Central Coast Community Energy (3CE) Operations Board
September 16, 2026

FOURTH ANNUAL 3CPRIME CERTIFIED REPORT TO BE RELEASED
Next month, 3CE will distribute an annual report to large load customers subscribed to the agency’s 100% renewable electricity offering, 3Cprime. As verified by the Western Renewable Energy Generation Information System (WREGIS), 3CE customers in the commercial, industrial, agricultural, healthcare, technology, and public sectors sourced more than 126 million kilowatt hours of wind and solar renewable energy through the program last year. This procurement avoided nearly 600,000 metric tons of carbon dioxide emissions. The number of commercial customers enrolled in 3Cprime increased by 15% in 2025, demonstrating sustained demand for transparent, accountable renewable consumption pathways. With a fixed premium of $0.008 per kilowatt-hour, 3Cprime provides important value to customers meaningfully committed to sustainability. Unlike unbundled carbon credit purchases, 3Cprime integrates renewable attributes directly into customers’ electricity supply portfolios. The annual 3Cprime Certified Report supplies important reporting data and is packaged with branding and marketing assets to help customers share their contributions to growing renewable energy on the Central Coast.

ARATINA SOLAR + STORAGE OPERATIONAL
3CE successfully commissioned the Avantus Aratina project, a 120 MW solar and 75 MW battery energy storage facility in Kern County. Aratina is expected to provide approximately 7% of 3CE's energy needs, adding a significant source of clean, reliable, and competitively priced energy. Its storage capability supports grid reliability and helps maximize the value of renewable generation.
3CE’s EV LAUNCHPAD TECHNICAL ASSISTANCE PROGRAM PLANNED OCTOBER 1ST 3CE is actively developing 3CE’s EV Launchpad Technical Assistance Program, which is planned to launch on October 1
st
, 2026. The program will offer 3CE’s nonresidential customers with fleet electrification planning and charging infrastructure assistance to help advance projects from concept through construction. The program will transition and expand on services offered through 3CE's Plan Your Fleet and Electrify Your Ride Concierge Service programs, and create a comprehensive offering tailored to meet the diverse needs of different customer types. Planned program enhancements include expanded support for public charging sites, customized assistance for public agencies, enhanced support for commercial customers, and tailored planning assistance for multifamily customers.

On August 19th, 3CE hosted a webinar for Member Agencies introducing the upcoming program. The webinar outlined enhanced support available to help agencies plan and implement transportation-electrification projects. Additional webinars were held on September 9th and 10th for special districts, commercial customers, and multifamily property owners to highlight technical assistance available through the program.

ATTACHMENT(S):

1. Contracts Under $200k

2. ST Energy Product Transactions

Vendor Total Engagement Amount From To Service Scope 1 Monterey Beach Hotel 11,001 $ 7/30/2026 9/15/2026 Contract for Annual Meeting Dinner catering services. 2 ABS (Alco Building Solutions) 29,029 $ 7/15/2026 7/15/2031 Provide five-year ChargePoint software and hardware service coverage for the listed AC and DC charging
infrastructure in 3CE Soquel and San Luis Obispo Office. 3 Keyes & Fox 200,000 $ 7/29/2026 Engagement Letter: provide 3CE with the Legal Services identified herein. Specifically, K&F to provide counsel to 3CE on regulatory issues, questions, and tasks, as they arise. K&F will work diligently to represent 3CE effectively, provide Legal Services in an efficient manner, and respond promptly to 3CE’s inquiries. 4 California Energy Storage Alliance (CESA) 5,500 $ 8/10/2026 12/31/2026 The CESA membership agreement: Associate Members receive access to monthly policy briefings covering
legislative, CPUC, CAISO, safety, permitting, and other regulatory developments affecting energy storage. 5 Phoenix America Group 16,490 $ 8/19/2026 7/30/2029 Amendment No.1 to the services agreement to add additional $12,490 to expand subscription services for the door and camera system at the 3CE San Luis Obispo Office. 3CE Contracts < $200k
Per 3CE Purchasing and Procurement Policy, the CEO shall have necessary and proper authority to approve and execute Agreements up to $200,000 per vendor for a given scope of work, per fiscal year, provided that (a) the expenditures authorized by these agreements are consistent with the approved budget; (b) the agreements are approved as to form by 3CE’s General Counsel; and (c) agreements are reported at the next regular Operations Board meeting
List of Agreements and Amendments to Existing Agreements Approved since the Last Operations Board Report-out

3CE Short-Term Power Supply Transactions — CEO Delegation Report Per 3CE's Energy Risk Management Policy (ERMP §9, Delegation of Financial Authority), the Chief Executive Officer is authorized to approve and execute certain wholesale power supply transactions outside CAISO market activity, subject to the limits set forth in that policy. The short-term transactions below were executed within this delegated authority and are reported in aggregate by product type and direction, consistent with 3CE's reporting practice.

Summary of Short-Term Transactions Executed Since the Last Operations Board Report-out (July 1 - August 31, 2026)
Product
Type Buy/Sell
# of
Transactions
Notional per
Transaction Delivery/Term Window
RA Buy 3 Each under $1,000,000 Sep 2026

Staff Report Item 12
TO: 3CE Operations Board of Directors
FROM: Robert M. Shaw, Chief Executive Officer
PREPARED BY: Juan Lopez, Director of Finance
SUBJECT: Support the Policy Board’s consideration of adopting the Fiscal Year 2026-27 Recommended Budget and revised FY 2026-27 Financial Policies DATE: September 16, 2026
RECOMMENDATION:

Support the Policy Board’s consideration of adopting the Fiscal Year 2026-27 Recommended Budget and revised FY 2026-27 Financial Policies.

BACKGROUND:

Annually, 3CE adopts a budget covering the fiscal year from October 1 through September 30. Attached to the memorandum is the Recommended Budget Book, which outlines detailed information on the Fiscal Year (FY) 2026-27 Recommended Budget, including an Executive Summary. Under 3CE’s two-board structure, the Policy Board adopts the annual budget and establishes customer rates. At this stage, the Operations Board reviews the recommendation for operational soundness and supports its transmittal to the Policy Board.

The Policy Board adopted the FY 2026-27 Financial Policies on June 17, 2026. Those policies guide and govern the development and implementation of the budget, including: a balanced budget aligned to a cost-of-service revenue requirement; minimal reliance on reserves and one-time revenue for ongoing operations; an operating contingency equal to five percent of appropriations excluding cost of energy (COE); and a long-term credit rating objective of A+/A1 or higher. After the March–April mid-year financial forecast, each department submitted a baseline spending plan and augmentation requests for new staffing, programs, and capital. The CEO reviewed and prioritized those requests within the constraint of a balanced budget as governed by the Financial Policies.

The Audit and Finance Committee received the Recommended Budget at its August 26, 2026 regular meeting and recommended that the Policy Board adopt it. No changes have been made to the Recommended Budget since that review.

DISCUSSION/ANALYSIS:
3CE’s mission is to deliver reliable, clean, and affordable electricity, along with electrification programs that reduce greenhouse gas emissions and strengthen the local economy. The Recommended Budget is that mission expressed in dollars. It appropriates $500.7 million, financed by $515.3 million in estimated revenues; it is balanced, requires no use of reserves, and is projected to add approximately $14.6 million to net position, continuing to strengthen reserves. Appropriations are $87.7 million, or 14.9 percent, below the FY 2025-26 Adopted Budget.

Summary of the Recommended Budget
Detailed schedules, department narratives, and the position schedule appear in the FY 2026-27 Recommended Budget book.

The Recommended Budget
Cost of Energy
At $432.7 million, the Cost of Energy (COE) is 86 percent of appropriations and the least discretionary part of the budget: the electricity, capacity, and compliance attributes that serve approximately 515,000 customer accounts across 35 member agencies and five counties. COE is down $102.1 million from the prior-year Adopted Budget, and that decline accounts for almost the entire $87.7 million reduction in total appropriations. Two forces explain it, and they are not equally durable. The first is contractual and lasting: four projects reached commercial operation in 2026, doubling the share of retail load served by 3CE’s own operating resources from roughly a quarter to more than half. That load is now priced under long-term agreements rather than subject to spot-market volatility. The second is market conditions,

including lower energy market prices and decreased Resource Adequacy and Renewable Portfolio Standard attribute costs, which are favorable today but could reverse.

Non-Energy Costs – Investing in Staffing, Programs, and Capital Assets The remaining 14 percent of appropriations funds the people, programs, advocacy, and facilities through which 3CE delivers the rest of its mission. Non-COE appropriations total $68.0 million, which includes $6.9 million in one-time capital outlay and staffing growth from 59 to 72 Full-Time Equivalent (FTE).

These investments reflect a maturing agency. 3CE has finished extending into its service territory and now operates a portfolio it spent years assembling; the work ahead is to run what it has built well and to invest in the next generation of community energy.

The Recommended Budget includes $18.2 million for salaries and benefits, funding the people who turn a renewable portfolio into reliable, clean, and affordable service. The new positions do the work the portfolio creates (settling deliveries, administering contracts, validating counterparty charges, and forecasting results) work that scales with the operating portfolio and determines whether customers see the savings the portfolio was built to produce. They also provide initial staffing for the Department of Energy Solutions, whose first-year scope is deliberately modest: evaluating local generation and storage sites, providing member-agency technical support, and delivering the agency's capital projects. The same appropriation sustains the team already in place, funding competitive salaries and the benefits behind two consecutive Great Place to Work certifications while absorbing rising employer health care premiums. The investment repositions the agency to its current scale, from a young agency assembling a portfolio to a mature one operating it, rather than a new growth rate.

The Recommended Budget includes $42.8 million for services and supplies. Energy programs and advocacy carry the part of the mission that reaches customers directly. Energy programs remain the largest non-COE commitment, sustaining incentives across transportation, building, and agricultural electrification while adding bidirectional charging and virtual power plant operations that return capacity to the grid. Government and community relations invests further in federal presence; advocacy is a cost-control function as much as a policy one, as the procurement-order revisions 3CE secured this year — expected to avoid an estimated $1.6 billion over ten years — demonstrate. The Recommended Budget further funds customer experience and call center capability and agencywide artificial intelligence enablement, and holds the operating contingency at $3.5 million, five percent of non-COE appropriations, as the Financial Policies require.

Capital outlay of $6.9 million marks 3CE’s transition to owning facilities and infrastructure. Of that amount, $4.3 million advances a permanent headquarters, including funding for land acquisition, planning, permitting, and entitlement work, which aligns with Section 5.4 of the Financial Policies, which directs 3CE to secure permanent facilities that provide continuity of operations while stabilizing facility

costs into the future. The remaining $2.6 million funds the first 3CE-owned public EV charging stations in Santa Maria and Monterey, preliminary local generation and storage design, and office and technology improvements across the agency’s four workplace locations.

These are the first investments of the owned-asset strategy the Department of Energy Solutions will carry forward, and they extend the mission from buying energy to owning and developing it: a purchased megawatt is a cost that recurs every year at whatever the market dictates, while an owned asset is a balance-sheet investment that builds local infrastructure and resilience on the Central Coast and returns value to customers for decades. Every figure is a planning-level estimate, and each project returns to the Policy Board or Executive Committee with its own funding and financing analysis before it proceeds.

Composition of FY 2026-27 appropriations by account type.

Pending Rate and Regulatory Outcomes
3CE sets rates to recover its cost of service, so lower energy costs flow through to customers rather than to the agency. That relationship is what allowed the Policy Board to reduce generation rates by an average of 25 percent across customer classes in February 2026, savings customers are receiving today.

The budget assumes no rate change. It is built on the current electric generation rates, which remain in effect under Resolution No. PB-2026-01, and staff will bring proposed 2027 rates to the Policy Board in March 2027. It also assumes no outcome from the regulatory decisions still pending: the CPUC’s 2027 Power Charge Indifference Adjustment (PCIA) decision and the Energy Resource Recovery Account (ERRA) proceedings that set IOU generation rates are not expected until the fall. Deferring the rate recommendation until those decisions are known is deliberate.

Reserves and Liquidity
3CE expects to close FY 2025-26 with approximately $320 million in unrestricted liquidity, roughly 233 days of cash on hand, and about 64 percent of budgeted annual expenditures, against the 180-day liquidity-on-hand target. That position was built through disciplined cost management and lower COE, not rate increases, and it allows the agency to hold rates stable through a volatile regulatory year. As FY 2025-26 concludes and year-end results solidify, staff will bring a multi-year reserve funding plan to the Boards during the year to formalize the allocation and support the pursuit of an A+ rating. 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%)

Revised FY 2026-27 Financial Policies
In preparing the budget for adoption, staff identified that the Financial Policies adopted in June assign defined financial responsibilities to a Chief Financial Officer (CFO), a position 3CE is not planning to fill in FY 2026-27, given shifting roles, responsibilities, and capabilities needed to lead 3CE in executing the strategic direction defined in this budget. Staff has therefore revised the policies to assign most of the CFO responsibilities to the Policy Board-appointed Treasurer. The revision is presented for adoption concurrently with the budget so the agency begins the fiscal year on October 1, 2026 with clean, current policy authority.

The revision is narrow and administrative. It reassigns to the Policy Board-appointed Treasurer the duties the June policies assigned to a Chief Financial Officer, with conforming changes to Sections 2.1,

3.3, 5.6, 8.3, and 8.4; redlined and clean versions are attached. Because the Recommended Budget document went to print before the revision was finalized, the Financial Policies reflect the June version; the resolution provides that the attached revised policies control in the event of any inconsistency.

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, or 14.9 percent, 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 and current rates hold for 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 these appropriations
CONCLUSION:

It is recommended that the Operations Board support the Policy Board’s consideration and adoption of the FY 2026-27 Recommended Budget and the revised FY 2026-27 Financial Policies. The budget is balanced, complies with the Financial Policies, expects to hold customer rates stable, and funds the staffing, programs, and capital investment required to operate the agency and its portfolio. It reinforces prudent energy portfolio management that serves the Central Coast, sustains electrification programs that reduce emissions, and extends the agency into owned local assets, advancing the energy transition on terms 3CE’s customers can afford.

ATTACHMENT(S):

1. FY 2026-27 Recommended Budget Book

2. Draft Policy Board Resolution No. PB-2026-05 — Attachment A: FY 2026-27 Recommended Budget; Attachment B: Revised FY 2026-27 Financial Policies (redline and clean)

2 About the cover: SunZia Wind, the largest renewable energy infrastructure project in U.S. history, is delivering clean, reliable power across the West.

Through its long-term commitment to receive 255 megawatts of energy from the project, 3CE helped make this landmark wind resource possible for the communities we serve. Photo Credit: Pattern Energy

Table of Contents
3 4
6 7
Leadership,
Community,
and Staff
Introduction
8 9
10 11
12 16
Policy Board
Operations Board
Community Advisory Council
About the Budget Process
Annual Highlights 2025-26
Organization Chart
Executive Letter
About 3CE
Our Boards
3CE Staff Positions Schedule
Executive Summary
Office of the CEO
Office of the General Counsel
Office of the COO
• General Services
• Finance
• Energy Risk Management
• Data Analytics & Information Technology
Office of the CPO
• Power Services
• Energy Solutions
Office of the CCO
• Customer Success
• Regulatory & Compliance
• Government & Community Relations
• Energy Programs
Energy Programs Overview
Financial Policies
Definition of Terms
FY 2026-27
Budget
Presentation
Office and
Department
Summaries
Appendices
17 20
26 28
30 36
40 48
50 58

Executive Letter
4 Dear Board Members, Customers,
and Community Partners,
The Board set an ambitious vision for Central Coast
Community Energy. Together we envisioned an
organization that would do more than procure clean
electricity. We set out to build a public power agency
that delivers affordable, reliable service, invests
in local communities, shapes energy policy, and
equips our customers with the tools to participate in
California’s clean energy future.

Today, that vision is taking shape.

This past year reminded us that progress is rarely
linear. The California Public Utilities Commission’s
decision to dramatically increase the Power Charge
Indifference Adjustment (PCIA) exacerbated the
affordability crisis for Californians. To support
customers, the Policy Board took decisive action
to reduce rates below the investor owned utilities
and we made a deliberate decision to engage
directly with our communities. Through proactive
communications, transparent public education,
and targeted outreach to customers, local officials,
and community partners, we helped customers
understand not only what was changing, but why.

Despite these unprecedented market pressures, 3CE
maintained its market share — a testament to the
trust we have built through years of transparency and
community engagement.

At the same time, our long-term planning and
investment are yielding tangible results.

Several of the clean energy projects we committed
to years ago entered commercial operation during
the past year, adding approximately 348 megawatts
of new renewable generation and 85 megawatts of
energy storage to California’s electric grid. These
projects represent more than infrastructure, they
demonstrate that community choice agencies are
leading the development of new clean energy
resources while supporting grid reliability.

Our work extends well beyond power procurement.

Throughout the year, 3CE continued to advocate
for policies that protect our customers and
strengthen California’s energy future. We remained
deeply committed to meaningful engagement in
state regulatory proceedings affecting electricity
affordability, resource adequacy, and PCIA reform
while working with legislators and industry partners
to advance practical solutions that balance reliability, affordability, and California’s clean energy goals.

Ensuring that local communities have a meaningful
voice in statewide energy policy remains one of the
most important responsibilities entrusted to us by our
member communities.

Internally, we have also continued to evolve.

As the agency has matured, our focus has expanded
from building an energy portfolio to building an
organization capable of delivering lasting value
directly within our communities. This year, we are
building a new Department of Energy Solutions,
which represents a commitment to integrate local
project development into our power portfolio and
the next phase of 3CE’s evolution. The department
will position 3CE to complement its core business of
procuring utility-scale clean energy with a growing
portfolio of local energy initiatives. Through our
shared vision and ambition, 3CE will soon be
developing local energy projects, managing strategic
assets, supporting member agencies with technical
expertise, and delivering innovative energy solutions
that improve resilience, strengthen local economies,
and create long-term value for our customers.

Looking back, I am proud of how much we have
accomplished together. The strategic priorities
we established several years ago — expanding
renewable energy resources, maintaining competitive
rates, investing in innovative customer programs,
strengthening our financial foundation, and
becoming a stronger voice in California energy policy
— are no longer aspirations. They have become
defining characteristics of this organization.

Looking ahead, our work is far from complete.

California’s energy landscape continues to evolve
rapidly, bringing new opportunities and new
challenges. We remain committed to delivering
affordable, reliable, and increasingly clean electricity while helping our communities navigate that
transition with confidence. We will continue investing
in local energy solutions, advocating for fair and
effective public policy, and ensuring that the benefits of the clean energy economy are realized here on the
Central Coast.

None of this would be possible without the vision
of our Board of Directors, the dedication and
professional expertise of our employees, and the
trust of the communities we serve. Thank you for your
continued partnership as we build the next chapter
of Central Coast Community Energy.

With gratitude,
September 2026
Robert M. Shaw, Chief Executive Officer
Central Coast Community Energy Page 151 of 744
5 Page 152 of 744
About 3CE
6 Central Coast Community Energy (3CE) is a Community Choice Aggregator (CCA) — a local public agency working to accelerate the transition to 100% clean and renewable energy.

Guided by our Boards and supported by professional staff, we serve customers across the Central Coast by providing reliable, clean, and affordable electricity, along with electrification programs that reduce greenhouse gas emissions and strengthen our local economy. 3CE comprises 35 member agencies across five counties. The agency serves over 1.2 million people through more than 515,000 customer accounts representing approximately 95% of the region’s electricity load. In Fiscal Year 2026-27, 3CE’s projected peak load is 892 MW, and we expect to deliver approximately 5.395 million MWh of electricity to a mix of residential, commercial, and industrial customers.
3CE supports electrification in transportation, agriculture, and the built environment through our innovative, customer-focused energy programs and invests in new renewable energy projects to bring more clean energy onto the grid. In partnership with our customers, 3CE is strengthening grid resilience and advancing a cleaner, more sustainable future for the Central Coast.

7 Our Boards
3CE is governed by two boards that work to guide the agency’s mission and operations: our Policy Board and Operations Board. Together, they provide oversight and leadership on behalf of our 35 member agencies, with each board composed of 19 appointed representatives.

The Policy Board of Directors is made up of local elected officials appointed by their respective jurisdictions. This Board is responsible for setting the agency’s strategic direction through informed oversight, approving the annual budget, establishing customer rates, and authorizing major non-energy capital expenditures.

The Operations Board of Directors includes senior city and county executives from 3CE’s member agencies. The Operations Board ensures policies are effectively implemented, provides day-to-day guidance, and approves contracts and agreements.

This two-board structure ensures that both community priorities and operational expertise shape 3CE’s decisions and long-term planning. 7 Page 154 of 744
Policy Board
Dawn Ortiz-Legg
Vice Chair
County of San Luis Obispo
Fred Keeley
Chair
City of Santa Cruz
Bruce Delgado
City of Marina
Joan Hartmann
County of Santa
Barbara
Dolores Morales
City of Hollister
Alice Patino
City of Santa Maria
Kate Daniels
County of Monterey
Open Seat
City of Grover Beach
Jose Luis Barajas
City of Salinas
Monica Martinez
County of Santa Cruz
8 Angela Curro
County of San Benito
David Silva
City of Buellton
Tyller Williamson
City of Monterey
Robert White
City of Greenfield
Derek Timm
City of Scotts Valley
Carla Wixom
City of Morro Bay
Charles Bourbeau
City of Atascadero
Wade Nomura
City of Carpinteria
Jimmy Dutra
City of Watsonville

Operations Board
Jim Lewis
Vice Chair
City of Atascadero
Matt Huffaker
Chair
City of Santa Cruz
Matthew Bronson
City of Grover Beach
Scott Wolfe
City of Buellton
Sonia de la Rosa
County of Monterey
Dante Hall
City of Monterey
Matt Mogensen
City of Marina
Mali LaGoe
City of Scotts Valley
Esparanza Colio-Warren
County of San Benito
Peter Imhof
City of Goleta
Rene Mendez
City of Salinas
Matt Pontes
County of San Luis
Obispo
Ana Cortez
City of Hollister
John Craig
City of Morro Bay
Megan Hunter
City of Soledad
Kimberly Petersen
County of Santa Cruz
Jana Petersen
County of Santa
Barbara
David W. Rowlands
City of Santa Maria
Tamara Vides
City of Watsonville
9 Page 156 of 744
1010
Community Advisory Council
Gine Johnson
Chair
County of Santa Cruz
Norman Tuitavuki
Vice Chair
County of Monterey
The Community Advisory Council (CAC) is composed of community members serving three-year terms. The Council currently has five vacancies, with new appointments considered by the Policy Board at the annual meeting. The CAC provides valuable input on energy programs and outreach strategies, helping to strengthen the connection between 3CE and the diverse communities we serve across the Central Coast.

Lew Bauman
County of Monterey
Jason Sedano
County of Monterey
Rosemary Soto
County of Monterey
Celina Stotler
County of San Benito
Ivor John
County of Santa Barbara
Kris Damhorst
County of Santa Cruz
Dennis Osmer
County of Santa Cruz

11 About the Budget Process
3CE’S ANNUAL BUDGET

IS DEVELOPED THROUGH

A FIVE-STAGE PROCESS

1. Budget Initiation
Mid-year Forecast 2.

Budget Development 3.

4. Budget Adoption
Budget Management 5.
3CE’s annual budget cycle begins with budget
initiation and a mid-year update to the three-year
financial forecast. The updated forecast informs
departmental budget proposals for the coming
fiscal year, including baseline operating needs and
requests for new or increased funding.

The CEO reviews and prioritizes these proposals
based on the reasonableness of financial
assumptions, demonstrated organizational
benefit, and alignment with Policy Board priorities.

This process results in a fiscally responsible
Recommended Budget that advances 3CE’s
mission, strategic priorities, and reliable operations
in the coming year.

The Recommended Budget for Fiscal Year 2026-27
will be reviewed by the Audit & Finance Committee
and the Operations Board before being presented
to the Policy Board for consideration and possible
adoption at its September 17, 2026, meeting.
• Departments
provide current-year estimates
and forecast
market outlook.
• Boards and
Audit & Finance
Committee
receive forecast.
• Departments
submit baseline
budget and
augmentation
requests.
• Policy Board
approves the
Financial Policies.
• Audit & Finance
Committee receives
the Recommended
Budget.
• Operations Board
receives the
Recommended
Budget.
• Policy Board
considers
adoption of the
Recommended
Budget.
• Management
monitors
expenditures
and estimated
revenues.
• Boards and
Audit & Finance
Committee
receive monthly
and quarterly
financial reports.

MID-YEAR

FORECAST
(MARCH-APRIL)
BUDGET

DEVELOPMENT
(MAY-AUGUST)
BUDGET

ADOPTION
(SEPTEMBER)
BUDGET

MANAGEMENT
(ONGOING)

12 12
ANNUAL

HIGHLIGHTS
2025-26

13 POWER SUPPLY RESOURCES

FINANCE
Aratina Solar & Storage Project
Comes Online
Another large-scale California clean energy
project has come online, in part due to 3CE’s
support. Aratina 1 in Kern County will provide
enough energy to power 93,000 homes statewide,
delivering 120 MW of solar power and 75 MW of
energy storage to 3CE customers. Altogether, this
project will deliver long-term contributions toward
3CE’s 100% clean and renewable energy goal.
3CE Extends Geothermal
Agreement through 2032
3CE extended its agreement with the Mammoth
Casa Diablo IV Geothermal Project, providing
customer access to round-the-clock renewable
energy. In addition to powering 22,000 homes
and offsetting 160,000 tons of carbon emissions,
this project brought over $13 million in economic
benefits to the Mammoth Lakes region and
created more than 180 construction jobs.

Innovative Partnership Generates
Local Renewable Energy
In partnership with ReGen Monterey, 3CE began
generating renewable energy locally through an
innovative landfill gas-to-energy biomass facility
that captures harmful emissions and uses them
to generate energy. Electricity generated from
landfill gas provides steady, around-the-clock
power.
3CE Policy Board Votes to Lower
Generation Rates
On February 11, 3CE’s Policy Board voted
to lower rates by an average generation rate
decrease of 25% across customer classes,
reflecting lower costs in the energy market,
disciplined financial management, and a
commitment to return savings directly to
customers. This decrease followed increases in
investor-owned utility fees, such as the Power
Charge Indifference Adjustment.

Reduced Energy Costs through
Second Prepayment Transaction
The Finance team initiated 3CE’s second energy
prepayment transaction on its PPA portfolio to
reduce future energy costs.

OPERATIONS
3CE Again Earns Great Place to
Work Certification
For the second consecutive year, 3CE achieved
Great Place to Work Certification through Our
Best Workplaces™. As 3CE works to fill open
positions, recognition as an employer of choice
will help attract and retain talent.
3CE Opens New Regional Santa
Barbara Office and Relocates
Headquarters
In addition to relocating its main office in
Monterey, 3CE celebrated the opening of its
new regional office in downtown Santa Barbara.

Located near the County Administration
Building, City Hall, and key community partners,
the new office gives 3CE a home base in the
region’s largest city with a place to listen,
collaborate, and work more closely with the
South County communities it serves.

14 GOVERNMENT &

COMMUNITY RELATIONS
3CE Staff Learn, Share, and
Collaborate at Annual CalCCA
Conference
3CE staff joined more than 1,000 energy leaders,
innovators, and policymakers in Sacramento
for the 2026 CalCCA Annual Conference. CEO
Robert Shaw moderated a high-profile panel
on California’s 2026 legislative agenda while
Energy Programs Analyst Paige Callaghan and
Director of Government & Community Relations
Das Williams shared their expertise through
presentations.

