Finance Committee of the
Clean Power Alliance of Southern California
Regular Meeting
Wednesday, January 28, 2026
11:00 a.m.
Visit CPA’s YouTube Channel to view a Live Stream of the Meeting www.youtube.com/@CPApublicmeetings
*There may be a streaming delay of up to 90 seconds. This is a view-only live stream.
Clean Power Alliance
Executive Conference Room
801 S. Grand Ave., Suite 400
Los Angeles, CA 90017
Members of the public may also participate in this meeting at the following locations:
Calabasas City Hall
Council Conference Room
100 Civic Center Way
Calabasas, CA 91302
Camarillo City Hall
Administrative Conference Room
601 Carmen Drive
Camarillo, CA 93010
Carson City Hall
Executive Conference Room
701 East Carson Street
Carson, CA 90745
Thousand Oaks City Hall
City Manager’s Office, Council Office #1
2100 Thousand Oaks Blvd.
Thousand Oaks, CA 91362
Rolling Hills Estates City Hall
Conference Room
4045 Palos Verdes Drive North
Rolling Hills Estates, CA 90274
Claremont City Hall
Council Office
207 Harvard Avenue
Claremont, CA 91711
PUBLIC COMMENT: Members of the public may submit their comments by one of the following options:
• Email Public Comment: Members of the public are encouraged to submit written comments on any agenda item to [email protected] up to four hours before the meeting. Written public comments will be announced at the meeting and become part of the meeting record. Public comments received in writing will not be read aloud at the meeting. • Provide Public Comment During the Meeting: The General Public Comment item is reserved for persons wishing to address the Committee on any Clean Power Alliance-related matters not on today’s agenda. Public comments on matters on today’s Consent Agenda and Regular Agenda shall be heard at the time the matter is called. Comments on items on the Consent Agenda are consolidated into one public comment period. Members of the public who wish to address the Committee at CPA’s Office are requested to complete a comment card and provide it to staff. If you are attending from a remote location, please identify yourself to a CPA representative when your item is called. Each speaker is limited to two (2) minutes (in whole-minute increments) per agenda Agenda Page 1
item with a cumulative total of five 5 minutes to be allocated between the General Public Comment, the entire Consent Agenda, or individual items in the Regular Agenda. Please refer to Policy No. 8 – Public Comment for additional information.
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ACCESSIBILITY: Meetings are accessible to people with disabilities. Individuals who need special assistance or a disability-related modification or accommodation to participate in this meeting, or who have a disability and wish to request an alternative format for the meeting materials, should contact the Clerk of the Board at least two (2) working days before the meeting at [email protected] or (213) 713- 5995. Notification in advance of the meeting, while not required, will enable us to make reasonable arrangements to ensure accessibility to this meeting and the materials related to it.
CALL TO ORDER & ROLL CALL
GENERAL PUBLIC COMMENT
CONSENT AGENDA
1. Approve Minutes from the October 29, 2025, Finance Committee Meeting
2. Receive and File December 2025 Risk Management Team Report
3. Receive and File December 2025 Investment Report
4. Receive and File November 2025 Financial Dashboard
REGULAR AGENDA
5. Oral Report from the Chief Financial Officer
6. Provide Input on Proposal for a 2-Year Budget Structure
7. Receive Presentation on Bad Debt Reserve and Accounts Receivable
COMMITTEE MEMBER COMMENTS
ADJOURN – NEXT MEETING ON FEBRUARY 25, 2026
Public Records: Public records that relate to any item on the open session agenda for a Committee Meeting are available for public inspection. Those records that are distributed less than 72 hours prior to the meeting are available for public inspection at the same time they are distributed to all, or a majority of, the members of the Committee. Public records are available for inspection at CPA’s Office at 801 S. Grand Ave., Suite 400, Los Angeles, CA 90017, or online at www.cleanpoweralliance.org/agendas. Agenda Page 2 Staff Report – Agenda Item 1
To: Finance Committee
Subject: Approve Minutes from the October 29, 2025, Finance Committee Meeting
Date: January 28, 2026
RECOMMENDATION
Approve.
ATTACHMENT
1. Minutes
Agenda Page 3
MINUTES
Finance Committee
of the Clean Power Alliance of Southern California
Regular Meeting
Wednesday, October 29, 2025, 11:00 a.m.
Meeting videos are available on CPA's YouTube Channel.
http://www.youtube.com/@CPApublicmeetings
Committee Members participated in this meeting from the following locations:
Camarillo City Hall
Administrative Conference Room
601 Carmen Drive
Camarillo, CA 93010
Clean Power Alliance
Executive Conference Room
801 S. Grand Ave., Suite 400
Los Angeles, CA 90017
Calabasas City Hall
Council Conference Room
100 Civic Center Way
Calabasas, CA 91302
Claremont City Hall
Council Office
207 Harvard Avenue
Claremont, CA 91711
Rolling Hills Estates City Hall
Conference Room
4045 Palos Verdes Drive North
Rolling Hills Estates, CA 90274
Thousand Oaks City Hall
City Manager’s Office, Council Office #1
2100 Thousand Oaks Blvd.
Thousand Oaks, CA 91362
CALL TO ORDER & ROLL CALL
Chair Santangelo called the meeting to order at 11:00 a.m. and Annie Mendoza, Deputy Clerk of the Board, conducted roll call.
