Governing Board and Alternates Chair: Peter Gilbert, City of Lincoln Vice Chair: Greg Janda, City of Rocklin Kim Douglass, City of Colfax Kirk Uhler, County of Placer Jim Holmes, County of Placer Jeffrey Duncan, Town of Loomis Cheryl Maki, City of Auburn Alternate County of Placer, Bonnie Gore Alternate Town of Loomis, Jan Clark-Crets Alternate City of Auburn, Matt Spokely Alternate City of Lincoln, Dan Karleskint Alternate City of Rocklin, Joe Patterson Alternate City of Colfax, Trinity Burruss 1) Agenda Approval 2) Public Comment Persons may address the Board on items not on this agenda. Please limit comments to 3 minutes per person The Board is not permitted to take any action on items addressed under Public Comment. 3) Drum Spaulding Hydroelectric Project (p.1) Authorize the Chair of the Board to sign a letter on behalf of the Pioneer Governing Board to the Board of Directors of the Placer County Water Agency (PCWA) relating to the Drum Spaulding Hydroelectric Project. 4) Policies (p.4) a) Adopt a resolution approving the revised Debt Management Policy. b) Adopt a resolution approving the updated Reserve Policy. 5) Financial Statements and Release of Reserves (p.24) a) Review Fiscal Year 2018/19 Unaudited Financial Statements b) Approve the cancellation of $5 million in reserves to make funds available to meet contractual obligations for collateral and margin calls related to power purchase agreements 6) Rate Setting Discussion (p.29) a) Receive a Fiscal Year 2019/20 Budget update b) Provide further direction to staff related to the August 16, 2019 motion postponing the electric generation rates adopted by Board resolution on August 6, 2019 7) Board Member and Executive Director Comments 8) Adjournment Pioneer Community Energy is committed to ensuring that persons with disabilities are provided the resources to participate fully in its public meetings. If you are hearing impaired, we have listening devices available. If you require additional disability-related modifications or accommodations, including auxiliary aids or services, please contact the Clerk of the Board. If requested, the agenda shall be provided in appropriate alternative formats to persons with disabilities. All requests must be in writing and must be received by the Clerk five business days prior to the scheduled meeting for which you are requesting accommodation. Requests received after such time will be accommodated only if time permits. Special Meeting Governing Board Agenda September 23, 2019 1:00 pm Larry Oddo Finance and Administration Building Assessor’s Conference Room, 2 nd Floor 2980 Richardson Drive, Auburn, CA 95603 Next Regular Meeting Scheduled for: October 7, 2019, 3:00 pm Board of Supervisors Chambers 175 Fulweiler Avenue, Auburn, CA 95603
Transcript
Governing Board and Alternates Chair: Peter Gilbert, City of Lincoln
Vice Chair: Greg Janda, City of Rocklin Kim Douglass, City of Colfax Kirk Uhler, County of Placer
Jim Holmes, County of Placer Jeffrey Duncan, Town of Loomis
Cheryl Maki, City of Auburn Alternate County of Placer, Bonnie Gore
Alternate Town of Loomis, Jan Clark-Crets Alternate City of Auburn, Matt Spokely
Alternate City of Lincoln, Dan Karleskint Alternate City of Rocklin, Joe Patterson Alternate City of Colfax, Trinity Burruss
1) Agenda Approval
2) Public Comment Persons may address the Board on items not on this agenda. Please limit commentsto 3 minutes per person The Board is not permitted to take any action on items addressed under PublicComment.
3) Drum Spaulding Hydroelectric Project (p.1)Authorize the Chair of the Board to sign a letter on behalf of the Pioneer Governing Board to theBoard of Directors of the Placer County Water Agency (PCWA) relating to the Drum SpauldingHydroelectric Project.
4) Policies (p.4)a) Adopt a resolution approving the revised Debt Management Policy.b) Adopt a resolution approving the updated Reserve Policy.
5) Financial Statements and Release of Reserves (p.24)a) Review Fiscal Year 2018/19 Unaudited Financial Statementsb) Approve the cancellation of $5 million in reserves to make funds available to meet contractual
obligations for collateral and margin calls related to power purchase agreements
6) Rate Setting Discussion (p.29)a) Receive a Fiscal Year 2019/20 Budget updateb) Provide further direction to staff related to the August 16, 2019 motion postponing the electric
generation rates adopted by Board resolution on August 6, 2019
7) Board Member and Executive Director Comments
8) Adjournment
Pioneer Community Energy is committed to ensuring that persons with disabilities are provided the resources to participate fully in its public meetings. If you are hearing impaired, we have listening devices available. If you require additional disability-related modifications or accommodations, including auxiliary aids or services, please contact the Clerk of the Board. If requested, the agenda shall be provided in appropriate alternative formats to persons with disabilities. All requests must be in writing and must be received by the Clerk five business days prior to the scheduled meeting for which you are requesting accommodation. Requests received after such time will be accommodated only if time permits.
Special MeetingGoverning Board Agenda September 23, 2019 1:00 pm Larry Oddo Finance and Administration Building Assessor’s Conference Room, 2nd Floor
2980 Richardson Drive, Auburn, CA 95603
Next Regular Meeting Scheduled for:
October 7, 2019, 3:00 pm Board of Supervisors Chambers 175 Fulweiler Avenue, Auburn, CA 95603
TO: The Governing Board DATE: September 23, 2019 FROM: Jenine Windeshausen SUBJECT: Drum Spaulding Hydroelectric Project
ACTION REQUESTED Authorize the Chair of the Board to sign a letter on behalf of the Pioneer Governing Board to the Board of Directors of the Placer County Water Agency (PCWA) relating to the Drum Spaulding Hydroelectric Project.
BACKGROUND In March 2019, the PCWA General Manager requested a meeting with the Pioneer Executive Director and Placer County Executive Officer (CEO). That meeting was held on March 28, 2019, at which time the General Manager expressed his concern that Pioneer may attempt to purchase physical assets of the Drum Spaulding Project, either on its own or in partnership with other Community Choice Aggregators (CCAs). The General Manager indicated his concerns were based on a California Public Utilities Commission filing1 by several CCAs operating in PG&E territory. However, the Executive Director explained that the filing in question was unrelated to the Drum Spaulding Project.
Subsequent to his meeting with the Executive Director and CEO, the General Manager attended the Pioneer Board meeting on April 1, 2019 and further expressed the importance of the Drum Spaulding Project as it relates to PCWA and Placer County as part of public comment. Additionally, the General Manager reiterated that the Drum Spaulding Project provides the primary water source for Placer County and indicated his concerns that the water source could be jeopardized by a change in ownership.