Passage of the Clean Energy Safety
Act
Secured passage and signing of the Pathways
Initiative (AB 825) and the Clean Energy Safety
Act (SB 283) through sustained advocacy in the
final weeks of the legislative session, including
stakeholder and coalition outreach, letters of
support, and in-person canvassing of Senate and
Assembly offices.

PCIA Transparency and Hourly RA
Trading
Staff advocated for two pieces of sponsored
legislation, including AB 1761 (PCIA transparency,
Assemblymember Rogers) and SB 1138 (hourly
RA trading, Senator Padilla) by meeting with
legislators, committee staff, and stakeholders
to advance 3CE’s broader agenda on large load
interconnection, Diablo Canyon Nuclear Power
Plant, CCA autonomy, and more.

EMISSIONS
689,890 Metric Tons of CO2 Emissions
Avoided through PPAs & Electrification
Equivalent to removing 60,920 gasoline-powered
passenger vehicles from the road for a year.

REGULATORY
CPUC Advocacy Resulted in $1.6
Billion Reduction to Procurement
Costs
Successfully advocated for revisions to a California
Public Utilities Commission (CPUC) procurement
order, resulting in an estimated $1.6 billion in
avoided procurement costs over 10 years by
aligning the order with resources already within
3CE’s portfolio.

First CCA to Secure BioMAT
Program
Led 3CE’s participation in the CPUC’s Bioenergy
Market Adjusting Tariff (BioMAT) Program,
becoming the first CCA to secure a project and
apply for cost recovery through the program.

BioMAT receives procurement funding through
a Public Purpose Program fund — a cost that
all Californians pay into, but from which CCA
customers had not previously received benefits.

Continued Progress on PCIA
Reform
Successfully reduced mid-year changes to the
2026 Power Charge Indifference Adjustment and
established a venue with the CPUC for broader
reform efforts for the 2027 Forecasted PCIA and
beyond.
14 Page 161 of 744
15 CUSTOMER SUCCESS
Brought Energy Bill Relief to Rural
Communities
Committed to addressing customer needs and
meeting them where they are, 3CE staff hosted
events in rural communities to provide bill
assistance and solutions that ease the burden of
energy costs. The Greenfield event took place at
an apartment community with units set aside for
income-qualified and farmworker households,
providing Spanish-language support for those who
needed it.

Advanced Customer Intelligence
Advanced Customer Intelligence by
connecting accounts, people, interactions,
customer inquiries, and energy program
participation data into structured customer
hierarchies, creating a more complete
organizational view of key customers and
reducing dependence on manual reports
and institutional knowledge.

PCIA Outreach & Education to
Strategic Accounts
Directed proactive outreach to 250 strategic
accounts ahead of the January PCIA increase,
delivering targeted customer education and
relationship-based support that helped retain
customers, reduce customer uncertainty, and
deepen engagement with key contacts.

ENERGY PROGRAMS
Electrify Your Home Program
Adds Renter-Friendly Offerings
In the prior fiscal year, 3CE hosted community
workshops to gather community input about
the Electrify Your Ride Program. The resulting
program updates — adding induction
cooktops and ranges as well as heat pump
space conditioners — provide more choices
for customers plus a renter-friendly option for
heating and cooling.

Pilot Project Powers Community
Benefits through Public Chargers
In partnership with the City of Santa Maria,
3CE launched a pilot program to own and
operate EV charging infrastructure across the
Central Coast, expanding access to affordable,
reliable public charging in high-use community
locations.

Electrify Your Ride Expands
Offerings and Impacts
3CE expanded its Electrify Your Ride (EYR)
Program, adding rebates for bi-directional
chargers. This two-way charging capability
helps customers maximize EV investment by
supporting energy resilience, grid reliability,
and smarter home energy use. Since 2021, EYR
has helped nearly 4,000 residential customers
purchase or lease an EV, saving them more than
$9 million.

Electric Bus Program Drives
Clean Public Transportation
Infrastructure
3CE staff continues to build relationships
and collaborate with Member Agencies.

In November 2025, the Electrify Your Fleet
program awarded $350,000 toward four
electric transit buses for the San Luis Obispo
Regional Transit Authority. These buses
benefit passengers, the environment, the city’s
bottom line, and expand clean transportation

16 16
Organization Chart
Policy & Operations Boards
Chief Executive
Officer
General Counsel
Office
Operations Office Power Office Customer Office
Finance
Department
Data Analytics & IT
Department
Energy Risk
Management
Department
General Services
Department
Energy Solutions
Department
Power Services
Department
Communications &
Government Relations
Department
Energy Programs
Department
Regulatory
& Compliance
Department
Customer Success
Department

17 3CE Staff Positions Schedule
Office/Department Position Title FY
2024-25
FY
2025-26
FY
2026-27
Change from
Prior Year
Office of the
CEO
Chief Executive Officer 1 1 1 0
Board Clerk 1 1 1 0
Principal Management Analyst 0 1 1 0
To Be Determined 1 0 0 0
Total Positions 3 3 3 0
Office of the
General Counsel
General Counsel 1 1 1 0
Deputy General Counsel 1 1 0 -1
Total Positions 2 2 1 -1
Office of the
COO
Chief Operating Officer 1 1 1 0
General Services Director of General Services 1 1 1 0
Senior Manager of Human Resources 0 0 1 1
Facilities Coordinator 0 0 1 1
Human Resources Analyst 1 1 2 1
Administrative Specialist 1 1 1.5 0.5
Subtotal 4 4 7.5 3.5
Finance Director of Finance 1 1 1 0
Controller 0 0 1 1
Senior Accountant 1 1 1 0
Accountant 1 1 1 0
Administrative Specialist 1 1 1 0
Financial Planning and Analysis Analyst 0 0 2 2
Senior Billing Operations & Rates Analyst 1 1 1 0
Billing Operations & Rates Analyst 1 1 1 0
Subtotal 6 6 9 3
Energy Risk
Management
Director of Energy Risk Management 1 1 1 0
Energy Risk Analyst 1 2 2 0
Subtotal 2 3 3 0
17 Page 164 of 744
18 Office/Department Position Title FY
2024-25
FY
2025-26
FY
2026-27
Change from
Prior Year
Data & IT Director of Data Analytics and IT 1 1 1 0
Manager of Information Technology 1 1 1 0
Data Analyst 1 1 1 0
Data Engineer 1 1 1 0
Business Applications Developer 0 1 1 0
Information Technology Specialist 1 1 1 0
Subtotal 5 6 6 0
Total Positions 17 19 25.5 6.5
Office of the CPO Chief Power Officer 1 1 1 0
Power Supply Director of Power Supply Resources 1 1 1 0 Manager of Planning & Portfolio
Management 1 1 1 0
Manager of Market Operations 1 1 1 0
Power Resources & Markets Manager 1 1 1 0
Power Resources Planner 2 2 2 0
Contract Lifecycle/Commerical
Operations Manager 0 0 1 1
Power Supply Asset Manager 1 1 1 0
Manager of Settlements 0 0 1 1
Energy Transaction & Portfolio Analyst 0 0 1 1
Power Supply Analyst 1 1 1 0
Settlements Analyst 2 2 2 0
Administrative Specialist 0 0 0.5 0.5
Subtotal 11 11 14.5 3.5
Energy Solutions Director of Energy Solutions 0 0 1 1
Manager of Project Delivery 1 1 1 0
Manager of Business Development 0 0 1 1
Subtotal 1 1 3 2
Total Positions 12 12 17.5 5.5
3CE Staff Positions Schedule

19 Office/Department Position Title FY
2024-25
FY
2025-26
FY
2026-27
Change from
Prior Year
Office of the CCO Chief Customer Officer 1 1 1 0
Customer Success Director of Customer Success 1 1 1 0
Manager of Customer Accounts &
Services 1 1 1 0
Senior Customer Accounts Manager 2 2 2 0
Customer Accounts Manager 2 2 2 0
Administrative Specialist 1 1 1 0
Subtotal 8 8 8 0
Regulatory &
Compliance
Director of Regulatory Affairs &
Compliance 1 1 1 0
Senior Policy Advisor 0 0 1 1
Policy Advisor 2 2 2 0
Subtotal 3 3 4 1
Government
& Community
Relations
Director of Government & Community
Relations 0 1 1 0
Manager of Communications 1 1 1 0
Community Relations Manager 2 2 2 0
Communications Specialist 2 2 2 0
Subtotal 5 6 6 0
Energy Programs Director of Energy Programs 1 1 1 0
Manager of Energy Programs 1 1 1 0
VPP Programs Manager 0 0 1 1
Energy Programs Analyst 4 4 4 0
Subtotal 6 6 7 1
Total Positions 22 23 25 2
3CE GRAND TOTAL 56 59 72 13

Executive Summary
20 Introduction
Fiscal Year (FY) 2026-27 will mark another year of progress for Central Coast Community Energy (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. Guided by Financial Policies adopted annually by the Policy Board, 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.

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.

FY 2025-26 Budget Summary
Prior Year
Actuals
2024-25
Adopted
Budget
2025-26
Mid-Year
Estimate
2025-26
Recommended
Budget
2026-27
Recommended
Change from
Adopted
Net Electricity Sales 658,974,802 578,022,716 555,527,132 505,582,881 (72,439,835) Deferred Revenue - - (39,527,962) - -
Interest and Investment Returns 11,037,533 9,100,000 9,942,617 9,450,000 350,000 Other Income 159,518 75,000 136,849 250,000 175,000
Revenue for Damages 8,101,745 - - - -
Sub-Total Revenues 678,273,598 587,197,716 526,078,636 515,282,881 (71,914,835) Capital Infrastructure Reserve - 1,200,000 6,741,324 - (1,200,000) Total Financing Sources 678,273,598 588,397,716 532,819,960 515,282,881 (73,114,835) Cost of Energy 593,415,108 534,776,256 452,043,477 432,693,327 (102,082,929) Salaries and Employee
Benefits 10,765,707 14,260,774 12,601,420 18,235,160 3,974,386 Services and Supplies 29,288,173 38,160,686 36,211,516 42,790,622 4,629,936 Capital Assets 276,648 1,200,000 383,219 6,941,500 5,741,500 Total Financing Uses 633,745,636 588,397,716 501,239,632 500,660,609 (87,737,107) Total Budgeted Change to
Net Position 44,527,962 0 31,580,328 14,622,272 14,622,272 Cost of Energy: Understanding the Decline
COE is 3CE’s largest and most volatile expense, comprising 86% of total appropriations. COE 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.

The Budget at a Glance
21 Page 168 of 744
Executive Summary (continued)
22 Prudent Management and Informed Oversight Drive Lower Cost Outcomes The decline in the cost of energy projected FY 2026-27 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 Power Purchase Agreements (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. The recommended $18.2 million 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) reflects potential salary adjustments and higher employer health care premiums – investments the agency is making to retain our talented staff. The remaining $3.0 million, funds 13 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 that the agency can avoid costly outside contractors and conditions where available consultants have been Historical COE

23 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 grows by $2.2 million, maintaining 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.

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).

24 Customers saw benefits in record program participation, greenhouse gas reductions, equity program participation levels, the launch of improved Electrify Your Home, 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.

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 that will span 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, Page 171 of 744 25 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.

Longer-term uncertainty rests in how Senate Bill 100’s zero-carbon requirement will be defined and what new compliance structures may be introduced, such as the Clean Energy Standard and Reliable Clean Power Procurement Program (RCPPP). Similarly, the RCPPP implementation may further limit local decision-making by converting the Integrated Resource Plan to an enforceable procurement mandate. These efforts could create unnecessary costs for customers by requiring load serving entities to procure beyond their need, or conversely, could discourage load serving entities from proactively addressing portfolio needs.

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.
25 Page 172 of 744
26 Office Summary
Office of the CEO
The Office of the Chief Executive Officer provides leadership and directs the implementation of 3CE’s business functions, programs, and initiatives to ensure alignment with the Policy Board’s strategic vision and policies. An integral part of this work involves communication and collaboration with customers and stakeholders, the cultivation of strong relationships with 3CE’s Member Agencies, and the facilitation of programs that advance the Board’s goals.

The Chief Executive Officer works to accelerate the adoption of renewable energy resources, overseeing the negotiation of Power Purchase Agreements (PPAs) and ensuring 3CE’s plans align with its mission to provide reliable, clean, affordable electricity and electrification programs that reduce greenhouse gas emissions and strengthen the local economy. At its heart, the Executive Office focuses on leading 3CE in a way that serves its customers, empowers its staff, and brings economic and environmental benefits to its communities.

The Recommended Budget for the Office of the CEO totals $1,607,816, with $1,460,816 allocated to salaries and benefits and $147,000 for services and supplies. This reflects a $440,731 increase from the FY 2025-26 Adopted Budget of $1,167,085. Personnel costs increase $426,731, of which $247,266 is an approved augmentation for a contracted Board Clerk. Services and supplies increase $14,000, primarily for travel costs. Three permanent positions are authorized for this office in FY 2026-27.

FY 2026-27 Budget Summary — Office of the CEO
Prior Year
Actuals
2024-25
Adopted
Budget
2025-26
Mid-Year
Estimate
2025-26
Recommended
Budget
2026-27
Recommended
Change from
Adopted
Salaries and Employee
Benefits
961,954 1,034,085 1,069,600 1,460,816 426,731
Services and Supplies 114,005 133,000 103,446 147,000 14,000 Total Financing Uses 1,075,958 1,167,085 1,173,046 1,607,816 440,731 Change in Net Position (1,075,958) (1,167,085) (1,173,046) (1,607,816) (440,731)

27 Office of the CEO: Chief Executive Officer
FY 2025-26 ACCOMPLISHMENTS
• Led a coordinated, agency-wide response
to unprecedented PCIA pressures, aligning
regulatory advocacy, customer outreach,
rate design and executive decision-making
to protect customer value and achieve 100%
retention among strategically engaged
accounts.
• Advanced the creation of the Department of
Energy Solutions, securing Board direction to
develop an implementation framework that will
help 3CE move from supporting local energy
concepts to developing and operating local
energy projects.
• Strengthened executive oversight and
organizational accountability by realigning
leadership responsibilities across Power
Services, Regulatory Affairs, Finance, Data
and IT, Human Resources and Facilities —
streamlining decision-making and reinforcing
audit-ready controls.
• Guided major strategic decisions defining
3CE’s next phase, including the transition
from standalone battery rebates toward a
Virtual Power Plant, expansion of the agency’s
renewable portfolio and development of 3CE-owned public-facing EV charging infrastructure. • Expanded 3CE’s regional presence and
institutional strength through service expansion
to Atascadero and unincorporated San Luis
Obispo County, establishment of the Santa
Barbara regional office, relocation of the
Monterey headquarters, completion of the
annual financial audit and maintenance of the
agency’s “A” credit rating.

FY 2026-27 FOCUS AREAS
• Support the Boards’ vision and lead an
enterprise strategy that aligns 3CE’s
affordability, renewable energy, customer
engagement, policy, financial, and
community-investment priorities.
• Strengthen executive-team coordination
and accountability through clear priorities,
performance measures, decision-making
responsibilities, and regular board reporting.
• Guide the successful launch of the Energy
Solutions Department, ensuring its project-development, financing, governance, and partnership models support member-agency priorities while appropriately managing risk.
• Strengthen relationships with board
members, member agencies, public-power
partners, and industry leaders to advance
shared priorities and identify strategic
opportunities for 3CE.
• Build a high-performing organizational
culture grounded in collaboration,
accountability, professional development,
transparent governance, and service to
customers and communities.

28 Office Summary (continued)
Office of the General Counsel
The Office of the General Counsel manages 3CE’s legal affairs, compliance, contract review and negotiation, and dispute resolution. The office also coordinates with outside counsel on specialized legal matters such as power purchase agreements, regulatory proceedings, real property transactions, and litigation. The General Counsel serves under a professional services agreement and will continue in that capacity in FY 2026-27.

The Recommended Budget totals $2,294,000, a decrease of $ 475,108 from the FY 2025-26 Adopted Budget. The FY 2025-26 Adopted Budget included two positions in salaries and employee benefits, General Counsel and Deputy General Counsel, totaling $698,108. Neither is budgeted for FY 2026-27. The General Counsel cost is now budgeted in services and supplies within the legal services line, consistent with how the function is contracted and paid, and the Deputy General Counsel position is not carried forward.

The reclassification accounts for a $240,000 increase in legal services; the balance of the reduction reflects the elimination of the Deputy General Counsel position and decreases across travel and other auxiliary expenses.

Services and supplies total $2,294,000; of that amount, $2,240,000 supports legal services, comprising the contracted General Counsel and outside counsel engaged on power supply, real property, regulatory, litigation, and dispute resolution matters.

Legal spending varies significantly year to year with transaction volume and the timing of contested proceedings, and the budget is set to maintain capacity for matters that cannot be forecast at adoption.

FY 2025-26 ACCOMPLISHMENTS
• Drafted and negotiated contracts and amendments
supporting all agency offices and departments.
• Advised on real-property negotiations and the
purchase of 3CE’s Santa Cruz County office.
• Supported Energy Programs procurements, capital-improvement initiatives, electrification projects and grants.
• Advised the Boards on closed-session matters,
public-agenda business and agency policy updates.
• Managed pending litigation with outside counsel
and advised on advocacy and comments in CPUC
proceedings.

FY 2026-27 FOCUS AREAS
• Provide timely, accurate legal advice and
services that support staff and board
priorities.
• Manage litigation and advise on contracts,
regulatory developments, and other legal
matters affecting the agency.
• Develop, review, and maintain agency
policies in coordination with staff and the
boards.
28 FY 2025-26 Budget Summary — Office of General Counsel Prior Year
Actuals
2024-25
Adopted
Budget
2025-26
Mid-Year
Estimate
2025-26
Recommended
Budget
2026-27
Recommended
Change from
Adopted
Salaries and Employee Benefits 293,224 698,108 137,237 - (698,108) Services and Supplies 459,413 2,071,000 831,247 2,294,000 223,000 Total Financing Uses 752,637 2,769,108 968,484 2,294,000 (475,108) Change in Net Position (752,637) (2,769,108) (968,484) (2,294,000) 475,108

2929 Page 176 of 744
30 Office Summary (continued)
Office of the Chief Operations Officer
FY 2026-27 Budget Summary — Office of the COO
Prior Year
Actuals
2024-25
Adopted
Budget
2025-26
Mid-Year
Estimate
2025-26
Recommended
Budget
2026-27
Recommended
Change from
Adopted
Interest and Investment Returns 9,731,643 9,100,000 9,223,535 9,450,000 350,000 Other Income 91,090 75,000 75,775 50,000 (25,000)
Sub-Total Revenues 9,822,733 9,175,000 9,299,310 9,500,000 325,000 Capital Infrastructure Reserve - 1,200,000 6,741,324 - (1,200,000) Total Financing Sources 9,822,733 10,375,000 16,040,634 9,500,000 (875,000) Salaries and Employee Benefits 3,179,023 4,314,396 4,095,262 5,968,743 1,654,347 Services and Supplies 9,751,046 15,212,433 13,901,048 15,883,050 670,617 Capital Assets 276,648 500,000 118,219 3,560,000 3,060,000 Total Financing Uses 13,206,718 20,026,829 18,114,529 25,411,793 5,384,964 Change in Net Position (3,383,985) (9,651,829) (2,073,895) (15,911,793) (6,259,964) The Office of the Chief Operations Officer oversees four departments: General Services, Finance, Energy Risk Management, and Data Analytics & Information Technology. This office is responsible for 3CE’s financial planning, treasury and investment management, rates and billing operations, and internal controls; for the independent monitoring and measurement of energy risk exposures; for the stewardship of customer usage and transaction data and the agency’s information technology infrastructure; and for the human resources, facilities, and administrative services that develop, retain, and enable 3CE staff.
30 The Recommended Budget for the Office of the Chief Operations Officer totals $25,411,793, with $5,968,743 allocated to salaries and benefits, $15,883,050 to services and supplies, and $3,560,000 to capital assets. This is a $5,384,964 increase from the FY 2025-26 Adopted Budget of $20,026,829, driven principally by planned capital projects and staffing augmentations. Salaries and benefits also include $152,616 for two contracted positions and three summer interns; these costs are budgeted within salaries and benefits but are excluded from the office’s position count.

The Recommended Budget for the office is partially financed by $9,500,000 in estimated revenue, consisting of $9,450,000 in interest income on self-managed investments and $50,000 in rental income from the San Luis Obispo office building.

No draw on the Capital Infrastructure Reserve is budgeted in FY 2026-27, compared to $1,200,000 in the prior year. Twenty-six positions, or 25.5 full-time equivalents, across its four departments are authorized for this office.

31 FY 2026-27 Budget Summary — General Services
Prior Year Actuals
2024-25
Adopted Budget
2025-26
Mid-Year
Estimate
2025-26
Recommended
Budget
2026-27
Recommended
Change from
Adopted
Salaries and Employee
Benefits
466,782 659,777 712,795 1,255,739 595,962
Services and Supplies 577,570 786,600 388,125 1,433,000 646,400 Capital Assets - - 10,000 - -
Total Financing Uses 1,044,352 1,446,377 1,110,920 2,688,739 1,242,362 Change in Net Position (1,044,352) (1,446,377) (1,110,920) (2,688,739) (1,242,362) The General Services Department (formerly Administrative Services and Human Resources) supports 3CE’s mission by developing, retaining, and enabling a diverse, productive workforce, and by managing the agency’s facilities, insurance, risk, and administrative operations across its office locations.

Office of the COO — General Services
The Recommended Budget for the General Services Department totals $2,688,739, with $1,255,739 in salaries and benefits and $1,433,000 in services and supplies. This is a $1,242,362 increase from the FY 2025-26 Adopted Budget of $1,446,377.

Personnel costs increase by $595,962, reflecting approved augmentation requests — a Senior Manager of Human Resources, a Facilities Coordinator, an additional Human Resources Analyst, a half-share of a shared Administrative Specialist, and additional workers’ compensation. Personnel costs also include funding for a limited-term contractor and for the agency’s summer internship program.

Services and supplies increase $646,400, driven largely by the realignment of agencywide facilities and risk costs from the Finance Department to General Services — including rent, liability insurance, utilities, and building maintenance.

Seven positions, or 6.5 full-time equivalents, are authorized for this department.

FY 2025-26 ACCOMPLISHMENTS
• Opened new 3CE Santa Barbara regional office
and moved the agency headquarters in Monterey
to 20 Ryan Ranch Road.
• Switched benefit providers, maintaining
competitive offerings while continuing to fund
100% of employee costs and 90% of employee
dependent costs.
• Achieved Great Place to Work certification for
second consecutive year.

FY 2026-27 FOCUS AREAS
• Improve Ryan Ranch office to add
collaborative team workspaces, modern
video conference facilities, and space for
future employee headcount growth.
• Work with employees to build a best-in-class workplace — one that invests in staff engagement, professional development, and
growth so our team has what it needs to
thrive on behalf of customers.
• Enhance the recruitment and onboarding
processes to secure top talent for all
departmental vacancies and support the
establishment of the new Department of
Energy Services.

32 Office Summary (continued)
FY 2026-27 Budget Summary — Finance
Prior Year
Actuals
2024-25
Adopted
Budget
2025-26
Mid-Year
Estimate
2025-26
Recommended
Budget
2026-27
Recommended
Change from
Adopted
Interest and Investment Returns 9,731,643 9,100,000 9,223,535 9,450,000 350,000 Other Income 91,090 75,000 75,775 50,000 (25,000)
Sub-Total Revenues 9,822,733 9,175,000 9,299,310 9,500,000 325,000 Capital Infrastructure Reserve - 1,200,000 6,741,324 - (1,200,000) Total Financing Sources 9,822,733 10,375,000 16,040,634 9,500,000 (875,000) Salaries and Employee Benefits 1,429,831 1,516,863 1,606,485 2,340,641 823,778 Services and Supplies 8,682,344 13,294,333 12,896,533 13,292,050 (2,283) Capital Assets 143,272 500,000 100,000 3,500,000 3,000,000 Total Financing Uses 10,255,448 15,311,196 14,603,018 19,132,692 3,821,496 Change in Net Position (432,715) (4,936,196) 1,437,616 (9,632,692) (4,696,496) The Finance Department oversees financial planning and budgeting, financial reporting and analysis, electric generation rates, billing operations, treasury and investment management, debt and financing transactions, internal controls and compliance, and financial strategy. Key duties include developing the annual Recommended Budget, recommending electric generation rates, producing the mid-year budget forecast, supporting the annual financial audit, and developing and monitoring financial policies.

By aligning financial operations with regulatory and market dynamics, the department plays a central role in sustaining 3CE’s operational and programmatic success.

Office of the COO — Finance
The Recommended Budget for the Finance Department totals $19,132,692, including $2,340,641 in salaries and benefits, $13,292,050 in services and supplies, and $3,500,000 in capital assets. This is a $3,821,496 increase from the FY 2025-26 Adopted Budget of $15,311,196.

Personnel costs increase $823,778, of which $506,270 reflects approved augmentation requests for a Controller and two Financial Planning Analysts. The remaining increase is largely due to increased health benefit costs.

Services and supplies are essentially flat, decreasing $2,283 on a net basis: with increases in data management, IOU service fees, and accounting services costs offset by the transfer of rent, insurance, utilities, and building maintenance to General Services. Capital assets increase $3,000,000 for planned agencywide capital projects, including real estate purchases related to the build-out of the Monterey headquarters.

The appropriation for operational contingencies, which equals five percent (5%) of recommended appropriations excluding cost of energy (COE), is budgeted under this department. Page 179 of 744
3333
FY 2025-26 ACCOMPLISHMENTS
• Updated Financial Policies to incorporate
credit rating and liquidity targets, Government
Accounting Standards Board (GASB) 62/63
reserve accounting treatment, and capital
governance enhancements.
• Initiated 3CE’s second energy prepayment
transaction on its PPA portfolio to reduce
future energy costs.
• Continued investment in automation,
validation, and check request processes to
improve customer support and experience.
• Implemented a new purchase card and travel
reimbursement platform, strengthening
internal financial controls and expense
management.

FY 2026-27 FOCUS AREAS
• Position 3CE for an A+ credit rating by
strengthening liquidity, reserves, and financial
governance and completing a well-supported
credit rating review process.
• Execute the second PPA prepayment
transaction to achieve meaningful, long-term
savings in power purchase costs and deliver
measurable value to customers.
• Strengthen finance and accounting capabilities
through process standardization, stronger
internal controls, and evaluation of an ERP
system and implementation roadmap.
• Develop and implement a multi-year reserve
funding plan that establishes a sustainable
path to policy targets while addressing rate
affordability, market volatility, and out-year cost
pressures.

The Recommended Budget for the department is financed by $9,450,000 in interest and investment returns and $50,000 in rental income from the San Luis Obispo office building.

No draw on the Capital Infrastructure Reserve is budgeted, compared to $1,200,000 in the prior year. The department is led by the Director of Finance and is authorized ten positions, or 10.0 full-time equivalents, including the Chief Operations Officer position, which is budgeted within the department.

Office Summary (continued)
The Energy Risk Management Department independently monitors, measures, and reports risk exposures; oversees compliance with the agency’s Energy Risk Management Policy; provides analytics, valuation, and counterparty credit management; and serves as a control and check on procurement activities.

The Recommended Budget for the Energy Risk Management Department totals $858,770, including $781,770 in salaries and benefits and $77,000 in services and supplies. This is a $17,247 decrease from the FY 2025-26 Adopted Budget of $876,017.

