Audit and Finance Committee
August 27, 2025
9:00 A.M.
Central Coast Community Energy
70 Garden Court, Suite 300
Monterey, CA 93940
REMOTE LOCATION VIA TELECONFERENCE
Any interested parties or community members may attend, and participate in, the meeting at the following addresses where Committee members may also join the meeting from:
City of Watsonville
City Hall 275 Main Street
Watsonville, CA 95076
City of Hollister
City Hall 375 Fifth Street
City Manager Conference Room Hollister, CA
95023
City of Salinas
City Hall
200 Lincoln Avenue
Salinas, CA 93901
City of Buellton
City Hall
541 Covelo Lane
Buellton, CA 93427
Public may participate through ZOOM. For ZOOM participation please join by computer audio at:
https://us02web.zoom.us/j/83507087702
Or join by phone:
+1 669 900 6833 or +1 669 219 2599
Enter this Webinar ID Number: 835 0708 7702 when prompted. Please note there is no Participant Code, you will press # again after the recording prompts you.
You will be placed in the meeting as an attendee. To make a public comment:
If joined by computer, please press the button to raise your hand If joined by phone, please push *9 on your keypad
If you have anything that you wish to be distributed to the Committee, please provide 15 copies to a member of 3CE staff or the Board Clerk, who will distribute the information to the Committee members and staff.
The public may comment on the consent agenda and matters not listed on the agenda but within the Committee's jurisdiction at the opening of the meeting. The Committee may not take action at this meeting on any item not listed on the agenda other than to refer the matter to staff or set it for a future meeting. The public may comment on a specific item listed on this agenda when the Committee considers that item. Speakers are limited to 3 minutes each.
In addition, members of the public may request and receive copies without undue delay of any documents that are distributed to the Committee, unless there is a specific exemption under the Public Records Act that prevents the disclosure of the record. (Cal. Gov’t Code Section 54957.5) In compliance with Government Code Section 54957.5, non-exempt writings that are distributed to a majority or all of the Committee in advance of a meeting and that relate to an agenda item will be made available at 3CE’s offices located at 70 Garden Court, Suite 300, Monterey, CA 93940 during normal business hours and are also available on the 3CE website located at: https://pub-3ce.escribemeetings.com/ REASONABLE ACCOMMODATIONS: In compliance with the Americans with Disabilities Act, any individuals who desire to request a reasonable accommodation or modification to observe or participate in the meeting may make such a request by sending an email to: [email protected] Copies of documents may be made in alternative formats, upon request. Requests for accommodations should be made no later than two (2) business days prior to the meeting to allow time for 3CE to address the request.
DISCLOSURE OF CAMPAIGN CONTRIBUTIONS: Pursuant to Government Code section 84308, members of the Committee are disqualified and not able to participate in any agenda item involving contracts (other than competitively bid, labor, or personal employment contracts), franchises, discretionary land use permits and other entitlements if the Committee member received more than $250 in campaign contributions from the applicant or contractor, an agent of the applicant or contractor, or any financially interested participant who actively supports or opposes the decision on the agenda item since January 1, 2023. Members of the Committee who have received, and applicants, contractors or their agents who have made, campaign contributions totaling more than $250 to a Committee member during the proceeding or for 12 months after a final decision is rendered in that proceeding, are required to disclose that fact for the official record of the subject proceeding. Disclosures must include the amount of the campaign contribution and identify the recipient Committee member and may be made either in writing to the Clerk of the Board prior to the subject hearing or by verbal disclosure at the time of the hearing.
Welcome & Roll Call
Corrections or Additions
The Clerk will announce agenda corrections or proposed additions of emergency, urgency, or continued items, which will be acted on by the Board as provided in Section 54954.2 of the California Government Code.
Public Comment on Items on the Consent Calendar and Items Not listed on the Agenda The public may address the Committee on the Consent Calendar and any matter within the jurisdiction of the Committee but not on the agenda.
CONSENT CALENDAR
1. Approve Minutes from the May 21, 2025, Meeting of the Audit and Finance Committee
2. Investment Performance Report for the period of October 1, 2024, through June 30, 2025
3. Financial Report for the period of October 1, 2024, through June 30, 2025
REGULAR AGENDA
4. Support seeking the Policy Board's adoption of the Fiscal Year 2025-26 Recommended Budget
5. Adjournment
Audit and Finance Committee
May 21, 2025
9:00 AM
Central Coast Community Energy
70 Garden Court, Suite 300
Monterey, CA 93940
City of Watsonville
City Hall
275 Main Street
Watsonville, CA 95076
City of Hollister
City Hall
375 Fifth Street
City Manager Conference
Room
Hollister, CA 95023
City of Salinas
City Hall
200 Lincoln Avenue
Salinas, CA 93901
City of Buellton
City Hall
541 Covelo Lane
Buellton, CA 93427
MINUTES
The meeting was called to order at 9:06 AM with 4 members attending from 4 noticed locations and a quorum established.
Members Present: City of Salinas: Mendez
City of Hollister: Mirrione
City of Buellton: Silva
City of Watsonville: Acting Chair Dutra
Members Absent: None
CONSENT CALENDAR
Chair opened public comment period on the Consent Calendar.
No public comments received.
Chair closed public comment period.
