverty, high unemployment, air and water pollution and the presence of hazardous wastes as well as high incidences of asthma and heart disease. One way that the state identifies these areas is by collecting and analyzing information from communities statewide. CalEnviroScreen, an analytical tool created by the California Environmental Protection Agency (CalEPA), combines different types of census tract-specific information into a score to determine which communities are the most burdened or “disadvantaged.”
DASR – Direct Access Service Request: DASR is a
request submitted by C&I customers to become direct access eligible.
Demand: Demand refers to the rate at which electric energy is delivered to or by a system or part of a system, generally expressed in kilowatts (kW), megawatts (MW) or gigawatts (GW), at a given instant or averaged over any designated interval of time. Demand should not be confused with Load or Energy. 392
SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Glossary of Terms 77 DER – Distributed Energy Resource: A DER is
a small-scale physical or virtual asset (e.g., EV charger, smart thermostat, behind-the-meter solar/storage, energy efficiency) that operates locally and is connected to a larger power grid at the distribution level.
Distribution: Distribution refers to the delivery of electricity to the retail customer’s home or business through low-voltage distribution lines.
DLAP – Default Load Aggregation Point: In the
CAISO’s electricity optimization model, DLAP is the node at which all bids for demand should be submitted and settled.
DR – Demand Response: DR is an opportunity for
consumers to play a significant role in the operation of the electric grid by reducing or shifting their electricity usage during peak periods in response to time-based rates or other forms of financial incentives.
DRP – Distributed Resource Plans: Distributed
Resource Plans are required by statute and intended to identify optimal locations for the deployment of distributed resources.
DWR – Department of Water Resources: DWR is
the state agency charged with managing California’s water resources, systems and infrastructure in a responsible, sustainable way.
ECR – Enhanced Community Renewable: ECR is
an IOU (Investor-Owned Utility) program that reflects the “Community Solar” model of renewable energy purchasing.
Customers sign up to purchase a portion of a local solar project directly from a developer at a level that meets at least 25% and up to 100% of their monthly electricity demand. The customer pays the developer for the subscribed output and receives a credit on their utility bill that reflects their enrollment level.
ED – Energy Division: The CPUC’s Energy Division
develops and administers energy policy and programs to
serve the public interest, advise the Commission and ensure compliance with Commission decisions and statutory Mandates.
EE – Energy Efficiency: Energy Efficiency refers to the use of less energy to perform the same task or produce the same result. Energy-efficient homes and buildings use less energy to heat and cool and run appliances and electronics, and energy-efficient manufacturing facilities use less energy.
ELCC – Effective Load Carrying Capacity: ELCC is
the additional load met by an incremental generator while maintaining the same level of system reliability. For solar and wind resources, the ELCC is the amount of capacity that can be counted for Resource Adequacy purposes.
EPIC – Electric Program Investment Charge:
The EPIC program was created by the CPUC to support
investments in clean energy technologies that provide benefits to the electricity ratepayers of Pacific Gas and Electric (PG&E), San Diego Gas & Electric Company (SDG&E) and Southern
California Edison Company (SCE).
ERRA – Energy Resource Recovery Account: ERRA
proceedings are used to determine fuel and purchased power costs that can be recovered in rates. The utilities do not earn a rate of return on these costs and recover only actual costs. The costs are forecast for the year ahead. If the actual costs are lower than forecast, then the utility gives money back, and vice versa.
ES – Energy Storage: Energy Storage is the capture of
energy produced at one time for use at a later time to reduce imbalances between energy demand and energy production.
ESA – Energy Storage Agreement: An ESA refers to a battery services contract, a capacity contract, demand response contract or similar agreement.
ESP – Energy Service Provider: An Energy Service
Provider is an energy entity that provides service to a retail or end-use customer.
EV – Electric Vehicle: An EV is a vehicle that uses one or more electric motors for propulsion.
FCR – Flexible Capacity Requirements: “Flexible
capacity need” is defined as the quantity of resources needed by the CAISO to manage grid reliability during the greatest three-hour continuous ramp in each month. Resources will be considered as “flexible capacity” if they can sustain or increase output or reduce ramping needs during the hours of “flexible need.” FCR means the flexible capacity requirements established for LSEs by the CPUC pursuant to the CPUC
decisions.
GHG – Greenhouse Gas: Water vapor, carbon
dioxide, tropospheric ozone, nitrous oxide, methane
and chlorofluorocarbons (CFCs) are gases that cause the atmosphere to trap heat radiating from the earth. The most common GHG is carbon dioxide.
393
SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Glossary of Terms 78 GRC – General Rate Case: General Rate Cases are
proceedings used to address the costs of operating and
maintaining the utility system and the allocation of those costs among customer classes. For California’s three large IOUs, the GRCs are parsed into two phases. Phase I of a GRC determines the total amount the utility is authorized to collect, while Phase II determines the share of the cost each customer class is responsible for and the rate schedules for each class. Each large electric utility files a GRC application every three years for review by the Public Advocate’s Office and interested parties and for approval by the CPUC.
GTSR – Green Tariff Shared Renewables: The GTSR
program enables customers to receive 50 to 100 percent
of their electricity demand from renewable sources. The GTSR program has two components: the Green Tariff (GT)
component and the Enhanced Community Renewables
(ECR) component. Through GT, a customer may pay the
difference between their current generation charge and
the cost of procuring 50 to 100 percent renewables. With ECR, a customer agrees to purchase a share of a community renewable (typically solar) project directly from a developer and in exchange will receive a credit from their utility for the customer’s avoided generation procurement.
GWh – Gigawatt-hour: This is the unit of energy equal to that expended in one hour at a rate of one billion watts. One GWh equals 1,000 megawatt-hours.
ICA – Integration Capacity Analysis: The enhanced
integrated capacity and locational net benefit analysis quantify the capability of the system to integrate Distributed Energy Resources (DERs) within the distribution system. Results are dependent on the most limiting element of the various power system criteria such as thermal ratings, power quality, system protection limits and safety standards of existing equipment.
IDER – Integrated Distributed Energy Resources: A
CPUC proceeding that aims to more effectively coordinate the integration of demand-side resources in order to better meet customer and grid needs, while enabling California to attain its greenhouse gas reduction goals.
IDSM – Integrated Demand-Side Management:
This is an approach that joins together all the resources utilities have at their disposal to plan, generate and supply electricity in the most efficient manner possible.
IEPA – Independent Energy Producers
Association: IEPA is California’s oldest and leading nonprofit trade association, representing the interest of developers and operators of independent energy facilities and independent power marketers.
IMD – Independent Marketing Division: Under
state law, IOUs are prohibited from lobbying or marketing on community choice unless the IOU forms an independent marketing division funded by shareholders rather than
ratepayers. SDG&E and its parent company Sempra were
permitted by the CPUC to create such an independent
marketing division, which allowed SDG&E to lobby against plans to create a CCA program.
IOU – Investor-Owned Utility: An IOU is a private
electricity and natural gas provider, such as SDG&E, PG&E or SCE, which are the three largest IOUs in California.
IRP – Integrated Resource Plan: An Integrated
Resource Plan outlines an electric utility’s resource needs in order to meet expected electricity demand long-term.
kW – Kilowatt: This is a measure of power where power
(watts) = voltage (volts) x amperage (amps) and 1 kW = 1,000 watts.
kWh – Kilowatt-hour: This is a measure of consumption.
It is the amount of electricity that is used over some period of time, typically a one-month period for billing purposes.
Customers are charged a rate per kWh of electricity used.
LCE – Lancaster Choice Energy: LCE is the CCA that
serves the City of Lancaster, California.
LCFS – Low Carbon Fuel Standard: This is a CARB
program designed to encourage the use of cleaner low-carbon fuels in California, encourage the production of those fuels and, therefore, reduce greenhouse gas emissions.
LCR – Local (RA) Capacity Requirements: This is
the amount of Resource Adequacy capacity required to be demonstrated in a specific location or zone.
LMP – Locational Marginal Price: Each generator unit
and load pocket is assigned a node in the CAISO optimization model. The model will assign a LMP to the node in both
the day-ahead and real-time market as it balances the
system using the least cost. The LMP is composed of three components: the marginal cost of energy, congestion and losses. The LMP is used to financially settle transactions in the CAISO.
LNBA – Locational Net Benefits Analysis: This is a
cost-benefit analysis of distributed resources that incorporates location-specific net benefits to the electric grid.
394
SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Glossary of Terms 79 Load: Load refers to an end-use device or customer that receives power from an energy delivery system. Load should not be confused with Demand, which is the measure of power that a load receives or requires. See Demand.
LSE – Load-serving Entity: Load-serving Entities have
been granted authority by state, local law or regulation to serve their own load directly through wholesale energy purchases and have chosen to exercise that authority.
LTPP – Long-Term Procurement Rulemaking: This is
an “umbrella” proceeding to consider, in an integrated fashion, all of the CPUC’s electric procurement policies and Programs.
MCE – Marin Clean Energy: MCE was the first CCA in
California and began serving customers in 2010. It serves customers in Contra Costa, Marin, Napa and Solano counties in Northern California.
MEO – Marketing Education and Outreach: This is
a term generally used to describe various strategies to inform customers, such as to motivate consumers to take action on energy efficiency or conservation measures and change their behavior.
MW – Megawatt: A megawatt hour (Mwh) is equal to
1,000 Kilowatt hours (Kwh) or 1,000 kilowatts of electricity used continuously for one hour.
MWH – Megawatt-hour: This is a measure of energy.
NAESCO – National Association of Energy Service
Companies: NAESCO is an advocacy and accreditation
organization for energy service companies (ESCOs). Energy service companies contract with private and public-sector energy users to provide cost-effective energy efficiency retrofits across a wide spectrum of client facilities.
NBC – Non-Bypassable Charge: Non-Bypassable
Charges are fees that are paid on every kilowatt-hour of electricity that is consumed from the grid. These charges can be used to fund things like energy assistance programs for low-income households and energy efficiency programs.
These charges apply even if customers buy grid-supplied power from an outside power company such as a CCA.
NDA – Non-Disclosure Agreement: An NDA is a
contract by which one or more parties agree not to disclose confidential information that they have shared with each other.
NEM – Net Energy Metering: NEM is a program in which
solar customers receive credit for excess electricity generated by solar panels.
NRDC – Natural Resources Defense Council: NRDC
is a nonprofit international environmental advocacy group.
NP-15 – North Path 15: NP-15 is a CAISO pricing zone
usually used to approximate wholesale electricity prices in Northern California in PG&E’s service territory.
OIR – Order Instituting Rulemaking: An OIR is a
procedural document that is issued by the CPUC to start a formal proceeding. A draft OIR is issued for comment
by interested parties and made final by vote of the five commissioners of the CPUC.
OSC – Order to Show Cause: OSC is an order requiring
an individual or entity to explain, justify or prove something.
ORA – Office of Ratepayer Advocates: The ORA is an
independent consumer advocate within the CPUC, now called the Public Advocates Office.
PA – Program Administrator (for EE Business Plans):
IOUs and local government agencies can be authorized to implement CPUC-directed energy efficiency programs.
PCE – Peninsula Clean Energy Authority: PCE is
the CCA serving San Mateo County and all 20 of its cities and towns as well as the City of Los Banos.
PCC1 – RPS Portfolio Content Category 1: RPS
Portfolio Content Category 1 includes bundled renewables where the energy and Renewable Energy Certificate (REC) are dynamically scheduled into a California Balancing Authority (CBA) such as the CAISO, also known as “in-state” renewables.
PCC2 – RPS Portfolio Content Category 2: RPS
Portfolio Content Category 2 includes bundled renewables where the energy and Renewable Energy Certificate (REC) are from out of state and not dynamically scheduled to a CBA.
PCC3 – RPS Portfolio Content Category 3: RPS
Portfolio Content Category 3 includes Unbundled Renewable Energy Certificate (REC).
PCIA or “exit fee” – Power Charge Indifference
Adjustment: The Power Charge Indifference Adjustment
(PCIA) is an “exit fee” based on stranded costs of utility generation set by the California Public Utilities Commission.
It is calculated annually and assessed to customers of CCAs and paid to the IOU that lost those customers as a result of the formation of a CCA.
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PCL – Power Content Label: The PCL is a user-friendly
way of displaying information to California consumers about the energy resources used to generate the electricity they sell, as required by AB 162 (Chapter 313, Statutes of 2009) and SB 1305 (Chapter 796, Statutes of 1997).
PD – Proposed Decision: A PD is a procedural document
in a CPUC Rulemaking that is formally commented on by
parties to the proceeding. A PD is a precursor to a final decision voted on by the five commissioners of the CPUC.
PG&E – Pacific Gas & Electric: PG&E is the IOU that
serves 16 million people over a 70,000-square-mile service area in Northern California.
PHC – Prehearing Conference: A PHC is a CPUC hearing
to discuss the scope of a proceeding, among other matters.
Interested stakeholders can request party status during these conferences.
Pnode – Pricing Node: In the CAISO optimization model,
this is a point where a physical injection or withdrawal of energy is modeled and for which an LMP is calculated.
PPA – Power Purchase Agreement: A PPA is a contract
used to purchase the energy, capacity and attributes from a renewable resource project.
PRP – Priority Review Project: These are transportation electrification pilot projects approved by the CPUC pursuant to SB 350 (Chapter 547, Statutes of 2015).
PRRR – Progress on Residential Rate Reform:
Pursuant to a CPUC decision, the IOUs must submit to the CPUC and other parties periodic updates on the progress of their efforts to assist customers with residential rate design changes related to rate reform, including tier collapse and transition to a default time of use rate.
PUC – Public Utilities Code: The PUC is a California
statute that contains 33 divisions; the range of topics within this code includes natural gas restructuring, private energy producers, telecommunication services, and specific municipal utility districts and transit authorities; the primary statute for governance of utilities as well as CCAs in California.
PURPA – Public Utilities Regulatory Policy Act:
The PURPA is a federal statute passed in 1978 by Congress in response to the 1973 energy crisis to encourage fuel diversity via alternative energy sources and to introduce competition into the electric sector. It was intended to promote energy conservation (reduce demand) and promote greater use of domestic energy and renewable energy (increase supply).
RA – Resource Adequacy: Under its Resource
Adequacy (RA) program, the California Public Utilities
Commission (CPUC) requires load-serving entities — investor-owned utilities, electricity service providers and CCAs — to demonstrate in both monthly and annual filings that they have purchased capacity commitments of no less than 115% of their peak loads.
RAM – Renewables Auction Mechanism: This is a
procurement program the investor-owned utilities (IOUs) may use to procure RPS eligible generation. The IOUs may use RAM to satisfy authorized procurement needs, for example, system Resource Adequacy needs, local Resource Adequacy needs, RPS needs, reliability needs, Local Capacity Requirements, Green Tariff Shared Renewables needs and any need arising from commission or legislative mandates.
RE – Renewable Energy: Renewable energy is energy
from a source that is not depleted when used, such as wind or solar power.
REC – Renewable Energy Certificate: A REC is the
property right to the environmental benefits associated with generating renewable electricity. For instance, homeowners who generate solar electricity are credited with 1 solar REC for every megawatt-hour of electricity they produce. Utilities obligated to fulfill an RPS requirement can purchase these RECs on the open market.
RES-BCT – Renewables Energy Self-Generation
Bill Credit Transfer: This program enables local
governments and universities to share generation credits from a system located on one government-owned property with billing accounts at other government-owned properties. The system size limit under RES-BCT is 5 MW, and bill credits are applied at the generation-only portion of a customer’s retail rate.
RFO – Request for Offers: This is a competitive
procurement process used by organizations to solicit the submission of proposals from interested parties in response to a scope of services.
RPS – Renewable Portfolio Standard: RPS is a law
that requires California utilities and other load-serving entities (including CCAs) to provide an escalating percentage of California qualified renewable power (culminating at 33% by 2020) in their annual energy portfolio.
SB – Senate Bill: A Senate Bill is a piece of legislation that is introduced in the Senate. In other words, the Senate, rather than the Assembly, is the house of origin in the Legislature for the Legislation.
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SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Glossary of Terms 81 SBP – Solar Billing Plan: The Solar Billing Plan, also
known as the Net Billing Tariff or NEM 3.0, is the new method of compensating customer-sited renewable energy self-generation, intended to promote grid reliability and incentivize solar and battery storage.
SCE – Southern California Edison: SCE is the large IOU
that serves the Los Angeles and Orange County area.
SCP – Sonoma Clean Power: SCP is the CCA serving
Sonoma County and surrounding areas in Northern California.
SDG&E – San Diego Gas & Electric: SDG&E is the IOU
that serves San Diego County and owns the infrastructure that delivers Community Power energy to our customers.
SGIP – Self-Generation Incentive Program: SGIP is a
program that provides incentives to support existing, new and emerging distributed energy resources (storage, wind turbines, waste heat to power technologies, etc.).
SUE – Super User Electric: This is an electric surcharge intended to penalize consumers for excessive energy use.
SVCE – Silicon Valley Clean Energy: SVCE is the CCA
serving the communities in Santa Clara County.
TCR EPS Protocol – The Climate Registry Electric
Power Sector Protocol: This refers to online tools
and resources provided by The Climate Registry to assist organizations to measure, report and reduce carbon emissions.
TE – Transportation Electrification: For the
transportation sector, electrification means replacing fossil fuels with electricity as the means of powering light-duty vehicles and medium- and heavy-duty trucks and buses. The primary goal is to reduce greenhouse gas (GHG) emissions and, ultimately, contribute to mitigating the effects of climate change on the planet.
Time-of-Use (TOU) Rates: TOU Rates refers to the
pricing of delivered electricity based on the estimated cost of electricity during a particular time block. Time-of-use rates are usually divided into three or four time blocks per 24 hour period (on-peak, mid-peak, off-peak and sometimes super off-peak) and by seasons of the year (summer and winter). Real-time pricing differs from TOU rates in that it is based on actual (as opposed to forecasted) prices that may fluctuate many times a day and are weather sensitive, rather than varying with a fixed schedule.
TM – Tree Mortality: This is a term that refers to the death of forest trees and provides a measure of forest health. In the context of energy, as part of the Governor’s Tree Mortality Emergency Proclamation, the CPUC is tasked with utilizing its authority to extend contracts and take actions to authorize new contracts on bioenergy facilities that receive feedstock from high hazard zones.
TURN – The Utility Reform Network: TURN is a
ratepayer advocacy group charged with ensuring that California IOUs implement just and reasonable rates.
Unbundled RECs: Unbundled RECs are renewable
energy certificates that verify a purchase of a MWH unit of renewable power where the actual power and the certificate are “unbundled” and sold to different buyers.
VPP – Virtual Power Plant: A Virtual Power Plant is
a cloud-based network that leverages an aggregation of
distributed energy resources (DERs) to shift energy demand or provide services to the grid. For example, thousands of EV chargers could charge at a slower speed and hundreds of home batteries could discharge to the grid during a demand peak to significantly reduce the procurement of traditional supply resources.
VAMO – Voluntary Allocation, Market Offer: VAMO
is the process for SDG&E to allocate a proportional share of its renewable portfolio to Community Power and other LSEs in the service territory.
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12 Budget Resolution
398
Budget Resolution
FPO
399
13 Acknowledgments
400
SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Acknowledgments 85 Acknowledgments
Finance Department
San Diego Community Power’s Finance Department works to maintain a fiscally responsible budget in accordance with Community Power’s Budget Policy. The department ensures sufficient funding to meet procurement needs, sustain operational needs and support sustained growth while delivering clean energy to the communities we serve. In addition, the team actively works to build Community Power’s reserves and develop policies that consider future economic conditions, provides an understandable and transparent operating budget for internal and external users, strives to keep the Community Power Board, committees and staff informed of Community Power’s fiscal condition and develops a budget that will ultimately prioritize people, transparency and our communities.
Board of Directors
Supervisor Terra Lawson-Remer, Chair
Councilmember Ditas Yamane, Vice Chair
Councilmember Sean Elo-Rivera, Director
Councilmember Jack Fisher, Director
Councilmember Michael Inzunza, Director
Councilmember Marco San Antonio, Director
Councilmember Genevieve Suzuki, Director
Finance and Risk Management Committee
Councilmember Ditas Yamane, Chair
Councilmember Genevieve Suzuki, Vice Chair
Councilmember Michael Inzunza, Director
Community Advisory Committee
CHULA VISTA
• Anthony Sclafani
• Alonso Gonzalez
COUNTY OF SAN DIEGO
• Peter Andersen
• Ross Pike
ENCINITAS
• Tara Hammond
• Molly Hintlian
IMPERIAL BEACH
• Vacant
• Kenneth Hoyt
LA MESA
• David Harris
• Shaun Sumner
NATIONAL CITY
• Sorayda Santos
• Larry Emerson
SAN DIEGO
• Luis Montero-Adams
• Matthew Vasilakis
Community Power Executive Team
Karin Burns, Chief Executive Officer
Veera Tyagi, General Counsel
Jack Clark, Chief Operating Officer
Gordon Samuel, Chief Commercial Officer
Jannies Burlingame, Chief Financial Officer and Treasurer Finance Department
Jannies Burlingame, Chief Financial Officer and Treasurer Tim Manglicmot, Senior Director of Finance and Risk
Jeb Spengler, Associate Director of Finance and Procurement William Weisman, Associate Director of Finance
Christopher Stephens, Procurement Manager
Krystal Carranza, Procurement Manager
Diana Gonzalez, Risk Manager
Mark Alfaro, Finance Manager
Christopher Do, Senior Financial Analyst
Michelle Phillips, Senior Financial Analyst
Julissa Mercedes, Financial Analyst
Kevin Bateman, Financial Analyst
Paige Spounias-Flynn, Procurement Analyst
Angad Kapoor, Procurement Analyst
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14 Financial Policies
Attachment 1
402
SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Financial Policies Attachment 1 87 Financial Policies
Budget Policy
Purpose
This policy (“Policy”) establishes San Diego Community
Power’s (SDCP’s) timeline for annual budget preparation and for discretionary budget adjustments. This Policy is adopted pursuant to Government Code Section 6508 et seq. and must be adopted or amended by resolution.
Budget Guidelines
On October 1, 2019, the Founding Members of SDCP adopted the Joint Powers Agreement (JPA), which was amended and restated on December 16, 2021. There are several sections of the JPA that guide the development and management of the budget.
• Section 4.6 Specific Responsibilities of the Board.
4.6.2 Formulate and adopt an annual budget prior to the commencement of the fiscal year.
• Section 7.2 Depository. 7.2.3 All expenditures shall be made in accordance with the approved budget and upon
the approval of any officer so authorized by the Board in accordance with its policies and procedures.
• Section 7.3 Budget and Recovery Costs. 7.3.1 Budget.
The initial budget shall be approved by the Board. The
Board may revise the budget from time to time as may
be reasonably necessary to address contingencies
and unexpected expenses. All subsequent budgets of
SDCP shall be prepared and approved by the Board
in accordance with its fiscal management policies that
should include a deadline for approval. 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.
Budget Preparation
The Chief Financial Officer (CFO) begins the annual budget process in February of any given year. The Finance department develops initial revenue and expense estimates and updates its short-term financial plan. In March and April, SDCP staff develop and refine budget proposals to develop an initial budget baseline for the Agency for the upcoming budget
year. The budget is further refined through strategic planning sessions and through the SDCP Finance and Risk Committee.
The CFO shall then prepare and submit to the CEO (who
further submits to the Board) a draft proposed budget for the next following fiscal year in May, or no later than the second month immediately preceding the start of the respective fiscal year. The budget shall be in alignment with established goals and shall reflect all activities including operating programs, revenues, and expenditures. The budget shall be approved by the Board at a public meeting in June, or no later than the month immediately preceding the start of the respective fiscal year.
CEO and CFO Authority
CEO and CFO Authority: The Chief Executive Officer (CEO) or CFO will have the discretion to authorize expense transfers from line items between and within SDCP’s Budget Level 2 categories as established and approved in the annual budget process by the SDCP Board, provided that net transfers total $150,000 or less from the budget category. For example, within the Professional Services and Consultants Budget Level 2 category, the CFO may authorize that $150,000 move from the Data Management to the Technical Support Budget Level 3 categories, provided that the total Professional Services and Consultants budget level 2 category remains the same.
403
SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Financial Policies Attachment 1 88 FIGURE 58. EXAMPLE: EXPENSE TRANSFERS WITHIN BUDGET LEVEL 2 CATEGORIES Professional Services and
Consultants
FY23 Original Budget FY23 Amended Budget Change
Data Management $10,541,810 $10,391,810 $(150,000)
Legal/Regulatory $1,330,000 $1,330,000 $ -
Other Services $1,111,000 $1,111,000 $ -
SDG&E Fees $2,563,226 $2,563,226 $ -
Technical Support $1,335,000 $1,485,000 $150,000
Total Professional Services Expenses $16,881,036 $16,881,036 $ - Additionally, for example, the CEO may authorize that $150,000 move from the Professional Services and Consultants to the General Administration Budget Level 2 categories.
FIGURE 59. EXAMPLE: EXPENSE TRANSFERS BETWEEN BUDGET LEVEL 2 CATEGORIES Budget Level 2 FY23 Original Budget FY23 Amended Budget Change Cost of Energy $661,638,828 $661,638,828 $ -
General and Administration $2,591,363 $2,741,363 $150,000 Marketing and Outreach $4,164,167 $4,164,167 $ -
Personnel Costs $7,951,499 $7,951,499 $ -
Professional Services and
Consultants
$16,881,036 $16,731,036 $(150,000)
Programs $1,395,000 $1,395,000 $ -
Debt Service $1,314,922 $1,314,922 $ -
Total Budget Level 2 $695,936,815 $695,936,815 $ -
The CEO, under his or her discretion, may still require approval of the Board for any budget changes that may fall under the discretion of the Policy. Amendments to the annual budget as approved by the Board will reset the original appropriation (revenue or expense) for the fiscal year for the purposes of the Policy.
Balanced Budget
A balanced budget shall exist when the total projected revenues are greater than or equal to the total projected expenses. Total revenues shall include all revenues from retail and wholesale sales of electricity. Total expenses shall include all operating expenses, program expenses, and contributions to reserve funds. Any year-end surplus will be used to maintain reserve levels. Any decrease in revenues and or increase in expenditures that causes the budget to become imbalanced will require an amended budget. The CFO shall prepare a proposed amended budget and submit it to the Board for approval.
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SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Financial Policies Attachment 1 89 Financial Reserves Policy
Purpose and Scope
San Diego Community Power (“Community Power” or
“agency”) will maintain Financial Reserves (Reserves) as described in this policy.
Definitions
• Days cash on hand: Unrestricted cash, cash equivalents, and investments unencumbered by legal agreements
and not earmarked for specific purposes x 365 /
(budgeted operating expenses for the current fiscal year) • Reserves: Unrestricted cash, cash equivalents, and
investments unencumbered by legal agreements and
not earmarked for specific purposes. Any Reserves
that are designated by the Board of Directors as Rate
Stabilization Reserves are included in the total Reserves calculation and reserve thresholds.
• Reserve Event: An occurrence that necessitates the use of Reserves to preserve Community Power’s financial
stability or to address risk factors. Reserve Events may include, but are not limited to:
• Volatility in energy costs, market price
benchmarks, and energy sales (load)
• An increase in uncollectable customer accounts
due to an unforeseen event
• Need to stabilize customer rates
• Ensuring sufficient working capital, including
funding for strategic capital projects
• Covering unanticipated expenditures
• Rate Stabilization Reserves: A type of reserve intended to provide budget stabilization for the organization
while mitigating financial impacts and cost of energy to customers due to cyclical cost of energy fluctuations.
It is intended to reduce rate shocks while maintaining
compliance with financial covenants.
Policy
A. Reserves Balance Thresholds
Community Power’s Reserves policy establishes three
key thresholds:
Minimum Reserve Balance: Community Power will
strive to ensure a minimum reserve balance sufficient
to cover at least 180 days cash on hand. This minimum
level provides the agency with the ability to meet
essential obligations and maintain financial stability.
Target Reserve Balance: Community Power will
strive to maintain a target reserve balance sufficient
to cover at least 225 days cash on hand. The Target
Reserve Balance provides sufficient reserves
for typical fluctuations in market volatility. This
target level ensures the agency’s ability to absorb
unexpected cost increases or revenue shortfalls
without immediate negative impacts on operations,
credit rating, or customer rates.
Maximum Reserve Balance: Community Power
will strive to build reserves sufficient to cover
no more than 270 days cash on hand, unless
specifically authorized by the Board. The Maximum
Reserve Balance provides sufficient reserves
for significant fluctuations in market volatility or
unforeseen circumstances.
B. Purpose and Intent of Reserves Balance
Thresholds:
The Board shall determine the contribution
to Reserves at least annually, with the goal of
maintaining balances between the Target Reserve
Balance and Maximum Reserve Balance. However,
to the extent fiscal year end reserves fall between
the Minimum and Maximum Reserve Balances, no
immediate Board action is required.
If Reserves are below the Minimum Reserve
Balance: The Board should ensure that Reserves do
not drop below the Minimum Reserve Balance unless
determined by the Board to be necessary to address
a Reserve Event. The Minimum Reserves Balance is
essential to maintain operational requirements and
credit worthiness by providing reserves sufficient to
meet basic threats of risk.
Should Community Power’s Reserves fall below the
Minimum Reserve Balance, a plan to restore Reserves
to the Minimum Reserve Balance shall be included in
subsequent budget and rate discussions to return to
the Minimum Reserve Balance as soon as practicable.
If Reserves are above the Maximum Reserve
Balance: If Fiscal Year End Reserves are above
the Maximum Reserve Balance, the Board may
evaluate opportunities for strategic investments,
programmatic reserves, or other purposes as
authorized by the Board.
C. Permissible Use of Reserves:
• The Board may authorize the use of Reserves for any
Reserve Event.
• The Board may authorize the use of Reserves
between the Target Reserve Balance and Maximum
Reserve Balance to be designated as Rate
Stabilization Reserves. Rate Stabilization Reserves
allows Community Power to defer revenues in years
of strong financial results for use in future years when 405
SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Financial Policies Attachment 1 90 financial results are weaker or stressed. This strategy would enable Community Power to address spikes in
energy costs or other variable costs through the use
of the Rate Stabilization Reserves and mitigating or
avoiding substantial rate increases for customers.
D. Permissible 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 Chief Financial Officer.
The Chief Executive Officer (“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. Meet any margin or collateral posting
requirements under energy supply
contracts; and
3. Provide resources to meet
emergency expenditures.
• Any use of the reserves under the CEO’s authority
shall be reported to the Board at the next regularly
scheduled meeting.
• Any further use of reserves as necessary or desirable, must be recommended by the CEO to the Board for
approval of such use.
D. Reserve Review and Reporting
Reserves and annual contributions will be reviewed
on an annual basis as part of Community Power’s
budget process. Reserves will also be reviewed at
the completion of Community Power’s annual audit
to reconcile the Reserve balance. The results will
be reported to the Board as part of the year-end
financial report presentation.
E. Excess Reserve Distribution
If Fiscal Year End reserves exceed the Maximum
Reserve Balance, the Board may authorize excess
reserve distributions at their discretion, including for the following purposes:
• Strategic Uses: Use excess funds for capital
projects, financing programs, paying down
existing debt, rate reductions, or other
strategic purposes.
• 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.
F. Policy Review
Community Power staff will complete a periodic
review of this Financial Reserve Policy.
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SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Financial Policies Attachment 1 91 Rate Stabilization Reserve Policy
Purpose and Scope
San Diego Community Power (Community Power) may
maintain a Rate Stabilization Reserve (RSR) as recognized in the Board-adopted Financial Reserves Policy. Any RSR will be maintained and utilized as described in this policy for the intention of providing customer rate stability.
Definitions
• Reserves: Unrestricted cash, cash equivalents, and
investments unencumbered by legal agreements and
not earmarked for specific purposes. Any Reserves
that are designated by the Board of Directors as Rate
Stabilization Reserves are included in the total Reserves calculation and reserve thresholds.
• Rate Stabilization Reserves: A type of reserve intended to provide budget stabilization for the organization
while mitigating financial impacts and cost of energy to customers due to cyclical cost of energy fluctuations.
It is intended to reduce rate shocks while maintaining
compliance with financial covenants.
• Rate Stability Metrics: The change in generation rates experienced by customers due to rate changes approved
by the Board of Directors, which may be measured as
year-over-year rate change or value proposition change.
Regular components of rates that fluctuate independently of changes approved by the Board, such as seasonal or
time-differentiated rates or changes to delivery rates may be excluded from rate stability metrics.
• Fiscal Year (FY): The consecutive twelve-month period of July through June, identified by the calendar year of the latter half (i.e., July 2025 through June 2026 is FY 26), for use in financial planning, or as otherwise established by the Community Power Board pursuant to Section 7.1
of the Joint Powers Agreement.
• Calendar Year (CY): The consecutive twelve-month
period of January through December, aligned with the
calendar, for use in rate-setting.
• Revenue Transfer: A financial decision within a strong FY, defined by expected net position, to allocate a portion of revenues to the RSR. In this scenario, the allocation to the RSR is classified as a negative contribution to
net position, so that these funds are not recognized as revenue within that FY.
• Revenue Recognition: A financial decision within a weak FY, defined by net position or rate stability metrics, to allocate a portion or all of funds in the RSR to revenues.
In this scenario, the allocation from the RSR is classified as a positive contribution to net position, so that these funds are recognized as revenue within that FY.
Policy
Objectives
The RSR allows Community Power to defer revenues in strong fiscal years and to withdraw revenues in weak fiscal years, relative to net position, in order to provide rate stability to customers and avoid substantial rate increases. The primary use case of the RSR is to mitigate rate volatility caused by Market Price Benchmark (MPB) and Power Charge Indifference Adjustment (PCIA) rate fluctuations, or for any other purpose, to reduce year-over-year rate changes and/or maintain
Community Power’s rate competitiveness between rate
setting cycles.
Community Power staff will closely monitor reserves and metrics associated with rate stability and affordability to determine appropriate Revenue Transfers and Revenue
Recognitions via the RSR during the fiscal year and the rate-setting process.
Target RSR Balance
The Target RSR Balance may be an amount up to or equivalent to 45 Days Cash on Hand, representing the Reserves between the Target Reserve Balance and Maximum Reserve Balance
of Community Power’s Financial Reserves, as defined in the Financial Reserves Policy. Community Power may reevaluate this Target RSR Balance annually to determine that the RSR is sufficient to cover identified risks and to mitigate rate volatility for customers. Should the balance increase above the amount equivalent to 45 Days Cash on Hand, the Community Power Board may authorize adjustment to the balance consistent with the Financial Reserves Policy.
Accounting
The RSR is accounted for under Government Accounting
Standards Board Statements 62 which codify deferred
outflows and inflows of resources. The balance of the RSR, including annual Revenue Transfers and Recognitions, will be recorded on the statement of net position in Community Power’s Statement of Revenues.
Trigger Mechanism: Revenue Transfers should be considered during fiscal years with positive net position, in which reserves are above the Target Reserve Balance as defined by the
Financial Reserves Policy. Revenue Recognitions should be considered during fiscal years with an expected negative net position, or during the rate-setting process to mitigate substantial rate increases for customers. The impacts on financial or bank covenants and other appropriate financial metrics should also be a factor in the decision-making process.
Community Power staff shall strive to not negatively impact the agency’s financial standing via decisions related to the RSR. 407
SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Financial Policies Attachment 1 92 Replenishment Mechanism: When Revenue Recognition
decisions from the RSR are approved, Community Power staff must also present a plan to replenish the RSR within 2-4 years by the next regularly scheduled Board meeting, if feasible.
Revenue Transfers and Recognitions may be made within the same fiscal year, provided that all other criteria are met.
Reporting and Authorization
The Chief Executive Officer (CEO) will have the discretion to authorize Revenue Transfer and Recognition decisions related to the RSR during the fiscal year. Any Recognition of the RSR during a fiscal year must be recommended by the CEO to
the Board for approval of such use, subject to appropriation approved by the Board.
Revenue Transfer and Recognition decisions will be reported to the Board of Directors by Community Power staff at the next regularly scheduled meeting. The year-end financial report presentation to the Board will also include an update on the status of the RSR.
Policy Review
Community Power will complete a periodic review of this Rate Stabilization Reserve Policy and recommend updates to the Board, as appropriate.
Miscellaneous
Nothing in this policy shall supersede any provisions
established or updated via Community Power’s Financial
Reserves Policy and Rate Development Policy.
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SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Financial Policies Attachment 1 93 Non-Energy Procurement Policy
Purpose
It is in the interest of San Diego Community Power (“Community Power”) to establish procurement practices that facilitate efficient business operations and provide fair compensation and local workforce opportunities, whenever possible, within a framework of high quality and competitive service offerings.
This Non-Energy Procurement Policy (“Policy”) shall not apply to energy procurement or transactions governed by the Energy Risk Management Policy as enacted, adopted or revised from time to time by Community Power’s Board of Directors (“Board”).
Policy
1. Procurement of Professional Services
Community Power may contract for professional services, which are services that require expertise and knowledge, including but not limited to consultant, legal, or design services, in its sole discretion. Community Power shall procure professional services in compliance with this Policy.
Community Power shall endeavor to secure the highest quality professional services available and is not required to award a contract for services to the lowest-cost proposer.
2. Procurement of General Services
Community Power may contract for general services, which are services that are not professional services, including but not limited to cleaning or maintenance services, in its sole discretion. Community Power shall procure general services in compliance with this Policy. Although Community Power shall not be required to award a contract to the lowest-cost proposer, Community Power shall seek to procure general services at the lowest costs.
3. Procurement of Goods
Community Power shall procure goods, including but
not limited to supplies, materials, furnishings, software or equipment, in compliance with this Policy. Although
Community Power shall not be required to award a contract to the lowest-cost proposer, Community Power shall seek to procure goods at the lowest costs. Community Power is encouraged to jointly procure goods with other governmental agencies to obtain the lowest cost when possible.
4. Procurement of Public Works Projects
Community Power shall comply with California Public Contract Code Section 20160 et seq. and other applicable laws and regulations when procuring public projects in excess of $5,000. For purposes of this section, a “public project” shall have the same meaning as defined in Public Contract Code Section 20160, and includes, among other things, projects for the erection, improvement, painting, or repair of public buildings and works.
5. Competitive Procurement Requirements
a. Contracts Exceeding $150,000. One of the following
methods shall be used for anticipated goods and/or
services with an aggregate contract value exceeding
$150,000 over the entire duration of the contract:
i. Request for Proposals (“RFP”): An RFP is typically
used to procure technical, complex and unique
services, and/or when the requirements are
qualitative rather than quantitative. A RFP tends to
be used when creative or innovative approaches
are needed or when Community Power is looking
for a customized solution to a problem. An RFP will
include, at a minimum, a requirements statement
or statement of work; experience, expertise, or
qualification criteria; and an evaluation criteria
for which a proposal will be evaluated. Proposals
will be required to include a detailed explanation
of Proposer’s approach, detailed work plans,
solutions, or methods, and price/budget, as
applicable. All RFPs shall, at a minimum, be posted
on Community Power’s website.
i. Request for Qualifications (“RFQ”): An RFQ is
typically used to procure goods and/or services
when Community Power needs to establish a
pool of pre-qualified providers (“PQPs”). The
RFQ process is typically used to determine a
proposer’s capability to perform specified services
and meet stipulated requirements. The RFQ will
specify the areas of expertise, experience, or
knowledge that Community Power seeks, and, if
applicable, the process for a proposer to become
a pre-qualified provider in those specified areas.
PQPs are then eligible to propose and compete in
subsequent task order solicitations when defined
scopes of work are identified by Community
Power. Subsequent task order solicitations will
include scope of work, experience, expertise or
qualifications, and evaluation criteria for which
proposals will be evaluated against.
i. Additionally, the RFQ method can be used to
award contracts for services that include scopes
of work to be authorized on an as-needed basis.
All RFQs shall, at a minimum, be posted on
Community Power’s website.
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SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Financial Policies Attachment 1 94 b. Contracts between $10,000 and $150,000. For
anticipated goods and/or services with an aggregate
contract value between $10,000 and $150,000 over
the entire duration of the contract. Community Power
shall obtain written quotes or bids from at least three providers, if feasible. Each quote or bid shall include the provider’s name, address, phone number, professional
license number (if applicable), a description of the
work to be performed, and the proposed cost. Public
advertising is not required for these solicitations.
6. Non-Competitive Procurement
a. Contracts Less than $10,000. For anticipated goods
and/or services with an aggregate contract value of less than $10,000 over the entire duration of the contract,
no competitive procurement is required, but staff is
directed to seek the lowest cost goods and the highest
quality services available. This process shall not be used when it is reasonably foreseeable that additional goods and/or services are anticipated from the same vendor
would exceed the $10,000 threshold in the aggregate, in which case competitive procurement shall be used.
b. Legal Services. No competitive procurement is required for legal services.
c. Rent or Lease of Office Space. No competitive
procurement is required to rent or lease office space.
d. Contracting with a Government Agency. No competitive procurement is required for goods and/or services
provided by another governmental agency, provided
that such agency’s procurement is in compliance with
California law.
e. Emergencies. In the event of an emergency, the Chief Executive Officer (“CEO”) may suspend the normal
purchasing and procurement requirements for goods
and/or services related to abatement of the impacts or
effects of the emergency. “Emergency” for purposes
of this Policy means a situation creating an imminent
danger to life or property or other material financial loss that calls for immediate action with inadequate time for a competitive procurement.
7. Sole-Source
The Board or the CEO, as applicable, after consultation with the General Counsel, may waive the competitive procurement requirements in this Policy and procure goods and/or services from a sole source, based upon written documentation
justifying a sole-source award as described below, and as allowed by applicable law.
a. Written justification for a sole-source award must
demonstrate that:
i. The desired goods and/or services are available
from only the sole source based upon one or more
of the following reasons: (a) The unique experience
and capabilities of the sole source; (b) The project
involves the use of proprietary technology from
sole source; or (c) The sole source has ownership of
key assets required for project performance; or
i. Other circumstances exist which in the
determination of the Board or the CEO, as
applicable, require such waiver in the best interests
of Community Power. Such circumstances may
include, but are not limited to: (a) Projects involving cost sharing by multiple sponsors; (b) Time
extension of an existing sole source agreement;
or (c) Projects requiring compatibility with existing
specialized equipment.
b. The following are not permissible justification for
sole source:
i. Personal preference for product or vendor;
ii. Cost, vendor performance or local service (the
latter may be considered an award factor in
competitive procurements);
iii.Features that exceed the minimum requirements
for the goods and/or services; or
iv.The length of time needed to conduct a
competitive procurement is inconvenient.
8. Additional Authorized Procurement Methods
a. Cooperative Procurement. Cooperative Procurement
refers to the combining of requirements of two or more
government agencies to leverage the benefits of volume
purchases, delivery and supply chain advantages, best
practices, the reduction of administrative time and
expenses, or some combination thereof. Community
Power may use Cooperative Procurement when the use
of it enhances operational efficiencies and demonstrates potential cost savings for Community Power, including
transaction costs.
b.Piggyback Procurement. Piggyback Procurement is
a type of Cooperative Procurement, and it refers to a
government agency’s use of an existing competitively
awarded contract from another government agency
to form its own contract directly with that vendor
to purchase goods and/or services on the same or
similar terms. Community Power may use Piggyback
Procurement when such a procurement enhances
operational efficiencies and demonstrates potential
cost savings for Community Power, including
transaction costs.
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SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Financial Policies Attachment 1 95
9. RFP/RFQ Proposal Evaluation
a. Responses received through an RFP or RFQ shall be
subject to a set of criteria and a scoring system, reviewed and evaluated by relevant Community Power staff and
an evaluation committee selected by the CEO or, at
the discretion of the Board, members of a designated
Board committee. Responses received shall be evaluated
based on competency to perform the scope of work,
best fit, price competitiveness, and other additional
criteria pursuant to Community Power’s Inclusive and
Sustainable Workforce Policy. The preferences below
may not apply to procurements conducted jointly
with other public agencies, and shall not apply when
prohibited by state or federal statutes or regulations
that require award to the lowest responsible bidder.
Proposers may only pursue two of the four preferences.
i. Businesses with office(s) located in San Diego
County and include at least 25% San Diego
County residents under their employment shall
receive a bonus of up to 5 points or 5% out
of a 100-point scoring system in competitive
solicitations. To receive the preference, a proposer
must submit written information relating to the
location of its office(s) in San Diego County and
the percentage of San Diego County residents
under its employment.
ii. Businesses certified as disabled veteran business
enterprises by the Supplier Clearinghouse
(thesupplierclearinghouse.com) shall receive a
bonus of up to 5 points or 5% out of a 100-point
scoring system in competitive solicitations. To
receive the preference, a proposer must submit
proof of current, valid certification by the Supplier
Clearinghouse. Such proof shall be subject to
verification by Community Power.
i. Businesses certified as a Persons with Disabilities
business enterprise by the Supplier Clearinghouse
or Disability:IN shall receive a bonus of up
to 5% or 5 points out of a 100 point scoring
system in competitive solicitations. To receive
the preference, a proposer must submit proof
of current, valid certification by the Supplier
Clearinghouse or Disability:IN. Such proof shall be
subject to verification by Community Power.
i. Businesses certified as small business by the
Department of General Services shall receive
a bonus of up to 5% or 5 points out of a 100-
point scoring system in competitive solicitations.
To receive the preference, a proposer must
submit proof of current, valid certification by the
Department of General Services. Such proof shall
be subject to verification by Community Power.
b. Community Power is committed to the highest
standards of responsible behavior and integrity in
all of its business relationships. Community Power
will consider an organization’s business practices,
environmental record, and commitment to fair
employment practices and compensation in its
procurement decisions.
10. Amendments.
a. For non-Board-approved contracts with an original value less than $10,000, amendments may be authorized to
increase the aggregate contract value up to $10,000.
b. For non-Board-approved contracts with an original value between $10,000 and $150,000 that were procured in
accordance with Section 5 of this Policy, amendments
may be authorized to increase the aggregate contract
value up to $150,000.
c. For Board-approved contracts, amendments may be
authorized to increase the aggregate contract value by
up to an additional $150,000 or 10% of the original
contract value, whichever is greater, without Board
approval. Amendments exceeding these values shall
require Board approval. The contract amendments shall
be reported at the next regular Board meeting.
11. General Provisions.
The provisions below shall apply to all methods of
procurement described above.
a. All awards resulting from solicitations conducted in accordance with this Policy shall be documented in a
written agreement. Execution of such agreements shall
be effectuated in accordance with Community Power’s
Delegated Authority Policy.
b. The Board may, consistent with applicable law, waive one or more purchasing procedures in this Policy in its sole discretion.
c. The Board designates the CEO as Community
Power’s purchasing agent. As the purchasing agent for
Community Power, the CEO is hereby authorized on
behalf of Community Power to (i) purchase Goods;
(ii) rent furnishings and equipment; (iii) contract for Services, Professional Services, or Legal Services, or
(iv) procure Public Works projects, as provided herein.
The CEO may further delegate this authority in the
CEO’s discretion.
d. The CEO, at their discretion, may direct Community
Power to use competitive procurement for anticipated
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SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Financial Policies Attachment 1 96 goods and/or services with an aggregate contract value
of $150,000 or less for a contract term.
e. When procuring goods and/or services utilizing state or federal funds (e.g., grant or loan funds), Community Power shall comply with all state and federal project
requirements in securing any goods or services
necessary. If there is a conflict between the foregoing, the more restrictive requirements shall apply.
f. Community Power shall not be required to award a
contract to purchase goods or services from the lowest
responsible bidder, unless required by California law.
g. A contract shall not split purchases into more than one purchase in order to avoid the Competitive Procurement
Requirements in this Policy. If it is reasonably
foreseeable that similar goods and/or services are
anticipated from a vendor that would have an aggregate
value of $10,000 or more, the competitive procurement
requirements of this Policy shall apply.
h. No Community Power officer or employee shall accept, directly or indirectly, any gift, rebate, money or anything of value from any person or entity if such gift, rebate, money or anything of value is intended to reward or be
an inducement for conducting business, placing orders
with, or otherwise using the officer’s or employee’s
position to secure a contract with Community Power.
