MSR Energy Authority€¦ · Cindy Worley Santa Clara: John Roukema (President) ... 2019 at the offices of Navigant Consulting, Inc. (NCI), 35 Iron Point Circle, ... Tilly, Virchow,

Updated 5/2019

MSR Energy Authority

MEETING OF THE COMMISSION Wednesday, September 18, 2019, 12:30 p.m.

Navigant Consulting, Inc. 35 Iron Point Circle, Suite 225

Folsom, CA 95630

AGENDA Distribution:

Commissioners & Alternate Commissioners Others

Modesto:

James McFall (V.P.)1 Martin Hopper Martin Caballero (Alt) Pete Scanlon Steve Gross Alan Hockenson Toxie Burriss Scott Van Vuren Jill De Jong Cindy Worley Santa Clara: John Roukema (President)2 Ann Hatcher2 (Alt) Alan Kurotori (Alt) Kathleen Hughes (Alt) Deanna Santana (Alt) Teresa O’Neill (Alt) Redding: Dan Beans3 Valerie Ibarra3 Nick Zettel (Alt) Carmen Bahr file/er/msrea

1 Please post agenda. 2 Please post agenda. 3 Please post agenda.

M-S-R Energy Authority

MEETING OF THE COMMISSION Wednesday, September 18, 2019, 12:30 p.m.

Navigant Consulting, Inc. 35 Iron Point Circle, Suite 225

Folsom, California

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. CALL TO ORDER

ROLL CALL

CONSENT ITEMS 1 – 4 (All items are approved by a single action)

There will be no separate discussion of those items unless an item is removed at the request of any Commissioner or member of the public. Those items removed will be separately considered at the end of the consent agenda. 1. Minutes of May 30, 2019 and July 17, 2019

2. Report of Summary invoices paid for May - August 2019 totaling $45,310.14 (summary attached)

3. May, June, July, and August 2019 Treasurer’s Reports (attached, Scott Van Vuren)

4. September 2019 Outside Services Budget Versus Actual Report (attached, Martin Hopper)

END OF CONSENT ITEMS

ACTION ITEMS 5 – 7

5. Discussion and Possible Action Regarding Annual Strategic Plan (attached, Martin Hopper)

6. Discussion and Possible Action Regarding Resolution 2019-01 Wildfire Mitigation Plan (attached, Martin Hopper)

7. Discussion and Possible Action Regarding Natural Gas Project Forward Delivery Agreement Renewals (attached, Martin Hopper)

CONVENE CLOSED SESSION:

a. Public Employee Performance Evaluation: Government Code §54957 – General Manager

RECONVENE OPEN SESSION

ANNOUNCEMENTS FOLLOWING CLOSED SESSION

MEMBER REPORTS

M-S-R Energy Authority Agenda Page 2 September 18, 2019

2019 MSR EA Commission Agenda

PUBLIC COMMENT

CONFIRM DATE AND TIME OF NEXT MEETING

ADJOURN

Alternate formats of this agenda will be made available upon request to qualified individuals with disabilities.

Note: It is the policy of M-S-R 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. MSR Energy Authority is an 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.

Page 1 of 2

M-S-R ENERGY AUTHORITY DRAFT MINUTES

SPECIAL MEETING OF THE COMMISSION MAY 31, 2019

The Commission of the M-S-R Energy Authority (M-S-R EA) met for a special meeting

on May 31, 2019 at the offices of Navigant Consulting, Inc. (NCI), 35 Iron Point Circle,

Suite 225, Folsom, CA, 95630. Present from Modesto Irrigation District (MID) was

James McFall, Scott Van Vuren, and Martin Caballero; present from Santa Clara was

Ann Hatcher; present from Redding was Nick Zettel. Also present were General Manager

Martin Hopper, General Counsel Steve Gross, and Auditor Gwen Zech.

Ms. Hatcher called the meeting to order at 11:53 A.M. A quorum was attained with the

voting representatives being Mr. McFall, Ms. Hatcher, and Mr. Zettel.

The Commission then considered approval of the Consent Calendar Items. It was moved

by Commissioner McFall and seconded by Alternate Commissioner Zettel to approve the

Consent Calendar consisting of Items 1, 2, 3, and 4 as listed below. The motion carried

unanimously.

1. Minutes of February 20, 2019 – approved.

2. Report of Summary invoices paid for February 2019 – April 2019 totaling

$25,151.55 – noted and filed.

3. February 2019 – March 2019 Treasurer’s Reports – accepted.

4. May 2019 Outside Services Budget versus Actual Report – noted and filed.

Mr. Hopper than addressed the Commission regarding the General Manager Report and

entertained questions thereon.

Mr. Hopper introduced Gwen Zech of Baker, Tilly, Virchow, Krause, LLP (Baker Tilly)

who presented the Report on M-S-R Energy Authority Financial Audit – December 31,

2018. Ms. Zech presented the required communications and highlights of the financial

statements to the Commission. She reported M-S-R EA received an “unmodified

Page 2 of 2

opinion” and stated Baker Tilly found the reports to be free from material misstatements.

She noted by definition, there was a weakness in Internal Controls because of the role

played by the Auditor in the preparation of Financial Statements and explained that they

have been working with MID to determine whether sufficient work in the preparation of

the statements can be transferred to MID Staff to allow this note to be eliminated. It was

moved by Alternate Commissioner Zettel and seconded by Commissioner McFall to

accept the M S R Energy Authority Financial Audit – December 31, 2018. The motion

carried unanimously.

The Chair then called for Member Reports and for Public Comment. There being none,

the Chair announced that the next regular meeting of the Commission will be held on

Wednesday, September 18, 2019 at 12:30 P.M., at Navigant’s offices in Folsom, CA.

The meeting was then adjourned by the Chair at 11:59 P.M.

Martin R. Hopper Assistant Secretary

Page 1 of 1

M-S-R ENERGY AUTHORITY DRAFT MINUTES

SPECIAL MEETING OF THE COMMISSION JULY 17, 2019

The Commission of the M-S-R Energy Authority (M-S-R EA) met for a special meeting

on July 17, 2019 at the offices of Navigant Consulting, Inc. (NCI), 35 Iron Point Circle,

Suite 225, Folsom, CA, 95630. Present from Modesto Irrigation District (MID) was

James McFall; present from Santa Clara was Kevin Kolnowski; present from Redding

was Nick Zettel. Also present were General Manager Martin Hopper, and General

Counsel Steve Gross.

