HomeMy WebLinkAbout2021-12-17; Clean Energy Alliance JPA; ; Annual Comprehensive Financial Report for the Fiscal Year Ended June 30, 2021~
CLEAN ENERGY ALLIANCE
Staff Report
DATE: December 17, 2021
TO: Clean Energy Alliance Board of Directors
FROM: Marie Marron Berkuti, Interim Treasurer
ITEM2: Annual Comprehensive Financial Report for the Fiscal Year Ended June 30, 2021
RECOMMENDATION :
Receive and File Clean Energy Alliance's (CEA) Annual Comprehensive Financial Report (Attachment A) for
the Fiscal Year Ended June 30, 2021.
BACKGROUND AND DISCUSSION:
The CEA's annual audit for the period July 1,2020, through June 30, 2021, has been completed.
Lance, Soll & Lunghard, LLC (LSL) has audited CEA's financial statements. The goal of the independent
audit is to provide reasonable assurance that the financial statements of CEA for the fiscal year ended
June 30, 2021, are free of material misstatement. As part of CEA's annual audit, reviews are made to
determine the adequacy of the internal control structure as well as to determine that CEA has complied
with applicable laws and regulations. The Statement of Auditing Standards (SAS) No. 115, Communication
of Internal Control Related Matters Identified in an Audit (Attachment B), received from the auditor's
states that there were no material instances of noncompliance, no material weaknesses in internal
controls, and no reportable conditions. The independent auditor concluded there was a basis for
rendering an unmodified opinion and CEA's financial statements are fairly presented in conformity with
Generally Accepted Accounting Principles (GAAP). The independent auditor's report is presented as the
first component of the financial section of this Report.
FISCAL IMPACT
There is no fiscal impact associated with these items.
ATTACHMENTS:
Attachment A -Clean Energy Alliance Annual Comprehensive Financial Report for the Fiscal Year ended
June 30, 2021
Attachment B -The Statement of Auditing Standards No. 115, Communication of Internal Control Related
Matters Identified in an Audit
CLEAN ENERGY ALLIANCE
CARLSBAD, CALIFORNIA
ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2021
Prepared by the Interim Treasurer/Chief Financial Officer
ATTACHMENT A
CLEAN ENERGY ALLIANCE
ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2021
TABLE OF CONTENTS
INTRODUCTORY SECTION
Page
Number
Letter of Transmittal ................................................................................................................................. i
Directory of Officials and Staff ............................................................................................................... xi
Organizational Chart ............................................................................................................................. xii
FINANCIAL SECTION
Independent Auditors' Report ................................................................................................................. 1
Management's Discussion and Analysis ................................................................................................ .4
Basic Financial Statements:
Statement of Net Position ................................................................................................................. 9
Statement of Revenues, Expenses, and Changes in Net Position ................................................ 10
Statement of Cash Flows ............................................................................................................... 11
Notes to Financial Statements ........................................................................................................ 12
STATISTICAL SECTION
Net Position by Component ............................................................................................................ 17
Operating Information ..................................................................................................................... 18
Principal Rate Payers ..................................................................................................................... 19
Ratios of Outstanding Debt by Type .............................................................................................. 20
Demographic and Economic Statistics ........................................................................................... 21
Major Employers-San Diego County .............................................................................................. 22
Two-Year Summary of Retail Sales and Usage by Type of Customer .......................................... 23
INTRODUCTORY SECTION
Among other goals, the agreement seeks to meet the following objectives:
• Default energy product from a minimum 50% renewable sources, increasing to 100%
renewable by 2035.
• Voluntary 100% renewable energy service at a premium above the default service rate.
• Default rates that are set to provide a minimum target of 2% discount below San Diego Gas &
Electric (SDG&E) comparable service offerings.
Each member city has equal voting power and JPA board meetings are held monthly, rotating between
the cities of Carlsbad, Del Mar and Solana Beach. CEA is operated under the direction of a Chief Executive
Officer (CEO) appointed by the Board, with legal and regulatory support provided by a Board-appointed
General Counsel. In the future, CEA's service area may expand to include additional regional agencies.
There are approximately 58,000 eligible customer accounts within CEA's boundaries as shown in the table
below:
Residential 50,400
Commercial & Agriculture 8,300
Street Lighting & Traffic ____lQQ
58,900
BUDGETARY PROCESS AND CONTROLS
An annual budget is adopted by the Board before the fiscal year begins and can be amended during the
fiscal year by the Board as needed. All expenditures are made in accordance with the approved budget.
