Because the current state of Community Choice Power programs is in a state of significant transition in California, the launch and first five years of operation are the make-it-or-break it period for CCAs. So, as opposed to a long-term planning study, the South Bay Clean Power Financial Strategy is focused on the feasibility of the CCA’s customer phase-in strategy over the year of operations, and near-term financial performance extending out five-years.
Results are provided on a granular, monthly basis that captures real-world dynamics impacting operational CCAs. It includes detailed visualizations and explanations of these key dynamics, and also explains how accurate forecasting of the utility’s power portfolios is a critical part of the analysis.
In this manner, the forecast horizon and level of specificity in the report is intended to be actionable: to engage lenders and support financial negotiations for implementation. The modeling is focused on the period when debt is 1) used to collateralize and launch the program and 2) subsequently paid off with net revenues generated over the initial years of operations.
It is important to note that these model runs are intended to support 1) SBCP municipalities in deciding whether to proceed with CCA, and 2) the negotiation of a startup loan to do so. Additional, larger financing rounds are anticipated during the CCA implementation process — at which point, SBCP will have key staff and contractors, and access to operational-grade data from SCE, to provide more accurate inputs to the model. In this manner, the current model results and this report should not be considered in isolation from the overall launch process, as it will be updated prior to finalizing and committing to power purchases.
Model results indicate how South Bay Clean Power can balance its objectives — in the provision of expert energy risk management services, growing staff capacity, rate competitiveness, financial stability, funding for Distributed Energy, and increased renewable and carbon-free electricity — while minimizing municipal liabilities and financial exposure.
The Financial Strategy report provides a range of scenarios to demonstrate the trade-offs in what the CCA can afford:
South Bay Clean Power Scenarios:
Scenarios included for the sake of comparison (these do not reflect policy goals):
The following factors are standardized across all scenarios (for the sake of comparison):
A key component of a Financial Strategy is to anticipate near-term risks that should be planned for from Day 1. Consequently, substantial analysis of ongoing regulatory risks is included in the appendix, and the report concludes with a “Contingency Plan” for managing key risks outside the CCA’s control over the next five years.
The appendices also include full ‘open book’ disclosure on model methodology — for the first time in any CCA report —accompanied by various datasets and all source material used in model preparation, analyzes sources of near-term regulatory risk and provides mitigating strategies, and concludes with a startup loan table.
Supporting documents also available for download include: