ATTACHMENT B
PASADENA WATER AND POWER
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ENERGY AND CREDIT RISK
MANAGEMENT POLICY
October 2025
Pasadena Water and Power
Energy and Credit Risk Management Policy
TABLE OF CONTENTS
1.0 2.0
2.1 2.2
2.3 3.0
4.0 4.1
4.2 4.3
4.4 5.0
INTRODUCTION.
PURPOSE and SCOPE.
Purpose
Scope
Effective Date
POLICY OBJECTIVES.
TRANSACTION POLICY AND LIMITS...
Anti-Speculation
Counterparty Limitations,
Transaction Types,
Transaction Authorizations and Limits.
4.4.1 Maximiun Transaction Term,
4.5 Trade Execution and Authorized Personnel....
RISK GOVERNANCE STRUCTURE AND RESPONSIBILITIES .
City Council.
Municipal Services Committee.
General Manager
Energy and Credit Risk Management Committee..
Management Oversight/Separation of Duties....
5.5.1 Front Office.
5.5.2 Middle Office.
5.5.3 Backoffice
6.0 POLICY MONITORING AND COMPLIANCE.
Monitoring and Reporting..
Compliance Exceptions
Reporting of Exceptions
Assessment
CONFLICT OF INTEREST..
5.1 5.2
5.3 5.4
5.5 6.1
6.2 6.3
6.4 7.0
.3
.3
...3
...3
..4
...4
...4
.5
.5
..6
..7
..8
.8
.8
..8
...9
...9
..9
.10
.11
.11
.12
.12
.12
.13
.13
.13
.13
APPENDICES
Appendix A - Transaction Type Authority: City Council Resolutions Appendix B - Acknowledgenient and Employee Compliance Form Appendix C - Glossary of Energy and Credit Risk Management Terms
Pasadena Water and Power
Energy and Credit Risk Management Policy
1.0 INTRODUCTION
It is the mission of the Pasadena Water and Power Department (//PWP//) to provide safe and reliable water and power with superior custoiner service at conipetitive rates.
PWP s elecfaric utility core business is to meet the load requirements of its customers and deliver reliable electric service in a safe and environmentally sustainable nianner while optimizing the value of its assets. PWP recognizes that certain risks are inherent in the energy business environment. PWP's energy and credit risk management philosophy is that no activities related to energy purchase and sales should expose the City to the possibility of large financial losses in relation to the size of the Energy Cost Adjustnient Fund.
2.0 PURPOSE and SCOPE
2.1 Purpose
•
•
•
•
The Energy and Credit Risk Management Policy ("Policy") details the key control structures and policies utilized to nianage risks associated with PWP's power supply portfolio.
It establishes prudent risk management processes based on sound utility risk management principles, while ensuring adherence to financial requirements set forth by the City Council as well as all pertinent legal requirements. The controls, structures and policies are focused on the following issues:
• Clearly defined segregation of duties and delegation of authority Organizational structure for risk management conta-ols
Policies relating to setting acceptable risk parameters and risk limits Policies for risk reporting
Permitted fa-ansaction and product types
Defined level of fa"ading authority granted by City Council to the City Manager and the PWP General Manager
2.2 Scope
The Policy applies only to activities related to PWP's power supply portfolio. It prescribes the management, organization, authority, processes, tools, and systems to monitor, measure, and control market and credit risks to which PWP is exposed in its normal course of business, including wholesale and retail operations, capital projects, and participation in the California Independent System Operator (CAISO) market.
The Policy does not cover electric distribution, information systems, customer services, or any aspect of the water system. Neither does it address the mitigation of risk of catastrophic failure, environmental, or regulatory exposures nor does it address general business risks such as fire, accident/ and general liability. It is intended solely for mitigation of energy-related risk.
Pasadena Water and Power
Energy and Credit Risk Management Policy
2.3 Effective Date
The Policy is effective immediately upon its adoption by the City Council and replaces the 2018 Policy adopted by the City Council.
3.0 POLICY OBJECTIVES
The objective of the Policy is to limit financial risks associated with procuring and optimizing the power supply portfolio used to meet PWP's retail electric demands in order to provide rate stability to its retail customers.
The key objectives of this Policy are to:
1. Provide stable retail electric rates to retail customers by managing energy cost and credit risks that are inherent in optimizing the power supply portfolio used to meet forecasted customer loads. This is accomplished by liniiting forecast exposure to unexpected costs to within acceptable limits.
2. Provide competitive rates by optimizing the power supply portfolio and ensuring that the best available price is obtained while coniplying with the requirements of this Policy and City codes, regulations, and policies.
