REGION — The Clean Energy Alliance board of directors approved an extended credit line during its Jan. 13 meeting.
Clean Energy Alliance, also known as CEA, will now have a credit line up to $15 million from JPMorgan Chase to help cover cash flow and future expansion costs.
The energy service provider, which covers the cities of Carlsbad, Del Mar and Solana Beach and provides a minimum 50% clean energy product, initially took out a $6 million loan to launch the program, which started service in May 2021.
The loans must be paid back by Dec. 2023 and Jan. 2026, according to Barbara Boswell, chief executive officer of the CEA. JP Morgan will not extend the line of credit any further until the first $6 million is repaid, Boswell said.
Boswell said the agency had a budgetary shortfall this year and the extended line of credit will allow them to cover their bills and get San Marcos and Escondido launched by April 2023.
However, Boswell said the new rates, which slightly increased but still saved 2% on generation compared to San Diego Gas & Electric, will be enough to cover operations and paying back the loan through the end of the year.
Boswell also provided an update to the Carlsbad City Council during its Jan. 18 meeting.
“It would be prudent to increase line of credit up to $15 million and have funds at our disposal if we need to draw them down,” she said. “It’s not a debt of the cities, but a debt of Clean Energy Alliance.”
Boswell said the CEA has drawn down the first $6 million and additional $9 million will be used to make up for cash flow and budget shortfalls, contracts for the cities of San Marcos and Escondido launching in 2023 and paying back past loans with interest and meeting those deadlines.
The Fiscal Year 2021-22 budget shows a massive jump in revenue to $53.5 million and expenditures to $51.5 million due to the CEA being fully launched with residential and business customers. However, the net position of the CEA is a negative $2.7 million, nearly $2 million more than 2020.
Additionally, the CEA’s reserve projections have taken a big hit as the agency estimated $27 million by 2023, although Boswell said those have been revised to $10 million for a difference of $17 million. The reserves have not been earmarked for a specific use by the CEA board, but in the past advocates and council members from the three cities have said those funds could be used for energy programs or projects.
Boswell said the reserve estimates are short because in 2019 the implementation plan for the three cities didn’t include a 2% discount for ratepayers and due to a phased-in launch in May and June 2021 on a request by San Diego Gas & Electric as the utility launched its new billing system, which is used by the CEA.
Also, the cost of power supply contracts were higher than anticipated prior to the launch of the CEA.
“It assumed all of our customers would be enrolled in May and we would have full revenue in June,” Boswell explained of the shortfall, noting large business customers didn’t come on board until June. “After we filed our implementation plan, SDG&E came to us. The request was to accommodate their scheduled early billing system that did result in lost revenue for Clean Energy Alliance.
As for the rate charges, Councilman Peder Norby said while there is debate over the Power Charge Indifference Adjustment, or exit fee, those are also included with SDG&E customers, but are listed in different bundle.
Also, Norby said he was concerned with the interest rates as it would be the worst time to do so as rates are expected to rise. Boswell said the rate will be locked when a draw down occurs, so each chunk of cash may have different interest rates.
Boswell said the CEA has conducted stress tests and has enough revenue, especially with the new rates, to cover costs to meet those loan repayment deadlines. CEA Chairwoman Kristi Becker asked during the Jan. 13 meeting if CEA needed to use its reserves, but Boswell said
“It would be nice to show our original projections were to how we’re meeting our targets so the audience and clearly see how close we are,” Carlsbad Mayor Matt Hall said. “When you go into the summertime, there is some exposure there.”
Boswell said the CEA has sufficient fixed-priced contracts in place and will help avoid spikes in the market during summer.
As for the cities of Escondido and San Marcos, both submitted implementation plans to the California Public Utilities Commission at the end of 2021, Boswell said. CPUC will review those plans over the next 90 days and by April, CEA will start evaluating their energy capacity to determine the scale of power supply contracts, Boswell said.