MSR Energy Authority. AGENDA Distribution:

Transcription

1 MSR Energy Authority SPECIAL MEETING OF THE COMMISSION Wednesday, September 23, 2015, 12:30 p.m. Navigant Consulting, Inc. 35 Iron Point Circle, Suite 225 Folsom, CA AGENDA Distribution: Commissioners & Alternate Commissioners Modesto: Greg Salyer 1 James McFall (Alt) Others Martin Hopper Pete Scanlon Steve Gross Alan Hockenson Toxie Burriss Scott Van Vuren Ed Oborn Cindy Worley Santa Clara: John Roukema 2 (V.P.) Ann Hatcher Pat Kolstad (Alt) Joyce Kinnear 1 Teresa O Neill (Alt) Alan Kuratori Redding: Barry Tippin, (Pres.) 3 Margie Walker 1 Paul Cummings (Alt) file/er/msrea Ann Czerwonka 1 1 Please post agenda. 2 Please post agenda. 3 Please post agenda.

2 M S R Energy Authority SPECIAL MEETING OF THE COMMISSION Wednesday, September 23, 12:30 p.m. Navigant Consulting, Inc. 35 Iron Point Circle, Suite 225 Folsom, CA AGENDA Any member of the public who desires to address the Commission on any item considered by the Commission at this meeting before or during the Commission s consideration of that item shall so advise the Chair and shall thereupon be given an opportunity to do so. 1. Call to Order 2. Roll Call 3. Approve meeting minutes of August 19, 2015 (attached) 4. Report of Summary of invoices paid totaling $5, (summary attached) 5. September 2015 M S R EA General Manager s Report (attached, Martin Hopper) 6. September 2015 Outside Services Budget v. Actual Report (attached, Martin Hopper) 7. Discussion and Possible Action Regarding M S R EA 2016 Strategic Plan (attached, Martin Hopper) 8. Discussion and Possible Action Regarding Amendment of Administrative and Accounting Services Agreement with Modesto Irrigation District (attached, Martin Hopper) 9. Discussion and Possible Action Regarding Amendment of Administrative and Technical Services Agreement with M S R Public Power Agency (attached, Martin Hopper) 10. Discussion and Possible Action Regarding 2015 Update to M S R EA Policies and Procedures Manual and Resolution (attached, Martin Hopper) 11. Public Comment 12. Confirm date and time of next meeting 13. Adjourn

3 M-S-R Energy Authority Agenda Page 2 September 23, 2015 Alternate formats of this agenda will be made available upon request to qualified individuals with disabilities. Note: It is the policy of MSR Energy Authority to not discriminate in admissions, provisions of services, hiring, training and employment practices on the basis of color, national origin, sex, religion, age or disability including AIDS and related conditions. Equal Opportunity Employer. The meeting location is accessible to people with disabilities. Every reasonable effort will be made to accommodate participation of the disabled in all of the Authority s public meetings. If particular accommodations for the disabled are needed (i.e., disability related aids or other services), please contact the General Manager at least 24 hours in advance of the meeting.

4 M-S-R ENERGY AUTHORITY DRAFT MINUTES MEETING OF THE COMMISSION AUGUST 19, 2015 The Commission of the M-S-R Energy Authority (M-S-R EA) met August 19, 2015, at the offices of Navigant Consulting, Inc. (NCI), 35 Iron Point Circle, Suite 225, Folsom, CA, Present from Modesto Irrigation District (MID) were Greg Salyer, and Scott Van Vuren; present from Santa Clara were Patrick Kolstad, and Alan Kuratori; and present from Redding were Barry Tippin, and Paul Cummings. Also present were Consultant Alan Hockenson; General Counsel Steve Gross; and General Manager Martin R. Hopper. Chair Tippin called the meeting to order at 1:27 P.M. A quorum was attained with the voting representatives being Mr. Salyer, Mr. Kuratori, and Mr. Tippin. The Commission then reviewed the minutes of its June 17, 2015, meeting. It was moved by Alternate Commissioner Kuratori and seconded by Commissioner Salyer to approve the minutes. Upon the call of the roll, the motion carried unanimously. The Commission then reviewed the invoices listed under Item No. 4 on the Agenda which have previously been paid pursuant to pre-existing delegations of authority. Mr. Hopper reviewed his General Manager s Report and noted the proposed schedule for the annual updates of the Authority s Strategic Plan and Policies and Procedures Manual. A number of corrections to the Authority s Organization chart were noted and a revised draft will be presented at the next meeting of the Authority. Mr. Hopper then briefed the Commission on the August 2015 Budget v. Actual Report and Mid-Year Budget Review. He reported no adjustments to the Budget are indicated or required at this time. However, although there has been no further activity regarding the Internal Revenue Service s examination of the Series 2009C Bonds, the Budget included

5 DRAFT Minutes M-S-R Energy Authority Meeting of August 19, 2015 Page 2 of 2 a line item of $30,000 for Bond Counsel support that has been cash-called from the Members. If at time of consideration of the Authority s 2016 Budget in November, there has been no further work, the Commission may wish to direct this item be rebated to the Members and a new allocation be made in that Budget as appropriate. He recommended the Commission note and file the report. The Chair then called for Public Comment and there being none, the Chair announced that the next regular meeting of the Commission will be Wednesday, September 23, 2015, at 12:30 PM, to be held at NCI s offices in Folsom, CA. The meeting was then adjourned by the Chair at 1:35 P.M. Martin R. Hopper Assistant Secretary Macintosh HD:Users:martinhopper:My Laptop Documents:M-S-R Energy Authority:Administrative:Commission:Minutes:2015 Minutes:MSR EA Minutes 0815.doc

6 M-S-R Energy Authority Summary of Invoices Paid Period Covered Payee Description Amount MID Administrative & Accounting Jul-15 $ 1, Services Martin Hopper Energy General Manager Services Aug-15 $ 4, Porter Simon General Legal Services Aug-15 $ $ 5,654.08

