Valley Clean Energy Board Meeting – July 13, 2023
Item 14 – 80% Renewable by 2030 Goal 1
Public Comments
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Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)]
1. Background
2. Existing Long-term Power Contracts
3. Portfolio Modeling
4. Dispatch Curves – Seasonal & Annual Observations
5. Capacity Additions by Scenario
6. Cost Comparisons
7. RPS Content
8. Key takeaways
9. Strategic Plan / CAC Feedback
10. Recommendation
3 Item 14 – 80% Renewable by 2030 Goal: Outline
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] • In 2018 the Board adopted a goal for VCE’s power content to target 80% renewables by 2030. The goal also stated that 25% of this amount should be from local resources
• At the CAC’s November 2022 meeting, the Committee voted unanimously to recommend that the Board modify the existing goal to 100% renewable and maintain the 25% renewable from local resources provision • In Nov 2022, staff did not have the supporting analysis of the advantages/disadvantages associated with the CAC proposed modification of the current portfolio goal – specifically the 25% local component • Staff engaged the portfolio modeling services of First Principles Advisory (FPA), the firm that performed the 2022 IRP modeling (VCE Board approved contract in Feb 2023)
• Analyze the cost impacts of increasing VCE’s renewable portfolio content • Updated technology cost assumptions – including the incorporation of the Inflation Reduction Act (IRA) 4
Item 14 – 80% Renewable by 2030 Goal: Background
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 5 Item 14 – 80% Renewable by 2030 Goal: Existing Long-Term Power Contracts
Notes:
1) Resurgence anticipated
COD is early July ’23
2) Putah is a 4 hr system
(not 8 hr)
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 6 Item 14 – 80% Renewable by 2030 Goal: Portfolio Modeling Scenarios • Scenario 1.a can be considered the base
case or business as usual (BAU)
• Scenario 1.b increases the renewable
percentage to 100% by 2030 as well as
maintaining the 25% local renewable
component
• Scenario 1.c increases the renewable
percentage to 100% but only considers
the two existing local PPAs1
• Scenario 1.d maintains the current 80%
renewable by 2030 and only considers
the two existing local PPAs1
Scenario NG Price 2030 RPS
Target
Local RPS
Target
1.a P50 80% 25%
1.b P50 100% 25%
1.c P50 100% -
1.d P50 80% -
Note: 1) Putah Creek and Gibson
2) In addition, scenarios were performed using a higher natural gas forecast. For this presentation, however, the focus will be on the base case natural gas scenario Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 7 Item 14 – 80% Renewable by 2030 Goal: Dispatch Curves January
July
2024 2030
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 8 Item 14 – 80% Renewable by 2030 Goal: Capacity Additions Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 9 Item 14 – 80% Renewable by 2030 Goal: Scenario Cost Comparisons • All scenarios are measured off Scenario
1.a (BAU scenario)
• Scenario 1.b is $23.5 million more than
the BAU case
• Scenario 1.c is $33.4 million cheaper than
the BAU case (or nearly $57 million
cheaper than Scenario 1.b)
• Scenario 1.d is the lowest cost of all cases
• The incremental cost to go from 80%
(1.d) to 100% (1.c) renewable is not
unreasonable
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 10 Item 14 – 80% Renewable by 2030 Goal: RPS Content
• All scenarios meet or exceed 100% RPS
by 2030
• The difference in scenarios is the
technological make-up of the selected
renewable technologies
• Scenario 1.c is a lower cost portfolio as it
incorporates more cost-effective
technology types that VCE does not
currently have & generates additional
sale opportunities
• This scenario also generates the greatest
amount RPS credits thanks to a more diverse
aggregate generation profile
Note: above graphic is Scenario 1.a
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] • Primary available renewable technology in Yolo County is solar + storage • VCE’s portfolio is already heavily concentrated in solar+4hr storage; mandating the 25% carve out will limit the organization’s ability to diversify its supply with other technologies • Onshore wind, geothermal, and storage greater than 4 hours in duration constitute a greater share of contracted supply for the scenarios where the local constraint is not active • Large scale solar is challenging to permit in Yolo County • Combined, the recently passed IRA legislation and the current strained market conditions for li-ion based storage projects have significantly increased the opportunity cost associated with VCE’s local generation policy
• Increasing the RPS target to 100% and keeping the 25% local carveout will result in an additional NPV expense of ~$23M relative to the baseline scenario • Increasing the current 80% renewable policy to 100%, excluding add’l local, will decrease costs • In all scenarios, VCE needs additional stand-alone storage. Easier to permit due to smaller footprint (compared to solar)
11 Item 14 – 80% Renewable by 2030 Goal: Key Takeaways
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] Strategic Plan
• VCE’s current Strategic Plan contains the following goal:
• “Manage power supply resources to consistently exceed California’s Renewable Portfolio Standard (RPS) while working toward a resource portfolio that is 100% carbon neutral by 2030.”