12. Protests
a. Protest Regarding Solicitation – an interested party that is an actual or prospective proposer with a direct economic interest in the procurement may submit a
protest in writing relating to the form or content of
a solicitation to Community Power’s Procurement
Manager at least five (5) business days before the
deadline to submit proposals.
b. Protest Regarding Award of Contract – a proposer may submit a protest in writing regarding the award of a
contract to Community Power’s Procurement Manager
no later than five (5) business days after proposer
receives notification of non-award.
c. Protest Contents – For the protest to be valid, it must:
clearly identify the procurement action being protested; specify, in detail, the factual and legal grounds for the protest, including identifying the specific provisions of the solicitation, rules, regulations or laws upon which the protest is based; include all relevant, supporting
documentation with the protest at the time of filing;
identify the specific relief requested; and include the name, mailing, address, telephone number and email address of the person representing the protester. Any matters not set forth in the protest shall be deemed waived.
d. Community Power Review – upon receipt of a valid
and timely protest, Community Power will investigate
the protest and will provide a written response to the
protester within a reasonable time. If necessary, the
CEO at their sole discretion may extend the deadline
to submit proposals to allow for a reasonable time to
review the protest. The CEO at their sole discretion
may elect to withhold contract execution until the
protest is resolved or denied, or proceed with contract execution while the review is pending. If the protest
is upheld, the CEO will consider all circumstances
surrounding the procurement in their decision for a
fair and reasonable remedy, including the degree of
prejudice to the protester or to the integrity of the
competitive procurement process, the urgency of the
procurement, the extent of performance if the contract
has already been executed, the cost to Community
Power, and the impact of the proposed remedy. The
remedy may include, but is not limited to, reissuance of the solicitation, revised evaluation of the proposals, or termination of the contract.
e. Exclusive Remedy – The procedure set forth in this
Policy is mandatory. Failure by a protester to comply
with the procedure for protests will constitute a waiver of any right to pursue the protest, including the filing of a claim under the relevant Government Code section or
initiating legal proceedings. In no event will a protest be considered if all proposals are rejected or no contract is awarded. If Community Power determines that the
protest is frivolous, the protester may be deemed
ineligible for future contract awards.
13. Nondiscrimination Contract Clause
Each Community Power contract and subcontract shall contain a nondiscrimination clause that reads substantially as follows:
“Contractor 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 subcontractors, vendors, or suppliers. Contractor shall provide equal opportunity for subcontractors to participate in subcontracting opportunities.”
14. Information on Supplier Diversity
Public Utilities Code Section 366.2(m) requires certain community choice aggregators, including Community Power, to annually submit to the California Public Utilities Commission (CPUC): (1) a detailed and verifiable plan for increasing procurement from small, local, and diverse business enterprises; and (2) a report regarding its procurement from women,
minority, disabled veteran, and LGBT business enterprises.
General Order 156 (GO 156), adopted by the CPUC, requires 412
SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Financial Policies Attachment 1 97 certain California public utilities to engage in outreach activities and meet specific procurement goals from women, minority, disabled veteran, persons with disabilities, and LGBT business enterprises. Qualified businesses become GO 156 certified through the CPUC and are then added to the GO 156 Supplier Clearinghouse database (www.thesupplierclearinghouse.com).
To assist Community Power with its reporting obligations under Public Utilities Code Section 366.2(m) and with
evaluating its supplier outreach and other activities, proposers that are awarded the contract will be asked to voluntarily disclose their certification status with the CPUC Clearinghouse, as well as their efforts to work with diverse business
enterprises, including WBEs, MBEs, DVBEs, and LGBTBEs.
Except as otherwise expressly provided under this Policy and/or required by applicable state or federal law or funding requirements (including, without limitation, any grant or loan conditions), Community Power shall not use any demographic information received from potential vendors in any way
as part of its decision-making or selection process. Rather, Community Power will use such information solely for
compliance with its reporting obligations to the CPUC and evaluation of Community Power’s outreach and other activities consistent with applicable law. Pursuant to Article I, Section 31 of the California Constitution, Community Power shall not discriminate against or give preferential treatment to any individual or group on the basis of race, sex, color, ethnicity, or national origin except as otherwise allowed therein.
15. Signing Authority
Community Power’s CEO and designated staff are authorized to execute contracts and related documents in accordance with Community Power's Delegated Contract and Signature Authority Policy, as enacted, adopted or revised from time to time by the Board.
16. Review and Approval as to Form by
General Counsel
All Community Power agreements must be approved as to the form and content by the General Counsel or his/her designee prior to signature by any authorized individual.
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SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Financial Policies Attachment 1 98 Debt Policy
Purpose
This Debt Policy (“Policy”) establishes San Diego Community Power’s (“SDCP”) Debt Policy. The Policy articulates: (1) the situations and steps necessary for the issuance of debt; (2) the types of debt that may be issued; and (3) how the debt fits into SDCP’s capital investment program (CIP), Community Power Plan, integrated resource plan, or strategic policy goals.
This Policy is adopted pursuant to Senate Bill 1029 (Hertzberg, 2016) and Government Code Section 8855 et seq. and must be adopted or amended by resolution. The SDCP Board of
Directors (“Board”) is required to adopt a formal Debt Policy before any debt can be used.
Background
The SDCP Board adopts budgets and establishes and adjusts rates, as appropriate, each fiscal year to provide sufficient revenues to pay all operating expenses, make required
payments and comply with commitments on all other debts or financial obligations of the Agency.
SDCP is committed to long-term financial planning,
maintaining appropriate reserve levels, and employing
prudent practices in governance, management, and budget administration. The SDCP Board further adopted its Strategic Plan on June 23, 2022, which included the goal to adopt financial controls and policies to meet or exceed best practices and manage risk.
SDCP utilizes financial policies that foster financial stability, support fiscal discipline, and enable SDCP to maintain strong investment-grade credit ratings.
This Policy confirms the commitment of the SDCP Board,
management, staff, advisors and other decision makers to adhere to sound financial management practices, including full and timely repayment of all borrowings, allowing continuing ready access to the capital markets to achieve the most effective cost of capital within prudent risk parameters. The goals and objectives of this Policy are as follows:
• Maintain cost-effective access to capital markets
• Maintain a prudent level of financial risk
• Preserve future financial flexibility
• Finance capital projects, acquisitions, or improvements in a timely and cost-effective manner
• Manage debt effectively within SDCP Board established objectives and parameters
• Maintain strong credit ratings and good investor relations • Maintain compliance with all relevant laws, reporting, and disclosure requirements
• Foster integrity in the debt management process
Further, this Policy is intended to comply with the regulatory requirements of California Government Code Section 8855 and Senate Bill 1029 which, among many things, requires debt issuers to adopt a local debt policy governing the issuance of debt and to enhance the management of government
financial resources.
Scope and Authority
This Policy shall govern the issuance and management of all bonds and other forms of indebtedness of SDCP, together with any credit, liquidity, or other security instruments and agreements that may be executed in connection with the
issuance of bonds and other forms of indebtedness (“bonds” or “debt”). It also considers certain financial targets which SDCP and its Board may contemplate in the future in order to continue to implement its capital investment program and to support cost-effective borrowing.
While this Policy specifically governs debt issued directly by SDCP, SDCP may consider joint arrangements with other
municipal issuers or private parties to finance a project when it serves SDCP’s policy objectives. SDCP is authorized to join together with other municipal agencies to create a separate entity, such as a joint powers authority, to issue debt on behalf of SDCP or the project participants. Typically, joint venture debt is repaid through revenues generated by the project, and SDCP will be liable only for its share of debt service, as specified in a contract executed in connection with the joint venture debt. If the potential for a joint venture does exist, SDCP will examine and negotiate the financial arrangements, obligations, liabilities, tax issues and other factors that may arise in the context of impacts on SDCP and its direct debt obligations using this Policy and financial best practices as guidance. SDCP will comply with state law limitations and in general, avoid joint procurement situations if SDCP lends it credit or enhances the credit of another entity, unless doing so will result in other net tangible benefits to SDCP. Further, as with all SDCP debt, any joint venture debt would be subject to evaluation and authorization of the Board.
While adherence to this Policy is generally required, it is recognized that changes in the capital markets, SDCP programs and other unforeseen circumstances may from
time to time produce situations that are not covered by the Policy and will require modifications or exceptions to best achieve policy goals. In these cases, management flexibility is appropriate, provided specific authorization from the SDCP Board is obtained.
This Policy shall be reviewed at least annually as described below and presented to the SCDP Board for approval of any changes as appropriate. This Policy will remain in effect as amended or restated in the future by the Board.
Notwithstanding anything in this Policy to the contrary, the failure of SDCP to comply with any provisions of this Policy 414
SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Financial Policies Attachment 1 99 shall not affect the authorization, validity, or enforceability of any debt or other forms of indebtedness that are otherwise issued in accordance with law.
Use of Debt
To achieve its objectives, SDCP may consider debt financing for the construction, acquisition, rehabilitation, replacement, or expansion of physical assets, including real and personal property, equipment, furnishings, and improvements. Debt may also be issued for other Board-approved needs or for the refunding of prior outstanding debt.
For example, SDCP may consider the use of debt to finance ownership interest in generating or storage assets if it is determined to be a cost-effective alternative to a standard power purchase agreement or if asset ownership may afford synergies between SDCP’S other objectives (e.g., resiliency, GHG free energy, etc.) or additional measurable advantages in terms of operational efficiency.
SDCP, under the direction of the Board, will retain full flexibility in determining the best funding approach on a case-by-case basis.
Types of Debt
Types of bond issuance, further described in the Appendix, include:
• New Money: Debt may be incurred to provide for
capital financing for future capital expenditures or
reimbursement of prior expenditures.
• Refunding: Refunding bonds may be issued to realize
debt service savings, restructure outstanding debt,
modify covenants, or for other debt management
purposes. Absent significant non-economic factors,
refunding transactions contemplated solely for debt
service savings must produce a minimum aggregate net
present value debt service savings of at least 3% of the par value of the refunded bonds, calculated using the
refunding issue’s true interest cost (“TIC”) as the discount rate. SDCP will work with its Municipal Advisor (“MA”) to assess potential refunding opportunities.
Bonds may be issued as taxable or federally tax-exempt:
• Tax-Exempt: Interest received by bondholders of
SDCP’s bonds issued on a federally tax- exempt basis is exempt from federal income tax, and so typically may
be issued at lower interest rates, reducing SDCP’s cost of borrowing. Additional interest rate advantages may
be available for bank qualified bonds (where SDCP will
issue less than $10 million of tax- exempt bonds in a
year). However, SDCP is limited by federal tax law in the uses of tax- exempt bond proceeds and must comply
with additional federal tax law requirements during the full term of any bond issue. Uses of proceeds typically require a governmental purpose and must be spent on
capital improvements rather than operating expenses.
Tax implications include having reasonable expectations for spending proceeds at the time of issuance, limiting private use of financed projects, and complying with
arbitrage restrictions on the bond proceeds.
• Taxable: Taxable debt’s interest is not exempt from
federal income tax, and so is typically issued at higher interest rates than tax-exempt debt. However, the
IRS restrictions described above do not apply, and
so SDCP may wish to use taxable debt in situations
where the project or purpose of borrowing may not
meet federal tax law requirements. SDCP may also
consider taxable tax credit or direct subsidy bonds, such as Clean Renewable Energy Bonds, Qualified Energy
Conservation Bonds, etc., that offer lower costs of
borrowing to SDCP through the issuance of taxable debt
that is supported by federal subsidy payments on the
interest expense to SDCP.
Method of Sale
SDCP may choose to issue bonds using either a competitive or negotiated sale process. SDCP may also sell bonds by means of a private placement or direct sale with a financial institution or other accredited investor when this method is expected to result in cost savings or provide other advantages compared to a traditional public offering. SDCP staff will work with its Municipal Advisor to determine the most appropriate method of sale for each issuance. Please see the Appendix for a detailed description of the different methods of sale that SDCP may consider.
Structure and Term
The repayment schedule of a bond issue can vary greatly from one sale to another. The same is true for other debt instruments. SDCP will consider which structures meet SDCP’s strategic goals, are cost effective, minimize the new debt’s impact on SDCP’s overall debt service schedule, future debt capacity, and other factors when deciding how to structure new debt. In addition to debt amortization terms, structuring options may include the addition and procurement of credit enhancement, the establishment of reserves, the use of
capitalized interest, and call or redemption options.
In structuring debt service, SDCP shall consider (1) current and forecasted revenues and any anticipated changes to rates, charges and operating expenses, (2) future borrowing plans, (3) meeting the Credit Considerations described in the next section, and (4) feedback from the Municipal Advisor and rating agencies on a structure’s potential impacts to SDCP’s credit worthiness. Generally, but not a requirement under 415
SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Financial Policies Attachment 1 100 this Policy, SDCP prefers level debt service over time. SDCP, consistent with tax law, will not structure debt with a maturity date that materially exceeds the average useful life of the assets or improvements being financed.
Green Bonds
To the extent possible, SDCP bond issuances shall be green bonds. A green bond is a type of fixed-income instrument that is specifically earmarked to raise money for climate and environmental projects. These bonds are typically asset-linked and backed by the issuing entity's balance sheet, so they usually carry the same credit rating as their issuers' other debt obligations.
Credit Considerations
When SDCP issues debt, the Agency will have to execute
certain bond documentation and agreements (herein generally referred to as ‘indentures’) that will bind SDCP to specific terms or requirements. Generally speaking, SDCP will agree to abide by certain covenants written in the indenture which describes in detail the obligations and responsibilities of SDCP and the rights of the bondholders which are designed to protect bondholders by setting standards by which SDCP agrees to comply. These types of covenants may require SDCP to meet certain requirements or, conversely, may forbid SDCP from undertaking certain activities that would jeopardize SDCP’s ability to repay its debt. An indenture defines SDCP’s contractual obligations and determines the parameters of SDCP’s permissible financial behavior.
The incorporation of effective bond covenants into SDCP’s future bond issues and respective documentation signal a commitment to abide by stated financial and
operating parameters over the long-term and contribute
towards SDCP’s ability to maintain strong financial health.
Credit ratings are ultimately statements about the likelihood of full and timely debt repayment. Because bond covenants govern an issuer’s ongoing financial behavior, the analysis of bond/indenture covenants and their impact on the risk profile of a bond is an integral part of the credit rating process.
Credit ratings are fundamentally forward-looking opinions on the relative default risk associated with a particular issuer and its debt obligations. Credit ratings have a significant impact on the interest rates for SDCP debt, and therefore SDCP will work to address the cost and benefits of obtaining and maintaining strong credit ratings. Depending on the lien structure of the debt, some, or all, of the following factors may be included in its bond documentation in order to obtain and maintain strong credit ratings that would broaden the appeal of and lower the cost of debt issued by SDCP.
• Debt Service Coverage Ratio: The ability of an agency to pay debt service (i.e. principal and interest on debt obligations) when due is often measured by how much
cash flow is available, after payment of operating
expenses, to cover debt service payments (Debt Service
Coverage Ratio). Debt Service Coverage Ratio is a
common financial metric used in the utility industry and is used by the rating agencies and investors to determine the ability of a utility to fulfill its debt obligations and ensure that the utility generates sufficient revenues
to make its debt secure. SDCP’s future indentures will
likely require cash flow in excess of debt service, or a Debt Service Coverage Ratio greater than 1.0x. Many
public agencies target a Debt Service Coverage Ratio in its financial and debt policies higher than the minimum required by its indenture to improve debt ratings and
lower their costs of borrowing. Should SDCP establish
a minimum Debt Service Coverage Ratio in its future
indentures, the Board may consider establishing a target ratio in this Policy that is higher than the legal minimum.
Note, that a failure by SDCP to meet a target ratio
proposed in this Policy will not result in a default under the indenture so long as the minimum Debt Service
Coverage Ratio is achieved.
• Rate Covenant: A rate covenant is a promise to set
rates or fees at levels that are set to recover sufficient revenues at a designated threshold level to cover
operating expenses and debt service payments. This
designated threshold level is the same as the Debt
Service Coverage Ratio discussed previously. SDCP
may develop one or more rate covenants in order to
measure and govern operating performance. As noted,
future indentures may establish minimum levels of
coverage and SDCP’s Board-adopted financial policies
may establish internal goals that exceed these minimum
coverage requirements.
• Additional Bonds Test: If SDCP were to issue bonds or other debt obligations, the indentures governing those
obligations may have covenants that stipulate whether
SDCP may sell additional bonds in the future that share that same pledged revenue stream as security. SDCP
may develop conditions or standards in its indentures
that describe the parameters whereby SDCP could issue
additional bonds (referred to as an “additional bonds
test”). This test is intended to ensure that future bond issuance does not reduce bondholder security by placing too high a burden on the revenue stream. The additional bonds test may require that SDCP demonstrate that it
has sufficient revenues to meet or exceed the designated Debt Service Coverage Ratio before additional bonds
can be issued.
416
SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Financial Policies Attachment 1 101 While the specific formulation of the Additional Bonds
Test may vary depending on the type of bonds being
contemplated, the SDCP will utilize an Additional Bonds which establishes a limitation on new issuances such that the pledged revenues are no less than one and a half times (1.5x) the maximum annual principal and interest and debt service for the aggregate outstanding senior lien bonds including the debt service for the new issuance.
The Agency will also seek to maintain aggregate annual debt service on long- term debt at a level not-to-exceed 5% of the Agency’s annual total operating expenses. The actual terms and conditions specific to each debt issue will be controlled by the applicable documents.
• Reserves: SDCP may maintain reserves including
those in compliance with GASB 62 such as the adopted
Operating Reserve Fund to act as a rate stabilization fund that can help mitigate the impacts of revenue variability.
Depending on whether or not SDCP incorporates a rate
stabilization fund reserve into its indentures, this reserve may be used to help meet Debt Service Coverage Ratio
requirements during times of revenue shortfalls. This
fund can be a valuable tool to manage and mitigate
the risk related to any Debt Service Coverage Ratio
requirements included in future indentures and to
address revenue and rate volatility. There are other
reserves that the Board may consider adopting in the
future that, for example, may be utilized for paying
debt service, for funding specific capital projects, or for emergency purposes etc.
• Additional Ratio Targets: In the future the Board
will continue to monitor this Policy and will establish enhancements to further strengthen the financial ratios and targets of SDCP. For example, while not a ratio
included in Indenture covenants, another ratio that can help measure SDCP’s financial health and tion is the
ratio of debt-funded capital to overall capital spending (i.e., debt to pay-go spending). Prudent use of debt
financing rather than pay-go funding of capital projects can facilitate better allocation of resources over time and ensure payment equity across generations for the use of long-term assets.
Financing Team and Professional Services
SDCP will assemble a financing team that will provide advice and support for the development and implementation of debt issuance as well as ongoing analysis and support. The financing team will include both SDCP staff and outside professional consultants. When required by SDCP’s procurement policy, SDCP will use a competitive process through a Request for Proposal (“RFP”) in the retention of professional consultants.
Otherwise, SDCP will adhere to its best practices in contracting to procure such vendors. The professional consultants selected by SDCP could be engaged to help develop a credit strategy, issue debt and/or assist SDCP with its compliance with
applicable federal and state statutes, and Internal Revenue Code at the time of issuance as well as on a continuing basis.
Please see the Appendix for a detailed description of the outside professional consultants SDCP may include on its financing team.
Debt Administration
The Chief Executive Officer (“CEO”), or designee shall make recommendations on budget, stabilization transfers and rate adjustments. The Chief Financial Officer shall be responsible for the administration and implementation of this Policy and will have day- to-day responsibility for structuring, implementing and managing SDCP’s debt program.
Internal Control Procedures
When issuing debt, in addition to complying with the terms of this Policy, SDCP shall comply with any other applicable policies regarding initial bond disclosure, continuing disclosure, post- issuance compliance, and investment of bond proceeds.
Please see the Appendix for a detailed description of SDCP’s internal control procedures.
Post-Issuance Administration
SDCP will comply with requirements pertaining to initial bond disclosure, continuing disclosure, tax-exemption, post-issuance compliance, and investment of bond proceeds.
This includes any continuing disclosure undertakings under Securities and Exchange Commission (“SEC”) Rule 15c2-12; tax covenants and related federal tax compliance requirements such as arbitrage restrictions and rebate requirements; and all California State reporting requirements. Please see the Appendix for a detailed description of SDCP’s Post-Issuance Compliance Policy and additional information on SDCP’s post-compliance procedures.
Training
The Chief Financial Officer shall provide training the members of SDCP staff involved in the tax compliance and the initial or continuing disclosure process in coordination with the CEO, and the SDCP Board regarding their respective responsibilities for disclosure and tax compliance.
The Chief Financial Officer, or designee, shall arrange for periodic disclosure and tax training sessions conducted by SDCP’s disclosure counsel or other professionals (e.g., seminars) which shall include education regarding disclosure policies, SDCP’s disclosure obligations under applicable federal and state securities and tax laws, and the tax compliance and disclosure responsibilities of SDCP.
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SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Financial Policies Attachment 1 102 Policy Review
In coordination with the CEO, the Chief Financial Officer, or designee, will be responsible for regularly reviewing and updating this Policy, and shall present any recommended revisions to the Board for consideration and adoption.
APPENDIX
Permitted Types of Debt
SDCP may legally issue both short-term and long-term debt, through either a direct loan or through the public market, using the debt instruments described below. SDCP in consultation with its internal Counsel, Bond Counsel and Municipal
Advisors, shall determine the most appropriate instrument for a proposed debt offering.
SDCP may issue the following types of tax-exempt
or taxable Debt:
• Long-Term Debt: Long-term debt generally includes
debt issued to finance capital expenditures with the
objective of structuring repayment within the expected
life of the financed asset. Debt may be used as a tool for rate stabilization as repayment of the debt is spread over the useful life of the financed project. Long-term bonds may bear interest at fixed or variable rates or structured with level debt service payments or otherwise with term maturities. Long-term revenue bonds are a type of debt
that may be entered into by SDCP and which may be
secured by a lien on the revenues of SDCP. SDCP may
also enter into long-term loans with state or federal
agencies. These loans typically have fixed interest
rates. Government loan programs may offer favorable
interest rates and terms, and should be considered as
alternatives to market rate debt when available. The
use of long-term debt will be evaluated with pay-as-you-go capital investment and would not be expected (absent extraordinary circumstances) to fund non-capital operational expenditures or operating deficits.
• Short-Term Debt: Short-term debt generally has a
maturity of less than 7 years and may take several
forms, including notes, commercial paper, direct bank
loans and other short- term products with either fixed
or variable rates. Short- term debt products are flexible cash management tools that are primarily used to meet
interim funding (pending the issuance of long-term
debt). When approving short-term debt products, the
Board may limit SDCP’s percentage of short-term debt
when compared to its long-term debt portfolio taking
into account future market access, term-out provisions
and retail rate stability.
• Variable-Rate Debt: In addition to interim financing, which includes commercial paper and similar short-term
borrowing programs, it may be appropriate to issue long-term variable rate debt that bears an interest rate that is reset periodically at predetermined intervals, including entering into revolving credit facilities, to diversify the debt portfolio, to reduce interest costs, and to improve the match of variable rate assets (such as short-term
investments and reserves) to liabilities. The amount of variable rate debt will generally not exceed a net 20%
after consideration of investments and cash equivalents of the outstanding debt portfolio of SDCP.
• Refunding Debt: Refunding bonds may be issued
to refinance existing bonds to achieve debt service
savings, restructure the type of debt outstanding,
modify SDCP’s covenants to bondholders, restructure
future debt service payments, take advantage of
market opportunities, or to reduce exposure to certain
counterparties. SDCP will work with its Municipal Advisor (MA) to assess potential savings and determine whether
refunding bond issuance is warranted. If refunding bonds are being contemplated solely for debt service savings, the refunding should generally result in a reduction in average annual debt service or provide an overall savings target (net of all costs) set by the Board at the time
it approves the financing. This savings target may be
adjusted depending on the remaining term of the debt
or under circumstances where the number of refunding
options is then limited by federal tax law.
SDCP may consider the following types of fixed or variable rate debt:
• Revenue Bonds secured by general revenues or project
revenues
• Commercial Paper or other Interim Funding Notes
• Capital Leases
• Certificates of Participation/Lease Revenue Bonds
• Installment Sale or Purchase Agreements Revenue
Bonds
• Bond or Grant Anticipation Notes
• Tax and Revenue Anticipation Notes
• State and Federal Loans and Grants
• Direct Bank Loans or Lines of Credit
• Public Private Partnerships
This list is not meant to be inclusive of all options that may be available to SDCP as different circumstances may dictate.
SDCP may from time to time find that other types of debt would be beneficial to further its purposes and may approve such debt without an amendment to this Policy.
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SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Financial Policies Attachment 1 103 Method of Sale
SDCP may choose to issue bonds using either a competitive or negotiated sale process. SDCP may also sell bonds by means of a private placement or direct sale with a financial institution or other accredited investor when this method is demonstrated to result in cost savings or provide other advantages relative to a traditional public offering. SDCP staff will work with its Municipal Advisor to determine the most appropriate method of sale for each issuance.
• Competitive Sale: SDCP may elect to sell bonds in the public market on a competitive basis depending on
market conditions, required size of issuance and relative complexity of structure. The Bonds are marketed to a
wide audience of investment banking (underwriting)
firms. The underwriter is selected based on its bid for the securities. SDCP will award the sale of the competitively sold bonds on the basis of the lowest true interest cost basis. Pursuant to this policy, The Chief Financial Officer, or designee, is authorized to sign the bid form on behalf of the SDCP fixing the interest rates on bonds sold on a competitive basis.
• Negotiated Sale: SDCP may elect to sell bonds in
the public market on a negotiated basis depending
on market conditions, required size of issuance and
relative complexity of structure. SDCP staff selects the underwriter, or team of underwriters, of its securities in advance of the bond sale on the basis of responses to
a proposal review. With the assistance of the Municipal Advisor (MA), SDCP staff works with the underwriter
to bring the issue to market and negotiates all rates
and terms of the sale. In advance of the sale, SDCP
staff will determine compensation for and liability of
each underwriter employed and the designation rules
and priority of orders under which the sale itself will be conducted. Pursuant to this policy, the Chief Financial Officer or designee will be authorized to sign the bond purchase agreement on behalf of SDCP, fixing the
interest rates on bonds sold on a negotiated basis.
• Private placement: SDCP may elect to issue debt
on a private placement basis. Such method shall be
considered if it is demonstrated to result in cost savings or provide other advantages relative to other methods
of debt issuance, or if it is determined that access to the public market is unavailable and/or timing considerations require that a financing be completed more quickly than required for a competitive or negotiated sale.
Financing Team and Professional Services
SDCP will assemble a financing team that will provide advice and support for the best execution of each debt transaction.
The financing team may consist of multiple parties with distinct responsibilities and is generally comprised of both SDCP staff and outside professional consultants. These
outside professional consultants may include:
• Municipal Advisors: SDCP shall utilize the services
of independent MAs in connection with debt-related
issuances or projects. SDCP’s MA will not serve as an
underwriter on negotiated bond sales of SDCP
• Underwriters: SDCP will utilize an underwriter in the sale of bonds on a competitive or negotiated basis. An
underwriter is a financial services firm that acquires (by purchase) bonds for resale in the public bond markets.
For a negotiated sale, SDCP will select an underwriter
through a request for proposal process; basing the
selection on value for SDCP including capital structure, underwriting capabilities, demonstrated expertise
and experience as well as proposed fees. SDCP may
also select an underwriting firm to act as placement
agent in connection with a private placement of bonds.
In a competitive sale, bonds are offered for sale at a
designated date and time, and multiple underwriters
may submit bids. The bonds are awarded to the
underwriter (or group of underwriters) that submit the
lowest bid.
• Disclosure Counsel: SDCP will endeavor to provide
complete and appropriate disclosure of financial and
legal condition in the issuance of debt. SDCP will also take steps and adopt policies in order to provide for
compliance with continuing disclosure requirements.
Disclosure counsel, which may be Bond Counsel, shall
be responsible for assisting SDCP in the preparation of the Preliminary and Final Official Statements and any
other disclosure documents. SDCP will select, through
a request for proposal process, and retain qualified
and experienced counsel in achieving this objective of
appropriate disclosure.
• Bond Counsel: SDCP will retain qualified and
experienced legal counsel as representation of SDCP to
provide the customary opinions required for the issuance of bonds and other financial obligations. Bond counsel
shall be responsible for developing the legal documents required for each transaction and draft and review
documentation sufficient to provide approving legal
opinions. Bond counsel will render customary approving
legal and tax opinions for each transaction.
• Trustee: SDCP may select through a request for proposal process the services of a financial institution, acting through its trust division, to act as trustee. The trustee may hold, invest and disburse financing proceeds as directed by
SDCP. The trustee will act as registrar as well as the paying agent for SDCP debt. The Chief Financial Officer or
designee shall monitor the services rendered by the trustee. 419
SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Financial Policies Attachment 1 104 Internal Control Procedures
All debt transactions must be approved by the Board of
Directors. The proceeds of bond sales will be invested until used for the intended project(s) in order to maximize utilization of the public funds. The investments will be made consistent with the following guidelines: (1) compliance with federal tax arbitrage requirements, as applicable; (2) safety of principal; (3) liquidity; (4) diversity; and (5) return on investment or yield, and may be held as cash. SDCP’s Investment Policy guidelines and bond indentures will govern objectives and criteria for investment of bond proceeds. The Treasurer will oversee the investment of bond proceeds consistent with the foregoing guidelines.
Proceeds of debt will be held either by a third-party trustee or by SDCP. The trustee will disburse bond proceeds to SDCP upon submission of one or more written requisitions signed by an authorized SDCP officer. If the funds are held directly by SDCP, they must be held and accounted for in a separate fund or account, the expenditure of which will be documented by SDCP and subject to established internal controls consistent with SDCP’s applicable policies and procedures. These
procedures will include, in connection with each requisition or expenditure of proceeds held by SDCP, a written record of the particular capital project or program or other expense to which the funds drawn were applied or allocated.
For bond proceeds that are meant to reimburse SDCP for
previous expenditures, SDCP staff will provide documentation that conform to tax requirements and other applicable
regulations. To support this certification, staff will analyze capital expenditures and establish that requirements are met before the bond issuance takes place and maintain a written record of such analysis and the amount reimbursed to each particular capital project or program or other expense to which such reimbursed proceeds are to be allocated.
For bond proceeds intended to provide funding for ongoing or upcoming capital expenditures, SDCP staff will monitor the expenditure process. Staff will analyze the use of proceeds on an annual basis or more frequently, if deemed appropriate, until the proceeds are completely spent and will perform monitoring and record-keeping in accordance with SDCP’s accounting guidelines and other applicable regulatory requirements.
Refunding bond proceeds are generally held by a third-party trustee or fiscal agent to be applied in connection with written directions generally prepared by bond counsel. SDCP will maintain records of the directions to the trustee, and will review of fund statements and other records received from, the trustee.
Post-Issuance Administration
SDCP will comply with requirements pertaining to initial bond disclosure, continuing disclosure, tax-exemption, post-issuance compliance, and investment of bond proceeds. This includes any continuing disclosure undertakings under SEC Rule 15c2- 12; tax covenants and related federal tax compliance requirements such as arbitrage restrictions and rebate
requirements; and all California State reporting requirements. • Post-Issuance Compliance Policy: SDCP will adopt a
Post-Issuance Compliance Policy (“PICP”) to provide
for ongoing monitoring and reporting with respect to
compliance with SEC requirements for publicly offered
indebtedness and with tax regulations applicable to
tax-exempt debt. The PICP will provide for the federal
disclosure requirements, responsibility for reporting,
training, and describe procedures for compliance with
continuing disclosure agreements entered into for each
such series of bonds from the date they are issued until the bonds are no longer outstanding. The PICP may be
administratively adopted and amended without approval
of the Board.
• Financial Disclosure: SDCP will comply with applicable deliverable obligations and financial disclosure
requirements, as specified in any and all bond and
debt- related documents. Staff has developed and will
maintain an updated schedule of the requirements
in compliance with SDCP’s internal record-keeping
processes. SDCP will post required documents to the
Municipal Securities Rulemaking Board’s (“MSRB”)
Electronic Municipal Market Access (“EMMA”) website
as required on a timely basis. SDCP, at its discretion, may also post documents voluntarily to EMMA. SDCP
will provide financial disclosure to rating agencies,
institutional and individual investors, other levels
of government, and the general public to share
clear, comprehensible, financial information using
the appropriate channels/policies/procedures. The
Chief Financial Officer is responsible for monitoring
the compliance by SDCP of applicable disclosure
requirements. SDCP also may contract with an outside
service provider to monitor disclosure postings.
• Tax Compliance: SDCP will comply with applicable
federal arbitrage and rebate regulations related to its bonds and other debt instruments. These responsibilities include monitoring the investment and expenditure of
bond proceeds, maintaining a system of record-keeping
and reporting and contracting for the services of outside arbitrage consultants as necessary. SDCP will establish and implement post-issuance procedures to guide its
compliance with these requirements. The Chief Financial Officer is responsible for monitoring the compliance by 420
SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Financial Policies Attachment 1 105 SDCP of applicable tax requirements for debt issued on
a tax- exempt basis.
• Record Keeping: A copy of all debt-related records shall be retained at SDCP’s offices or otherwise electronically.
At a minimum, these records shall include all official
statements, bid documents, bond documents/
transcripts, indentures, resolutions, trustee statements, leases, and title reports for each financing (to the extent available). The following documents shall be maintained for the term of each issue of bonds (including refunding bonds) plus at least three years:
– A copy of the bond closing transcript(s) and other
relevant documentation delivered to SDCP at or
in connection with closing of the issue of bonds;
– A copy of material documents relating to
capital expenditures financed or refinanced by
bond proceeds, including (without limitation)
construction contracts, purchase orders, invoices,
trustee requisitions and payment records, draw
requests for bond proceeds and evidence as to
the amount and date for each draw down of
bond proceeds, as well as documents relating
to costs paid or reimbursed with bond proceeds
and records identifying the assets or portion of
assets that are financed or refinanced with bond
proceeds, including a final allocation of bond
proceeds;
– A copy of all contracts and arrangements
involving the use of bond-financed or refinanced
assets; and
– A copy of all records of investments, investment
agreements, arbitrage reports and underlying
documents, including trustee statements, in
connection with any investment agreements, and
copies of all bidding documents, if any.
421
SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Financial Policies Attachment 1 106 Investment Policy
Purpose and Scope
The San Diego Community Power (“Community Power”)
Investment Policy (“Policy”) establishes investment guidelines for protecting Community Power’s cash reserves, deposits, and investments (collectively, “Funds”) while producing a reasonable rate of return on investments.
This Policy articulates: (1) the objectives and priorities for Community Power investments; (2) the types of investments that are permitted and prohibited; and (3) the controls Community Power will implement to ensure investments are protected.
This Policy is adopted pursuant to California Government Code Section (“Section”) 53600-53608 and must be adopted or amended by resolution. The Community Power 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 Community Power 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 Board may at its discretion adopt rules, regulations, policies, bylaws and procedures governing the operation of Community Power.
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 states that 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 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, selection and designation of financial institutions for deposit of Community Power funds, and credit/depository matters.
Investment Objectives
To the extent possible, investments will align with Community Power’s mission, vision, value, and goals. When managing Funds, Community Power’s primary objectives shall be to (1) safeguard the principal of the Funds, (2) meet the liquidity needs of Community Power, (3) achieve a return on Funds invested, and (4) exercise a high standard of care on Funds within Community Power’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 Community Power 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
Community Power’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 (1) and Investment Objectives, Section (2), above.
4. Standard of Care
Community Power will manage the Funds in accordance
with the “Prudent Investor Standard” pursuant to California Government Code Section 53600.311
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.
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SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Financial Policies Attachment 1 107 Delegation of Authority
Pursuant to Section 53607, the Board has the authority to delegate the responsibility to manage Community Power’s funds to the Treasurer. The Treasurer has authority to appoint Deputy Treasurer(s) as the Treasurer deems necessary to carry out the duties in accordance with the Policy.
Community Power 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 Community Power’s investment portfolio in a manner consistent with Community Power’s Policy. External investment advisers may be granted discretion to purchase and sell investment securities in accordance with the investment objective set forth in this Policy.
Scope
This Policy applies to all funds and investment under the direct authority of Community Power. 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 the Board.
Acceptable Investment Types: To the extent possible,
investments will align with Community Power’s mission, vision, value, and goals.
1. Deposits at Bank(s): Funds may be invested in non-interest-bearing depository accounts to meet Community Power’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 Community Power deposits that exceed FDIC insurance limits to ensure the safety of Community Power deposits. There are no limits on the dollar amount or percentage that Community
Power may invest in collateralized bank 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 Community Power’s policy do not
exclude the investment in LAIF itself from Community
Power’s list of allowable investments, provided LAIF’s
reports allow the Treasurer to adequately judge the risk inherent in LAIF’s portfolio.
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 or better by at least one Nationally Recognized Statistical Rating Organization (NRSRO). 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).
No more than 30% of the total portfolio may be invested in a combination of qualifying placement service deposits.
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. Under 423
SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Financial Policies Attachment 1 108 a provision sunsetting on January 1, 2031, no more than 50% of the portfolio may be invested in deposits through a placement service. The maximum maturity shall not
exceed five (5) years.
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: Funds may be invested in commercial paper of “prime” quality of the highest ranking or of the highest letter and number rating as provided for by an
NRSRO. The entity that issues the commercial paper must meet all of the following conditions in either paragraph A or paragraph B below:
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 Community Power’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 Community Power’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 an 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: These include obligations of
Community Power, 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 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.
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 an 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.
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SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Financial Policies Attachment 1 109
15. Local Government Investment Pools (LGIPs): Shares
of beneficial interest issued by a Joint Powers Authority (JPA) organized pursuant to California Government
Code Section 6509.7 that invest in the securities and
obligations authorized in subdivisions (a) to (r), inclusive.
Each share shall represent an equal proportional interest in the underlying pool of securities owned by the JPA. To be eligible under this section, the JPA issuing the shares will have retained an investment adviser who is registered with the SEC (or exempt from registration), has assets
under management in excess of five hundred million
dollars ($500,000,000), and has not less than five years of experience investing in the securities and obligations authorized in subdivisions (a) to (q) of Government Code Section 53601, inclusive.
Prohibited Investment Types
Pursuant to Section 53601.6, Community Power 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. Community Power is prohibited from investing in any company or organization whose business do not align with Community Power’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). Community Power 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 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. A bank or financial institution may pledge securities or other deposits for the purpose of securing repayment of deposited funds. Community Power shall require any bank or financial institution to comply with the collateralization criteria defined in California Government Code, Section 53651.
Risk Management and Diversification
Community Power’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 this Policy and by diversifying the
investment portfolio so that the failure of any one issuer would not unduly harm Community Power’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 Community Power based on Community Power’s
investment objectives, constraints and risk tolerances. c. Credit Rating: This 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:
1. 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
NRSRO.
2. For securities with maturities greater than 13
months, the rating must be “A” or higher by at least
one NRSRO.
425
SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Financial Policies Attachment 1 110 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,
Community Power’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, Community Power’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.
to any member of the Board, or any candidate who may join the 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 Community Power Policy, as amended from time to time. The selected broker or dealers shall be provided with and acknowledge receipt of this Policy.
Losses
Losses are acceptable on a sale before maturity and may be taken if required to meet the liquidity needs of Community Power 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 Community Power
investments are subject to public review and evaluation.
Community Power 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.
Community Power 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 Community Power.
Brokers
The Treasurer shall endeavor to complete investment
transactions with institutions eligible to transact investment business with Community Power, in accordance with Section 53601.5, including:
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 426
SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Financial Policies Attachment 1 111 Investment Officials, pursuant with all applicable laws, shall not accept honoraria, gifts, and gratuities from advisers, brokers, dealers, bankers, or other entity with whom
Community Power conducts business.
Any external investment adviser contracted by Community Power 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.
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. d. Safekeeping and Custody: Securities purchased from
any bank or dealer, including appropriate collateral
(as defined by California Government Code), that
are not insured by the FDIC, shall be placed with an
independent third party for custodial safekeeping. 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 Community Power’s portfolio shall be held in safekeeping in Community Power’s name by a third-party custodian, acting as agent for Community Power under the terms of a custody agreement executed by the
bank and Community Power. All investment transactions
will require a safekeeping receipt or acknowledgment
generated from the trade. A monthly report will be
received by Community Power 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.
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. Community
Power will consider entering into a Wire Transfer
Agreement with the Lead Bank or Third-Party.
g. Audits: Community Power’s Funds shall be subject to a process of independent review by its external auditors.
Community Power’s external auditors shall review the
investment portfolio in connection with Community
Power’s annual audit for compliance with the Policy
pursuant to Section 27134. The results of the audit shall be reported to the Treasurer.
427
SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Financial Policies Attachment 1 112 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, and 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 Community Power’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.
428
SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Financial Policies Attachment 1 113 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.
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.
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.
429
SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Financial Policies Attachment 1 114 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
Community Power staff participating in the investment process; Community Power Treasurer; Community Power Deputy
Treasurer(s); and Community Power 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.
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-BACKED 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 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).
430
SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Financial Policies Attachment 1 115 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.
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.
431
SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Financial Policies Attachment 1 116 Rate Development Policy
Background
San Diego Community Power (SDCP) advocates for ratepayers by providing a choice of electricity providers and shifting control of local energy decisions from profit-driven, incumbent utility into the hands of residents and businesses located in our service jurisdiction. This creates competition in rates that benefits customers, increased transparency and ensures a better overall customer experience.
Purpose
This policy provides the framework for SDCP’s Board of Directors and staff to ensure SDCP’s rate design, development and implementation process remains transparent, fiscally responsible and centered on the customer.
As a not-for-profit public agency, SDCP must, at a minimum, set rates to recover costs associated with debt service and the purchase of power and operational costs. It is in the best interest of SDCP and its customers to design and implement rates that meet revenue requirements as well as targeted reserves, while maintaining rate competitiveness, stability and long-term financial viability.
General Criteria
SDCP has established various objectives and priorities that shall be considered as part of SDCP’s rate design process. SDCP’s rate setting objectives are as follows:
1. Cost Recovery: rates must be sufficient to recover
all expenses, debt service and other expenditure
requirements.
2. Reserves: rates must be sufficient to build prudent
reserves in line with SDCP’s Reserve Policy, which will provide funds to cover unanticipated expenditures,
secure favorable terms with vendors, secure a standalone investment-grade credit rating and meet strategic objectives.
3. Rate Competitiveness and Customer Value:
rates must allow SDCP to successfully compete to retain and attract customers while offering superior electricity service offerings with higher renewable content compared to the incumbent investor-owned utility.
4. Rate Stability: rate changes should be minimized to
reduce customer bill impacts with a preference for annual rate adjustments. Additionally, a Rate Stabilization Fund may be established and over time sufficiently funded to help mitigate significant swings in rates.
5. Equity among customers: rate difference among
customers should be justified by differences in usage
characteristics and/or cost of service. Additionally, to the extent possible, rates shall be equalized from a value
proposition perspective among customers enrolled during different Power Charge Adjustment Indifference (PCIA)
Vintage Years.
6. Rate Structures: as new rates are developed,
emphasis shall be put on rate-design simplicity and
comparability as well as overall customer experience.
SDCP reserves the right to design pilot rates as reviewed and approved by the Board.
7. Transparency: SDCP’s Board will review and approve
rates at an open and public meeting held in accordance
with the Ralph M. Brown Act. SDCP shall post a copy
of the adopted rates in both English and Spanish on its website within 14 calendar days of approval or by the
rates’ effective date, whichever is sooner. SDCP shall also make any rate design documents promptly available upon
request under the California Public Records Act.
8. Cost Shifting: SDCP shall avoid, to the best of its
ability, cost shifting between customer classes.
9. Cost of Service: SDCP may explore a cost-of-service
model for rate design. Cost-of-service studies are used to determine the total costs incurred by a utility in providing service to its customers and the allocation of those costs through rates back to customer classes. Revenue collected from each customer class then may be compared with
that class’s cost responsibility to determine the extent to which each class is reimbursing the utility for the costs it incurred in providing service.
432
SAN DIEGO COMMUNITY POWER OPERATIONAL BUDGET FY 2026–2027 Financial Policies Attachment 1 117 SDCP's Rate Setting Timeline
SDG&E’s Energy Resource Recovery Account (ERRA) application is usually approved by the CPUC in December, which provides the trajectory of bundled service commodity rates including the above market costs and other fees1
that will be passed on from
SDG&E to all customers. Once the ERRA is approved, SDCP staff shall present proposed rates for the year to the Board in January of each year for review, deliberation and approval to be effective no later than February 15. With ever-changing market developments and regulatory climate, there may be instances where SDCP staff also proposes intra-year changes to rates.
To the greatest extent possible, SDCP’s rates will be competitive with SDG&E’s rates. With each SDG&E and SDCP rate change, both entities are required to work collaboratively to co-publish and post a Joint Rate Comparison on their respective websites to allow customers to easily see how rates compare.
1 Fees passed on by SDG&E to “departing load” customers such as SDCP include the Power Charge Indifference Adjustment (PCIA) and Franchise Fees. The PCIA is a charge to ensure that both SDG&E customers and those who have left SDG&E service to purchase electricity from other providers pay for the above market costs for electric generation resources that were procured by SDG&E on their behalf. “Above market” refers to expenditures for generation resources that cannot be fully recovered through sales of these resources at current market prices.
The Franchise Fee is a surcharge applied to electricity transported over SDG&E systems that are constructed in public streets and highways. SDG&E collects the surcharge from customers and remits them to the appropriate municipality. The surcharge is charged equally to customers regardless of who provides their electric generation.
The PCIA and the SDG&E commodity portion of the Franchise Fee are included within the generation rate of SDG&E’s standard bundled service. In other words, they are paid by all customers, regardless of who provides their electricity generation.
Implementation of SDCP's Rates
SDCP’s rate setting process is and will always be open and transparent to the public. SDCP’s Board of Directors, which is composed of a representative from each of its member agencies, will set rates according to agreed-upon strategic goals of SDCP and the cost of service.
Prior to the implementation of new rates, the Board will review and deliberate the proposed rates in a public setting and take comments from the public. Once the Board approves proposed rates, the rates will be published on SDCP’s website in advance of their effective date, giving customers time to compare, budget and better understand what to expect on their bills going forward.
For more information on SDCP’s rates, visit SDCommunityPower. org/billing-rates/residential-rates for residential rates or SDCommunityPower.org/billing-rates/commercial-rates for commercial rates.
433
RESOLUTION
NO. 2026-10
EXHIBIT B
434
Resolution 2026-XX Proposed June 2026
SAN DIEGO COMMUNITY POWER
Capital Investment
Plan (CIP)
Fiscal Year
2027–2031
435
Contents
How to Use This Book 4
A Letter from the Chief Executive Officer 5
Capital Investment Plan Overview 8
Overview of San Diego Community Power 11
Who We Are 11
Our Story 11
How It Works 12
Governance and Structure 13
Organizational Structure 13
About the CIP 15
CIP Development Process 16
Core Strategic Goals 19
Community Engagement 21
Community Engagement Process 21
Capital Investment Areas 24
Investment Type Overview 24
Investment Type 1. Application Assistance 25
Investment Type 2. Disadvantaged Communities Green Tariff 26 Investment Type 3. Pilot Programs 27
Investment Type 4. Grant Programs 28
Investment Type 5. Building Electrification 29
Investment Type 6. Planning and Studies 30
Investment Type 7. Battery Energy Storage Systems 32
Investment Type 8. Demand Response 33
Investment Type 9. Energy Efficiency 34
Investment Type 10. Information Technology 35
Funding Guide 38
Internal vs. External Funding 38
External Sources 38
Budget Resolution 40
Acknowledgments 42
Finance Department 42
436
List of Figures
FIGURE 1. FY 2026–2027 CAPITAL BUDGET* 8
FIGURE 2. FY 2027–2031 CIP PROGRAMS AND PROJECTS* 9
FIGURE 3. CCAS IN CALIFORNIA 12
FIGURE 4. MEMBER AGENCIES 13
FIGURE 5. ORGANIZATIONAL STRUCTURE 13
FIGURE 6. CIP DEVELOPMENT PROCESS 16
FIGURE 7. COMMUNITY POWER PLAN COMMUNITY NEEDS ASSESSMENT 21 FIGURE 8. APPLICATION ASSISTANCE PROJECTS 25
FIGURE 9. DISADVANTAGED COMMUNITIES GREEN TARIFF PROJECTS 26 FIGURE 10. PILOT PROGRAMS PROJECTS 27
FIGURE 11. GRANT PROGRAMS PROJECTS 28
FIGURE 12. BUILDING ELECTRIFICATION PROJECTS 29
FIGURE 13. PLANNING & STUDIES PROJECTS 30
FIGURE 14. BATTERY ENERGY STORAGE SYSTEMS PROJECTS 32
FIGURE 15: DEMAND RESPONSE PROJECTS 33
FIGURE 16. ENERGY EFFICIENCY PROJECTS 34
FIGURE 17. INFORMATION TECHNOLOGY PROJECTS 35
437
How to Use This Book
The San Diego Community Power (Community Power) Fiscal Years (FY) 2027–2031 Capital Investment Plan (CIP) contains agency budgetary and fiscal policy information as well as detailed agency capital investment plans. The adopted Capital Investment Plan is organized into the following sections.
Executive Summary
Includes the Chief Executive
Officer’s Letter for the CIP and
provides a high-level overview
of the agency’s capital budget
and other high-level details
on specific projects and their
benefits to the community.
Capital Investment
Plan Overview
Describes the CIP in brief,
including summary tables that
reflect the operating transfer
into the CIP as well as the list of
projects planned for the next
five years.
Strategic Plan
Describes Community Power’s
strategic planning process and
board-adopted strategic goals that
provide the foundation for the
creation of the CIP.
Investment Types
Includes the 10 investment
types, projects and funding
segments that will be
delivered within the CIP.
Community
Engagement
Outlines the outreach process
to the community that provided
feedback and significant input
into project and program design.
Overview
Provides a high-level overview
of Community Power’s
governance, structure and
agency values and priorities.
