San Diego Community Power details $687M prepay bond, new S&P rating and reserve policy

San Diego Community Power’s finance team on April 9 described a large prepayment financing, a newly issued investment-grade credit rating and a new reserve framework intended to protect customers from market volatility.

Jeb Spangler, senior strategic finance manager and interim treasurer, told the Community Advisory Committee the agency completed its third clean-energy prepayment bond transaction for $687 million that prepays energy under existing contracts and is expected to produce discounted energy pricing. "This prepay transaction . . . we are now up to $20 million in annual savings starting in 2030–2031," Spangler said, noting the deal also yields roughly $43 million in total savings over the first 10 years.

Spangler also announced the agency has obtained a public investment-grade credit rating from S&P Global with a stable outlook. "We now have a public investment grade credit rating," he said, and added the rating improves the agency’s negotiating position and can lower procurement costs for both energy and non-energy contracts.

The presentation reviewed a risk-based reserve policy adopted in December that sets three thresholds: a minimum operating reserve of 180 days cash on hand, a target of 225 days and an upper threshold of 270 days. Staff described a rate-stabilization reserve concept that would set aside funds in strong years to smooth rates in years of market weakness. Spangler explained the designated pool is sized as the 45-day difference between the 225-day target and the 270-day upper threshold (roughly $125 million), a figure he said equates to about 10% of operating revenues and about 30% of the market-price benchmark volatility the agency treats as its primary risk.

Committee members pressed staff on whether the agency might hold more than 225 days and how quickly rate-stabilization funds could be used and replenished. Spangler said the thresholds resulted from a bottom-up risk analysis and that the reserve policy and any designations would be reviewed at least annually. He warned that large designations have accounting and covenant implications, and stressed staff will present detailed proposals for any designation decisions before funds are moved.

The committee received the item as a non-action "receive and file" briefing. The finance presentation also previewed a department-by-department FY27 budget review staff will bring to committees and the board in late May to early June.

What's next: staff said they will return with more detailed forecasts and the rate team will present any proposals that would use rate-stabilization funds during the January rate-setting cycle.