Valley Clean Energy Board – March 10, 2022
via video/teleconference
Item 16 – Line of credit – River City Bank
1 yvonnehunterphotography.com
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Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 3 Item 16 – Line of Credit (VCE / RCB)
Overview
• Background
• Proposed River City Bank Amended and Restated Credit Agreement • Recommendation
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 4 Item 16 – Line of Credit (VCE / RCB)
Background
• Customer Rate Stabilization – Past 24 Months: COVID-19 pandemic, 2021 PCIA, power market prices, heat storm, drought, modeling, and CPUC delays. • Reserves Policy – 30 Day Min (2022 Reserve target of 80-90 days by Dec. 31, 2022) • Current Financial Instruments
o Line of Credit with River City for $5M Cash with $2M letter of credit capacity under 45 day extension o Line of Credit with Yolo County for $5M ending December 31, 2022 • 2022 PCIA and PG&E rates shows VCE net income ~$17M by the end of 2022.
Proposed River City Amended and Restated Agreement
(1) Revolving line of credit not to exceed $11M and (2) Term loan for approximately $1.1M. • Renewal Period – 2-year agreement increased from short-term and annual extension • Cash Facility - $2M increase in cash from $5M to $7M
• Letter of Credit Facility - $4M increase from $7M to $11M • Return to pre-pandemic credit facility
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 5 Item 16 – Line of Credit (VCE / RCB)
Line of Credit Summary (2 Year Agreement)
• Type of Financing: Commercial Revolving Line of Credit • Maximum Amount: $11M, with a $7M limit for cash advances • Maturity: March 1, 2024
• Interest Rate: Variable rate, Floating at the one (1) month U.S. Treasury Bill Yield + 2.00%, subject to a 2.00% floor (unchanged)
• Fees:
o 0.50% of the total RLOC commitment, payable upon loan closing o $5k, payable upon loan closing, provided that Borrower approves the use of Bank’s standard form documents o 0.10% of the average unused RLOC amount per annum, payable annually upon each anniversary of the RLOC Term Loan Summary (2 Year Agreement)
• Type of Financing: Term Loan
• Amount: $ 1,120,079.13 (outstanding principal as of 2/3/2022) • Maturity: Two (2) years 3/1/2024
• Interest Rate: Fixed 3.57%
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 6 Item 16 – Line of Credit (VCE / RCB)
Collateral/Pledged Assets
• Perfected security interest in 1st lien position for each of the following:
o Debt Service Reserve Account (“DSRA”) maintained at $1.1M o A security agreement that covers (i) the right of set-off to all of Borrower’s deposit accounts not otherwise encumbered by outside liens, and (ii) a pledge on Borrower revenues not otherwise encumbered by outside liens. Accounts encumbered by outside liens include the SMUD lockbox/revenue account and the SMUD reserve account.
o A perfected blanket lien filing covering all Accounts, Revenues, Resource Adequacy Contracts, and the Debt Service Reserve Account.
o No junior liens will be permitted on any Collateral
o Security: Rates set to recover costs covenant
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 7 Item 16 – Line of Credit (VCE / RCB)
Conclusions
• Staff believes that the reduced but continued uncertainty related to the PCIA fee, resource adequacy costs, and PG&E bundled rates for 2023 justify a 2-year agreement with River City Bank. • Agreement allows VCE to manage minimum short-term operational reserves and build back longer-term reserves of approximately 80 to 90 days cash by the end of 2022. • Additionally, credit support from both the County and River City Bank will allow VCE to (1) optimize borrowing costs, (2) provide additional assurance of rate stabilization and (3) work towards establishing a credit rating.
Recommendation & Discussion
1. Adopt a resolution approving terms for an Amended and Restated Credit Agreement with River City Bank, including a revolving line of credit not to exceed $11M and term loan for approximately $1.1M.
2. Authorize the Interim General Manager to conduct any final negotiations and implement the approval, sign all necessary documents, and ratify past actions related to the two-year Amended and Restated Credit Agreement with River City Bank
VCE Board of Directors Meeting – March 10, 2022
via video/teleconference
Item 17 – Bill Protection in the Time-of-Use (TOU) Transition 8 yvonnehunterphotography.com
Public Comments
9 To Provide Public Comment on any agenda item please:
➢ E-mail 300 words or less to: [email protected] OR
Join the Public Comment Queue by
➢ “Raising Hand” on Zoom Meeting
OR
➢ Press *9 if joining by phone
Emailed comments received before the item has concluded will be read into the record.
Emailed comments received after the item has concluded but before the end of the meeting will not be read but will be included in the meeting record.