Funding Guide
Explains sources that fund the
CIP as well as considerations
for future potential funding
sources that Community
Power can leverage to bolster
CIP funding amounts.
SAN DIEGO COMMUNITY POWER CAPITAL INVESTMENT PLAN FY 2027–2031 How to Use This Book 4 438
A Letter from the
Chief Executive Officer
San Diego Community Power continues to invest in near-term affordability so we can deliver long-term value for our customers. We are advancing programs, infrastructure and tools that will expand access to clean energy this year and beyond.
Our approach is disciplined to ensure stability and flexible to ensure we remain competitive in an evolving and volatile energy market. We are intentional in how we allocate resources so we can equitably advance toward 100% renewable energy by 2035 through careful planning, testing and scaling investments over time. This phased and data-driven approach allows us to build a portfolio that strengthens reliability and delivers value to the communities we serve.
At the same time, we are building the financial strength necessary to sustain growth. Maintaining strong reserves, managing risk and leveraging innovation are core to our strategy. By combining internal resources with external funding opportunities, we are able to expand the reach and impact of our programs and maximize their benefits.
Many of the investments are intentionally structured to allow Community Power time to evaluate their performance and refine its approach to achieve success. This includes investments in customer pilot programs that encourage adoption among residential and commercial customers. It also includes the implementation of a Distributed Energy Resource Management System (DERMS), which integrates data from customer usage, market conditions and weather patterns to optimize resources and reduce costs.
We continue to grow Solar Battery Savings, our most successful program to date, by funding upfront and ongoing performance incentives for new battery energy storage systems. This supports grid reliability during peak demand and reduces long-term cost pressures while also strengthening the local workforce.
Community Power is also expanding our impact through the San Diego Regional Energy Network (SDREN) and its comprehensive portfolio of 10 new energy efficiency programs that will all be available for enrollment by the end of 2026. In partnership with San Diego County, SDREN provides hands-on assistance, technical support and low- to no-cost installations that help customers reduce their energy use and bills.
As Community Power’s impact grows, so will our reach. Community Power is currently the second-largest Community Choice Aggregator in the nation, serving nearly 1 million municipal, business and residential power customers in the cities of San Diego, Chula Vista, Encinitas, Imperial Beach, La Mesa and National City as well as the unincorporated communities in San Diego County. This year, the Coronado City Council voted unanimously to join Community Power.
Coronado residents and businesses could begin receiving service as soon as 2028. This growth reflects the trust that local communities place in us to deliver reliable, affordable service.
SAN DIEGO COMMUNITY POWER CAPITAL INVESTMENT PLAN FY 2027–2031 A Letter from the Chief Executive Officer 5 439
Chief Executive Officer
San Diego Community Power
Looking ahead, our mission is clearly focused on affordability, fiscal resilience and advancing clean energy for all communities. Our strategic investments and careful planning help build a sustainable, adaptable and reliable future that is built to last.
With continued leadership from our Board of Directors, Community Advisory Committee and dedicated staff, Community Power is proud to deliver more affordable energy, strengthen our communities and build a cleaner, more resilient future for the San Diego region.
We thank our community for its continued trust and partnership.
SAN DIEGO COMMUNITY POWER CAPITAL INVESTMENT PLAN FY 2027–2031 A Letter from the Chief Executive Officer 6 440
01 Capital Investment
Plan Overview
441
San Diego Community Power developed its first Capital
Investment Plan (CIP) for FY 2024–2028 and continues to grow it with the FY 2027–2031 CIP, which contains all the individual capital projects, major equipment purchases and major programs for the agency that are intended to span multiple years. The FY 2026–2027 budget proposes a one-time portion of net operating revenues be transferred to the CIP as a continuing fund in which any unspent funds are kept within that fund and carried forward to the subsequent fiscal year. The figure below also outlines planned expenditures of funds that the Board previously approved, accepted and appropriated.
The CIP includes funding for local development feasibility studies, customer program pilot projects, community grants, Capital Investment Plan Overview
a customer education platform and other areas as outlined in the short- and medium-term program areas. Given the
number of planning and pilot projects, the Community Power CIP is largely funded by internal funding that allows maximum flexibility in the planning phase with designing programs and projects. This allows the agency to focus on designing based on community and agency needs rather than based on the
requirements requested by a funding agency. The planning phase of a program or project also requires less funding when compared with implementation or design and construction.
As Community Power builds reserve funds and endeavors to maximize impact, Community Power will leverage the CIP
to aggressively pursue external funding from sources such as state and federal agencies.
FIGURE 1. FY 2026–2027 CAPITAL BUDGET*
Carryforward1
FY27
Authorized Budget
FY27
Proposed Appropriation
Operating Transfer In 18.4 - 8.0
Regional Energy Network2 - 63.1 -
DAC-GT 0.3 0.3 -
Equitable Building Decarbonization 1.4 - -
Planning and Studies 0.7 - -
CIP Revenue 20.8 63.4 8.0
1 The Carryforward amount represents actual financial data through February 28, 2026. Carryforward amounts will be reconciled until the close of fiscal year 2025–2026.
2 The Regional Energy Network was fully appropriated for $124 million in January 2025 for Calendar Years 2024–2027 and funded programs will be available across SDG&E service territory.
*Amounts displayed in millions of dollars
SAN DIEGO COMMUNITY POWER CAPITAL INVESTMENT PLAN FY 2027–2031 Capital Investment Plan Overview 8 442
FIGURE 2. FY 2027–2031 CIP PROGRAMS AND PROJECTS*
The first year of the CIP is appropriated as part of Community Power’s annual budget process and becomes the adopted capital budget for the fiscal year. The subsequent years of the CIP are planned expenses that are subject to Board approval during the annual budget process and are subject to change.
Beginning
Balance
Expenses Carryforward1 5-Year Budget
FY26 FY26 FY26 FY27 FY28 FY29 FY30 FY31 Total
External Funding
Regional Energy
Network
15.9 15.9 - 63.1 51.4 42.0 43.7 45.5 245.7
DAC-GT 0.5 0.2 0.3 0.3 - - - - 0.6
Equitable Building
Decarbonization
1.4 - 1.4 - - - - - 1.4
Planning and Studies 0.7 - 0.7 - - - - - 0.7
Subtotal 18.5 16.1 2.4 63.4 51.4 42.0 43.7 45.5 248.4
Internal Funding
Solar Battery
Savings
21.9 11.1 10.8 3.5 10.4 8.3 8.5 7.6 49.1
Pilot Programs 2.3 0.5 2.0 2.5 - - - - 4.5
Grants 1.5 0.2 1.3 - - - - - 1.3
Flexible Load 0.6 0.1 0.5 1.5 - - - - 2.0
IT Projects 3.7 0.5 3.2 0.2 - - - - 3.4
Planning and Studies 0.3 - 0.3 0.3 - - - - 0.6
Application
Assistance
0.3 - 0.3 - 0.3 - - 0.3 0.9
Subtotal 30.6 12.4 18.4 8.0 10.7 8.3 8.5 7.9 61.8
CIP Expense Total 49.1 28.5 20.8 71.4 62.1 50.3 52.2 53.4 310.2 *Amounts displayed in millions of dollars
1 The Carryforward amount reviews actual financial data through February 28, 2026 updated April 30. Carryforward amounts will be reconciled at the close of FY 2025–2026.
2 The Regional Energy Network was fully appropriated for $124M in January 2025 for Calendar Years 2024–2027. It is reflected in this table as anticipated spending by fiscal year.
SAN DIEGO COMMUNITY POWER CAPITAL INVESTMENT PLAN FY 2027–2031 Capital Investment Plan Overview 9 443
02 Overview of San Diego
Community Power
444
Overview of San Diego Community Power
Who We Are
San Diego Community Power is a Community Choice
Aggregator (CCA) that gives customers an option to power their homes and businesses with significantly higher levels of renewable power at competitive rates. Since 2021, Community Power has grown to serve nearly 1 million residential, business and municipal power customers in the cities of San Diego, Chula Vista, Encinitas, Imperial Beach, La Mesa and National City as well as the unincorporated communities of San Diego County.
Community Power is a not-for-profit public agency that
provides affordable clean energy and invests in its local communities to create an equitable and sustainable future for the San Diego region.
Learn more at SDCommunityPower.org.
Our Story
Through phased enrollment from
2021 through 2023, Community
Power gradually became the
official clean energy provider for
our member agencies. Customers
were automatically enrolled in
our service and received two
notices before and two notices
after enrollment.
Community Power is now the
second-largest CCA in the nation,
serving nearly 1 million customers
with competitively priced clean
energy; we are beginning to offer
customer programs and rebates as
well as continuing to support San
Diego County’s energy efficiency
goals through the San Diego
Regional Energy Network (SDREN).
With support from local
communities, Community Power
was established as a Joint Powers
Authority by five cities in the San
Diego region. Community Power
submitted an implementation
plan to the California Public
Utilities Commission, outlining the
intended organizational structure,
operations and funding. Once
approved, our Board of Directors
began meeting regularly, and
implementation activities began.
In 2020, a sixth municipality,
National City, and the County
of San Diego elected to join
Community Power.
FORMATION ENROLLMENT
2021–2023
TODAY
SAN DIEGO COMMUNITY POWER CAPITAL INVESTMENT PLAN FY 2027–2031 Overview of San Diego Community Power 11 445
How It Works
About Community Choice
San Diego Community Power is one of 25 Community Choice Aggregators (CCAs) that serve a total of more than 15 million customers in California. The first CCA began service in 2010, and 25 CCAs are operating today.
Communities that participate in a CCA work together to
purchase clean energy and create local clean energy projects and programs for residents and businesses by pooling,
or aggregating, their electricity loads. CCAs work with the investor-owned utility that serves the community to deliver power and maintain the grid. For Community Power, this
means partnering with SDG&E.
FIGURE 3. CCAS IN CALIFORNIA
CCAs are making good on their commitments to invest in new renewable energy facilities throughout California.
To date, CCAs have contracted for more than 21,000
megawatts (MW) of new clean generation capacity through long-term power purchase agreements (PPAs) with terms of 10 years or more. CCA PPAs equate to:
• More than 21 gigawatts (GW) of new solar, wind, energy storage, geothermal and demand response resources
• Projects totaling more than 9,700 MW that are already operational and serving CCA customers
• Over $48.4 billion committed by CCAs to build and operate clean energy resources
• Support for more than 48,000 construction jobs
SAN DIEGO COMMUNITY POWER CAPITAL INVESTMENT PLAN FY 2027–2031 Overview of San Diego Community Power 12 446
FIGURE 4. MEMBER AGENCIES
Governance and Structure
In September 2019, the cities of San Diego, Chula Vista, Encinitas, Imperial Beach and La Mesa adopted an ordinance and resolution to form San Diego Community Power, a
California Joint Powers Authority (JPA). National City and the County of San Diego voted to join Community Power in 2020.
Community Power’s Board of Directors is composed of an
elected representative from each member jurisdiction, with each member selecting an alternate from the agency they represent. The Board is publicly accountable to Community Power ratepayers and hosts monthly Board meetings, where it establishes policy, sets rates, determines power purchase options and maintains fiscal oversight. As a public agency, Community Power is designed to be fully transparent with all official meetings and information open or available to the public.
Organizational Structure
FIGURE 5. ORGANIZATIONAL STRUCTURE
BOARD OF DIRECTORS
Supervisor Terra Lawson-Remer
Chair
Sean Elo-Rivera
Councilmember
Michael Inzunza
Councilmember
Genevieve Suzuki
Councilmember
Councilmember Ditas Yamane
Vice Chair
Jack Fisher
Councilmember
Marco San Antonio
Councilmember
CHIEF EXECUTIVE OFFICER
Karin Burns
LEGAL
General Counsel
OPERATIONS
Chief Operating Officer
FINANCE
Chief Financial Officer/
Treasurer
POWER
SERVICES
Chief Commercial
Officer Customer Operations
IT and Data Analytics
Public Affairs
Programs
Regulatory and Legislative Affairs
Human Resources and Administration
Clerk of the Board
Finance and Risk
Management Committee
Community Advisory Committee
SAN DIEGO COMMUNITY POWER CAPITAL INVESTMENT PLAN FY 2027–2031 Overview of San Diego Community Power 13 447
03 Capital Investment Plan
448
About the CIP
The Community Power Fiscal Year 2027–2031 Capital Investment Plan (CIP) includes 10 investment categories that will receive funding during the five-year period, totaling $310.8 million in investments across San Diego County.
The Proposed FY 2026–2027 operating budget proposes an $8.0 million transfer from operations into the CIP. This transfer is funded by a combination of net operating revenue and non-operating investment income, based on the nature of the project or program being funded. The proposed operating contribution supports the following investments:
$3.5 million, Solar Battery Savings — Community Power's residential Solar Battery Savings Program is designed to help single-family homeowners in Community Power's service territory invest in clean energy and support the grid by installing solar and battery storage in their homes or complement an existing solar system with a new battery system. The program provides two financial incentives for participating customers: an upfront incentive to minimize the initial cost of the battery system and a performance incentive for participating in battery discharges during on-peak dispatch windows to maximize benefits for the customer and the grid.
$1.5 million, Distributed Energy Resources Management Systems Software Platform — Central to Community Power's Flexible Load Strategy is the selection and implementation of a Distributed Energy Resource Management System (DERMS). A DERMS is a software platform that incorporates various data points, such as weather, market/price data and customer preferences, to optimize the operation of distributed energy resources (DERs) in support of various grid services. Once operational, this system will allow Community Power to help customers reduce usage during high-cost on-peak periods, while managing portfolio-wide power procurement and resource adequacy costs and risk. $0.3 million, EV Load Growth Study — The Regional EV Load Analysis will forecast how growing EV adoption can impact electricity demand across Community Power’s service territory, including hourly load profiles, adoption scenarios and geographic variation. It will evaluate how different charging behaviors — especially unmanaged vs. managed charging — affect load shape, peak demand and system risks, with a focus on strategies (for example, time-of-use rates or managed charging) that can shift or mitigate EV-related peaks. Overall, the study aims to provide insights that support long-term planning, helping Community Power understand both the risks and opportunities of transportation electrification for load forecasting, Resource Adequacy and program design. $2.5 million, Customer Pilot Programs — Pilot programs are small-scale, short-duration projects (6–18 months) that can provide Community Power and stakeholders data on program design, technology acceptance and other information helpful for broader program delivery. Pilot programs support Community Power staff's ability to design and implement programs properly and efficiently. Additionally, pilot programs can cover all customer segments and a variety of technologies or activities, including managed charging for electric vehicles and energy efficiency.
SAN DIEGO COMMUNITY POWER CAPITAL INVESTMENT PLAN FY 2027–2031 About the CIP 15 449
This CIP continues Community Power’s commitment to plan and finance programs and projects that align with community and organizational priorities. The programs and projects compose a list that gives Community Power the confidence to target a core set of investment types that focus on community needs. It also provides Community Power the flexibility to co-design programs with community partners and to be
responsive to external funding opportunities as they emerge.
This plan is not a final or absolute list of funded projects, and projects may not have funding identified. Each funded and partially funded project identifies a potential source of funding, but this does not necessarily indicate that the project has been funded. As design requirements, budgets and priorities change, the planned projects may also move within the plan or drop out entirely.
Likewise, this list is not all-inclusive. Unexpected requirements often require adjustments in the design and execution process.
Projects, programs and funding are also subject to Board approval, consistent with the JPA and the agency’s internal policies and programs.
CIP Development Process
Community Power will update the CIP annually during its budget development process. Programs and projects are
included in the CIP based on community engagement and
alignment with Community Power’s strategic goals.
The capital budget and the CIP undergo a public outreach process comprising a wide range of stakeholder groups.
Additionally, the CIP is a dynamic document intended to be updated regularly as needs shift or fund availability changes.
All subsequent updates to the CIP will be brought to the Community Power Board for approval.
FIGURE 6. CIP DEVELOPMENT PROCESS
$0.2 million, IT Projects — Focused on Community Power’s commitment to fiscal stewardship and operational scaling, this project funds the optimization and expanded rollout of the agency’s central Enterprise Resource Planning (ERP) platform. While Phase 1 successfully established core budgeting functionalities, Phase 2 is being considered for strategic rescoping to prioritize immediate agency-wide operational controls and financial efficiencies. Once deployed, this phase will streamline cross-departmental workflows, enhance internal financial controls and automate routine processes. This targeted optimization ensures the finance, non-energy procurement team and broader agency possess the scalable infrastructure required to support expanding community programs and minimize administrative overhead.
SAN DIEGO COMMUNITY POWER CAPITAL INVESTMENT PLAN FY 2027–2031 About the CIP 16 450
04 Strategic Planning
451
San Diego Community Power’s budgeting process, including its CIP, is directly informed by its strategic plan — a document co-created by the Board, Community Advisory Committee,
executive leadership and staff — that translates community priorities into actionable goals. The Strategic Plan serves as a critical management tool, aligning resources, guiding operational decisions and driving long-term organizational focus across all departments and initiatives.
Community Power is sharpening its focus on delivering long-term value to the communities it serves through affordability, transparency and disciplined growth. The next chapter of the agency’s work will be defined by measurable outcomes, including maintaining competitive rates, strengthening
financial resilience and advancing a cleaner, more renewable energy portfolio.
Central to this approach is a commitment to aligning fiscal decisions with community priorities. This budget reflects customer expectations, including rate stability, incentives that support grid reliability and continued progress toward sustainable, locally beneficial energy procurement. This is achieved by prioritizing the following items.
Affordability
All decisions are
evaluated with a
focus on customer
impact. Community
Power prioritizes
competitive rates,
minimizes volatility
and expands
programs that help
households and
businesses manage
energy costs.
By reinvesting
locally, Community
Power strengthens
regional economies,
supports workforce
development and
expands access
to programs,
with a focus on
benefiting historically
underserved
communities.
Financial
Strength and
Stability
Advancement
to 100%
Renewable
Energy Maintaining strong
reserves, actively
managing risk and
implementing
innovative financial
strategies position
the agency to
navigate market
uncertainty while
safeguarding long-term affordability
and organizational
resilience.
Community Power
expands access to
clean, renewable
energy through a
balanced approach
that prioritizes
reliability and cost
stability, supports local
project development
and ensures the
benefits are broadly
shared across the
communities it serves.
Strategic
Infrastructure
Local Impact
As a public agency,
Community Power
operates with
transparency and
is guided by public
input, ensuring
accountability to
ratepayers and
consistent delivery
on commitments.
SAN DIEGO COMMUNITY POWER CAPITAL INVESTMENT PLAN FY 2027–2031 About the CIP 18 452
Core Strategic Goals
1. Fiscal Sustainability
• Maintain fiscal strategies to promote long-term
organizational sustainability.
• Execute at least six clean prepayment transactions over the next three years to generate $30 million in annual
power cost savings.
• Obtain a public investment-grade credit rating by
November 2027.
• Grow reserves by $150 million to maintain 180 days cash on hand by December 2027.
• Build a $70 million Rate Stabilization Reserve to mitigate cost volatility.
• Strengthen financial controls across contracting, risk management and procurement.
2. Energy Portfolio Development
• Provide sufficient, affordable and clean electricity to our customers.
• Achieve 100% renewable energy by 2035 with interim
targets of 75% by 2027 and 85% by 2030.
• Support development of 1 gigawatt of new local clean
energy capacity by 2035, including 300 MW of infill and distributed energy resources (DERs).
• Ensure reliable and cost-effective compliance with all regulatory requirements.
• Create good-paying local jobs in clean energy sectors.
3. Community Program Delivery
• Implement programs that reduce greenhouse gas
emissions, align energy supply and demand, and benefit
our diverse communities.
• Deliver 150 MW of local DER capacity (of the 300 MW
total goal) by 2035 through programs like Solar Battery Savings.
• Launch all San Diego Regional Energy Network (SDREN)
programs in 2026.
• Implement a robust program evaluation framework in
2026.
• Expand external funding for clean energy programs.
4. Legislative and Regulatory Advocacy
• Advance policies that support Community Power’s
mission and customer goals.
• Educate policymakers and regulators to influence
outcomes consistent with our policy platform.
• Support and sponsor legislation aligned with our values and needs.
• Remain an active participant in coalitions such as CalCCA to amplify our voice.
• Strategically pursue public funding aligned with
agency goals.
5. Trusted Brand Building
• Build a trusted brand that supports engagement,
participation and program success.
• Position Community Power as a collaborative public
agency rooted in transparency.
• Grow the Power Network of nonprofit and community-based partners to expand community reach. • Elevate brand awareness through education and outreach. • Empower customers to take advantage of savings and
services through awareness, education and ongoing
communication programs.
6. Customer Care
• Ensure high customer satisfaction and retention.
• Refine rate structures to balance affordability, clean energy and fiscal prudence.
• Resolve SDG&E billing issues and improve customer
experience.
• Explore options for a best-in-class customer service
model.
• Address arrearages and connect customers to available resources.
7. Organizational Excellence
• Foster an innovative, inclusive and resilient workplace. • Transition into a learning organization by late 2026 with robust staff development.
• Maintain a high level of employee satisfaction through engagement and continuous feedback.
• Launch a new internship program for local college
students by FY 2027.
SAN DIEGO COMMUNITY POWER CAPITAL INVESTMENT PLAN FY 2027–2031 About the CIP 19 453
05 Community Engagement
454
Community Engagement Process
San Diego Community Power is a not-for-profit public agency that integrates community engagement directly into its decision-making and views outreach as a core function of governance. Through ongoing dialogue with customers, local leaders and regional partners, the agency ensures its budgeting reflects real-world priorities and evolving community needs. This approach reinforces our commitment to affordability while maintaining strong accountability for how public funds are managed. By grounding financial planning, including the development of the Capital Investment Plan (CIP), in community input, Community Power strengthens organizational stability, supports local economic opportunities and accelerates the transition to cleaner energy while delivering benefits to the communities it serves.
Community Engagement
Community Power Plan (CPP)
A key milestone shaping Community Power’s customer
engagement and investment strategies is the Community
Power Plan (CPP), adopted by the Board of Directors on May 25, 2023. The CPP provides strategic direction for customer energy program development over a five-year time frame and is instrumental in guiding CIP investments.
Community Power is committed to designing programs that are community driven, with a particular focus on uplifting Communities of Concern. The CPP was built through extensive outreach and partnership building, helping Community Power strengthen ongoing relationships with residents, community-based organizations and stakeholders across the region.
Between May and November 2022, Community Power
engaged more than 3,450 community members through
listening sessions, workshops, pop-up events and a customer-wide survey — prioritizing equity and reaching harder-to-engage populations. The CPP’s foundational community needs assessment shaped both short-term priorities and a longer-term framework for program evaluation and design.
Rather than treating outreach and partnership building as a one-time effort, the CPP established a foundation for ongoing dialogue and partnership between the agency and the
communities it serves — a commitment that continues through the CIP, program design and investments. This community-centered approach informs all areas of work, including public meetings, partnerships with local organizations and targeted outreach efforts to ensure clean energy opportunities are accessible, equitable and responsive to community needs.
Public Meetings and Oversight
Transparency and public oversight are built into Community Power’s operations. Consistent with its Rate Development Policy, rate setting occurs in an open, deliberative process led by staff and approved by the Board of Directors at publicly noticed meetings. This ensures the public has direct visibility into and input on decisions that shape costs, programs and long-term strategy.
Board decisions are informed and shaped by a subset of
members on the Finance and Risk Management Committee
(FRMC). The Community Advisory Committee (CAC) also
advises the Board and provides a venue for ongoing citizen support and engagement in Community Power. These regular meetings offer meaningful opportunities for community input on agency decisions.
FIGURE 7. COMMUNITY POWER PLAN COMMUNITY
NEEDS ASSESSMENT
ENGAGEMENT
METHOD
Estimated
Number
Engaged
Community-Based Organization
Co-hosted Listening Sessions (two rounds)
325
Business, Key Stakeholders and Public
Listening Workshops
325
Unincorporated San Diego County
Pop-up Events
100
Community Needs Survey 2,980
Total 3,450
SAN DIEGO COMMUNITY POWER CAPITAL INVESTMENT PLAN FY 2027–2031 Community Engagement 21 455
Customer Information and Transparency
Clear, accessible information is essential in building trust with customers and supporting informed decision-making about service options. Community Power publishes an annual Joint Rate Comparison in coordination with SDG&E that allows
customers to easily evaluate pricing. The Power Content Label further reinforces transparency by providing a detailed look at the sources used for each service plan. In addition, Community Power’s website serves as a central resource for information, rebates, incentives and self-service tools.
Community Engagement
Staff regularly provide updates to member agencies and their elected bodies on Community Power’s performance, priorities and initiatives. Community Power also continues to expand its presence through events, partnerships and targeted outreach to reach a broad and diverse audience.
In FY 2025–2026, Community Power participated in 183 community events, resulting in 16,000 unique interactions and nearly 650,000 impressions. These in-person efforts are enhanced by strategic partnerships, sponsorships and targeted media outreach, including an ongoing partnership with CBS 8’s “Working for Our Communities” campaign, which highlights available services and opportunities for customers to save money. Regular newsletters also provide subscribers with updates on new initiatives and energy-saving tips.
These efforts create a strong, continuous feedback loop between the agency and the public, strengthening transparency, informing budget decisions and ensuring Community Power remains responsive, accountable and focused on delivering affordable, reliable and increasingly renewable energy solutions. 183 16,000 650,000 community
events
unique
interactions impressions
456
06 Capital Investment Areas
457
Investment Type Overview
Community Power’s investment types are designed to deliver measurable value to customers by improving affordability, enhancing reliability and expanding access to clean energy solutions. Each investment reflects the agency’s commitment to reinvesting public funds in ways that reduce costs over time, support rate stability and provide direct benefits to the communities it serves.
Guided by the Community Power Plan (CPP) and informed by ongoing community engagement, these investment types represent a coordinated portfolio of customer programs, infrastructure investments, pilot initiatives, planning efforts and enabling technologies.
Together, they support near-term customer benefits while advancing long-term system reliability, cost control and sustainability.
Community Power prioritizes disciplined, data-driven investments that can be refined, scaled and aligned with available funding over time. This flexible approach enables the agency to respond to changing market conditions, leverage external funding and incorporate emerging technologies while minimizing financial risk. By focusing on a defined set of high-impact investment types, Community Power ensures resources are used effectively to support long-term financial strength and deliver reliable, affordable and community-driven energy solutions.
Capital Investment Areas
SAN DIEGO COMMUNITY POWER CAPITAL INVESTMENT PLAN FY 2027–2031 Capital Investment Areas 24 458
Investment Type 1. Application Assistance
Project Scope of Work Carryforward FY27
Commercial Application
Assistance Program
This initiative aims to support small and large
commercial and industrial customers in identifying
energy saving solutions and publicly available
funding programs that can help meet their needs
and goals. The program also provides project
management and grant support, if needed.
$250,000 -
Total $250,000 -
FIGURE 8. APPLICATION ASSISTANCE PROJECTS
Nonresidential Community Power customers may be eligible for energy savings opportunities through existing utility, state and federal funding programs. This program provides key customers in the commercial, industrial, agricultural and public sectors with a no-cost assessment of their business energy needs and identifies available funding opportunities that can support these needs.
Simplifying access to third-party energy savings programs reduces administrative burdens for nonresidential customers and streamlines the customer application process. By improving participation in existing programs, this initiative positions Community Power as a strategic partner to our key and priority nonresidential customers. The program brings additional energy resources and investments into the region, which helps retain customers in our service while lowering their utility bills.
Description Benefits
SAN DIEGO COMMUNITY POWER CAPITAL INVESTMENT PLAN FY 2027–2031 Capital Investment Areas 25 459
Investment Type 2. Disadvantaged Communities Green Tariff Project Scope of Work Carryforward FY27
Disadvantaged
Communities Green Tariff
(DAC-GT)
Bring the benefits from local solar projects to
those who may not be able to install solar on their
roofs and offer a 20% bill discount to eligible
residential customers in state-defined disadvantaged
communities
$299,175 $300,000
Total $299,175 $300,000
FIGURE 9. DISADVANTAGED COMMUNITIES GREEN TARIFF PROJECTS The California Public Utilities Commission (CPUC)
Disadvantaged Communities Green Tariff (DAC-GT) program provides a 20% bill discount to income-qualified residential customers in underresourced communities who may be
unable to install solar on their roof. Community Power brands DAC-GT as Solar Advantage in public-facing materials. This investment supports outreach and enrollment through trusted local partners, helping build awareness of Solar Advantage and trust in Community Power among eligible customers in disadvantaged communities. Eligibility is determined by the CPUC, using the “CalEnviroScreen” tool to identify communities that are disproportionately burdened by or vulnerable to multiple sources of pollution.
DAC-GT provides equitable bill relief to low-income residents by overcoming ownership, structural, financial and linguistic barriers to clean energy access. The program is externally funded through CPUC-administered sources, allowing
Community Power to deliver savings and solar benefits without relying on internal funding.
Description Benefits
SAN DIEGO COMMUNITY POWER CAPITAL INVESTMENT PLAN FY 2027–2031 Capital Investment Areas 26 460
Investment Type 3. Pilot Programs
Project Scope of Work Carryforward FY27
Customer Pilot Programs Test program concepts and support the implementation of high-impact projects that
Community Power may be able to scale with more
funding.
$1,772,839 $2,500,000
Clean Energy Asset
Feasibility Study
This solar and storage feasibility study will assess
the technical, economic and environmental viability
of integrating solar generation and/or energy
storage into Community Power's service territory.
The project involves data collection and review,
technical analysis of potential solar locations and grid interconnection, economic modeling to assess costs
and savings, environmental impact assessment and
development of a preliminary implementation plan
with project size, timeline and cost estimates. The
final deliverables will include reports on technical
feasibility, economic analysis, environmental impact
and a preliminary implementation plan.
$225,088 -
Total $1,997,927 $2,500,000
FIGURE 10. PILOT PROGRAMS PROJECTS
Pilot Programs allow Community Power to test targeted energy solutions in real-world conditions before broader deployment.
These efforts focus on customer-facing programs and emerging technologies, generating data on participation, performance and cost-effectiveness to inform near-term program expansion.
This investment also supports project-level feasibility work, such as the Clean Energy Asset Feasibility Study, which evaluates the viability of specific local clean energy resources, including solar and energy storage. Unlike broader planning and studies, these analyses are directly tied to potential near-term projects and implementation pathways.
Together, these pilots and feasibility assessments enable Community Power to validate program design and advance
investment-ready opportunities that align with community needs and operational priorities.
Pilots and feasibility assessments help Community Power advance cost-effective solutions while reducing financial risk.
Testing programs at a smaller scale allows the agency to refine design, address participation barriers and confirm performance before expanding investments.
Project-specific feasibility studies complement this work by identifying viable clean energy opportunities and clarifying costs, benefits and implementation considerations. This ensures potential investments are well understood and positioned for efficient execution.
These efforts support more informed decision-making,
helping Community Power manage procurement and resource adequacy costs, improve reliability and deliver programs that are both effective and scalable. By validating solutions before broader deployment, this investment type helps protect
ratepayer funds while advancing reliable, affordable and community-driven energy solutions.
Description Benefits
SAN DIEGO COMMUNITY POWER CAPITAL INVESTMENT PLAN FY 2027–2031 Capital Investment Areas 27 461
Investment Type 4. Grant Programs
Project Scope of Work Carryforward FY27
Community Clean Energy
Grants
Designed to support both community organizations
and other tax-exempt organizations in Community
Power’s service territory to fund clean energy
initiatives and support regional climate goals
$1,256,980 -
Total $1,256,980 -
FIGURE 11. GRANT PROGRAMS PROJECTS
Community Power provides competitive grants to local
nonprofits and other tax-exempt organizations to deploy community-scale clean energy infrastructure and energy
initiatives that deliver long-term public benefits.
Beginning in the 2026 grant cycle, the program prioritizes projects that install distributed energy resources — such as solar and battery storage — at community-serving facilities, including resilience hubs and critical service locations. These investments reduce facility energy costs, strengthen local energy resilience and expand access to clean energy in Communities of Concern.
The program continues to support clean energy programming that increases energy literacy, builds local capacity and expands participation in clean energy programs and workforce pathways.
In addition to Community Power funding, these grants are supplemented by Calpine Community Energy, which provides back-office support to Community Power, and the San Diego Foundation, the grants’ administrator.
Community Power’s grant program delivers both direct
community benefits and system-wide value for ratepayers by pairing locally deployed infrastructure with long-term operational and grid benefits. Grant-funded projects reduce energy costs for community-serving facilities, allowing savings to be reinvested over time into local programs and services.
Grant-funded infrastructure also strengthens grid reliability by deploying distributed energy resources that can provide backup power and support critical facilities. When integrated through Distributed Energy Resource Management System (DERMS)
and a Virtual Power Plant, these assets help manage peak demand, reduce Resource Adequacy costs and lower system-wide costs for ratepayers.
By pairing local investment with grid services, the program extends the value of each dollar while supporting long-term affordability, reliability and community impact.
Description Benefits
SAN DIEGO COMMUNITY POWER CAPITAL INVESTMENT PLAN FY 2027–2031 Capital Investment Areas 28 462
Investment Type 5. Building Electrification
Project Scope of Work Carryforward FY27
Equitable Building
Decarbonization
This statewide initiative offers no-cost installation
of electric appliances, energy efficiency measures,
basic health and safety improvements and electrical
panel upgrades.
$1,400,000 -
Total $1,400,000 $40,000
FIGURE 12. BUILDING ELECTRIFICATION PROJECTS
Building electrification programs promote the installation of electric appliances, such as electric heat pumps for space heating and cooling or for water heating in buildings. The Equitable Building Decarbonization Program is income-restricted, which ensures equitable access to clean electric technologies for customers facing financial and infrastructure barriers, such as upfront costs and electrical panel constraints.
Equitable Building Decarbonization uses state funding provided through the California Energy Commission (CEC) to deliver practical value to eligible customers by making their homes more energy efficient, healthier and more comfortable. Upgrading fossil-fueled home appliances to electric home appliances can improve indoor air quality. By removing participation barriers, complementary upgrades through the Equitable Building
Decarbonization Program ensure more communities can access these benefits. Reducing overall energy demand supports long-term affordability and clean energy goals, lowering upfront costs and making cleaner energy more accessible.
Description Benefits
SAN DIEGO COMMUNITY POWER CAPITAL INVESTMENT PLAN FY 2027–2031 Capital Investment Areas 29 463
Investment Type 6. Planning and Studies
Project Scope of Work Carryforward FY27
EV Load Growth Study The Regional EV Load Analysis will forecast how growing EV adoption can impact electricity demand
across Community Power’s service territory,
including hourly load profiles, adoption scenarios and
geographic variation. It will evaluate how different
charging behaviors — especially unmanaged vs.
managed charging — affect load shape, peak
demand and system risks, with a focus on strategies
(for example, time-of-use rates or managed
charging) that can shift or mitigate EV-related peaks.
Overall, the study aims to provide insights that
support long-term planning, helping Community
Power understand both the risks and opportunities
of transportation electrification for load forecasting, Resource Adequacy and program design.
- $250,000
Program Evaluation Fund a variety of third-party program evaluation efforts. Near-term projects include an evaluation of
potential load shift from the Smart Home Flex pilot
project and a bill impact analysis of Solar Battery
Savings program participants.
$250,000 -
California Energy
Commission (CEC) Grant
Fund a variety of third-party program evaluation
efforts. Near-term projects include an evaluation of
potential load shift from the Smart Home Flex pilot
project and a bill impact analysis of Solar Battery
Savings program participants.
Funding from the CEC Grant Agreement EPC-25-015
supports the Charging Harmonization and Analysis
for Resilient, Grid-Efficient Utilization and Planning
(CHARGE UP) project. The CHARGE UP project
will analyze and quantify the value of advanced
managed charging/V1G strategies in balancing bulk
system and distribution operational needs.
$693,611 -
Total $43,611 $250,000
FIGURE 13. PLANNING & STUDIES PROJECTS
SAN DIEGO COMMUNITY POWER CAPITAL INVESTMENT PLAN FY 2027–2031 Capital Investment Areas 30 464
Planning and Studies provide the analytical foundation for Community Power’s programs and investments. These efforts include data collection, technical analysis and stakeholder engagement to assess energy use, forecast demand and
evaluate potential program and infrastructure opportunities.
Unlike pilot programs, which test specific solutions for near-term implementation, Planning and Studies focuses on broader analysis and long-term strategy development to guide future investments.
Key activities include evaluating building and housing
characteristics, assessing local development feasibility, analyzing regional electric vehicle load growth and conducting program evaluations.
This work ensures Community Power designs programs and
investments that are data-driven, aligned with community needs and positioned to maximize impact before committing significant funding.
Planning and Studies help Community Power make
informed, cost-effective decisions that directly benefit ratepayers. By identifying the most effective strategies before implementation, these investments reduce financial risk and ensure limited public funds are directed to programs with the greatest potential impact.
Improved forecasting and analysis support more efficient resource planning, helping manage peak demand and avoid unnecessary costs that can be passed on to customers.
Evaluating building stock, transportation trends and program performance also enables Community Power to design targeted solutions that improve participation, expand access and better serve diverse communities.
Collectively, this work strengthens long-term affordability, enhances program effectiveness and ensures Community
Power delivers measurable value to customers through strategic, accountable investments.
Description Benefits
SAN DIEGO COMMUNITY POWER CAPITAL INVESTMENT PLAN FY 2027–2031 Capital Investment Areas 31 465
Investment Type 7. Battery Energy Storage Systems
Project Scope of Work Carryforward FY27
Residential Solar Battery
Savings Program
Designed to help single-family homeowners in
Community Power's service territory invest in clean
energy and support the grid by installing solar and
battery storage in their homes or complementing
an existing solar system with a new battery system.
The program provides two financial incentives for
participating customers: an upfront incentive to
minimize the initial cost of the battery system and
a performance incentive for discharging the battery
during a specified on-peak window to maximize
benefits for the customer, the grid and all ratepayers. $10,810,899 $3,532,500
Total $10,810,899 $3,532,500
FIGURE 14. BATTERY ENERGY STORAGE SYSTEMS PROJECTS
The amount of solar-generated electricity has steadily
increased in California, and production often exceeds demand at midday. Community Power’s residential Solar Battery
Savings program supports the installation of on-site energy storage systems to capture excess solar electricity for use when traditional renewable energy resources are unavailable.
The investment covers an upfront rebate that is given to customers when they install an eligible battery, as well as ongoing performance incentives for allowing Community
Power to discharge the customer’s battery to their home and the grid during specified windows.
Solar Battery Savings increases access to energy storage for Community Power customers by lowering the customer’s
upfront investment. Energy storage systems also increase local grid reliability and have the added benefit of providing customers with backup power during an outage or emergency.
By using enrolled customers’ batteries, Community Power staff can reduce peak load consumption, benefiting all ratepayers by reducing demand when energy costs are highest and reducing agency Resource Adequacy obligations and associated costs.
Description Benefits
SAN DIEGO COMMUNITY POWER CAPITAL INVESTMENT PLAN FY 2027–2031 Capital Investment Areas 32 466
Investment Type 8. Demand Response
Project Scope of Work Carryforward FY27
Distributed Energy
Resources Management
Systems (DERMS)
Software
Platform
The implementation of a DERMS is central to
Community Power's Flexible Load Strategy. A
DERMS software platform incorporates various
data points, such as weather, market/price data and
customer preferences, to optimize the operation
of distributed energy resources (DERs) in support
of various grid services. The Community Power
DERMS platform allows Community Power to help
customers reduce usage during high-cost on-peak
periods, while managing portfolio-wide power
procurement and resource adequacy costs and risk.
$535,622 $1,500,000
Total $535,622 $1,500,000
FIGURE 15: DEMAND RESPONSE PROJECTS
Demand Response programs incentivize customers to use less electricity when energy costs are higher by combining simple behavioral changes with automated smart technologies.
Demand Response investments are centered on the
implementation of Community Power’s DERMS, a software
platform that enables coordinated control of DERs such as batteries, electric vehicles and flexible loads.
DERMS serves as a foundational platform for multiple
Community Power CIP investment types, including
Solar Battery Savings, pilot programs and grant-funded
infrastructure. By integrating these distributed assets into a single system, DERMS enables Community Power to
aggregate, monitor and optimize customer-sited resources in response to real-time grid conditions.
This investment supports the continued buildout of DERMS capabilities to expand participation, improve system
integration and enable these resources to function collectively as a Virtual Power Plant, supporting grid reliability and peak demand management.
DERMS enables Community Power to maximize the value of
distributed energy investments by coordinating assets deployed through Solar Battery Savings, pilot programs and applicable grant-funded projects into a single, flexible system.
By aggregating these resources and deploying them during high-cost periods, DERMS helps reduce peak demand, lower Resource Adequacy obligations and avoid system costs that would otherwise be passed on to ratepayers.
This approach strengthens grid reliability while converting individual program investments into ongoing grid services, ensuring ratepayer dollars deliver sustained operational value rather than one-time benefits.
Description Benefits
SAN DIEGO COMMUNITY POWER CAPITAL INVESTMENT PLAN FY 2027–2031 Capital Investment Areas 33 467
Investment Type 9. Energy Efficiency
Project Scope of Work Carryforward FY27
Regional Energy Network The San Diego Regional Energy Network (SDREN) is an initiative of Community Power, in partnership with
the County of San Diego, that offers a portfolio of
energy-efficiency programs to residents, businesses
and public agencies throughout San Diego
County. The 10 SDREN programs are managed
by Community Power staff, and all activities are
cost-recoverable through California Public Utilities
Commission (CPUC) funds.
- $63,117,654
Total - $63,117,654
FIGURE 16. ENERGY EFFICIENCY PROJECTS
Led by San Diego Community Power and the County of
San Diego, SDREN is shaped by a regional Advisory Council of community members, municipal representatives and
sector partners. The 10 SDREN programs make clean energy upgrades easier, more accessible and more impactful
for every community in San Diego County. Collectively,
SDREN provides hands-on assistance and low- to no-cost
installations, strengthens the local clean energy industry and addresses specialized needs to ensure no community is left behind.
Funded by California utility ratepayers, under the authority of the CPUC, SDREN helps communities across San Diego
County save energy, especially those that need energy
efficiency most. Reducing overall energy demand supports long-term affordability and clean energy goals, lowering upfront costs and making cleaner energy more accessible.
By prioritizing underserved communities and addressing
barriers in underserved communities, energy efficiency
programs can expand equitable access to clean energy
solutions and their benefits.
Description Benefits
SAN DIEGO COMMUNITY POWER CAPITAL INVESTMENT PLAN FY 2027–2031 Capital Investment Areas 34 468
Investment Type 10. Information Technology
Project Scope of Work Carryforward FY27
Customer Relationship
Management Setup
Establish a centralized system to enhance service
delivery and community engagement, with a focus
on energy management and customer support. This
initiative, excluding confidential security work, will
streamline operations across Community Power’s
service area and reduce long-term costs.
$750,000 -
Contact Center
Enhancements
Explore initiatives that enhance customer service
operations to improve service responsiveness and
increase customer satisfaction.
$200,000 -
Enterprise Data Platform Establish a centralized data infrastructure to improve data access and analytics for staff, aiming to enhance
control and reduce costs. The project encompasses
capital investment, staff training, data migration and
cybersecurity enhancements. Deliverables include
a functional data platform, trained personnel and
detailed progress reports. The initiative will proceed
through planning and implementation phases,
excluding confidential security-sensitive details.
$796,460 -
Amazon Web Services
Infrastructure and
Security Layer
Develop an Amazon Web Services Infrastructure
and Security Layer to ensure robust, scalable cloud
services with enhanced security for customer
data. This project will provide a reliable and secure
foundation for all Community Power digital services,
improving customer trust and service efficiency.
$250,000 -
Energy Trading Risk
Management and
Portfolio Analytics
Implementation
Community Power has licensed and will be
deploying an Energy Trading Risk Management
(ETRM) system to help manage its power portfolio
and financial and budget processes. This system will
support various activities such as recording trades,
monitoring positions, assessing value, generating
reports, managing risks, processing settlements and
integrating with the budget. The system is designed
to manage diverse power agreements and contracts,
ensuring comprehensive coverage of Community
Power’s energy dealings.
$446,467 -
Enterprise Resource
Planning (ERP)
Implement an ERP system for Community Power
to streamline budgeting, enhance reporting,
manage procurement and contracts and improve
overall operational efficiency. The ERP project’s
major deliverables include a fully implemented
and functional ERP system; system documentation
including configuration details, user manuals and
training materials; trained staff capable of effectively using the ERP system; and a post-implementation
review report.
$750,000 $217,500
Total $3,192,927 $217,500
FIGURE 17. INFORMATION TECHNOLOGY PROJECTS
SAN DIEGO COMMUNITY POWER CAPITAL INVESTMENT PLAN FY 2027–2031 Capital Investment Areas 35 469
Information Technology upgrades are designed to modernize and integrate the agency’s digital, data and customer service infrastructure to better support its mission of delivering cleaner affordable energy. These investments establish
a secure, scalable and interoperable technology system, including those that help manage customer relationships, contact center enhancements, enterprise data platforms, cloud infrastructure and core business systems. Building a resilient and future-ready technology foundation ensures Community Power’s ability to adapt to market and regulatory changes and deliver high-quality, transparent and community-focused services.
These upgrades strengthen operational efficiency,
cybersecurity and system reliability while enabling more responsive and customer-focused services. Improving data access, automation and platform integration helps reduce costs over time, supports fiscal responsibility and enhances transparency and accountability.
Description Benefits
SAN DIEGO COMMUNITY POWER CAPITAL INVESTMENT PLAN FY 2027–2031 Capital Investment Areas 36 470
07 Funding Guide
471
San Diego Community Power funds programs in two primary ways: through internal funding or by securing external funding.
When available, internal funding provides Community Power the greatest flexibility to design programs that respond directly to community needs. As a newer organization, however,
Community Power must also balance program investments
with building a strong financial foundation, meeting reserve targets, maintaining customer affordability and advancing other organizational priorities. In the near term, the amount of revenue available for programs will be limited, but it is expected to grow over time.
Internal funding also offers greater flexibility during the planning phase, allowing Community Power to design
programs based on community and agency priorities rather than external funding requirements. Planning activities typically require less funding than implementation or capital-intensive phases, such as design and construction.
To maximize impact while continuing to build reserves,
Community Power will also pursue external funding from
state, federal and other sources. External funding can provide larger investment opportunities but requires additional effort to secure and administer and may include constraints that limit program flexibility. Key sources include the California Public Utilities Commission, the California Energy Commission and other state and federal agencies.
Internal vs. External Funding
When determining how to fund programs, Community Power
must evaluate the trade-offs between using internal revenues and pursuing external funding. Investing internal revenues in programs may limit resources available for other organizational priorities. However, reinvesting revenues into programs provides a highly equitable way to return value to customers and offers the greatest certainty and flexibility in program design and administration.
Internal funding is generated from net operating revenues and nonoperating investment earnings. Programs that provide broad benefits to customers may be funded through net operating revenues. Programs with more targeted eligibility or benefits, such as those serving Communities of Concern, may be
supported through nonoperating investment earnings.
External funding typically involves competitive application processes, requiring additional resources for grant writing, administration and reporting. It can introduce uncertainty for long-term program planning due to the variability of grant awards.
In contrast, administering programs with internal funding can reduce many of the administrative requirements associated with external funding, such as complex reporting and rigid program design criteria. This flexibility is particularly important for advancing Community Power’s equity commitments, as
some external funding requirements may limit the ability to effectively deliver programs to Communities of Concern.
Across the community choice aggregation (CCA) landscape, approaches to program funding vary. Some CCAs prioritize internal spending, minimizing reliance on external funding due to administrative complexity. Others rely more heavily on external sources and limit internal program investment. As a newer organization, Community Power is positioned to pursue a balanced approach, adjusting its strategy over time.
In the near term, Community Power is focused on building financial reserves in alignment with its Financial Reserves Policy, which establishes a target of at least 180 days of cash on hand to support a key organizational goal of achieving and maintaining an investment-grade credit rating. The agency also maintains designated reserves, including a Rate Stabilization Reserve Policy, to help mitigate the impacts of market volatility and support stable, predictable rates over time for customers.
Maintaining a strong financial position is critical to managing financial risk, meeting long-term community needs and
ensuring organizational stability. As reserve targets are achieved and sustained, Community Power’s ability to reinvest revenues into customer programs and strategic initiatives will continue to expand while supporting rate stability and affordability for all customers.
External Sources
Community Power can pursue funding from a range of
external sources to supplement its program investments.
These sources vary in the size of available funds, application complexity and flexibility in how funds can be used.
Additional funding opportunities will continue to emerge through state and federal legislation. Community Power will monitor and pursue opportunities that align with community and organizational priorities, recognizing that funding availability and timelines may vary. When appropriate, the agency may partner with regional organizations to share administrative responsibilities and increase competitiveness for funding.