Since that time, the Executive Director has become aware that the General Manager continues to maintain concern that Pioneer my attempt to purchase the assets of the Drum Spaulding Hydroelectric Project. As the Board knows, Pioneer does not have any plan to acquire physical assets of any kind, including electric generation facilities, and specifically has no interest in ownership of the Drum Spaulding Project physical assets. Additionally, your Executive Director does not have any information that any other CCA has interest in the Drum Spaulding Project. However, the Pioneer Executive Director was approached by a representative of publicly owned utilities who indicated active interactions relating to the acquisition of PG&E assets. The representative specifically inquired about Pioneer’s interest in joining with publicly owned utilities in taking an ownership interest in PG&E electric generation assets, including the Drum Spaulding Project. In response, the Executive Director declined Pioneer interest in joining with other load serving entities in the acquisition of PG&E assets and further indicated that Pioneer has no plans to purchase physical generation assets of any kind.
In order to alleviate any concern that Pioneer has interest in the Drum Spaulding Hydroelectric Project, staff recommends authorizing the Chair of the Board to execute the attached letter to the PCWA Board of Directors.
FISCAL IMPACT Not applicable.
1 I.15-08-019 Order Institution Investigation on the Commission’s Own Motion to Determine Whether Pacific Gas and Electric Company and PG&E Corporation’s Organization Culture and Governance Prioritize Safety
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September 23, 2019
Board of Directors Placer County Water Agency 144 Ferguson Road Auburn, CA 95604
Re: Drum Spaulding Hydroelectric Project
Honorable Board of Directors,
The purpose of this letter is to address and dispel the concerns of the Placer County Water Agency (PCWA) General Manager regarding a perception that Pioneer Community Energy (Pioneer) desires to acquire physical assets of the Drum Spaulding Hydroelectric Project (Drum Spaulding Project) from PG&E.
In March 2019 the General Manager requested a meeting with the Pioneer Executive Director and Placer County Executive Officer (CEO). That meeting was held on March 28, 2019, at which time the General Manager expressed his concern that Pioneer may attempt to purchase assets of the Drum Spaulding Project, either on its own or in partnership with other Community Choice Aggregators (CCAs). The General Manager indicated his concerns were based on a California Public Utilities Commission filing1 by several CCAs operating in PG&E territory. However, the Executive Director explained that the filing in question was unrelated to the Drum Spaulding Project.
Subsequent to his meeting with the Executive Director and CEO, the General Manager attended the Pioneer Board meeting on April 1, 2019 and further expressed the importance of the Drum Spaulding Project as it relates to PCWA and Placer County as part of public comment. Additionally, the General Manager reiterated that the Drum Spaulding Project provides the primary water source for Placer County and indicated his concerns that the water source could be jeopardized by a change in ownership.
On behalf of the Pioneer Board, I am taking this opportunity to reiterate that Pioneer has no plans to acquire physical assets of any kind, including electric generation facilities, and specifically has no interest in ownership of the Drum Spaulding Project physical assets. Additionally, Pioneer does not have any information that any other CCA has interest in the Drum Spaulding Project. However, I am aware that the Pioneer Executive Director was approached by a representative of publicly owned utilities who indicated active interactions relating to the acquisition of PG&E assets. The representative specifically inquired about Pioneer’s interest in joining with publicly owned utilities in taking an ownership interest in PG&E electric generation assets, including the Drum Spaulding Project. In response, the Executive Director declined Pioneer having interest in joining with other load serving entities in the acquisition of PG&E assets and further indicated that Pioneer has no plans to purchase physical generation assets of any kind.
1 I.15-08-019 Order Institution Investigation on the Commission’s Own Motion to Determine Whether Pacific Gas and Electric Company and PG&E Corporation’s Organization Culture and Governance Prioritize Safety
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Pioneer recognizes the importance of keeping Placer County’s water sources secure and supports PCWA’s efforts in that regard.
Sincerely,
Peter Gilbert Chair of the Board
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TO: The Governing Board DATE: September 23, 2019 FROM: Jenine Windeshausen, Executive Director SUBJECT: Debt Management Policy
ACTION REQUESTED Adopt a resolution approving the revised Debt Management Policy.
BACKGROUND The update of Pioneer’s Debt Management Policy (the “Policy”) is timely in and of itself. Further, the Policy is presented for the Board’s consideration pursuant to a motion approved by the Board at a special meeting held on August 16, 2019; to “postpone indefinitely the decision on rates from August 5th, until the board adopts policy for debt and reserves and adopted into an amended budget.”
The Board originally adopted Pioneer’s Policy on January 20, 2017 by Resolution No. 2017-1A. The Debt Management Policy was modeled after Placer County’s Debt Management Policy and was developed to ensure compliance with California Government Code Section 8855. Pursuant to Government Code Section 8855, a local agency is required to provide the California Debt and Investment Advisory Commission a certification prior to the issuance of public debt that it has adopted local debt policies concerning the use of debt and that the contemplated debt issuance is consistent with the local agency’s debt policies. Prior to the Board’s adoption of the Policy on January 20, 2017, the policy was reviewed by outside bond counsel for compliance with Government Code 8855, and for any additional recommendations.
When the Policy was adopted in January of 2017, Pioneer (then Sierra Valley Energy Authority [the “Authority”]) was operating as a financing authority for the primary purpose of authorizing and issuing debt related to the mPOWER Program. As a financing authority, it was contemplated the Authority members may want to use the Authority to provide a financing mechanism for other purposes. Since that time the original joint powers agreement has been amended and restated to include the purposes of the CCA Program.
As part of staff’s review of Pioneer’s existing Policy, staff obtained copies of the debt management policies of Pioneer’s member entities to consider pertinent policy and practices of its members. Staff found Pioneer’s Policy to be relatively consistent with the Debt Management Policies of its members. Below is a summary of the proposed revisions to the Policy. The additions to Section 4 of the Policy noted below in italics were incorporated from the City of Rocklin’s Debt Management Policy, adopted in November 2018 which staff found to be prudent and pertinent.
The proposed revisions to the policy include revisions to: • Section 1. DEBT POLICY PURPOSE, updating the purposes to be consistent the Amended and
Restated Joint Exercise of Powers Agreement for Pioneer Community Energy.• Section 2. PURPOSES OF DEBT, to remove references to providing financing for its members
and to clarify financing is to be consistent with Pioneer’s purposes.
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• Section 4. RELATIONSHIP TO CAPITAL IMPROVEMENTS PROGRAM OR BUDGET, PLANNINGGOALS AND OBJECTIVES, to add clarification about Pioneer’s uses for debt consideringPioneer’s lack of capital plans, and adding the following statements –
o Pioneer is committed to long-term financial planning, maintain appropriate reserve levelsand employing prudent practices in governance, financial management and budgetadministration. Pioneer intends to issue debt for the purposes stated in this DebtManagement Policy and to implement policy decisions in the annual operations budget.
o It is Pioneer’s goal to utilize conservative financing methods and techniques to obtain thehighest practical credit ratings and the lowest practical borrowing costs.
o Pioneer will comply with state and federal law as it pertains to the maximum term ofdebt, and any applicable procedures for setting and imposing any related assessments,rates and charges.
All revisions from the Policy adopted by the Board on January 20, 2017 are on page 2 and 3 of the prior Policy. Red-line versions of pages 2 and 3 of the prior policy are attached. A clean copy of complete proposed Policy with revisions incorporated is included as an attachment to the resolution for adopting the Policy.
FISCAL IMPACT Not applicable.