7 Date: September 16, 2015 M-S-R Energy Authority Staff Report From: To: Subject: Martin R. Hopper, General Manager M-S-R EA Commission September 2015 General Manager s Report M-S-R Energy Authority Organization Chart The Authority has recently been notified by Santa Clara and Redding of updates to their appointed representatives. The attached corrected organization chart reflects those updates. Macintosh HD:Users:martinhopper:My Laptop Documents:M-S-R Energy Authority:Administrative:General Manager:September 2015 MSR EA General Manager's Report.doc Page 1 of 2

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9 M-S-R ENERGY AUTHORITY Staff Report Date: September 16, 2015 From: To: Subject: Martin R. Hopper, General Manager M-S-R EA Commission September 2015 Outside Services Budget versus Actual Report Major Providers Reporting Are: General Manager: Through: August 31, 2015 Porter Simon: Through August 31, 2015 KBT LLC: Through July 31, 2015 Modesto Irrigation District: Through August 31, 2015 Baker Tilly: Through August 31, 2015 Orrick Herrington: Through August 31, 2015 Detailed charts of monthly budget versus actual cost comparisons for each provider are attached in their usual format. I recommend the Commission note and file this report. Macintosh HD:Users:martinhopper:My Laptop Documents:M-S-R Energy Authority:Budgets:2015:Sep 2015 EA Outside Services Budget v Actual Report.doc

10 M-S-R EA Outside Services Summary Month of: Aug ,000 Outside Services - Total 140, , ,000 80,000 60,000 CUMMULATIVE BUDGET CUMMULATIVE ACTUAL 40,000 20,000 - Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec By Provider Budget Current Month Actual Current Month Positive Variance Actual v. Budget % By Provider Budget Year to Date Actual Year to Date Positive Variance Actual v. Budget % General Manager 4,000 4, % General Manager 32,000 32, % General Counsel (64) 113% General Counsel 4,000 2,351 1,650 59% KBT % KBT 1, ,333 0% MID 1,167 1, % MID 9,333 6,236 3,098 67% Baker Tilly #DIV/0! Baker Tilly 20,600 20, % Orrick 5, ,000 0% Orrick 10, ,000 0% Total 10,833 5,654 5,179 52% Total 77,267 60,586 16,680 78% 9/16/ EA Outside and Financial Services Expenses.xlsx

11 M-S-R EA General Manager Summary Month of: Aug-2015 Budget Current Month Actual Current Month Positive Variance Actual v. Budget % Admin 4,000 4, % Total 4,000 4, % Budget Year to Date Actual Year to Date Positive Variance Actual v. Budget % Admin 32,000 32, % Total 32,000 32, % 60,000 50,000 40,000 30,000 20,000 10,000 - General Manager - Total CUMMULATIVE BUDGET CUMMULATIVE ACTUAL Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec /16/ EA Outside and Financial Services Expenses.xlsx

12 M-S-R EA General Counsel Summary Month of: Aug-2015 Budget Current Month Actual Current Month Positive Variance Actual v. Budget % Admin (64) 113% Total (64) 113% Budget Year to Date Actual Year to Date Positive Variance Actual v. Budget % Admin 4,000 2,351 1,650 59% Total 4,000 2,351 1,650 59% 7,000 6,000 5,000 4,000 3,000 2,000 1,000 - General Counsel - Total CUMMULATIVE BUDGET CUMMULATIVE ACTUAL Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec /16/ EA Outside and Financial Services Expenses.xlsx

13 M-S-R EA KBT Summary Month of: Aug-2015 Budget Current Month Actual Current Month Positive Variance Actual v. Budget % Admin % Total % Budget Year to Date Actual Year to Date Positive Variance Actual v. Budget % Admin 1, ,333 0% Total 1, ,333 0% 2,500 KBT - Total 2,000 1,500 1, CUMMULATIVE BUDGET CUMMULATIVE ACTUAL Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec /16/ EA Outside and Financial Services Expenses.xlsx

14 M-S-R EA MID Summary Month of: Aug-2015 Budget Current Month Actual Current Month Positive Variance Actual v. Budget % Admin 1,167 1, % Total 1,167 1, % Budget Year to Date Actual Year to Date Positive Variance Actual v. Budget % Admin 9,333 6,236 3,098 67% Total 9,333 6,236 3,098 67% 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 - MID - Total CUMMULATIVE BUDGET CUMMULATIVE ACTUAL Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec /16/ EA Outside and Financial Services Expenses.xlsx

15 M-S-R EA Baker Tilly Summary Month of: Jul-2015 Budget Current Month Actual Current Month Positive Variance Actual v. Budget % Admin #DIV/0! Total #DIV/0! Budget Year to Date Actual Year to Date Positive Variance Actual v. Budget % Admin 20,600 20, % Total 20,600 20, % 25,000 Baker Tilly - Total 20,000 15,000 10,000 5,000 - CUMMULATIVE BUDGET CUMMULATIVE ACTUAL Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec /16/ EA Outside and Financial Services Expenses.xlsx

16 M-S-R EA Orrick Summary Month of: Aug-2015 Budget Current Month Actual Current Month Positive Variance Actual v. Budget % Admin 5, ,000 0% Total 5, ,000 0% Budget Year to Date Actual Year to Date Positive Variance Actual v. Budget % Admin 10, ,000 0% Total 10, ,000 0% 35,000 30,000 25,000 20,000 15,000 10,000 5,000 - Orrick- Total CUMMULATIVE BUDGET CUMMULATIVE ACTUAL Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec /16/ EA Outside and Financial Services Expenses.xlsx