3. Establishing/ measuring and managing authorizations and transactional authority limits associated with optimizing PWP's portfolio of energy, fuel and related products to ensure adequate mitigation of risks associated with participation in market transactions.
necessary
4.0 TRANSACTION POLICY AND LIMITS
All executed transactions shall conform to the Policy as described in this document, as well as in the risk management program procedures, guidelines and controls manuals as developed and adopted by PWP's Energy and Credit Risk Management Committee ("RMC")/ which is further defined in Section 5.4 below.
Authority to execute ta-ansactions shall be subject to enabling agreements and contracts or contrachial forms approved by the City Council. In all cases the Pasadena Municipal Code provides the final authorization rules and regulations for energy purchases.
Failure to observe the Transaction Policy and Limits when executing transactions is a violation of the Policy and is subject to disciplinary action. The key requirements and limitations for transactions are as follows:
Pasadena Water and Power
Energy and Credit Risk Management Policy
4.1 Anti-Speculation
Speculative buying and/or selling of energy products is prohibited. In no event shall transactions be entered into to speculate on market conditions. Speculation is defined as any of the following transaction types:
Buying energy products that are not needed for meeting forecasted retail load or wholesale obligations; and,
Selling energy products that are not owned and excess to forecasted retail load.
The simultaneous purchase of an energy product and sale of a corresponding energy product shall be permitted provided that the net value (proceeds) from the transaction is derived from the utilization of owned and excess transmission or generation capacity.
Credit sleeving is an arrangement where a more financially reputable entity acts as an intermediary for a smaller undercapitalized entity in the execution of a transaction. Contract sleeving is an arrangement where an entity acts as an interinediary between two entities to bridge a contract gap that exists between the two entities. PWP may not act as the intermediary in either a credit or contract sleeve. However, PWP may participate in a sleeving transaction provided that the intermediary sleeving the transaction is an approved counterparty in accordance with the Counterparty Credit Evaluation and Procedures Manual and the transaction is otherwise in compliance with delegated authority.
4.2 Counterparty Limitations
Transactions must be with counterparties approved by the Energy Risk Manager in accordance with the Counterparty Credit Evaluation and Procedures Manual Any transactions with counterparties that do not have approved and/or executed enabling agreements in place with PWP must be contingent upon the approval of a stand alone contract or long form confirmation governing the terms of such applicable transactions..
Regardless of potential credit concerns with the CAISO/ PWP may continue to transact with the CAISO to the extent necessary to meet retail loads, wholesale obligations, utilize existing resources/ and/or as required by the CAISO Tariff or any statutory or regulatory requirement.
During a system emergency or a market emergency, a limited number of short-term transactions with non-approved counterparties may be required, and may require exceeding established credit limits, in order to meet retail loads and/or maintain power system stability.
A system emergency is defined as a natural disaster, weather-related incident, major equipment failure, gas supply curtailment or operational flow order requiring immediate response, or CAISO failure to deliver power for any reason that affects PWP/s ability to provide power to retail load or meet obligations. A market emergency is defined as a notification of a declared emergency froni the CAISO or an Operational Flow Order from a Pipeline Operator such as SoCal Gas and supply cannot be obtained from PWP's current list of approved counterparties.
Tf an pmerp-pnrv sihiatinn nrnirs- 1-hp PWP Gpnpral TvTanayer shall Tiave tlip antTinnl-v tn obtain Page5
Pasadena Water and Power
Energy and Credit Risk Management Policy
resources on a short-term basis (up to 30 days) from non-approved counterparties and/or to exceed established credit limits. In addition, the General Manager shall notify the City Manager within 48 hours of declaring an emergency. As soon as is practically possible at the next meeting of the Municipal Services Committee (//MSC") and the City Council/ the PWP General Manager shall file a full report of the circumstances of any such emergency transactions, or such additional transactions as may be necessary to provide resources on a continuing basis to retail customers from the MSC and the City Council.
Specific details for counterparty credit risk management shall be prescribed in the Counterparty Credit Evaluation and Procedures Manual as developed by the RMC and revised from time to time.
Pasadena Water and Power
Energy and Credit Risk Management Policy
4.3 Transaction Types
All transactions must be Approved Transaction Types, as authorized by the City Council and the Policy.