MOTION: Moved by Member Silva, seconded by Member Mirrione, to approve the Consent Calendar ACTION: The Motion Carried with a roll call vote: 4/0/0
AYES: Mendez, Mirrione, Silva, Chair Dutra
NOES: None
ABSENT: None
1. Approved Minutes from the February 27, 2025 special meeting of the Audit and Finance Committee as submitted.
2. Investment Performance Report for the period of October 1, 2024 through March 31, 2025
3. Financial Report for the period of October 1, 2024 through March 31, 2025
REGULAR AGENDA
4. Appointed Chair and Vice Chair of the 3CE Audit and Finance Committee The Chair opened the public comment period.
No public comment received.
The Chair Closed the public comment period.
MOTION: Moved by Member Mendez, seconded by Member Silva, to appoint Member Dutra as Chair and Member Mendez as Vice Chair of the Audit and Finance Committee.
ACTION: The Motion Carried with a roll call vote: 4/0/0 AYES: Mendez, Mirrione, Silva, Acting Chair Dutra
NOES: None
ABSENT: None
5. Presentation on the FY 2024-25 Mid-Year Budget Forecast The Chair opened the public comment period.
No public comment received.
The Chair Closed the public comment period.
ACTION: Discussion item; no action required.
6. Supported the Policy Board's approval of the FY 2025-26 Financial Policies The Chair opened the public comment period.
No public comment received.
The Chair Closed the public comment period.
MOTION: Moved by Member Silva, seconded by Vice Chair Mendez to approve ACTION: The Motion Carried with a roll call vote: 4/0/0 AYES: Mirrione, Silva, Vice Chair Mendez, Chair Dutra
NOES: None
ABSENT: None
Adjourned at 9:46 AM
Staff Report Item 2
TO: 3CE Audit and Finance Committee
FROM: Robert M. Shaw, Chief Executive Officer
PREPARED BY: Thomas White, Accountant
SUBJECT: Investment Performance Report for the period of October 1, 2024, through June 30, 2025
DATE: August 27, 2025
RECOMMENDATION:
Receive the 3CE investment performance report for the period of October 1, 2024, through June 30, 2025.
BACKGROUND:
As of June 30, 2025, Central Coast Community Energy held $224.9 million across its operating and investment accounts. The agency’s investment strategy remains conservative and compliant with the Investment Policy and the California Government Code, prioritizing liquidity, preservation of capital, and a passive investment approach. The portfolio's structure is designed to support day-to-day operating needs, meet collateral calls, and maintain reserves for strategic and rate stabilization purposes.
DISCUSSION/ANALYSIS:
3CE ended the quarter on June 30, 2025, with investment holdings that followed the Investment Policy and the strategy of holding enough cash to meet operating costs, including counterparty collateral calls.
The strategy consists of holding three different classes of funds: cash to meet ongoing operating costs, liquidity reserves to meet collateral calls and unforeseen costs, and short-term investments to meet reserves, including the strategic reserve and energy rate stabilization funds. As of June 30, 2025, 3CE held $224.9 million in operating and investment accounts. The table below lists the cash and investment balances by account type.
Cash and Investment Mix Holdings by Institution
Account Type Institution Balance Investment Mix
Operating
River City Bank $86,507,256
Cash (sweep) - $58.4M
money market - $23.9M
cash (operating) - $4.0M
Chase $9,258,690 cash (held for collateral)
Investment
Schwab $63,939,260
Treasuries - $58.6M
cash (sweep) - $5.0M
money market - $0.3M
Fidelity $65,201,585 Treasuries - $59.8M
money market - $5.4M
Total $224,906,792
The investment strategy is passive, where fixed-income holdings such as Treasury notes and bills are held to maturity, and 3CE receives the coupon income and discount. As of June 30, 2025, 3CE served as investment manager of the $129.1 million held in the Schwab and Fidelity brokerage accounts. The average annual percentage yield for Treasuries ranged from 3.75% to 4.56% over the third quarter.
Treasuries with a maturity date of less than one calendar year accounted for 85% of holdings. Three Treasuries with a combined market value of $12.3 million have a maturity date in Q3 of 2026. One Treasury with a market value of $5.0 million has a maturity date in Q2 of 2027. All investment holdings managed are high-grade rated investments or higher.
3CE’s investment mix aligns with the Investment Policy and California Government Code. As of June 30, 2025, 3CE held $76.9 million in cash and cash equivalents, $118.4 million in U.S. Treasuries, and $13.2 million in money market funds. Aside from money market funds, all other investment types do not have state investment limits. The State code limits money market funds to 20% of the portfolio. 3CE is within the State limit at 13.2%.
Cash and Investment Mix Holdings
Type Market Value
% of
Portfolio
Permitted by
CA Government Code
Cash and cash equivalents $76,904,389 34.2% 100%
Money Market Funds $29,582,953 13.2% 20%
U.S. Treasuries $118,418,474 52.7% 100%
Total $224,906,792 100.0%
The FY 2024-25 Adopted Budget, with appropriations of $730.3 million, included estimated investment revenues of $7.2 million. In the third quarter, investment earnings from operating and investment accounts netted $7.3 million, $3.3 million from interest on cash and money market accounts, and $3.9 million from short-term investments, mostly from Treasuries. Interest earned on 3CE collateral held by
counterparties totaled $1.0 million. To date, the total investment and interest earnings from internal liquidity and counterparty collateral are $8.3 million. Based on the mid-year budget forecast, revenue from interest and investment earnings is estimated to total $10.8 million based on current market yields.
As of June 30, 2025, 3CE has 115 days of cash on hand. This is based on the total cash and equivalents of $224.9 million divided by an average daily expense of $1.9 million. Total operating expenses for FY 2024- 25, less depreciation, are $712.4 million.
FISCAL IMPACT:
There is no fiscal impact to receiving this report.
