Staff Report Item 6
Staff Report Item 6
To: Ava Community Energy Board of Directors
From: Howard Chang, CEO
Subject: Fiscal Year 2025-2026 Budget
Date: June 18, 2025
______________________________________________________
Recommendation
Adopt a resolution approving:
1) The 2025-2026 fiscal year base case budget; and
2) Utilization of the GASB62 Budget Stabilization Fund to offset a budget deficit for fiscal year 2025-26 with the existing GASB62 funds and any subsequent allocation made to the GASB62 fund resulting from the 2024-2025 fiscal year Background and Discussion
Ava’s fiscal year is from July 1 through June 30. Each year the Board of Directors (‘the “Board”) approves the following fiscal year’s budget. The budget presented today is based on feedback garnered from previous draft versions presented to the Financial, Administrative, and Procurement subcommittee (May 8, 2025), the Executive Committee (May 7 and June 4, 2025), and the Board (May 21, 2025). The budget outlines staff’s best expected estimates for costs and revenues anticipated for the next fiscal year, based on load, market prices, and PCIA charges. Due to these updates, the numbers in this draft may differ from those presented in previous versions.
This budget presents two scenarios:
• Upside: Reflecting a revenue outcome based upon PG&E’s Energy Resource Recovery Account (ERRA) filing in May which did not include any updates to Staff Report Item 6
market price benchmarks (MPB’s) to resource adequacy (RA) and renewable energy prices
• Base Case: Reflecting a revenue outcome based on Ava’s current best estimates of where energy prices could materialize and utilization of $35.3MM from the Budget Stabilization Fund
Other factors and assumptions that are represented in both revenue scenarios are:
• No recommended changes to Ava’s value proposition to customers • Assumes Ava maintains a 1% uncollectable rate
• Energy costs are derived from a blend of contracted and open positions. Open prices are non-stressed, mean-forecasted market prices. • Implementation of a compliance period procurement methodology over a three-year period of 2024-2026 with an average target of 81% renewable and carbon free energy, which is unchanged from previous board approved targets • Assumes San Joaquin County begins service in May of 2026 (to be finalized) • No draws on credit facility or use of reserve funds
• Non-operating revenues assume an average of 3.5% interest rate earned through the fiscal year
• Personnel headcount as 7 incremental additional staff • Local Development allocation is $10.2MM
Ava staff is recommending the adoption of the Base Case scenario budget. The fiscal year 2025-26 budget forecasts a deficit of $35.3MM while the fiscal year 2024-25 budget is actualizing with a surplus in excess of $107MM and reflects its strong financial state. This is in addition to reserves of approximately $330MM. While Ava has not previously utilized its Budget Stabilization Fund, it serves to balance overcollection and under collection year over year. It was in September, 2020, for the purposes of satisfying financial covenants, rate stabilization, and such other matters as may be approved by the Board. The establishing resolution is attached for review.
Staff plans to bring forward to the board in future meetings further review of a detailed proposal to implement a multi-year power procurement period methodology for discussion and approval. Staff also anticipates reviewing the fiscal year 2024-25 budget surplus and potential changes to the surplus waterfall in the summer/fall timeframe.
Fiscal Impact
The approved budget establishes the forecast of Ava’s fiscal position for the next 12 months.
Staff Report Item 6
Attachments:
A. Exhibit A: 1-Pager of the Fiscal Year 2025-2026 Budget B. Resolution Adopting Ava’s Fiscal Year 2025-2026 Budget C. Presentation on Fiscal Year 2025-2026 Budget
D. Resolution R-2020-26: A Resolution of the Board to Establish a GASB 62 Fund for Budget Stabilization
EXHIBIT A: 1-PAGER OF FISCAL YEAR 2025-2026 BUDGET
AVA COMMUNITY ENERGY FY 2025-2026
BUDGET
OPERATING ACTIVITY
REVENUE & OTHER SOURCES
Electricity Sales 869,170,000
GASB 62 Revenue (Deferral) 35,327,000
Uncollectables (8,692,000)
Other Operating Revenue 0
TOTAL OPERATING REVENUE 895,805,000
EXPENSES & OTHER USES
Cost of Energy 836,970,000
Energy Services
Data Management/CRM 10,081,000
Billing & Metering 3,208,000
Scheduling 767,000
Cost of Energy Services 14,056,000
Total Energy Operating Expenses 851,026,000
Overhead Operating Expenses
Personnel 29,639,000
Marketing & Communications 3,872,000
Legal, Policy, & Regulatory Affairs 4,243,000
Other Professional Services 3,518,000
General & Administrative 7,095,000
Total Overhead Operating Expenses 48,367,000
TOTAL OPERATING EXPENSES 899,393,000
NET OPERATING POSITION (3,588,000)
NON-OPERATING ACTIVITY
NON-OPERATING REVENUE
Interest Income 15,066,000
Grants 0
Other Non-Operating Revenue 49,000
TOTAL NON-OPERATING REVENUE 15,115,000
NON-OPERATING EXPENSES
Borrowing Interest 1,087,000
Local Development Funding 10,190,000
Total Capital Expenditures 250,000
TOTAL NON-OPERATING EXPENSES 11,527,000
NET NON-OPERATING POSITION 3,588,000
TOTAL NET REVENUES 0
Attachment Staff Report Item 6A
Attachment Staff Report Item 6B
RESOLUTION NO. R-2025-XX
A RESOLUTION OF THE BOARD OF DIRECTORS
OF THE AVA COMMUNITY ENERGY AUTHORITY ADOPTING THE FISCAL YEAR 2025-2026 BUDGET
WHEREAS Ava Community Energy Authority (“Ava”) was formed as a community choice aggregation agency (“CCA”) on December 1, 2016, under the Joint Exercise of Powers Act, California Government Code sections 6500 et seq., among the County of Alameda, and the Cities of Albany, Berkeley, Dublin, Emeryville, Fremont, Hayward, Livermore, Piedmont, Oakland, San Leandro, and Union City to study, promote, develop, conduct, operate, and manage energy-related climate change programs in all of the member jurisdictions. The cities of Newark and Pleasanton, located in Alameda County, along with the City of Tracy, located in San Joaquin County, were added as members of Ava and parties to the Joint Powers Agreement (“JPA”) in March of 2020. The city of Stockton was added as a member to Ava in September of 2022. The city of Lathrop was added as a member to Ava in October of 2023. San Joaquin County was added as a member to Ava in July 2024. On October 24, 2023, Ava legally adopted the name Ava Community Energy Authority, where it had previously used the name East Bay Community Energy Authority since its inception.
