Audit and Finance Committee
August 26, 2026
10:30 AM
Amended August 20, 2026 2:55 PM
Central Coast Community Energy
20 Ryan Ranch Rd, Suite 214
Monterey, CA 93940
TELECONFERENCE LOCATIONS
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
275 Main Street,
4th floor
Watsonville, CA 95076
City of Salinas
City Hall
200 Lincoln Avenue
Salinas, CA 93901
City of Santa Maria
City Hall Council Chambers
110 East Cook Street
Santa Maria, CA 93454
County of Santa Cruz
701 Ocean Street, Room 500
Santa Cruz, CA 95060
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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 20 Ryan Ranch Rd., Suite 214 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
Pledge of Allegiance
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 27, 2026 Meeting of the Audit and Finance Committee
2. Investment Performance Report for the period of October 1, 2025 through June 30, 2026
3. Financial report for the period October 1, 2025 through June 30, 2026
REGULAR
4. Update on 3CE’s second prepay financing transaction and support the Policy Board’s approval and authorization of the CEO to
execute a Clean Energy Purchase Contract with California Community Choice Financing Authority and ancillary documents and agreements to affect the prepay financing transaction
5. Support the Policy Board’s consideration to adopt the Fiscal Year 2026-27 Recommended Budget Item 1
Audit and Finance Committee
May 27, 2026
10:30 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 Salinas
City Hall
200 Lincoln Avenue
Salinas, CA 93901
County Sheriff’s Felton
Substation 6062 Graham Hill
Road, Suite A Felton, CA 95018
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
Draft Minutes
CONSENT CALENDAR
The meeting was called to order at 11: 30 AM with three (3) members attending from three (3) locations and a quorum established.
Members Present: County of Grover Beach: Bronson
County of Santa Cruz: Vice Chair Martinez
City of Santa Maria: Rowlands
City of Watsonville: Chair Dutra (arrived at 11:43 am)
Members Absent: Mendez
The Vice Chair called for corrections or additions to the agenda:
• There were no corrections or additions to the agenda.
CONSENT
1. Approved minutes from the March 18, 2026 meeting of the Audit and Finance Committee
2. Received Financial Report for the period of October 1, 2025, through March 31, 2026
3. Received Investment Performance Report for the period of October 1, 2025, through March 31, 2026 The Vice Chair called for Public Comment on the Consent Calendar and items not listed on the agenda. There was no public comment.
MOTION: Moved by Director Bronson, Seconded by Director Rowlands to approve the Consent Calendar.
ACTION: The Motion Carried with a roll call vote: 3/0/2 AYES: Bronson, Rowlands, Vice Chair Martinez
NOES: None
ABSENT: Mendez, Chair Dutra
REGULAR AGENDA
4. Considered supporting the Policy Board’s approval of the FY 2026-27 Financial Policies The Vice Chair opened the public comment period.
There was no public comment.
MOTION: Moved by Director Bronson, Seconded by Director Rowlands to support Policy Board’s approval of the FY 2026-27 Financial Policies.
ACTION: The Motion Carried with a roll call vote: 3/0/2 AYES: Bronson, Rowlands, Vice Chair Martinez
NOES: None
ABSENT: Mendez, Chair Dutra
5. Presentation on the FY 2025-26 Mid-Year Budget Forecast Chair Dutra arrived at approximately 11:43 AM.
The Chair opened the Public Comment period.
• There was no public comment.
Action: Presentation received; No action required.
Adjourned at 11:57 AM
____________________
Clerk ______________________ Chair
Date: _________________
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, 2025, through June 30, 2026
DATE: August 26, 2026
RECOMMENDATION:
Receive the quarterly investment performance report for the period of October 1, 2025, through June 30, 2026.
BACKGROUND:
As of June 30, 2026, Central Coast Community Energy held $309.0 million across its operating and investment accounts. The agency's investment strategy remains conservative and compliant with the 3CE Investment Policy and the California Government Code, prioritizing liquidity, capital preservation, and a passive investment approach. 3CE self-manages all its investments; the agency does not currently retain an outside party with discretionary investment authority. Charles Schwab and Fidelity Investments serve solely as custodial brokerage platforms executing transactions directed by 3CE staff.
DISCUSSION/ANALYSIS:
3CE held investment holdings as of June 30, 2026, 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 June 30, 2026, 3CE held $309.0 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 $125,829,948
cash (sweep) - $119.2M
money market - $0.2M
cash (operating) - $4.0M
letters of credit - $2.4M
JP Morgan Chase $14,102,262 cash (held for collateral)
West Coast Community Bank $34,986,536 money market
Investment
Schwab $66,313,999
Treasuries - $51.0M
cash (sweep) - $5.0M
money market - $10.3M
Fidelity $67,788,594 Treasuries (incl. accrued interest) - $67.7M money market - $0.1M
Total $309,021,340
Cash and Investment Mix Holdings by Type
Type Market Value % of Portfolio Permitted by CA Gov Code §53601 Cash and cash equivalents $142,348,447 46.1% 100.0%
Money Market Funds $48,030,979 15.5% 20.0%
U.S. Treasuries $118,641,914 38.4% 100.0%
Total $309,021,340 100.0%
Investment Policy Compliance Certification
Pursuant to Government Code Section 53646(b)(2), the following certifies the portfolio's compliance with 3CE's Investment Policy and the California Government Code as of June 30, 2026:
Requirement
Policy / Code
Reference
3CE Status as of 6/30/26 Compliant?
Money market fund concentration ≤
20% of portfolio
Gov. Code §53601(l);
Investment Policy 15.5% of portfolio Yes
Maximum maturity ≤ 5 years absent
prior Board approval Gov. Code §53601 Longest maturity 6/30/2028 (~2.0 years) Yes Prohibited instruments (inverse floaters,
range notes, IO strips) not held Gov. Code §53601.6 None held Yes Investments limited to permitted
issuers/instrument types Gov. Code §53601
100% direct U.S. Treasury
obligations; remainder in FDIC-eligible bank deposits and government money market funds
Yes
Annual delegation of investment
authority to Treasurer current Gov. Code §53607 9/18/2025 Yes 3CE Investment Policy
considered/reviewed by legislative body
within last year
Gov. Code §53646(a) 9/18/2025 Yes
Six-Month Expenditure Sufficiency Statement
Pursuant to Government Code Section 53646(b)(3): as of June 30, 2026, 3CE held $306.6 million in unrestricted cash and investments (total portfolio of $309.0 million, less $2.4 million pledged as collateral to counterparties, the SCE and PG&E letter-of-credit security accounts). The JP Morgan Chase account is a cash equivalent used for collateral purposes, but is not restricted.
On a static basis (assuming no further revenue collections), this represents approximately 6.3 months of FY budgeted operating expenditure of $588.4 million (annualized, less depreciation). 3CE continuously collects operating revenue throughout the year, averaging approximately $46.2 million per month, which substantially exceeds this static coverage measure. 3CE has sufficient resources, together with ongoing operating receipts, to meet its expenditure requirements for the next six months.