CONCLUSION:
3CE proactively diversified its financial institutional partners while strategically deploying cash and short-term investments to capture favorable yields, while retaining liquidity for ongoing operating costs and collateral calls.
ATTACHMENT(S):
None.
Staff Report Item 3
TO: 3CE Audit and Finance Committee
FROM: Robert M. Shaw, Chief Executive Officer
PREPARED BY: Gina Urmatan, Senior Accountant
SUBJECT: Financial Report for the period of October 1, 2024, through June 30, 2025 DATE: August 27, 2025
RECOMMENDATION:
Receive a financial report for the period October 1, 2024, through June 30, 2025.
SUMMARY:
Over the nine months ending June 30, 2025, operating revenues amounted to $460.9 million, and operating expenses totaled $396.5 million for a net operating income of $64.3 million. Non-operating revenue of $8.3 million, driven by interest and investment returns, netted the month with a total net position increase of $72.6 million.
Year-to-date operating revenue is $58.8 million below budget, primarily due to a lower-than-expected retail load partially offset by settlement fund receipts. 3CE is actively monitoring retail load projections and has adjusted the forecast downward in March 2025 as part of the electric generation rate adjustments approved by the Policy Board effective April 1, 2025. Non-operating revenue from investment returns from assets held in operating, investment accounts, and interest on collateral exceeded the budget with a variance of $3.0 million from higher-than-anticipated investment yields.
Year-to-date total revenue (operating & non-operating revenue) is $55.7 million lower than the budget, an unfavorable variance of 11%.
Year-to-date operating expenditures, excluding capital outlay, are $42.3 million below budget, a variance of 10%. This variance is primarily attributable to lower-than-anticipated energy costs, which came in $33.4 million under budget. The reduction in energy expenses compared to the budget reflects a convergence of factors, including lower market prices, higher-than-expected wholesale energy sales, and increased revenue from congestion revenue rights. Additionally, Renewable Portfolio Standard
(RPS) compliance expenditures are below budget due to lower market prices for these attributes. Higher resource adequacy (RA) costs partially offset these favorable impacts because of elevated market prices.
Non-energy operating costs were $8.9 million lower than budget due to less-than-planned costs for contracted services, energy programs, and staff vacancies. The capital outlay was below budget by $10.0 million since capital projects are not recorded as direct expenditures. Instead, these projects are recorded as capital assets on the balance sheet and are expensed over time through depreciation following accounting principles. Year-to-date total expenditure, including capital outlay, is $52.2 million lower than the budget, a favorable variance of 12%.
The net position at the end of June 30, 2025, totaled $290.8 million, a $72.6 million increase from the start of the fiscal year. The increase is primarily due to higher deposits held by counterparties to meet collateral requirements, accrued revenue, accounts receivable, and capital assets. The increase is further supported by a reduction in accrued electricity costs, other accrued liabilities, and security deposits from counterparties. Cash, cash equivalents, and investments totaled $224.9 million, a $1.8 million decrease from the start of the fiscal year. The reduction in liquidity was largely attributed to the elevated cost of electricity invoices, including the prepayment of expenses for RA in the month of June.
FISCAL IMPACT:
There is no financial impact associated with receiving this report.
ATTACHMENT(S):
1. June 30, 2025 Financial Report
FINANCIAL REPORT
Fiscal Year to Date
As of June 30, 2025
ACCOUNTANTS’ COMPILATION REPORT
Board of Directors
Central Coast Community Energy
Management is responsible for the accompanying financial statements of Central Coast Community Energy (a California Joint Powers Authority) which comprise the statement of net position as of June 30, 2025, and the related statement of revenues, expenses, and changes in net position, and the statement of cash flows for the nine months then ended in accordance with accounting principles generally accepted in the United States of America. We have performed a compilation engagement in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the AICPA. We did not audit or review the accompanying statements nor were we required to perform any procedures to verify the accuracy or completeness of the information provided by management. Accordingly, we do not express an opinion, conclusion, nor provide any assurance on these financial statements.
Management has elected to omit substantially all of the note disclosures required by accounting principles generally accepted in the United States of America in these interim financial statements.
Central Coast Community Energy’s annual audited financial statements include the note disclosures omitted from these interim statements. If the omitted disclosures were included in these financial statements, they might influence the user’s conclusions about the Authority’s financial position, results of operations, and cash flows. Accordingly, these financial statements are not designed for those who are not informed about such matters.
We are not independent with respect to the Authority because we performed certain accounting services that impaired our independence.