WHEREAS Ava operates on a fiscal year budget cycle from July 1st through June 30th; and
WHEREAS draft version of Ava’s budget for fiscal year 2025-2026 were presented to the Executive Committee on May 7
th and June 5th, 2025, the Finance,
Administrative, & Procurement subcommittee on May 8th, 2025, and the Board of Directors on May 21, 2025 (the “Prior Presentations”); and WHEREAS Staff has incorporated feedback from the Prior Presentations and prepared a revised proposed budget set forth in Exhibit A (the “Proposed Budget”).
WHEREAS Staff is proposing a slight alteration from the current fiscal year’s net revenues whereby net revenues remaining after initial allocations to reserve funds, on-bill credits, and incentives be allocated to the Budget Stabilization Fund instead of the Reserve Fund.
NOW, THEREFORE, THE BOARD OF DIRECTORS OF AVA COMMUNITY ENERGY AUTHORITY DOES HEREBY RESOLVE AS FOLLOWS:
Section 1. The Board of Directors hereby approves and adopts the Proposed Budget, as set forth in Exhibit A, as Ava’s fiscal year 2025-2026 budget.
Section 2. The Board of Directors hereby approves utilization of the GASB62 Budget Stabilization Fund to offset a budget deficit for fiscal year 2025-26 using the existing GASB62 funds and any subsequent allocation made to the GASB62 fund resulting from the 2024-2025 fiscal year.
Attachment Staff Report Item 6B
ADOPTED AND APPROVED this 18th day of June, 2025.
Jack Balch, Chair
ATTEST:
Adrian Bankhead, Clerk of the Board
Fiscal Year 2025-2026
Draft Budget
Board of Directors
Howard Chang | June 18, 2025
Attachment Staff Report Item 6C
Introduction & Updates
2 • The CPUC issued a Proposed Decision (PD) on Friday 5.23.25 indicating PCIA reform in line with our modeled assumptions
▪ This decision will be voted out on 6.23.25 and Ava has filed comments on it • PG&E's ERRA filing was made on 5.15.25 providing a preliminary indication of rates for 2026 ▪ This filing was made prior to PD and uses outdated Market Price Benchmarks (MPBs) from end of 2024 • The changes in this budget presentation relative to the previous presentation are:
▪ Two budget scenarios, both incorporating the PCIA reform changes - variance reflects different market prices ▪ Reduced operating expenses due to lower procurement costs from implementing compliance period procurement methodology and reduced Overhead Operating Expenses ▪ Both scenarios now reflect the same operating expenses ▪ Assumes enrollment of SJ County in May 2026, previously assumed March (to be finalized) Attachment Staff Report Item 6C
Recommendation for Board Approval
3 • This is a final review of the Fiscal year 2025-26 Budget (Reviewed in May Ex Comm, FAP, Board, and June Ex Comm)
• Approve the base case budget
▪ The base case scenario is our best estimate of market prices ▪ Utilize GASB62 Rate Stabilization Fund to offset any potential fiscal year deficit • Formal recommendation to allocate a portion of the fiscal year 2024-25 surplus (forecasted at >$110MM) to the Rate Stabilization Fund to be brought forward in July/Sept timeframe
Attachment Staff Report Item 6C
PCIA Update
4 Attachment Staff Report Item 6C
The CPUC's PCIA Process – Key Dates
PCIA Rulemaking
• Phase I RA MPB proposed decision – issued 5/23/25
• Phase I RA MPB final decision - 6/23/25
ERRA
• 2026 ERRA Forecast filing - filed 5/15/25
• 2026 ERRA Forecast "October update filing" - 10/15/25 • 2026 ERRA Forecast final decision - 12/18/25
• New rates go into effect - 1/1/26
5 The Energy Resource
Recovery Account (ERRA)
Forecast proceeding at the
CPUC results in PCIA and
PG&E generation rates for
the following year. In this
case, calendar year 2026.
