HomeMy WebLinkAbout2021-01-21; Clean Energy Alliance JPA; ; Clean Energy Alliance Treasurer's Report111•11w-
CLEAN ENERGY ALLIANCE
Staff Report
DATE: January 21, 2021
TO: Clean Energy Alliance Board of Directors
FROM: Marie Marron Berkuti, Interim Treasurer
ITEM 1: Clean Energy Alliance Treasurer's Report
RECOMMENDATION
Receive and File Clean Energy Alliance (CEA) Interim Treasurer's Report for December 2020 and
Annual Financial Report from the period of inception (November 4, 2019) through June 30,
2020.
BACKGROUND AND DISCUSSION
This report provides the Board with the following financial information through December 31,
2020:
•Statement of Financial Position — Reports assets, liabilities, and financial position of
the CEA as of December 31, 2020
•Statement of Revenues, Expenses and Changes in Net Position for the six months
ended December 31, 2020
•Budget to Actuals Comparison Schedule — Reports actual revenues and expenditures
compared to the amended budget as of December 31, 2020
•Budget Reconciliation to Statement of Revenues, Expenses and Changes in Net
Position
•List of Payments Issued — Reports payments issued for December 2020
As of December 31, 2020, liabilities represent invoices received for services, but not yet paid.
The noncurrent accounts payable are amounts due to the cities of Carlsbad, Del Mar and Solana
Beach for the $150,000 advance made by each member agency for start-up costs and services
provided to CEA for the period December 2019 to June 2020. These invoices are scheduled to be
paid three years from the time CEA is operational.
The CEA's annual audit for the fiscal year ended June 30, 2020 has been completed and is
included as part of the Treasurer's Report.
DECEMBER 31 2020 REPORTS
2
STATEMENT OF FINANCIAL POSITION
CLEAN ENERGY ALLIANCE
STATEMENT OF NET POSITION
As of December 31, 2020
ASSETS
Current Assets
Cash Operating Account
Total Current Assets
$ 101,469.86
101,469.86
Noncurrent Assets
Deposits
CCA Bond 247,000.00
Cash Collateral Deposits-SDG&E 240,000.00
Total Noncurrent Assets 487,000.00
Total Assets 588,469.86
LIABILITIES
Current Liabilities
Accounts Payable
Accrued Liabilities
Refundable Deposits
Total Current Liabilities
Noncurrent Liabilities
Due to Member Agencies
Due to City of Carlsbad
Due to City of Del Mar
Due to City of Solana Beach
Total Due to Member Agencies
Calpine Promissory Note
Total Noncurrent Liabilities
Total Liabilities
70,397.35
14,934.98
75,000.00
160,332.33
186,571.79
151,892.97
165,552.69
504,017.45
582,843.71
1,086,861.16
1,247,193.49
NET POSITION
Unrestricted (deficit) (658,723.63)
Total Net Position $ (658,723.63)
3
STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION
CLEAN ENERGY ALLIANCE
STATEMENT OF REVENUES, EXPENSES
AND CHANGES IN NET POSITION
For the six months ended December 31, 2020
Operating Revenues
Operating Expenses
Professional Services 378,850.26
Bank Fees 985.00
Website Maintenance 204.00
Total Operating Expenses 380,039.26
Operating Income (Loss) (380,039.26)
Change in Net Position (380,039.26)
Net Position at beginning of period (278,684.37)
Net Position at end of period $ (658,723.63)
BUDGET TO ACTUALS COMPARISON SCHEDULE
At its August 20, 2020 board meeting, the CEA Board approved a Promissory Note with Ca'pine
Energy Solutions for $400,000 to provide funding for the FY 2020/21 budget through February
2021. A second Promissory Note with Calpine for $250,000 was approved by the CEA Board at
its December 19, 2020 board meeting to provide funding for the Financial Security Requirement
and the cash collateral deposits required as part of the resource adequacy procurements. Total
drawdowns against the Promissory Notes as of December 2020 equal $582,843.71. Staff will be
presenting at today's Board meeting a proposed credit solution with JPMorgan.
At its June 18, 2020 board meeting, the CEA Board adopted the Fiscal Year (FY) 2020/21 budget
approving $4,006,500 in total operating expenses and uses of funds. The CEA Board approved
an amendment to the budget at its November 19, 2020 board meeting to cover the Financial
Security Requirement amount of $147,000. At its December 17, 2020 board meeting, the CEA
Board approved an amendment to the budget totaling $9,459,000 in expenses and uses of funds
to reflect resource adequacy contracts executed and costs associated with CEA beginning to
provide service in May and June 2021. These budget amendments brought the amended
adopted budget total to $13,612,500.