Maher Accountancy
San Rafael, CA
July 24, 2025
1101 Fifth Avenue, Suite 200 San Rafael, CA 94901 415 459 1249 mahercpa.com
Current assets
Cash and cash equivalents $ 130,551,308
Accounts receivable, net of allowance 50,478,920
Accrued revenue 39,032,629
Other receivables 1,872,696
Investments 81,853,991
Prepaid expenses 9,190,100
Deposits 33,009,121
Loan receivable 194,301
Total current assets 346,183,066
Noncurrent assets
Investments 12,513,045
Deposits 21,055
Loan receivable 1,135,778
Capital assets, net of depreciation and amortization 6,444,386 Total noncurrent assets 20,114,264
Total assets 366,297,330
Current liabilities
Accrued cost of electricity 57,171,935
Accounts payable 3,677,493
Other accrued liabilities 1,935,385
User taxes and energy surcharges due to other governments 2,023,181 Security deposits - energy suppliers 759,299
Lease liability 344,859
Total current liabilities 65,912,152
Noncurrent liabilities
Security deposits - energy suppliers 9,050,025
Lease liability 580,208
Total noncurrent liabilities 9,630,233
Total liabilities 75,542,385
Net investment in capital assets 5,519,319
Unrestricted 285,235,626
Total net position $ 290,754,945
NET POSITION
As of June 30, 2025
STATEMENT OF NET POSITION
CENTRAL COAST COMMUNITY ENERGY
ASSETS
LIABILITIES
See accountants' compilation report. Page 11 of 26
OPERATING REVENUES
Electricity sales, net 452,709,844$
Liquidated damages 8,101,745
Other income 70,337
Total operating revenues 460,881,926
OPERATING EXPENSES
Cost of electricity 368,142,933
Contract services 10,620,624
Staff compensation 7,376,991
Program incentives 8,380,730
Other operating expenses 1,573,069
Depreciation and amortization 453,970
Total operating expenses 396,548,317
Operating income (loss) 64,333,609
NONOPERATING REVENUES (EXPENSES)
Investment income 8,291,701
Interest and financing costs (35,808)
Nonoperating revenues (expenses) 8,255,893
CHANGE IN NET POSITION 72,589,502
Net position at beginning of period 218,165,443
Net position at end of period $ 290,754,945
Nine Months Ended June 30, 2025
AND CHANGES IN NET POSITION
STATEMENT OF REVENUES, EXPENSES
CENTRAL COAST COMMUNITY ENERGY
See accountants' compilation report. Page 12 of 26
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers 446,383,985$
Receipts of liquidated damages 8,101,745
Other operating receipts 18,899,322
Receipts of deposits and collateral 47,109,302
Payments to suppliers for electricity (410,484,101)
Payments for other goods and services (10,652,552)
Payments for deposits and collateral (68,860,259)
Payments for program incentives (10,545,625)
Payments for staff compensation (6,932,007)
Payments of taxes and energy surcharges to other governments (7,753,232) Net cash provided by operating activities 5,266,578
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Payments of lease liability (277,693)
Purchases of capital assets (3,010,528)
Net cash provided (used) by capital and related financing activities (3,288,221)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment income received 5,435,782
Proceeds from sales and maturities of investments 114,977,000 Principal payments received of loan receivable 190,718
Purchase of investments (142,570,230)
Net cash provided (used) by investing activities (21,966,730) Net change in cash and cash equivalents (19,988,373)
Cash and cash equivalents at beginning of year 150,539,681 Cash and cash equivalents at end of period $ 130,551,308 Unrealized appreciation (depreciation) and
timing differences in investment income $ 2,855,919
Nine Months Ended June 30, 2025
STATEMENT OF CASH FLOWS
CENTRAL COAST COMMUNITY ENERGY
NONCASH INVESTING ACTIVITES
See accountants' compilation report. Page 13 of 26
Operating income (loss) $ 64,333,609
Adjustments to reconcile operating income (loss) to net cash provided by operating activities
Depreciation and amortization expense 453,970
(Increase) decrease in:
Accounts receivable, net of allowance (6,041,025)
Accrued revenue (8,084,097)
Other receivables 4,624,734
Prepaid expenses (7,360,876)
Deposits (21,338,365)
Increase (decrease) in:
Accrued cost of electricity (19,601,311)
Accounts payable (1,226,603)
Other accrued liabilities 1,103,609
User taxes and energy surcharges due to other governments 46,033 Security deposits - energy suppliers (1,643,100)
Net cash provided by operating activities $ 5,266,578
CENTRAL COAST COMMUNITY ENERGY
STATEMENT OF CASH FLOWS (continued)
Nine Months Ended June 30, 2025
RECONCILIATION OF OPERATING INCOME (LOSS) TO NET
CASH PROVIDED BY OPERATING ACTIVITIES
See accountants' compilation report. Page 14 of 26
ACCOUNTANTS’ COMPILATION REPORT
Board of Directors
Central Coast Community Energy
Management is responsible for the accompanying special purpose budgetary comparison schedule of Central Coast Community Energy (a California Joint Powers Authority) for the one and nine months ended June 30, 2025, and for determining that the budgetary basis of accounting is an acceptable financial reporting framework. We have performed a compilation engagement in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the AICPA. We did not audit or review the accompanying statement nor were we required to perform any procedures to verify the accuracy or completeness of the information provided by management. Accordingly, we do not express an opinion, a conclusion, nor provide any assurance on this special purpose budgetary comparison statement.
The special purpose statement is prepared in accordance with the budgetary basis of accounting, which is a basis of accounting other than accounting principles generally accepted in the United States of America. This report is intended for the information of the Board of Directors of the Authority.
Management has elected to omit substantially all of the note disclosures required by accounting principles generally accepted in the United States of America in these interim financial statements.
Central Coast Community Energy’s annual audited financial statements include the note disclosures omitted from these interim statements. If the omitted disclosures were included in these financial statements, they might influence the user’s conclusions about the Authority’s financial position, results of operations, and cash flows. Accordingly, these financial statements are not designed for those who are not informed about such matters.
We are not independent with respect to the Authority because we performed certain accounting services that impaired our independence.