Portfolio Characteristics
All fixed-income holdings at Schwab and Fidelity are direct obligations of the U.S. Treasury, consistent with 3CE's prudent, capital-preservation-focused investment strategy. As of June 30, 2026, 3CE managed $134.1 million in investments across its Schwab and Fidelity brokerage accounts. The combined $118.4 million Treasury portfolio had a weighted average maturity of approximately 204 days (0.56 years), with yields ranging from approximately 3.4% to 4.2%. Treasuries maturing within one year represented approximately 83% of holdings; the remainder mature between September 2027 and June 2028.
Quarterly Trend
Quarter Ended Total Cash & Investments
Cash & Equiv.
%
Money Market Funds
%
U.S. Treasuries %
12/31/2025 $243.5M 37.0% 14.7% 48.3%
3/31/2026 $282.5M 42.6% 14.7% 42.7%
6/30/2026 $309.0M 46.1% 15.5% 38.4%
FISCAL IMPACT:
There is no fiscal impact to receiving this report.
CONCLUSION:
3CE continues to proactively diversify its financial institutional partnerships, self-manage its investment portfolio, and strengthen the transparency of its quarterly reporting to the Audit and Finance Committee, Operations Board, and Policy Board. The agency strategically deploys cash and short-term U.S. Treasury investments to capture favorable yields while maintaining sufficient liquidity to meet operating expenses and collateral requirements, consistent with the 3CE Investment Policy and California Government Code.
ATTACHMENT(S):
1. Attachment A: Investment Securities Detail Schedule
ATTACHMENT A: INVESTMENT SECURITIES DETAIL SCHEDULE
Pursuant to Government Code Section 53646(b)(1), the following schedule lists the type, issuer, maturity, par amount, and market value of all securities and cash positions held as of the dates indicated.
A-1. Fixed-Income Securities (all U.S. Treasury obligations, as of 6/30/2026) Custodian CUSIP Type Coupon Maturity Par ($)
Market Value
($)
Yield
Schwab 912797UR6 T-Bill Zero 07/28/26 5,000,000 4,986,444 3.7% Schwab 912797TQ0 T-Bill Zero 07/30/26 10,000,000 9,971,120 3.5% Schwab 912797UT2 T-Bill Zero 08/11/26 4,500,000 4,481,422 3.7% Schwab 912797TY3 T-Bill Zero 08/27/26 4,348,000 4,322,597 3.6% Schwab 91282CLH2 T-Note 3.750% 08/31/26 2,500,000 2,499,707 3.9% Schwab 912797UG0 T-Bill Zero 09/17/26 500,000 496,035 3.7% Schwab 912797UH8 T-Bill Zero 09/24/26 5,000,000 4,956,615 3.8% Schwab 912797VL8 T-Bill Zero 10/13/26 5,000,000 4,946,194 3.8% Schwab 912797UK1 T-Bill Zero 10/15/26 4,500,000 4,450,909 3.7% Schwab 912797SK4 T-Bill Zero 10/29/26 5,000,000 4,937,333 3.7% Schwab 912797VH7 T-Bill Zero 12/17/26 5,000,000 4,910,688 3.8% Fidelity 912797TN7 T-Bill Zero 07/16/26 5,000,000 4,992,500 3.4% Fidelity 91282CLB5 T-Note 4.375% 07/31/26 5,000,000 5,002,600 3.8% Fidelity 912797TY3 T-Bill Zero 08/27/26 5,652,000 5,619,162 3.7% Fidelity 912797UG0 T-Bill Zero 09/17/26 6,200,000 6,151,020 3.7% Fidelity 912797SU2 T-Bill Zero 11/27/26 1,300,000 1,279,720 3.8% Fidelity 912797TM9 T-Bill Zero 01/21/27 10,000,000 9,790,600 3.8% Fidelity 912797UD7 T-Bill Zero 03/18/27 5,000,000 4,864,000 3.9% Fidelity 912797UE5 T-Bill Zero 04/15/27 5,000,000 4,848,850 3.9% Fidelity 91282CMY4 T-Note 3.750% 04/30/27 5,000,000 4,986,700 4.1% Fidelity 91282CPB1 T-Note 3.500% 09/30/27 5,000,000 4,960,750 4.1% Fidelity 91282CQH7 T-Note 3.875% 03/31/28 5,000,000 4,975,400 4.2% Fidelity 91282CQY0 T-Note 4.125% 06/30/28 10,000,000 9,994,900 4.2% Total $118,425,266
Note: Schwab does not calculate a yield to maturity for this CUSIP because it holds multiple tax lots; the figure shown is calculated using the same approximate-yield formula as footnote 2. Fidelity's statement does not report a per-position yield to maturity. The figure shown is calculated using the standard approximate-bond-yield formula: YTM ≈ [Coupon + (Par−Price)/Years to Maturity] / [(Par+Price)/2], based on each security's own par, market value, maturity date, and coupon rate — an estimate, not a custodian-reported figure.
A-2. Cash, Bank Deposits & Money Market Funds
Institution Account Type Balance ($) As of
River City Bank ICS Investment Bank sweep / ICS cash $119,223,259 6/30/26 River City Bank Money Market Public fund money market $225,977 6/30/26 River City Bank Operating Operating cash $4,000,000 6/30/26 River City Bank SCE LOC Security Collateral (restricted) $308,486 6/30/26 River City Bank PG&E LOC Security Collateral (restricted) $2,072,225 6/30/26 JP Morgan Chase Operating Collateral $14,102,262 6/30/26 West Coast Community Bank Money Market Money market $34,986,536 6/30/26 Schwab Cash + Bank Sweep Cash sweep $5,022,925 6/30/26
Schwab SNSXX Schwab US Treasury
Money Market Money market fund $10,332,010 6/30/26
Fidelity SPAXX Fidelity Government
Money Market Money market fund $322,392 6/30/26
Total $190,596,074
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, 2025, through May 31, 2026 DATE: August 26, 2026
RECOMMENDATION:
Receive a financial report for the period October 1, 2025, through May 31, 2026.
BACKGROUND:
Consistent with 3CE’s commitment to affordability and prudent cost management, financial performance through the first eight months of the fiscal year was favorable, with revenues slightly exceeding budget and expenditures remaining below plan, primarily due to lower energy costs. As a result, the 3CE’s cash and investment position grew, and its net position increased compared to the start of the fiscal year, while overall liabilities declined. Additional details on revenues, expenditures, receivables, collateral, and liquidity follow below.
DISCUSSION/ANALYSIS:
For the eight-month period ending May 31, 2026, 3CE reported operating revenues of $369.9 million and operating expenses of $310.5 million, resulting in operating income of $59.4 million. Net non-operating revenue totaled $6.8 million, primarily driven by interest and investment returns, resulting in a total increase in net position of $66.2 million.