Of its approved $13,612,500.00 amended budgeted operating expenses and uses of funds,
$767,039.26 has been expended, leaving $12,845,460.74
CLEAN ENERGY ALLIANCE
BUDGET TO ACTUALS COMPARISON SCHEDULE
For the six months ended December 31, 2020
Operating Revenues
AMENDED
BUDGET ACTUALS VARIANCE
Energy Sales $ 8,000,000.00 $ - $ 8,000,000.00
Total Operating Revenue 8,000,000.00
8,000,000.00
Operating Expenses
Power Supply 8,000,000.00
8,000,000.00
Professional Services
Administrative 120,000.00 62,412.43 57,587.57
Legal 320,000.00 145,095.41 174,904.59
Technical 198,200.00 124,302.25 73,897.75
Data Manager 130,200.00
130,200.00
Marketing 102,238.00 38,240.17 63,997.83
Audit 40,000.00 7,200.00 32,800.00
Other 19,562.00 1,600.00 17,962.00
Total Professional Services 930,200.00 378,850.26 551,349.74
Print/Mail Services 132,000.00 - 132,000.00
SDG&E Service Fees & Deposit 83,800.00 - 83,800.00
Membership Dues 15,000.00 - 15,000.00
Advertis ing 10,000.00 - 10,000.00
Website Maintenance 2,500.00 204.00 2,296.00
Bank Fees
985.00 (985.00)
Total Operating Expenses 9,173,500.00 380,039.26 8,793,460.74
Operating Income (Loss) (1,173,500.00) (380,039.26) (793,460.74)
Non-Operating Expenses
Interest Expense 10,000.00
10,000.00
Other Sources and Uses
Sources
Credit Solution 5,000,000.00 - 5,000,000.00
Ca Ipine Promissory Note 650,000.00 582,843.71 67,156.29
Total Sources 5,650,000.00 582,843.71 5,067,156.29
Uses
CCA Bond(Financial Security Reqmt-FSR) 47,000.00 147,000.00 (100,000.00)
CAISO Deposit 500,000.00
500,000.00
Lock Box Reserves/Cash Flow 2,500,000.00
2,500,000.00
Calpine Promissory Note Repayment 650,000.00 - 650,000.00
Collateral Deposits-SDG&E 585,000.00 240,000.00 345,000.00
Financial Security Requirement 147,000.00 - 147,000.00
Total Uses 4,429,000.00 387,000.00 4,042,000.00
Total Sources and Uses 1,221,000.00 195,843.71 1,025,156.29
Net Increase (Decrease) in Available Fund Balance $ 37,500.00 $ (184,195.55) $ 221,695.55
Total Operating and Non-Operating Expenses and
Uses of Funds $ 13,612,500.00 $ 767,039.26 $ 12,845,460.74
4
5
BUDGET RECONCILIATION TO STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET
POSITION
CLEAN ENERGY ALLIANCE
BUDGET RECONCILIATION TO STATEMENT OF
REVENUES, EXPENSES, AND CHANGES IN NET POSITION
For the six months ended December 31, 2020
Net Increase (Decrease) in Available Fund Balance
per Budgetary Comparison Schedule
Adjustments needed to reconcile to the changes
in Net Position in the Statement of Revenues,
Expenses, and Changes in Net Position
Subtract Advances from Calpine Promissory Note
Add back:
Collateral Deposits-SDG&E
CCA Bond(Financial Security Reqmt-FSR)
Change in Net Position
LIST OF PAYMENTS ISSUED
The report below provides the detail of payments issued by CEA for December 2020. All
payments were within approved budget.
Clean Energy Alliance
List of Payments Issued December 2020
Date Via Vendor Description Amount
12/09/20 Tra nsfer City River Bank Financial Security Reqmt (FSR)-Line of Credit $ 147,000.00
12/09/20 Tra nsfer City River Bank FSR Bank Fee 985.00
12/18/20 ACH Bayshore Consulting Group, Inc Oct CEO Services 6,481.18
12/18/20 AcH Bayshore Consulting Group, Inc Nov CEO Services 10,561.25
12/18/20 ACH Richards, Watson & Gershon Oct 2020 General Counsel Svcs 3,551.00
12/18/20 ACH Tosdal APC Nov 2020 Regulatory Counsel Svcs 13,186.24
12/18/20 ACF1 Hall Energy Law PC Nov 2020 Energy Procurement Counsel Svcs 2,796.50
12/18/20 ACH Pacific Energy Advisors, Inc Nov 2020 Technical Consulting Svcs 23,600.00
12/18/20 ACH Keyes & Fox LLP Nov ERRA Forecast Counsel Services 10,915.25
12/18/20 ACH Tripepi, Smith & Associates, Inc. Nov 2020 Retainer 9,248.07
12/23/20 ACH Tullett Prebon Americas Corp 11/09/20 Brokers Fee (Exelon Generation Co) 1,600.00
Total December Payments $ 229,924.49
$ (184,195.55)
(582,843.71)
240,000.00
147,000.00
$ (380,039.26)
6
ANNUAL AUDIT FOR FISCAL YEAR ENDED (FYE) JUNE 30, 2020
The CEA's Annual Financial Report from the period of inception (November 4, 2019) through June
30, 2020 (Attachment A) has been completed.