The City Council must provide authorization for all transactions via approval of the Policy. In general, the City Council authorizes the City Manager and/or PWP General Manager to enter into contracts for various types of energy-related products (e.g., energy, capacity, transmission, natural gas, environmental and emission credits, etc.) by way of adopting an 'Authorizing Resolution". Appendix A, which shall be updated and maintained by the RMC/ sumniarizes applicable Authorizing Resolutions adopted by the City Council. PWP is required to conduct a comprehensive review of the Authorizing Resolutions at least once every three years and make recommendations to update the Authorizing Resolutions as necessary. //
The Policy may further limit the use of the Authorizing Resolutions, but cannot expand upon the transaction authority granted by the City Council. For specific transactions that are not covered by an Authorizing Resolution or exceed the scope of this Policy, the City Council may also provide authorization for the contract or faransaction by motion pursuant to a staff recommendation.
In addition to trading the various energy related products in their "physical" form, these products may also be traded as financial products to the extent authorized by City Council resolution/ up to the authorization limits of the General Manager. Such transactions would be used to only manage (hedge) financial risks associated with PWP's open positions (retail load or wholesale sales commitments) by set price caps and floors. Examples include:
Financial Commodity Swaps for Natural Gas and/or Powers Financial Commodity Options and Swaptions
Natural Gas or Elecfaric Exchange-Traded Products (Futures and Options) • Natural Gas or Electric Options
Emission Allowances
Renewable Energy Credits
• Carbon Products
Capacity Products
• Firm and Non-Firm Transmission
•
Any financially-settled schedules or transactions with the CAISO of otherwise approved physical transaction types (e.g., energy or transmission products including, but not limited to CAISO Auctioned Congestion Revenue Rights) are expressly permitted by this Policy.
Pasadena Water and Power
Energy and Credit Risk Management Policy
4.4 Transaction Authorizations and Limits
The authorized transactions and limits for authorized personnel are shown below.
Transaction Authorizations and Limits
Real Time
Schedulers
Pre-
Schedulers
Energy
Trading
Manager
Assistant
General
Manager-
Power Supply
General
Manager
General
Manager
with City
Manager's
Approval
TypePurchases to
meet load,
covered sales
Purchases to
meet load,
covered sales
Purchases to
meet load/
covered sales,
hedges
Purchases to
meet load,
covered sales,
hedges
Purchases to
meet load,
covered sales,
hedges
Purchases to meet
load, covered sales,
hedges
Term51 Day< 1 Week< 1 Month< 3 Months< 1 Year
|> 1 year .< 3 Years
Lead
Time
51 Day
Hourly to
balance of day
Same-day
transactions or
day-ahead
activities
performed on
weekends and
holidays
< 1 Week
Day ahead to
balance of week
Transaction can
be executed
within one-
week period
prior to the
transaction
effective date or
initial delivery
date
< 1 Month
Week ahead to
month ahead
Transaction can
be executed
within one-
month period
prior to the
transaction
effective date
or initial
delivery date
<, 3 Months
Month ahead
to quarter
ahead
Transaction can
be executed
within the
three- month
period prior to
the transaction
effective date
or mitial
delivery date
<1 Year
Up to 1 year.
Transaction can
be executed
within the
twelve-month
period prior to
the transaction
effective date
or initial
delivery date
< 2 Years
Up to 2 years
Transaction can be
executed within the
eighteen-month
period prior to the
transaction
effective date or
initial delivery date
Total
Volume
|Up to 100%
lestimated
[requirement
lavaUable
of
or
|Up to 100%
[estimated
[requuement
[available
of
or
|Up to 100%
[estimated
|requirement
lavailable
of
or
|Up to 115% of
[estimated
[requirement or
lavailable
[Up to 115% of
[estimated
[requirement or
lavailable
|Up to 115% of
lestimated
[requirement or
lavailable
ICounter
-party
Credit
From pre-
approved
counterparty
credit list
From pre-
approved
Counterparty
credit list
From pre-
approved
Counterparty
credit list
From pre-
approved
counterpar
ty credit
list
From pre-
approved
counterparty
credit list or
with credit
facihty
From pre-approved
counterparty credit
list or with credit
facility
*
Note: Energy sales and purchases are limited to sales from capacity and purchases to meet load requirements (or to replace higher cost resources or limited energy/hydro).
Page8
Pasadena Water and Power
Energy and Credit Risk Management Policy
-4.-4.7 Maximum Transaction Term
The niaxiniuni term of any transaction term for purchases and sales of energy and related products is limited to three years unless otherwise approved by the City Council.
Transactions with a terni up to three years can be executed within the two year period prior to the transaction effective date or initial delivery date with the approval/concurrence of the City Manager. The RMC, with the approval of PWP General Manager, will have the responsibility to establish transaction term authority limits of up to six months for various personnel involved in the Front Office functions.
4.5 Trade Execution and Authorized Personnel
All transactions must be confirmed over recorded phone lines or via electronic media (e.g. counterparty/exchange software application).