Year-to-date operating revenue was $11.7 million above budget, primarily due to electricity sales revenue coming in above budget across multiple customer classes. Non-operating revenue, consisting primarily of investment returns from assets held in operating and investment accounts and interest on collateral, exceeded budget by $0.7 million due to higher-than-anticipated liquidity. In total, year-to-date revenues and other sources were $12.4 million above budget, representing a favorable variance of
3%. This favorable revenue variance will be monitored, as energy costs have historically trended higher over the remainder of the fiscal year, and rates were adjusted downward on February 15, 2026.
Year-to-date operating expenditures, excluding capital outlay, were $67.5 million below budget, representing a favorable variance of 18%. This variance was primarily attributable to lower-than-anticipated energy costs, which were $64.1 million under budget. The favorable energy cost variance reflects a combination of factors, including strong portfolio management, lower market prices, the timing of invoices for items such as Renewable Energy Credits (RECs) and annual net energy metering true-ups, and higher-than-planned revenue from congestion revenue rights. These variances are expected to moderate over the remainder of the fiscal year as 3CE fulfills its energy-related obligations, including resource adequacy (RA) and REC purchases, and as costs increase during the higher-priced summer months.
Non-energy operating costs were $3.4 million below budget mostly due to lower-than-planned costs for contracted services and staff vacancies. Capital outlay is $0.2 million below budget due to pending work on electric vehicle charging and tenant improvement capital projects. Non-energy operating costs are projected to level out over the fiscal year as contracted services materialize and energy programs and capital projects continue to progress. Year-to-date total expenditure, including capital outlay, is $67.8 million lower than the budget, a favorable variance of 18%.
Net position as of May 31, 2026, totaled $328.9 million, representing an increase of $66.2 million from the prior fiscal year-end. This increase was primarily held in cash and investment balances, coupled with a decrease in accrued cost of electricity. Cash, cash equivalents, restricted cash, and investments totaled $304.0 million, an increase of $81.1 million from the start of the fiscal year. The favorable change in liquidity was primarily attributable to cash generated from operating revenues. Overall, year-to-date 3CE’s financial statements present a strong financial position, with increased liquidity, reduced liabilities, and continued growth in net position compared to the prior fiscal year-end. 3CE maintains $2.4 million in interest-bearing Letter of Credit accounts with SCE and PG&E, satisfying its regulatory-mandated Provider of Last Resort (POLR) Financial Security Requirement (FSR). Separately, and in the other direction, 3CE holds $13.1 million in security deposits posted by its own energy suppliers as protection against nonperformance by those suppliers. Together, these two balances represent 3CE's full counterparty-collateral position.
Accounts receivable, net of allowance for doubtful accounts, totaled $37.3 million as of May 31, 2026.
Approximately 72% of this balance was current or aged 30 days or less, consistent with normal billing cycles. Approximately $6.2 million, or 16.7% of total receivables, was aged over 91 days. This balance is
presented as net of an allowance for doubtful accounts, which reserves for anticipated losses, including amounts in the over-91-day category.
FISCAL IMPACT:
There is no financial impact associated with receiving this report.
CONCLUSION:
Staff will continue to monitor accounts receivable aging, energy cost trends, and liquidity throughout the remaining months of the fiscal year and will bring any material changes to the Board's attention in future reports. These are unaudited, compiled interim financial statements. Year-end results remain subject to 3CE’s annual independent audit.
ATTACHMENT(S):
1. May 31, 2026 Financial Report
Compiled Financial Statements 1
Compiled Budgetary Comparison Schedule 6
Budget Variance Commentary 8
Investment Summary 9
Accounts Receivable Aging Summary 10
Table of Contents
FINANCIAL REPORT
Fiscal Year to Date
As of May 31, 2026
1 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 May 31, 2026, and the related statement of revenues, expenses, and changes in net position, and the statement of cash flows for the eight 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 7, 2026
1101 Fifth Avenue, Suite 200 San Rafael, CA 94901 415 459 1249 mahercpa.com
ASSETS
Current assets
Cash and cash equivalents - unrestricted 198,201,089 $
Cash - restricted 2,376,312
Accounts receivable, net of allowance 37,348,566
Accrued revenue 26,483,580
Other receivables 1,678,876
Investments 93,480,884
Prepaid expenses 291,352
Deposits 11,983,850
Loan receivable 197,952
Total current assets 372,042,461
Noncurrent assets
Investments 9,959,750
Deposits 61,204
Loan receivable 937,826
Capital assets, net of depreciation and amortization 6,608,254 Total noncurrent assets 17,567,034
Total assets 389,609,495
LIABILITIES
Current liabilities
Accrued cost of electricity 39,630,446
Accounts payable 3,243,907
Other accrued liabilities 2,479,275
User taxes and energy surcharges due to other governments 1,681,025 Security deposits - energy suppliers 1,116,000
Lease liability 369,972
Total current liabilities 48,520,625
Noncurrent liabilities
Security deposits - energy suppliers 11,950,650
Lease liability 240,041
Total noncurrent liabilities 12,190,691
Total liabilities 60,711,316
NET POSITION
Net investment in capital assets 5,998,241
Restricted for security collateral 2,376,312
Unrestricted 320,523,626
Total net position 328,898,179 $
As of May 31, 2026
STATEMENT OF NET POSITION
CENTRAL COAST COMMUNITY ENERGY
See accountants' compilation report. 2 Page 14 of 37
OPERATING REVENUES
Electricity sales, net 369,803,891 $
Other income 120,075
Total operating revenues 369,923,966
OPERATING EXPENSES
Cost of electricity 279,151,090
Contract services 9,141,689
Staff compensation 8,547,905
Program incentives 11,513,526
Other operating expenses 1,737,224
Depreciation and amortization 421,034
Total operating expenses 310,512,468
Operating income (loss) 59,411,498
NONOPERATING REVENUES (EXPENSES)
Investment income 6,815,529
Interest expense (22,253)
Nonoperating revenues (expenses) 6,793,276
CHANGE IN NET POSITION 66,204,774
Net position at beginning of period 262,693,405
Net position at end of period 328,898,179 $
Eight Months Ended May 31, 2026
AND CHANGES IN NET POSITION
STATEMENT OF REVENUES, EXPENSES
CENTRAL COAST COMMUNITY ENERGY
See accountants' compilation report. 3 Page 15 of 37
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers 415,473,189 $
Receipts from wholesale sales and other operating revenue 9,589,118 Receipts of deposits and collateral 65,033,003