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 10 Item 17 – Bill Protection in the Time-of-Use (TOU) Transition Background & Analysis
• Customers transitioning from flat rate (E1) to TOU rates – transition began in April 2021
• VCE is part of statewide movement to TOU
• Nearly 20% of VCE customers will transition
• CARE/FERA customers in hot climates exempt
• PG&E required to provide bill protection; CCAs are not • 4 different bill protection options
• Another option is not to provide bill protection (staff does not recommend)
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)]
11 Item 17 – Bill Protection in the Time-of-Use (TOU) Transition Bill Protection Option Estimated Cost Notes
1. Standardized $25 credit Total: $300,000-$312,500 One-time $25 bill credit for all residential TOU customers that stay on the rate for 12
months
2. Upon request by
customer – Bill Calculation
• $15,000 for billing engine tool
• $85 per account calculation
• $12,000-$15,000 for bill protection
credit
• Total: $78,000-81,000
Manual calculation in which customers call
in and are eligible for a “backwards
looking” bill protection credit after 12
months on the rate.
3. Upon request by
customer – Standardized
$25 credit
• $15,000 - $40,000 One-time $25 bill credit for residential TOU customers that opt for bill protection
and stay on the rate for 12 months.
4. Automatic for all eligible
customers
• $22,500+ for billing engine tool
• $120,000-$150,000 for bill protection
credit
• Total: $142,500-$172,500
Tool estimate of $22,500 could increase.
[1] Assuming that of 6,000 eligible customers, 10% request bill protection. The average credit would be $20-25. The high end of the range in total cost is unlikely as only 2-3% of customers are likely to call and request bill protection.
[2] Assuming 10-20% of eligible customers call to request bill protection [3] Assuming $20-$25 credit for 6,000 eligible customers VCE Board of Directors Meeting – March 10, 2022
via video/teleconference
Item 18 – Heat Pump Pilot Program 12
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Public Comments
13 To Provide Public Comment on any agenda item please:
➢ E-mail 300 words or less to: [email protected] OR
Join the Public Comment Queue by
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➢ Press *9 if joining by phone
Emailed comments received before the item has concluded will be read into the record.
Emailed comments received after the item has concluded but before the end of the meeting will not be read but will be included in the meeting record.
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] Background: Growing trend in home electrification. Rebate programs through Comfortable Homes and TECH Clean California, incentivizing the adoption of heat pumps. Customers could receive up to $4,800 for an installation.
VCE Program Design: Multi-phase
Phase 1 : Marketing, education and outreach (ME+O) – 2022-2023 • Customers, contractors, and key stakeholders (realtors, HVAC manufacturers, building officials, etc.) • Primary Focus: Encouraging replacements of failing, failed, or outdated cooling and heating systems with heat pumps • Highly efficient and lead to the near/total elimination of greenhouse gas emissions from furnaces • Secondary Focus: Retrofitting water heaters with heat pumps and home/duct insulation upgrades Phase 2: Influenced by phase 1, could include additional rebates from VCE – 2023 14 Item 18 – Heat Pump Pilot Program
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] ME+O Details (could include):
• Contractors: application assistance, web materials, webinars, 1:1 engagement • Customers: web materials, social media, print info, events (“Ask a Contractor”), providing info on items like ducting and mitigating bill increases
Program Partners: Energy Solutions and Franklin Energy
Phase 1 Budget (2022-2023): $5,000
Next Steps:
• Board approval 3/10/22
• Integrate feedback from Board
• Full program rollout in March
15 Item 18 – Heat Pump Pilot Program
VCE Board of Directors Meeting – March 10, 2022
via video/teleconference
Item 19 – Agricultural Flexible Irrigation Technology (AgFIT) Update 16 yvonnehunterphotography.com
Public Comments
17 To Provide Public Comment on any agenda item please:
➢ E-mail 300 words or less to: [email protected] OR
Join the Public Comment Queue by
➢ “Raising Hand” on Zoom Meeting
OR
➢ Press *9 if joining by phone
Emailed comments received before the item has concluded will be read into the record.
Emailed comments received after the item has concluded but before the end of the meeting will not be read but will be included in the meeting record.
Item 19 – AgFIT Update
Agricultural Flexible Irrigation Technology (AgFIT) Basics:
• 15% of VCE Load – Ag Sector/85% of service territory
• Pilot launch date: May 1st, 2022
• Duration: 3 years
• 5 MW cap
• Customer-centric: $1M in automation incentives for growers; easy and intuitive UI
• Dynamic pricing – mimics energy markets
• Goal is to shift load off peak; customers save money by responding to price signals
18 Agricultural Flexible Irrigation Technology (AgFIT) Basics:
• Launch date: May 1st, 2022
• Duration: 3 years
• 5 MW cap
• Customer-centric: $1M in automation incentives for growers, easy and intuitive UI
• Dynamic pricing
• Goal is to shift load off peak; customers save money by responding to price signals
19 Item 19 – AgFIT Update
Agricultural Flexible Irrigation Technology (AgFIT) Update:
• Advice Letter submitted 1/5/22; Petition to Modify submitted 1/31/22 to increase admin budget
• Customer meetings in progress: interest level moderately high • Press release went out in December 2021
• Contacted by press; other CCAs for more details
• Working with PG&E and the CPUC’s Energy Division on Pilot structure/implementation
• Next steps: enroll customers; begin process of installing automation incentives for enrolled customers
20 Item 19 – AgFIT Update