Mr. Zettel called the meeting to order at 1:39 P.M. A quorum was attained with the

voting representatives being Mr. McFall, Mr. Kolnowski, and Mr. Zettel.

Mr. Hopper then presented the July 2019 Outside Services Budget versus Actuals Report

and Mid-Year Budget Review. He noted legal and consulting costs are expected to end

the year at about 88% of the annual budget. It was moved by Commissioner McFall and

seconded by Alternate Commissioner Kolnowski to note and file the July 2019 Outside

Services Budget versus Actuals Report and Mid-Year Budget Review. The motion

carried unanimously.

The Chair then called for Public Comment. There being none, the Chair announced that

next regular meeting of the Commission will be held on Wednesday, September 18, 2019

at 12:30 P.M., at Navigant’s offices in Folsom, CA. The meeting was then adjourned by

the Chair at 1:40 P.M.

Martin R. Hopper Assistant Secretary

Payee DescriptionPeriod

Covered Amount

Martin Hopper Energy General Manager Services Apr-19 4,000.00$ Baker Tilly Virchow Krause Services for 2018 Audit Apr-19 6,507.00$ MID Accounting and Coordination Apr-19 1,226.13$ Martin Hopper Energy General Manager Services May-19 4,000.00$ MID Accounting and Coordination May-19 1,226.13$ Porter Simon General Business May-19 608.00$ Orrick Legal Services Jun-19 2,103.75$ Baker Tilly Virchow Krause Services for 2018 Audit May-19 5,277.00$ Martin Hopper Energy General Manager Services Jun-19 4,000.00$ MID Accounting and Coordination Jun-19 1,226.13$ Fitch Rating, Inc Annual Relationship Fee Aug-19 10,000.00$ Martin Hopper Energy General Manager Services Jul-19 4,000.00$ Porter Simon General Business Jul-19 1,136.00$

45,310.14$

M-S-R Energy AuthorityReport of Summary Invoices PaidMay, June, July and August 2019

To Commission September 18, 2019

UNRESTRICTED EUNOS General Fund

BESIBICIED B!tllDS MSR Series 2009A MSR Series 20098 MSR Series 2009C

TOTAL FUNDS

QEMANQ ACCOUNTS Union Bank - General Fund

INVESTMENTS (See Attacl>ecJ) Bankers Acceptances Certificates of Deposit(Coll./lns.) Commercial Paper(A1/P1) Corporate Notes-Medium Term Federal Agencies Local Agency Investment Fund Money Market Accounts Repurchase Agreements U.S. Treasury Instruments

TOTAL INVESTMENTS

Add: Deposits In transit Less: Outstanding checks

TOTAL CASH & INVESTMENTS

MSR ENERGY AUTHORrrY TREASURER'S REPORT

FOR THE MONTH OF MAY 2019

4/30/2019 Cost Value

172,206

7,048,287 17,798,764

71369,542 32,216,692

32,388,798

Standard per Gov't Code

40°.4 No Limit

25% 30%

No Limit $65,000,000

No Limit NoUmit NoUmit

BJND BALANCES

Receipts Disbursements 0 12 ,394

1,618,779 7,611,1 35 8,355,683 22,252,862

10,6471601 16,207,171 20,622,262 46,071,168

20,622&62 46,0831562

CASH & INVESTMENTS

Aclual 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% wrta

• Source of Market Value lnfonnation Is Union Bank and US Bank

We certify that this statement is a true and correct record of transactions in the Treasury since the prior report. The agency has sufficient liquid assets on deposit to meet its obligations over the ne><t 6 months. All investments are In compliance with the agency's investment policy guidelines.

Scott Van Vuren - Treasurer Ana Vigil -- Assistant Treasurer

5/3112019 Cost Value

159,812

1,055,930 3,901,584 11810,172 6,767,686

61927,498

159,812

0 0 0 0 0 0 0 0 0 0

0 0

159,812

5/31/2019 Mkt. Value•

159,812

1,056,091 3,902,545 118101112 6,768,808

619281620

Unrealized Gain/Loss

0.00

161 961

0 1,122

1,122

UNRESTRICTED FUNDS General Fund

BESIBICIEO ELll':,IOS MSR Series 2009A MSR Series 20098 MSR Series 2009C

TOTAL FUNDS

DEMAND ACCOUNTS Union Bank - General Fund

INVESTMENTS (SM Attached) Bankers Acceptances Certificates of Deposit(Coll./lns.) Commercial Paper(A1/P1) Corporate Notes-Medium Term Federal Agencies Local Agency Investment Fund Money Market Accounts Repurchase Agreements U.S. Treasury Instruments

TOTAL INVESTMENTS

Add: Deposits in transit Less: Outstanding checks


MSR ENERGYAUTHORITY TREASURER'S REPORT

FOR THE MONTH OF JUNE 2019


159,812

1,055,930 3,901,584 1,810,172 6,767,686

61927,498

Standard per Gov'tCode

4()0~

No Limit 25% 30%

No Limit $65,000,000

No limit No Limit No Limit

FUND BALANCES

Receipts Disbursements 0 13,601

2,681,879 1,842,735 9,012,467 6,397,767 2,088,743 11043,502

13,783,088 9,284,003

131783,088 9,297,604

CASH & INYESTMENJS

AclUa1 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

~

• Source of Marl<et Value Information is Union Bank and US Bank

We certify that this statement is a true and correct record of transactions In the Treasury since the prior report. The agency has sufficient liquid assets on deposit to meet its obligations over the next 6 months. All Investments are in compliance with the agency's investment policy guidelines.