Lance, Soil & 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, 2020, 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 Financial Report from the period of inception (November 4,
2019) through June 30, 2020
Attachment B - The Statement of Auditing Standards No. 115, Communication of Internal Control Related
Matters Identified in an Audit
ATTACHMENT A
CLEAN ENERGY ALLIANCE
CARLSBAD, CALIFORNIA
ANNUAL FINANCIAL REPORT
FOR THE PERIOD OF INCEPTION (NOVEMBER 4, 2019) THROUGH JUNE 30, 2020
Prepared by the Interim Treasurer/Chief Financial Officer
CLEAN ENERGY ALLIANCE
ANNUAL FINANCIAL REPORT
FOR THE PERIOD OF INCEPTION (NOVEMBER 4, 2019) THROUGH JUNE 30, 2020
TABLE OF CONTENTS
INTRODUCTORY SECTION
Letter of Transmittal
Directory of Officials and Staff xii
FINANCIAL SECTION
Independent Auditors' Report 1
Basic Financial Statements:
Statement of Net Position 3
Statement of Revenues, Expenses, and Changes in Net Position 4
Statement of Cash Flows 5
Notes to Financial Statements 6
INTRODUCTORY SECTION
41110-
CLEAN ENERGY ALLIANCE
January 11, 2021
To the Clean Energy Alliance Board of Directors (Board) and Residents/Businesses within CEA territory:
We are pleased to submit the Comprehensive Annual Financial Report (Report) of Clean Energy Alliance
(CEA) for the fiscal year ended June 30, 2020.
The Interim Treasurer/Chief Financial Officer prepared the data in this Report. Lance, Soli & Lunghard,
LLP (LSL) independently audited the financial statements and related notes. Nonetheless, CEA bears the
responsibility for the accuracy of all data presented in this Report. We, CEA's Interim Chief Executive
Officer and Interim Treasurer/Chief Financial Officer, assume the responsibility for the Report's
completeness and fairness of presentation including all disclosures. We affirm that, to the best of our
knowledge and belief, information in the Report provides an accurate and fair representation of CEA's
financial position and the status of its operations during the fiscal year ended June 30, 2020. We believe
that this Report contains all information and disclosures needed to clearly understand CEA's Fiscal Year
2020 financial activities.
LSL has issued an unmodified opinion on CEA's financial statements for the fiscal year ended
June 30, 2020. The independent auditors' report is located at the front of the financial section of this
Report.
A Management Discussion and Analysis (MD&A) is normally included as part of the Report. The MD&A
provides "financial highlights" and interprets the financial reports by analyzing trends and by explaining
changes, fluctuations, and variances in the financial data by comparing current fiscal year financial
information to the previous year's financial information. This is the first fiscal year for CEA; therefore, a
MD&A is not included in the Report for the fiscal year ended June 30, 2020.
BACKGROUND
California Assembly Bill 117 allows local governments to form Community Choice Aggregations (CCAs),
which are also referred to as Community Choice Energy (CCE) programs, that offer an alternative electric
power option to constituents currently served electric power by investor owned utilities (IOUs). Under
the CCE model, local governments purchase and manage their community's electric power supply by
sourcing power from a preferred mix of traditional and renewable generation sources, while the
incumbent IOU continues to provide distribution service. CCEs face the same requirements for renewable
energy purchases as the incumbent IOUs and public utilities; however, many CCE programs can offer
power content that has a greater share of renewable energy compared with the incumbent utility and at
lower retail rates.
1200 Carlsbad Village Drive I Carlsbad, CA 92008 I 760-434-2808
thecleanenergyalliance.org
SOURCE
CCE Operator
buys and builds
cleaner energy
supplies
DELIVERY
Investor Owned
Utility
delivers energy,
repairs lines
CUSTOMER
You
choice, cleaner
energy, local
control and
competitive rates
Mann County was the first to create a California CCE utility in 2008. Today there are 19 CCE programs
operating throughout California. In San Diego County, Solana Beach began using this model in 2018 with
Solana Energy Alliance (SEA), and other cities and the county are currently exploring CCE formations. The
cities of Chula Vista, Encinitas, Imperial Beach, La Mesa and San Diego recently formed a CCE named
San Diego Community Power (SDCP).
GOVERNMENT PROFILE
A feasibly study was completed in April 2019 that evaluated the financial feasibility of a potential CCE, and
based on this study, the cities of Carlsbad, Del Mar, and Solana Beach partnered in November 2019 to
form CEA. CEA is organized under the Joint Powers Act (California Government Code 6500 et seq). By
law, as a joint powers authority (JPA), CEA is a separate legal entity from its member agencies. Its budget
is separate from the member cities' general funds. In addition, CEA is funded by program revenues and
reserves.
(City of
Carlsbad CITY OF
DEL MAK
Senate Bill 350, adopted in 2015, mandates a reduction in greenhouse gas emissions to 40 percent below
1990 levels by 2030 and to 80 percent below 1990 levels by 2050. In 2018, the State Legislature adopted
SB 100, which directs the Renewable Portfolio Standard to be increased to 60% renewable by 2030 and
establishes a policy for eligible renewable energy resources and zero-carbon resources to supply
100 percent of electricity retail sales to California end-use customers by 2045. Each city has adopted a
Climate Action Plan to help the city meet the state goals for reducing greenhouse gasses and a CCA is
expected to help the cities meet those goals.
