Fiscal Year 2026-2027
Draft Budget
Howard Chang, CEO | May 6, 2026
Introduction
2 • Every year in June, Ava Board of Directors (the “Board”) approves the following fiscal year’s budget • This draft budget will be reviewed with the Ex Comm (5/6 and 6/3) and FAP (5/27) subcommittees and presented to the Board at the May 20th meeting with approval scheduled for the meeting on June 17th. • The Budget covers the overall categories of the General Operating Fund:
▪ Revenues from Operations
▪ Energy Operating Expenses (typically 90%+ of total 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 Electricity Product Load & Rates
• Renewable 100:
• Originally set at $0.01/kWh above PG&E and has migrated down as Ava financials improved • Currently priced at $0.0175/kWh above PG&E rates
• Bright Choice:
• Originally set at 1.5% discount to PG&E, reduced to a 1% discount in 2021,increased to a 3% discount in 2022, increased to 5% discount to PG&E rates in 2023. Latest adjustment was to 0.5% discount to PG&E in January of 2026
• The percent load of Bright Choice customers is estimated at ~66% for FY 2027 3 50%
55%
60%
65%
70%
75%
80%
85%
90%
95%
100%
0 1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
9,000,000
10,000,000
2023 2024 2025 2026 2027
BC%
Retail MWh
Bright Choice as Percent of Retail Load by Fiscal Year
BC-Res BC-C&I R100-Res R100-C&I BC%
PCIA & Operating Headroom
4 • 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 Portfolio
Costs
Portfolio
Value*
Stranded
Costs/credit
*Value calculated using “Market
Price Benchmarks” (MPBs)
PCIA Proceeding & Risk Elements
The CPUC has an ongoing proceeding regarding the PCIA, divided into "Tracks". o Track 1
o CalCCA has appealed CPUC Track 1 decision; appeal is pending o Revised the MPB for RA retroactive through 2025
o Major driver for the much higher PCIA most Ava customers see in 2026 versus 2025 o Track 2
o Proceeding is ongoing; decision expected in time for inclusion in 2027 rates o The CPUC is reviewing the methodology for valuing RECs that PG&E "banked" prior to 2019 but did not actually use for compliance purposes until 2025. An interim methodology values those RECs at $0. This increases the PCIA for most Ava customers versus what the PCIA would be if those RECs were valued at the current market price for RECs
o Outcome indeterminate; CalCCA proposal would use current market prices for REC value, and lower the PCIA for most Ava customers versus status quo; PG&E proposal would make the status quo interim methodology permanent o Track 3
o Scope and timing undetermined
▪ CCAs propose to address reviewing the Track One revisions to MPBs; aligning the RA MPB with the RA Slice of Day framework; revintaging of PCIA resources; PCIA GHG-free methodology; and potentially other structural changes to the PCIA ▪ IOUs propose to prioritize changes to RPS MPBs ahead of any other issues, with changes to the brown power MPB next o Outcome indeterminate; CCA approach would likely reduce PCIA for most Ava customers if adopted while the IOU approach would likely raise the PCIA for most Ava customers if adopted 5 Fiscal Year 2025-2026
Budget Performance
6 Current Fiscal Year Performance • Details on “Actuals” are settlements through February and updated projections through June.
• Revenues are expected to settle above budget due to
Board action on value proposition in December. ▪ Other Operating Revenue is primarily a modification fee on an energy contract delivery and damages to Ava for delayed energy deliveries
• Cost of energy is coming in below expectations as
market prices soften and higher than expected large
generation
• Total overhead is currently estimated at $6.5MM below budget due to opex reductions
• Non-operating activity is higher than expected as interest rates on accounts remains higher-for-longer and with the reduction of Local Development contributions
• Overall Net Revenues are expected to come in at
$80.7MM above estimates without using $35MM
budgeted GASB 62 funds.
7 Fiscal Year 2026-2027 Draft Budget
8 Draft Budget Fiscal Year 2026-2027
• Revenues: Market prices continue to push lower, lowering projected rates an increasing expected PCIA
• Cost of Energy: Lower market prices equates to lower
open position costs
• Overhead: Increase in G&A is predominately due to a
change in accounting treatment of credit facility fees and increasing software costs
• Non-Operating Activity: Higher interest income as
“higher-for-longer” remains as policy. Lower borrowing
interest due to change in accounting treatment of credit facility.
9 Brown Power Energy Price Volatility
10 • Customer rates are determined truing up
forecasted market prices with actualized
prices
• 2026 rates were set by 2025 actualized prices
and 2026 forecasted prices. 2027 rates will be
set by 2026 actualized prices and 2027
forecasted prices.
• In a declining price environment, rates set by
prior year’s forecast over-collect relative to
current year prices and future rates will adjust
to correct the over-collection
• Calendar years 2026 and 2027 rates are being
set by such a correction
11 Market Price Benchmark Trends 2020-2027
• Forecast MPBs used to develop rates are calculated in Sept each year:
o Energy: Avg forward price during Sept for delivery the following year o REC: Avg executed contract price in the past 15 months for delivery in following year
o RA: Avg executed contract price in the past 3 years for delivery the following year
• Forecasted vs. Final MPBs vary significantly, reflecting year to year market volatility
• RA MPB in 2025 reflects regulatory changes, no future PCIA reform is assumed in forecasts
• "Final" numbers in 2026 reflect actuals through March and updated forecast as of April
RA Market Price Benchmark
Brown Power Market Price Benchmark
RPS Adder
12 Expected Market Environment & Impact to Rates/PCIA
• Rates have increased and PCIA has decreased from 2021 to 2025, driven by historic increases in market energy prices • Since then, energy costs softened and market prices set PCIA higher and rates lower in 2026, in addition to substantive PCIA reform.
• Lower prices are expected to continue through the 2026 and we are forecasting continued lower rates and higher PCIA for 2027 true up
• Between calendar year 2025 and 2026, customer rates have dropped 20.9%, and between 2026 and 2027 Ava is estimating rates will decline an additional 19.1% (inclusive of PCIA) ▪ Ava average rates dropped 28.8% between 2025 and 2026, and is expected to decline an additional 43.6% in 2027 to the lowest rates in Ava’s history
12 0.081 0.080 0.066
0.113
0.137 0.141 0.147
0.105
0.059
0.029 0.032 0.043
0.024
0.004 0.010 0.004
0.015
0.037
0.016 0.016
0.003
0.022
0.038 0.035 0.034
0.007
0.026 -0.04
-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 2027
$/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
0.113
0.073
0.026 0.030 0.038
0.037
0.012
0.006
0.008
0.018
0.036
0.017 0.018
0.008 0.011
0.029
0.039
0.022 0.016
-0.013
-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 2027
$/kWh
Fiscal Year
Customer Rate Revenue Profile
Ava Average Rates PCIA Fees Operating Expenses Margin
Draft Budget: Base Case Assumptions
• Base Case Assumptions have MPB’s for calendar year 2026 down to align with market actuals and forwards year to date
• Forward looking prices in cost of energy reflect market price assumptions • Renewable and carbon free targets are aligned with previous Board decisions for compliance period through calendar year 2027
• Interest income reflects higher-for-longer interest rate policy and adjusts for expected cash drawdowns—current estimates are 3.5% until December then 3.25% for remaining period • No contributions to Local Development Fund this year
• Borrowing costs reflects collateral changes expected with FSR, higher placement is anticipated 13 Year Forecast Final Forecast Final Forecast Final
2026 $ 51.38 $ 33.28 $ 62.45 $ 40.00 $ 11.53 $ 9.42
2027 $ 42.18 $ 42.18 $ 25.00 $ 25.00 $ 9.67 $ 9.67
2028 $ 47.25 $ 47.25 $ 20.00 $ 20.00 $ 10.65 $ 10.65
Energy RPS
Brown Power RPS Adder System RA ($/kW-mo.)