Attachment Staff Report Item 6C
CPUC Proposed Decision (PD)
• The PD essentially proposes to adopt what Ava modeled as the "PCIA Reform" scenario • Specifically, the PD:
o Includes the prior 4 years of available transactions for a given delivery year, instead of only more recent (prior 21 months) transactions
o Uses one value for all RA MPBs that include system, local, and flexible RA, instead of separate values for each type of RA
o Excludes affiliate, swap, and sleeve transactions from RA MPB calculations • The PD, if finalized, will:
o increase calendar 2026 PCIA rates for most Ava customers (depending on vintage) and o lower calendar 2026 PG&E bundled generation rates
• Ava and CalCCA have engaged in this proceeding and filed comments to negotiate altering this implementation
6 Attachment Staff Report Item 6C
Impact of PCIA Reform on Revenues
• In 2026, the impact of PCIA Reform for
2025 true-up is estimated to reduce
revenues by ~$187MM
▪ This reduction is based on retroactive
adjustments to the 2025 RA MPBs used in the
PCIA calculation
▪ Separate from PCIA reform, revenues are
expected to decrease due to true-up of other
market prices that are softening in 2025
• $79MM would be realized in January – June
2026, in this proposed budget
• The remaining $108MM would be realized
in July – December 2026, impacting fiscal
year 2026-2027
7 35,086,000
79,200,000
137,648,000
186,819,000
-
50,000,000
100,000,000
150,000,000
200,000,000
250,000,000
300,000,000
CY Q1 CY Q2 CY Q3 CY Q4
Comparative Revenue Performance & Impact of Reform for
Calendar Year 2026
No Reform PCIA Reform Difference Cumulative
Attachment Staff Report Item 6C
Market Price Benchmark Trends 2023-2027
8 • In addition to changes in the PCIA methodology,
we forecast a softening of prices in 2025 and 2026,
though markets have seen historically high
volatility
• Note that Forecasted and Final MPBs vary
significantly, reflecting year to year market
volatility
RA Market Price Benchmark
Brown Power Market Price Benchmark
RPS Adder
Attachment Staff Report Item 6C
2025-26 Draft Budget
9 Attachment Staff Report Item 6C
Expected Market Environment & Impact to Rates/PCIA
• Rates have increased and PCIA has decreased since 2021, driven by historic increases in market energy prices • We are seeing some stabilization and softening in energy costs where forecasted market prices are likely to set PCIA higher and rates lower in 2026
• The PCIA methodology changes will further increase PCIA and decrease rates in calendar year 2026 • For this presentation, two budget scenarios are considered with varying market price assumptions ▪ Upside Budget: PCIA reform incorporated and assumes higher RPS MPBs (outdated) as filed in May ERRA ▪ Base case Budget: PCIA reform incorporated and assumes lower RPS MPBs based on our internal forecasts 10 2026-U is the Upside Scenario
2026-B is the Base case Scenario
0.081 0.080 0.066
0.113
0.137 0.141 0.147
0.077 0.061
0.029 0.032 0.043
0.024
0.004 0.010 0.004
0.036
0.042
0.016 0.016
0.003
0.022
0.038 0.035 0.034
0.029
-0.05 0.046
0 0.05
0.1 0.15
0.2 2019 2020 2021 2022 2023 2024 2025 2026-U 2026-B
$/kWh
Calendar Year
Customer Rate Revenue Profile
Ava Average Rates PCIA Fees Operating Expenses Margin
0.078 0.082 0.072 0.083
0.132 0.145 0.135
0.112 0.104
0.026 0.030 0.038
0.037
0.012
0.006
0.008
0.017 0.021
-0.02
0 0.02
0.04 0.06
0.08 0.1
0.12 0.14
0.16 2019 2020 2021 2022 2023 2024 2025 2026-U 2026-B
$/kWh
Fiscal Year
Customer Rate Revenue Profile
Ava Average Rates PCIA Fees Operating Expenses Margin
Attachment Staff Report Item 6C
Draft Budget Fiscal Year 2025-2026
11 • Current fiscal year budget is presented
along with an "Actuals" column reflecting
incurred actual costs through March 2025
and projected costs for the final quarter
• Both 2026 budgets assume San Joaquin
County service begins in May, 2026
• 2026 "Base case" budget results in a
deficit of negative $35.3MM and assume
utilization of the Budget Stabilization Fund
to offset this deficit
• While Ava has not previously utilized its
Budget Stabilization Fund, it serves to
balance overcollection and under
collection year to year
AVA COMMUNITY ENERGY FY 2025 FY 2025 FY 2026 FY 2026
BUDGET ACTUALS UPSIDE BASE CASE
OPERATING ACTIVITY
TOTAL OPERATING REVENUE 872,854,000 927,547,000 921,673,000 895,805,000
EXPENSES & OTHER USES
Cost of Energy 760,248,000 770,121,000 836,970,000 836,970,000 Cost of Energy Services 11,608,000 12,013,000 14,056,000 14,056,000 Total Energy Operating Expenses 771,856,000 782,134,000 851,026,000 851,026,000 Total Overhead Operating Expenses 44,868,000 35,160,000 48,367,000 48,367,000 TOTAL OPERATING EXPENSES 816,724,000 817,294,000 899,393,000 899,393,000 NET OPERATING POSITION 56,130,000 110,253,000 22,280,000 (3,588,000)
NON-OPERATING ACTIVITY
TOTAL NON-OPERATING REVENUE 11,449,000 20,557,000 15,115,000 15,115,000 TOTAL NON-OPERATING EXPENSES 25,296,000 23,701,000 11,527,000 11,527,000 NET NON-OPERATING POSITION (13,847,000) (3,144,000) 3,588,000 3,588,000 TOTAL NET REVENUES 42,283,000 107,109,000 25,868,000 0
Attachment Staff Report Item 6C
Draft Budget Scenario Assumptions
• Revenues assume no changes to value proposition under both scenarios. Ava maintains 5% discount to PG&E for Bright Choice and a 0.25 cent premium for Renewable 100 • Net revenues assume Ava maintains a 1% uncollectable rate • Energy costs are derived from a blend of contracted and open positions. Open prices are non-stressed, mean-forecasted market prices. • Implementation of a compliance period procurement methodology over a three-year period of 2024- 2026 with an average target of 81% renewable and carbon free energy, which is unchanged from previous board approved targets
• Assumes San Joaquin County begins service in May of 2026 (to be finalized) • No draws on credit facility or use of reserve funds
• We do anticipate use of Rate Stabilization Fund to offset any budget deficit • Non-operating revenues assume an average of 3.5% interest rate earned through the fiscal year • Personnel headcount as 7 incremental additional staff • Local Development allocation is $10.2MM
12 Attachment Staff Report Item 6C
Budget Uncertainty and Risk Mitigants
• To mitigate the forecasted deficit this
budget incorporates the following actions:
o Adjustments to renewable energy & large
hydro procurement targets (with the
implementation of a compliance period
procurement methodology)
o Reduced local development funding relative to
prior years
o Reduced personnel hiring relative to prior
years
o Reduced Overhead Operating Expenses
relative to prior budget drafts
o Use of the GASB6 Budget Stabilization Fund
(Future consideration for allocating 2024-25
budget surplus to Rate Stabilization Fund)
13 • Staff will monitor our financial forecast closely
and consider future actions at the mid-year to
mitigate further risks:
o Adjustments to the customer value proposition
(Bright Choice rate discount and R100 Premium)
o Further adjustments to procurement targets
o Potential adjustment to SJ County enrollment
timing (To be reviewed further in July)
o Consideration of further reduced spending in
Overhead, local development, hiring, etc.