Personnel costs decrease $37,247 based on updated position and benefit assumptions.

Services and supplies increase $20,000 for ancillary costs such as analytical service subscriptions and professional development. The department is led by the Director of Energy Risk Management and is authorized three positions, or 3.0 full-time equivalents.

FY 2026-27 Budget Summary — Energy Risk Management
Prior Year
Actuals
2024-25
Adopted
Budget
2025-26
Mid-Year
Estimate
2025-26
Recommended
Budget
2026-27
Recommended
Change from
Adopted
Salaries and Employee Benefits 311,212 819,017 620,622 781,770 (37,247) Services and Supplies 21,711 57,000 33,711 77,000 20,000 Total Financing Uses 332,922 876,017 654,333 858,770 (17,247) Change in Net Position (332,922) (876,017) (654,333) (858,770) 17,247 Office of the COO — Energy Risk Management
34 FY 2025-26 ACCOMPLISHMENTS
• Completed the 2025 Energy Risk Management
Policy (ERMP) annual review (adopted by
the Operations Board in November 2025),
delivered the 2026 staff and agent training and
acknowledgement cycle, and launched the 2026
revision — benchmarking peer policies and scoping
a substantial slate of governance and control
enhancements for Board adoption later in the year.
• Authored a Risk Office operating-model framework
establishing an independent, auditable risk function
with explicit model, valuation, and consultant
governance, benchmarked against peer CCAs and
utilities.
• Advanced 3CE’s in-house ETRM to production
(deal entry, position, mark-to-market, RA and RPS
compliance, credit/collateral) and deployed internal
Energy and Credit/Collateral Dashboards for real-time prices and portfolio views, reducing reliance on external systems and consultants.
• Strengthened trade-lifecycle controls — trade
validation, price-source governance, and
counterparty and collateral exposure monitoring —
with monthly reporting to the RMC, and contributed
risk and portfolio analysis to the October 2025
Executive Committee staff report and the Long-Range Portfolio Strategy Working Group.

FY 2026-27 FOCUS AREAS
• Complete and adopt the 2026 ERMP revision,
strengthening escalation and budget-deviation
reporting, Middle Office compliance independence,
advisor governance and attestation, delegation
provisions, and Back Office confirmation review, and
aligning hedge tolerances with Long-Range Portfolio
Strategy and PCIA developments.
• Formalize the independent Risk Office as an
enterprise-facing control and analytics function
— a documented charter, standing interfaces with
Finance, Legal, Regulatory, and Data/IT, direct risk
reporting to executive and board committees, and
clear dual-key controls where risk oversight meets
business execution.
• Mature the ETRM (Version II) and Energy Dashboard
toward a single governed system of record for
positions, valuation, compliance, and exposure
reporting.
• Establish formal model and valuation governance —
a model inventory, change control, and documented
price-source hierarchies and assumptions — to
further reduce dependence on outside consultants.
• Deepen analyst-team capability and cross-training to
ensure the continuity, independence, and resilience
of the risk function as portfolio complexity grows.

The Data Analytics & Information Technology Department oversees 3CE’s customer usage and transaction data for more than 515,000 accounts and provides strategic analysis to inform business decisions. The department’s primary objective is to empower the organization with information and insights derived from a consolidated data environment that increases visibility into agency operations. The department also includes 3CE’s information technology team, which builds, maintains, and defends the agency’s technology infrastructure and ensures data security.

The Recommended Budget for the Data Analytics & Information Technology Department totals $2,731,592, with $1,590,592 in salaries and benefits, $1,081,000 in services and supplies, and $60,000 in capital assets. This is a $338,353 increase from the FY 2025-26 Adopted Budget of $2,393,239.

Personnel costs increase $271,853, reflecting higher salary and health care premium benefit expenses based on competitive market conditions. Services and supplies increase $6,500 on a net basis, driven by an augmentation for agencywide artificial intelligence enablement, partially offset by lower contractor services. Capital assets of $60,000 are budgeted for end-user equipment and network security hardware. The department is authorized six positions, or 6.0 full-time equivalents. Salaries and benefits also include $100,000 for a contracted part-time backfill, which is not counted in the position total.

FY 2025-26 Budget Summary — Data Analytics & Information Technology Prior Year
Actuals
2024-25
Adopted
Budget
2025-26
Mid-Year
Estimate
2025-26
Recommended
Budget
2026-27
Recommended
Change from
Adopted
Salaries and Employee Benefits 971,198 1,318,739 1,155,360 1,590,592 271,853 Services and Supplies 469,421 1,074,500 582,679 1,081,000 6,500 Capital Assets 133,376 - 8,219 60,000 60,000
Total Financing Uses 1,573,995 2,393,239 1,746,258 2,731,592 338,353 Change in Net Position (1,573,995) (2,393,239) (1,746,258) (2,731,592) (338,353) Office of the COO — Data Analytics & Information Technology 35 FY 2025-26 ACCOMPLISHMENTS
• Strengthened data governance and compliance
by implementing additional Advanced Metering
Infrastructure (AMI) audit readiness measures,
including annual scanning of vendors with access
to AMI-related data.
• Created and implemented the Agency’s AI Policy
to support the safe, responsible, and consistent
use of AI across the agency.
• Advanced the Agency’s data and technology
foundation through continued support of core
analytics, reporting, and operational systems.

FY 2026-27 FOCUS AREAS
• Expand ETRM 2.0 to include additional
contract management capabilities and power
supply-specific use cases, improving visibility
across transactions, settlements, financial
tracking, and operational decision-making.
• Enable the Agency’s AI infrastructure to
support safe, responsible AI innovation
across departments, including approved
tools, governance, training, and practical use
cases.
• Strengthen documentation of existing
systems, including schemas, data flows,
business logic, ownership, and system
dependencies to improve continuity,
supportability, and long-term governance.

The Office of the Chief Power Officer oversees two departments: Power Services and Energy Solutions. This office is responsible for securing competitively priced, reliable, clean, and renewable electricity for 3CE customers; for managing the agency’s wholesale portfolio, settlements, and long-term resource planning; and for developing and operating 3CE-owned energy assets and distributed energy resource solutions that create additional value for customers and the grid.

The Recommended Budget for the Office of the Chief Power Officer totals $443,590,628, including $432,693,327 in cost of energy, $5,033,802 in salaries and benefits, $2,482,000 in services and supplies, and $3,381,500 in capital assets. This is a $96,895,045 decrease from the FY 2025-26 Adopted Budget of $540,485,673, driven almost entirely by a $102,082,929 reduction in the cost of energy.

The Recommended Budget for the office is financed by $505,782,881, consisting of $505,582,881 in net electricity sales and $200,000 in grant-supported other income.

The office is authorized 18 positions, or 17.5 full-time equivalents, across its two departments. Salaries and benefits also include $221,957 for a part-time contracted position, which is not counted in the position total.

Office of the Chief Power Officer
FY 2026-27 Budget Summary — Office of the Chief Power Officer Prior Year
Actuals
2024-25
Adopted
Budget
2025-26
Mid-Year
Estimate
2025-26
Recommended
Budget
2026-27
Recommended
Change from
Adopted
Net Electricity Sales 658,974,802 578,022,716 555,527,132 505,582,881 (72,439,835) Deferred Revenue - - (39,527,962) - -
Interest and Investment Returns 1,305,890 - 716,029 - - Other Income - - - 200,000 200,000
Revenue for Damages 8,101,745 - - - -
Total Financing Sources 668,382,437 578,022,716 516,715,199 505,782,881 (72,239,835) Cost of Energy 593,415,108 534,776,256 452,043,477 432,693,327 (102,082,929) Salaries and Employee Benefits 2,281,186 3,293,777 2,753,122 5,033,802 1,740,025 Services and Supplies 1,321,307 2,415,640 1,402,485 2,482,000 66,360 Capital Assets - - - 3,381,500 3,381,500
Total Financing Uses 597,017,600 540,485,673 456,199,084 443,590,628 (96,895,045) Change in Net Position 71,364,837 37,537,043 60,516,115 62,192,252 24,655,209 Office Summary (continued)
36 Page 183 of 744
3737
The Power Services Department secures competitively priced, reliable, clean, and renewable electricity for 3CE customers. This is achieved through a mix of short-term and long-term contracts designed to increase cost certainty and ensure compliance with all regulatory procurement requirements. Other departmental functions include power settlements, scheduling coordination, and long-term resource planning, as well as continued participation in joint procurement efforts through California Community Power (CC Power).

Power Services staff operate within a dynamic and often volatile energy market, where prices can shift unpredictably and significantly. In addition to market variability, evolving regulatory and legislative frameworks may lead to structural changes that impact energy pricing and procurement obligations. To navigate these challenges, 3CE adheres to its Energy Risk Management Policy — helping to mitigate risk, promote rate stability, and support the agency’s commitment to securing clean and renewable energy resources.

The Recommended Budget for the Power Services Department totals $439,074,835, including $432,693,327 in cost of energy, $4,319,509 in salaries and benefits, and $2,062,000 in services and supplies. This is a $101,410,838 decrease from the FY 2025-26 Adopted Budget of $540,485,673.

The cost of energy decreases $102,082,929, reflecting lower energy purchase and CAISO day-ahead costs, reduced capacity purchases, and increased generation credits from 3CE’s expanding portfolio of executed power purchase agreements. Personnel costs increase $1,025,732, of which $663,834 reflects approved augmentation requests for a Manager of Settlements, a Contract Lifecycle and Commercial Operations Manager, an Energy Transaction and Portfolio Analyst, and a half-share of a shared Administrative Specialist. The remaining increase is largely due to increased health care premium benefit costs. Services and supplies decrease $353,640 on a net basis, with a reduction in technical consultants partially offset by legal services and membership and project costs associated with CC Power.

Office of the CPO — Power Services
FY 2026-27 Budget Summary — Power Services
Prior Year
Actuals
2024-25
Adopted Budget
2025-26
Mid-Year
Estimate
2025-26
Recommended
Budget
2026-27
Recommended
Change from
Adopted
Net Electricity Sales 658,974,802 578,022,716 555,527,132 505,582,881 (72,439,835) Deferred Revenue - - (39,527,962) - -
Interest and Investment Returns 1,305,890 - 716,029 - - Revenue for Damages 8,101,745 - - - -
Total Financing Sources 668,382,437 578,022,716 516,715,199 505,582,881 (72,439,835) Cost of Energy 593,415,108 534,776,256 452,043,477 432,693,327 (102,082,929) Salaries and Employee Benefits 2,281,186 3,293,777 2,753,122 4,319,509 1,025,732 Services and Supplies 1,321,307 2,415,640 1,402,485 2,062,000 (353,640) Total Financing Uses 597,017,600 540,485,673 456,199,084 439,074,835 (101,410,838) Change in Net Position 71,364,837 37,537,043 60,516,115 66,508,045 28,971,002

38 The Recommended Budget for the department is financed by $505,582,881 in estimated net electricity sales, a $72,439,835 decrease from the prior year, driven by lower generation rates as a result of the rate adjustment that the Policy Board approved in early 2026 driven by lower energy costs. The Recommended Budget assumes no rate adjustment, but staff will continue to monitor per the rate development schedule. The department is authorized 15 positions, or 14.5 full-time equivalents, including the Chief Power Officer position, which is budgeted within the department. Salaries and benefits also include $221,957 for a part-time contracted position, which is not counted in the position total.

FY 2025-26 ACCOMPLISHMENTS
• Onboarded six PPA/ESA into operation,
including Sunzia Wind, Angela Solar+Storage
and Aratina Solar+Storage. These are 3CE’s first
new build projects since 2022. Signed a PPA and
began receiving energy from ReGen Monterey, a
local landfill gas project.
• Completed an audit of the Settlements division,
identifying strengths and opportunities.
• Improved internal processes to facilitate COE
performance monitoring and optimize hedging
strategy to benefit customers.
• Implemented load forecasting enhancements to
reduce forecasting errors by nearly two thirds,
improving budgeting and planning.

FY 2026-27 FOCUS AREAS
• Evaluate a settlements system to
improve resource-level revenue tracking
and validation of counterparty and
vendor charges, with potential midyear
procurement.
• Develop an ETRM roadmap with Energy
Risk Management and Data Analytics and
IT to guide future portfolio and contract
management enhancements.
• Implement a Power Services staffing
strategy to manage the agency’s growing
portfolio.

Office Summary (continued)
Office of the CPO — Energy Solutions
The Energy Solutions Department is a new department in FY 2026-27. It develops, owns, and operates 3CE energy assets and customer-sited solutions — including electric vehicle charging infrastructure, distributed energy resources, and storage — that expand customer access to clean energy, strengthen local resilience, and aims to create new revenue streams that support rate stability. The department also serves as 3CE’s capital project delivery function, managing tenant improvement and office buildout projects on behalf of the agency.

FY 2026-27 Budget Summary — Energy Solutions
Prior Year
Actuals
2024-25
Adopted
Budget
2025-26
Mid-Year
Estimate
2025-26
Recommended
Budget
2026-27
Recommended
Change from
Adopted
Other Income - - - 200,000 200,000
Total Financing Sources - - - 200,000 200,000
Salaries and Employee Benefits - - - 714,293 714,293
Services and Supplies - - - 420,000 420,000
Capital Assets - - - 3,381,500 3,381,500
Total Financing Uses - - - 4,515,793 4,515,793

39 The Recommended Budget for the Energy Solutions Department totals $4,515,793, with $714,293 in salaries and benefits, $420,000 in services and supplies, and $3,381,500 in capital assets covering both energy asset development and agency facility buildouts.

Because FY 2026-27 is the department’s first budgeted year, there is no comparable prior-year adopted budget, and the full amount is presented as an increase.

Personnel costs of $714,293 fund the department’s initial staffing component, including approved augmentations for a Director of Energy Solutions and a Manager of Business Development, both budgeted from January 1, with a Manager of Project Delivery transferred from the Energy Programs Department.

Services and supplies of $420,000 include consulting for program development, site assessment, and technical support. The budget also funds ongoing operations and maintenance of 3CE-owned charging assets at three sites. Capital assets of $3,381,500 fund three areas of work: $1.4 million for electric vehicle charger asset program (EVCAP) infrastructure and planning, $0.5 million for microgrid analysis and preliminary design, and $1.5 million for agency facility buildouts delivered by the department in its capital project management role.

The Recommended Budget for the department is financed in part by $200,000 in grant revenue from the Santa Barbara County Air Pollution Control District for EVCAP infrastructure. The department is authorized three positions, or 3.0 full-time equivalents.

FY 2025-26 ACCOMPLISHMENTS
• Received Policy Board direction to
establish a new department of Energy
Solutions with a mission to convert clean
energy procurement success into local
energy infrastructure, member agency
support, customer value, and long-term
business resilience.

FY 2026-27 FOCUS AREAS
• Establish and resource department, including hiring
staff, reviewing active support opportunities across
service area, and establishing short-term, medium-term, and long-term strategic priorities. • Identify and evaluate sites for local generation
projects to utilize battery storage and generation
assets to enhance energy resiliency, reduce utility
costs, and support transition to 100% renewable
energy.
• Manage 3CE capital projects, including renovation
of existing Soquel office and preliminary planning of
new main headquarters.

40 Office Summary (continued)
The Office of the Chief Customer Officer leads 3CE’s efforts to drive lasting community impact through strong, transparent relationships with customers and member communities. This office oversees four departments: Customer Success, Regulatory & Compliance, Communications & Government Relations, and Energy Programs. Together they guide customer service and experience, regulatory advocacy and compliance, legislative and community engagement, and the delivery of energy programs that provide meaningful benefits across the Central Coast.

By promoting accessible, community-driven programs for residents, businesses, and public agencies, and by advocating for 3CE customers before state and federal regulators and legislators, the Office of the Chief Customer Officer fosters trust, encourages participation, and magnifies the value of 3CE service.

Office of the Chief Customer Officer
FY 2026-27 Budget Summary — Office of the Chief Customer Officer Prior Year
Actuals
2024-25
Adopted Budget
2025-26
Mid-Year
Estimate
2025-26
Recommended
Budget
2026-27
Recommended
Change from
Adopted
Interest and Investment Returns - - 3,053 - -
Other Income 68,428 - 61,074 - -
Total Financing Sources 68,428 - 64,127 - -
Salaries and Employee Benefits 4,050,321 4,920,408 4,546,199 5,771,799 851,391 Services and Supplies 17,642,403 18,328,613 19,973,290 21,984,572 3,655,959 Capital Assets - 700,000 265,000 - (700,000)
Total Financing Uses 21,692,723 23,949,021 24,784,489 27,756,371 3,807,350 Change in Net Position (21,624,295) (23,949,021) (24,720,362) (27,756,371) (3,807,350) s
40 The Recommended Budget for the Office of the Chief Customer Officer totals $27,756,371, a $3,807,350 increase from the FY 2025-26 Adopted Budget of $23,949,021.

Salaries and benefits account for $5,771,799 and services and supplies for $21,984,572.

No capital assets are budgeted in FY 2026-27, compared to $700,000 in the prior year, as ownership of charging assets will be transferred to the Energy Solutions Department.

The increase reflects continued investment in customer-facing programs and advocacy.

Salaries and benefits grow $851,391, of which $400,927 funds approved augmentations — a Senior Policy Advisor and a Virtual Power Plant Programs Manager — with the remainder reflecting merit and benefit cost adjustments across existing positions.

Services and supplies grow $3.7 million: $2.2 million for energy program delivery, including direct customer incentive payments and $1.5 million to expand communications, customer experience capacity, and legislative and community engagement.

The office is authorized 25 positions, or 25.0 full-time equivalents, across its four departments. Page 187 of 744
41 Office of the CCO — Customer Success
The Customer Success Department (formerly Communications & Outreach) provides direct customer support services, helping customers access benefits and understand their energy choices. Following the completion of 3CE’s regional enrollment, the department is reoriented toward post-enrollment operations: customer accounts and service delivery, call center performance, customer experience systems, and the measurement of customer satisfaction.

The Recommended Budget for the Customer Success Department totals $2,506,507, with $1,984,007 in salaries and benefits and $522,500 in services and supplies. This is a $1,437,502 decrease from the FY 2025-26 Adopted Budget of $3,944,009. The reduction reflects a change in organizational structure, which moved the agency’s communications staff to the Government & Community Relations Department.

Personnel costs decrease $257,252 versus the prior year because of the transfer of communications staff to the Government & Community Relations Department, which is partially offset by an increase in merit and benefit cost adjustments across remaining positions.

Services and supplies decrease $1,180,250, reflecting the reorganization that transfers the agency’s advertising, communications consulting, website, promotional items, noticing, and required mailings budgets to the Government & Community Relations Department. These decreases are partially offset by an augmentation for a new customer experience systems contract and a planned assessment of call center capabilities.

The department is led by the Director of Customer Success, and is authorized eight positions, or 8.0 full-time equivalents.

FY 2026-27 Budget Summary — Customer Success
Prior Year
Actuals
2024-25
Adopted
Budget
2025-26
Mid-Year
Estimate
2025-26
Recommended
Budget
2026-27
Recommended
Change from
Adopted
Salaries and Employee Benefits 2,409,030 2,241,259 2,009,434 1,984,007 (257,252) Services and Supplies 1,646,356 1,702,750 1,055,614 522,500 (1,180,250) Total Financing Uses 4,055,386 3,944,009 3,065,048 2,506,507 (1,437,502) Change in Net Position (4,055,386) (3,944,009) (3,065,048) (2,506,507) 1,437,502

42 Office Summary (continued)
42 FY 2025-26 ACCOMPLISHMENTS
• Strengthened customer intelligence and service
delivery by connecting account, contact,
interaction and program-participation data in
Salesforce; centralizing customer escalations;
and advancing the Customer Insights Report to
support more informed decision-making.
• Conducted proactive outreach to 250 strategic
accounts ahead of the January PCIA increase,
providing targeted education and relationship-based support that reduced uncertainty, strengthened engagement and supported
customer retention.
• Enhanced rate-related customer support by
developing communications and service plans for
3Cflex, supporting a new rate-analysis tool and
positioning 3Cprime as a source of sustainability,
rate stability and strategic value.
• Expanded customer and community education
through ten webinars — including bilingual rates
and programs sessions — and partnerships with
community-based organizations and social-service
representatives.
• Advanced community and equity initiatives by
coordinating climate-action planning research
across 35 member agencies and implementing
most actions in the Underserved Communities
Outreach and Engagement Action Plan, including
improved communications, bilingual feedback,
program refinements and strategic partnerships.

FY 2026-27 FOCUS AREAS
• Expand agencywide Salesforce CRM
adoption through intuitive dashboards,
custom views, reports, mobile access, and
training.
• Launch a load-analysis tool that improves
billing transparency, models bill impacts,
and provides account-specific cost and
usage information for strategic customers.
• Strengthen strategic-account retention
through proactive engagement with key
commercial and public-sector customers,
emphasizing rate education, sustainability
value, relationship-building, and early
identification of opt-out risk.
• Prepare customer account managers to
support future Energy Solutions offerings
by identifying large-load customers and
member agencies with generation or
storage potential, mapping key contacts
and needs, and tracking projects in
development.
• Evaluate high-value, responsibly governed
AI applications for customer support and
account intelligence and develop a pilot
roadmap for CRM- and website-enabled
tools.

Office of the CCO — Regulatory & Compliance
The Regulatory & Compliance Department ensures 3CE meets all regulatory requirements and actively engages with the agencies that oversee energy markets and Community Choice Aggregators. The department supports statewide goals related to reliability, clean energy, and affordability through proceedings addressing Integrated Resource Planning, Resource Adequacy, the Renewable Portfolio Standard, the Reliable and Clean Power Procurement Program, and the Power Charge Indifference Adjustment.

FY 2026-27 Budget Summary — Regulatory & Compliance
Prior Year
Actuals
2024-25
Adopted Budget
2025-26
Mid-Year
Estimate
2025-26
Recommended
Budget
2026-27
Recommended
Change from
Adopted
Salaries and Employee Benefits 640,004 634,995 613,241 1,016,313 381,318 Services and Supplies 580,925 1,279,500 856,904 1,319,500 40,000 Total Financing Uses 1,220,929 1,914,495 1,470,145 2,335,813 421,318 Change in Net Position (1,220,929) (1,914,495) (1,470,145) (2,335,813) (421,318)

43 FY 2025-26 ACCOMPLISHMENTS
• Secured revisions to a CPUC procurement order
that recognized resources already in 3CE’s
portfolio, resulting in an estimated $1.6 billion in
avoided procurement costs over 10 years.
• Advanced customer affordability and billing
protections by limiting midyear changes to the
2026 PCIA, establishing a pathway for broader
PCIA reform and filing a proposed settlement
with PG&E to improve CCA billing data, bill-design
flexibility and correction procedures.
• Expanded recognition and value for CCA
resources by becoming the first CCA to secure
a BioMAT project and apply for cost recovery,
earning recognition for prudent contract
management and enabling co-located Energy-Only resources to support storage-charging requirements.
• Strengthened long-term planning and forecasting
by establishing CCAs as the default energy
provider within their service areas, securing access
to interconnection data and completing 3CE’s
Integrated Resource Plan through 2045.
• Maintained rigorous compliance and regulatory
advocacy, completing more than 100 filings and
requirements on time with no penalties, submitting
over 650 pages of 3CE-specific comments and
participating in more than 16 CalCCA working
groups.

FY 2026-27 FOCUS AREAS
• Work with CalCCA and industry stakeholders
to protect customers from rate shock and
inequitable cost shifts arising from Power
Charge Indifference Adjustment decisions.
• Advance regulatory and policy changes that
accelerate resource integration and enable
load shifting in support of 3CE’s 100% clean
and renewable energy goal.
• Advocate for statewide policies aligned
with 3CE’s existing and planned resource
portfolio to maximize customer value and
avoid unnecessary procurement costs.
• Improve compliance valuation for short- and
long-duration storage, so it reflects each
resource’s contribution to reliability and
greenhouse-gas reduction.

The Recommended Budget for the Regulatory & Compliance Department totals $2,335,813, with $1,016,313 allocated to salaries and benefits and $1,319,500 for services and supplies.

This is a $421,318 increase from the FY 2025-26 Adopted Budget of $1,914,495.

Personnel costs increase $381,318, of which $202,714 funds a new Senior Policy Advisor position, budgeted to begin January 1. The remaining increase is largely due to increased health benefit costs. Services and supplies increase $40,000, primarily from an increase in industry memberships and dues supporting participation in CalCCA, the statewide trade association for CCAs.

The department is led by the Director of Regulatory Affairs and is authorized four positions, or 4.0 full-time equivalents.

44 Office of the CCO — Government & Community Relations Office Summary (continued)
The Government & Community Relations Department leads 3CE’s engagement with Member Agencies, local officials, community-based organizations, and state and federal policymakers. Mid-fiscal year, the department grew to encompass the agency’s brand, advertising, and public communications functions, positioning 3CE to speak with one voice across community, legislative, and customer audiences.

The Recommended Budget for the Government & Community Relations Department totals $4,360,444, with $1,328,944 allocated to salaries and benefits and $3,031,500 for services and supplies. This is a $3,182,444 increase from the FY 2025-26 Adopted Budget of $1,178,000.

Personnel costs increase $606,944, which reflects communications positions consolidated into the department through the mid-year reorganization rather than net new staffing; underlying growth is approximately $70,000 and includes increases in merit and benefit cost adjustments across remaining positions and an augmentation for a year-round intern.

Services and supplies increase by $2,575,500; of that, $2.4 million is a mixture of ongoing and augmented funding for advertising, communications, notice, and required mailings functions transferred from the Customer Success Department. The remaining increase supports expanded advocacy, including further funding to increase federal and state lobbying presence and further strengthen community sponsorships.

The department is led by the Director of Government & Community Relations and is authorized six positions, or 6.0 full-time equivalents.

FY 2026-27 Budget Summary — Government & Community Relations Prior Year
Actuals
2024-25
Adopted
Budget
2025-26
Mid-Year
Estimate
2025-26
Recommended
Budget
2026-27
Recommended
Change from
Adopted
Salaries and Employee Benefits - 722,000 723,666 1,328,944 606,944 Services and Supplies - 456,000 406,461 3,031,500 2,575,500 Total Financing Uses - 1,178,000 1,130,127 4,360,444 3,182,444 Change in Net Position - (1,178,000) (1,130,127) (4,360,444) (3,182,444) 44 Page 191 of 744
45 FY 2025-26 ACCOMPLISHMENTS
• Helped secure passage and signing of AB 825 and SB
283 through coalition building, stakeholder outreach,
letters of support and direct legislative advocacy.
• Advanced 3CE-sponsored legislation, including AB
1761 on PCIA transparency and SB 1138 on hourly
resource-adequacy trading, while advocating on large-load interconnection, Diablo Canyon, CCA autonomy and related priorities.
• Strengthened member-agency engagement through
presentations to 31 agencies across all five counties
and targeted PCIA briefings for county supervisors
and city officials.
• Expanded 3CE’s state, federal and regional presence
by participating in Federal Advocacy Days for the first time, engaging federal agencies and congressional
staff, and representing 3CE at more than 50
community events and public meetings.
• Delivered 3CE’s strongest-performing advertising
campaigns to date, quadrupling year-over-year
website traffic and increasing website engagement by
more than 50%.

