Electric Utility
Enterprise Fund
(Silicon Valley Power)
Financial Statements
For the year ended June 30, 2024 with
comparative totals as of June 30, 2023
City of Santa Clara, California
1500 Warburton Avenue
Santa Clara, CA 95050-3796
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h
e 30, 2023
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CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
TABLE OF CONTENTS
Page
INDEPENDENT AUDITOR'S REPORT ................................................................................... 1 Management’s Discussion and Analysis ..................................................................................... 5 Statements of Net Position .................................................................................................... 11 Statements of Revenue, Expenses and Changes in Net Position .......................................... 13 Statements of Cash Flows ..................................................................................................... 14 Required Supplementary Information
Schedule of Proportionate Share of the Net Pension Liability .............................................. 74 Schedule of Contributions (Pension Plan) ............................................................................ 76 Schedule of Proportionate Share of the Net OPEB Liability and Related Ratios ................. 78 Schedule of Proportionate Share of the Contributions (OPEB Plan) .................................... 79
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INDEPENDENT AUDITOR’S REPORT
To the Honorable Members of the City Council
City of Santa Clara, California
Report on the Audit of the Financial Statements
Opinion
We have audited the accompanying financial statements of the City of Santa Clara Electrical Utility Enterprise Fund (Silicon Valley Power) of the City of Santa Clara, California, as of and for the year ended June 30, 2024, and the related notes to the financial statements, whic h collectively comprise Silicon Valley Power’s basic financial statements as listed in the Table of Contents. We did not audit the financial statements of Northern California Power Agency (NCPA), Transmission Agency of Northern California (TANC), M-S-R Energy Authority (MSR EA) and M-S-R Public Power Agency (MSR PPA) as of and for the year ended June 30, 2023, related to the calculation of the Investments in Joint Ventures. At June 30, 2024, the Investment in these Joint Ventures collectively represents 4.2%, 5.0% a nd 0%, respectively, of total assets, net position and revenues of Silicon Valley Power. The financial st atements of the NCPA, TANC, MSR EA and MSR PPA were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the calculation of the Investments in Joint Ventures, is based solely on the reports of the other auditors.
In our opinion, based on our audit and the reports of the other auditors, the financial statements referred to above present fairly, in all material respects, the financial position of Silicon Valley Power as of June 30, 2024, and the changes in financial position and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audit in accordance with auditing sta ndards generally accepted in the United States of America. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of Silicon Valley Power, and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in th e United States of America; and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about Silic on Valley Power’s ability to continue as a going concern for twel ve months beyond the financial stat ement date, including any currently known information that may raise substantial doubt shortly thereafter.
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Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or erro r, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with ge nerally accepted auditing standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud ma y involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the a ggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with generally accepted auditing standards, we:
Exercise professional judgment and maintain professional skepticism throughout the audit.
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures r esponsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Silicon Valley Power’s internal control. Accordingly, no such opinion is expressed.
Evaluate the appropriateness of accounting polic ies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Silicon Valley Power’s ability to continue as a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
Report on Summarized Comparative Information
We have previously audited Silicon Valley Power’s June 30, 2023 financial statements, and we expressed an unmodified audit opinion on those audited financial statements in our report dated November 30, 2023. In our opinion the summarized comparative information presented herein as of and for the year ended June 30, 2023 is consistent, in all material respects, with the audited financial statements from which it has been derived.
Emphasis of Matter
As discussed in Note 1, the financial statements present only Silicon Valley Power and do not purport to, and do not present fairly the financial position of the City as of June 30, 2024, the changes in its financial position, or, where applicable, its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter.
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Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis and other requ ired supplementary information as li sted in the Table of Contents be presented to supplement the basic fina ncial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standard s generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial stat ements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated November __, 2024, on our consideration of the City of Santa Clara’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters.
The purpose of that report is solely to describe the sc ope of our testing of inte rnal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City of Santa Clara’s internal control over financia l reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City of Santa Clara’s internal control over financial reporting and compliance.
Pleasant Hill, California
November __, 2024
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5 Management’s Discussion and Analysis
MANAGEMENT’S DISCUSSION AND ANALYSIS
The Management's Discussion and Analysis (MD&A) of Silicon Valley Power (SVP) offers a comprehensive overview of SVP's financial activities during the fiscal years concluding on June 30, 2024 and 2023. The purpose of this MD&A is to provide a holistic assessment of SVP's financial performance. To gain a deeper insight into SVP's financial performance, readers are encouraged to examine this MD&A alongside the Basic Financial Statements and their accompanying notes. This combined approach will enhance their comprehension of SVP's financial performance.
SVP, a distinct enterprise fund under the jurisdiction of the City of Santa Clara (City), was created to manage and report on the City's electric power operations. SVP holds ownership of power generation facilities, maintains investments in joint ventures engaged in electricity production, and actively participates in power trading on the open market. These activities are undertaken with the primary objective of ensuring that SVP's retail customers, including the residents, institutions, and businesses within the City, have access to a dependable source of electric power at affordable rates.
The operations of SVP have been significantly influenced by the deregulation of the electric power industry in California, a topic elaborated upon in Note 9 within the financial statements.
FINANCIAL HIGHLIGHTS
Key financial highlights for the fiscal year ended June 30, 2024 are summarized as follows:
The total assets and deferred outflows of resources surpassed the liabilities and deferred inflows of resources by $1,292.8 million, representing a notable increase of $221.5 million or 20.7% compared to the previous fiscal year's position of $1,071.3 million. This growth is primarily attributed to a $48.7 million expansion in the net investment of capital assets, a $3.7 million increase in pension stabilization reserve, and a $169.1 million increase in unrestricted net position.
Operating revenues exhibited an increase of $54.3 million or 7.9%, climbing from the previous fiscal year of $687.1 million to $741.5 million. This growth can be chiefly attributed to heightened retail sales, the result of the implementation of a 5% rate increase in July 2023 and a 10% rate increase in January 2024.
Operating expenses declined by $75.1 million or -11.5% from the previous fiscal year, descending from $655.1 million to $580.0 million in the fiscal year 2023-24. This decrease is primarily the result of lower resource purchase costs and lower generation production costs compared to the previous fiscal year.
SVP’s total outstanding long-term debt saw a reduction of $15.9 million, declining from $128.4 million in the previous fiscal year to $112.5 million during the current fiscal year.
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MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)
6 OVERVIEW OF SVP’S BASIC FINANCIAL STATEMENTS
This annual report comprises a series of financial statements and their accompanying notes, organized to provide readers with a comprehensive understanding of SVP’s financial position.
The Basic Financial Statements consist of two key components:
1. Management’s Discussion and Analysis (this part),
2. The Basic Financial Statements, in conjunction with the Notes to these Basic Financial Statements.
The Basic Financial Statements offer insights into both the short-term and long-term financial aspects of SVP.
These statements include:
Statements of Net Position: These statements present a comprehensive overview of SVP's financial position, encompassing all long-term liabilities on a full accrual basis. Statements of Revenues, Expenses, and Changes in Net Position: These statements provide detailed information on all of SVP's revenues and expenses, also on a full accrual basis, with a focus on measuring the net revenues and expenses of the program. Statements of Cash Flows: These statements offer information about cash activities during the fiscal year.
FISCAL YEAR 2023-24 FINANCIAL HIGHLIGHTS
Below is a summary of financial information extracted from the Statements of Net Position (Table1) and the Statements of Revenues, Expenses, and Changes in Net Position (Table 2).
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MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)
7 Description 2024 2023 Amount % 2022 *
Pooled cash and investments 609.0 $ 461.1 $ 147.9 $ 32.1% 417.6 $ Other assets 265.6 238.1 27.5 11.5% 263.4 Capital assets 688.8 655.8 33.0 5.0% 635.3 Total Assets 1,563.4 1,355.0 208.4 15.4% 1,316.3 Deferred outflows on derivative instruments - 0.8 (0.8) N/A 0.2 Deferred outflows on refunding 4.5 5.3 (0.8) -15.1% 6.2
25.4 26.8 (1.4) -5.2% 14.2 Total Deferred Outflows of Resources 29.9 32.9 (3.0) -9.1% 20.6 Long-term Debt Outstanding 112.5 128.4 (15.9) -12.4% 142.8 Right-to-use liabilities 2.7 4.4 (1.7) -38.6% 3.7 Net OPEB liability 6.9 7.3 (0.4) -5.5% 13.1 Net pension liabilities 108.3 105.8 2.5 2.4% 73.5 Other liabilities 54.2 42.2 12.0 28.4% 67.4 Total Liabilities 284.6 288.1 (3.5) -1.2% 300.5 Deferred inflows on derivative instruments 12.0 23.4 (11.4) -48.7% 42.2 Deferred inflows on refunding 1.0 1.3 (0.3) -23.1% 1.5 Deferred inflows on lease revenue 2.0 2.3 (0.3) -13.0% 2.6 Deferred inflows on pension related items 0.5 0.8 (0.3) -37.5% 18.4 Deferred inflows on OPEB related items 0.4 0.7 (0.3) -42.9% 0.9 Total Deferred Inflows of Resources 15.9 28.5 (12.6) -44.2% 65.6 Net Position:
Net investment in capital assets 575.8 527.1 48.7 9.2% 494.9 Restricted for contractual obligation 10.0 6.3 3.7 58.7% 6.2 Unrestricted 707.0 537.9 169.1 31.4% 469.7 Total Net Position 1,292.8 $ 1,071.3 $ 221.5 $ 20.7% 970.8 $ * Net Investment in Capital Assets were restated to exclude leases receivable and re-categorize it to unrestricted net position.
Deferred outflows on pension and OPEB
related items
Table 1
Net Position
(in millions)
Increase (Decrease)
June 30, 2024, 2023, and 2022
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MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)
8 Description 2024 2023 Amount % 2022
Revenues:
Retail 648.6 $ 556.2 $ 92.4 $ 16.6% 497.9 $ Wholesale 11.5 85.0 (73.5) -86.5% 50.0 Interest Revenue 13.9 8.4 5.5 65.5% 6.1 Net increase (decrease) in fair value of investments 8.7 (2.8) 11.5 410.7% (21.0) Rents and royalties 3.5 3.8 (0.3) -7.9% 3.9 Renewable energy credits 10.5 3.9 6.6 169.2% 2.0 Mandated program receipts 20.1 15.9 4.2 26.4% 14.2 Other 89.4 95.0 (5.6) -5.9% 72.0 - Total Revenues 806.2 765.4 40.8 5.3% 625.1 Expenses:
Retail 564.0 631.0 (67.0) -10.6% 540.5 Wholesale 9.8 19.4 (9.6) -49.5% 18.3 Interest on long term debt and swap termination
payment 2.2 2.7 (0.5) -18.5% 3.1 Mandated program disbursement 6.2 4.5 1.7 37.8% 5.5 Other - 3.8 (3.8) -100.0% - Total Expenses 582.2 661.4 (79.2) -12.0% 567.4 Increase (decrease) in net position before transfers 224.0 104.0 120.0 115.4% 57.7 Transfers in (out) (2.5) (3.5) 1.0 28.6% (2.3) Increase (decrease) in net position 221.5 100.5 121.0 120.4% 55.4 Net Position - July 1 1,071.3 970.8 100.5 10.4% 915.4 Net Position - June 30 1,292.8 $ 1,071.3 $ 221.5 $ 20.7% 970.8 $ Table 2
Revenues, Expenses, and Changes in Net Position
(in millions)
Increase (Decrease)
For the years ended June 30, 2024, 2023 and 2022
In fiscal year 2023-24, SVP's retail revenues reached $648.6 million, showing substantial growth from $556.2 million in fiscal year 2022-23 and $497.9 million in fiscal year 2021-22. These figures represent significant year over year growth of 16.6% in fiscal year 2023-24 compared to the preceding fiscal year (2022-23) and 11.7% growth in fiscal year 2022-23 compared to the fiscal year before that (2021-22). The primary driver behind the growth in fiscal year 2023-24 was the implementation of a 5% rate increase effective July 1, 2023 and a 10% rate increase effective January 1, 2024, coupled with a moderate load growth in the fiscal year 2023-24.
In fiscal year 2023-24, SVP's retail operating expenses amounted to $564.0 million, declining from $631.0 million in fiscal year 2022-23 and increasing from $540.5 million in fiscal year 2021-22. These numbers indicate a decrease of $67.0 million or 10.6% in the fiscal year 2023-24 DRAFT
MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)
9 compared to the preceding fiscal year (2022-23), and an increase of $90.5 million or 16.7% in the fiscal year 2022-23 compared to the fiscal year before that (2021-22). The lower operating expenses for the fiscal year 2023-24 were primarily driven by the lower resource purchase costs and lower generation production costs compared to the fiscal year 2022-23.
In fiscal year 2023-24, revenues generated from wholesale resources sales, which encompass both gas and power, was $11.5 million. This figure represents a substantial decrease compared to the $85.0 million in fiscal year 2022-23 and the $50.0 million reported as reclassified in fiscal year 2021-22. Simultaneously, the wholesale resources purchase was $9.8 million in fiscal year 2023-24, $19.4 million in fiscal year 2022-23, and $18.3 million in fiscal year 2021-22. The $73.5 million decrease in wholesale resource sales during the fiscal year 2023-2024 was primary attributed to significant decrease in wholesale futures trading profit compared to the previous fiscal year due to sharp declined prices in overall resource market. The $35 million surge in wholesale resource sales during the fiscal year 2022-2023 was attributed to the recognition of a $60 million gain in wholesale futures trading in the year when the resource market experienced unprecedent price spikes. Likewise, the decrease in wholesale resources purchase during this fiscal year was primarily due to the lower prices prevailing in the resource market.
Interest income for fiscal year 2023-24 amounted to $13.9 million, an increase from $8.4 million reported in fiscal year 2022-23, and the $6.1 million recorded in fiscal year 2022-23. This increase in the most recent fiscal year can be primarily attributed to the higher interest rate environment. Conversely, interest expense for fiscal year 2023-24 was $2.2 million, which is a decrease from the $2.7 million in fiscal year 2022-23 and the $3.1 million in fiscal year 2021-22.
For more detailed information regarding interest income and expense, please refer to Note 5 in the financial statements.
As of June 30, 2024, SVP's net position stood at $1,292.8 million, reflecting a $221.5 million increase from the preceding fiscal year. Within this total, there was a $48.7 million increase in the net investment in capital assets, a $3.7 million increase in the amount restricted for contractual obligations, and a $169.1 million increase in unrestricted net position.
CAPITAL ASSETS
As of the end of fiscal year 2023-24, SVP had invested $688.8 million in capital assets, net of depreciation. Most of this investment was allocated to power generation facilities, with the remaining portion distributed across transmission and distribution assets, right-to-use buildings, and subscriptions for information technology arrangements.
As of June 30, 2024, SVP had several projects that were either completed or in progress. In the fiscal year 2023-24, the Capital Improvement Projects Budget included appropriations for significant investments in substation improvements for the upcoming years.
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MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)
10 For more comprehensive information regarding SVP's capital assets, please refer to Note 4 in the financial statements.
DEBT ADMINISTRATION
SVP's debt portfolio and its individual components are comprehensively outlined in Note 5 within the financial statements. As of June 30, 2024, SVP's outstanding debt consists of one issue of Revenue Bonds and three issues of Subordinate Revenue Bonds, amounting to a total of $112.5 million. These bonds are backed by the net electric revenues generated by SVP and have maturity dates spanning from fiscal years 2025 through 2033.
ECONOMIC OUTLOOK AND MAJOR INITIATIVES
For detailed information regarding the economic outlook and major initiatives of the City, as well as what is planned for the upcoming year, please refer to the Letter of Transmittal Section of the City's Annual Comprehensive Financial Report for the fiscal year concluding on June 30, 2024. This section provides an in-depth analysis and insight into the City's economic prospects and its key initiatives moving forward.
CONTACTING SVP’S FINANCIAL MANAGEMENT
These Basic Financial Statements are intended to provide citizens, taxpayers, investors, and creditors with a general overview of SVP’s finances. Questions about these Basic Financial Statements should be directed to the City of Santa Clara Finance Department, 1500 Warburton Avenue, Santa Clara, CA 95050-3796.