o Note: Future forecasts (2027 & beyond) are highly
uncertain due to market conditions and PCIA
reform. Longer-term modeling is in process to
incorporate the recent changes to PCIA and the
ERRA filing
Attachment Staff Report Item 6C
Draft Budget: Fiscal Year Revenue Scenarios
14 • Difference in revenues in FY 2026 driven by potential MPB settlements
• No change to value proposition in both scenarios
• Bright Choice: 5% discount to PG&E
• Renewable 100: Premium of 0.25 cents to PG&E
• Uncollectable rates maintained at 1% of sales
• Recognition of $35.3MM of GASB 62 deferred revenue balance At the current 2025 load distribution:
•1% Δ in Bright Choice discount results in
$7.3MM change in revenue
•0.25 cent Δ in R100 premium results in
$5.6MM change in revenue
•Staff may consider a mid-year value
proposition change to bring to the board
later in 2025 as market prices actualize
Fiscal Year 1% ∆ BC 0.25 Cent ∆ R100
First Half 4,303,000 2,745,000
Second Half 3,020,000 2,873,000
AVA COMMUNITY ENERGY FY 2025 FY 2025 FY 2026 FY 2026
BUDGET ACTUALS UPSIDE BASE CASE
OPERATING ACTIVITY
REVENUE & OTHER SOURCES
Electricity Sales 881,671,000 903,378,000 930,983,000 869,170,000 GASB 62 Revenue (Deferral) 0 22,319,000 0 35,327,000
Uncollectables (8,817,000) (9,034,000) (9,310,000) (8,692,000) Other Operating Revenue 0 10,884,000 0 0
TOTAL OPERATING REVENUE 872,854,000 927,547,000 921,673,000 895,805,000 Attachment Staff Report Item 6C
Compliance Period Procurement Methodology
• CA mandated Renewable Procurement Standards (RPS) include Compliance periods of 3-4 years whereby load serving entities can bank/retire RECs in different years relative to the generating year • This allows for management of variable resources like renewable energy and hydro in meeting compliance obligations while increasing procurement of renewables over an extended timeframe • Ava can apply a similar approach for our voluntary procurement targets with 3-4 year periods • This approach can help Ava address deficit concerns and reduce costs associated with over-procurement of green attributes by creating a balancing mechanism across the period 15 • 2024 Power Content Label reflects total
renewables and large hydro of 96% for Ava
• This is a result of a conservative estimation
method to ensure not missing procurement
targets along with well performing assets, a
good water year, and unpredictable
allocation process associated with PG&E
• PG&E procured 23% renewables utilizing
banked RECs to meet its RPS compliance
• PG&E's 2025 power content will change
significantly, likely with lower nuclear and
higher natural gas
2024 Power Content Label
Attachment Staff Report Item 6C
Compliance Period Procurement Methodology (Cont.)
• Without compliance periods, Ava will continue to over procure as our portfolio includes more contingent, as-delivered contracts, based on the new projects that Ava is building • Ava proposes implementing procurement periods for 2024-2026 to utilize over procurement from 2024 in future years, this would result in our Power Content Label being above and below procurement targets in certain years allowing staff to balance procurement levels based on new projects coming online, firm vs. Contingent contracts, and optimal supply/pricing • There are different variations of this methodology and we estimate that this can reduce procurement costs in 2025-26 by $10-16MM, which is incorporated into the budget scenarios • Staff to bring forward more detailed procedures and policy in July for board discussion and review 16 Bright Choice 2020 2021 2022 2023 2024 2025 2026
Board Adjusted Target Procurement NA NA 68% 76% 81% 81% 81% Actuals (Renewables + Large Hydro) 55% 58% 71% 89% 96% TBD TBD Over/(Under) procurement % 1% 3% 3% 13% 15% (7.5%) (7.5%) Compliance Period Adjusted Target 73.5% 73.5%
Attachment Staff Report Item 6C
Rate Stabilization Fund Utilization
17 • The GASB 62 Revenue Deferral Fund was
established by Resolution R-2020-26
• Current balance is approximately $57.6MM
with ~$32.1MM retained specifically for rate
stabilization
• Based on the strong forecasted surplus for
2024-25 of >$107MM, staff will propose a
recommendation to allocate all or a portion
to the Rate Stabilization Fund in July/Sept
timeframe
• If we allocate the current year's full surplus,
this would total $139MM for rate stabilization
o The Rate Stabilization Fund is intended to be
used to balance surplus and deficit year
reflecting over and undercollection year to year FY Contribution Recognition Balance Purpose 2020 12,680,000 - 12,680,000
Stabilize Local Development balance until
Fund is established by Reso R2020-26
2021 15,814,000 12,680,000 15,814,000
Recognized LD balance with fund
establishment via Budget. Contributed to PCIA
PUBA balance through December 2023 as
allocated by Audit
2022 - - 15,814,000
2023 37,200,000 - 53,014,000
~$10.5MM each for on-bill credits and PPA
premium plus $16.2MM for rate stabilization
as allocated by audit and Resolution R-2023-
37 2024 - 10,504,837 42,509,163
Recognition is for on-bill credits, by
Resolution R-2023-58
2025 37,407,824 22,316,492 57,600,495
Contribution for on-bill credits and NBT from
surplus revenue as allocated by audit and
Resolution R-2024-2. Recognition is net on-bill credits by Resolution R-2024-73. 2026 3,194,472 35,327,000 25,467,967
Bold is potential contribution from FY 2024-25
for recognition in FY 2025-26
2027 - 10,504,837 14,963,130
Recognition is for PPA premium contribution
from 2023, by Resolutions R-2023-58 and R-2024-26
2027 - 14,963,130 -
Possible recognition of NBT incentives
contributed in FY 2025
Attachment Staff Report Item 6C
Draft Budget: Overview of Operating Expenses
18 • Expenses are divided into three overall
cost center categories:
• Energy Operations which includes all
energy, energy attributes, and ancillary
related costs and required management
services such as scheduling, data
management, and customer billing
▪ This category comprises nearly 95% of Ava’s
total operating expenses
• Overhead Operations which includes all
personnel and staffing needs as well as
work function cost centers required to
manage the organization at large, and is
about 5% of total operating expenses
• Non-Operating Expenses, which are all
capital and capital transfer related costs,
includes the local development budget.
