Audit and Finance Committee
Special Meeting
January 21, 2026
2:00PM
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
County Sheriff’s Felton Substation
6062 Graham Hill Road, Suite A
Felton, CA 95018
City of Salinas
City Hall
200 Lincoln Avenue
Salinas, CA 93901
City of Grover Beach
City Hall
154 South 8th Street
Grover Beach, CA 93433
City of Santa Maria
City Hall
110 East Cook Street, Council Chambers
Santa Maria, CA 93454
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
CONSENT CALENDAR
1. Approve minutes from the August 27, 2025 meeting of the Audit and Finance Committee
2. Financial Report for the period of October 1, 2025, through November 30, 2025
3. Investment Performance Report for the period of October 1, 2025, through December 31, 2025
REGULAR AGENDA
4. Consider supporting the Policy Board adopt cost-based generation rates through April 2027 Adjournment
Audit and Finance Committee
August 27, 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 9:02 AM with 4 members attending from 4 noticed locations and a quorum established.
Members Present: City of Hollister: Mirrione
City of Buellton: Silva
City of Salinas: Vice Chair Mendez
City of Watsonville: Chair Dutra
Members Absent: None
Chair called for corrections or additions to the agenda.
Clerk announced that there were no changes to the agenda.
CONSENT CALENDAR
Chair opened public comment period on the Consent Calendar and items not listed on the agenda.
No public comments received.
Chair closed public comment period.
MOTION: Moved by Vice Chair Mendez, seconded by Member Silva, to approve the Consent Calendar ACTION: The Motion Carried with a roll call vote: 4/0/0 AYES: Mirrione, Silva, Vice Chair Mendez, Chair Dutra
NOES: None
ABSENT: None
1. Approved Minutes from the May 21, 2025, special meeting of the Audit and Finance Committee as submitted.
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. Supports seeking the Policy Board's adoption of the Fiscal Year 2025-26 Recommended Budget The Chair opened the public comment period.
No public comment received.
The Chair Closed the public comment period.
MOTION: Moved by Member Mirrione, seconded by Vice Chair Mendez 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 9:28 AM
Staff Report Item 2
TO: 3CE Operations Board of Directors
FROM: Robert M. Shaw, Chief Executive Officer
PREPARED BY: Juan Lopez, Director of Finance
SUBJECT: Financial Report for the period of October 1, 2025, through November 30, 2025 DATE: January 21, 2026
RECOMMENDATION:
Receive a financial report for the period October 1, 2025, through November 30, 2025.
SUMMARY:
During the two months of the new fiscal year ending on November 30, 2025, operating revenues amounted to $105.5 million, and operating expenses totaled $95.2 million for a net operating income of $10.3 million. Net non-operating revenue of $1.6 million, driven by interest and investment returns, resulted in a total increase in net position of $11.9 million for the month.
Year-to-date operating revenue is $10.2 million over budget, primarily due to a higher-than-expected revenue in multiple customer classes. Non-operating revenue from investment returns from assets held in operating and investment accounts, and interest on collateral exceeded the budget with a variance of $0.1 million due to higher-than-anticipated investment yields. Year-to-date total revenue (operating & non-operating revenue) is $10.3 million higher than the budget, a positive variance of 11.0%.
Year-to-date operating expenditures excluding capital outlay are $14.0 million below budget, a variance of 13.0%. This variance is primarily attributable to lower-than-anticipated energy costs, which came in $12.6 million under budget. The variances reflect a convergence of factors, including lower market prices, the timing of invoicing for attributes such as Renewable Energy Credits (RECs), and higher-than-planned revenue from congestion revenue rights. These variances are expected to level out over the fiscal year as 3CE fulfills its energy obligations, including resource adequacy (RA) and renewable energy credits (RECs).