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See accompanying notes to financial statements
11 ASSETS 2024 2023
Current Assets:
Pooled cash and investments (Note 3) 609,040,674$ 461,055,857$ Investments with fiscal agent (Note 3) 16,596,885 16,197,916 Leases Receivable (Note 2R) 259,985 249,167 Receivables (net of allowances)
Accounts 122,946,617 91,998,401
Interest 3,761,308 1,768,781
Derivative instrument (Note 5G) 7,119,963 8,294,280 Due from the City of Santa Clara (Note 2E) 4,017,195 3,209,849 Inventory of materials and supplies (Note 2F) 19,366,588 15,827,132 Total Current Assets 783,109,215 598,601,383
Noncurrent Assets:
Capital assets (Note 4)
Land 14,371,743 14,371,743
Construction in progress 86,463,324 71,262,465 Buildings, improvements and infrastructure 1,147,187,859 1,101,647,613 Equipment 10,212,515 10,297,966
Right-to-use leased assets 2,916,623 2,916,623 Right-to-use SBITA 3,837,038 3,108,024
Accumulated depreciation (576,144,800) (547,761,849) Total Capital Assets (Net of Accumulated
Depreciation) 688,844,302 655,842,585
Other Noncurrent Assets:
Restricted investments (Note 3) 10,065,874 6,324,045 Derivative instrument (Note 5G) 4,867,018 15,163,920 Investments in joint ventures (Note 6) 65,209,772 65,844,941 Deposits (Note 3) 9,449,807 11,127,179
Leases receivable (Note 2R) 1,852,925 2,112,910 Total Other Noncurrent Assets 91,445,396 100,572,995 Total Noncurrent Assets 780,289,698 756,415,580
Total Assets 1,563,398,913 1,355,016,963
DEFERRED OUTFLOWS OF RESOURCES
Accumulated decrease in fair value of hedging
instruments (Note 5G) 7,708 783,790
Deferred outflow on refunding of debt 4,474,983 5,333,697 Deferred outflows on OPEB related items (Note 8) 311,077 616,793 Deferred outflows on pension related items (Note 7) 25,096,908 26,223,040 Total Deferred Outflows of Resources 29,890,676 32,957,320 June 30, 2024
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
STATEMENTS OF NET POSITION
with Comparative Totals as of June 30, 2023
Statements of Net Position
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See accompanying notes to financial statements
12 LIABILITIES 2024 2023
Current Liabilities:
Accrued liabilities 44,808,600 33,601,331
Interest payable 1,190,753 1,389,163
Accrued compensated absences 472,381 566,004 Current portion of long-term debt (Note 5) 15,460,000 15,140,000 Current portion derivative financial instruments (Note 5G) 7,708 783,790 Current portion of leases obligation (Note 5J) 710,181 681,619 Current portion of SBITA (Note 5K) 481,034 392,381 Total Current Liabilities 63,130,657 52,554,288 Noncurrent Liabilities:
Long-term portion accrued compensated absences 6,438,722 5,888,451 Net pension liability (Note 7) 108,269,790 105,823,291 Net OPEB liability (Note 8) 6,898,479 7,288,705 Long-term leases obligation (Note 5J) 240,824 951,003 Long-term SBITA (Note 5K) 2,495,433 2,325,628 Long-term debt (Note 5) 97,089,699 113,302,932 Total Noncurrent Liabilities 221,432,947 235,580,010 Total Liabilities 284,563,604 288,134,298
DEFERRED INFLOWS OF RESOURCES
Accumulated increase in fair value of hedging instruments (Note 5G) 11,986,981 23,458,200
Deferred inflow on refunding of debt 1,024,530 1,280,797 Deferred inflow - leases related (Note 2R) 1,997,165 2,282,329 Deferred inflows pension related items (Note 7) 479,098 821,311 Deferred inflows OPEB related items (Note 8) 382,621 702,262 Total Deferred Inflows of Resources 15,870,395 28,544,899
NET POSITION
Net investment in capital assets, restated (Note 12) 575,817,583 527,101,920 Restricted 10,065,874 6,324,045
Unrestricted restated (Note 12) 706,972,133 537,869,121 Total Net Position 1,292,855,590 1,071,295,086$
with Comparative Totals as of June 30, 2023
(SILICON VALLEY POWER)
STATEMENTS OF NET POSITION
June 30, 2024
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
DRAFT
See accompanying notes to financial statements
13 2024 2023
Operating Revenues:
Residential sales 41,675,989$ 38,021,218$
Commercial sales 22,584,103 17,991,071
Industrial sales 584,360,495 500,189,088
Renewable energy credits 10,502,295 3,916,420
Wholesale resource sales (Note 9) 11,470,683 85,035,267 Mandated program receipts 20,120,470 15,926,482 Other operating revenues 50,751,706 26,084,529
Total Operating Revenues 741,465,741 687,164,075
Operating Expenses:
Operations 111,613,480 92,744,945
Maintenance 29,090,846 31,152,357
Purchased resource 394,828,371 480,208,227
Wholesale resource purchases (Note 9) 9,785,427 19,474,055 Mandated program disbursement 6,179,170 4,541,142 Amortization (Note 4) 1,158,632 1,051,552
Depreciation (Note 4) 27,322,314 25,934,672
Total Operating Expenses 579,978,240 655,106,950
Operating Income 161,487,501 32,057,125
Nonoperating Revenues (Expenses):
Interest revenue 13,871,450 8,392,327
Net changes in the fair value of investments 8,702,128 (2,841,392) Interest expense (2,206,422) (2,659,346)
Equity in income (losses) of joint ventures (635,169) 8,532,699 Rents and royalties 3,484,588 3,845,365
Other revenues 39,365,830 60,399,404
Other expenses - (3,763,379)
Total Nonoperating Revenues, net 62,582,405 71,905,678 Income Before Transfers 224,069,906 103,962,803
Transfers from the City of Santa Clara 376,500 208,290 Transfers to the City of Santa Clara (2,885,902) (3,706,812) Net Income 221,560,504 100,464,281
Net Position, Beginning of Year 1,071,295,086 970,830,805 Net Position, End of Year 1,292,855,590$ 1,071,295,086$
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION For the Year Ended June 30, 2024
with Comparative Totals for the Year Ended June 30, 2023
Statements of Revenue, Expenses and Changes in Net Position
DRAFT
See accompanying notes to financial statements
14 2024 2023
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers $ 668,767,150 $ 587,190,157 Payments to suppliers (465,537,231) (583,494,659) Payments to employees for salaries and benefits (56,790,537) (52,546,917) Rents and royalties received 4,543,348 3,774,218 Resource energy trading escrow 1,677,372 8,391,775 Wholesale resource sales 11,470,683 85,035,267 Wholesale resource purchases (9,785,427) (19,474,055) Renewable energy credits 10,502,295 3,916,420
Other receipts 48,902,208 69,427,502
Net Cash provided by Operating Activities 213,749,861 102,219,708
CASH FLOWS FROM NONCAPITAL FINANCING
ACTIVITIES
Increase (decrease) in due from other funds (807,346) (522,955) Changes in restricted investments 3,741,829 177,687 Transfers in 376,500 208,290
Transfers out (2,885,902) (3,706,812)
Net Cash (used in) Noncapital Financing Activities 425,081 (3,843,790)
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Acquisition and construction of capital assets, net (63,780,946) (45,362,719) Principal payments on debt (16,292,174) (14,573,440) Interest paid on debt (2,555,620) (3,089,729) Net Cash (used in) Capital and Related Financing Activities (82,628,740) (63,025,888)
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
STATEMENTS OF CASH FLOWS
with Comparative Totals for the Year Ended June 30, 2023 For the Year Ended June 30, 2024
Statements of Cash Flows
DRAFT
See accompanying notes to financial statements
15 2024 2023
CASH FLOWS FROM INVESTING ACTIVITIES
Interest and dividends 11,877,286 8,236,726
Net increase (decrease) in the fair value of investments 8,702,128 (2,841,392) Payments made by fiscal agent 17,593,392 16,555,791 Deposits made with fiscal agent (17,992,362) (13,650,909) Net Cash (used in) Investing Activities 20,180,444 8,300,216 Net Increase (Decrease) in Cash and Cash Equivalents 151,726,646 43,650,246 Cash and cash equivalent at Beginning of Period 467,379,902 423,729,656 Cash and cash equivalent at End of Period 619,106,548$ 467,379,902$ Reconciliation of Operating Gain (Loss) to Net Cash
Provided (Used) by Operating activities:
Operating income 161,487,501$ 32,057,125$
Adjustments to reconcile operating income to net cash
provided (used) by operating activities:
(Decrease) Increase due to OPEB system (404,151) (5,395,611) (Decrease) Increase due to retirement system 3,230,418 1,566,196 (Decrease) Increase due to lease and SBITA Obligation (34,360) (44,658) Depreciation and amortization 28,480,946 26,986,224 Change in assets and liabilities:
Receivable, net (30,948,216) 6,417,073
Inventory (3,539,456) (2,022,294)
Accrued liabilities 14,234,570 (25,723,647)
Restricted cash (3,741,829) (177,687)
Compensated absences 456,648 (316,178)
Other receipts 42,850,418 64,244,769
Other expenses - (3,763,379)
Resource trading escrow 1,677,372 8,391,775
Net Cash Provided by Operating Activities 213,749,861$ 102,219,708$ NONCASH TRANSACTIONS:
Joint Ventures
Nonoperating Income (Expense) (635,169)$ 8,532,699$ Issuance of SBITA Liability (729,014)$ (1,670,794)$ Addition of SBITA Asset 729,014$ 1,670,794$ (SILICON VALLEY POWER)
STATEMENTS OF CASH FLOWS
with Comparative Totals for the Year Ended June 30, 2023
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
For the Year Ended June 30, 2024
DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
16 NOTE 1 – DEFINITION OF THE REPORTING ENTITY
The City of Santa Clara (the City), California’s Electric Utility Enterprise Fund, which began operating as Silicon Valley Power (SVP) in 1997, commenced operations over 100 years ago in 1896. Originally, SVP constructed a lighting plant consisting of forty-six 2000 candlepower direct current lamps and a dynamo (a type of electric generator) which entered into service in October 1896. In late 1903, SVP invested $5,000 to convert the system to alternating current and abandoned the small generating plant. Wholesale power was purchased from United Gas and Electric Company of San Jose.
Between 1903 and 1965, SVP purchased all of its electric power requirements from investor- owned utilities. In 1965, it received an allocation of power from the Federal Central Valley Project and began to diversify its resources. SVP became a charter member of the Northern California Power Agency (NCPA) in June 1968. Throughout the 1970’s, SVP and NCPA worked on behalf of all municipal electric utilities in Northern California to gain access to wholesale transmission markets and to jointly develop cost-effective electric generation resources.
In 1980, SVP became a generating utility for the first time in 73 years with the start of operations of the 6-Megawatt Cogen No. 1 power plant. In 1983, the 110 Megawatt NCPA Geothermal Project, the first municipally owned and operated geothermal power plant in the United States, entered service with SVP as lead partner holding a 55% participation share. Subsequently, SVP participated in further jointly owned power generation projects including hydroelectric, natural gas and coal fired generation. In 2005, SVP placed the 147 Megawatt Don Von Raesfeld Power Plant into service.
Today, SVP has grown to approximately 8,431 streetlights and serves approximately 60,346 electric customers. As SVP looks to the future, it continues to be responsive to the electric market development by increasing its renewable power resources, reducing its greenhouse gas (GHG) footprint, and working with its customers to enhance the value they receive from municipal ownership of their electric utility.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Basis of Presentation
SVP’s Financial Statements are prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) as applied to government units. The Government Accounting Standards Board (GASB) is the acknowledged standard setting body for establishing accounting and financial reporting standards followed by governmental entities in the United States of America. The electric enterprise fund is included in the City’s Annual Comprehensive Financial Report, and therefore, these financial statements do not purport to represent the financial position and changes in financial position of the City.
DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 2- SUMMARY OF SIGNIIFICANT ACCOUNTING POLICIES (continued) 17 B. Basis of Accounting
SVP reports its activities as a proprietary fund type (Enterprise Fund) which is maintained on the accrual basis of accounting wherein revenues are recognized in the accounting period in which they are earned regardless of whether they are received, and expenses are recognized in the period in which the related liabilities are incurred. Certain indirect costs are included in program expenses reported for individual functions and activities.
During the year ended June 30, 2023, SVP implemented the following GASB Statement:
The GASB issued Statement No. 91 “Conduit Debt Obligation.” The objective of this statement is to provide a single method of reporting conduit debt obligations by issuers and eliminate diversity in practices. This statement becomes effective for periods beginning after December 15, 2021. The implementation had no effect on the financial statements.
The GASB issued Statement No. 92 “Omnibus 2020.” The objective of this statement is to enhance comparability in reporting and improve the consistency of authoritative literature by addressing practice issues identified during implantation of certain GASB statements. This statement becomes effective upon issuance for requirements related to GASB 87. For GASB 73, GASB 74, and GASB 84 as well as measurement of liabilities associated with asset retirement obligations, the requirements become effective for reporting periods beginning after June 15, 2021. The implementation had no effect on the financial statements.
The GASB issued Statement No. 94 “Public-Private and Public-Public Partnerships and Availability Payment Arrangements.” The objective of this statement is to address issues related to public-private and public-public partnership arrangements and to provide guidance for accounting and financial reporting for availability payment arrangements. This statement becomes effective for periods beginning after June 15, 2022. The implementation had no effect on the financial statements.
The GASB issued Statement No. 96 “Subscription-Based Information Technology Arrangements.” The objective of this statement is to provide guidance on the accounting and financial reporting for subscription-based information technology arrangements (SBITAs) for government end users. This statement becomes effective for periods beginning after June 15, 2022. The provisions of this State were implemented during the fiscal year 2022-23.
As a result, the balances of the SBITA payable and intangible right-to-use SBITA asset were $1,437,230 as of July 1, 2022. SVP restated and increased the balances in that amount, and the net effect on beginning net position and fund balance was zero. See the disclosure in Note 5.
During the year ended June 30, 2024, SVP implemented the following GASB Statement:
DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 2- SUMMARY OF SIGNIIFICANT ACCOUNTING POLICIES (continued) 18 The GASB issued Statement No. 100 “Accounting Changes and Errors Corrections.” The objective of this statement is to establish accounting and financial reporting requirements for (a) accounting changes and (b) the correction of an error in previously issued financial statements.
This statement becomes effective for periods beginning after June 15, 2023. The provision of this statement were implemented during fiscal year 2024. The implementation had no effect on the financial statement.
SVP is analyzing the effects of the following pronouncements and plans to adopt them by the effective dates:
The GASB issued Statement No. 101 “Compensated Absences.” The objective of this statement is to amend the existing requirements for the recognition of compensated absences liability. This statement becomes effective for periods beginning after December 15, 2023. SVP is currently evaluating the impact on the financial statements.
The GASB issued Statement No. 102 “ Certain Risk Disclosures.” The objective of this Statement is to provide users of government financial statements with essential information about risks related to a government’s vulnerabilities due to certain concentrations or constraints.
This statement is effective for fiscal years beginning after June 15, 2024. SVP is currently evaluating the impact on the financial statements.
The GASB issued Statement No. 103, “Financial Reporting Model Improvements.” The objective of this Statement is to improve key components of the financial reporting model to enhance its effectiveness in providing information that is essential for decision making and assessing a government’s accountability. This statement is effective for fiscal years beginning after June 15, 2025. SVP is currently evaluating the impact on the financial statements.
The GASB issued Statement No. 104, “Disclosure of Certain Capital Assets.” The objective of this Statement is to provide users of government financial statements with essential information about certain types of capital assets. This statement is effective for fiscal years beginning after June 15, 2025. SVP is currently evaluating the impact on the financial statements.
C. Measurement Focus
Enterprise funds are accounted for on a cost of services or economic resources measurement focus, which means that all liabilities associated with the activity are included on their Statement of Net Position. Enterprise fund type operating statements present increases (revenues) and decreases (expenses) in total net position. Reported net position is segregated into three categories – net investment in capital assets, restricted, and unrestricted.
DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 2- SUMMARY OF SIGNIIFICANT ACCOUNTING POLICIES (continued) 19 D. Cash and Investments
SVP’s cash and investments pool is maintained by the City except for fiscal agent cash and investments.
While maintaining safety and liquidity, the City maximizes investment return by pooling its available cash for investment purposes. Unless there are specific legal or contractual requirements to do otherwise, interest earnings are apportioned among funds according to average monthly cash and investment balances. It is generally the City's intention to hold investments until maturity. City investments are stated at fair value (see Note 3).
Cash and cash equivalents for purposes of the statement of cash flows include pooled cash and investments and cash designated for construction. Transactions with City-wide cash management pools are similar to those with external investment pools; therefore, since pooled cash and investments have the same characteristics as demand deposits in that the City's individual funds and component units may withdraw additional monies at any time without prior notice or penalty, pooled cash and investments are considered essentially demand deposit accounts.
Cash and investments with fiscal agent, a bond reserve investment pool, and amounts classified as deposits are not considered cash and cash equivalents.
E. Due from City of Santa Clara
During the course of operations, transactions occur between SVP and the City for goods provided or services rendered. The related receivables, net, are classified as “Due from the City of Santa Clara” on the accompanying statement of net position.
F. Inventory of Materials and Supplies
Inventory of materials and supplies is accounted for using the consumption method and is stated at average cost. Inventory consists of expendable supplies held for consumption by the electric utility.
G. Capital Assets
All capital equipment and right-to-use equipment with a value of $5,000 or more, buildings, improvements and infrastructure, right-to-use building with costs exceeding $20,000 or more, and the right-to-use SBITA with a value of $400,000 or more, with useful lives exceeding two years are capitalized. These assets are valued at historical cost or estimated historical cost if actual historical cost is not available except for intangible right -to-use assets, the measurement of which discussed in Note 2R and 2S below. Contributed capital assets are valued at their DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 2- SUMMARY OF SIGNIIFICANT ACCOUNTING POLICIES (continued) 20 estimated acquisition value on the date contributed. Depreciation is recorded on a straight-line basis over the estimated useful lives of the assets (buildings and improvements: 20 to 50 years; equipment: 3 to 25 years; and right-to-use SBITA assets: 3-25 years) and is charged as an expense against operations. Accumulated depreciation is reported on the statement of net position.
The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized. Improvements are capitalized and depreciated over the remaining useful lives of the related capital assets.
Capital assets and the related obligations under lease/purchase agreements are capitalized and accounted for in accordance with Accounting Standards Codification (ASC) Topic 842. Interest is capitalized on construction in progress in accordance with ASC Topic 835, Capitalization of Interest Cost in Situations Involving Certain Tax-Exempt Borrowings, and Certain Gifts and Grants. Accordingly, interest capitalized is the total interest cost for the date of the borrowings net of any interest earned on temporary investments of the borrowed proceeds until the specified asset is ready for its intended use. There was no interest capitalized for the fiscal years ended June 30, 2023 or 2024.
