Valley Clean Energy Board Meeting – April 11, 2024
Item 17 – Calendar Year 2023 Financial Audit – James Marta & Associates 1 yvonnehunterphotography.com
James Marta & Company LLP
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Presented by
James Marta CPA, CGMA, ARPM
VALLEY CLEAN ENERGY ALLIANCE
SUMMARY OF AUDIT RESULTS
DECEMBER 31, 2023
3 James Marta & Company LLP
Agenda • Communications with Those Charged with Governance • December 31, 2023, Valley Clean Energy Alliance (VCE) Financial Information and Auditor’s Report
4 COMMUNICATION WITH
THOSE CHARGED WITH GOVERNANCE
5 James Marta & Company LLP
Professional
standards require
that we provide
you with
information related
to our audit of
VCE. This
information is
summarized as
follows:
• Responsibilities and Opinion
• Financial statements are the
responsibility of management
• Our responsibility is to express
an audit opinion
• We issued an unmodified
opinion (the best and auditor
can give)
6 James Marta & Company LLP
REPORT TO YOU - INTERACTIONS WITH MANAGEMENT
Management Consultations
with Other Independent
Accountants:
✓ None
Disagreements with
Management of Difficulties
Encountered:
✓ None
Management
Representations:
In process
7 James Marta & Company LLP
REPORT TO YOU
QUALITATIVE
ASPECTS OF
ACCOUNTING
PRACTICES
• Significant Accounting Policies and
Changes in Those Policies - No changes
• Management Judgments and
Accounting Estimates
• Receivables, Allowance for Doubtful
Accounts
• Appropriate and in-line with
standards
8 James Marta & Company LLP
AUDIT
PROCEDURES
• An Audit is more than just assurance regarding the fairness of presenting financial statements. An Audit involves gaining an understanding of the organization’s systems and controls.
- Understanding; systems, policies and procedures
- Tests of control
- Gathering other audit evidence, review of details, performing test calculations. - Review of accounting methods and reporting
9 James Marta & Company LLP
RESULTS OF
THE AUDIT
10 Consideration Area Result
Planned Scope and Timing Scope and timing as anticipated Findings Identified in
Performing the Audit None
Significant Adjustments or Disclosures Not
Reflected in the Financial Statements None
FINANCIAL STATEMENTS
WITH INDEPENDENT AUDITOR'S REPORT
11 James Marta & Company LLP
INDEPENDENT
AUDITOR'S
REPORT
• Pages 1-3 of the Audited Financial
Statements
• Unmodified opinion (Page 1),
the best opinion that we can provide.
(DRAFT REPORT)
12 James Marta & Company LLP
MANAGEMENT’S
DISCUSSION &
ANALYSIS
(MD&A)
• Pages 4-7
• Financial Highlights
• Condensed financial statements and graphs plus narrative about why balances changed from prior years
• Analysis of balances and transactions
• Facts or conditions that are expected to have a significant effect 13 James Marta & Company LLP
STATEMENT OF
NET POSITION
14 Assets up $22.2M
(Mainly increase in
Electricity Revenue)
Liabilities up $1.5M
Net position is
up $20.8M
James Marta & Company LLP
STATEMENT OF
NET POSITION
15 2023 2022
ASSETS
Current assets
Unrestricted Cash $ 27,479,933 $ 3,850,610
Accounts receivable, net of allowance 10,599,982 11,085,087 Accrued revenue 3,434,034 3,430,397
Prepaid expenses 42,169 -
Other current assets and deposits 1,806,883 1,806,883
Total Current Assets 43,363,001 20,172,977
Restricted assets:
Cash in - debt service reserve fund 1,100,000 1,100,000 Cash in - power purchase reserve fund - 2,709,273
Total Restricted assets 1,100,000 3,809,273
Noncurrent Assets
Other noncurrent assets and deposits 1,893,604 152,313
Total Noncurrent Assets 1,893,604 152,313
TOTAL ASSETS $ 46,356,605 $ 24,134,563
LIABILITIES
Current Liabilities
Accounts payable $ 446,056 $ 399,529
Accrued cost of electricity 5,743,525 4,657,891
Accrued payroll 58,367 116,285
Interest payable - 2,248
Due to member agencies 4,132 25,160
Other accrued liabilities 3,821,884 2,810,664
Line of credit - 530,968
Total Current Liabilities 10,073,964 8,542,745
Noncurrent Liabilities
Line of credit - 181,284
Total Noncurrent Liabilities - 181,284
TOTAL LIABILITIES 10,073,964 8,724,029
NET POSITION
Net position
Designated - local program reserves 840,000 224,500
Restricted 1,100,000 3,809,273
Unrestricted 34,342,641 11,376,761
TOTAL NET POSITION $ 36,282,641 $ 15,410,534
James Marta & Company LLP
STATEMENT OF
REVENUES,
EXPENSES,
AND CHANGES
IN NET
POSITION
16 Primary drivers: • Electricity sales and
costs
• Conscious pricing
decisions
• Management of
electricity cost
• As you build capital,
investment revenue
may contribute more.