Payments to suppliers for electricity (327,411,065)
Payments for other goods and services (10,251,566)
Payments of deposits and collateral (50,005,711)
Payments for program incentives (12,153,614)
Payments for staff compensation (8,171,816)
Payments of taxes and energy surcharges to other governments (7,238,428) Net cash provided by operating activities 74,863,110
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Payments of lease (253,931)
Purchases of capital assets (616,676)
Net cash provided (used) by capital and related financing activities (870,607)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment income received 4,831,105
Proceeds from sales and maturities of investments 109,915,000 Loan principal received 194,301
Investment purchases (105,510,147)
Net cash provided (used) by investing activities 9,430,259 Net change in cash and cash equivalents 83,422,762
Cash and cash equivalents at beginning of year 117,154,639 Cash and cash equivalents at end of period 200,577,401 $ Reconciliation to the Statement of Net Position
Cash and cash equivalents - unrestricted 198,201,089 $
Cash - restricted 2,376,312
Cash and cash equivalents 200,577,401 $
Change in fair value of investments 2,259,002 $
Change in interest income receivable (274,578) $
Eight Months Ended May 31, 2026
STATEMENT OF CASH FLOWS
CENTRAL COAST COMMUNITY ENERGY
NONCASH INVESTING ACTIVITIES
See accountants' compilation report. 4 Page 16 of 37
Operating income (loss) 59,411,498 $
Adjustments to reconcile operating income (loss) to net cash provided by operating activities
Depreciation and amortization expense 421,034
(Increase) decrease in:
Accounts receivable, net of allowance 25,114,026
Accrued revenue 13,860,729
Other receivables 2,164,199
Prepaid expenses 162,928
Deposits 13,449,965
Increase (decrease) in:
Accrued cost of electricity (41,107,518)
Accounts payable (36,976)
Other accrued liabilities 389,785
User taxes and energy surcharges due to other governments (543,886) Security deposits - energy suppliers 1,577,326
Net cash provided by operating activities 74,863,110 $
CENTRAL COAST COMMUNITY ENERGY
STATEMENT OF CASH FLOWS (continued)
Eight Months Ended May 31, 2026
RECONCILIATION OF OPERATING INCOME (LOSS) TO NET
CASH PROVIDED BY OPERATING ACTIVITIES
See accountants' compilation report. 5 Page 17 of 37
1 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 eight months ended May 31, 2026, 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 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 $ 40,061,138 43,299,412 $ 3,238,274 $ 8% 369,803,891 $ 358,217,398 $ 11,586,493 $ 3% 578,022,716 $ 208,218,825 $ Interest and investment returns 730,241 758,333 (28,092) -4% 6,815,529 6,066,664 748,865 12% 9,100,000 2,284,471 Other income 5,436 6,250 (814) -13% 120,075 50,000 70,075 140% 75,000 (45,075) Total revenues and other sources 44,035,089 40,825,721 3,209,368 8% 376,739,495 364,334,062 12,405,433 3% 587,197,716 210,458,221EXPENDITURES AND OTHER USESCurrent Expenditures Cost of energy 31,784,634 35,084,248 3,299,614 9% 279,738,464 343,831,782 64,093,318 19% 534,776,256 255,037,792 Salaries and benefits 990,315 1,176,920 186,605 16% 8,547,905 9,418,463 870,558 9% 14,260,774 5,712,869 Services and supplies 2,190,507 3,025,185 834,678 28% 22,058,996 24,630,154 2,571,158 10% 38,160,686 16,101,690 Capital outlay 7,146 100,000 92,854 93% 573,596 800,000 226,404 28% 1,200,000 626,404 Total current expenditures 34,972,602 39,386,353 4,413,751 11% 310,918,961 378,680,399 67,761,438 18% 588,397,716 277,478,755Surplus (deficit) 9,062,487 $ 1,439,368 $ 7,623,119 $ 65,820,534 $ (14,346,337) $ 80,166,871 $ (1,200,000) $ (67,020,534) $ Favorable variances represent revenues exceeding budget or expenditures below budget.
Annual
CENTRAL COAST COMMUNITY ENERGY
BUDGETARY COMPARISON SCHEDULE
Current Month and Eight Months Ended May 31, 2026
Current Month
Variance
Favorable
(unfavorable)
Year-To-Date
Variance
Favorable
(unfavorable)
See accountants' compilation report. Page 19 of 37 2
CCA Program surplus/(deficit)
per budgetary comparison schedule: 65,820,534 $
Adjustments needed to reconcile to the changes in net position in the Statement of Revenues, Expenses and Changes in Net Position:
Add back GASB 87 lease amortization not in operating budget 231,678 Subtract depreciation expense (421,034)
Add back capital asset acquisitions 573,596
Change in Net Position 66,204,774 $
REVENUES, EXPENSES AND CHANGES IN NET POSITION
CENTRAL COAST COMMUNITY ENERGY
BUDGET RECONCILIATION TO STATEMENT OF
Eight Months Ended May 31, 2026
See accountants' compilation report. 3 Page 20 of 37
Budget Item
YTD Variance -
Favorable
(Unfavorable) Comment
Electric Sales Revenue, net 3.2% 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 18.6% 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 9.2% Staffing expenses are under budget due to the timing of new hires.
Services and Supplies 10.4% This category includes accounting, IT, technical and other consultants.
Budget Commentary for significant items
CENTRAL COAST COMMUNITY ENERGY
October 1, 2025 through May 31, 2026
Return of Investments YTD Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep CASH AND CASH EQUIVALENTSRiver City Bank / Chase / West Coast Community Bank - Money Market and other Interest Earning AccountsFunds Invested - Average Balance $ 99,293,298 96,624,568 $ 108,525,583 $ 110,254,298 $ 124,052,493 $ 141,426,764 $ 149,167,365 $ 159,931,211 $ Gains/Losses/Interest $ 331,876 3,106,432 $ 320,565 $ 354,632 $ 351,482 $ 354,822 $ 444,421 $ 451,349 $ 497,284 $ Average APY 4.12% 3.87% 3.92% 3.83% 3.43% 3.77% 3.63% 3.73%INVESTMENTSSchwab/FidelityFunds Invested - Average Balance $ 131,499,666 131,114,341 $ 131,948,441 $ 132,208,888 $ 132,677,578 $ 133,044,877 $ 133,414,246 $ 133,771,576 $ Gains/Losses/Interest $ 574,669.46 3,021,030 289,175.13 406,774.61 300,989.12 472,598.40 370,254.94 419,232.98 187,335.53 Average APY 5.26% 2.64% 3.70% 2.73% 4.27% 3.34% 3.77% 1.68%
CENTRAL COAST COMMUNITY ENERGY
Investment Summary
October 1, 2025 through September 30, 2026
Current 0 - 30 Days 31 - 60 Days 61 - 90 Days > 91 Days A/R Balance $ 8,647,336 18,343,153 $ 2,542,055 $ 1,588,990 $ 6,227,032 $ 37,348,566 $
CENTRAL COAST COMMUNITY ENERGY
Summary of Accounts Receivable, Net of Bad Debt Allowance As of May 31, 2026
Staff Report Item 4
TO: 3CE Policy Board of Directors
FROM: Robert M. Shaw, Chief Executive Officer
PREPARED BY: Juan Lopez, Director of Finance
SUBJECT: Support Policy Board authorizing the CEO to execute a clean energy purchase contract with California Community Choice Finance Authority and all ancillary documents and agreements to effectuate 3CE’s second energy prepayment financing transaction
DATE: August 26, 2026
RECOMMENDATION:
This recommends that the Audit and Finance Committee support the Policy Board to authorize the CEO to execute a clean energy purchase contract with California Community Choice Finance Authority and all ancillary documents and agreements to effectuate 3CE’s second energy prepayment financing transaction.