Non-energy operating costs were $1.4 million below budget due to lower-than-planned costs for contracted services, staff vacancies, and energy programs. The capital outlay exceeded the budget by $0.2 million due to ongoing work to finalize electric vehicle charging at the 3CE Santa Cruz office. Non-energy operating costs are projected to level out over the fiscal year as participation in energy programs and capital projects continues to progress. Year-to-date total expenditures, including capital outlay, are $13.8 million lower than the budget, a favorable variance of 13.0%.
The net position at the end of November 30, 2025, totaled $274.6 million, an increase of $11.9 million from last fiscal year. The increase is primarily due to a reduction in the accrued cost of electricity and accounts payable, offset by a decrease in accounts receivable, other accrued revenue, and other receivables. Cash, cash equivalents, and investments totaled $231.6 million, a $8.7 million increase from the start of the fiscal year. The positive variance in liquidity was primarily attributed to the increase in cash from operating revenue.
FISCAL IMPACT:
There is no financial impact associated with receiving this report.
ATTACHMENT(S):
1. November 30, 2025 Financial Report
FINANCIAL REPORT
Fiscal Year to Date
As of November 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 November 30, 2025, and the related statement of revenues, expenses, and changes in net position, and the statement of cash flows for the two 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
January 7, 2026
1101 Fifth Avenue, Suite 200 San Rafael, CA 94901 415 459 1249 mahercpa.com
Current assets
Cash and cash equivalents - unrestricted $ 127,532,290
Cash - restricted 2,957,701
Accounts receivable, net of allowance 46,270,618
Accrued revenue 36,737,956
Other receivables 1,458,378
Investments 94,065,524
Prepaid expenses 610,779
Deposits 28,563,660
Loan receivable 196,118
Total current assets 338,393,024
Noncurrent assets
Investments 10,010,750
Deposits 36,204
Loan receivable 1,037,262
Capital assets, net of depreciation and amortization 6,712,477 Total noncurrent assets 17,796,693
Total assets 356,189,717
Current liabilities
Accrued cost of electricity 62,901,147
Accounts payable 1,210,277
Other accrued liabilities 3,398,885
User taxes and energy surcharges due to other governments 1,796,131 Security deposits - energy suppliers 2,376,000
Lease liability 356,082
Total current liabilities 72,038,522
Noncurrent liabilities
Security deposits - energy suppliers 9,113,324
Lease liability 429,502
Total noncurrent liabilities 9,542,826
Total liabilities 81,581,348
Net investment in capital assets 5,726,332
Restricted for security collateral 2,957,701
Unrestricted 265,924,336
Total net position $ 274,608,369
NET POSITION
As of November 30, 2025
STATEMENT OF NET POSITION
CENTRAL COAST COMMUNITY ENERGY
ASSETS
LIABILITIES
See accountants' compilation report. Page 7 of 21
OPERATING REVENUES
Electricity sales, net $ 105,440,995
Other income 14,082
Total operating revenues 105,455,077
OPERATING EXPENSES
Cost of electricity 88,292,707
Contract services 2,066,134
Staff compensation 2,118,751
Program incentives 2,027,737
Other operating expenses 551,373
Depreciation and amortization 108,084
Total operating expenses 95,164,786
Operating income (loss) 10,290,291
NONOPERATING REVENUES (EXPENSES)
Investment income 1,630,880
Interest expense (6,207)
Nonoperating revenues (expenses) 1,624,673
CHANGE IN NET POSITION 11,914,964
Net position at beginning of period 262,693,405
Net position at end of period $ 274,608,369
Two Months Ended November 30, 2025
AND CHANGES IN NET POSITION
STATEMENT OF REVENUES, EXPENSES
CENTRAL COAST COMMUNITY ENERGY
See accountants' compilation report. Page 8 of 21
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers $ 127,076,505