This category is presented and discussed
in a later slide
Note that Overhead Operating Expenses have been further reduced by approximately $800k from May meetings and the June Ex Comm presentation
AVA COMMUNITY ENERGY FY 2025 FY 2025 FY 2026 FY 2026
BUDGET ACTUALS UPSIDE BASE CASE
EXPENSES & OTHER USES
Cost of Energy 760,248,000 770,121,000 836,970,000 836,970,000 Cost of Energy Services 11,608,000 12,013,000 14,056,000 14,056,000 Total Energy Operating Expenses 771,856,000 782,134,000 851,026,000 851,026,000 Overhead Operating Expenses
Personnel 26,592,000 21,707,000 29,639,000 29,639,000
Marketing & Communications 6,168,000 4,176,000 3,872,000 3,872,000 Legal, Policy, & Regulatory Affairs 4,104,000 2,250,000 4,243,000 4,243,000 Other Professional Services 2,136,000 1,905,000 3,518,000 3,518,000 General & Administrative 5,868,000 5,122,000 7,095,000 7,095,000 Total Overhead Operating Expenses 44,868,000 35,160,000 48,367,000 48,367,000 TOTAL OPERATING EXPENSES 816,724,000 817,294,000 899,393,000 899,393,000 Attachment Staff Report Item 6C
Draft Budget: Fiscal Year Energy Operations
19 Energy Costs
• Costs are derived from a blend of contracted and
open positions for all energy, attributes, and RA
▪ Open prices are non-stressed, mean-forecasted
▪ FY 2026 overall prices are expected to be about 11%
higher than FY 2025 on average
▪ Material increases in Open and RA costs
• RECs are lower to reflect compliance period
savings
• Approx. 25.3% of cost is with open positions to
the market. This gives up to $70MM of potential
cost increases from market risk
• Note: While the last year maintained stabile
market prices, we are still in a period of
historically high brown power prices with FY 2026
prices projected at 70% above 10-year average,
and expected to increase in later years
PPAs Hedges Open Resource
Adequacy
RECs Carbon Free
FY 2026 Budget to FY 2025 Actuals by Attribute
FY 2025 FY 2026
AVA COMMUNITY ENERGY FY 2025 FY 2025 FY 2026 FY 2026
BUDGET ACTUALS UPSIDE BASE CASE
EXPENSES & OTHER USES
Cost of Energy 760,248,000 770,121,000 836,970,000 836,970,000 Energy Services
Data Management/CRM 8,057,000 8,459,000 10,081,000 10,081,000 Billing & Metering 2,820,000 2,826,000 3,208,000 3,208,000 Scheduling 731,000 728,000 767,000 767,000
Cost of Energy Services 11,608,000 12,013,000 14,056,000 14,056,000 Total Energy Operating Expenses 771,856,000 782,134,000 851,026,000 851,026,000 Attachment Staff Report Item 6C
Draft Budget: Fiscal Year Non-Operating Details
20 Non-Operating Revenue
• Interest Income is based on expected returns
for the managed treasury accounts for
reserve funds and rotating working capital
▪ Rates are estimated at 3.5%
• Other Non-Operating Revenue is rent from
the AT&T tower on the 8th Street building
Non-Operating Expenses
• Borrowing Interest are costs associated with
Ava’s credit facility held with US Bank. This
facility will be up for renewal in October 2025
and current market surveys indicate
marginally more favorable rates
• Capital Expenditures are costs estimated for
tenant improvements at 1999 Harrison St
offices
AVA COMMUNITY ENERGY FY 2025 FY 2025 FY 2026 FY 2026
BUDGET ACTUALS UPSIDE BASE CASE
NON-OPERATING ACTIVITY
NON-OPERATING REVENUE
Interest Income 11,400,000 20,545,000 15,066,000 15,066,000 Grants 0 0 0 0
Other Non-Operating Revenue 49,000 12,000 49,000 49,000 TOTAL NON-OPERATING REVENUE 11,449,000 20,557,000 15,115,000 15,115,000
NON-OPERATING EXPENSES
Borrowing Interest 2,796,000 1,301,000 1,087,000 1,087,000 Local Development Funding 22,400,000 22,400,000 10,190,000 10,190,000 Total Capital Expenditures 100,000 0 250,000 250,000
TOTAL NON-OPERATING EXPENSES 25,296,000 23,701,000 11,527,000 11,527,000 NET NON-OPERATING POSITION (13,847,000) (3,144,000) 3,588,000 3,588,000 Attachment Staff Report Item 6C
Draft Budget: Local Development Incremental Funding Allocation 21 Program Area Previous
Upside
Budget
Current
Proposed
Budget
Comments
Ava Charge $5,000,000 $3,000,000 Upside allocation would support expansion to additional cities Critical Municipal Facilities (CMF) $6,000,000 $0 Upside allocation would support a second future portfolio Heat Pump Water Heater support $5,000,000 $0 Program funding to support Air District gas water heater phase out Future Roadmap Funding $5,000,000 $4,000,000 Upside allocation to support 2027 programmatic effort. PCIA reform allocation could be used for CMF, expansion of Ava Charge, heat pump support, or future road map
Consultants for Roadmap $500,000 $500,000 Allocation for external consultants to help inform future roadmap for 2027 forward
Legal expenses $1,500,000 $1,050,000 Expenses associated primarily with Ava Charge and CMF Marketing expenses $2,000,000 $1,640,000 Expenses to support operational programs, such as Ava Charge, Ava Bike Electric, Ava SmartHome Charging, and the upcoming solar and storage program
FY25-26 Total Additional LD Funding $25,000,000 $10,190,000 Est EOY LD Fund Balance $92,000,000
Potential updated Fund Balance $117,000,000 $102,190,000 Ava is currently in the execution phase of previously budgeted programs (more details on following slide) and additional strategic planning for future phase implementations is underway Attachment Staff Report Item 6C
Local Development –
FY26 anticipated spend of existing funding
22 Program Area Previously Funded Comments
Ava Charge $1,500,000 Development, Operations and Marketing Critical Municipal Facilities $8,000,000 Capital expenditure and risk mitigation Grants $950,000 Payments for contracted grants