Only authorized PWP staff in the Energy Trading Group within the Power Supply Business Unit may conduct energy purchase and sale transactions. The RMC, with the approval of PWP General Manager, will have the responsibility to delegate specific transaction authority to designated Energy Trading Group personnel, not to exceed the limits of the PWP General Manager as delegated in the Policy. Such authorizations are maintained in the Energy Trading, Risk and Settlements Procedures and Controls Manual as developed, adopted and updated from time-to-time by the RMC. Authorized personnel in the Energy Risk and Credit Group of PWP's Finance, and Administration Business Unit shall be responsible for informing counterparties of such approved authorizations/ including transacting authority and restrictions, along with product types and/or term and dollar limits.
All personnel with designated responsibility for energy risk and credit control functions and settlement and processing functions are strictly prohibited from executing transactions.
5.0 RISK GOVERNANCE STRUCTURE AND RESPONSIBILITIES
This section defines the overall roles and responsibilities for implementation of this Policy. Specific details of the roles and responsibilities of the oversight and operational divisions within the energy and credit risk management program at PWP are outlined in the Energy Trading, Risk, and Settlements Procedures and Controls Manual as developed by the RMC and revised from time to time.
5.1 City Council
The City Council is responsible for adopting high-level broad policies and providing strategic direction as contained in this Policy document. The City Council adopts the Policy based upon its review of the recommendations made by the RMC, as reviewed by the MSC,
Pasadena Water and Power
Energy and Credit Risk Management Policy
and directs the General Manager of PWP to execute the Policy. The City Council will review the Policy every two years and approve new enabling agreements under which wholesale energy agreements can be made.
5.2 Municipal Services Committee
The City Council Municipal Services Committee ("MSC") provides direction to PWP on long- term planning and policy niatters relating to utility operations. The MSC will receive and review management energy and credit risk reports prepared by the RMC, as needed or upon request, and make recommendations consistent with the Policy to the City Council.
5.3 General Manaser
The General Manager reports to the City Manager and has overall responsibility for executing and ensuring compliance with the Policy adopted by the City Council. The General Manager provides annual updates to the City Manager on the energy portfolio risk management activities as a comp. In addition, the General Manager provides reports as needed or upon request to the MSC on the energy portfolio risk management activities and annual reports to the City Council on the adequacy of the Policy, including any necessary changes to the Policy.
5.4 Energy and Credit Risk Management Committee
The Energy and Credit Risk Management Committee ("RMC") is responsible for overseeing compliance with the Policy, and reviewing and recommending changes to the Policy as necessary. The RMC is also responsible for authorizing all products and commodity types as further detailed in the Energy Trading/ Risk and Settlements Procedures and Controls Manual as developed and adopted by the RMC. In addition/ the RMC is responsible for creating and implementing a sound approach to managing risk consistent with the business strategy and risk tolerance of the organization as defined by the City Council. As such/ the RMC is critical to overseeing and reviewing the risk management process and infrastructure and managing PWP's risk exposure.
The RMC will consist of the following City staff:
PWP General Manager (RMC Chairperson);
PWP Assistant General Manager - Power Supply;
• PWP Assistant General Manager - Finance and Administration; Wholesale Operations Manager / Energy Trading Manager;
Wholesale Operations Manager / Energy Settlements Manager; Power Resources Planning Manager and/
Pasadena Water and Power
Energy and Credit Risk Management Policy
Wholesale Operations Manager / Energy Risk and Credit Manager (RMC Secretary).
The Assistant City Manager (or designee). The Director of Finance (or designee), the Internal Audit Manager (or designee), and the Assistant City Attorney (or designee) will act as advisors to the RMC.
The RMC shall meet regularly, but at a minimum monthly, to discuss risk management, operating processes, trading controls and authorizations. The RM.C meetings can be conducted in person or virtually using electronic media. A quorum of at least 4 committee voting members must be present.
5.5 Manasement Oversisht/Separation of Duties
Risk management oversight at an operational level is accomplished through supervisory review and approval with appropriate separation of duties. PWP/s risk management functions shall be segregated into Front Office, Middle Office and Back Office as outlined below to maintain effective system of controls over financial and operational risks.