RA
Draft Budget: Renewable & Large Hydro Content
14 • In April 2022, the Board approved the “Path to Zero by 2030” plan for the Bright Choice product, as
shown in the table to the left
• Periodically, the Board has approved adjusting
targets to fit Ava’s financial position, typically raising targets
• In December 2025, the Board approved a
compliance period approach across multiple years
instead of single year targets specifically
This table shows where Ava currently stands
with procurement relative to the compliance
period, and annual, targets
Year Renewables Lg. Hydro Total Renewables Lg. Hydro Total Long/Short 2024 52.0% 29.0% 81.0% 62.0% 33.7% 95.6% 14.6%
2025 56.0% 25.0% 81.0% 56.5% 37.6% 94.1% 13.1%
2026 55.6% 21.0% 76.6% 54.7% 18.0% 72.7% -3.9%
2027 64.0% 21.0% 85.0% 58.4% 12.3% 70.8% -14.3%
Period* 57.3% 23.7% 80.9% 57.9% 25.4% 83.3% 2.4%
* Load Weighted
Annual Targets Actuals/Forecast
Draft Budget: Forecast Uncertainty
• May ERRA filing will provide a year-to-date on a subset of the underlying assumptions that generate the PCIA and rates, but will not provide updated MPBs
• Tracks 2 and 3 of the PCIA reform may be fast-tracked or delayed, depending upon CPUC rulings • Load has some uncertainty:
▪ With the addition of SJC, estimates will become more accurate as Ava receives more data directly in real time ▪ Longer-term: data center and electrification resents significant uncertainty • New PPA developments may be delayed or moved forward in expected start dates • Market prices are fluctuant and can spike on demand or supply constraints, or generally migrate over time
• Opaque portfolios with the IOU could lead to materially different MPBs in October filing • Interest rates could be adjusted at a different time and amount than modeled 15 FY 2026-2027 Scenarios & Sensitivities
16 Ava looked at possible alternative market outcomes—High-End and Low-End scenarios • High-end: calendar year 2026 prices end up as current MPB forecasts from October ERRA filings • Low-end: calendar year 2026 prices end up one standard deviation down from current forward averages for brown power and Ava’s base case RPS and RA estimates Staff also tested sensitivities to
gauge general price movement
impacts on net revenues
Base Case High End Low End
Revenues 639,453,000 739,032,000 594,075,000
Cost of Energy 759,673,000 819,347,000 738,685,000
Overhead 53,231,000 53,231,000 53,231,000
Net Non-Op 23,178,000 23,178,000 23,178,000
Net Revenues (150,273,000) (110,368,000) (174,663,000)
MPBs 2026 2027 2026 2027 2026 2027
Power 33.28 42.18 51.38 42.18 23.7 42.18
RPS 40.00 25.00 62.45 25.00 40.00 25.00
RA 9.42 9.67 11.53 9.67 9.42 9.67
Base Case High End Low End
MPBs Move Impact on Net Revenues
Power $5.00 $11.0MM
RPS $5.00 $4.9MM
RA $1.00 $8.1MM
Price Sensitivities
Draft Budget: Revenues
• Revenues from sales of electricity are expected down from previous year’s budget due to softer energy prices materializing in 2026, which affects rates for 2027 • Value proposition remains unchanged at 0.5% discount to PG&E for Bright Choice and a $0.0175 premium on Renewable 100 products
• Estimated bad debt slightly increased from 1.0% to 1.25% of billings based on rising trends and getting ahead of possible inflation increases due to oil market volatility • Recognition of GASB 62 deferred revenue is not from the Rate Stabilization Fund but is half of the amount deferred from resolution R-2024-26, which allocated $10,504,837 to local, incremental generation and capacity from the 2023 RFO for projects starting in 2027 17 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 93.5% 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 6.5% of total operating expenses
• Non-Operating Expenses which are all capital and
capital transfer related costs, including Local
Development Fund contributions. This category is
presented and discussed in a later slide
Draft Budget: Energy Operations
19 Energy Costs
• Costs are generally derived from a blend of
contracted and open position for all energy
attributes
▪ Currently, renewables, carbon free, and RA are
fully procured
▪ Open prices are non-stressed, mean
forecasted
▪ Material increase in PPAs due to reduced
revenue expectations from lower market
prices
PPAs Hedges Open Resource
Adequacy
RECs Carbon Free Transaction
Costs
Other
Fiscal Year Cost of Energy Budget by Attribute
2022 2023 2024 2025 2026 2027
Draft Budget: Fiscal Year Personnel Details
• FY 2026 Budget was set for 7 additional FTE (105 total) to build more depth and to continue addressing increased workflow in key areas to help scale operations further. ▪ Ava is not filling 2 roles bringing the forecasted end of FY 2026 FTE to 103. • FY 2027 Budget seeks to add 5 FTE (108 total) to provide added expertise and support in key areas and help to meet essential business needs.