Scott Van Vuren -- Treasurer Ana Vigil -- Assistant Treasurer


146,819

1,895,074 6,516,284 21855,413

11,266,771

111413,590

146,819

0 0 0 0 0 0 0 0 0 0

0 (608)

146,211

6/30/2019 Mkt. Value•

146,819

1,895,520 6,518,498 2,855,413

11,269,432

111416,251


0.00

446 2,214

0 2,660

21660

MSR ENERGY AUTHORITY TREASURER'S REPORT

FOR THE MONTH OF JULY 2019

FUND BALANCES

7/31/2019 7/31/2019 Unrealized UNRE$IBICIEQ FlJNQS

General Fund

6/30/2019 Cost Value Receipts Disbursements Cost Value Mid. Value* Gain/Loss

146,819 79,015 6,232 219,602 219,602 0.00

BESIBICTEO EUtilOS MSR Series 2009A MSR Series 20098 MSR Series 2009C

TOTAL FUNDS

DEMANQ ACCOLJl\!Ui Union Bank - General Fund

IN\IESIMENJS (See Attached) Bankers Acceptances Certificates of Deposit(Col!Jlns.) Commercial Paper(A1/P1) Corporate Notes-Medium Term Federal Agencies Local Agency Investment Fund Money Market Accounts Repurchase Agreements U.S. Treasury Instruments

TOTAL INVESTMENTS

Add: Deposits in transit Less: Outstanding checks


1,895,074 6,516,284 21855,413

11,2es,n1

11,413,590


40% No Limit

25% 30°.k

No Limit $65,000,000

No Limit No Limit No Limit

• 50lM'C8 of Market Value lnfonnatlon is Union Bank Md US Bank

3,499,270 2,669,211 11,558,179 8,971,522 2,063,963 1,030,090

17,121,412 12,670,823

17~001427 12,an,055

CASH & INVESTMENTS

AcWal 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0 .0% 0.0% ~

We certify that this statement is a true and correct reoord of transactions In the Treasury since the prior report. The agency has sufficient liquid assets on deposit to meet its obligations over the next 6 months. All Investments are in compliance with the agency's Investment policy guidelines.

~ Scott Van Vuren - treasurer Ana Vigil - Assistant Treasurer

2,725,133 9,102,941 31889.287

15,717,360

15,936,962

219,602

0 0 0 0 0 0 0 0 0 0

0 0

219,602

2,726,076 943 9,107,072 4,132 318891287 0

15,722,435 5,074

15,9421036 5,074

UNRESTRICTED FUNDS General Fund

BESIBICIEO EUblOS MSR Serles 2009A MSR Series 20098 MSR Series 2009C

TOTAL FUNDS

DEMAND ACCOUNIS Union Bank - General Fund

INVESIMENIS (See Attached) Bankers Acceptances Certificates Qf Deposit(CollJlns.) Commercial Paper(A1/P1) Corporate Notes-Medium Term Federal Agencies Local Agency Investment Fund Money Market Accounts Repurchase Agreements U.S. Treasury Instruments

TOTAL INVESTMENTS

Add; Deposits in transit Less: Outstanding checks


MSR ENERGY AUTHORITY TREASURER'S REPORT

FOR THE MONTH OF AUGUST 2019


219,602

2,725,133 9,102,941 3,889,287

15,717,360

15,936,962


40% No Limit

25% 30%

No Limit $65,000,000

No Limit No Limit No Limit

FUND BALANCES

Receipts Dlsbu rsements 0 16,794

5,768,739 4,216,765 14,495,631 11,724,773 2,209,217 1,101,627

22,473,587 17,043,165

22,473,587 17,059,960

CA$H & INVESTMENT'S

Aclual 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

~

• Source of Market Value lnfonnation is Union Bank and US Bank

We certify that this statement is a true and correct record of transactions In the Treasury since the prior report. The agency has sufficient liquid assets on deposit to meet Its obligations over the next 6 months. All investments are in compliance with the agency's investment policy g.Jidelines.

Scott Van Vuren -- Treasurer


202,807

4,277,107 11,873,798 4,996,877

21,147,783

21,350,590

202,807

0 0 0 0 0 0 0 0 0 0

0 0

2021807

8/31/2019 Mkt. Value•

202,807

4,279,139 11,880,627 4,9961877

21,156,643

21,359,450


0.00

2,032 6,828

0 8,860

81860

M-S-R ENERGY AUTHORITY

Staff Report Date: September 10, 2019 From: Martin R. Hopper, General Manager To: M-S-R EA Commission Subject: September 2019 Outside Services Budget versus Actual Report Fiscal Year 2019: Major Providers Reporting Are: General Manager: Through: August 31, 2019 Porter Simon: Through August 31, 2019 KBT LLC: Through August 31, 2019 Modesto Irrigation District: Through July 31, 2019 Baker Tilly: Through August 31, 2019 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.

M-S-R EAOutside Services Summary

9/10/19 2019 EA Outside and Financial Services Expenses.xlsx

Month of: Aug-2019

By ProviderBudget Current Month

Actual Current Month

Positive Variance

Actual v. Budget % By Provider Budget Year

to DateActual Year

to DatePositive Variance

Actual v. Budget %

General Manager 4,000 4,000 0 100% General Manager 32,000 32,000 0 100%General Counsel 667 22 645 3% General Counsel 5,333 2,462 2,871 46%KBT 167 0 167 0% KBT 1,333 0 1,333 0%MID 1,250 0 1,250 0% MID 10,000 7,857 2,143 79%Baker Tilly 0 0 0 #DIV/0! Baker Tilly 21,000 20,600 400 98%Total 6,083 4,022 2,061 66% Total 69,667 62,919 6,747 90%

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

Jan-2019 Feb-2019 Mar-2019 Apr-2019 May-2019 Jun-2019 Jul-2019 Aug-2019 Sep-2019 Oct-2019 Nov-2019 Dec-2019