Funding Guide
SAN DIEGO COMMUNITY POWER CAPITAL INVESTMENT PLAN FY 2027–2031 Funding Guide 38 472
08 Budget Resolution
473
Budget Resolution
FPO
SAN DIEGO COMMUNITY POWER CAPITAL INVESTMENT PLAN FY 2027–2031 Budget Resolution 40 474
09 Acknowledgments
475
Acknowledgments
Finance Department
San Diego Community Power’s Finance Department works to maintain a fiscally responsible budget in accordance with Community Power’s Budget Policy. The department ensures sufficient funding to meet procurement needs, sustain operational needs and support sustained growth while delivering clean energy to the communities we serve. In addition, the team actively works to build Community Power’s reserves and develop policies that consider future economic conditions, provides an understandable and transparent operating budget for internal and external users, strives to keep the Community Power Board, committees and staff informed of Community Power’s fiscal condition and develops a budget that will ultimately prioritize people, transparency and our communities.
Board of Directors
Supervisor Terra Lawson-Remer, Chair
Councilmember Ditas Yamane, Vice Chair
Councilmember Sean Elo-Rivera, Director
Councilmember Jack Fisher, Director
Councilmember Michael Inzunza, Director
Councilmember Marco San Antonio, Director
Councilmember Genevieve Suzuki, Director
Finance and Risk Management Committee
Councilmember Ditas Yamane, Chair
Councilmember Genevieve Suzuki, Vice Chair
Councilmember Michael Inzunza, Director
Community Advisory Committee
CHULA VISTA
• Anthony Sclafani
• Alonso Gonzalez
COUNTY OF SAN DIEGO
• Peter Andersen
• Ross Pike
ENCINITAS
• Tara Hammond
• Molly Hintlian
IMPERIAL BEACH
• Kenneth Hoyt
• Vacant
LA MESA
• David Harris
• Shaun Sumner
NATIONAL CITY
• Sorayda Santos
• Larry Emerson
SAN DIEGO
• Luis Montero-Adams
• Matthew Vasilakis
Community Power Executive Team
Karin Burns, Chief Executive Officer
Veera Tyagi, General Counsel
Jack Clark, Chief Operating Officer
Gordon Samuel, Chief Commercial Officer
Jannies Burlingame, Chief Financial Officer and Treasurer Finance Department
Jannies Burlingame, Chief Financial Officer and Treasurer Tim Manglicmot, Senior Director of Finance and Risk
Jeb Spengler, Associate Director of Finance and Procurement William Weisman, Associate Director of Finance
Christopher Stephens, Procurement Manager
Krystal Carranza, Procurement Manager
Diana Gonzalez, Risk Manager
Mark Alfaro, Finance Manager
Christopher Do, Senior Financial Analyst
Michelle Phillips, Senior Financial Analyst
Julissa Mercedes, Financial Analyst
Kevin Bateman, Financial Analyst
Paige Spounias-Flynn, Procurement Analyst
Angad Kapoor, Procurement Analyst
SAN DIEGO COMMUNITY POWER CAPITAL INVESTMENT PLAN FY 2027–2031 Acknowledgments 42 476
SAN DIEGO COMMUNITY POWER
Staff Report – Item 14
To: Board of Directors
From: Gordon Samuel, Chief Commercial Officer
Andrea Torres, Director of Origination
Via: Jack Clark, Acting Chief Executive Officer
Subject: Approve 15-Year Renewable Power Purchase Agreements with SunZia Wind North LLC and SunZia Wind South LLC for 25 MW of wind products in substantially final form and authorize the Acting Chief Executive Officer to execute the agreement
Date: June 25, 2026
Recommendation
Approve 15-Year Renewable Power Purchase Agreements with SunZia Wind North LLC and SunZia Wind South LLC in substantially final form and authorize the Acting Chief Executive Officer to execute the agreement.
Background
As San Diego Community Power (Community Power) strives to meet its environmental, financial, and regulatory compliance goals and requirements, long-term power purchase agreements (PPAs) are integral components of its energy supply portfolio. Long-term PPAs provide renewable generation facility developers with a certain revenue stream against which they can finance up-front capital requirements, so each long-term PPA that Community Power signs with a developing facility will underpin a new, incremental renewable energy project, while locking in renewable energy supply and capacity for Community Power’s portfolio.
Community Power is currently contracted for 150 MW of renewable energy benefits from the larger approximately 3,500 MW SunZia Wind facility (referred to as “SunZia” or “Project”).
Subsequently, the PPAs were bifurcated between two portions of SunZia: SunZia Wind North LLC (“SunZia North”) and SunZia Wind South LLC (‘SunZia South”). Staff propose two PPAs 477
for an additional 25 MW of renewable energy capacity, similarly bifurcated between SunZia North and SunZia South. SunZia Wind North LLC and SunZia Wind South LLC are subsidiaries of Pattern Energy Group LP (“Pattern”). The PPAs originated from an auction Pattern issued to sell energy and renewable energy credits (“RECs”) from SunZia. Community Power submitted bids conditioned on review by the Energy Contract Working Group and Board approval and has reached PPA terms mutually agreeable to both parties.
Analysis and Discussion
In recent months, staff have received several offers on a bilateral basis for products from operational wind projects that are seeking additional long-term contracts after existing PPAs expire, including notice of Pattern’s SunZia auction to sell additional renewable energy to existing offtakers like Community Power, as well as from the broader market. Staff believe this is due to a particularly constrained market for 24/7 renewable resources for the foreseeable future. The vast majority of active projects in the CAISO queue are solar and/or battery storage.
Given the termination of tax credits available to wind and solar projects, as well as permitting headwinds for new-build wind resources both within California and out of state, a number of wind developers have chosen to pause their pipeline of new wind development. Further, while geothermal development retains the opportunity to capture tax credits beyond 2035, transmission and permitting constraints as well as high capital expenditure requirements constrain development.
Resources that can provide renewable energy in the evening and overnight are particularly valuable to diversify a portfolio like Community Power’s that is dominated by solar photovoltaic and 4-hr battery energy storage resources. In addition to delivering power during evening ramp periods, starting in 2028, load serving entities like Community Power will have to begin reporting on the hourly green-house gas emissions (“GHG”) from generation serving Community Power’s load in its Power Source Disclosure report. Further, the CPUC and California’s Air Resources Board have adopted an aggressive 8 million metric ton (“MMT”) target for the electricity sector by 2045. Resources like wind provide renewable power during those overnight hours that would otherwise be provided by system power.
Pattern offered up to 150 MW of energy and RECs, releasing 25 MW over six auctions. Notably, resource adequacy (“RA”) was excluded from the products offered. This is due to the highly constrained ability for offtakers to secure long-term CAISO import rights, which is a requirement for RA. Staff assessed the value of incremental volume from SunZia against several other wind proposals and determined that an additional long-term contract from SunZia is a good fit for Community Power’s portfolio. Community Power secured one winning bid for 25 MW in this highly competitive market.
Staff negotiated the attached redacted PPAs for the purchase of renewable energy from SunZia, which is a recently operational wind project in New Mexico for which roughly one dozen long-term offtakers rely upon.
478
Below is additional information regarding Leeward Renewable Energy, the project and the PPAs.
Background on Pattern:
• Pattern has 17 years of experience in renewable energy development. • Pattern operates 367 MW in wind generation projects in California. • Pattern has placed approximately 12,000 MW of wind and solar projects into service across 46 facilities.
• Pattern has over 1,100 miles of transmission in operation and in development.
Project Overview:
• Project: 25 MW (from the larger 3,500 MW) operational wind • Project location: Lincoln, Torrance and San Miguel Counties, New Mexico • Delivery Point: Palo Verde
• Contract term: 15 years, commencing on 1/1/2027
• Expected annual energy production: 55,928 MWh from 17.54 MW of SunZia North and 23,287 MWh from 7.46 MW of SunZia South.
• Operational project with no development risk
• Guaranteed energy production: 75% of projected annual deliveries • Community Power would receive financial compensation in the event of seller’s failure to meet the guaranteed energy production
• Community Power is not exposed to any tax credit losses via price adjustments due to the fact that it is an operational resource for which prior tax credits have already been monetized
Workforce development:
• No construction jobs are associated with the PPAs. SunZia was built with union labor and as presented at the time of Board approval of Community Power’s initial 150 MW PPA, received letters of support from IBEW International President, Kenneth Cooper and from the New Mexico Building Construction & Trades Council.
Fiscal Impact
The competitive energy and capacity pricing of the PPAs are confidential, but the long-term purchase of renewable energy will provide Community Power with significant value and cost certainty over the term of these PPAs.
479
Committee Review
Key terms of the PPAs were reviewed with the Energy Contract Working Group (ECWG) on June 8, 2026, and the ECWG approved staff’s recommendation to move forward on the recommendation for Board approval.
Strategic Plan
This project ties to two of the strategic plan goals for the Power Services team:
1. Develop a clean energy portfolio with renewable content of 100% no later than 2035, with interim targets of 75% by 2027 and 85% by 2030; and
2. Ensure cost-effective compliance with RA and RPS requirements and all other regulatory obligations.
Attachments
A. Renewable Power Purchase Agreement with SunZia Wind North LLC (redacted version for commercially sensitive information)
B. Renewable Power Purchase Agreement with SunZia Wind South LLC (redacted version for commercially sensitive information)
480
ITEM 14
ATTACHMENT A
481
RENEWABLE POWER PURCHASE AND SALE AGREEMENT (SUNZIA NORTH)
COVER SHEET
Seller: SunZia Wind North LLC
Buyer: San Diego Community Power, a California Joint Powers Authority Description of Facility: A wind-powered electricity generating facility known as SunZia Wind North, with a nameplate capacity of up to 1,089 MW, as described in Exhibit A, as such facility may be modified under the terms of this Agreement.
Milestones:
Milestone Date for
Completion
Execute Interconnection Agreement Complete
Evidence of Site Control Complete
Financial Close Complete
Procurement of Major Equipment Complete
Construction Start Date Complete
CEC Pre-Certification Complete
Delivery Term: Fifteen (15) Contract Years.
Guaranteed Capacity: 7.46 MW.
Expected Energy: per Contract Year, as such amount may be adjusted by Seller in accordance with the definition of “Expected Energy” below.
Product:
☒ Delivered Energy
☒ Green Attributes/Renewable Energy Credits (Portfolio Content Category 1) attributable to the Delivered Energy
Scheduling Coordinator: Seller/Seller Third Party.
482
Development Security & Performance Security
Development Security:
Performance Security:
483
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS ............................................................................................................1
1.1 Contract Definitions .................................................................................................1
1.2 Rules of Interpretation ...........................................................................................18 ARTICLE 2 TERM; CONDITIONS PRECEDENT .....................................................................19
2.1 Contract Term ........................................................................................................19
2.2 [Reserved.] .............................................................................................................19
2.3 Obligations Prior to Delivery Term .......................................................................19
2.4 Progress Reports ....................................................................................................21
2.5 Remedial Action Plan ............................................................................................21
2.6 Outside Commercial Operation Date .....................................................................21 ARTICLE 3 PURCHASE AND SALE .........................................................................................22
3.1 Sale of Product .......................................................................................................22
3.2 Sale of Green Attributes .........................................................................................22
3.3 Compensation. .......................................................................................................22
3.4 Imbalance Energy ..................................................................................................23
3.5 Ownership of Renewable Energy Incentives .........................................................23
3.6 Future Environmental Attributes. ..........................................................................24
3.7 Pre-COD Product ...................................................................................................24
3.8 Reserved. ................................................................................................................24
3.9 CEC Certification and Verification .......................................................................24
3.10 Non-Modifiable Terms. .........................................................................................24
3.11 California Renewables Portfolio Standard .............................................................25
3.12 Compliance Expenditure Cap ................................................................................25 ARTICLE 4 OBLIGATIONS AND DELIVERIES ......................................................................27
4.1 Delivery..................................................................................................................27
4.2 Title and Risk of Loss ............................................................................................27
4.3 Scheduling Coordinator Responsibilities ...............................................................27
4.4 Forecasting .............................................................................................................29
4.5 Dispatch Down/Curtailment ..................................................................................30
4.6 Reduction in Delivery Obligation ..........................................................................31
4.7 Guaranteed Energy Production ..............................................................................32
4.8 WREGIS ................................................................................................................32 ARTICLE 5 TAXES ......................................................................................................................34
5.1 Allocation of Taxes and Charges ...........................................................................34
5.2 Cooperation ............................................................................................................34 ARTICLE 6 MAINTENANCE OF THE FACILITY ...................................................................35
6.1 Maintenance of the Facility ...................................................................................35
6.2 Maintenance of Health and Safety .........................................................................35
6.3 Shared Facilities .....................................................................................................35 484
485
13.1 Seller’s Representations and Warranties ...............................................................52
13.2 Buyer’s Representations and Warranties. ..............................................................52
13.3 General Covenants .................................................................................................53 ARTICLE 14 ASSIGNMENT .......................................................................................................53
14.1 General Prohibition on Assignments .....................................................................53
14.2 Collateral Assignment ............................................................................................53
14.3 Permitted Assignment ............................................................................................54
14.4 Permitted Buyer Assignment .................................................................................54 ARTICLE 15 DISPUTE RESOLUTION ......................................................................................54
15.1 Venue .....................................................................................................................54
15.2 Dispute Resolution .................................................................................................54 ARTICLE 16 INDEMNIFICATION .............................................................................................55
16.1 Indemnification. .....................................................................................................55
16.2 Claims ....................................................................................................................55 ARTICLE 17 INSURANCE ..........................................................................................................56
17.1 Insurance ................................................................................................................56 ARTICLE 18 CONFIDENTIAL INFORMATION ......................................................................57
18.1 Definition of Confidential Information ..................................................................57
18.2 Duty to Maintain Confidentiality ...........................................................................57
18.3 Irreparable Injury; Remedies .................................................................................57
18.4 Permitted Disclosures ............................................................................................58
18.5 Press Releases ........................................................................................................58 ARTICLE 19 MISCELLANEOUS ...............................................................................................58
19.1 Entire Agreement; Integration; Exhibits ................................................................58
19.2 Amendments ..........................................................................................................58
19.3 No Waiver ..............................................................................................................58
19.4 No Agency, Partnership, Joint Venture or Lease ...................................................58
19.5 Severability ............................................................................................................59
19.6 Mobile-Sierra .........................................................................................................59
19.7 Counterparts ...........................................................................................................59
19.8 Electronic Delivery ................................................................................................59
19.9 Binding Effect ........................................................................................................59
19.10 Change in Electric Market Design .........................................................................59
19.11 No Recourse to Members of Buyer .......................................................................60
19.12 Forward Contract ...................................................................................................60
19.13 Further Assurances.................................................................................................60 486
Exhibits
Exhibit A Facility Description
Exhibit B Facility Construction and Commercial Operation Exhibit C Progress Reporting Form
Exhibit D Form of Average Forecast of Energy (MWh)
Exhibit E Energy Replacement Damages Calculation
Exhibit F Form of Commercial Operation Date Certificate Exhibit G Form of Installed Capacity Certificate
Exhibit H Reserved
Exhibit I Form of Letter of Credit
Exhibit J Form of Guaranty
Exhibit K Notices
Exhibit L Operating Restrictions
Exhibit M Form of Limited Assignment Agreement
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RENEWABLE POWER PURCHASE AND SALE AGREEMENT (SUNZIA NORTH) This Renewable Power Purchase and Sale Agreement (SunZia North) (“Agreement”) is entered into as of ___________, 2026 (the “Effective Date”), between Buyer and Seller. Buyer and Seller are sometimes referred to herein individually as a “Party” and jointly as the “Parties.”
RECITALS
WHEREAS, Seller owns and operates the Facility; and;
WHEREAS, Seller desires to sell, and Buyer desires to purchase, on the terms and conditions set forth in this Agreement, the Product;
NOW THEREFORE, in consideration of the mutual covenants and agreements herein contained, and for other good and valuable consideration, the sufficiency and adequacy of which are hereby acknowledged, the Parties agree to the following:
ARTICLE 1
DEFINITIONS
1.1 Contract Definitions. The following terms, when used herein with initial capitalization, shall have the meanings set forth below:
“Accepted Compliance Costs” has the meaning set forth in Section 3.12. “Affiliate” means, with respect to any Person, each Person that directly or indirectly controls, is controlled by, or is under common control with such designated Person. For purposes of this definition and the definition of “Permitted Transferee”, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”), as used with respect to any Person, shall mean (a) the direct or indirect right to cast at least fifty percent (50%) of the votes exercisable at an annual general meeting (or its equivalent) of such Person or, if there are no such rights, ownership of at least fifty percent (50%) of the equity or other ownership interest in such Person, or (b) the right to direct the policies or operations of such Person. “Agreement” has the meaning set forth in the Preamble and includes any Exhibits, schedules and any written supplements hereto, the Cover Sheet, and any designated collateral, credit support or similar arrangement between the Parties. “Alternative Delivery Point” means a Scheduling Point other than the Delivery Point, that is agreed upon by Buyer and Seller.
“Approved Meter” means a CAISO-approved revenue quality meter or meters, together with a CAISO-approved data processing gateway or remote intelligence gateway, telemetering equipment and data acquisition services sufficient for monitoring, recording and reporting, in real time, all Energy produced by the Facility net of Electrical Losses and Station Use. “Available Capacity” means the capacity from Buyer’s Share of the Facility, expressed in whole MW, that is available to generate Energy.
488
“Balancing Authority” has the meaning set forth in the CAISO Tariff. “Bankrupt” means with respect to any entity, such entity that (a) files a petition or otherwise commences, authorizes or acquiesces in the commencement of a proceeding or cause of action under any bankruptcy, insolvency, reorganization or similar Law, (b) has any such petition filed or commenced against it which remains unstayed or undismissed for a period of thirty (30) days (provided that such thirty (30) day period shall be extended to sixty (60) days if Seller is actively contesting the petition), (c) makes an assignment or any general arrangement for the benefit of creditors, (d) otherwise becomes bankrupt or insolvent (however evidenced), (e) has a liquidator, administrator, receiver, trustee, conservator or similar official appointed with respect to it or any substantial portion of its property or assets, or (f) is generally unable to pay its debts as they fall due.
“Business Day” means any day except a Saturday, Sunday, the Friday after the U.S.
Thanksgiving holiday, or a Federal Reserve Bank holiday in California. A Business Day begins at 8:00 a.m. and ends at 5:00 p.m. local time for the Party sending a Notice, or payment, or performing a specified action.
“Buyer” has the meaning set forth on the Cover Sheet.
“Buyer Performance Security” means cash or Letter of Credit in the amount equal to the Seller Performance Security.
“Buyer Lockbox Arrangement” has the meaning set forth in Section 8.12. “Buyer’s Share” means the percentage that is equal to the quotient of the Guaranteed Capacity divided by the Installed Capacity (or, prior to the Commercial Operation Date, the total nameplate capacity of the Facility in operation at the time), not to exceed one hundred percent (100%), as such percentage may change from time to time with changes to the Installed Capacity in accordance with this Agreement, if applicable.
“Buyer’s WREGIS Account” has the meaning set forth in Section 4.8(a). “CAISO” means the California Independent System Operator Corporation or any successor entity performing similar functions.
“CAISO Grid” has the same meaning as “CAISO Controlled Grid” as defined in the CAISO Tariff.
“CAISO Operating Instruction” has the same meaning as “Operating Instruction” as defined in the CAISO Tariff.
“CAISO Tariff” means the California Independent System Operator Corporation Agreement and Tariff, Business Practice Manuals (BPMs), and Operating Procedures, including the rules, protocols, procedures and standards attached thereto, as the same may be amended or modified from time-to-time and, to the extent subject to approval by FERC, as approved by FERC. 489
“California Renewables Portfolio Standard” or “RPS” means the renewable energy program and policies established by California State Senate Bills 1038 (2002), 1078 (2002), 107 (2008), X-1 2 (2011), 350 (2015), and 100 (2018) as codified in, inter alia, California Public Utilities Code Sections 399.11 through 399.31 and California Public Resources Code Sections 25740 through 25751, as such provisions are amended or supplemented from time to time. “CEC” means the California Energy Commission, or its successor agency. “CEC Certification and Verification” means that the CEC has certified (or, with respect to periods before the date that is one hundred eighty (180) days following the Commercial Operation Date, that the CEC has pre-certified) that the Facility is an Eligible Renewable Energy Resource for purposes of the California Renewables Portfolio Standard and that all Energy generated by the Facility qualifies as generation from an Eligible Renewable Energy Resource. “Change of Control” means any circumstance in which (a) in respect of Buyer, the Person that has ultimate control over Buyer ceases to have such ultimate control, and (b) in the case of Seller, the Ultimate Parent ceases to have control over Seller; provided that, for the avoidance of doubt, it shall not be a Change of Control of Seller if the Ultimate Parent retains either (i) the direct or indirect right to cast at least fifty percent (50%) of the votes exercisable at an annual general meeting (or its equivalent) of Seller or, if there are no such rights, ownership of at least fifty percent (50%) of the equity or other ownership interest in Seller, or (ii) the right to direct the policies or operations of Seller.
“COD Delay Damages Payment” has the meaning set forth in Exhibit B. “Collateral Agent” has the meaning set forth in the Security Agreement. “Commercial Operation” has the meaning set forth in Exhibit B. “Commercial Operation Date” has the meaning set forth in Exhibit B. “Compliance Actions” has the meaning set forth in Section 3.12. “Compliance Expenditure Cap” has the meaning set forth in Section 3.12. “Confidential Information” has the meaning set forth in Section 18.1. “Construction Start” has the meaning set forth in Exhibit B. “Contract Revenues” has the meaning set forth in Section 4.5(b). “Contract Term” has the meaning set forth in Section 2.1. 490
“Contract Year” means a period of twelve (12) consecutive months, with the first Contract Year commencing on the Commercial Operation Date and each subsequent Contract Year commencing on the anniversary of the Commercial Operation Date. “Costs” means, with respect to the Non-Defaulting Party, brokerage fees, commissions and other similar third-party transaction costs and expenses reasonably incurred by such Party either in terminating any arrangement pursuant to which it has hedged its obligations or entering into new arrangements which replace the Agreement; and all reasonable expenses, including reasonable attorneys’ fees incurred by the Non-Defaulting Party in connection with terminating the Agreement.
“Cover Sheet” means the cover sheet to this Agreement.
“COVID-19” means the pandemic disease designated COVID-19 and the related virus designated SARS-CoV-2 and any mutations thereof, or the efforts of a Governmental Authority to combat or mitigate such disease.
“CPUC” means the California Public Utilities Commission, or successor entity. “Credit Rating” means, with respect to any entity, the publicly available or (subject to the express condition that the Party seeking to use private rating reports has provided to the other Party true and correct copies of the private rating reports of such subject entity) private rating then assigned to such entity’s unsecured, senior long-term debt obligations (not supported by third party credit enhancements) or if such entity does not have a rating for its senior unsecured long-term debt, then the publicly available or (subject to the above parenthetical) private rating then assigned to such entity as an issuer rating by S&P, Fitch, or Moody’s. If ratings by Fitch, S&P and Moody’s are not equivalent, the lower rating shall apply.
“Curtailment Order” means any of the following:
(a) the CAISO orders, directs, alerts, or provides notice to a Party, including a CAISO Operating Instruction, to curtail deliveries of Energy from the Facility for the following reasons: (i) any System Emergency, or (ii) any warning of an anticipated System Emergency, or warning of an imminent condition or situation, which jeopardizes CAISO’s electric system integrity or the integrity of other systems to which CAISO is connected; (b) a curtailment ordered by a Transmission Provider for reasons including, but not limited to, (i) any situation that affects normal function of the electric system including, but not limited to, any abnormal condition that requires action to prevent circumstances such as equipment damage, loss of load, or abnormal voltage conditions, or (ii) any warning, forecast or anticipation of conditions or situations that jeopardize the Transmission Provider’s electric system integrity or the integrity of other systems to which the Transmission Provider is connected; (c) a curtailment ordered by CAISO or a Transmission Provider due to scheduled or unscheduled maintenance on the Transmission Provider’s transmission facilities that prevents (i) Buyer from receiving or (ii) Seller from delivering Energy at the Delivery Point; or 491
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(1) Subject to the Hourly Delivery Cap, (i) (a) Buyer’s Share of the Energy produced by the Facility and delivered to the Point of Interconnection, as measured in MWh by the Approved Meter, as such amount may be reduced as a result of a Curtailment Order, net of all Electrical Losses (other than Electrical Losses that are reflected in the meter readings) and Station Use; or (b) if a portion of the Facility output is curtailed at Seller’s election, in any Settlement Period or Settlement Interval that is not during a Curtailment Period or Market Curtailment Period and Buyer’s Share is not curtailed, then Delivered Energy for such Settlement Period or Settlement Interval will instead be equal to Buyer’s Share of the Energy that the Facility would have been able to produce and deliver to the Point of Interconnection if the Facility was not so curtailed, estimated in a manner consistent with the description set forth in clause (a) above; or (c) if the Facility output is reduced, at Seller’s direction in any Settlement Interval or Settlement Period, as applicable, during a Market Curtailment Period, then Delivered Energy for such Settlement Interval or Settlement Period will be instead equal to the amount of Energy delivered to Buyer at the Delivery Point during such Market Curtailment Period; provided, however, that neither (a), (b) nor (c) above shall exceed the quantity of E-Tags demonstrating delivery of such Energy to the Delivery Point, if such E-Tags are required by the CAISO Tariff or other applicable Law; plus
(2) all Replacement Energy delivered as part of prospectively delivered Replacement Product pursuant to Section 4.7(b)(i).
“Delivery Point” has the meaning set forth in Exhibit A. “Delivery Term” shall mean the period of Contract Years set forth on the Cover Sheet beginning on the Commercial Operation Date, unless terminated earlier in accordance with the terms and conditions of this Agreement.
“Development Cure Period” has the meaning set forth in Exhibit B. “Development Security” means, at Seller’s option, (a) cash or (b) a Letter of Credit, in the amount set forth on the Cover Sheet.
“Disclosing Party” has the meaning set forth in Section 18.2. “Early Termination Date” has the meaning set forth in Section 11.2(a). “Effective Date” has the meaning set forth in the Preamble hereto. “Electrical Losses” means all transmission or transformation losses between the Facility and the Delivery Point, other than losses that are financially settled by Seller. “EIRP” means “Eligible Intermittent Resource Protocol” as described in Appendix Q of the CAISO Tariff or a successor CAISO program for intermittent resources. 493
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“Forced Facility Outage” means an unexpected failure of one or more components of the Facility or any outage on the Transmission System that prevents Seller from making power available at the Delivery Point and that is not the result of a Force Majeure Event. “Future Environmental Attributes” means Buyer’s Share of any and all generation attributes (other than Green Attributes or Renewable Energy Incentives) under the RPS regulations and/or under any and all other international, federal, regional, state or other Law, rule, regulation, bylaw, treaty or other intergovernmental compact, decision, administrative decision, program (including any voluntary compliance or membership program), competitive market or business method (including all credits, certificates, benefits, and emission measurements, reductions, offsets and allowances related thereto) that are attributable, as of the Effective Date, or in the future, to the generation of electrical energy by a wind generation facility as opposed to from a conventional generation resource.
“Gains” means, with respect to any Party, an amount equal to the present value of the economic benefit to it, if any (exclusive of Costs), resulting from the termination of this Agreement for the remaining Contract Term, determined in a commercially reasonable manner. Factors used in determining the economic benefit to a Party may include, without limitation, reference to information supplied by one or more third parties, which shall exclude Affiliates of the Non-Defaulting Party, including without limitation, quotations (either firm or indicative) of relevant rates, prices, yields, yield curves, volatilities, spreads or other relevant market data in the relevant markets, comparable transactions, forward price curves based on economic analysis of the relevant markets, settlement prices for comparable transactions at liquid trading hubs (e.g., SP-15), all of which should be calculated for the remaining Contract Term, and includes the value of Green Attributes.
“Governmental Authority” means any federal, state, provincial, local or municipal government, any political subdivision thereof or any other governmental, congressional or parliamentary, regulatory, or judicial instrumentality, authority, body, agency, department, bureau, or entity with authority to bind a Party at law, including CAISO and WREGIS. “Green Attributes” means any and all credits, benefits, emissions reductions, offsets, and allowances, howsoever entitled, attributable to the Delivered Energy. Green Attributes include but are not limited to Renewable Energy Credits, as well as: (1) any avoided emissions of pollutants to the air, soil or water such as sulfur oxides (SOx), nitrogen oxides (NOx), carbon monoxide (CO) and other pollutants; (2) any avoided emissions of carbon dioxide (CO2), methane (CH4), nitrous oxide, hydrofluorocarbons, perfluorocarbons, sulfur hexafluoride and other greenhouse gases (GHGs) that have been determined by the United Nations Intergovernmental Panel on Climate Change, or otherwise by law, to contribute to the actual or potential threat of altering the Earth’s climate by trapping heat in the atmosphere; (3) the reporting rights to these avoided emissions, such as Green Tag Reporting Rights. Green Attributes do not include (i) any energy, capacity, reliability or other power attributes from the Facility, (ii) investment or production tax credits associated with the construction or operation of the Facility and other financial incentives associated therewith, (iii) fuel-related subsidies or “tipping fees” that may be paid to Seller to accept certain fuels, or local subsidies received by the generator for the destruction of particular preexisting pollutants or the promotion of local environmental benefits, or (iv) emission reduction credits encumbered or used by the Facility for compliance with local, state, or 495
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“Installed Capacity” means the nameplate capacity of the Facility at the point of interconnection (which point of interconnection is specified in the Interconnection Agreement), as evidenced by a certificate from a Licensed Professional Engineer substantially in the form attached as Exhibit G hereto, as it may be updated as set forth in Exhibit B by delivery of a subsequent certificate from a Licensed Professional Engineer substantially in the form attached as Exhibit G hereto.
“Interconnection Capacity Limit” means the maximum instantaneous amount of Energy that is permitted to be delivered by the Facility to the Point of Interconnection, which amount shall be not less than nine hundred (900) MW.
“Intercreditor and Collateral Agency Agreement” means that certain Intercreditor and Collateral Agency Agreement, dated as of March 1, 2021, by and among (i) River City Bank, (ii) each of the creditors from time to time signatory thereunder, and (iii) Buyer. “Inter-SC Trade” has the meaning set forth in the CAISO Tariff. “Interconnection Agreement” means the interconnection agreement entered into by Seller pursuant to which the Facility will be interconnected with the PTO’s Transmission System, and pursuant to which any Interconnection Facilities will be constructed, operated and maintained during the Contract Term.
“Interconnection Facilities” means the interconnection facilities, control and protective devices and metering facilities required to connect the Facility with the PTO’s Transmission System in order to meet the terms and conditions of this Agreement. “Interest Rate” has the meaning set forth in Section 8.2. “Intertie” has the meaning set forth in the CAISO Tariff. “Investment Grade Credit Rating” means, in respect of a Person, a Credit Rating of ; provided that if there is a Credit
Rating for the Person by more than one of S&P, Fitch, or Moody’s, then each such Credit Rating shall be at or higher than as applicable.
“Joinder” has the meaning set forth in the Intercreditor and Collateral Agency Agreement. “Law” means any applicable law, statute, rule, regulation, decision, writ, order, decree or judgment, permit or any interpretation thereof, promulgated or issued by a Governmental Authority.
“Lender” means, collectively, any Person (i) providing senior or subordinated construction, interim, back leverage or long-term debt, equity or tax equity financing or refinancing for or in connection with the development, construction, purchase, installation or operation of the Facility, whether that financing or refinancing takes the form of private debt, equity, public debt or any other form (including financing or refinancing provided to a member or other direct or indirect owner of Seller), including any equity or tax equity investor directly or indirectly providing financing or refinancing for the Facility or purchasing equity ownership 497
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“Progress Report” means a progress report including the items set forth in Exhibit C. “Project” has the same meaning as “Facility”.
“Prudent Operating Practice” means the practices, methods and standards of professional care, skill and diligence engaged in or approved by a significant portion of the utility-scale wind energy industry for facilities of similar size, type and design, that, in the exercise of reasonable judgment, in light of the facts known at the time, would have been expected to accomplish results consistent with Law, reliability, safety, environmental protection, applicable codes, and standards of economy and expedition. Prudent Operating Practice is not necessarily defined as the optimal standard practice method or act to the exclusion of others, but rather refer to a range of actions reasonable under the circumstances. “PTC Amount” means the amount, on a dollar per MWh basis, equal to the Production Tax Credits that Seller would have earned in respect of energy produced by the Facility at the time, grossed up on an after tax basis at the then-highest marginal combined federal and state corporate tax rate, but failed to earn as a result of a Market Curtailment Period, which amount will be calculated by reference to the amount of Deemed Delivered Energy and prorated for the number of the Facility’s wind turbines that are eligible to receive Production Tax Credits at the time of determination.
“QRE” has the meaning set forth for “Qualified Reporting Entity” in the WREGIS Operating Rules.
“Real-Time Forecast” means Seller’s final forecast of the amount of expected Delivered Energy, net of all Electrical Losses, for each hour of a given day, based on a commercially reasonable forecasting methodology to determine the potential generation of the Facility as a function of Available Capacity, wind speed and direction, wind turbine power curves and other pertinent data for the period of time, consistent with Prudent Operating Practice; provided that, for the avoidance of doubt, market conditions and pricing shall not be factored into such determination of the potential generation of the Facility.
“Real-Time Market” has the meaning set forth in the CAISO Tariff. “REC Price” means the prevailing market price (expressed in $/MWh) for RECs meeting the RPS requirements for Portfolio Content Category 1, determined by averaging quotes provided by Buyer from three (3) unaffiliated brokers.
“Receiving Party” has the meaning set forth in Section 18.2. “Recurring Certificate Transfers” has the meaning set forth in the WREGIS Operating Rules.
“Remedial Action Plan” has the meaning in Section 2.5(a). “Renewable Energy Credit” or “REC” has the meaning set forth in California Public Utilities Code Section 399.12(h), as may be amended from time to time or as further defined or supplemented by Law.
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“Self-Schedule” has the meaning set forth in the CAISO Tariff. “Seller” has the meaning set forth on the Cover Sheet.
“Seller’s WREGIS Account” has the meaning set forth in Section 4.8(a). “Settlement Amount” means the Non-Defaulting Party’s Costs and Losses, on the one hand, netted against its Gains, on the other. If the Non-Defaulting Party’s Costs and Losses exceed its Gains, then the Settlement Amount shall be an amount owing to the Non-Defaulting Party. If the Non-Defaulting Party’s Gains exceed its Costs and Losses, then the Settlement Amount shall be zero dollars ($0). The Settlement Amount does not include consequential, incidental, punitive, exemplary or indirect or business interruption damages. “Settlement Interval” has the meaning set forth in the CAISO Tariff. “Settlement Period” has the meaning set forth in the CAISO Tariff, which as of the Effective Date is the period beginning at the start of the hour and ending at the end of the hour. “Shared Facilities” has the meaning set forth in Section 6.3. “Shared Facilities Agreement” has the meaning set forth in Section 6.3. “Site” means the real property on which the Facility is or will be located, as further described in Exhibit A.
“SPTO PPA” has the meaning set forth in the Recitals hereto. “Station Use” means:
(a) The Energy produced by the Facility that is used within the Facility to power the lights, motors, control systems and other electrical loads that are necessary for operation of the Facility; and
(b) The Energy produced by the Facility that is consumed within the Facility’s electric energy distribution system as losses.
“SunZia PowerCo” has the meaning set forth in the Recitals hereto. “SunZia Transmission Line” means that certain 3,000-MW high-voltage (+/-525-kV) transmission line originating at the Point of Interconnection (as defined in the Interconnection Agreement) in New Mexico and terminating near Phoenix, Arizona. The western terminus of the line will connect to the 500-kV Pinal Central Substation. “System Emergency” means any condition that: (a) requires, as determined and declared by CAISO, the PTO or a Transmission Provider, automatic or immediate action to (i) prevent or limit harm to or loss of life or property, (ii) prevent loss of transmission facilities or generation supply in the immediate vicinity of the Facility, or (iii) to preserve Transmission System reliability, 503
504
“WREGIS Certificates” has the same meaning as “Certificate” as defined by WREGIS in the WREGIS Operating Rules and are designated as eligible for complying with the California Renewables Portfolio Standard.
“WREGIS Operating Rules” means those operating rules and requirements adopted by WREGIS as of October 2022, as subsequently amended, supplemented or replaced (in whole or in part) from time to time.
1.2 Rules of Interpretation.
In this Agreement, except as expressly stated otherwise or unless the context otherwise requires:
(a) headings and the rendering of text in bold and italics are for convenience and reference purposes only and do not affect the meaning or interpretation of this Agreement; (b) words importing the singular include the plural and vice versa and the masculine, feminine and neuter genders include all genders; (c) the words “hereof”, “herein”, and “hereunder” and words of similar import shall refer to this Agreement as a whole and not to any particular provision of this Agreement; (d) a reference to an Article, Section, paragraph, clause, Party, or Exhibit is a reference to that Section, paragraph, clause of, or that Party or Exhibit to, this Agreement unless otherwise specified;
(e) a reference to a document or agreement, including this Agreement shall mean such document, agreement or this Agreement including any amendment or supplement to, or replacement, novation or modification of this Agreement, but disregarding any amendment, supplement, replacement, novation or modification made in breach of such document, agreement or this Agreement;
(f) a reference to a Person includes that Person’s successors and permitted assigns;
(g) the term “including” means “including without limitation” and any list of examples following such term shall in no way restrict or limit the generality of the word or provision in respect of which such examples are provided; (h) references to any statute, code or statutory provision are to be construed as a reference to the same as it may have been, or may from time to time be, amended, modified or reenacted, and include references to all bylaws, instruments, orders and regulations for the time being made thereunder or deriving validity therefrom unless the context otherwise requires; (i) in the event of a conflict, a mathematical formula or other precise description of a concept or a term shall prevail over words providing a more general description of a concept or a term;
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(j) references to any amount of money shall mean a reference to the amount in United States Dollars;
(k) the expression “and/or” when used as a conjunction shall connote “any or all of”;
(l) words, phrases or expressions not otherwise defined herein that (i) have a generally accepted meaning in Prudent Operating Practice shall have such meaning in this Agreement or (ii) do not have well known and generally accepted meaning in Prudent Operating Practice but that have well known and generally accepted technical or trade meanings, shall have such recognized meanings;
(m) references to “reasonably acceptable” shall require that the Party with discretion shall not unreasonably withhold, delay or condition its approval; (n) each Party acknowledges that it was represented by counsel in connection with this Agreement and that it or its counsel reviewed this Agreement and that any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement.
ARTICLE 2
TERM; CONDITIONS PRECEDENT
2.1 Contract Term.
(a) Effective Date. This Agreement shall become effective on the Effective Date, and shall remain in full force and effect until the conclusion of the Delivery Term, subject to any early termination provisions and any contract term extension provisions set forth herein (the “Contract Term”).
(b) Continuing Provisions. Applicable provisions of this Agreement shall continue in effect after termination, including early termination, to the extent necessary to enforce or complete the duties, obligations or responsibilities of the Parties arising prior to termination. In addition, the confidentiality obligations of the Parties under Article 18 shall remain in full force and effect for following the termination of this Agreement, all indemnity obligations shall remain in full force and effect for following termination of this Agreement, all audit rights shall remain in full force and effect for following the termination of this Agreement, and Buyer’s obligation to return to Seller the Development Security and/or Performance Security less any amounts drawn in accordance with this Agreement shall remain in full force and effect following the termination of this Agreement.
2.2 [Reserved.].
2.3 Obligations Prior to Delivery Term. The Delivery Term shall not commence until Seller completes each of the following conditions. Upon receipt of Notice from Seller of the completion of each condition, Buyer shall, if it disputes the completion of the condition provide Notice to Seller stating Buyer’s grounds for dispute within five (5) Business Days of receipt of 506
Seller’s Notice. In the event that Buyer fails to provide such Notice of dispute within such five (5) Business Days, Buyer shall be deemed to have accepted that the condition has been completed. (a) Seller shall have delivered to Buyer certificates from a Licensed Professional Engineer substantially in the form of Exhibit F and Exhibit G; (b) A Participating Generator Agreement (as defined in the CAISO Tariff) between Seller and CAISO, and a Meter Service Agreement for CAISO Metered Entities (as defined in the CAISO Tariff) between CAISO and Seller, if, with respect to each such agreement, it is required under the CAISO Tariff or for Seller to meet its obligations under this Agreement, shall have been executed and delivered and be in full force and effect, and a copy of each such agreement delivered to Buyer;
(c) All applicable regulatory authorizations, approvals and permits for the operation of the Facility have been obtained (or if not obtained, applied for and reasonably expected to be received within ninety (90) days) and all conditions thereof have been satisfied and shall be in full force and effect;
(d) Seller has received the requisite pre-certification of the CEC Certification and Verification (and reasonably expects to receive final CEC Certification and Verification for the Facility in no more than one hundred eighty (180) days from the Commercial Operation Date); (e) Installed Capacity equal to at least of the
Guaranteed Capacity has been completed and is ready to produce and deliver Product to Buyer, as stated in the certificate in the form of Exhibit F delivered pursuant to clause (a) of this Section 2.3; (f) Seller (with the reasonable participation of Buyer) shall have completed all applicable WREGIS registration requirements pursuant to the WREGIS Operating Rules that are reasonably capable of being completed prior to the Commercial Operation Date under the WREGIS Operating Rules, including, if applicable, the completion and submittal of all applicable registration forms and supporting documentation, which may include applicable interconnection agreements, informational surveys related to the Facility, QRE service agreements, and other appropriate documentation required to effect Facility registration with WREGIS and to enable Renewable Energy Credit transfers related to the Facility within the WREGIS system; (g) Seller has obtained insurance meeting the requirements of Article 17; provided, however, that Seller may deliver copies of certificates of such insurance to Buyer within ten (10) Business Days after the Commercial Operation Date; (h) Seller has delivered the Performance Security to Buyer in accordance with Section 8.8; and
(i) Seller has paid Buyer for all Delay Damages due and owing under this Agreement, if any.
Upon request from Seller from time to time, Buyer shall confirm in writing the completion of those of the foregoing conditions that have been completed by Seller as of such request. 507
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(d) Excess Settlement Interval Deliveries. If, during any Settlement Interval, Seller delivers Product amounts to Buyer, as measured by the amount of Delivered Energy, in excess of the product of the Guaranteed Capacity and the duration of the Settlement Interval, expressed in hours (“Excess MWh”), then Buyer shall not be obligated to pay for all such Excess MWh.
3.4 Imbalance Energy. Other than during a Market Curtailment Period, Seller shall use commercially reasonable efforts to deliver Energy in accordance with the Scheduled Energy but shall not be required to curtail the Delivered Energy other than pursuant to a Curtailment Order.
Buyer and Seller recognize that from time to time the amount of Delivered Energy will deviate from the amount of Scheduled Energy. Seller shall be responsible for all CAISO costs, and shall be entitled to all CAISO revenues, associated with Imbalance Energy.
3.5 Ownership of Renewable Energy Incentives. Seller shall have all right, title and interest in and to all Renewable Energy Incentives. Buyer acknowledges that any Renewable Energy Incentives belong to Seller. If any Renewable Energy Incentives, or values representing the same, are initially credited or paid to Buyer, Buyer shall cause such Renewable Energy Incentives or values relating to same to be assigned or transferred to Seller without delay. Buyer shall reasonably cooperate with Seller, at Seller’s sole expense, in Seller’s efforts to meet the requirements for any certification, registration, or reporting program relating to Renewable Energy Incentives.
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3.6 Future Environmental Attributes.
(a) The Parties acknowledge and agree that as of the Effective Date, environmental attributes anticipated to be sold under this Agreement are restricted to Green Attributes; however, Future Environmental Attributes may be created by a Governmental Authority through Laws enacted after the Effective Date. The Parties shall promptly notify each other upon becoming aware of the existence of Future Environmental Attributes and, subject to the final sentence of this Section 3.6(a), in such event, Buyer shall have the exclusive right to claim such Future Environmental Attributes by providing Notice to Seller. If Buyer provides such Notice, Buyer shall bear all costs associated with the transfer, qualification, verification, registration and ongoing compliance for such Future Environmental Attributes, but there shall be no increase in the Contract Price. Upon Seller’s receipt of Notice from Buyer of Buyer’s intent to claim such Future Environmental Attributes, the Parties shall determine the necessary actions and additional costs associated with such Future Environmental Attributes. Seller shall have no obligation to alter the Facility or its operations unless the Parties have agreed on all necessary terms and conditions relating to such alteration and Buyer has agreed to reimburse Seller for all costs associated with such alteration.
(b) If Buyer elects to receive Future Environmental Attributes pursuant to Section 3.6(a), the Parties agree to negotiate in good faith with respect to the development of further agreements and documentation necessary to effectuate the transfer of such Future Environmental Attributes, including agreement with respect to (i) appropriate transfer, delivery and risk of loss mechanisms, and (ii) the determination of any additional costs to be borne by Buyer, as set forth above; provided, that the Parties acknowledge and agree that such terms are not intended to alter the other material terms of this Agreement.
3.7 Pre-COD Product. Seller shall have no obligation to sell or deliver to Buyer, and Buyer shall have no obligation to buy or receive from Seller, any Product prior to the commencement of the Delivery Term. Prior to the Delivery Term, Seller may sell all energy and associated Green Attributes from the Facility to any third party, and all revenues and costs associated with such sales shall be for Seller’s account.
3.8 Reserved.
3.9 CEC Certification and Verification. Seller shall take all necessary steps including, but not limited to, making or supporting timely filings with the CEC to obtain and maintain CEC Certification and Verification for the Facility throughout the Delivery Term, including compliance with all applicable requirements for certified facilities set forth in the current version of the RPS Eligibility Guidebook (or its successor). Seller must promptly notify Buyer and the CEC of any changes to the information included in Seller’s application for CEC Certification and Verification for the Facility.
3.10 Non-Modifiable Terms.
(a) Eligibility. Seller, and, if applicable, its successors, represents and warrants that throughout the Delivery Term of this Agreement that: (i) the Project qualifies and is certified by the CEC as an Eligible Renewable Energy Resource (“ERR”) as such term is defined in Public 511
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(a) CEC Certification and Verification;
(b) Green Attributes; and
(c) WREGIS.
Any actions required for Seller to comply with its obligations set forth in the first paragraph above, the cost of which will be included in the Compliance Expenditure Cap, shall be referred to collectively as the “Compliance Actions.”
If Seller reasonably anticipates the need to incur out-of-pocket expenses in excess of the Compliance Expenditure Cap in order to take any Compliance Action, Seller shall provide Notice to Buyer reasonably demonstrating such anticipated out-of-pocket expenses.
Buyer will have sixty (60) days to evaluate such Notice (during which time period Seller is not obligated to take any Compliance Actions described in the Notice) and shall, within such time, either (1) agree to reimburse Seller for all or some portion of the reasonably incurred costs that exceed the Compliance Expenditure Cap specified in such Notice (such Buyer-agreed upon costs, the “Accepted Compliance Costs”), or (2) waive Seller’s obligation to take such Compliance Actions, or any part thereof for which Buyer has not agreed to reimburse Seller; provided, if in any Contract Year, Seller’s costs to take Compliance Actions exceed the annual Compliance Expenditure Cap: (i) Buyer may pay to Seller any reasonably demonstrated amounts that Seller expends in connection with Compliance Actions that are over the annual Compliance Expenditure Cap; (ii) in the following Contract Year, Seller shall reimburse Buyer for all such amounts paid by Buyer , and
provided that all such reimbursed amounts in combination with all other Seller costs and expenses associated with Compliance Actions shall not exceed
in the aggregate over the Contract Term; and (iii) such reimbursed amounts shall be considered costs and expenses associated with Compliance Actions and shall count towards the current annual and aggregate Compliance Expenditure Cap; for the avoidance of doubt, in no case shall Seller be required to bear any costs in connection with Compliance Actions (including those associated with a reimbursement by Seller of Buyer payments hereunder) in any Contract Year or in the aggregate in excess of the respective Compliance Expenditure Cap.
If Buyer does not respond to a Notice given by Seller under this Section 3.12 within sixty (60) days after Buyer’s receipt of same, Buyer shall be deemed to have waived its rights to require Seller to take the Compliance Actions that are the subject of the Notice, and Seller shall have no further obligations to take, and no liability for a failure to take, such Compliance Actions for the remainder of the Term.
If Buyer agrees to reimburse Seller for the Accepted Compliance Costs, then Seller shall take such Compliance Actions covered by the Accepted Compliance Costs as agreed upon by Buyer and Buyer shall reimburse Seller for Seller’s actual costs to effect the Compliance Actions, not to exceed the Accepted Compliance Costs, within sixty (60) days from the time that Buyer receives an invoice and documentation of such costs from Seller. If Buyer agrees to reimburse Seller for the Accepted Compliance Costs for less than all of the costs that exceed the Compliance Expenditure Cap, Seller shall only be obligated to take the Compliance Actions covered by the Accepted Compliance Costs.
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The term “commercially reasonable efforts” as used in Section 3.10 means efforts consistent with and subject to this Section 3.12.
ARTICLE 4
OBLIGATIONS AND DELIVERIES
4.1 Delivery.
(a) Energy. Subject to the terms and conditions of this Agreement, Seller shall make available and Buyer shall accept all Delivered Energy on an as-generated, instantaneous basis. Seller shall effectuate the delivery of Delivered Energy, and shall be responsible for securing such arrangements with CAISO, the PTO and any other Transmission Provider as are necessary in connection therewith.