BACKGROUND:
A power purchase agreement (PPA) prepay is a transaction structure in which a PPA holder receives a discount to the contracted PPA price by facilitating a prepayment of the PPA’s renewable energy. The prepay transaction is undertaken by a conduit financing authority, California Community Choice Financing Authority (CCCFA), a Joint Powers Authority formed in 2021 for this sole purpose, of which 3CE is a founding member. Historically, discounts have ranged from 8% to 17% (12% average) relative to the contracted price.
3CE completed its first energy prepayment in October 2023, when the CCCFA issued $647.8 million in Clean Energy Project Revenue Bonds on 3CE's behalf. That transaction ("Prepay #1") is delivering roughly $5 million per year in energy cost savings. As 3CE’s portfolio has grown since 2023, staff seeks to use this financing vehicle to continue delivering affordability for its customers.
On March 18, 2026, the Policy Board authorized the CEO to develop, structure, and execute a second prepayment in 2026 ("Prepay #2") with an estimated par amount between $800 million and $1.2 billion, subject to market conditions, minimum savings thresholds, and final Board approval of transaction documents. PFM Financial Advisors LLC (PFM) was engaged as municipal advisor and swap advisor and has run competitive solicitations for the remaining transaction roles.
Staff is currently sizing the transaction at approximately $1.0 billion, within the previously authorized range. At current market indications, it would be expected to deliver roughly $6.5 million per year in energy cost savings over a nine-year initial period, bringing 3CE's combined savings from both prepayments to roughly $11.5 million per year.
Prepay #2 would use the same structure, the same conduit issuer (California Community Choice Financing Authority, CCCFA), and substantially the same documents as Prepay #1, which has performed as expected since 2023. Staff anticipates seeking Policy Board approval at the 3CE annual meeting, and pricing is scheduled to be ready by early October, with flexibility to extend into early 2027, so 3CE can achieve the best possible savings given market conditions.
The Executive Committee unanimously supported the Policy Board’s consideration and authorization of Prepay #2 at its regular meeting on August 19, 2026.
DISCUSSION/ANALYSIS:
Prepays have existed in the power and natural gas business for decades, with over $100 billion in total market value. Since the first prepayments for natural gas were done in the early 1990s, the IRS issued rules allowing tax-exempt prepayments and Congress enacted legislation specifically allowing the transactions (National Energy Policy Act of 2005; Section 1327).
Since its inception, CCCFA has issued over $31.4 billion in renewable energy prepay bonds, saving $200 million per year to date. 3CE’s financial advisor, PFM Financial Advisors LLC, has advised on most of those completed transactions.
How 3CE Customers Benefit
3CE buys most of its power under long-term power purchase agreements, paying as energy is delivered.
A prepayment transaction does not change that. 3CE still pays monthly and only for energy delivered; it simply pays a lower price for it.
The prepayment mechanism rests on the fact that interest rates on tax-exempt debt are lower than the rates a private company pays to borrow. IRS regulations codified in 2005 recognized that a public power provider could put that advantage to work by paying for energy in advance. The bond proceeds prepay for roughly 30 years of energy, but they are not simply handed to the counterparty that delivers it. They are lent onward to a highly rated funding recipient (typically a bank, an insurance company, or a large
corporation), which gains access to inexpensive capital and repays it on a fixed monthly schedule. Those payments service the bonds, and in return 3CE buys the energy at a discount.
In practice, the sequence runs as follows. CCCFA issues tax-exempt bonds and uses the proceeds to prepay a special-purpose supplier entity for approximately 30 years of deliveries. That entity lends the proceeds to the funding recipient, which makes fixed monthly payments back into the structure through the initial interest-rate period. A new funding recipient is competitively selected at each subsequent reset.
Through this financing structure, 3CE assigns existing power purchase agreements (PPAs) into the transaction through Limited Assignment Agreements, so the physical energy reaching customers does not change. What changes is that 3CE now buys that same energy from CCCFA at a discount rather than at contract price, and CCCFA uses those payments, together with the funding recipients, to service the bonds. Commodity swaps sit alongside the structure to convert index pricing to fixed pricing so cash flows match fixed-rate debt service, and 3CE is not a party to them.
How 3CE and Customers are Protected
Two features of the structure do most of the work of protecting 3CE:
3CE pays only for energy actually delivered. The contract is "take-and-pay," not "take-or-pay." 3CE has no debt service obligation of any kind.
The bonds are non-recourse. They are limited obligations of CCCFA, payable solely from transaction revenues. Under CCCFA's Joint Powers Agreement, no CCCFA debt is a member's debt, and each transaction's costs are allocated solely to the member participating in it. If the
structure unwound tomorrow, 3CE's assigned PPAs would revert to 3CE and the loss would be the forgone discount plus the staff time invested.
The remaining risks are economic rather than balance-sheet risks. If market conditions do not support the minimum discount at pricing, staff does not proceed and the PPAs remain as negotiated prior to assignment. If the floor cannot be met at a future reset, the re-pricing agreement permits 3CE to terminate and the contracts return. 3CE is not obliged to accept a price that does not meet its savings criteria.
The two risks 3CE does carry have known limits and are set before anything is signed. Assigned projects may deliver less than the prepaid quantity, so sizing is set conservatively against guaranteed or historical production, and over-deliveries in one prepayment can offset shortfalls in the other. A material decline in load would reduce 3CE's ability to take prepaid energy, so tax guidance caps prepaid volume at 80 percent of expected load in any year. The only genuine financial at risk before closing is rating agency and green bond verification fees, which staff authorizes only once the transaction is substantially de-risked.
Status of Prepay #2
The transaction has progressed through authorization and competitive procurement and is now in the documentation stage. On July 15, PFM distributed a prepay counterparty RFP to banks and a bond/tax and prepay/disclosure counsel RFP to law firms. Responses arrived on July 29, with experienced firms submitting underwriter and supplier proposals. Staff and PFM evaluated them the week of August 3. 3CE selected Stradling Yocca Carson & Raugh LLP as prepay counsel, Nixon Peabody LLP as bond and tax counsel, and Goldman Sachs & Co. LLC as underwriter and supplier.
Documentation for the transition has begun, including first drafts of the Trust Indenture, Preliminary Official Statement, and Bond Purchase Agreement. If all progresses as planned, the commodity swap counterparty could be selected by August 24, and second drafts circulate August 26. The substantive open work is the power purchase agreement assignment strategy. Staff and PFM are modeling a scenario built on assignments. From here, the schedule is largely sequencing:
Date Milestone
Sept 8–10 Near-final drafts; documents submitted for Board meetings; engage Kestrel for the green bond opinion
Sept 16–17 3CE Operations Board and Policy Board meetings Sept 18 Engage Moody's; submit financing documents for CCCFA approval Sept 24 CCCFA Board meeting
Oct 2 Receive Moody's rating; final second party opinion Staff will not execute unless expected savings thresholds are met at pricing, and the Policy Board will review those thresholds beforehand.
