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Community Choice Aggregation Feasibility Analysis Alameda County <br />June, 2016 43 MRW & Associates, LLC <br />Chapter 6: Other Risks <br />Aside from the risks identified above, the CCA or the political jurisdictions that are part of the CCA could be at risk. This section addresses some of those risks.45 <br />Financial Risks to CCA Members <br />A CCA is effectively an association of various political subdivisions. The formation documents <br />for the CCA define the rights and responsibilities of each member of the CCA. Given the large <br />number of political subdivisions that might participate in an Alameda County CCA, MRW <br />assumes that the Alameda CCA would be formed under a Joint Powers Authority, in much the same way as MCE Clean Energy and Sonoma Clean Power. <br />The CCA will ultimately take on various financial obligations. These include obtaining start-up <br />financing, establishing lines of credit, and entering into contracts with suppliers. Because a CCA <br />will take on such financial obligations, it is likely very important to the prospective member <br />political subdivisions that the financial obligations of the CCA cannot be assigned to the members. <br />As a result, it is critical that the Joint Powers Authority and any other structuring documents are <br />carefully drafted to ensure that the member agencies are not jointly obligated on behalf of the <br />CCA (unless a member agency chooses to bear such obligations). The CCA should obtain <br />competent legal assistance when developing the formation documents.46 <br />Procurement-Related Risks <br />Because a CCA is responsible for procurement of supply for its customers, the CCA must develop a portfolio of supply that meets the resource preferences of its customers (e.g., ratio of <br />renewable versus non-renewable supply) while controlling risks (e.g., ratio of short-term versus <br />long-term purchase agreements) and meeting regulatory mandates (e.g., resource adequacy and <br />RPS requirements). Thus, it is tempting to assume that customers would prefer a fully hedged <br />supply portfolio. However, such insurance comes at a cost and a CCA must be mindful of the potential competition from PG&E. As a result, the CCA’s portfolio must be both flexible while <br />meeting the needs of its customers. <br />The CCA will likely need to negotiate a flexible supply arrangement with its initial set of <br />suppliers. Such an arrangement is important since the CCA’s loads are highly uncertain during CCA ramp-up. Without such an arrangement, the CCA faces the risk of either under- or over-procuring renewable or non-renewable supplies. Excessive mismatches between supply and <br />demand of these different products would expose the CCA’s customers to major purchases or <br />sales in the spot markets. These spot purchases could have a major impact on the CCA’s <br />financials. <br /> <br />45 Note that this section does not provide legal opinion regarding specific risks, especially those related to the formation or the structure of the Joint Powers Authority under which MRW assumes the CCA will be established. <br />46 Cities such as El Cerrito and Benicia have conducted legal analyses when they were considering joining MCE. which should also be consulted.