Staff Report Item 16
Staff Report Item 16
To: Ava Community Energy Authority
From: Howard Chang, CEO
Subject: Informing the Board of Historic Electricity Rates, Rate Components, and Ava Rate Setting
Date: February 19, 2025
__________________________________________________________________ Summary
This memo serves to accompany an informational presentation to the Board regarding historic rates, rate components, and Ava rate setting.
Context
Staff requests the Board receive an informational presentation regarding electric rates.
The attached presentation provides an overview of historic rates, rate components, and the Ava Rate setting process.
Attachments
A. Powerpoint
Rate Setting Methodology
and Historic Rates
Board of Directors | February 19,
2025
Howard Chang, CEO
Attachment Staff Report Item 16A
Topics
• Definitions
• Rate setting methodology
• Historic rates and value proposition
• Risk Management
2 Attachment Staff Report Item 16A
Definitions
Term Definition
Bundled Rate PG&E's price for both generation and delivery charges. Bundled customers receive both generation and delivery from PG&E.
(Ava) Generation Rate Price of just the energy, not the transportation. Ava provides generation services; this is the rate we charge customers.
(PG&E) Delivery Rate Price of just the transportation, or "transmission and distribution." PG&E provides delivery services to both bundled and Ava customers. This also includes other costs associated with Public Purpose Funds and wildfire mitigation related costs.
Power Charge
Indifference
Adjustment (PCIA)
A volumetric fee paid by both bundled and Ava customers. This rate includes above (or below) market costs related to power supply commitments made many years ago. The PCIA is "vintaged;" bundled customers pay the current vintage and Ava customers pay the vintage assigned based on their jurisdiction's departure from PG&E. PCIA is included in the PG&E generation rate, but it is shown as a unique line item on an Ava bill. Customers pay this charge directly to PG&E, not Ava.
Franchise Fee
Surcharge (FFS)
A volumetric fee, also paid by both bundled and Ava customers. Like the PCIA, this is a unique line-item for Ava customers. The FFS is levied by the CPUC on behalf of municipalities. FFS is also vintaged.
Value Proposition Ava's value proposition is the rate difference between Ava and PG&E rates. Today, customers on Bright Choice save 5%; Renewable 100 is $0.0025 per kWh above PG&E's rates. 3 Attachment Staff Report Item 16A
What are rates?
• A rate is the price assessed per unit of electricity, listed in a "rate schedule"
o Components of a rate schedule
▪ Different rates based on
• Time of day (peak and off-peak)
• Season (winter or summer)
▪ Non-residential rates may include different prices for demand charges (kW) and usage (kWh)
4 Attachment Staff Report Item 16A
What are Ava's rates?
• Ava serves customers on 81 different rates with 427
unique rate components
o Rate sheets are available at avaenergy.org/rates
• Example rates for E-TOUC (default residential rate)
o Summer – Peak summer, Off-peak summer
o Winter – Peak winter, Off-peak winter
o Example rates for B19S (large non-residential rate)
o Summer – Peak summer, Off-peak summer, Part-peak summer o Winter – Peak winter, Off-peak winter, Super-off-peak winter o Demand charges – Max part-peak summer, Max
peak demand summer, Max peak demand winter
5
of Ava's rate components
Attachment Staff Report Item 16A
Example Rates for Common Customer Groups – October
2024
Cents (¢) per kilowatt-hour
Average
Monthly
Electric Bill
Ava Bright
Choice
Generation PG&E Delivery PCIA + FFS
Total ¢ per
kWh
Small Commercial 13.3 28.2 0.9 42.4 $215
Medium Commercial 14.0 21.2 0.9 36.1 $6,180
Large Commercial 12.8 16.4 0.9 30.1 $67,150
Residential 13.3 27.7 0.9 41.9 $150
Residential - CARE 13.3 12.5 0.9 26.6 $90
6 Attachment Staff Report Item 16A
Ava's Rate Setting Methodology
Rate setting happens in three parts:
• PG&E has an General Rate Case (GRC) and annual
Energy Resource Recovery Account (ERRA) filings where
they seek approval from CPUC to set rates based on a
cost-of-service methodology
• Ava indexes to PG&E rates and its board approves an
annual value proposition
▪ The value proposition is the discount or premium relative to PG&E’s total generation rate (not including delivery)
• Inclusive of the Power Charge Indifference Adjustment (PCIA) and Franchise Fee Surcharge (FFS)
▪ Bright Choice is currently set with a discount to PG&E’s generation rate at 5%
▪ Renewable 100 is currently set at with a cost premium relative to PG&E at a ¼ cent/kWh premium
7 PG&E Delivery
Ava Generation
PCIA/FFS
Bright Choice Discount
Total Electricity Rate
Attachment Staff Report Item 16A
Rate Setting Process and Timeline
8 • Staff provides preliminary recommendations for setting the value proposition as part of the draft budget discussion
May: Finance, Administrative, & Procurement Subcommittee, Executive Committee Meeting, and/or Board of Directors Meeting • If Staff proposes a change to the value proposition, Ava hosts community meetings to review changes and accept comments
May – June: Community Workshops
•Staff will present an analysis, findings, and recommendation from all previous parties' feedback (including the public, CAC and Board)
•Board votes to adopt a new, or the same, value proposition, as part of the budget approval •Value proposition is effective July 1 – June 30
June: Board of Directors Meeting
Attachment Staff Report Item 16A
Rate Setting Policy
9 o The setting of rates for power sold by the Authority and the setting of charges for any other category of service provided by the Authority.