Like the PPAs themselves, a prepayment is not a one-time financing event; it is the beginning of a 30- year supply relationship. Unlike a PPA, the prepayment transaction is refinanced every five to ten years.
Most agencies that have used the structure have come to treat it as a program rather than a series of unrelated deals, with practical consequences for how authorizations are written. 3CE's current authorization covers this transaction only. As Prepay #2 closes and attention turns to the remaining unassigned contracts in the portfolio, a programmatic authorization is a structure the Boards may wish to consider, and staff can bring that concept forward for discussion after closing.
FISCAL IMPACT:
Transaction costs, including financial advisory fees, underwriting fees, legal fees, and other issuance expenses, are expected to be paid from bond proceeds at closing. There is no anticipated impact on 3CE’s operating budget beyond staff time and preliminary structuring expenses incurred prior to bond issuance. Final execution of the transaction will depend on achieving the minimum savings thresholds set by staff, which the Policy Board will review before pricing.
CONCLUSION:
The transaction is on schedule. Competitive procurement is complete or nearly complete, documentation is in its first draft cycle, and Prepay #2 remains on track for Board approvals in mid-September and CCCFA Board approval on September 24, subject to market conditions and achievement of minimum savings thresholds.
The Operations Board will review the transaction on September 16, followed by the Policy Board's consideration of approvals and authorization on September 17.
ATTACHMENT(S):
None.
Staff Report Item 5
TO: 3CE Audit and Finance Committee
FROM: Robert M. Shaw, Chief Executive Officer
PREPARED BY: Juan Lopez, Director of Finance
SUBJECT: Support the Policy Board’s consideration to adopt the Fiscal Year 2026-27 Recommended Budget
DATE: August 26, 2026
RECOMMENDATION:
Support the Policy Board’s consideration to adopt the Fiscal Year 2026-27 Recommended Budget.
BACKGROUND:
Annually, the Policy Board considers staff’s budget recommendations and adopts a budget covering the fiscal year from October 1 through September 30. On June 17, 2026, the Policy Board adopted staff recommendations to guide the development of the Recommended Budget through the Financial Policies. The 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.
Fiscal Year (FY) 2026-27 will mark another year of progress for 3CE as the agency now serves more than 1.2 million people and 515,000 customer accounts across residential, commercial & industrial, and agricultural industries. We are proud to be the energy provider for these customers and communities, working hand in hand with 35 local agencies in five counties to serve approximately 95% of our region's total electricity load.
The Recommended Budget aligns 3CE's resources with its mission: to deliver reliable, clean, affordable electricity and electrification programs that reduce greenhouse gas emissions and strengthen the local economy. That mission places 3CE at the center of California's energy transition — and carries a corresponding commitment to make that transition affordable for the customers who fund it. This budget reflects proactive strategic and financial stewardship:
investing in 3CE's growth and protecting affordability, while navigating and shaping an uncertain regulatory environment, to deliver the best outcomes for our customers and stakeholders.
DISCUSSION/ANALYSIS:
The Recommended Budget totals $500.7 million in appropriations, funded by $515.3 million in projected revenues. The budget is balanced and is projected to add approximately $14.6 million to net position—strengthening reserves while maintaining rates stable for customers. Total appropriations are $87.7 million (14.9%) below the prior-year Adopted Budget, driven almost entirely by lower cost of energy (COE). Given these market conditions, 3CE can invest in the agency's service commitment to customers, which includes continued progress on our renewable goals and ensuring fair and stable customer rates. These investments show up as robust energy contract administration, building internal capabilities to reduce reliance on outside vendors, promoting engagement through market driven energy programs, developing 3CE owned generation assets, and enhancing 3CE’s legislative and regulatory advocacy.
That choice is disciplined by three investment commitments that run through this budget and through the agency's Financial Policies:
investing in growth: the staffing, programs, and portfolio that let 3CE operate at the scale it has reached;
investing in robust fiscal discipline: the reserves, risk controls, and owned assets that let the agency withstand market and regulatory shocks; and investing in affordability: holding rates stable, building long-term value, and promoting local economic investment, as well as helping customers lower their overall energy costs through electrification.
How the Budget Was Built
The Recommended Budget is the product of 3CE's five-stage annual process, developed within the framework of the Financial Policies the Policy Board adopts each year. Those policies set the agency's guiding commitments — a balanced budget aligned to a cost-of-service revenue requirement, minimal reliance on reserves for ongoing operations, stable and fair rates, and quantified liquidity and credit-rating targets. Following the mid-year forecast, each department submitted a baseline spending plan — the cost to continue current operations — along with augmentation requests to staff new functions and business lines for programs and capital projects. The CEO reviewed and prioritized these submissions based on accuracy, demonstrated benefit, and alignment with Policy Board priorities. The result is a comprehensive and balanced recommendation.
The Budget at a Glance
Financial Summary
(in millions)
Actuals Adopted
Budget
Mid-Year
Forecast
Requested Recommended Change vs
FY 24-25 FY 25-26 FY 25-26 FY 26-27 FY 26-27
Prior Year
Adopted
Net Electricity Sales $659.0 $578.0 $555.5 $505.6 $505.6 ($72.4) Deferred Revenue - - ($39.5) - - -
Liquidated Damages $8.1 - - - - -
Other Income $0.2 $0.1 $0.1 $0.3 $0.3 $0.2
Interest and Investment Returns $11.0 $9.1 $9.9 $9.5 $9.5 $0.4 Sub-Total Revenues $678.3 $587.2 $526.1 $515.3 $515.3 ($71.9) Capital Infrastructure Reserve - $1.2 $6.7 - - ($1.2)
Total Financing Sources $678.3 $588.4 $532.8 $515.3 $515.3 ($73.1) Cost of Energy $593.4 $534.8 $452.0 $432.7 $432.7 ($102.1) Salaries and Benefits $10.8 $14.3 $12.6 $18.2 $18.2 $4.0 Services and Supplies $29.3 $38.2 $36.2 $42.8 $42.8 $4.6 Capital Assets $0.3 $1.2 $0.4 $6.9 $6.9 $5.7
Total Financing Uses $633.7 $588.4 $501.2 $500.7 $500.7 ($87.7) Total Change to Net Position $44.5 $0.0 $31.6 $14.6 $14.6 $14.6 Cost of Energy: Understanding the Decline
COE is 3CE's largest and most volatile expense, comprising 86% of total appropriations. COE is a non-discretionary cost and covers the electricity needed to serve customer load, regulatory compliance products such as Resource Adequacy (RA) and Renewable Portfolio Standard (RPS) attributes, as well as grid-operation services managed by the California Independent System Operator (CAISO). At $432.7 million, the COE is down $102.1 million (19%) from the prior-year Adopted Budget and well below the $593.4 million recorded in FY 2024-25. 3CE sets rates to recover its cost of service; a lower COE flows through to customers as lower rates and to the agency as lower revenue. The corresponding $71.9 million reduction in budgeted revenues reflect a declining energy market while keeping the budget balanced. Understanding both why COE ran high in recent years and why it is now declining is central to this budget.
