Audit & Finance Committee
August 27, 2025
1 Consent Calendar
Approve Minutes from the May 21, 2025, Meeting of the Audit and Finance Committee Investment Performance Report for the period of October 1, 2024, through June 30, 2025 Financial Report for the period of October 1, 2024, through June 30, 2025
ITEM 5
Support seeking the Policy Board's adoption of the
Fiscal Year 2025-26 Recommended Budget
3 Budget Development – FY 2025-26
4 Recommended Budget Guiding Principles
Fiscal Responsibility: Balanced budget that supports long-term stability and near-term success.
Fair & Stable Rates: Deliver reliable, clean electricity while keeping customer rates fair and steady.
Community & Climate Impact: Invest in programs that reduce GHGs and grow the local economy.
Reserves: Maintain reserves that protect credit strength, uphold contractual obligations, and buffer customers from unexpected energy market cost spikes. 5 Recommended Budget Highlights
Fiscal Responsibility & Reserves: Maintain current reserves protecting liquidity and credit strength, understanding that building reserves must be considered with market and regulatory challenges.
Disciplined Operations & Portfolio: Renewable projects come online; continue securing long-term procurement and strengthen risk management to reduce financial uncertainty.
Investing in Organizational Sustainability: Add targeted expertise (legislative, risk, analytics) while upskilling the agency to support long-term strategy and service delivery.
Energy Programs: Focus funding on high-impact offerings that cut peak demand and emissions and create long-term sustainability.
Infrastructure Rollout: Invest in EV charging and community presence 6 Recommended Budget - $588M in appropriations
7 COE drives the Operating Budget
Appropriations of $588 million represent a $142 million decrease from the prior year’s Adopted Budget Overall drop in COE from lower attributes offset by minor increases in electricity - $131M $16M YoY reduction in capital assets offset by $5M growth in non-COE operations 8 Cost of Energy – Market Dynamics
91% of expenses; from lower RA/RPS costs, but vulnerable to delays and market shifts, Stabilization Strategy: continue to deploy long-term projects while offsetting costs with prepays 9 Non-COE Operating Costs – Sustainable Growth
Lower non-COE costs from last year due to lower planned capital outlay Sustainable growth to meet operating needs
10 Capital Investment
Capital Infrastructure Reserve funds continued investment in permeant presence in the service territory:
$700,000 Owned Charger Asset initiative
$500,000 for tenant improvements in Santa Cruz and San Luis Obispo 11 Financing Sources
Lower operating costs impact the revenue requirement for 2026 Uncertainty in the 2026 PCIA and IOU generation rates reduces planned reserve additions and timing of the 2026 rate adjustment 12 IOU Generation Rate and PCIA Uncertainty
The 2025 ERRA proceeding showed the regulatory volatility present in the PCIA The current proceeding to change the PCIA methodology and market price benchmarks project a significant impact on unbundled CCA customers 13 Rate Whirlwind Pitted Against Rate Stability
Recommended Budget Summary
Appropriations of $588.4 million funds:
The first full fiscal year of service to the entire service area A status quo budget with marginal growth in operations
$534.8 million in COE, a downward pressure YOY
$14.3 million in personnel costs, 3 new FTEs
$38.2 million in ongoing operating costs
$1.2 million in investment in permanent presence and EV infrastructure Revenues estimated to meet expenditures of $588.4 million Net electricity sales of $578.0 million assume a 2026 adjustment to 3CE’s generation rates to meet operating costs $9.2 million in other operating revenue (interest and investment returns) $1.2 million use of the Capital Infrastructure Reserve
15 Next Steps
The Operations Board will receive a presentation on the Recommended Budget on September 17 The Policy Board will consider the Recommended Budget for adoption on September 18 16 Committee Recommendation
Support seeking the Policy Board’s adoption of the Fiscal Year 2025-26 Recommended Budget. 17 Questions
18 Cost of Energy - Historical
19