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:

1. The ‘Greener Power’ scenario launches and maintains a 60% carbon-free supply for the CCA, with renewable supply growing from 35% to 45%, and a 1% generation rate decrease relative to SCE. (Between 2018-2022, we estimate SCE at 44% → 50% carbon free electricity, of which 34% → 39% is renewable.)
2. The ‘Decarbonization’ scenario launches the CCA at 60% carbon-free starting with 35% renewable power content, and grows to 100% carbon-free with 50% renewable by 2022 — with a 0.5% rate decrease compared to SCE.

Scenarios included for the sake of comparison (these do not reflect policy goals):

3. The ‘Base Case’ scenario provides an initial point of comparison with SCE. The CCA matches SCE’s estimated renewable and carbon content, and sets rates such that customers would pay the same under either CCA or SCE bundled service.
4. The ‘Cheaper Power’ scenario holds the Base Case assumptions steady but decreases generation rates by 2% in all years as compared to SCE. It is included to provide insight into the impact of rate decreases on the CCA.

The following factors are standardized across all scenarios (for the sake of comparison):

• Overhead costs support an empowered agency that grows in expert staff capacity from 12 FTE at the end of 2018 to 27 staff by 2020;
• A range of contractors provide supporting services, and at-risk contracting is used to lower upfront implementation costs by an estimated $400,000.
• Staff positions and program funding for Distributed Energy Resources (DER) total $12.3MM in expenses over the five-year forecast horizon.

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:

1. MS Excel workbook of full model results (MS Excel, for PC and Mac): provides monthly energy and financial model results, on both an accrual and cash-flow basis (allowing analytical verification of the customer phase-in and startup phase financial strategy). This is also the first time this level of detail in CCA model results has been made public.
2. Silicon Valley Clean Energy & Redwood Coast Energy Authority: Energy Risk Management Policies and corresponding service contracts with Portfolio Managers. (The policies reflect a comprehensive and expert approach to monitoring, analyzing and mitigating key sources of financial risk for CCAs in energy planning and operations — and are extremely sophisticated as compared to any prior CCA risk management policy).
3. Silicon Valley Clean Energy: Financial Policy adopted by the Board,financial agreements executed with River City Bank, and CEO memo identifying multiple energy suppliers from which the CCA intends to source power.
4. Upon request: points of contacts with lenders interested in providing startup capital, and introductions to other CCA key staff who can assist in this process.

Forthcoming Work Products for CCA Implementation Phase