Solar + storage upfront incentives $2,000,000
Incentives and expenses for ongoing programs
Solar + storage ongoing incentives $500,000
Health-e Communities pilot $1,000,000
Building Efficiency Accelerator $1,000,000
Ava Bike Electric incentives $5,000,000
Ava SmartHome Charging incentives $900,000
Total $20,850,000
Attachment Staff Report Item 6C
Conclusion and Next Steps
• Staff is seeking approval of the presented base case budget, reflecting our best estimate of market prices and reflects a more conservative scenario
• This assumes:
▪ Implementation of a Compliance Period Procurement methodology – detailed procedure and policy to be brought forward for review with board in July
▪ Utilization of GASB-62 Rate Stabilization Fund to offset any potential fiscal year deficit – formal recommendation to allocate a portion of the fiscal year 2024-25 surplus (forecasted at >$107MM) to the Rate Stabilization Fund to be brought forward in July/Sept timeframe • Staff will monitor the budget closely and bring forward pertinent updates to the board in the mid-year and sooner as necessary 23 Attachment Staff Report Item 6C
Appendix
24 Attachment Staff Report Item 6C
Background & Discussion
25 • Every year in June, Ava Board of Directors (the “Board”) approves the following fiscal year’s budget • This draft budget has been reviewed with the Ex Comm (5/7) and FAP (5/8) • The Budget typically goes through a few rounds of review in May with formal board approval in June • The Budget covers the overall categories of the General Operating Fund:
▪ Revenues from Operations
▪ Energy Operating Expenses
▪ Services to Facilitate Energy Operations
▪ Operational Overhead to Energy Operations
▪ Non-Operating Revenues
▪ Non-Operating Expenses, including a Capital Transfer to the Local Development Fund • Expenses are typically 90%+ energy related with overhead and Local Development funding accounting for 6-8% of total expenses
Attachment Staff Report Item 6C
How Ava Works—Revenues & Rates
• Ava offers two electricity products to customers:
• Renewable 100: 100% of the energy is from renewable resources • Originally set at $0.01/kWh above PG&E and has migrated down as Ava financials improved • Currently priced at $0.0025/kWh above PG&E rates
• Bright Choice: In 2025-26 this will be 81% from renewable energy and large hydro, plus ~10% nuclear • Originally set at 1.5% discount to PG&E, reduced to a 1% discount in 2021,increased to a 3% discount in 2022 • The latest adjustment was to a 5% discount to PG&E rates in 2023 • The current percent load of Bright Choice customers is ~72% for FY 2026 26 Attachment Staff Report Item 6C
How Ava Works—Energy Delivery
• Ava sells energy directly to its customers by procuring energy through various market mechanisms and scheduling delivery into California Independent Service Operator (CAISO) • Ava is not responsible for transmission or delivery of the commodity; this is a service retained by PG&E • Per Ava’s risk management policy, much of the expected load is procured and hedged in advance across energy, RECs, and Resource Adequacy
• Ava schedules it's forecasted load with CAISO on a day-ahead basis and real-time basis • This is done regardless of the amount of energy hedges that Ava has procured • The CAISO is California’s regional market balancing authority whose primary purpose is to keep the energy being pulled off the grid balanced by energy being put on the grid to prevent grid damage or area shortages 27 Attachment Staff Report Item 6C
How Ava Works—Billing Cycle
• Revenues are made from sales of energy to customers based on generation rates that are indexed to PG&E cost of service rates as approved by the CPUC
• PG&E will read Ava customer meters to monitor consumption. These reads are then reported to Ava and its Billing data manager
• The consumption data is processed to generate billing amounts based on Ava’s rates and then sent back to PG&E, who then issues the bills and collects payments on Ava’s behalf • PG&E's bundled customers and unbundled (Ava) customers also pay a power charge indifference adjustment (PCIA) and minor system fees. These are collected by PG&E from customer revenues and retained prior to payment distribution to Ava.
o Additionally, all PG&E bundled and unbundled customers are charged a Transmission & Distribution cost • A billing cycle is typically about three months, meaning it takes about three months for Ava to receive payment from a customer’s consumption
• Consumption occurs in the first month
• A bill is issued in the second month
• Payment is due in the third month
28 Attachment Staff Report Item 6C
Power Charge Indifference Adjustment (PCIA)
• Ava’s generation rates to customers are indexed to PG&E’s generation rate • A portion of the generation cost is a pass-through charge to PG&E for the PCIA • The PCIA is how PG&E recovers "stranded costs or credits" for legacy generation resources • PCIA rates are based on an annual mark-to-market
• For Energy, Resource Adequacy (RA), and Renewable Portfolio Standard (RPS) resources, the mark-to-market is against "Market Price Benchmarks" (MPBs)
• Forecasts for MPBs are presented by the Investor-Owned Utilities (IOUs) in May and then updated in October to establish the next year’s rates
• PCIA and rates are "trued up" from forecast to actual, and any overcollection or under-collection is recovered in rates the following year.