OutsideServices-Total

CUMMULATIVEBUDGET

CUMMULATIVEACTUAL

M-S-R EAGeneral Manager Summary


Month of: Aug-2019

Budget Current Month


Positive Variance

Actual v. Budget %

Admin 4,000 4,000 0 100%Total 4,000 4,000 0 100%

Budget Year to Date

Actual Year to Date

Positive Variance

Actual v. Budget %

Admin 32,000 32,000 0 100%Total 32,000 32,000 0 100%

-

10,000

20,000

30,000

40,000

50,000

60,000

Jan-2019

Feb-2019

Mar-2019

Apr-2019

May-2019

Jun-2019

Jul-2

019

Aug-2019

Sep-2019

Oct-201

9

Nov-2019

Dec-201

9

GeneralManager-Total

CUMMULATIVEBUDGET

CUMMULATIVEACTUAL

M-S-R EAGeneral Counsel Summary


Month of: Aug-2019



Positive Variance

Actual v. Budget %

Admin 667 22 645 3%Total 667 22 645 3%

Budget Year to Date

Actual Year to Date

Positive Variance

Actual v. Budget %

Admin 5,333 2,462 2,871 46%Total 5,333 2,462 2,871 46%

-1,0002,0003,0004,0005,0006,0007,0008,0009,000

Jan-2019

Feb-2019

Mar-2019

Apr-2019

May-2019

Jun-2019

Jul-2

019

Aug-2019

Sep-2019

Oct-201

9

Nov-2019

Dec-201

9

GeneralCounsel-Total

CUMMULATIVEBUDGET

CUMMULATIVEACTUAL

M-S-R EAKBT Summary


Month of: Aug-2019



Positive Variance

Actual v. Budget %

Admin 167 0 167 0%Total 167 0 167 0%

Budget Year to Date

Actual Year to Date

Positive Variance

Actual v. Budget %

Admin 1,333 0 1,333 0%Total 1,333 0 1,333 0%

-

500

1,000

1,500

2,000

2,500

Jan-2019

Feb-2019

Mar-2019

Apr-2019

May-2019

Jun-2019

Jul-2

019

Aug-2019

Sep-2019

Oct-201

9

Nov-2019

Dec-201

9

KBT-Total

CUMMULATIVEBUDGET

CUMMULATIVEACTUAL

M-S-R EAMID Summary


Month of: Aug-2019



Positive Variance

Actual v. Budget %

Admin 1,250 0 1,250 0%Total 1,250 0 1,250 0%

Budget Year to Date

Actual Year to Date

Positive Variance

Actual v. Budget %

Admin 10,000 7,857 2,143 79%Total 10,000 7,857 2,143 79%

-2,0004,0006,0008,00010,00012,00014,00016,000

Jan-2019

Feb-2019

Mar-2019

Apr-2019

May-2019

Jun-2019

Jul-2

019

Aug-2019

Sep-2019

Oct-201

9

Nov-2019

Dec-201

9

MID-Total

CUMMULATIVEBUDGET

CUMMULATIVEACTUAL

M-S-R EABaker Tilly Summary


Month of: Aug-2019



Positive Variance

Actual v. Budget %

Admin 0 0 0 #DIV/0!Total 0 0 0 #DIV/0!

Budget Year to Date

Actual Year to Date

Positive Variance

Actual v. Budget %

Admin 21,000 20,600 400 98%Total 21,000 20,600 400 98%

-

5,000

10,000

15,000

20,000

25,000

Jan-2019

Feb-2019

Mar-2019

Apr-2019

May-2019

Jun-2019

Jul-2

019

Aug-2019

Sep-2019

Oct-201

9

Nov-2019

Dec-201

9

BakerTilly-Total

CUMMULATIVEBUDGET

CUMMULATIVEACTUAL

9/10/19 2019 Input 2019 EA Outside and Financial Services Expenses.xlsx

Authority Admin - 2019 2019 Budget Revised 2019 Budget

Jan-2019 Feb-2019 Mar-2019 Apr-2019 May-2019 Jun-2019 Jul-2019 Aug-2019 Sep-2019 Oct-2019 Nov-2019 Dec-2019 Total Average Year-End Notes

8.33% 16.67% 25.00% 33.33% 41.67% 50.00% 58.33% 66.67% 75.00% 83.33% 91.67% 100.00% Projection

General ManagerAdmin 48,000 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 - - - - 32,000 4,000 48,000 8.33% 16.67% 25.00% 33.33% 41.67% 50.00% 58.33% 66.67% 66.67% 66.67% 66.67% 66.67% 100%

General CounselAdmin 8,000 8,000 - 696 - - 608 - 1,136 22 2,462 308 3,693

8,000 8,000 - 696 - - 608 - 1,136 22 - - - - 2,462 308 3,693 0.00% 8.70% 8.70% 8.70% 16.30% 16.30% 30.50% 30.78% 30.78% 30.78% 30.78% 30.78% 46%

KBTAdmin 2,000 2,000 - - - - - - - - - - -

2,000 2,000 - - - - - - - - - - - - - - - 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0%

MIDAdmin 15,000 15,000 687 767 1,499 1,226 1,226 1,226 1,226.13 7,857 1,122 13,470

15,000 15,000 687 767 1,499 1,226 1,226 1,226 1,226.13 - - - - - 7,857 1,122 13,470 4.58% 9.69% 19.69% 27.86% 36.03% 44.21% 52.38% 52.38% 52.38% 52.38% 52.38% 52.38% 90%

- - Baker Tilly

Admin 21,000 21,000 1,492 - 7,324 6,507 5,277 - - - - - - - 20,600 1,717 20,600 21,000 21,000 1,492 - 7,324 6,507 5,277 - - - - - - - 20,600 1,717 20,600

7.10% 7.10% 41.98% 72.97% 98.10% 98.10% 98.10% 98.10% 98.10% 98.10% 98.10% 98.10% 98%

Bank Fees 2,000 2,000 - - - - 2,000 2,000 - - - - - - - - - - - - - - -

0.00% 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 96,000 96,000 6,179 5,463 12,823 11,733 11,111 5,226 6,362 4,022 - - - - 62,919 7,147 85,763 6.44% 12.13% 25.48% 37.71% 49.28% 54.72% 61.35% 65.54% 65.54% 65.54% 65.54% 65.54% 89%

98.3%Debt Admin - 2019

Financial Services Montague 35,000 35,000 - - - - Orrick 17,000 17,000 - - - - 2,104 - - 2,104 301 3,606 Fitch 10,000 10,000 - - - - - - 10,000 - - - - - 10,000 833 10,000 Standard & Poors 15,000 15,000 - - - -

77,000 77,000 - - - - 2,104 - 10,000 - - - - - 12,104 1,009 12,104 0.00% 0.00% 0.00% 0.00% 2.73% 2.73% 15.72% 15.72% 15.72% 15.72% 15.72% 15.72% 16%

Trustee 11,200 11,200 - - - - 11,200 11,200 - - - - - - - - - - - - - - -

0.00% 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 88,200 88,200 - - - - 2,104 - 10,000 - - - - - 12,104 1,009 12,104 0.00% 0.00% 0.00% 0.00% 2.39% 2.39% 13.72% 13.72% 13.72% 13.72% 13.72% 13.72% 14%


Staff Report Date: September 11, 2019 From: Martin R. Hopper, General Manager To: M-S-R EA Commission Subject: 2020 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. Although the proposed update continues to reflect the status quo structure of M-S-R EA operations, it has been simplified and stream-lined in a manner similar to that done for the M-S-R PPA Strategic Plan update. 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 5, 2019. A copies of the proposed 2020 M-S-R EA Strategic Plan clear and red-lined to show changes from last year’s report are attached. I recommend the Commission adopt the 2020 M-S-R EA Strategic Plan.

