California Independent System Operator QUARTERLY FINANCIAL REPORT March 31, 2018 250 Outcropping Way Folsom, CA 95630 (916) 351-4000
CALIFORNIA INDEPENDENT SYSTEM OPERATOR CORPORATION QUARTERLY FINANCIAL REPORT - March 31, 2018 Table of Contents Page Number Summary, Discussion and Commentary i THE ISO Statement of Operations 1 Balance Sheet 2 Capital Projects Report 3 Summary Financial Data Cumulative Operating Revenues 4 Monthly GMC Revenues 5 Monthly Operating and Maintenance Expenses 6 Cumulative Capital Expenditures 7 ISO Market Costs by Month - April 2016 through March 2018 8 ISO Market Costs by Quarter - 2nd Quarter 2014 through 1st Quarter 2018 9 Collateral and Estimated Aggregate Liability 10 Unsecured Collateral 11 Secured Collateral 12 Finance and Accounting 4/18/17
CALIFORNIA ISO SUMMARY, DISCUSSION AND COMMENTARY For the quarter ended March 31, 2018 Results of Operations Revenues Through the first quarter ending March 31, 2018, operating revenues were higher by $1.2 million compared to the budgeted amounts. The overall increase in revenues was primarily due to to higher other revenues of $1.6 million due to the recognition of EIM implementation fees, partially offset by lower GMC revenues of $0.4 million. The Company monitors changes in GMC revenues and will adjust rates, if necessary, to align actual GMC revenues closer to budget, as required by the Tariff. Expenses Operating expenses are $3.7 million under budget through the first quarter of the year, largely due to timing of expenses. Interest income and other are lower than budget during the 1st quarter due to unrecognized losses on the value of investments, due to rising interest rates. Material Changes to Assets and Liabilities Debt service, market collateral transactions, incentive compensation payouts and annual 401k contributions were the primary contributors to the changes in company assets and liabilities during the the first quarter. Capital Projects Through the end of the first quarter of 2018, $3.0 million in projects were approved by the Corporate Management Committee. These projects will enhance the current systems' performance and effectiveness in meeting future challenges and FERC mandates. Collateral Held Report As of April 4, 2018, the ISO maintained $1.9 billion in collateral from market participants to support $300.9 million in aggregate liabilities due in the market. Approximately $1.5 billion of the collateral is from unsecured sources (i.e., unsecured credit limits and parent guarantees) with investment grade or equivalent ratings, and $0.5 billion is from secured forms (i.e., cash and letters of credit). This collateral is predominantly invested in AAA-rated money market funds or backed by A rated or better financial institutions. Page i Finance and Accounting 4/19/18
CALIFORNIA ISO Statement of Operations For the quarter ended March 31, 2018 (dollars in thousands) Quarter Year to Date Year to Date Actual Prior Year Actual Prior Year Budget Operating revenues: Grid management charge $ 43,872 $ 44,617 $ 43,872 $ 44,617 $ 44,238 Other revenues 4,801 2,865 4,801 2,865 3,206 Total operating revenues 48,673 47,482 48,673 47,482 47,444 Operating expenses: Salaries and benefits 29,945 28,543 29,945 28,543 29,982 Building, leases and facility 494 346 494 346 605 Insurance 367 314 367 314 456 Third party vendor contracts 3,447 3,309 3,447 3,309 4,009 Consulting and contracting services 2,471 2,828 2,471 2,828 4,022 Legal and audit 95 150 95 150 803 Training, travel and professional dues 635 554 635 554 1,127 Other 428 358 428 358 598 Total operating expenses 37,882 36,402 37,882 36,402 41,602 Operating income before depreciation and amortization 10,791 11,080 10,791 11,080 5,842 Depreciation and amortization 7,239 6,290 7,239 6,290 7,000 Net operating income (loss) 3,552 4,790 3,552 4,790 (1,158) Other income (expenses) Interest income & other (134) 1,034 (134) 1,034 625 Interest expense (2,196) (2,240) (2,196) (2,240) (2,165) Total other income (expenses) (2,330) (1,206) (2,330) (1,206) (1,540) Excess (deficiency) of revenues over expenses $ 1,222 $ 3,584 $ 1,222 $ 3,584 $ (2,698) Number of full-time employees 599 584 600 Finance and Accounting Departments Page 1 4/19/18