II
Among other goals, the agreement seeks to meet the following objectives:
•Default energy product from a minimum 50% renewable sources
•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 49,800
Commercial & Agriculture 8,000
Street Lighting & Traffic 200
58,000
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 first year of operations reported a deficit net position of $278,684, as explained in Note 2 to
the Financial Statements, the reason for the deficit is that CEA has not established a revenue stream by
selling energy to customers but has incurred operating expenses associated with startup costs. These
startup costs were funded by advances made by the founding members. From a budgetary comparison,
the budget to actual variance was a net positive variance of $71,316 as shown in the schedule on the
following page.
CLEAN ENERGY ALLIANCE
BUDGETARY COMPARISON SCHEDULE
November 4, 2019 though June 30, 2020
Operating Expenses
Professional Services
BUDGET ,ACTUALS VARIANCE
Administrative $ 50,000 $ 95,874 $ (45,874)
Legal 130,000 77,796 52,204
Technical 115,000 78,469 36,531
Total Professional Services 295,000 252,139 42,861
Membership Dues 1,500 26,500 (25,000)
Graphic Design Services 6,500
6,500
Bank Fees - 45 (45)
Total Operating Expenses 303,000 278,684 24,316
Other Sources and Uses
Sources
Advances from Member Agencies 450,000 450,000
Uses
CCA Bond 147,000 100,000 47,000
Total Sources and Uses 303,000 350,000 (47,000)
Net Increase (Decrease) in Available Fund Balance $ $ 71,316 $ (71,316)
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 absolute, 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, 2020, 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, 2020, 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
iv
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:
•Travel and Expense Reimbursement Policy
•Protection of Confidential Information Policy
•Privacy and Customer Confidentiality Policy
•Advanced Metering Infrastructure Data Security and Privacy Policy
•Collections Policy
IMPLEMENTATION TIMELINE
To meet the goal of a 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 three general categories:
•Administrative
•Implementation Plan Related
•Regulatory Compliance
Administrative tasks included actions specific to the operations of CEA, such as appointment of interim
staff and adoption of policies and procedures. Implementation Plan Related tasks included actions
specific to meeting the requirements established by California Public Utilities Commission (CPUC)
Resolution E-4907 for the Clean Energy Alliance to begin serving customers in 2021. They included
preparation, approval and filing of the Implementation Plan, creating and submitting a draft customer
notice, filing the financial security (CCA bond) requirement and execution of the SDG&E Service
Agreement. Regulatory Compliance tasks included actions such as preparation and filing of an initial
Renewable Portfolio Standards Procurement Plan and participation in the year-ahead Resource Adequacy
process.
By the end of the fiscal year, all actions listed on the timeline were successfully completed as shown in
the schedule on the following page:
Clean Energy Alliance
Timeline of Implementation Related Action Items
Date
Timing Completed Description Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20
12/19/19 12/19/19 Appoint Interim Executive Director
12/19/19
12/19/19 &
12/23/19
Approve & File Implementation Plan & Statement of
Intent
1/16/20 1/16/20 Direction on Banking and Credit Solutions
1/16/20 1/16/20
Authorize RFP for Technical Consultant to Assist with
Regulatory Filings
1/16/20 1/16/20 Authorize RFP for Data Manager/Call Center
1/16/20 1/16/20 CEA Public Outreach and Marketing Kickoff
1/20/20 1/20/20 Issue RFP for Technical Consultant & Data Manager.
2/20/20 2/20/20 Select Financial Institution & Approve Financing Plan
2/20/20 2/20/20
Select Technical Consultant to Assist with Regulatory .
Filings
2/20/20 2/20/20 Select Data Manager
2/20/20 2/20/20 Staff Develop & Submit Draft Customer Notice to CPUC
2/20/20 2/20/20 Develop Renewable Portfolio Standards Procurement Plan
2/20/20 2/20/20 Authorize Execution of Service Agreement with SDG&E
4/20/20 4/23/20 Post CCA Bond with CPUC
4/20/20 4/23/20 Execute Service Agreement with SDG&E & Submit to CPUC
4/20/20 4/23/20 Year-Ahead Resource Adequacy Forecast Filing
6/80/20 6/30/20 Initial Resource Adequacy Solicitation Initiated
6/30/20 6/30/20 File Updated Renewable Portfolio Standards Procurment Plan
Key:
Administrative
Implementation Plan Related
Regulatory Compliance
Implementation Plan
Public Utilities Code Section 366.2(c)(3) establishes the requirements related to the filing of an
Implementation Plan (Plan) for a CCA program. CEA submitted its Plan by the due date of January 1, 2020
which made CEA eligible to serve customers in 2021. This regulatory compliance document details CEA's
complete organizational and operational structure including setting operational policies and its process
of hiring key vendors and staff; goals such as renewable energy standards, energy supply mix and rate
discount targets; and addresses universal access, reliability and state law compliance
CEA achieved a significant milestone on March 16, 2020 with the CPUC's certification of the Plan.