(b) Green Attributes. Seller hereby provides and conveys all Green Attributes associated with the Delivered Energy as part of the Product being delivered. Seller represents and warrants that Seller holds the rights to all Green Attributes from the Facility, and Seller agrees to convey and hereby conveys all such Green Attributes to Buyer as included in the delivery of the Product from the Facility.
(c) Interconnection Capacity and Transmission Rights. Seller shall maintain (i) contractual rights to interconnection capacity that is no less than the Interconnection Capacity Limit, and (ii) firm transmission rights sufficient to deliver 636 MWAC to the Delivery Point, in each case throughout the Delivery Term; provided, that, subject to Section 6.3 below, (i) Seller may share its firm transmission rights with one or more of Seller’s Affiliates or with third parties, solely if and to the extent that, and solely for the period of time that, the amount of Energy that the Facility is capable of generating is less than 636 MWAC, and (ii) Seller may share the interconnection capacity to which it is entitled under Seller’s Interconnection Agreement with one or more of Seller’s Affiliates or with third parties, solely if and to the extent that, and solely for the period of time that, the amount of Energy that the Facility is capable of generating is less than 900 MWAC.
4.2 Title and Risk of Loss.
(a) Energy. Title to and risk of loss related to the Delivered Energy shall pass and transfer from Seller to Buyer at the Delivery Point. Subject to Section 5.1, Seller shall be responsible for paying or satisfying when due any costs or charges imposed in connection with the delivery of Energy from the Facility to the Delivery Point and Buyer shall be responsible for paying or satisfying when due any costs or charges imposed in connection with the delivery of Energy at and after the Delivery Point.
(b) Green Attributes. Title to and risk of loss related to the Green Attributes shall pass and transfer from Seller to Buyer upon the transfer of such Green Attributes in accordance with WREGIS.
4.3 Scheduling Coordinator Responsibilities.
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CAISO revenues (including credits, Imbalance Energy payments, and other payments), including costs and revenues associated with CAISO dispatches, bid cost recovery, Inter-SC Trade credits, or other credits in respect of the Product scheduled or delivered from the Facility. In addition, if during the Delivery Term, the CAISO implements or has implemented any sanction or penalty related to scheduling, outage reporting, or generator operation, the cost of such sanctions or penalties arising from the scheduling, outage reporting, or generator operation of the Facility shall be the Seller’s responsibility except to the extent such costs are incurred due to the fault or negligence of Buyer.
(d) Master File and Resource Data Template. Seller shall provide the data to the CAISO (and to Buyer) that is required for the CAISO’s Master File and Resource Data Template (or successor data systems) for this Facility consistent with this Agreement. Neither Party shall change such data without the other Party’s prior written consent. At least once per Contract Year, Seller shall review and confirm that the data provided for the CAISO’s Master Data File and Resource Data Template (or successor data systems) for this Facility remains consistent with the actual operating characteristics of the Facility and update such data as appropriate.
4.4 Forecasting. Seller shall provide the forecasts described below at its sole expense and in a format reasonably acceptable to Buyer (or Buyer’s designee). Seller shall use reasonable efforts to provide forecasts that are consistent with the information actually known by Seller at the time the forecasts are submitted and, to the extent not inconsistent with the requirements of this Agreement, shall prepare such forecasts, or cause such forecasts to be prepared, in accordance with Prudent Operating Practice.
(a) Annual Forecast of Available Capacity. No less than forty-five (45) days before (i) the first day of the first Contract Year of the Delivery Term and (ii) the first day of every subsequent Contract Year during the Delivery Term, Seller shall provide to Buyer a non-binding forecast of each month’s Available Capacity, by hour, and Seller’s projection of scheduled maintenance for the following calendar year in a form reasonably requested by Buyer. (b) Annual Forecast of Energy. No less than forty-five (45) days before (i) the first day of the first Contract Year of the Delivery Term and (ii) the first day of every subsequent Contract Year during the Delivery Term, Seller shall provide to Buyer a non-binding forecast of each month’s average-day expected Delivered Energy, by hour, for the following calendar year in a form substantially similar to the table found in Exhibit D, or as reasonably requested by Buyer. (c) Monthly Forecast of Energy and Available Capacity. No less than thirty (30) days before the beginning of Commercial Operation, and thereafter no less than ten (10) Business Days before the beginning of each calendar month during the Delivery Term, Seller shall provide to Buyer a non-binding forecast of the hourly expected Delivered Energy and Available Capacity for each day of the following month in a form reasonably requested by Buyer. (d) Daily Forecast of Available Capacity. By 5:30 AM Pacific Prevailing Time on the Business Day immediately preceding the date of delivery, Seller shall provide Buyer with (i) a non-binding forecast of its best estimate of Available Capacity and (ii) the Day-Ahead Forecast, in each case, for each hour of the immediately succeeding day. 516
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4.6 Reduction in Delivery Obligation. For the avoidance of doubt, and in no way limiting Section 3.1 or Exhibit E:
(a) Facility Maintenance. Seller shall be permitted to reduce deliveries of Product during any Planned Outage.
(b) Forced Facility Outage. Seller shall be permitted to reduce deliveries of Product during any Forced Facility Outage. As soon as practicable after the Forced Facility Outage has occurred, Seller shall provide Buyer with Notice by e-mail including the expected duration (if known) of any Forced Facility Outage and Seller shall keep Buyer informed of any developments that will affect either the duration of the outage or the availability of the Facility during or after the end of such outage. Upon Buyer’s reasonable request, Seller shall promptly prepare and provide to Buyer all reports of Forced Facility Outages or Planned Outages that Buyer may reasonably require for the purpose of enabling Buyer to comply with CAISO requirements or any applicable Laws, provided that Seller may redact such reports as necessary with respect to any Confidential Information except to the extent such Confidential Information is required to be provided to CAISO by Buyer.
(c) System Emergencies and other Events. Seller shall be permitted to reduce deliveries of Product (i) during any period of System Emergency, (ii) pursuant to a Curtailment Order, (iii) during a Market Curtailment Period, (iv) during any Force Majeure Event, (v) as required by Prudent Operating Practice, (vi) due to a POI Curtailment, or (vii) otherwise pursuant to the terms of this Agreement, the Interconnection Agreement or applicable tariff or as may be required under a Shared Facilities Agreement. Notwithstanding anything in this Agreement to the contrary, Seller may, in its sole discretion, sell and deliver some or all of the Product during any Curtailment Period or Market Curtailment Period to one or more third-party buyers to the extent that Seller may do so in compliance with Law and Prudent Operating Practice. (d) Health and Safety. Seller shall be permitted to reduce deliveries of Product as necessary to maintain health and safety pursuant to Section 6.2. (e) Real-Time Curtailment. Seller shall be permitted to reduce Facility generation during a period in which the LMP at the Delivery Point in the Real-Time Market is below the Floor Price. During such periods, (i) when the Real-Time Forecast exceeds the portion of the Day-Ahead Forecast that has a Day-Ahead Schedule, Seller shall be permitted to reduce deliveries of Product to Buyer to equal no less than the portion of the Day-Ahead Forecast that has a Day-Ahead Schedule, and (ii) when the Real-Time Forecast is equal to or less than the portion of the Day-Ahead Forecast that has a Day-Ahead Schedule, Buyer shall receive Product based on Buyer’s Share of the generation that the Facility would have been able to produce and deliver to the Delivery Point (taking into account Seller’s rights to reduce deliveries in Section 4.6(c)) but did not produce and deliver, due to the LMP at the Delivery Point in the Real-Time Market being below the Floor Price, and such amount shall be considered “Delivered Energy” for payment and invoicing purposes.
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and Buyer shall be given sole title to all such WREGIS Certificates. Seller shall satisfy its obligations pursuant to Section 3.10(d) and Section 4.2(b) by fulfilling its obligations under Sections 4.8(a) through (f) below.
(a) Prior to the Commercial Operation Date, if practicable, and as soon as reasonably possible thereafter if not practicable, Seller shall register the Facility with WREGIS and establish an account with WREGIS (“Seller’s WREGIS Account”), which Seller shall maintain until the end of the Delivery Term. Seller shall transfer the WREGIS Certificates using Recurring Certificate Transfers from Seller’s WREGIS Account to the WREGIS account(s) of Buyer or the account(s) of a designee that Buyer identifies by Notice to Seller (“Buyer’s WREGIS Account”). Seller shall be responsible for all expenses associated with registering the Facility with WREGIS, establishing and maintaining Seller’s WREGIS Account, paying WREGIS Certificate issuance and transfer fees, and transferring WREGIS Certificates from Seller’s WREGIS Account to Buyer’s WREGIS Account.
(b) Seller shall cause Recurring Certificate Transfers to occur on a monthly basis in accordance with the certification procedure established by the WREGIS Operating Rules.
Since WREGIS Certificates will only be created for whole MWh amounts of Energy generated, any fractional MWh amounts (i.e., kWh) will be carried forward until sufficient generation is accumulated for the creation of a WREGIS Certificate. If Seller is required to generate E-Tags associated with Delivered Energy pursuant to the CAISO Tariff, and if required by WREGIS, the CPUC, the CEC, or other applicable Law, WREGIS Certificates must be matched with E-Tags associated with the Delivered Energy and WREGIS Certificates without matching E-Tags associated with Delivered Energy will be rejected.
(c) Seller shall, at its sole expense, ensure that the WREGIS Certificates for a given calendar month correspond with the Delivered Energy for such calendar month. If Seller is required to generate E-Tags associated with Delivered Energy pursuant to the CAISO Tariff, and if matching E-Tags to Delivered Energy is required by WREGIS, the CPUC, the CEC, or other applicable Law, this shall be evidenced by the amounts corresponding to the Facility’s metered data that match E-Tags associated with the Delivered Energy. Subject to delivery of Replacement Product, Seller shall ensure that no WREGIS Certificates are transferred to Buyer’s WREGIS Account unless they are the result of Delivered Energy reflected in the Facility’s metered data and, if Seller is required to generate E-Tags associated with Delivered Energy pursuant to the CAISO Tariff, and if matching E-Tags to Delivered Energy is required by WREGIS, the CPUC, the CEC, or other applicable Law, matched with E-Tags associated with the Delivered Energy. (d) Due to the approximately ninety (90) day delay in the creation of WREGIS Certificates relative to the timing of invoice payment under Section 8.2, Buyer shall make an invoice payment for a given month in accordance with Section 8.2 before the WREGIS Certificates for such month are formally transferred to Buyer in accordance with the WREGIS Operating Rules and this Section 4.8. Notwithstanding this delay, Buyer shall have all right and title to all such WREGIS Certificates upon payment to Seller in accordance with Section 8.2. (e) A “WREGIS Certificate Deficit” means any deficit or shortfall in WREGIS Certificates delivered to Buyer for a calendar month as compared to the Delivered Energy for the same calendar month (“Deficient Month”). 520
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Facilities”) to be entered into among two or more of Seller, the Participating Transmission Owner, Seller’s Affiliates, and/or third parties pursuant to which certain Interconnection Facilities, interconnection service and/or transmission service may be subject to joint ownership and/or shared maintenance and operation arrangements. Seller agrees that the Shared Facilities Agreements (i) shall not preclude Seller from performing or satisfying, and shall not purport to limit, Seller’s obligations hereunder, (ii) shall provide for separate metering of the Installed Capacity, (iii) shall provide that any other generating or energy storage facilities not included in the Facility but using Shared Facilities shall not be included within the Facility’s CAISO Resource IDs; and (iv) shall provide that any curtailment of the full capacity of Shared Facilities that is ordered by Transmission Provider that Seller and its Affiliates have discretion to allocate across generating or energy storage facilities using the Shared Facilities shall not be allocated to the Facility more than its pro rata portion of the total capacity of all generating or energy storage facilities using the Shared Facilities, except to the extent such curtailment is caused by the Facility or Seller’s actions or inactions with respect to the Facility. Seller shall not, and shall not permit any Affiliate in respect of the Facility to, allocate to other parties a share of the total interconnection capacity under the Interconnection Agreement in excess of an amount equal to the total interconnection capacity under the Interconnection Agreement minus 636 MW; provided, Seller may share the interconnection capacity to which Seller is entitled under Seller’s Interconnection Agreement with one or more of Seller’s Affiliates or with third parties in excess of such amount, solely if and to the extent that, and solely for the period of time that, the amount of Energy that the Facility is capable of generating is less than 636 MW.
6.4 CAISO Tariff Requirements. Throughout the Delivery Term, Seller shall comply with all CAISO Tariff requirements applicable to the Facility throughout the Delivery Term.
ARTICLE 7
METERING
7.1 Metering. Seller shall measure the amount of Delivered Energy produced by the Facility using an Approved Meter. The Approved Meter shall be installed at the switching station adjacent to the SunZia East Converter Station and maintained at Seller’s cost. If the Approved Meter is inaccurate, Seller will cause such meter to be promptly corrected in accordance with Prudent Operating Practice and CAISO requirements, as applicable. Seller will be responsible for any costs, fines or penalties, including imbalance charges as a result of the inaccurate meter. The meter shall be kept under seal, such seals to be broken only when the meters are to be tested, adjusted, modified or relocated. In the event Seller breaks a seal, Seller shall notify Buyer as soon as practicable. In addition, Seller hereby agrees to provide all Approved Meter data to Buyer in a form reasonably acceptable to Buyer, and consents to Buyer obtaining from CAISO the meter data directly relating to the Facility and all inspection, testing and calibration data and reports. Buyer and Seller, or Seller’s Scheduling Coordinator, shall cooperate to allow both Parties to retrieve the meter reads from the CAISO Market Results Interface – Settlements (MRIS-S) (or its successor) or directly from the Approved Meter at the Facility.
7.2 Meter Verification. Annually, if Seller has reason to believe there may be a meter malfunction, or upon Buyer’s reasonable request, Seller shall test the meter. The tests shall be conducted by independent third parties qualified to conduct such tests. Buyer shall be notified seven (7) days in advance of such tests and have a right to be present during such tests. If a meter 523
is inaccurate it shall be promptly repaired or replaced. If a meter is inaccurate by more than one percent (1%) and it is not known when the meter inaccuracy commenced (if such evidence exists such date will be used to adjust prior invoices), then the invoices covering the period of time since the last meter test shall be adjusted for the amount of the inaccuracy on the assumption that the inaccuracy persisted during the second half of such period.
ARTICLE 8
INVOICING AND PAYMENT; CREDIT
8.1 Invoicing. Seller shall make good faith efforts to deliver an invoice to Buyer no sooner than fifteen (15) days after the end of the prior monthly delivery period. Each invoice shall provide Buyer (a) records of metered data, including metering and CAISO transaction data sufficient to document and verify the amount of Delivered Energy for each Settlement Period during the preceding month, the applicable Contract Price, the LMP in the Day-Ahead Market at the Delivery Point for each Settlement Period; (b) information supporting the amount of Deemed Delivered Energy, and the amounts determined pursuant to Section 4.6(e), if applicable, and Adjusted Energy Production, (c) a reconciliation of hourly meter data, E-Tag data (to the extent required under the CAISO Tariff) and associated calculations, including the lesser of each by hour, plus any additional data as may be reasonably required by Buyer for compliance with CPUC reporting obligations, including pursuant to the CPUC’s Energy Division Portfolio Content Category Classification Review Handbook (or successor publication); (d) a statement of the quantity of WREGIS Certificates transferred during the prior month that have been matched with E-Tags associated with the Delivered Energy (only if Seller is required to generate E-Tags associated with Delivered Energy pursuant to the CAISO Tariff, and if matching E-Tags to Delivered Energy is required by WREGIS, the CPUC, the CEC, or other applicable Law); (e) access to any records, including invoices or settlement data from the CAISO, necessary to verify the accuracy of any amount; (f) information as reasonably necessary to verify Contract Revenues from third-party sales pursuant to Section 4.5(b), if any; and (g) be in a reasonable format covering the services provided in the preceding month determined in accordance with the applicable provisions of this Agreement.
8.2 Payment. Buyer shall make payment to Seller by wire transfer or ACH payment to the bank account provided on each monthly invoice. Buyer shall pay undisputed invoice amounts within twenty five (25) days after the end of the prior monthly delivery period; provided, if Seller delivers an invoice to Seller after the fifteenth (15th) day following the end of the prior monthly delivery period, Buyer shall pay undisputed invoice amounts no later than the tenth (10th) day following delivery of such invoice. If such due date falls on a weekend or legal holiday, such due date shall be the next Business Day. Payments made after the due date will be considered late and will bear interest on the unpaid balance. If the amount due is not paid on or before the due date or if any other payment that is due and owing from one party to another is not paid on or before its applicable due date, a late payment charge shall be applied to the unpaid balance and shall be added to the next billing statement. Such late payment charge shall be calculated based on an annual Interest Rate equal to the prime rate published on the date of the invoice in The Wall Street Journal (or, if The Wall Street Journal is not published on that day, the next succeeding date of publication), (the “Interest Rate”). If the due date occurs on a day that is not a Business Day, the late payment charge shall begin to accrue on the next succeeding Business Day.
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8.3 Books and Records. To facilitate payment and verification, each Party shall maintain all books and records necessary for billing and payments, including copies of all invoices under this Agreement, for a period of at least two (2) years or as otherwise required by Law. Upon fifteen (15) days’ prior Notice to the other Party, either Party shall be granted reasonable access to the accounting books and records within the possession or control of the other Party (subject to the two (2) year retention requirement of the preceding sentence) pertaining to all invoices generated pursuant to this Agreement, subject to redaction by Seller with respect to Confidential Information.
Seller acknowledges that in accordance with California Government Code Section 8546.7, Seller may be subject to audit by the California State Auditor with regard to Seller’s performance of this Agreement, for a period of three (3) years after final payment hereunder, because the compensation under this Agreement exceeds $10,000.
8.4 Payment Adjustments; Billing Errors. Payment adjustments shall be made if Buyer or Seller discovers there have been good faith inaccuracies in invoicing that are not otherwise disputed under Section 8.5, there is determined to have been a meter inaccuracy sufficient to require a payment adjustment, or if CAISO recalculates amounts due or owing in respect of prior periods. If the required adjustment is in favor of Buyer, Buyer’s monthly payment shall be credited in an amount equal to the adjustment. If the required adjustment is in favor of Seller, Seller shall add the adjustment amount to Buyer’s next monthly invoice. Adjustments in favor of either Buyer or Seller shall bear interest, until settled in full, in accordance with Section
8.2, accruing from the date on which the non-erring Party received Notice thereof.
8.5 Billing Disputes. A Party may, in good faith, dispute the correctness of any invoice or any adjustment to an invoice rendered under this Agreement or adjust any invoice for any arithmetic or computational error within twelve (12) months of the date the invoice, or adjustment to an invoice, was rendered. In the event an invoice or portion thereof, or any other claim or adjustment arising hereunder, is disputed, payment of the undisputed portion of the invoice shall be required to be made when due. Any invoice dispute or invoice adjustment shall be in writing and shall state the basis for the dispute or adjustment. Payment of the disputed amount shall not be required until the dispute is resolved. Upon resolution of the dispute, any required payment shall be made within ten (10) Business Days of such resolution along with interest accrued at the Interest Rate from and including the original due date to but excluding the date paid. Inadvertent overpayments shall be returned upon request or deducted by the Party receiving such overpayment from subsequent payments, with interest accrued at the Interest Rate from and including the date of such overpayment but excluding the date repaid or deducted by the Party receiving such overpayment. Any dispute with respect to an invoice is waived if the other Party is not notified in accordance with this Section 8.5 within twelve (12) months after the invoice is rendered or subsequently adjusted, except to the extent any misinformation was from a third party not affiliated with any Party and such third party corrects its information after the twelve-month period. If an invoice is not rendered within twelve (12) months after the close of the month during which performance occurred, the right to payment for such performance is waived.
8.6 Netting of Payments. The Parties hereby agree that they shall discharge mutual debts and payment obligations due and owing to each other on the same date through netting, in which case all undisputed amounts owed by each Party to the other Party for the purchase and sale of Product during the monthly billing period under this Agreement or otherwise arising out of this Agreement, including any related damages calculated pursuant to Exhibits B and E, interest, and 525
payments or credits, including pursuant to Section 4.3(c), shall be netted so that only the excess amount remaining due shall be paid by the Party who owes it.
8.7 Seller’s Development Security. To secure its obligations under this Agreement, Seller shall deliver the Development Security to Buyer within thirty (30) days after the Effective Date. Seller shall maintain the Development Security in full force and effect. Upon the earlier of (A) Seller’s delivery of the Performance Security, or (B) sixty (60) days after termination of this Agreement, Buyer shall return the Development Security to Seller, less the amounts drawn in accordance with this Agreement. If and to the extent that any portion of the Development Security is a Letter of Credit and the issuer of such Letter of Credit (i) fails to maintain a Credit Rating of at least “A-” by S&P or “A3” by Moody’s, (ii) indicates its intent not to renew such Letter of Credit and such Letter of Credit expires prior to the Commercial Operation Date, (iii) fails to honor Buyer’s properly documented request to draw on such Letter of Credit, or (iv) becomes Bankrupt, Seller shall have ten (10) Business Days to post substitute collateral that meets the requirements set forth in the definition of Development Security. If and to the extent that any portion of the Development Security is a Guaranty, Seller shall (i) provide prompt Notice to Buyer if Guarantor becomes Bankrupt or otherwise fails to meet the criteria for an acceptable Guarantor as set forth in clauses (c) and (d) of the definition of Guarantor, but not later than ten (10) Business Days after Seller becomes aware of such development and (ii) post substitute collateral that meets the requirements set forth in the definition of Development Security within ten (10) Business Days.
Seller shall have no obligation to replenish the Development Security following any draws thereon by Buyer. Seller’s maximum liability for an Event of Default or failure to perform its obligations hereunder prior to the Commercial Operation Date shall be capped at the amount of the Development Security, less any amounts collected by Buyer prior to such Event of Default or failure to perform.
8.8 Seller’s Performance Security. To secure its obligations under this Agreement, Seller shall deliver Performance Security to Buyer on or before the Commercial Operation Date.
Seller shall maintain the Performance Security in full force and effect until the following have occurred: (A) the Delivery Term has expired or terminated early; and (B) all payment obligations of the Seller arising under this Agreement, including compensation for penalties, Termination Payment, indemnification payments or other damages are paid in full (whether directly or indirectly such as through set-off or netting). Following the occurrence of both events, Buyer shall promptly return to Seller the unused portion of the Performance Security. Within ten (10) Business Days following any draw by Buyer on the Performance Security, Seller shall replenish the amount drawn such that Performance Security is restored to the amount on Cover Sheet. If and to the extent that any portion of the Performance Security is a Letter of Credit and the issuer of such Letter of Credit (i) fails to maintain a Credit Rating of at least “A-” by S&P or “A3” by Moody’s, (ii) fails to honor Buyer’s properly documented request to draw on such Letter of Credit, or (iii) becomes Bankrupt, Seller shall have ten (10) Business Days to post substitute collateral that meets the requirements set forth in the definition of Performance Security. If and to the extent that any portion of the Performance Security is a Guaranty, Seller shall (i) provide prompt Notice to Buyer if Guarantor becomes Bankrupt or otherwise fails to meet the criteria for an acceptable Guarantor as set forth in clauses (c) and (d) of the definition of Guarantor, but not later than ten (10) Business Days after Seller becomes aware of such development and (ii) post substitute collateral that meets the requirements set forth in the definition of Performance Security within ten (10) Business Days. 526
8.10 Buyer’s First Priority Security Interest in Cash or Cash Equivalent Collateral.
To secure its obligations under this Agreement, and until released as provided herein, Seller hereby grants to Buyer a present and continuing first-priority security interest in, and lien on (and right to net against), and assignment of the Development Security or Performance Security, any other cash collateral and cash equivalent collateral posted by Seller and any and all interest thereon or proceeds resulting therefrom or from the liquidation thereof, whether now or hereafter held by, on behalf of, or for the benefit of Buyer, and Seller agrees to take all action as Buyer reasonably requires in order to perfect Buyer’s first-priority security interest in, and lien on (and right to net against), such collateral and any and all proceeds resulting therefrom or from the liquidation thereof.
Upon or any time after the occurrence of an Event of Default caused by Seller, an Early Termination Date resulting from an Event of Default caused by Seller, or an occasion provided for in this Agreement where Buyer is authorized to retain all or a portion of the Development Security or Performance Security, Buyer may do any one or more of the following (in each case subject to the final sentence of this Section 8.10, the final sentence of Section 11.2 and the provisions of Article 12):
(a) Exercise any of its rights and remedies with respect to the Development Security or Performance Security, as applicable, including any such rights and remedies under Law then in effect;
(b) Draw on any outstanding Letter of Credit issued for its benefit and retain any cash held by Buyer as Development Security or Performance Security, as applicable; and (c) Liquidate all Development Security or Performance Security, as applicable then held by or for the benefit of Buyer free from any claim or right of any nature whatsoever of Seller, including any equity or right of purchase or redemption by Seller.
Buyer shall apply the proceeds of the collateral realized upon the exercise of any such rights or remedies to reduce Seller’s obligations under this Agreement (Seller remains liable for any amounts owing to Buyer after such application), subject to Buyer’s obligation to return any surplus proceeds remaining after these obligations are satisfied in full.
8.11 Buyer Financial Statements. Buyer shall provide to Seller, both upon request and as indicated below: (a) within ninety (90) days following the end of each fiscal quarter, an unaudited quarterly financial statement of Buyer (including a balance sheet and statements of income and cash flows) prepared in accordance with generally accepted accounting principles as promulgated by the Government Accounting Standards Board in the United States, consistently applied; (b) within one hundred and eighty (180) days following the end of each fiscal year, annual 527
financial statements of Buyer (including a balance sheet and statements of income and cash flows) prepared in accordance with the requirements of California law applicable to Joint Powers Authorities; (c) as available, Buyer’s annual report; (d) reserve levels; (e) subscription and opt out rates; and (f) other financial and operational information as may be reasonably requested by the Seller’s financing parties from time to time; provided that nothing in this Section 8.11 shall require Buyer to provide information that is not generally available to Buyer as part of its normal accounting and financing reporting processes. Notwithstanding anything to the contrary herein, the provisions of this Section 8.11 shall not apply so long as Buyer obtains and maintains a publicly available Investment Grade Credit Rating.
8.12 Buyer Lockbox Arrangement.
(a) To secure Buyer’s obligations under this Agreement, Seller shall have the right to execute a Joinder, which shall allow Seller to become a PPA Provider and Secured Creditor under the Intercreditor and Collateral Agency Agreement for so long as Buyer is subject to the Security Agreement and Lockbox Account (or any successor arrangement generally available to Buyer’s creditors) (the current arrangement and any successor arrangement generally available to Buyer’s creditors is the “Buyer Lockbox Arrangement”); provided, however, that if Buyer (i) has an Investment Grade Credit Rating, or (ii) provides Buyer Performance Security, then so long as Buyer is not in default under this Agreement or the Buyer Lockbox Arrangement, Buyer may, at the direction of its Board, request the dissolution of the Buyer Lockbox Arrangement and Seller hereby agrees that (x) its security interest under the Buyer Lockbox Arrangement shall terminate, without further action, effective upon the termination of the security interests of all other PPA Providers under the Buyer Lockbox Arrangement and (y) if requested by Buyer, Seller would promptly execute a written termination statement confirming such termination in accordance with the Buyer Lockbox Arrangement. If the Buyer Lockbox Arrangement is dissolved as a result of Buyer obtaining a privately issued Investment Grade Credit Rating, Buyer shall provide to Seller, within ten (10) Business Days of its receipt or sending by Buyer from time to time, for so long as Buyer does not maintain a Buyer Lockbox Arrangement, all correspondence with the rating agency(ies) providing a Credit Rating to Buyer. If, subsequent to the dissolution and termination of the Buyer Lockbox Arrangement, Buyer has obtained a privately issued Investment Grade Credit Rating and Seller has reasonable grounds to believe that Buyer’s Credit Rating is no longer an Investment Grade Credit Rating, Buyer will make commercially reasonable efforts, within thirty (30) days of Seller’s request, to obtain an update of its Credit Rating. If, subsequent to the dissolution and termination of the Buyer Lockbox Arrangement, Buyer ceases to maintain the Investment Grade Credit Rating under clause (i) of this Section 8.12(a) or fails to maintain the Buyer Performance Security required under clause (ii) of this Section 8.12(a), then Buyer shall within five (5) Business Days either post replacement Buyer Performance Security or enter into a substantially similar successor Buyer Lockbox Arrangement under which Seller is allowed to become a PPA Provider and Secured Creditor.
(b) Under the Buyer Lockbox Arrangement:
(i) Buyer shall provide Notice to Seller of the termination of all security interests under the Security Agreement at least five (5) Business Days prior to such termination.
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(ii) Buyer further agrees it will not create any additional security interests (i) under the Security Agreement on terms more favorable than those currently offered to Seller, or (ii) under any arrangement similar to the Security Agreement that is generally available to Buyer’s creditors unless Seller is offered the right to participate in such arrangement on terms no less favorable than those offered to the other participants. (iii) In addition, so long as Buyer is not in default under this Agreement, the Intercreditor and Collateral Agency Agreement and the Security Agreement, Buyer may request the dissolution of the current Buyer Lockbox Arrangement in order to enter into a substantially similar successor Buyer Lockbox Arrangement and, provided that Seller is allowed to become a PPA Provider and Secured Creditor under the successor Buyer Lockbox Arrangement, Seller hereby agrees that (x) its security interest under the Security Agreement shall terminate, without further action, effective upon the termination of the security interests of all other PPA Providers under the Security Agreement, and (y) if requested by Buyer, Seller would promptly execute a written termination statement confirming such termination in accordance with Section 7.12 of the Security Agreement.
ARTICLE 9
NOTICES
9.1 Addresses for the Delivery of Notices. Any Notice required, permitted, or contemplated hereunder shall be in writing, shall be addressed to the Party to be notified at the physical or electronic addresses set forth on Exhibit K or at such other address or addresses as a Party may designate for itself from time to time by Notice hereunder.
9.2 Acceptable Means of Delivering Notice. Each Notice required, permitted, or contemplated hereunder shall be deemed to have been validly served, given or delivered as follows: (a) if sent by United States mail with proper first class postage prepaid, three (3) Business Days following the date of the postmark on the envelope in which such Notice was deposited in the United States mail; (b) if sent by a regularly scheduled overnight delivery carrier with delivery fees either prepaid or an arrangement with such carrier made for the payment of such fees, the next Business Day after the same is delivered by the sending Party to such carrier; (c) if sent by electronic communication (including email or other electronic means), at the time indicated by the time stamp upon delivery; or (d) if delivered in person, upon receipt by the Receiving Party.
Notwithstanding the foregoing, Notices of outages or other scheduling or dispatch information or requests may be sent by electronic communication and shall be considered delivered upon successful completion of such transmission. In addition, for any Notice sent pursuant to (a), (b) or (d) above, the Party sending such Notice shall send a courtesy copy by email to the email address provided in Exhibit K.
ARTICLE 10
FORCE MAJEURE
10.1 Definition.
(a) “Force Majeure Event” means any act or event that delays or prevents a Party from timely performing all or a portion of its obligations under this Agreement or from 529
complying with all or a portion of the conditions under this Agreement if such act or event, which event or circumstance was not anticipated as of the Effective Date and despite the exercise of reasonable efforts, cannot be avoided by and is beyond the reasonable control (whether direct or indirect) of and without the fault or negligence of the Party relying thereon as justification for such delay, nonperformance, or noncompliance.
(b) Without limiting the generality of the foregoing, so long as the following events, despite the exercise of reasonable efforts, cannot be avoided by, and are beyond the reasonable control (whether direct or indirect) of and without the fault or negligence of the Party relying thereon as justification for such delay, nonperformance or noncompliance, a Force Majeure Event may include an act of God or the elements, such as flooding, lightning, hurricanes, tornadoes, or ice storms; explosion; fire; volcanic eruption; flood; epidemic, or pandemic, including COVID-19 (but only to the extent that new governmental rules or mandates related to COVID-19 are implemented that were not in place as of the Effective Date); landslide; mudslide; sabotage; terrorism; earthquake; or other cataclysmic events; an act of public enemy; acts or failure to act by a Governmental Authority; war; blockade; civil insurrection; riot; civil disturbance; serial defect; or strikes or other labor difficulties caused or suffered by a Party or any third party except as set forth below.
(c) Notwithstanding the foregoing, the term “Force Majeure Event” does not include (i) economic conditions that render a Party’s performance of this Agreement at the Contract Price unprofitable or otherwise uneconomic (including Buyer’s ability to buy Energy at a lower price, or Seller’s ability to sell Energy generated by the Facility at a higher price, than the Contract Price); (ii) Seller’s inability to obtain permits or approvals of any type for the construction, operation, or maintenance of the Facility, except to the extent such inability is caused by a Force Majeure Event; (iii) the inability of a Party to make payments when due under this Agreement, unless the cause of such inability is a disruption of payment systems caused by a Force Majeure Event; (iv) a Curtailment Order, except to the extent that a Curtailment Order is caused by an event that otherwise qualifies as a Force Majeure Event; (v) Seller’s inability to obtain sufficient labor, equipment, materials, or other resources to build or operate the Facility except to the extent such inability is caused by a Force Majeure Event; (vi) a strike, work stoppage or labor dispute limited only to any one or more of Seller, Seller’s Affiliates, Seller’s contractors, their subcontractors thereof or any other third party employed by Seller to work on the Facility; (vii) any equipment failure except if such equipment failure is caused by a Force Majeure Event; or (viii) except as the Guaranteed Commercial Operation Date may be extended as a result of a Development Cure Period, Seller’s inability to achieve Commercial Operation following the Guaranteed Commercial Operation Date; or (ix) any action or inaction by any third party, including Transmission Provider, that delays or prevents the approval, construction or placement in service of any Interconnection Facilities or Network Upgrades, except to the extent caused by a Force Majeure Event.
10.2 No Liability If a Force Majeure Event Occurs. Neither Seller nor Buyer shall be liable to the other Party in the event it is prevented from performing its obligations hereunder in whole or in part due to a Force Majeure Event. The Party rendered unable to fulfill any obligation by reason of a Force Majeure Event shall take reasonable actions necessary to remove such inability with due speed and diligence. Nothing herein shall be construed as permitting that Party to continue to fail to perform after said cause has been removed. The obligation to use due 530
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(ii) with respect to any Guaranty provided for the benefit of Buyer, the failure by Seller to provide for the benefit of Buyer either (1) cash, (2) a replacement Guaranty from a different Guarantor meeting the criteria set forth in the definition of Guarantor, or (3) a replacement Letter of Credit from an issuer meeting the criteria set forth in the definition of Letter of Credit, in each case, in the amount required hereunder within after Seller receives Notice of the occurrence of any of the following events:
(A) if any representation or warranty made by the Guarantor in connection with this Agreement is false or misleading in any material respect when made or when deemed made or repeated, and such representation or warranty is not remedied within after Notice thereof;
(B) the failure of the Guarantor to make any payment required or to perform any other material covenant or obligation in any Guaranty; (C) the Guarantor becomes Bankrupt;
(D) the Guarantor shall fail to meet the criteria for an acceptable Guarantor as set forth in the definition of Guarantor;
(E) the failure of the Guaranty to be in full force and effect (other than in accordance with its terms) prior to the indefeasible satisfaction of all obligations of Seller hereunder; or
(F) the Guarantor shall repudiate, disaffirm, disclaim, or reject, in whole or in part, or challenge the validity of any Guaranty; or (iii) with respect to any outstanding Letter of Credit provided for the benefit of Buyer that is not then required under this Agreement to be canceled or returned, the failure by Seller to provide for the benefit of Buyer either (1) cash, or (2) a replacement Guaranty from a Guarantor meeting the criteria set forth in the definition of Guarantor, or (3) a substitute Letter of Credit from a different issuer meeting the criteria set forth in the definition of Letter of Credit, in each case, in the amount required hereunder within after Seller receives Notice of the occurrence of any of the following events:
(A) the issuer of the outstanding Letter of Credit shall fail to maintain a Credit Rating of at least “A-” by S&P or “A3” by Moody’s; (B) the issuer of such Letter of Credit becomes Bankrupt; (C) the issuer of the outstanding Letter of Credit shall fail to comply with or perform its obligations under such Letter of Credit and such failure shall be continuing after the lapse of any applicable grace period permitted under such Letter of Credit;
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(D) the issuer of the outstanding Letter of Credit shall fail to honor a properly documented request to draw on such Letter of Credit; (E) the issuer of the outstanding Letter of Credit shall disaffirm, disclaim, repudiate or reject, in whole or in part, or challenge the validity of, such Letter of Credit;
(F) such Letter of Credit fails or ceases to be in full force and effect at any time; or
(G) Seller shall fail to renew or cause the renewal of each outstanding Letter of Credit on a timely basis as provided in the relevant Letter of Credit and as provided in accordance with this Agreement, and in no event less than prior to the expiration of the outstanding Letter of Credit. 534
(c) with respect to Buyer as the Defaulting Party, the failure of Buyer to comply with the requirements of Section 8.12.
11.2 Remedies; Declaration of Early Termination Date. If an Event of Default with respect to a Defaulting Party shall have occurred and be continuing, the other Party (“Non-Defaulting Party”) shall have the following rights:
(a) to send Notice, designating a day, no earlier than the day such Notice is deemed to be received and no later than twenty (20) days after such Notice is deemed to be received, as an early termination date of this Agreement (“Early Termination Date”) that terminates this Agreement (the “Terminated Transaction”) and ends the Contract Term effective as of the Early Termination Date;
(b) to accelerate all amounts owing between the Parties, and to collect as liquidated damages (i) the Damage Payment (in the case of an Event of Default occurring before the Commercial Operation Date) or (ii) the Termination Payment calculated in accordance with Section 11.3 below (in the case of an Event of Default occurring on or after the Commercial Operation Date);
(c) to withhold any payments due to the Defaulting Party under this Agreement; (d) to suspend performance; and
(e) to exercise any other right or remedy available at Law or in equity, including specific performance or injunctive relief, except to the extent such remedies are expressly limited under this Agreement;
provided, that payment by the Defaulting Party of the Damage Payment or Termination Payment, as applicable, shall constitute liquidated damages and the Non-Defaulting Party’s sole and exclusive remedy for the Terminated Transaction and the Event of Default related thereto.
11.3 Damage Payment; Termination Payment.
(a) Damage Payment Prior to Commercial Operation Date. If the Early Termination Date occurs before the Commercial Operation Date, then the Damage Payment shall be calculated in accordance with this Section 11.3(a):
(i) If Seller is the Defaulting Party, then the Damage Payment shall be owed to Buyer and shall be a dollar amount that equals the amount of the Development Security as set forth on the Cover Sheet plus, if the Development Security is posted as cash, any interest accrued thereon. Buyer shall be entitled to immediately retain for its own benefit any Delay Damages paid by Seller, plus those funds held as Development Security and any interest accrued thereon if the Development Security is posted as cash, and any amount of Development Security that Seller has not yet posted with Buyer shall be 535
immediately due and payable by Seller to Buyer. There will be no amounts owed to Seller.
The Parties agree that Buyer’s damages in the event of an Early Termination Date prior to the Commercial Operation Date caused by Seller’s default would be difficult or impossible to determine and that the damages set forth in this Section 11.3(a)(i) are a reasonable approximation of Buyer’s harm or loss.
(ii) If Buyer is the Defaulting Party, then the Damage Payment shall equal to the Termination Payment as set forth in Section 11.3(b) below, calculated as of the Early Termination Date. The Parties agree that Seller’s damages in the event of an Early Termination Date prior to the Commercial Operation Date caused by Buyer’s default would be difficult or impossible to determine and that the damages set forth in this Section
11.3(a)(ii) are a reasonable approximation of Seller’s harm or loss. (b) Termination Payment On or After the Commercial Operation Date. The Termination Payment for a Terminated Transaction occurring after the Commercial Operation Date (“Termination Payment”) shall be the aggregate of all Settlement Amounts plus any or all other amounts due to the Non-Defaulting Party netted into a single amount. The Non-Defaulting Party shall calculate, in a commercially reasonable manner, a Settlement Amount for the Terminated Transaction as of the Early Termination Date. Third parties (which shall not include Affiliates of the Non-Defaulting Party) supplying information for purposes of the calculation of Gains or Losses may include, without limitation, dealers in the relevant markets, end-users of the relevant product, information vendors and other sources of market information. The Settlement Amount shall not include consequential, incidental, punitive, exemplary, indirect or business interruption damages; provided, however, that any lost Green Attributes shall be deemed direct damages covered by this Agreement. Without prejudice to the Non-Defaulting Party’s duty to mitigate, the Non-Defaulting Party shall not have to enter into replacement transactions to establish a Settlement Amount. Each Party agrees and acknowledges that (a) the actual damages that the Non-Defaulting Party would incur in connection with a Terminated Transaction would be difficult or impossible to predict with certainty, (b) the Termination Payment described in this Section is a reasonable and appropriate approximation of such damages, and (c) the Termination Payment described in this Section is the exclusive remedy of the Non-Defaulting Party in connection with a Terminated Transaction but shall not otherwise act to limit any of the Non-Defaulting Party’s rights or remedies if the Non-Defaulting Party does not elect a Terminated Transaction as its remedy for an Event of Default by the Defaulting Party.
11.4 Notice of Payment of Termination Payment. As soon as practicable after a Terminated Transaction, Notice shall be given by the Non-Defaulting Party to the Defaulting Party of the amount of the Termination Payment and whether the Termination Payment is due to the Non-Defaulting Party. The Notice shall include a written statement explaining in reasonable detail the calculation of such amount and the sources for such calculation. The Termination Payment shall be made to the Non-Defaulting Party, as applicable, within ten (10) Business Days after such Notice is effective.
11.5 Disputes With Respect to Termination Payment. If the Defaulting Party disputes the Non-Defaulting Party’s calculation of the Termination Payment, in whole or in part, the Defaulting Party shall, within five (5) Business Days of receipt of the Non-Defaulting Party’s calculation of the Termination Payment, provide to the Non-Defaulting Party a detailed written 536
explanation of the basis for such dispute. Disputes regarding the Termination Payment shall be determined in accordance with Article 15.
11.6 Rights And Remedies Are Cumulative. Except where liquidated damages are provided as the exclusive remedy, the rights and remedies of a Party pursuant to this Article 11 shall be cumulative and in addition to the rights of the Parties otherwise provided in this Agreement.
11.7 Mitigation. Any Non-Defaulting Party shall use commercially reasonable efforts to mitigate its Costs, Losses and damages resulting from any Event of Default of the other Party under this Agreement.
ARTICLE 12
LIMITATION OF LIABILITY AND EXCLUSION OF WARRANTIES
12.1 No Consequential Damages. EXCEPT TO THE EXTENT PART OF AN
EXPRESS REMEDY OR MEASURE OF DAMAGES HEREIN OR AN INDEMNITY CLAIM UNDER ARTICLE 16, NEITHER PARTY SHALL BE LIABLE TO THE OTHER OR ITS
INDEMNIFIED PERSONS FOR ANY SPECIAL, PUNITIVE, EXEMPLARY, INDIRECT, OR
CONSEQUENTIAL DAMAGES, OR LOSSES OR DAMAGES FOR LOST REVENUE OR
LOST PROFITS, WHETHER FORESEEABLE OR NOT, ARISING OUT OF, OR IN
CONNECTION WITH THIS AGREEMENT, BY STATUTE, IN TORT OR CONTRACT, OR OTHERWISE.
12.2 Waiver and Exclusion of Other Damages. THE PARTIES CONFIRM THAT
THE EXPRESS REMEDIES AND MEASURES OF DAMAGES PROVIDED IN THIS AGREEMENT SATISFY THE ESSENTIAL PURPOSES HEREOF. ALL LIMITATIONS OF
LIABILITY CONTAINED IN THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, THOSE PERTAINING TO THE PARTIES’ LIMITATION OF LIABILITY AND THE PARTIES’ WAIVER OF CONSEQUENTIAL DAMAGES, SHALL APPLY EVEN IF THE 537
REMEDIES FOR BREACH OF WARRANTY PROVIDED IN THIS AGREEMENT ARE DEEMED TO “FAIL OF THEIR ESSENTIAL PURPOSE” OR ARE OTHERWISE HELD TO BE INVALID OR UNENFORCEABLE.
NOTWITHSTANDING ANYTHING ELSE HEREIN TO THE CONTRARY, PRIOR TO THE COMMERCIAL OPERATION DATE, SELLER’S AGGREGATE LIABILITY ARISING
UNDER OR RELATED TO THIS AGREEMENT FOR ANY AND ALL REASONS SHALL
NOT EXCEED THE SUM OF (A) THE AMOUNT OWING OR PAID BY SELLER IN
RESPECT OF DELAY DAMAGES, IF ANY, AND (B) THE AMOUNT OF THE DAMAGE PAYMENT OWED BY SELLER, IF ANY.
FOR BREACH OF ANY PROVISION FOR WHICH AN EXPRESS AND EXCLUSIVE
REMEDY OR MEASURE OF DAMAGES IS PROVIDED, SUCH EXPRESS REMEDY OR
MEASURE OF DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY, THE OBLIGOR’S LIABILITY SHALL BE LIMITED AS SET FORTH IN SUCH PROVISION, AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED.
IF NO REMEDY OR MEASURE OF DAMAGES IS EXPRESSLY PROVIDED HEREIN, THE OBLIGOR’S LIABILITY SHALL BE LIMITED TO DIRECT DAMAGES ONLY. THE VALUE OF ANY RENEWABLE ENERGY INCENTIVES (INCLUDING ANY TAX CREDITS) NOT GENERATED OR OBTAINED DUE TO BUYER’S DEFAULT (WHICH
SELLER HAS NOT BEEN ABLE TO MITIGATE AFTER USE OF REASONABLE EFFORTS)
AND AMOUNTS DUE IN CONNECTION WITH THE RECAPTURE OR REPAYMENT OF ANY RENEWABLE ENERGY INCENTIVES DUE TO OR RESULTING FROM BUYER’S DEFAULT, IF ANY, SHALL BE DEEMED TO BE DIRECT DAMAGES.
TO THE EXTENT ANY DAMAGES REQUIRED TO BE PAID HEREUNDER ARE LIQUIDATED, INCLUDING UNDER SECTIONS 4.7, 11.2 AND 11.3, AND AS PROVIDED
IN EXHIBIT B AND EXHIBIT E, THE PARTIES ACKNOWLEDGE THAT THE DAMAGES
ARE DIFFICULT OR IMPOSSIBLE TO DETERMINE, THAT OTHERWISE OBTAINING AN
ADEQUATE REMEDY IS INCONVENIENT, AND THAT THE LIQUIDATED DAMAGES
CONSTITUTE A REASONABLE APPROXIMATION OF THE ANTICIPATED HARM OR LOSS. IT IS THE INTENT OF THE PARTIES THAT THE LIMITATIONS HEREIN IMPOSED
ON REMEDIES AND THE MEASURE OF DAMAGES BE WITHOUT REGARD TO THE
CAUSE OR CAUSES RELATED THERETO, INCLUDING THE NEGLIGENCE OF ANY
PARTY, WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, OR ACTIVE OR PASSIVE. THE PARTIES HEREBY WAIVE ANY RIGHT TO CONTEST SUCH PAYMENTS AS AN UNREASONABLE PENALTY.
THE PARTIES ACKNOWLEDGE AND AGREE THAT MONEY DAMAGES AND
THE EXPRESS REMEDIES PROVIDED FOR HEREIN ARE AN ADEQUATE REMEDY FOR
THE BREACH BY THE OTHER OF THE TERMS OF THIS AGREEMENT, AND EACH
PARTY WAIVES ANY RIGHT IT MAY HAVE TO SPECIFIC PERFORMANCE WITH RESPECT TO ANY OBLIGATION OF THE OTHER PARTY UNDER THIS AGREEMENT. 538
ARTICLE 13
REPRESENTATIONS AND WARRANTIES; AUTHORITY
13.1 Seller’s Representations and Warranties. As of the Effective Date, Seller represents and warrants as follows:
(a) Seller is a limited liability company, duly organized, validly existing and in good standing under the Laws of the jurisdiction of its formation, and is qualified to conduct business in each jurisdiction where the failure to so qualify would have a material adverse effect on the business or financial condition of Seller.
(b) Seller has the power and authority to enter into and perform this Agreement and is not prohibited from entering into this Agreement or discharging and performing all covenants and obligations on its part to be performed under and pursuant to this Agreement, except where such failure does not have a material adverse effect on Seller’s performance under this Agreement. The execution, delivery and performance of this Agreement by Seller has been duly authorized by all necessary corporate action on the part of Seller and does not and will not require the consent of any trustee or holder of any indebtedness or other obligation of Seller or any other party to any other agreement with Seller.