Attachments: Debt Management Red-line of prior policy pages 2 and 3 Resolution Adopting Debt Management Policy Debt Management Policy
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Pioneer Community Energy Debt Management Policy Approved 1/20/2017 2 V.2 Approved
1. DEBT POLICY PURPOSE
Pioneer Community Energy (“Pioneer”) was established under the Joint Exercise of Powers Act, Chapter 5 of Division 7 of Title 1 of the California Government Code, commencing with Section 6500 (the "Act") and a Joint Exercise of Powers Agreement for the Establishment of Pioneer Community Energy (the "Agreement") for the purposes including, but not limited to of:
1) Providing electric power and other forms of energy to customers at a competitive cost;
2) Promoting long-term electric rate stability and energy security and reliability for residents through local control of electric generation resources and the overall power supply portfolio;
3) Carrying out programs to reduce energy consumption;
4) Stimulating and sustaining the local economy by developing local jobs in renewable energy; and
5) Reducing greenhouse gas emissions related to the use of electric power and other forms of energy in Placer County and neighboring regions;
This policy is intended to comply with Section 8855 of the California Government Code.
2. PURPOSES OF DEBT
Pioneer will consider debt financing for the construction, acquisition, rehabilitation, replacement, or expansion of physical assets, including real and personal property, equipment, furnishings, and improvements, and any other uses authorized by the Agreement, for the following purposes:
a. To assist a member of Pioneer in Of financing public facilities, services or programs, including but not limited to short-term borrowing needs, budget shortfalls, and access to capital for public improvements and infrastructure.
b. To assist certain private individuals and entities in financing a project or program that produces public benefits.
c. To refinance outstanding debt in order to produce debt service savings or to restructure debt for other benefits such as refinancing a bullet payment or a spike in debt service.
d. To finance a project or program, consistent with Pioneer’s purposes which are intended to provide public benefits to any local community, including its residents, business, or institutions, including but not limited to promoting economic development.
3. TYPES OF DEBT
The following types of debt are allowable under this Policy:
a. Conduit revenue bonds or notes
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Pioneer Community Energy Debt Management Policy Approved 1/20/2017 3 V.2 Approved
b. General obligation bonds
c. Bond or grant anticipation notes
d. Leases, lease revenue bonds, installment sale or purchase agreements, certificates of participation and lease-purchase transactions
e. Revenue bonds
f. Tax and revenue anticipation notes
g. Land-secured financings, such as special tax revenue bonds issued under the Mello-Roos Community Facilities Act of 1982, as amended, and limited obligation bonds issued under applicable assessment acts, including PACE financings
h. Any other type of debt permitted under the Agreement and authorized by law.
For purposes of this section, the term "bonds" may include notes, warrants, leases, installment purchase agreements, certificates of participation, financing agreements, loan agreements or any other evidence of an obligation to pay or repay money.
Pioneer may from time to time find that other types of debt would be beneficial to further its purposes and may approve such debt without an amendment of this Policy.
This policy includes all debt that must ultimately be approved by Pioneer Community Energy Board. This policy is not intended to address inter-fund borrowing; interagency borrowing; or investment activities of the Pioneer Treasurer including but not limited to reverse repurchase agreements and securities lending.
4. RELATIONSHIP TO CAPITAL IMPROVEMENTS PROGRAM OR BUDGET, PLANNING GOALS AND OBJECTIVES
Pioneer's purpose is described in Section 1.0. Pioneer does not have a capital improvement program because its primary purposes is to provide assistance to its members with their financing programs.
Pioneer's purpose is described in Section 1.0. are related to procuring and providing electric power primarily using contractual arrangements and not through the purchase of physical assets. Pioneer's goal is to undertake programs that advance its purpose, and this Policy provides flexibility for Pioneer to obtain financing to provide energy related services including financing programs to further its purpose.
Pioneer is committed to long-term financial planning, maintain appropriate reserve levels and employing prudent practices in governance, financial management and budget administration. Pioneer intends to issue debt for the purposes stated in this Debt Management Policy and to implement policy decisions in the annual operations budget.
It is Pioneer’s goal to utilize conservative financing methods and techniques to obtain the highest practical credit ratings and the lowest practical borrowing costs.
Pioneer will comply with state and federal law as it pertains to the maximum term of debt, and any applicable procedures for setting and imposing any related assessments, rates and charges.
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Before the Governing Board of Pioneer Community Energy
Resolution No.: ____________
The following Resolution was duly passed by the Governing Board of Pioneer
Community Energy at a regular meeting held September 23, 2019, by the following vote
on roll call:
Signed and approved by me after its passage.
_____________________________ Chair, Board of the Governing Board
Attest:
_______________________ Secretary
THE GOVERNING BOARD OF PIONEER COMMUNITY ENERGY DOES HEREBY RESOLVE AS FOLLOWS:
WHEREAS, pursuant to Senate Bill 1029 (“SB 1029”), which was signed by the California Governor on September 12, 2016, California public agencies that issue debt must adopt debt management policies that meet certain criteria;
In the matter of:
A Resolution Adopting the Pioneer Community Energy Debt Management Policy
Ayes:
Noes:
Absent:
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WHEREAS, in response to SB 1029, and in order to adhere to sound financial management practices, the Governing Board adopted the first debt management policy on January 20, 2017 by Resolution No. 2017-1A, and
WHEREAS, the Governing Board finds it appropriate to approve an updated and revised Pioneer Community Energy Debt Management Policy; and
WHEREAS, there has been presented as this meeting the proposed revisions, and the proposed updated and revised Pioneer Community Energy Debt Management Policy;
THEREFORE, BE IT RESOLVED, the Governing Board hereby approves the Pioneer Community Energy Debt Management Policy as set forth in the attached Exhibit A; and
BE IT FURTHER RESOLVED, that this Resolution and the attached Pioneer Community Energy Debt Management Policy shall be effective immediately after the date of adoption of this Resolution.
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Attached: Exhibit A – Pioneer Community Energy Debt Management Policy
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DEBT MANAGEMENT POLICY
Contents
1. DEBT POLICY PURPOSE ............................................................................................................................. 2 2. PURPOSES OF DEBT ................................................................................................................................... 2 3. TYPES OF DEBT ........................................................................................................................................... 2 4. RELATIONSHIP TO CAPITAL IMPROVEMENTS PROGRAM OR BUDGET, PLANNING GOALS AND
OBJECTIVES ................................................................................................................................................. 3 5. DEBT ADMINISTRATION .............................................................................................................................. 4 6. DEBT STRUCTURE CONSIDERATIONS ..................................................................................................... 5 7. METHOD OF SALE ....................................................................................................................................... 5 8. REFUNDING OF PIONEER INDEBTEDNESS .............................................................................................. 6
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1. DEBT POLICY PURPOSE
Pioneer Community Energy (“Pioneer”) was established under the Joint Exercise of PowersAct, Chapter 5 of Division 7 of Title 1 of the California Government Code, commencing withSection 6500 (the "Act") and a Joint Exercise of Powers Agreement for the Establishment ofPioneer Community Energy (the "Agreement") for the purposes including, but not limited to:
1) Providing electric power and other forms of energy to customers at a competitive cost;
2) Promoting long-term electric rate stability and energy security and reliability forresidents through local control of electric generation resources and the overall powersupply portfolio;
3) Carrying out programs to reduce energy consumption;
4) Stimulating and sustaining the local economy by developing local jobs in renewableenergy; and
5) Reducing greenhouse gas emissions related to the use of electric power and other formsof energy in Placer County and neighboring regions;
This policy is intended to comply with Section 8855 of the California Government Code.