Maher Accountancy
San Rafael, CA
July 24, 2025
1101 Fifth Avenue, Suite 200 San Rafael, CA 94901 415 459 1249 mahercpa.com
Actual Budget Amount % Actual Budget Amount % Budget
Annual
Budget Less
Actual YTD
REVENUES AND OTHER SOURCES
Electricity sales, net $ 62,433,645 $ 70,081,074 $ (7,647,429) -11% $ 452,709,844 $ 519,621,398 $ (66,911,554) -13% $ 745,962,356 $ 293,252,512 Revenue for damages - - - na 8,101,745 - 8,101,745 n/a - (8,101,745) Interest and investment returns 975,268 583,333 391,935 67% 8,291,701 5,249,997 3,041,704 58% 7,000,000 (1,291,701) Other income 6,016 5,700 316 6% 70,337 51,300 19,037 37% 68,400 (1,937) Total revenues and other sources 63,414,929 70,670,107 (7,255,178) -10% 469,173,627 524,922,695 (55,749,068) -11% 753,030,756 283,857,129 EXPENDITURES AND OTHER USESCurrent Expenditures
Cost of energy 54,009,103 56,665,561 2,656,458 5% 369,422,136 402,814,719 33,392,583 8% 665,267,116 295,844,980 Salaries and benefits 947,163 1,048,820 101,657 10% 7,376,991 9,439,381 2,062,390 22% 12,585,842 5,208,851 Services and supplies 2,752,390 2,931,483 179,093 6% 19,572,912 26,383,343 6,810,431 26% 35,177,798 15,604,886 Capital outlay 13,790 1,443,167 1,429,377 99% 3,043,468 12,988,500 9,945,032 77% 17,318,000 14,274,532 Total current expenditures 57,722,446 62,089,031 4,366,585 7% 399,415,507 451,625,943 52,210,436 12% 730,348,756 330,933,249 Surplus (deficit) $ 5,692,483 $ 8,581,076 $ (2,888,593) $ 69,758,120 $ 73,296,752 $ (3,538,632) $ 22,682,000 $ (47,076,120) Annual
CENTRAL COAST COMMUNITY ENERGY
BUDGETARY COMPARISON SCHEDULE
One Month and Nine Months Ended June 30, 2025
Month
Variance
Favorable
(unfavorable)
Year-To-Date
Variance
Favorable
(unfavorable)
See accountants' compilation report. Page 16 of 26
Budget Item YTD Variance Comment
Electric Sales Revenue (12.9%) Sales revenue includes revenues actually billed to customers as well as estimated customer usage during the reporting period that is not yet billed.
Cost of Energy (8.3%) Variances in this category are typically due to (1) timing difference between projected and actual REC deliveries, (2) variance from actual to anticipated market prices, and (3) variance from actual to expected volume used by customers. Cost of energy includes scheduling coordinator fees for budget purposes only.
Staffing (21.8%) Staffing expenses are under budget due to the timing of new hires.
Professional Services (26.6%) This category includes accounting, IT, technical and other consultants.
Legal Costs (54.5%) This category includes outside legal costs for regulatory and energy procurement needs.
Marketing and customer enrollment (20.1%) Variance is mostly due to the lower than anticipated costs of recent customer enrollments.
Data Management Services 0.6% These fees non-discretionary and are charged on a per customer basis.
Utility Service Fees (5.9%) These are PG&E and SCE fees charged on a per customer basis.
Other General & Administrative (62.0%) This category includes occupancy costs, industry membership dues, and other general and administrative costs.
Energy and Related Programs (19.2%) Programs expenses have generally been delayed until future periods Budget Commentary for significant items
CENTRAL COAST COMMUNITY ENERGY
October 1, 2024 through June 30, 2025
Return of Investments YTD Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep CASH AND CASH EQUIVALENTSRiver City Bank/ Chase - Money Market and other Interest Earning AccountsFunds Invested - Average Balance 99,664,821$ 114,669,913$ 87,375,820$ 86,192,993$ 97,066,887$ 102,454,815$ 111,974,304$ 107,649,306$ 103,295,944$ Gains/Losses/Interest 3,269,816$ 380,768$ 421,162$ 324,104.99 317,642.68 320,213.20 371,348.25 391,318.15 386,324.48 356,934.61 Average APY 4.58% 4.41% 4.45% 4.42% 3.96% 4.35% 4.19% 4.31% 4.15%INVESTMENTSSchwab/FidelityFunds Invested - Average Balance 125,703,797$ 126,158,519$ 126,652,212$ 127,096,361$ 127,561,770$ 127,989,614$ 128,449,074$ 128,806,745$ 129,263,682$ Gains/Losses/Interest 3,868,280$ 451,482.54 308,267.24 504,316.11 576,572.23 414,554.41 494,803.49 379,880.26 240,759.17 497,644.42 Average APY 4.31% 2.93% 4.78% 5.44% 3.90% 4.64% 3.55% 2.24% 4.62%
CENTRAL COAST COMMUNITY ENERGY
Investment Summary
October 1, 2024 through June 30, 2025
Current 0 - 30 Days 31 - 60 Days 61 - 90 Days > 91 Days A/R Balance $ 26,299,951 $ 12,875,559 $ 2,453,355 $ 2,373,041 $ 6,477,014 $ 50,478,920
CENTRAL COAST COMMUNITY ENERGY
Summary of Accounts Receivable, Net of Bad Debt Allowance As of June 30, 2025
Staff Report Item 4
TO: 3CE Audit and Finance Committee
FROM: Robert M. Shaw, Chief Executive Officer
PREPARED BY: Juan Lopez, Director of Finance
SUBJECT: Support seeking the Policy Board’s adoption of the Fiscal Year 2025-26 Recommended Budget
DATE: August 27, 2025
RECOMMENDATION:
Consider supporting the Policy Board’s adoption of the Fiscal Year 2025-26 Recommended Budget.
BACKGROUND:
Annually, 3CE adopts a budget covering the fiscal year from October 1 through September 30. Attached is the Executive Summary outlining detailed information on the Fiscal Year (FY) 2025-26 Recommended Budget.