Receipts from wholesale sales and other operating revenue 4,244,046 Receipts of deposits and collateral 2,506,980
Payments to suppliers for electricity (107,977,046)
Payments for other goods and services (3,368,274)
Payments of deposits and collateral (5,734,796)
Payments for program incentives (2,504,926)
Payments for staff compensation (1,895,027)
Payments of taxes and energy surcharges to other governments (2,265,962) Net cash provided by operating activities 10,081,500
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Payments of lease (62,314)
Purchases of capital assets (207,388)
Net cash provided (used) by capital and related financing activities (269,702)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment income received 1,178,804
Proceeds from sales and maturities of investments 16,970,000 Loan principal received 96,699
Investment purchases (14,721,949)
Net cash provided (used) by investing activities 3,523,554 Net change in cash and cash equivalents 13,335,352
Cash and cash equivalents at beginning of year 117,154,639 Cash and cash equivalents at end of period $ 130,489,991 Reconciliation to the Statement of Net Position
Cash and cash equivalents - unrestricted $ 127,532,290
Cash - restricted 2,957,701
Cash and cash equivalents $ 130,489,991
Change in fair value of investments $ 614,869
Change in interest income receivable $ (162,793)
NONCASH CAPITAL FINANCING ACTIVITIES
Capital acquisitions included in accounts payable
and other liabilities $ 200,561
Two Months Ended November 30, 2025
STATEMENT OF CASH FLOWS
CENTRAL COAST COMMUNITY ENERGY
NONCASH INVESTING ACTIVITES
See accountants' compilation report. Page 9 of 21
Operating income (loss) $ 10,290,291
Adjustments to reconcile operating income (loss) to net cash provided by operating activities
Depreciation and amortization expense 108,084
(Increase) decrease in:
Accounts receivable, net of allowance 16,191,974
Accrued revenue 3,606,353
Other receivables 2,496,482
Prepaid expenses (156,499)
Deposits (3,227,816)
Increase (decrease) in:
Accrued cost of electricity (17,836,817)
Accounts payable (2,271,167)
Other accrued liabilities 1,309,395
User taxes and energy surcharges due to other governments (428,780) Net cash provided by operating activities $ 10,081,500
CENTRAL COAST COMMUNITY ENERGY
STATEMENT OF CASH FLOWS (continued)
Two Months Ended November 30, 2025
RECONCILIATION OF OPERATING INCOME (LOSS) TO NET
CASH PROVIDED BY OPERATING ACTIVITIES
See accountants' compilation report. Page 10 of 21
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 two months ended November 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
January 7, 2026
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 $ 50,908,476 $ 46,546,481 $ 4,361,995 9% $ 105,440,995 $ 95,255,248 $ 10,185,747 11% $ 578,022,716 $ 472,581,721 Interest and investment returns 629,558 758,333 (128,775) -17% 1,630,880 1,516,666 114,214 8% 9,100,000 7,469,120 Other income 9,246 6,250 48% 2,996 14,082 12,500 13% 1,582 75,000 60,918 Total revenues and other sources 51,547,280 47,311,064 4,236,216 9% 107,085,957 96,784,414 10,301,543 11% 587,197,716 480,111,759
EXPENDITURES AND OTHER USES
Current Expenditures
Cost of energy 41,884,899 46,665,946 4,781,047 10% 88,439,111 101,022,921 12,583,810 12% 534,776,256 446,337,145 Salaries and benefits 1,128,130 1,116,399 (11,731) -1% 2,118,751 2,323,368 204,617 9% 14,260,774 12,142,023 Services and supplies 2,598,678 2,866,327 267,649 9% 4,561,154 5,759,288 1,198,134 21% 38,160,686 33,599,532 Capital outlay 194,200 100,000 (94,200) -94% 361,326 200,000 (161,326) -81% 1,200,000 838,674 Total current expenditures 45,805,907 50,748,672 4,942,765 10% 95,480,342 109,305,577 13,825,235 13% 588,397,716 492,917,374 Surplus (deficit) $ 5,741,373 $ (3,437,608) $ 9,178,981 $ 11,605,615 $ (12,521,163) $ 24,126,778 $ (1,200,000) $ (12,805,615) Favorable variances represent revenues exceeding budget or expenditures below budget.