FY 2026-27 FOCUS AREAS
• Expand public awareness through additional
advertising and community partnerships.
• Tell 3CE’s story through the new website,
social media, advertising, and impact-focused content.
• Implement a strategic communications plan
that guides public relations, earned media,
and executive visibility.
• Advance 3CE priorities in Sacramento,
including reforms to the Power Charge
Indifference Adjustment and Resource
Adequacy program and policies addressing
the grid impacts of large producers and
consumers.
• Represent 3CE in regional, statewide, and
national energy discussions and ensure
Central Coast perspectives inform policy
development.
45 Office of the CCO — Energy Programs
The Energy Programs Department leads 3CE’s efforts to empower customers to take part in the renewable energy transition and reduce greenhouse gas emissions. Through a range of incentives and technical assistance, the department helps customers replace fossil-fuel-powered vehicles, equipment, and appliances with clean, all-electric alternatives.

Programs also support customers in shifting when and how they use energy to improve cost effectiveness and reduce strain on the grid.

FY 2026-27 Budget Summary — Energy Programs
Prior Year Actuals
2024-25
Adopted Budget
2025-26
Mid-Year Estimate
2025-26
Recommended
Budget
2026-27
Recommended
Change from
Adopted
Salaries and Employee Benefits - 722,000 723,666 1,328,944 606,944 Services and Supplies - 456,000 406,461 3,031,500 2,575,500 Total Financing Uses - 1,178,000 1,130,127 4,360,444 3,182,444 Salaries and Employee Benefits 1,001,287 1,322,154 1,199,858 1,442,535 120,381 Services and Supplies 15,415,122 14,890,363 17,654,311 17,111,072 2,220,709 Capital Assets - 700,000 265,000 - (700,000)
Total Financing Uses 16,416,409 16,912,517 19,119,169 18,553,607 1,641,090 Change in Net Position (16,347,981) (16,912,517) (19,055,042) (18,553,607) (1,641,090)

46 Office Summary (continued)
The Recommended Budget for the Energy Programs Department totals $18,553,607, with $1,442,535 allocated to salaries and benefits and $17,111,072 for services and supplies.

This is a $1,641,090 increase from the FY 2025-26 Adopted Budget of $16,912,517. No capital assets are budgeted in FY 2026-27, compared to $700,000 in the prior year, as ownership of charging assets moves to the Energy Solutions Department.

Personnel costs increase $120,381, of which $178,431 is an approved augmentation for a Virtual Power Plant Programs Manager budgeted from January 1, partially offset by baseline reductions from the transfer of the Manager of Project Delivery. Services and supplies increase $2,220,709, driven by a $1.1 million increase in direct customer incentive payments and a $1.1 million increase in energy program delivery and implementation.

The department is led by the Director of Energy Programs and is authorized seven positions, or 7.0 full-time equivalents.
46 FY 2025-26 ACCOMPLISHMENTS
• Developed Agricultural Electrification

2.0 in partnership with the Community
Advisory Council, customers and agricultural
stakeholders, incorporating new offerings
informed by industry research and direct
feedback.
• Launched improved Electrify Your Home,
expanding contractor eligibility and adding
induction-cooktop and portable space-conditioning rebates to better serve renters and homeowners.
• Established Energy Optimization as a new
portfolio focus, building on the Residential
Battery Rebate Program’s achievement of
more than 8 MWh of daily load shifting.
• Expanded 3CE-owned EV charging
infrastructure by operationalizing workplace
chargers at the San Luis Obispo and Soquel
offices — contributing to a 50% increase
in staff EV adoption — and beginning
construction of public chargers in Santa Maria.
• Improved program access, performance and
equity through stronger communications and
budget management, record participation
and emissions-reduction results, and support
for a mobile-home park’s CEC Coordinated
Holistic Inverter-based Resources (CHOIR)
grant application for a potential microgrid
and distributed energy resource management
system.

FY 2026-27 FOCUS AREAS
• Develop a long-term Energy Programs
strategic plan with input from the Community
Advisory Council, communities, and
stakeholders.
• Launch a Virtual Power Plant supported by
a Distributed Energy Resource Management
System, including a residential battery-enrollment pilot that shifts load to improve grid operations and customer value.
• Launch the EV Launchpad Program to provide
planning and technical assistance for fleet,
workplace, multifamily, public, and community
EV-charging projects.
• Offer virtual home assessments that
help residential customers understand
electrification options, available financial
support, project requirements, and potential
bill impacts.
• Expand agricultural electrification through
enhanced incentives, technical assistance, and
demonstration events.
• Continue improving the CRM platform and
integrate Salesforce Marketing Cloud to
automate customer touchpoints, reduce
escalations, and streamline the program
application experience.

47 47 Page 194 of 744
48 Energy Programs 2026-27 Overview
Supports customers to transition from fossil fuels to electricity for all vehicles including charging infrastructure
Supports agricultural customers to transition from fossil fuel to electric equipment and automation options
Supports customers to transition from fossil fuels to electricity for various end uses in new and existing residential buildings

CHARGE & ELECTRIFY YOUR FLEET
member community incentives to purchase fleet EVs &
install EV Chargers - $1.45mil

EV LAUNCHPAD TECHNICAL ASSISTANCE
EV fleet & EV infrastructure development assistance for member communities, nonresidential, and multifamily
customers - $1.2mil

ELECTRIFY YOUR RIDE
residential & commercial incentives to purchase EVs
& install EV Chargers - $4mil

E-BUS PROGRAM
incentives for all-electric buses in public schools,
districts, & transit agencies - $1.6mil

AG-POWER ELECTRIC SHOWCASE
opportunity for customers to demo available electric
equipment and learn financing options - $25k
“The support we received from 3CE allowed us to
purchase a fully electric excavator to help trench new
irrigation lines to support our expansion efforts. This is a critical part of our growth. Without the Ag program, we would have struggled to maintain our farm, let alone expand it.“ - Our Parent Company, Watsonville

AG ELECTRIFICATION PROGRAM
residential & commercial incentives to
purchase EVs & install EV Chargers - $800k

AG TECHNICAL ASSISTANCE PILOT
Energy assessments and technical support to
electrify and optimize energy use at farms and
ag facilities - $70k

REACH CODES PROGRAM
technical assistance to adopt and codify building codes that promote electrification - $80k

VIRTUAL HOME ENERGY ASSESSMENTS
providing customized recommendations on home
electrification projects, incentives available, bill impacts, and more - $164k

ELECTRIFY YOUR HOME
residential & commercial incentives to purchase EVs
& install EV Chargers - $2.9mil

NEW CONSTRUCTION ELECTRIFICATION
incentives to develop new, all-electric single-family
and multifamily housing - $1.2mil

TRANSPORTATION ELECTRIFICATION

AGRICULTURAL ELECTRIFICATION

BUILDING ELECTRIFICATION

49 ENERGY OPTIMIZATION
Supports agricultural customers to transition from fossil fuel to electric equipment and automation options

VIRTUAL POWER PLANT PROGRAM
residential & commercial incentives to
purchase EVs & install EV Chargers - $2.8mil

1. Install smart electric
devices in your home

2. Connect devices to Distributed
Energy Resource Management
System (DERMS)

3. Devices aggregated
to support cleaner,
reliable grid
HOURLY FLEX PRICING PILOT 1 & 2
dynamic pricing for agricultural, residential, and
commercial customers to enable load shifting - $100k
3 community discussions
with 3CE’s community advisory council consisting of representa-tives from five counties 12 engagement workshops
including focus groups, roundtable discussions, one-on-on inter-views, and presentations 50+ attendees
including growers, shippers, farm operators, agricultural workers, Resource Conservation Districts, and Farm Bureaus
23 survey responses
engaging past program particpants and grower networks

Financial Policies
50 1.0 Purpose and Background
The prudent and responsible stewardship of public assets is a principal obligation of Central Coast Community Energy (3CE) officials and managers. The development and maintenance of financial policies enable 3CE officials to protect those public assets, ensure transparency, and build public trust. Financial policies define a shared understanding of how 3CE administers its financial affairs and communicates how the agency manages its resources to deliver the highest value to the communities served.

This document centralizes 3CE’s financial policies and establishes a framework for overall fiscal planning, management, and decision-making related to public assets controlled by 3CE. These policies are reviewed, updated, and brought before the Policy Board as needed, but at least annually for adoption. This continued review and adoption promote sound financial management and help maintain 3CE’s stability, efficiency, and effectiveness by ensuring the Policy Board’s financial policy guidance is provided before 3CE takes any financial actions. The policies also offer guidelines for evaluating both current activities and proposals for future programs and direct 3CE’s financial resources toward meeting its objectives and strategic initiatives.

These policies provide general guidance in the management of 3CE’s fiscal affairs and are to be used by all 3CE employees to meet their obligation to operate in a financially prudent manner. The Recommended Budget is developed in accordance with this framework.

2.0 General Financial Policy
The cornerstone and highest priority of 3CE’s financial policies is fiscal integrity. It shall be the goal of 3CE to achieve a strong financial condition with the ability to:
• Sustain adequate financial liquidity to meet operating and contingent obligations; • Ensure a sufficient financial base is maintained to withstand local, regional, national, and global economic impacts;
• Foster the ability to adjust efficiently to the community’s changing service requirements; • Maintain and improve infrastructure and capital assets; • Regularly review operations and operational methods to improve processes that result in higher productivity and eliminate repetitive and duplicative functions;
• Encourage collaboration with other government entities, the private sector, and public-private partnerships where cost and risk are minimized in the delivery of services; • Promote sharing of costs and benefits by service users; • Ensure the legal use of financial resources through an effective system of internal controls; • Support sound financial management by providing accurate and timely information on 3CE’s financial condition; and
• Provide a framework for the wise and prudent use of debt financing and maintain a strong credit rating in the financial community, with the long-term goal of achieving and sustaining a rating in the A category or higher.

2.1 THE ANNUAL BUDGET
The Chief Executive Officer (CEO) will recommend a balanced budget that:
• Aligns annual expenditures with the revenue requirement established through a cost-of-service methodology; • Minimizes reliance on reserves and one-time funding sources for ongoing operations; and • Maintains competitive, cost-based rates while supporting 3CE’s renewable energy goals.

Through the CEO, the Chief Financial Officer (CFO) will consult with 3CE Officers and seek their input in developing the Recommended Budget through cooperative discussions and financial education. The CEO will keep the Policy Board apprised of the condition of 3CE’s finances and emerging fiscal issues. Page 197 of 744 51 Subheader

3.0 Roles and Functions

3.1 ROLE OF CHIEF EXECUTIVE OFFICER
The CEO serves as the chief policy advisor to the Policy Board, Operations Board, and the various Board committees. The CEO promotes responsible resource allocation, strives to protect 3CE’s financial position and integrity, and provides independent analysis on policy and financial issues. The CEO is the fund manager for 3CE’s enterprise fund and any other funds that may be created.

3.2 PRINCIPAL FUNCTIONS OF THE CHIEF EXECUTIVE OFFICER
Principal functions of the CEO include:
• Promoting continuous improvement of the structures, systems, processes, and effectiveness of operations; • Preparing the annual financial plan (Recommended Budget); • Evaluating potential federal, state, and local budget impacts; • Developing financial forecasts;
• Monitoring revenues and expenditures for conformance with the annual budget; • Recommending effective fiscal policies to carry out the 3CE mission; • Verifying Policy Board policies are consistently applied; and • Ensuring items brought before the Policy Board are transparent, accurate, complete, fully justified, and reviewed by appropriate stakeholders.

3.3 PRINCIPAL FUNCTIONS OF THE CHIEF FINANCIAL OFFICER
The CFO is 3CE’s Policy Board-appointed Treasurer and considered the subject-matter expert for the financial management of the agency. The CFO is responsible for:
• Carrying out financial operations efficiently and cost-effectively while adhering to all 3CE, state, and federal laws, regulations, and policies;
• Preparing budgets and financial estimates with attention to accuracy based on financial expertise, state, and federal funding and regulatory changes, and economic indicators affecting revenues, expenditures, and service levels;
• Reviewing, evaluating, and assessing potential federal and state budget and regulatory issues that may impact the agency;
• Developing and performing financial forecasts;
• Overseeing Middle Office responsibilities as identified in 3CE’s Energy Risk Management Policy; • Monitoring monthly revenue, expenditure, and cash flow performance and conformance with the Adopted Budget;
• Meeting the Policy Board’s strategic financial initiatives and policies; and • Ensuring items brought before the Policy Board are transparent, accurate, complete, fully justified, and reviewed by all appropriate stakeholders.

3.4 PRINCIPAL FUNCTIONS OF THE AUDIT AND FINANCE COMMITTEE The Audit and Finance Committee’s principal functions include receiving staff updates on financial issues and providing oversight and direction to staff in developing and modifying the budget and audits.

3.5 PRINCIPAL FUNCTIONS OF THE ENERGY RISK MANAGEMENT COMMITTEE The Energy Risk Management Committee is formed by the CEO to implement and maintain the Energy Risk Management Policy, which requires 3CE to maintain sufficient financial reserves to:
• Establish long-term business sustainability;
• Build collateral for power procurement activities;
51 Page 198 of 744
52 Subheader
• Maintain an investment-grade credit rating;
• Develop funding sources for investment in generation and other local initiatives; and • Reduce the business and customer impact of year-to-year volatility in energy markets and procurement costs.

4.0 Services and Fund Structure

4.1 ENTERPRISE FUND
3CE operates as an enterprise fund. The enterprise fund accounts for revenues and expenditures for all 3CE activities. The fund’s operations are financed and operated like private business enterprises, with services primarily funded through user charges (electric generation rates).

4.2 EXPENSES
Enterprise fund expenses and revenues will be established at sufficient levels to properly maintain the fund’s infrastructure and provide significant capital development.

4.3 RATE STRUCTURE AND NET POSITION
The enterprise fund will maintain an adequate rate structure to cover the cost of all operations, including cash flow, capital replacement and maintenance, debt service if applicable, contingency funding, reserve contributions, and depreciation. Rates may be offset from the available unreserved net position, including the Energy Rate Stabilization Reserve, only after these requirements are met.

5.0 Operating Budget

5.1 THE BUDGET
The Recommended Budget is the central financial planning document that sets the agency’s goals, objectives, priorities, levels of service, and the associated operating revenue and expenditures. Expenditures are recommended based on the relationship between expected expenditures and revenue. If revenues are estimated to fall below expected amounts, the agency will take all actions available to reestablish a revenue and expenditure relationship that conforms to the operating requirements.

The Recommended Budget shall be presented to the Policy Board for adoption in September of each year and clearly presented to a general audience of the public.

5.2 BALANCE BUDGET
A budget is balanced when the total estimated financing sources (beginning net position plus revenues) equal the total expenditures. At no time shall spending in a given year exceed total current estimated revenues plus any net positive position (reserved and non-reserved).

5.3 ONGOING OPERATIONS NEEDS
3CE will adequately fund ongoing maintenance and operational needs with ongoing annual revenue. Without prior direction and approval from the Policy Board, the use of one-time revenues or short-term borrowing is not allowed as a resource for financing ongoing operational needs.

5.4 CAPITAL FACILITIES AND EQUIPMENT
3CE shall establish as a primary fiscal responsibility the acquisition, preservation, maintenance, improvement, and, when applicable, orderly replacement of 3CE’s capital facilities and equipment. 3CE shall endeavor to purchase a permanent headquarters and appropriate regional offices to provide continuity of location and operations while stabilizing and controlling facility costs into the future. 3CE will acquire and maintain high-quality equipment to maximize useful life and ensure efficient operations.

5.5 APPROPRIATIONS AND TRANSFERS
The agency enterprise fund is not constrained by appropriation controls. The CEO is charged with maintaining the relationship between financing uses and sources and shall report to the Policy Board any deviation exceeding 52 Page 199 of 744
53 Subheader
the adopted budget. The CEO is authorized to make appropriation transfers between departments within the enterprise fund as necessary to adequately reflect the agency’s expenditure needs.

5.6 RESPONSIBILITY FOR BUDGET MANAGEMENT AND BUDGETARY CONTROL 3CE shall maintain a budgetary control system to help it adhere to the adopted budget. The CEO has budgetary control and authority over expenditures. The CFO shall administer and maintain the system utilized for budgetary control. As the administrator of the budgetary control system, the CFO shall notify the CEO when a department approaches its expenditure limit. The CFO shall seek guidance from the CEO on all issues relating to expenditures and controls.
3CE Officers, in coordination with the CFO, have primary responsibility for managing departmental budgets by:
• Providing accurate and timely budget estimates;
• Monitoring revenues to ensure timely receipt in the amounts anticipated; • Ensuring that expenditures comply with the law, adopted resolutions, policies, and align appropriations relative to revenues;
• Providing prompt notification to the CEO when either revenues or expenditures are not as anticipated; and • Preparing and justifying budget revisions when necessary

5.7 PREPARATION OF FINANCIAL REPORTS
The CEO annually prepares or causes to be prepared:
• An Annual Comprehensive Financial Report (ACFR) that reports on 3CE’s financial position and activities, adhering to Generally Accepted Accounting Principles (GAAP) or state law requirements, to provide readers with a broader understanding of the agency’s financial operations; • A mid-year estimate to provide current-year performance and three-year forecast to advise the Policy Board on future challenges and provide a base for building the following year’s Recommended Budget; and • Additional reports, as appropriate, to keep the Policy Board informed on current financial performance and developments.

The CEO has oversight and contract management over the external auditors reviewing the ACFR.

External auditors shall report to the CEO or designated officer on audit findings. The CEO will thereafter take the audit findings to the Policy Board.

5.8 PUBLICATION OF BUDGET
The CEO shall publish annually a Recommended Budget document that satisfies nationally recognized standards for effective budget presentation. The Recommended Budget will be provided to the Policy Board a minimum of two weeks in advance of the annual budget hearings.

5.9 BUDGET DEVELOPMENT
Budget development is an annual process incorporating the Policy Board’s priorities and weighing competing requests for 3CE resources within expected fiscal constraints. The process begins with departments preparing “baseline” budgets proposing levels of service and staffing that can be carried out within expected resources (e.g., revenues). Departments may submit “augmentation requests” for additional resources to mitigate potential impacts, increase staffing/services, or invest in infrastructure. The CEO evaluates baseline budgets and augmentation requests within the constraints of a balanced budget and builds the annual Recommended Budget.

Staff considers the following criteria in formulating recommendations for the annual budget and subsequent mid-year budget modifications:
• Mandated by current law, regulation, or Policy Board policy; • Alignment with 3CE’s strategic initiatives and priorities; • Necessary to maintain the current level of mission-critical services/operations; • Substantiation of compelling public need (e.g., health, safety, economic vitality, quality of life) that cannot be met within existing resources; 53 Page 200 of 744
54 Subheader
• Likelihood of success based on prior performance, degree of planning/specificity, requested resources, and assumed timeline;
• Leverages sustainable financial support from non-3CE sources; • Appropriate placement of responsibility (federal, state, or local); • Degree of urgency; and
• Critical infrastructure investment to ensure productivity and continuity of operations.

Criteria in the listing are not exhaustive or in any particular order, nor are they mutually exclusive; funding recommendations may align with more than one criterion.

5.10 AMENDMENTS TO THE ADOPTED BUDGET
Modifications to the Adopted Budget require the approval of a majority of Policy Board members. Amendments to the Adopted Budget will be made in compliance with Policy Board policies. As an enterprise fund, the relationship between financing uses and financing sources is the overriding principle; thus, appropriation controls are not required.

5.11 BUDGETARY BASIS
3CE uses the full accrual basis of accounting following GAAP. The budgetary basis is appropriation-based, beginning on October 1 and ending on the last day of September each year. 3CE is an enterprise fund that is appropriation-based budgeted; however, accounting is on a full accrual basis.

5.12 CAPITAL ASSET DEFINITION
3CE defines capital assets as assets with initial, individual costs of $5,000 or more and an estimated useful life greater than one year, except infrastructure, for which the threshold is set at $100,000. Capital assets include both tangible and intangible assets categorized by asset type for reporting purposes.

Infrastructure refers to long-lived capital assets that are typically stationary and can be preserved for significantly longer than most other capital assets. Infrastructure assets typically include, but are not limited to, energy generation and storage facilities, electric distribution systems, and grid interconnection infrastructure.

5.13 APPROPRIATIONS FOR CONTINGENCIES
3CE annually budgets for contingencies to provide sufficient working capital and a margin of safety for unplanned operational needs. The contingency is utilized only after all other budget resources have been examined.

The budgeted amount for operational contingencies shall be equal to five percent (5%) of recommended appropriations, excluding cost of energy (COE), unless expressly modified by the Policy Board as part of the annual budget adoption.

6.0 Net Position and Reserve Policies

6.1 NET POSITION
Net position is a measurement of available financial resources. It is the difference between total assets and total liabilities. The Policy Board recognizes that maintaining a positive net position is essential to preserving 3CE’s financial integrity. Sufficient net position and reserve levels are a critical component of 3CE’s overall financial management strategy. They are key factors in the ability to sustain service delivery and obtain external financing.

Rating agencies analyze net position when considering 3CE’s overall financial strength and creditworthiness.

Adequate reserves enable flexible financial planning in developing rate structures, future capital projects, dealing with unforeseen emergencies, and changes in general economic conditions.

6.2 STRATEGIC RESERVE
A strategic reserve is essential to provide an adequate financial backstop throughout the year. 3CE shall adopt a strategic reserve equal to twenty-five percent (25%) of budgeted appropriations. The strategic reserve will provide sufficient working capital (cash flow), fund settlements of legal judgments against 3CE in excess of reserves specifically designated for litigation, for natural disasters as determined by the CEO or Policy Board, and for one-time-only budget overruns that could not be addressed through the annual appropriations for contingencies. 54 Page 201 of 744
55 Subheader
If the strategic reserve is utilized to provide temporary funding for unforeseen needs, 3CE shall take the measures necessary to prevent its use in the following fiscal year by increasing revenues and/or decreasing expenditures to regain balance. 3CE shall also restore the strategic reserve to the minimum level of twenty-five percent (25%) of budgeted appropriations within three fiscal years following the fiscal year in which the event occurred. The plan to restore the strategic reserve shall be included and highlighted in the Recommended Budget.

6.3 ENERGY RATE STABILIZATION RESERVE
The agency shall maintain an energy rate stabilization reserve equal to twenty percent (20%) of the budgeted COE. This reserve serves as a financial buffer to absorb fluctuations in energy costs and to respond to unforeseen changes in market conditions or regulatory requirements that may increase power procurement expenses beyond what rate adjustments can cover.

The central purpose of this reserve is to support rate smoothing and long-term rate stability. By strategically using this reserve, 3CE pursues stable customer rates even during periods of cost volatility, strengthening its position as a load-serving entity and sustaining customer trust.

The reserve may be partially or fully accounted for under Government Accounting Standards Board (GASB) Statement 62 and GASB Statement 63, which govern the presentation of deferred outflows and inflows of resources and their effects on net position. A transfer into the reserve reduces revenue and the change in net position in the year of deferral by the same amount. A transfer from the reserve increases revenues and changes net position in the year the transfer occurs.

The reserve balance is recorded on the Statement of Net Position as unrestricted net position and, if deferred, in a separate section following liabilities, entitled Deferred Inflows of Resources. Transfers to and from the reserve are recorded in the Statements of Revenues, Expenses, and Changes in Net Position under Operating Revenues.

Any material or sustained use of the reserve shall be reflected in the Recommended Budget, including a long-term plan to replenish the reserve. This reserve may be utilized throughout the fiscal year at the direction of the CEO, with subsequent reporting to the Audit & Finance and Energy Risk Management committees and the Boards.

6.4 RENEWABLE ENERGY INNOVATION AND INITIATIVES RESERVE The agency shall maintain a renewable energy innovation and initiatives reserve equal to five percent (5%) of the budgeted COE. This reserve shall be utilized for investments in furtherance of the Boards’ goals to accelerate the utilization of 100% clean and renewable energy through the commitment to new or emerging, but scalable, technologies that can address the challenges of an intermittent renewable grid and reduce dependency on fossil fuels for electricity generation.

6.5 CAPITAL INFRASTRUCTURE RESERVE
The agency shall establish a capital infrastructure reserve sufficient to provide for the operation, routine scheduled maintenance, reasonably anticipated unplanned repair, and orderly replacement of 3CE’s capital infrastructure, including enterprise software, real estate, and electric generation and storage facilities. Funding contributions to this reserve shall be established annually through the budget process or otherwise amended by Policy Board resolution.

6.6 MEASUREMENT OF RESERVE TARGETS
Due to the nature of the agency’s business, the mechanism for funding the four reserves shall be cash, cash equivalents, and short-term investments, including any balance in the Energy Rate Stabilization Reserve held as deferred inflows. The reserves must be liquid and available to ensure they can be used for their intended purpose.

7.0 Capital Facilities and Improvement Policies

7.1 CAPITAL INVESTMENTS
3CE is responsible for investing in the preservation, maintenance, and improvement of owned assets, including buildings, equipment, and other capital infrastructure.

Projects in excess of $100,000 with an estimated useful life of at least five years and non-recurring costs are considered capital projects and should be evaluated against other uses and priorities. All capital projects should be included in the Adopted Budget or taken to the Policy Board for approval and amendment to the Adopted Budget. 55 Page 202 of 744
56 Subheader
Per Resolution No. PB-2025-04, the Executive Committee is delegated to approve capital projects that do not exceed $5,000,000 per project, with CEO approval of any necessary contracts or agreements to effectuate the approved projects within that limit.

8.0 Credit Rating, Coverage, and Liquidity Targets

8.1 RATIONALE
A strong credit profile reduces 3CE’s borrowing costs, expands access to power-supply counterparties without onerous collateral postings, and signals financial discipline to ratepayers and member agencies. 3CE manages its finances to achieve and sustain an investment-grade issuer credit rating, with the long-term objective of reaching and maintaining a rating in the A category or higher.

8.2 FINANCIAL-METRICS TARGETS
Reserves shall support a DLOH (Days Liquidity on hand) target equal to 180 days. The Financial Policies seek to achieve a long-term target of a strong investment-grade rating (A+/A1 or higher) or an equivalent rating from any nationally recognized rating organization.

8.3 LIQUIDITY FACILITIES
3CE may maintain a committed liquidity facility (revolving credit agreement or equivalent) with one or more investment-grade financial institutions. The CFO shall report annually to the Audit and Finance Committee on the status of the liquidity facility, including pricing, covenants, available headroom, and any anticipated renewal or replacement activity.

8.4 CREDIT-RATING MAINTENANCE
3CE shall maintain active relationships with at least one nationally recognized credit rating organization. The CFO shall provide the Policy Board with any updates to 3CE’s rating actions and outlook changes.