2. PURPOSES OF DEBT
Pioneer will consider debt financing for the construction, acquisition, rehabilitation,replacement, or expansion of physical assets, including real and personal property,equipment, furnishings, and improvements, and any other uses authorized by the Agreement,for the following purposes:
a. Of financing public facilities, services or programs, including but not limited toshort-term borrowing needs, budget shortfalls, and access to capital for publicimprovements and infrastructure.
b. To assist certain private individuals and entities in financing a project or program thatproduces public benefits.
c. To refinance outstanding debt in order to produce debt service savings or torestructure debt for other benefits such as refinancing a bullet payment or a spike indebt service.
d. To finance a project or program, consistent with Pioneer’s purposes which areintended to provide public benefits to any local community, including its residents,business, or institutions, including but not limited to promoting economicdevelopment.
3. TYPES OF DEBT
The following types of debt are allowable under this Policy:
a. Conduit revenue bonds or notes
b. General obligation bonds
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c. Bond or grant anticipation notes
d. Leases, lease revenue bonds, installment sale or purchase agreements, certificates ofparticipation and lease-purchase transactions
e. Revenue bonds
f. Tax and revenue anticipation notes
g. Land-secured financings, such as special tax revenue bonds issued under the Mello-RoosCommunity Facilities Act of 1982, as amended, and limited obligation bonds issued underapplicable assessment acts, including PACE financings
h. Any other type of debt permitted under the Agreement and authorized by law.
For purposes of this section, the term "bonds" may include notes, warrants, leases, installment purchase agreements, certificates of participation, financing agreements, loan agreements or any other evidence of an obligation to pay or repay money.
Pioneer may from time to time find that other types of debt would be beneficial to further its purposes and may approve such debt without an amendment of this Policy.
This policy includes all debt that must ultimately be approved by Pioneer Community Energy Board. This policy is not intended to address inter-fund borrowing; interagency borrowing; or investment activities of the Pioneer Treasurer including but not limited to reverse repurchase agreements and securities lending.
4. RELATIONSHIP TO CAPITAL IMPROVEMENTS PROGRAM OR BUDGET, PLANNING GOALS ANDOBJECTIVES
Pioneer's purpose is described in Section 1.0. Pioneer does not have a capital improvement program because its primary purposes
described in Section 1.0. are related to procuring and providing electric power primarily using contractual arrangements and not through the purchase of physical assets. Pioneer's goal is to undertake programs that advance its purpose, and this Policy provides flexibility for Pioneer to obtain financing to provide energy related services including financing programs to further its purpose.
Pioneer is committed to long-term financial planning, maintain appropriate reserve levels and employing prudent practices in governance, financial management and budget administration. Pioneer intends to issue debt for the purposes stated in this Debt Management Policy and to implement policy decisions in the annual operations budget.
It is Pioneer’s goal to utilize conservative financing methods and techniques to obtain the highest practical credit ratings and the lowest practical borrowing costs.
Pioneer will comply with state and federal law as it pertains to the maximum term of debt, and any applicable procedures for setting and imposing any related assessments, rates and charges.
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5. DEBT ADMINISTRATION
Debt management will be the responsibility of Pioneer Executive Director (ED) and theTreasurer Tax Collector as follows:
a. Reviewing and recommending debt financing - ED & Treasurer. The ED andTreasurer Tax Collector will be responsible for reviewing, analyzing andrecommending new issue debt financing when appropriate and consistent withthese policies. The Pioneer Board will review and approve proposed Pioneerdebt financing proposals
b. Leading the process of issuance - ED, Treasurer and Pioneer Counsel. Officialswill work together to select financial advisors, underwriters, bond counsel,disclosure counsel and other members of a financing team. Officials willprepare bond documentation including official statements and will reviewthem for material errors or omissions before such documents can bedeemed final.
c. Internal control procedures regarding use of debt proceeds; fiscal agent-Treasurer. Whenever reasonably possible, proceeds of debt used to financecapital improvements will be held by a third-party trustee and Pioneer willsubmit written requisitions for such proceeds. The Treasurer will execute eachsuch requisition. The Treasurer will be responsible for selecting trustees andother fiscal agents associated with bond and certificate of participation issues.To the extent permitted by bond counsel, the rating agencies or any bondinsurer, the Treasurer will serve as Pioneer's fiscal agent on its debttransactions.
d. Continuing annual disclosure -Treasurer, Auditor-Controller, and ED. TheSecurities and Exchange Commission ("SEC") requires that underwriters obtainpromises in writing from municipal debt issuers to provide specified financialand operating information on an annual basis for all public offerings. Thispromise for continuing annual disclosure is set forth in a separate agreementbetween the issuer and the underwriter who purchases Pioneer's bonds. ThePioneer ED will oversee the preparation of annual disclosure reports asrequired under federal law and regulations, and consistent with the continuingdisclosure agreement pertaining to that financing. Such reports will bereviewed in the manner of initial official statements. Under continuingdisclosure requirements Pioneer is obligated to provide ongoing disclosure ofmaterial events, including those that are specifically enumerated in theagreement for its public offerings.
e. Arbitrage administration-Treasurer. The Treasurer is charged withresponsibility for establishing and maintaining, either directly or throughcontract, a system of record keeping and reporting to meet the arbitragerebate compliance requirements of the federal tax code. This effort includestracking investment earnings on bond proceeds, calculating rebate paymentsin compliance with tax law, and remitting any rebate earnings to the federalgovernment in a timely manner in order to preserve the tax-exempt status of
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Pioneer's outstanding debt issues.
f. Covenant Administration-ED. The ED will establish and maintain a system formonitoring the various covenants and commitments established within thedocumentation of a bond issue and ensuring that Pioneer staff or consultantstake such actions as required to comply with the various covenants of afinancing.
g. Small lease-purchases-ED. Pioneer or sub-unit of Pioneer shall not enter into alease-purchase contract, or incur other form of indebtedness, of more than$50,000 without the express approval of the Board.
h. Investing Bond Proceeds-Treasurer. The Treasurer is responsible for investingall bond or certificate of participation proceeds held by Pioneer and directingthe investment of all funds held by a trustee under an indenture or trustagreement. Investments will be consistent with those authorized by state andfederal law.