ELECTRICAL USAGE AND COVID-19
United States economic growth was continuing with solid growth in business investment and spending
until March 2020 when the growth was curtailed by the COVID-19 pandemic. In response to the outbreak
and spread of COVID-19, in March 2020, California Governor Gavin Newsom issued stay at home orders
and shut down non-essential businesses. In January 2020, California expected a $5.6 billion surplus in
the state budget by the time the fiscal year ended on June 30. In May, however, the Department of
Finance changed its projection, saying that the state would instead have a deficit of $54.3 billion. Some of
this shortfall was caused by expenses for COVID-19 response - an unanticipated $7.1 billion for health
programs and an additional $6 billion for other types of responses - but most was caused by the
expectation that tax revenue—personal income, corporate, and sales—will be one-quarter lower than
originally projected.
vi
Since mid-March, as infection rates fluctuated, there have been various versions of stay-at-home orders
statewide and by the County of San Diego. The most recent increase in infections rates, and subsequent
hospitalizations and related deaths, have resulted in Governor Newsom announcing on December 3, 2020,
a regional stay-at-home order, which divides the state into 5 regions (Northern California, Bay Area,
Greater Sacramento, San Joaquin Valley, Southern California). The order would be implemented in any
region if the region's ICU capacity falls 15% and would be in effect for three weeks at a time. As of the
beginning of January, only Northern California has not reached the 15% threshold.
How has Covid-19 affected electrical usage? Broadly speaking, the pandemic has resulted in a decrease
in electricity usage by commercial customers, largely due to the economic slowdown and millions of
employees working from home. Conversely, residential consumption is up, which is leading to higher bills
for some households. During the hot summer and early fall months, residential usage spiked due to
families being home during the day when they would otherwise be at work or school.
Shortly after Governor Newsom instituted the first stay-at-home order in March, SDG&E suspended all
service disconnections due to non-payment, waived late payment fees for business customers and offered
flexible payments for customers struggling to pay their monthly bills. SDG&E has also suspended sending
out late notices and streamlined processed for enrollment in programs that offer discounts on power bills
is up. These measures are due to expire in April 2021.
Consumer protections were further extended in June 2020 when the CPUC mandated an Arrearage
Management Program (AMP) which provides debt forgiveness of past due amounts for residential
customers that meet certain criteria. Debt forgiven will be reimbursed to the utilities, and CCAs, from
Public Purpose Program funds administered by the CPUC. The Board will consider participating in the
AMP at its January board meeting.
FUTURE GOALS AND PLANS
Credit Solution
CEA requires financing for its start-up implementation activities and initial cash flow. Initial start-up
funding was provided by advances from its Member Agencies to be repaid in the future from revenues
generated through CCA operations. CEA plans to seek financing for implementation and initial cash flow
needs through a loan or line of credit from a financial institution.
The implementation of the CCA Program requires funding for three major functions: (1) staffing and
contractor costs; (2) deposits and reserves; and (3) operating cash flow. Based on CEA's anticipated start-
up activities and implementation schedule, a total need of $6M has been identified to support the
functions. A short-term borrowing arrangement has been made with Calpine Energy Solutions (Ca'pine)
for $650,000 to cover CEA's cash flow needs through January 2021. A revolving credit agreement with
JPMorgan is expected to be finalized at the beginning of February 2021.
Out of the $6M capital requirements, $540K is related to the administrative costs related to
implementation/startup efforts (i.e., rate setting, power procurement and contract negotiations,
marketing and communications, regulatory compliance, SDG&E security deposit, etc.) in order to serve
customers beginning in May 2021. Deposits in the amount of $745K will also need to be posted to the
California Independent System Operator (CAISO) for CEA to be a Congestion Revenue Rights Holder and
VII
related to power procurements. CEA plans to repay the short-term loan to Ca!pine of $650K and $1M will
be available to accommodate contingencies and letters of credit that may be required by energy suppliers.
The remaining $590K is the cash "float" required for CEA to pay its monthly bills due to the timing of when
customer payments are anticipated to begin coming in and when expenses are due.
Community Advisory Committee (CAC)
The Board approved a CAC Policy at the regular Board meeting held in July. Per the policy, the purpose of
the CAC is to advise CEA's Board of Directors on those matters concerning the operation of its CCA
program as directed by the Board in an annual workplan for the CAC that is adopted by the Board. The
objectives of the CAC are to provide feedback to the Board, act as a liaison between the Board and the
community and serve as a forum for community input on those matters assigned to the CAC in the annual
workplan. The CAC does not have any decision-making authority but serves as an advisory body to the
Board of Directors. The CAC membership consist of two appointees from each CEA member agency and
1 Board Alternate.
At the Board meeting held in September 2020, the Board approved the following scope of work and
desired outcomes for the Workplan:
•Community Outreach
•Social Equity Issues
•CEA Program Review for meeting CEA Goals of equity & innovation
•Monitoring Climate Action Plan goals
•Play role in strategic plan process
The first meeting of the CAC took place on December 3, 2020.
Integrated Resource Plan (IRP)
The Board adopted an IRP at its August 2020 meeting which provides the CPUC with CEA's 10-year
projected electricity load as part of the integrated resource planning process. The IRP is required to
ensure that California's electric sector meets its Green House Gas (GHG) reduction goals while maintaining
reliability at the lowest possible costs. The IRP was submitted by the September 1, 2020 deadline.