9.0 Debt Management
Due to its length and complexity, the Debt Management Policy is reviewed by the Policy Board separately from these policies.
56 Page 203 of 744
5757 Page 204 of 744
58 3CE Central Coast Community Energy
ACFR Annual Comprehensive Financial Report
BioMAT Bioenergy Market Adjusting Tariff
CAC Community Advisory Council
CAISO California Independent System Operator
CalCCA California Community Choice Association
CBO Community-Based Organization
CCA Community Choice Aggregator
CCO Chief Customer Officer
CEC California Energy Commission
CEO Chief Executive Officer
CFO Chief Financial Officer
CIR Capital Infrastructure Reserve
COE Cost of Energy
COO Chief Operations Officer
COS Cost of Service
CPO Chief Power Officer
CPUC California Public Utilities Commission
CRM Customer Relationship Management
DERMS Distributed Energy Resource Management System
ERRA Energy Resource Recovery Account
ETRM Energy Trading and Risk Management
FTE Full-Time Equivalent
GAAP Generally Accepted Accounting Principles
HRIS Human Resources Information Systems
IOU Investor-Owned Utility
kWh Kilowatt-hour
LSE Load Serving Entity
MPB Market-Price Benchmark
MWh Megawatt-hour
PCIA Power Charge Indifference Adjustment
PPA Power Purchase Agreement
RA Resource Adequacy
RPS Renewable Portfolio Standard
VPP Virtual Power Plant
Definition of Terms

5959 Page 206 of 744

DRAFT POLICY BOARD RESOLUTION NO. PB-2026-05

A RESOLUTION OF THE CENTRAL COAST COMMUNITY ENERGY POLICY BOARD OF DIRECTORS ADOPTING THE FISCAL YEAR 2026-27 RECOMMENDED BUDGET AND REVISED FINANCIAL POLICIES WHEREAS, Central Coast Community Energy (3CE) is a Joint Powers Authority (JPA) established and operated pursuant to California Government Code sections 6500 et seq. to study, promote, develop, conduct, operate, and manage energy programs in the California Central Coast region of Santa Cruz, Monterey, San Benito, Santa Barbara, and San Luis Obispo counties; and
WHEREAS, 3CE is a community choice aggregator (CCA), as such term is defined in section 331.1 of the Public Utilities Code of the State of California (Public Utilities Code), that is a public agency, as such term is defined in the JPA law, which has implemented a CCA program pursuant to section 366.2 of the Public Utilities Code, and possesses the power to purchase and sell electric energy and enter related contracts for such purposes; and WHEREAS, pursuant to sections 3.3.1 and 3.3.3 (d and f) of the Joint Exercise of Powers Agreement, as amended from time to time, the Policy Board is responsible for adopting the annual operating budget and setting the 3CE electric generation rates consistent with California’s Constitution and applicable state law; and WHEREAS, on June 17, 2026, the Policy Board adopted the FY 2026-27 Financial Policies, which establish the framework within which the Recommended Budget is developed, including a balanced budget aligned to a revenue requirement determined through a cost-of-service methodology, minimal reliance on reserves and one-time funding sources for ongoing operations, competitive and stable cost-based rates, defined reserve types and targets, capital project governance thresholds, and quantified liquidity and credit-rating targets; and WHEREAS, the Financial Policies adopted in June 2026 assign defined financial responsibilities to a Chief Financial Officer, a position the agency does not maintain, and staff have therefore revised the Financial Policies to assign those responsibilities to the Policy Board-appointed Treasurer, with conforming changes to Sections 2.1, 3.3, 5.6,

8.3, and 8.4 and a corresponding update to the table of contents, as shown in redlined and clean form in Attachment B; and
WHEREAS, adopting the revised Financial Policies concurrently with the FY 2026-27 Recommended Budget provides the agency with clean and current policy authority at the commencement of the fiscal year on October 1, 2026; the Financial Policies reproduced at pages 50 through 57 of the printed FY 2026-27 Recommended Budget document reflect the version adopted on June 17, 2026, and Attachment B Revised Financial Polices shall control in the event of any inconsistency between the two; and
WHEREAS, the Recommended Budget was developed through 3CE’s five-stage annual budget process, under which each department submitted a baseline spending plan reflecting the cost to continue current operations together with augmentation requests for new or expanded staffing, programs, and capital projects, and the Chief Executive Officer reviewed and prioritized those submissions based on the reasonableness of financial assumptions, demonstrated organizational benefit, and alignment with Policy Board priorities; and WHEREAS, the Recommended Budget document was published and provided to the Policy Board not less than two weeks in advance of the annual budget hearing, consistent with Section 5.8 of the Financial Policies; and WHEREAS, the FY 2026-27 Recommended Budget totals $500,660,609 in appropriations funded by $515,282,881 in estimated financing sources; is balanced within the meaning of Section 5.2 of the Financial Policies; requires no use of reserves or one-time funding sources to finance ongoing operations; and is projected to increase net position by approximately $14,622,272; and

WHEREAS, it is recommended that currently effective rates be maintained as set forth in Resolution No. PB-2026- 01, pending additional information arising out of the Energy Resource Recovery Account (ERRA) proceedings and Power Charge Indifference Adjustment (PCIA) rates; and
WHEREAS, the FY 2026-27 Recommended Budget was presented to the Audit & Finance Committee on August 26, 2026, which recommended that the Policy Board adopt it, and the FY 2026-27 Recommended Budget and the revised Financial Policies were presented to the Operations Board on September 16, 2026; and WHEREAS, the Policy Board has carefully considered the Staff Report and accompanying exhibits, public comment, customer input, the revised Financial Policies, and comments at its publicly noticed September 17, 2026 meeting;

NOW, THEREFORE, THE CENTRAL COAST COMMUNITY ENERGY POLICY BOARD OF DIRECTORS DOES HEREBY RESOLVE, DETERMINE, AND ORDER AS FOLLOWS:

1. The Policy Board hereby adopts:
a. The FY 2026-27 Recommended Budget, with $500,660,609 in appropriations funded with $515,282,881 in operating revenue as set forth in Attachment A Summary. b. The revised FY 2026-27 Financial Policies, as set forth in Attachment B, which supersede and restate in their entirety the Financial Policies adopted by the Policy Board on June 17, 2026, take effect upon adoption of this Resolution, govern the administration of the FY 2026-27 Adopted Budget, and control over the Financial Policies reproduced in the printed FY 2026-27 Recommended Budget document in the event of any inconsistency.

2. The Policy Board hereby finds:
a. The above recitals are true and correct and substantial evidence supports them. b. Notice of public meetings at which this Resolution was considered was properly given, and all oral and written presentations made to and heard by the Policy Board were properly considered. c. The adoption of the FY 2026-27 Recommended Budget accurately represents the reasonable cost to serve customers.
d. The FY 2026-27 Recommended Budget is balanced as defined in Section 5.2 of the Financial Policies, was developed in accordance with the Financial Policies adopted herein and relies on no reserves or one-time funding sources to finance ongoing operational needs. e. That this Resolution is not subject to the California Environmental Quality Act (“CEQA”) and, therefore, an environmental review is not required pursuant to Section 21080(b)(8) of the California Public Resources Code and Sections 15273(a) and 15061(b)(3) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3 because CEQA does not apply to the establishment, modification, restructuring, or approval of rates and other charges by public agencies for purposes such as those set forth herein.

3. The Policy Board directs and authorizes:
a. The electric generation rates, effective February 15, 2026, per Resolution No. PB-2026-01 to remain in effect until the Policy Board acts on proposed 2027 electric generation rates, which staff will present for consideration in March 2027 in accordance with the rate development timeline established in 2026, pending additional information from the ERRA proceedings and 2027 PCIA rates.
b. Staff to return to the Policy Board with proposed 2027 cost-of-service rates that align revenues with the Fiscal Year 2026-27 Recommended Budget, ensuring sufficient funding of appropriations and consistency with the Board’s adopted financial policies. c. Staff to evaluate the effectiveness of its rates on an annual basis for the next fiscal year to update the approved cost of service model for the purpose of determining whether an annual rate change is necessary.

d. Staff to monitor and determine when market or industry conditions beyond 3CE’s control require the approved cost of service model and subsequent 3CE customer rates to be modified between the annual evaluations.
e. Staff to incorporate the revised Financial Policies into the agency’s official policy record and to reflect them in the next publication of the Recommended Budget document; reprinting of the FY 2026-27 Recommended Budget document is not required.
f. The CEO to take such other and further actions as may be necessary and appropriate to implement the intent and purpose of this resolution.
g. In the event of a fiscal emergency or the emergence of a significant shift in market or industry conditions threatening the fiscal stability of 3CE such that its credit rating or fiscal outlook is in danger of a downgrade, the Policy Board authorizes the Chief Executive Officer (CEO) to take immediate action to adjust the approved rates between meetings of the Policy Board when needed to achieve the goals set by the Policy Board.
h. In the event of such a fiscal emergency or threatened downgrade requiring the CEO to adjust rates between meetings of the Policy Board, the CEO shall place a report on the agenda of the next regular meeting of the Policy Board explaining the adjustment and the reasons for the adjustment and requesting that the Policy Board ratify the actions of the CEO. i. This Resolution is adopted under the authority of the Joint Exercise of Powers Agreement and state law. If any section, subsection, clause or phrase is declared invalid or otherwise void by a court of competent jurisdiction, it shall not affect any remaining provision hereof. In this regard, the Policy Board finds and declares that it would have adopted this measure notwithstanding any partial invalidity hereof.

PASSED AND ADOPTED this 17th Day of September 2026, by the following vote:

AYES:

NOES:

ABSENT:
__________________________________
Chair, Fred Keeley
__________________________________
Board Clerk, Gail Borkowski

ATTACHMENT A
FY 2026-27 Recommended Budget Summary
Prior Year
Actuals
2024-25
Adopted
Budget
2025-26
Mid-Year
Estimate
2025-26
Recommended
Budget
2026-27
Requested
Change from
Adopted
Net Electricity Sales 658,974,802 578,022,716 555,527,132 505,582,881 (72,439,835) Deferred Revenue - - (39,527,962) - -
Interest and Investment Returns 11,037,533 9,100,000 9,942,617 9,450,000 350,000 Other Income 159,518 75,000 136,849 250,000 175,000
Revenue for Damages 8,101,745 - - - -
Sub-Total Revenues $ 678,273,598 $ 587,197,716 $ 526,078,636 $ 515,282,881 $ (71,914,835) Capital Infrastructure Reserve - 1,200,000 6,741,324 - (1,200,000) Total Financing Sources $ 678,273,598 $ 588,397,716 $ 532,819,960 $ 515,282,881 $ (73,114,835) Cost of Energy 593,415,108 534,776,256 452,043,477 432,693,327 (102,082,929) Salaries and Employee Benefits 10,765,707 14,260,774 12,601,420 18,235,160 3,974,386 Services and Supplies 29,288,173 38,160,686 36,211,516 42,790,622 4,629,936 Capital Assets 276,648 1,200,000 383,219 6,941,500 5,741,500 Total Financing Uses $ 633,745,636 $ 588,397,716 $ 501,239,632 $ 500,660,609 $ (87,737,107) Total Budgeted Change to Net Position $ 44,527,962 $ 0 $ 31,580,328 $ 14,622,272 $ 14,622,272

ATTACHMENT B
Revised FY 2026-27 Financial Policies - redline

1.0 Purpose and Background
The prudent and responsible stewardship of public assets is a principal obligation of Central Coast Community Energy (3CE) officials and managers. The development and maintenance of financial policies enable 3CE officials to protect those public assets, ensure transparency, and build public trust. Financial policies define a shared understanding of how 3CE administers its financial affairs and communicates how the agency manages its resources to deliver the highest value to the communities served.

This document centralizes 3CE’s financial policies and establishes a framework for overall fiscal planning, management, and decision-making related to public assets controlled by 3CE. These policies are reviewed, updated, and brought before the Policy Board as needed, but at least annually for adoption.

This continued review and adoption promote sound financial management and help maintain 3CE’s stability, efficiency, and effectiveness by ensuring the Policy Board’s financial policy guidance is provided before 3CE takes any financial actions. The policies also offer guidelines for evaluating both current activities and proposals for future programs and direct 3CE’s financial resources toward meeting its objectives and strategic initiatives.

These policies provide general guidance in the management of 3CE’s fiscal affairs and are to be used by all 3CE employees to meet their obligation to operate in a financially prudent manner. The Recommended Budget is developed in accordance with this framework.

2.0 General Financial Policy
The cornerstone and highest priority of 3CE’s financial policies is fiscal integrity. It shall be the goal of 3CE to achieve a strong financial condition with the ability to:
• Sustain adequate financial liquidity to meet operating and contingent obligations; • Ensure a sufficient financial base is maintained to withstand local, regional, national, and global economic impacts;
• Foster the ability to adjust efficiently to the community’s changing service requirements; • Maintain and improve infrastructure and capital assets; • Regularly review operations and operational methods to improve processes that result in higher productivity and eliminate repetitive and duplicative functions; • Encourage collaboration with other government entities, the private sector, and public-private partnerships where cost and risk are minimized in the delivery of services; • Promote sharing of costs and benefits by service users; • Ensure the legal use of financial resources through an effective system of internal controls; • Support sound financial management by providing accurate and timely information on 3CE’s financial condition; and
• Provide a framework for the wise and prudent use of debt financing and maintain a strong credit rating in the financial community, with the long-term goal of achieving and sustaining a rating in the A category or higher.

2.1 The Annual Budget
The Chief Executive Officer (CEO) will recommend a balanced budget that:
• Aligns annual expenditures with the revenue requirement established through a cost-of-service methodology;

• Minimizes reliance on reserves and one-time funding sources for ongoing operations; and • Maintains competitive, cost-based rates while supporting 3CE’s renewable energy goals.

Through the CEO, the Treasurer will consult with 3CE Officers and seek their input in developing the Recommended Budget through cooperative discussions and financial education. The CEO will keep the Policy Board apprised of the condition of 3CE’s finances and emerging fiscal issues.

3.0 Roles and Functions

3.1 Role of Chief Executive Officer
The CEO serves as the chief policy advisor to the Policy Board, Operations Board, and the various Board committees. The CEO promotes responsible resource allocation, strives to protect 3CE’s financial position and integrity, and provides independent analysis on policy and financial issues. The CEO is the fund manager for 3CE’s enterprise fund and any other funds that may be created.

3.2 Principal Functions of the Chief Executive Officer
Principal functions of the CEO include:
• Promoting continuous improvement of the structures, systems, processes, and effectiveness of operations;
• Preparing the annual financial plan (Recommended Budget); • Evaluating potential federal, state, and local budget impacts; • Developing financial forecasts;
• Monitoring revenues and expenditures for conformance with the annual budget; • Recommending effective fiscal policies to carry out the 3CE mission; • Verifying Policy Board policies are consistently applied; and • Ensuring items brought before the Policy Board are transparent, accurate, complete, fully justified, and reviewed by appropriate stakeholders.

3.3 Principal Functions of the Treasurer
Principal functions of the Treasurer include:
• Carrying out financial operations efficiently and cost-effectively while adhering to all 3CE, state, and federal laws, regulations, and policies;
• Preparing budgets and financial estimates with attention to accuracy based on financial expertise, state, and federal funding and regulatory changes, and economic indicators affecting revenues, expenditures, and service levels;
• Reviewing, evaluating, and assessing potential federal and state budget and regulatory issues that may impact the agency;
• Developing and performing financial forecasts;
• Monitoring monthly revenue, expenditure, and cash flow performance and conformance with the Adopted Budget;
• Meeting the Policy Board’s strategic financial initiatives and policies; and • Ensuring items brought before the Policy Board are transparent, accurate, complete, fully justified, and reviewed by all appropriate stakeholders.
• In the absence or unavailability of the Treasurer, or during a vacancy in the office, the CEO or a 3CE employee designated by the CEO in writing may perform the functions and responsibilities assigned to the Treasurer under this policy.

3.4 Principal Functions of the Audit and Finance Committee The Audit and Finance Committee’s principal functions include receiving staff updates on financial issues and providing oversight and direction to staff in developing and modifying the budget and audits.

3.5 Principal Functions of the Energy Risk Management Committee The Energy Risk Management Committee is formed by the CEO to implement and maintain the Energy Risk Management Policy, which requires 3CE to maintain sufficient financial reserves to:
• Establish long-term business sustainability;
• Build collateral for power procurement activities;
• Maintain an investment-grade credit rating;
• Develop funding sources for investment in generation and other local initiatives; and • Reduce the business and customer impact of year-to-year volatility in energy markets and procurement costs.

4.0 Services and Fund Structure

4.1 Enterprise Fund
3CE operates as an enterprise fund. The enterprise fund accounts for revenues and expenditures for all 3CE activities. The fund’s operations are financed and operated like private business enterprises, with services primarily funded through user charges (electric generation rates).

4.2 Expenses
Enterprise fund expenses and revenues will be established at sufficient levels to properly maintain the fund’s infrastructure and provide significant capital development.

4.3 Rate Structure and Net Position
The enterprise fund will maintain an adequate rate structure to cover the cost of all operations, including cash flow, capital replacement and maintenance, debt service if applicable, contingency funding, reserve contributions, and depreciation. Rates may be offset from the available unreserved net position, including the Energy Rate Stabilization Reserve, only after these requirements are met.

5.0 Operating Budget

5.1 The Budget
The Recommended Budget is the central financial planning document that sets the agency’s goals, objectives, priorities, levels of service, and the associated operating revenue and expenditures.

Expenditures are recommended based on the relationship between expected expenditures and revenue. If revenues are estimated to fall below expected amounts, the agency will take all actions available to reestablish a revenue and expenditure relationship that conforms to the operating requirements.

The Recommended Budget shall be presented to the Policy Board for adoption in September of each year and clearly presented to a general audience of the public.

5.2 Balance Budget
A budget is balanced when the total estimated financing sources (beginning net position plus revenues) equal the total expenditures. At no time shall spending in a given year exceed total current estimated

revenues plus any net positive position (reserved and non-reserved).

5.3 Ongoing Operations Needs
3CE will adequately fund ongoing maintenance and operational needs with ongoing annual revenue.

Without prior direction and approval from the Policy Board, the use of one-time revenues or short-term borrowing is not allowed as a resource for financing ongoing operational needs.

5.4 Capital Facilities and Equipment
3CE shall establish as a primary fiscal responsibility the acquisition, preservation, maintenance, improvement, and, when applicable, orderly replacement of 3CE’s capital facilities and equipment. 3CE shall endeavor to purchase a permanent headquarters and appropriate regional offices to provide continuity of location and operations while stabilizing and controlling facility costs into the future. 3CE will acquire and maintain high-quality equipment to maximize useful life and ensure efficient operations.

5.5 Appropriations and Transfers
The agency enterprise fund is not constrained by appropriation controls. The CEO is charged with maintaining the relationship between financing uses and sources and shall report to the Policy Board any deviation exceeding the adopted budget. The CEO is authorized to make appropriation transfers between departments within the enterprise fund as necessary to adequately reflect the agency's expenditure needs.

5.6 Responsibility for Budget Management and Budgetary Control 3CE shall maintain a budgetary control system to help it adhere to the adopted budget. The CEO has budgetary control and authority over expenditures. The Treasurer shall administer and maintain the system utilized for budgetary control. As the administrator of the budgetary control system, the Treasurer shall notify the CEO when a department approaches its expenditure limit. The Treasurer shall seek guidance from the CEO on all issues relating to expenditures and controls. 3CE Officers, in coordination with the Treasurer, have primary responsibility for managing departmental budgets by:
• Providing accurate and timely budget estimates;
• Monitoring revenues to ensure timely receipt in the amounts anticipated; • Ensuring that expenditures comply with the law, adopted resolutions, policies, and align appropriations relative to revenues;
• Providing prompt notification to the CEO when either revenues or expenditures are not as anticipated; and
• Preparing and justifying budget revisions when necessary

5.7 Preparation of Financial Reports
The CEO annually prepares or causes to be prepared:
• An Annual Comprehensive Financial Report (ACFR) that reports on 3CE’s financial position and activities, adhering to Generally Accepted Accounting Principles (GAAP) or state law requirements, to provide readers with a broader understanding of the agency’s financial operations; • A mid-year estimate to provide current-year performance and three-year forecast to advise the Policy Board on future challenges and provide a base for building the following year’s Recommended Budget; and
• Additional reports, as appropriate, to keep the Policy Board informed on current financial performance and developments.

The CEO has oversight and contract management over the external auditors reviewing the ACFR.

External auditors shall report to the CEO or designated officer on audit findings. The CEO will thereafter take the audit findings to the Policy Board.

5.8 Publication of Budget
The CEO shall publish annually a Recommended Budget document that satisfies nationally recognized standards for effective budget presentation. The Recommended Budget will be provided to the Policy Board a minimum of two weeks in advance of the annual budget hearings.

5.9 Budget Development
Budget development is an annual process incorporating the Policy Board’s priorities and weighing competing requests for 3CE resources within expected fiscal constraints. The process begins with departments preparing “baseline” budgets proposing levels of service and staffing that can be carried out within expected resources (e.g., revenues). Departments may submit “augmentation requests” for additional resources to mitigate potential impacts, increase staffing/services, or invest in infrastructure.

The CEO evaluates baseline budgets and augmentation requests within the constraints of a balanced budget and builds the annual Recommended Budget. Staff considers the following criteria in formulating recommendations for the annual budget and subsequent mid-year budget modifications:
• Mandated by current law, regulation, or Policy Board policy; • Alignment with 3CE’s strategic initiatives and priorities; • Necessary to maintain the current level of mission-critical services/operations; • Substantiation of compelling public need (e.g., health, safety, economic vitality, quality of life) that cannot be met within existing resources;
• Likelihood of success based on prior performance, degree of planning/specificity, requested resources, and assumed timeline;
• Leverages sustainable financial support from non-3CE sources; • Appropriate placement of responsibility (federal, state, or local); • Degree of urgency; and
• Critical infrastructure investment to ensure productivity and continuity of operations.

Criteria in the listing are not exhaustive or in any particular order, nor are they mutually exclusive; funding recommendations may align with more than one criterion.

5.10 Amendments to the Adopted Budget
Modifications to the Adopted Budget require the approval of a majority of Policy Board members.

Amendments to the Adopted Budget will be made in compliance with Policy Board policies. As an enterprise fund, the relationship between financing uses and financing sources is the overriding principle; thus, appropriation controls are not required.

5.11 Budgetary Basis
3CE uses the full accrual basis of accounting following GAAP. The budgetary basis is appropriation-based, beginning on October 1 and ending on the last day of September each year. 3CE is an enterprise fund that is appropriation-based budgeted; however, accounting is on a full accrual basis.

5.12 Capital Asset Definition
3CE defines capital assets as assets with initial, individual costs of $5,000 or more and an estimated useful life greater than one year, except infrastructure, for which the threshold is set at $100,000. Capital assets include both tangible and intangible assets categorized by asset type for reporting purposes.

Infrastructure refers to long-lived capital assets that are typically stationary and can be preserved for significantly longer than most other capital assets. Infrastructure assets typically include, but are not limited to, energy generation and storage facilities, electric distribution systems, and grid interconnection infrastructure.

5.13 Appropriations for Contingencies
3CE annually budgets for contingencies to provide sufficient working capital and a margin of safety for unplanned operational needs. The contingency is utilized only after all other budget resources have been examined. The budgeted amount for operational contingencies shall be equal to five percent (5%) of recommended appropriations, excluding cost of energy (COE), unless expressly modified by the Policy Board as part of the annual budget adoption.

6.0 Net Position and Reserve Policies

6.1 Net Position
Net position is a measurement of available financial resources. It is the difference between total assets and total liabilities. The Policy Board recognizes that maintaining a positive net position is essential to preserving 3CE’s financial integrity. Sufficient net position and reserve levels are a critical component of 3CE’s overall financial management strategy. They are key factors in the ability to sustain service delivery and obtain external financing. Rating agencies analyze net position when considering 3CE’s overall financial strength and creditworthiness. Adequate reserves enable flexible financial planning in developing rate structures, future capital projects, dealing with unforeseen emergencies, and changes in general economic conditions.

6.2 Strategic Reserve
A strategic reserve is essential to provide an adequate financial backstop throughout the year. 3CE shall adopt a strategic reserve equal to twenty-five percent (25%) of budgeted appropriations. The strategic reserve will provide sufficient working capital (cash flow), fund settlements of legal judgments against 3CE in excess of reserves specifically designated for litigation, for natural disasters as determined by the CEO or Policy Board, and for one-time-only budget overruns that could not be addressed through the annual appropriations for contingencies.

If the strategic reserve is utilized to provide temporary funding for unforeseen needs, 3CE shall take the measures necessary to prevent its use in the following fiscal year by increasing revenues and/or decreasing expenditures to regain balance. 3CE shall also restore the strategic reserve to the minimum level of twenty-five percent (25%) of budgeted appropriations within three fiscal years following the fiscal year in which the event occurred. The plan to restore the strategic reserve shall be included and highlighted in the Recommended Budget.

6.3 Energy Rate Stabilization Reserve
The agency shall maintain an energy rate stabilization reserve equal to twenty (20%) of the budgeted COE.

This reserve serves as a financial buffer to absorb fluctuations in energy costs and to respond to unforeseen changes in market conditions or regulatory requirements that may increase power procurement expenses beyond what rate adjustments can cover.

The central purpose of this reserve is to support rate smoothing and long-term rate stability. By

strategically using this reserve, 3CE pursues stable customer rates even during periods of cost volatility, strengthening its position as a load-serving entity and sustaining customer trust.

The reserve may be partially or fully accounted for under Government Accounting Standards Board (GASB) Statement 62 and GASB Statement 63, which govern the presentation of deferred outflows and inflows of resources and their effects on net position. A transfer into the reserve reduces revenue and the change in net position in the year of deferral by the same amount. A transfer from the reserve increases revenues and changes net position in the year the transfer occurs.

The reserve balance is recorded on the Statement of Net Position as unrestricted net position and, if deferred, in a separate section following liabilities, entitled Deferred Inflows of Resources. Transfers to and from the reserve are recorded in the Statements of Revenues, Expenses, and Changes in Net Position under Operating Revenues.

Any material or sustained use of the reserve shall be reflected in the Recommended Budget, including a long-term plan to replenish the reserve. This reserve may be utilized throughout the fiscal year at the direction of the CEO, with subsequent reporting to the Audit and Finance and Energy Risk Management committees and the Boards.

6.4 Renewable Energy Innovation and Initiatives Reserve The agency shall maintain a renewable energy innovation and initiatives reserve equal to five percent (5%) of the budgeted COE. This reserve shall be utilized for investments in furtherance of the Boards’ goals to accelerate the utilization of 100% clean and renewable energy through the commitment to new or emerging, but scalable, technologies that can address the challenges of an intermittent renewable grid and reduce dependency on fossil fuels for electricity generation.

6.5 Capital Infrastructure Reserve
The agency shall establish a capital infrastructure reserve sufficient to provide for the operation, routine scheduled maintenance, reasonably anticipated unplanned repair, and orderly replacement of 3CE’s capital infrastructure, including enterprise software, real estate, and electric generation and storage facilities. Funding contributions to this reserve shall be established annually through the budget process or otherwise amended by Policy Board resolution.

6.6 Measurement of Reserve Targets
Due to the nature of the agency's business, the mechanism for funding the four reserves shall be cash, cash equivalents, and short-term investments, including any balance in the Energy Rate Stabilization Reserve held as deferred inflows. The reserves must be liquid and available to ensure they can be used for their intended purpose.

7.0 Capital Facilities and Improvement Policies

7.1 Capital Investments
3CE is responsible for investing in the preservation, maintenance, and improvement of owned assets, including buildings, equipment, and other capital infrastructure.

Projects in excess of $100,000 with an estimated useful life of at least 5 years and non-recurring costs are considered capital projects and should be evaluated against other uses and priorities. All capital projects

should be included in the Adopted Budget or taken to the Policy Board for approval and amendment to the Adopted Budget.

Per Resolution No. PB-2025-04, the Executive Committee is delegated to approve capital projects that do not exceed $5,000,000 per project, with CEO approval of any necessary contracts or agreements to effectuate the approved projects within that limit.

8.0 Credit Rating, Coverage, and Liquidity Targets

8.1 Rationale
A strong credit profile reduces 3CE’s borrowing costs, expands access to power-supply counterparties without onerous collateral postings, and signals financial discipline to ratepayers and member agencies. 3CE manages its finances to achieve and sustain an investment-grade issuer credit rating, with the long-term objective of reaching and maintaining a rating in the A category or higher.