6. DEBT STRUCTURE CONSIDERATIONSa. Rapidity of Debt Repayment. Borrowing by Pioneer should be of a duration
that does not exceed the economic life of the improvement that it finances.The debt repayment term should be shorter than the improvements projectedlife in an effort to improve Pioneer's credit profile through early retirement ofdebt, and to recapture debt capacity for future use. Pioneer may choose tostructure debt repayment on any particular transaction so as to consolidate orrestructure existing obligations or to achieve other financial planning goals.
b. Capitalized Interest. Pioneer may include within its borrowings additionalfunds to pay interest on the obligation during an initial period. Such capitalizingof interest will be most commonly used to secure lease obligations during theproject construction period, as generally required under California law, or tosecure an improved financing structure for strategic management of cash flow.
c. Mello-Roos and Assessment Bonds. The existing "Program Report andProgram Manual" contain Pioneer's policies for the mPOWER program. The EDwill evaluate programs in light of the total tax rate burden described herein.
d. Short-term Financing. Pioneer will consider issuing Tax and RevenueAnticipation Notes for annual cash flow purposes or other short-term financinginstruments to the extent such notes would reduce expenses, increaserevenues and/or expedite the meeting of Pioneer goals.
e. Pioneer will consider variable rate debt on a case-by-case basis. The generalpreference of Pioneer is to issue fixed rate debt.
7. METHOD OF SALE
There are generally three ways bonds can be sold, through a competitive, negotiated sale or aprivate placement. The following outlines the basis by which Pioneer will determine the
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appropriate method of sale for a given financing.
a. Competitive Process. With a competitive sale, any interested underwriter is invited tosubmit a proposal to purchase an issue of bonds. The bonds are awarded to theunderwriter{s) presenting the best bid according to stipulated criteria set forth in thenotice of sale. Pioneer, as a matter of policy, will seek to issue its debt obligationsthrough a competitive process unless it is determined in consultation with theTreasurer/Tax Collector that such a sale method will not produce the best results forPioneer. This type of sale process is also significantly more likely to give Pioneer highermarket exposure which creates an awareness of Pioneer credit that increases marketinterest in future debt issues of Pioneer.
b. Negotiated Sale. Under this method of sale, securities are sold through an exclusivearrangement between the issuer and an underwriter or underwriting syndicate. At theend of successful negotiations, the issue is awarded to the underwriters. Negotiatedunderwriting may be considered if it fits one or more of the following criteria: extremelysmall issue size; complex financing structure or nature of the project being financed (i.e.,variable rate financing, new derivatives and certain revenues issues, etc.); compromisedcredit quality of Pioneer or the issue; other issue or market factors which lead the EDand Treasurer to conclude that a competitive sale would not be effective. Whendetermined appropriate by the ED and Treasurer, and approved by the board, Pioneermay elect to sell its debt obligations through a negotiated sale.
c. Private Placement. When determined appropriate, usually in the case of a very smallissue, Pioneer may elect to sell its debt obligations through a private placement orlimited public offering. Selection of a lender or placement agent will be made pursuantto selection procedures developed by the ED and Treasurer.
8. REFUNDING OF PIONEER INDEBTEDNESS
The Pioneer ED will monitor Pioneer's existing indebtedness and will initiate the refunding ofsuch obligations if it would generate a reasonable level of savings. The following guidelineswill be used in determining whether a refunding would be appropriate.
a. Debt Service Savings - Advance Refunding. Pioneer may issue advance refunding bonds(as defined by federal tax law) when advantageous, legally permissible, financiallyprudent, and net present value savings, expressed as a percentage of the par amount ofthe refunded bonds, equal or exceed 5 percent. The Pioneer Board may approve a lowersavings threshold to the extent that such a threshold is appropriate given the specificconditions of the proposed refunding.
b. Debt Service Savings - Current Refunding. Pioneer may issue current refunding bonds(as defined by federal tax law) when advantageous, legally permissible, and financiallyprudent, and net present value savings equal or exceed 3% of the outstandingamount of refunded bonds.
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9. INTERPRETATION
This Policy is intended to be interpreted in a manner consistent with Pioneer's existingpolicies and program guidelines and shall be subject to any contrary provisions thereof.The Board may, by resolution, waive any provision of this Policy, with respect to aparticular debt issue.
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TO: The Governing Board DATE: September 23, 2019 FROM: John Delassi, Pacific Energy Advisors
Jenine Windeshausen, Executive Director SUBJECT: Reserve Policies
ACTION REQUESTED Adopt a resolution approving the updated Reserve Policy.
BACKGROUND On March 19, 2018, your Board adopted Pioneer’s initial Reserve Policies. Those policies were the Rate Stabilization, Cash-on-Hand, Allowance for Uncollectable Accounts, and Budgetary Fund Balance policies.
The purpose of reserve policies is to manage risk associated with economic uncertainties including: rate instability for budgetary purposes, volatile energy prices requiring collateral posting, and any other unexpected expenditures.
The implementation of adequate Reserve Policies has enabled CCAs to have cash set aside to weather negative economic and regulatory impacts that threaten rate stability including increases in wholesale power costs, competitor electric prices, and increases in the Power Charge Indifference Adjustment charge. It has further assisted two CCAs in attaining investment grade credit ratings which has reduced their collateral posting requirements and increased competitive pricing to lower costs. Having reserves have specifically helped Pioneer to address increased prices.
As the proposed Reserve Policy states: “Pioneer will prudently manage its operations in a manner that supports its short-term obligations while providing enough financial capacity to achieve and maintain long-term financial stability. This Reserve Policy is important in meeting Pioneer’s strategic objectives, securing more favorable commercial terms from both third-party service providers and lenders and in the development of a future stand-alone Pioneer credit rating. Adequate reserves and financial stability will enable Pioneer to satisfy working capital requirements; allow Pioneer to procure energy on more favorable commercial terms; to adhere to loan covenants; will provide resiliency to cover unanticipated expenditures; and will ultimately support rate stability.”
The proposed Reserve Policy specifically calls for: • a Target Reserve Level equaling 40% of projected energy and operating expenses for the
upcoming fiscal year• a Minimum Liquidity Level of 120 days of operating expenses• achieving the Target Reserve Level and the Minimum Liquidity Level by June of 2022.
18
FISCAL IMPACT There is no immediate or direct fiscal impact to adoption of the proposed Reserve Policy. The fiscal impact will depend on the approach the Board selects in achieving the Target Reserve Level and the Minimum Liquidity Level. If applied to current financial conditions, the Target Reserve Level is $29.2 million, and the Minimum Liquidity Level is $24 million. The level amount necessary to put aside in the current and each subsequent fiscal year to achieve the Minimum Reserve Level by June of 2022 is approximately $9.73 million.
Before the Governing Board of Pioneer Community Energy
Resolution No.: ____________
The following Resolution was duly passed by the Governing Board of Pioneer
Community Energy at a regular meeting held September 23, 2019, by the following vote
on roll call:
Signed and approved by me after its passage.
