Sincerely,
VALLEY CLEAN ENERGY ALLIANCE
__________________________
Edward Burnham, Director of Finance & Internal Operations Date: January 17, 2025
ACCEPTED AND AGREED
CALIFORNIA COMMUNITY CHOICE FINANCING AUTHORITY
By: __________________________
Name: Garth Salisbury, Treasurer/Controller
Date: January 17, 2025
Digitally signed by Bruce Edward Burnham II
DN: cn=Bruce Edward Burnham II,
[email protected]
Date: 2025.01.17 13:42:12 -08'00'
Memorandum of Understanding
January 17, 2025
Sincerely,
VALLEY CLEAN ENERGY ALLIANCE
__________________________
Edward Burnham, Director of Finance & Internal Operations Date: January 17, 2025
ACCEPTED AND AGREED
CALIFORNIA COMMUNITY CHOICE FINANCING AUTHORITY
By: __________________________
Name: Garth Salisbury, Treasurer/Controller
Date: January 17, 2025
______________________
: Garth Salisbury, Treasur
OH&S
DRAFT
01/16/25
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APPENDIX A
VALLEY CLEAN ENERGY
General
Valley Clean Energy Alliance (“VCE”) is a joint powers authority organized and existing pursuant to the Joint Exercise of Powers Act (constituting Chapter 5 of Division 7 of Title 1 (commencing with Section 6500), as amended or supplemented from time to time) (the “Joint Powers Act”), as a “community choice aggregator” (“CCA”) as defined in Section 331.1 of the Public Utilities Code of the State of California, as amended (the “Public Utilities Code”). For a general description of CCAs in California, see the section “COMMUNITY CHOICE AGGREGATORS” in this Official Statement.
Formation and Purpose of VCE
VCE was created in 2017 pursuant to a Joint Exercise of Powers Agreement, as amended, currently among the County of Yolo, the City of Davis, the City of Woodland and the City of Winters, and is a public agency separate from its members. VCE was established to enable participating jurisdictions to determine the sources, modes of production and costs of the electricity they procure for the residential, commercial, agricultural and industrial users in their areas. In June 2018, VCE began providing service to approximately 57,000 customer accounts as part of its initial enrollment phase. In calendar year 2020, VCE enrolled approximately 2,500 Net Energy Metering (“NEM”) customer accounts and in January 2021, VCE enrolled approximately 2,500 customer accounts in the City of Winters.
VCE’s mission is to deliver cost-competitive clean electricity, product choice, price stability, energy efficiency, and greenhouse gas emission reductions. VCE provides electric service to retail customers and has the rights and powers to set rates and charges for electricity and services it furnishes and incur indebtedness and other obligations. VCE acquires electricity from commercial suppliers and delivers it through existing physical infrastructure and equipment managed by the California Independent System Operator (“CAISO”) and Pacific Gas and Electric Company (“PG&E”).
Service Area
VCE currently serves the cities of Woodland, Winters, and Davis and unincorporated Yolo County. VCE is responsible for the acquisition of electric power for its service area.
The service area of VCE is shown in the following map:
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VCE Service Territory
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Governance and Management
Board of Directors. VCE is governed by an eight-member board of directors (the “Board of Directors”) composed of two elected officials representing each of its member agencies. The Board of Directors meets monthly to discuss matters pertaining to the operation of VCE.
Management.
Mitch Sears, Chief Executive Officer. Mitch has played a central role in launching VCE; managing start-up, customer launch, early/on-going operations and strategic planning for the new community based public energy agency providing service to the communities of the County of Yolo. Under his leadership VCE has signed over $600 million in long-term renewable and energy storage contracts while advancing award winning innovative programs that have earned recognition by peer agencies. He currently serves on the Board of Directors of the California Community Choice Association, the statewide association of community choice aggregation programs that serve approximately one-third of California’s generation load (approximately 14 million customers) and California Community Power, a joint powers agency that enables its members to combine their buying power to procure new, cost-effective clean energy and reliability resources for over 2.7 million customers. He has contributed his depth of experience to VCE gained through nearly 28 years with the City of Davis serving in various staff and management roles. He served as the City’s Sustainability Manager/Assistant Director of the Community Development and Sustainability Department, leading Davis’ comprehensive efforts to address climate change, including implementation of community energy projects. Prior to that, he oversaw the City’s Agricultural Land Conservation Program, helping permanently preserve over a thousand acres of prime Yolo County farmland through innovative market-based transactions with willing property owners. He holds degrees in Environmental Planning and Economics.