8.2 Financial-Metrics Targets
Reserves shall support a DLOH (Days Liquidity on hand) target equal to 180 days. The Financial Policies seek to achieve a long-term target of a strong investment-grade rating (A+/A1 or higher) or an equivalent rating from any nationally recognized rating organization.

8.3 Liquidity Facilities
3CE may maintain a committed liquidity facility (revolving credit agreement or equivalent) with one or more investment-grade financial institutions. The Treasurer shall report annually to the Audit and Finance Committee on the status of the liquidity facility, including pricing, covenants, available headroom, and any anticipated renewal or replacement activity.

8.4 Credit-Rating Maintenance
3CE shall maintain active relationships with at least one nationally recognized credit rating organization.

The Treasurer shall provide the Policy Board with any updates to 3CE’s rating actions and outlook changes.

9.0 Debt Management
Due to its length and complexity, the Debt Management Policy is reviewed by the Policy Board separately from these policies.

Revised FY 2026-27 Financial Policies – clean

1.0 Purpose and Background
The prudent and responsible stewardship of public assets is a principal obligation of Central Coast Community Energy (3CE) officials and managers. The development and maintenance of financial policies enable 3CE officials to protect those public assets, ensure transparency, and build public trust. Financial policies define a shared understanding of how 3CE administers its financial affairs and communicates how the agency manages its resources to deliver the highest value to the communities served.

This document centralizes 3CE’s financial policies and establishes a framework for overall fiscal planning, management, and decision-making related to public assets controlled by 3CE. These policies are reviewed, updated, and brought before the Policy Board as needed, but at least annually for adoption.

This continued review and adoption promote sound financial management and help maintain 3CE’s stability, efficiency, and effectiveness by ensuring the Policy Board’s financial policy guidance is provided before 3CE takes any financial actions. The policies also offer guidelines for evaluating both current activities and proposals for future programs and direct 3CE’s financial resources toward meeting its objectives and strategic initiatives.

These policies provide general guidance in the management of 3CE’s fiscal affairs and are to be used by all 3CE employees to meet their obligation to operate in a financially prudent manner. The Recommended Budget is developed in accordance with this framework.

2.0 General Financial Policy
The cornerstone and highest priority of 3CE’s financial policies is fiscal integrity. It shall be the goal of 3CE to achieve a strong financial condition with the ability to:
• Sustain adequate financial liquidity to meet operating and contingent obligations; • Ensure a sufficient financial base is maintained to withstand local, regional, national, and global economic impacts;
• Foster the ability to adjust efficiently to the community’s changing service requirements; • Maintain and improve infrastructure and capital assets; • Regularly review operations and operational methods to improve processes that result in higher productivity and eliminate repetitive and duplicative functions; • Encourage collaboration with other government entities, the private sector, and public-private partnerships where cost and risk are minimized in the delivery of services; • Promote sharing of costs and benefits by service users; • Ensure the legal use of financial resources through an effective system of internal controls; • Support sound financial management by providing accurate and timely information on 3CE’s financial condition; and
• Provide a framework for the wise and prudent use of debt financing and maintain a strong credit rating in the financial community, with the long-term goal of achieving and sustaining a rating in the A category or higher.

2.1 The Annual Budget
The Chief Executive Officer (CEO) will recommend a balanced budget that:
• Aligns annual expenditures with the revenue requirement established through a cost-of-service methodology;
• Minimizes reliance on reserves and one-time funding sources for ongoing operations; and • Maintains competitive, cost-based rates while supporting 3CE’s renewable energy goals.

Through the CEO, the Treasurer will consult with 3CE Officers and seek their input in developing the Recommended Budget through cooperative discussions and financial education. The CEO will keep the Policy Board apprised of the condition of 3CE’s finances and emerging fiscal issues.

3.0 Roles and Functions

3.1 Role of Chief Executive Officer
The CEO serves as the chief policy advisor to the Policy Board, Operations Board, and the various Board committees. The CEO promotes responsible resource allocation, strives to protect 3CE’s financial position and integrity, and provides independent analysis on policy and financial issues. The CEO is the fund manager for 3CE’s enterprise fund and any other funds that may be created.

3.2 Principal Functions of the Chief Executive Officer
Principal functions of the CEO include:
• Promoting continuous improvement of the structures, systems, processes, and effectiveness of operations;
• Preparing the annual financial plan (Recommended Budget); • Evaluating potential federal, state, and local budget impacts; • Developing financial forecasts;
• Monitoring revenues and expenditures for conformance with the annual budget; • Recommending effective fiscal policies to carry out the 3CE mission; • Verifying Policy Board policies are consistently applied; and • Ensuring items brought before the Policy Board are transparent, accurate, complete, fully justified, and reviewed by appropriate stakeholders.

3.3 Principal Functions of the Treasurer
Principal functions of the Treasurer include:
• Carrying out financial operations efficiently and cost-effectively while adhering to all 3CE, state, and federal laws, regulations, and policies;
• Preparing budgets and financial estimates with attention to accuracy based on financial expertise, state, and federal funding and regulatory changes, and economic indicators affecting revenues, expenditures, and service levels;
• Reviewing, evaluating, and assessing potential federal and state budget and regulatory issues that may impact the agency;
• Developing and performing financial forecasts;
• Monitoring monthly revenue, expenditure, and cash flow performance and conformance with the Adopted Budget;
• Meeting the Policy Board’s strategic financial initiatives and policies; and • Ensuring items brought before the Policy Board are transparent, accurate, complete, fully justified, and reviewed by all appropriate stakeholders.
• In the absence or unavailability of the Treasurer, or during a vacancy in the office, the CEO or a 3CE employee designated by the CEO in writing may perform the functions and responsibilities assigned to the Treasurer under this policy.

3.4 Principal Functions of the Audit and Finance Committee The Audit and Finance Committee’s principal functions include receiving staff updates on financial issues and providing oversight and direction to staff in developing and modifying the budget and audits.

3.5 Principal Functions of the Energy Risk Management Committee The Energy Risk Management Committee is formed by the CEO to implement and maintain the Energy Risk Management Policy, which requires 3CE to maintain sufficient financial reserves to:
• Establish long-term business sustainability;
• Build collateral for power procurement activities;
• Maintain an investment-grade credit rating;
• Develop funding sources for investment in generation and other local initiatives; and • Reduce the business and customer impact of year-to-year volatility in energy markets and procurement costs.

4.0 Services and Fund Structure

4.1 Enterprise Fund
3CE operates as an enterprise fund. The enterprise fund accounts for revenues and expenditures for all 3CE activities. The fund’s operations are financed and operated like private business enterprises, with services primarily funded through user charges (electric generation rates).

4.2 Expenses
Enterprise fund expenses and revenues will be established at sufficient levels to properly maintain the fund’s infrastructure and provide significant capital development.

4.3 Rate Structure and Net Position
The enterprise fund will maintain an adequate rate structure to cover the cost of all operations, including cash flow, capital replacement and maintenance, debt service if applicable, contingency funding, reserve contributions, and depreciation. Rates may be offset from the available unreserved net position, including the Energy Rate Stabilization Reserve, only after these requirements are met.

5.0 Operating Budget

5.1 The Budget
The Recommended Budget is the central financial planning document that sets the agency’s goals, objectives, priorities, levels of service, and the associated operating revenue and expenditures.

Expenditures are recommended based on the relationship between expected expenditures and revenue. If revenues are estimated to fall below expected amounts, the agency will take all actions available to reestablish a revenue and expenditure relationship that conforms to the operating requirements.

The Recommended Budget shall be presented to the Policy Board for adoption in September of each year and clearly presented to a general audience of the public.

5.2 Balance Budget
A budget is balanced when the total estimated financing sources (beginning net position plus revenues) equal the total expenditures. At no time shall spending in a given year exceed total current estimated

revenues plus any net positive position (reserved and non-reserved).

5.3 Ongoing Operations Needs
3CE will adequately fund ongoing maintenance and operational needs with ongoing annual revenue.

Without prior direction and approval from the Policy Board, the use of one-time revenues or short-term borrowing is not allowed as a resource for financing ongoing operational needs.

5.4 Capital Facilities and Equipment
3CE shall establish as a primary fiscal responsibility the acquisition, preservation, maintenance, improvement, and, when applicable, orderly replacement of 3CE’s capital facilities and equipment. 3CE shall endeavor to purchase a permanent headquarters and appropriate regional offices to provide continuity of location and operations while stabilizing and controlling facility costs into the future. 3CE will acquire and maintain high-quality equipment to maximize useful life and ensure efficient operations.

5.5 Appropriations and Transfers
The agency enterprise fund is not constrained by appropriation controls. The CEO is charged with maintaining the relationship between financing uses and sources and shall report to the Policy Board any deviation exceeding the adopted budget. The CEO is authorized to make appropriation transfers between departments within the enterprise fund as necessary to adequately reflect the agency's expenditure needs.

5.6 Responsibility for Budget Management and Budgetary Control 3CE shall maintain a budgetary control system to help it adhere to the adopted budget. The CEO has budgetary control and authority over expenditures. The Treasurer shall administer and maintain the system utilized for budgetary control. As the administrator of the budgetary control system, the Treasurer shall notify the CEO when a department approaches its expenditure limit. The Treasurer shall seek guidance from the CEO on all issues relating to expenditures and controls. 3CE Officers, in coordination with the Treasurer, have primary responsibility for managing departmental budgets by:
• Providing accurate and timely budget estimates;
• Monitoring revenues to ensure timely receipt in the amounts anticipated; • Ensuring that expenditures comply with the law, adopted resolutions, policies, and align appropriations relative to revenues;
• Providing prompt notification to the CEO when either revenues or expenditures are not as anticipated; and
• Preparing and justifying budget revisions when necessary

5.7 Preparation of Financial Reports
The CEO annually prepares or causes to be prepared:
• An Annual Comprehensive Financial Report (ACFR) that reports on 3CE’s financial position and activities, adhering to Generally Accepted Accounting Principles (GAAP) or state law requirements, to provide readers with a broader understanding of the agency’s financial operations; • A mid-year estimate to provide current-year performance and three-year forecast to advise the Policy Board on future challenges and provide a base for building the following year’s Recommended Budget; and
• Additional reports, as appropriate, to keep the Policy Board informed on current financial performance and developments.

The CEO has oversight and contract management over the external auditors reviewing the ACFR.

External auditors shall report to the CEO or designated officer on audit findings. The CEO will thereafter take the audit findings to the Policy Board.

5.8 Publication of Budget
The CEO shall publish annually a Recommended Budget document that satisfies nationally recognized standards for effective budget presentation. The Recommended Budget will be provided to the Policy Board a minimum of two weeks in advance of the annual budget hearings.

5.9 Budget Development
Budget development is an annual process incorporating the Policy Board’s priorities and weighing competing requests for 3CE resources within expected fiscal constraints. The process begins with departments preparing “baseline” budgets proposing levels of service and staffing that can be carried out within expected resources (e.g., revenues). Departments may submit “augmentation requests” for additional resources to mitigate potential impacts, increase staffing/services, or invest in infrastructure.

The CEO evaluates baseline budgets and augmentation requests within the constraints of a balanced budget and builds the annual Recommended Budget. Staff considers the following criteria in formulating recommendations for the annual budget and subsequent mid-year budget modifications:
• Mandated by current law, regulation, or Policy Board policy; • Alignment with 3CE’s strategic initiatives and priorities; • Necessary to maintain the current level of mission-critical services/operations; • Substantiation of compelling public need (e.g., health, safety, economic vitality, quality of life) that cannot be met within existing resources;
• Likelihood of success based on prior performance, degree of planning/specificity, requested resources, and assumed timeline;
• Leverages sustainable financial support from non-3CE sources; • Appropriate placement of responsibility (federal, state, or local); • Degree of urgency; and
• Critical infrastructure investment to ensure productivity and continuity of operations.

Criteria in the listing are not exhaustive or in any particular order, nor are they mutually exclusive; funding recommendations may align with more than one criterion.

5.10 Amendments to the Adopted Budget
Modifications to the Adopted Budget require the approval of a majority of Policy Board members.

Amendments to the Adopted Budget will be made in compliance with Policy Board policies. As an enterprise fund, the relationship between financing uses and financing sources is the overriding principle; thus, appropriation controls are not required.

5.11 Budgetary Basis
3CE uses the full accrual basis of accounting following GAAP. The budgetary basis is appropriation-based, beginning on October 1 and ending on the last day of September each year. 3CE is an enterprise fund that is appropriation-based budgeted; however, accounting is on a full accrual basis.

5.12 Capital Asset Definition
3CE defines capital assets as assets with initial, individual costs of $5,000 or more and an estimated useful life greater than one year, except infrastructure, for which the threshold is set at $100,000. Capital assets include both tangible and intangible assets categorized by asset type for reporting purposes.

Infrastructure refers to long-lived capital assets that are typically stationary and can be preserved for significantly longer than most other capital assets. Infrastructure assets typically include, but are not limited to, energy generation and storage facilities, electric distribution systems, and grid interconnection infrastructure.

5.13 Appropriations for Contingencies
3CE annually budgets for contingencies to provide sufficient working capital and a margin of safety for unplanned operational needs. The contingency is utilized only after all other budget resources have been examined. The budgeted amount for operational contingencies shall be equal to five percent (5%) of recommended appropriations, excluding cost of energy (COE), unless expressly modified by the Policy Board as part of the annual budget adoption.

6.0 Net Position and Reserve Policies

6.1 Net Position
Net position is a measurement of available financial resources. It is the difference between total assets and total liabilities. The Policy Board recognizes that maintaining a positive net position is essential to preserving 3CE’s financial integrity. Sufficient net position and reserve levels are a critical component of 3CE’s overall financial management strategy. They are key factors in the ability to sustain service delivery and obtain external financing. Rating agencies analyze net position when considering 3CE’s overall financial strength and creditworthiness. Adequate reserves enable flexible financial planning in developing rate structures, future capital projects, dealing with unforeseen emergencies, and changes in general economic conditions.

6.2 Strategic Reserve
A strategic reserve is essential to provide an adequate financial backstop throughout the year. 3CE shall adopt a strategic reserve equal to twenty-five percent (25%) of budgeted appropriations. The strategic reserve will provide sufficient working capital (cash flow), fund settlements of legal judgments against 3CE in excess of reserves specifically designated for litigation, for natural disasters as determined by the CEO or Policy Board, and for one-time-only budget overruns that could not be addressed through the annual appropriations for contingencies.

If the strategic reserve is utilized to provide temporary funding for unforeseen needs, 3CE shall take the measures necessary to prevent its use in the following fiscal year by increasing revenues and/or decreasing expenditures to regain balance. 3CE shall also restore the strategic reserve to the minimum level of twenty-five percent (25%) of budgeted appropriations within three fiscal years following the fiscal year in which the event occurred. The plan to restore the strategic reserve shall be included and highlighted in the Recommended Budget.

6.3 Energy Rate Stabilization Reserve
The agency shall maintain an energy rate stabilization reserve equal to twenty (20%) of the budgeted COE.

This reserve serves as a financial buffer to absorb fluctuations in energy costs and to respond to unforeseen changes in market conditions or regulatory requirements that may increase power procurement expenses beyond what rate adjustments can cover.

The central purpose of this reserve is to support rate smoothing and long-term rate stability. By

strategically using this reserve, 3CE pursues stable customer rates even during periods of cost volatility, strengthening its position as a load-serving entity and sustaining customer trust.

The reserve may be partially or fully accounted for under Government Accounting Standards Board (GASB) Statement 62 and GASB Statement 63, which govern the presentation of deferred outflows and inflows of resources and their effects on net position. A transfer into the reserve reduces revenue and the change in net position in the year of deferral by the same amount. A transfer from the reserve increases revenues and changes net position in the year the transfer occurs.

The reserve balance is recorded on the Statement of Net Position as unrestricted net position and, if deferred, in a separate section following liabilities, entitled Deferred Inflows of Resources. Transfers to and from the reserve are recorded in the Statements of Revenues, Expenses, and Changes in Net Position under Operating Revenues.

Any material or sustained use of the reserve shall be reflected in the Recommended Budget, including a long-term plan to replenish the reserve. This reserve may be utilized throughout the fiscal year at the direction of the CEO, with subsequent reporting to the Audit and Finance and Energy Risk Management committees and the Boards.

6.4 Renewable Energy Innovation and Initiatives Reserve The agency shall maintain a renewable energy innovation and initiatives reserve equal to five percent (5%) of the budgeted COE. This reserve shall be utilized for investments in furtherance of the Boards’ goals to accelerate the utilization of 100% clean and renewable energy through the commitment to new or emerging, but scalable, technologies that can address the challenges of an intermittent renewable grid and reduce dependency on fossil fuels for electricity generation.

6.5 Capital Infrastructure Reserve
The agency shall establish a capital infrastructure reserve sufficient to provide for the operation, routine scheduled maintenance, reasonably anticipated unplanned repair, and orderly replacement of 3CE’s capital infrastructure, including enterprise software, real estate, and electric generation and storage facilities. Funding contributions to this reserve shall be established annually through the budget process or otherwise amended by Policy Board resolution.

6.6 Measurement of Reserve Targets
Due to the nature of the agency's business, the mechanism for funding the four reserves shall be cash, cash equivalents, and short-term investments, including any balance in the Energy Rate Stabilization Reserve held as deferred inflows. The reserves must be liquid and available to ensure they can be used for their intended purpose.

7.0 Capital Facilities and Improvement Policies

7.1 Capital Investments
3CE is responsible for investing in the preservation, maintenance, and improvement of owned assets, including buildings, equipment, and other capital infrastructure.

Projects in excess of $100,000 with an estimated useful life of at least 5 years and non-recurring costs are considered capital projects and should be evaluated against other uses and priorities. All capital projects

should be included in the Adopted Budget or taken to the Policy Board for approval and amendment to the Adopted Budget.

Per Resolution No. PB-2025-04, the Executive Committee is delegated to approve capital projects that do not exceed $5,000,000 per project, with CEO approval of any necessary contracts or agreements to effectuate the approved projects within that limit.

8.0 Credit Rating, Coverage, and Liquidity Targets

8.1 Rationale
A strong credit profile reduces 3CE’s borrowing costs, expands access to power-supply counterparties without onerous collateral postings, and signals financial discipline to ratepayers and member agencies. 3CE manages its finances to achieve and sustain an investment-grade issuer credit rating, with the long-term objective of reaching and maintaining a rating in the A category or higher.

8.2 Financial-Metrics Targets
Reserves shall support a DLOH (Days Liquidity on hand) target equal to 180 days. The Financial Policies seek to achieve a long-term target of a strong investment-grade rating (A+/A1 or higher) or an equivalent rating from any nationally recognized rating organization.

8.3 Liquidity Facilities
3CE may maintain a committed liquidity facility (revolving credit agreement or equivalent) with one or more investment-grade financial institutions. The Treasurer shall report annually to the Audit and Finance Committee on the status of the liquidity facility, including pricing, covenants, available headroom, and any anticipated renewal or replacement activity.

8.4 Credit-Rating Maintenance
3CE shall maintain active relationships with at least one nationally recognized credit rating organization.

The Treasurer shall provide the Policy Board with any updates to 3CE’s rating actions and outlook changes.

9.0 Debt Management
Due to its length and complexity, the Debt Management Policy is reviewed by the Policy Board separately from these policies.

Staff Report Item 13
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: September 16, 2026
RECOMMENDATION:

This recommends that the Operations Board support the Policy Board’s authorization of the Chief Executive Officer to execute a clean energy purchase contract with the California Community Choice Financing Authority, together with the ancillary documents and agreements needed to complete 3CE’s second energy prepayment 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. A conduit financing authority undertakes the prepay transaction: the 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, CCA prepays issued by CCCFA have produced savings that ranged from 8% to 17% (12% average) relative to the contracted price. 3CE completed its first energy prepayment transaction 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 in a range of $1.3 billion to $1.5 billion. That is above the $800 million to $1.2 billion range the Policy Board authorized in March, because 3CE has since executed additional long-term PPA contracts that are also candidates for the transaction. The resolution before the Policy Board will therefore seek authorization for an issuance of up to $1.7 billion. That ceiling is not the expected size of the transaction; it provides room above the sizing range for movement between now and pricing. Staff would size the issuance only to the assigned contracts and to what market conditions support at pricing. The resolution contemplates that the transaction may be financed with one or more series of bonds, and the not-to-exceed amount applies to all series in the aggregate.

At current market indications and a sizing in the $1.3 billion to $1.5 billion range, the transaction would be expected to deliver roughly $7.0 million to $9.0 million per year in energy cost savings over a nine-year initial period, with the range reflecting a savings of 8% to 10% on the assigned contracts. Combined with Prepay #1, total savings from both prepayments would be roughly $12 million to $14 million per year.

Prepay #2 uses the same structure, the same conduit issuer, and substantially the same documents as Prepay #1, which has performed as expected since 2023. Staff is seeking Policy Board approval at the Board’s regularly scheduled September meeting, which will enable pricing as early as October, with the flexibility to wait into early 2027 if market conditions would produce better savings.

The Executive and Audit and Finance committees unanimously supported the Policy Board’s consideration and authorization of Prepay #2 at their regular meetings on August 19 and 26, 2026, respectively.

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 began in the early 1990s, the IRS has issued rules allowing tax-exempt prepayments, and Congress has enacted legislation specifically allowing these 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 and pays 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.

The savings come from the gap between tax-exempt and corporate borrowing costs. Federal tax rules adopted in 2005 allow a public power agency to capture that gap by paying for energy in advance.

CCCFA issues tax-exempt bonds and uses the proceeds to prepay for roughly 30 years of energy deliveries. Those proceeds are not simply handed to the supplier. They are lent to a highly rated bank, insurance company, or corporation, which gains access to inexpensive capital and repays it on a fixed monthly schedule. Those payments cover debt service on the bonds, and in exchange, 3CE receives its energy at a discount.
3CE brings existing power purchase agreements into the transaction through limited assignment agreements. The projects, the physical energy, and 3CE’s monthly payment obligation all stay the same.

The only change is that 3CE buys that same energy from CCCFA at a discount to the contract price.

Swaps and other financial arrangements sit alongside the structure so that its cash flows match fixed-rate debt service; 3CE is not a party to any of 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.

 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 power purchase agreements remain as originally negotiated. At each future reset, if the discount floor cannot be met, the purchase contract allows 3CE to terminate and the contracts return to 3CE. 3CE is never obliged to accept a price that does not meet its savings criteria.

The two risks 3CE does carry have known limits, and both are set before anything is signed. First, an assigned project 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. Second, a material decline in load would reduce 3CE’s ability to take prepaid energy, so federal tax rules cap prepaid volume at 80 percent of expected load in any year. The only money genuinely at risk before closing is rating agency and green bond verification fees.

Progress to Date and Next Steps
Since the March authorization, the transaction has moved through competitive procurement and into final documentation. PFM solicited proposals for the remaining transaction roles in July. Following evaluation in early August, 3CE selected Goldman Sachs & Co. LLC as underwriter and supplier, Stradling Yocca Carlson & Rauth LLP as prepay counsel, and Nixon Peabody LLP as bond and tax counsel.

Through late August, staff identified the specific power purchase agreements to bring into the transaction and provided the underlying contracts and production history for review. 3CE used that information to develop the preliminary sizing described above. Counsel circulated first drafts of the transaction documents in late August; the working group completed its review in early September, and the team finalized and submitted revised documents ahead of this meeting. The documents attached to this report are those near-final drafts.

Part of the assignment work supports the existing transaction rather than the new one. A scheduled reduction in contracted capacity for an existing PPA will reduce the energy flowing through Prepay #1 beginning in 2027. Staff will direct a portion of the new assignments to Prepay #1 to replace that volume and preserve its roughly $5 million in annual savings, with the balance supporting Prepay #2.

The remaining steps are largely sequencing and are summarized below. Nothing in that schedule commits 3CE to proceed. Staff will not execute unless expected savings meet the thresholds staff has set, and the Policy Board will review those thresholds before pricing.

Timing Milestone Status
July Competitive solicitations issued for underwriter, supplier, and counsel Complete Early Aug. Proposals evaluated; transaction team selected Complete

Timing Milestone Status
Late Aug. Power purchase agreements identified; preliminary sizing; first drafts of transaction documents
Complete
Sept. 1–5 Working group document review; revised documents completed and submitted to the Boards
Complete
Sept. 16–17 Operations Board support and Policy Board authorization This item Mid–late
Sept.

Financing documents submitted to CCCFA; funding solicitation launched; submission to rating agencies
Upcoming
Sept. 24 CCCFA Board considers approval of the transaction Upcoming Late Sept. Preliminary Official Statement finalized; green bond verification Upcoming Early Oct. Disclosure documents mailed to investors Upcoming Oct. or later Pricing and closing, subject to market conditions and savings thresholds Upcoming A prepayment is not a one-time financing event. Like the power purchase agreements behind it, it begins a supply relationship that runs for about 30 years, and unlike a power purchase agreement, it is refinanced (also called a reset) every five to ten years. Most agencies that use the structure manage it as an ongoing program rather than a series of unrelated transactions. 3CE's current authorization covers only this transaction. As Prepay #2 closes and attention turns to the remaining unassigned contracts in the portfolio and future resets, a programmatic authorization is a structure the Boards may wish to consider. Staff can bring that concept forward for discussion after closing.

Key Transaction Documents
The nine agreements attached to this report are presented in near-final form, with all parties having settled the language on the major elements of the transaction. The market-dependent terms, most importantly the discount, are fixed at pricing. Staff has set a minimum discount below which it will not execute the transaction and is targeting 10%. The Policy Board will review that threshold before pricing.

1. Clean Energy Purchase Contract – Between 3CE and CCCFA. 3CE’s agreement to buy roughly 30 years of prepaid energy. Sets the discount 3CE receives, confirms that 3CE pays only for energy actually delivered, establishes how the discount is reset in future periods, and governs how 3CE’s power purchase agreements enter and leave the structure.

2. Consolidated, Amended and Restated PPA Custodial Agreement – Between 3CE, J. Aron & Company LLC, CCCFA, and U.S. Bank Trust Company as custodian. Replaces the 2023 custodial agreement and administers both prepayments under a single agreement, so that each project seller continues to receive one consolidated monthly payment from one account.

3. Form of Limited Assignment Agreement – Between 3CE, the seller under the power purchase agreement being assigned, and J. Aron. Assigns the right to receive a specified portion of a project’s output for a defined period, together with the obligation to pay for what is delivered.

All other rights and obligations under the power purchase agreement remain with 3CE, and the assigned rights automatically revert to 3CE when the assignment or the underlying contract

ends. The resolution approves this as a form, so it can be used for additional contracts without returning to the Boards.

4. Letter Agreement re: Limited Assignment Agreements – Between 3CE and J. Aron. Although each assignment agreement can be terminated at will on its face, this agreement bars either party from doing so except in a short list of defined circumstances, such as the underlying contract ending, 3CE electing to remarket, or a project persistently under-delivering.

5. Clean Energy Project Operational Services Agreement – Between 3CE and CCCFA. Governs the administrative and operational services CCCFA provides in connection with the transaction and the associated fee.

6. Trust Indenture – Between CCCFA and U.S. Bank Trust Company as trustee. Authorizes the Series 2026 Clean Energy Project Revenue Bonds, which may be issued in one or more series, and governs how transaction revenues are held and applied to debt service. This document makes the bonds limited obligations payable solely from transaction revenues. 3CE is not a party, and the bonds are not 3CE debt.

7. Master Power Supply Agreement – Between CCCFA and Aron Energy Prepay 65 LLC, the special-purpose entity formed to supply the transaction. Governs the supplier’s delivery obligations, the remarketing of any prepaid energy 3CE does not take, and the circumstances under which the transaction can be terminated.