Front Office
(Transactions)
Middle Office
(Control)
Back Office
(Processing)
Power Supply Business
Unit
PWP Finance and
Administration
Business Unit
PWP Finance and
Administration Business
Unit and the City Finance
Department
Energy Trading ManagerEnergy Risk and Credit
Manager
Energy Settlements
Manager
>^ Demand forecast and
portfolio position
>• Portfolio optimization
and hedging strategy
adhering to Hedge
Policy
$-> IVIarketing contact
>» Customer contact
>• Transaction stmcture
>- Pricing/negotiation
>• Transaction execution,
booking, scheduling,
and nominations
^ Master Agreement /
Contract Negotiations
^ Independent control
^ Risk identification
5-> Risk measurement
^•> Risk monitoring
>^ Mark-to-market
> Risk limits
>- Risk metrics
>• Hedge Policy
compliance
monitoring
>• Credit emergency
shutdown
>• Management reporting
>• Counter-party credit
authorization
>- Confirmations
>> Reconciliations
5^ Energy Accounting
>^ Shadow, Initial,
Final, True-up, and
CAISO Settlement
>^ Contract management
and compliance
>» Approve mvoices
(accounts payable)
>i> Issue invoices
>^ Manage Escrow
Accounts
Page
Pasadena Water and Power
Energy and Credit Risk Management Policy
The Middle and Back Offices shall be independent from the Front Office functions/ and shall provide oversight of the risks assumed by the Front Office in the course of transacting energy and energy related products and services.
Some of the front, middle, and back office functions may be contracted to a third party vendor. PWP has currently engaged Alliance for Cooperative Energy Services Power Marketing LLC ("ACES") to perform its real-time fa-ading activities/ along with limited Middle and Back Office functions. Additional support functions such as Legal, Treasury/Finance/Audit, and Information Technology will be drawn upon as needed to support the segregated structure.
5.5.1 Front Office
The Front Office is primarily responsible for resource planning and procuring resources to meet the physical, financial and contractual requirements of PWP's energy and fuel portfolio. The Front Office shall maintain an integrated and balanced portfolio of resources to cover retail forecasted load requirements/ and establish minimum coverage requirements for capacity and energy.
The Front Office is responsible for ensuring that the procedures and processes needed to transact business within the Policy are in place and shall perform all duties related to actual transacting in the wholesale natural gas and energy markets. PWP Assistant General Manager - Power Supply is responsible for inanaging the Front Office. The Front Office is the primary interface with potential wholesale transacting counterparties. Detailed responsibilities of the Front Office are outlined in the Energy Trading, Risk and Settlements Procedures and Controls Manual.
5.5.2 Middle Office
The Middle Office is primarily responsible for providing risk oversight and controls.
The Middle Office will monitor, verify and report on the compliance with the Policy and risk management program, review all risk management activities/ determine portfolio and credit exposure, transaction compliance and on-going approval of counterparties. The Middle Office will be responsible for reporting to the RMC on risk management issues, and recommending to the RMC when changes in policy or operating procedures are required. These recommendations may relate to the temporary or permanent halting of transactions with one or more counterparties, exceptions to rules and procedures, other operational exceptions, and any other topic the Middle Office believes represents an unacceptable risk exposure. The Energy Risk and Credit Manager will be responsible for managing the middle-office functions and will report to PWP Assistant General Manager - Finance and Administration.
The Middle Office enforces and updates as necessary the Policy and develops and updates related procedures and controls manuals so that portfolio management functions occur in compliance with the City Council-ad opted Policy and RMC adopted procedures, guidelines and controls. The functions of the Middle Office can be broadly defined as
Pasadena Water and Power
Energy and Credit Risk Management Policy
Quantitative Analysis, Compliance Review, Credit Administration, and Management Reporting.
Quantitative Ana lysis
The Middle Office performs necessary risk analysis to evaluate the risk exposure on a transacdonal and portfolio basis.
Compliance Review
The Middle Office monitors all transactions to ensure compliance of transactions with the RMC Policy procedures, guidelines and controls.
Credit Administration
The Middle Office monitors counterparty creditworthiness. The Middle Office objectively measures and monitors credit limits and credit histories/ and without approval of the RMC, may temporarily halt trading or, with the approval of the RMQ permanently halt trading with an approved counterparty because of credit exposure or credit condition. In the event of any trading suspensions, the Middle Office will communicate with Front Office in writing or via email the term of suspension.
Management Reporting
The Middle Office administers reports to the RMC related to risk management, and performance in alignment with the Policy and related procedures, guidelines and controls and the requests of the RMC.
5.5.3 Backoffice
The Back Office is primarily responsible for energy accounting and settlements, settlement and payment of bills, recording and reconciling transactions, contract management and compliance. The Back Office is also responsible for accurate transactions records and settlements, independently monitoring and recording transactions into a fa-acking database, and verifying and reporting on compliance with procedures as reflected in deal tracking documentation. The Back Office functions are detailed in the Energy Trading, Risk and Settlements Procedures and Controls Manual. The Back Office is managed by the Wholesale Operations Manager/Energy Settlements Manager who reports to PWP Assistant General Manager - Finance and Administration.