While CEA's year of operations reported a deficit net position of $2,707,414, as explained in Note 2 to the
financial statements, the reason for the deficit is that CEA has not yet established a revenue stream selling
energy to customers that has exceeded operating expenses associated with startup costs. In the fiscal
year ended June 30, 2021, these startup costs were funded by a short-term line of credit with
JPMorgan Chase of $5 million. From a budgetary comparison, the budget to actual variance was a net
positive variance of $1,301,772 as shown in the schedule on the following page.
iii
CLEAN ENERGY ALLIANCE
BUDGETARY COMPARISON SCHEDULE
For the twelve months ended June 30, 2021
BUDGET ACTUALS VARIANCE
Operating Revenues
Energy Sales $ 8,000,000 $ 7,309,663 $ 690,337
Operating Expenses
Power Supply 8,000,000 8,388,484 (388,484)
Professional Services
Legal 320,000 414,633 (94,633)
Technical/Power Consultant 198,200 265,902 (67,702)
Data Manager 105,400 119,193 (13,793)
Forecasting and Sched uling 24,800 24,800
Marketing 102,238 101,440 798
SDG&E Service Fees & Deposit 83,800 17,118 66,682
Other 9,562 24,851 (15,289)
Total Professional Services 844,000 967,937 (123,937)
General and Administrative 329,500 300,376 29,124
Total Operating Expenses 9,173,500 9,656,797 (483,297}
Operating (Loss) (1,173,500) (2,347,134} 1,173,634
Nonoperating Expenses
Interest Expense (10,000) (81,596) 71,596
Other Sources and Uses
Sources
JPMorgan Revolving Credit Agreement 5,000,000 5,000,000
Calpine Promissory Note 650,000 650,000
Total Sources 5,650,000 5,000,000 650,000
Uses
CCA Bond(Financial Security Reqmt-FSR) 47,000 147,000 (100,000)
CAISO Deposit 500,000 500,000
Lock Box Reserves/Cash Flow 2,500,000 2,500,000
Calpine Promissory Note Repayment 650,000 650,000
Collateral Deposits-SDG&E 585,000 585,000
Financial Security Requirement 147,000 147,000
Total Uses 4,429,000 1,232,000 3,197,000
Total Sources and Uses 1,221,000 3,768,000 (2,547,000)
Net Increase (Decrease) in Available Fund Balance $ 37,500 $ 1,339,270 $ (1,301,770)
iv
INTERNAL CONTROLS
The management of CEA is responsible for establishing and maintaining an internal control structure
designed to ensure that the assets of CEA are protected from loss, theft, or misuse, and to ensure that
adequate accounting data is compiled to allow for the preparation of financial statements in conformity
with Generally Accepted Accounting Principles (GAAP). The internal control structure is designed to
provide reasonable, but not apsolute, assurance that these objectives are met. The concept of reasonable
assurance recognizes that (1) the costs of a control should not exceed the benefits likely to be derived;
and (2) the valuation of costs and benefits requires estimates and judgments by management. The
internal control structure is subject to periodic evaluation by the management of CEA.
ANNUAL AUDIT
LSL has audited CEA's financial statements. The goal of the independent audit is to provide reasonable
assurance that the financial statements of CEA for the fiscal year ended June 30, 2021, are free of material
misstatement. As part of CEA's annual audit, reviews are made to determine the adequacy of the internal
control structure as well as to determine that CEA has _complied with applicable laws and regulations.
The results of CEA's annual audit for the fiscal year ended June 30, 2021, provided no instances of material
weaknesses in the internal control structure and no violations of applicable laws and regulations. The
independent auditor concluded there was a basis for rendering an unmodified opinion and CEA's financial
statements are fairly presented in conformity with GAAP. The independent auditor's report is presented
as the first component of the financial section of this Report.
ADMINISTRATIVE AND OPERATIONAL POLICIES
The policies listed below were approved by the end of the fiscal year and are based on government code
or regulatory requirements and best practices of successfully operational CCAs:
• Unsolicited Proposal Policy
• Non-Energy Procurement Policy
• Inclusive and Sustainable Workforce Policy
• Financial Reserve Policy
• 2020 Legislative and Regulatory Platform
• Records Retention Schedule
• Bid Evaluation Criteria Policy
• Energy Risk Management Policy
• Social M edia Policy
• Debt Management Policy
• Conflict of Interest Code
• Renewable Energy Self-Generation Bill Credit Transfer Program Policy
• New Member Addition Policy
V
IMPLEMENTATION TIMELINE AND LAUNCH
To meet the goal of a May 2021 launch, pertinent action items needed to be completed by the end of the
fiscal year. These tasks were tracked on a timeline to ensure they were being completed on time and in
compliance with regulatory requirements. The action items were grouped into four general categories:
• Board Actions/Activity
• Staff/Consultant Activity
• Marketing/Customer Outreach
• CCA Launch
Board Actions and Activity tasks included actions specific to the operations of CEA, such as adoption of
policies and procedures, approving line of credit to cover startup costs, and rate setting. Staff and
Consultant activities included tasks related to systems testing with SDG&E, establishing a call center with
scripting, interactive voice response systems, and customer enrollment notices. Marketing and Customer
Outreach included various communication mechanisms including the required noticing of new customers.
CCA launch activities were steps taken to begin CEA's enrollment of customers and providing electrical
service to the.