M-S-R ENERGY AUTHORITY STRATEGIC PLAN

Effective January 1, 2020

Adopted by Commission 9-XX-2019

Martin Hopper� 8/29/19 2:36 PM

Martin Hopper� 9/9/19 9:44 AM



Deleted: 2019

Deleted: 1

Deleted: 9

Deleted: 18

Commission Review Draft 9-18-2019 1



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 2024.

INDEX

I. Introduction . . . . . . . . . . 2 II. Organizational Structure And Philosophy . . . . . . 4 III. Manage And Maintain Assets . . . . . . . . 5 Natural Gas Project . . . . . . . . . 5 IV. Financial Matters . . . . . . . . . . 7

Exhibit “A” M-S-R EA Organization Chart . . . . . . 8









Deleted: 19

Deleted: 3

Deleted: 2

Deleted: 3

Deleted: 3

Deleted: 4

Deleted: V. Joint Action Opportunities . . . . . . . . 4Background . . . . . . . . . . 4Big Horn Wind Energy Project . . . . . 5

VI. Strategic Risks And Exposures . . . . . . . . 5

Deleted: 6


M-S-R ENERGY AUTHORITY STRATEGIC PLAN Effective January 1, 2020

I. INTRODUCTION 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

Martin Hopper� 8/29/19 2:38 PMDeleted: 19


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

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 third-

parties. 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.”

Recommendations:

No changes are recommended to the Authority’s organization structure at this time. Martin Hopper� 8/29/19 2:39 PM

Deleted: <#>M-S-R EA should continue to be member-directed and member-supported.

<#>M-S-R EA should continue to conduct its Technical Committee and Financial Management Committee in noticed Public and Closed Sessions.

<#>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. This discount is based on a contract index discount of about $0.78/MMBTU

plus earnings on the Debt Service Fund. For Modesto and Santa Clara the yield on their Debt

Service Fund investments is determined by a ten-year Forward Delivery Agreement entered

into simultaneously with the original transaction. Redding did not participate in the Forward

Deliver Agreement and has independently managed its investments.

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 2010-04 Adopting Gas

Project Operating Procedures to guide the implementation of the project.

Goals:

1. Efficiently and economically manage the Natural Gas Project on behalf of the Members.

Potential Actions:

1. Renew or extend Forward Delivery Agreements for investment of Natural Gas Project

Debt Service Reserve Funds for terms of either 10 or 20-years.


2. Natural Gas Project Debt Service Reserve Funds to be self-invested in permitted

investments (which include LAIF, U.S. Treasuries, Federal Agency securities, and

highly-rated commercial paper.)

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.

3. M-S-R EA will monitor interest rate market conditions regarding replacement

Forward Delivery Agreements related to the investment of the Debt Service Funds

and periodically report (at least every six-months) to the Commission regarding the

viability of entering into new or replacement Forward Delivery Agreements.



Deleted: renew or replace the

Deleted: prior to its expiration in September 2019


IV. FINANCIAL MATTERS

M-S-R EA has about $900 million of outstanding debt on the various bond issues sold to

finance the Natural Gas Project as of December 31, 2019. M-S-R EA maintains operating

funds and restricted and un-restricted 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.




Deleted: 2

Deleted: 8

Deleted: <#>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.

<#>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.


Exhibit “A”

M-S-R Energy Authority Organization Chart (As of September 18, 2019)

Commissioners: McFall (Vice President) Pineda, Beans (President – Vacant)

Alternates: Modesto: Caballero; Redding: Zettel Santa Clara: Kolnowski, Hatcher, Kurotori, Wong

General Counsel Steve Gross, Esq

Controller Jill De Jong

Treasurer Scott Van Vuren

Secretary Steve Gross, Esq

Assistant Secretary Martin Hopper

General Manager Martin Hopper

Administrative Assistant Amy Santos

Technical Committee Hopper (Chair – Ex Officio),

Burriss, Wong, Handy Alts: Caballero, Hance, Watros

Financial Management Committee

Hopper (Chair – Ex Officio Van Vuren, Qui, Bowers

Alts: De Jong, Wong, Spaner

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

Special Counsels & Consultants











Deleted:

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.

Recommendations

1. Upon the specific request of the members, M-S-R EA should identify and evaluate future opportunities such as:Specific fuel or power supply alternatives (renewable or non-renewable resources);“Pre-Pay” energy or fuel-supply arrangements;Other risk reduction/mitigation measures; orOther 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 Avangrid 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, Avangrid 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

At the direction of the Members, M-S-R EA may continue discussions with Avangrid 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,

Deleted: 9

Deleted: 8

Deleted: Roukema

Deleted: (Vice-President),

Deleted: (President)

Deleted: Kolstad, O’Neill, Santana,

Deleted: , Hughes

Deleted: Hughes

Deleted: Hughes

... [1]

Page 8: [1] Deleted Martin Hopper 9/5/19 1:51 PM V.JointactionopportunitiesBackground

Although each of themembers has developed its own power and fuel supplystrategies through a combination of owned and purchased resources and hasdeveloped the infrastructure and a level of sophistication to perform theirneededfunctions,theauthorityisaviablevehicleforfuturejointopportunities.Activities previously examined by M-S-R EA members have included jointnatural gas operations and wind-energy storage and shaping projects.Opportunities for greater utilization or improvement of existing member orrelated joint resourcesmay occur from time to time.M-S-R EA alsomay haveopportunities toparticipate in renewable resource ornon-renewable resourcegenerationprojectsasdescribedbelowandisuniquelystructuredforthemorebeneficial use of “pre-pay” transactions than the members or other jointagencies.Recommendations

1.1. Upon the specific requestof themembers,M-S-REA should identify andevaluatefutureopportunitiessuchas:a.Specific fuel or power supply alternatives (renewable or non-renewableresources);b.“Pre-Pay”energyorfuel-supplyarrangements;c.Otherriskreduction/mitigationmeasures;orOthersupply/reliabilityenhancements.d.