o The Parties seek to:
(a) Provide electricity rates that are lower or competitive with those offered by PG&E for similar products;
(j) Provide and manage lower-cost energy supplies in a
manner that provides cost savings to low-income
households and promotes public health in areas
impacted by energy production.
Joint Powers Agreement
• Staff must receive Board approval to revise the service level value propositions (e.g., offering a greater or lesser discount on Bright Choice)
Amended & Restated Rate Setting Policy
Attachment Staff Report Item 16A
Ava Rate Setting:
Rate Changes
• When the Board adopts a new value proposition,
Ava updates our rates accordingly at the start of
the new fiscal year, on July 1
• Additionally, Ava will update rates when PG&E
updates their generation or PCIA rates throughout
the year
▪ Ava's rates change accordingly to maintain the value
proposition at all times
▪ Ava does not update rates if PG&E changes only
delivery rates
• PG&E almost always updates rates on January 1
and it is common for rates to be updated 3-5 times
throughout the year
▪ PG&E modifies rates to meet updated revenue
requirements or tariff changes
10 Attachment Staff Report Item 16A
How do other CCAs set their rates?
• Common methodologies seen across
California CCAs
▪ Set value proposition regularly, index to Investor
Owned Utility (IOU, or PG&E, SCE, SDG&E) rate,
update rates with each IOU generation rate
change
▪ Set rates annually, potentially indexed to the
IOU rate, but do not update with each IOU
generation rate change within the year
▪ Set rates independently of the IOU
11 Benefits of Ava’s methodology
1. Presents a clear and consistent
value proposition to our
customers with a commitment to
serving a rate that is competitive
to PG&E
2. Provides customers increased
stability on overall generation
rates, as PCIA rate is inversely
related to energy costs
3. Allows Ava to manage energy
procurement costs more
effectively
Attachment Staff Report Item 16A
Value Proposition 2018 to Current
June 2018 July 2020 July 2022 July 2023
(Current)
Bright
Choice
1.5% below
PG&E
1% below PG&E 3% below PG&E 5% below PG&E
Renewable
100
1¢ per kWh above PG&E 3/4¢ per kWh
above PG&E
1/4¢ per kWh
above PG&E
12 Attachment Staff Report Item 16A
Historic Rates – Most Common Residential Rate
13 • Currently Ava generation
rates are ~50% of delivery
• Overall energy bills have
increased about 40% in
2024 driven primarily by
increased wildfire
mitigation related costs
• Energy generation rates
have been relatively
stable
Attachment Staff Report Item 16A
Historic Rate Components, Including Market Prices
14 Attachment Staff Report Item 16A
Power Charge
Indifference
Adjustment
15 • Depending on the year that a
customer departs from
PG&E service, they are
assigned a vintage for PCIA
• PCIA rates by vintages
generally follow similar
trends, though they typically
vary
• Ava offers the same value
proposition, or same
effective rate, regardless of
the vintage
Attachment Staff Report Item 16A
Risk Management
• Ava energy costs are generally broken down into 3 main components and these drive how PCIA is set.
▪ Brown Power energy
▪ Renewable Energy Certificates
▪ Resource Adequacy
• Ava utilizes the PCIA portfolio of resources as a portion of its portfolio of energy hedges ▪ As market energy prices increase, PCIA goes down, which increases Ava's financial operating headroom to serve our customers. This is necessary as Ava's energy prices are rising with the market. ▪ As market energy prices decrease, PCIA goes up, which decreases Ava's financial operating headroom to serve our customers. This is necessary as Ava's energy prices are rising with the market. • Ava's strong balance sheet and $200MM credit facility allow it to manage working capital needs through volatile energy prices year to year
• If Ava were to hedge 100% of its energy needs directly to stabilize Ava generation rates, customers would face greater volatility with the addition of PCIA 16 Attachment Staff Report Item 16A
Overview of Future Topics • February o Rate Setting Methodology o Mid-year Budget Review • March o Reserve Policy • April o Accelerating Renewables • May o Draft Budget Review 17 Attachment Staff Report Item 16A
18 Attachment Staff Report Item 16A