By the end of the fiscal year, all actions listed on the timeline were successfully completed as shown in
the schedule below:
Timing
09/01/20
09/17/20
09/17/20
11/19/20
10/15/20
01/21/21
01/21/21
02/01/21
01/21/21
01/21/21
02/01/21
02/18/21
02/18/21
03/01/21
05/01/21
Clean Energy Alliance Tlmeline of Action Items
CCA Program Related
Description
Marl<eting/Customer Outreach Plan Development & Kickoff
Marl<eting Strategic Plan
Logo Design
Website Refresh
Bid Evaluation and Criteria Scoring System
Award Scheduling Coordinator Services
Introduce/Adopt Energy Risk Management Policy
Records Retention Polley
System Testing 11ath SDG&E
Credit Solution
CEA Default Products/programs/renewable energy policies
Create Customer Pre-and Post-Enrollment Notices
Social Media Policy
Debt Issuance Policy
Set up Call Center/Scriptlng/lVR Recordings
Rate Setting
Investment Policy
Energy Supply Procurement -Short Term Renewable & Conventional
Customer Noticing
Launch-2 phases May & June 2021
Key·
Board Actions/Activity
Staff/Consultant Acthnty
Marl<eting/Customer Outreach
CCA Launch
Status 3rd Qtr 4th Qtr 1st Qtr Apr-21 May-21 Jun-21 '20 '20 '21
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
CEA began enrolling customers in May 2021 and completed the mass enrollment of its customers in
June 2021.
vi
CLEAN ENERGY ALLIANCE
Members and officers of the Board of Directors on June 30, 2021
Member Agency Representative Alternate
City of Carlsbad Priya Bhat-Patel -Vice Chair Teresa Acosta
Council Member Council Member
City of Del Mar Dave Druker Dwight Worden
Council Member Council Member
City of Solana Beach Kristi Becker -Chair David A. Zito
Deputy Mayor Council Member
CEA Staff
Barbara Boswell -Chief Executive Officer
Gregory W. Stepanicich -General Counsel
Marie Marron Berkuti -Interim Treasurer/Chief Financial Officer
Sheila Cobian -Interim Board Secretary
Susan Caputo -Interim Board Clerk
xi
I
Interim
Treasurer /CFO
CLEAN ENERGY ALLIANCE
ORGANIZATION CHART
Rate Payers &
Citizens of CEA
Member Cities
Board of Directors
Chief Executive
Officer
Interim Board
Clerk
xii
General
Counsel
I
Interim
Secretary
FINANCIAL SECTION
Ls~ .... •••• ••
To the Board of Directors
Clean Energy Alliance
Carlsbad, California
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 error, 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 the GAAS and
Government 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 may 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
aggregate, they would influence the judgment made by a reasonable user based on the financial
statements.
In performing an audit in accordance with GAAS and Government 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 responsive 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 to the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the District's internal control. Accordingly, no such opinion is expressed.
• Evaluate the appropriateness of accounting policies 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 the District'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.
Other Reporting Responsibilities
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management's
discussion and analysis on pages 4 - 8 be presented to supplement the basic financial 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 standards 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 statements. 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.
2
CLEAN ENERGY ALLIANCE
MANAGEMENT'S DISCUSSION AND ANALYSIS
YEAR ENDED JUNE 30, 2021
This section provides an overview and analysis of key data presented in the basic financial
statements for the year ended June 30, 2021. Information within this section should be used in
conjunction with the basic financial statements and accompanying notes.
OVERVIEW OF THE FINANCIAL STATEMENTS
Clean Energy Alliance (CEA) accounts for its financial activities within a single proprietary fund
and its financial activities are comprised of the purchase and sale of electric energy. In accordance
with requirements set forth by the Governmental Accounting Standards Board (GASS), CEA's
financial statements employ the accrual basis of accounting in recognizing increases and
decreases in economic resources. Accrual accounting recognizes all revenues and expenses
incurred during the year, regardless of when cash is received or paid.
The basic financial statements consist of:
Statement of Net Position:
CEA presents its Statement of Net Position using the net position format. The Statement of
Net Position reflects the assets, liabilities, and net position (equity) of CEA at year-end. For the
fiscal years ended June 30, 2021, net position is reported as unrestricted net position.
Statement of Revenues, Expenses, and Changes in Net Position:
This statement reflects the transactions and events that have increased or decreased CEA's total
economic resources during the period. Revenues and expenses are classified as operating or
nonoperating based on the nature of the transaction.
Statement of Cash Flows:
The Statement of Cash Flows reflects the sources and uses of cash separated into two categories
of activities: operating and noncapital financing.
The notes to the financial statements, presented at the end of the basic financial statements, are
considered an integral part of CEA's presentation of financial position, results of operations, and
changes in cash flows.
4
FINANCIAL ANALYSIS
CLEAN ENERGY ALLIANCE
MANAGEMENT'S DISCUSSION AND ANALYSIS
YEAR ENDED JUNE 30, 2021
The following table is a summary of CEA's assets, liabilities and net position and a discussion of
significant changes for the years ending June 30:
Statements of Net Position
2021 2020 *
Assets
Current assets $ 9,138,544 $ 3031530
Total Assets 9,1381544 303,530
Liabilities
Current liabilities 11,845,958 582,214
Total Liabilities 11 ,845,958 582,214
Net position:
Unrestricted {2?071414} {278,684}
Total net position $ {2,707,414} $ {278,684}
* 11 /04/19-06/30/20
Current Assets
CEA began operations on November 4, 2019, and at the end of fiscal year 2020, or after
approximately eight months of operations, CEA had current assets of $303,530 which consisted
of $203,530 in cash and $100,000 in deposits. Each of the three members of CEA -Carlsbad,
Del Mar, and Solana Beach -contributed $150,000 each for a total of $450,000 to pay for initial
startup costs. As part of CEA's submission of its Community Choice Aggregation (CCA)
Implementation Plan and Statement of Intent to the California Public Utilities Commission
(CPUC), and subsequent certification by the CPUC, CEA was required to pay a $100,000 CCA
bond.
