Power Charge Indifference Adjustment
(PCIA) Primer
Marketing Regulatory and Legislative Subcommittee
July 21, 2025
Contents
• What is the Power Charge Indifference Adjustment (PCIA)? • How does the PCIA work?
• How does the PCIA affect CCAs?
2 Why PCIA Matters
• PCIA/bundled rates drive Ava's gross revenue.
• As PCIA goes up, gross revenue generally goes
down
• And vice versa
3 What is the PCIA?
PCIA “Elevator Pitch”
• What is it? A $/kWh surcharge (or credit) on customer bills • Does it go by other names? Yes, people also refer to it as a departing load charge and an exit fee. It's actually neither of these things - it's a non-bypassable charge or credit.
• Who pays/receives it? Everyone (Ava customers and bundled [PG&E] customers)
• What does it cover? Costs of contracts executed and PG&E-owned powerplants from when Ava customers were still PG&E customers • How does it impact CCAs? The PCIA affects CCAs’ ability to compete against IOU generation service, for better or for worse, depending on market conditions.
5 Stranded Assets: The Basics • The PCIA is a rate mechanism for recovering "stranded costs" from all
customers.
• Costs can be stranded because:
o the price of historic procurement is high
relative to the current market value, and/or
o the quantity of procurement was too high
(customers left IOU service, so the IOU has
excess resources)
• Shaded areas in box to right represent
PCIA portfolio costs: o top shaded area is “too expensive” and o right shaded is “too much” 6 Stranded Costs: An Example
• Renewable prices declined between 2010 and 2019
• A significant source of PCIA stranded costs is
above-market IOU renewable PPAs—these average
about $110/MWh (red line)
• These and other PCIA resources that are “out of the
money” are earning less in the market (green line)
than they cost
7 Source for chart: Lawrence Berkeley National Laboratory Utility-Scale Solar Data Update (Oct 2020) Source for IOU PPA cost: 2021 Padilla Report
How does it work?
How does the PCIA calculate “stranded
costs?”
9 Portfolio
Costs
Portfolio
Value*
Stranded
Costs/credit
*Value calculated using “Market Price
Benchmarks” (MPB)
What are Market Price Benchmarks
(MPBs)?
• MPBs are used to value unsold portions of
the portfolio
▪ Retained for bundled customers
▪ Allocated to non-bundled customers
• PCIA Ratemaking has two phases: a
forecast and an actual.
▪ IOUs present their forecasts in May
• This is the “best guess” at what rates will be
▪ Updated in October with actuals to date
MPB
Component
Forecast Actual
RA RA-only
transactions
RA-only
transactions
(updated)
RPS PCC1 Index-Plus* PCC1 Index-Plus
(updated)
Energy Platts-ICE
Forward Curve -
Electricity forecast
for next year
Actual CAISO
Market
Revenues**
10 *Index-plus refers to contracts for the market index price of energy plus a REC bid premium **What did the PCIA resource portfolio earn in the CAISO energy market? Single largest determinant of PCIA.
Volatile: Varies widely YoY based on revenues in energy markets. Highly dependent on weather, load, and hydro conditions
What goes into Portfolio Costs and Value?
11 *Negative value – these offset the costs
Portfolio
Costs
Portfolio
Value
Who pays for what resources?
• PCIA rates are differentiated by “vintage”
• Each customer and each procurement commitment (including utility-owned storage (UOG)) is assigned a vintage
• Customer vintage
▪ For CCA or Direct Access, generally the year the customer departed the IOU generation service
▪ For bundled IOU customers, it’s the current year
▪ The vintage year runs July 1 through June 30
▪ Remain until last resource in that vintage expires
• Resource vintage
▪ Date the IOU makes the commitment to a resource (e.g., contract execution, UOG investment)
12 Example Customer Vintage:
• If a CCA launched in March of
2018, their customers would
be in the 2017 vintage.
• If a CCA launched in October
of 2018, their customers would
be in the 2018 vintage.
How does PCIA affect CCAs?
PCIA Affects “Headroom”
• Headroom is the rate derived from the most a CCA can spend on procurement and stay competitive with the incumbent IOU.
• Can change due to a variety of factors and varies by vintage 14 Bundled
PCIA Rate
Bundled
At-market
Rate
Departed
Load PCIA
Rate
Headroom
Competitive Dynamics
• IOU is guaranteed to be “in the money” every year due to the structure of the PCIA
▪ PG&E collects above market costs from all customers (varies by vintage)
• CCAs can only recover costs from current CCA customers ▪ If Ava enters into above-market contracts and it causes rates to increase, customers can opt-out to PG&E service
▪ Low market prices result in a double-whammy to headroom ▪ Low prices increase the PCIA rate, and
▪ Low prices decrease the IOU generation rates
▪ This is aggravated by the need to “true-up” the forecasted rate and PCIA values with the actuals on a year-to-year basis Bill Presentation
• How the PCIA is presented on utility bills has impact on CCAs • While all customers, bundled and unbundled, pay a PCIA rate, bundled customer bills initially did not show a separate PCIA line item • Since unbundled customer bills did show a PCIA line item, it inflated bundled gen rates and created the illusion that bundled customers do not pay a PCIA rate
• Resolution E-5131 (2021) updated D. 20-03-019 and ordered the utilities to create a PCIA line item on bundled customer bills and modified the definition of the PCIA on customer bills to make clearer all customers pay the PCIA
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