_____________________________ Chair, Board of the Governing Board
Attest:
_______________________ Secretary
THE GOVERNING BOARD OF PIONEER COMMUNITY ENERGY DOES HEREBY RESOLVE AS FOLLOWS:
WHEREAS, it is prudent for any organization to maintain established levels of reserves; and
In the matter of:
A Resolution Adopting the Pioneer Community Energy Reserve Policy
Ayes:
Noes:
Absent:
20
WHEREAS, reserves serve as a risk management tool to provide a buffer and mitigation against both uncertain and known risks, and whereas established reserves provide financial resiliency and stability; and
WHEREAS, the Board deems it prudent to establish a policy to provide guidance and monitor in the establishment and maintenance of reserves; and
WHEREAS, the Governing Board finds it appropriate to approve an new Pioneer Community Energy Reserve Policy; and
WHEREAS, there has been presented at this meeting the proposed changes, and the new Pioneer Community Energy Reserve Policy has been discussed and considered by the Board.
THEREFORE, BE IT RESOLVED, the Governing Board hereby approves the Pioneer Community Energy Reserve Policy as set forth in the attached Exhibit A; and
BE IT FURTHER RESOLVED, that this Resolution and the attached Pioneer Community Energy Reserve Policy shall be effective immediately after the date of adoption of this Resolution.
21
Attached: Exhibit A – Pioneer Community Energy Debt Management Policy
22
Reserve Policy
Policy Statement Reserves will grow to and be maintained at a Target Reserve Level equal to or exceeding 40% of projected energy and operating expenses for the upcoming fiscal year and a Minimum Liquidity Level of 120 days of operating expenses. The Pioneer Board will adopt budgets and establish rates that provide for building and maintaining an Operating Reserve (Reserve) at or above the Target Reserve Level and Minimum Liquidity Level by June 2022, subject to Pioneer’s ability to meet operational expenditures and maintain competitive rates. The Reserve will be accounted for as part of the Net Position in Pioneer’s financial statements.
Pioneer will prudently manage its operations in a manner that supports its short-term obligations while providing enough financial capacity to achieve and maintain long-term financial stability. This Reserve Policy is important in meeting Pioneer’s strategic objectives, securing more favorable commercial terms from both third-party service providers and lenders and in the development of a future stand-alone Pioneer credit rating. Adequate reserves and financial stability will enable Pioneer to satisfy working capital requirements; allow Pioneer to procure energy on more favorable commercial terms; to adhere to loan covenants; will provide resiliency to cover unanticipated expenditures; and will ultimately support rate stability.
Suppliers, lenders and credit rating agencies utilize a number of criteria, including measures (ratios) and analysis such as, but not limited to year over year trends, debt to equity, and liquidity ratios. In addition to financial analysis, credit rating agencies consider the experience, skill and stability of management, and the relative economic environment of the rated entity. Power suppliers and lenders independently evaluate creditworthiness, as well as, rely on credit rating agencies determinations of creditworthiness. Credit rating agencies consider the availability of liquidity/cash on hand a key factor in their evaluations of community choice aggregation organization creditworthiness.
For new community choice aggregation organizations in the process of establishing credit and financial wherewithal, at least 120 days of operating expenses has been established as the minimum level of liquidity. Days liquidity as calculated by Moody’s credit rating agency is defined as (available cash and investments + unused bank lines of credit) x 365/(operating expenses + cost of energy for the upcoming fiscal year).
To ensure prudent use of debt, unused lines of credit should be limited to a maximum of 20% of total liquidity/cash.
Policy Application to the Budget and Liquidity, and Periodic Review As part of the annual budget process, the Pioneer Board will determine authorized expenditures, appropriate contributions to Reserves to achieve and maintain the Target Reserve Level, amounts necessary for working capital (including power contract prepayments and collateral requirements), debt service payments and rates when approving a Final Budget. Staff will carefully monitor reserve levels and will monitor Pioneer’s liquidity to ensure it meets the liquidity/cash goal of building and maintaining 120 days of projected energy and operating expenses for the upcoming fiscal year. The Pioneer Board is responsible for reviewing Pioneer’s Budget, Financial Statements and Reserve Policy at least annually to ensure Pioneer builds and maintains financial stability in a manner that will support ongoing rate competitiveness.
As Pioneer works to build and achieve the Minimum Reserve Level and Minimum Liquidity Level, it shall not be considered out of compliance, prior to June of 2022.
23
TO: The Governing Board DATE: September 23, 2019 FROM: Jenine Windeshausen, Executive Director SUBJECT: Financial Statements and Release of Reserves
ACTION REQUESTED a) Review Fiscal Year 2018/19 Unaudited Financial Statementsb) Approve the cancellation of $5 million in reserves to make funds available to meet contractual
obligations for collateral and margin calls related to power purchase agreements
BACKGROUND Financial Statements Since July 1, 2019, staff has been working on year-end adjustments and the accounting to close the fiscal year-end and the corresponding development of the year-end financial statements. Staff has also been working with Pioneer’s outside auditors from the firm of Eide Bailly in preparation of the annual audited financial statements. The outside auditors were on-site to perform field work testing during September. Staff is continuing to work with the outside auditor to complete the audited financial statements and anticipates having those statements completed by mid-October.
Today, the Board is presented with the attached unaudited financial statements for Fiscal Year 2019/19. Fiscal year 2018/19 was Pioneer’s first full year of operation. Electricity revenues were $71.8 million in fiscal year 2018/19, while the cost of electric power supply was$63.2 million. For its first full year of operation, Pioneer’s Gross Surplus, defined as electric sales less power supply cost was $8.7 million. Gross Surplus for FY 2017/18’s four and on half months of operation was $9.1 million. During fiscal year 2018/19 Pioneer generated additional net position of $4.2 million, for a total net position of $10.1. Cash and cash equivalents increased to $15.7 million. For fiscal year 2018/19, approximately 27% of Pioneer’s total liabilities consisted of accrued power supply costs which represent energy delivered to Pioneer customers, but not yet paid to the supplier.
Long-Term Debt: Pioneer’s long-term debt consists of bonds outstanding in the total amount of $25.1 million for financing related to both the CCA Program ($14.4 million) and the mPOWER Program ($11.2 million).
• CCA Program Revenue Bond, Series 2017 - Pioneer ended the fiscal year with a long-term debtbalance of $25.1 million. During the fiscal year 2018/19 Pioneer did not draw any additionalamounts on its CCA Program Revenue Bond, Series 2017, and was able to pay the balancedown to $14.4 million from its 2017/18 ending balance of $. The CCA Program Revenue Bond,Series 2017 is repaid solely from electric generation revenues.
• mPOWER Program Series R 2018-19 and Series NR-2018-19 - During fiscal year 2018/19,Pioneer issued $6.1 million of Revenue Bonds (mPOWER Program), Series R 2018-19 and SeriesNR 2018-19, to finance energy retrofit projects within its jurisdiction, and repaid the principalof $0.8 Million, resulting in an ending balance of $11.2 million. The Revenue Bonds (mPOWER
24
Program, Series R 2018-19 and Series NR 2018-19) are payable solely from voluntary assessments on participating properties.
Attached is a year over year comparison of the Audited FY 2017/18 and unaudited FY 2018/19 financial statements. The FY 2017/18 financial statements reflect approximately four- and one-half months of operation, since Pioneer only began operations in February 2018, while FY 2018/19 financial statements reflect Pioneer’s first full year of operation.