(c) The execution and delivery of this Agreement, consummation of the transactions contemplated herein, and fulfillment of and compliance by Seller with the provisions of this Agreement will not conflict with or constitute a breach of or a default under any Law presently in effect having applicability to Seller, subject to any permits that have not yet been obtained by Seller, the documents of formation of Seller or any outstanding trust indenture, deed of trust, mortgage, loan agreement or other evidence of indebtedness or any other agreement or instrument to which Seller is a party or by which any of its property is bound. (d) This Agreement has been duly executed and delivered by Seller. This Agreement is a legal, valid and binding obligation of Seller enforceable in accordance with its terms, except as limited by Laws of general applicability limiting the enforcement of creditors’ rights or by the exercise of judicial discretion in accordance with general principles of equity.
13.2 Buyer’s Representations and Warranties. As of the Effective Date, Buyer represents and warrants as follows:
(a) Buyer is a California Joint Powers Authority, duly organized, validly existing and in good standing under the Laws of the jurisdiction of its formation, and is qualified to conduct business in each jurisdiction where the failure to so qualify would have a material adverse effect on the business or financial condition of Buyer. (b) Buyer has the power and authority to enter into and perform this Agreement and is not prohibited from entering into this Agreement or discharging and performing all covenants and obligations on its part to be performed under and pursuant to this Agreement, except where such failure does not have a material adverse effect on Buyer’s performance under this Agreement. The execution, delivery and performance of this Agreement by Buyer has been duly authorized by all necessary action on the part of Buyer and does not and will not require the consent 539
of any trustee or holder of any indebtedness or other obligation of Buyer or any other party to any other agreement with Buyer.
(c) The execution and delivery of this Agreement, consummation of the transactions contemplated herein, and fulfillment of and compliance by Buyer with the provisions of this Agreement will not conflict with or constitute a breach of or a default under any Law presently in effect having applicability to Buyer, including but not limited to community choice aggregation, competitive bidding, public notice, open meetings, election, referendum, or prior appropriation requirements, the documents of formation of Buyer or any outstanding trust indenture, deed of trust, mortgage, loan agreement or other evidence of indebtedness or any other agreement or instrument to which Buyer is a party or by which any of its property is bound. (d) This Agreement has been duly executed and delivered by Buyer. This Agreement is a legal, valid and binding obligation of Buyer enforceable in accordance with its terms, except as limited by Laws of general applicability limiting the enforcement of creditors’ rights or by the exercise of judicial discretion in accordance with general principles of equity.
13.3 General Covenants. Each Party covenants that commencing on the Effective Date and continuing throughout the Contract Term:
(a) It shall continue to be duly organized, validly existing and in good standing under the Laws of the jurisdiction of its formation and to be qualified to conduct business in each jurisdiction where the failure to so qualify would have a material adverse effect on its business or financial condition;
(b) It shall maintain (or obtain from time to time as required) all regulatory authorizations necessary for it to legally perform its obligations under this Agreement; and (c) It shall perform its obligations under this Agreement in compliance with all terms and conditions in its governing documents and any contracts to which it is a party and in material compliance with any Law.
ARTICLE 14
ASSIGNMENT
14.1 General Prohibition on Assignments. Except as provided below, neither Party may voluntarily assign this Agreement or its rights or obligations under this Agreement, without the written consent of the other Party, which consent shall not be unreasonably withheld. Any direct or indirect Change of Control of a Party (whether voluntary or by operation of Law) will be deemed an assignment and will require the prior written consent of the other Party, except as provided in Section 14.3. Any assignment made without required written consent, or in violation of the conditions to assignment set out below, shall be null and void. The assigning Party shall be responsible for the other Party’s costs associated with the preparation, review, execution and delivery of documents in connection with any assignment of this Agreement, including without limitation reasonable attorneys’ fees.
14.2 Collateral Assignment. Subject to the provisions of this Section 14.2, Seller has the right to assign this Agreement as collateral for any financing or refinancing of the Facility 540
without the consent of Buyer. In connection with any financing or refinancing of the Facility by Seller, Buyer shall work in good faith with Seller (and its Affiliate(s)) and Lender to agree upon a consent to collateral assignment of this Agreement (“Collateral Assignment Agreement”) in a form mutually agreeable to Buyer, Seller and Lender; provided, however, that Buyer shall be under no obligation to ultimately enter into a Collateral Assignment Agreement to the extent the form thereof cannot be agreed.
14.3 Permitted Assignment. Notwithstanding Section 14.1, and in addition to its rights set forth in Section 14.2, Seller may at any time, without the prior written consent of Buyer, transfer or assign this Agreement (including by a Change of Control) (i) to an Affiliate of Seller, or (ii) in connection with a tax equity financing (regardless of whether a Change of Control results from such tax equity financing). Seller may also, without the prior written consent of Buyer, transfer or assign this Agreement (including by a Change of Control) to a Person that is, individually, or to Persons that collectively qualify as, a Permitted Transferee.
14.4 Permitted Buyer Assignment. Without the prior written consent of Seller, Buyer may make a limited assignment in connection with a municipal prepayment transaction to an entity that has
(“Limited Assignee”) of Buyer’s right to receive Product and Buyer’s obligation to make payments to Seller, subject to execution of an assignment agreement, in a form substantially similar to that set forth in Exhibit M (“Limited Assignment Agreement”), between and among Seller, Buyer, and Limited Assignee, provided that the limited assignment shall be expressly subject to Limited Assignee’s timely payment of amounts due under this Agreement and that Buyer remains liable for Buyer’s obligations under this Agreement notwithstanding the limited assignment. Buyer may make such assignment by delivering Notice upon not less than thirty (30) days prior to such proposed assignment. Subject to the foregoing, Seller agrees to (i) comply with Limited Assignee’s reasonable requests for know-your-customer and similar account opening information and documentation with respect to Seller, including but not limited to information related to forecasted generation, credit rating, and compliance with anti-money laundering rules, the Dodd-Frank Act, the Commodity Exchange Act, the Patriot Act and similar rules, regulations, requirements and corresponding policies; and (ii) promptly execute such Limited Assignment Agreement and implement such assignment as contemplated thereby, subject only to the countersignature of Limited Assignee and Buyer, the requirements of this Section 14.4, and Lender consent.
ARTICLE 15
DISPUTE RESOLUTION
15.1 Venue. The Parties agree that any suit, action or other legal proceeding by or against any party (or its affiliates or designees) with respect to or arising out of this Agreement shall be brought in the federal courts of the United States or, if such federal courts refuse jurisdiction notwithstanding the Parties’ agreement, then in the courts of the State of California, in either case sitting in County of Los Angeles, California.
15.2 Dispute Resolution. In the event of any dispute arising under this Agreement, within ten (10) days following the receipt of a Notice from either Party identifying such dispute, the Parties shall meet, negotiate and attempt, in good faith, to resolve the dispute quickly, 541
informally and inexpensively. If the Parties are unable to resolve a dispute arising hereunder within the earlier of either thirty (30) days of initiating such discussions, or within forty (40) days after Notice of the dispute, either Party may seek any and all remedies available to it at Law or in equity, subject to the limitations set forth in this Agreement.
ARTICLE 16
INDEMNIFICATION
16.1 Indemnification.
(a) Each Party (the “Indemnifying Party”) agrees to indemnify, defend and hold harmless the other Party and its Affiliates, directors, officers, employees, attorneys, representatives and agents (collectively, the “Indemnified Party”) from and against all third-party claims, demands, losses, liabilities, penalties, and expenses and expert witness fees (collectively “Indemnifiable Event”), to the extent such Indemnifiable Event arises out of, results from, or is caused by any of the following: (a) the negligent act or omission, recklessness or willful misconduct of the Indemnifying Party, its Affiliates, its or their directors, officers, employees, agents, subcontractors, and anyone directly or indirectly employed by the Indemnifying Party or any of its subcontractors or anyone that they control; (b) any violation of applicable Law by the Indemnifying Party, in each case in connection with this Agreement; or (c) third-party claims resulting from the Indemnifying Party’s material breach (including inaccuracy of any representation of warranty made hereunder)or non-performance of its material obligations under this Agreement. Upon the Indemnified Party’s written request, the Indemnifying Party, at its own expense, must defend any suit or action that is subject to the Indemnifying Party’s indemnity obligations. The Parties’ indemnification obligations survive the expiration or termination of this Agreement until the relevant statute of limitations.
(b) Nothing in this Section 16.1 shall enlarge or relieve Seller or Buyer of any liability to the other for any breach of this Agreement. Neither Party shall be indemnified for its damages resulting to the extent of its own negligence, intentional acts or willful misconduct. These indemnity provisions shall not be construed to relieve any insurer of its obligation to pay claims consistent with the provisions of a valid insurance policy.
16.2 Claims. Promptly after receipt by a Party of any claim or Notice of the commencement of any action, administrative, or legal proceeding, or investigation as to which the indemnity provided for in this Article 16 may apply, the Indemnified Party shall notify the Indemnifying Party in writing of such fact. The Indemnifying Party shall assume the defense thereof with counsel designated by such Party and reasonably satisfactory to the Indemnified Party, provided, however, that if the defendants in any such action include both the Indemnified Party and the Indemnifying Party and the Indemnified Party shall have reasonably concluded that there may be legal defenses available to it which are different from or additional to, or inconsistent with, those available to the Indemnifying Party, the Indemnified Party shall have the right to select and be represented by separate counsel, at the Indemnifying Party’s expense, unless a liability insurer is willing to pay such costs. If the Indemnifying Party fails to assume the defense of a claim meriting indemnification, the Indemnified Party may at the expense of the Indemnifying Party contest, settle, or pay such claim, provided that settlement or full payment of any such claim may be made only following consent of the Indemnifying Party or, absent such consent, written opinion 542
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wildfire, all with limits in accordance with industry standard recognizing that natural perils may be subject to a lower sublimit. Coverage will be on an “all-risk” basis including mechanical and electrical breakdown.
ARTICLE 18
CONFIDENTIAL INFORMATION
18.1 Definition of Confidential Information. The following constitutes “Confidential Information,” whether oral or written which is delivered by Seller to Buyer or by Buyer to Seller:
(a) pricing and other commercially-sensitive or proprietary information provided to or from Buyer in connection with the terms and conditions of, and proposals and negotiations related to, this Agreement, and (b) information that either Seller or Buyer stamps or otherwise identifies as “confidential” or “proprietary” before disclosing it to the other. Confidential Information does not include (i) information that was publicly available at the time of the disclosure, other than as a result of a disclosure in breach of this Agreement; (ii) information that becomes publicly available through no fault of the recipient after the time of the delivery; (iii) information that was rightfully in the possession of the recipient (without confidential or proprietary restriction) at the time of delivery or that becomes available to the recipient from a source not subject to any restriction against disclosing such information to the recipient; and (iv) information that the recipient independently developed without a violation of this Agreement.
18.2 Duty to Maintain Confidentiality. Except as permitted in this Article 18, neither Party shall disclose Confidential Information to a third party, except upon the written consent of the Disclosing Party. Confidential Information will retain its character as Confidential Information but may be disclosed by the recipient (the “Receiving Party”) if and to the extent such disclosure is required (a) to be made by any requirements of Law, including the California Public Records Act, (b) pursuant to an order of a court or (c) in order to enforce or implement this Agreement. If the Receiving Party becomes legally compelled (by interrogatories, requests for information or documents, subpoenas, summons, civil investigative demands, or similar processes or otherwise in connection with any litigation or to comply with any applicable Law, order, regulation, ruling, regulatory request, accounting disclosure rule or standard or any exchange, control area or independent system operator rule) to disclose any Confidential Information of the disclosing Party (the “Disclosing Party”), Receiving Party shall provide Disclosing Party with prompt notice so that Disclosing Party, at its sole expense, may seek an appropriate protective order or other appropriate remedy. If the Disclosing Party takes no such action within five (5) Business Days after receiving the foregoing notice from the Receiving Party, the Receiving Party is not required to defend against such request and shall be permitted to disclose such Confidential Information of the Disclosing Party to the extent required under applicable Law, with no liability for any damages that arise from such disclosure. Each Party hereto acknowledges and agrees that information and documentation provided in connection with this Agreement may be subject to the California Records Act (Government Code Section 6250 et seq.).
18.3 Irreparable Injury; Remedies. Receiving Party acknowledges that its obligations hereunder are necessary and reasonable in order to protect Disclosing Party and the business of Disclosing Party, and expressly acknowledges that monetary damages may be inadequate to compensate Disclosing Party for any breach or threatened breach by Receiving Party of any covenants and agreements set forth herein. Accordingly, Receiving Party acknowledges that any 544
such breach or threatened breach may cause irreparable injury to Disclosing Party and that, in addition to any other remedies that may be available, in Law, in equity or otherwise, Disclosing Party will be entitled to seek injunctive relief against the threatened breach of this Agreement or the continuation of any such breach, without the necessity of proving actual damages.
18.4 Permitted Disclosures. Notwithstanding anything to the contrary in this Article 18, Confidential Information may be disclosed by either Party to such Party’s counsel, accountants, auditors, advisors, other professional consultants, credit rating agencies, Affiliates or actual or prospective owners, investors, lenders, directors, underwriters, contractors, suppliers or others involved in the construction, operation and financing transactions and arrangements for a Party or its affiliates, or any of its or their agents, consultants or trustees, so long as the Person to whom Confidential Information is disclosed agrees in writing to be bound by the confidentiality provisions of this Article 18 to the same extent as if it were a Party, or is bound by substantially similar confidentiality requirements.
18.5 Press Releases. Neither Party shall issue (or cause its Affiliates to issue) a press release regarding the transactions contemplated by this Agreement unless both Parties have agreed upon the contents of any such public statement.
ARTICLE 19
MISCELLANEOUS
19.1 Entire Agreement; Integration; Exhibits. This Agreement, together with the Cover Sheet and Exhibits attached hereto, constitutes the entire agreement and understanding between Seller and Buyer with respect to the subject matter hereof and supersedes all prior agreements relating to the subject matter hereof, which are of no further force or effect. The Exhibits attached hereto are integral parts hereof and are made a part of this Agreement by reference. The headings used herein are for convenience and reference purposes only. In the event of a conflict between the provisions of this Agreement and those of the Cover Sheet or any Exhibit, the provisions of first the Cover Sheet, and then this Agreement shall prevail, and such Exhibit shall be corrected accordingly. This Agreement shall be considered for all purposes as prepared through the joint efforts of the Parties and shall not be construed against one Party or the other as a result of the preparation, substitution, submission or other event of negotiation, drafting or execution hereof.
19.2 Amendments. This Agreement may only be amended, modified or supplemented by an instrument in writing executed by duly authorized representatives of Seller and Buyer; provided, that, for the avoidance of doubt, this Agreement may not be amended by electronic mail communications.
19.3 No Waiver. Waiver by a Party of any default by the other Party shall not be construed as a waiver of any other default.
19.4 No Agency, Partnership, Joint Venture or Lease. Seller and the agents and employees of Seller shall, in the performance of this Agreement, act in an independent capacity and not as officers or employees or agents of Buyer. Under this Agreement, Seller and Buyer intend to act as energy seller and energy purchaser, respectively, and do not intend to be treated 545
as, and shall not act as, partners in, co-venturers in or lessor/lessee with respect to the Facility or any business related to the Facility. This Agreement shall not impart any rights enforceable by any third party (other than a permitted successor or assignee bound to this Agreement).
19.5 Severability. In the event that any provision of this Agreement is unenforceable or held to be unenforceable, the Parties agree that all other provisions of this Agreement have force and effect and shall not be affected thereby. The Parties shall, however, use their best endeavors to agree on the replacement of the void, illegal or unenforceable provision(s) with legally acceptable clauses which correspond as closely as possible to the sense and purpose of the affected provision and this Agreement as a whole.
19.6 Mobile-Sierra. Notwithstanding any other provision of this Agreement, neither Party shall seek, nor shall they support, any third party seeking to prospectively or retroactively revise the rates, terms or conditions of service of this Agreement through application or complaint to FERC pursuant to the provisions of Section 205, 206 or 306 of the Federal Power Act, or any other provisions of the Federal Power Act, absent prior written agreement of the Parties. Further, absent the prior written agreement in writing by both Parties, the standard of review for changes to the rates, terms or conditions of service of this Agreement proposed by a Party shall be the “public interest” standard of review set forth in United Gas Pipe Line Co. v. Mobile Gas Service Corp., 350 U.S. 332 (1956) and Federal Power Commission v. Sierra Pacific Power Co., 350 U.S. 348 (1956). Changes proposed by a non-Party or FERC acting sua sponte shall be subject to the most stringent standard permissible under applicable Law.
19.7 Counterparts. This Agreement may be executed in one or more counterparts, including electronic signatures, all of which taken together shall constitute one and the same instrument and each of which shall be deemed an original.
19.8 Electronic Delivery. This Agreement may be duly executed and delivered by a Party by execution and electronic format (including portable document format (.pdf)) delivery of the signature page of a counterpart to the other Party.
19.9 Binding Effect. This Agreement shall inure to the benefit of and be binding upon the Parties and their respective successors and permitted assigns.
19.10 Change in Electric Market Design.
(a) If a change in the CAISO Tariff renders this Agreement or any provisions hereof incapable of being performed or administered, then any Party may request that Buyer and Seller enter into negotiations to make the minimum changes to this Agreement necessary to make this Agreement capable of being performed and administered, while attempting to preserve to the maximum extent possible the benefits, burdens, and obligations set forth in this Agreement as of the Effective Date. Upon delivery of such a request, Buyer and Seller shall engage in such negotiations in good faith. If Buyer and Seller are unable, within sixty (60) days after delivery of such request, to agree upon changes to this Agreement or to resolve issues relating to changes to this Agreement, then any Party may submit issues pertaining to changes to this Agreement to the dispute resolution process set forth in Article 15. Notwithstanding the foregoing, (i) a change in cost shall not in and of itself be deemed to render this Agreement or any of the provisions hereof 546
incapable of being performed or administered, or constitute, or form the basis of, a Force Majeure Event, and (ii) all of unaffected provisions of this Agreement shall remain in full force and effect during any period of such negotiation or dispute resolution. (b) If the Interconnection Point and/or any of the Transmission Systems utilized to deliver Product to the Delivery Point under this Agreement (i) are integrated into a new or existing regional transmission organization or independent system operator (other than the CAISO Balancing Authority), or (ii) leave a regional transmission organization or independent system operator, and such integration or departure has a material and adverse impact on either Party’s performance under this Agreement, including the costs of either Party to perform, then the affected Party may request that Buyer and Seller enter into negotiations to make the minimum changes to this Agreement necessary to restore the balance of benefits, burdens, and obligations set forth in this Agreement as of the Effective Date. Upon delivery of such a request, Buyer and Seller shall engage in such negotiations in good faith; provided, that neither Party shall be obligated to amend this Agreement if such amendment(s) would materially adversely affect, or could reasonably be expected to have or result in a material adverse effect on, any of such Party’s rights, benefits, risks and/or obligations under this Agreement.
19.11 No Recourse to Members of Buyer. Buyer is organized as a Joint Powers Authorities in accordance with the Joint Exercise of Powers Act of the State of California (Government Code Section 6500, et seq.) pursuant to its Joint Powers Agreement and is a public entity separate from its constituent members. Buyer shall solely be responsible for all debts, obligations and liabilities accruing and arising out of this Agreement. Seller shall have no rights and shall not make any claims, take any actions or assert any remedies against any of Buyer’s constituent members or the employees, directors, officers, consultants or advisors of Buyer or its constituent members, in connection with the PPA.
19.12 Forward Contract. The Parties acknowledge and agree that this Agreement constitutes a “forward contract” within the meaning of the U.S. Bankruptcy Code, and Buyer and Seller are “forward contract merchants” within the meaning of the U.S. Bankruptcy Code. Each Party further agrees that, for all purposes of this Agreement, each Party waives and agrees not to assert the applicability of the provisions of 11 U.S.C. § 366 in any bankruptcy proceeding wherein such Party is a debtor. In any such proceeding, each Party further waives the right to assert that the other Party is a provider of last resort to the extent such term relates to 11 U.S.C. §366 or another provision of 11 U.S.C. § 101-1532.
19.13 Further Assurances. Each of the Parties hereto agree to use commercially reasonable efforts to provide such information, execute and deliver any instruments and documents and to take such other actions as may be necessary or reasonably requested by the other Party which are not inconsistent with the provisions of this Agreement and which do not involve the assumptions of obligations other than those provided for in this Agreement, to give full effect to this Agreement and to carry out the intent of this Agreement. [Signatures on following page]
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the Effective Date.
SunZia Wind North LLC
By:
Name:
Title:
San Diego Community Power
By:
Name:
Title:
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EXHIBIT A
FACILITY DESCRIPTION
The Facility Description provided herein reflects Seller’s expectation for the Facility and the Site as of the Effective Date. Except as otherwise provided in the Agreement, Seller shall not make any alteration or modification to the Facility which results in a change to the Guaranteed Capacity or the anticipated output of the Facility without Buyer’s prior written consent; provided that Seller shall be permitted to repower the Facility after the tenth (10th) Contract Year so long as Seller continues to be obligated to deliver Guaranteed Energy Production during such repower; upon any such repower that changes the Installed Capacity, Seller shall deliver an updated Installed Capacity Certificate in the form of Exhibit G.
Site Name: SunZia Wind North
Site Map: [See next page]
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Site Location: San Miguel County, New Mexico
Technology: Utility Scale Wind Technology
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Guaranteed Capacity: 7.46 MW
Delivery Point: CAISO Scheduling Point-Intertie combination at PALOVRDE_ASR-APND and PVWEST, or an Alternative Delivery Point as mutually agreed by the Parties Participating Transmission Owner: SunZia Transmission, LLC 551
EXHIBIT B
FACILITY CONSTRUCTION AND COMMERCIAL OPERATION
1. Construction of the Facility. “Construction Start” will occur upon Seller’s issuance of a full notice to proceed with the construction of the Facility following Seller’s execution of an EPC Contract related to the Facility. The Parties agree that Construction Start of the Facility has been completed.
2. Commercial Operation of the Facility. “Commercial Operation” means the condition existing when (i) Seller has fulfilled all of the conditions in Section 2.3 of the Agreement and (ii) Seller has confirmed to Buyer in writing that Commercial Operation has been achieved.
The “Commercial Operation Date” shall be the later of (x) , and (y) date on which Commercial Operation is achieved.
a. Seller shall cause Commercial Operation for the Facility to occur by the Guaranteed Commercial Operation Date. Seller shall notify Buyer at least sixty (60) days before the anticipated Commercial Operation Date. For the avoidance of doubt, Seller may continue to increase the Installed Capacity of the Facility after the Commercial Operation Date and will notify Buyer from time to time of such increases by delivering a certificate from a Licensed Professional Engineer substantially in the form attached as Exhibit G hereto; when the Installed Capacity is complete, Seller shall include a statement to that effect in a Notice accompanying the final such certificate.
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553
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EXHIBIT C
PROGRESS REPORTING FORM
Each Progress Report must include the following items:
1. Executive summary.
2. Facility description.
3. Site plan of the Facility.
4. Description of any planned changes to the Facility or the site.
5. Schedule showing progress on achieving each of the Milestones.
6. Summary of activities during the previous calendar month/quarter.
7. Forecast of activities scheduled for the current calendar month/quarter.
8. Written description about the progress relative to Seller’s Milestones, including whether Seller has met or is on target to meet the Milestones, and evidence of completion of Milestones, upon reasonable request from Buyer.
9. List of issues that could reasonably foreseeably affect Seller’s Milestones.
10. A status report of start-up activities including a forecast of activities ongoing and after start-up, a report on Facility performance including performance projections for the next twelve (12) months.
11. Progress and schedule of all major agreements, contracts, permits, approvals, technical studies, financing agreements and major equipment purchase orders showing the start dates, completion dates, and completion percentages.
12. Pictures, in sufficient quantity and of appropriate detail, in order to document construction and startup progress of the Facility, the interconnection into the PTO’s Transmission System and all other interconnection utility services.
13. Any other documentation, including copies of the Interconnection Agreement, transmission agreements and permits, as reasonably requested by Buyer, as such documentation may be redacted by Seller as necessary.
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EXHIBIT D
FORM OF AVERAGE FORECAST OF ENERGY (MWh)
1:00 2:00 3:00 4:00 5:00 6:00 7:00 8:00 9:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 17:00 18:00 19:00 20:00 21:00 22:00 23:00 24:00 JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
NOV
DEC
The foregoing table (i) is provided for informational purposes only, and it shall not constitute, or be deemed to constitute, an obligation of any of the Parties to this Agreement, and (ii) reflects expected P50 delivered volumes taking into account estimated X% physical losses from the Facility to the Delivery Point.
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EXHIBIT E
ENERGY REPLACEMENT DAMAGES CALCULATION
In accordance with Section 4.7, if Seller fails to achieve the Guaranteed Energy Production during any Performance Measurement Period, and Seller elects to not provide Replacement Product, a liquidated damages (“Energy Replacement Damages”) payment shall be due from Seller to Buyer, calculated as follows:
“Adjusted Energy Production” shall mean the sum of the Delivered Energy plus Lost Output plus Deemed Delivered Energy in the first Contract Year of the current Performance Measurement Period, plus (ii) Delivered Energy plus Lost Output plus Deemed Delivered Energy in the second Contract Year of the Performance Measurement Period. “Lost Output” means the sum of electric energy in MWh that would have been generated and delivered, but was not, on account of Force Majeure Event, Buyer default, System Emergency, POI Curtailment, and Curtailment Order. The additional MWh comprising Lost Output shall be calculated in the same manner as Deemed Delivered Energy.
No payment shall be due if the calculation of (A - B) or (C - D) yields a negative number.
Within sixty (60) days after each Contract Year, Buyer will send Seller Notice of the amount of damages owing, if any, which shall be payable to Buyer before the later of (a) thirty (30) days of such Notice and (b) ninety (90) days after each Contract Year. 557
EXHIBIT F
FORM OF COMMERCIAL OPERATION DATE CERTIFICATE
This certification (“Certification”) of Commercial Operation is delivered by the undersigned, a licensed professional engineer and duly authorized representative of ____________________ in its capacity as independent engineer (“Engineer”) for purposes of this certification, to [____] (“Buyer”), pursuant to the [agreement between Seller and Engineer] and in connection with that certain Renewable Power Purchase and Sale Agreement (SunZia North) dated _______ (“Agreement”) by and between [Pattern Entity] (“Seller”) and Buyer. All capitalized terms used in this Certification but not otherwise defined herein shall have the respective meanings assigned to such terms in the Agreement.
Engineer hereby certifies and represents to Buyer the following:
(1) Wind turbines with a nameplate capacity at least equal to of the Guaranteed Capacity have been installed at the Facility.
(2) Testing and commissioning of each wind turbine referred to in paragraph (1) above has been completed in accordance with the turbine supply agreement and each such wind turbine has delivered electricity to the Point of Interconnection specified in the Interconnection Agreement.
(3) Authorization to parallel the Facility was obtained by the Participating Transmission Owner on ______[DATE]______.
EXECUTED on this ________ day of _____________, 20__.
Sincerely,
By:
[NAME], P.E.
[TITLE]
New Mexico License No. [##]
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EXHIBIT G
FORM OF INSTALLED CAPACITY CERTIFICATE
This certification (“Certification”) of Installed Capacity is delivered by the undersigned, a licensed professional engineer and duly authorized representative of ________________ in its capacity as independent engineer (“Engineer”) for purposes of this certification, to [____] (“Buyer”), pursuant to the [agreement between Seller and Engineer] and in connection with that certain Renewable Power Purchase and Sale Agreement (SunZia North) dated __________ (“Agreement”) by and between [Pattern Entity] (“Seller”) and Buyer. All capitalized terms used in this Certification but not otherwise defined herein shall have the respective meanings assigned to such terms in the Agreement.
As of the date set forth below, [___] wind turbines with an aggregate nameplate capacity of [__], which is the Installed Capacity as of the date hereof, have been installed at the Facility, and testing and commissioning of each such wind turbines has been completed in accordance with the turbine supply agreement and each such wind turbine has delivered electricity to the Point of Interconnection specified in the Interconnection Agreement.
EXECUTED on this ________ day of _____________, 20__.
Sincerely,
By:
[NAME], P.E.
[TITLE]
New Mexico License No. [##]
Exp. [DATE]
559
EXHIBIT H
RESERVED
560
EXHIBIT I
FORM OF LETTER OF CREDIT
[Seller to provide prior to PPA execution]
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pursuant to the PPA for five (5) Business Days following Seller’s receipt of Buyer’s written notice of such failure (the “Demand Notice”), then Buyer may elect to exercise its rights under this Guaranty and may make a demand upon Guarantor (a “Payment Demand”) for such unpaid Guaranteed Amount. A Payment Demand shall be in writing and shall reasonably specify in what manner and what amount Seller has failed to pay and an explanation of why such payment is due and owing, with a specific statement that Buyer is requesting that Guarantor pay under this Guaranty. Guarantor shall, within five (5) Business Days following its receipt of the Payment Demand, pay the Guaranteed Amount to Buyer.
3. Scope and Duration of Guaranty. This Guaranty applies only to the Guaranteed Amount. This Guaranty shall continue in full force and effect from the Effective Date until the earlier of the following: (x) all Guaranteed Amounts have been paid in full (whether directly or indirectly through set-off or netting of amounts owed by Buyer to Seller), or (y) replacement Performance Security is provided in an amount and form required by the terms of the PPA.
Further, this Guaranty (a) shall remain in full force and effect without regard to, and shall not be affected or impaired by any invalidity, irregularity or unenforceability in whole or in part of this Guaranty, and (b) subject to the preceding sentence, shall be discharged only by complete performance of the undertakings herein. Without limiting the generality of the foregoing, the obligations of the Guarantor hereunder shall not be released, discharged, or otherwise affected and this Guaranty shall not be invalidated or impaired or otherwise affected for the following reasons:
(i) the extension of time for the payment of any Guaranteed Amount, or (ii) any amendment, modification or other alteration of the PPA, or (iii) any indemnity agreement Seller may have from any party, or (iv) any insurance that may be available to cover any loss, except to the extent insurance proceeds are used to satisfy the Guaranteed Amount, or (v) any voluntary or involuntary liquidation, dissolution, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of, or other similar proceeding affecting, Seller or any of its assets, including but not limited to any rejection or other discharge of Seller’s obligations under the PPA imposed by any court, trustee or custodian or any similar official or imposed by any law, statue or regulation, in each such event in any such proceeding, or (vi) the release, modification, waiver or failure to pursue or seek relief with respect to any other guaranty, pledge or security device whatsoever, or (vii) any payment to Buyer by Seller that Buyer subsequently returns to Seller pursuant to court order in any bankruptcy or other debtor-relief proceeding, or (viii) those defenses based upon (A) the legal incapacity or lack of power or authority of any person, including Seller and any representative of Seller to enter into the PPA or perform its obligations thereunder, (B) lack of due execution, delivery, validity or enforceability, including of the PPA, or (C) Seller’s inability to pay any Guaranteed Amount or perform its obligations under the PPA, or
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(ix) any other event or circumstance that may now or hereafter constitute a defense to payment of the Guaranteed Amount, including, without limitation, statute of frauds and accord and satisfaction;
provided that Guarantor reserves the right to assert for itself any defenses, setoffs or counterclaims that Seller is or may be entitled to assert against Buyer (except for such defenses, setoffs or counterclaims that may be asserted by Seller with respect to the PPA, but that are expressly waived under any provision of this Guaranty).
4. Waivers by Guarantor. Guarantor hereby unconditionally waives as a condition precedent to the performance of its obligations hereunder, with the exception of the requirements in Paragraph 2, (a) notice of acceptance, presentment or protest with respect to the Guaranteed Amounts and this Guaranty, (b) notice of any action taken or omitted to be taken by Buyer in reliance hereon, (c) any requirement that Buyer exhaust any right, power or remedy or proceed against Seller under the PPA, and (d) any event, occurrence or other circumstance which might otherwise constitute a legal or equitable discharge of a surety. Without limiting the generality of the foregoing waiver of surety defenses, it is agreed that the occurrence of any one or more of the following shall not affect the liability of Guarantor hereunder:
(i) at any time or from time to time, without notice to Guarantor, the time for payment of any Guaranteed Amount shall be extended, or such performance or compliance shall be waived;
(ii) the obligation to pay any Guaranteed Amount shall be modified, supplemented or amended in any respect in accordance with the terms of the PPA; (iii) (a) sale, transfer or consolidation of Seller into or with any other entity, (b) sale of substantial assets by, or restructuring of the corporate existence of, Seller or (c) change in ownership of any membership interests of, or other ownership interests in, Seller; or (iv) the failure by Buyer or any other person to create, preserve, validate, perfect or protect any security interest granted to, or in favor of, Buyer or any person.
5. Subrogation. Notwithstanding any payments that may be made hereunder by the Guarantor, Guarantor hereby agrees that until the earlier of payment in full of all Guaranteed Amounts or expiration of the Guaranty in accordance with Section 3, it shall not be entitled to, nor shall it seek to, exercise any right or remedy arising by reason of its payment of any Guaranteed Amount under this Guaranty, whether by subrogation or otherwise, against Seller or seek contribution or reimbursement of such payments from Seller.
6. Representations and Warranties. Guarantor hereby represents and warrants that (a) it has all necessary and appropriate limited liability company powers and authority and the legal right to execute and deliver, and perform its obligations under, this Guaranty, (b) this Guaranty constitutes its legal, valid and binding obligations enforceable against it in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, moratorium and other similar laws affecting enforcement of creditors’ rights or general principles of equity, (c) the execution, delivery and performance of this Guaranty does not and will not contravene Guarantor’s organizational documents, any applicable law or any contractual provisions binding on or affecting 564
Guarantor, (d) there are no actions, suits or proceedings pending before any court, governmental agency or arbitrator, or, to the knowledge of the Guarantor, threatened, against or affecting Guarantor or any of its properties or revenues which may, in any one case or in the aggregate, adversely affect the ability of Guarantor to enter into or perform its obligations under this Guaranty, and (e) no consent or authorization of, filing with, or other act by or in respect of, any arbitrator or governmental authority, and no consent of any other Person (including, any stockholder or creditor of the Guarantor), that has not heretofore been obtained is required in connection with the execution, delivery, performance, validity or enforceability of this Guaranty by Guarantor.
7. Notices. Notices under this Guaranty shall be deemed received if sent to the address specified below: (i) on the day received if served by overnight express delivery, and (ii) four business days after mailing if sent by certified, first class mail, return receipt requested. If transmitted by facsimile, such notice shall be deemed received when the confirmation of transmission thereof is received by the Party giving the notice. Any Party may change its address or facsimile to which notice is given hereunder by providing notice of the same in accordance with this Paragraph 8.
If delivered to Buyer, to it at [____]
Attn: [____]
Fax: [____]
If delivered to Guarantor, to it at [____]
Attn: [____]
Fax: [____]
8. Governing Law and Forum Selection; WAIVER OF JURY TRIAL. This Guaranty shall be governed by, and interpreted and construed in accordance with, the laws of the United States and the State of California, excluding choice of law rules. The Parties agree that any suit, action or other legal proceeding by or against any party (or its affiliates or designees) with respect to or arising out of this Guaranty shall be brought in the federal courts of the United States sitting in the County of Los Angeles, California. TO THE EXTENT ENFORCEABLE AT SUCH
TIME, EACH PARTY WAIVES ITS RESPECTIVE RIGHT TO ANY JURY TRIAL WITH
RESPECT TO ANY LITIGATION ARISING UNDER OR IN CONNECTION WITH THIS GUARANTY.
9. Miscellaneous. This Guaranty shall be binding upon Guarantor and its successors and assigns and shall inure to the benefit of Buyer and its successors and permitted assigns pursuant to the PPA. No provision of this Guaranty may be amended or waived except by a written instrument executed by Guarantor and Buyer. This Guaranty is not assignable by Guarantor without the prior written consent of Buyer. No provision of this Guaranty confers, nor is any provision intended to confer, upon any third party (other than Buyer’s successors and permitted assigns) any benefit or right enforceable at the option of that third party. This Guaranty embodies the entire agreement and understanding of the Parties with respect to the subject matter hereof and supersedes all prior or contemporaneous agreements and understandings of the Parties, verbal or written, relating to the subject matter hereof. If any provision of this Guaranty is determined to be illegal or unenforceable (i) such provision shall be deemed restated in accordance with applicable Laws to reflect, as nearly 565
as possible, the original intention of the Parties and (ii) such determination shall not affect any other provision of this Guaranty and all other provisions shall remain in full force and effect. This Guaranty may be executed in any number of separate counterparts, each of which when so executed shall be deemed an original, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. This Guaranty may be executed and delivered by electronic means with the same force and effect as if the same was a fully executed and delivered original manual counterpart.
10. DISPUTE RESOLUTION.
In the event of any dispute arising under this Guaranty, within ten (10) days following the receipt of a notice from either Party identifying such dispute, the Parties shall meet, negotiate and attempt, in good faith, to resolve the dispute quickly, informally and inexpensively. If the Parties are unable to resolve a dispute arising hereunder within the earlier of either thirty (30) days of initiating such discussions, or within forty (40) days after notice of the dispute, either Party may seek any and all remedies available to it at law or in equity, subject to the limitations set forth in this Guaranty.
IN WITNESS WHEREOF, the undersigned has caused this Guaranty to be duly executed and delivered by its duly authorized representative on the date first above written.
GUARANTOR:
[_______]
By:
Printed Name:
Title:
BUYER:
[_______]
By:
Printed Name:
Title:
By:
Printed Name:
Title:
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Emergency Contact:
Attn: 24/7 Operations Control Center
Phone: (713) 308-4242
Email: [email protected]
With additional Notices of an Event of
Default to:
PO Box 12716
San Diego, CA 92112
Attn: SDCP General Counsel
Email: [email protected]
Emergency Contact:
Attn: Chief Commercial Officer
Phone: (619) 657-0422
Email:
[email protected]
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EXHIBIT L
OPERATING RESTRICTIONS
Operating restrictions of the Facility for Market Curtailment Periods are as follows:
• Interconnection Capacity (Maximum Injection Amount): 1,089 MW1 • Minimum operating capacity: 0.0 MW
• Maximum number of start-ups per calendar day (if any such operational limitations exist): N/A
• Ramp Rate: To be provided by Seller upon Notice to Buyer prior to Commercial Operation
• Minimum Down Time: N/A
1 Under certain circumstances, as set forth in the Interconnection Agreement, the Interconnection Capacity available to the Facility will be 901.28 MW.
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EXHIBIT M
FORM OF LIMITED ASSIGNMENT AGREEMENT
This Limited Assignment Agreement (this “Agreement”) is entered into as of [____] (the “Assignment Agreement Effective Date”) by and among [____], a [____] (“PPA Seller”), San Diego Community Power, a California joint powers authority (“PPA Buyer”), and Morgan Stanley Capital Group Inc., a Delaware corporation (“MSCG”).
RECITALS
WHEREAS, PPA Buyer and PPA Seller are parties to that certain PPA identified on Appendix 1 hereto;
WHEREAS, in connection with one or more prepaid energy transactions entered into between the Issuer and a Prepay Seller, and with effect from and including the Assignment Period Start Date, PPA Buyer wishes to transfer by limited assignment to MSCG, and MSCG wishes to accept the transfer by limited assignment of, the Assigned Rights and Obligations (as defined below) with respect to any and all Assignment Appendices in effect (as defined below) during the Assignment Period (as defined below);
WHEREAS, pursuant to this Agreement, during the Assignment Period, MSCG will receive the Assigned Product specified in any and all Assignment Appendices in effect from time to time and MSCG will deliver such Assigned Product to Prepay Seller(s), which will redeliver such Assigned Product to Issuer for ultimate redelivery to PPA Buyer; and WHEREAS, pursuant to this Agreement, during the Assignment Period, MSCG will assume responsibility for the Delivered Product Payment Obligation with respect to any and all Assignment Appendices then in effect.
THEREFORE, in consideration of the premises above and the mutual covenants and agreements herein set forth, PPA Seller, PPA Buyer and MSCG (the “Parties” hereto; each is a “Party”) agree as follows:
AGREEMENT
1. Definitions.
Unless the context otherwise specifies or requires, or defined below, capitalized terms used but not defined in this Agreement have the meanings set forth in the PPA. The following terms, when used in this Agreement and identified by the capitalization of the first letter thereof, have the respective meanings set forth below, unless the context otherwise requires:
“Agreement” has the meaning specified in the first paragraph above. “Assigned Product” means [____].
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“Assigned Rights and Obligations” means (i) the rights of PPA Buyer under the PPA to receive the Assigned Product in each Month as specified in any and all Assignment Appendices then in effect during the Assignment Period, as such rights may be limited or further described in the “Further Information” section on Appendix 1, and (ii) the Delivered Product Payment Obligation, which right and obligation are transferred and conveyed to MSCG hereunder, but which shall not relieve PPA Buyer of its obligations under the PPA in any respects. “Assignment Agreement Effective Date” has the meaning set forth in the first paragraph above.
“Assignment Appendix” means each Assignment Appendix in the form attached hereto as Appendix 2 and delivered by MSCG hereunder pursuant to Section 11(f). “Assignment Appendix End Date” has, with respect to each Assignment Appendix, the meaning specified therein.
“Assignment Appendix Period” means, with respect to each Assignment Appendix, the period from the Assignment Appendix Start Date to the Assignment Appendix End Date; provided that no Assignment Appendix Period may commence prior to the Assignment Period Start Date and no Assignment Appendix Period may extend beyond the Assignment Period End Date. “Assignment Appendix Start Date” has, with respect to each Assignment Appendix, the meaning specified therein.
“Assignment Early Termination Date” has the meaning specified in Section 5(b). “Assignment Period” has the meaning specified in Section 5(a). “Assignment Period End Date” means 11:59:59 p.m. pacific prevailing time on [____]. “Assignment Period Start Date” means [_____].
“Claims” means all claims or actions, threatened or filed, and the resulting losses, damages, expenses, attorneys’ fees, experts’ fees, and court costs, whether incurred by settlement or otherwise, and whether such claims or actions are threatened or filed prior to or after the termination of this Agreement, in each case arising under, in respect of or related in any way to the PPA or any transaction thereunder, except for the Delivered Product Payment Obligation. “Custodian” has, with respect to each Assignment Appendix, the meaning specified therein.
“Custody Agreement” has, with respect to each Assignment Appendix, the meaning specified therein.
“Delivered Product Payment Obligation” has the meaning specified in Section 3(a). “Issuer” has, with respect to each Assignment Appendix, the meaning specified therein. 571
“Month” means a calendar month.
“Monthly Gross Amount” has the meaning specified in Section 3(c). “MSCG” has the meaning specified in the first paragraph of this Agreement. “PPA Buyer” has the meaning specified in the first paragraph of this Agreement. “PPA Seller” has the meaning specified in the first paragraph of this Agreement. “Prepaid Agreement” has, with respect to each Assignment Appendix, the meaning specified therein.
“Prepay Power Supply Contract” has, with respect to each Assignment Appendix, the meaning specified therein.
“Prepay Seller” has, with respect to each Assignment Appendix, the meaning specified therein.
“Receivables” has the meaning given to such term in Section 3(f). “Retained Rights and Obligations” has the meaning specified in Section 3.
2. Transfer and Undertakings.
(a) PPA Buyer hereby assigns, transfers and conveys to MSCG all right, title and interest in and to the rights of PPA Buyer under the PPA to receive delivery of the Assigned Product specified in any and all Assignment Appendices then in effect during the Assignment Period. In connection with this assignment, PPA Buyer hereby delegates to MSCG the Assigned Rights and Obligations during the Assignment Period.
(b) PPA Seller hereby consents and agrees to PPA Buyer’s assignment, transfer and conveyance of all right, title and interest in and to the Assigned Product specified in any and all Assignment Appendices then in effect and, subject to Section 3, the delegation of the Assigned Rights and Obligations to MSCG and the exercise and performance by MSCG of the Assigned Rights and Obligations during the Assignment Period.
(c) MSCG hereby accepts such assignment, transfer and conveyance of PPA Buyer’s right, title and interest in and to the Assigned Product specified in any and all Assignment Appendices then in effect during the Assignment Period, and PPA Buyer’s delegation of the Assigned Rights and Obligations during the Assignment Period and agrees to perform any such Assigned Rights and Obligations due from it during the Assignment Period to the extent expressly set forth in this Agreement.
3. Limited Assignment.
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The Parties acknowledge and agree that (i) the Assigned Rights and Obligations include only a portion of PPA Buyer’s and PPA Seller’s rights and obligations under the PPA, and that all rights and obligations (including without limitation obligations with respect to payment for any Product not included in the Assigned Product and any other amounts owed under the PPA, including payment of the Contract price by PPA Buyer to PPA Seller) arising under the PPA that are not expressly included in the Assigned Rights and Obligations shall be “Retained Rights and Obligations” that are retained solely by PPA Buyer, and (ii) the Retained Rights and Obligations include all rights and obligations of PPA Buyer and PPA Seller arising during the Assignment Period except the rights and obligations expressly included in the Assigned Rights and Obligations.
In this regard:
(a) Limited to Delivered Product Payment Obligation. MSCG’s sole payment obligation hereunder will be to pay the Floating Price Payments into the Custodial Account as such terms are defined in and described on Appendix 1 (the “Delivered Product Payment Obligation”). MSCG and PPA Buyer each agree to instruct the Custodian in accordance with Section 3(c) hereof to pay PPA Seller for the Assigned Product delivered during each Month of the Assignment Period specified in any and all Assignment Appendices then in effect on each applicable payment date under Section 8.2 of the PPA. PPA Buyer shall remain responsible for all payment obligations and performance obligations of PPA Buyer under the PPA during the Assignment Period, and shall remain so responsible to make such payments and complete such performance by the times and on the terms set out in the PPA, including in the event that either (i) MSCG does not make the payments into the Custodial Account as described above or (ii) the Custodian does not make the payments to PPA Seller from the Custodial Account as described above. Any payment adjustments or subsequent reconciliations occurring or to occur after payment by MSCG as described in this Section 3(a) will be resolved exclusively between PPA Buyer and PPA Seller consistent with the applicable provisions of the PPA. Without limiting a Party’s obligations under this Agreement, the Parties agree that the assignment, transfer and/or conveyance of all or any portion of the Assigned Products in accordance with this Agreement and the Parties’ performance of any obligation in accordance with this Agreement shall not constitute a failure to meet the requirements of the PPA, or a breach of any covenant, representation or warranty under the PPA (and in no event shall PPA Seller be responsible for any failure of any portion of the Assigned Products to satisfy the requirements of the PPA, to the extent such failure results from the assignment, transfer and/or conveyance of such Assigned Products in accordance with this Agreement).
(b) Retained Rights and Obligations. Any Claims (other than the Delivered Product Payment Obligation or a failure to perform the same) arising or existing in connection with or related to the PPA, whether related to performance by PPA Seller, PPA Buyer or MSCG, and whether arising before, during or after the Assignment Period, in each case excluding the Delivered Product Payment Obligation (provided, however, that PPA Buyer still remains liable for any failure in timely payment of all amounts due and owing under the PPA), will be included in the Retained Rights and Obligations, and any such Claims will be resolved exclusively between PPA Seller and PPA Buyer in accordance with the PPA.
(c) Invoicing. During the Assignment Period specified in any and all Assignment Appendices then in effect, PPA Seller shall continue to provide PPA Buyer a monthly invoice of 573
amounts owing under the PPA in accordance with the requirements thereof, which invoice shall show the total amount due to PPA Seller under the PPA for such Month (the “Monthly Gross Amount”). Promptly following PPA Buyer’s receipt of each monthly invoice from PPA Seller during the Assignment Period specified in any and all Assignment Appendices then in effect and, in any event, no later than thereafter, PPA Buyer shall deliver (i) a copy of such monthly invoice and the related supporting data to MSCG and (ii) a statement to each of MSCG and the Custodian indicating (A) the Monthly Gross Amount; (B) the Delivered Product Payment Obligation; and (C) the “Retained Payment Obligation”, which shall be an amount equal to the Monthly Gross Amount minus the Delivered Product Payment Obligation. PPA Buyer and MSCG covenant and agree to instruct the Custodian to pay the Monthly Gross Amount to PPA Seller on or before the applicable payment date in the PPA; provided that (x) the liability of MSCG hereunder to PPA Seller is limited as described on Appendix 1 and (y) the Monthly Gross Amount payable to PPA Seller shall be reduced to the extent that PPA Buyer disputes any of the invoiced amounts pursuant to Section 8.5 of the PPA. PPA Buyer and MSCG may agree in a separate writing as to the allocation of the Monthly Gross Amount between PPA Buyer and MSCG of amounts paid by the Custodian to PPA Seller hereunder. At all times, PPA Buyer remains liable to PPA Seller for all amounts due and owing under the PPA. [If the monthly invoice of amounts owing under the PPA results in a settlement amount due from PPA Seller to PPA Buyer, PPA Seller will make such payments directly to PPA Buyer’s existing bank account, without settlement with MSCG or through the Custodial Account.]2
For the avoidance of doubt, the Parties
acknowledge and agree that any invoice adjustments or reconciliations occurring after the initial settlement of amounts due under a monthly invoice shall be resolved exclusively between PPA Seller and PPA Buyer pursuant to the terms of the PPA.