Gordon Samuel, Chief Operating Officer. Gordon joined VCE in 2020 and is responsible for acquiring a diverse supply of clean renewable resources. With over 25 years’ experience leading resource planning and acquisition, marketing and trading, and regulatory compliance, Gordon brings a wealth of experience to the VCE team. Prior to joining VCE, Gordon was with Marin Clean Energy and also spent two years with a start-up battery storage integrator company (Doosan GridTech) developing key relationships with investor-owned and public utilities, independent power producers, and electric cooperatives. The bulk of Gordon’s career was with Arizona Public Service Company where he had several roles including the procurement of numerous large-scale wind, photovoltaic and solar thermal projects.
Edward Burnham, Director of Finance & Internal Operations. Edward joined VCE in 2021 as Director of Finance & Internal Operations and is responsible for oversight of finance and accounting as well as treasury, enterprise risk, information technology, and audits. Prior to joining VCE, Edward served with the County of Yolo as the Manager overseeing Revenues, Treasury, and Finance activities. Additionally, Edward served international postings from 2005 to 2017 in various financial positions, including responsibility for all country financial activities in China, UK, Ukraine, Saudi Arabia, and the West Africa region for the Energy Sector. Edward holds a BBA in International Business from Stephen F. Austin State University, an MBA from A-4
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Rutgers University as well as studies in Spanish and Mandarin. He currently holds a CPA license with the California State Board of Accountancy. Edward remains actively involved with various finance professional associations, most recently serving on the Board of Financial Executives International Sacramento Chapter and Chair for Sacramento Chapter of Financial Executives Network Group.
Customers
General. VCE provides energy to approximately 54,000 residential, 6,050 commercial and agricultural and 1,950 industrial accounts throughout its service area. The current mix of VCE’s customer base is approximately 42% residential and 58% commercial, agricultural and industrial based on load served.
Customer Energy Choices. VCE offers three levels of electricity service to its customers, Standard Green, UltraGreen, and Base Green. Standard Green is VCE’s default electricity service that is 60% renewable, 60% clean and priced below PG&E’s rates. UltraGreen is VCE’s premium service, it is both 100% renewable and 100% carbon free with a slight premium over Standard Green (currently $0.015 per kWh more than Standard Green). Base Green is VCE’s lowest-cost option, with slightly lower renewable content than Standard Green, and is cheaper than PG&E’s rates. The average VCE residential customer uses between 460 and 660 kWh of electricity monthly, so opting for UltraGreen costs an additional $7 to $10 per month for most customers.
Customer Enrollment. All new customers are automatically enrolled in Standard Green service. Once enrolled customers may choose to switch products at any time.
Customer Election to Opt-out of Service. Customers can “opt out” of VCE service and return to service from their traditional electric service provider, PG&E, upon initial enrollment in VCE or at any time after VCE becomes their energy provider. VCE opt-out fees are $5 for residential customers and $25 for non-residential customers.
Cumulative Opt-Out Rate and Customer Retention. The total customer participation rate across VCE’s entire service territory is approximately 92%, meaning that VCE is providing electric service to the vast majority of residential and commercial customers throughout its service territory. VCE has close to a 30% turnover rate of customers annually as residents start/stop energy services and move in/out of the service territory. This is mainly driven by college students attending UC Davis. All new accounts are automatically opted in to VCE service, even if the previous account holder decided to opt-out. Therefore, while VCE continues to experience some amount of opt-out activity seasonally, many of those accounts do eventually turn over and VCE has achieved its strategic goal to be above 90% customer participation in each year of VCE’s operation since launch.