BigHornWindEnergyProject:On June 1, 2005, and December 2, 2009, M-S-R Public Power Agency (M-S-RPPA) entered into a series of agreements with PPM Energy (now AvangridRenewables, LLC.) to purchase wind power energy as firmed, shaped, anddeliveredtotheCalifornia-OregonBorder(COB)fromtheBigHornIandIIWindEnergyProjects.Fromtime-to-time,AvangridRenewables Inc.andothershaveormayoffertoeitherM-S-REAorM-S-RPPAopportunitiesforpotentialenergypre-paycontracts to reduce thecostofdeliveredpowerandM-S-REAmaybethemoreappropriatevehicleforsuchcontracts.Recommendations

1.At the direction of the Members, M-S-R EA may continue discussions withAvangrid Renewables, Inc. or others regarding a prepay option to reduce theeffective delivered costs of energy provided, however, that sufficient benefitsand adequate security for M-S-R EA’s investment can be achieved. M-S-R EAshouldalsodevelopspecificeconomiccriteriabywhichsuchproposalsmaybeevaluated.VI.StrategicRisksAndExposuresM-S-R EA has developed an initial portfolio of fuel supply resource assets,consisting of the Natural Gas Project, inwhich there are inherent riskswhichcouldhavepotentialadverseimpactstoM-S-REAanditsMembers.There are three broad categories of risk: Operational, Contractual, andInstitutional.Individuallyandcollectivelytheycanaffecttheusefullifeandcost-effectivenessofM-S-REA’sassets.Recommendations1. M-S-R EA shall regularly review risks to M-S-R EA and its Members withrespect to their participation in M-S-R EA and develop mitigation plans asappropriate.

Page Break



Adopted by Commission 9-XX-2019




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 2024.

INDEX

I. Introduction . . . . . . . . . . 2 II. Organizational Structure And Philosophy . . . . . . 4 III. Manage And Maintain Assets . . . . . . . . 5 Natural Gas Project . . . . . . . . . 5 IV. Financial Matters . . . . . . . . . . 7

Exhibit “A” M-S-R EA Organization Chart . . . . . . 8


M-S-R ENERGY AUTHORITY STRATEGIC PLAN Effective January 1, 2020

I. INTRODUCTION 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

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 third-

parties. 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.”

Recommendations:

No changes are recommended to the Authority’s organization structure at this time.


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. This discount is based on a contract index discount of about $0.78/MMBTU

plus earnings on the Debt Service Fund. For Modesto and Santa Clara the yield on their Debt

Service Fund investments is determined by a ten-year Forward Delivery Agreement entered

into simultaneously with the original transaction. Redding did not participate in the Forward

Deliver Agreement and has independently managed its investments.

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 2010-04 Adopting Gas

Project Operating Procedures to guide the implementation of the project.

Goals:

1. Efficiently and economically manage the Natural Gas Project on behalf of the Members.

Potential Actions:

1. Renew or extend Forward Delivery Agreements for investment of Natural Gas Project

Debt Service Reserve Funds for terms of either 10 or 20-years.


2. Natural Gas Project Debt Service Reserve Funds to be self-invested in permitted

investments (which include LAIF, U.S. Treasuries, Federal Agency securities, and

highly-rated commercial paper.)

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.

3. M-S-R EA will monitor interest rate market conditions regarding replacement

Forward Delivery Agreements related to the investment of the Debt Service Funds

and periodically report (at least every six-months) to the Commission regarding the

viability of entering into new or replacement Forward Delivery Agreements.


IV. FINANCIAL MATTERS

M-S-R EA has about $900 million of outstanding debt on the various bond issues sold to

finance the Natural Gas Project as of December 31, 2019. M-S-R EA maintains operating

funds and restricted and un-restricted 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.


Exhibit “A”

M-S-R Energy Authority Organization Chart (As of September 18, 2019)

Commissioners: McFall (Vice President) Pineda, Beans (President – Vacant)

Alternates: Modesto: Caballero; Redding: Zettel Santa Clara: Kolnowski, Hatcher, Kurotori, Wong

General Counsel Steve Gross, Esq

Controller Jill De Jong

Treasurer Scott Van Vuren

Secretary Steve Gross, Esq

Assistant Secretary Martin Hopper

General Manager Martin Hopper

Administrative Assistant Amy Santos

Technical Committee Hopper (Chair – Ex Officio),

Burriss, Wong, Handy Alts: Caballero, Hance, Watros

Financial Management Committee

Hopper (Chair – Ex Officio Van Vuren, Qui, Bowers

Alts: De Jong, Wong, Spaner

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

Special Counsels & Consultants

M-S-R ENERGY AUTHORITY

Staff Report Date: September 9, 2019 From: Martin R. Hopper, General Manager To: M-S-R EA Commission Subject: Resolution 2019-01 Regarding Wildfire Mitigation Plans In response to recent catastrophic wildfires, new California laws impose requirements on the State’s electric utilities to prepare and adopt wildfire mitigation plans addressing how they will construct, operate, and maintain their electrical lines and equipment in a manner that will minimize the risk of wildfires. Local publically owned utilities, which include M-S-R Energy Authority, are required to prepare and adopt wildfire mitigation plans before January 1, 2020, to submit their wildfire mitigation plan to the California Wildfire Safety Advisory Board on or before July 1, 2020, and to obtain further review by an independent evaluator that their plan complies with specified criteria. However, M-S-R Energy Authority does not currently own, lease, operate, or maintain any electrical lines or equipment. Therefore, it is reasonable to conclude that M-S-R Energy Authority is not required to prepare a wildfire mitigation plan. The proposed Resolution 2019-01 makes findings to this effect and further commits that if in the future the Authority constructs, acquires, leases, operates or maintains any electrical lines or equipment, it will adopt a wildfire mitigation plan compliant with the law concurrently with any such action. I recommend the Commission adopt Resolution 2019-01 Regarding Wildfire Mitigation Plans.