ROLL CALL
Camarillo Susan Santangelo Committee Chair Remote
Calabasas Ed Albrecht Committee Member Remote
Carson Absent
Claremont Corey Calaycay Committee Member Remote
Rolling Hills
Estates
Steve Zuckerman Committee Member Remote
Santa Monica Absent
Thousand Oaks David Newman Committee Member Remote
All votes are unanimous, unless otherwise stated.
GENERAL PUBLIC COMMENT
There was no public comment.
Finance Committee Item 1
Agenda Page 4
CONSENT AGENDA
1. Approve Minutes from the September 24, 2025, Finance Committee Meeting
2. Receive and File September 2025 Risk Management Team Report
3. Receive and File September 2025 Investment Report
4. Receive and File August 2025 Financial Dashboard
Motion: Committee Member Calaycay, Claremont
Second: Committee Member Newman, Thousand Oaks
Vote: The consent agenda was approved by a roll call vote
REGULAR AGENDA
5. Receive Report from the Independent Auditor and Review Fiscal Year 2024-2025 Financial Statements and Fiscal Year 2024-2025 Budget to Actual Report Hui Lisano, Senior Director, Finance and Accounting, introduced Ryan Theiler, Senior Manager from Baker Tilly, who presented the 2025 Audit. Mr. Theiler stated that the audit was performed in accordance with Generally Accepted Auditing Standards, noting that CPA received an Unmodified Opinion and that no material weaknesses or significant deficiencies in controls were found.
Committee Members Calaycay and Albrecht praised the work of the auditor and staff. Committee Member Zuckerman asked if there were any internal controls that the auditor would like to see from CPA, and Mr. Theiler responded that CPA’s controls and processes were adequate, especially for an organization of its size.
Jennifer Stevenson, Financial Planning and Analysis Manager, presented the Fiscal Year 2024-2025 Financial Results and reviewed the balance sheet components, as of June 30, 2025, including assets, liabilities, and deferred inflows of resources. She described a set of financial indicators, noted that working capital and unrestricted cash decreased year over year due to an increase in long-term investments.
Committee Member Zuckerman inquired about a legal matter referenced in the report, and staff responded that claim information was confidential. He also asked about a canceled PPA; staff said they terminated the option after the developer requested a second price increase. He also made suggestions for the Board presentation related to accounts receivable information. Committee Member Calaycay asked if the legal matter should be presented either to the Board or the Finance Committee in closed session and staff responded that they could do that.
Mr. McNeil, Chief Financial Officer, closed the presentation by thanking staff for their work on the audit and financial reporting.
6. A. Recommend that the Board of Directors Approve up to $4.5 Billion of Prepayment Transactions with Goldman Sachs (GS), Morgan Stanley (MS), Royal Bank of Canada (RBC), or JPMorgan (JPM) as CPA’s Underwriter & Prepaid Supplier; and
B. Recommend that the Board of Directors Approve the Delegation of Authority to Staff to Select Funding Recipients(s) for Prepayment Transactions Completed with GS, MS, and/or JPM; RBC will Serve as the Funding Recipient for any Prepayment Transactions Completed with RBC.
Kate Freeman, Senior Manager, Strategic Finance, requested that the Finance Committee make a recommendation to the Board of Directors to approve up to Finance Committee Item 1
Agenda Page 5
$4.5 billion of prepayment transactions with Goldman Sachs (GS), Morgan Stanley (MS), Royal Bank of Canada (RBC), or JPMorgan (JPM) and grant staff the authority to select the Funding Recipient(s) for prepayment transactions completed with GS, MS, and/or JPM. Ms. Freeman explained that prepays are well-established financing mechanisms, grounded in the US tax code, that allow municipal utilities and CCAs to leverage their status as issuers of tax-exempt debt to reduce energy costs. CPA completed five prepay transactions in 2023 and 2024, issuing $5.9 billion of prepay bonds, leading to approximately $361 million of energy cost savings over the next eight years, an average annual savings of $45 million. Ms. Freeman described the two-step approach for future prepays, presented a history of prepay bond transactions from 2021 to 2025, and explained the bank selection process.
Committee Member Newman asked for clarification regarding a dollar figure that appeared to be inaccurate; staff responded that the correct number will be presented to the Board. Committee Member Albrecht suggested that in the future staff inform the Committee about other entities, besides CCCFA, that could serve as the conduit issuer of the bonds. Committee Member Zuckerman asked for more information about CCCFA, and staff responded that it was created as an affordable conduit issuer for CCAs, that issuing bonds for CCAs is its only function and that member CCAs’ staff serve as the board members of CCCFA. The Southern California Public Power Authority issues bonds on behalf of utilities, but CPA cannot utilize its services because, as a CCA, CPA cannot be a member. David McNeil, Chief Financial Officer, stated that staff can do more research ahead of the next round of prepay bond transactions.