Service Rates
General. VCE electric generation rates are managed with the intention of providing cleaner electricity than PG&E at competitive rates. Rates are determined by VCE’s Board of Directors and are not regulated by the California Public Utilities Commission (“CPUC”). Any A-5
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changes to rates will be adopted at duly noticed public meetings of the VCE Board of Directors.
Pursuant to the terms of the Clean Energy Purchase Contract, VCE covenants that it will establish, maintain, and set rates and charges so as to provide revenues sufficient to enable it to pay any and all amounts payable from the revenues of its operations and to maintain any reserves as required by VCE’s reserve policies. VCE further covenants and agrees that it will not pledge or encumber its revenues through a gross revenue pledge or in any other way which creates a prior or superior obligation to its obligation to make payments under the Clean Energy Purchase Contract.
Determination of Rates for Energy. A customer’s total cost of electric service is determined by VCE’s charges for energy and PG&E charges for transmission, distribution and other non-by-passable charges. Changes to PG&E or VCE rates will impact cost comparisons between VCE and PG&E. PG&E charges VCE customers a monthly Power Charge Indifference Adjustment (“PCIA”), which can vary annually based upon a number of market factors including benchmarks for regional energy costs, resource adequacy, the year in which the community joined VCE and other considerations, as well as a Franchise Fee Surcharge. VCE has already accounted for these additional charges in calculating rates. Financial assistance programs like CARE (California Alternative Rates for Energy), FERA (Federal Electric Rate Assistance) and Medical Baseline Allowance remain the same with VCE.
Current and Historical Rate Information. VCE rates are designed to cover the costs of energy, resource adequacy, and operating costs, fund customer programs, and meet VCE’s reserve and liquidity goals.
A VCE customer’s total cost of electric service includes both VCE’s energy charges and PG&E’s charges for transmission, distribution, and other non-by-passable charges. These charges, including the PCIA, determine the all-in cost of service for VCE customers.
Since beginning to provide service in 2018, VCE rates have remained at or below PG&E generation rates (not taking into account the price premium for UltraGreen). However, if VCE’s operating reserves are projected to fall below 120 days of operating expenses, VCE will implement plans—such as increasing rates or reducing VCE’s discount—to restore operating reserves to the target of 120 days within 18 months through VCE’s rate adjustment policy.
California Renewable Portfolio Standards and Other Regulations General. Community choice aggregators such as VCE are “load-serving entities” (“LSEs”) and as such are required to comply with California’s Renewable Portfolio Standard, Resource Adequacy requirements and Power Source Disclosure requirements described below.
Renewable Portfolio Standard. California’s Renewable Portfolio Standard (“RPS”) requires LSEs to supply their retail sales with minimum quantities of eligible renewable energy.
Senate Bill 100 directs all LSEs to procure 60% of their portfolios from RPS-eligible resources by 2030, and 100% of their retail sales from zero-carbon resources (or eligible renewable resources) by 2045. VCE has exceeded the RPS regulatory minimum requirements since its inception. In 2024, VCE met 83% of its total retail sales with eligible RPS resources, above the 2024 RPS percentage target of 40%. VCE has adopted a policy to achieve 100% of retail sales from renewable resources by 2030. To date VCE has 12 executed RPS contracts and three stand-alone A-6
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storage contracts of ten years or more in term length and will continue to solicit and execute additional contracts to meet VCE’s renewable goals.
Resource Adequacy. Resource Adequacy (“RA”), a California program jointly administered by the CPUC and the California Independent System Operator (“CAISO”), directs LSEs to secure forward capacity and offer it into the CAISO’s Day-Ahead and Real-Time markets to ensure that there will be enough supply in the right locations and with sufficient ramping capability to meet load. The RA program is comprised of three products: System RA; Local RA; and Flexible RA. Local RA obligations have been assigned to a Central Procurement Entity as of 2023. In addition, per CPUC Decisions 19-11-016, 21-06-035, and 23-02-040, LSEs are required to procure “Incremental System Capacity,” which is RA capacity from non-emitting, storage, and/or renewable resources that are in addition to the resources identified on a baseline list respective to each Decision. VCE has a strong track record of meeting its RA obligations and expects to meet its future RA obligations through its PPAs and ESAs as well as bilateral transactions from qualifying generators to comply with the RA program.