While Pioneer generated $5.8 million in net position in FY 2017/18 for its first four months of operation, it generated only $4.2 million in net position for its first full year of operation. This has resulted in a total net position of $10 million as of June 30, 2019. The primary reasons for the relative decrease in revenues are increased power costs ($3.3 million) and reduced revenues from decreases in power consumption ($3 million).
Cancellation of Reserves After the close of FY 2017/18, assuming consistent net revenues for FY 2018/19, staff recommended, and the Board approved at its September 24, 2018 meeting the allocation of the $5 million to reserves. Over the past several months staff has been working to build Pioneer’s energy supply portfolio and will continue to build the energy supply to provide a hedge against power supply costs. As Pioneer’s energy supply portfolio increases so does its contractual and financial obligations related to the contracts it enters. Specifically, Pioneer must post collateral to provide financial security to its counterparties on many of its contracts. It is imperative that Pioneer have cash available to meet margin calls on collateral when contract terms and market conditions dictate posting of collateral. Pioneer expects to post as much as $10 million in collateral based on current energy supply portfolio contracts, power procurement plans and expected market conditions. Currently, $3.4 million in collateral is held with counterparties. Therefore, staff recommends the Board approve the cancellation of the $5 million set aside in reserves early last fiscal year to provide the available cash to meet margin calls.
FISCAL IMPACT Cancelling $5 million in reserves will make cash available for collateral calls, however it will leave Pioneer without reserves until it generates additional net position for allocation to reserves.
25
Pion
eer C
omm
unity
Ene
rgy
Stat
emen
t of R
even
ues,
Exp
ense
s and
Cha
nges
in N
et P
ositi
on Y
ear-
Ove
r-Ye
ar
(Sta
ted
In T
hous
ands
$00
0's)
CCA
Prog
ram
FY 1
7-18
FY 1
8-19
FY 1
7-18
FY 1
8-19
Audi
ted
Una
udite
dAu
dite
dU
naud
ited
Ope
ratin
g Re
venu
esEl
ectr
icity
sale
s, n
et a
llow
. for
Unc
olle
ctib
le A
ccts
.$
2
4,61
1$
7
1,84
6$
0
$
0Pr
ogra
m In
vest
men
t Inc
ome
00
850
Serv
ice
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ges
00
6567
6To
tal o
pera
ting
reve
nues
24,6
1171
,846
149
676
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ratin
g Ex
pens
esCo
st o
f ele
ctric
ity15
,449
63,1
950
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xes a
nd A
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ts31
90
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ntra
ct se
rvic
es2,
643
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636
53St
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ompe
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6763
037
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and
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n15
551
91
37Pr
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tal o
pera
ting
expe
nses
18,4
9767
,696
7660
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pera
ting
inco
me
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)6,
114
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Non
oper
atin
g Re
venu
es (E
xpen
ses)
Inte
rest
inco
me
3841
399
240
Inte
rest
and
rela
ted
expe
nses
(345
)(3
89)
(84)
(303
)To
tal n
onop
erat
ing
reve
nues
(exp
ense
s)(3
07)
2415
(63)
Chan
ge in
Net
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ition
Chan
ge in
net
pos
ition
5,80
74,
174
895
Net
pos
ition
at b
egin
ning
of p
erio
d0
5,80
70
89N
et p
ositi
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t end
of p
erio
d$
5
,807
$
9,9
81$
8
9$
9
4
mPO
WER
Pro
gram
mPO
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Pro
gram
CCA
Prog
ram
26
Pion
eer C
omm
unity
Ene
rgy
Stat
emen
t of N
et P
ositi
on Y
ear-
Ove
r-Ye
ar
(Sta
ted
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h eq
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s$
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ts re
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10,3
7511
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00
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: Allo
wan
ce fo
r dou
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l acc
ount
s(3
61)
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Inte
rest
rece
ivab
le13
251
141
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ract
ual a
sses
smen
ts re
ceiv
able
(due
with
in o
ne y
ear)
00
035
0Pr
epai
d ex
pens
es1
2,65
52,
078
00
Colla
tera
l dep
osits
1,39
42,
790
00
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l cur
rent
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ets
24,7
5730
,532
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1,44
4
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curr
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sset
sCo
ntra
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l ass
essm
ents
rece
ivab
le0
05,
671
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non
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340
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l non
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s34
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671
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,790
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326,
113
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52
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sCu
rren
t lia
bilit
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pay
able
232
323
21
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ued
cost
of e
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3,88
45,
610
00
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ccru
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185
03
Accr
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bond
inte
rest
pay
able
3130
5812
6Bo
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with
in o
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325
335
1216
9Co
ntra
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xclu
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- en
ergy
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liers
010
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0U
ser t
axes
and
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rgy
surc
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es d
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oth
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over
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780
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near
ned
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nue
00
5210
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tal c
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nt li
abili
ties
4,57
86,
481
123
398
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curr
ent l
iabi
litie
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nd p
rinci
ple
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ble,
net
of c
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nt p
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on14
,405
14,0
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59To
tal n
oncu
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t lia
bilit
ies
14,4
0514
,070
5,90
011
,059
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l lia
bilit
ies
18,9
8320
,551
6,02
411
,458
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ition
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inve
stm
ent i
n ca
pita
l ass
ets
340
00
Unr
estr
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05,
000
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Unr
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d5,
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189
94To
tal n
et p
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n$
5
,807
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9,9
81$
8
9$
9
4
mPO
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Pro
gram
FY 1
8-19
Una
udite
d
mPO
WER
Pro
gram
FY 1
7-18
Audi
ted
CCA
Prog
ram
FY 1
7-18
Audi
ted
CCA
Prog
ram
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8-19