Annual
CENTRAL COAST COMMUNITY ENERGY
BUDGETARY COMPARISON SCHEDULE
Current Month and Two Months Ended November 30, 2025
Month
Variance
Favorable
(unfavorable)
Year-To-Date
Variance
Favorable
(unfavorable)
See accountants' compilation report. Page 12 of 21
Budget Item
YTD Variance -
Favorable
(Unfavorable) Comment
Electric Sales Revenue, net 10.7% 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 12.5% 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.
Salaries and Benefits 8.8% Staffing expenses are under budget due to the timing of new hires.
Services and Supplies 20.8% This category includes accounting, IT, technical and other consultants.
Budget Commentary for significant items
CENTRAL COAST COMMUNITY ENERGY
October 1, 2025 through November 30, 2025
Return of Investments YTD Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
CASH AND CASH EQUIVALENTS
River City Bank / Chase / West Coast
Community Bank - Money Market and
other Interest Earning Accounts
Funds Invested - Average Balance $ 96,624,568 $ 99,293,298 Gains/Losses/Interest $ 652,441 $ 331,876 $ 320,565
Average APY 4.12% 3.87%
INVESTMENTS
Schwab/Fidelity
Funds Invested - Average Balance $ 131,114,341 $ 131,499,666 Gains/Losses/Interest $ 863,845 574,669.46 289,175.13
Average APY 5.26% 2.64%
CENTRAL COAST COMMUNITY ENERGY
Investment Summary
October 1, 2025 through November 30, 2025
Current 0 - 30 Days 31 - 60 Days 61 - 90 Days > 91 Days A/R Balance $ 13,480,834 22,060,792 $ 3,132,040 $ 1,351,147 $ 6,245,805 $ 46,270,618 $
CENTRAL COAST COMMUNITY ENERGY
Summary of Accounts Receivable, Net of Bad Debt Allowance As of November 30, 2025
Staff Report Item 3
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, 2025, through December 31, 2025
DATE: January 21, 2026
RECOMMENDATION:
3CE investment performance report for the period of October 1, 2025, through December 30, 2025.
BACKGROUND:
As of December 31, 2025, Central Coast Community Energy held $243.5 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.
In the fourth quarter of FY 2024-25, 3CE established a new account with West Coast Community Bank to further diversify its financial holdings for the specific purpose of holding capital funds. The selection of a local banking partner within 3CE’s service area supports community investment while providing a secure vehicle to hold funds designated for capital outlay from the Capital Infrastructure Reserve.
DISCUSSION/ANALYSIS:
3CE ended the quarter on December 31, 2025, with investment holdings that aligned with the Investment Policy and a strategy of maintaining sufficient 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, capital acquisition, and unforeseen costs, and short-term investments to meet reserves, including the strategic reserve and
energy rate stabilization funds. As of December 31, 2025, 3CE held $243.5 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 $82,715,642
cash (sweep) - $74.8M
money market - $3.9M
cash (operating) - $4.0M
LOC money market - $3.0M
Chase $14,359,240 cash (held for collateral)
West Coast Community Bank $14,674,560 money market
Investment
Schwab $65,229,011
Treasuries - $61.2M
cash (sweep) - $0.0M
money market - $4.0M
Fidelity $66,551,063 Treasuries - $56.4M
money market - $10.2M
Total $243,529,516
3CE employs a conservative, passive investment strategy in which fixed-income securities—primarily U.S. Treasury notes and bills—are held to maturity, allowing the agency to realize coupon income and discounts over time. As of December 31, 2025, 3CE managed $131.8 million in investments across its Schwab and Fidelity brokerage accounts. During the first quarter, Treasury yields averaged between
3.50% and 4.38%. Treasuries with maturities under one year represented approximately 91% of total holdings, while two longer-term Treasuries, each valued at $5.0 million, mature in the second and third quarters of 2027. All investments are rated high-grade or better, consistent with 3CE’s prudent investment policy.