In the fiscal ending June 30, 2021, current assets increased by $8,835,014 to $9,138,544 as
compared to the prior fiscal year. Current assets consisted of $710,368 in cash, $7,196,176 in
accounts receivable and $1,232,000 in deposits. Cash increased by $506,838 to $710,368 as
compared to the previous fiscal year mainly due to the drawdown of funds from the JPMorgan
line of credit that was established in February 2021 . CEA began providing electricity to its
customers in May 2021 and accounts receivable were invoices billed to customers through
June 30, 2021 , that were still outstanding at the end of the fiscal year and electricity used by
customers through the end of the fiscal year that had not yet been invoiced.
5
CLEAN ENERGY ALLIANCE
MANAGEMENT'S DISCUSSION AND ANALYSIS
YEAR ENDED JUNE 30, 2021
Deposits increased by $1,132,000 to $1,232,000 as compared to the previous fiscal year. Part of
the increase was due to cash collateral deposits totaling $585,000 paid by CEA to San Diego Gas
& Electric (SDG&E) to satisfy credit requirements as part of its Resource Adequacy (RA)
procurement. The deposits will be returned once the contracts are complete. A deposit in the
amount of $500,000 was paid to the California Independent System Operator Corporation
(CASIO) as financial security for CEA to apply as a Candidate Congestion revenue rights (CRR)
Holder by CAISO in accordance with the CAISO Tariff.
Current Liabilities
Current liabilities at the end of the fiscal year ended June 30, 2020, equaled $582 ,214 and
consisted of $78,197 in accounts payable and $504,017 as due to member agencies. The
accounts payable of $78, 197 consisted primarily of amounts due at the end of the fiscal year for
administrative and technical and power consultants' costs. The amounts due to the member
agencies consisted of the $450,000 in cash advanced by Carlsbad, Del Mar, and Solana Beach
at $150,000 by each city and $54,017 in amounts due to the cities for services provided to CEA
during the fiscal year for a total of $504,017. The initial cash advance of $450,000 is refundable
back to the cities three years after CEA begins providing services to customers.
In the fiscal ending June 30, 2021 , current liabilities increased by $11 ,263,744 to $11,845,958 as
compared to the prior fiscal year. Current liabilities primarily consisted of $6,242,455 in accounts
payable and $5 million in an amount due to JPMorgan. Accounts payable consists mainly of
amounts due for energy delivered to customers that were not yet paid as of the end of the fiscal
year and totaled $5,858,502. A line of credit for $6 million at a 3.7 percent interest rate was
established with JPMorgan on February 3, 2021 . At the fiscal year end, $5 million had been drawn
down to finance general operations.
The table on the following page is a summary of CEA's revenues, expenses and changes in
net position and a discussion of significant changes for the years ending June 30:
Statements of Revenues, Expenses and Changes in Net Position
2021 2020 *
Operating Revenues $ 7,309,663 $
Operating Expenses 9,656,797 278,684
Nonoperating Expenses 81,596
Total Expenses 9,738,393 278,684
Change in Net Position (2,428,730) (278,684)
Net Position -Beginning (278,684)
Net Position -Ending $ (2,707,414) $ (278,684)
* 11/04/19-06/30/20
6
Operating Revenues
CLEAN ENERGY ALLIANCE
MANAGEMENT'S DISCUSSION AND ANALYSIS
YEAR ENDED JUNE 30, 2021
CEA began operations on November 4, 2021, and through the end of the fiscal year ending
June 30, 2021, received no revenues.
For the fiscal year ending June 30, 2021 , revenues increased to $7,309,663 and consisted of
sales and service charges to customers. CEA began serving customers in May 2021 with final
enrollments being completed in June 2021. Revenues included invoicing through June 30, 2021,
and electricity provided to customers through the end of the fiscal year but not yet invoiced.
Operating Expenses
Operating expenses for fiscal year ending June 30, 2020, equaled $278,684 and consisted
primarily of costs for technical and power consultants, legal fees, and administrative services.
For the fiscal year ending June 30, 2021 , expenses increased by $9,378,113 to $9,656,797 as
compared to the prior fiscal year and consisted of costs of sales and services at $8,388,484 which
were the cost of electricity delivered to customers, professional services at $967,937 and
administrative services at $300,376. Professional services included consultant costs for
forecasting and scheduling, data management, technical and power, marketing and legal services
and service fees paid to SDG&E.
Nonoperating Expenses
Interest expense at $81,596 for the fiscal year ending June 30, 2021 , was interest paid on the
JPMorgan borrowing.