6.0 POLICY MONITORING AND COMPLIANCE
6.1 Monitoring and Reportins
PWP shall prepare risk management reports containing an analysis of physical and financial positions of all energy resources in its energy portfolio and any potential risks associated with its energy portfolio. Such reports shall be prepared by the Middle and Back Office staff, and reviewed by the RMC. The frequency and content of the risk management reports for each oversight body shall be prescribed in the Energy Trading, Risk and Settlements Procedures and Controls Manual.
Pasadena Water and Power
Energy and Credit Risk Management Policy
6.2 Compliance Exceptions
Compliance exceptions are actions which violate the authority limits or directives set forth herein or in the risk management program procedures and controls manuals as developed and adopted by the RMC.
6.3 Reporting of Exceptions
Exceptions to mandated policies/ procedures and regulations shall be reported to the RMC within 48 hours after they are identified as provided in the risk management program procedures and controls manuals as developed and adopted by the RMC.
6.4 Assessment
Compliance with the Policy and with the specific procedures, guidelines and controls as developed and adopted by the RMC shall be subject to a review every three years by an independent consulting firm that the RMC, with concurrence of the Director of Finance/ may appoint to evaluate the effectiveness of mandated controls. The hired firm will also verify that stated objectives are being carried out, and that internal conta-ols are in place for processes to comply with the Policy. The firm will also identify any recent changes in industry best practices that may warrant program revisions. Upon completion of the assessment, the report shall be provided to the RMC, City Manager and Director of Finance. The RMC will review any recommended changes or enhancements to the Energy and Credit Risk Management prograni and update the risk nianagement procedures and controls manuals as required. The RMC will also recommend updates to the Policy and make a recommendation to the City Council on the adequacy of the Policy and necessary changes.
7.0 CONFLICT OF INTEREST
In accordance with the Pasadena Municipal Code and California law, personnel involved in transacting and oversight of PWP's supply resource acquisition programs may not engage in financial conflict of interest, unless the City is duly informed and it elects to waive such conflicts. All such personnel are: (1) strictly forbidden from directly investing in any business entity that could potentially enter into energy transactions with PWP; and, (2) required to complete, on an annual basis, the Employee Qualifications and Code of Conduct and Form 700 Disclosures forms and submit these forms to the City Clerk; and/ (3) required to provide written acknowledgement of conipliance with this Policy by completing the Energy Risk Management Policy Acknowledgement and Employee Compliance Form each year after Risk Policy training is provided by the Energy Risk and Credit Manager.
The PWP Energy Risk and Credit Manager is responsible for routinely reviewing the Form 700 of each personnel engaged in the supply resource decision-making process for the purpose of identifying potential financial conflicts of interest. The City Attorney's Office will assist the
Pasadena Water and Power
Energy and Credit Risk Management Policy
PWP Energy Risk and Credit Manager in reviewing these forms and providing legal advice in connection with such reviews.
The Energy Trading, Risk and Settlements Procedures and Controls Manual contains additional detailed requirements for personnel conflict of interest disclosure and prohibitions as to acquiring or maintaining financial interest in energy trading counterparties.
Pasadena Water and Power
Energy and Credit Risk Management Policy
Appendix A
Transaction Type Authority: City Council Resolutions
This table summarizes the City Council resolutions authorizing various transaction types to be carried out by PWP. A list of Authorized Transaction Types shall be updated and maintained by the RMC, consistent with the Energy and Credit Risk Management Policy and approved City Council Resolutions.
Resolution
(Dated)
7452
(12-16-1996)
75492
(10-20-1997)
8243
(5-12-2003)
4184-2
(10-22-2007)
8965
(8-3-2009)
9063
(10-4-2010)
9216
(7-9-2012)
To Contract for Energy Products1
Air emissions credits (NOx and SOx)
Contracts for products <$25,000 may be authorized by
the General Manager
• Products <$75,000 may be authorized by the City
Manager
•Physical Natural gas commodity
Physical Petroleum products
Gas transaction master enabling agreements (e.g
NAESB, bilateral)
Physical Electrical energy
Physical Electrical capacity
The transmission of electrical energy or capacity or both Electric generation and transmission capacity for
planning purposes (e.g., RA)
Congestion revenue rights (CRR's) for use in CAISO
operated transmission markets
Envirorunental atfaributes such as RECs/ green tags/
carbon credits, and any other environmental attributes
as may be defined in the future
Carbon-related permits/ credits, allowances/ certificates, offsets and similar instruments
Designates the General Manager as the City's
"Authorized Account Representative" and the Assistant
General Manager as "Alternative Authorized Account
Representative" to conduct transactions related to the
California Cap and Trade
Pasadena Water and Power
Energy and Credit Risk Management Policy
9221
(7-30-2012)
•Authorizes The City Manager or General Manger of
Water and Power Department to execute and
implement agreements with CAISO
9959
(11-14-2022)
Designates formally Water and Power Department
authorities as Authorized/Designated Representatives
to execute transactions or submit reporting in regulated compliance programs
Supersedes Resolution 9216 (7-9-2012) designed
specifically for Cap and Trade
Pasadena Water and Power
Energy and Credit Risk Management Policy
Appendix A (Continued)
* Notes: 1. Council resolutions authorize the General Manager to enter into agreements for the purchase, sale, exchange, storage, transportation, transfer, and/or participation in auctions, as may be applicable for the authorized energy products.