17 Authority Admin Budget Jan-2015 Feb-2015 Mar-2015 Apr-2015 May-2015 Jun-2015 Jul-2015 Aug-2015 Sep-2015 Oct-2015 Nov-2015 Dec-2015 Total Average Year-End Notes 12/31/ % 16.67% 25.00% 33.33% 41.67% 50.00% 58.33% 66.67% 75.00% 83.33% 91.67% % Projection General Manager General Counsel KBT MID Baker Tilly Admin 48,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 32,000 4,000 48,000 48,000 48,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4, ,000 4,000 48, % 16.67% 25.00% 33.33% 41.67% 50.00% 58.33% 66.67% 66.67% 66.67% 66.67% 66.67% 100% Admin 6,000 1, , ,526 4,062 6,000 1, , , % 17.09% 20.76% 20.76% 20.76% 29.78% 29.78% 39.18% 39.18% 39.18% 39.18% 39.18% 59% Admin 2, , % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0% Admin 14, ,091 1,091 1,091 6, ,354 20,248 14, ,091 1,091 1, , , % 9.37% 13.26% 14.71% 21.17% 28.96% 36.75% 44.54% 44.54% 44.54% 44.54% 44.54% 67% - - Admin 20, ,932 4,910 3,551 1, ,000 1,667 20,000 17,503 20, ,932 4,910 3,551 1, ,000 1,667 20, % 0.00% 48.21% 72.05% 89.29% 97.09% 97.09% 97.09% 97.09% 97.09% 97.09% 97.09% 97% Bank Fees 1, ,081 1, % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0% Total Agency Admin 91,800 5,635 4,703 14,696 9,114 8,455 7,239 5,091 5, ,586 6,740 80, % 11.26% 27.27% 37.20% 46.41% 54.29% 59.84% 66.00% 66.00% 66.00% 66.00% 66.00% 88% Debt Admin Bond Counsel Orrick 30, , % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0% - Financial Services Montague 10,000 2, , ,075 Fitch 10,000 10,000 10,000 10,000 10,000 Standard & Poors 15,000 15,000 15,000 15,000 15,000 35,000 2, ,000 15, ,050 2,254 27,050 27, % 5.86% 5.86% 5.86% 5.86% 5.86% 34.43% 77.29% 77.29% 77.29% 77.29% 77.29% 77% Trustee 13, ,800 13, % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0% Total Debt Admin 78,500 2, ,000 15, ,050 2,254 27, % 2.61% 2.61% 2.61% 2.61% 2.61% 15.35% 34.46% 34.46% 34.46% 34.46% 34.46% 34% 9/16/ Input 2015 EA Outside and Financial Services Expenses.xlsx

18 M-S-R Energy Authority Staff Report Date: September 16, 2015 From: To: Subject: Martin R. Hopper, General Manager M-S-R EA Commission 2016 M-S-R EA Strategic Plan Each year the M-S-R EA Commission considers an update to the M-S-R EA Strategic Plan to provide guidance for the preparation of the M-S-R EA Budget and for the operations of the Agency. The proposed update continues to reflect the status quo structure of M-S-R EA operations and other than updated editing is substantially similar to last year s Strategic Plan. The discussions and analysis of issues within the M-S-R EA (and M-S-R PPA) Strategic Plans have also been reviewed by General Counsel for conformity with disclosure requirements and applicable legislative and regulatory obligations of the Authority and the Agency. The M-S-R EA Technical Committee reviewed and revised the draft plan in a workshop held September 10, A copy of the proposed 2016 M-S-R EA Strategic Plan red-lined to show changes from last year s report is attached. I recommend the Commission adopt the 2016 M-S-R EA Strategic Plan.

19 M-S-R ENERGY AUTHORITY STRATEGIC PLAN Effective January 1, 2015 Joyce Kinnear 7/16/14 7:42 AM Deleted: 4

20 M-S-R ENERGY AUTHORITY STRATEGIC PLAN Effective January 1, 2015 Each year the M-S-R Energy Authority Commission will develop and adopt a strategic plan to address the issues faced by the Authority in the ensuing five-year period. The plan is updated and reviewed by the M-S-R Energy Authority Commission in September of each ensuing year prior to the development of the annual M-S-R Energy Authority Budget. The issues of Organizational Structure and Philosophy; Managing and Maintaining Assets; Financial Matters; and Joint Action Opportunities presented below characterize the Authority s strategic vision through Joyce Kinnear 7/16/14 7:42 AM Deleted: 4 Joyce Kinnear 7/16/14 7:57 AM Deleted: 2019 INDEX I. Introduction II. Organizational Structure And Philosophy III. Manage And Maintain Assets Natural Gas Project IV. Financial Matters V. Joint Action Opportunities Background Big Horn Wind Energy Project VI. Strategic Risks And Exposures Exhibit A M-S-R EA Organization Chart Martin Hopper 8/31/14 5:34 PM Deleted: Adopted by Joyce Kinnear 7/20/15 10:32 AM Deleted: CommissionTech C tee Martin Hopper 9/1/15 9:53 AM Deleted: August Commission Review Draft Sept

21 M-S-R ENERGY AUTHORITY STRATEGIC PLAN Effective January 1, 2015 I. INTRODUCTION Joyce Kinnear 7/16/14 7:41 AM Deleted: 4 The M-S-R Energy Authority (M-S-R EA) was created on July 15, 2008, through a Joint Exercise of Powers Agreement among Modesto Irrigation District (Modesto), the City of Santa Clara (Santa Clara), and the City of Redding (Redding) to acquire, construct, maintain, operate and finance Projects, including but not limited to: (a) the purchase, generation, transmission or distribution of energy; (b) the purchase, sale, exchange, storage, construction, maintenance and operation of natural gas, natural gas facilities and natural gas transportation facilities, output, reserves and capacity; (c) the acquisition and sale of environmental commodities, including but not limited to: (1) renewable energy credits; (2) emissions reduction credits; and (3) other interests in environmental attributes or benefits of renewable energy projects or rights to offset the environmental impacts of conventional energy use; and (d) any other project, facility, improvement, asset, commodity or interest therein related to the generation, transmission or distribution of energy as may be designated by the M- S-R EA Commission. Unless otherwise noted the participation in M-S-R EA Projects is Modesto 1/3, Santa Clara 1/3, and Redding 1/3. M-S-R EA s purpose is to maximize the value of its existing assets for the benefit of the Members and to respond to Member needs where joint action rather than individual action is deemed to be in the Member s best interests. M-S-R EA is also intended to provide more responsive services to its members than may be possible from larger or state-wide agencies or associations. II. ORGANIZATIONAL STRUCTURE AND PHILOSOPHY Since its formation, M-S-R EA has been a member-directed, member-supported organization. Policy direction is provided to M-S-R EA through its Commission. Management, legal, administrative and operational support is provided through agreements with the M-S-R Public Power Agency (M-S-R PPA), the Modesto Irrigation District (MID), and other third parties. General and technical (project management, engineering and Martin Hopper 8/31/14 5:34 PM Deleted: Adopted by Joyce Kinnear 7/20/15 10:32 AM Deleted: CommissionTech C tee Martin Hopper 9/1/15 9:53 AM Deleted: August Commission Review Draft Sept