Energy Risk Management Policy (ERMP)
CEA established an ERMP to manage the inherent risks associated with wholesale energy market
transactions. These transactions include procurement of energy products needed to fulfill customer
needs and meet regulatory compliance requirements, the negotiation of contracts for those products,
review and validation of related invoices, payments of invoices, resolution of disputes and management
of credit concerns. The ERMP provides a framework and related guidance, intended to establish
procedures for administration of the tasks and responsibilities related to risk management, including
identification of necessary roles and responsibilities assigned to those individuals and groups who will be
involved in the energy transactions process and risk management activities.
Energy market risks that the ERMP is intended to assist CEA in addressing include:
viii
•Market Price Risk — exposure to changes in wholesale energy prices
•Counterparty Credit and Performance Risk — inability or unwillingness of a counterparty to
perform according to its contractual obligations
•Load and Generation Volumetric Risk — inaccuracies in load forecasts resulting in over- or
under-procurement of energy and/or customer rate revenues that deviate from projections
•Operational Risk — potential for failure to execute and control business activities relative to
plan
•Liquidity Risk — risk that CEA will be unable to meet its financial obligations
•Regulatory/Legislative Risk — shifting state and federal regulatory policies, rules, and
requirements that could negatively impact CEA
To mitigate CEA's exposure to such risks, the Policy has been adopted to focus on the following key
principles:
•Risk Management Goals and Principles
•Internal Control Principles
•Risk Management Business Practices
•Risk Management Policy Governance
CEA Communications and Marketing
A ten-month workplan was developed for communications and marketing tasks needed to support CEA's
implementation efforts. These tasks are in the areas of branding, website design and launch, social media,
communication tools, customer notifications, press and public relations. As part of the branding efforts,
the following logo for CEA was designed and approved:
CLEAN
ENERGY
_
ALLIANCE
1111111110-
CLEAN ENERGY ALLIANCE
The CEA website was updated and went live on December 1, 2020 at thecleanenergyalliance.org
CEA Launch Schedule
SDG&E has been working over the past several years on their Customer Information System replacement
program, known as Envision. They had committed to, and were on track, for a January 4, 2021 go live,
despite the challenges of working remote in the COVID-19 environment. With a January 2021 go live,
SDG&E committed to supporting CEA's launch of May 2021. CEA and its consultants worked diligently with
SDG&E to develop a launch schedule that minimized impact to CEA while also minimizing the risk of
incorrect bills being sent to customers. SDG&E and CEA agreed to a two-phased schedule with accounts
transitioning to CEA in May and June 2021. May 2021 Phase 1 would include the transition of SEA
customers to CEA as well as customers who do not have complex billing plans in Carlsbad and Del Mar.
ix
Those customers who have been identified with complex billing plans would transition in June 2021.
Preliminary analysis indicates that the proposed phasing does not have a material impact from a financial
perspective.
CCA Launch
To date, CEA is meeting its milestones for the implementation of its CCA program and is on track to begin
serving customers in May 2021/June 2021. The following are the identified milestones and completion
dates:
•Award Scheduling Coordinator Services contract - September 2020
•Resource Adequacy Compliance - October 2020 and ongoing monthly reports
As a load serving entity serving customers in 2021, CEA has an obligation to procure Resource
Adequacy (RA), based on quantities allocated by the CPUC and CAISO. RA procurements do
not supply any energy to CEA or its customers, rather it commits the seller to be available to
supply energy to the grid if called upon by CAISO and reduce the possibility of outages. This
process is key to ensuring grid reliability. CEA has monthly and annual RA compliance
reporting requirements with the Year-Ahead Compliance Demonstration due by
October 31, 2020. This report must demonstrate CEA has entered into contracts to meet
CPUC requirements. CEA successfully procured all its RA requirements by the due date and is
fully compliant with its RA obligation.
•Long-Term Renewable Procurement
As a load serving entity, CEA will be required to procure 65% of its minimum state required
renewable portfolio standards in contracts of 10-years or longer. To ensure compliance with
this requirement, CEA's initial renewable energy .solicitation is underway. The solicitation
process, from beginning through final execution can be lengthy, particularly in light of the
impacts of COVID-19 on the renewable development industry. The solicitation opened on July
1, 2020 with proposals due July 27, 2020. CEA's consultant, Pacific Energy Advisors, has
identified a short list of projects and negotiations are proceeding. It is anticipated final
contracts will be before the Board in first quarter 2021.
•System testing with SDG&E - 4th quarter 2020 and 1st quarter 2021
•Setup Call Center, develop scripting and Interactive Voice Response (IVR) recordings -
4th quarter 2020 and 1st quarter 2021
•Create customer pre-and post-enrollment Notices — 4th quarter 2020
•Select product options to offer at launch with 50% renewable energy product as the minimum
default energy product/renewable energy policies - February 2021
•Set Rates - March 2021
•Customer Noticing — March — August 2021
•Procure Power — Spring 2021
•Go live in two phased CCA implementation process to accommodate SDG&E's billing system
replacement project — May and June 2021
Administrative and Operational Policies
In addition to the policies mentioned in previous sections, the following policies were approved by the
Board after June 30, 2020:
•Unsolicited Proposals Policy
•Non-Energy Procurement Policy
•Inclusive and Sustainable Workforce Policy
•Financial Reserve Policy
•2020 Legislative and Regulatory Platform
•Records Retention Policy
•Bid Evaluation and Criteria Scoring System Policy
•Investment Policy (January Board Meeting)
•Social Media Policy (January Board Meeting)
•Debt Management Policy (January Board Meeting)
Acknowledgments
We would like to thank the Board of Directors for their continued support for maintaining the highest
standards of professionalism in the management CEA's finances and acknowledge the professional work
and advice of Lance, Sol & Lunghard, LLP.