H. Joint Ventures
SVP participates in several joint ventures in accordance with GAAP. If SVP’s equity in net losses of a joint venture exceeds its investments, use of the equity method is suspended except to the extent that SVP is obligated to provide further support or has guaranteed obligations of the joint venture.
SVP advances funds to certain of its joint ventures in the form of refundable advances, project advances, and operating and maintenance advances. Refundable advances accrue interest at rates stated in the related agreements. Operating, maintenance, and project advances are charged to operations when incurred.
Capitalized project costs are charged to operations in the event that a project is determined to be not economically feasible.
I. Compensated Absences
Amounts of vested or accumulated vacation leave and certain benefits that are not expected to be liquidated with expendable available financial resources are reported in the SVP financial statements as an expense and liability.
In accordance with GAAP, Accounting for Compensated Absences, a liability for sick leave and benefits is accrued using the vesting method. The vesting method provides that a governmental DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 2- SUMMARY OF SIGNIIFICANT ACCOUNTING POLICIES (continued) 21 entity estimate its accrued sick leave liability based on the sick leave accumulated at the statement of net position date by those employees who currently are eligible to receive termination payments as well as other employees who are expected to become eligible in the future to receive such payments. Estimated sick leave payments are recorded as an expense and liability by SVP.
J. Risk Management
SVP is covered under the City’s self-insurance programs via Internal Service Funds. There were no significant reductions in insurance coverage from the prior year by major categories of risk and the amount of settlements did not exceed insurance coverage for the past four fiscal years.
Additional information with respect to the City’s self-insurance programs can be found in the City’s Annual Comprehensive Financial Report.
In addition, SVP has property coverage specific to the power plants with a policy limit of $250 million.
K. Electric Resource Purchased
SVP purchases power from various suppliers and agencies (including joint powers agencies) for resale to its customers (see Note 10). SVP also engages in numerous resource energy transactions with the objective of reducing its overall cost of resource energy. Gross resource energy sales and resource energy purchases are recorded as operating revenue and expense, respectively (see Note 9).
L. Bond Discounts/Issuance Costs
Bond discounts are presented as a reduction of the face amount of bonds payable, whereas issuance costs are recognized in the current period.
M. Revenue Recognition
Operating revenues are recognized based on cycle billings periodically rendered to customers.
Operating revenues for services provided, but not billed at the end of the fiscal year, are recognized and accrued based on estimated consumption. Operating revenues primarily include the sales of electric power to residential, commercial, industrial, and municipal customers.
Non-operating revenues primarily represent interest income, grants, rents, and other non- recurring miscellaneous income.
DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 2- SUMMARY OF SIGNIIFICANT ACCOUNTING POLICIES (continued) 22 N. Taxes on Income
As an agency of the City, SVP falls under the review of the Internal Revenue Code Section 115 and corresponding California Revenue and Taxation Code provisions. As such, it is not subject to federal income or state franchise taxes.
O. Deferred Outflows/Inflows of Resources
In addition to assets, the statement of financial position includes a separate section for deferred outflows of resources. Deferred outflows of resources represent a consumption of net assets that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. SVP has four items that qualify for reporting in this category:
deferred outflows related to the derivative instruments, refunding of debt, pension, and OPEB.
In addition to liabilities, the statement of financial position includes a separate section for deferred inflows of resources. Deferred inflows of resources represent an acquisition of net assets that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. SVP reports deferred amounts related to derivative instruments, debt refunding, leases and deferred amounts related to pension and OPEB.
P. Net Position and Fund Equity
SVP may fund certain programs with a combination of restricted and unrestricted net position.
The policy is to first apply restricted net position followed by unrestricted net position if necessary.
Q. Use of Estimates
The preparation of financial statements in conformity with GAAP in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
R. Lease Agreements
A lease is defined as a contract that conveys control of the right to use another entity’s nonfinancial asset (the underlying asset) as specified in the contract for a period of time in an exchange or exchange-like transaction. Examples of nonfinancial assets include buildings, land, vehicles, and equipment.
DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 2- SUMMARY OF SIGNIIFICANT ACCOUNTING POLICIES (continued) 23 Lessee - SVP is a lessee for noncancellable lease of buildings. SVP recognizes a lease liability with an initial, and individual value of $100,000 and an intangible right‐to‐use lease asset (lease asset) in the statement of net position financial statements.
At the commencement of a lease, SVP initially measures the lease liability at the present value of payments expected to be made during the lease term. Subsequently, the lease liability is reduced by the principal portion of lease payments made. The lease asset is initially measured as the initial amount of the lease liability, adjusted for lease payments made at or before the lease commencement date, plus certain initial direct costs. Subsequently, the lease asset is amortized on a straight‐line basis over its useful life.
Key estimates and judgments related to leases include how SVP determines (1) the discount rate it uses to discount the expected lease payments to present value, (2) lease term, and (3) lease payments as follows:
SVP uses the interest rate charged by the lessor as the discount rate. When the interest rate charged by the lessor is not provided, SVP generally uses its estimated incremental borrowing rate as the discount rate for leases.
The lease term includes the noncancellable period of the lease. Lease payments included in the measurement of the lease liability are composed of fixed payments and purchase option price that SVP is reasonably certain to exercise.
SVP monitors changes in circumstances that would require a remeasurement of its lease and will remeasure the lease asset and liability if certain changes occur that are expected to significantly affect the amount of the lease liability.
Lease assets are reported with other capital assets and lease liabilities are reported with long-term debt on the statement of net position. Additional information can be found in Notes 4 and 5J.
Lessor - SVP is a lessor for noncancellable leases of land, equipment, and fiber infrastructure.
SVP recognizes a lease receivable and a deferred inflow of resources in the financial statements.
At the commencement of a lease, SVP initially measures the lease receivable at the present value of payments expected to be received during the lease term. Subsequently, the lease receivable is reduced by the principal portion of lease payments received. The deferred inflow of resources is initially measured as the initial amount of the lease receivable, adjusted for lease payments received at or before the lease commencement date. Subsequently, the deferred inflow of resources is recognized as revenue over the life of the lease term.
DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 2- SUMMARY OF SIGNIIFICANT ACCOUNTING POLICIES (continued) 24 Key estimates and judgments include how SVP determines (1) the discount rate it uses to discount the expected lease receipts to present value, (2) lease term, and (3) lease receipts as follows:
SVP uses its estimated incremental borrowing rate as the discount rate for leases. The lease term includes the noncancellable period of the lease. Lease receipts included in the measurement of the lease receivable is composed of fixed payments from the lessee.
SVP monitors changes in circumstances that would require a remeasurement of its lease, and will remeasure the lease receivable and deferred inflows of resources if certain changes occur that are expected to significantly affect the amount of the lease receivable. SVP has not engaged in any sublease transactions, sale-leaseback arrangements, or lease-leaseback agreements.
The balances related to the leases receivable and deferred inflow of resources as of June 30, 2023 were $2,362,077 and $2,282,329 respectively. SVP recognized $284,929 in lease revenue and $63,636 in interest revenue during the fiscal year 2022-23 related to these leases. The leases receivable and deferred inflow of resources as of June 30, 2024 were $2,112,910 and $1,997,165 respectively. SVP recognized $285,164 in lease revenue and $58,002 in interest revenue during the fiscal year 2023-24 related to these leases.
S. Subscription-Based Information Technology Arrangements (SBITAs) Accounting A Subscription-Based Information Technology Arrangement (SBITA) is a contract that conveys control of the right to use another party’s (a SBITA vendor’s) IT software, alone or in combination with tangible capital assets (the underlying IT assets), as specified in the contract for a period of time in an exchange or exchange-like transaction.
At the commencement of a SBITA, SVP initially measures the subscription liability at the present value of payments expected to be made during the contract term. Subsequently, the subscription liability is reduced by the principal portion of payments made. The subscription asset is initially measured as the initial amount of the subscription liability, adjusted for payments made at or before the SBITA commencement date, plus certain initial direct costs.
Subsequently, the subscription asset is amortized on a straight‐line basis over shorter of the subscription term or the useful life of the underlying IT assets. SVP recognizes SBITA liabilities with an initial, individual value of $400,000 or more for all funds based on the future SBITA payments remaining at the start of the contract.
DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 2- SUMMARY OF SIGNIIFICANT ACCOUNTING POLICIES (continued) 25 Key estimates and judgments related to SBITAs include how SVP determines (1) the discount rate it uses to discount the expected subscription payments to present value, (2) subscription term, and (3) subscription payments as follows:
SVP uses the interest rate charged by the IT vendor as the discount rate. When the interest rate charged by the IT vendor is not provided, SVP uses its estimated incremental borrowing rate as the discount rate for subscription liabilities. The subscription term includes the noncancellable period of the subscription. Subscription payments included in the measurement of the subscription liability are composed of fixed payments and purchase option price that SVP is reasonably certain to exercise.
SVP monitors changes in circumstances that would require a remeasurement of its subscription and will remeasure the subscription asset and liability if certain changes occur that are expected to significantly affect the amount of the subscription liability.
Subscription assets are reported with other capital assets and subscription liabilities are reported with liabilities on the statement of net position. Additional information can be found in Notes 4 and 5K.
T. Prior Year Summarized Comparative Information
The basic financial statements include certain prior year summarized comparative information in total but not at the level of detail required for a presentation in accordance with generally accepted accounting principles. Accordingly, such information should be read in conjunction with the SVP’s financial statements for the year ended June 30, 2023, from which the summarized information was derived.
NOTE 3 – CASH AND INVESTMENTS
SVP’s cash and investments pool is maintained by the City except for fiscal agent cash and investments. A full description of the City’s cash and investment policy is in Note 7 of its Annual Comprehensive Financial Report.
DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 3 – CASH AND INVESTMENTS (continued)
26 A. Investments Authorized by the California Government Code and the City’s Investment Policy
The City’s Investment Policy and the California Government Code allow the City to invest in certain types of investments, provided the credit ratings of the issuers are acceptable to the City.
The table below also identifies certain provisions of the City’s Investment Policy and the California Government Code that address interest rate risk, credit risk, and concentration of credit risk.
DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 3 – CASH AND INVESTMENTS (continued)
27 Minimum Maximum Maximum
Maximum Credit Percentage Investment
Authorized Investment Type Maturity Quality or Portfolio In One Issuer U.S. Treasury Obligations 7 years N/A 100% 100%
U.S. Agency Securities
(1) 7 years Top three ratings
categories 80%
(2) 40%
Negotiable Certificates of Deposit 5 years A / A-1 30% 5% Bankers Acceptances 180 days N/A 25% 5%
Commercial Paper 270 days A / A-1 25% 5%
(3)
California Local Agency Investment
Fund
N/A N/A None $75M Per
A/C
Repurchase Agreements 60 days N/A 50% 20%
Reverse Repurchase Agreements
(requires City Council approval)
92 days N/A 20% 10%
Municipal Obligations 7 years A 20% 5%
Medium Term Corporate Notes 5 years A/A- 25% 5%
(3)
Mutual Funds / Money Market Funds N/A Top rating category 20% 10% Joint Powers Authority Investment N/A N/A 100% 100%
Supranational Obligations 5 years AA 20% 10%
Asset-Backed Securities 5 years AA 10% 5%
Non-Negotiable Certificates of
Deposit 5 years N/A 10% 5%
Mortgage-Backed Securities and
Collateralized Mortgage Obligations 6-12 years
(4) AA 15% 5%
(2)
Callable securities are limited to 30% of the portfolio. time of purchase for Mortgage-Backed Securities (MBS). Maximum Final Maturity for MBS's and CMOs = 30 years with balloon payments.
(1)
Securities issued by the Federal Farm Credit Bank (FFCB), the Federal Home Loan Bank (FHLB), the Federal National Mortgage Association (FNMA), the Federal Home Loan Mortgage Corporation (FHLMC), local agencies and other U.S. government sponsored enterprises. (4)
Maximum Weighted Average Life with Current Public Securities Association Assumptions =12 years at (3)
No more than 10% of the outstanding commercial paper and medium term corporate notes of any single issuer.
DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 3 – CASH AND INVESTMENTS (continued)
28 B. Investments Authorized by Debt Agreements
The City invests bond proceeds restricted for construction in instruments that are stated in the Investment Policy and in various return-guaranteed investment agreements. These investments are invested in accordance with bond indentures and the maturities of each investment should not exceed the final maturity of each bond. Bond proceed investments are reported monthly to the City Council.
SVP also maintains required amounts of cash and investments with trustees or fiscal agents under the terms of certain debt issues. These funds are unexpended bond proceeds or are pledged reserves to be used if SVP fails to meet its obligations under these debt issues. The California Government Code 53601 (L) allows these funds to be invested in accordance with the statutory provisions governing the issuance of those bonds, indebtedness, other agreements, or certificates of participation in accordance with the ordinance, resolution, indenture, or agreement of the local agency providing for the issuance.
C. Pension Rate Stabilization Program
In February 2017, the City Council approved a Pension Rate Stabilization Program, (PRSP) Trust administered by Public Agency Retirement Services (PARS). The PRSP is an irrevocable trust and qualifies as an Internal Revenue Section 115 trust. This trust will assist the City in mitigating the CalPERS contribution rate volatility. Investments of funds held in Pension Rate Stabilization Program (PRSP) are governed by the Investment Guideline Document for the investment account and by the agreement for administrative services with the Public Agency Retirement Services (PARS), rather than the general provisions of the California Government code or the City’s investment policy. The City elected a discretionary investment approach which allows the City to maintain oversight of the investment management, control on target yield and the portfolio’ risk tolerance. The assets in this program will eventually be used to fund Pension Plan obligations.
As part of the year-end process for fiscal year 2016-17, the City Council approved SVP to designate and make an initial deposit of $3.5 million in fiscal year 2018 towards pre-funding the City’s pension obligations. As of June 30, 2024, the balance in the pension rate stabilization program trust was $10.1 million.
D. Credit and Interest Rate Risk
Credit risk is the risk that an issuer of an investment will not fulfill its obligations to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization.
DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 3 – CASH AND INVESTMENTS (continued)
29 Interest rate risk is the risk that changes in market interest rate will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment is the greater the sensitivity of its fair value to changes in market interest rates to be.
Information about the sensitivity of the fair values of SVP’s investments to market interest rate fluctuations is provided by the following table that shows the distribution to SVP’s investment by maturity.
DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 3 – CASH AND INVESTMENTS (continued)
30 2024 2023
Credit Under 180 181 - 365 1 - 3 3 - 5 Fair Fair
Type of Investment Rating Days Days Years Years Value Value Cash and Investments
- City Treasury:
Cash N/A 59,372,862$ - $ -$ -$ 59,372,862$ 46,773,624$ US Treasury Notes AA+ 8,344,088 7,107,701 76,966,441 139,555,698 231,973,928 175,578,523 Federal Farm Credit Bank AA+ 2,347,711 12,535,145 4,535,026 - 19,417,882 21,362,478 Federal Home Loan Bank AA+ 2,350,184 - - - 2,350,184 8,533,545 Federal National Mortgage Association AA+ - 8,087,630 833,650 - 8,921,280 16,389,831 Federal Home Loan Mortgage
Corporation AA+ - 2,323,618 6,573,875 2,009,098 10,906,591 7,885,349 Federal Home Loan Mortgage
Corporation
Mortagage-Backed Securities AA+ - - 11,078,380 16,760,367 27,838,747 2,217,115 Corporate Notes AAA - 2,339,292 4,623,915 - 6,963,207 6,229,168 Corporate Notes Aa - 7,357,573 14,044,083 1,550,597 22,952,253 21,071,405 Corporate Notes A - 15,111,325 23,600,208 23,246,966 61,958,499 50,093,597 Corporate Notes BBB+(1) - 1,190,179 - - 1,190,179 - Supranational Notes Aaa - - - - - 4,540,810 Asset-Backed Securities Aaa - - 5,688,445 24,543,736 30,232,181 4,126,694 Municipal Notes Aaa - - - - - 1,697,579 Certificates of Deposit A+ - - 3,602,799 - 3,602,799 3,165,831 Certificates of Deposit A 3,457,974 - - - 3,457,974 - Money Market Funds (CAMP Pool) AAAm 95,951,939 - - - 95,951,939 88,900,304 Money Market Funds (CAMP Term) AAAf 19,026,752 - - - 19,026,752 - Principal Public Deposit Sweep Program Not Rated 100,549 - - - 100,549 - State Investment Pool (LAIF) Not Rated 2,822,868 - - - 2,822,868 2,490,004 Cash and Investments
- City Treasury 193,774,927 56,052,463 151,546,822 207,666,462 609,040,674 461,055,857 Cash and Investments
- Other:
Cash (Debt Fund) N/A 6,414,375 - - - 6,414,375 6,195,375 Cash (Pension Rate Stabilization
Investment) N/A 2,823 - - - 2,823 4,289 Mutual Fund - JP Morgan
- Money Market Funds
(Debt Funds) Aaam 10,182,510 - - - 10,182,510 10,002,541 Pension Rate Stabilization
Investment
(Cash and Equivalents) Not Rated 414,823 - - - 414,823 280,435 Pension Rate Stabilization
Investment
(Mutual Fund - Equity) Not Rated 3,033,155 - - - 3,033,155 1,823,569 Pension Rate Stabilization
Investment
(Mutual Fund - Fixed Income) Not Rated 6,615,073 - - - 6,615,073 4,215,752 Collateral Obligations
(Archer Daniels Midland and
CAISO) Not Rated 9,449,807 - - - 9,449,807 11,127,179 Investments - Other 36,112,566 - - - 36,112,566 33,649,140 Total Cash and Investments 229,887,493$ 56,052,463$ 151,546,822$ 207,666,462$ 645,153,240$ 494,704,997$ (1) The investments in the corporate notes were rated A+ when purchased.