• Higher MPBs higher rates and lower PCIA = more operating headroom for Ava • Lower MPBs lower rates and higher PCIA = less operating headroom for Ava 29 Portfolio
Costs
Portfolio
Value*
Stranded
Costs/credit
*Value calculated using “Market
Price Benchmarks” (MPBs)
Attachment Staff Report Item 6C
Carbon Free & Renewable Procurement Schedule
30 • In April 2022, the Board approved
the “Path to Zero by 2030” for the
Bright Choice product, as shown
in the table to the left
▪ Carbon Free percentages reflect
renewable and large hydro energy
on a net annual basis
• In previous years, the Board has
approved an increase to carbon
free procurement targets
• June 2024, the Board approved an
additional 5% to calendar year
2025 targets; increasing from
76% to 81%
Year Path Target Increase Updated Target Increase Updated Target Increase Updated Target Increase Updated Target 2022 63% 5% 68% -- -- -- -- -- --
2023 66% 5% 71% 5% 76% -- -- -- --
2024 71% 0% 71% 10% 81% 0% 81% -- --
2025 76% 0% 76% 0% 76% 5% 81% 0% 81%
2026 81% 0% 81% 0% 81% 0% 81% 0% 81%
2027 85% 0% 85% 0% 85% 0% 85% 0% 85%
2022 2023 2024 2025
Attachment Staff Report Item 6C
Draft Budget: Fiscal Year Personnel Details
31 • FY 2024 Budget was set for 15 additional FTE (83 total) and FY 2025 Budget was set for 15 additional FTE (98 total) to expand on internal expertise, build more depth, and help scale operations further. • FY 2026 Budget seeks to add 7 additional FTE (105 total) to continue addressing increased workflow in key areas and meet essential business needs.
▪ Proposed additional hires have been separated to align with the two budget scenarios presented (7): 3 Power Resources, 2 Operations, 1 Local Development, 1 Marketing • Compensation Adjustments:
▪ COLA: 3%; Promotions/Wage Adjustments: 3%; Merit-based Compensation: 13% • Note: In 2023-2024, Ava adjusted compensation structure to standardize pay scales and create merit-based compensation to reduce pay bias in salaries as a DEI initiative 2025 2025 2026 2026
PERSONNEL BUDGET %Cost ACTUALS %Cost UPSIDE %Cost BASE CASE %Cost Salaries & Wages 19,765,000 74.3% 17,398,000 80.1% 23,171,000 78.2% 23,171,000 78.2% Health Care/Benefits 3,961,000 14.9% 2,229,000 10.3% 3,242,000 10.9% 3,242,000 10.9% Retirement 2,450,000 9.2% 1,778,000 8.2% 2,745,000 9.3% 2,745,000 9.3% Payroll Expenses 416,000 1.6% 302,000 1.4% 481,000 1.6% 481,000 1.6% Total Personnel Costs 26,592,000 100.0% 21,707,000 100.0% 29,639,000 100.0% 29,639,000 100.0% Attachment Staff Report Item 6C
Draft Budget: General & Administrative
32 Current Year Material Items:
• Operational Expenses were slightly higher than expected due to additional banking fees associated with certain energy contracts • Rent & Utilities were slightly above expected amounts due to increased on-site needs with internet, parking, and on-site board meetings
• HR & Recruiting costs were slightly higher than expected with increased recruiting efforts
• Small Equipment is well below expected amounts due to lower than expected equipment cycling
• All other areas are actualizing lower than expected costs Next Year Material Items:
• Operational Expenses: Increased staff costs related
to insurance, service fees, supplies, membership
dues, operational services, building maintenance,
and other relevant G&A
• Membership Dues, Fees, & Operating Expenses:
Costs associated with JPAs, trade associations, and
industry associations (CalCCA, CCCFA, CCPower,
CFEE, Veloz, etc.)
• Software & Subscriptions: Increase covers
additional software needs for Power Resources, HR,
and EAS, as well as essential subscriptions for
ongoing operations with expanded staff
• Rent & Utilities: Increases with lease transition and improvements
• Board & Director Fees: Draft Budget reflects
potential maximum cost
DRAFT BUDGET BUDGET ACTUALS
2026 2025 2025
GENERAL OPERATIONS
Operational Expenses 1,180,000 832,000 1,006,000
Memberships & Sponsorships 1,212,000 600,000 657,000
Software & Subscriptions 2,880,000 2,669,000 1,987,000
Small Equipment 310,000 510,000 70,000
Rent & Utilities 1,021,000 770,000 977,000
Conferences & Prof. Development 231,000 249,000 160,000 HR & Recruiting 170,000 156,000 227,000
Board & Director Fees 91,000 78,000 38,000
Total 7,095,000 5,864,000 5,122,000
Attachment Staff Report Item 6C
Draft Budget: Marketing & Communications
33 Current Year Material Items:
• Advertising & Promotions: Advertising costs and
promotional items were sourced at lower-than-expected costs, also certain special event fundings did not materialize
Next Year Material Items:
• Advertising & Promotions: Event and Local
sponsorships, education and awareness
campaigns, other printing costs
• Required Mailings: Enrollment notifications
for San Joaquin County, Fremont R100
notifications, Joint Rate Mailer, Power Content
Label Mailer
• Communications Consultants: Consultants
for graphic design, public relations, other
creative services
• Software & Subscriptions: With efficiencies
in other areas, software and subscriptions are
expected to increase to compensate
DRAFT BUDGET BUDGET ACTUALS
2026 2025 2025
MARKETING
Advertising & Promotions 1,130,000 1,515,000 474,000
Required Mailings 635,000 1,052,000 877,000
Communications 1,270,000 2,755,000 2,149,000
Sponsorships & Memberships 661,000 780,000 603,000
Software & Subscriptions 176,000 66,000 73,000
Total 3,872,000 6,168,000 4,176,000
Attachment Staff Report Item 6C
Draft Budget: Legal, Policy, & Regulatory Affairs
34 Current Year Material Items:
• Legal Consultants: Certain expected litigations costs did not wholly materialize in the fiscal year, also
efficiencies in procedure developed by counsel and
staffing has reduced outside counsel demand
• Software & Subscriptions: Software expectations
were not implemented in current FY, but are planned
for next year
Next Year Material Items:
• Policy & Legislative Consultants: Expected
increase due to increase in CPUC docket
DRAFT BUDGET BUDGET ACTUALS
2026 2025 2025
LEGAL, POLICY, & REGULATORY AFFAIRS
Legal Consultants 3,143,000 3,238,000 1,585,000
Policy & Legislative Consultants 740,000 560,000 559,000 Software & Subscriptions 281,000 256,000 56,000
Memberships & Sponsorships 79,000 50,000 50,000
Total 4,243,000 4,104,000 2,250,000
Attachment Staff Report Item 6C
Draft Budget: Other Professional Services
35 No significant current year
material items to report.