(d) Scheduling. All scheduling of Assigned Product and other communications related to the PPA shall take place between PPA Buyer and PPA Seller pursuant to the terms of the PPA; provided that during any Assignment Period specified in any and all Assignment Appendices then in effect (i) title to Assigned Product specified in any and all Assignment Appendices then in effect will pass to MSCG upon delivery by PPA Seller at the Delivery Point in accordance with the PPA; (ii) immediately thereafter, title to such Assigned Product will pass to one or more Prepay Sellers (as set forth in the applicable Assignment Appendix), Issuer (as set forth in the applicable Assignment Appendix) and then to PPA Buyer upon delivery by MSCG at the same point where title is passed to MSCG pursuant to clause (i) above; (iii) PPA Buyer will be deemed to be acting as MSCG’s agent with regard to scheduling Assigned Product; and (iv) PPA Buyer will provide copies to MSCG of (A) any notice of a Force Majeure Event delivered under the PPA, (B) any notice of a default or of a breach or other event that, if not cured within an applicable grace period, could result in an Event of Default, (C) annual forecasts and monthly forecasts with respect to the Assigned Product delivered by PPA Seller under the PPA, if any, (D) invoices delivered by PPA Seller under Section 8.1 of the PPA (with a copy to the Custodian if and to the extent retained by PPA Buyer and MSCG), and (E) any other information reasonably requested by MSCG relating to Assigned Product. For the avoidance of doubt, in accordance with Section 5.1 of the PPA, PPA Buyer shall continue to pay or cause to be paid all Taxes on or with respect to the delivery to and 2 What would these payments be for? / Is there an expectation that there will be payments from time to time by PPA Seller to PPA Buyer and the PPA? Or is this text to account for something such as an indemnity payment? 574
purchase by PPA Buyer, MSCG, Issuer, and/or Prepay Seller(s), as applicable, of Product that are imposed on Product at and after its delivery to PPA Buyer, MSCG, Issuer, and/or Prepay Seller(s), as applicable, at the time and place contemplated under the PPA or hereunder (other than withholding or other Taxes imposed on PPA Seller’s income, revenue, receipts or employees), if any.
(e) Amendments. PPA Buyer will provide written notice (including copies thereof) of any proposed or actual amendment, waiver, supplement, modification, or other changes to the PPA to MSCG relating to the Assigned Rights and Obligations, and the Parties hereby acknowledge and agree that an amendment, waiver, supplement, modification or other change will not have any effect on MSCG’s rights or obligations under this Agreement unless MSCG receives prior written notice thereof. No amendment, modification, or waiver in respect of this Agreement will be effective unless in writing (including a writing evidenced by a facsimile or electronic transmission) and executed by each of the Parties hereto. (f) Setoff of Receivables. Pursuant to the applicable Prepaid Agreement(s), Prepay Seller(s) may purchase the rights to payment of the net amounts owed by PPA Buyer under the applicable Prepay Power Supply Contract (“Receivables”) in the case of non-payment by PPA Buyer. To the extent any such Receivables relate to Assigned Product purchased by MSCG pursuant to the Assigned Rights and Obligations, the applicable Prepay Seller may sell such Receivables to MSCG and, provided that MSCG has notified PPA Seller in writing (with a copy to PPA Buyer) (a “Receivables Setoff Notice”) that the amount of any such Receivables is, to its knowledge, true and accurate, MSCG may transfer such Receivables (excluding any penalties, late payment fees, late payment interest or other fees, costs or interest included in such Receivables) to PPA Seller and apply the face amount of such Receivables (excluding any penalties, late payment fees, late payment interest or other fees, costs or interest included in such Receivables) as a reduction to any Delivered Product Payment Obligations; provided, however, that (1) at no time shall PPA Seller be required to pay MSCG for any amounts by which such Receivables exceed any Delivered Product Payment Obligations, and (2) at all times, PPA Buyer remains liable to PPA Seller for all amounts due and owing under the PPA including the Monthly Gross Amount under each invoice. The amount of any Receivables set forth in a Receivables Setoff Notice shall be final and binding unless PPA Buyer shall have provided PPA Seller and MSCG a written notice within of its receipt of a Receivables Setoff Notice containing conclusive evidence that such amount is incorrect and asserting what PPA Buyer has determined is the correct amount of Receivables. If any dispute arises therefrom, MSCG shall still be entitled to set-off the amount of Receivables set forth in its Receivables Setoff Notice as provided above, and any such dispute as to the correct amount of Receivables shall be settled exclusively between PPA Buyer and PPA Seller with no liability to MSCG, provided that at all times, PPA Buyer remains liable to PPA Seller for all amounts due and owing under the PPA including the Monthly Gross Amount under each invoice. To effect such transfer, MSCG shall deliver to PPA Seller a Receivables Setoff Notice not later than the payment due date for the Delivered Electricity Payment Obligations and shall deliver to PPA Seller a bill of sale signed by MSCG not later than thereafter.
4. Forward Contract.
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The Parties acknowledge and agree that this Agreement constitutes a “forward contract” and that the Parties shall constitute “forward contract merchants” within the meaning of the United States Bankruptcy Code.
5. Assignment Period; Assignment Early Termination.
(a) Assignment Period. The “Assignment Period” under an Assignment Appendix shall begin on the Assignment Appendix Start Date and extend until the Assignment Appendix End Date; provided that in no event shall the Assignment Period extend past an Assignment Early Termination Date with respect to such Assignment Appendix; provided further that the Assignment Period under each Assignment Appendix will automatically terminate upon the expiration or early termination of either the Delivery Term (as defined in the PPA) or the PPA. (b) Early Termination. An “Assignment Early Termination Date” will occur under the following circumstances and as of the dates and for the applicable Assignment Appendices specified below:
i. delivery of a written notice of termination by either MSCG or PPA Buyer to each of the other Parties hereto, which Assignment Early Termination Date shall occur under the Assignment Appendices specified in such written notice and on the date set forth in a written notice of such election delivered by either MSCG or PPA Buyer to each of the other Parties hereto; or ii. delivery of a written notice of termination by PPA Seller in its sole discretion to each of the other Parties hereto, if MSCG fails to pay when due any amounts owed to PPA Seller in respect of any Delivered Product Payment Obligation and such failure continues for
following receipt by MSCG of written notice thereof, which Assignment Early Termination Date shall occur under all Assignment Appendices then in effect upon the date set forth in a written notice of such election delivered by PPA Seller to MSCG and PPA Buyer; or
iii. the election of PPA Seller in its sole discretion to declare an Assignment Early Termination Date if any of the events described in the definition of “Bankrupt” set forth in the PPA occurs with respect to MSCG, which Assignment Early Termination Date shall occur under all Assignment Appendices then in effect immediately on the date of PPA Seller’s delivery of notice of its election to MSCG and PPA Buyer.
(c) Reversion of Assigned Rights and Obligations. The applicable Assignment Period(s) will end at the end of the last delivery hour on the date specified in any termination notice provided pursuant to Section 5(b). The Parties acknowledge and agree that upon the occurrence of an Assignment Early Termination Date, upon the automatic termination referred to in Section 5(a), and at the expiration of any Assignment Period, the Assigned Rights and Obligations under each applicable Assignment Appendix will revert from MSCG to PPA Buyer. Any Assigned Rights and Obligations under an Assignment Appendix that would become due for payment or performance on or after such Assignment Early Termination Date or on or after the automatic 576
termination referred to in Section 5(a) in either case with respect to such Assignment Appendix shall immediately and automatically revert from MSCG to PPA Buyer; provided that (i) MSCG shall remain jointly (with PPA Buyer) responsible for the Delivered Product Payment Obligation with respect to any Assigned Product delivered to MSCG prior to the Assignment Early Termination Date or prior to the expiration of an Assignment Period, and (ii) any legal restrictions on the effectiveness of such reversion (whether arising under bankruptcy law or otherwise) shall not affect the occurrence of the Assignment Early Termination Date or expiration of the Assignment Period.
(d) Notice of Assignment Early Termination Date. Within of the occurrence of an Assignment Early Termination Date, PPA Buyer shall provide written notice thereof to PPA Seller.
6. Representations and Warranties.
(a) Copy of PPA. As of the Assignment Agreement Effective Date, PPA Seller and PPA Buyer represent and warrant to MSCG that a true, complete, and correct copy of the PPA as of such date is attached hereto as Appendix 3.
(b) No Default. As of the Assignment Agreement Effective Date, PPA Seller and PPA Buyer represent and warrant to MSCG that to its knowledge no event or circumstance exists (or would exist with the passage of time or the giving of notice) that would give either of them the right to terminate the PPA or suspend performance thereunder. (c) Other. As of the Assignment Agreement Effective Date, each of PPA Buyer and PPA Seller represents and warrants to each other and to MSCG that:
i. It has made no prior transfer (whether by way of security or otherwise) of any interest in the Assigned Rights and Obligations; and ii. All obligations of PPA Buyer and PPA Seller under the PPA required to be performed on or before the Assignment Period Start Date have been fulfilled. (d) Representations. Each Party represents to each of the other Parties as of the Assignment Agreement Effective Date:
i. Status. It is duly organized and validly existing under the laws of the jurisdiction of its organization or incorporation and, if relevant under such laws, in good standing.
ii. Powers. It has the power to execute, this Agreement and any other documentation relating to this Agreement to which it is a party, to deliver this Agreement and any other documentation relating to this Agreement that it is required by this Agreement to deliver and to perform its obligations under this Agreement and has taken all necessary action to authorize such execution, delivery and performance. iii. No Violation or Conflict. Such execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby, including 577
the incurrence by such Party of its obligations under this Agreement, will not result in any violation of, or conflict with: (i) any term of any material contract or agreement applicable to it; (ii) any of its charter, bylaws, or other constitutional documents; (iii) any determination or award of any arbitrator applicable to it; or (iv) any license, permit, franchise, judgment, writ, injunction or regulation, decree, order, charter, law, ordinance, rule or regulation of any Government Agency in effect, applicable to it or any of its assets or properties or to any obligations incurred by it or by which it or any of its assets or properties or obligations are bound or affected, and shall not cause a breach of, or default under, any such term or result in the creation of any lien upon any of its properties or assets. iv. Consents. All consents, approvals, orders or authorizations of, registrations, declarations, filings or giving of notice to, obtaining of any licenses or permits from, or taking of any other action with respect to, any Person or Government Agency that are required to have been obtained by such Party with respect to this Agreement and the transactions contemplated hereby, including the due authorization of such Party and its governing body and any approval or consent of any security holder of such Party or any holder (or any trustee for any holder) of any indebtedness or other obligation of such Party, have been obtained and are in full force and effect and all conditions of any such consents have been complied with. v. Obligations Binding. Its obligations under this Agreement constitute its legal, valid and binding obligations, enforceable in accordance with their respective terms (subject to applicable bankruptcy, reorganization, insolvency, moratorium or similar laws affecting creditors’ rights generally and subject, as to enforceability, to equitable principles of general application (regardless of whether enforcement is sought in a proceeding in equity or at law)).
vi. Non-Reliance. It is acting for its own account, and it has made its own independent decisions to enter into this Agreement and as to whether this Agreement is appropriate or proper for it based upon its own judgment and upon advice from such advisers as it has deemed necessary. It is not relying on any communication (written or oral) of the other Parties as investment advice or as a recommendation to enter into this Agreement; it being understood that information and explanations related to the terms and conditions of this Agreement shall not be considered investment advice or a recommendation to enter into this Agreement. It is entering into this Agreement as a bona-fide, arm’s-length transaction involving the mutual exchange of consideration and, once executed by all Parties, considers this Agreement a legally enforceable contract. No communication (written or oral) received from any of the other Parties shall be deemed to be an assurance or guarantee as to the expected results of this Agreement. vii. Assessment and Understanding. It is capable of assessing the merits of and understanding (on its own behalf or through independent professional advice), and understands and accepts, the terms, conditions and risks of this Agreement. It is also capable of assuming, and assumes, the risks of this Agreement. 578
viii. Status of Parties. None of the other Parties is acting as a fiduciary for or an adviser to it in respect of this Agreement.
7. Miscellaneous.
Article [__] (Confidential Information), [__] (No Consequential Damages), [__] (No Agency, Partnership, Joint Venture or Lease), Sections [__] (Severability), [__] (Electronic Delivery), [__] (Counterparts), and Section [__] (Binding Effect) of the PPA are incorporated by reference into this Agreement, mutatis mutandis, as if fully set forth herein.
8. Amendments.
Except as provided in Section 11(c), no amendment, modification, or waiver in respect of this Agreement will be effective unless in writing and executed by each of the Parties.
9. Costs and Expenses.
The Parties shall each pay their own costs and expenses (including legal fees) incurred in connection with this Agreement and as a result of the negotiation, preparation, and execution of this Agreement.
10. Notices.
Any notice, demand, statement, or request required or authorized by this Agreement to be given by one Party to another Party shall be delivered in accordance with Article 9 of the PPA and to the addresses of each of PPA Seller and PPA Buyer specified in the PPA. PPA Buyer agrees to notify MSCG of any updates to such notice information, including any updates provided by PPA Seller to PPA Buyer. Notices to MSCG shall be provided to the address set forth in Appendix 3.
Each Party may update its address from time to time by notice to the other Parties.
11. Governing Law; Dispute Resolution.
(a) Governing Law. This Agreement and the rights and duties of the Parties under this Agreement will be governed by and construed, enforced and performed in accordance with the laws of the state of New York, without reference to any conflicts of laws provisions that would direct the application of another jurisdiction’s laws; provided, however, that the authority of PPA Buyer to enter into and perform its obligations under this agreement shall be determined in accordance with the laws of the state of California.
(b) Arbitration. Any dispute, claim or controversy arising out of or relating to this Agreement or the breach, termination, enforcement, interpretation or validity thereof, including the determination of the scope of this Agreement to arbitrate, shall be determined by final, non-appealable binding arbitration in San Francisco, California before three (3) arbitrators. The arbitration shall be administered by Judicial Arbitration and Mediation Services, Inc. (“JAMS”) pursuant to its Comprehensive Arbitration Rules and Procedures. Within after 579
the commencement of arbitration, each of MSCG and PPA Buyer, on the one hand, and PPA Seller, on the other hand, shall select one person to act as arbitrator, and JAMS shall appoint one (1) person to act as an arbitrator (for such an arbitration, MSCG, PPA Buyer and PPA Seller are the “Arbitration Parties”), provided that if the arbitration pertains to matters and disputes solely as between PPA Buyer and MSCG, and PPA Seller is neither asserting nor defending a claim in relation thereto, then each of MSCG and PPA Buyer shall select one person to act as arbitrator, and JAMS shall appoint one (1) person to act as an arbitrator (for such an arbitration, only MSCG and PPA Buyer are the “Arbitration Parties”). The JAMS appointed arbitrator shall serve as the chairperson (the “chairperson”). If any of the Arbitration Parties is unable or fails to select one person to act as arbitrator, such arbitrator shall be appointed by JAMS. The chairperson shall be a person who has experience in renewable energy-related transactions, and none of the arbitrators shall have been previously employed by any Arbitration Party or have any direct pecuniary interest in any Arbitration Party or the subject matter of the arbitration, unless such conflict is expressly acknowledged and waived in writing by all of the Arbitration Parties. The Arbitration Parties shall maintain the confidential nature of the arbitration proceeding and any award, including any hearing(s), except as may be necessary to prepare for or conduct the arbitration hearing on the merits, or except as necessary in connection with a court application for a preliminary remedy, a judicial challenge to an award or its enforcement, or unless otherwise required by law or judicial decision. Any arbitration proceedings, decision or award rendered hereunder and the validity, effect and interpretation of this arbitration provision shall be governed by the Federal Arbitration Act. The arbitrator(s) shall have no authority to award consequential, treble, exemplary, or punitive damages of any type or kind regardless of whether such damages may be available under any law or right, with the Arbitration Parties hereby affirmatively waiving their rights, if any, to recover or claim such damages. The responsibility for compensation and expenses of the three arbitrators and all other expenses charged by JAMS shall be shared equally between or among the Arbitration Parties, as the case may be. In any arbitration arising out of or related to this Agreement, the arbitrators shall award to the prevailing Arbitration Party or Arbitration Parties, if any, the costs and attorney’s fees reasonably incurred in seeking to enforce the application of this Section 11(b) by the prevailing party in connection with the arbitration, and the non-prevailing Arbitration Party or Arbitration Parties shall also be liable to the prevailing Arbitration Party or Arbitration Parties for the compensation and expenses of the three arbitrators and all costs and charges of JAMS in connection with the arbitration. Notwithstanding the foregoing provisions of this Section 11(b), any costs incurred by an Arbitration Party in seeking judicial enforcement of any written decision of the arbitrators shall be chargeable to and borne exclusively by the Arbitration Party against whom such court order is obtained. The award shall be final and binding on the Arbitration Parties and judgment upon any award may be entered in any court of competent jurisdiction.
(c) Judicial Reference. Without limiting the provisions in Section 11(b), if Section 11(b) is deemed ineffective or unenforceable in any respect, any dispute between the Parties arising out of or in connection with this Agreement or its performance, breach, or termination (including the existence, validity and interpretation of this Agreement and the applicability of any statute of limitation period) (each, a “Dispute”) shall be resolved by a reference proceeding in California in accordance with the provisions of Sections 638 et seq. of the California Code of Civil Procedure (“CCP”), or their successor sections (a “Reference Proceeding”), which shall constitute the exclusive remedy for the resolution of any Dispute. As a condition precedent to initiating a 580
Reference Proceeding with respect to any Dispute, the Parties shall comply with the provisions of Section 11(c)(i).
i. Notice of Dispute. Prior to initiating the Reference Proceeding, a Party (the “Disputing Party”) shall provide the other Parties (the “Responding Parties”; and together with the Disputing Party, the “Dispute Parties”) with a written notice of each issue in dispute, a proposed means for resolving each such issue, and support for such position (the “Notice of Dispute”). Within after receiving the Notice of Dispute, the Responding Parties shall provide the Disputing Party with a written Notice of each additional issue (if any) with respect to the dispute raised by the Notice of Dispute, a proposed means for resolving every issue in dispute, and support for such position (the “Dispute Response”). If the Notice of Dispute makes no claim or assertion against one of the Responding Parties, and such Responding Party, in making its Dispute Response does not make or assert a claim against either the Disputing Party or the other Responding Party and states that it has no interest in the Dispute, then such Responding Party shall not participate in the resolution of the Dispute and shall not be a “Dispute Party” for purposes of this Section 11(c). Thereafter, the Dispute Parties shall meet to discuss the matter and attempt in good faith to reach a negotiated resolution of the dispute. If the Dispute Parties do not resolve the dispute by unanimous agreement within after receipt of the Dispute Response, (the “Negotiation Period”), then any Dispute Party may provide to the other Dispute Party(ies) written notice of intent for judicial reference (the “Impasse Notice”) in accordance with the further provisions of this Section 11(c). ii. Applicability; Selection of Referees. Within of the delivery of an Impasse Notice, each of MSCG and PPA Buyer, on the one hand, and PPA Seller, on the other hand, shall nominate one (1) referee, provided that if PPA Seller is not a Dispute Party, then each of MSCG and PPA Buyer shall nominate (1) referee, and PPA Seller will not nominate a referee. The two (2) referees (the “Party-Appointed Referees”) shall unanimously appoint one additional referee (the “Additional Referee”, together with the Party-Appointed Referees, the “Referees”). The Party-Appointed Referees shall be competent and experienced in matters involving the electric energy business in the United States, with at least ten (10) years of electric industry experience as a practicing attorney.
The Additional Referee shall be an active or retired California state or federal judge (the “Head Referee”). Each of the Party-Appointed Referees and the Additional Referee shall be impartial and independent of each of the Dispute Parties and of the other referees and not employed by any of the Dispute Parties in any prior matter. iii. Inability to Agree upon Third Referee. If the Party-Appointed Referees are unable to agree on the Additional Referee within from delivery of the Impasse Notice, then the Additional Referee shall be appointed pursuant to CCP Section 640(b) in an action filed in the Superior Court of California, County of San Francisco (the “Court”), and with due regard given to the selection criteria above. A request for appointment of a referee may be heard on an ex parte or expedited basis, and the Dispute Parties agree that irreparable harm would result if ex parte relief is not granted. Pursuant to CCP Section 170.6, each of PPA Buyer and MSCG, on the one hand, and PPA Seller, on the other hand, shall have one (1) peremptory challenge to the referee selected by the Court, provided that 581
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for compensation and expenses of the Referees and all other expenses of judicial reference shall be shared equally between or among the Dispute Parties. (d) Assignment Appendix Prepaid Transaction Details. From time to time, MSCG may deliver one or more completed Assignment Appendices to the other Parties hereto completing the terms that are currently bracketed therein, and each such Assignment Appendix shall be binding upon each of the Parties hereto; provided that the aggregate sum of the Assigned Product under all Assignment Appendices then in effect will not exceed the Guaranteed Capacity under and as defined in the PPA. As set forth in Appendix 1 hereto, MSCG’s payment obligations are limited to the Assigned Product delivered pursuant to the Assignment Appendices then in effect.
Each Assignment Appendix will set forth certain details relating to the commodity prepayment transaction pursuant to which all or a portion of the Assigned Product shall be delivered; provided that MSCG may, at any time with the prior consent of PPA Buyer but without the consent of PPA Seller, by written notice to PPA Seller and PPA Buyer, (i) rescind any Assignment Appendix, provided that such rescission shall be on a prospective basis only and shall not affect obligations accrued prior to such rescission or (ii) update or amend any Assignment Appendix to change any or all of the following terms specified therein, provided that any and all such changes shall be consistent with MSCG’s, PPA Seller’s and PPA Buyer’s rights and obligations, and the limitations provided, under this Agreement:: (A) an increase or decrease of the volume of Assigned Product to be delivered into the applicable commodity prepayment transaction (including without limitation a change thereto to reflect that all MWh of Assigned Product delivered in accordance with the PPA by PPA Seller shall be delivered into one commodity prepayment transaction, subject only the aggregate quantity limit specified above); (B) a change in the relevant commodity prepayment transaction (i.e., the “Prepaid Agreement”) pursuant to which the Assigned Product shall be delivered; (C) a change in the identity of the Prepay Seller; or (D) a change to the Assignment Appendix Start Date and/or the Assignment Appendix End Date. For the avoidance of doubt, (I) more than one Assignment Appendix may be in effect at any time, and (II) at any given time, less than one hundred percent (100%) of the Guaranteed Capacity under and as defined in the PPA may be assigned pursuant to the Assignment Appendices then in effect.
11. U.S. Resolution Stay Protocol.3 The Parties agree that the terms of Section 1 and Section 2 and the related defined terms (together, the “Bilateral Terms”) of the form of bilateral template entitled "Full-Length Omnibus (for use between U.S. G-SIBs and Corporate Groups),” published by ISDA on November 2, 2018 (currently available on the 2018 ISDA U.S. Resolution Stay Protocol page at www.isda.org)), the effect of which is to amend the qualified financial contracts between the Parties thereto to conform with the requirements of the QFC Stay Rules, are hereby incorporated into and form a part of this Agreement, and for such purposes this Agreement shall be deemed a "Covered Agreement", MSCG shall be deemed a "Covered Entity" and the Counterparty shall be deemed a "Counterparty Entity." In the event that, after the date of this Agreement, all Parties hereto become adhering Parties to the 2018 ISDA U.S. Resolution Stay Protocol (the “Protocol”), the terms of the Protocol will replace the terms of this section.
In the event of any inconsistencies between this Agreement and the terms of the Protocol or the Bilateral Terms (each, the "QFC Stay Terms"), as applicable, the QFC Stay Terms will govern. 3 NTD: PPA Sellers are not currently adherents to the ISDA Stay Protocol. 583
Terms used in this paragraph without definition shall have the meanings assigned to them under the QFC Stay Rules. For purposes of this paragraph, references to "this Agreement" include any related credit enhancements entered into between the Parties, directly or indirectly through an agent, or provided by one to the other.
"QFC Stay Rules" means the regulations codified at 12 C.F.R. 252.2, 252.81–8, 12 C.F.R. 382.1-7 and 12 C.F.R. 47.1-8, which, subject to limited exceptions, require an express recognition of the stay-and-transfer powers of the FDIC under the Federal Deposit Insurance Act and the Orderly Liquidation Authority under Title II of the Dodd Frank Wall Street Reform and Consumer Protection Act and the override of default rights related directly or indirectly to the entry of an affiliate into certain insolvency proceedings and any restrictions on the transfer of any covered affiliate credit enhancements.
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IN WITNESS WHEREOF, the Parties have executed this Agreement effective as of the date first set forth above.
[PPA SELLER]
By: ____________________________
Name:_______________________
Title:________________________
SAN DIEGO COMMUNITY POWER
By: ____________________________
Name:_______________________
Title:________________________
MORGAN STANLEY CAPITAL GROUP INC.
By: ____________________________
Name:_______________________
Title:________________________
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Appendix 2
Assignment Appendix - [A][B][C]
Date: [____]
“Assignment Appendix End Date” means 11:59:59 p.m. pacific prevailing time on [____], 20[_]. “Assignment Appendix Start Date” means [____] 1, 20[_]. “Custodian” means U.S. Bank Trust Company, National Association a national banking association.
“Custody Agreement” means the [Amended & Restated Custodial Agreement] dated as of [____], among the Issuer, PPA Buyer, MSCG, each applicable Prepay Seller and the Custodian, as from time to time amended, restated, supplemented or otherwise modified. “Issuer” means California Community Choice Financing Authority, a joint powers authority and a public entity of the State of California established pursuant to the provisions of the Joint Exercise of Powers Act (Article 1, Chapter 5, Division 7, Title 1, Section 6500 et seq. of the California Government Code, as amended).
“Prepaid Agreement” means that certain Prepaid Energy Sales Agreement, dated as of [____], 20[_] by and between Prepay Seller and Issuer, as from time to time amended, restated, supplemented or otherwise modified.
“Prepay Power Supply Contract” means that certain Power Supply Contract, dated as of [____], 20[_] by and between Prepay Seller and Issuer, as from time to time amended, restated, supplemented or otherwise modified.
“Prepay Seller” means [_____], a [_____], or any other Person that is the prepay seller under the terms of the Prepaid Agreement from time to time.
Assigned Product subject to this Assignment Appendix: As set forth immediately below, [the percentage of Assigned Product]/[the monthly quantities of Assigned Product] delivered to the Delivery Point: [____]
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Appendix 3
MSCG Notice Information
[To be completed before signing.]
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Appendix 4
Copy of PPA
[To be attached.]
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ITEM 14
ATTACHMENT B
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RENEWABLE POWER PURCHASE AND SALE AGREEMENT (SUNZIA SOUTH)
COVER SHEET
Seller: SunZia Wind South LLC
Buyer: San Diego Community Power, a California Joint Powers Authority Description of Facility: A wind-powered electricity generating facility known as SunZia Wind South, with a nameplate capacity of up to 2,561.2 MW, as described in Exhibit A, as such facility may be modified under the terms of this Agreement.
Milestones:
Milestone Date for
Completion
Execute Interconnection Agreement Complete
Evidence of Site Control Complete
Financial Close Complete
Procurement of Major Equipment Complete
Construction Start Date Complete
CEC Pre-Certification Complete
Delivery Term: Fifteen (15) Contract Years.
Guaranteed Capacity: 17.54 MW.
Expected Energy: per Contract Year, as such amount may be adjusted by Seller in accordance with the definition of “Expected Energy” below.
Product:
☒ Delivered Energy
☒ Green Attributes/Renewable Energy Credits (Portfolio Content Category 1) attributable to the Delivered Energy
Scheduling Coordinator: Seller/Seller Third Party.
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Development Security & Performance Security
Development Security:
Performance Security:
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TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS ............................................................................................................1
1.1 Contract Definitions .................................................................................................1
1.2 Rules of Interpretation ...........................................................................................18 ARTICLE 2 TERM; CONDITIONS PRECEDENT .....................................................................19
2.1 Contract Term ........................................................................................................19
2.2 [Reserved.] .............................................................................................................19
2.3 Obligations Prior to Delivery Term .......................................................................19
2.4 Progress Reports ....................................................................................................21
2.5 Remedial Action Plan ............................................................................................21
2.6 Outside Commercial Operation Date .....................................................................21 ARTICLE 3 PURCHASE AND SALE .........................................................................................22
3.1 Sale of Product .......................................................................................................22
3.2 Sale of Green Attributes .........................................................................................22
3.3 Compensation. .......................................................................................................22
3.4 Imbalance Energy ..................................................................................................23
3.5 Ownership of Renewable Energy Incentives .........................................................23
3.6 Future Environmental Attributes. ..........................................................................24
3.7 Pre-COD Product ...................................................................................................24
3.8 Reserved. ................................................................................................................24
3.9 CEC Certification and Verification .......................................................................24
3.10 Non-Modifiable Terms. .........................................................................................24
3.11 California Renewables Portfolio Standard .............................................................25
3.12 Compliance Expenditure Cap ................................................................................25 ARTICLE 4 OBLIGATIONS AND DELIVERIES ......................................................................27
4.1 Delivery..................................................................................................................27
4.2 Title and Risk of Loss ............................................................................................27
4.3 Scheduling Coordinator Responsibilities ...............................................................27
4.4 Forecasting .............................................................................................................29
4.5 Dispatch Down/Curtailment ..................................................................................30
4.6 Reduction in Delivery Obligation ..........................................................................31
4.7 Guaranteed Energy Production ..............................................................................32
4.8 WREGIS ................................................................................................................32 ARTICLE 5 TAXES ......................................................................................................................34
5.1 Allocation of Taxes and Charges ...........................................................................34
5.2 Cooperation ............................................................................................................34 ARTICLE 6 MAINTENANCE OF THE FACILITY ...................................................................35
6.1 Maintenance of the Facility ...................................................................................35
6.2 Maintenance of Health and Safety .........................................................................35
6.3 Shared Facilities .....................................................................................................35 594
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13.1 Seller’s Representations and Warranties ...............................................................52
13.2 Buyer’s Representations and Warranties. ..............................................................52
13.3 General Covenants .................................................................................................53 ARTICLE 14 ASSIGNMENT .......................................................................................................53
14.1 General Prohibition on Assignments .....................................................................53
14.2 Collateral Assignment ............................................................................................53
14.3 Permitted Assignment ............................................................................................54
14.4 Permitted Buyer Assignment .................................................................................54 ARTICLE 15 DISPUTE RESOLUTION ......................................................................................54
15.1 Venue .....................................................................................................................54
15.2 Dispute Resolution .................................................................................................54 ARTICLE 16 INDEMNIFICATION .............................................................................................55
16.1 Indemnification. .....................................................................................................55
16.2 Claims ....................................................................................................................55 ARTICLE 17 INSURANCE ..........................................................................................................56
17.1 Insurance ................................................................................................................56 ARTICLE 18 CONFIDENTIAL INFORMATION ......................................................................57
18.1 Definition of Confidential Information ..................................................................57
18.2 Duty to Maintain Confidentiality ...........................................................................57
18.3 Irreparable Injury; Remedies .................................................................................57
18.4 Permitted Disclosures ............................................................................................58
18.5 Press Releases ........................................................................................................58 ARTICLE 19 MISCELLANEOUS ...............................................................................................58
19.1 Entire Agreement; Integration; Exhibits ................................................................58
19.2 Amendments ..........................................................................................................58
19.3 No Waiver ..............................................................................................................58
19.4 No Agency, Partnership, Joint Venture or Lease ...................................................58
19.5 Severability ............................................................................................................59
19.6 Mobile-Sierra .........................................................................................................59
19.7 Counterparts ...........................................................................................................59
19.8 Electronic Delivery ................................................................................................59
19.9 Binding Effect ........................................................................................................59
19.10 Change in Electric Market Design .........................................................................59
19.11 No Recourse to Members of Buyer .......................................................................60
19.12 Forward Contract ...................................................................................................60
19.13 Further Assurances.................................................................................................60 596
Exhibits
Exhibit A Facility Description
Exhibit B Facility Construction and Commercial Operation Exhibit C Progress Reporting Form
Exhibit D Form of Average Forecast of Energy (MWh)
Exhibit E Energy Replacement Damages Calculation
Exhibit F Form of Commercial Operation Date Certificate Exhibit G Form of Installed Capacity Certificate
Exhibit H Reserved
Exhibit I Form of Letter of Credit
Exhibit J Form of Guaranty
Exhibit K Notices
Exhibit L Operating Restrictions
Exhibit M Form of Limited Assignment Agreement
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RENEWABLE POWER PURCHASE AND SALE AGREEMENT (SUNZIA SOUTH) This Renewable Power Purchase and Sale Agreement (SunZia South) (“Agreement”) is entered into as of ___________, 2026 (the “Effective Date”), between Buyer and Seller. Buyer and Seller are sometimes referred to herein individually as a “Party” and jointly as the “Parties.”
RECITALS
WHEREAS, Seller owns and operates the Facility; and;
WHEREAS, Seller desires to sell, and Buyer desires to purchase, on the terms and conditions set forth in this Agreement, the Product;
NOW THEREFORE, in consideration of the mutual covenants and agreements herein contained, and for other good and valuable consideration, the sufficiency and adequacy of which are hereby acknowledged, the Parties agree to the following:
ARTICLE 1
DEFINITIONS
1.1 Contract Definitions. The following terms, when used herein with initial capitalization, shall have the meanings set forth below:
“Accepted Compliance Costs” has the meaning set forth in Section 3.12. “Affiliate” means, with respect to any Person, each Person that directly or indirectly controls, is controlled by, or is under common control with such designated Person. For purposes of this definition and the definition of “Permitted Transferee”, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”), as used with respect to any Person, shall mean (a) the direct or indirect right to cast at least fifty percent (50%) of the votes exercisable at an annual general meeting (or its equivalent) of such Person or, if there are no such rights, ownership of at least fifty percent (50%) of the equity or other ownership interest in such Person, or (b) the right to direct the policies or operations of such Person. “Agreement” has the meaning set forth in the Preamble and includes any Exhibits, schedules and any written supplements hereto, the Cover Sheet, and any designated collateral, credit support or similar arrangement between the Parties. “Alternative Delivery Point” means a Scheduling Point other than the Delivery Point, that is agreed upon by Buyer and Seller.
“Approved Meter” means a CAISO-approved revenue quality meter or meters, together with a CAISO-approved data processing gateway or remote intelligence gateway, telemetering equipment and data acquisition services sufficient for monitoring, recording and reporting, in real time, all Energy produced by the Facility net of Electrical Losses and Station Use. “Available Capacity” means the capacity from Buyer’s Share of the Facility, expressed in whole MW, that is available to generate Energy.
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“Balancing Authority” has the meaning set forth in the CAISO Tariff. “Bankrupt” means with respect to any entity, such entity that (a) files a petition or otherwise commences, authorizes or acquiesces in the commencement of a proceeding or cause of action under any bankruptcy, insolvency, reorganization or similar Law, (b) has any such petition filed or commenced against it which remains unstayed or undismissed for a period of thirty (30) days (provided that such thirty (30) day period shall be extended to sixty (60) days if Seller is actively contesting the petition), (c) makes an assignment or any general arrangement for the benefit of creditors, (d) otherwise becomes bankrupt or insolvent (however evidenced), (e) has a liquidator, administrator, receiver, trustee, conservator or similar official appointed with respect to it or any substantial portion of its property or assets, or (f) is generally unable to pay its debts as they fall due.
“Business Day” means any day except a Saturday, Sunday, the Friday after the U.S.
Thanksgiving holiday, or a Federal Reserve Bank holiday in California. A Business Day begins at 8:00 a.m. and ends at 5:00 p.m. local time for the Party sending a Notice, or payment, or performing a specified action.
“Buyer” has the meaning set forth on the Cover Sheet.
“Buyer Performance Security” means cash or Letter of Credit in the amount equal to the Seller Performance Security.
“Buyer Lockbox Arrangement” has the meaning set forth in Section 8.12. “Buyer’s Share” means the percentage that is equal to the quotient of the Guaranteed Capacity divided by the Installed Capacity (or, prior to the Commercial Operation Date, the total nameplate capacity of the Facility in operation at the time), not to exceed one hundred percent (100%), as such percentage may change from time to time with changes to the Installed Capacity in accordance with this Agreement, if applicable.
“Buyer’s WREGIS Account” has the meaning set forth in Section 4.8(a). “CAISO” means the California Independent System Operator Corporation or any successor entity performing similar functions.
“CAISO Grid” has the same meaning as “CAISO Controlled Grid” as defined in the CAISO Tariff.
“CAISO Operating Instruction” has the same meaning as “Operating Instruction” as defined in the CAISO Tariff.
“CAISO Tariff” means the California Independent System Operator Corporation Agreement and Tariff, Business Practice Manuals (BPMs), and Operating Procedures, including the rules, protocols, procedures and standards attached thereto, as the same may be amended or modified from time-to-time and, to the extent subject to approval by FERC, as approved by FERC. 599
“California Renewables Portfolio Standard” or “RPS” means the renewable energy program and policies established by California State Senate Bills 1038 (2002), 1078 (2002), 107 (2008), X-1 2 (2011), 350 (2015), and 100 (2018) as codified in, inter alia, California Public Utilities Code Sections 399.11 through 399.31 and California Public Resources Code Sections 25740 through 25751, as such provisions are amended or supplemented from time to time. “CEC” means the California Energy Commission, or its successor agency. “CEC Certification and Verification” means that the CEC has certified (or, with respect to periods before the date that is one hundred eighty (180) days following the Commercial Operation Date, that the CEC has pre-certified) that the Facility is an Eligible Renewable Energy Resource for purposes of the California Renewables Portfolio Standard and that all Energy generated by the Facility qualifies as generation from an Eligible Renewable Energy Resource. “Change of Control” means any circumstance in which (a) in respect of Buyer, the Person that has ultimate control over Buyer ceases to have such ultimate control, and (b) in the case of Seller, the Ultimate Parent ceases to have control over Seller; provided that, for the avoidance of doubt, it shall not be a Change of Control of Seller if the Ultimate Parent retains either (i) the direct or indirect right to cast at least fifty percent (50%) of the votes exercisable at an annual general meeting (or its equivalent) of Seller or, if there are no such rights, ownership of at least fifty percent (50%) of the equity or other ownership interest in Seller, or (ii) the right to direct the policies or operations of Seller.
“COD Delay Damages Payment” has the meaning set forth in Exhibit B. “Collateral Agent” has the meaning set forth in the Security Agreement. “Commercial Operation” has the meaning set forth in Exhibit B. “Commercial Operation Date” has the meaning set forth in Exhibit B. “Compliance Actions” has the meaning set forth in Section 3.12. “Compliance Expenditure Cap” has the meaning set forth in Section 3.12. “Confidential Information” has the meaning set forth in Section 18.1. “Construction Start” has the meaning set forth in Exhibit B. “Contract Revenues” has the meaning set forth in Section 4.5(b). “Contract Term” has the meaning set forth in Section 2.1. 600
“Contract Year” means a period of twelve (12) consecutive months, with the first Contract Year commencing on the Commercial Operation Date and each subsequent Contract Year commencing on the anniversary of the Commercial Operation Date. “Costs” means, with respect to the Non-Defaulting Party, brokerage fees, commissions and other similar third-party transaction costs and expenses reasonably incurred by such Party either in terminating any arrangement pursuant to which it has hedged its obligations or entering into new arrangements which replace the Agreement; and all reasonable expenses, including reasonable attorneys’ fees incurred by the Non-Defaulting Party in connection with terminating the Agreement.
“Cover Sheet” means the cover sheet to this Agreement.
“COVID-19” means the pandemic disease designated COVID-19 and the related virus designated SARS-CoV-2 and any mutations thereof, or the efforts of a Governmental Authority to combat or mitigate such disease.
“CPUC” means the California Public Utilities Commission, or successor entity. “Credit Rating” means, with respect to any entity, the publicly available or (subject to the express condition that the Party seeking to use private rating reports has provided to the other Party true and correct copies of the private rating reports of such subject entity) private rating then assigned to such entity’s unsecured, senior long-term debt obligations (not supported by third party credit enhancements) or if such entity does not have a rating for its senior unsecured long-term debt, then the publicly available or (subject to the above parenthetical) private rating then assigned to such entity as an issuer rating by S&P, Fitch, or Moody’s. If ratings by Fitch, S&P and Moody’s are not equivalent, the lower rating shall apply.
“Curtailment Order” means any of the following:
(a) the CAISO orders, directs, alerts, or provides notice to a Party, including a CAISO Operating Instruction, to curtail deliveries of Energy from the Facility for the following reasons: (i) any System Emergency, or (ii) any warning of an anticipated System Emergency, or warning of an imminent condition or situation, which jeopardizes CAISO’s electric system integrity or the integrity of other systems to which CAISO is connected; (b) a curtailment ordered by a Transmission Provider for reasons including, but not limited to, (i) any situation that affects normal function of the electric system including, but not limited to, any abnormal condition that requires action to prevent circumstances such as equipment damage, loss of load, or abnormal voltage conditions, or (ii) any warning, forecast or anticipation of conditions or situations that jeopardize the Transmission Provider’s electric system integrity or the integrity of other systems to which the Transmission Provider is connected; (c) a curtailment ordered by CAISO or a Transmission Provider due to scheduled or unscheduled maintenance on the Transmission Provider’s transmission facilities that prevents (i) Buyer from receiving or (ii) Seller from delivering Energy at the Delivery Point; or 601
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(1) Subject to the Hourly Delivery Cap, (i) (a) Buyer’s Share of the Energy produced by the Facility and delivered to the Point of Interconnection, as measured in MWh by the Approved Meter, as such amount may be reduced as a result of a Curtailment Order, net of all Electrical Losses (other than Electrical Losses that are reflected in the meter readings) and Station Use; or (b) if a portion of the Facility output is curtailed at Seller’s election, in any Settlement Period or Settlement Interval that is not during a Curtailment Period or Market Curtailment Period and Buyer’s Share is not curtailed, then Delivered Energy for such Settlement Period or Settlement Interval will instead be equal to Buyer’s Share of the Energy that the Facility would have been able to produce and deliver to the Point of Interconnection if the Facility was not so curtailed, estimated in a manner consistent with the description set forth in clause (a) above; or (c) if the Facility output is reduced, at Seller’s direction in any Settlement Interval or Settlement Period, as applicable, during a Market Curtailment Period, then Delivered Energy for such Settlement Interval or Settlement Period will be instead equal to the amount of Energy delivered to Buyer at the Delivery Point during such Market Curtailment Period; provided, however, that neither (a), (b) nor (c) above shall exceed the quantity of E-Tags demonstrating delivery of such Energy to the Delivery Point, if such E-Tags are required by the CAISO Tariff or other applicable Law; plus
(2) all Replacement Energy delivered as part of prospectively delivered Replacement Product pursuant to Section 4.7(b)(i).
“Delivery Point” has the meaning set forth in Exhibit A. “Delivery Term” shall mean the period of Contract Years set forth on the Cover Sheet beginning on the Commercial Operation Date, unless terminated earlier in accordance with the terms and conditions of this Agreement.
“Development Cure Period” has the meaning set forth in Exhibit B. “Development Security” means, at Seller’s option, (a) cash or (b) a Letter of Credit, in the amount set forth on the Cover Sheet.
“Disclosing Party” has the meaning set forth in Section 18.2. “Early Termination Date” has the meaning set forth in Section 11.2(a). “Effective Date” has the meaning set forth in the Preamble hereto. “Electrical Losses” means all transmission or transformation losses between the Facility and the Delivery Point, other than losses that are financially settled by Seller. “EIRP” means “Eligible Intermittent Resource Protocol” as described in Appendix Q of the CAISO Tariff or a successor CAISO program for intermittent resources. 603
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“Forced Facility Outage” means an unexpected failure of one or more components of the Facility or any outage on the Transmission System that prevents Seller from making power available at the Delivery Point and that is not the result of a Force Majeure Event. “Future Environmental Attributes” means Buyer’s Share of any and all generation attributes (other than Green Attributes or Renewable Energy Incentives) under the RPS regulations and/or under any and all other international, federal, regional, state or other Law, rule, regulation, bylaw, treaty or other intergovernmental compact, decision, administrative decision, program (including any voluntary compliance or membership program), competitive market or business method (including all credits, certificates, benefits, and emission measurements, reductions, offsets and allowances related thereto) that are attributable, as of the Effective Date, or in the future, to the generation of electrical energy by a wind generation facility as opposed to from a conventional generation resource.
“Gains” means, with respect to any Party, an amount equal to the present value of the economic benefit to it, if any (exclusive of Costs), resulting from the termination of this Agreement for the remaining Contract Term, determined in a commercially reasonable manner. Factors used in determining the economic benefit to a Party may include, without limitation, reference to information supplied by one or more third parties, which shall exclude Affiliates of the Non-Defaulting Party, including without limitation, quotations (either firm or indicative) of relevant rates, prices, yields, yield curves, volatilities, spreads or other relevant market data in the relevant markets, comparable transactions, forward price curves based on economic analysis of the relevant markets, settlement prices for comparable transactions at liquid trading hubs (e.g., SP-15), all of which should be calculated for the remaining Contract Term, and includes the value of Green Attributes.
“Governmental Authority” means any federal, state, provincial, local or municipal government, any political subdivision thereof or any other governmental, congressional or parliamentary, regulatory, or judicial instrumentality, authority, body, agency, department, bureau, or entity with authority to bind a Party at law, including CAISO and WREGIS. “Green Attributes” means any and all credits, benefits, emissions reductions, offsets, and allowances, howsoever entitled, attributable to the Delivered Energy. Green Attributes include but are not limited to Renewable Energy Credits, as well as: (1) any avoided emissions of pollutants to the air, soil or water such as sulfur oxides (SOx), nitrogen oxides (NOx), carbon monoxide (CO) and other pollutants; (2) any avoided emissions of carbon dioxide (CO2), methane (CH4), nitrous oxide, hydrofluorocarbons, perfluorocarbons, sulfur hexafluoride and other greenhouse gases (GHGs) that have been determined by the United Nations Intergovernmental Panel on Climate Change, or otherwise by law, to contribute to the actual or potential threat of altering the Earth’s climate by trapping heat in the atmosphere; (3) the reporting rights to these avoided emissions, such as Green Tag Reporting Rights. Green Attributes do not include (i) any energy, capacity, reliability or other power attributes from the Facility, (ii) investment or production tax credits associated with the construction or operation of the Facility and other financial incentives associated therewith, (iii) fuel-related subsidies or “tipping fees” that may be paid to Seller to accept certain fuels, or local subsidies received by the generator for the destruction of particular preexisting pollutants or the promotion of local environmental benefits, or (iv) emission reduction credits encumbered or used by the Facility for compliance with local, state, or 605
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“Installed Capacity” means the nameplate capacity of the Facility at the point of interconnection (which point of interconnection is specified in the Interconnection Agreement), as evidenced by a certificate from a Licensed Professional Engineer substantially in the form attached as Exhibit G hereto, as it may be updated as set forth in Exhibit B by delivery of a subsequent certificate from a Licensed Professional Engineer substantially in the form attached as Exhibit G hereto.
“Interconnection Capacity Limit” means the maximum instantaneous amount of Energy that is permitted to be delivered by the Facility to the Point of Interconnection, which amount shall be not less than two thousand one hundred (2,100) MW.
“Intercreditor and Collateral Agency Agreement” means that certain Intercreditor and Collateral Agency Agreement, dated as of March 1, 2021, by and among (i) River City Bank, (ii) each of the creditors from time to time signatory thereunder, and (iii) Buyer. “Inter-SC Trade” has the meaning set forth in the CAISO Tariff. “Interconnection Agreement” means the interconnection agreement entered into by Seller pursuant to which the Facility will be interconnected with the PTO’s Transmission System, and pursuant to which any Interconnection Facilities will be constructed, operated and maintained during the Contract Term.
“Interconnection Facilities” means the interconnection facilities, control and protective devices and metering facilities required to connect the Facility with the PTO’s Transmission System in order to meet the terms and conditions of this Agreement. “Interest Rate” has the meaning set forth in Section 8.2. “Intertie” has the meaning set forth in the CAISO Tariff. “Investment Grade Credit Rating” means, in respect of a Person, a Credit Rating of ; provided that if there is a Credit
Rating for the Person by more than one of S&P, Fitch, or Moody’s, then each such Credit Rating shall be at or higher than , as applicable.
“Joinder” has the meaning set forth in the Intercreditor and Collateral Agency Agreement. “Law” means any applicable law, statute, rule, regulation, decision, writ, order, decree or judgment, permit or any interpretation thereof, promulgated or issued by a Governmental Authority.
“Lender” means, collectively, any Person (i) providing senior or subordinated construction, interim, back leverage or long-term debt, equity or tax equity financing or refinancing for or in connection with the development, construction, purchase, installation or operation of the Facility, whether that financing or refinancing takes the form of private debt, equity, public debt or any other form (including financing or refinancing provided to a member or other direct or indirect owner of Seller), including any equity or tax equity investor directly or indirectly providing financing or refinancing for the Facility or purchasing equity ownership 607
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“Progress Report” means a progress report including the items set forth in Exhibit C. “Project” has the same meaning as “Facility”.