Maturity
DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 3 – CASH AND INVESTMENTS (continued)
31 The City is a voluntary participant in the Local Agency Investment Fund (LAIF). LAIF is regulated by California Government Code Section 16429 under the oversight of the Treasurer of the State of California. LAIF’s investment portfolio mainly consists of Treasuries, loans, Federal Agency securities, and collateralized mortgage obligations. Each regular LAIF account is permitted to have up to 15 transactions per month, with a minimum transaction amount of $5,000, a maximum transaction amount of $75 million and at least 24 hours advance notice for withdrawals of $10 million or more. Bond proceeds accounts are subject to one time deposit with no cap and are set up with a monthly draw down schedule. The carrying value of LAIF approximates fair value.
The City, as a CAMP shareholder, participates in both the CAMP Pool Portfolio and the CAMP Term Portfolio. The CAMP Pool i
s fully liquid, stable net asset value (NAV) investment option with a competitive yield, while the CAMP Term is a fixed-rate, fixed term investment option that offers securities with maturities ranging from 60 days to one year. Investment principal and interest in the CAMP Term account are paid at maturity, with an automatic sweep into the CAMP Pool account.
The CAMP Pool is managed to maintain a dollar-weighted average portfolio maturity of 60 days or less and seeks to maintain a constant NAV per share of $1.00. The CAMP Pool invests in obligations of the United States Government and its agencies, high-quality, short-term debt obligations of U.S. companies and financial institutions. The CAMP Term investments are based on a pool of open-market securities similar to those in the CAMP Pool. The investments are matched to the amount invested and maturities selected by the Shareholder.
The City may withdraw all or any portion of the fund
s in the CAMP Pool account at any time by
redeeming shares. The City may withdraw all or a portion of the funds in the CAMP Term account in $10,000 increments prior to maturity, but there is a premature redemption penalty.
The CAMP Declaration of Trust permits the CAMP trustee to suspend the right of withdrawal from CAMP or to postpone the date of payment of redemption proceeds if the New York Stock Exchange is closed other than for customary weekend and holiday closings, if trading on the New York Stock Exchange is restricted, or if, in the opinion of the CAMP trustees, an emergency exists such that disposal of the CAMP pool securities or determination of its net asset value is not reasonably practicable. If the right of withdrawal is suspended, the City may either withdraw its request for that withdrawal or receive payment based on the net asset value of the CAMP pool next determined after termination of the suspension of the right of withdrawal. At June 30, 2024, the fair value approximated the City’s cost. At June 30, 2024, the CAMP Pool investments had an average maturity of 38 days.
Mutual funds are available for withdrawal on demand. See City’s Annual Financial Report Note 7 to the financial statements for additional detail on the fiscal year 2023-24 investment portfolio.
DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 3 – CASH AND INVESTMENTS (continued)
32 E. Custodial Credit Risk
Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, the City will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. Under California Government Code Section 53651, depending on specific types of eligible securities, a bank must deposit eligible securities posted as collateral with its Agent having a fair value of 105% to 150% of the City’s cash on deposit. All of the City’s deposits are either insured by the Federal Depository Insurance Corporation (FDIC) or collateralized with pledged securities held in the trust department of the financial institutions.
The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g. broker-dealer) to a transaction, the City will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The City’s Investment Policy limits its exposure to custodial credit risk by requiring that all security transactions entered into by the City, including collateral for repurchase agreements, be conducted on a delivery-versus-payment basis. Securities are to be held by a third party custodian.
F. Fair Value Hierarchy
SVP categorizes its fair value measurements within the fair value hierarchy established by GAAP. The hierarchy is based on the valuation input used to measure the fair value of asset.
Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs. See City’s Annual Comprehensive Financial Report Note 7 to the financial statements for more detailed information.
DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 3 – CASH AND INVESTMENTS (continued)
33 Fair Value Measurements Using
Investments and
Derivative
Instruments
Measured at Fair
Value
Quoted Prices in
Active Markets for
Identical Assets
Significant
Other
Observable
Inputs
6/30/2024 Level 1 Level 2 Exempt
(1)
Investments by Fair Value Level
Short Term Investments
US Treasury Notes 231,973,928$ 231,973,928$ $ - $ - Federal Farm Credit Bank 19,417,882 - 19,417,882 - Federal Home Loan Bank 2,350,184 - 2,350,184 - Federal National Mortgage Association 8,921,280 - 8,921,280 - Federal Home Loan Mortgage Corp 10,906,591 - 10,906,591 - Federal Home Loan Mortgage Corporation
Mortagage-Backed Securities 27,838,747 - 27,838,747 - Corporate notes 93,064,138 - 93,064,138 - Asset-Backed Securities 30,232,181 - 30,232,181 - Certificates of Deposit 7,060,773 - 7,060,773 - Money Market Fund (CAMP Pool and Term) 114,978,691 - - 114,978,691 Principal Public Deposit Sweep Program 100,549 - - 100,549 Total Short Term Investments 546,844,944 231,973,928 199,791,776 115,079,240 Debt Securities and Other
Mutual Fund - JP Morgan
- Money Market Funds (Debt Funds) 10,182,510 - - 10,182,510 Pension Rate Stabilization Investment (Cash and
Equivalents) 414,823 414,823 - - Pension Rate Stabilization Investment (Mutual
Fund - Equity) 3,033,155 3,033,155 - - Pension Rate Stabilization Investment (Mutual 6,615,073 6,615,073 - - Collateral Obligations
(Archer Daniels Midland and CAISO) 9,449,807 - - 9,449,807 Total Debt Securities and Other 29,695,368 10,063,051 - 19,632,317 Total Investment by Fair Value Level $ 576,540,312 $ 242,036,979 $ 199,791,776 $ 134,711,557 Investments Measured at fair value, but not subject to fair value hierarchy:
State Investment Pool (LAIF) 2,822,868 - - 2,822,868 Total Investments 579,363,180 $ 242,036,979 $ 199,791,776 $ 137,534,425 Cash in Banks 65,790,060
Total Cash and Investment 645,153,240$
Investments Derivative Instruments
Open contract power trading - current assets 673,783$ 673,783$ Open contract power trading - current liabilities (7,708) (7,708) Open contract gas trading - current assets 6,446,180 6,446,180 Open contract gas trading - non-current assets 4,867,018 4,867,018 Total Investment Derivative Instruments 11,979,273$ 11,979,273$ DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 3 – CASH AND INVESTMENTS (continued)
34 The City utilizes a third party pricing service to determine fair market prices for its individually held investments. Evaluations are based on market information available at the time and generated using proprietary evaluated pricing models and methodologies.
Level 1 investments are valued using a marketable actively traded assets closing price for identical assets. Level 2 investments are determined by using quoted prices for similar assets.
NOTE 4 – CAPITAL ASSETS
A. Capital Assets Summary
Capital asset activity for the years ended June 30, 2024 and 2023 is as follows:
DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 4 – CAPITAL ASSETS (continued)
35 Balance Balance
June 30, 2023 Additions Retirements Transfers June 30, 2024 Non Depreciable Assets:
Land 14,371,743$ -$ -$ -$ 14,371,743$ Construction In Progress 71,262,465 60,741,105 - (45,540,246) 86,463,324 Total Non Depreciable Assets 85,634,208 60,741,105 - (45,540,246) 100,835,067 Capital assets being depreciated:
Buildings and Improvements 1,101,647,613 - - 45,540,246 1,147,187,859 Right-to-use leased building 2,916,623 - - - 2,916,623 Right-to-use SBITA 3,108,024 729,014 - - 3,837,038 Machinery & Equipment 10,297,966 12,544 (97,995) - 10,212,515 Total capital assets being
depreciated 1,117,970,226 741,558 (97,995) 45,540,246 1,164,154,035 Less accumulated depreciation for:
Buildings and Improvements (537,222,730) (27,026,175) - - (564,248,905) Right-to-use leased building (1,346,134) (673,066) - - (2,019,200) Right-to-use SBITA (378,485) (485,566) - - (864,051) Machinery & Equipment (8,814,500) (296,139) 97,995 - (9,012,644) Total accumulated depreciation (547,761,849) (28,480,946) 97,995 - (576,144,800) Net Depreciable Assets 570,208,377 (27,739,388) - 45,540,246 588,009,235 Enterprise Activity Capital
Assets, Net 655,842,585$ 33,001,717$ -$ -$ 688,844,302$
DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 4 – CAPITAL ASSETS (continued)
36 Balance
June 30, 2022
(as restated) Additions Retirements Transfers
Balance
6/30/2023
Non Depreciable Assets:
Land 14,371,743$ -$ -$ -$ 14,371,743$ Construction In Progress 63,161,131 43,810,104 - (35,708,770) 71,262,465 Total Non Depreciable Assets 77,532,874 43,810,104 - (35,708,770) 85,634,208 Capital assets being depreciated:
Buildings and Improvements 1,065,938,843 - - 35,708,770 1,101,647,613 Right-to-use leased building 2,916,623 - - - 2,916,623 Right-to-use SBITA 1,437,230 1,670,794 - - 3,108,024 Machinery & Equipment 9,941,798 570,680 (214,512) - 10,297,966 Total capital assets being
depreciated 1,080,234,494 2,241,474 (214,512) 35,708,770 1,117,970,226 Less accumulated depreciation for:
Buildings and Improvements (511,596,415) (25,626,315) - - (537,222,730) Right-to-use leased building (673,067) (673,067) - - (1,346,134) Right-to-use SBITA - (378,485) - - (378,485) Machinery & Equipment (8,720,654) (308,358) 214,512 - (8,814,500) Total accumulated depreciation (520,990,136) (26,986,225) 214,512 - (547,761,849) Net Depreciable Assets 559,244,358 (24,744,751) - 35,708,770 570,208,377 Enterprise Activity Capital
Assets, Net 636,777,232$ 19,065,353$ -$ -$ 655,842,585$
DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 4 – CAPITAL ASSETS (continued)
37 B. Construction in Progress
Construction in progress as of June 30, 2024 and 2023 consisted of the following in SVP Projects.
Projects as of June 30 , 2024 Authorized Expended Commitments Implementation of Advanced Met 28,089,215$ 28,024,202$ 65,013$ Grizzly Tap Line Repairs 21,999,893 14,113,347 7,886,546 NRS Transformer Replacement 15,900,020 5,998,030 9,901,990 System Capacity Expansion 10,973,778 4,954,305 6,019,473 Memorex Junction Substation 11,739,354 3,649,556 8,089,798 KRS Rebuild and Replacement 14,211,430 3,317,073 10,894,357 SRS Rebuild and Replacement 13,956,517 2,973,236 10,983,281 Freedom Circle Junction Substn 5,350,106 2,682,803 2,667,303 Replace Bal Plant Contr Sy(DCS 5,559,127 2,540,683 3,018,444 San Tomas Junction 5,570,131 2,394,995 3,175,136 Electric Vehicle (EV) Charging 4,563,033 1,769,817 2,793,216 Stender Way Jnctn Substation 8,697,335 1,767,424 6,929,911 NRS-KRS 115kV Line 11,644,882 1,317,608 10,327,273 Bower Avenue Junction 3,882,492 1,122,084 2,760,408 Street Light Improvement 2,813,495 1,015,901 1,797,594 Other Projects 93,731,632 8,822,259 84,909,374 Total 258,682,442$ 86,463,324$ 172,219,118$
Projects as of June 30 , 2023 Authorized Expended Commitments Replace NRS 115/60KV Transformers 10,035,632$ 3,439,488$ 6,596,144$ Sierra Substation 15,954,547 15,695,343 259,204 Implementation Advanced Meter Infrastructure 28,132,392 27,844,679 287,713 Bucks Creek Relicensing 6,447,846 6,318,577 129,269 Electric Vehicle Charging 3,570,049 1,524,954 2,045,095 San Tomas Junction 5,162,977 1,264,724 3,898,253 Memorex Juction Substation 7,969,006 1,239,162 6,729,844 Freedom Circle Junction Substation 4,025,663 1,029,444 2,996,219 Street Light Improvement 2,884,102 1,015,901 1,868,201 Other Projects 106,544,628 11,890,193 94,654,435 Total 190,726,842$ 71,262,465$ 119,464,377$
DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
38 NOTE 5 – LONG-TERM DEBT AND DERIVATIVE INSTRUMENTS
Changes in long-term debt for the year ended June 30, 2024, consisted of the following:
Outstanding Debt Additions and Outstanding
Type of Indebtedness as of June 30, Retired / Amortization as of June 30, Current Rate, Issue Date and Maturity 2023 Defeased of Discounts 2024 Portion Obligation Bonds:
2018 Series A Refunding Revenue Bonds,
5%, 12/18/18 - 07/01/27 30,215,000$ 5,440,000$ -$ 24,775,000$ 5,795,000$ Unamortized Discount/Premium 3,012,932 - (753,233) 2,259,699 - Subtotal Electric Utility Revenue Bonds 33,227,932 5,440,000 (753,233) 27,034,699 5,795,000 Direct Placement:
Series 2020-1 Revenue Refunding Bonds,
1.74%, 04/10/2020 - 07/01/2032 52,985,000 - - 52,985,000 - Series 2020-2 Revenue Refunding Bonds,
1.31%, 04/10/2020 - 07/01/2028 34,315,000 5,755,000 - 28,560,000 5,695,000 Series 2020-3 Revenue Refunding Bonds,
0.58% 04/10/2020 - 07/01/2024 7,915,000 3,945,000 - 3,970,000 3,970,000 Subtotal Electric Utility Revenue Bonds 95,215,000 9,700,000 - 85,515,000 9,665,000 Total Electric Utility Activities - Bonds
and Notes from Direct Borrowing 128,442,932$ 15,140,000 $ (753,233)$ 112,549,699$ 15,460,000$
A. Electric Revenue Refunding Bonds, Series 2018A
On December 18, 2018, SVP issued $48.8 million of Electric Revenue Refunding Bonds, Series 2018A (Electric 2018A Bonds) to refinance $54.58 million outstanding principal amount of Variable Rate Demand Electric Revenue Refunding Bonds, Series 2008B and terminate a related swap agreement. The Electric 2018A Bonds bear a 5% coupon rate, mature annually beginning on July 1, 2019 through July 1, 2027, and were sold at an All-In True Interest Cost of 2.32%.
Debt service on the Electric 2018A Bonds is secured by a pledge of net revenues of SVP.
In the event of default, SVP will transfer to the trustee all adjusted net revenues held by it and received thereafter and the trustee will disburse all adjusted net revenues and any other funds then held or thereafter received by the trustee under the provisions of indenture. In the case of default, the trustee will be entitled to declare the bond obligation of all bonds then outstanding to be due and payable immediately.
DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 5 – LONG-TERM DEBT AND DERIVATIVE INSTRUMENTS (continued)
39 B. Subordinate Electric Revenue Refunding Bonds, Series 2020-1 As of April 1, 2020, all $54.830 million of the Electric 2011 A Bonds were outstanding and callable at par beginning July 1, 2021. The passage of the Tax Cuts and Jobs Act on December 22, 2017 eliminated tax-exempt advance refunding of tax-exempt bonds beginning January 1, 2018, and therefore tax-exempt advance refunding is no longer a refinancing option.
The City Council determined that it was in the best interests of the City to enter into a credit facility with a bank for the purpose of refunding all outstanding Electric 2011A Bonds; and for the indebtedness created under such credit facility to be evidenced by a subordinate electric revenue bond to be issued by the City and delivered to the bank as authorized by Resolution No. 20-8834 adopted by the City Council on April 7, 2020.
On April 10, 2020, the City entered into a loan agreement with Bank of America, N.A. (the “Bank”) and issued $52.985 million of Subordinate Electric Revenue Refunding Bonds, Series 2020-1 (Electric 2020-1 Bonds) to refinance $54.830 million outstanding principal amount of Electric Series 2011A Bonds under a Taxable to Tax-Exempt Conversion structure. The Electric 2020-1 Bonds bear 1.74% coupon rates, mature annually beginning on July 1, 2028 through July 1, 2032 and were sold at a true interest cost of 1.43% with an average coupon rate of 1.40%.
Electric 2020-1 Bonds were priced at taxable rates and was converted to tax-exempt on April 2, 2021. Both the taxable rate and tax-exempt rate after conversion were fixed at time of issuance.
Starting April 2, 2021, the Bonds will bear interest at the tax exempt rate of 1.360% per annum.
Debt service on the Electric 2020-1 Bonds is secured by a pledge of Available Electric Revenues of SVP on a basis subordinate to outstanding Senior Electric Revenue Bonds, if any.
In the event of default under the loan agreement for the 2020-1 bonds (including a failure by the City to pay principal or interest on the related bonds, a failure by the City to perform or observe its covenants, a default in other specified indebtedness or obligations of the City, certain acts of bankruptcy or insolvency, or other specified events of default), the Bank has the right, upon written notice to the City, to accelerate and declare the City’s obligation to repay the related bonds and all other obligations of the City to the Bank under such loan agreement to be immediately due and payable.