Power Source Disclosure. California law requires LSEs to disclose the types of power resources used to supply retail sales. This mandate, known as the Power Source Disclosure program (“PSD”), is a consumer information program managed by the CEC on an annual basis. A key output of the PSD program is the Power Content Label (“PCL”). The PCL is an LSE-specific document that shows the breakdown of power resource types for each of the LSE’s energy products used to serve retail load, as well as a breakdown of resource types for the overall California grid.
The PCL is distributed to customers each year.
Energy Demand
Long-Term Load Forecast. VCE’s long-term load forecast is a 10-year projection of electricity consumption (MWh) by all VCE customers. Its forecast is built on the previous five years of historical data segmented by customer class, month, hour, and weekday/weekend. Load-per-meter and number of meters are forecasted separately. The load-per-meter forecast weather normalizes historical data at the level of segmentation specified above while accounting for year-on-year behavior changes. The number of residential and small commercial customer accounts is forecasted to grow at an average rate of 1% per year; no growth is forecasted for other classes.
The forecasts of load-per-meter and number of meters are used to create the Gross Load Forecasts.
Then load-modifying technologies are layered on to calculate the Net Load Forecasts. Currently this includes estimates of new EV adoption and behind-the-metersolar and solar + storage systems.
The EV adoption forecast is based on both recent trends and modelling by industry experts. The behind-the-meter solar and solar + storage forecast is based on recent adoption trends in the short term and industry forecasts in the long term.
The table below shows VCE’s actual historical retail load for the years 2022-2024 and VCE’s long-term retail load forecast for the years 2025-2035.
Year 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 RetailLoad(GWh) 719.68 650.83 668.73 706.89 707.19 707.49 707.78 708.08 708.38 708.67 708.97 709.27 709.56 709.86 Actuals Forecast
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Sources of Energy
General. In its procurement of energy supplies, VCE prioritizes securing sufficient, low-cost, clean sources of electricity that achieve VCE’s priorities while ensuring reliability and meeting regulatory mandates. VCE’s procurement strategies focus on diversity among technologies, production profiles, project sizes and locations, counterparties, length of contract, and timing of market purchases.
Energy Purchases. In 2023, VCE procured approximately 347,222 MWh of carbon free electricity for its customers. VCE anticipates that roughly 92% of its total 2024 retail sales will be sourced from renewables and carbon-free large hydroelectric projects. VCE’s procurement strategy includes continuing to procure new RPS eligible renewable resources, via contracts with terms of 10 years or more. These new renewable contracts will be in addition to more than 368 MW of renewables that VCE had already procured. The strategy also includes investments in wholesale storage capacity to help VCE with meeting regulatory compliance and mitigating market risks.
Energy Load and Supply Risk Management. VCE manages risks associated with its portfolio by aligning electricity purchase commitments with expected demand for electricity and by securing power supplies from a diversity of technologies, geographical locations, and suppliers.
VCE maintains its portfolio coverage targets of up to 70-130% in the near term and leaves a portion open in the medium- to long-term, consistent with generally accepted industry practice. VCE monitors its positions on a regular basis to reduce exposure to CAISO day-ahead market prices.
VCE uses fixed-price shaped and block energy contracts to hedge CAISO day-ahead market price exposure associated with its portfolio. These products are solicited on a quarterly basis through issuing RFPs (Request for Proposals).
Procurement. All contracting for energy and energy-related products for VCE, including but not limited to products related to electricity, capacity, energy efficiency, distributed energy resources, demand response, and storage shall be referred to as “Energy Procurement”. In Energy Procurement, VCE will procure according to established guidelines.