Una
udite
d
27
Pion
eer C
omm
unity
Ene
rgy
Stat
emen
t of C
ash
Flow
s Yea
r-O
ver-
Year
(Sta
ted
In T
hous
ands
$00
0's)
CCA
Prog
ram
CCA
Prog
ram
FY 1
7-18
FY 1
8-19
FY 1
7-18
FY 1
8-19
Audi
ted
Una
udite
dAu
dite
dU
naud
ited
Cash
Flo
ws f
rom
Ope
ratin
g Ac
tiviti
esRe
ceip
ts fr
om e
lect
ricity
sale
s$
1
4,32
5$
7
1,32
0$
5
2$
0
Paym
ents
rece
ived
from
oth
er re
venu
e so
urce
s0
$
014
988
5Pa
ymen
ts re
ceiv
ed fr
om se
curit
y de
posit
s with
ene
rgy
supp
liers
0$
1
000
0Pa
ymen
ts to
pur
chas
e el
ectr
icity
(15,
382)
$
(62,
348)
20
Paym
ents
for T
axes
and
Ass
essm
ents
0$
(3
30)
00
Paym
ents
for c
ontr
act s
ervi
ces
(2,6
43)
$
(2,6
85)
(36)
(54)
Paym
ents
for s
taff
com
pens
atio
n(6
7)$
(6
30)
(37)
(464
)Pa
ymen
ts fo
r fin
ance
and
adm
inist
ratio
n(1
37)
$
(498
)(1
)(2
1)Pa
ymen
ts fo
r Pro
gram
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elop
men
t0
$
00
0Pa
ymen
ts fo
r mak
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g (1
84)
$
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)(2
)(1
8)Co
ntra
ctua
l ass
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ents
issu
ed0
$
0(5
,671
)(4
,724
)N
et c
ash
prov
ided
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d) b
y op
erat
ing
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ities
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$
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)(4
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)
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00$
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6,01
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)(9
9)15
7In
tere
st p
aid
on lo
ng-t
erm
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t(3
13)
$
(390
)(2
6)(2
36)
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cas
h pr
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ed b
y no
ncap
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es14
,417
$
(715
)5,
886
5,08
0
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rom
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nd R
elat
ed F
inan
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ition
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onde
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sets
(34)
$
00
0
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rom
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stin
g Ac
tiviti
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tere
st in
com
e25
$
401
99(1
24)
Net
incr
ease
in c
ash
and
cash
equ
ival
ents
10,3
21$
4
,418
441
561
Cash
and
cas
h eq
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lent
s, b
egin
ning
of y
ear
0$
1
0,32
10
441
Cash
and
cas
h eq
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s, e
nd o
f yea
r$
1
0,32
1$
1
4,73
9$
4
41$
1
,003
Reco
ncili
atio
n of
Ope
ratin
g In
com
e to
Net
Cas
h Pr
ovid
ed b
y (U
sed)
Ope
ratin
g Ac
tiviti
es
FY 1
7-18
FY 1
8-19
FY 1
7-18
FY 1
8-19
CCA
CCA
mPO
WER
mPO
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Ope
ratin
g in
com
e (lo
ss)
$
6,1
14$
4
,150
$
74
$
68
Adju
stm
ents
to re
conc
ile o
pera
ting
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me
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) to
net c
ash
prov
ided
by
(use
d in
) ope
ratin
g ac
tiviti
es:
(Incr
ease
) dec
reas
e in
non
depr
ecia
ble
capi
tal a
sset
s0
340
0(In
crea
se) d
ecre
ase
in n
et a
ccou
nts r
ecei
vabl
e(1
0,37
5)(5
26)
00
(Incr
ease
) dec
reas
e in
oth
er re
ceiv
able
s0
0(5
,671
)(4
,787
)(In
crea
se) d
ecre
ase
in p
repa
id e
xpen
ses
(2,6
55)
577
00
(Incr
ease
) dec
reas
e in
col
late
ral d
epos
its(1
,394
)(1
,396
)0
0In
crea
se (d
ecre
ase)
in a
ccou
nts p
ayab
le23
215
12
(1)
Incr
ease
(dec
reas
e) in
acc
rued
cos
t of e
lect
ricity
3,88
41,
666
00
Incr
ease
(dec
reas
e) in
oth
er a
ccru
ed li
abili
ties
18(1
2)0
0In
crea
se (d
ecre
ase)
in u
near
ned
reve
nue
00
5227
2In
crea
se (d
ecre
ase)
in se
curit
y de
posit
s fro
m e
nerg
y su
pplie
rs10
00
0In
crea
se (d
ecre
ase)
in u
ser t
axes
due
to o
ther
gov
ernm
ents
88(1
1)0
0N
et c
ash
prov
ided
(use
d) b
y op
erat
ing
activ
ities
$
(4,0
87)
$
4,7
33$
(5
,544
)$
(4
,448
)
mPO
WER
Pr
ogra
mm
POW
ER
Prog
ram
28
TO: The Governing Board DATE: September 23, 2019 FROM: Jenine Windeshausen, Executive Director SUBJECT: Rate Setting Discussion
ACTION REQUESTED a) Receive a Fiscal Year 2019/20 Budget updateb) Provide further direction to staff related to the August 16, 2019 motion postponing the electric
generation rates adopted by Board resolution on August 6, 2019
BACKGROUND Attached is a Fiscal Year 2019/20 Budget Worksheet for Pioneer’s CCA Program Fund. The purpose of the worksheet and presentation are to provide information for Board discussion regarding Pioneer’s revenue requirements and current budget status so staff may receive direction regarding adoption of a Final Budget for FY 2019/20 and implementation of rates.
Key elements of the FY 2019/20 Budget Worksheet are as follows: • Line 5 – Total Operating Revenues assume October 1 implementation of rates adopted on
August 5th, reduced from Line 2 by $4.9 million, which assumed July 1 implementation
• Line 11– Staff compensation reduced approximately $374,000 to reflect deferral of hiring for four months.
• Line 31 – Assumes $5 million replenishment of cancelled reserves by June 30, 2020• Line 32 – Assumes $10 million collateral requirement remains flat through June 30, 2020• Line 33 – Assumes $3.6 million additional principal payment on debt at June 30, 2020 to
avoid larger balloon payment June 2023 • Line 34 – Remaining net position of $5.3 million available for reserves, additional debt
repayment or revenue reduction
Today staff has provided the Board with the Debt Management Policy and a revised Reserve Policy as requested and staff has provided the Board information amounts necessary to take a level approach to implementing the Reserve Policy which is to set aside at least $9.73 million each year to achieve the Minimum Reserve Level by June of 2022.
The Board adopted a Proposed Budget on June 3, 2019. Pursuant to the motion made on August 16,
2019 to “postpone indefinitely the decision on rates from August 5th, until the board adopts policy for debt and reserves and adopted into an amended budget”, rate adjustments may take effect immediately upon adoption of a Final Budget. However, staff prefers the Board to provide direction, and to take affirmative action to implement any rate adjustments.
Related to proposed rate adjustments, the Board has held a public hearing on July 1, 2019, and on August 5, 2019. When the Board adopted initial rates in December of 2017, it also held a public hearing. In all cases the public hearings were publicly noticed in all local papers at least once. The
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purpose of the public noticing and public hearings is to provide notice, transparency and opportunity for public participation in the rate setting process. However, there is no requirement to provide public notice in newspapers or to hold a public hearing related to rate setting. Pursuant to the Brown Act, as with any other action of the Board, rate setting agenda items must be noticed on the Board’s agenda in a manner to provide notice of potential actions. Staff requests the Board provide direction for returning to the Board regarding Final Budget allocations, rate adjustment implementation and procedural actions for both. Staff recommends the Board consider a meeting on September 30, 2019 to continue moving forward with the Board’s decisions, since continued delay directly affects total revenues for the current fiscal year. FISCAL IMPACT There is no direct fiscal impact with the Board’s review and direction. Fiscal impact will ultimately be determined by the future actions of the Board when they adopt a Final Budget and implement any rate adjustments. However, staff notes that delays in implementing the pending rate increase have already reduced potential revenues by approximately $4.9 million, particularly since no rate adjustment was effective during the peak consumption months of July and August. Staff suggests the Board consider a meeting on September 30, 2019 to take actions to adopt a Final Budget and any additional actions related to the implementation of a rate adjustment. ATTACHMENTS Final Budget Worksheet