2. The use of Resolution 7549 restricts the use of financial derivatives.
Pasadena Water and Power
Energy and Credit Risk Management Policy
Appendix B
Acknowledgement and Employee Compliance Form
The purpose of this form is for the individual PWP employee involved with energy risk and credit management activities, including but not limited to. Front Office/ Middle Office or Back Office activities associated with transactions, energy trading, risk management and other related activities to acknowledge in writing that they have received, read and understood the Energy and Credit Risk Management Policy (Policy) and related procedural documents. And for the employee to acknowledge the confidential and proprietary nature of the information used in energy risk management activities and agree to maintain such information as confidential.
The employee recognizes that violating the Policy and related policies and procedural documents can lead to disciplinary actions or constitute grounds for progressive disciplinary action/ which may include termination of employment.
The undersigned hereby certifies that he/she has received, read and understood the Policy and related procedural documents.
Employee Name
Title
Department
Manager/ Supervisor
Confa:ol Office() Front Office
() Middle Office
() Back Office
() Other
SignatureDate
Pasadena Water and Power
Energy and Credit Risk Management Policy
Appendix C
Glossary of Energy and Credit Risk Management Terms
The following are definitions of terms used in energy and credit risk management:
Authorized Counterparty List: A list that indicates the approved counterparties and their specific credit limit and current credit rating.
California Independent System Operator (CAISO): A state chartered, California non-profit public benefit corporation that is responsible for ensuring the efficient use and reliable operation of the electric transmission grid (system) in the state of California.
Collateral: An obligation or security linked to another obligation or security to secure its performance.
Congestion: Physical constraints at certain points on electricity transmission networks.
Congestion Revenue Rights (CRRs): CRRs are financial insta-uments made available through the CAISO's allocation process where a certain amount of CRRs are provided at no cost to load serving entities (such as PWP), the CAISO's auction process and a secondary market that enable CRR holders to manage the variability in congestion cost based on Locadonal Marginal Pricing.
Counterparty: A participant in a physical or financial confa-act.
Counterparty Risk: This is the risk that a counterparty to a transaction or contract will default or fail to perform) on its obligation under the contract.
Credit Limit: Pre-established dollar valued trade limit set for each counterparty based upon their financial strength, trading and payment history.
Day-Ahead Market: The market trading for the day before the operating day.
Derivative: Any financial instrument, such as a futures confa-act. Swap or Option, which derives its value from the value of an underlying security or physical commodity.
Energy Portfolio: The collective term for PWP's generation assets, short and long term power supply contracts for natural gas and power, transmission assets, transactions or trades/ and retail load obligation.
Pasadena Water and Power
Energy and Credit Risk Management Policy
Energy Portfolio Open Position - The amount or percent of the load obligation that is not covered by available resources (power and/or natural gas). A negative or short portfolio position implies that available resources are less than the load obligation and a positive or long portfolio position implies that available resources exceed load obligation.
Energy Risk Management: The identification and management of PWP's energy portfolio risks to support achievement of its business objectives.
Estimated Available: The estimated available for a given period is equal to excess resources above the forecasted load and/or compliance/reliability obligation.
Estimated Requirement: The estimated requirement for a given period is the forecasted load and/or compliance/reliability obligation less available resources.
Federal Energy Regulatory Commission (FERC): The U.S. government body that regulates interstate energy markets.
Hedge: A transaction that reduces price risk relative to a position that an organization has or intends to take in the physical or financial market.
Hedging: This is the use of energy-related transactions to limit or reduce the likelihood of financial loss due to fluctuations in market conditions. For example, buying or selling physical or financial energy-related products to offset short or long inventory positions.
Liquid Market: A market in which buying and selling can be performed with ease, due to the presence of a large number of buyers and sellers prepared to ta"ade substantial quantities at small price differences. (The opposite is an illiquid market.) Locational Marginal Pricing (LMP): A method of pricing the cost of congestion into electricity prices.