• By definition, California RPS renewable energy is also carbon free • VCE would be exceeding its strategic plan goal by modifying to a 100% renewable goal by 2030 Community Advisory Committee (CAC) Feedback
• The CAC was supportive of Staff’s recommendation and further requested a slight enhancement of the recommendation
• The CAC proposed (and staff supports), that when VCE conducts solicitations it states there is a preference for locally sited resources. In addition, the CAC believes the definition of “local” to be expanded to include Yolo County and the adjacent counties 12 Item 14 – 80% Renewable by 2030 Goal: Strategic Plan / CAC Feedback Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] Staff’s Recommendation:
• Receive presentation and provide feedback on VCE’s power portfolio content goals
• Increase the current 80% renewable goal by 2030 to 100% renewable by 2030 and substitute the 25% renewable local component goal with a goal of 25% of future storage amounts to be from local installations
• When conducting solicitations state a preference for locally sited resources1 13 Item 14 – 80% Renewable by 2030 Goal: Recommendation Note: 1) “Local” defined as Yolo and adjacent counties
Valley Clean Energy Board Meeting – July 13, 2023
Item 15 – Net Margin Allocation 14
Public Comments
15 To Provide Public Comment on any agenda item please:
➢ E-mail 300 words or less to: [email protected] OR
If in person, complete a COMMENT CARD
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Join the Public Comment Queue by
➢ “Raising Hand” on Zoom Meeting
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➢ Press *9 if joining by phone
Emailed comments received before the item has concluded will be read into the record.
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Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 16 Item 15 – Allocation of 2022 Net Margin
Overview
VCE’s 2022 audited net margin is $5.3 million. The VCE Rate Structure & Dividend Program Guidelines (adopted in 2019), provides guidance for the Board’s options in allocating the net margin.
This presentation will provide:
• Background of 2022 Net Margin
• Present 2022 Net Margin Allocation
• Recommended 2022 Net Margin Allocation
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 17 Item 15 – Allocation of 2022 Net Margin
Description
Audited 2022
Results
Electricty Sales 86,662,000
Operating Expense 80,897,000
Operating Margin 5,765,000
Prinipal Debt Payments 441,000
Adjusted Net Margin less prinicpal Debt Payments 5,324,000 Adjusted Net Margin Pectentage 6.14%
Allocation Amount <=5% 4,333,000
Allocation Amount > 5% 991,000
Aloocation of Net Margin up to 5% Perectage
Allocation
Amount
Cash Reserves Allocation 95% 4,116,000 Minimum
Local Programs Allocation 5% 217,000 Minimum
Aloocation of Net Margin above 5% Perectage
Allocation
Amount
Allocation to Cash Reserves 50% 495,500 Minimum
Discretionary Allocation (After Cash Reserves) 50% 495,500 Maximum Dividend Program Formula
The VCE Dividend Program formula
recommends allocating the net margin as
follows:
• Net margin up to 5% is to be allocated
as follows:
o At least 5% (of the 5%) goes to
Local Program Reserves for
program implementation
o The balance goes to cash
reserves
• Net margin above 5% is to be
allocated as follows:
o At least 50% to cash reserves
o Remainder allocated amongst
dividends and Program Reserve
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 18 Item 15 – Allocation of 2022 Net Margin
Discretionary Allocation (After Cash Reserves) 50% 495,000 Maximum Cash Reserves 0% -
Local Programs (Targeted 2024 Spend) 100% 495,500
Customer Dividends (Targeted 2024 Spend) 0% -
Discretionary Allocation (After Cash Reserves) 50% 495,000 Maximum Cash Reserves 100% 495,500
Local Programs (Targeted 2024 Spend) 0% -
Customer Dividends (Targeted 2024 Spend) 0% -
Discretionary Allocation (After Cash Reserves) 50% 495,000 Maximum Cash Reserves 0% -
Local Programs (Targeted 2024 Spend) 0% -
Customer Dividends (Targeted 2024 Spend) 100% 495,500
Scenario 1: Additional Programs Funds (Staff Recommended) Discretionary Allocation Staff considered the following
factors related to this
recommendation.
