Silicon Valley Clean Energy Enters Into Second Prepayment Transaction
Clean Energy Project Bonds to save $4.5M annually
Sunnyvale, Calif. – Silicon Valley Clean Energy (SVCE) closed its second prepayment transaction to finance its clean energy supplies, resulting in significant savings to the agency, and ultimately to customers via stable rates. The savings are approximately $4.5 million annually, a 10 percent discount on the cost of power supply contracts representing about 55 MWs. The Clean Energy Project Bonds, valued at $841,550,000, support SVCE’s ongoing commitment to clean, affordable, and reliable electricity for its communities.
The goal of the prepayment transaction is to reduce the cost of power purchases on quantities delivered under the prepay structure with minimal risk to SVCE. The prepay structure enables publicly owned utilities, including Community Choice Aggregators (CCAs), to reduce their energy costs by financing the acquisition of long-term energy supplies with tax-exempt bonds. For decades, municipal utilities have used the prepayment structure as an industry standard practice to reduce costs for the purchase of natural gas.
“The savings to SVCE from this transaction will benefit our communities as we continue to offer innovative programs to help us achieve our shared carbon reduction goals,” said Girish Balachandran, SVCE CEO.
In June 2021, four CCAs, Central Coast Community Energy (3CE), East Bay Community Energy (EBCE), Marin Clean Energy (MCE), and Silicon Valley Clean Energy (SVCE), jointly formed the California Community Choice Financing Authority (CCCFA), a Joint Powers Agency. CCCFA was created with the goal to reduce the cost of power purchases through a pre-payment structure. These prepayments allow CCAs to reduce customer costs and increase funding available for local programs.
A tax-exempt public electricity supplier (the CCA), a taxable financial counterparty, and a municipal bond issuer enter into a long-term supply agreement called a Clean Energy Project Revenue Bond to pre-purchase wholesale zero-emission clean electricity from sources like solar, wind, geothermal, and hydropower. The municipal bond issuer – in this case, CCCFA – issues tax-exempt bonds to raise the funds for the transaction, flowing the funds to the financial counterparty. The financial counterparty utilizes the bond funds and provides a discount to the CCA on the power purchases based on the difference between the taxable and tax-exempt rates.
About Silicon Valley Clean Energy
Silicon Valley Clean Energy is a not-for-profit, community-owned agency providing clean electricity from renewable and carbon-free sources to more than 270,000 residential and commercial customers in 13 Santa Clara County jurisdictions. As a public agency, net revenues are returned to the community to keep rates competitive and promote clean energy programs. Silicon Valley Clean Energy is advancing innovative solutions to fight climate change by decarbonizing the grid, transportation, and buildings. Learn more at SVCleanEnergy.org.
Pamela Leonard, Senior Manager of Communications