“Prudent Operating Practice” means the practices, methods and standards of professional care, skill and diligence engaged in or approved by a significant portion of the utility-scale wind energy industry for facilities of similar size, type and design, that, in the exercise of reasonable judgment, in light of the facts known at the time, would have been expected to accomplish results consistent with Law, reliability, safety, environmental protection, applicable codes, and standards of economy and expedition. Prudent Operating Practice is not necessarily defined as the optimal standard practice method or act to the exclusion of others, but rather refer to a range of actions reasonable under the circumstances. “PTC Amount” means the amount, on a dollar per MWh basis, equal to the Production Tax Credits that Seller would have earned in respect of energy produced by the Facility at the time, grossed up on an after tax basis at the then-highest marginal combined federal and state corporate tax rate, but failed to earn as a result of a Market Curtailment Period, which amount will be calculated by reference to the amount of Deemed Delivered Energy and prorated for the number of the Facility’s wind turbines that are eligible to receive Production Tax Credits at the time of determination.
“QRE” has the meaning set forth for “Qualified Reporting Entity” in the WREGIS Operating Rules.
“Real-Time Forecast” means Seller’s final forecast of the amount of expected Delivered Energy, net of all Electrical Losses, for each hour of a given day, based on a commercially reasonable forecasting methodology to determine the potential generation of the Facility as a function of Available Capacity, wind speed and direction, wind turbine power curves and other pertinent data for the period of time, consistent with Prudent Operating Practice; provided that, for the avoidance of doubt, market conditions and pricing shall not be factored into such determination of the potential generation of the Facility.
“Real-Time Market” has the meaning set forth in the CAISO Tariff. “REC Price” means the prevailing market price (expressed in $/MWh) for RECs meeting the RPS requirements for Portfolio Content Category 1, determined by averaging quotes provided by Buyer from three (3) unaffiliated brokers.
“Receiving Party” has the meaning set forth in Section 18.2. “Recurring Certificate Transfers” has the meaning set forth in the WREGIS Operating Rules.
“Remedial Action Plan” has the meaning in Section 2.5(a). “Renewable Energy Credit” or “REC” has the meaning set forth in California Public Utilities Code Section 399.12(h), as may be amended from time to time or as further defined or supplemented by Law.
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“Self-Schedule” has the meaning set forth in the CAISO Tariff. “Seller” has the meaning set forth on the Cover Sheet.
“Seller’s WREGIS Account” has the meaning set forth in Section 4.8(a). “Settlement Amount” means the Non-Defaulting Party’s Costs and Losses, on the one hand, netted against its Gains, on the other. If the Non-Defaulting Party’s Costs and Losses exceed its Gains, then the Settlement Amount shall be an amount owing to the Non-Defaulting Party. If the Non-Defaulting Party’s Gains exceed its Costs and Losses, then the Settlement Amount shall be zero dollars ($0). The Settlement Amount does not include consequential, incidental, punitive, exemplary or indirect or business interruption damages. “Settlement Interval” has the meaning set forth in the CAISO Tariff. “Settlement Period” has the meaning set forth in the CAISO Tariff, which as of the Effective Date is the period beginning at the start of the hour and ending at the end of the hour. “Shared Facilities” has the meaning set forth in Section 6.3. “Shared Facilities Agreement” has the meaning set forth in Section 6.3. “Site” means the real property on which the Facility is or will be located, as further described in Exhibit A.
“SPTO PPA” has the meaning set forth in the Recitals hereto. “Station Use” means:
(a) The Energy produced by the Facility that is used within the Facility to power the lights, motors, control systems and other electrical loads that are necessary for operation of the Facility; and
(b) The Energy produced by the Facility that is consumed within the Facility’s electric energy distribution system as losses.
“SunZia PowerCo” has the meaning set forth in the Recitals hereto. “SunZia Transmission Line” means that certain 3,000-MW high-voltage (+/-525-kV) transmission line originating at the Point of Interconnection (as defined in the Interconnection Agreement) in New Mexico and terminating near Phoenix, Arizona. The western terminus of the line will connect to the 500-kV Pinal Central Substation. “System Emergency” means any condition that: (a) requires, as determined and declared by CAISO, the PTO or a Transmission Provider, automatic or immediate action to (i) prevent or limit harm to or loss of life or property, (ii) prevent loss of transmission facilities or generation supply in the immediate vicinity of the Facility, or (iii) to preserve Transmission System reliability, 613
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“WREGIS Certificates” has the same meaning as “Certificate” as defined by WREGIS in the WREGIS Operating Rules and are designated as eligible for complying with the California Renewables Portfolio Standard.
“WREGIS Operating Rules” means those operating rules and requirements adopted by WREGIS as of October 2022, as subsequently amended, supplemented or replaced (in whole or in part) from time to time.
1.2 Rules of Interpretation.
In this Agreement, except as expressly stated otherwise or unless the context otherwise requires:
(a) headings and the rendering of text in bold and italics are for convenience and reference purposes only and do not affect the meaning or interpretation of this Agreement; (b) words importing the singular include the plural and vice versa and the masculine, feminine and neuter genders include all genders; (c) the words “hereof”, “herein”, and “hereunder” and words of similar import shall refer to this Agreement as a whole and not to any particular provision of this Agreement; (d) a reference to an Article, Section, paragraph, clause, Party, or Exhibit is a reference to that Section, paragraph, clause of, or that Party or Exhibit to, this Agreement unless otherwise specified;
(e) a reference to a document or agreement, including this Agreement shall mean such document, agreement or this Agreement including any amendment or supplement to, or replacement, novation or modification of this Agreement, but disregarding any amendment, supplement, replacement, novation or modification made in breach of such document, agreement or this Agreement;
(f) a reference to a Person includes that Person’s successors and permitted assigns;
(g) the term “including” means “including without limitation” and any list of examples following such term shall in no way restrict or limit the generality of the word or provision in respect of which such examples are provided; (h) references to any statute, code or statutory provision are to be construed as a reference to the same as it may have been, or may from time to time be, amended, modified or reenacted, and include references to all bylaws, instruments, orders and regulations for the time being made thereunder or deriving validity therefrom unless the context otherwise requires; (i) in the event of a conflict, a mathematical formula or other precise description of a concept or a term shall prevail over words providing a more general description of a concept or a term;
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(j) references to any amount of money shall mean a reference to the amount in United States Dollars;
(k) the expression “and/or” when used as a conjunction shall connote “any or all of”;
(l) words, phrases or expressions not otherwise defined herein that (i) have a generally accepted meaning in Prudent Operating Practice shall have such meaning in this Agreement or (ii) do not have well known and generally accepted meaning in Prudent Operating Practice but that have well known and generally accepted technical or trade meanings, shall have such recognized meanings;
(m) references to “reasonably acceptable” shall require that the Party with discretion shall not unreasonably withhold, delay or condition its approval; (n) each Party acknowledges that it was represented by counsel in connection with this Agreement and that it or its counsel reviewed this Agreement and that any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement.
ARTICLE 2
TERM; CONDITIONS PRECEDENT
2.1 Contract Term.
(a) Effective Date. This Agreement shall become effective on the Effective Date, and shall remain in full force and effect until the conclusion of the Delivery Term, subject to any early termination provisions and any contract term extension provisions set forth herein (the “Contract Term”).
(b) Continuing Provisions. Applicable provisions of this Agreement shall continue in effect after termination, including early termination, to the extent necessary to enforce or complete the duties, obligations or responsibilities of the Parties arising prior to termination. In addition, the confidentiality obligations of the Parties under Article 18 shall remain in full force and effect for following the termination of this Agreement, all indemnity obligations shall remain in full force and effect for following termination of this Agreement, all audit rights shall remain in full force and effect for following the termination of this Agreement, and Buyer’s obligation to return to Seller the Development Security and/or Performance Security less any amounts drawn in accordance with this Agreement shall remain in full force and effect following the termination of this Agreement.
2.2 [Reserved.].
2.3 Obligations Prior to Delivery Term. The Delivery Term shall not commence until Seller completes each of the following conditions. Upon receipt of Notice from Seller of the completion of each condition, Buyer shall, if it disputes the completion of the condition provide Notice to Seller stating Buyer’s grounds for dispute within five (5) Business Days of receipt of 616
Seller’s Notice. In the event that Buyer fails to provide such Notice of dispute within such five (5) Business Days, Buyer shall be deemed to have accepted that the condition has been completed. (a) Seller shall have delivered to Buyer certificates from a Licensed Professional Engineer substantially in the form of Exhibit F and Exhibit G; (b) A Participating Generator Agreement (as defined in the CAISO Tariff) between Seller and CAISO, and a Meter Service Agreement for CAISO Metered Entities (as defined in the CAISO Tariff) between CAISO and Seller, if, with respect to each such agreement, it is required under the CAISO Tariff or for Seller to meet its obligations under this Agreement, shall have been executed and delivered and be in full force and effect, and a copy of each such agreement delivered to Buyer;
(c) All applicable regulatory authorizations, approvals and permits for the operation of the Facility have been obtained (or if not obtained, applied for and reasonably expected to be received within ninety (90) days) and all conditions thereof have been satisfied and shall be in full force and effect;
(d) Seller has received the requisite pre-certification of the CEC Certification and Verification (and reasonably expects to receive final CEC Certification and Verification for the Facility in no more than one hundred eighty (180) days from the Commercial Operation Date); (e) Installed Capacity equal to at least of the
Guaranteed Capacity has been completed and is ready to produce and deliver Product to Buyer, as stated in the certificate in the form of Exhibit F delivered pursuant to clause (a) of this Section 2.3; (f) Seller (with the reasonable participation of Buyer) shall have completed all applicable WREGIS registration requirements pursuant to the WREGIS Operating Rules that are reasonably capable of being completed prior to the Commercial Operation Date under the WREGIS Operating Rules, including, if applicable, the completion and submittal of all applicable registration forms and supporting documentation, which may include applicable interconnection agreements, informational surveys related to the Facility, QRE service agreements, and other appropriate documentation required to effect Facility registration with WREGIS and to enable Renewable Energy Credit transfers related to the Facility within the WREGIS system; (g) Seller has obtained insurance meeting the requirements of Article 17; provided, however, that Seller may deliver copies of certificates of such insurance to Buyer within ten (10) Business Days after the Commercial Operation Date; (h) Seller has delivered the Performance Security to Buyer in accordance with Section 8.8; and
(i) Seller has paid Buyer for all Delay Damages due and owing under this Agreement, if any.
Upon request from Seller from time to time, Buyer shall confirm in writing the completion of those of the foregoing conditions that have been completed by Seller as of such request. 617
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for the payment by Seller, as liquidated damages, of the Damage Payment; provided further, that the time period for which Seller is subject to the right of first refusal pursuant to Section 11.8 shall be shortened on a day-for-day basis for each day following the Outside Commercial Operation Date for which Buyer does not exercise its in termination right in accordance with Section
11.1(b)(iv) and 11.2.
ARTICLE 3
PURCHASE AND SALE
3.1 Sale of Product. Subject to the terms and conditions of this Agreement, during the Delivery Term, Seller shall sell and deliver to Buyer, and Buyer shall purchase from Seller, all the Product produced by or associated with the Facility, subject to the Hourly Delivery Cap. The sale by Seller and purchase by Buyer of Delivered Energy hereunder shall be for resale. During the Delivery Term, Buyer will have exclusive rights to offer, bid, or otherwise submit the Product, or any component thereof, from the Facility after the Delivery Point for resale into the market or to any third party, and retain and receive any and all related revenues. Subject to Buyer’s obligations to pay for Deemed Delivered Energy, Buyer has no obligation to purchase from Seller any Product that is not or cannot be delivered to the Delivery Point or Alternative Delivery Point as a result of any circumstance, including, an outage of the Facility, a Force Majeure Event, or a Curtailment Order. The Parties acknowledge and agree that (i) the Product is limited to Delivered Energy and associated Green Attributes; (ii) Buyer has no right under this Agreement to purchase or receive capacity attributes, resource adequacy benefits, ancillary services, or tax or other financial benefit associated with the Facility, or any product, attribute or benefit that is similar to or derivative of such products, attributes or benefits; and (iii) Seller shall bear all costs and receive all revenues associated with such excluded products, attributes or benefits under this Agreement.
3.2 Sale of Green Attributes. During the Delivery Term, Seller shall sell and deliver to Buyer, and Buyer shall purchase from Seller, all of the Green Attributes attributable to the Delivered Energy.
3.3 Compensation.
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(d) Excess Settlement Interval Deliveries. If, during any Settlement Interval, Seller delivers Product amounts to Buyer, as measured by the amount of Delivered Energy, in excess of the product of the Guaranteed Capacity and the duration of the Settlement Interval, expressed in hours (“Excess MWh”), then Buyer shall not be obligated to pay for all such Excess MWh.
3.4 Imbalance Energy. Other than during a Market Curtailment Period, Seller shall use commercially reasonable efforts to deliver Energy in accordance with the Scheduled Energy but shall not be required to curtail the Delivered Energy other than pursuant to a Curtailment Order.
Buyer and Seller recognize that from time to time the amount of Delivered Energy will deviate from the amount of Scheduled Energy. Seller shall be responsible for all CAISO costs, and shall be entitled to all CAISO revenues, associated with Imbalance Energy.
3.5 Ownership of Renewable Energy Incentives. Seller shall have all right, title and interest in and to all Renewable Energy Incentives. Buyer acknowledges that any Renewable Energy Incentives belong to Seller. If any Renewable Energy Incentives, or values representing the same, are initially credited or paid to Buyer, Buyer shall cause such Renewable Energy Incentives or values relating to same to be assigned or transferred to Seller without delay. Buyer shall reasonably cooperate with Seller, at Seller’s sole expense, in Seller’s efforts to meet the requirements for any certification, registration, or reporting program relating to Renewable Energy Incentives.
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3.6 Future Environmental Attributes.
(a) The Parties acknowledge and agree that as of the Effective Date, environmental attributes anticipated to be sold under this Agreement are restricted to Green Attributes; however, Future Environmental Attributes may be created by a Governmental Authority through Laws enacted after the Effective Date. The Parties shall promptly notify each other upon becoming aware of the existence of Future Environmental Attributes and, subject to the final sentence of this Section 3.6(a), in such event, Buyer shall have the exclusive right to claim such Future Environmental Attributes by providing Notice to Seller. If Buyer provides such Notice, Buyer shall bear all costs associated with the transfer, qualification, verification, registration and ongoing compliance for such Future Environmental Attributes, but there shall be no increase in the Contract Price. Upon Seller’s receipt of Notice from Buyer of Buyer’s intent to claim such Future Environmental Attributes, the Parties shall determine the necessary actions and additional costs associated with such Future Environmental Attributes. Seller shall have no obligation to alter the Facility or its operations unless the Parties have agreed on all necessary terms and conditions relating to such alteration and Buyer has agreed to reimburse Seller for all costs associated with such alteration.
(b) If Buyer elects to receive Future Environmental Attributes pursuant to Section 3.6(a), the Parties agree to negotiate in good faith with respect to the development of further agreements and documentation necessary to effectuate the transfer of such Future Environmental Attributes, including agreement with respect to (i) appropriate transfer, delivery and risk of loss mechanisms, and (ii) the determination of any additional costs to be borne by Buyer, as set forth above; provided, that the Parties acknowledge and agree that such terms are not intended to alter the other material terms of this Agreement.
3.7 Pre-COD Product. Seller shall have no obligation to sell or deliver to Buyer, and Buyer shall have no obligation to buy or receive from Seller, any Product prior to the commencement of the Delivery Term. Prior to the Delivery Term, Seller may sell all energy and associated Green Attributes from the Facility to any third party, and all revenues and costs associated with such sales shall be for Seller’s account.
3.8 Reserved.
3.9 CEC Certification and Verification. Seller shall take all necessary steps including, but not limited to, making or supporting timely filings with the CEC to obtain and maintain CEC Certification and Verification for the Facility throughout the Delivery Term, including compliance with all applicable requirements for certified facilities set forth in the current version of the RPS Eligibility Guidebook (or its successor). Seller must promptly notify Buyer and the CEC of any changes to the information included in Seller’s application for CEC Certification and Verification for the Facility.
3.10 Non-Modifiable Terms.
(a) Eligibility. Seller, and, if applicable, its successors, represents and warrants that throughout the Delivery Term of this Agreement that: (i) the Project qualifies and is certified by the CEC as an Eligible Renewable Energy Resource (“ERR”) as such term is defined in Public 621
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(a) CEC Certification and Verification;
(b) Green Attributes; and
(c) WREGIS.
Any actions required for Seller to comply with its obligations set forth in the first paragraph above, the cost of which will be included in the Compliance Expenditure Cap, shall be referred to collectively as the “Compliance Actions.”
If Seller reasonably anticipates the need to incur out-of-pocket expenses in excess of the Compliance Expenditure Cap in order to take any Compliance Action, Seller shall provide Notice to Buyer reasonably demonstrating such anticipated out-of-pocket expenses.
Buyer will have sixty (60) days to evaluate such Notice (during which time period Seller is not obligated to take any Compliance Actions described in the Notice) and shall, within such time, either (1) agree to reimburse Seller for all or some portion of the reasonably incurred costs that exceed the Compliance Expenditure Cap specified in such Notice (such Buyer-agreed upon costs, the “Accepted Compliance Costs”), or (2) waive Seller’s obligation to take such Compliance Actions, or any part thereof for which Buyer has not agreed to reimburse Seller; provided, if in any Contract Year, Seller’s costs to take Compliance Actions exceed the annual Compliance Expenditure Cap: (i) Buyer may pay to Seller any reasonably demonstrated amounts that Seller expends in connection with Compliance Actions that are over the annual Compliance Expenditure Cap; (ii) in the following Contract Year, Seller shall reimburse Buyer for all such amounts paid by Buyer , and
provided that all such reimbursed amounts in combination with all other Seller costs and expenses associated with Compliance Actions shall not
in the aggregate over the Contract Term; and (iii) such reimbursed amounts shall be considered costs and expenses associated with Compliance Actions and shall count towards the current annual and aggregate Compliance Expenditure Cap; for the avoidance of doubt, in no case shall Seller be required to bear any costs in connection with Compliance Actions (including those associated with a reimbursement by Seller of Buyer payments hereunder) in any Contract Year or in the aggregate in excess of the respective Compliance Expenditure Cap.
If Buyer does not respond to a Notice given by Seller under this Section 3.12 within sixty (60) days after Buyer’s receipt of same, Buyer shall be deemed to have waived its rights to require Seller to take the Compliance Actions that are the subject of the Notice, and Seller shall have no further obligations to take, and no liability for a failure to take, such Compliance Actions for the remainder of the Term.
If Buyer agrees to reimburse Seller for the Accepted Compliance Costs, then Seller shall take such Compliance Actions covered by the Accepted Compliance Costs as agreed upon by Buyer and Buyer shall reimburse Seller for Seller’s actual costs to effect the Compliance Actions, not to exceed the Accepted Compliance Costs, within sixty (60) days from the time that Buyer receives an invoice and documentation of such costs from Seller. If Buyer agrees to reimburse Seller for the Accepted Compliance Costs for less than all of the costs that exceed the Compliance Expenditure Cap, Seller shall only be obligated to take the Compliance Actions covered by the Accepted Compliance Costs.
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The term “commercially reasonable efforts” as used in Section 3.10 means efforts consistent with and subject to this Section 3.12.
ARTICLE 4
OBLIGATIONS AND DELIVERIES
4.1 Delivery.
(a) Energy. Subject to the terms and conditions of this Agreement, Seller shall make available and Buyer shall accept all Delivered Energy on an as-generated, instantaneous basis. Seller shall effectuate the delivery of Delivered Energy, and shall be responsible for securing such arrangements with CAISO, the PTO and any other Transmission Provider as are necessary in connection therewith.
(b) Green Attributes. Seller hereby provides and conveys all Green Attributes associated with the Delivered Energy as part of the Product being delivered. Seller represents and warrants that Seller holds the rights to all Green Attributes from the Facility, and Seller agrees to convey and hereby conveys all such Green Attributes to Buyer as included in the delivery of the Product from the Facility.
(c) Interconnection Capacity and Transmission Rights. Seller shall maintain (i) contractual rights to interconnection capacity that is no less than the Interconnection Capacity Limit, and (ii) firm transmission rights sufficient to deliver 1,495 MWAC to the Delivery Point, in each case throughout the Delivery Term; provided, that, subject to Section 6.3 below, (i) Seller may share its firm transmission rights with one or more of Seller’s Affiliates or with third parties, solely if and to the extent that, and solely for the period of time that, the amount of Energy that the Facility is capable of generating is less than 1,495 MWAC, and (ii) Seller may share the interconnection capacity to which it is entitled under Seller’s Interconnection Agreement with one or more of Seller’s Affiliates or with third parties, solely if and to the extent that, and solely for the period of time that, the amount of Energy that the Facility is capable of generating is less than 2,100 MWAC.
4.2 Title and Risk of Loss.
(a) Energy. Title to and risk of loss related to the Delivered Energy shall pass and transfer from Seller to Buyer at the Delivery Point. Subject to Section 5.1, Seller shall be responsible for paying or satisfying when due any costs or charges imposed in connection with the delivery of Energy from the Facility to the Delivery Point and Buyer shall be responsible for paying or satisfying when due any costs or charges imposed in connection with the delivery of Energy at and after the Delivery Point.
(b) Green Attributes. Title to and risk of loss related to the Green Attributes shall pass and transfer from Seller to Buyer upon the transfer of such Green Attributes in accordance with WREGIS.
4.3 Scheduling Coordinator Responsibilities.
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CAISO revenues (including credits, Imbalance Energy payments, and other payments), including costs and revenues associated with CAISO dispatches, bid cost recovery, Inter-SC Trade credits, or other credits in respect of the Product scheduled or delivered from the Facility. In addition, if during the Delivery Term, the CAISO implements or has implemented any sanction or penalty related to scheduling, outage reporting, or generator operation, the cost of such sanctions or penalties arising from the scheduling, outage reporting, or generator operation of the Facility shall be the Seller’s responsibility except to the extent such costs are incurred due to the fault or negligence of Buyer.
(d) Master File and Resource Data Template. Seller shall provide the data to the CAISO (and to Buyer) that is required for the CAISO’s Master File and Resource Data Template (or successor data systems) for this Facility consistent with this Agreement. Neither Party shall change such data without the other Party’s prior written consent. At least once per Contract Year, Seller shall review and confirm that the data provided for the CAISO’s Master Data File and Resource Data Template (or successor data systems) for this Facility remains consistent with the actual operating characteristics of the Facility and update such data as appropriate.
4.4 Forecasting. Seller shall provide the forecasts described below at its sole expense and in a format reasonably acceptable to Buyer (or Buyer’s designee). Seller shall use reasonable efforts to provide forecasts that are consistent with the information actually known by Seller at the time the forecasts are submitted and, to the extent not inconsistent with the requirements of this Agreement, shall prepare such forecasts, or cause such forecasts to be prepared, in accordance with Prudent Operating Practice.
(a) Annual Forecast of Available Capacity. No less than forty-five (45) days before (i) the first day of the first Contract Year of the Delivery Term and (ii) the first day of every subsequent Contract Year during the Delivery Term, Seller shall provide to Buyer a non-binding forecast of each month’s Available Capacity, by hour, and Seller’s projection of scheduled maintenance for the following calendar year in a form reasonably requested by Buyer. (b) Annual Forecast of Energy. No less than forty-five (45) days before (i) the first day of the first Contract Year of the Delivery Term and (ii) the first day of every subsequent Contract Year during the Delivery Term, Seller shall provide to Buyer a non-binding forecast of each month’s average-day expected Delivered Energy, by hour, for the following calendar year in a form substantially similar to the table found in Exhibit D, or as reasonably requested by Buyer. (c) Monthly Forecast of Energy and Available Capacity. No less than thirty (30) days before the beginning of Commercial Operation, and thereafter no less than ten (10) Business Days before the beginning of each calendar month during the Delivery Term, Seller shall provide to Buyer a non-binding forecast of the hourly expected Delivered Energy and Available Capacity for each day of the following month in a form reasonably requested by Buyer. (d) Daily Forecast of Available Capacity. By 5:30 AM Pacific Prevailing Time on the Business Day immediately preceding the date of delivery, Seller shall provide Buyer with (i) a non-binding forecast of its best estimate of Available Capacity and (ii) the Day-Ahead Forecast, in each case, for each hour of the immediately succeeding day. 626
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4.6 Reduction in Delivery Obligation. For the avoidance of doubt, and in no way limiting Section 3.1 or Exhibit E:
(a) Facility Maintenance. Seller shall be permitted to reduce deliveries of Product during any Planned Outage.
(b) Forced Facility Outage. Seller shall be permitted to reduce deliveries of Product during any Forced Facility Outage. As soon as practicable after the Forced Facility Outage has occurred, Seller shall provide Buyer with Notice by e-mail including the expected duration (if known) of any Forced Facility Outage and Seller shall keep Buyer informed of any developments that will affect either the duration of the outage or the availability of the Facility during or after the end of such outage. Upon Buyer’s reasonable request, Seller shall promptly prepare and provide to Buyer all reports of Forced Facility Outages or Planned Outages that Buyer may reasonably require for the purpose of enabling Buyer to comply with CAISO requirements or any applicable Laws, provided that Seller may redact such reports as necessary with respect to any Confidential Information except to the extent such Confidential Information is required to be provided to CAISO by Buyer.
(c) System Emergencies and other Events. Seller shall be permitted to reduce deliveries of Product (i) during any period of System Emergency, (ii) pursuant to a Curtailment Order, (iii) during a Market Curtailment Period, (iv) during any Force Majeure Event, (v) as required by Prudent Operating Practice, (vi) due to a POI Curtailment, or (vii) otherwise pursuant to the terms of this Agreement, the Interconnection Agreement or applicable tariff or as may be required under a Shared Facilities Agreement. Notwithstanding anything in this Agreement to the contrary, Seller may, in its sole discretion, sell and deliver some or all of the Product during any Curtailment Period or Market Curtailment Period to one or more third-party buyers to the extent that Seller may do so in compliance with Law and Prudent Operating Practice. (d) Health and Safety. Seller shall be permitted to reduce deliveries of Product as necessary to maintain health and safety pursuant to Section 6.2. (e) Real-Time Curtailment. Seller shall be permitted to reduce Facility generation during a period in which the LMP at the Delivery Point in the Real-Time Market is below the Floor Price. During such periods, (i) when the Real-Time Forecast exceeds the portion of the Day-Ahead Forecast that has a Day-Ahead Schedule, Seller shall be permitted to reduce deliveries of Product to Buyer to equal no less than the portion of the Day-Ahead Forecast that has a Day-Ahead Schedule, and (ii) when the Real-Time Forecast is equal to or less than the portion of the Day-Ahead Forecast that has a Day-Ahead Schedule, Buyer shall receive Product based on Buyer’s Share of the generation that the Facility would have been able to produce and deliver to the Delivery Point (taking into account Seller’s rights to reduce deliveries in Section 4.6(c)) but did not produce and deliver, due to the LMP at the Delivery Point in the Real-Time Market being below the Floor Price, and such amount shall be considered “Delivered Energy” for payment and invoicing purposes.
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and Buyer shall be given sole title to all such WREGIS Certificates. Seller shall satisfy its obligations pursuant to Section 3.10(d) and Section 4.2(b) by fulfilling its obligations under Sections 4.8(a) through (f) below.
(a) Prior to the Commercial Operation Date, if practicable, and as soon as reasonably possible thereafter if not practicable, Seller shall register the Facility with WREGIS and establish an account with WREGIS (“Seller’s WREGIS Account”), which Seller shall maintain until the end of the Delivery Term. Seller shall transfer the WREGIS Certificates using Recurring Certificate Transfers from Seller’s WREGIS Account to the WREGIS account(s) of Buyer or the account(s) of a designee that Buyer identifies by Notice to Seller (“Buyer’s WREGIS Account”). Seller shall be responsible for all expenses associated with registering the Facility with WREGIS, establishing and maintaining Seller’s WREGIS Account, paying WREGIS Certificate issuance and transfer fees, and transferring WREGIS Certificates from Seller’s WREGIS Account to Buyer’s WREGIS Account.
(b) Seller shall cause Recurring Certificate Transfers to occur on a monthly basis in accordance with the certification procedure established by the WREGIS Operating Rules.
Since WREGIS Certificates will only be created for whole MWh amounts of Energy generated, any fractional MWh amounts (i.e., kWh) will be carried forward until sufficient generation is accumulated for the creation of a WREGIS Certificate. If Seller is required to generate E-Tags associated with Delivered Energy pursuant to the CAISO Tariff, and if required by WREGIS, the CPUC, the CEC, or other applicable Law, WREGIS Certificates must be matched with E-Tags associated with the Delivered Energy and WREGIS Certificates without matching E-Tags associated with Delivered Energy will be rejected.
(c) Seller shall, at its sole expense, ensure that the WREGIS Certificates for a given calendar month correspond with the Delivered Energy for such calendar month. If Seller is required to generate E-Tags associated with Delivered Energy pursuant to the CAISO Tariff, and if matching E-Tags to Delivered Energy is required by WREGIS, the CPUC, the CEC, or other applicable Law, this shall be evidenced by the amounts corresponding to the Facility’s metered data that match E-Tags associated with the Delivered Energy. Subject to delivery of Replacement Product, Seller shall ensure that no WREGIS Certificates are transferred to Buyer’s WREGIS Account unless they are the result of Delivered Energy reflected in the Facility’s metered data and, if Seller is required to generate E-Tags associated with Delivered Energy pursuant to the CAISO Tariff, and if matching E-Tags to Delivered Energy is required by WREGIS, the CPUC, the CEC, or other applicable Law, matched with E-Tags associated with the Delivered Energy. (d) Due to the approximately ninety (90) day delay in the creation of WREGIS Certificates relative to the timing of invoice payment under Section 8.2, Buyer shall make an invoice payment for a given month in accordance with Section 8.2 before the WREGIS Certificates for such month are formally transferred to Buyer in accordance with the WREGIS Operating Rules and this Section 4.8. Notwithstanding this delay, Buyer shall have all right and title to all such WREGIS Certificates upon payment to Seller in accordance with Section 8.2. (e) A “WREGIS Certificate Deficit” means any deficit or shortfall in WREGIS Certificates delivered to Buyer for a calendar month as compared to the Delivered Energy for the same calendar month (“Deficient Month”). 630
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Facilities”) to be entered into among two or more of Seller, the Participating Transmission Owner, Seller’s Affiliates, and/or third parties pursuant to which certain Interconnection Facilities, interconnection service and/or transmission service may be subject to joint ownership and/or shared maintenance and operation arrangements. Seller agrees that the Shared Facilities Agreements (i) shall not preclude Seller from performing or satisfying, and shall not purport to limit, Seller’s obligations hereunder, (ii) shall provide for separate metering of the Installed Capacity, (iii) shall provide that any other generating or energy storage facilities not included in the Facility but using Shared Facilities shall not be included within the Facility’s CAISO Resource IDs; and (iv) shall provide that any curtailment of the full capacity of Shared Facilities that is ordered by Transmission Provider that Seller and its Affiliates have discretion to allocate across generating or energy storage facilities using the Shared Facilities shall not be allocated to the Facility more than its pro rata portion of the total capacity of all generating or energy storage facilities using the Shared Facilities, except to the extent such curtailment is caused by the Facility or Seller’s actions or inactions with respect to the Facility. Seller shall not, and shall not permit any Affiliate in respect of the Facility to, allocate to other parties a share of the total interconnection capacity under the Interconnection Agreement in excess of an amount equal to the total interconnection capacity under the Interconnection Agreement minus 1,495 MW; provided, Seller may share the interconnection capacity to which Seller is entitled under Seller’s Interconnection Agreement with one or more of Seller’s Affiliates or with third parties in excess of such amount, solely if and to the extent that, and solely for the period of time that, the amount of Energy that the Facility is capable of generating is less than 1,495 MW.
6.4 CAISO Tariff Requirements. Throughout the Delivery Term, Seller shall comply with all CAISO Tariff requirements applicable to the Facility throughout the Delivery Term.
ARTICLE 7
METERING
7.1 Metering. Seller shall measure the amount of Delivered Energy produced by the Facility using an Approved Meter. The Approved Meter shall be installed at the switching station adjacent to the SunZia East Converter Station and maintained at Seller’s cost. If the Approved Meter is inaccurate, Seller will cause such meter to be promptly corrected in accordance with Prudent Operating Practice and CAISO requirements, as applicable. Seller will be responsible for any costs, fines or penalties, including imbalance charges as a result of the inaccurate meter. The meter shall be kept under seal, such seals to be broken only when the meters are to be tested, adjusted, modified or relocated. In the event Seller breaks a seal, Seller shall notify Buyer as soon as practicable. In addition, Seller hereby agrees to provide all Approved Meter data to Buyer in a form reasonably acceptable to Buyer, and consents to Buyer obtaining from CAISO the meter data directly relating to the Facility and all inspection, testing and calibration data and reports. Buyer and Seller, or Seller’s Scheduling Coordinator, shall cooperate to allow both Parties to retrieve the meter reads from the CAISO Market Results Interface – Settlements (MRIS-S) (or its successor) or directly from the Approved Meter at the Facility.
7.2 Meter Verification. Annually, if Seller has reason to believe there may be a meter malfunction, or upon Buyer’s reasonable request, Seller shall test the meter. The tests shall be conducted by independent third parties qualified to conduct such tests. Buyer shall be notified seven (7) days in advance of such tests and have a right to be present during such tests. If a meter 633
is inaccurate it shall be promptly repaired or replaced. If a meter is inaccurate by more than one percent (1%) and it is not known when the meter inaccuracy commenced (if such evidence exists such date will be used to adjust prior invoices), then the invoices covering the period of time since the last meter test shall be adjusted for the amount of the inaccuracy on the assumption that the inaccuracy persisted during the second half of such period.
ARTICLE 8
INVOICING AND PAYMENT; CREDIT
8.1 Invoicing. Seller shall make good faith efforts to deliver an invoice to Buyer no sooner than fifteen (15) days after the end of the prior monthly delivery period. Each invoice shall provide Buyer (a) records of metered data, including metering and CAISO transaction data sufficient to document and verify the amount of Delivered Energy for each Settlement Period during the preceding month, the applicable Contract Price, the LMP in the Day-Ahead Market at the Delivery Point for each Settlement Period; (b) information supporting the amount of Deemed Delivered Energy, and the amounts determined pursuant to Section 4.6(e), if applicable, and Adjusted Energy Production, (c) a reconciliation of hourly meter data, E-Tag data (to the extent required under the CAISO Tariff) and associated calculations, including the lesser of each by hour, plus any additional data as may be reasonably required by Buyer for compliance with CPUC reporting obligations, including pursuant to the CPUC’s Energy Division Portfolio Content Category Classification Review Handbook (or successor publication); (d) a statement of the quantity of WREGIS Certificates transferred during the prior month that have been matched with E-Tags associated with the Delivered Energy (only if Seller is required to generate E-Tags associated with Delivered Energy pursuant to the CAISO Tariff, and if matching E-Tags to Delivered Energy is required by WREGIS, the CPUC, the CEC, or other applicable Law); (e) access to any records, including invoices or settlement data from the CAISO, necessary to verify the accuracy of any amount; (f) information as reasonably necessary to verify Contract Revenues from third-party sales pursuant to Section 4.5(b), if any; and (g) be in a reasonable format covering the services provided in the preceding month determined in accordance with the applicable provisions of this Agreement.
8.2 Payment. Buyer shall make payment to Seller by wire transfer or ACH payment to the bank account provided on each monthly invoice. Buyer shall pay undisputed invoice amounts within twenty five (25) days after the end of the prior monthly delivery period; provided, if Seller delivers an invoice to Seller after the fifteenth (15th) day following the end of the prior monthly delivery period, Buyer shall pay undisputed invoice amounts no later than the tenth (10th) day following delivery of such invoice. If such due date falls on a weekend or legal holiday, such due date shall be the next Business Day. Payments made after the due date will be considered late and will bear interest on the unpaid balance. If the amount due is not paid on or before the due date or if any other payment that is due and owing from one party to another is not paid on or before its applicable due date, a late payment charge shall be applied to the unpaid balance and shall be added to the next billing statement. Such late payment charge shall be calculated based on an annual Interest Rate equal to the prime rate published on the date of the invoice in The Wall Street Journal (or, if The Wall Street Journal is not published on that day, the next succeeding date of publication), (the “Interest Rate”). If the due date occurs on a day that is not a Business Day, the late payment charge shall begin to accrue on the next succeeding Business Day.
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8.3 Books and Records. To facilitate payment and verification, each Party shall maintain all books and records necessary for billing and payments, including copies of all invoices under this Agreement, for a period of at least two (2) years or as otherwise required by Law. Upon fifteen (15) days’ prior Notice to the other Party, either Party shall be granted reasonable access to the accounting books and records within the possession or control of the other Party (subject to the two (2) year retention requirement of the preceding sentence) pertaining to all invoices generated pursuant to this Agreement, subject to redaction by Seller with respect to Confidential Information.
Seller acknowledges that in accordance with California Government Code Section 8546.7, Seller may be subject to audit by the California State Auditor with regard to Seller’s performance of this Agreement, for a period of three (3) years after final payment hereunder, because the compensation under this Agreement exceeds $10,000.
8.4 Payment Adjustments; Billing Errors. Payment adjustments shall be made if Buyer or Seller discovers there have been good faith inaccuracies in invoicing that are not otherwise disputed under Section 8.5, there is determined to have been a meter inaccuracy sufficient to require a payment adjustment, or if CAISO recalculates amounts due or owing in respect of prior periods. If the required adjustment is in favor of Buyer, Buyer’s monthly payment shall be credited in an amount equal to the adjustment. If the required adjustment is in favor of Seller, Seller shall add the adjustment amount to Buyer’s next monthly invoice. Adjustments in favor of either Buyer or Seller shall bear interest, until settled in full, in accordance with Section
8.2, accruing from the date on which the non-erring Party received Notice thereof.
8.5 Billing Disputes. A Party may, in good faith, dispute the correctness of any invoice or any adjustment to an invoice rendered under this Agreement or adjust any invoice for any arithmetic or computational error within twelve (12) months of the date the invoice, or adjustment to an invoice, was rendered. In the event an invoice or portion thereof, or any other claim or adjustment arising hereunder, is disputed, payment of the undisputed portion of the invoice shall be required to be made when due. Any invoice dispute or invoice adjustment shall be in writing and shall state the basis for the dispute or adjustment. Payment of the disputed amount shall not be required until the dispute is resolved. Upon resolution of the dispute, any required payment shall be made within ten (10) Business Days of such resolution along with interest accrued at the Interest Rate from and including the original due date to but excluding the date paid. Inadvertent overpayments shall be returned upon request or deducted by the Party receiving such overpayment from subsequent payments, with interest accrued at the Interest Rate from and including the date of such overpayment but excluding the date repaid or deducted by the Party receiving such overpayment. Any dispute with respect to an invoice is waived if the other Party is not notified in accordance with this Section 8.5 within twelve (12) months after the invoice is rendered or subsequently adjusted, except to the extent any misinformation was from a third party not affiliated with any Party and such third party corrects its information after the twelve-month period. If an invoice is not rendered within twelve (12) months after the close of the month during which performance occurred, the right to payment for such performance is waived.
8.6 Netting of Payments. The Parties hereby agree that they shall discharge mutual debts and payment obligations due and owing to each other on the same date through netting, in which case all undisputed amounts owed by each Party to the other Party for the purchase and sale of Product during the monthly billing period under this Agreement or otherwise arising out of this Agreement, including any related damages calculated pursuant to Exhibits B and E, interest, and 635
payments or credits, including pursuant to Section 4.3(c), shall be netted so that only the excess amount remaining due shall be paid by the Party who owes it.
8.7 Seller’s Development Security. To secure its obligations under this Agreement, Seller shall deliver the Development Security to Buyer within thirty (30) days after the Effective Date. Seller shall maintain the Development Security in full force and effect. Upon the earlier of (A) Seller’s delivery of the Performance Security, or (B) sixty (60) days after termination of this Agreement, Buyer shall return the Development Security to Seller, less the amounts drawn in accordance with this Agreement. If and to the extent that any portion of the Development Security is a Letter of Credit and the issuer of such Letter of Credit (i) fails to maintain a Credit Rating of at least “A-” by S&P or “A3” by Moody’s, (ii) indicates its intent not to renew such Letter of Credit and such Letter of Credit expires prior to the Commercial Operation Date, (iii) fails to honor Buyer’s properly documented request to draw on such Letter of Credit, or (iv) becomes Bankrupt, Seller shall have ten (10) Business Days to post substitute collateral that meets the requirements set forth in the definition of Development Security. If and to the extent that any portion of the Development Security is a Guaranty, Seller shall (i) provide prompt Notice to Buyer if Guarantor becomes Bankrupt or otherwise fails to meet the criteria for an acceptable Guarantor as set forth in clauses (c) and (d) of the definition of Guarantor, but not later than ten (10) Business Days after Seller becomes aware of such development and (ii) post substitute collateral that meets the requirements set forth in the definition of Development Security within ten (10) Business Days.
Seller shall have no obligation to replenish the Development Security following any draws thereon by Buyer. Seller’s maximum liability for an Event of Default or failure to perform its obligations hereunder prior to the Commercial Operation Date shall be capped at the amount of the Development Security, less any amounts collected by Buyer prior to such Event of Default or failure to perform.
8.8 Seller’s Performance Security. To secure its obligations under this Agreement, Seller shall deliver Performance Security to Buyer on or before the Commercial Operation Date.
Seller shall maintain the Performance Security in full force and effect until the following have occurred: (A) the Delivery Term has expired or terminated early; and (B) all payment obligations of the Seller arising under this Agreement, including compensation for penalties, Termination Payment, indemnification payments or other damages are paid in full (whether directly or indirectly such as through set-off or netting). Following the occurrence of both events, Buyer shall promptly return to Seller the unused portion of the Performance Security. Within ten (10) Business Days following any draw by Buyer on the Performance Security, Seller shall replenish the amount drawn such that Performance Security is restored to the amount on Cover Sheet. If and to the extent that any portion of the Performance Security is a Letter of Credit and the issuer of such Letter of Credit (i) fails to maintain a Credit Rating of at least “A-” by S&P or “A3” by Moody’s, (ii) fails to honor Buyer’s properly documented request to draw on such Letter of Credit, or (iii) becomes Bankrupt, Seller shall have ten (10) Business Days to post substitute collateral that meets the requirements set forth in the definition of Performance Security. If and to the extent that any portion of the Performance Security is a Guaranty, Seller shall (i) provide prompt Notice to Buyer if Guarantor becomes Bankrupt or otherwise fails to meet the criteria for an acceptable Guarantor as set forth in clauses (c) and (d) of the definition of Guarantor, but not later than ten (10) Business Days after Seller becomes aware of such development and (ii) post substitute collateral that meets the requirements set forth in the definition of Performance Security within ten (10) Business Days. 636
8.10 Buyer’s First Priority Security Interest in Cash or Cash Equivalent Collateral.
To secure its obligations under this Agreement, and until released as provided herein, Seller hereby grants to Buyer a present and continuing first-priority security interest in, and lien on (and right to net against), and assignment of the Development Security or Performance Security, any other cash collateral and cash equivalent collateral posted by Seller and any and all interest thereon or proceeds resulting therefrom or from the liquidation thereof, whether now or hereafter held by, on behalf of, or for the benefit of Buyer, and Seller agrees to take all action as Buyer reasonably requires in order to perfect Buyer’s first-priority security interest in, and lien on (and right to net against), such collateral and any and all proceeds resulting therefrom or from the liquidation thereof.
Upon or any time after the occurrence of an Event of Default caused by Seller, an Early Termination Date resulting from an Event of Default caused by Seller, or an occasion provided for in this Agreement where Buyer is authorized to retain all or a portion of the Development Security or Performance Security, Buyer may do any one or more of the following (in each case subject to the final sentence of this Section 8.10, the final sentence of Section 11.2 and the provisions of Article 12):
(a) Exercise any of its rights and remedies with respect to the Development Security or Performance Security, as applicable, including any such rights and remedies under Law then in effect;
(b) Draw on any outstanding Letter of Credit issued for its benefit and retain any cash held by Buyer as Development Security or Performance Security, as applicable; and (c) Liquidate all Development Security or Performance Security, as applicable then held by or for the benefit of Buyer free from any claim or right of any nature whatsoever of Seller, including any equity or right of purchase or redemption by Seller.
Buyer shall apply the proceeds of the collateral realized upon the exercise of any such rights or remedies to reduce Seller’s obligations under this Agreement (Seller remains liable for any amounts owing to Buyer after such application), subject to Buyer’s obligation to return any surplus proceeds remaining after these obligations are satisfied in full.
8.11 Buyer Financial Statements. Buyer shall provide to Seller, both upon request and as indicated below: (a) within ninety (90) days following the end of each fiscal quarter, an unaudited quarterly financial statement of Buyer (including a balance sheet and statements of income and cash flows) prepared in accordance with generally accepted accounting principles as promulgated by the Government Accounting Standards Board in the United States, consistently applied; (b) within one hundred and eighty (180) days following the end of each fiscal year, annual 637
financial statements of Buyer (including a balance sheet and statements of income and cash flows) prepared in accordance with the requirements of California law applicable to Joint Powers Authorities; (c) as available, Buyer’s annual report; (d) reserve levels; (e) subscription and opt out rates; and (f) other financial and operational information as may be reasonably requested by the Seller’s financing parties from time to time; provided that nothing in this Section 8.11 shall require Buyer to provide information that is not generally available to Buyer as part of its normal accounting and financing reporting processes. Notwithstanding anything to the contrary herein, the provisions of this Section 8.11 shall not apply so long as Buyer obtains and maintains a publicly available Investment Grade Credit Rating.
8.12 Buyer Lockbox Arrangement.
(a) To secure Buyer’s obligations under this Agreement, Seller shall have the right to execute a Joinder, which shall allow Seller to become a PPA Provider and Secured Creditor under the Intercreditor and Collateral Agency Agreement for so long as Buyer is subject to the Security Agreement and Lockbox Account (or any successor arrangement generally available to Buyer’s creditors) (the current arrangement and any successor arrangement generally available to Buyer’s creditors is the “Buyer Lockbox Arrangement”); provided, however, that if Buyer (i) has an Investment Grade Credit Rating, or (ii) provides Buyer Performance Security, then so long as Buyer is not in default under this Agreement or the Buyer Lockbox Arrangement, Buyer may, at the direction of its Board, request the dissolution of the Buyer Lockbox Arrangement and Seller hereby agrees that (x) its security interest under the Buyer Lockbox Arrangement shall terminate, without further action, effective upon the termination of the security interests of all other PPA Providers under the Buyer Lockbox Arrangement and (y) if requested by Buyer, Seller would promptly execute a written termination statement confirming such termination in accordance with the Buyer Lockbox Arrangement. If the Buyer Lockbox Arrangement is dissolved as a result of Buyer obtaining a privately issued Investment Grade Credit Rating, Buyer shall provide to Seller, within ten (10) Business Days of its receipt or sending by Buyer from time to time, for so long as Buyer does not maintain a Buyer Lockbox Arrangement, all correspondence with the rating agency(ies) providing a Credit Rating to Buyer. If, subsequent to the dissolution and termination of the Buyer Lockbox Arrangement, Buyer has obtained a privately issued Investment Grade Credit Rating and Seller has reasonable grounds to believe that Buyer’s Credit Rating is no longer an Investment Grade Credit Rating, Buyer will make commercially reasonable efforts, within thirty (30) days of Seller’s request, to obtain an update of its Credit Rating. If, subsequent to the dissolution and termination of the Buyer Lockbox Arrangement, Buyer ceases to maintain the Investment Grade Credit Rating under clause (i) of this Section 8.12(a) or fails to maintain the Buyer Performance Security required under clause (ii) of this Section 8.12(a), then Buyer shall within five (5) Business Days either post replacement Buyer Performance Security or enter into a substantially similar successor Buyer Lockbox Arrangement under which Seller is allowed to become a PPA Provider and Secured Creditor.
(b) Under the Buyer Lockbox Arrangement:
(i) Buyer shall provide Notice to Seller of the termination of all security interests under the Security Agreement at least five (5) Business Days prior to such termination.
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(ii) Buyer further agrees it will not create any additional security interests (i) under the Security Agreement on terms more favorable than those currently offered to Seller, or (ii) under any arrangement similar to the Security Agreement that is generally available to Buyer’s creditors unless Seller is offered the right to participate in such arrangement on terms no less favorable than those offered to the other participants. (iii) In addition, so long as Buyer is not in default under this Agreement, the Intercreditor and Collateral Agency Agreement and the Security Agreement, Buyer may request the dissolution of the current Buyer Lockbox Arrangement in order to enter into a substantially similar successor Buyer Lockbox Arrangement and, provided that Seller is allowed to become a PPA Provider and Secured Creditor under the successor Buyer Lockbox Arrangement, Seller hereby agrees that (x) its security interest under the Security Agreement shall terminate, without further action, effective upon the termination of the security interests of all other PPA Providers under the Security Agreement, and (y) if requested by Buyer, Seller would promptly execute a written termination statement confirming such termination in accordance with Section 7.12 of the Security Agreement.