Over the past year, the Policy Board adopted staff recommendations to guide the development of the Recommended Budget. These Financial Policies emphasize maintaining sufficient liquid reserves to support long-term operations, provide collateral for power procurement, sustain 3CE’s “A” credit rating, and mitigate the impacts of regulatory and market volatility on customer rates.
Grounded in these policy directives and 3CE’s mission, the Recommended Budget reaffirms the Agency’s commitment to serving the Central Coast with affordable, clean, and reliable electricity and electrification programs to reduce greenhouse gas emissions and strengthen our local economy. The Board’s Financial Policies and resulting Recommended Budget facilitate our mission while safeguarding rate stability in the face of evolving regulatory requirements and ongoing volatility in energy markets.
DISCUSSION/ANALYSIS:
The FY 2025-26 Recommended Budget reflects the Agency’s eighth year of operation serving 515,000 customer accounts across all member agencies, with strong progress toward its mission of delivering
100% clean and renewable energy. At the same time, external market and regulatory conditions continue to create significant uncertainty, requiring a conservative financial approach.
Summary of the Recommended Budget
The Recommended Budget totals $588.4 million for operating and capital expenditures, funded by $587.2 million in revenues and $1.2 million from the Capital Infrastructure Reserve, supporting 59 full-time equivalent (FTE) positions. The most notable change in the budget is a $142.0 million decrease in total appropriations compared to the current year Adopted Budget, almost entirely due to reduced energy and attribute costs. Cost of Energy (COE) remains 3CE’s largest and most volatile expense, representing 91% of all expenditures at $534.8 million. While lower Resource Adequacy (RA) and Renewable Portfolio Standard (RPS) energy attribute costs provide short-term relief, COE continues to be influenced by external factors such as weather events, supply constraints, and forward market prices.
Longer-term Power Purchase Agreements (PPAs) remain an important strategy for reducing exposure to these fluctuations, with seven operational renewable projects now providing 36% of retail sales and additional projects scheduled through 2029.
While the COE remains the dominant driver of 3CE’s budget, non-energy costs play a critical role in supporting operations, programs, and community engagement. The FY 2025-26 Recommended Budget allocates $14.3 million for salaries and benefits and $38.2 million for services, supplies, and programs.
Staffing investments include filling vacant positions and adding three FTEs: a Director of Legislative Affairs, an Energy Risk Analyst, and a Business Applications Developer. These positions expand 3CE’s ability to influence state energy policy, strengthen financial risk management, and improve portfolio management tools.
Prior Year
Actuals
2023-24
Adopted
Budget
2024-25
Mid-Year
Estimate
2024-25
Requested Total
2025-26
Recommended
Budget
2025-26
Recommended
Change from
Adopted
Net Electricity Sales 544,358,419 745,962,355 660,909,347 620,920,150 578,022,716 (167,939,639) Interest and Investment
Returns 12,893,661 7,000,000 10,770,808 9,100,000 9,100,000 2,100,000 Other Income 98,215 68,400 8,182,430 74,592 75,000 6,600 Sub-Total Revenues 557,350,295 753,030,755 679,862,585 630,094,742 587,197,716 (165,833,039) Capital Infrastructure Reserve - 17,318,000 2,780,254 1,900,000 1,200,000 (16,118,000) Total Financing Sources 557,350,295 770,348,755 682,642,839 631,994,742 588,397,716 (181,951,039) Cost of Energy 547,248,240 665,267,116 600,074,023 534,776,255 534,776,256 (130,490,860) Salaries and Benefits 7,830,528 12,585,841 11,203,086 16,499,844 14,260,774 1,674,933 Services and Supplies 25,391,651 35,177,798 28,751,007 38,818,643 38,160,686 2,982,888 Capital Assets 585,758 17,318,000 2,780,254 1,900,000 1,200,000 (16,118,000) Total Financing Uses 581,056,177 730,348,755 642,808,370 591,994,742 588,397,716 (141,951,039) Total Budgeted Change to Net
Position (23,705,882) 40,000,000 39,834,469 40,000,000 - (40,000,000) FY 2025-26 Budget Summary
The most significant financial risk in FY 2025-26 stems from the California Public Utilities Commission’s (CPUC) revised methodology for calculating the Power Charge Indifference Adjustment (PCIA) and significant fluctuations in year-over-year market price benchmarks for the value of energy attributes.
Initial forecasts suggest significant increases that could materially impact customer costs. To mitigate these uncertainties for customers, staff recommend maintaining current rates going into calendar year 2026 to provide enough time to monitor upcoming CPUC and IOU decisions. This cautious approach ensures that any adjustments are based on finalized information and that 3CE maintains fair and stable rates in the face of external cost pressures.
Hence, the Recommended Budget does not include a planned addition to reserves, reflecting the need to prioritize flexibility until PCIA and IOU generation rate outcomes are known. Even without new contributions, 3CE is projected to close FY 2025-26 at 43% of expenditures, an improvement driven by lower COE. Maintaining strong liquidity remains a cornerstone of financial resilience, supporting credit strength and enabling the Agency to manage unexpected market shifts. If fiscal conditions improve or there’s a significant variance in the impact of the PCIA, staff will re-evaluate the potential for a mid-year reserve contribution.
Finally, the budget funds $1.2 million in capital projects through the Capital Infrastructure Reserve.
These include office improvements in San Luis Obispo and Santa Cruz to support operations and the second year of the EV Charger Asset Pilot that will expand charging infrastructure in the region. These projects align with 3CE’s broader sustainability goals while addressing community needs and operational efficiency.