ECONOMIC OUTLOOK
CEA serves approximately 92% of all eligible customers in the cities of Carlsbad, Del Mar, and
Solana Beach or 58,859 customer accounts. The core mission is to provide electric from minimum
50% renewable sources at stable and competitive electric rates with a target 2% generation
savings as compared to San Diego Gas & Electric (SDG&E). The fiscal year ended
June 30, 2021 , saw CEA reporting a net deficit for the year due to CEA incurring start-up and
energy purchase costs during the year with electrical sales to its customers beginning May 1 and
completing its enrollment of customers in June. It is expected in future fiscal years that this deficit
will be eliminated as CEA becomes fully operational and revenues increase.
The Board has approved an operating budget for fiscal year 2022 which will be CEA's first full
year of operation with revenues projected at $53,573,000 and expenses projected at $51,547,500
with a net result of operations projected at $2,025,500. The budget provides funding for a full year
of power supply, on-going regulatory compliance requirements and professional and legal
services required to support operations. Assumptions used to develop the proposed budget were:
• Revenue based on 7% opt out rate
Power supply costs based on actual executed contracts and April forward price curves
• Consulting services based on approved contracts
• Reserves to achieve minimum 5% of FY 2022 revenues
7
CLEAN ENERGY ALLIANCE
MANAGEMENT'S DISCUSSION AND ANALYSIS
YEAR ENDED JUNE 30, 2021
Sufficient revenues are projected to cover costs based on the current assumptions. Energy
forward price curves have been increasing, driven by concerns about summer reliability, impacts
of the Texas winter events on gas prices, low California water reservoir levels and Diablo Canyon
Unit 2 concerns. Should this trend continue, CEA rates would need to be adjusted to reflect the
increased costs. Staff continues to monitor the market and anticipates bringing forward a market
update in late fall, along with an update on SDG&E 2022 rates proceedings.
One of the goals of CEA is to expand and offer its community choice energy service to eligible
communities within San Diego Gas & Electric territory. The cities of Escondido and San Marcos
have been evaluating options related to bringing community choice energy to residents and
businesses with the two cities and the results of those efforts identified joining CEA was the best
option for both cities. As part of CEA's evaluation of Escondido and San Marcos joining, CEA
received historical electric usage data from SDG&E for Escondido and San Marcos loads. CEA's
technical team analyzed the usage, prepared a financial pro forma utilizing CEA's revenue and
expense assumptions and an assessment report. The assessment report concluded that CEA
expansion into both cities would have a positive financial impact on CEA.
Using a base assumption of enrolling customers in April 2023, which was determined to be the
optimal enrollment date, and serving 90% of eligible customers, the assessment concluded that
with the additions of Escondido and San Marcos, CEA's net operating margin would increase by
approximately 85% and 52%, respectively, beginning in fiscal year ended 2024 which would be
the first full fiscal·year of service.
CEA currently has 58,859 customer accounts. The addition of Escondido would add potentially
another 56,348 customer accounts and the addition of San Marcos would add potentially another
36,820 accounts for a total of 93, 168 additional accounts, or a combined 158% increase in
accounts as compared to the number of CEA's existing accounts.
Accommodating this expansion will require careful consideration of resource availability,
particularly for RA and long-term renewable energy products. When Escondido and San Marcos
customers transition to CEA service, SDG&E should have surplus RA and long-term renewable
energy supply. CEA intends to work closely with SDG&E to acquire the surplus supply SDG&E
holds to ensure CEA can meet its new obligations.
Based on the results of the assessments, the CEA Board approved the addition of Escondido at
its November 18, 2021, special meeting and is expected to approve the addition of San Marcos
at its December 17, 2021 , special meeting.
REQUEST FOR INFORMATION
This financial report is designed to provide CEA's board members, stakeholders, customers,
and creditors with a general overview of the CEA's finances and to demonstrate CEA's
accountability for the funds under its stewardship. If you have any questions about this report or
have requests for additional financial information please contact CEA at 1200 Carlsbad Village
Dr, Carlsbad, California 92008.
8
CLEAN ENERGY ALLIANCE
STATEMENT OF NET POSITION
JUNE 30, 2021
Assets:
Current Assets:
Cash and cash equivalents
Accounts receivable
Deposits
Total Current Assets
Total Assets
Liabilities:
Current Liabilities:
Accounts payable
Accrued liabilities
Accrued interest
Deposits payable
Due to member agencies
Short-term debt
Total Current Liabilities
Total Liabilities
Net Position:
Unrestricted
Total Net Position
The notes to financial statements are an integral part of this statement.
9
$ 710,368
7,196,176
1,232,000
9,138,544
9,138,544
6,242,455
12,923
11 ,563
75,000
504,017
5,000,000
11 ,845,958
11,845,958
{2,707,414)
$ {2,707,414)
CLEAN ENERGY ALLIANCE
STATEMENT OF REVENUES, EXPENSES,
AND CHANGES IN NET POSITION
FOR THE YEAR ENDED JUNE 30, 2021
Operating Revenues:
Sales and service charges
Total Operating Revenues
Operating Expenses:
Cost of sales and services
Professional services
General and administrative
Total Operating Expenses
Operating (Loss)
Nonoperating Expenses:
Interest expense
Total Nonoperating Expenses
Change in Net Position
Net Position -Beginning
Net Position -Ending
The notes to financial statements are an integral part of this statement.