CALIFORNIA ISO Balance Sheet As of March 31, 2018 (dollars in thousands) ASSETS Current Quarter 3/31/2018 Prior Year 12/31/2017 CURRENT ASSETS Cash and cash equivalents, including restricted amounts 317,835 $ 332,767 Accounts receivable 26,504 16,404 Short-term Investments, including restricted amounts 53,432 49,050 Other current assets 6,963 5,708 Total current Assets 404,734 403,929 NONCURRENT ASSETS Long-term investments, including restricted amounts 127,971 143,281 Fixed assets, net 177,201 178,898 Other assets 13,665 14,579 Total noncurrent assets 318,837 336,758 TOTAL ASSETS $ 723,571 $ 740,687 LIABILITIES AND NET ASSETS CURRENT LIABILITIES Accounts payable and accrued expenses 4,619 10,186 Accrued salaries and compensated absences 15,932 32,700 Current portion of long-term debt 4,970 4,765 Due to market participants 338,643 330,381 Generator noncompliance fines refund obligation 2,198 2,167 Total current liabilities 366,362 380,199 NONCURRENT LIABILITIES Long-term debt, net of current portion 176,248 181,372 Employee retirement plan obligations 18,005 17,218 Total noncurrent liabilities 194,253 198,590 TOTAL LIABILITIES 560,615 578,789 TOTAL NET ASSETS 162,956 161,898 TOTAL LIABILITIES AND NET ASSETS $ 723,571 $ 740,687 Finance and Accounting Page 2 4/19/18
Capital Projects Report For the quarter ended March 31, 2018 ($ in thousands) 2018 Projects Capital and Project Approved Remaining Expenditures Project Classification Budget 1 YTD Budget YTD Market and Operational Excellence $ 10,050 $ 1,436 $ 8,614 $ 206 Enhance the Technology Foundation 6,050 939 5,111 70 Focus on Customer Service and Other Costs 1,150 650 500 - Grid Evolution Readiness and Regional Innovation Opportunities 750-750 - $ 18,000 $ 3,025 $ 14,975 $ 276 Expenditures on projects approved prior to 2017 2 : 5,159 $ 5,435 1 The Board approved a maximum level of $18.0 million in capital and project commitments for 2018 at their December 2017 meeting. The sub-amounts allocated to the project classifications will vary as actual projects are approved during the year by the Corporate Management Committee. 2 Expenditures on projects approved in a prior budget year. Does not include EIM Implementation projects as those expenditures are reimbursed by the EIM entity. Finance and Accounting Page 3 04/19/18
Cumulative Operating Revenues Revenues = GMC & Other Revenues $225 $200 $175 $150 $ in millions $125 $100 $75 $50 $25 $0 Jan-18 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Actual 16.51 31.7 48.67 Budget 16.41 31.21 47.44 63.47 80.5 99.58 120.31 141.21 160.14 177.63 194.04 211.45 Variance 0.1 0.49 1.23 Finance and Accounting Page 4 04/19/18
Monthly GMC Revenues $22 $21 $20 $19 $18 $ in millions $17 $16 $15 $14 $13 $12 $11 $10 Jan-18 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Actual 15.08 13.82 14.98 Budget 15.34 13.77 15.13 14.90 15.89 17.85 19.56 19.70 17.82 16.32 14.97 16.00 Variance (0.26) 0.05 (0.15) Cum Variance (0.26) (0.21) (0.37) Finance and Accounting Page 5 04/19/18
Operating and Maintenance Expenses (O&M) $180 $160 $140 $120 $ in millions $100 $80 $60 $40 $20 $0 Jan-18 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Monthly Actual 11.64 13.07 13.18 Monthly Budget 13.35 14.27 13.98 17.82 13.61 13.71 13.21 13.19 18.20 13.08 13.08 21.02 Cum Actual 11.64 24.70 37.88 Cum Budget 13.35 27.62 41.61 59.42 73.03 86.74 99.95 113.14 131.34 144.42 157.50 178.52 Cum Variance 1.72 2.92 3.72 Finance and Accounting Page 6 04/19/18
Cumulative Capital Expenditures $20 $15 $ in millions $10 $5 $0 Jan-18 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Budgeted capital 18.00 Cumulative Expenditures 0.00 0.03 0.28 Approved projects 1.48 1.59 3.03 Finance and Accounting Page 7 04/19/18
$1,300 ISO Market Revenues By Month Apr 2016 through Mar 2018 $1,200 $1,100 $1,000 $900 $ in millions $800 $700 $600 $500 $400 $300 $200 $100 $0 Apr-16 May Jun Jul Aug Sep Oct Nov Dec Jan-17 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan-18 Feb Mar GMC RMR A/S Capacity Energy (RT and DA) Transmission and Other Inter SC trades Finance and Accounting Page 8 04/19/18
$3,500 ISO Market Revenues By Quarter 2nd Quarter 2014 through 1st Quarter 2018 $3,000 $2,500 $ in millions $2,000 $1,500 $1,000 $500 $0 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 GMC RMR A/S Capacity Energy (RT and DA) Transmission and Other InterSC trades Finance and Accounting Page 9 04/19/18
Collateral & Estimated Aggregate Liability (as of 04/04/18) Collateral Types Amount Unsecured $1,465,420,460 Secured $454,154,173 Total $1,919,574,633 Estimate Aggregate Amount Liability Positive EAL $300,910,210 Finance and Accounting Page 10 04/19/18
Unsecured Collateral (as of 04/04/18) (in millions) 500.00 450.00 400.00 350.00 300.00 250.00 200.00 150.00 100.00 50.00 - AAA AA+ AA AA- A+ A A- BBB+ BBB NR $$ 146.29 100.00 200.00 430.01 61.40 114.68 111.00 132.38 163.88 5.78 Finance and Accounting Page 11 04/19/18
Secured Collateral (as of 04/04/18) (in millions) 200.00 Secured Collateral (Millions) 180.00 160.00 140.00 120.00 100.00 80.00 60.00 40.00 20.00 - AAA AA+ AA- A+ A A- $$ 167.98 50.00 18.25 43.06 174.85 0.01 Finance and Accounting Page 12 04/19/18