FISCAL IMPACT:
The Policy Board’s adoption of the 2025-26 Recommended Budget funds $588.4 million in appropriations financed by $587.2 million in estimated revenues and $1.2 million from the Capital Infrastructure Reserve, allowing 3CE to continue operations with a balanced budget.
CONCLUSION:
It is recommended that the Audit and Finance Committee support the Policy Board‘s approval and adoption of the FY 2025-26 Recommended Budget. The Recommended Budget provides financing to deliver clean and renewable energy, stabilize customer rates, and navigate evolving regulatory and energy market conditions.
ATTACHMENT(S):
1. Executive Summary - FY 2025-26 Recommended Budget Book
Executive Summary of the FY 2025-26 Recommended Budget Book Introduction
Fiscal Year (FY) 2025-26 marks 3CE’s seventh year of successfully serving Central Coast customers and its eighth year of operation. The Recommended Budget aligns with 3CE’s goals to meet 100% of retail energy demand with clean, renewable energy, deliver transformative community programs, and maintain fair and stable rates. This year is a milestone, reflecting the first full fiscal year with all member agencies enrolled, including unincorporated San Luis Obispo County and the City of Atascadero, totaling 515,000 customer accounts. Guided by Financial Policies adopted annually by the Policy Board, 3CE prioritizes robust financial reserves, rate stability, risk management, and strategies to reduce long-term customer costs.
The Recommended Budget totals $588.4 million for operating and capital expenditures, funded by $587.2 million in revenues and $1.2 million from the Capital Infrastructure Reserve, supporting 59 full-time equivalent (FTE) positions. Amid an uncertain regulatory and federal policy environment impacting energy markets, the budget adopts a conservative approach, maintaining current rates to ensure any adjustments proposed early in FY 2025-26 reflect finalized regulatory outcomes, expected to be finalized by October/November 2025, preserving 3CE’s financial stability and sustainability.
The recommended appropriations of $588.4 million
represent a $142.0 million decrease from the prior year’s Adopted Budget, primarily due to reduced market-driven
energy and attribute costs. Operating costs are divided between Cost of Energy (COE) and non-energy costs.
Prior Year
Actuals
2023-24
Adopted
Budget
2024-25
Mid-Year
Estimate
2024-25
Requested Total
2025-26
Recommended
Budget
2025-26
Recommended
Change from
Adopted
Net Electricity Sales 544,358,419 745,962,355 660,909,347 620,920,150 578,022,716 (167,939,639) Interest and Investment
Returns 12,893,661 7,000,000 10,770,808 9,100,000 9,100,000 2,100,000 Other Income 98,215 68,400 8,182,430 74,592 75,000 6,600 Sub-Total Revenues 557,350,295 753,030,755 679,862,585 630,094,742 587,197,716 (165,833,039) Capital Infrastructure Reserve - 17,318,000 2,780,254 1,900,000 1,200,000 (16,118,000) Total Financing Sources 557,350,295 770,348,755 682,642,839 631,994,742 588,397,716 (181,951,039) Cost of Energy 547,248,240 665,267,116 600,074,023 534,776,255 534,776,256 (130,490,860) Salaries and Benefits 7,830,528 12,585,841 11,203,086 16,499,844 14,260,774 1,674,933 Services and Supplies 25,391,651 35,177,798 28,751,007 38,818,643 38,160,686 2,982,888 Capital Assets 585,758 17,318,000 2,780,254 1,900,000 1,200,000 (16,118,000) Total Financing Uses 581,056,177 730,348,755 642,808,370 591,994,742 588,397,716 (141,951,039) Total Budgeted Change to Net
Position (23,705,882) 40,000,000 39,834,469 40,000,000 - (40,000,000) FY 2025-26 Budget Summary
Cost of Energy
The Cost of Energy (COE) drives the $130.5 million reduction in appropriations, yet remains 3CE’s largest and most volatile expense, comprising approximately 91% of total expenditures. COE covers customer electricity needs, regulatory compliance products like Resource Adequacy (RA) and Renewable Portfolio Standard (RPS) requirements, and grid operation services managed by the California Independent System Operator (CAISO). In recent years new generation project delays and surging RA costs due to heightened demand and constrained supply has amplified COE volatility.
COE is calculated by applying contracted energy to the projected load and using forward market prices for unhedged energy. Volatility arises from external factors, including project delays, macroeconomic trends, and seasonal events like summer or fall heat waves that strain renewable sources and increase market prices. The FY 2025-26 COE decrease reflects lower RA and RPS costs resulting from both improved market conditions, implementation of 3CE’s RA hedging strategy, and new renewable generation projects coming online.
To stabilize rates and diversify its renewable portfolio, 3CE maintains long-term Power Purchase Agreements (PPAs) with seven operational renewable projects, meeting 31% of retail sales. Seven additional projects under development are expected online by 2029. 3CE plans to explore tax-exempt financing to prepay PPAs, locking in discounted long-term power, as done in FY 2023-24, which is projected to save customers $33 million over seven years.
Non-COE Operating Costs
The budget allocates $14.3 million for salaries and benefits, up $1.7 million, driven by filling vacant positions, competitive market trends, and three new FTEs: Director of Legislative Affairs, Energy Risk Analyst, and Business Applications Developer. These roles enhance 3CE’s ability to navigate energy policies, strengthen financial resilience through risk modeling, and improve energy portfolio management via internal applications. Included are investments in professional development and Future Leadership Development programs, which will foster a resilient, inclusive workplace.