3CE’s investment mix aligns with the Investment Policy and California Government Code. As of December 31, 2025, 3CE held $90.2 million in cash and cash equivalents, $117.5 million in U.S.
Treasuries, and $37.8 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 14.7%.
Cash and Investment Mix Holdings
Type Market Value
% of
Portfolio
Permitted by
CA Government Code
Cash and cash equivalents $90,193,043 37.0% 100%
Money Market Funds $35,787,340 14.7% 20%
U.S. Treasuries $117,549,133 48.3% 100%
Total $243,529,516 100.0%
The FY 2025-26 Adopted Budget, with appropriations of $588.4 million, included estimated investment revenues of $9.1 million. In the first quarter, investment earnings from operating and investment accounts netted $2.6 million, $1.2 million from interest on cash and money market accounts, and $1.2 million from short-term investments, mostly from Treasuries. Interest earned on 3CE collateral held by counterparties totaled $0.2 million. This first-quarter investment revenue is higher than the $2.3 million estimated in the recommended budget, attributed to more favorable investment returns.
As of December 31, 2025, 3CE has 151 days of cash on hand. This is based on the total cash and equivalents of $243.5 million divided by an average daily expense of $1.6 million. Total operating expenses for FY 2025-26, less depreciation, are $588.4 million.
FISCAL IMPACT:
There is no fiscal impact to receiving this report.
CONCLUSION:
3CE continues to proactively diversify its financial institutional partnerships, including the recent addition of an operating account with West Coast Community Bank. The agency strategically deploys cash and short-term investments to capture favorable yields while maintaining sufficient liquidity to meet operating expenses and collateral requirements.
ATTACHMENT(S):
None.
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: Consider supporting the Policy Board adopt cost-based generation rates through April 2027
DATE: January 21, 2026
RECOMMENDATION:
Consider supporting a recommendation that the Policy Board adopt cost-based generation rates through April 2027.
BACKGROUND:
Since adopting a cost-of-service rate methodology in 2022, the Policy Board has approved generation rates designed to recover costs and build reserves consistent with adopted financial policies. This methodology, which has remained in place through 2025, provides customers with fair and stable generation rates (rates) that align revenues with the cost to serve. The proposed 2026 generation rates result in a system-wide average decrease of approximately 24%, reducing the effective system generation rate from $0.13517/kWh to $0.10270/kWh.
On March 19, 2025, the Policy Board adopted Resolution No. PB-2025-02 approving adjustments to the calendar year (CY) 2025 rates. These adjustments were necessary to reflect a lower load forecast and to maintain 3CE historically fair rates across all customer classes. These rates became effective April 1, 2025. Throughout 2025, staff completed the annual cost-of-service analysis and rate design using cost assumptions aligned with the FY 2025-26 Recommended Budget.
The Policy Board subsequently adopted Resolution No. PB-2025-06 approving the FY 2025-26 Recommended Budget and authorized CY 2025 rates to remain in effect into CY 2026 pending additional clarity of regulatory and IOU rate impacts. At that time, the Board directed staff to return with 2026
cost-based rates that align revenues with the FY 2025-26 budget, ensure fair customer rates and funding of appropriations, while remaining consistent with adopted financial policies.
DISCUSSION/ANALYSIS:
Proposed Rate Adjustments
FY 2025-26 total appropriations are $142.0 million lower than the prior year’s adopted budget, driven primarily by a reduction in Cost of Energy (COE). COE remains 3CE’s largest and most volatile expense, representing approximately 91% of total appropriations. The decrease in COE is largely attributable to significantly lower Resource Adequacy (RA) and Renewable Portfolio Standard (RPS) energy attribute costs. These reductions materially lower 3CE’s overall cost structure and directly support lower generation rates for customers while maintaining reliability and clean energy commitments.
Because CY 2025 rates remain in effect through at least January 2026, staff evaluated the remaining revenue requirement based on the balance of FY 2025-26 operating costs and energy market risks.