Consultant projects are well
managed.
Next Year Material Items:
• Operations: Increase due to tenant improvement contractors and project management consultants
• Finance Consultants: Increase is from new Treasury Manager costs and some expected increases in rates from current consultants • Human Resources: With headcount growth and continued staff collaboration on key initiatives, increased need for training & development plus increased scope with 3rd-party staffing agencies. • Technology Consultants: Expanding operations requires additional data engineering and CRM structure and design
DRAFT BUDGET BUDGET ACTUALS
2026 2025 2025
OPERATIONS CONSULTANTS
Operations 475,000 335,000 291,000
Finance Consultants 650,000 333,000 299,000
Power Resources Consultants 741,000 715,000 642,000
Human Resources Consultants 792,000 364,000 327,000
Technology Consultants 410,000 25,000 23,000
Information Technology Consultants 450,000 360,000 323,000 Total 3,518,000 2,132,000 1,905,000
Attachment Staff Report Item 6C
East Bay Community Energy
Board of Directors
MINUTE ORDER
The following was action taken by the Board of Directors on September 16, 2020 Approved as Recommended Other
Unanimous
Albany Berkeley Dublin Emeryville Fremont
Hayward Livermore Newark Oakland Piedmont
Pleasanton San Leandro Tracy Union City Alameda
County
Vote total - 12
Vote Key: N=No; A=Abstain; X=Excused
Documents accompanying this matter:
Resolution(s) R-2020-26
Policy
Contract(s)
Item No. 19
Copies sent to:
I certify that the foregoing is a correct
copy of a Minute Order adopted by the
East Bay Community Energy Board of
Directors.
ATTEST:
Clerk of the Board,
East Bay Community Energy Board of
Directors.
By: ______________________________
Stephanie Cabrera
Attachment Staff Report Item 6D
RESOLUTION NO. 2020-26
A RESOLUTION OF THE BOARD OF DIRECTORS
OF THE EAST BAY COMMUNITY ENERGY AUTHORITY ESTABLISHING A GASB 62 FUND
FOR BUDGET STABILIZATION
WHEREAS
Exercise of Power Act, California Government Code sections 6500 et seq., among the County of Alameda, and the Cities of Albany, Berkeley, Dublin, Emeryville, Fremont, Hayward, Livermore, Piedmont, Oakland, San Leandro, and Union City to study, promote, develop, conduct, operate, and manage energy-related climate change programs in all of the member jurisdictions. The cities of Newark and Pleasanton, located in Alameda County, along with the City of Tracy, located in San Joaquin County, were added as members of EBCE and parties to the JPA in March of 2020.
WHEREAS EBCE has exceeded budgeted performance in the 2019-2020 fiscal year with revenue surplus suitable for GASB 62 compliance for accrual in the 2020- 2021 fiscal year.
WHEREAS The Board of Directors deems it prudent to establish, designate, and maintain a Rate Stabilization GASB 62 Fund to provide a contingency available to satisfy financial covenants, stabilize customer rates, fulfill local development obligations, and other such matters as may be approved from time to time by the Board of Directors, to be funded as deferred surplus revenues from time to time as suitable over-performing years allow.
NOW, THEREFORE, THE BOARD OF DIRECTORS OF THE EAST BAY COMMUNITY ENERGY AUTHORITY DOES HEREBY RESOLVE AS FOLLOWS:
Section 1. The Board of Directors hereby authorizes the establishment of an Budget
shall be accounted for as a separate fund from all other EBCE funds, although amounts credited to it may be commingled with other funds of EBCE.
Section 2. The Board of Directors hereby authorizes the Chief Executive Officer and the Treasurer, or their designee, to deposit from time to time such amount as the Treasurer may determine as prudent and appropriate into the Budget Stabilization GASB 62 Fund from any source of moneys designated as surplus in accordance with the budget previously approved by the Board.
Section 3. The Budget Stabilization GASB 62 Fund shall be recognized by GASB 62 and provide a contingency available upon approval by the Board of Directors to satisfy financial covenants, rate stabilization, and such other matters as may be approved from time to time by the Board of Directors.
Attachment Staff Report Item 6D
Section 4. The Chief Executive Officer and the Treasurer, or their designee, are hereby authorized to apply deferred revenues from the 2019-2020 fiscal year in the 2020-2021 fiscal year in an amount not to exceed the Local Development budgeted expenses not yet realized in the 2019-2020 fiscal year as determined by that Section 5. The Chief Executive Officer and the Treasurer, or their designee, are hereby authorized and directed to do any and all things to effectuate the purposes of this Resolution.
ADOPTED AND APPROVED this 16th day of September, 2020.
Dan Kalb, Chair
ATTEST:
Stephanie Cabrera, Clerk of the Board
Attachment Staff Report Item 6D