Expenditures for services and supplies total $38.2 million, up $3.0 million, reflecting a 5% operating contingency per Financial Policies, enhanced data management, software needs, and external legal counsel for regulatory and contract negotiations. The budget supports 3CE’s leadership in California Community Choice Association (CalCCA) and California Community Power (CC Power), alongside community engagement through events, sponsorships, marketing, and website redesign. Energy program funding remains steady, with reallocations for new offerings and demand response initiatives, building on the Residential Battery Rebate Program’s success.
COE Type as %
of total COE
FY 2023-24
Actual
FY 2024-25
Adopted
FY 2024-25
Mid-Year Estimate
FY 2025-26
Recommended
Energy 56% 60% 61% 80%
RA 33% 28% 33% 17%
RPS 11% 12% 6% 3%
Total 100% 100% 100% 100%
Operating Revenue
Revenues of $587.2 million, primarily from electricity sales, are $165.9 million lower than the current year’s Adopted Budget, reflecting lower COE and no planned reserve additions due to regulatory challenges of a yet unknown magnitude. Net electricity sales of $578.0 million, down $167.9 million, are based on a 94% participation rate, a 1% uncollectable rate, and reduced retail load due to increase behind-the-meter solar, milder weather, and time-of-use pricing shifts. This reduced load increases pressure on electric generation rates to cover Cost-of-Service (COS) requirements. Staff recommends maintaining currently effective rates, pending clarity on Energy Resource Recovery Account (ERRA) proceedings and Power Charge Indifference Adjustment (PCIA) rates.
Other revenues include $75,000 from San Luis Obispo office rentals and $9.1 million from interest and investments, up $2.1 million due to higher liquidity while expecting potential Federal Reserve rate adjustments.
Regulatory and Market Uncertainty
Maintaining stable and fair rates is central to 3CE’s mission to deliver reliable, clean energy, reduce emissions, and strengthen the local economy. The Power Charge Indifference Adjustment (PCIA), set annually by the California Public Utilities Commission (CPUC) through ERRA proceedings, is estimated to significantly impact unbundled Community Choice Aggregator (CCA) customers. In 2024, unexpected PCIA rate changes and load forecast deviations disrupted 3CE’s position in PG&E and SCE territories, necessitating staff assessment of final CPUC decisions and potential spring rate adjustments. In 2025, CPUC proceedings revised the PCIA methodology, adopting a multi-year average for the RA Market Price Benchmark (MPB), three years for forecasts and four for final calculations. This incorporates lower historical prices, reducing the MPB and increasing the PCIA charge (Investor Owned Utility (IOU) portfolio costs minus MPB). The CPUC’s decision changes in the MPB benchmark were implemented for 2026, severely limiting CCAs’ ability to plan and hedge around the dramatic changes, significantly raising customer responsibility for IOU costs and challenging cost stability.
These changes are expected to provide IOU’s declining or smoothing MPBs for RA and RPS, while CCA’s have been required to be market participants paying full market prices without any benefit of smoothing. 3CE will monitor October ERRA updates and CPUC’s final 2026 PCIA and IOU rate decisions before recommending adjusting rates, ensuring data-driven decisions. The PCIA’s unpredictability, driven by external benchmarks and IOU forecasts, poses a persistent risk to rate affordability.
Maintaining Liquidity to Meet Reserve Targets
Financial resilience remains a cornerstone of 3CE’s ability to navigate market and regulatory uncertainty. The FY 2025-26 Recommended Budget does not include a planned addition to net position for the purpose of increasing cash reserves by September 30, 2026 delivering immediate rate relief and providing greater flexibility. This conservative approach reflects the current rate and market outlooks and the need to first evaluate the impacts of the CPUC’s final 2026 PCIA and IOU generation rate decisions before committing funds to reserves. If the final PCIA rates are lower— and IOU generation rates higher—than projected, staff will assess the resulting improvement in financial ability and determine whether a mid-year reserve contribution is operationally and prudent to recommend to the Board.
Absent a reserve contribution this year, 3CE is projected to close FY 2025-26 with reserves at 43% of expenditures, an improvement from the prior year driven primarily by lower Cost of Energy (COE) rather than new reserve funding. At its March 19, 2025 meeting, the Policy Board directed staff to take proactive steps to mitigate PCIA-related volatility, including collaboration with CalCCA and active engagement by the Executive Committee, Audit & Finance Committee, and Energy Risk Management Committee to develop both strategic and regulatory solutions.
Pursuing these strategies is essential not only to address near-term PCIA volatility but also to offer fair and stable rates. Central to this effort is the continued growth of the Energy Rate Stability Reserve, which provides the financial capacity to absorb revenue impacts in challenging years while maintaining fair and stable rates for 3CE customers. By building this reserve alongside regulatory advocacy and market strategies, 3CE strengthens its ability to manage risk, stabilize rates, and protect the long-term interests of the communities it serves all while ensuring the continued positive outlook by credit rating agencies that view strong liquidity as a key factor in assessing financial stability.
Capital Projects
Capital improvements enhance 3CE’s assets and operational efficiency. The Capital Infrastructure Reserve (CIR) funds $1.2 million in projects, including $500,000 for tenant improvements at San Luis Obispo and Santa Cruz offices, supporting staff and Policy Board needs, and $700,000 for the EV Charger Asset Pilot. This pilot expands Level 2 and DC Fast charging stations, addressing transportation emissions, with a potential site in downtown Santa Maria. These investments, pending Policy Board approval, support long-term efficiency and sustainability.