California's CPA to use pre-pay bond for 685-MW renewables procurement

California community choice aggregator Clean Power Alliance (CPA) said Tuesday it has arranged for the issuance of its second pre-pay green bond of about USD 1 billion (EUR 915m) to further reduce costs of renewable energy procurement.

Energy prepayment bonds enable municipal agencies like CPA to secure power procurement cost savings and have historically been used for natural gas procurements. This time, CPA will use the bond to prepay the purchase of 685.5 MW of clean electricity under four power purchase agreements (PPAs) tied to three solar-plus-storage projects and one wind project.

The bond is expected to reduce CPA’s renewable energy costs by about USD 31.9 million over the first five years, or an average of USD 6.4 million per year. It follows the arrangement of a similar bond issuance in February, with CPA anticipating combined annual savings of USD 14.7 million from the two issuances.

“As a not-for-profit public agency, we are able to utilise our tax-exempt status to reduce our power procurement costs. We can then pass along these appreciable savings to our Southern California customers,” explained Susan Santangelo, chair of CPA’s finance committee and mayor of the city of Camarillo.

The not-for-profit electricity provider said that the bond is a form of wholesale electricity prepayment. It requires three key parties: a tax-exempt public electricity retailer, a taxable energy supplier and a municipal bond issuer, which in this case are CPA, J Aron & Company LLC, and the California Community Choice Financing Authority (CCCFA), respectively. The parties enter into long-term power supply agreements for clean electricity. The bond funds a prepayment of energy, for which prepayment a discount is received.

(USD 1 = EUR 0.915)

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