▪ 1) Contract Management Analyst 2) Finance Manager / Staff Accountant 3) Contract / Settlements Analyst ▪ 4) Optimization Software Engineer 5) Analyst
• Compensation Adjustments:
▪ COLA: 3%; Promotions/Wage Adjustments: 3%; AIP Compensation: 12% ▪ Accounting for increased healthcare premiums and associated benefit costs (realized and expected) 20 Public Hearing - AB 2561: Ava FY 25-26 YTD
21 FY 2025 - 2026 Budgeted Headcount
Total Active FTE
Budgeted 105
New FTE Budgeted 7
New FTE Filled to date 5
Average Time to Hire 67 Days
Vacancy Rate 29%
Retention Rate 95%
Average Turnover Rate 5%
*For recruitment, only new budgeted positions are included. This does not account for other roles, like backfill positions.
*Reporting Period: FY 25-26; July ‘25 - April ‘26 (YTD at time of report) *Average Time to Hire: Days from role posted to start date. *FTE: Full-time employee; YTD: Year-to-date
Ava has a strong retention rate of 95%, with only 5
terminations so far this year.
Hiring Decision: Ava elected not to fill 2 positions this FY, bringing the total budgeted FTE down to 103.
Challenges faced in hiring:
• Finding a great fit can take time, but it’s worth it. ▪ We are prudent in our hiring process, strategically
planning the timing of hiring, carefully considering all aspects of the role and desired impact.
• Competition for talent is high, especially in the Bay Area What helps us overcome challenges?
• A strategic and robust hiring approach
• Ava is mission-driven & a certified Great Place to Work! This slide and data presented ensure compliance to AB 2561, which requires local public agencies to present the status of vacancies and recruitment and retention efforts at a public hearing before the governing board of the local agency at least once per fiscal year.
Draft Budget: Marketing & Communications
22 FY 2027 Summary of Adjustments:
• Continued notifications to unincorporated San Joaquin County solar customers • Customer mailings for Fremont commercial Renewable 100 transition • Investment to concept and launch first phase of multi-year awareness initiative • Investment in sponsorships, fellow, partners to activate community engagement strategy Draft Budget: Legal, Policy, & Regulatory Affairs
23 FY 2027 Summary of Adjustments
Legal:
• Litigation counsel: ongoing dispute with energy provider; litigation readiness; all potential disputes.
• Commercial counsel: all procurement activities other than power resources. • Software and implementation: Legal research resources; contract platform Phase 3 rollout.
Policy and Regulatory Affairs
• Federal and state lobbyists
• Consultants for compliance and CAISO matters
• Potential AI services
Draft Budget: Professional Services
24 FY 2027 Summary of Adjustments:
• Operations: Reduction in costs as tenant improvement contractors are not in 2027 • Technology Consultants: Expanding operations requires additional engineering and CRM structure and design support
• Other Services: Work continues to expand in all areas and to offset full time hires, temporary contractors are needed
Draft Budget: General & Administrative
25 FY 2027 Summary of Adjustments:
• Operational Expenses: Increase is due to
accounting change for interest reporting, some
increases in insurance premiums and service
fees
• Software & Subscriptions: Increases to cover
additional software needs for IT, Power
Resources, and EAS data and increased cyber
security needs
• Rent & Utilities: Annual increase and TI catchup
• HR & Recruiting: Some increase in recruiting
costs for placing temporary consultants
• Board & Director Fees: These are reduced to
more closely align with Board practices of
requesting stipends
Draft Budget: Non-Operating Activity
26 Non-Operating Revenue
• Interest Income: Reflects “higher-for-longer” FED interest rate policy and expected balance drawdowns
▪ Rates are estimated to hold at 3.5% through
2026 then 3.25% in 2027
• Other Non-Operating Revenue: is
expected income AT&T tower rent at the 8th
Street building
Non-Operating Expenses
• Borrowing Interest: reduced due to
changes in interest accounting
• Capital Expenditures: costs estimated for
general improvements at 1999 Harrison St
offices
• Local Development: no planned
contributions
Draft Budget: Five-Year Forecast
27 Assumptions for 5-year outlook
• Base case assumptions applied
• Current value proposition is retained through
whole period
• No application of RSF
• Energy costs perform along mean
expectations
• Overhead grows at rate of inflation
• Interest rates remain at 3%
2027 2028 2029 2030 2031
Power 42.18 47.25 50.14 53.80 54.08
RPS 25.00 20.00 20.00 25.00 25.00
RA 9.67 10.65 10.86 10.29 11.24
Calendar Year MPB's
Draft Budget: Deferred Revenues & Reserve Funds
28 • Current reserve fund balance
covers 40.7% of projected
operating expenses for FY 2027
• Rate Stabilization Fund balance
holds 8% margin above base
case drawdown for FY 2027
• Current FY surplus estimate of
$80.7MM is not included in
these balances
• Staff will bring
recommendations for
allocation of the surplus to the
Board after completion of the
annual audit in November
Deferred Revenue Usage Balance Guidance
Rate Stabilization Fund 162,546,828
R-2025-23 authorizes recognition of ~$35MM to balance FY25-26 budget R-2025-41 authorizes conversions from previous budget deferrals R-2025-42 & R-2025-51 authorizes RSF funding allocations Clean Energy Investments 10,504,837
R-2023-37 authorizes deferral for specified use.