C. Subordinate Electric Revenue Refunding Bonds, Series 2020-2 The City Council determined that it was in the best interests of the City to enter into a credit facility with a bank for the purpose of refunding a portion of the outstanding Electric 2013A Bonds; and for the indebtedness created under such credit facility to be evidenced by a subordinate electric revenue bond to be issued by the City and delivered to the Bank as authorized by Resolution No. 20-8834 adopted by the City Council on April 7, 2020.
DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 5 – LONG-TERM DEBT AND DERIVATIVE INSTRUMENTS (continued)
40 On April 10, 2020, the City entered into a loan agreement with Bank of America, N.A. (the “Bank”) and issued $34.315 million of Subordinate Electric Revenue Refunding Bonds, Series 2020-2 (Electric 2020-2 Bonds) to refinance $30.725 million of the callable portion of the outstanding Electric Revenue Refunding Bonds, Series 2013 A under a Taxable to Tax-Exempt Conversion structure. The Electric 2020-2 Bonds bear 1.31% coupon rates, mature annually beginning on July 1, 2023 through July 1, 2028 and were sold at a true interest cost of 1.21% with an average coupon rate of 1.15%. Electric 2020-2 Bonds were priced at taxable rates and were convert to tax-exempt basis on December 28, 2022, which now bear 1.02% coupon rates.
Debt service on the Electric 2020-2 Bonds is secured by a pledge of Available Electric Revenues of SVP on a basis subordinate to outstanding Senior Electric Revenue Bonds, if any.
In the event of default under the loan agreement for the 2020-2 Bonds (including a failure by the City to pay principal or interest on the related bonds, a failure by the City to perform or observe its covenants, a default in other specified indebtedness or obligations of the City, certain acts of bankruptcy or insolvency, or other specified events of default), the Bank has the right, upon written notice to the City, to accelerate and declare the City’s obligation to repay the related bonds and all other obligations of the City to the Bank under such loan agreement to be immediately due and payable.
D. Subordinate Electric Revenue Refunding Bonds, Series 2020-3 On June 16, 2014, the City entered into a Tax-Exempt Multiple Draw Term Loan with the Bank of America Preferred Funding Corporation (the “Electric 2014 Loan Agreement”) to fund the phase-shifting transformer project and the acquisition of property for future utility use. The indebtedness created under such credit facility was evidenced by a subordinate electric revenue bond issued by the City - Subordinated Electric Revenue Bond, Series 2014. As of April 1, 2020, $19.413 million principal amount was outstanding and unpaid.
The City Council determined that it was in the best interests of the City to continue the credit facility with the bank for the purpose of refunding of the outstanding Electric 2014 Loan Agreement at lower interest rate; and for the indebtedness created under such credit facility to be evidenced by a subordinate electric revenue bond to be issued by the City and delivered to the Bank as authorized by Resolution No. 20-8834 adopted by the City Council on April 7, 2020.
On April 10, 2020, the City entered into a loan agreement with Bank of America, N.A. (the “Bank” and issued $16.720 million of Subordinate Electric Revenue Refunding Bonds, Series 2020-3 (Electric 2020-3 Bonds) to refinance $19.413 million outstanding principal amount of Subordinated Electric Revenue Bonds, Series 2014. The Electric 2020-3 Bonds bear 0.58% coupon rates mature annually beginning on July 1, 2020 through July 1, 2024 and were sold at a true interest cost of 0.70%. Debt service on the Electric 2020-3 Bonds is secured by a pledge of DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 5 – LONG-TERM DEBT AND DERIVATIVE INSTRUMENTS (continued)
41 Available Electric Revenues of SVP on a basis subordinate to outstanding Senior Electric Revenue Bonds, if any.
In the event of default under the loan agreement for the 2020-3 bonds (including a failure by the City to pay principal or interest on the related bonds, a failure by the City to perform or observe its covenants, a default in other specified indebtedness or obligations of the City, certain acts of bankruptcy or insolvency, or other specified events of default), the Bank has the right, upon written notice to the City, to accelerate and declare the City’s obligation to repay the related bonds and all other obligations of the City to the Bank under such loan agreement to be immediately due and payable.
E. Pledge of Future Electric Revenues
The pledge of future Electric Fund revenues ends upon repayment of the $110.3 million in outstanding principal on the bonds which is scheduled to occur in fiscal year 2032-33. For fiscal year 2023-24, Electric Fund revenues including operating revenues and non-operating interest earnings amounted to $635.0 million and operating costs including operating expenses, but not interest, depreciation or amortization amounted to $518.5 million. Net revenues available for debt service amounted to $116.5 million which represented a coverage ratio of 6.69 on the $17.4 million of debt service.
F. Subsequent Event
On October 23, 2024, City issued $112,175,000 of Electric Revenue Bonds, Series 2024 A (Electric 2024A Bonds) to provide funding for several of its capital projects in the System Expansion Plan. These projects include Kifer Receiving Station (KRS) rebuild, Scott Receiving Station (SRS) rebuild, and Northern Receiving Station (NRS) upgrades and expansion. The Electric 2024A Bonds mature annually beginning on July 1, 2025 through July 1, 2044 and bear a coupon rate of 5%, with optional redemption for bonds with maturities on or after July 1, 2035.
Debt service on the Electric 2024A Bonds is secured by a pledge of net revenues of the Electric Utility Enterprise Fund.
G. Derivative Instruments
In fiscal year 2009-10, SVP implemented GAAP, which addresses recognition, measurement and disclosures related to derivative instruments to determine whether they meet the definition of derivative instruments, and if so, whether they effectively hedge the expected cash flows associated with the interest rate and energy exposures. Under hedge accounting, the increase (decrease) in the fair value of a hedge is reported as a deferred cash flow hedge on the statement of net position.
DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 5 – LONG-TERM DEBT AND DERIVATIVE INSTRUMENTS (continued)
42 Notional Amounts and Fair Values – Future Derivative Instruments SVP maintains a Market Risk Management Policy, which among other things, sets forth the guidelines for the purchase and sale of certain financial instruments defined as hedge instruments in support of market power purchase and sales transactions. The primary goal of these guidelines is to provide a framework for the operation of an energy price hedging program to better manage SVP’s risk exposure in order to utilize resources, stabilize pricing and hedge costs for the benefit of SVP and its customers.
Consistent with hedge accounting treatment meeting effectiveness tests, changes in fair value are reported as deferred flows of resources on the statement of net position until the contract expiration that occurs in conjunction with the hedged expected energy purchase/sales transaction.
When hedging contracts expire, at the time the purchase/sales transactions occur, the deferred balance is recorded as a component of Purchased Power. For energy derivatives, fair values are estimated by comparing contract prices to forward market prices quoted by third party market participants.
SVP had the following future derivative instruments outstanding at June 30, 2024 with Archer Daniels Midland Company to hedge cash flows on sales of excess resources in CAISO market in June and purchase of power from CAISO in the future months.
DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 5 – LONG-TERM DEBT AND DERIVATIVE INSTRUMENTS (continued)
43 Notional Amount (MWh)
Long Short
Effective
Date
Maturity
Date
Average
Price Classification Amount Classification Amount
24,960 7/1/2023 7/31/2024 $62.02 Derivative
Instrument 144,019$ Deferred inflow 144,019 $
25,920 8/1/2023 8/31/2024 67.70 Derivative Instrument 296,784 Deferred inflow 296,784
23,040 9/1/2023 9/30/2024 60.75 Derivative Instrument 103,680 Deferred inflow 103,680
16,400 6/1/2023 7/31/2024 47.28 Derivative Instrument (7,708) Deferred
outflow (7,708)
15,600 7/1/2023 8/31/2024 49.90 Derivative Instrument 33,540 Deferred inflow 33,540
16,800 8/1/2023 9/30/2024 53.45 Derivative Instrument 95,760 Deferred inflow 95,760
666,075$ 666,075$
Notional Amount (MMBtu)
Long Short
Effective
Date
Maturity
Date
Average
Price Classification Amount Classification Amount
2,590,000 7/1/2020 12/31/2025 $2.42 Derivative
Instrument 2,314,545$ Deferred inflow 2,314,545 $
5,180,000 1/1/2022 12/31/2025 2.64 Derivative Instrument 3,489,490 Deferred inflow 3,489,490
2,745,000 1/1/2021 12/31/2025 0.56 Derivative Instrument 2,687,338 Deferred inflow 2,687,338
5,490,000 1/1/2022 12/31/2025 1.03 Derivative Instrument 2,821,825 Deferred inflow 2,821,825
11,313,198$ 11,313,198$
Grand Total 11,979,273$ 11,979,273$
Fair Value Change in Fair Value
Fair Value Change in Fair Value
Credit Risk
Credit risk is the risk of loss due to a counterparty defaulting on its obligations. SVP is exposed to credit risk if hedging instruments are in asset positions. To eliminate counterparty credit risk, SVP has transacted both long term power and gas contracts on the Futures market on Intercontinental Exchange (ICE). As of June 30, 2024, SVP’s open derivative power and gas contracts were in an asset position, reflecting with a positive $12.0 million of Mark-to-Market value. The open contract was with ADM Investor Service, Inc., a clearing member of ICE and a subsidiary of Archer Daniels Midland Company who was rated A by Standard & Poor’s as of June 30, 2024.
DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 5 – LONG-TERM DEBT AND DERIVATIVE INSTRUMENTS (continued)
44 SVP's policy for requiring collateral on hedging instruments varies based on individual contracts and counterparty credit ratings. Under the brokerage agreements with Archer Daniels Midland Company, the accounts are prefunded by SVP. If the account value falls below zero, margin calls are invoked.
It is also SVP's policy to negotiate netting arrangements whenever it has entered into more than one bilateral transactions with counterparty. Under the terms of these arrangements, should one party become insolvent or otherwise default on its obligations, the non-defaulting party may accelerate and terminate all outstanding transactions and net their fair values so that a single amount will be owed by (or to) the non-defaulting party.
Termination Risk
SVP’s futures contracts are traded over the counter and have no termination risk.
Price Risk
With respect to price risk under power Futures contracts, on purchase contracts (long positions), SVP receives the CAISO NP15 average daily rate at settlement and pays the fixed contracted rate entered into on the trade date; on sales contracts (short positions), SVP pays the CAISO NP15 average daily rate at settlement and receives the fixed contracted rate entered into on the trade date. With respect to price risk under gas Futures contracts, on purchase contracts (long positions), SVP receives PG&E Citygate average daily price at settlement and pays the fixed contracted rate entered into on the trade date; on sales contracts (short positions), SVP pays the PG&E Citygate average daily price at settlement and receives the fixed contracted rate entered into on the trade date. SVP is exposed to risk because the contract prices are different from the settlement prices.
H. Other
Various debt agreements governing SVP’s revenue bonds contain a number of covenants including those that require SVP to maintain and preserve the enterprise in good repair and working order, to maintain certain levels of insurance, and to fix and collect rates, fees, and charges so as to maintain certain debt coverage ratios. SVP is in compliance with these specific covenants and all other material covenants governing the particular revenue bond issues. No event of default as defined in the bond indentures has occurred or was occurring as of the date of this report.
I. Repayment Requirements
As of June 30, 2024, the debt service requirements to maturity for SVP’s long-term debt are as follows:
DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 5 – LONG-TERM DEBT AND DERIVATIVE INSTRUMENTS (continued)
45 Year Ending
June 30 Principal Interest Total Principal Interest Total 2025 5,795,000$ 1,093,875$ 6,888,875$ 9,665,000$ 994,377$ 10,659,377$ 2026 6,005,000 798,875 6,803,875 5,910,000 923,678 6,833,678 2027 6,320,000 490,750 6,810,750 5,975,000 863,065 6,838,065 2028 6,655,000 166,375 6,821,375 6,050,000 801,737 6,851,737 2029 - - - 11,485,000 701,165 12,186,165 2030-2033 - - - 46,430,000 1,159,875 47,589,875 24,775,000$ 2,549,875$ 27,324,875$ 85,515,000$ 5,443,897$ $90,958,897 Senior Revenue Bonds
Future Debt Service Requirements
Subordinate Revenue Bonds from
Direct Placement
Long-term Debt
Reconciliation of Long-term Debt:
Principal Outstanding as of June 30, 2024 110,290,000$
Unamortized Discount/Premium - Electric Revenue Bonds 2,259,699 Total Long-term Debt 112,549,699$
J. Lease Liabilities
SVP entered into a five‐year lease agreement as lessee for the use of office space in November 2015 and the lease was extended to October 2025. SVP is required to make monthly principal and interest payments and common area operating expenses with 3% annual escalation. The lease agreement qualifies as other than short-term leases under GASB87 and therefore, has been recorded at the present value of the future minimum lease payment as of the date of June 30, 2021. The lease liability is measured at a discount rate of 1.10% based on Applicable Federal Rates for real estate as of July 2021.
A summary of the SVP’s lease transactions for the fiscal year ended June 30, 2024 and 2023 are as follows:
DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 5 – LONG-TERM DEBT AND DERIVATIVE INSTRUMENTS (continued)
46 Balance
June 30, 2022 Addition Retirment
Balance
June 30, 2023 Current portion
Lease liabilities 2,286,666$ - $ (654,044)$ 1,632,622$ 681,619$ Balance
June 30, 2023 Addition Retirment
Balance
June 30, 2024 Current portion
Lease liabilities 1,632,622$ - $ (681,617)$ 951,005$ 710,181$
The future principal and interest lease payments as of June 30, 2024, are as follows:
For the Year
Ending June 30 Principal Interest Total
2025 710,181$ 6,920$ 717,101$
2026 240,824 553 241,377
Total 951,005$ 7,473$ 958,478$
K. Subscription-Based IT Arrangements and Liabilities
In fiscal year 2022-23, SVP implemented the provisions of GASB Statement No. 96, Subscription-Based Information Technology Arrangements, which required the SVP to record an intangible right-to-use subscription asset. As a result, a right-to-use subscription asset was recorded in the amount of $3,108,024. As of June 30, 2023, SVP recorded a net intangible right- to use subscription asset amounting to $2,729,539, with accumulated amortization of $378,485.
As of June 30, 2024, SVP has recorded a net intangible right-to use subscription asset amounting to $2,972,987, with accumulated amortization of $864,051. The subscription assets are offset with subscription liabilities. A summary of the SVP’s SBITA transactions for the fiscal year ended June 30, 2023 and 2024 are as follows:
Balance
June 30, 2022
(As restated) Addition Retirment
Balance
June 30, 2023 Current portion
SBITA liabilities 1,437,230$ 1,670,794 $ (390,015)$ 2,718,009$ 392,381$ Balance
June 30, 2023 Addition Retirment
Balance
June 30, 2024 Current portion
SBITA liabilities 2,718,009$ 729,014 $ (470,556)$ 2,976,467$ 481,034$
DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 5 – LONG-TERM DEBT AND DERIVATIVE INSTRUMENTS (continued)
47 The future principal and interest SBITA payments as of June 30, 2024, are as follows:
For the Year
Ending June 30 Principal Interest Total
2025 481,034$ 80,265$ 561,299$
2026 503,819 67,315 571,134
2027 527,486 53,844 581,330
2028 552,141 39,762 591,903
2029 382,523 25,069 407,592
2030-2034 529,464 20,782 550,246
Total 2,976,467$ 287,037$ 3,263,504$
NOTE 6 – PARTICIPATION IN JOINT VENTURES
A. Investment in Joint Ventures
SVP (through the City) participates in significant joint ventures: Northern California Power Agency (NCPA), Transmission Agency of Northern California (TANC), M-S-R Public Power Agency (MSR PPA), M-S-R Energy Authority (MSR EA).
The separately issued financial statements of these joint ventures (as noted below) are available on request.
Date of latest audited
financial statement Joint venture’s address
NCPA 6/30/2023 651 Commerce Dr. Roseville, CA 95678
TANC 6/30/2023 P.O. Box 15129 Sacramento, CA 95851
MSR EA 12/31/2023 P.O. Box 4060 Modesto, CA 95352
MSR PPA 12/31/2023 P.O. Box 4060 Modesto, CA 95352
DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 6 – PARTICIPATION IN JOINT VENTURES (continued)
48 As described in paragraph (E) below, the carrying value of SVP’s investment in MSR EA is $0.
SVP’s financial statements as of June 30, 2024 and 2023 reflect the following investments in joint ventures:
Participating
percentage Investment
Participating
percentage Investment
Method of
accounting
NCPA $41,747,424 $44,467,652
Geothermal 44.39% 44.39% Equity
Hydroelectric 37.02% 37.02%
Combustion Turbine 41.67% 41.67%
Lodi Energy Center 25.75% 25.75%
TANC 9.69% 9,136,635 9.65% 7,631,453 Equity MSR EA 33.40% - 33.40% - Suspended MSR PPA 35.00% 14,325,713 35.00% 13,745,836 Equity * Total $65,209,772 $65,844,941
*
June 30, 2024 June 30, 2023
The equity method of accounting for investment in MSR PPA was suspended prior to fiscal year ended June 30, 2021.
Starting in fiscal year 2022, equity method was used for SVP's investment with MSR PPA.
B. Northern California Power Agency (NCPA)
NCPA was formed in 1968 as a joint powers agency in the State of California. Its membership consists of sixteen public agencies. NCPA is generally empowered to sell, purchase, generate, transmit, manage electrical energy and provide regulatory and legislative advocacy. Members participate in the projects of NCPA on an elective basis. Therefore, the participation percentage varies for each project in which it participates.
A Commission comprised of one representative from each joint venture member governs NCPA.
The Commission is responsible for the general management of the affairs, property, and business of NCPA. Under the direction of the General Manager, the staff of NCPA is responsible for providing various administrative, operating and planning services for NCPA and its associated power corporations.