Long: A position in which an asset or right is owned or a position that appreciates in value if the value of the underlying instrument or market price increases.
Market (Price) Risk: Risk due to changes in the market prices of energy commodities which can have an adverse impact on energy cost
Marking-to-Market (MTM): The process of valuing a position or portfolio against a market clearing-price.
North American Energy Standards Board (NAESB): NAESB serves as an industry forum for the development and promotion of standards which will lead to a seamless marketplace for
Pasadena Water and Power
Energy and Credit Risk Management Policy
wholesale and retail natural gas and electricity, as recognized by its customers, business community, participants, and regulatory entities.
North Anierican Electric Reliability Corporation (NERC): A not-for-profit entity whose mission is to ensure the reliability of the bulk power system in North America.
Netting Agreement - A contingency agreement in which debit and credit positions are allowed to offset each other .
Operational and Organizational Risk: The risk that deficiencies in internal control or information systems or failure to effectively execute business activities will result in unexpected economic loss.
Physical Hedge - an energy input purchase or retail/wholesale sale transacted to meet physical requirements.
Real-Time - To schedule for delivery of physical power on an hourly basis.
Regulatory and Legal Risks: The risk that contracts are not legally enforceable or documented correctly or that regulatory agencies or courts may take actions or adopt measures which may potentially impact the portfolio value
Risk: Refers to uncertainty about future cash flows and asset values, and it consist of an event that could potentially cause actual outcomes to differ from expected outcomes, either negatively or positively
Short: A position in which an asset or right is not owned or a position that increases in value if the value of the underlying instrument or market price decreases.
Sleeving: A transaction whereby two counterparties which do not have credit with each other, ask a third party that has credit with both to be a middleman to facilitate a trade.
Speculative Trading: Taking positions in any commodity price with the expectation that prices will move in a particular direction, including buying power that is not needed with the intent to resell at a profit or selling power that is needed with the intent to repurchase it at a later date and make a profit.
System Emergency:
(i) A condition that exists when extraordinary events outside normal operating conditions occur that threatens system stability, such as the unplanned loss of a resource; or
(ii) A natural disaster, major equipment failure, gas supply curtailment or operational flow order requiring immediate response; or
Pasadena Water and Power
Energy and Credit Risk Management Policy
(iii) CAISO failure to deliver power for any reason that affects PWP's ability to provide power to retail load or meet obligations.
Transaction: All of the approved Transaction types defined in the Policy, including physical or financial obligations of PWP and one or more counterparties related to energy, capacity/ ancillary services, transmission service/ natural gas, renewable energy credits and greenhouse gasses.
Transaction Activities: The activities involved in the energy supply decision process involving Transactions as defined in the Policy.
Transaction Limits (or Authorized Transaction Limits) - Predefined parameters that restrict transactions. These can include limits on volume, duration, dollar amounts and approval authorities.
Volatility: A measure of the variability of a market factor, most often the price of the underlying instrument.
Volumetric Risk: The risk that fluctuations in load or resources will adversely affect net revenues
Western Electricity Coordinating Council (WECC): A North American Electric Reliability Council for the Western Interconnection.
Western System Power Pool (WSPP): WSPP is an agreement and an organization that creates power trading opporhinities and allows WSPP members to manage power delivery and price risk. As of January 1st, 2025, the current WSPP Agreement with effective date October 21, 2024 is the most commonly used standardized power sales contract in the electric industry. It is approved by the FERC and used by jurisdictional and non-jurisdictional entities. Once signed, the Agreement allows instant access to power trading within the membership.
11/7/25, 3:28 PMPasadena Office - Social Security Administration Pasadena Office - Social Security Administration
The agency administers and provides retirement benefits, disability benefits, survivors benefits, Medicare coverage, and Supplemental Security Income (SSI.
Address: 104 N. Mentor Ave. Pasadena CA 91106 (https://maps.google.com?daddr=104 N. Mentor Ave. Pasa denaCA 91106)
Website: http://www.ssa.gov (http://www.ssa.gov)
Hours:
• Monday, Tuesday, Thursday, Friday, 9:00am to 3:00pm
• Wednesday, 9:00am to 12:00pm.
Phones:
• TDD(800)325-0778
Service/lntake and Administration (877) 255-1508
National Toll Free Number Service/lntake (800)772-1213
Service/lntake (626) 796-0306
•
<$* Visit Website (http://www.ssa.gov)
Directions (https://maps.google.com?daddr=104 N. Mentor Ave. Pasadena CA 91106) 0 See an issue with this info? Tell us here. (/lac/SuggestCorrection/3173341) +
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