22 analytical) support is provided by the M-S-R PPA and under open-ended agreements with unrelated third-parties. Accounting and administrative support services are provided by Modesto Irrigation District. General Manager, General Counsel, Bond Counsel, and Financial Advisor services are provided under open-ended agreements with unrelated thirdparties. A member-staffed committee structure currently provides financial, risk management, technical and operational input. A copy of the Agency s current organization chart is attached as Exhibit A. Joyce Kinnear 7/20/15 10:26 AM Deleted: Public Power Agency Recommendations: 1. M-S-R EA should continue to be member-directed and member-supported. 2. M-S-R EA should continue to conduct its Technical Committee, Natural Gas Program Committee, and Financial Management Committee in noticed Public and Closed Sessions. 3. M-S-R EA should continue to contract for the provision of management, administrative, technical, and legal services and when needed, provide timely succession plans for the replacement of incumbent candidates. 4. M-S-R EA should periodically appraise its management and administrative processes and policies. III. MANAGE AND MAINTAIN ASSETS Natural Gas Project: M-S-R EA has entered into a series of transactions with Citigroup Inc and related entities for a thirty-year pre-pay purchase of up to 22,500 MMBTU per day of natural gas as delivered to the Members pursuant to a pre-defined schedule. The benefit of the transaction is to provide a guaranteed discount of about $0.86/MMBTU from a specified index-price of natural gas in return for the Member s take-and-pay obligation to purchase specified natural gas volumes. Natural Gas Project Operations: The Members will take and use or remarket gas pursuant to the remediation requirements of the gas purchase agreements to maintain the tax-exempt status of the bonds which support the transaction. On July 28, 2010, M-S-R EA approved Resolution Adopting Gas Project Operating Procedures to guide the implementation of the project. Martin Hopper 8/31/14 5:34 PM Deleted: Adopted by Joyce Kinnear 7/20/15 10:32 AM Deleted: CommissionTech C tee Martin Hopper 9/1/15 9:53 AM Deleted: August Commission Review Draft Sept

23 Recommendations 1. M-S-R EA will continue to administer the pre-pay agreements and will monitor each Member s compliance with private-use and remediation requirements. 2. M-S-R EA will continue to monitor Citigroup Inc. and related entity financial conditions and advise Members thereof. IV. FINANCIAL MATTERS M-S-R EA has about $902 million of outstanding debt on the various bond issues sold to finance the Natural Gas Project. M-S-R EA maintains operating funds and restricted and unrestricted reserves as required by Bond Indentures, to fund contingent liabilities, and to manage member cash call requirements. Recommendations 1. The Financial Management Committee should continue its efforts to evaluate the use of new financial products and market opportunities to lower the effective costs and maximize the benefits of the Natural Gas Project. Joyce Kinnear 7/20/15 10:27 AM Comment: Need update for 2015 Martin Hopper 9/1/15 9:59 AM Comment: Note: First Principal payments are in YE 12/31/ M-S-R EA should continue the evaluation process regarding additional prepay options and upon Commission and Member approval, consummate transactions beneficial to the Members. 3. M-S-R EA should periodically evaluate and recommend debt-limit guidelines for use in the strategic evaluation and prioritization of future projects, including consideration of the use of prepay transactions. V. JOINT ACTION OPPORTUNITIES Background Although each of the members has developed its own power and fuel supply strategies through a combination of owned and purchased resources and has developed the infrastructure and a level of sophistication to perform their needed functions, the authority is a viable vehicle for future joint opportunities. Activities previously examined by M-S-R EA members have included joint natural gas operations and wind-energy storage and shaping projects. Opportunities for greater utilization or improvement of existing member or related joint resources may occur from time to time. M-S-R EA also may have opportunities to participate in renewable resource or non-renewable resource generation projects as described below and is uniquely structured for the more beneficial use of pre-pay transactions than the members or other joint agencies. Martin Hopper 8/31/14 5:34 PM Deleted: Adopted by Joyce Kinnear 7/20/15 10:32 AM Deleted: CommissionTech C tee Martin Hopper 9/1/15 9:53 AM Deleted: August Commission Review Draft Sept

24 Recommendations 1. Upon the specific request of the members, M-S-R should identify and evaluate future opportunities such as: a. Specific fuel or power supply alternatives (renewable or non-renewable resources); b. Pre-Pay energy or fuel-supply arrangements; c. Other risk reduction/mitigation measures; or d. Other supply/reliability enhancements. Big Horn Wind Energy Project: On June 1, 2005, and December 2, 2009, M-S-R Public Power Agency (M-S-R PPA) entered into a series of agreements with PPM Energy (now Iberdrola Renewables, LLC.) to purchase wind power energy as firmed, shaped, and delivered to the California-Oregon Border (COB) from the Big Horn I and II Wind Energy Projects. From time-to-time, Iberdrola Renewables Inc. and others have or may offer to either M-S-R EA or M-S-R PPA opportunities for potential energy pre-pay contracts to reduce the cost of delivered power and M-S-R EA may be the more appropriate vehicle for such contracts. Recommendations 1. At the direction of the Members, M-S-R EA may continue discussions with Iberdrola Renewables, Inc. or others regarding a prepay option to reduce the effective delivered costs of energy provided, however, that sufficient benefits and adequate security for M-S-R EA s investment can be achieved. M-S-R EA should also develop specific economic criteria by which such proposals may be evaluated. VI. STRATEGIC RISKS AND EXPOSURES M-S-R EA has developed an initial portfolio of fuel supply resource assets, consisting of the Natural Gas Project, in which there are inherent risks which could have potential adverse impacts to M-S-R EA and its Members. There are three broad categories of risk: Operational, Contractual, and Institutional. Individually and collectively they can affect the useful life and cost-effectiveness of M-S-R EA s assets. Recommendations 1. M-S-R EA shall regularly review risks to M-S-R EA and its Members with respect to their participation in M-S-R EA and develop mitigation plans as appropriate. Martin Hopper 8/31/14 5:34 PM Deleted: Adopted by Joyce Kinnear 7/20/15 10:32 AM Deleted: CommissionTech C tee Martin Hopper 9/1/15 9:53 AM Deleted: August Commission Review Draft Sept

