Frequently Asked Questions: CCA Green Bond Prepayment Transactions
1. Why are CCAs using green bond prepayment transactions?
Prepayment transactions allow CCAs to reduce the cost of long-term renewable energy contracts by using tax-exempt financing, leading directly to lower utility bills for customers.
2. How much money have CCAs saved through CCCFA so far?
CCCFA has issued $23 billion in prepayment bonds, saving CCA customers roughly $150 million every year, totaling about $4.6 billion over the life of these contracts.
3. How do energy prepayment contracts work?
CCAs prepay for a long-term supply of electricity using proceeds from tax-exempt municipal bonds. Because these bonds carry lower interest rates, the resulting energy price is discounted compared to traditional procurement.
4. How do prepayment transactions support clean energy development?
Prepayments help finance the purchase and construction of new renewable energy projects by providing developers with upfront capital and long-term revenue certainty.
5. Why can CCAs use tax-exempt bonds for energy prepayments?
Federal law permits tax-exempt public entities—including CCAs—to finance prepaid energy contracts using municipal bonds. The IRS and Congress codified this framework in the 1990s.
6. Why are green bond prepayments a competitive advantage for CCAs compared to IOUs?
CCAs can access tax-exempt financing, which investor-owned utilities cannot use. This enables CCAs to secure meaningfully lower energy prices—an important competitive advantage in California’s energy landscape.
7. Have prepayment bonds been used before?
Yes. Municipal utilities have long used similar structures to prepay for natural gas. CCCFA is now leveraging this framework for renewable energy purchases on behalf of CCAs.
8. What is the California Community Choice Financing Authority (CCCFA)?
CCCFA is a joint powers authority created by CCAs to issue green bonds that facilitate energy prepayments. By working together, CCAs gain access to lower-cost capital and greater purchasing power.
9. Who participates in a typical prepayment transaction?
A standard transaction includes:
- A CCA purchasing electricity
- CCCFA, which issues the bonds and coordinates the structure
- A taxable energy supplier providing electricity under a prepaid contract
10. What major parties benefit from the prepayment structure?
- CCAs benefit from lower-cost renewable energy.
- Customers benefit from lower rates.
- Investors gain access to tax-exempt green bonds.
- Energy suppliers secure long-term revenue from prepaid contracts.
11. Are more CCAs planning to use these structures?
Yes. Several CCAs that are not yet part of CCCFA have expressed interest, and demand from both CCAs and investors suggests more issuances are likely.
12. How do green bond prepayments generate savings?
Savings come from the difference between taxable and tax-exempt interest rates. Investors accept lower, tax-exempt returns; CCAs pass these lower financing costs directly into discounted energy prices.
13. Is the typical 10% savings rate reliable?
Ten percent is a useful benchmark but not guaranteed. Actual savings depend heavily on market conditions at the time of issuance, and some recent transactions have produced lower discounts.
14. Are there additional fees CCAs must pay to participate?
Underwriting fees and other issuance costs are built into the transaction cashflows. The only additional cost to CCAs is minimal internal staff time.
15. What does it mean that CCCFA’s bonds are “non-recourse”?
Non-recourse means CCAs are not financially responsible for repaying the bonds beyond the structured transaction revenues. The bonds are secured only by the contract rights and cashflows within the prepayment deal—not CCA general funds.
16. Why is interest in green bond prepayments growing?
Early savings have been substantial, the structures are scalable, and investors continue to show strong demand for tax-exempt, climate-aligned bonds. As a result, future issuances are highly likely.
You can find more information on CCA green bond transactions here.