Project Financing and Construction
NCPA’s project construction and development programs have been individually financed by project revenue bonds collateralized by NCPA’s assignment of all payments, revenues and DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 6 – PARTICIPATION IN JOINT VENTURES (continued)
49 proceeds associated with its interest in each project. Each project participant has agreed to pay its proportionate share of debt service and other costs of the related project, notwithstanding the suspension, interruption, interference, reduction or curtailment of output from the project for any reason. Certain of the revenue bonds are additionally supported by municipal bond insurance credit enhancements.
Hydroelectric Project
NCPA contracted to finance, manage, construct, and operate Hydroelectric Project Number One for the licensed owner, Calaveras County Water District (CCWD). In exchange, NCPA has the right to the electric output of the project for 50 years from February 1982. NCPA also has an option to purchase power from the project in excess of the CCWD’s requirements for the subsequent 50 years, subject to regulatory approval.
Geothermal Project
The NCPA Geothermal Plants have historically experienced greater than anticipated declines in steam production from the existing geothermal wells. Although initially operated as baseload generation projects at full capability (238MW), NCPA changed its steam field production from baseload to load-following and reduced average annual steam production. Along with other steam field operators in the area, the Agency began implementing various operating strategies to further reduce the rate of decline in steam production. The Agency has modified both steam turbine units and the associated steam collection system to enable generation with lower pressure steam at higher mass-flow rates to optimize the utilization of the available steam resource. In FY 19-20, NCPA began a well-workover program to restore underperforming wells.
Based upon current operation protocols and forecasted operations, NCPA expects average annual generation and peak capacity to decrease further, reaching approximately 68 MW by the year 2040.
Combustion Turbine Project No. 1
NCPA originally owned five combustion turbine units, each of which is nominally rated at 25 MW, which are collectively known as the Combustion Turbine Project No. 1. These units were completed in 1986 and are designed to provide peak power and reserve requirements and emergency support. Effective September 1, 2010, two units located in the City of Roseville was sold to the City of Roseville. NCPA still owns and operates two units in the City of Alameda and one unit in the City of Lodi. Each purchaser is responsible under its power sales contract for paying entitlement share in Combustion Turbine Project No. 1 of all NCPA’s costs of such project.
DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 6 – PARTICIPATION IN JOINT VENTURES (continued)
50 Lodi Energy Center
On May 24, 2010, SVP entered into an agreement with NCPA for a 25.75% interest in the Lodi Energy Center, a 280 MW combined cycle natural gas fired power plant, located in Lodi, California. The project received approval from the California Energy Commission in April 2010 and was placed into operation in November 2012. In January 2020, the Lodi Energy Center suffered a catastrophic turbine failure. NCPA replaced the turbine with a newer state-of-the-art turbine which could use hydrogen as a cleaner fuel source. The majority of the replacement cost was covered by NCPA’s insurance resulting in relatively minimal financial impact to project participants.
C. Transmission Agency of Northern California (TANC)
TANC was organized under the California Government Code pursuant to a joint powers agreement entered into by 15 Northern California utilities. The purpose of TANC is to provide electric transmission and other facilities for the use of its members through its authority to plan, acquire, construct, finance, operate and maintain facilities for electric power transmission. The joint powers agreement provides that the costs of TANC’s activities can be financed or recovered through assessment of its members or from user charges through transmission contracts with its members. Each TANC member has agreed to pay a pro-rata share of the costs to operate TANC and for payment of debt service, and has the right to participate in future project agreements.
The joint powers agreement remains in effect until all debt obligations and interest thereon have been paid, unless otherwise extended by the members.
California-Oregon Transmission Project
TANC is a participant and also the Project Manager of the California-Oregon Transmission Project (Project), a 340 mile long, 500 kilovolt alternating current transmission project between Southern Oregon and Central California. As Project Manager, TANC is responsible for the overall direction and coordination of all Project operations and maintenance, additions and betterments, and for general and administrative support.
The Project was declared commercially operable on March 24, 1993, with a rated transfer capability of 1,600 megawatts and provides a third transmission path between the electric systems of the Pacific Northwest and those in California. The Project has successfully met and completed all major environmental requirements. As of June 30, 2023, the most recent data available, TANC’s investment in the Project was $545.2 million, less accumulated depreciation and amortization of $267.8 million.
In connection with its participation in the Project, TANC has an entitlement balance of the Project’s transfer capability of approximately 1,362 megawatts and is obligated to pay an DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 6 – PARTICIPATION IN JOINT VENTURES (continued)
51 average of approximately 80 percent of the operating costs associated with the Project. TANC incurred and initially capitalized all costs for project construction since they were expected to be recovered through reimbursement from Project participants and from the successful operations of the Project transmission lines. The Project agreement among the participating members provides that each member agrees to make payments, from its revenues, to TANC for project costs incurred and for payment of debt service.
SVP has historically been obligated to pay 20.47% of TANC’s COTP operating and maintenance expenses and 20.70% of TANC’s COTP debt service and 22.16% of the Vernon acquisition debt.
SVP has also been entitled to 20.4745% of TANC’s share of COTP transfer capability (approximately 278 MW net of third party layoffs of TANC) on an unconditional take-or-pay basis. Starting on July 1, 2014, SVP laid-off 147 MWs of this entitlement to other TANC members under a 25 year agreement. During the term of this agreement the parties taking on the entitlement will pay all associated debt service, operations and maintenance costs, and all administrative and general costs. SVP’s portion of the operating and maintenance expenses and the COTP debt service is 10.004 %.
D. M-S-R Public Power Agency (MSR PPA)
MSR PPA is a joint power agency formed in 1980 by the Modesto Irrigation District, the City of Santa Clara, and the City of Redding, California, to develop or acquire and manage electric power resources for the benefit of the members. The personnel of its members and contract professional staff perform the administrative and management functions of MSR PPA. The member’s income and expenses sharing ratio is as follows: Modesto Irrigation District – 50 percent, City of Santa Clara – 35 percent, and City of Redding – 15 percent.
Prior to fiscal year ended December 31, 2020, SVP’s equity in MSR PPA’s net losses exceeds its investments and, therefore, the equity method of accounting for the investment was suspended.
As of December 31, 2023, the date of the latest available audited financial statements, SVP was in a positive equity position of $14.3 million. The equity method of accounting of SVP’s investment in MSR PPA was applied. Under the joint exercise of power agreement, which formed MSR PPA, SVP is responsible for funding up to 35 percent of MSR PPA’s operating cost, to the extent such funding is necessary. During the years ended June 30, 2024 and 2023, SVP funded its share of operating costs in SVP’s expenses.
MSR PPA’s principal activity is a 28.8% ownership interest in a 507-megawatt unit of a coal- fired electricity generating plant located in New Mexico (San Juan Plant). The San Juan plant was jointly owned by the Public Service Company of New Mexico (PNM) (38.5%), MSR PPA (28.8%) and other municipal power entities (32.7%). On December 31, 2017, MSR PPA divested its ownership interest in the San Juan plant and no longer receives electric energy or capacity from the San Juan Generating Station.
DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 6 – PARTICIPATION IN JOINT VENTURES (continued)
52 In 2006, MSR PPA entered into a Wholesale Purchase and Sale Agreement and a Shaping and Firming Agreement with Avangrid Renewables, Inc. to provide renewable wind energy to the Members from the Big Horn I Wind Energy Project (Big Horn I Project) with a nominal installed capacity of approximately 199.5 MW. SVP receives the power purchased by MSR PPA from the Big Horn I Project. SVP’s share equates to approximately a 105 MW share of the output.
Power deliveries commenced on October 1, 2006 and will continue through September 30, 2026.
Through an amendment of the original agreements MSR PPA has an obligation to continue to take the same output through September 30, 2031, or if the Big Horn Project is repowered MSR PPA will have a right of first offer to negotiate a long-term power purchase for such repowered project. The participation in this project is as follows:
Modesto Irrigation District 12.5%
City of Santa Clara 52.5%
City of Redding 35.0%
In 2009, MSR PPA entered into a Power Purchase Agreement and Redelivery Agreement with Avangrid Renewables Inc. to purchase additional wind power energy from the same site, called Big Horn II, with a nominal installed capacity of 50 MW for a twenty-year period. Deliveries of energy under this project began on November 1, 2010. The participation in this project is as follows: Modesto Irrigation District – 65%; City of Santa Clara – 35%.
MSR PPA San Juan
In 2015, the MSR PPA Commission approved a number of agreements (the “San Juan Restructuring Agreements”) to provide for the interests of MSR PPA and certain other San Juan Participants (the “exiting participants”) in the San Juan Generation Station to be transferred to the remaining San Juan Participants effective December 31, 2017. In addition to the ownership divesture, the San Juan Restructuring Agreements provide for, among other things, the allocation of ongoing responsibility for decommissioning costs, mine reclamation costs and any environmental remediation obligations among the exiting participants and the remaining San Juan Participants, and the establishment and funding of mine reclamation and plant decommissioning trust funds. The San Juan Restructuring Agreements were subsequently executed by all nine San Juan Generation Station owners and PNM Resources Development Company (a non-utility affiliate of PNM) and, following receipt of regulatory approvals, became effective on January 31, 2016. Various other implementing agreements and amendments to existing San Juan project agreements to effect the restructuring have also been executed. Closing of the ownership restructuring of the San Juan Generation Station and the divestiture of M-S-R PPA’s interests in San Juan Unit No. 4 was completed on schedule on December 31, 2017.
DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 6 – PARTICIPATION IN JOINT VENTURES (continued)
53 E. M-S-R Energy Authority (MSR EA)
MSR EA is a joint power agency formed in 2008 by the Modesto Irrigation District, the City of Santa Clara, and the City of Redding, California, to develop or acquire and manage natural gas resources for the benefit of the members. The personnel of its members and contract professional staff perform the administrative and management functions of MSR EA. Each member’s income and expense sharing ratio is as follows: Modesto Irrigation District – 33.3%; City of Santa Clara – 33.4%; and City of Redding – 33.3%.
SVP’s equity in MSR EA’s net losses exceeds its investment and, therefore, the equity method of accounting for the investment has been suspended. As of December 31, 2023, the date of the latest available audited financial statements, SVP’s unrecognized share of member’s deficit of MSR EA was $27.2 million. Under the joint exercise of power agreement, which formed MSR EA, SVP is responsible for funding up to 33.4% of MSR EA’s operating cost, to the extent such funding is necessary. During the years ended June 30, 2024 and 2023, SVP funded its share of operating costs in SVP’s expenses.
In 2009, the City of Santa Clara, along with the Cities of Modesto and Redding participated in the M-S-R Energy Authority Gas Prepay Project. The Gas Prepay Project provides the City, through a Gas Supply Agreement with MSR EA dated September 10, 2009, a secure and long- term supply of natural gas of 7,500 MM Btu (Million British thermal unit) daily or 2,730,500 MM Btu annually through December 31, 2012, and 12,500 MM Btu daily, or 4,562,500 MM Btu annually thereafter until September 30, 2039. The agreement provides this supply at a discounted price below the spot market price (the Pacific Gas & Electric City gate index) over the next 30 years. As of December 31, 2023, bonds issued by MSR EA to finance the City’s share of the Gas Prepay Project were outstanding in the principal amount of $482,400,000. These bonds were initially sold on August 27, 2009. Under the Gas Supply Agreement, MSR EA will bill the City for actual quantities of natural gas delivered each month on a “take-and-pay” basis.
MSR EA has contracted with Citigroup Energy, Inc. (“CEI”) to use the proceeds of the Gas Prepay bond issue to prepay CEI for natural gas. CEI has guaranteed repayment of the bonds, and responsibility for bond repayment is non-recourse to the City. Moreover, any default by the other Gas Prepay Project participants is also non-recourse to the City.
F. Contingent Liability
Under the terms of the various joint venture agreements, SVP is contingently liable for a portion of the long-term debt of the entities under take-or-pay agreements, letters of credit, guarantees or other similar agreements.
DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 6 – PARTICIPATION IN JOINT VENTURES (continued)
54 Based on the most recent audited financial statements of the individual joint ventures, SVP was contingently liable for long-term debt as of June 30, 2023 as follows:
Total Debt Silicon Valley Power's Silicon Valley Power's Agreements (Principal) Debt Share Contingent Liability
NCPA 06/30/23 500,597,477$ 35.19% 176,167,851$
TANC 06/30/23 165,500,000 9.65% 15,972,687
TOTAL 666,097,477$ 192,140,538$
In addition, SVP would be, under certain conditions, liable to pay a portion of costs associated with the operations of the entities. Under certain circumstances, such as default or bankruptcy of the other participants, SVP may also be liable to pay a portion of the debt of these joint ventures on behalf of those participants and seek reimbursement from those participants.
Take-or-Pay commitments expire upon final maturity of outstanding debt for each project. Final fiscal year debt expirations as of June 30, 2023 are as follows:
Entitlement Debt Service
Project Debt Expiration Share % Share %
NCPA - Geothermal Project (NGP) July-2024 44.3905% 44.3905% NCPA - Hydroelectric Project (NHP) July-2032 37.0200% 37.0200% NCPA - Lodi Energy Center (NLEC)** June-2040 25.7500% 34.5385% TANC - CA-OR Transmission Project (COTP) May-2039 9.6887% 9.6512% MSR PPA -San Juan Plant July-2022 35.0000% 35.0000%
** The SVP's debt service share in NLEC on issue one is 46.1588%, on issue two is 0%.
DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 6 – PARTICIPATION IN JOINT VENTURES (continued)
55 A summary of SVP’s “Take-or-Pay” contracts and related projects and its contingent liability for the debt service including principal and interest payments at June 30, 2023 is as follows:
Fiscal Year NGP NHP NLEC COTP Total
2024 1,541,819$ 14,375,558$ 7,565,130$ 1,348,027$ 24,830,534$ 2025 1,545,765 14,399,154 7,565,513 1,465,120 24,975,552 2026 - 7,912,261 7,581,031 1,464,903 16,958,195 2027 - 7,908,013 7,721,815 1,464,831 17,094,659 2028 - 7,905,973 7,723,465 1,464,806 17,094,244 2029-2033 - 40,921,387 38,619,608 7,324,611 86,865,606 2034-2038 - - 38,618,066 7,324,419 45,942,485 2039-2041 - - 22,527,489 1,465,338 23,992,827 Total 3,087,584$ 93,422,346$ 137,922,117$ 23,322,055$ 257,754,102$
NOTE 7 – RETIREMENT PLAN – DEFINED BENEFIT PENSION PLAN For purposes of measuring the net pension liability and deferred outflows/inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Plan and additions to/deductions from the Plan’s fiduciary net position have been determined on the same basis as they are reported by the CalPERS Financial Office. For this purpose, benefit payments (including refunds of employee contributions) are recognized when currently due and payable in accordance with the benefit terms. Investments are reported at fair value.
A. General Information about the Pension Plan
Plan Descriptions
All qualified regular and probationary employees are required to participate in the City’s Miscellaneous Agent Multiple-Employer defined benefit plan administered by the California Public Employees’ Retirement System (CalPERS), which acts as a common investment and administrative agent for its participating member employers. Benefit provisions under the Plan are established by State statute and City resolution. CalPERS issues a publicly available report that include a full description of the pension plan regarding benefit provisions, assumptions and membership information and can be found on the CalPERS website.
DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 7 – RETIREMENT PLAN – DEFINED BENEFIT PENSION PLAN (continued)
56 Benefits Provided
CalPERS provides service retirement and disability benefits, annual cost of living adjustments, and death benefits to plan members, who must be public employees or beneficiaries. Benefits are based on years of credited service, equal to one year of full time employment. Members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. All members are eligible for non-duty disability benefits after 5 years of service. The pre-retirement death benefit is the Optional Settlement 2W Death Benefit. The cost of living adjustments for each plan are applied as specified by the Public Employees’ Retirement Law.
The Plan’s provisions and benefits in effect at June 30, 2023 and June 30, 2022, are summarized as follows:
Miscellaneous
Hire date
Prior to
January 1, 2013
On or after
January 1, 2013
Benefit formula 2.7% @ 55 2% @ 62
Benefit vesting schedule 5 years service 5 years service Benefit payments monthly for life monthly for life
Retirement age 50 - 55 52 - 67
Monthly benefits, as a % of eligible compensation 2.00 - 2.70% 1.00 - 2.50% Required employee contribution rates 8.00% 7.00%
Required employer contribution rates 11.160% 11.160%
June 30, 2024 June 30, 2023
Required unfunded liability contribution $8,571,789 $8,696,424 Contributions
Section 20814(c) of the California Public Employees’ Retirement Law requires that the employer contribution rates for all public employers are determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. Funding contributions are determined annually on an actuarial basis as of June 30 by CalPERS. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability.
SVP is required to contribute the difference between the actuarially determined rate and the contribution rate of employees.
DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 7 – RETIREMENT PLAN – DEFINED BENEFIT PENSION PLAN (continued)
57 The contributions to the Plan were as follows:
June 30, 2024 June 30, 2023
Contributions - employer $11,871,745 $11,321,067
Miscellaneous
B. Net Pension Liability, Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions
SVP reported a net pension liability for its proportionate share of the net pension liability of the Plan as follows:
June 30, 2024 June 30, 2023
Miscellaneous 108,269,790$ 105,823,291 $
Proportionate Share of Net Pension Liability
SVP’s net pension liability for the Plan is measured as the proportionate share of the net pension liability. The net pension liability of the Plan is measured as of June 30, 2023, and the total pension liability for the Plan used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2022 rolled forward to June 30, 2023 using standard update procedures. SVP’s proportion of the net pension liability was based on a projection of SVP’s long-term share of contributions to the pension plan relative to the projected contributions of all funds of the City. SVP’s proportionate share of the net pension liability for the Plan as of June 30, 2024 and 2023 was 32.31%.