Market Volatility and Regulatory Impacts Pushed Costs Higher In past years, COE rose due to a combination of forces largely outside 3CE's direct control. The COVID pandemic and resulting supply chain challenges delayed new generation projects, requiring the agency to purchase a larger share of its energy on the open market rather than take delivery from its own contracted, fixed-price resources. With less of its load hedged by operating projects, the agency was more exposed to that market volatility driven by macroeconomic pressures and seasonal events such as summer and fall heat waves. At the same time, surging RA costs, driven by heightened statewide demand and constrained supply, inflated the cost of meeting compliance obligations.
Prudent Management and Informed Oversight Drive Lower Cost Outcomes
The FY 2026-27 decline reflects a structural improvement in 3CE's hedge performance and maturing portfolio, not just a favorable market. New long-term clean generation and storage resources are coming online and delivering, reducing our need to buy power on the open market.
For 3CE, advancing the energy transition and protecting affordability are complementary objectives. Four factors compound:
More projects online. 2026 is a breakout year for 3CE's build-out. Four new projects reached commercial operation in 2026, adding roughly 25% of retail load. With them, 3CE's operational portfolio grows to approximately 11 projects covering more than half of retail load, up from roughly a quarter the prior year.
More energy delivered from owned contracts. As these projects deliver, energy generated under 3CE's PPAs displaces market purchases. 3CE is buying more of its power from contracted resources at known, long-term prices and less from the volatile spot market.
Lower market prices and effective hedging. 3CE's hedging strategy has locked in favorable pricing during favorable market conditions, and has reduced RA and RPS costs. 3CE’s effective position management, conducted in compliance with the board-adopted Energy Risk Management Policy and the board’s strategic approach to RA compliance, has also contributed to lower cost outcomes.
Lower-cost financing of energy supply. 3CE's 2023 “prepayment” transaction, a bond issuance through the California Community Choice Financing Authority, discounted a portion of the power delivered under it by roughly $5 million per year. A second prepayment transaction opportunity will be presented to the Policy Board for approval alongside this budget as another strategy to ultimately lower costs for our customers; because it is not yet final, no savings from this proposed transaction are yet reflected in the Recommended Budget.
The result is energy costs that are both lower and more stable than in recent years, with far less of the portfolio exposed to spot-market swings. That is the payoff of a long-term procurement strategy reaching maturity, financing decisions which reduced COE, and advocacy for compliance rules that lower RA and RPS costs.
Investing in the Organization
Salaries and benefits account for 3.6% of the total Recommended Budget but nearly 30% of the non-energy and non-one-time expenditures. As compensation is an ongoing agency commitment, it must remain sustainable across multiple rate cycles and shifting market conditions to support the agency’s affordability goals.
The recommended $18.2 million for salaries and benefits represents an increase of $4.0 million, or 27.9%, over the $14.3 million adopted for FY 2025-26. Roughly a quarter of that increase ($1.0 million) covers higher employer health care premiums, driven largely by health care cost inflation outside the agency's control, together with provision for best-in-class benefits and potential salary adjustments. Investments the agency is recommending to retain and support our talented staff.
The remaining $3.0 million funds 14 new positions, including two in the new Energy Solutions department, as described later in this summary.
The new additions are in operational and analytical roles in Power Services and Finance — settlement, contract administration, portfolio analysis, and financial planning — functions that must scale with a growing portfolio, or areas where the agency can avoid costly outside contractors and conditions where available consultants have been over-consolidated, leaving few qualified vendors. Other additions deepen senior specialist capacity in regulatory policy and virtual power plant program management, and add internal operations, facilities, and human resources capacity for an expanded workforce and property footprint. Building this expertise internally reduces reliance on consultants, keeps institutional knowledge within the organization, and gives 3CE direct command of the technical work that determines its costs and its standing before regulators.
Services and supplies of $42.8 million include $3.8 million in new spending to support customers.
Energy Programs funding grows by $2.2 million. This maintains funding levels across transportation, building, and agricultural electrification while expanding offerings such as bidirectional charging and virtual power plant operations that shift the portfolio from one-way incentives toward programs that return capacity to the grid. Roughly $950,000 strengthens 3CE's voice with the customers and policymakers who shape its operating environment — including strengthening its federal advocacy presence. A further $700,000 modernizes how the agency serves and understands its customers, funding new customer experience and call center capability, agencywide artificial intelligence enablement, and the technical support behind the agency's move into owned assets. The operating contingency remains at $3.5 million, 5% of non-COE, thereby preserving the flexibility required by the approved Financial Policies without expanding the agency's cost base.
Capital outlay investments reach $6.9 million, with the majority ($4.3 million) advancing a permanent 3CE headquarters, including $3.5 million to acquire the land and $800,000 for planning, permitting, and entitlement work that must precede construction. These investments will consolidate the agency's core operations into a facility it owns. The remaining $2.6 million funds the first 3CE-owned public EV charging stations in Santa Maria and Monterey, preliminary microgrid design, and improvements to existing offices and technology infrastructure across our four workplace locations in Monterey County, Santa Cruz County, San Luis Obispo County, and Santa Barbara County. Every figure here is a planning-level estimate, and every project returns to the Policy Board or Executive Committee for approval before it proceeds, with its own funding and financing analysis.
Composition of FY 2026-27 appropriations by account type.
Operating Revenue
Appropriations are funded by revenues of $515.3 million, $71.9 million below the prior-year Adopted Budget, reflecting lower COE and savings passed on directly to customers. Net electricity sales of $505.6 million are down 12.5%, driven by lower COE. Interest and investment returns are budgeted at $9.5 million, a deliberately conservative figure in anticipation of a softening short-term rate environment.
Staff will bring proposed 2027 electric generation rates to the Policy Board for consideration in March 2027, in accordance with the rate development timeline established in 2026. Based on the Recommended Budget as presented, no rate increase is expected to fund the appropriations described above. The declining cost of energy is sufficient to support the agency's investments while maintaining a balanced budget and meeting its cost-of-service revenue requirement.
Building on a Year of Accomplishment
This Recommended Budget builds on a year that demonstrated commitment to 3CE’s mission.
The agency’s clean-energy portfolio expanded significantly — 3CE onboarded four Power Purchase and Energy Storage Agreement projects, including receiving energy from the local ReGen Monterey project — while strengthening load forecasting, a new cost of energy review process, and the in-house Energy Trading and Risk Management (ETRM) system improved the discipline with which that growing portfolio is managed. Regulatory and legislative advocacy delivered direct customer value, most notably CPUC procurement-order revisions expected to avoid an estimated $1.6 billion in costs over ten years, alongside the signing of the Pathways Initiative (AB 825), Clean Energy Safety Act (SB 283), and sponsoring of bills on Power Charge Indifference Adjustment (PCIA) transparency (AB 1761) and hourly Resource Adequacy trading (SB 1138).