James Marta & Company LLP
STATEMENT OF
REVENUES,
EXPENSES,
AND CHANGES
IN NET
POSITION
17 • Twelve Months vs
Six Months
• Other revenue is
largely the AgFit
program.
2023 2022
OPERATING REVENUE
Electricity sales, net $ 94,681,216 $ 85,322,760
Other revenue 748,282 1,338,974
TOTAL OPERATING REVENUES 95,429,498 86,661,734
OPERATING EXPENSES
Cost of electricity 68,527,737 75,130,283
Contractors 3,063,635 2,556,894
Staff compensation 1,450,487 1,282,519
Program expenses 1,014,792 1,168,019
General and administrative 813,019 759,754
TOTAL OPERATING EXPENSES 74,869,670 80,897,469
TOTAL OPERATING INCOME (LOSS) 20,559,828 5,764,265
NONOPERATING REVENUES (EXPENSES)
Interest income 327,157 46,501
Interest and related expenses (14,878) (86,468)
TOTAL NONOPERATING REVENUES (EXPENSES) 312,279 (39,967) CHANGE IN NET POSITION 20,872,107 5,724,298
Net position at beginning of period 15,410,534 9,686,236 Net position at end of period $ 36,282,641 $ 15,410,534 James Marta & Company LLP
STATE MENT OF
CASH FLOWS
Your program
operated quite
marginally before.
You have
strengthened your
cash flows.
18 James Marta & Company LLP
STATEMENT OF
CASH FLOWS
2023 2022
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from electricity sales $ 95,146,830 $ 79,912,041 Payments for security deposits with energy suppliers (1,741,291) (152,313) Payments to purchase electricity (67,426,248) (74,983,435) Payments for contract services, program expenses, general, and administration (3,896,896) (4,167,896) Payments for staff compensation (1,508,405) (1,230,143) Other cash payments 748,282 1,530,367
Net Cash Provided (Used) by Operating Activities 21,322,272 908,621
CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES
Principal payments of debt (712,252) (440,774)
Interest and related expense (17,127) (87,007)
Net Cash Provided (Used) by Non-Capital Financing Activities (729,379) (527,781)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest income 327,157 46,501
Net Cash Provided (Used) by Investing Activities 327,157 46,501 NET CHANGE IN CASH AND CASH EQUIVALENTS 20,920,050 427,341 Cash and cash equivalents at beginning of period 7,659,883 7,232,542 Cash and cash equivalents at ending of period $ 28,579,933 $ 7,659,883 Operating income (loss) $ 20,559,828 $ 5,764,265
(Increase) decrease in net accounts receivable 485,105 (3,678,618) (Increase) decrease in net accrued revenue (3,637) (1,662,204) (Increase) decrease in prepaid expense (42,169) 9,192
(Increase) decrease in other assets and deposits (1,741,291) 39,080 Increase (decrease) in accounts payable 46,527 (45,513) Increase (decrease) in accrued payroll (57,918) 52,376
Increase (decrease) in due to member agencies (21,028) (92,785) Increase (decrease) in accrued cost of electricity 1,101,489 146,848 Increase (decrease) in other accrued liabilities 1,011,220 445,877 Increase (decrease) in user taxes and energy surcharges (15,854) (69,897) Net Cash Provided by Operating Activities $ 21,322,272 $ 908,621
RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES
Adjustments to reconcile operating income to net cash provided (used) by operating activities:
19 James Marta & Company LLP
INDEPENDENT
AUDITOR’S
REPORT
ON INTERNAL
CONTROL AND
COMPLIANCE
• No Material Weaknesses identified
• No instances of noncompliance
identified
20 James Marta & Company LLP
Thank you to
Valley Clean Energy Alliance staff
for the partnership
in working on this engagement.
21 James Marta CPA, CGMA, ARPM
QUESTIONS?
22 Valley Clean Energy Board Meeting – April 11, 2024
Item 18 – Allocation of 2023 Net Margin 23
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Public Comments
24 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)] 25 Item 18 – Allocation of 2023 Net Margin: Overview
VCE’s draft audited financial statements presented in Item 17 resulted in $20.9 M net income for 2023. Taking into account the Dividend Program parameters, as well as available and forecast cash reserves, Staff is recommending allocations towards cash reserves, programs, and customer dividend program in the form of an additional rate credits beginning July 1, 2024.
