Fiscal Year 2024
-2025
Mid-Year Budget Update
Executive Committee
February 5, 2025
1 Fiscal Year 2024-2025 Mid-Year Budget Summary
• Ava's Fiscal Year (FY) runs from July 1, 2024 to June 30, 2025
• Mid-year budget update based on actuals through
Nov 2024, estimates for the month of Dec 2024,
and updated forecast for Jan-Jun 2025
• Forecasted FY Total Net Revenues increased from
$42MM to $95MM, primarily driven off an increase
in Electricity Sales, partially offset by an increase in cost of energy
• Note: Stockton & Lathrop starting service in April
• Increases to Cost of Energy is predominately from
increases in renewable energy costs
• Decreases to Overhead Operating Expenses is
mostly due to lower personnel costs due to hiring
timing and reduced legal costs
• Increase in Non-Operating Revenue is from higher
interest rates earned on interest bearing accounts
2 June Mid-Year Delta
OPERATING ACTIVITY BUDGET UPDATE
REVENUE & OTHER SOURCES
Electricity Sales 881,671,000 934,857,000 53,186,000
Uncollectables (8,817,000) (9,349,000) (532,000)
Other Operating Revenue 0 4,846,000 4,846,000
TOTAL OPERATING REVENUE 872,854,000 930,354,000 57,500,000
EXPENSES & OTHER USES
Cost of Energy 760,248,000 775,538,000 15,290,000
Cost of Energy Services 11,608,000 11,601,000 (7,000)
Total Energy Operating Expenses 771,856,000 787,139,000 15,283,000 Total Overhead Operating Expenses 45,267,000 39,334,000 (5,933,000) TOTAL OPERATING EXPENSES 817,123,000 826,473,000 9,350,000 NET OPERATING POSITION 55,731,000 103,881,000 48,150,000
NON-OPERATING ACTIVITY
TOTAL NON-OPERATING REVENUE 11,799,000 15,459,000 3,660,000 TOTAL NON-OPERATING EXPENSES 25,300,000 24,414,000 (886,000) NET NON-OPERATING POSITION (13,501,000) (8,955,000) 4,546,000 TOTAL NET REVENUES 42,230,000 94,926,000 52,696,000
Overview of Revenue Changes
3 • At time of budget approval, our rate
estimates for July-Dec 2024 were slightly
higher than what actualized
• Jan-Jun 2025 rates materialized higher than
forecasted at time of budget approval
• On average, revenues were about 3.6%
lower than expected in the first half of the
Fiscal Year
• On average, revenues are expected to be
about 19.2% higher than expected in the
second half of the Fiscal Year
• For the full fiscal year, revenues are
expected to be about 6.0% higher than
expected
-20,000,000
0 20,000,000
40,000,000
60,000,000
80,000,000
100,000,000
120,000,000
Jul-24 Aug-24 Sep-24 Oct-24 Nov-24 Dec-24 Jan-25 Feb-25 Mar-25 Apr-25 May-25 Jun-25 Fiscal Year Revenue Trends & Performance
Difference Cummulative Difference Budget Actual Updated Overview of Rate Changes • As of June 2024 budget approval, the Jul-Dec 2024 rate estimates were slightly higher than what actualized.
While the PCIA was relatively unchanged, overall
generation charges actualized approximately half a cent per kWh lower o Note that load estimates were in line with actuals • As of June 2024 budget approval, the Jan-Jun 2025 rate estimates were lower than what actualized; this was
largely offset by a lower PCIA, leading to relatively flat overall generation charges
• The increase in rates leads to an increase in operating headroom and an increase in the current forecasted
budget surplus
• Jan-Jun rates are structurally lower than Jul-Dec rates due to summer/winter rate differentials
• The increase in rates and decrease in PCIA is driven by lower brown power costs and higher RA and RPS
4 Overview of Energy Cost Changes
• Energy costs typically have variability between budget and actuals and year over year volatility
• Decrease in Capacity is due to sale of previous
procurement in anticipation of Stockton joining in
2024 and the CEC changing the load forecast
methodology for 2025
• Renewable energy costs increased by nearly $55MM,
or about 41%
• Decreases in carbon free energy is due to increases in the large hydro allocation that is provided due to PCIA • CAISO ancillary costs and basis price spreads have
been consistently to our benefit
5 Hedges Open/CAISO Capacity Renewables Carbon-Free Other Budget to Actual Attribute Energy Costs
Budget Actual
Power Charge Indifference Adjustment Rate (PCIA)
Uncertainty
• The California Public Utilities Commission (CPUC) set PCIA and PG&E bundled customer rates for 2025 in a December 2024 decision. • The CPUC's decision indicated that these rates are subject to after-the-fact revision for a change in PCIA methodology: "the Commission may in another proceeding consider revisions to the [Market Price Benchmark] MPB methodology that may impact the adopted 2025 Final MPBs."