25 Exhibit A M-S-R Energy Authority Organization Chart (As of September 23, 2015) Martin Hopper 9/1/15 10:08 AM Deleted: 4 Commissioners: Salyer Tippin (President), Roukema (Vice President) Alternates: Modesto: McFall; Redding: Beans Santa Clara: Kolstad, O Neill Hatcher, Kurotori, Kinnear General Counsel Steve Gross, Esq Controller Ed Oborn General Manager Martin Hopper Secretary Steve Gross, Esq Treasurer Scott van Vuren Administrative Assistant Regina Cox Assistant Secretary Martin Hopper Martin Hopper 9/1/15 10:06 AM Deleted: (President) Martin Hopper 9/1/15 10:06 AM Deleted: Vice Martin Hopper 9/1/15 10:07 AM Deleted: Matthews, Fuentes, Martin Hopper 8/31/14 5:40 PM Deleted: Vacant Technical Committee Hopper (Chair Ex Officio) McFall, Kinnear, Handy Alts: Burriss, Pepper, Cummings Financial Management Committee Hopper (Chair Ex Officio) Scott van Vuren, Pepper, Haddad Alts: Oborn, Hulbert, Kinnear Martin Hopper 9/1/15 10:06 AM Deleted: Beans Martin Hopper 9/1/15 10:06 AM Deleted: Handy Special Counsels & Consultants M-S-R EA Bond Counsel Orrick, Herrington & Sutcliffe John Wang, Esq. George Wolf, Esq. M-S-R EA Financial Advisor Montague DeRose Frank Perdue Natalie Perkins Consultant KBT, LLC. Alan Hockenson Dave Arthur Martin Hopper 8/31/14 5:34 PM Deleted: Adopted by Joyce Kinnear 7/20/15 10:32 AM Deleted: CommissionTech C tee Martin Hopper 9/1/15 9:53 AM Deleted: August Commission Review Draft Sept

26 M-S-R Energy Authority Staff Report Date: September 16, 2015 From: To: Subject: Martin R. Hopper, General Manager M-S-R EA Commission 2016 M-S-R EA Strategic Plan Each year the M-S-R EA Commission considers an update to the M-S-R EA Strategic Plan to provide guidance for the preparation of the M-S-R EA Budget and for the operations of the Agency. The proposed update continues to reflect the status quo structure of M-S-R EA operations and other than updated editing is substantially similar to last year s Strategic Plan. The discussions and analysis of issues within the M-S-R EA (and M-S-R PPA) Strategic Plans have also been reviewed by General Counsel for conformity with disclosure requirements and applicable legislative and regulatory obligations of the Authority and the Agency. The M-S-R EA Technical Committee reviewed and revised the draft plan in a workshop held September 10, A copy of the proposed 2016 M-S-R EA Strategic Plan red-lined to show changes from last year s report is attached. I recommend the Commission adopt the 2016 M-S-R EA Strategic Plan.

27 M-S-R ENERGY AUTHORITY STRATEGIC PLAN Effective January 1, 2015 Joyce Kinnear 7/16/14 7:42 AM Deleted: 4

28 M-S-R ENERGY AUTHORITY STRATEGIC PLAN Effective January 1, 2015 Each year the M-S-R Energy Authority Commission will develop and adopt a strategic plan to address the issues faced by the Authority in the ensuing five-year period. The plan is updated and reviewed by the M-S-R Energy Authority Commission in September of each ensuing year prior to the development of the annual M-S-R Energy Authority Budget. The issues of Organizational Structure and Philosophy; Managing and Maintaining Assets; Financial Matters; and Joint Action Opportunities presented below characterize the Authority s strategic vision through Joyce Kinnear 7/16/14 7:42 AM Deleted: 4 Joyce Kinnear 7/16/14 7:57 AM Deleted: 2019 INDEX I. Introduction II. Organizational Structure And Philosophy III. Manage And Maintain Assets Natural Gas Project IV. Financial Matters V. Joint Action Opportunities Background Big Horn Wind Energy Project VI. Strategic Risks And Exposures Exhibit A M-S-R EA Organization Chart Martin Hopper 8/31/14 5:34 PM Deleted: Adopted by Joyce Kinnear 7/20/15 10:32 AM Deleted: CommissionTech C tee Martin Hopper 9/1/15 9:53 AM Deleted: August Commission Review Draft Sept

29 M-S-R ENERGY AUTHORITY STRATEGIC PLAN Effective January 1, 2015 I. INTRODUCTION Joyce Kinnear 7/16/14 7:41 AM Deleted: 4 The M-S-R Energy Authority (M-S-R EA) was created on July 15, 2008, through a Joint Exercise of Powers Agreement among Modesto Irrigation District (Modesto), the City of Santa Clara (Santa Clara), and the City of Redding (Redding) to acquire, construct, maintain, operate and finance Projects, including but not limited to: (a) the purchase, generation, transmission or distribution of energy; (b) the purchase, sale, exchange, storage, construction, maintenance and operation of natural gas, natural gas facilities and natural gas transportation facilities, output, reserves and capacity; (c) the acquisition and sale of environmental commodities, including but not limited to: (1) renewable energy credits; (2) emissions reduction credits; and (3) other interests in environmental attributes or benefits of renewable energy projects or rights to offset the environmental impacts of conventional energy use; and (d) any other project, facility, improvement, asset, commodity or interest therein related to the generation, transmission or distribution of energy as may be designated by the M- S-R EA Commission. Unless otherwise noted the participation in M-S-R EA Projects is Modesto 1/3, Santa Clara 1/3, and Redding 1/3. M-S-R EA s purpose is to maximize the value of its existing assets for the benefit of the Members and to respond to Member needs where joint action rather than individual action is deemed to be in the Member s best interests. M-S-R EA is also intended to provide more responsive services to its members than may be possible from larger or state-wide agencies or associations. II. ORGANIZATIONAL STRUCTURE AND PHILOSOPHY Since its formation, M-S-R EA has been a member-directed, member-supported organization. Policy direction is provided to M-S-R EA through its Commission. Management, legal, administrative and operational support is provided through agreements with the M-S-R Public Power Agency (M-S-R PPA), the Modesto Irrigation District (MID), and other third parties. General and technical (project management, engineering and Martin Hopper 8/31/14 5:34 PM Deleted: Adopted by Joyce Kinnear 7/20/15 10:32 AM Deleted: CommissionTech C tee Martin Hopper 9/1/15 9:53 AM Deleted: August Commission Review Draft Sept