For the years ended June 30, 2024 and 2023, SVP recognized pension expense of $15,598,392 and $12,887,264 respectively. At June 30, 2024 and 2023, SVP reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:
Miscellaneous Plan:
Deferred Outflows Deferred Inflows
June 30, 2024 of Resources of Resources
Pension contributions subsequent to measurement date 11,871,745$ -$ Differences between expected and actual experience 1,737,475 (479,098) Changes in assumptions 3,232,554 -
Net differences between projected and actual earnings
on plan investments 8,255,134 -
Total 25,096,908$ (479,098)$
DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 7 – RETIREMENT PLAN – DEFINED BENEFIT PENSION PLAN (continued)
58 Deferred Outflows Deferred Inflows
June 30, 2023 of Resources of Resources
Pension contributions subsequent to measurement date 11,321,067$ -$ Differences between expected and actual experience 602,798 (821,311) Net differences between projected and actual earnings
on plan investments 8,757,655 -
Total 26,223,040$ (821,311)$
$11,871,745 reported as deferred outflows of resources related to contributions subsequent to the June 30, 2024 measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2025. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows:
Measurement Period Annual Measurement Period Annual
Ended June 30 Amortization Ended June 30 Amortization
2024 4,182,884 $ 2023 3,868,013 $
2025 2,313,824 2024 3,237,809
2026 6,037,743 2025 1,368,749
2027 211,614 2026 5,606,091
2024 2023
C. Actuarial Assumptions
For the measurement period ended June 30, 2023, the total pension liability was determined by rolling forward the June 30, 2022 total pension liability. The June 30, 2024 total pension liability was based on the following actuarial methods and assumptions:
DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 7 – RETIREMENT PLAN – DEFINED BENEFIT PENSION PLAN (continued)
59 Miscellaneous
Valuation Date June 30, 2022
Measurement Date June 30, 2023
Actuarial Cost Method Entry-Age Normal Cost Method
Actuarial Assumptions:
Discount Rate 6.90%
Inflation 2.30%
Payroll Growth 2.80%
Projected Salary Increase Varies by Entry-Age and Service Investment Rate of Return 6.90%
(1)
Post Retirement Benefit Increase The lesser of Contract COLA or 2.3% until Purchasing Power Protection applies, 2.3%
thereafter
Mortality
(2) Derived using CalPERS' Membership Data
for all Funds
(1)
Net of pension plan investment and administrative expenses; including inflation. (2)
The probabilities of mortality are based on the 2021 CalPERS Experience Study for the period from 2001 to 2019. Pre-retirement and post-retirement mortality rates include generational mortality improvement using 80% of Scale MP-2020 published by the Society of Actuaries. For more details on this table, please refer to the CalPERS' November 2021 experience study report available on CalPERS' website.
The underlying mortality assumptions and all other actual assumptions used in the June 30, 2021 valuation were based on the results of a December 2021 actuarial experience study for the period 2000 to 2019. Further details of the Experience Study can be found on the CalPERS website.
Discount Rate
The discount rate used to measure the total pension liability for the Plan was 6.90%. The projection of cash flows used to determine the discount rate for the Plan assumed that contributions from all plan members in the Public Employees Retirement Fund (PERF) will be made at the current member contribution rates and that contributions from employers will be made statutorily required rates, actuarially determined. Based on those assumptions, the Plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members for all plans in the PERF. Therefore, the long-term expected rate of DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 7 – RETIREMENT PLAN – DEFINED BENEFIT PENSION PLAN (continued)
60 return on plan investments was applied to all period of projected benefit payments to determine the total pension liability for the Plan.
The long-term expected rate of return on pension plan investments was determined using a building-block method in which expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class.
In determining the long-term expected rate of return, CalPERS took into account both short-term and long-term market return expectations as well as the expected pension fund cash flows.
Using historical returns of all the funds’ assets classes, expected compound (geometric) returns were calculated over the short-term (first 10 years) and the long-term (11+ years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the rounded single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equal to the single equivalent rate calculated above and adjusted to account for assumed administrative expenses.
The table below reflects the long-term expected real rate of return by asset class.
Asset Class
(a)
Assumed Asset
Allocation Real Return
(a)(b)
Global Equity - Cap-weighted 30.0% 4.54%
Global Equity - Non-Cap-weighted 12.0% 3.84%
Private Equity 13.0% 7.28%
Treasury 5.0% 0.27%
Mortgage-backed Securities 5.0% 0.50%
Investment Grade Corporates 10.0% 1.56%
High Yield 5.0% 2.27%
Emerging Market Debt 5.0% 2.48%
Private Debt 5.0% 3.57%
Real Assets 15.0% 3.21%
Leverage -5.0% -0.59%
100.0%
(b) Figures are based on the 2021 Asset Liability Management Study. (a) An expected inflation of 2.30% used for this period.
DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 7 – RETIREMENT PLAN – DEFINED BENEFIT PENSION PLAN (continued)
61 Sensitivity of the Proportionate Share of the Net Pension Liability to Changes in the Discount Rate
The following presents SVP’s proportionate share of the net pension liability for the Plan, calculated using the discount rate for the Plan, as well as what SVP’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage point lower or 1-percentage point higher than the current rate:
June 30, 2024 June 30, 2023
1% Decrease 5.90% 5.90%
Net Pension Liability 144,951,938$ 141,406,186$
Current Discount Rate 6.90% 6.90%
Net Pension Liability 108,269,790$ 105,823,291$
1% Increase 7.90% 7.90%
Net Pension Liability 77,805,619$ 76,286,918 $
Miscellaneous
Pension Plan Fiduciary Net Position
Detailed information about the pension plan’s fiduciary net position is available in the separately issued CalPERS financial report.
NOTE 8 – OTHER POST EMPLOYMENT BENEFITS
A. Plan Description
The City’s agent multiple-employer defined benefit Other Post Employment Benefit (OPEB) Plan, which was established by City Council in fiscal year 2007-08 in accordance with GAAP, provides reimbursements to retirees for qualified expenses. Employees who have retired from the City with at least ten years of service and meet certain criterion based upon retirement date, household income in the most recent calendar year and age are entitled to reimbursements for qualified expenses. Annual maximum reimbursement amounts differ depending on when an employee retired from City service. The majority of retirees may be eligible for a maximum of annual reimbursements of $4,932 in the fiscal year 2023-24 and $4,788 in the fiscal year 2022-
23. Amendments to benefit provisions are negotiated by the various bargaining units at the City and must be approved by Council. In fiscal year 2007-08, the City established an irrevocable exclusive agent multiple-employer defined benefit trust which is administered by Public Agency Retirement Services (PARS). The City is the Plan administrator, and PARS administers the DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 8 – OTHER POST EMPLOYMENT BENEFITS (continued)
62 investment trust for the City’s Plan. The trust is used to accumulate and invest assets necessary to reimburse retirees. Separate financial reports are issued by PARS for the OPEB Plan Trust.
The report can be obtained by writing to PARS at 4350 Von Karman Avenue, Suite 100, Newport Beach, CA 92660, or by calling 1-800-540-6369.
For purposes of measuring the net OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the OPEB plan and additions to and deduction from the OPEB’s fiduciary net position have been determined on the same bases. For this purpose OPEB benefit payments are recognized when currently due and payable in accordance with the benefits terms. Investments are report at fair value.
Generally accepted accounting principles require that the reporting results must pertain to liability and asset information within certain defined timeframes. For the fiscal year 2023-24 and the fiscal year 2022-23, the following time frames were used.
Fiscal year 2023-24
Measurement Date June 30, 2024
Measurement Period July 1, 2023 to June 30, 2024
Actuarial valuation date
(1)
June 30, 2022
Fiscal year 2022-23
Measurement Date June 30, 2023
Measurement Period July 1, 2022 to June 30, 2023
Actuarial valuation date
(1)
June 30, 2022
(1) Update procedures were used to roll forward the Total OPEB Liability from the valuation date to the measurement date.
B. Contributions
The OPEB Plan trust annual contributions are based upon actuarial determine contributions. The contribution requirements are established and may be amended by the City Council. Plan members do not make contributions to the plan; the plan is funded entirely by employer contributions. For the fiscal year ending June 30, 2024 and June 30, 2023, SVP contributed $812 thousand and $758 thousand.
C. Actuarial Assumptions
The June 30, 2024 total OPEB liability was based on the following actuarial methods and assumptions:
DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 8 – OTHER POST EMPLOYMENT BENEFITS (continued)
63 Significant Actuarial Assumptions Used in Total OPEB Liability Actuarial Assumption June 30, 2024 Measurement Date
Actuarial valuation date June 30, 2022
Discount rate 4.50% at June 30, 2024
Crossover analysis showed benefit payments always fully funded by plan assets
Inflation 2.50%
Salary increases Aggregate 2.75%
Investment rate of return 4.50% at June 30, 2024
Funding policy Full pre-funding to PARS trust, PARS portfolio: Moderately Conservative Mortality, Disability,
Termination, and Retirement
CalPERS 2000-2019 Experience Study
Mortality Improvement Mortality projected fully generational with Scale MP-2021 Healthcare cost trend rates Non-Medicare - 8.5% for 2024 scaling down to 3.45% for year 2076 Medicare(Non-Kaiser) - 7.5% for 2024 scaling down to 3.45% for year 2076 Medicare(Kaiser) - 6.25% for 2024 scaling down to 3.45% for year 2076 Healthcare participation for future
retirees - Cash subsidy
PEMHCA minimum only: Currently covered: 50% Waived: 25% Other plans: Currently covered: 80% Waived: 25%
Healthcare participation for future
retirees - PEMHCA implied
subsidy
PEMHCA minimum only: Currently covered: 50% Waived: 25% Other plans: Currently covered: 80% Waived: 25%
The June 30, 2023 total OPEB liability was based on the following actuarial methods and assumptions:
DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 8 – OTHER POST EMPLOYMENT BENEFITS (continued)
64 Significant Actuarial Assumptions Used in Total OPEB Liability Actuarial Assumption June 30, 2023 Measurement Date
Actuarial valuation date June 30, 2022
Discount rate 4.50% at June 30, 2023
Crossover analysis showed benefit payments always fully funded by plan assets
Inflation 2.50%
Salary increases Aggregate 2.75%
Investment rate of return 4.75% at June 30, 2023
Funding policy Full pre-funding to PARS trust, PARS portfolio: Moderately Conservative Mortality, Disability,
Termination, and Retirement
CalPERS 2000-2019 Experience Study
Mortality Improvement
Mortality projected fully generational with Scale MP-2021 Healthcare cost trend rates Non-Medicare - 8.5% for 2023 scaling down to 3.45% for year 2076 Medicare(Non-Kaiser) - 7.5% for 2023 scaling down to 3.45% for year 2076 Medicare(Kaiser) - 6.25% for 2022 scaling down to 3.45% for year 2076 Healthcare participation for future
retirees - Cash subsidy
PEMHCA minimum only: Currently covered: 50% Waived: 25% Other plans: Currently covered: 80% Waived: 25%
Healthcare participation for future
retirees - PEMHCA implied
subsidy
PEMHCA minimum only: Currently covered: 50% Waived: 25% Other plans: Currently covered: 80% Waived: 25%
D. Net OPEB Liability, OPEB Expenses and Deferred Outflows/Inflows of Resources Related to OPEB
SVP’s net OPEB liability for the Plan is measured as the proportionate share of the City’s net OPEB liability as of June 30. The total OPEB liability for the Plan used to calculate the net OPEB liability for the fiscal year 2023-24 was determined by an actuarial valuation as of June 30, 2022, rolled forward to June 30, 2023 using standard actuarial methods, based on actuarial methods and assumptions. The total OPEB liability for the Plan used to calculate the net OPEB liability for the fiscal year 2022-23 was determined by an actuarial valuation as of June 30, 2020, rolled forward to June 30, 2022 using standard actuarial methods, based on actuarial methods and assumptions. SVP’s proportion of the net OPEB liability was based on a projection of SVP’s long-term share of contributions to the OPEB plan relative to the projected contributions of all funds of the City. SVP’s proportionate share of the net OPEB liability for the Plan as of June 30, 2024 and 2023 was 19.32%.
DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 8 – OTHER POST EMPLOYMENT BENEFITS (continued)
65 For the year ended June 30, 2024, SVP reported a net OPEB liability of $6.898 million and recognized OPEB expense of $403 thousand. For the year ended June 30, 2023, SVP reported a net OPEB liability of $7.289 million and recognized OPEB expense of $495 thousand. At June 30, 2024 and 2023, SVP reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources (in thousands):
June 30, 2024
Deferred Outflows
of Resources
Deferred Inflows
of Resources
Changes of assumptions 121$ 135 $
Differences between expected and actual experience - 248 Net differences between projected and actual earnings
on OPEB plan investments 190 -
Total 311$ 383$
June 30, 2023
Deferred Outflows
of Resources
Deferred Inflows
of Resources
Changes of assumptions 173$ 341$
Differences between expected and actual experience - 361 Net differences between projected and actual earnings
on OPEB plan investments 443 -
Total 616$ 702$
Other amounts reported as deferred outflows of resources related to OPEB will be recognized as expense as follows:
Annual Annual
Measurement Period Amortization Measurement Period Amortization Ended June 30 (in thousands) Ended June 30 (in thousands) 2025 13$ 2024 (149)$
2026 121 2025 46
2027 (88) 2026 155
2028 (110) 2027 (54)
2029 (8) 2028 (76)
Thereafter - Thereafter (8)
2024 2023
DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 8 – OTHER POST EMPLOYMENT BENEFITS (continued)
66 E. Discount Rate
The discount rate used to measure the total OPEB liability was 4.50% as of June 30, 2023 and June 30, 2022. The projection of cash flows used to determine the discount rate assumed that City contributions will be made at rate equal to the actuarially determined contributions rates.
Based on those assumptions, the OPEB plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on OPEB plan investments was applied to all periods of projected benefit payments to determine the total OPEB liability.
Asset Class
Target
Allocation
Long-Term Expected
Real Rate of Return
Gloabal Equity 30% 4.56%
Mutual Funds - Fixed Income 65% 0.78%
Cash and equivalent 5% -0.50%
100%
Expected Inflation 2.50%
Discount Rate 4.50%
2023 and 2024
F. Sensitivity of the Net OPEB Liability to Changes in the Discount Rate The following table presents the net OPEB liability of the Plan as of June 30 as well as what the plan’s net OPEB liability would be if it were calculated using a discount rate that is 1% point lower or 1% point higher than the current rate.
June 30, 2024
(In Thousands)
June 30, 2023
(In Thousands)
1% Decrease 3.50% 3.50%
Net OPEB Liability 8,601$ 8,951$
Current Discount Rate 4.50% 4.50%
Net OPEB Liability 6,898$ 7,289$
1% Increase 5.50% 5.50%
Net OPEB Liability 5,486$ 5,910$
DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 8 – OTHER POST EMPLOYMENT BENEFITS (continued)
67 G. Sensitivity of the Net OPEB Liability to Healthcare Cost Trend Rates The following table presents the net OPEB liability of the City, as of June 30, as well as what the City’s net OPEB liability would be if it were calculated using healthcare cost trend rates that are 1% point lower or 1% point higher than the current rate.
June 30, 2024
(In Thousands)
June 30, 2023
(In Thousands)
Net OPEB Liability
1% Decrease $5,084 $5,637
Net OPEB Liability
Current Rate $6,898 $7,289
Net OPEB Liability
1% Increase $9,149 $9,330
NOTE 9 – WHOLESALE ACTIVITIES
A. Long-term Power Purchase Contracts
SVP purchases wholesale electric power from various participants of the Western Systems Power Pool (WSPP), NCPA, MSR Public Power Agency (Note 6), Western Area Power Administration, and other sources to supply the power requirements of Silicon Valley Power’s electric utility customers under long-term power purchase agreements (PPAs). SVP actively manages the financial risks inherent in these PPAs, including the risks arising from the changing spot market prices that move above and below the contract prices and from contract disputes that may arise from time to time. The proceeds and costs related to generation, either owned or under PPAs, except ancillary services are included in purchased resource expense and excluded from wholesale resources purchases.
B. Restructuring of the California Electric Industry
Deregulation Legislation and Direct Access
The passage of AB1890 in 1998 triggered fundamental changes in the structure of the electric industry in California. Generally, AB1890 provided for creation of the California Power Exchange (Cal PX), which was to be a clearinghouse for energy transactions among investor- owned utilities, independent generators and power marketers, who in turn would serve so called DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 9 – WHOLESALE ACTIVITIES (continued)
68 direct-access customers. AB1890 also created the California Independent System Operator (CAISO), which was to manage the state’s bulk transmission grid.
However, in 2000 and 2001, the price of electricity at the Cal PX became extremely high, and investor-owned utilities were unable to pay for the energy that they needed from the Cal PX.
Eventually the Cal PX filed for bankruptcy and was dismantled. Investor-owned utility PG&E and several energy marketers would also file for bankruptcy and over a decade of litigation ensued.
The CAISO, however, continues to manage the state’s bulk electric system and the day-ahead and day-of markets, and it has implemented various price controls and tariffs in an effort to avoid repeating the mistakes of 2000 and 2001. Along with balancing control area responsibility, the CAISO has also announced that it will take on the role of reliability coordinator for the region.