Page 1 of 2

RESOLUTION NO. 2019 – 01

RESOLUTION OF THE COMMISSION OF THE M-S-R ENERGY AUTHORITY

REGARDING WILDFIRE MITIGATION PLANS WHEREAS, Local publically owned electric utilities are required to construct, operate and maintain their electrical lines and equipment in a manner that will minimize the risk of catastrophic wildfire posed by those electrical lines and equipment; and

WHEREAS, California Public Utilities Code Section 8387 (b) requires local publically owned electric utilities to prepare a wildfire mitigation plan before January 1, 2020, and annually thereafter, and that each wildfire mitigation plan be presented to and adopted by its governing board at an appropriately noticed public meeting; and

WHEREAS, California Public Utilities Code Section 8387 (b) further requires local publically owned electric utilities to submit their wildfire mitigation plan to the California Wildfire Safety Advisory Board on or before July 1, 2020, and annually thereafter, and that such wildfire mitigation plans be further reviewed by an independent evaluator for compliance with certain criteria; and

WHEREAS, Wildfire mitigation plans are to, among other purposes, address the risks of the local publically owned electric utility’s electrical lines and equipment causing catastrophic wildfires; and

WHEREAS, M-S-R Energy Authority does not currently own, lease, operate or maintain any electrical lines or equipment.

NOW, THEREFORE, BE IT RESOLVED BY THE COMMISSION of the M-S-R ENERGY AUTHORITY that:

1. The M-S-R Energy Authority does not currently own, lease, operate or maintain any electrical lines or equipment.

2. The M-S-R Energy Authority is not required to prepare a wildfire mitigation plan because it does not currently own, lease, operate or maintain any electrical lines or equipment.

3. If in the future the M-S-R Energy Authority constructs, acquires, leases, operates or maintains any electrical lines or equipment, it will adopt a wildfire mitigation plan compliant with California Public Utilities Code Section 8387 (b) concurrently with any such action.

////

Page 2 of 2

////

PASSED AND ADOPTED this 18th day of September, 2019, upon the following vote of the Members:

Modesto Irrigation District

City of Santa Clara

City of Redding

ATTEST: _______________________ _______________________ PRESIDENT SECRETARY


Staff Report Date: September 9, 2019 From: Martin R. Hopper, General Manager To: M-S-R EA Commission Subject: Natural Gas Project Forward Delivery Agreement Renewals Modesto and Santa Clara entered into Forward Delivery Agreements (FDAs) for the investment of Natural Gas Project Debt Service Reserve Funds with Citibank dated September 10, 2009. The FDAs have a term of 10-years and stated yields of about 2.19% and 2.32% per annum respectively. The FDA’s mature October 25, 2019. Redding chose not to enter into the FDA, but chose to independently invest its Debt Service Reserve Funds - which we understand to earn at California Local Agency Investment Fund (LAIF) rates. The following table enumerates the performance of the FDAs/Investments to date:

Modesto Series 2009A

Santa Clara Series 2009B

Redding Series 2009C

Bond Principal Amount $201 million $500 million $200 million

Current FDA/ Investment Yield 2.19% 2.32% Variable

2010 Earnings $98,850 $181,671 $7,667 2011 Earnings $342,568 $453,914 $12,517 2012 Earnings $242,832 $1,282,504 $221,203 2013 Earnings $201,211 $534,165 $14,103 2014 Earnings $164,755 $426,358 $5,801 2015 Earnings $133,252 $342,697 $4,718 2016 Earnings $105,562 $255,709 $19,949 2017 Earnings $90,045 $242,224 $23,328 2018 Earnings $77,357 $196,718 $54,331 Less Estimated Capitalized Interest Refund

-$200,000 -$500,000 -$200,000

Total Net Earnings $1,256,432 $3,415,960 $177,720

Page 2 of 2

The Financial Management Committee met August 5, 2019 and August 19, 2019 to consider options available to the Members including:

1. Individual investments of Natural Gas Project Debt Service Reserve Funds in permitted investments (which include LAIF, U.S. Treasuries, Federal Agency securities, and highly-rated commercial paper) such as made by Redding for the past 10-years.

2. Enter into a new FDA with a term of 10-years. 3. Enter into a new FDA with a term of 20-years. 4. Any combination of the above options.

Mr. Rai of MDR reported to the Financial Management Committee that MDR had sought informal proposals from the incumbent FDA provider, another large investment bank, and a FDA broker. Proposals for a 10-year FDA yielded earnings under 1% per annum and 20-year proposals had slightly higher earnings rates. Mr. Rai noted interest rates continued to decline through August and given the apparently inverted yield curve in the Treasury market, it does not appear to be an opportune time to enter into a new FDA. Mr. Rai opined it not be likely that LAIF earnings would drop to the 1% range in the immediate future. Additionally he noted the incumbent FDA provider stated they would not likely extend the no-cost termination provision in the FDAs for a renewal or replacement. The Financial Management Committee noted it appears that utilizing LAIF is the practical alternative to proceeding with new FDAs and that current LAIF yields (greater than 2%) are of similar magnitude to the maturing FDAs. After some discussion, it was the consensus of the Financial Management Committee that the Authority not enter into new FDAs at this time, but instead invest the Natural Gas Project Debt Service Funds in LAIF, monitor the market, and revisit this issue every six-months. A copy of the Financial Advisor’s report concurring with this recommendation is attached. I recommend the Commission direct that the Authority not enter into new FDAs at this time, that Natural Gas Project Debt Service Funds be invested in LAIF or equivalent short-term investments permitted by the Trust Indentures and the Authority’s Investment Policy, and that the Financial Management Committee and Financial Advisor continue to monitor the market and update their recommendations to this Commission every six-months.

2175 North California Blvd., Suite 422 • Walnut Creek, CA 94596 Phone (925) 256-9797 • Fax (925) 256-9795

Memorandum To: M-S-R Financial Management Committee From: Montague DeRose and Associates, LLC Date: August 21, 2019 Subject: M-S-R Energy Authority (the “Authority”) Debt Service Fund Investment

Background

As per the recommendation in our memo dated July 25, 2019 (M-S-R Energy Authority Debt Service Fund Investment, attached for reference), Montague DeRose and Associates (“MDA”) has had preliminary discussions with forward delivery agreement (“FDA”) providers and brokers regarding putting in place new FDAs to replace the FDAs scheduled to terminate on October 25, 2019.

