Power Charge Indifference Adjustment
(PCIA) Regulatory Update
Marketing Regulatory and Legislative Subcommittee
September 18, 2026
Contents
• Power Charge Indifference Adjustment (PCIA) Background • What is happening with the PCIA at the California Public Utilities Commission (CPUC)?
▪ PCIA Rulemaking
• Track 1
• Track 2
• Tracks 3 and 4
▪ 2027 Energy Resource Recovery Account (ERRA) Forecast Proceeding
2 PCIA Background
Why PCIA Matters
• PCIA/bundled rates drive Ava's gross revenue.
• As PCIA goes up, gross revenue generally goes
down
• And vice versa
4 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 How does the PCIA calculate “stranded
costs?”
6 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, which are either:
▪ 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
Resource
Adequacy (RA)
RA-only
transactions
RA-only
transactions
(updated)
Renewables
Portfolio Standard
(RPS)
PCC1 Index-Plus* PCC1 Index-Plus
(updated)
Energy Platts-ICE
Forward Curve -
Electricity forecast
for next year
Actual CAISO
Market
Revenues**
7 *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?
8 UOG = Utility-owned generation
Portfolio
Costs
Portfolio
Value
Who pays for what resources?
• PCIA rates are differentiated by “vintage”
• Each customer and each procurement commitment (including utility-owned generation (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)
9 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.
PCIA Affects “Headroom”
• Headroom is the rate a CCA has to spend on its own procurement while remaining at or below the generation rate of the incumbent IOU.
• Can change due to a variety of factors and varies by vintage 10 Bundled
PCIA Rate
Bundled
At-market
Rate
Departed
Load PCIA
Rate
Headroom
PCIA Proceedings at the California Public
Utilities Commission (CPUC)
Rulemaking to Reform the PCIA
R.25-02-005
12 PCIA OIR Track 1/2026 ERRA Forecast
• Issue
▪ Changes methodology for setting the RA MPB
▪ Applied retroactively, to benefit of bundled customers and detriment of departed customers
▪ Effective in 2026 via the ERRA Forecast, which CalCCA also appealed • Current Status
▪ CalCCA appealed the Track 1 decision to the Court of Appeal, which denied the appeal in June
▪ CalCCA took a writ to the Supreme Court in July
▪ CalCCA also appealed the ERRA decisions implementing Track 1 ▪ The Court of Appeal stayed the ERRA appeals pending S.Ct action • Schedule
▪ Supreme Court action on CalCCA’s writ expected 10/2
13 PCIA OIR Track 2
• Issue
▪ Valuation of pre-2019 banked renewable energy certificates (RECs) • Current Status
▪ The assigned administrative law judge (ALJ) issued a proposed decision (PD) in August
▪ The PD gives zero value to customers who paid for the RECs but later departed for CCA service, when the investor-owned utilities (IOUs) use these RECs for current bundled-customer Renewable Portfolio Standard (RPS) compliance.
• Schedule
▪ The CPUC is expected to vote on the PD on September 17, 2026. ▪ Applications for rehearing are due to the CPUC within 30 days of a decision
14 PCIA OIR Tracks 3 and 4
• Issue
▪ Reforms to the existing PCIA framework (Track 3A) and broader structural reforms to the indifference framework (Track 3B). ▪ Track 4 will address remaining issues after Tracks 3A and 3B conclude • Current Status
▪ Ongoing
▪ Trifurcated procedural schedule
• Schedule(s)
▪ Track 3A
• Proposed decision expected end of Q2 2027
• Final Decision expected Q3 2027
▪ Track 3B – schedule to be issued in Q4 2026
▪ Track 4 – to begin following conclusion of Tracks 3A and 3B 15 2027 Energy Resource Recovery Account
(ERRA) Forecast Proceeding
A.26-05-007
16 2027 ERRA Forecast Proceeding Scope
• Issues
▪ PG&E 2027 ERRA Forecast sets PG&E generation/PCIA rates for 2027 ▪ Error in PG&E’s Slice-of-Day methodology, which would have excluded nearly 350 MW of RA value from the PCIA and thus increased PCIA rates.
▪ CalCCA also recommends that PG&E
• prioritize use of post-2019 over pre-2019 banked RECs, • improve coordination with CCAs on data center load forecasts, and
• incorporate authorized 2027 GRC increases into PCIA rates to mitigate future rate shocks.
17 2027 ERRA Forecast Proceeding Schedule
• Proceeding schedule
▪ PG&E will file Rebuttal Testimony on September 16, 2026. ▪ CPUC to publish Market Price Benchmarks in the first week of October. ▪ PG&E will file the October update to rates on Thursday, October 15, 2026
▪ Proposed decision – November 2026
▪ Final decision – December 17, 2026
▪ Preliminary Annual Electric true-up (AET) – November 2026 ▪ Final AET – end of December 2026
▪ New rates effective January 1, 2027
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