10
$ 7,309,663
7,309,663
8,388,484
967,937
300,376
9,656,797
(2,347,134)
(81 ,596)
{81!596}
(2,428,730)
(278,684)
$ {2,707,414)
CLEAN ENERGY ALLIANCE
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2021
Cash Flows from Operating Activities:
Cash received from customers and users
Payments to suppliers and service providers
Net Cash (Used for) Operating Activities
Cash Flows from Noncapital Financing Activities:
Proceeds from short-term borrowings
Interest paid on short-term borrowings
Net Cash Provided by Noncapital Financing Activities
Net Increase in Cash and Cash Equivalents
Cash and Cash Equivalents, July 1
Cash and Cash Equivalents, June 30
Reconciliation of Operating (Loss) to Net Cash (Used for)
Operating Activites:
Operating (Loss)
Adjustments to Reconcile Operating (Loss) to
Net Cash (Used for) Operating Activities:
(Increase) in accounts receivable
(Increase) in deposits
Increase in accounts payable
Increase in accrued liabilities
Total Adjustments
Net Cash (Used for) Operating Activities
The notes to financial statements are an integral part of this statement.
11
$ 188,487
{4,611,616)
(4,423,129)
5,000,000
{70,033)
4,929,967
506,838
203,530
$ 710,368
$ {2,347,134)
(7,196,176)
(1,057,000)
6,164,258
12,923
{2,075,995)
$ {4,423,129)
CLEAN ENERGY ALLIANCE
NOTES TO FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2021
Note 1: Summary of Significant Accounting Policies
a. Reporting Entity
Clean Energy Alliance, ("CEA"), is a joint exercise of powers agency organized under the
laws of the State of California by agreements dated November 4, 2019, and entered into
by the cities of Carlsbad, Del Mar, and Solana Beach, California. CEA was formed to
operate a Community Choice Energy program to provide alternative energy resources
within those three cities. CEA's powers are exercised through a Board of Directors
(the "Board"), which is the governing body of CEA. The Board is responsible for the
legislative and executive control of CEA. The governmental reporting entity consists of
CEA, which reports no component units.
b. Basis of Presentation
CEA's financial statements are prepared in accordance with accounting principles
generally accepted in the U.S (GAAP). The Governmental Accounting Standards Board
(GASB) is responsible for establishing GMP for state and local governments through its
pronouncements (Statements and Interpretations).
c. Basis of Accounting/Measurement Focus
The basic financial statements include a Statement of Net Position, a Statement of
Revenues, Expenses and Changes in Fund Net Position, and a Statement of Cash Flows.
The basic financial statements are accounted for using the "economic resources"
measurement focus and the accrual basis of accounting. Accordingly, all assets, deferred
outflows of resources, liabilities (whether current or noncurrent), and deferred inflows of
resources are included on the Statement of Net Position. The Statement of Revenues,
Expenses and Changes in Fund Net Position presents increases (revenues) and
decreases (expenses) in total net position. Under the accrual basis of accounting, revenues
are recognized in the period in which they are earned while expenses are recognized in
the period in which the liability is incurred, regardless of the timing of related cash flows.
The basic financial statements distinguish operating revenues and expenses from
nonoperating items. Operating revenues and expenses generally result from providing
services in connection with CEA's principal ongoing operations. The principal operating
revenues of CEA are charges to customers for energy sales. Operating expenses include
the cost of sales and services and administrative expenses. All revenues and expenses
not meeting this definition are reported as nonoperating revenues and expenses.
d. Net Position Flow Assumption
Sometimes CEA will fund outlays for a particular purpose from both restricted
(e.g., restricted bond or grant proceeds) and unrestricted resources. In order to calculate
the amounts to report as restricted net position and unrestricted net position in the financial
statements, a flow assumption must be made about the order in which the resources are
considered to be applied. It is CEA's policy to consider restricted net position to have been
depleted before unrestricted net position is applied.
12
CLEAN ENERGY ALLIANCE
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE FISCAL YEAR ENDED JUNE 30, 2021
Note 1:
Note 2:
Note 3:
Note 4:
Summary of Significant Accounting Policies (Continued)
e. Implementation of GASB Statement No. 98
CEA early adopted GASS Statement No. 98, the Annual Comprehensive Financial Report,
which establishes the term annual comprehensive financial report and its acronym ACFR.
The new term and acronym replace instances of comprehensive annual financial report
and its acronym in generally accepted accounting principles for state and local
governments. This statement was developed in response to concerns raised by
stakeholders that the common pronunciation of the acronym for comprehensive annual
financial report sounds like a profoundly objectionable racial slur. This Statement's
introduction of the new term is founded on a commitment to promoting inclusiveness.
Stewardship, Accountability, and Compliance
At June 30, 2021, CEA reported a deficit net position of $2,707,414. It is not unusual for
organizations in early years of operation to report a deficit. The reason for the deficit is that
CEA's revenue stream has not exceeded operating expenses associated with continuing
startup costs. This deficit is expected to be eliminated in future years as resources are obtained
and sales operations increase.
