Prepay Bond Financing Saves Ava $22 Million
Jun 17, 2025
Ava has saved customers $22 million so far by using “prepayment bonds,” a form of municipal financing, to buy renewable energy for up to 30 years into the future. Ava has used the technique to finance three prepay transactions since 2021 and is planning to execute another transaction later this year.
Prepay To Save
The standard way to buy power is to sign a power purchase agreement (PPA) with a power generator, then pay it off monthly using revenues from ratepayers, kind of like paying rent.
The prepayment method is more like getting a mortgage to buy a house.
First, a tax-exempt entity like Ava works with a financier such as Morgan Stanley or Goldman Sachs, who serves as a bond underwriter and prepay energy supplier. The two parties sign a 30-year power supply contract, in which the financier buys from various power generators and Ava customers receive the electricity.
To raise money to prepay for the power, Ava issues public bonds through a “conduit.” In 2021, Ava and four other CCAs created the California Community Choice Financing Authority (CCCFA), which serves as a low-cost conduit for issuing bonds. By banding together through the CCCFA, CCAs create greater expertise and lower operating expenses.
CCAs then use the revenues from the bond sales to pay for 30 years of power up front. Thanks to Ava’s status as a tax-exempt public entity, interest rates for the bonds are lower than those for taxable bonds.
The result is a win-win-win. The bank makes money by issuing the tax-free bonds and through underwriting fees, Ava gets a portion of those revenues by receiving a discount on energy each month—which fluctuates with interest rates, but has averaged around 18%—and bond buyers (the public) get a safe return on their investment.
Prepay bonds have long been used by public agencies to finance natural gas purchases, and are increasingly being applied to electricity contracts. In fact, Ava was the first CCA to close an electricity prepay in California in 2021, along with Silicon Valley Clean Energy.
Savings and Awards
CCCFA was the top issuer of “green municipal bonds” nationally in 2023, according to the Climate Bonds Initiative, and won the 2024 ESG/Green Financing Deal of the Year award from The Bond Buyer magazine.
“The transaction highlights the growing importance of prepayments in financing the clean energy transition and offers a promising model for other electric utilities across the U.S.,” according to The Bond Buyer’s award nomination.
To date, CCCFA has issued $16 billion in prepayment bonds on behalf of CCAs, saving participating community choice ratepayers roughly $84 million annually or nearly $3 billion over the life of prepaid energy contracts.
As of the end of 2024, Ava’s share of those savings totaled $22 million, helping keep rates down and making funds available for local programs.

“Private for-profit entities such as investor-owned utilities cannot do this,” says Ava CEO Howard Chang. “So it gives us a structural advantage for achieving efficient and effective procurement costs and helping to address affordability concerns by lowering our rates.”
Ava is planning to close a fourth and potentially fifth prepay transaction in 2025.