Respectfully submitted, Respectfully submitted,
1411.-t,
Barbara Boswell Marie Marron Berkuti
Interim Chief Executive Officer Interim Treasurer/Chief Financial Officer
xi
CLEAN ENERGY ALLIANCE
Members and officers of the Board of Directors on June 3012020
Member Agency Representative Alternate
City of Carlsbad Cori Schumacher — Chair Matt Hall
City of Del Mar Ellie Haviland — Vice Chair Dwight Worden
City of Solana Beach Kristi Becker Judy Hegenauer
CEA Staff
Barbara Boswell — Interim Chief Executive Officer
Marie Marron Berkuti — Interim Treasurer/Chief Financial Officer
Sheila Cobian — Interim Board Secretary
Susan Caputo — Interim Board Clerk
FINANCIAL SECTION
Ls
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Clean Energy Alliance
Carlsbad, California
Report on the Financial Statements
We have audited the accompanying financial statements of Clean Energy Alliance (CEA) for the period of
inception to June 30, 2020, and the related notes to the financial statements, which collectively comprise
CEA's basic financial statements as listed in the table of contents.
Management's Responsibility 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 the United States of America; this includes
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.
Auditor's Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We conducted
our audit in accordance with auditing standards generally accepted in the United States of America; the
standards applicable to financial audits contained in Government Auditing Standards, issued by the
Comptroller General of the United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. The procedures selected depend on the auditor's judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the entity's
preparation and fair presentation of the financial statements 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
the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating
the appropriateness of accounting policies used and the reasonableness of significant accounting
estimates made by management, as well as evaluating the overall presentation of the financial
statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinions.
%-'• PrimeGlobal
Lance, Soil & Lunghard, LLP 203 N. Brea Blvd., Suite 203 I Brea, CA 9282.1 I Phone: 714.672.0022
Ls
To the Board of Directors
Clean Energy Alliance
Carlsbad, California
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the
financial position of Clean Energy Alliance as of June 30, 2020, and the changes in financial position and
cash flows thereof for the period then ended in accordance with accounting principles generally accepted
in the United States of America.
Other Matters
Required Supplementary Information
Management has omitted the management's discussion and analysis that accounting principles generally
accepted in the United States of America require to be presented to supplement the basic financial
statements. Such missing information, 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. Our opinion on the basic financial statements is not affected by this missing information.
Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively
comprise CEA's basic financial statements. The introductory section is presented for purposes of
additional analysis and are not a required part of the basic financial statements and has not been
subjected to the auditing procedures applied in the audit of the basic financial statement. Accordingly, we
do not express an opinion or provide any assurance on it.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated
January 11, 2021, on our consideration of CEA'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 scope of our testing of internal control over
financial reporting and compliance and the results of that testing, and not to provide an opinion on the
effectiveness of CEA's internal control over financial reporting or on compliance. That report is an integral
part of an audit performed in accordance with Government Auditing Standards in considering CEA's
internal control over financial reporting and compliance.
Brea, California
January 11, 2021
2
CLEAN ENERGY ALLIANCE
STATEMENT OF NET POSITION
JUNE 30, 2020
Assets:
Cash and cash equivalents S 203,530
Deposits 100,000
Total Assets 303,530
Liabilities:
Accounts payable 78,197
Due to member agencies 504,017
Total Liabilities 582,214
Net Position:
Unrestricted (278,684)
Total Net Position $ (278,684)
The notes to financial statements are an integral part of this statement.
3
CLEAN ENERGY ALLIANCE
STATEMENT OF REVENUES, EXPENSES,
AND CHANGES IN NET POSITION
FOR THE PERIOD OF INCEPTION (NOVEMBER 4, 2019) THROUGH JUNE 30, 2020
Operating Expenses:
Professional services $ 252,139
Membership dues 26,500
Miscellaneous 45
Total Operating Expenses 278,684
Operating (Loss) (278,684)
Net Position - Beginning
Net Position - Ending $ (278,684)
The notes to financial statements are an integral part of this statement.
4
CLEAN ENERGY ALLIANCE
STATEMENT OF CASH FLOWS
FOR THE PERIOD OF INCEPTION (NOVEMBER 4, 2019) THROUGH JUNE 30, 2020
Cash Flows from Operating Activities:
Payments to suppliers and service providers $ (246,470)
Net Cash (Used for) Operating Activities (246,470)
Cash Flows from Noncapital Financing Activities:
Cash advances from member agencies
Net Cash Provided by Noncapital Financing Activities
450,000
450,000
Net Increase in Cash and Cash Equivalents 203,530
Cash and Cash Equivalents, Inception
Cash and Cash Equivalents, June 30
203,530
Reconciliation of Operating (Loss) to Net Cash (Used for)
Operating Activites:
Operating (Loss) (278,684)
Adjustments to Reconcile Operating (Loss) to
Net Cash (Used for) Operating Activities:
(Increase) in deposits
Increase in accounts payable
Increase in due to member agencies
Total Adjustments
(100,000)
78,197
54,017
32,214
Net Cash (Used for) Operating Activities $ (246,470)
Schedule of Non-Cash Activities:
For the year ended June 30, 2020, CEA received $54,017 in services provided from its member agencies to support
commencement of activities.