8. Form of 3CE Appendix A – The description of 3CE included in the official statement used to sell the bonds, covering governance, service area, customers, rates, load, supply portfolio, and financial information. The resolution authorizes an officer certificate as to that information.

9. First Amendment to 2023 Clean Energy Purchase Contract – Between 3CE and CCCFA. Updates the Prepay #1 contract so that both transactions operate under the single consolidated custodial agreement and use the same monthly billing and true-up mechanics. Approving this item amends the existing 2023 transaction and authorizes the new one.

FISCAL IMPACT:

Transaction costs, including financial advisory, underwriting, legal, and other issuance expenses, will be paid from bond proceeds at closing, and the resolution caps total issuance costs at 1.25% of bond proceeds. There is no anticipated impact on 3CE’s operating budget beyond staff time and the preliminary structuring expenses incurred before issuance, principally rating agency and green bond verification fees.

CONCLUSION:

The transaction is on schedule. Competitive procurement is complete, the transaction documents are in near-final form and attached to this report, and Prepay #2 remains on track for CCCFA Board approval on September 24 and pricing thereafter, subject to market conditions and achievement of the minimum savings thresholds.

The Operations Board reviews the transaction on September 16, followed by the Policy Board’s consideration of the approvals and authorization on September 17.

ATTACHMENTS:

1. Clean Energy Purchase Contract

2. Consolidated, Amended, and Restated PPA Custodial Agreement

3. Form of Limited Assignment Agreement

4. Letter Agreement re Limited Assignment Agreements

5. Clean Energy Project Operational Services Agreement

6. Trust Indenture

7. Master Power Supply Agreement

8. Form of 3CE Appendix A

9. First Amendment to 2023 Clean Energy Purchase Contract

Sheppard Draft 1 September 2026

CLEAN ENERGY PURCHASE CONTRACT
between

CALIFORNIA COMMUNITY CHOICE FINANCING AUTHORITY
and

CENTRAL COAST COMMUNITY ENERGY
Dated as of [____], 20[_]

-i-TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS ........................................................................................................2 Section 1.1 Defined Terms ................................................................................................2 Section 1.2 Definitions; Interpretation.............................................................................13 ARTICLE II. DELIVERY PERIOD; NATURE OF CLEAN ENERGY PROJECT; CONDITION PRECEDENT ........................................................................13 Section 2.1 Delivery Period .............................................................................................13 Section 2.2 Nature of Clean Energy Project ....................................................................13 Section 2.3 Condition Precedent......................................................................................14 Section 2.4 Pledge of this Agreement..............................................................................14 ARTICLE III. SALE AND PURCHASE; PRICING...............................................................14 Section 3.1 Sale and Purchase of Product........................................................................14 Section 3.2 Payments.......................................................................................................14 Section 3.3 Limited Obligation to Take Base Quantities ................................................15 Section 3.4 Annual Refund..............................................................................................15 Section 3.5 Reset Period Remarketing.............................Error! Bookmark not defined.

ARTICLE IV. FAILURE TO SCHEDULE PRODUCT .........................................................16 Section 4.1 Issuer’s Failure to Schedule Base Quantity (Not Due to Force Majeure)........................................................................................................16 Section 4.2 Project Participant’s Failure to Schedule or Take Base Quantities (Not Due to Force Majeure)..........................................................................17 Section 4.3 Failure to Deliver or Take Due to Force Majeure.........................................17 Section 4.4 Assigned Products.........................................................................................17 Section 4.5 Sole Remedies...............................................................................................18 ARTICLE V. DELIVERY POINTS; SCHEDULING .............................................................18 Section 5.1 Delivery Points..............................................................................................18 Section 5.2 Transmission and Scheduling .......................................................................18 Section 5.3 Title and Risk of Loss...................................................................................18 Section 5.4 PCC1 Product and.........................................................................................19

-ii-Section 5.5 Communications Protocol.............................................................................21 Section 5.6 Deliveries within CAISO or another Balancing Authority...........................22 Section 5.7 Assigned Products.........................................................................................22 ARTICLE VI. ASSIGNMENT OF POWER PURCHASE AGREEMENTS........................22 Section 6.1 Assignments Generally .................................................................................22 Section 6.2 Failure to Obtain ...........................................................................................23 Section 6.3 Adjustments to Base Quantities....................................................................24 Section 6.4 J. Aron Non-Payment to APC Party. ............................................................24 ARTICLE VII. USE OF PRODUCT .........................................................................................24 Section 7.1 Tax Exempt Status of the Bonds...................................................................24 Section 7.2 Priority Products ...........................................................................................24 Section 7.3 Assistance with Sales to Third Parties..........................................................24 Section 7.4 Qualifying Use ..............................................................................................25 Section 7.5 Remediation ..................................................................................................25 Section 7.6 Remediation; Ledger Entries; Redemption...................................................26 ARTICLE VIII. REPRESENTATIONS AND WARRANTIES; ADDITIONAL COVENANTS ................................................................................................27 Section 8.1 Representations and Warranties of Issuer.....................................................27 Section 8.2 Warranty of Title...........................................................................................28 Section 8.3 Disclaimer of Warranties..............................................................................28 Section 8.4 Continuing Disclosure ..................................................................................28 ARTICLE IX. TAXES.................................................................................................................29 ARTICLE X. JURISDICTION; WAIVER OF JURY TRIAL ...............................................29 Section 10.1 Consent to Jurisdiction..................................................................................29 Section 10.2 Waiver of Jury Trial......................................................................................29 ARTICLE XI. FORCE MAJEURE...........................................................................................30 Section 11.1 Applicability of Force Majeure.....................................................................30 Section 11.2 Settlement of Labor Disputes........................................................................30

-iii-ARTICLE XII. GOVERNMENTAL RULES AND REGULATIONS...................................30 Section 12.1 Compliance with Laws .................................................................................30 Section 12.2 Contests.........................................................................................................30 Section 12.3 Defense of Agreement ..................................................................................31 ARTICLE XIII. ASSIGNMENT................................................................................................31 ARTICLE XIV. PAYMENTS.....................................................................................................31 Section 14.1 Monthly Statements......................................................................................31 Section 14.2 Payments.......................................................................................................33 Section 14.3 Payment of Disputed Amounts.....................................................................33 Section 14.4 Late Payment ................................................................................................33 Section 14.5 Audit; Adjustments.......................................................................................33 Section 14.6 Netting; No Set-Off.......................................................................................34 Section 14.7 Rate Covenant...............................................................................................34 ARTICLE XV. RESERVED.......................................................................................................35 ARTICLE XVI. NOTICES.........................................................................................................35 ARTICLE XVII. DEFAULT; REMEDIES; TERMINATION...............................................35 Section 17.1 Issuer Default................................................................................................35 Section 17.2 Project Participant Default............................................................................35 Section 17.4 Remedies Upon Default................................Error! Bookmark not defined.

Section 17.5 Termination of Master Power Supply Agreement...... Error! Bookmark not defined.

Section 17.6 Limitation on Damages.................................................................................38 ARTICLE XVIII. MISCELLANEOUS.....................................................................................38 Section 18.1 Indemnification Procedure............................................................................39 Section 18.2 Deliveries......................................................................................................39 Section 18.3 Entirety; Amendments..................................................................................39 Section 18.4 Governing Law .............................................................................................39 Section 18.5 Non-Waiver...................................................................................................40 Section 18.6 Severability ...................................................................................................40 Section 18.7 Exhibits.........................................................................................................40

-iv-Section 18.8 Winding Up Arrangements...........................................................................40 Section 18.9 Relationship of Parties..................................................................................40 Section 18.10 Immunity.......................................................................................................40 Section 18.11 Rates and Indices ..........................................................................................40 Section 18.12 Limitation of Liability...................................................................................41 Section 18.13 Counterparts..................................................................................................41 Section 18.14 Third Party Beneficiaries; Rights of Trustee ................................................41 Section 18.15 No Recourse to Members of Project Participant...........................................42 Section 18.16 Waiver of Defenses.......................................................................................42 Section 18.17 Rate Changes ................................................................................................42 [DRAFTING NOTE: TABLE OF CONTENTS TO BE UPDATED.]
Exhibit A-1 — Base Quantities; Base Delivery Point; Commodity Reference Prices Exhibit A-2 — Assigned Rights and Obligations
Exhibit B — Notices
Exhibit C — Remarketing Election Notice
Exhibit D — Federal Tax Certificate
Exhibit E — Project Participant’s Legal Opinion
Exhibit F — Assignment of Assignable Power Contracts
Exhibit G — Communications Protocol
Exhibit H — Pricing and Other Terms
Exhibit I — Closing Certificate

-1-

CLEAN ENERGY PURCHASE CONTRACT
This Clean Energy Purchase Contract (this “Agreement”) is made and entered into as of [____], 2026 (the “Execution Date”), by and between California Community Choice Financing Authority, a joint powers authority and a public entity of the State of California established pursuant to the provisions of the Joint Exercise of Powers Act (Article 1, Chapter 5, Division 7, Title 1, Section 6500 et seq. of the California Government Code, as amended) (“Issuer”) and Central Coast Community Energy, a California joint powers authority (“Project Participant”).

W I T N E S S E T H:

WHEREAS, Issuer has planned and developed a project to acquire long-term supplies of Product from Aron Energy Prepay 65 LLC, a Delaware limited liability company (“Prepay LLC”) and a wholly-owned subsidiary of The Goldman Sachs Group, Inc., pursuant to a Master Power Supply Agreement, dated as of [____], 2026 (the “Master Power Supply Agreement”), to meet a portion of the Product supply requirements of Project Participant through a discounted clean energy purchase product (the “Clean Energy Project”); WHEREAS, Project Participant desires to enter into an agreement with Issuer for the purchase of Product acquired by the Issuer under the Clean Energy Project; WHEREAS, Issuer will finance its payment for Product under, and the other costs of, the Clean Energy Project by issuing Bonds;
WHEREAS, Project Participant is a joint powers authority and a community choice aggregator, duly organized, validly existing and in good standing under the laws of the State of California and the rules, regulations and orders of the California Public Utilities Commission, and is qualified to conduct business in each jurisdiction of the Joint Powers Agreement members for the transmission, distribution, sale, and delivery of Product to retail electric consumers within its service area;
WHEREAS, Project Participant is agreeable to purchasing a portion of its Product requirements from Issuer under the terms and conditions set forth in this Agreement and Issuer is agreeable to selling to Project Participant such supplies of Product under the terms and conditions set forth in this Agreement;
WHEREAS, concurrently herewith, Project Participant has assigned to J. Aron (as defined below) certain Assigned Rights and Obligations (as defined below), including the right to receive Assigned Products (as defined below), which Assigned Products will be resold to Prepay LLC under the Electricity Sale and Service Agreement, then resold to Issuer under the Master Power Supply Agreement and then resold to Project Participant hereunder; and

-2-
WHEREAS, as a condition precedent to the effectiveness of the Parties’ obligations under this Agreement, Issuer shall have entered into the Master Power Supply Agreement and shall have issued the Bonds.

NOW, THEREFORE, in consideration of the premises above and the mutual covenants and agreements herein set forth, Issuer and Project Participant (the “Parties” hereto; each is a “Party”) agree as follows:

ARTICLE I.

DEFINITIONS
Section 1.1 Defined Terms. The following terms, when used in this Agreement (including the preamble or recitals to this Agreement) and identified by the capitalization of the first letter thereof, have the respective meanings set forth below, unless the context otherwise requires:
“Administrative Fee” means the amount per MWh specified as such in Exhibit H. “Affiliate” means, with respect to either Party, any entity which is a direct or indirect parent or subsidiary of such Party or which directly or indirectly (i) owns or controls such Party, (ii) is owned or controlled by such Party, or (iii) is under common ownership or control with such Party. For purposes of this definition, “control” of an entity means the power, directly or indirectly, either to (a) vote 50% or more of the securities having ordinary voting power for the election of directors or Persons performing similar functions or (b) direct or cause the direction of the management and policies, whether by contract or otherwise. “Agreement” has the meaning specified in the preamble and shall include exhibits, recitals and attachments referenced herein and attached hereto. “Alternate Delivery Point” has the meaning specified in Section 5.1(a). “Annual Refund” means the annual refund, if any, to be provided to the Project Participant and calculated pursuant to the procedures specified in Section 3.4. “APC Contract Price” means (i) the fixed prices specified in Exhibit A-2 as of the date hereof with respect to the Assigned Prepay Quantities for the Initial Assignment Periods and (ii) the Day-Ahead Average Price with respect to the Assigned Prepay Quantities for any Assignment Period outside of the Initial Assignment Periods. “APC Party” has the meaning specified in Exhibit F.
“Applicable Project” has the meaning specified in Exhibit F. “Assignable Power Contract” has the meaning specified in Section 6.1.

-3-
“Assigned Delivery Point” means, with respect to any Assigned Energy, the Assigned Delivery Point as set forth in the applicable Assignment Agreement for such Assigned Energy.
“Assigned Energy” means any Energy, including Energy associated with PCC1 Product and Long-Term PCC1 Product, to be delivered to J. Aron or any successor thereto pursuant to any Assigned Rights and Obligations.
“Assigned PAYGO Product” means, for any Month with respect to an Assigned PPA, the amount, if any, by which the total quantity of Assigned Products delivered under such Assigned PPA in such Month exceeds the Assigned Prepay Quantity for such Assigned PPA for such Month.
“Assigned PPA” means any power purchase agreement that is assigned pursuant to an Assignment Agreement in accordance with the terms of this Agreement. “Assigned Prepay Quantity” has the meaning specified in Exhibit F. “Assigned Prepay Value” means, for any Month and each Assignment Agreement, the Assigned Prepay Quantity for such Month multiplied by the applicable APC Contract Price. “Assigned Products” means, as applicable, PCC1 Product, Long-Term PCC1 Product, Assigned Energy, Assigned RECs and any other Product included in an Assignment Agreement, subject to the limitations for such other Product set forth in Exhibit F. “Assigned Quantity” means, with respect to each Assigned PPA and each Month during the Assignment Period therefor, the quantity of Assigned Energy delivered pursuant to such Assigned PPA consistent with the terms of the applicable Assigned Rights and Obligations in connection with the Assigned Products during such Month. “Assigned RECs” means any RECs associated with PCC1 Product or Long-Term PCC1 Product to be delivered to J. Aron or any successor thereto pursuant to any Assigned Rights and Obligations.
“Assigned Rights and Obligations” has the meaning specified in Section 6.1. “Assignment Agreement” means, for any Assigned Rights and Obligations, an agreement among Project Participant, J. Aron and the APC Party, approved by Issuer, in the form attached hereto as Annex I to Exhibit F (with such changes thereto as may be mutually agreed upon by Project Participant, J. Aron, the APC Party, and Issuer, each in its sole discretion). “Assignment Period” for any Assigned Rights and Obligations has the meaning specified in the applicable Assignment Agreement.
“Available Discount Percentage” has the meaning specified in the Re-Pricing Agreement. For the avoidance of doubt, the “Available Discount Percentage” under the Re-Pricing

-4-
Agreement includes the Monthly Discount Percentage, as well as additional discounting expected to be made available through the Annual Refund.
“Balancing Authority” has the meaning specified in the CAISO Tariff. “Base Delivery Point” has the meaning specified in Section 5.1(a). “Base Product” means Firm (LD) Energy delivered to the Base Delivery Point. “Base Quantity” means, with respect to each Delivery Hour during the Delivery Period, the Base Unadjusted Quantity for such Delivery Hour less the Base Quantity Reduction for such Delivery Hour, each as set forth on Exhibit A-1, as Exhibit A-1 may be revised pursuant to Article VI.
“Base Quantity Reduction” means, with respect to each Delivery Hour during the Delivery Period, the “Base Quantity Reduction” of Base Product (in MWh) set forth for such Delivery Hour on Exhibit A-1, as Exhibit A-1 may be revised pursuant to Article VI. “Base Unadjusted Quantity” means, with respect to each Delivery Hour during the Delivery Period, the “Base Unadjusted Quantity” (in MWh) set forth for such Delivery Hour on Exhibit A-1.
“Billing Statement” has the meaning specified in Section 14.1(b). “Bond Closing Date” means the date on which Bonds are first issued pursuant to the Trust Indenture.
“Bonds” means the bonds issued pursuant to the Trust Indenture. “Business Day” means any day other than (i) a Saturday or Sunday, (ii) a Federal Reserve Bank Holiday, (iii) any other day on which commercial banks generally in either New York, New York or the State of California are authorized or required by Law to close, or (iv) any day excluded from “Business Day” as therein defined, pursuant to the Trust Indenture. “CAISO” means California Independent System Operator or its successor. “CAISO Tariff” means CAISO’s FERC-approved tariff, as modified, amended or supplemented from time to time.
“Calculation Agent” has the meaning specified in the Re-Pricing Agreement. “California Long-Term Contracting Requirements” means the long-term contracting requirement set forth in the Clean Energy and Pollution Reduction Act of 2015 (SB 350), California Public Utilities Code Section 399.13(b), and CPUC Decision 17-06-026 and CPUC Decision 18-05-026, as may be modified by subsequent decision of the California Public Utilities Commission or by other Law.

-5-
“CEC” means California’s State Energy Resources Conservation and Development Commission, also known as the California Energy Commission, and any successor agency thereto. “Claiming Party” has the meaning specified in Section 11.1. “Claims” means all claims or actions, threatened or filed, that directly or indirectly relate to the indemnities provided herein, and the resulting losses, damages, expenses, attorneys’ fees, experts’ fees, and court costs, whether incurred by settlement or otherwise, and whether such claims or actions are threatened or filed prior to or after the termination of this Agreement. “Clean Energy Project” has the meaning specified in the recitals. “Code” means the Internal Revenue Code of 1986, as amended. “Commercially Reasonable” or “Commercially Reasonable Efforts” means, with respect to any decision, purchase, sale or other action required to be made, attempted or taken by a Party under this Agreement, such decision or efforts as a reasonably prudent Person would make or undertake, as the case may be, for the protection of its own interest under the conditions affecting such decision, purchase, sale or other action. For the avoidance of doubt, the reasonableness of any action taken by a Party under this Agreement shall be determined at the time of such action, taking into account the facts, circumstances and competitive environment surrounding such action including without limitation, the amount of notice of the need to take such action, the duration and type of the purchase or sale or other action, and the risk to the Party required to take such action.
“Commodity Reference Price” means either (i) the Day-Ahead Market Price, or (ii) the Real-Time Market Price, as applicable.
“Contract Price” means (i) with respect to the Base Product and any Delivery Hour, (A) the Day-Ahead Market Price for such Delivery Hour at the Base Delivery Point less (B) the product of the Fixed Price for Base Quantities multiplied by the Monthly Discount Percentage, (ii) with respect to Assigned Prepay Quantities during the Initial Assignment Periods, (A) the applicable APC Contract Price(s) multiplied by (B) the result of 100% less the Monthly Discount Percentage, (iii) with respect to Assigned Prepay Quantities outside of the Initial Assignment Periods, (A) the APC Contract Price less (B) the product of the Fixed Price for Assigned Prepay Quantities outside of the Initial Assignment Periods multiplied by the Monthly Discount Percentage, and (iv) with respect to Assigned PAYGO Product, the contract price then in effect under the applicable Assigned PPA for such Assigned PAYGO Product. “Day” means each period of 24 consecutive Hours commencing at the Hour ending at 01:00 (PPT) through the Hour ending at 24:00 (PPT).
“Day-Ahead Average Price” means, for any Assigned Prepay Quantities after the Initial Assignment Periods, the result of (i) (x) the sum of the Day-Ahead Market Prices for each Pricing Interval in a Month, divided by (y) the number of Pricing Intervals in such Month; plus (ii)

-6-
$[____]/MWh. As used in this definition, “Pricing Interval” means the unit of time for which CAISO establishes a separate price.
“Day-Ahead Market Price” has the meaning specified on Exhibit A-1 for the Primary Delivery Point.
“Default Rate” means, as of any date of determination, the lesser of (a) the sum of (i) the rate of interest per annum quoted in The Wall Street Journal (Eastern Edition) under the “Money Rates” section as the “Prime Rate” for such date of determination, plus (ii) one percent per annum, or (b) if a lower maximum rate is imposed by applicable Law, such maximum lawful rate.
“Delivering Entity” has the meaning specified in the Master Power Supply Agreement.
“Delivery Hour” has the meaning specified in Exhibit A-1. “Delivery Period” has the meaning specified in Exhibit H. “Delivery Point” means the Base Delivery Point or an Assigned Delivery Point, as applicable.
“Disqualified Sale Proceeds” has the meaning specified in Section 7.6. “Disqualified Sale Units” has the meaning specified in Section 7.6. “Electricity Sale and Service Agreement” has the meaning specified in the Master Power Supply Agreement.
“Eligible Renewable Energy Resource” has the meaning set forth in California Public Utilities Code Section 399.12(e) and California Public Resources Code Section 25741(a), as either code provision is amended or supplemented from time to time. “Energy” means three-phase, 60-cycle alternating current electric energy, expressed in megawatt hours.
“EPS” means California’s Emissions Performance Standards, as set forth in Sections 8340 and 8341 of the California Public Utilities Code, as implemented and amended from time to time, and any successor Law.
“EPS Compliant Energy” means Energy that Project Participant can contract for and purchase in compliance with EPS requirements that are applicable to Project Participant. “EPS Energy Period” means any Assignment Period or J. Aron EPS Energy Period. “Execution Date” has the meaning specified in the preamble.

-7-
“Federal Tax Certificate” means the executed Federal Tax Certificate delivered by Project Participant in the form attached as Exhibit D.
“FERC” means the Federal Energy Regulatory Commission or any successor thereto.
“Firm (LD)” means, with respect to a Party’s obligation to sell and deliver or purchase and receive, that such Party’s liability for the failure to meet such obligation shall only be excused to the extent that, and for the period during which, such performance is prevented by Force Majeure, and that in the absence of Force Majeure, the Party to which performance of such obligation is owed shall be entitled to receive from the Party which failed to deliver/receive an amount determined pursuant to Article IV.
“Fixed Price” means $[____]/MWh with respect to Base Quantities and $[____]/MWh with respect to Assigned Prepay Quantities outside of the Initial Assignment Periods, which are the fixed prices under the Buyer Swap (as defined in the Master Power Supply Agreement).
“Force Majeure” means an event or circumstance which prevents one Party from performing its obligations under this Agreement, which event or circumstance was not anticipated as of the date this Agreement was executed, which is not within the reasonable control of, or the result of the negligence of, the Claiming Party, and which, by the exercise of due diligence, the Claiming Party is unable to overcome or avoid or cause to be avoided; provided that, for the avoidance of doubt, the declaration of “Force Majeure” by an APC Party under a PPA (as defined in an Assignment Agreement) shall constitute Force Majeure hereunder. Force Majeure shall include, provided the criteria in the first sentence are met, riot, insurrection, war, labor dispute, natural disaster, vandalism, terrorism and sabotage. Force Majeure shall not be based on (i) the loss of Project Participant’s markets; (ii) Project Participant’s inability economically to use or resell the Product purchased hereunder; (iii) the delay, loss or failure of Issuer’s supply; or (iv) Issuer’s ability to sell the Product at a higher price. Neither Party may raise a claim of Force Majeure based in whole or in part on curtailment by a Transmission Provider unless (x) such Party has contracted for firm transmission with a Transmission Provider for the Product to be delivered to or received at the applicable Delivery Point and (y) such curtailment is due to “force majeure” or “uncontrollable force” or a similar term as defined under the Transmission Provider’s tariff; provided, however, that existence of the foregoing factors shall not be sufficient to conclusively or presumptively prove the existence of a Force Majeure absent a showing of other facts and circumstances which in the aggregate with such factors establish that a Force Majeure as defined in the first sentence hereof has occurred. Force Majeure invoked by Prepay LLC under the Master Power Supply Agreement shall constitute Force Majeure in respect of Issuer hereunder to the extent the conditions set forth above have been satisfied with respect to Prepay LLC.

Notwithstanding the foregoing or anything to the contrary herein, to the extent that an Assignment Agreement is terminated early, such termination shall constitute Force Majeure with respect to Issuer hereunder until the earlier of (I) the commencement of an “Assignment Period” under a replacement Assignment Agreement, (II) the commencement of a J. Aron EPS Energy Period or (III) the end of the second Month following the Month in which such early termination occurs.

-8-
“Government Agency” means the United States of America, any state thereof, any municipality, or any local jurisdiction, or any political subdivision of any of the foregoing, including, but not limited to, courts, administrative bodies, departments, commissions, boards, bureaus, agencies, or instrumentalities.
“Governmental Approval” means any authorization, consent, approval, license, ruling, permit, exemption, variance, order, judgment, registration, filing, giving of notice to, decree, declaration of or regulation by any Government Agency relating to the valid execution, delivery or performance of this Agreement or the consummation of any of the transactions contemplated hereby.
“Hour” means the 60-minute period commencing at 00:00 (PPT) on first Day of the Delivery Period and ending at 01:00 (PPT) on the first Day of the Delivery Period, and each 60-minute interval thereafter.
“Initial Assigned Rights and Obligations” means Assigned Rights and Obligations expected to be assigned by the Project Participant to J. Aron prior to the commencement of the Delivery Period, which as of the date hereof the Parties expect to be an Assigned PPA entered into following the Bond Closing Date by and between the Project Participant and [PPA Seller] with sufficient quantities to reduce the Base Quantities to zero for the Initial Reset Period. “Initial Assignment Periods” means the Assignment Periods for the Initial Assigned Rights and Obligations specified in Exhibit A-2 hereto as of the date hereof. “Initial Reset Period” has the meaning specified in Exhibit H. “Interest Rate Period” has the meaning specified in the Trust Indenture. “Issuer” has the meaning specified in the preamble.
“Issuer Default” has the meaning specified in Section 17.1. “ISTs” has the meaning specified in Section 5.1(a).
“J. Aron” means J. Aron & Company LLC, a New York limited liability company, and its permitted successors and assigns under an Assignment Agreement. “J. Aron EPS Energy Period” has the meaning specified in Section 6.1(c). [“J. Aron Fixed Payment” has the meaning specified in the PPA Custodial Agreement.]
“J. Aron Prepay Payment” has the meaning specified in the PPA Custodial Agreement.
“Joint Powers Act” means the Joint Exercise of Powers Act of the State of California (Government Code Section 6500 et seq.).