VCE procures energy and Resource Adequacy consistent with its internal goals, Energy Risk Management Policy and regulatory requirements. To effectively plan and manage its portfolio, VCE differentiates contracts by their term length, technology, location, production profile, and project size. VCE uses a variety of methods, including competitive solicitations, standard contract offerings, and bilaterally negotiated agreements.
Further descriptions of VCE’s policies and procedures addressing energy procurement and risk management can be found on VCE’s website at https://www.valleycleanenergy.org. The reference to this website address is presented herein for informational purposes only, and information on such website is not incorporated by reference to this Official Statement.
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Technology and Analytics
VCE is committed to maintaining the highest standards of cybersecurity and data protection following industry standards and best practices to ensure safe and secure information.
VCE adheres to a comprehensive set of IT policies on advanced encryption, access controls, vulnerability assessments, continuous monitoring, and employee training.
VCE goes through a triennial regulatory compliance and IT security audit administered by a third party. This includes a complete assessment of VCE’s IT infrastructure, network, and systems and VCE’s adherence to industry standards and regulatory requirements. VCE’s successful audit outcomes demonstrate VCE’s commitment to maintaining a secure IT environment.
Energy Storage
VCE currently has approximately 132.4 MW of wholesale (i.e., in front of the meter) storage capacity contracted over the course of the next fifteen to twenty years. Of the 132.4 MW contracted storage capacity, 127 MW is paired with renewables. VCE is in the process of negotiating and executing additional co-located and standalone storage contracts.
Financial Information
Revenues from Energy Sales and Operating Expenses. VCE’s operating revenues are derived from the sale of electricity to commercial, agricultural and residential customers through its territory. VCE reports its revenue net of uncollectible accounts.
Other Sources of Revenue. VCE receives revenue from sources other than retail customer sales through grant awards that are primarily driven by energy programs and energy investment projects from regional, state, and federal organizations.
Financial Statements. For financial information related to VCE, see the annual audited financial statements of VCE for the calendar years ended December 31, 2023 and 2022 attached to this Official Statement as Appendix B.
Deposit Accounts. VCE maintains its cash in both interest-bearing and non-interest-bearing deposit accounts at River City Bank of Sacramento, California. VCE’s deposits with River City Bank are subject to California Government Code Section 16521 which requires that River City Bank collateralize public funds in excess of the Federal Deposit Insurance Corporation limit of $250,000 by 110%. VCE monitors its risk exposure to River City Bank on an ongoing basis.
VCE has not adopted its own investment policy and follows the investment policy of the County of Yolo.
Financial Reserves. VCE’s Financial Reserve Policy recognizes the importance of developing reserves to ensure financial stability, ensure access to credit at competitive rates, ensure rate stability and set aside monies for local programs. To achieve these objectives, VCE targets an operating cash reserves account minimum balance of 120 days of operating expenses, with a goal of building and maintaining a reserve of 180 days of operating expenses. Additionally, VCE A-9
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targets a rate stabilization reserve account with a minimum balance of 60 days of operating expenses. VCE local programs and dividends are designated by the Board of Directors during the annual budget process and dividend program allocation process.
Other Liquidity Sources. VCE has available at River City Bank a line of credit totaling $11,000,000 with a $7,000,000 withdrawal limit, which expires on April 15, 2026. The related debt outstanding as of [DATE TBD] was $0. VCE has issued, but undrawn, letters of credit for a total of $3,897,000 for regulatory and power purchase requirements.
Risk Management. VCE maintains risk management policies, procedures and systems that help mitigate credit, liquidity, market, operating, regulatory and other risks that arise from participation in the California energy market. Credit guidelines include a preference for transactions with investment-grade counterparties, evaluation of counterparties’ financial condition and assigning credit limits as applicable. These credit limits are established based on risk and return considerations under terms customarily available in the industry. In addition, VCE enters into netting arrangements whenever possible and where appropriate obtains collateral and other performance assurances from counterparties.