Cash and Cash Equivalents
At June 30, 2021, the reported amount of CEA's deposits was $710,368, which equaled the
bank balance. Of the bank balance, $250,000 was covered by federal depository insurance
and $460,368 was covered by collateral held in the pledging bank's trust department in
accordance with California Government Code.
Deposits
The CEA deposited $147,000 with the California Public Utilities Commission (CPUC) for the
purpose of covering costs borne by San Diego Gas & Electric (SDG&E) in the event of a mass
involuntary return of CEA customers to SDG&E, such as the decertification of CEA or a
community choice aggregation failure.
The CEA deposited $500,000 with the California Independent System Operator Corporation
(CAISO) for the purpose of applying to become a Candidate Congestion Revenue Rights
(CRR) Holder. CRR Holders are eligible to participate in the CRR Allocation process which
offset congestion charges for the scheduled load serving obligation of the CEA.
The CEA deposited $585,000 with SDG&E pursuant to the CEA's Resource Adequacy
Agreement with SDG&E for purposes of collateral in accordance with the agreement.
The total amount of deposits held with other agencies at June 30, 2021 is $1,232,000.
13
CLEAN ENERGY ALLIANCE
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE FISCAL YEAR ENDED JUNE 30, 2021
Note 5:
Note 6:
Related Party Transactions
CEA received funding from the cities of Carlsbad, Del Mar, and Solana Beach for the initial
startup costs associated with commencing operations. These amounts are refundable back to
the cities within three years after operating revenues commence. These advances and services
are reported as Due to Member Agencies in the basic financial statements. Amounts due to
each of the cities are as follows:
Member Cash Advances
City of Carlsbad $ 150,000
City of Del Mar 150,000
City of Solana Beach 150,000
Total $ 450,000
Short-term Debt
Services
Pro-.,ded
$ 36,572
1,893
15,552
$ 54,017
Total
$ 186,572
151,893
165,552
$ 504,017
On February 3, 2021, CEA entered into an agreement with JP Morgan Chase Bank for a
$6 million 3.7 percent interest rate line of credit. Of the funds borrowed during the year,
$5 million was used to finance general operations. At June 30, 2021, the CEA has $1,000,000
in available, but unused line of credit.
Beginning Balance $
Additions
Reductions
5,000,000
Ending Balance $ 5,000,000 ---===----
14
STATISTICAL SECTION
15
Statistical Section
This part of CEA 's ACFR presents detailed information as a context for understanding what the
information in the accompanying financial statements and notes to the basic financial statements says
about CEA 's overall financial health.
Contents
Financial Trends
These schedules contain trend information to help the reader understand how CEA 's financial
performance and we/I-being have changed over time.
* Net Position by Component
* Operating Information
Revenue Capacity
These schedules contain information to help the reader assess the factors affecting CEA 's ability to
generate revenue
* Principal Rate Payers
Debt Capacity
These schedules present information to help the reader assess the affordability of CEA 's current
levels of outstanding debt and CEA 's ability to issue additional debt in the future.
* Ratios of Outstanding Debt by Type
Demographic and Economic Information
These schedules offer demographic and economic indicators to help the reader understand the
environment within which CEA 's financial activities take place and to help make comparisons over
time and with other governments.
* Demographic and Economic Statistics
* Major Employers-San Diego County
Operating Information
These schedules contain information about CEA 's operations and resources to help the reader
understand how CEA 's financial information relates to the services CEA provides and the activities
* Two-Year Summary of Retail Sales and Usage by Type of Customer
16
CLEAN ENERGY ALLIANCE
Net Position by Component
Last Two Fiscal Years*
(Accrual Basis of Accounting)
Fiscal Year __ 2_0_2_0_**_""'"'" 2021 ***
Business-type activities
Unrestricted (278,684) (2,707,414)
*
**
***
Total Business-type activities net
position $ (278,684) $ (2,707,414)
2020 was the first year of operations of CEA. More years will be added to this schedule as
they become available.
Inception (11/4/2019 -6/30/2020)
Delivery of electrical service to customers began May 1, 2021.