-9-
“Joint Powers Agreement” means that certain Joint Powers Agreement dated December 19, 2008, as amended from time to time, under which Project Participant is organized as a Joint Powers Authority in accordance with the Joint Powers Act. “Law” means any statute, law, rule or regulation or any written judicial or administrative decision, ruling or interpretation with respect thereto or thereof having the effect of the foregoing enacted, promulgated, or issued by a Government Agency whether in effect as of the Execution Date or at any time during the term of this Agreement. “Long-Term PCC1 Product” means bundled renewable energy and RECs meeting the requirements of Portfolio Content Category 1, and the California Long-Term Contracting Requirements, to be delivered to J. Aron or any successor thereto pursuant to any Assigned Rights and Obligations.
“Master Power Supply Agreement” has the meaning specified in the recitals. “Minimum Discount Percentage” has the meaning specified in Exhibit H. “Month” means a period beginning on the first Day of a calendar month and ending immediately prior to the commencement of the first Day of the next calendar month. The term “Monthly” shall be construed accordingly.
“Monthly Discount Percentage” has the meaning specified in Exhibit H. “Municipal Utility” means any Person that (i) is a “governmental person” as defined in the implementing regulations under Section 141 of the Code and any successor provision, (ii) owns either or both a gas distribution utility or an electric distribution utility (or provides natural gas or electricity at wholesale to, or that is sold to entities that provide natural gas or electricity at wholesale to, governmental Persons that own such utilities), and (iii) agrees in writing to use the gas or electricity purchased by it (or cause such gas or electricity to be used) for a qualifying use as defined in U.S. Treas. Reg. § 1.148-1(e)(2)(iii). “MWh” means megawatt-hour.
“Non-Priority Products” means any Products that are not Priority Products. “Party” has the meaning specified in the preamble.
“PCC1 Product” means bundled renewable energy and RECs meeting the requirements of Portfolio Content Category 1 to be delivered to J. Aron or any successor thereto pursuant to any Assigned Rights and Obligations.
“Person” means any individual, limited liability company, corporation, partnership, joint venture, trust, unincorporated organization, or Government Agency. “Portfolio Content Category 1” or “PCC1” means any Renewable Energy Credit associated with the generation of electricity from an Eligible Renewable Energy Resource

-10-
consisting of the portfolio content set forth in California Public Utilities Code Section 399.16(b)(1), as may be amended from time to time or as further defined or supplemented by Law.
“Potential Remarketing Event” has the meaning specified in Section 3.5(b). “PPA Custodial Agreement” means that certain Consolidated, Amended and Restated PPA Custodial Agreement, dated as of [____], 2026, by and among Project Participant, Issuer, J. Aron and the PPA Custodian.
“PPA Custodian” means U.S. Bank Trust Company, National Association, a national banking association.
“PPT” means Pacific Prevailing Time.
“Prepay LLC” has the meaning stated in the recitals.
“Primary Delivery Point” has the meaning specified in Section 5.1(a). “Priority Products” means the Base Quantity and Assigned Products to be purchased by Project Participant under this Agreement, together with Products that (i) Project Participant is obligated to take under a long-term agreement, which Products either have been purchased by Project Participant or a joint action agency pursuant to a long-term prepaid power purchase agreement using the proceeds of bonds, notes, or other obligations, the interest on which is excluded from income for federal income tax purposes, or (ii) with respect to Energy, Energy that is generated using capacity that was constructed using the proceeds of bonds, notes, or other obligations, the interest on which is excluded from income for federal income tax purposes (provided that, for the avoidance of doubt, Priority Products shall not include Energy that is generated using capacity that was wholly or partially financed through the monetization of renewable tax credits other than to the extent such energy was generated with capacity financed with tax-exempt bonds, whether such monetization is accomplished through a tax equity investment or otherwise, or that is generated from federally owned and operated hydroelectric facilities, including through the United States Army Corps of Engineers and the United States Bureau of Reclamation, and marketed by the Bonneville Power Administration or the Western Area Power Administration).
“Product” means Energy and, to the extent included in an Assignment Agreement, associated RECs, capacity or other products related to the foregoing; provided that the inclusion of any Product in an Assignment Agreement is subject to the limitation set forth in Exhibit F. “Project Participant” has the meaning specified in the preamble. “Project Participant Default” has the meaning specified in Section 17.2. “Qualifying Use Requirements” means, with respect to any Product delivered under this Agreement, such Product is used (i) for a “qualifying use” as defined in U.S. Treas.

Reg. § 1.148-1(e)(2)(iii), (ii) in a manner that will not result in any “private business use” within

-11-
the meaning of Section 141 of the Code, and (iii) in a manner that is consistent with the Federal Tax Certificate attached as Exhibit D.
“Re-Pricing Agreement” means the Re-Pricing Agreement, dated as of the Bond Closing Date (as defined in the Master Power Supply Agreement), by and between Prepay LLC and Issuer.
“Real-Time Market Price” has the meaning specified on Exhibit A-1 for each Delivery Point.
“Remarketing Election Deadline” means, for any Reset Period, the last date and time by which Project Participant may provide a Remarketing Election Notice, which shall be 4:00 p.m. PPT on the 10th day of the Month (or, if such day is not a Business Day, the next succeeding Business Day) prior to the first delivery Month of a Reset Period with respect to which a Potential Remarketing Event has occurred.
“Remarketing Election Notice” has the meaning specified in Section 3.5(b). “Remarketing Entity” has the meaning specified in the Master Power Supply Agreement.
“Renewable Energy Credit” or “REC” has the meaning specified for “Renewable Energy Credit” in California Public Utilities Code Section 399.12(h), as may be amended from time to time or as further defined or supplemented by Law. “Replacement Assigned Rights and Obligations” means any Assigned Rights and Obligations other than the Initial Assigned Rights and Obligations. “Replacement Price” means, with respect to any Shortfall Quantity of Base Quantities, the price at which Project Participant, acting in a Commercially Reasonable manner, purchases at the applicable Delivery Point Replacement Product for such Shortfall Quantity, plus (i) costs reasonably incurred by Project Participant in purchasing Replacement Product, and (ii) additional transmission charges, if any, reasonably incurred by Project Participant to the applicable Delivery Point, or at Project Participant’s option, the market price at the Delivery Point for such Product not delivered as determined by Project Participant in a Commercially Reasonable manner.

The Replacement Price for any Shortfall Quantity shall not include any administrative or other internal costs incurred by Project Participant and shall be limited to a price that is Commercially Reasonable with respect to the timing and manner of purchase. In no event shall the Replacement Price include any penalties, ratcheted demand or similar charges, nor shall Project Participant be required to utilize or change its utilization of its owned or controlled assets or market positions to minimize Issuer’s liability.
“Replacement Product” means any Energy purchased by Project Participant to replace any Shortfall Quantity at the Delivery Point where such Shortfall Quantity occurred; provided that such Energy is purchased for delivery in the Delivery Hour to which such Shortfall Quantity relates.

-12-
“Reset Period” means each “Reset Period” under the Re-Pricing Agreement. “Reset Period Notice” has the meaning specified in Section 3.5(a). “RPS Law” means the California Renewable Energy Resources Act, including the California Renewables Portfolio Standard Program, Article 16 of Chapter 2.3, Division 1 of the California Public Utilities Code, as implemented and amended from time to time, and any successor Law.
“Schedule”, “Scheduled” or “Scheduling” means the actions of Issuer, Project Participant and/or their designated representatives, including each Party’s Transmission Providers, if applicable, of notifying, requesting and confirming to each other the quantity and type of Product to be delivered during any given portion of the Delivery Period at a specified Delivery Point. “Shortfall Quantity” has the meaning specified in Section 4.1(a). “Transmission Provider” means any entity or entities transmitting or transporting the Product on behalf of Issuer or Project Participant to or from the Delivery Point. “Trust Indenture” means (i) the Trust Indenture to be entered into prior to the commencement of the Delivery Period between Issuer and the Trustee, as supplemented and amended from time to time in accordance with its terms, and (ii) any trust indenture entered into in connection with the commencement of any Interest Rate Period after the initial Interest Rate Period between Issuer and the Trustee containing substantially the same terms as the indenture described in clause (i) and which is intended to replace the indenture described in clause (i) as of the commencement of such Interest Rate Period.
“Trustee” means U.S. Bank Trust Company, National Association, a national banking association, and its successors as trustee under the Trust Indenture. “Utility Revenues” means all income, rents, rates, fees, charges and other moneys derived from the ownership or operation of Project Participant’s community choice aggregation program, including, without limiting the generality of the foregoing, (1) all income, rents, rates, fees, charges, or other moneys derived by the Project Participant from the sale, furnishing and supplying of the electric capacity or energy or other services, facilities, and commodities sold, furnished or supplied through the facilities of or in the conduct or operation of the business of the Project Participant’s community choice aggregation, (2) the earnings on and income derived from the investment of such income, rents, rates, fees, charges, or other moneys to the extent that the use of such earnings and income is limited to Project Participant’s community choice aggregation by or pursuant to law, (3) deferred revenues and moneys maintained in the Project Participant’s operating reserve fund and (4) such other income, charges, revenue or moneys maintained in reserves as the Project Participant may specify in a written order of the Project Participant filed with the Issuer, but excluding (A) in all cases customers’ deposits or any other deposits or advances subject to refund until such deposits or advances have become the property of the Project Participant; and (B) such other income, charges, revenue or moneys as the Project Participant may specify in a written order of the Project Participant filed with the Issuer, provided that such written

-13-
order of the Project Participant confirms that, following the filing of such written order of the Project Participant, (i) the requirements of Section 14.7 shall be satisfied; and (ii) the income, charges, revenue or moneys specified in such written order of the Project Participant shall be accounted for separately from the “Utility Revenues” as defined herein. “Voided Remarketing Election Notice” has the meaning specified in Section 3.5(b). “Western EIM” has the meaning ascribed to “Energy Imbalance Market (EIM)” under the CAISO Tariff.
“WREGIS” means the Western Renewable Energy Generation Information System or its successor.

Section 1.2 Definitions; Interpretation. References to “Articles,” “Sections,” “Schedules” and “Exhibits” shall be to Articles, Sections, Schedules and Exhibits, as the case may be, of this Agreement unless otherwise specifically provided. Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect. Any of the terms defined herein may, unless the context otherwise requires, be used in the singular or the plural, depending on the reference. The use herein of the word “include” or “including”, when following any general statement, term or matter, shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not nonlimiting language (such as “without limitation” or “but not limited to” or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that fall within the broadest scope of such general statement, term or matter.

Except where expressly provided otherwise, any reference herein to any agreement or document includes all amendments, supplements or restatements to and of such agreement or document as may occur from time to time in accordance with its terms and the terms hereof, and any reference to a party to any such agreement includes all successors and assigns of such party thereunder permitted by the terms hereof and thereof.

ARTICLE II.

DELIVERY PERIOD; NATURE OF CLEAN ENERGY PROJECT; CONDITION

PRECEDENT
Section 2.1 Delivery Period. Subject to Section 2.3, delivery of Product by Issuer to Project Participant shall commence at the beginning of the Delivery Period and, except for any Reset Period for which a Remarketing Election Notice is in effect as provided in Section 3.5(b), shall continue throughout the Delivery Period.

Section 2.2 Nature of Clean Energy Project. Project Participant acknowledges and agrees that Issuer will meet its obligations to provide Product to Project Participant under this Agreement exclusively through its purchase of Product the Delivering Entity pursuant to the Master Power Supply Agreement and that Issuer is financing its purchase of such supplies through the issuance of the Bonds.

-14-
Section 2.3 Condition Precedent. Notwithstanding anything to the contrary herein, commencement of deliveries and the rights and obligations of Issuer and Project Participant hereunder are subject to the condition precedent that Issuer shall have entered into the Master Power Supply Agreement and shall have issued the Bonds.

Section 2.4 Pledge of this Agreement. Project Participant acknowledges and agrees that Issuer will pledge its right, title and interest under this Agreement and the revenues to be received under this Agreement to secure Issuer’s obligations under the Trust Indenture.

ARTICLE III.

SALE AND PURCHASE; PRICING
Section 3.1 Sale and Purchase of Product. Issuer shall sell and deliver or cause to be delivered to Project Participant, and Project Participant shall purchase and receive from Issuer, the applicable Product in the quantities and at the times and subject to the terms and conditions set forth in this Agreement. The quantities of Product to be sold and purchased and delivered and received pursuant to the terms and conditions set forth in this Agreement shall be equal to (a) the Base Quantity, if any, for each Delivery Hour and (b) the Assigned Quantity delivered to J. Aron in each Month of the Delivery Period pursuant to the Assignment Agreements.

Section 3.2 Payments.
(a) For each Month for which an EPS Energy Period is in effect at the start of such Month:
(i) Project Participant shall pay Issuer the Contract Price multiplied by the Assigned Prepay Quantities actually delivered for such Month, provided that Issuer shall owe a payment to Project Participant to the extent that the Contract Price for Assigned Prepay Quantities is negative; and
(ii) Pursuant to the terms of the PPA Custodial Agreement, Project Participant shall owe a separate [Project Participant Gross Payment] (as defined in the PPA Custodial Agreement) for each Assigned PPA consistent with the terms of the PPA Custodial Agreement, and, upon satisfying its obligations under the PPA Custodial Agreement in respect of such amount (after taking into consideration any [PPA Seller Payment Obligation] (as such term is defined in the PPA Custodial Agreement) credited to Project Participant in respect thereof), any portion of such amount attributable to Assigned PAYGO Product shall be deemed to be paid by Project Participant to the applicable APC Party on behalf of J. Aron and shall satisfy the obligations of the respective parties under each of the Electricity Sale and Service Agreement, the Master Power Supply

-15-
Agreement, this Agreement and the applicable Assignment Agreement for such Assigned PAYGO Product.
(b) To the extent that Base Quantities are delivered hereunder in any Month, Project Participant shall pay Issuer the Contract Price multiplied by the Base Quantities actually delivered.
(c) The Contract Price for Assigned Energy is inclusive of any amounts due in respect of other Assigned Products.

Section 3.3 Limited Obligation to Take Base Quantities. Notwithstanding anything to the contrary in this Agreement, Project Participant shall not be required to purchase and receive any Base Quantities hereunder, and Issuer, with respect to any Base Quantities that otherwise would be delivered hereunder, shall cause Prepay LLC to remarket such Base Quantities pursuant to the provisions of Exhibit C to the Master Power Supply Agreement.

Section 3.4 Annual Refund. In addition to any Monthly Discount Percentage applied to Energy Scheduled hereunder, Issuer shall credit such Annual Refund to Project Participant as may be available for distribution by Issuer pursuant to [Section 5.12] of the Trust Indenture, subject to the provisions of this Section 3.4. Such Annual Refund, if any, shall be credited to the next amount due from Project Participant following the release of funds for such purpose to Issuer under the terms of the Trust Indenture. In determining the amount of such Annual Refund, if any, to be credited to Project Participant, Issuer may reserve such funds (i) as may be required under the terms of the Trust Indenture or (ii) with the prior written consent of Project Participant (a) to fund or maintain the Minimum Discount Percentage for any future Reset Period, (b) to fund or maintain any rate stabilization or working capital reserve, (c) to reserve or account for unfunded liabilities and expenses or (d) for other costs of the Clean Energy Project.

Section 3.5 Reset Period Remarketing.
(a) Reset Period Notice. For each Reset Period, Issuer shall provide to Project Participant, at least ten (10) days prior to the Remarketing Election Deadline, written notice (a “Reset Period Notice”) setting forth (i) the duration of such Reset Period, (ii) the estimated Available Discount Percentage for such Reset Period, and (iii) the applicable Remarketing Election Deadline. Issuer may thereafter update such notice at any time prior to the Remarketing Election Deadline and in any such update may extend the Remarketing Election Deadline in its sole discretion.
(b) Remarketing Election. If the Reset Period Notice (or any update thereto) for any Reset Period indicates that the estimated Available Discount Percentage specified in such notice is not at least equal to the Minimum Discount Percentage for such Reset Period, then: (i) a “Potential Remarketing Event” shall be deemed to exist, and (ii) Project Participant may, not later than the Remarketing Election Deadline, issue a written notice in the form attached hereto as Exhibit C (a “Remarketing Election Notice”) to Issuer, Prepay LLC and the Trustee electing for the Assignment Agreements to be terminated and all Base Quantities with respect to such Reset Period to be remarketed; provided, however, if the actual Available Discount Percentage, as finally

-16-
determined under the Re-Pricing Agreement, is equal to or greater than the Minimum Discount Percentage, then Issuer shall elect by written notice (a “Voided Remarketing Election Notice”) to Project Participant to treat such Remarketing Election Notice as void, unless Prepay LLC has contracted to remarket the related Product for the applicable Reset Period. If Project Participant issues a valid Remarketing Election Notice (other than a Voided Remarketing Election Notice) in accordance with this Section 3.5(b) for any Reset Period, then Project Participant shall have no rights or obligations to receive any Product hereunder during such Reset Period or to receive any Annual Refund attributable to such Reset Period.
(c) Final Determination of Available Discount Percentage. The Parties acknowledge and agree that the final Available Discount Percentage for any Reset Period following the Initial Reset Period will be determined on the [Re-Pricing Date] (as defined in the Re-Pricing Agreement) for such Reset Period, and that such Available Discount Percentage may differ from the estimate or estimates of such Available Discount Percentage last provided to Project Participant prior to the Remarketing Election Deadline for such Reset Period; provided that the Available Discount Percentage for any Reset Period will not be less than the lower of (i) the last estimated Available Discount Percentage set forth in the Reset Period Notice for such Reset Period (or any update thereof) sent to Project Participant by Issuer and (ii) the Minimum Discount Percentage for Reset Period.
(d) Obligations Following a Remarketing Election. Notwithstanding the issuance of any Remarketing Election Notice for a Reset Period, Project Participant shall not make any new commitment to purchase Priority Products during such Reset Period to the extent any such commitment could reasonably be expected to cause, during any portion of the Delivery Period after such Reset Period, Project Participant’s aggregate obligations to purchase Priority Products (including its obligation to purchase Priority Products hereunder) to exceed Project Participant’s expected aggregate requirements for Products that will be used (i) for a “qualifying use” as defined in U.S. Treas. Reg. § 1.148-1(e)(2)(iii) and (ii) in a manner that will not result in any “private business use” within the meaning of Section 141 of the Code. Unless Project Participant issues a new Remarketing Election Notice (other than a Voided Remarketing Election Notice) for any subsequent Reset Period in accordance with this Section 3.5, Project Participant and J. Aron will cooperate in good faith and exercise Commercially Reasonable Efforts to locate EPS Compliant Energy for redelivery hereunder in any such Reset Period.

ARTICLE IV.

FAILURE TO SCHEDULE PRODUCT
Section 4.1 Issuer’s Failure to Schedule Base Quantity (Not Due to Force Majeure). (a) Shortfall Quantity. If, for any Delivery Hour during the Delivery Period, Issuer breaches its obligation to Schedule or deliver all or any portion of the Base Quantity, after giving effect to reductions for Assigned Energy at any Delivery Point pursuant to the terms of this Agreement, then the portion of the Base Quantity that Issuer failed to Schedule or deliver shall be a “Shortfall Quantity”.

-17-
(b) Issuer Cover Damage Payments. To the extent Project Participant actually purchases Replacement Product with respect to any Shortfall Quantity, then Issuer shall pay to Project Participant the result determined by the following formula:

P = Q x (RP - CP + AF)
Where:

P = The amount payable by Issuer under this Section 4.1(b); Q = The quantity of Replacement Product purchased;
RP = The Replacement Price;
CP = The Contract Price that would have applied to such Product; and AF = The Administrative Fee.
(c) Project Participant Obligation to Mitigate. Project Participant shall exercise Commercially Reasonable Efforts to mitigate Issuer’s damages paid by Issuer hereunder.

Section 4.2 Project Participant’s Failure to Schedule or Take Base Quantities (Not Due to Force Majeure). If, for any Delivery Hour during the Delivery Period, Project Participant breaches its obligation to Schedule or take all or any portion of the Base Quantity at any Delivery Point pursuant to the terms of this Agreement, then Project Participant shall remain obligated to pay Issuer the Contract Price for such Base Quantity. Issuer shall credit to Project Participant’s account any net revenues Issuer may receive from Prepay LLC under the Master Power Supply Agreement in connection with the ultimate sale of any such Product by the Delivering Entity to Municipal Utilities or, if necessary, other Project Participants, up to the Contract Price.

Section 4.3 Failure to Deliver or Take Due to Force Majeure. If with respect to all or any portion of Base Quantities or Assigned Prepay Quantities:
(a) Project Participant fails to take or Issuer fails to deliver all or any portion of such quantities at any Delivery Point pursuant to the terms of this Agreement; and (b) such failure is due to Force Majeure claimed by either Party, then the Parties shall have no payment obligations with respect to such quantities hereunder.

Section 4.4 Assigned Products. Notwithstanding anything herein to the contrary, neither Project Participant nor Issuer shall have any liability or other obligation to one another for any failure to Schedule, take, or deliver Assigned Products.

-18-
Section 4.5 Sole Remedies. Except with respect to the termination of this Agreement pursuant to Article XVII, the remedies set forth in this Article IV shall be each Party’s sole and exclusive remedies for any failure by the other Party to Schedule, deliver or take Product, as applicable, pursuant to this Agreement.

ARTICLE V.

DELIVERY POINTS; SCHEDULING
Section 5.1 Delivery Points.
(a) Base Delivery Points. All Base Product delivered under this Agreement shall be Scheduled for delivery and receipt at (i) the Delivery Point set forth in Exhibit A-1 (the “Primary Delivery Point”) or (ii) any other point (an “Alternate Delivery Point”) that has been mutually agreed by Issuer, Project Participant and Prepay LLC (the Primary Delivery Point or, to the extent specified, any Alternate Delivery Point being the “Base Delivery Point”). Delivery of Energy to Project Participant at the Primary Delivery Point shall be facilitated through submission of Inter-SC Trades, as defined in the CAISO Tariff (“ISTs”). Project Participant shall designate a scheduling coordinator in the CAISO market for this purpose as specified in Exhibit G. (b) Alternate Base Market Prices. The Day-Ahead Market Price and Real-Time Market Price for each Alternate Delivery Point, as applicable, shall be the price mutually agreed and identified by the Parties, or if no such price is identified for such Alternate Delivery Point, the Day-Ahead Market Price and Real-Time Market Price, as applicable, specified on Exhibit A-1 for the Primary Delivery Point from which quantities are being shifted to such Alternate Delivery Point.
(c) Assigned Energy Delivery Points. Assigned Energy delivered under this Agreement shall be Scheduled for delivery and receipt at the applicable Assigned Delivery Point specified in the applicable Assignment Agreement. All other Assigned Products shall be delivered consistent with the terms of the applicable Assignment Agreement.

Section 5.2 Transmission and Scheduling. Issuer shall Schedule or arrange for Scheduling services with CAISO in accordance with the CAISO Tariff, to deliver the Base Product to the Base Delivery Point. Project Participant shall Schedule or arrange for Scheduling services with CAISO in accordance with CAISO Tariff, to receive the Base Product at the Base Delivery Point. If Prepay LLC Schedules or arranges for Scheduling services, to deliver Base Product to the Base Delivery Point, then Issuer’s obligations under this Section shall be relieved pro tanto.

Scheduling of Assigned Energy shall be in accordance with the applicable Assignment Agreement.

Section 5.3 Title and Risk of Loss. Title to and risk of loss of the Product delivered under this Agreement shall pass from Issuer to Project Participant at the applicable Delivery Point.

The transfer of title and risk of loss for all Assigned Products shall be in accordance with the applicable Assignment Agreement; provided that all Assignment Agreements shall provide for the transfer of Renewable Energy Credits in accordance with WREGIS. Subject to Section 18.1, each Party shall indemnify, defend and hold harmless the other Party from and against any Claims made

-19-
by a third party arising from or out of any event, circumstance, act or incident related to the Product delivered hereunder first occurring or existing during the period when control and title to Base Product or Assigned Products are vested in the indemnifying Party as provided in this Section; provided that, notwithstanding the foregoing, (a) Issuer shall have no obligations to indemnify, defend or hold harmless Project Participant for any such Claims relating to replacement costs, cover damages or similar liabilities that are payable to any Person because of Project Participant’s failure to deliver any Product to such Person and (b) no obligation to indemnify, defend or hold harmless shall supplant or control the provisions of this Agreement relating to Force Majeure.

Notwithstanding anything to the contrary herein, no Party shall have any obligations to indemnify, defend or hold harmless the other Party in respect of any Claims relating to any Assigned Products.

Section 5.4 PCC1 Product and Long-Term PCC1 Product. Notwithstanding any other provision of this Agreement to the contrary, to the extent that any Assigned Products are PCC1 Product or Long-Term PCC1 Product, the following provisions apply:
(a) Eligibility. Seller, and, if applicable, its successors, represents and warrants that throughout the Delivery Term of this Agreement that: (i) the Project qualifies and is certified by the CEC as an Eligible Renewable Energy Resource (“ERR”) as such term is defined in Public Utilities Code Section 399.12 or Section 399.16; and (ii) the Project’s output delivered to Buyer qualifies under the requirements of the California Renewables Portfolio Standard. To the extent a change in law occurs after execution of this Agreement that causes this representation and warranty to be materially false or misleading, it shall not be an Event of Default if Seller has used commercially reasonable efforts to comply with such change in law. [STC 6, Non-Modifiable. (Source: D.07-11-025, Attachment A.) D.08-04-009].
(b) Transfer of Renewable Energy Credits. Seller and, if applicable, its successors, represents and warrants that throughout the Delivery Term of this Agreement the Renewable Energy Credits transferred to Buyer conform to the definition and attributes required for compliance with the California Renewables Portfolio Standard, as set forth in California Public Utilities Commission Decision 08-08-028, and as may be modified by subsequent decision of the California Public Utilities Commission or by subsequent legislation. To the extent a change in law occurs after execution of this Agreement that causes this representation and warranty to be materially false or misleading, it shall not be an Event of Default if Seller has used commercially reasonable efforts to comply with such change in law. [STC REC-1, Non-modifiable. D.11-01-025].
(c) Tracking of RECs in WREGIS. Seller warrants that all necessary steps to allow the Renewable Energy Credits transferred to Buyer to be tracked in the Western Renewable Energy Generation Information System will be taken prior to the first delivery under the contract. [STC REC-2, Non-modifiable. D.11-01- 025]. With respect to Sections 5.4(a) through (c), “Seller” means “Issuer”, Buyer means “Project Participant”, and any other capitalized terms not otherwise defined therein shall have the meaning specified in the Assigned PPA.

-20-
(d) Governing Law. This Agreement and the rights and duties of the Parties hereunder shall be governed by and construed, enforced, and performed in accordance with the laws of the state of California, without regard to principles of conflicts of law. To the extent enforceable at such time, each Party waives its respective right to any jury trial with respect to any litigation arising under or in connection with this Agreement. [STC 17, Non-Modifiable. (Source: D.07-11- 025, Attachment A) D.08-04-009]
(e) Issuer Representations and Warranties.

Issuer represents and warrants:
(i) Issuer has the right to sell the Assigned Products from the Applicable Project;
(ii) Issuer has not sold the Assigned Products or any REC or other attributes of the Assigned Products to be transferred to Project Participant to any other person or entity;
(iii) The Energy component of the Assigned Products produced by the Applicable Project and purchased by Issuer for resale to Project Participant hereunder is not being sold by Issuer back to the Applicable Project or APC Party;
(iv) Assigned Products to be purchased and sold pursuant to this Agreement has not been committed to another party;
(v) The Assigned Products are free and clear of all liens or other encumbrances;
(vi) Issuer will deliver to Project Participant all Assigned Energy and associated RECs generated by the Applicable Project for Long-Term PCC1 Product in compliance with the California Long-Term Contracting Requirements, if applicable;
(vii) The Assigned Products supplied to Project Participant under this Agreement that is Long-Term PCC1 Product will be sourced solely from Applicable Projects that have an Assignment Period of ten years or more in length, or otherwise in compliance with the California Long Term Contracting Requirements; and
(viii) Issuer will cooperate and work with Project Participant, the CEC, and/or the CPUC to provide any documentation required by the CPUC or CEC to support the Product’s classification as a Portfolio Content Category 1 Product as set forth in California Public Utilities Code Section 399.16(b)(1) or, if applicable, or compliance with the California Long-Term Contracting Requirements.

Issuer further represents and warrants to Project Participant that, to the extent that the Product sold by Issuer is a resale of part or all of a contract between Issuer and