• Additional cash reserves would
not have a material affect
• Dividends less than a 1%
discount; small impact
• ~2.5%/$1M annually in
discounts (CARE and FERA)
• Investment in programs
provides largest material affect
(partial implementation of VCE’s
3-Year Programs Plan)
Scenario 2: Additional Cash Reserves
Scenario 3: Customer Dividends
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 19 Item 15 – Allocation of 2022 Net Margin
Considerations
• Actual and forecasted cash reserves are an important consideration. • Ongoing power cost increases and regulatory pressures on resource adequacy
• 2023 Reserve targets to increase to 180+ days of cash on hand • Cash Reserves are utilized primarily to enhance rate stability Community Advisory Committee (CAC) Consideration
The staff recommendation was presented to the CAC at its June 22, 2023 meeting. The CAC unanimously supported the staff recommendation.
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 20 Item 15 – Allocation of 2022 Net Margin
Recommendation
Based on VCE’s Rate Structure & Dividend Program Guidelines and its assessment of material impact on VCE’s strategic goals, staff is recommending the VCE Board of Directors approve the following allocation of VCE’s 2022 net margin of $5.3M:
• $4,611,000 to cash reserves to reach cash reserve targets (87%) • $712,500 to the Local Programs Reserve (13%)
Note: $1 M allocated to low-income customers in 2023 in the form of a 2.5% rate discount approved by the Board in Dec 2022
Valley Clean Energy Board Meeting – July 13, 2023
Item 16 – CalCCA Best Practices 21
Public Comments
22 To Provide Public Comment on any agenda item please:
➢ E-mail 300 words or less to: [email protected] OR
If in person, complete a COMMENT CARD
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)] 23 Item 16 – CalCCA Model Practices: Overview
Overview
This is an informational presentation.
• The California Community Choice Association (CalCCA) released a new guide on responsible business practices and sound governance for Community Choice Aggregation (CCA) programs. • The Model Practices Guide addresses key areas of CCA operations including financial management, enterprise risk management, implementation and expansion planning, transparency, and deregistration.
• VCE has been set up and managed based on Energy Industry and CCA best practices and plans to use the new CalCCA guide to assess and refine its existing practices.
This presentation will provide:
• Brief background on the CalCCA guide
• Highlight VCE’s Actions Related to Model Practices
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 24 Item 16 – CalCCA Model Practices: Background
The Model Practices Guide is intended to act as a framework for community choice energy providers to best support their operations while considering scale, local interests, and other unique circumstances. The Guide is designed to:
• Help ensure that Community Choice Aggregators (CCAs) are consistently well-managed, financially secure, operating professionally, and effectively governed by boards of elected or appointed officials; • Facilitate a more deliberate exchange among Members of model practices for governance and operation; • Enable CCAs to jointly anticipate and address challenges arising in regulatory and legislative venues and within the CCA community; and
• Communicate model practices to customers, governing boards, policymakers, financial institutions, the CCA community, and the public.
CalCCA Model Practices Guide
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 25 Item 16 – CalCCA Model Practices: Summary
Responsible governance – Enable and foster a governance model that organizes operational, financial, risk management, and reporting processes to inform the Member’s governing board .
Sustained Financial Strength – Addressing financial planning and reporting, risk management with the goal of long-term financial viability.
Transparency - Members commit to transparency in their operations and finances to promote accountability to the community they serve.
Model Practices Guide - Member commitment
• Member commitment
• Responsible governance
• Sustained Financial Strength
• Transparency
• Implementation, Deregistration, and Expansion Planning • Enterprise Risk Management
• Energy
• Regulatory & Legislative
• Information Technology
• Financial Management & Human Resources
CalCCA Model Practices Guide – Covered Topics
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 26 Item 16 – CalCCA Model Practices: VCE Accomplishments CalCCA Model Practices Guide – VCE Model Practices Related Actions VCE’s Responsible Governance
• JPA Agreement (Establishment)
• Mission Statement and Vision Statement
• Feasibility Study and Implementation Plan
• VCE’s Strategic Plan (2021-2023)
• VCE Integrated Resource Planning
• Enterprise Risk Management Policy
• VCE’s Three Year Programs Plan
VCE’s Sustained Financial Strength
Budget Policy, Collections Policy, Cost Based
Rate Policy, Financial Reserve Policy, Rate
Adjustment Policy, Debt Policy
VCE’s Transparency
Hybrid Meetings, Customer & Data Policies,
Net Energy Metering (NEM) Policy,
Sponsorship Guidelines, Dividend Program
Guidelines, and Employee Handbook Updates
VCE’s Key Documents webpage hosts all updated documents and financial information Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 27 Item 16 – Allocation of 2022 Net Margin
Next Steps
VCE has been set up and managed based on Energy Industry and CCA best practices and plans to use the new CalCCA guide to assess and refine its existing practices going forward.