Current Debt Service Fund Investment Opportunities

Based on discussions with FDA providers (Citibank and Barclays) and an investment agreement broker (Raymond James), MDA estimates that as of August 9, 2019 the Authority could lock-in fixed rates of approximately 0.80% to 0.95% and 0.90% to 1.17% on 10-year and 20-year FDAs, respectively:

Further, we have confirmed no providers, including Citi, will be able offer the Authority the ability to terminate the FDA at no cost in the event the Series 2009 bonds are mandatorily redeemed due to early termination of the underlying prepaid gas agreements.

As of July 2019, the State’s Local Agency Investment Fund (“LAIF”) yield was about 2.38%. The LAIF yield fluctuates as short-term market yields rise and fall and will likely be lower for August. However, given the Federal Reserve Bank’s current Fed Funds rate target range and its public commentary regarding the likely path of monetary policy, it is unlikely that the LAIF return will fall below 1.00% in the near future.

Rates as of Provider/Broker 10 Year 20 Year

8/9/2019 Citi 0.95% 1.17%

8/16/2019 Barclays 0.57% 0.70%

Adj Barclays* 0.77% 0.88%

8/9/2019 Raymond James 0.90% 1.15%

* 8/16 rates adjusted for change in market rates between 8/9 and 8/16

FDA Term

M-S-R Energy Authority Debt Service Fund Investment Page 2 Recommendation

Given current levels of short- and long-term interest rates and the inability of FDA providers to offer a no-cost termination feature in the event of a mandatory redemption of the Series 2009 Bonds, MDA recommends that the Authority invest the Debt Service Fund deposits in LAIF (or similar high quality shorter-term investments) when the existing FDAs mature rather than entering into new FDAs. MDA further suggests that the Authority monitor market conditions no less frequently than every six months and consider pursuing a new investment strategy when it deems appropriate.

M-S-R Energy Authority Debt Service Fund Investment Page 3

Memorandum To: M-S-R Financial Management Committee From: Montague DeRose and Associates, LLC Date: July 25, 2019 Subject: M-S-R Energy Authority Debt Service Fund Investment

Montague DeRose and Associates (“MDA”) has prepared the following memo to assist M-S-R Energy Authority (“the Authority”) in evaluating investment options for its debt service funds.

Background

The Authority issued its Gas Revenue Bonds Series 2009A, B, & C on September 10, 2009. The bonds were issued to finance the cost of acquiring a supply of natural gas pursuant to three separate Agreements for Purchase and Sale of Natural Gas between the Authority and Citigroup Energy Inc., the gas supplier. All of the natural gas purchased by the Authority is sold to the M-S-R members under separate Natural Gas Supply Agreements, one for each member and related bond series. In connection with the issuance of the bonds, MID and Santa Clara elected to enter into forward delivery agreements (“FDAs”) for the debt service payments associated with Series 2009A and 2009B, respectively, while Redding elected to independently invest its debt service funds.

Under the FDAs, the Authority agreed to deposit specific amounts monthly through the maturity of each FDA and the provider, Citigroup Financial Products Inc., agreed to sell short-term permitted investments (e.g., T-Bills) to the Authority at a price that would generate a guaranteed fixed yield to the Authority. This structure ensures that the Authority’s funds are invested in high-quality short-term investment securities at all times and that the fund deposits are never at risk to the credit of the provider.

The FDA associated with $201 million Series 2009A and MID has a guaranteed annual rate of 2.19% and matures on October 25, 2019. The FDA associated with $500 million Series 2009B and Santa Clara has a guaranteed annual rate of 2.315% and the same maturity date. To date the FDAs have realized net earnings of $1.256 million and $3.416 million for Series 2009A and 2009B respectively. We understand that the $200 million Series 2009C debt service funds have been invested in LAIF and have earned a net total of $177,720. (All earnings are net of estimated capitalized interest refund).

Alternatives

Going forward, the Members could elect to enter into new FDAs (which could match the maturity of the bonds or be another specified earlier date) or invest individually in permitted investments. In general terms, the guaranteed fixed rate for an FDA represents the market’s expectations of the average yield on short-term Treasury investments over the contract period, less a spread to cover hedging, operational, credit and other costs of the provider. The alternative would be for the Authority to invest each deposit at the time of receipt in permitted investments at whatever

M-S-R Energy Authority Debt Service Fund Investment Page 4 market rates are available at the time. The actual rates earned on the periodic short-term investments over time may fall short of or exceed an FDA’s guaranteed fixed rate.

The decision to enter into an FDA rather than invest over time is similar to the decision to issue fixed rate bonds versus floating rate bonds. In other words, the Authority must weigh the pros and cons of interest rate risk, cashflow certainty, etc. in determining if an FDA best achieves its goals.

In this particular case, the potential FDA is complicated by the fact that the Authority will stop making payments under the FDA if the Series 2009 bonds are mandatorily redeemed due to early termination of the underlying prepaid gas agreements. Thus, the Authority is likely to prefer an FDA that includes a no cost termination in the event of a mandatory redemption of the Series 2009 bonds. Given its roles in the gas prepay transaction, Citi understood this risk and was able to offer a no cost termination of the existing FDAs in the event of a mandatory redemption of the bonds.

Other potential FDA providers may be unwilling to provide a no cost termination on an FDA, or may charge a significant premium (in the form or a lower fixed FDA rate) to provide such a no cost termination option. Although at this stage we do not recommend it, if the Authority was willing to consider entering into an FDA without a no cost termination option, MDA could provide an estimate of the financial exposure this would impose on the Authority.

Recommendation

We recommend that MDA begin discussions with Citi on their levels and terms for new FDAs as well as explore with a few other potential providers to determine if they could potentially be competitive providers of FDAs that meet the Authority’s requirements. Once estimates of current market FDA rates are obtained, the Authority can evaluate these fixed rates relative to floating rate investment options.

Documents

MSR Energy Authority€¦ · Cindy Worley Santa Clara: John Roukema (President) ... 2019 at the offices of Navigant Consulting, Inc. (NCI), 35 Iron Point Circle, ... Tilly, Virchow,