This presentation will provide:
• Financial & Treasury Update
• Background of 2023 Net Margin
• Present estimated 2023 Net Margin Allocation
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 26 Item 18 – Allocation of 2023 Net Margin: Financial Update Finance & Treasury Update
• 2023 Ending with 100+ Days Cash Reserves projects a Tripple B “BBB” credit Rating • PPA Prepay – Early 2025 Reduces Long-term Power Costs (Does not require Credit Rating) • Initial Investment Grade Credit Rating – Mid-2025 (2024 Audited Financials) • 180+ Cash Reserves (Minimum) required to reach A Ratings • 3 Years Positive Net Income
• Smaller Customer Base – Recommended additional reserves for financial strength Description VCE 3CE SVCE EBCE MCE Sonoma PCE
Rating A A A A A A-Date Oct-20 Jan-21 Nov-21 Mar-21 Dec-21 Apr-23 Outlook Stable Stable Stable Stable Stable Stable
Current Reserves 27.5 M $119.4 M $160 M $206 M (>180days) $184 M (200 days) $85 M (180 days)
$135 M
(>200 days)
Projected Reserves 39+ M
180+ Days by 2024
$210M by 2024
(250 days)
$200 M
by 2024
75% of Annual OpEx
(@$320 M) N/A N/A $244 M
2023
Debt No debt No debt No debt No debt No debt No debt No debt Customers 62,200 296,000 270,000 640,000 490,000 229,000 310,000 Rate Target 2% below PG&E 4.5% below since
launch N/A 5% below PG&E
Liquidity and Reserve Metrics Comparison
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 27 Item 18 – Allocation of 2023 Net Margin: Dividend Program Formula The adopted 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
(LPR) 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
additional reserves,
amongst dividends, and LPR
VCE Dividend Program Allocation - 2023
Description
Estimated
2023 Results
Avg. Days
Cash
Electricity Sales 95,429,500
Operating Expense 74,557,400
Operating Margin 20,872,100
Principal Debt Payments 712,252
Adjusted Net Margin less principal Debt Payments 20,160,000 Adjusted Net Margin Percentage 21.13%
Allocation Amount <=5% 4,771,000
Allocation Amount > 5% 15,389,000
Allocation of Net Margin up to 5% Percentage
Allocation
Amount
Operating
Days Cash
Cash Reserves Allocation 95% 4,532,000 22 Minimum
Local Programs Allocation 5% 239,000 1 Minimum
Allocation of Net Margin above 5% Percentage
Allocation
Amount
Allocation to Cash Reserves 50% 7,694,500 38 Minimum
204,000
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 28 Item 18 – Allocation of 2023 Net Margin: Discretionary Allocation Staff considered the following factors in Scenario 1
related to this recommendation.
• Power Costs power cost increases and
regulatory pressures (increased costs
= decreased days cash on hand)
• VCE’s current 180 day cash reserve
target does not include rate
stabilization.
• Available funds for dividends would
increase VCE’s current 1% discount
during peak season.
• CPUC has approved increased security
requirements (POLR proceeding)
• VCE provides an additional
~2.5%/$1.1M annually in discounts to
25% of customers (CARE and FERA)
• PG&E’s additional
Transmission/Distribution rate
increase in March 2024 (projected
+13%)
Scenario 2
Scenario 3
Percentage
Allocation
Amount
Operating
Days Cash
Discretionary Allocation (After Cash Reserves) 50% 7,694,500 38 Maximum Cash Reserves 75% 5,770,800 28
Local Programs (Targeted 2024/25 Spend) 10% 769,500 4
Customer Dividends (Targeted 2024/25 Spend) 15% 1,154,200 6 Percentage
Allocation
Amount
Operating
Days Cash
Discretionary Allocation (After Cash Reserves) 50% 7,694,500 38 Maximum Cash Reserves 70% 5,386,100 26
Local Programs (Targeted 2024/25 Spend) 10% 769,500 4
Customer Dividends (Targeted 2024/25 Spend) 20% 1,538,900 8 Percentage
Allocation
Amount
Operating
Days Cash
Discretionary Allocation (After Cash Reserves) 50% 7,694,500 38 Maximum Cash Reserves 80% 6,155,500 30
Local Programs (Targeted 2024/25 Spend) 5% 384,700 2
Customer Dividends (Targeted 2024/25 Spend) 15% 1,154,200 6 Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 29 Item 18 – Allocation of 2023 Net Margin: Summary Discussion Summary
Staff believes that these scenarios represent a disciplined and financially prudent approach to building reserves and providing some additional level of rate relief. The longer-term outlook (2024+) shows increased stability and cost certainty due to VCE’s fixed price long-term renewable power purchase contracts coming fully online combined with a cost-recovery based rate structure.