Energy Wholesale Trading and Risk Management
SVP participates in the wholesale gas and power market and the CAISO’s centralized market.
Since CAISO’s Market Redesign and Technology Upgrade (MRTU), CAISO has become the ultimate buyer and seller in the California day ahead market. Therefore, SVP engages in the trading of commodity forward contracts (gas and electric energy contracts) to secure fuel supply and hedge daily power purchase/sales from/to CAISO. The primary type of forward contracts SVP currently engages in is the futures contracts SVP transacts on Intercontinental Exchange (ICE). Activities during the fiscal year were substantially considered hedging transactions and, as such, have been accounted for using the settlement method of accounting. In the past, the gains recognized from futures transactions in natural gas and power were reported as negative expenses in the purchased resource. The gains recognized from futures transactions in natural gas and power are reported as revenues in the wholesale resource sales. Accordingly, wholesale resources gross sales and purchases totaling $11.5 million and $9.8 million, respectively, for fiscal year ended June 30, 2024; wholesale resources gross sales and purchases totaling $85.0 million and $19.5 million, respectively, for fiscal year ended June 30, 2023, have been separately reported on the statement of revenues, expenses and changes in net position.
The restructured electric wholesale market exposes SVP to various risks including market, credit and operational risks. Active and effective management of these risks associated with the power trading activity is critical to its continued success and contribution to the entire utility. A Risk Management Committee administers and monitors compliance with the Council approved risk policies and the related procedures on a regular basis. The City and SVP believe that it has the resource commitment, effective policies and procedures, and is continuing to improve the control structure and oversight for evaluating and managing the market and credit risks to which it is exposed.
DRAFT
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 9 – WHOLESALE ACTIVITIES (continued)
69 Credit Arrangements
SVP has risk policies, regulations, and procedures that help mitigate credit risk and minimize overall credit risk exposure. The policies include transacting only with investment grade counterparties, evaluating of potential 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. For counterparties below investment grade or lack of solid financial records, SVP requires collateral in the form of parental guarantee, surety bonds, letter of credit, or cash prepayment. Additionally, The City is a signatory to the WSPP netting agreement supplement and otherwise, enters into master netting arrangements whenever possible and, where appropriate, obtains collateral prior to trade execution. Master netting agreements incorporate rights of setoff that provide for the net settlement of subject contracts with the same counterparty in the event of default.
NOTE 10 – MAJOR SUPPLIERS
SVP purchases electric energy through its participation in the NCPA and M-S-R Public Power Agency joint powers agencies, from the Western Area Power Administration, from the market via the California Independent System Operator (CAISO), and from other sources to supply its retail electric utility customers. Additionally, SVP purchases transmission services through its participation in the TANC and from the CAISO.
The purchases of energy and transmission services that represent 5% or more of the total purchased power costs are shown in the table below:
Supplier
June 30, 2024
Power Purchased
% of the Total
Purchased Power
NCPA 201,619,042$ 49.63%
Tri-Dam Project 40,670,953 10.01%
M-S-R Public Power Agency 21,687,301 5.34% Supplier
June 30, 2023
Power Purchased
% of the Total
Purchased Power
NCPA 307,064,381$ 68.63%
M-S-R Energy Authority 53,305,412 11.91%
Tri-Dam Project 33,708,170 7.53%
EDF Trading North America LLC 23,565,161 5.27% M-S-R Public Power Agency 22,424,268 5.01%
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CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 11 – COMMITMENTS AND CONTINGENCIES
Commitments and contingencies, undeterminable in amount, include normal recurring pending claims and litigation. In the opinion of management, based upon discussion with legal counsel, there is no pending litigation, which is likely to have a material adverse effect on the financial position of the fund.
SVP has future commitments under construction projects as stated in Construction in Progress in Notes to Financial Statements 4B.
NOTE 12 – NET POSITION AND STABILIZATION AGREEMENTS
A. Net Position
Net Position is the excess of all SVP’s assets and deferred outflow of resources over all its liabilities and deferred inflow of resources. Net Position is divided into three categories that are described below:
Net investment in capital assets describes the portion of Net Position which is represented by the current net book value of SVP’s capital assets, less the outstanding balance of any debt issued to finance these assets.
Restricted for other agreements describes the portion of Net Position which is restricted as to use by the terms and conditions of agreements with outside parties, governmental regulations, laws, or other restrictions which SVP cannot unilaterally alter.
Unrestricted describes the portion of Net Position which is not restricted as to use.
SVP reported net position at June 30 as follows:
2024 2023
Net investment in capital assets: 575,817,583$ 527,101,920$ Restricted:
Pension benefits 10,065,874 6,324,045 Unrestricted:
Capital projects 212,222,222 167,116,904 Rate stabilization 261,000,000 207,542,169 Operations 233,749,911 163,210,048
Total Unrestricted 706,972,133 537,869,121 Total Net Position 1,292,855,590$ 1,071,295,086$
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CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 2024 and 2023
NOTE 12 – NET POSITION AND STABILIZATION AGREEMENTS (continued) 71 B. S tabilization Agreements
Rate Stabilization Fund
In 1996, SVP established the Rate Stabilization Fund and Cost Reduction Fund to assure that the rates were set properly with sufficient operating cash as well as cost reduction and financial stability of the Electric Utility. In December 2010, Council approved to transfer the Cost Reduction Fund as a subaccount to the Rate Stabilization Fund and continued to be used to offset Electric Utility costs in essentially the same manner. As of June 30, 2024, the balance of the Rate Stabilization Fund was $261 million.
Pension Stabilization Fund
In fiscal year 2016-17, the City established an irrevocable pension trust as a way to address unfunded pension liabilities. As part of the year-end process for 2016-17, City Council approved SVP to designate and make an initial deposit of $3.5 million in fiscal year 2018 toward prefunding pension obligations. As of June 30, 2024, the balance of the Pension Stabilization Fund was $10,065,874.
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CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
REQUIRED SUPPLEMENTARY INFORMATION
73 This part of the City of Santa Clara Electric Utility Enterprise Fund Financial Statements provides detailed information to better understand the data presented within the financial statements and note disclosures.
SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY AND
RELATED RATIOS
Discloses the proportionate share of the net pension liability and related ratios, including the proportionate share of fiduciary net position as a percentage of the total pension liability, and proportionate share of the net pension liability as a percentage of covered payroll.
SCHEDULE OF CONTRIBUTIONS – PENSION PLAN
Contains information of the employer’s contractually required contribution rates, contributions to the pension plan and related ratios.
SCHEDULE OF PROPORTIONATE SHARE OF THE NET OPEB LIABILITY AND
RELATED RATIOS
Discloses the proportionate share of the net OPEB liability and related ratios, including proportionate share of fiduciary net position as a percentage of the total OPEB liability, and the proportionate share of the net OPEB liability as a percentage of covered employee payroll.
SCHEDULE OF PLAN CONTRIBUTIONS - OPEB PLAN
Contains information of the employer’s contractually required contribution rates, contributions to the OPEB Plan and related ratios.
Required Supplementary Information
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74 Measurement Date June 30, 2023 June 30, 2022 June 30, 2021 June 30, 2020 Plan's Proportion of the Net Position
Liability/(Asset) 32.31% 32.31% 32.31% 32.31%
Plan's Proportionate Share of the Net Pension
Liability/(Asset) $ 108,269,790 105,823,291$ 73,533,480$ 98,396,395$ Plan's Covered Payroll 32,408,374$ 29,932,874$ 28,859,863$ 28,818,319$ Plan's Proportionate Share of the Net Pension
Liability/(Asset) as a Percentage of it's Covered
Payroll 334.08% 353.54% 254.79% 341.44%
Plan's Proportionate Share of the Fiduciary Net
Position as a Percentage of the Plan's Total
Pension Liability 63.05% 62.47% 72.48% 61.90%
Notes to Schedule:
Schedule of Proportionate Share of the Net Pension Liability City of Santa Clara Electric Utility Enterprise Fund Miscellaneous Plan, a Cost-Sharing Defined Benefit Pension Plan
Last Ten Fiscal Years for the Measurement Periods Ended June 30 (1)
(1)
Fiscal year 2014-15 was the first year of implementation.
Schedule of Changes in the Net Pension Liability and Related Ratios Schedule of Proportionate Share of the Net Pension Liability DRAFT
75 June 30, 2019 June 30, 2018 June 30, 2017 June 30, 2016 June 30, 2015 June 30, 2014
32.31% 34.97% 34.97% 34.97% 34.97% 34.97%
92,007,139$ 94,238,259 $ 92,735,319 $ 84,615,916 $ 74,516,387 $ 69,068,338 $ 28,630,755$ 26,407,732 $ 24,928,548 $ 21,661,244 $ 20,300,577 $ 20,289,905 $ 321.36% 356.86% 372.00% 390.63% 367.07% 340.41%
62.72% 62.97% 62.02% 62.18% 65.57% 67.42%
Schedule of Proportionate Share of the Net Pension Liability City of Santa Clara Electric Utility Enterprise Fund Miscellaneous Plan, a Cost-Sharing Defined Benefit Pension Plan
Last Ten Fiscal Years for the Measurement Periods Ended June 30
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76 June 30, 2024 June 30, 2023 June 30, 2022 June 30, 2021 Actuarially determined contribution 1 1,871,745 $ 11,321,067$ 11,026,399 $ 10,027,454 $ Contributions in relation to the
actuarially (11,871,745) (11,321,067) (11,026,399) (10,027,454) Contribution deficiency (excess) - $ - $ - $ - $
Covered payroll 33,220,790$ 32,408,374$ 29,932,874$ 28,859,863$ Contributions as a percentage of
covered payroll 35.74% 34.93% 36.84% 34.75%
Notes to Schedule
Valuation date 6/30/2021 6/30/2020 6/30/2019 6/30/2018
Methods and assumptions used to determine contribution rates:
Actuarial cost method Entry age normal
Amortization method Level percentage of payroll, closed Remaining amortization period 23 years as of valuation date Asset valuation method
Inflation
Salary increases
Investment rate of return
Retirement age
Mortality
(1)
Fiscal year 2014-15 was the 1st year of implementation.
Schedule of Contributions
City of Santa Clara Electric Utility Enterprise Fund Miscellaneous Plan, a Cost-Sharing Defined Benefit Pension Plan
Last Ten Fiscal Years (1)
7.5% for 2015 to 2018, 7.375% for 2019, 7.25% for 2020, 7% for 2021 t
hrough 2022, and 6.8% for 2023 and 2024, net of pension plan investment expense, including inflation.
2.75% for 2015 to 2019, 2.675% for 2020, and 2.50% for 2021 through 2022,
2.30% for 2023 and 2024
5-year smoothed market
The probabilities of Retirement are based on the CalPERS Experience Study.
Varies by Entry Age and Service.
The probabilities of mortality are based on the 2017 CalPERS Experience Study for the period from 1997 to 2015. Pre-retirement and Post-retirement mortality rates include 15 years of projected mortality improvement using 90% of Scale, MP-2016 published by the Society of Actuaries.
Schedule of Contributions (Pension Plan)
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77 June 30, 2020 June 30, 2019 June 30, 2018 June 30, 2017 June 30, 2016 June 30, 2015 9,365,958$ 8,258,503$ 8,832,105 $ 7,558,410 $ 6,484,674 $ 5,335,643 $ (9,365,958) (8,258,503) (8,832,105) (7,558,410) (6,484,674) (5,335,643) - $ - $ - $ - $ - $ - $ 28,818,319$ 28,630,755$ 26,407,732 $ 24,928,548 $ 21,661,244 $ 20,300,577 $
32.50% 28.84% 33.45% 30.32% 29.94% 26.28%
6/30/2017 6/30/2016 6/30/2015 6/30/2014 6/30/2013 6/30/2012 Schedule of Contributions
City of Santa Clara Electric Utility Enterprise Fund Miscellaneous Plan, a Cost-Sharing Defined Benefit Pension Plan
Last Ten Fiscal Years
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78 Measurement Date
June 30,
2024
June 30,
2023
June 30,
2022
June 30,
2021
Liability/(Asset) 19.32% 19.32% 32.31% 32.31%
Plan's Proportionate Share of the Net OPEB
Liability/(Asset) 6,898,479$ 7,288,705$ 13,057,945$ 11,860,957$ Plan's Covered Payroll 37,402,861$ 34,795,415$ 54,801,960$ 52,857,221$ Plan's Proportionate Share of the Net OPEB
Liability/(Asset) as a Percentage of it's Covered Payroll 18.44% 20.95% 23.83% 22.44% Plan's Proportionate Share of the Fiduciary Net Position as a Percentage of the Plan's Total OPEB Liability 48.40% 44.03% 40.25% 44.03% June 30,
2021
June 30,
2020
June 30,
2019
June 30,
2018
Plan's Proportionate Share of the Net Position
Liability/(Asset) 32.31% 32.31% 34.97% 34.97%
Liability/(Asset) 11,860,957$ 12,076,500 $ 13,339,656 $ 16,285,879 $ Plan's Covered Payroll 52,857,221$ 53,127,656 $ 52,963,135 $ 47,313,294 $ Plan's Proportionate Share of the Net OPEB
Liability/(Asset) as a Percentage of it's Covered Payroll 22.44% 22.73% 25.19% 34.42% Plan's Proportionate Share of the Fiduciary Net Position as a Percentage of the Plan's Total OPEB Liability 44.03% 40.11% 37.14% 28.90% Notes to Schedule:
Schedule of Proportionate Share of the Net OPEB Liability and Related Ratios City of Santa Clara Electric Utility Enterprise Fund
OPEB Plan, A Cost-Sharing Defined Benefit Plan
Last Ten Fiscal Years Ended June 30
(1)
(1)
Fiscal year 2017-18 was the first year of implementation.
Schedule of Proportionate Share of the Net OPEB Liability and Related Ratios
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79 June 30, 2024 June 30, 2023 June 30, 2022
Actuarially determined contribution 1,010$ 946$ 1,534$ Contributions in relation to the actuarially
determined contributions (812) (758) (635) Contribution deficiency (excess) 198$ 188$ 899$ Covered payroll 37,403$ 34,795$ 54,802$ Contributions as a percentage of covered payroll 2.17% 2.18% 1.16% June 30, 2021 June 30, 2020 June 30, 2019 June 30, 2018 Actuarially determined contribution 1,559$ 1,512$ 1,856$ 1,911$ Contributions in relation to the actuarially
determined contributions (570) (638) (748) (886) Contribution deficiency (excess) 989$ 874$ 1,108$ 1,025 $ Covered payroll 52,857$ 53,128$ 52,963$ 47,313$ Contributions as a percentage of covered payroll 1.08% 1.20% 1.41% 1.87% Notes to Schedule:
(1)
Fiscal year 2017-18 was the first year of implementation. (In Thousands)
Schedule of Proportionate Share of Contributions
City of Santa Clara Electric Utility Enterprise Fund
OPEB Plan, A Cost-Sharing Defined Benefit Plan
Last Ten Fiscal Years Ended June 30 (1)
Schedule of Proportionate Share of the Contributions (OPEB Plan)
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80 80
Actuarial valuation date June 30, 2020
Actuarial cost method Entry Age Normal, Level Percentage of Payroll Amortization method Level percent of payroll
Unfunded liability amortization
Asset valuation method
Discount rate 5.25%
General inflation 2.75%
Healthcare trend
Mortality CalPERS 1997-2015 Experience Study
Mortality improvement
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
Notes to Schedule of Employer Contribution (OPEB Plan)
Post-retirement mortality projected fully generational with Scale MP-2020
Methods and Assumptions for 2022-23 Actuarially Determine Contributions 15 years (open period) for method, assumption, plan changes, and gains and losses
Maximum 30-year combined period
Investment gains and losses spread over a 5-year rolling period.
Not less that 80% nor greater than 120% of fair value
Non-Medicare - 7% for 2022, decreasing to an ultimated
rate of 4% in 2076
Medicare (non-Kaiser)- 6.1% for 2022, decreasing to an ultimated rate of 4% in 2076
30 years (closed period) for initial UAAL
(17 Years remaining on June 30, 2022)
20 years (closed period) for implied subsidy on 06/30/2019 (17 years remaining on June 30, 2022)
Medicare (Kaiser)- 5% for 2022, decreasing to an ultimated rate of 4% in 2076
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81 81
Actuarial valuation date June 30, 2022
Actuarial cost method Entry Age Normal, Level Percentage of Payroll Amortization method Level percent of payroll
Unfunded liability amortization
Asset valuation method
Discount rate 4.50%
General inflation 2.50%
Healthcare trend
Mortality CalPERS 2000-2019 Experience Study
Mortality improvement
30 years (closed period) for initial UAAL
(16 Years remaining on June 30, 2023)
20 years (closed period) for implied subsidy on 06/30/2019 (16 years remaining on June 30, 2023)
15 years (open period) for method, assumption, plan changes, and gains and losses
Methods and Assumptions for 2023-24 Actuarially Determine Contributions
CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
Notes to Schedule of Employer Contribution (OPEB Plan)
Post-retirement mortality projected fully generational with Scale MP-2021
Maximum 30-year combined period
Non-Medicare - 8.50% for 2024, decreasing to an ultimated rate of 3.45% in 2076
Medicare (non-Kaiser)- 7.50% for 2024, decreasing to an ultimated rate of 3.45% in 2076
Investment gains and losses spread over a 5-year rolling period.
Medicare (Kaiser)- 6.25% for 2024, decreasing to an ultimated rate of 3.45% in 2076
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