Based on this analysis, staff recommends adjusting generation rates beginning in 2026 to reflect the updated cost-of-service.
The proposed 2026 rates result in a system-wide average decrease of approximately 24%, reducing the effective system rate from $0.13517/kWh to $0.10270/kWh. Rate impacts vary by customer class, consistent with cost-of-service principles, and range from 20% to 30% lower than current rates.
Residential rates are proposed to decrease by approximately 21%, resulting in an estimated monthly generation bill reduction of $11, or approximately $133 on an annualized basis for a typical customer.
This reduction illustrates the strength of 3CE’s cost-of-service methodology, which ensures that rates reflect the actual cost of providing electric service and that savings are passed on immediately to customers in a fair and stable manner, while maintaining adequate reserves to address both near-term volatility and long-term risks. Even with these reductions, 3CE remains financially sound and continues to increase renewable generation on behalf of our customers. 3CE System – Customer Class1
Current Rate
($/kWh)
Proposed 2026
Rate ($/kWh)
Difference
($/kWh)
% Change
Residential $0.14646 $0.11603 $ (0.03043) -21%
Small Commercial $0.13385 $0.10030 $ (0.03355) -25%
Medium Commercial $0.13410 $0.09437 $ (0.03973) -30%
Large Commercial $0.11732 $0.09090 $ (0.02642) -23%
Small & Medium Agricultural $0.13092 $0.10401 $ (0.02691) -21% Large Agricultural $0.11988 $0.09648 $ (0.02340) -20%
System $0.13517 $0.10270 $(0.03247) -24%
1 Represents the largest customer classes for illustration purposes, with a system effective rate
External Pressures and Regulatory Impacts
While customers are experiencing meaningful bill relief through lower 3CE generation rates, other components of the electric bill—outside of 3CE’s control and charges—continue to exert upward pressure. Customers in PG&E’s service territory will experience an average increase of approximately 7% in transmission and distribution (T&D) charges at the start of 2026, affecting both bundled and CCA customers alike.
In addition, unbundled customers are facing increased regulatory charges in 2026. CPUC decisions in PG&E’s and SCE’s 2026 ERRA proceedings resulted in higher PCIA rates driven by legacy procurement costs, market benchmark recalculations, and interim policy determinations While these regulatory outcomes create significant electricity price volatility for Californians, 3CE continues to advocate, through CalCCA, on behalf of all customers. Moreover, 3CE is exploring additional rate flexibility options for customers. As local decision makers, 3CE’s Board is best suited to evaluate how rate flexibility can provide customers’ an additional tool in response to cost impacts beyond 3CE’s control, like those impacting T&D costs and regulatory charges.
Committee Action and Timing
Staff recommend that the Audit and Finance Committee support the Policy Board’s approval of the proposed generation rates. The Policy Board is scheduled to consider rate adoption at a special meeting on January 28, 2026, with rates proposed to take effect February 15, 2026. This effective date represents the earliest operationally feasible implementation and ensures customers benefit as soon as possible from the lower cost of service rates.
FISCAL IMPACT:
Adoption of the proposed rates will enable 3CE to recover costs consistent with FY 2025-26 operating requirements while maintaining flexibility to respond to market volatility. Net electricity sales revenue for the fiscal year is currently estimated at $559.6 million, approximately $11.5 million below the adopted budget, primarily due to lower-than-budgeted cost of energy expenditures in the first few months of the fiscal year. Maintaining a strong net position supports financial stability amid regulatory impacts, helps sustain fair rates, and reinforces 3CE’s long-term credit strength.
CONCLUSION:
Adopting the proposed generation rates aligns 3CE’s revenues with the FY 2025-26 adopted budget, supports fair cost recovery, and maintains compliance with the agency’s financial policies. Approval of these rates will allow 3CE to pass through cost savings to customers, preserve financial stability, and continue meeting customer energy demand with reliable, clean power in an increasingly uncertain regulatory environment. The Policy Board will consider adopting the proposed rates at its January 28, 2026 special meeting.