30 analytical) support is provided by the M-S-R PPA and under open-ended agreements with unrelated third-parties. Accounting and administrative support services are provided by Modesto Irrigation District. General Manager, General Counsel, Bond Counsel, and Financial Advisor services are provided under open-ended agreements with unrelated thirdparties. A member-staffed committee structure currently provides financial, risk management, technical and operational input. A copy of the Agency s current organization chart is attached as Exhibit A. Joyce Kinnear 7/20/15 10:26 AM Deleted: Public Power Agency Recommendations: 1. M-S-R EA should continue to be member-directed and member-supported. 2. M-S-R EA should continue to conduct its Technical Committee, Natural Gas Program Committee, and Financial Management Committee in noticed Public and Closed Sessions. 3. M-S-R EA should continue to contract for the provision of management, administrative, technical, and legal services and when needed, provide timely succession plans for the replacement of incumbent candidates. 4. M-S-R EA should periodically appraise its management and administrative processes and policies. III. MANAGE AND MAINTAIN ASSETS Natural Gas Project: M-S-R EA has entered into a series of transactions with Citigroup Inc and related entities for a thirty-year pre-pay purchase of up to 22,500 MMBTU per day of natural gas as delivered to the Members pursuant to a pre-defined schedule. The benefit of the transaction is to provide a guaranteed discount of about $0.86/MMBTU from a specified index-price of natural gas in return for the Member s take-and-pay obligation to purchase specified natural gas volumes. Natural Gas Project Operations: The Members will take and use or remarket gas pursuant to the remediation requirements of the gas purchase agreements to maintain the tax-exempt status of the bonds which support the transaction. On July 28, 2010, M-S-R EA approved Resolution Adopting Gas Project Operating Procedures to guide the implementation of the project. Martin Hopper 8/31/14 5:34 PM Deleted: Adopted by Joyce Kinnear 7/20/15 10:32 AM Deleted: CommissionTech C tee Martin Hopper 9/1/15 9:53 AM Deleted: August Commission Review Draft Sept

31 Recommendations 1. M-S-R EA will continue to administer the pre-pay agreements and will monitor each Member s compliance with private-use and remediation requirements. 2. M-S-R EA will continue to monitor Citigroup Inc. and related entity financial conditions and advise Members thereof. IV. FINANCIAL MATTERS M-S-R EA has about $902 million of outstanding debt on the various bond issues sold to finance the Natural Gas Project. M-S-R EA maintains operating funds and restricted and unrestricted reserves as required by Bond Indentures, to fund contingent liabilities, and to manage member cash call requirements. Recommendations 1. The Financial Management Committee should continue its efforts to evaluate the use of new financial products and market opportunities to lower the effective costs and maximize the benefits of the Natural Gas Project. Joyce Kinnear 7/20/15 10:27 AM Comment: Need update for 2015 Martin Hopper 9/1/15 9:59 AM Comment: Note: First Principal payments are in YE 12/31/ M-S-R EA should continue the evaluation process regarding additional prepay options and upon Commission and Member approval, consummate transactions beneficial to the Members. 3. M-S-R EA should periodically evaluate and recommend debt-limit guidelines for use in the strategic evaluation and prioritization of future projects, including consideration of the use of prepay transactions. V. JOINT ACTION OPPORTUNITIES Background Although each of the members has developed its own power and fuel supply strategies through a combination of owned and purchased resources and has developed the infrastructure and a level of sophistication to perform their needed functions, the authority is a viable vehicle for future joint opportunities. Activities previously examined by M-S-R EA members have included joint natural gas operations and wind-energy storage and shaping projects. Opportunities for greater utilization or improvement of existing member or related joint resources may occur from time to time. M-S-R EA also may have opportunities to participate in renewable resource or non-renewable resource generation projects as described below and is uniquely structured for the more beneficial use of pre-pay transactions than the members or other joint agencies. Martin Hopper 8/31/14 5:34 PM Deleted: Adopted by Joyce Kinnear 7/20/15 10:32 AM Deleted: CommissionTech C tee Martin Hopper 9/1/15 9:53 AM Deleted: August Commission Review Draft Sept

32 Recommendations 1. Upon the specific request of the members, M-S-R should identify and evaluate future opportunities such as: a. Specific fuel or power supply alternatives (renewable or non-renewable resources); b. Pre-Pay energy or fuel-supply arrangements; c. Other risk reduction/mitigation measures; or d. Other supply/reliability enhancements. Big Horn Wind Energy Project: On June 1, 2005, and December 2, 2009, M-S-R Public Power Agency (M-S-R PPA) entered into a series of agreements with PPM Energy (now Iberdrola Renewables, LLC.) to purchase wind power energy as firmed, shaped, and delivered to the California-Oregon Border (COB) from the Big Horn I and II Wind Energy Projects. From time-to-time, Iberdrola Renewables Inc. and others have or may offer to either M-S-R EA or M-S-R PPA opportunities for potential energy pre-pay contracts to reduce the cost of delivered power and M-S-R EA may be the more appropriate vehicle for such contracts. Recommendations 1. At the direction of the Members, M-S-R EA may continue discussions with Iberdrola Renewables, Inc. or others regarding a prepay option to reduce the effective delivered costs of energy provided, however, that sufficient benefits and adequate security for M-S-R EA s investment can be achieved. M-S-R EA should also develop specific economic criteria by which such proposals may be evaluated. VI. STRATEGIC RISKS AND EXPOSURES M-S-R EA has developed an initial portfolio of fuel supply resource assets, consisting of the Natural Gas Project, in which there are inherent risks which could have potential adverse impacts to M-S-R EA and its Members. There are three broad categories of risk: Operational, Contractual, and Institutional. Individually and collectively they can affect the useful life and cost-effectiveness of M-S-R EA s assets. Recommendations 1. M-S-R EA shall regularly review risks to M-S-R EA and its Members with respect to their participation in M-S-R EA and develop mitigation plans as appropriate. Martin Hopper 8/31/14 5:34 PM Deleted: Adopted by Joyce Kinnear 7/20/15 10:32 AM Deleted: CommissionTech C tee Martin Hopper 9/1/15 9:53 AM Deleted: August Commission Review Draft Sept

