Staff Report Item 11
Staff Report Item 11
To: Ava Community Energy Authority Board of Directors
From: Howard Chang, CEO
Subject: Mid-Year Budget Review
Date: February 18, 2026
Recommendation
Receive the report informing Ava’s Board of Directors (the “Board”) of the mid-year budget performance for the 2025-26 fiscal year.
Analysis and Context
Every June, the Board approves the budget for the following fiscal year spanning from July 1st of that calendar year through June 30th of the following calendar year. Staff internally reviews budget performance regularly during the fiscal year and presents an update of these results to the Board at the mid-year mark.
Ava’s accounting generally requires about 45 days to close the preceding period to ensure all revenues and expenses are captured accurately. As such, the close of December 31st is typically mid-February. Presenting the mid-year analysis in February allows a more accurate presentation on the half-year performance.
The mid-year report presented covers the closed months of July through December 2025 actuals, and updated projections for the second half of the fiscal year: January through June 2026. Below is a concise high-level summary of our year-to-date financial performance.
Revenues
Revenues from sales are expected to come in approximately $42MM above budget for the fiscal year due to moving forward the timeline to incorporate San Juaquin County from November 2026 to May and Board approved changes to the value proposition in calendar year 2026.
These changes improved revenues by $7.8MM and eliminated the need to use the budgeted $35 million from the Rate Stabilization Fund (RSF).
Staff Report Item 11
Cost of Energy
Total cost of energy is down by about $19.3MM driven predominately by favorable energy market conditions and reduction in renewable targets for 2026 Overhead
Total overhead expenses are expected to be down by about $3.5MM due primarily to a more measured approach in filling vacant positions throughout the year.
Non-Operating Activity
Total annual net non-operating activity is expected to be about $13.9MM above budget due to “higher for longer” interest rates on invested capital and reductions to Local Development Net Revenues
Total annual net revenue is expected to be $44.5MM above budget without the utilization of RSF.
Staff Report Item 11
Attachment
A. Power Point Presentation to Board
Fiscal Year 2025-26 Mid-Year Budget to Actuals
Review
Board of Directors
Howard Chang | February 18, 2026
Attachment Staff Report Item 11A
Introduction
2 • Every June, Ava’s Board of Directors (the “Board”) approves spending for the following fiscal year spanning from July 1st through June 30th of the following year. • Staff reviews budget performance internally regularly and presents these results to the Board at, or about, the mid-year mark.
• Ava’s accounting cycle generally requires about 45 days to close a period to ensure all revenues and expenses are captured accurately. Thus, the close of December 31st is typically mid-February. • Presenting the mid-year analysis in February allows a more accurate presentation on the true half year performance.
• The mid-year report presented today covers the closed months of July through December, and updated projections for the second half of the fiscal year—January through June. These updated values will collectively be referred to as “updates”
• This mid-year budget update incorporates more substantive updates from a typical year due to significant rate changes and following the board actions taken in December 2025 Attachment Staff Report Item 11A
Ava Historical and 2026 Residential Generation Rates
3 • PG&E's final Annual Energy True-up (AET) was released on December 31st, which finalized 2026 rates
▪ Avg 2026 rates in the AET were higher than the ERRA by ~12% ▪ Relative to the Oct ERRA, this results in a 1.3 cent increase in Bright Choice customer rates with 0.7 cents from rates and
0.6 cents in PCIA
• Ava reduced 2026 Bright Choice generation rates by 42% (exclusive of PCIA) and 20% (inclusive of PCIA)
▪ The Dec update reflected a 29% reduction (inclusive of PCIA) • For Renewable 100 , 2026 generation rates are reduced by 34% (exclusive of PCIA) and 14% (inclusive of PCIA)
▪ The Dec update reflected a 21% reduction (inclusive of PCIA) • Average TOU-C residential Bright Choice customer bill is ~ $10 less per month compared to 2025
• Average TOU-C residential Renewable 100 customer bill is ~ $8 less per month compared to 2025
Note: All data on this slide reflects 2018 PCIA vintage TOU-C (Ava’s most common residential rate)
Attachment Staff Report Item 11A
2026 Forward Energy Market Volatility
4 • The graph shows the forward price for full calendar year 2026 at the NP15 node over the past 5 years. NP15 is a close proxy to PG&E DLAP. Prices have been highly volatile for the past 5 years, reaching a peak in 2023 and have since steadily softened.
Attachment Staff Report Item 11A
Historical Energy Market Volatility
5 • The graph to the right shows historical daily NP15 energy and PG&E Citygate natural gas hub prices.