VCE Recommendation
Adopt a resolution approving the allocation of the $20.9M 2023 Audited Net Margin as follows:
• $17,997,300 (90%) of Net Margin to cash reserves;
• $ 1,008,500 (05%) of Net Margin to the Local Programs Reserve (LPR). • $ 1,154,200 (05%) of Net Margin to the Dividends Program in the form of increasing Rate Credits by 1% for all customers starting July 1, 2024 Valley Clean Energy Board Meeting – April 11, 2024
Item 19 – ERRO and Concierge Service 30
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Public Comments
31 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)] • Electrification Retrofit Rebate Outreach Program (ERRO) Background, Implementation Strategies
• Concierge Service: Key Features
• Next Steps
• Staff Recommendations
32 Item 19 – ERRO and Concierge Service
Presentation Overview
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] • In partnership with Yolo County; ARP-funded
• The County has complementary programs: weatherization; Home Energy Reports
• Connecting low-income residents with available rebates (est $1B in CA)
• Contracting completed, refining Outreach Plan
• Projected customer launch Spring/Summer 2024
33 Item 19 – ERRO and Concierge Service: ERRO Background ERRO - Electrification Retrofit Rebate Outreach Program Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] • Concierge Service
• A new proposed service that would align well with program structure (task order)
• 50% funding from VCE Programs Fund, 50% reimbursable from ERRO budget • REACH Strategies
• Assistance with Marketing, Education and Outreach elements (task order)
• Collateral
• Website material
• In-language (Spanish)
34 Item 19 – ERRO and Concierge Service: ERRO Implementation Strategies Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] • Concierge Service would
enhance and expand existing
customer service
• Intended for ERRO, as well as
customers that would not
qualify for ERRO
• Service will further Strategic
Plan goal of increasing VCE’s
role as a trusted energy
advisor to customers
35 Item 19 – ERRO and Concierge Service: Concierge Service Overview ERRO-eligible
customers
All VCE
customers
Concierge
Service
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 36 Item 19 – ERRO and Concierge Service
Confusion about what electrification is
Don’t know where to start
Unaware of benefits (health, safety, climate, savings)
Technology is unknown/unfamiliar
May require electrical infrastructure upgrades
Rebates & incentives change often and often have specific eligibility and limitations Why an Electrification Concierge Service for Customers? Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 37 Item 19 – ERRO and Concierge Service
• Help customers access the various programs and resources offered by VCE and other organizations (e.g. statewide rebates)
• Ensure that all customers, at all levels of technical understanding, have a positive experience from the start to end of their journey to electrify • Provide support at the appropriate technical level in a way that is actionable, clear, and relevant
• Simplify the process to electrify so that customers feel empowered, encouraged, and supported to take on the next step, no matter where they are in their journey to electrify.
Why an Electrification Concierge Service for Customers? Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 38 Item 19 – ERRO and Concierge Service
Concierge Service will cover:
General Guidance &
Recommendations
Technical Assistance
Virtual Energy Audits
Electrification Plan Development
Finding a Contractor
Reviewing Project Quotes
Incentive Information &
Applications
VCE Program Referrals
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 39 Item 19 – ERRO and Concierge Service
Website Online Chat Webform Phone Email Electrification Plan
Channels & Deliverables
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 40 Item 19 – ERRO and Concierge Service
Tiered customer support to optimize accessibility, escalations, and personalization Energy Advisors: Front Line & Dedicated
Support
Energy Specialists: Energy Audits &
Weatherization
Program Managers: General Support & Program Expertise
Energy Experts: Technical Support &
Electrification Plans
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 41 Item 19 – ERRO and Concierge Service
CRM Integration
Customer Records
Access to various customer information such as address, rate(s)/adders, VCE enrollment, etc.
Communication Management
Handle live chats, emails, and webform communications within the CRM, attached to a customer record.
Cases & Interactions
Designed for in-depth case management, customer info, and interaction record capture.
Reporting/Dashboard
Tracking contacts, channel, contact reason, outcomes, and progress to going electric.
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] • Integrate Feedback provided by key stakeholders into Outreach Plan
• Main priorities: effective segmenting & targeting; in-language materials; renter/owner split incentive; Outreach Plan & CBOs/key stakeholders
• If approved, integrate VCE branding elements, and launch Concierge Service spring 2024
• Customer-facing name: Home Energy Help Desk (?)
• Finalize Collateral Spring 2024
• Customer launch Spring/Summer 2024
42 Item 19 – ERRO and Concierge Service: Next Steps
Next Steps
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] • Approve Electrification Retrofit Rebate Outreach Program (ERRO) Implementation Elements:
• Task Order Amendments with SMUD and REACH Strategies for implementation and support.
• Authorize the Executive Officer to execute and implement the contracts
• Approve ERRO Program & Concierge Service Budget of $270,000 and 2024 Programs budget transfer of $160,000 to ERRO Program including $70,000 in reimbursable revenues and $90,000 non-reimbursable costs (Net neutral impact 2024 Budget) 43 Item 19 – ERRO and Concierge Service: Staff Recommendations Staff Recommendations