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Home My WebLink About2020-12-17; Clean Energy Alliance JPA; ; Ratify Execution of Letter of Credit in Satisfaction of California Public Utilities Commission Resolution E-5059 Setting an Updated Financial Security RequirementClean Energy Alliance JOINT POWERS AUTHORITY Staff Report DATE: December 17, 2020 TO: Clean Energy Alliance Board of Directors FROM: Barbara Boswell, Interim Chief Executive Officer ITEM 3: Ratify Execution of Letter of Credit in Satisfaction of California Public Utilities Commission Resolution E-5059 Setting an Updated Financial Security Requirement RECOMMENDATION Ratify Execution of a Letter of Credit, in the amount of $147,000, with U.S. Bank, in satisfaction of California Public Utilities Commission Resolution E-5059 setting an updated Financial Security Requirement. BACKGROUND AND DISCUSSION In 2018, the CPUC issued Decision 18-05-022 (Decision) which established reentry fees and financial security requirements (FSR) for CCAs. The purpose of the FSR instrument is to cover costs borne by SDG&E in the event of a mass involuntary return of CEA customers to the SDG&E, such as the decertification of CEA or a CCA failure. SDG&E may only withdraw funds from the financial security instrument for unpaid administrative or procurement costs associated with the return of CEA customers to the IOU. Any withdrawal of those funds must first be approved by the CPUC. Under the Decision, Investor-Owned Utilities (IOUs), including SDG&E, were required to submit advice letters implementing the FSR requirements. Those advice letters were submitted in August 2018; however, they were suspended by the CPUC until final implementation issues could be resolved. On October 8, 2020, the CPUC adopted the Resolution finalizing the implementation of the IOU advice letters and setting the minimum FSR at $147,000. To date, CCAs have been operating under an interim amount of $100,000, which was submitted to the CPUC as part of the CEA's CCA registration process. The FSR can be satisfied in three ways: Letter of Credit, Surety Bond, or Cash Deposit with 3' Party Financial Institution Subject to an Escrow Agreement. At its last Board meeting on November 19, the Board approved execution of an escrow agreement to satisfy the FSR requirement. Subsequent to that approval, CEA staff and its legal team began working with SDG&E to come to an agreement on the form of escrow agreement. After several meetings, CEA and SDG&E were not able to come to agreement on the form. As a result, staff changed direction to execute a letter of credit (Attached). Due to timing related to the deadline to file the advice letter showing compliance with the requirement, staff was not able to bring this change to the Board prior to execution. The letter of credit is for $147,000, in line with the amount the Board approved for the escrow agreement. December 17, 2020 Financial Security Requirement Page 2 of 2 FISCAL IMPACT The $147,000 Financial Security Requirement has been funded by an increase in the loan from Calpine Energy Solutions. The advice letter filed with the CPUC included a request for reimbursement of the original $100,000 deposit that CEA made in March 2020 as part of its CCA Registration process. ATTACHMENTS Redacted Standby Letter of Credit bank. U.S. Bank National Association Global Documentary Services 555 S.W. Oak Street, Suite 400-P Portland, Oregon U.S.A. 97204 Fax: (503) 464-4125 Phone: (503) 464-3700 Issue Date: December 7, 2020 IRREVOCABLE STANDBY LETTER OF CREDIT NO. BENEFICIARY: San Diego Gas & Electric Company Quantitative Risk and Major Markets Credit 8326 Century Park Court CP21C San Diego, CA 92123 AMOUNT: US$ 147,000.00 Ladies and Gentlemen: APPLICANT: Clean Energy Alliance 1200 Carlsbad Village Drive Carlsbad, CA 92008 EXPIRATION DATE: December 7, 2021 at our counters We have been informed that this Letter of Credit is issued as financial security pursuant to California Public Utilities Code section 394.25(e), California Public Utilities Commission Decision (D.) 18-05- 022 and Resolution E-5059 by which the COMM i SSi011 established reentry fees, and financial security requirements ("FSR") applicable to Community Choice Aggregation (CCA) programs, and SDG&E Rule 27, which implements Reentry fees and Financial Security Requirements for CCA programs. Reentry fees include investor-owned utility (IOU) Fuirninistrative costs and procurement costs resulting from amass involuntary return of CCA customers to IOU service, and the financial security requirements must cover those potential costs. We hereby establishes our invvocable standby Letter of Credit Number in favor of San Diego Gas & Electric Company ("Beneficiary"), by order and for account of Clean Energy Alliance ("Applicant"), available at sight upon demand at our counters, at 555 SW Oak Street, Suite 400-P, Portland, Oregon 97204, ALM: Global Documentary Services, for an amount of US$ 147,000.00 (One Hundred Forty Seven Thousand Dollars), effective immediately. Funds under this Letter of Credit are available to Beneficiary by presentation on or before 5:00 p.m. Oregon time, on or before the Expiration Date of the following documents: 1. Statement signed by a person purported to be an authorized representative of Beneficiary stating that: "Under terms of the SDG&E Rule 27, Beneficiary is entitled to draw under Letter of Credit No the sum of U.S.