33 Exhibit A M-S-R Energy Authority Organization Chart (As of September 23, 2015) Martin Hopper 9/1/15 10:08 AM Deleted: 4 Commissioners: Salyer Tippin (President), Roukema (Vice President) Alternates: Modesto: McFall; Redding: Beans Santa Clara: Kolstad, O Neill Hatcher, Kurotori, Kinnear General Counsel Steve Gross, Esq Controller Ed Oborn General Manager Martin Hopper Secretary Steve Gross, Esq Treasurer Scott van Vuren Administrative Assistant Regina Cox Assistant Secretary Martin Hopper Martin Hopper 9/1/15 10:06 AM Deleted: (President) Martin Hopper 9/1/15 10:06 AM Deleted: Vice Martin Hopper 9/1/15 10:07 AM Deleted: Matthews, Fuentes, Martin Hopper 8/31/14 5:40 PM Deleted: Vacant Technical Committee Hopper (Chair Ex Officio) McFall, Kinnear, Handy Alts: Burriss, Pepper, Cummings Financial Management Committee Hopper (Chair Ex Officio) Scott van Vuren, Pepper, Haddad Alts: Oborn, Hulbert, Kinnear Martin Hopper 9/1/15 10:06 AM Deleted: Beans Martin Hopper 9/1/15 10:06 AM Deleted: Handy Special Counsels & Consultants M-S-R EA Bond Counsel Orrick, Herrington & Sutcliffe John Wang, Esq. George Wolf, Esq. M-S-R EA Financial Advisor Montague DeRose Frank Perdue Natalie Perkins Consultant KBT, LLC. Alan Hockenson Dave Arthur Martin Hopper 8/31/14 5:34 PM Deleted: Adopted by Joyce Kinnear 7/20/15 10:32 AM Deleted: CommissionTech C tee Martin Hopper 9/1/15 9:53 AM Deleted: August Commission Review Draft Sept

34 Date: September 16, 2015 M-S-R Energy Authority Staff Report From: To: Subject: Martin R. Hopper, General Manager M-S-R EA Commission Administrative and Accounting Services Agreement Extension Pursuant to an Agreement For Administrative and Accounting Services Between M-S-R Energy Authority and Modesto Irrigation District, MID provides services to account and report all financial transactions for the Authority including but not limited to general accounting, financial reporting, regulatory reporting, portfolio management, debt accounting, audit preparation and management, accounts payable and receivable services, and other related administrative services. The agreement was effective July 23, 2008, for a three-year term followed by optional one-year extensions and was subsequently extended through Although I am recommending the Authority approve a further such extension, it would be more efficient to extend this agreement on a longer-term basis. Therefore, prior to the next expiration of the agreement, I will propose the form of an amendment to allow the extension of the agreement for subsequent terms of up to five years per extension. I recommend the M-S-R EA Commission approve a one-year extension of the Agreement For Administrative and Accounting Services Between M-S-R Energy Authority and Modesto Irrigation District, for the period August 1, 2015, through July 31, Macintosh HD:Users:martinhopper:My Laptop Documents:M-S-R Energy Authority:Administrative:Staff Reports:Admin and Accounting Extension 2015 Staff Report.doc

35 Date: September 16, 2015 M-S-R Energy Authority Staff Report From: To: Subject: Martin R. Hopper, General Manager M-S-R EA Commission Administrative and Technical Services Agreement Extension Pursuant to an Agreement For Administrative and Technical Services Between M-S-R Energy Authority and M-S-R Public Power Agency, as amended, M-S-R PPA provides services provide technical services to M-S-R EA, including but not limited to: engineering; economic evaluation; feasibility studies; gas procurement, balancing or management services. The agreement was effective July 23, 2008, for a three-year term followed by optional one-year extensions and was subsequently extended through Although I am recommending the Authority approve a further such extension, it would be more efficient to extend this agreement on a longer-term basis. Therefore, prior to the next expiration of the agreement, I will propose the form of an amendment to allow the extension of the agreement for subsequent terms of up to five years per extension. I recommend the M-S-R EA Commission approve a one-year extension of the Agreement For Administrative and Technical Services Between M-S-R Energy Authority and M-S-R Public Power Agency, for the period August 1, 2015, through July 31, Macintosh HD:Users:martinhopper:My Laptop Documents:M-S-R Energy Authority:Administrative:Staff Reports:Admin and Technical Services Extension 2015 Staff Report.doc

36 Date: September 16, 2015 M-S-R ENERGY AUTHORITY Staff Report From: To: Subject: Martin R. Hopper, General Manager M-S-R EA Commission Annual Review of M-S-R EA Policy and Procedures Manual Resolution At its September 24, 2014 meeting, the M-S-R EA Commission through the adoption of Resolution approved the Authority s first comprehensive Policies and Procedures Manual. The Manual provides that commencing in 2014, following the original adoption of this Policies And Procedures Manual, the General Manager is to annually review the manual and recommend updates or amendments for consideration by the Commission at its September meeting. The proposed update includes general status updates and miscellaneous clarifications. The proposed updates were reviewed by the Technical Committee at its September 10, 2015 meeting. The proposed 2016 updated Policies and Procedures Manual is attached in redline format to show the changes from the originally adopted Policies and Procedures Manual. I recommend the Commission adopt the proposed M-S-R Energy Authority Resolution Regarding 2015 Annual Update of Policies and Procedures Manual.