Attachment Staff Report Item 11A
Price Volatility—Impact on Market Prices to Fiscal Year Outcomes 6 • Historically, March through May are
low price volatility months
• Stressed price scenarios are for
February through June
• +/-1 SD move across the 6-month
period results in a $12.7MM
increase/decrease in energy costs
• +/-2 SD move across the 6-month
period results in a $25.1MM
increase/decrease to energy costs
Chart shows expected market prices (mean) and +/-1 and +/-2 standard deviation moves by calendar month
Attachment Staff Report Item 11A
7 Ava Community Energy
Fiscal Year 2025-2026 Mid-Year Budget Update
• Expecting increase in operating revenue by $7.8MM
▪ Operating Revenue increases by $42MM without use of
Rate Stabilization Fund (GASB 62)
• Cost of Energy expected to improve by
$19.2MM based on favorable energy market
conditions
• Overhead expenses forecasted to be reduced by
$3.5MM
• Non-Operating activity is expected to add an
addition $13.9MM to net revenues
• Net Revenues are projected to be positive by about
$44.5MM
▪ Net Revenue increases by $79.8MM without use of
Rate Stabilization Fund (GASB 62)
The following slides provide more detail on these
changes
Attachment Staff Report Item 11A
8 First Half FY2026 Budget to Actuals
• Revenues from sales were $37.7MM under
budget driven by lower load resulting from milder
than expected weather
• Cost of Energy was $23.4MM under budget driven
by lower load/lower energy prices, higher than
forecasted RA sales, and higher than forecasted
large hydro production. This was partially offset
by higher REC costs from higher than expected
market price benchmarks.
• Overhead expenses are $6.3MM below budget
due to cost reductions, deferred hiring, and
deferred functional area costs
• Non-Operating activity increased net revenues by
$11.2MM from higher interest rates on
investments and reduced Local Development
funding from the December Board decision
• Net revenues were $5MM above expected budget
Attachment Staff Report Item 11A
9 Second Half FY2026 Original Budget to Updated
Budget
• Revenues from electricity sales is forecasted to
increase by $43.6MM driven by changes in value
proposition, higher than forecasted 2026 rates, and SJ
County enrollment in May
o Operating Revenue increases by $79.7MM when excluding RSF (GASB62)
• Cost of Energy is forecasted to increase by $4MM
relative to budget driven by higher REC costs due to
increased market price benchmarks and partially
offset by lower energy costs
• In Overhead, continued savings from deferred hiring
for open positions while deferred costs from the first
half in other functional areas are back half weighted
• Non-Operating activity is expected to add about
$2.7MM due to reduced Local Development Funding
offset by reduced expected interest income
• Net Revenues are expected to increase by $39.5MM
from the original budget
o Net Revenues increase by $74.9MM without use of RSF
GASB62
Attachment Staff Report Item 11A
10 Second Half Calendar 2026 Dec BOD to Updated
• Revenues from electricity sales is forecasted to
increase by $73.9MM driven by changes in value
proposition and higher than December estimated
2026 rates
• Cost of Energy is forecasted to decrease by
$42.4MM driven by $14.3MM in lower energy
prices, $11MM additional sales of RA length, and
$17MM reduced REC costs due to Board action
and lower market prices
• No expected changes in Overhead
• Non-Operating Income reduced by expected
changes in interest rates
• Non-Operating Expenses includes reduced Local
Development Funding
• Net Revenues are expected to increase by $114MM
from December estimates, but still retains a
structural deficit of $87.5MM
Attachment Staff Report Item 11A
11 Calendar 2027 Preliminary
Forecast
• This forecast is indicative and
not board approved
• Maintains the adjusted value
proposition of 0.5% discount on
BC and 1¾ ¢ on R100 and has $0
of incremental local
development funding
• Relative to the December Board
update, the Net Revenues are
reduced by ~$100MM when
accounting for the value
proposition adjustments
• This forecast does not include
any changes that may occur
resulting from PCIA Track 2 or 3
o The CPUC initiated Track 2 in early
2026
• The RSF balance is forecasted
to be higher relative to the
December forecast driven by
board actions, higher rates,
and lower forecasted energy
costs
o This is partially offset by lower
net revenues in 2027
• Staff will continue to update
projections going into the
May/June budget setting
process for FY 2026-27
• FY 2025-26 results will be
discussed with the financial
audit in fall 2026
Attachment Staff Report Item 11A