The notes to financial statements are an integral part of this statement.
5
CLEAN ENERGY ALLIANCE
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD OF INCEPTION (NOVEMBER 4, 2019) THROUGH JUNE 30, 2020
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 GAAP 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.
6
CLEAN ENERGY ALLIANCE
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD OF INCEPTION (NOVEMBER 4, 2019) THROUGH JUNE 30, 2020
Note 2: Stewardship, Accountability, and Compliance
At June 30, 2020, CEA reported a deficit net position of $278,684. It is not unusual for
organizations in their first year of operations to report a deficit. The reason for the deficit is that
CEA has not yet established a revenue stream by selling energy to customers but has incurred
operating expenses associated with startup costs. This deficit is expected to be eliminated as
resources are obtained and sales operations commence on May 1, 2021.
Note 3: Cash and Cash Equivalents
At June 30, 2020, the reported amount of CEA's deposits was $203,530 and the bank balance
was $305,030. The $101,500 difference represents various reconciling items such as
outstanding checks. Of the bank balance, $250,000 was covered by federal depository
insurance and $55,030 was covered by collateral held in the pledging bank's trust department
in accordance with California Government Code.
Note 4: Deposits Receivable
The CEA deposited $100,000 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. This deposit is to be refunded to CEA upon the
establishment of a line of credit for the aforementioned purpose.
Note 5: 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
Services
Provided Total
City of Carlsbad $ 150,000 $ 36,572 $ 186,572
City of Del Mar 150,000 1,893 151,893
City of Solana Beach 150,000 15,552 165,552
Total 450,000 $ 54,017 $ 504,017
7
CLEAN ENERGY ALLIANCE
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD OF INCEPTION (NOVEMBER 4, 2019) THROUGH JUNE 30, 2020
Note 6: Subsequent Events
a.Promissory Note
CEA's Board of Directors approved the execution of Promissory Notes with Calpine Energy
Solutions on August 20, 2020 and November 19, 2020 for $400,000 and $250,000,
respectively, to provide funding for CEA operational costs through February 2021. The
interest rate of the Promissory Notes is based on the 1-month LIBOR rate plus 2 percent
per annum not to exceed 5 percent, with interest accruing from the date funds are
deposited in CEA's account. The Notes are to be repaid in twelve equal monthly
installments beginning 90 days after the Power Start Date (or date CEA begins serving
customers).
b.Letter of Credit
On December 7, 2020, CEA opened a letter of credit with U.S. Bank National Association
in the amount of $147,000, with an expiration date of December 7, 2021. The purpose of
this letter of credit is described in Note 4. SDG&E may only withdraw funds from the letter
of credit for unpaid administrative or procurements costs associated with the return of CEA
customers. Any withdrawal of these funds must first be approved by the CPUC.
8
ATTACHMENT B
Ls
INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL
OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS
BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE
WITH GOVERNMENT AUDITING STANDARDS
To the Board of Directors
Clean Energy Alliance
Carlsbad, California
We have audited, in accordance with the auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Government Auditing Standards
issued by the Comptroller General of the United States, the financial statements of Clean Energy Alliance
(CEA), as of and for the period from inception to June 30, 2020, and the related notes to the financial
statements, which collectively comprise CEA's basic financial statements, and have issued our report
thereon dated January 11, 2021.
Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered CEA's internal control over
financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the
circumstances for the purpose of expressing our opinions on the financial statements, but not for the
purpose of expressing an opinion on the effectiveness of CEA's internal control. Accordingly, we do not
express an opinion on the effectiveness of CEA's internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management
or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct,
misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in
internal control, such that there is a reasonable possibility that a material misstatement of the entity's
financial statements will not be prevented or detected and corrected on a timely basis. A significant
deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a
material weakness, yet important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this
section and was not designed to identify all deficiencies in internal control that might be material
weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any
deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses
may exist that have not been identified.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether CEA's financial statements are free from material
misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts,
and grant agreements, noncompliance with which could have a direct and material effect on the financial
statements. However, providing an opinion on compliance with those provisions was not an objective of our
audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances
of noncompliance or other matters that are required to be reported under Government Auditing
Standards.
PrimeGlobal
Lance, Soil & Lunghard, LLP 203 N. Brea Blvd, Suite 203 I Bt ea, CA92821 I Phone. 714.6720022
ATTACHMENT B Ls L::::
To the Board of Directors
Clean Energy Alliance
Carlsbad, California
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance
and the results of that testing, and not to provide an opinion on the effectiveness of CEA's internal control
or on compliance. This report is an integral part of an audit performed in accordance with
Government Auditing Standards in considering CEA's internal control and compliance. Accordingly, this
communication is not suitable for any other purpose.
p-442,e,G4rez)
Brea, California
January 11, 2021