Customers saw benefits in record program participation, greenhouse gas reductions, equity program participation levels, the relaunch of Electrify Your Home 2.0, and the first 3CE-owned public EV charging station under construction in Santa Maria. Just as important, 3CE reinforced the financial framework underpinning this budget: it updated its Financial Policies to add credit-rating and liquidity targets and GASB 62/63 reserve treatment, advanced a second energy prepayment transaction now before the Policy Board, and modernized administrative and financial controls on which prudent stewardship depends.
86% 9%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
FY 2026-27
Cost of Energy — $432.7M (86%) Salaries and Benefits — $18.2M (4%) Services and Supplies — $42.8M (9%) Capital Assets — $6.9M (1%)
Priorities for the Year Ahead
The investments in this budget are directed toward a clear and connected set of priorities. At the center is the clean-energy portfolio itself: with a rapidly expanding resource base, 3CE will build out the Power Services team and develop an ETRM roadmap for end-to-end contract, settlement, and financial coverage, ensuring the agency can manage a portfolio spanning dozens of projects.
Alongside that operational work, 3CE will continue to advance PCIA reform and regulatory advocacy — through CalCCA and direct engagement — to protect customers from rate shock and inequitable cost shifts while pressing for incremental reforms to the PCIA calculation and other CPUC initiatives that erode local control.
Two initiatives extend 3CE's mission in new directions. The agency will establish the new Energy Solutions department and its owned-asset strategy, and launch a Virtual Power Plant (VPP) program built on a Distributed Energy Resource Management System (DERMS), piloting residential battery enrollment to optimize grid operations and deliver customer benefits through load shifting. Both reflect a deliberate move from buying energy toward shaping how and when it is generated and used.
Underpinning it all are financial and customer capacity. 3CE will pursue a credit-rating upgrade to A+ as part of its biannual review, evaluate adoption of an enterprise resource-planning (ERP) system, update electric generation rates in preparation for 2027 implementation, and advance a multi-year plan to sustain reserves at policy-target levels. On the customer side, the agency will operationalize a new customer load-analysis tool, expand CRM adoption agencywide, and continue delivering on the Underserved Communities Outreach and Engagement Action Plan.
A Long-Term Initiative: The Energy Solutions Department The most significant new investment in this budget is establishing the Department of Energy Solutions (DES). With the Policy Board's support, this department is tasked with translating 3CE's clean-energy procurement success into local energy infrastructure, member-agency support, customer value, and long-term business resilience. It represents a deliberate evolution in strategy:
supplementing our foundational approach of purchasing energy through traditional PPA structures to directly owning and developing energy assets that the agency controls throughout their full useful lives.
The DES is built to also establish a project development capability. Its initial work includes an EV charging master plan to scale affordable, 3CE-owned public charging at critical sites; identifying and evaluating local microgrid and grid-scale storage projects; and delivering the agency's office capital projects, including the new headquarters.
The long-term logic is straightforward. Owned generation, storage, EV charging infrastructure, and microgrids give 3CE a durable tool to advance grid reliability and resiliency in its own communities, to make measurable progress toward its greenhouse gas emission targets, and — over time — to convert capital investment into rate-stabilizing value rather than recurring market expense. Where a purchased megawatt is a cost that recurs every year at whatever the market dictates, an owned asset is a balance-sheet investment whose benefits accrue to customers for decades.
Regulatory and Market Uncertainty
Maintaining stable and fair rates is central to 3CE's mission, and the single largest source of near-term rate uncertainty remains the PCIA — a fee set annually by the CPUC and collected by the Investor-Owned Utilities from CCA customers to recover the utilities' legacy generation costs. The PCIA is not a 3CE charge. It is a CPUC established and IOU collected fee that appears on customers' bills and can move sharply from year to year, creating volatility largely outside the agency's control. A CPUC methodology change, effective January 1, 2026, increased the charge for CCA customers, and 3CE has joined the California Community Choice Association (CalCCA) in formally challenging the CPUC’s decision.
What customers ultimately pay depends on decisions still pending: the challenge to the 2026 change, a broader CPUC rulemaking on how the charge is calculated, and the annual benchmarks that are not final until the fall. Given that uncertainty, the Recommended Budget takes a deliberately conservative posture: current rates are maintained, and staff will assess the CPUC's final 2027 PCIA and IOU generation-rate decisions before recommending any adjustments. 3CE continues to advocate — through CalCCA, its Board committees, and its regulatory and legislative teams, including sponsored legislation on PCIA transparency (AB 1761) — for a PCIA that is fair, transparent, and predictable for the communities it serves. At the same time, 3CE has been building connections with customers to ensure our long-term value proposition and partnership resonate, despite whatever year-to-year regulatory challenges may come our way.
Reserves and Liquidity
Prudent financial management is core to 3CE's ability to navigate market and regulatory uncertainty, and strong liquidity is the foundation of that resilience. Aided by the stronger-than-budgeted current year, 3CE expects to close FY 2025-26 with approximately $320 million in unrestricted liquidity available for reserves — equivalent to roughly 64% of budgeted annual expenditures, or about 233 days of cash on hand. This position reflects disciplined cost management and the lower cost of energy described throughout this summary, rather than any rate increase.
Central to this strength is the Energy Rate Stability Reserve, which provides the financial capacity to absorb revenue impacts in challenging years while maintaining fair and stable rates. By continuing to build reserves alongside regulatory advocacy and market strategies, 3CE strengthens its ability to manage risk, stabilize rates, and protect the long-term interests of its communities. Robust liquidity is also a key factor credit rating agencies weigh when assessing financial stability—supporting 3CE's objective of maintaining and improving its credit standing.
Looking Ahead
This Recommended Budget reflects 3CE at an inflection point: financially strong enough to invest, and strategically clear about where those investments should go. The agency has fully extended into its service territory footprint; a maturing clean-energy portfolio is bringing energy costs down and making them more predictable; a strong liquidity position anchors the agency's resilience; and a new Department of Energy Solutions extends 3CE's mission into owned assets that advance grid reliability and greenhouse gas reduction for decades to come. The regulatory path, particularly around the PCIA, remains uncertain; 3CE's response is to stay disciplined, stay
engaged, and continue acting as a careful steward of the public resources entrusted to it — advancing the energy transition on terms its customers can afford.
FISCAL IMPACT:
The Policy Board's adoption of the FY 2026-27 Recommended Budget funds $500.7 million in appropriations financed by $515.3 million in estimated revenues, allowing 3CE to continue operations with a balanced budget. Appropriations are $87.7 million (14.9%) below the prior-year Adopted Budget, driven primarily by a $102.1 million reduction in the cost of energy, with revenues declining $71.9 million as those savings are passed through to customers. The budget requires no use of reserves and is projected to add approximately $14.6 million to net position.
No rate increase is anticipated to fund the appropriations described above; staff will bring proposed 2027 electric generation rates to the Policy Board in March 2027.
CONCLUSION:
It is recommended that the Audit and Finance Committee support the Policy Board‘s approval and adoption of the FY 2026-27 Recommended Budget. The Recommended Budget provides financing to deliver clean and renewable energy, stabilize customer rates, and navigate evolving regulatory and energy market conditions.