$ ) owed by Clean Energy Alliance for the payment of Reentry Fees." or ***This page forms an integral part of credit • usbank.com Mbank. 2. Statement signed by a person purported to be an authorized representative of Beneficiary stating that: "As of the close of business on __ [insert date, which is less than 90 days prior to the expiration date of the Letter, of Credit] you have provided written notice to us indicating your election not to permit extension of this Letter of Credit beyond its current expiry date. The amount due to Beneficiary, whether or not a triggering event under SDG&B Rule 27 has occurred, is U.S. $ Special Conditions: All costs and banking charges pertaining to this Letter of Credit are for the account of Applicant. Partial and multiple drawings are permitted. Fax of Document 1 or 2 above acceptable. This Letter of Credit expires on December 7, 2021 at our counters. Such payment documents, notices and communications must be sent either (but not both) by: (a) Courier mail to U.S. Bank National Association, 555 SW Oak Street, Suite 400-P, Portland, Oregon 97204, Attn: Global Documentary Services, or (b) Facsimile to facsimile number (503) 464-4125, Attn: Global Documentary Services; provided, however, that such address and facsimile number may be amended by us upon the provision of written notice of such amendment to you. Beneficiary shall use best efforts to give telephonic notification of a demand for payment at either (866) 359-2503 (extension 3620) or (503) 464-3620. We hereby engage with Beneficiary that upon presentation of a document as specified under and in compliance with the terms and conditions of this Letter of Credit, this Letter of Credit will be duly honored in the amount stated in Document 1 or 2 above. If a complying document is so presented by 10:00 am Pacific Time on Oregon banking day, we will honor the same in full in immediately available funds on the next succeeding Oregon banking day and, if so presented after 10:00 am Pacific Time on Oregon banking day, we will honor the same in full in immediately available funds by noon on the second succeeding Oregon banking day. It is a condition of this Letter of Credit that it shall be deemed automatically extended without an amendment for a one year period beginning on the present expily date hereof and upon each anniversary of such date, unless at least ninety (90) days prior to any such expiry date we have sent you written notice by regular and registered mail or courier service that we elect not to permit this Letter of Credit to be so extended beyond, and will expire on its then current expiry date. No presentation made under this Letter of Credit after such expiry date will be honored. We agree that if this Letter of Credit would otherwise expire during, or within 30 days after, an interruption of our business caused by an act of god, riot, civil commotion, insurrection, act of terrorism, war or any other cause beyond our control or by any strike or lockout, then this Letter of Credit shall expire on the 30th day following the day on which we resume our business after the cause of such interruption has been removed or eliminated and any drawing on this Letter of Credit which could properly have been made but for such interruption shall be permitted during such extended ***This page forms an integral part of credit usbank.com bank. period. This Letter of Credit is subject to the Uniform Customs and. Practice for Documentary Credits (2007 Revision) International Chamber of Commerce, Publication No. 600 ("UCP"), except to the extent that the terms hereof are inconsistent with the provisions of the UCP, including but not limited to Articles 14(b) and 36 of the UCP, in which case the terms of this Letter of Credit shall govern. Matters not covered by the UCP shall be governed and construed in accordance with the laws of the State of California. B,4nk National Asso,pation Authorized Signature Lori E. Rowell Vice President ***This page forms an integral part of credit usbank.com