37 RESOLUTION NO RESOLUTION OF THE COMMISSION OF THE M-S-R ENERGY AUTHORITY REGARDING 2015 ANNUAL UPDATE TO POLICIES AND PROCEDURES MANUAL WHEREAS, To provide for the efficient administration of the Authority and to clearly delineate the basic authorities and relationships between and among the Authority, its Officers, Staff, and Members it is appropriate to set forth those authorities and relationships in a single document; and WHEREAS, The Policies and Procedures Manual for the M-S-R Energy Authority as adopted pursuant to Resolution documents such authorities and relationships; and WHEREAS, each year in conjunction with preparation of the Authority s Annual Strategic Plan, the M S-R Energy Authority Policies and Procedures Manual is to be reviewed by the General Manager and Technical Committee and any proposed amendments are to be presented to the Commission for consideration; and Whereas, such a review has been preformed and an updated Policies and Procedures Manual has been prepared. NOW, THEREFORE, BE IT RESOLVED BY THE COMMISSION of the M-S-R ENERGY AUTHORITY that: 1. The attached updated M-S-R Energy Authority Policies and Procedures Manual is hereby adopted and supersedes the M-S-R Energy Authority Policies and Procedures Manual previously adopted September 24, PASSED AND ADOPTED this 23 rd day of September, 2015 upon the following vote of the Members: Modesto Irrigation District City of Santa Clara City of Redding ATTEST: PRESIDENT SECRETARY

38 M-S-R ENERGY AUTHORITY ORGANIZATION, AUTHORIZATIONS, POLICIES, & PROCEDURES MANUAL Commission Review Draft September 23, 2015 Resolution Martin Hopper 9/16/15 7:02 PM Deleted: Technical Committee Martin Hopper 9/16/15 7:02 PM Deleted: 10 Author 9/1/15 10:32 AM Deleted: 4 Author 9/1/15 10:32 AM Deleted:

39 Table of Contents I. Introduction A. Purpose B. Responsibility C. Management II. Organization and Authorities A. M-S-R EA President B. M-S-R EA Vice President C. General Manager D. Secretary E. M-S-R EA Committees F. Fiscal Authorization III. Treasurer/Controller Functions, Budget Development, Invoice Approval Process, Expense and Investment Policies A. Treasurer and Controller B. Working Capital and Member Payments C. M-S-R EA Annual Budgets D. M-S-R EA Annual Strategic Plan E. Invoice Approval Process F. Expense Policies G. Investment Policies H. Review Of Policies And Procedures Manual IV. Other M-S-R EA Policies & Procedures A. Gas Project Operating Procedures B. M-S-R EA Legislative program C. Website Access, Public Records Request, Photocopy Policy, and Posting of Public Documents D. Document Retention Policy List of Exhibits Commission Review Draft September 23,2015

40 I. INTRODUCTION The M-S-R Energy Authority (M-S-R EA or Authority) is a joint powers agency created in 2008 pursuant to Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California and is governed by a Commission consisting of one representative from each M-S-R EA Member. Members of M-S-R EA include the Modesto Irrigation District and the Cities of Redding and Santa Clara, California. The Governing Bodies of the Members appoint M-S-R EA Commissioners and any Alternates. 1 A. PURPOSE The M-S-R EA is empowered to acquire, construct, maintain, operate and finance Projects, including but not limited to: (a) the purchase, generation, transmission or distribution of energy; (b) the purchase, sale, exchange, storage, construction, maintenance and operation of natural gas, natural gas facilities and natural gas transportation facilities, output, reserves and capacity; or (c) the acquisition and sale of environmental commodities. M-S-R EA s purpose is to maximize the value of its existing assets for the benefit of the Members and to respond to Member needs where joint action, rather than individual action, is deemed to be in the Members best interests. M-S-R EA is also intended to provide more responsive services to its Members than may be possible from larger or state-wide agencies or associations. The primary project of M-S-R EA to date was the creation and approval of Prepaid Natural Gas Agreements with Citigroup Energy Inc., in September 2009 (Gas Project) which provide each of the M-S-R EA Members with access to discounted natural gas supplies through the issuance of M-S-R Energy Authority Gas Revenue Bonds, Series 2009A, 2009B, and 2009C; each series of 1 Joint Exercise Of Powers Agreement of the M-S-R Energy Authority By And Among the Modesto Irrigation District and the City Of Santa Clara and the City Of Redding, dated as of July 15, 2008 Commission Review Draft September 23,2015

41 which is dedicated to a different Member and each Member has been authorized to transact business associated with its series of bonds. B. RESPONSIBILITY M-S-R EA is governed by its Commission. The Commission meetings are chaired by its President, a Commissioner who is subject to annual election by the Commission. Minutes of Commission meetings are taken by the Secretary, who is subject to annual appointment by the Commission. The Commission may or may not choose to elect a Vice-President. 2 The Authority is a California joint powers agency created pursuant to the California Government Code and is subject to California laws generally applicable to public agencies, including, but not limited to, the Ralph M. Brown Act, Public Records Act, Political Reform Act and other conflict of interest laws. The Authority and its officials must abide by the Conflict of Interest Code adopted by the California Fair Political Practices Commission for the Authority. C. MANAGEMENT M-S-R EA s General Manager directs Authority activities and reports directly to the M-S-R EA Commission. The General Manager oversees the contracts and performance of consultants and advisors, and coordinates the activities of M-S-R EA s standing and any Ad Hoc Committees. The current M-S-R EA standing committees are the Technical Committee and the Financial Management Committee. In July 2008, M-S-R EA entered into an agreement with the M-S-R Public Power Agency (PPA) for the purpose of securing Administrative and Technical Services. 3 This agreement was amended in December 2009 (effective January 2010) to exclude certain services which were subsequently to be performed by the General Manager. The Administrative and Technical Services Agreement was for a three-year term with optional annual renewals. M-S-R EA has currently renewed this agreement through July In July 2008, M-S-R EA entered into an agreement with the Modesto Irrigation District Author 9/1/15 10:34 AM Deleted: 5 2 Resolution Adopted March 20, 2013 Regarding Election and Duties of Officers 3 Agreement For Administrative And Technical Services By And Between M-S-R Energy Authority And M-S-R Public Power Agency, Dated As Of July 23, 2008 Commission Review Draft September 23,2015