Source: Financial Statements
17
CLEAN ENERGY ALLIANCE
Operating Information
Two-Year Summary of Changes in Net Position*
(Accrual Basis of Accounting)
2020**
Operating Revenues
Sales and service charges $
Operating Expenses
Cost of sales and services
Professional services 156,265
General and administrative 122,419
Total Operating Expenses 278,684
Operating Activities (278,684)
Nonoperating Activities
Interest expense
Total Nonoperating Activities
Change in Net Position $ (278,684)
2021***
$ 7,309,663
8,388,484
967,937
300,376
9,656,797
(2,347,134)
(81,596)
(81,596)
$ (2,428,730)
* 2020 was the first year of operations of CEA. More years will be added to this
•• 11 /04/19-06/30/20
*** Delivery of electrical service to customers began May 1, 2021
Source: Financial Statements
18
Ratepayer's Rate Class'
Commercial AL-TOU-S
Commercial AL-TOU-S
Commercial AL-TOU-2-S
Commercial AL-TOU-2-P
Commercial AL-TOU-2-S
Commercial AL-TOU-S
Commercial TOU-A-S
Commercial AL-TOU-S
Commercial AL-TOU-S
Commercial AL-TOU-S
Total all Ratepayers3
CLEAN ENERGY ALLIANCE
Principal Rate Payers
Fiscal Year ended June 30 (unaudited)
(in dollars)
2021
Percentage of
Total Retail
Rank Retail Sales• Electric Sales
1 $ 61,248 1.6%
2 38,242 1.0%
3 35,863 0.9%
4 34,074 0.9%
5 32,711 0.8%
6 30,515 0.8%
7 28,988 0.7%
8 28,658 0.7%
9 28,440 0.7%
10 27,850 0.7%
$ 346,589 9.0%
$ 3,865,824
(1) To preserve confidentiality, individual ratepayer names are not disclosed
(2) Retail sales are before unbilled revenue
(3) CEA began serving customers in mid-May 2021
for billing rate information go to: www.thecleanenergyalliance.org/billing-rates/
19
Percentage of
KWh Total kWh
650,778 1.50%
422,759 0.98%
380,109 0.88%
368,184 0.85%
356,862 0.82%
298,106 0.69%
283,212 0.65%
277,612 0.64%
288,960 0.67%
285,632 0.66%
3,612,214 8.35%
43,261,773
Fiscal
Year
2020
2021
Notes:
$
CLEAN ENERGY ALLIANCE
Ratios of Outstanding Debt by Type
Last Two Fiscal Years*
(dollars in thousands, except per capita)
Business-type
Activities
Short-Term Loans
Percentage
of Personal
Income a
0.00%
0.00%
Per
Capita a
Details regarding the CEA's outstanding debt can be found in the
notes to the financial statements.
* 2020 was the first year of operations of CEA. More years will be added to this
schedule as they become available
a See Demographic and Economic Statistics schedule for
personal income and poopulation data
20
Calendar
Year
2020
2021
Note:
Source:
Carlsbad
114,664
115,501
CLEAN ENERGY ALLIANCE
Demographic and Economic Statistics
Last Two Calendar Years
Poeulatlon
Del Mar Solana Beach Total
4,271 13,872 132,807 $
4,258 13,827 133,586
Personal Per
Income Capita
(thousands Personal Unemployment
of dollarsi Income Rate
8,080,642 $ 60,845 3.4%
8,852,210 66,266 8.0%
Certain economic indicators such as unemployment rate and personal income are not calculated separately for CEA.
Therefore, CEA has chosen to use the County of San Diego data, which is representative of the conditions and experiences
of CEA
Population -State of California Department of Finance
Per Capita Personal Income and Unemployment Rate -U.S. Bureau of Economic Analysis
21
CLEAN ENERGY ALLIANCE
25 MAJOR EMPLOYERS • SAN DIEGO COUNTY
AS OF 2020
Employer Category
Barona Resort & Casino 1
Employee's Association SDG&E 1
General Dynamics Nassco 1
lllumina Inc 1
Kaiser Permanente Zion Med C 1
Merchants Building Maintenanc 1
Palomar Medical Ctr Downtown 1
Palomar Pomerodo Health Reh. 1
Rady's Children's Hospital 1
San Diego County Sheriff 1
Scripps Mercy Hospital 1
Scripps Research Institute 1
Sea World-San Diego 1
Sharp Mary Birch Hospital 1
Sharp Memorial Hospital 1
Sony Electronics 1
US Navy Med Ctr-OrthoPedics 1
Kaiser Permanente Vandever l'v 2
San Diego Community College 2
UC San Diego Health 2
32nd St Naval Station 3
Mees Mcrd 3
UCSD 3
University of California 3
Univesity-Calfornia Sn Diego 3
Source:
Business category
Casinos
Associations
Ship Builders & Repairers (Mfrs)
Biotechnology Products & Services
Health Services
Janitor Service
Hospitals
Rehabilitation Services
Hospitals
Police Departments
Hospitals
Laboratories-Research & Development
Amusement & Theme Parks
Hospitals
Hospitals
Electronic Equipment & Supplies-Retail
Clinics
Physicians & Surgeons
Junior-Community College-Tech Institutes
Hospitals
Federal Government-National Security
Military Bases
College & University Placement Svc
University-College DepUF acil ity/Office
University-College DepUF acil ity/Office
State of California-Employee Development Department-Major Employers in San Diego for 2020
Categories
1 1,000-4,999 Employees
2 5,000-9,999 Employees
3 10,000+ Employees
Employer information specific to the juristications in CEA are not readily available*
22
CLEAN ENERGY ALLIANCE
Two-Year Summary of Retail Sales and Usage (kWh) by Type of Customer
Fiscal Year ended June 30 (unaudited)
2021** 2020 *
Retail Sales*** Usage (kWh) Retail Sales*** Usage (kWh) Type of Customer
Residential
Commercial
Agricultural
$ 1,251,226
2,611,655
2,622
321
15,186,669 $
28,023,204
46,028
5,872 Street Lighting
Total $ 3,865,824 43,261,773 $
* 11 /04/19-06/30/20
** Delivery of electrical service to customers began May 1, 2021
*** Retail sales are before unbilled revenue
Source: Invoice Summary Report
23
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