• MPBs reflect prevailing market costs for different energy products – renewable energy certificates, brown power, and Resource Adequacy (RA). There is a formally set methodology approved by the CPUC to collect market data and calculate the MPBs. MPBs are used to calculate the PCIA and the PCIA is in turn part of the aggregate electricity rates.
• Translation – Ava's 2025 collections are subject to revisitation via rate changes in 2026, if/when the CPUC revises the 2025 Final MPBs. 6 • The CPUC may change a key
element of the PCIA.
• Retroactive revisions to Ava's
2025 revenue could be
effectuated via 2026 rates.
PCIA Rate Uncertainty – PCIA Mechanics
• PCIA and PG&E's bundled customer rates are a key
determinant of Ava revenue
• PCIA is a nonbypassable charge to recover the stranded costs of PG&E's legacy procurement portfolio.
• PCIA is not an exit fee. All customers pay PCIA.
o MPBs determine the value of PG&E's legacy procurement portfolio, and so drive PCIA rates
o High MPBs => low PCIA => greater operating headroom for Ava revenue o 2025 Forecast MPBs were relatively high (see sidebar). o A change to the 2025 methodology would impact
▪ the true-up of 2025 rates (with revisions to take effect in 2026) and ▪ the forecast of 2026 rates (which will also take effect in 2026, subject to true-up in 2027)
7 System RA MPBs ($/kw/year)
2023 (final) 2024 (final) 2025 (forecast)
14.37 28.26 40.31
What change, if any,
the CPUC will make
to MPBs, is
unknown.
Accordingly, the
financial impacts of
any changes are
also unknown.
Surplus Revenue Waterfall Allocation
8 • First $50MM to Reserve Funds
• CARE/FERA/MED customers each receive
$25 bill credit (currently about 200,400
accounts)
• Next $25MM split 60/40 to additional on-bill
credits and Net Billing Tariff resilience
program
• Remaining surplus allocated to reserve
funds
Resolution R-2024-42: Waterfall
Allocations of Surplus Revenue
Allocation Balance
Mid-Year Estimated Net Revenues 94,926,000
Contributions
Working Capital - 94,926,000
Reserve Funds 50,000,000 44,926,000
Divisional Surplus
CARE/FERA/MED Credit $25 5,010,000 39,916,000
On Bill Credits 60% 15,000,000 24,916,000
Net Billing Tariff Program 40% 10,000,000 14,916,000
Total Divisional 30,010,000
Reserve Fund Additional 14,916,000
Total to Reserves 64,916,000
Reserve Funds
9 Reserve fund policy P-10.1 as
set by resolution R-2021-2
• Target percentage is 50% of
operating expenses
• Range allows as low as
25% and as high as 75%
variation
• Because reserves are to cover forward operating expenses, the Operating Expenses column are the forward fiscal year’s values • The Forward FY expenses for 2023-2024 contributions are current updated operating expenses
▪ Current reserves provide approximately 40% coverage
• Contributions from current FY revenues increase balance to cover next FY’s operating expense
▪ Currently estimated near $1B Contribution Year Contribution Withdraws Balance Operating Expenses* PctCoverage 2018-2019 40,513,687 - 40,513,687 410,686,000 9.9%
2019-2020 49,704,640 - 90,218,327 383,045,000 23.6%
2020-2021 - - 90,218,327 471,897,000 19.1%
2021-2022 65,655,073 - 155,873,400 562,667,000 27.7%
2022-2023 75,000,000 - 230,873,400 732,885,000 31.5%
2023-2024 100,000,000 - 330,873,400 828,800,000 39.9%
2024-2025** 64,916,000 - 395,789,400 1,076,267,000 36.8% *Operating Expenses are fiscal year ahead for coverage purposes **Proposed contribution with projected operating expenses to cover for FY 25-26 as of 1/28/2025