R-2024-26 authorizes recognition in 2027
Contribution Year Contribution Withdraws Balance Operating Expenses* OpEx Year PctCoverage 2018-2019 40,513,687 - 40,513,687 410,686,000 FY 2019-2020 9.9% 2019-2020 49,704,640 - 90,218,327 383,045,000 FY 2020-2021 23.6% 2020-2021 - - 90,218,327 471,897,000 FY 2021-2022 19.1% 2021-2022 65,655,073 - 155,873,400 562,667,000 FY 2022-2023 27.7% 2022-2023 75,000,000 - 230,873,400 732,885,000 FY 2023-2024 31.5% 2023-2024 100,000,000 - 330,873,400 814,123,000 FY 2024-2025 40.6% 2024-2025 - - 330,873,400 899,393,000 FY 2025-2026 36.8% 2025-2026** - - 330,873,400 812,904,000 FY 2026-2027 40.7% *Operating Expenses are fiscal year ahead for coverage purposes: 2025-26 contribution year aligns with 2026-2027 OpEx **Expected contribution with current policy as of 5/6/2026 Note: If $0 are contributed from 2025-2026 surplus, the balance of $330.9MM is 40.7% of FY 2026-27 OpEx Local Development
29 Draft Budget: Local Development Fund Balance*
30 Program Area Balance
Local Development $2,800,000
BE+EE
Building Electrification $14,600,000
Building Efficiency Accelerator $1,300,000
TE
Vehicle Electrification $8,100,000
Ava Charge $15,900,000
Bike Electric $2,200,000
SmartHome Charging $5,700,000
Resilience
Critical Municipal Facilities (CMF) $5,800,000
SmartHome Battery $10,900,000
Resiliency Hubs $5,600,000
BE+TE Virtual Power Plant DERMS Platform $1,900,000
Grants Community Investment Grants $8,800,00
Total $83,600,000
*Fund balance as of 1/31/26
Local Development – FY27 anticipated spend
31 Program Area FY '27 Spend Committed FY'27 Activities Program Roadmap $500,000 $500,000 Local Development Programs Roadmap Ava Charge $2,640,000 $6,750,000 Development, Operations and Marketing for 5 Sites Critical Municipal Facilities $2,000,000 N/A - 25 yr PPA Complete Projects, Establish operating reserves, bill customers
Grants $600,000 $1,900,000 Issue new solicitation, select at least three grantees and Payments for contracted grants
SmartHome Battery
incentives $1,250,000 $10,900,000 Upfront and ongoing payments for SHB Resilience Hub
TA/Incentives $1,500,000 $5,600,000 Upfront incentives and Technical Assistance costs Building Efficiency
Accelerator $1,000,000 $1,000,000 Incentives for Commercial Heat Pump Water Heaters Ava Bike Electric incentives $2,200,000 $2,200,000 Bike Electric will add $4M from ACTC Ava SmartHome Charging
incentives $300,000 $600,000 Enrollment incentives and VPP dispatch payment for SmartHome Charging program Total $11,990,000 $29,450,000
Draft Budget: Next Steps & Expected Updates
• The next presentation will be at the May 20th Board meeting • Typically, end of May PG&E/CPUC issue ERRA update for current year filings—may or may not have material impact on these numbers as depending upon content reported • Additional review opportunities by FAP (5/27), Ex Com (6/3) • Final delivery to Board (6/17) for approval
Note: These budget scenarios are indicative and will change based on energy market conditions and developments in CPUC proceedings
Staff is seeking feedback on any matters that should be updated in May presentation to the Board 32