Motion: Committee Member Calaycay, Claremont
Second: Committee Member Zuckerman, Rolling Hills Estates Vote: The item was approved by a roll call vote
COMMITTEE MEMBER COMMENTS
None.
ADJOURN
Chair Santangelo adjourned the meeting at 12:03 p.m.
Finance Committee Item 1
Agenda Page 6
Staff Report – Agenda Item 2
To: Finance Committee
From: Lyon Hardgrave, Director, Energy Risk Management
Approved By: Ted Bardacke, Chief Executive Officer
David McNeil, Chief Financial Officer
Subject: Receive and File December 2025 Risk Management Team Report Date: January 28, 2026
December 2025 RMT REPORT
Key Actions
• Reviewed the counterparty credit exposure summary
• Reviewed September 2025 day-ahead load forecast performance • Reviewed November 2025 market performance
• Reviewed 2026 - 2029 energy position recommendations
• Reviewed 2025 - 2030 Renewable and Carbon-Free positions • Reviewed PCC1 purchase and sales strategy
• Reviewed CF purchase and sales strategy
• Reviewed the 2025 Voluntary Allocation update
• Reviewed Sunzia test energy forecast and COD update
• Reviewed 2026 - 2028 slice of day RA position
• Reviewed 2026 LT PPA COD impacts on RA compliance
• Reviewed RA purchase and sales strategy
• Reviewed Energy Risk Management Policy (ERMP) compliance for RA, REC, CF, and Energy
• Reviewed Long-Term Energy Contract amendments and terminations • Reviewed December 2025 CRR Allocations
• Reviewed the Negative REC Price strategy
Agenda Page 7
Finance Committee Item 2
Policy Compliance
Policy Deviation Required Action
Beginning in June 2024, the
renewable energy hedge ratio
exceeded the maximum hedge
percentage for 2027 due to the
addition of new renewable energy
supply from a PPA.
Beginning in November 2024, the
renewable energy hedge ratio
exceeded the maximum hedge
percentage for 2028-2030 due to a
reduction in the renewable energy
product targets that are used for
long-term power planning and
position management.
None.
The deviations for 2027-2030 will resolve
themselves as CPA nears these years and the
maximum hedge percentages increase.
Beginning in September 2025, the
energy hedge ratio for Q3 2028
exceeded the maximum hedge
percentage by 0.2% due to a
reduction in forecast load.
None.
On January 1st, 2026 the maximum hedge % for
Q3 2028 increased which resolved the deviation.
ATTACHMENT
None.
Agenda Page 8
Staff Report – Agenda Item 3
To: Finance Committee
From: David McNeil, Chief Financial Officer
Approved By: Ted Bardacke, Chief Executive Officer
Subject: Receive and File December 2025 Investment Report Date: January 28, 2026
RECOMMENDATION
Receive and file.
ATTACHMENT
1. December 2025 Investment Report
Agenda Page 9
Clean Power Alliance Investment Report
December 2025
(in USD unless otherwise noted)
Local Agency
Investment
Fund (LAIF)
Certificates of Deposit
(CDs)
California Asset
Management Program
(CAMP)
US Bank Custodial
Account
US Treasury Securities Total
Beginning Balance 17,746 30,000,000 177,439,857 4,919,041 199,207,196 411,583,839 Amortization & Accretion** 0 0 0 0 119,606 119,606
Deposits & Purchases 0 0 594,642 866,183 0 1,460,825
Maturities & Withdrawals 0 0 0 0 0 0
Ending Balance 17,746 30,000,000 178,034,499 5,785,224 199,326,802 413,164,270 Book Value*
Beginning Balance 17,746 30,000,000 177,439,857 4,919,041 201,669,302 414,045,946 Amortization & Accretion 0 0 0 0 (660,939) (660,939)
Deposits & Purchases 0 0 594,642 866,183 0 1,460,825
Maturities & Withdrawals 0 0 0 0 0 0
Ending Balance 17,746 30,000,000 178,034,499 5,785,224 201,008,363 414,845,832 Interest Earned*** 60 109,634 594,642 15,293 535,935 1,255,564 Yield**** 4.03% 4.17% 3.95% 3.62% 3.88% 3.93%
Weighted Average Term to Maturity (Months) 7.0 2.5 2.0 1.0 48.0 24.2 **** Yield for LAIF & CAMP is reported on a monthly average basis; yield for CDs is determined based on a weighted average annual basis; yield for US Treasuries is equivalent to the yield to maturity at purchase date; total yield is the weighted average yield for the whole portfolio Transaction Type
Depository
Par Amount
Rate
Placement Date
Maturity Date
Term (weeks)
Interest Earnings (Total)
Market Value*
* Book value represents the original purchase cost of US Treasury assets adjusted for amortization/accretion. Market value reflects the month-end fair market value of US Treasury assets based on current interest rate and market conditions. ** Represents the change in book value of UST assets due to amortization/accretion of bond premium/discount at purchase over the lifetime of the asset *** Interest earned on LAIF is based on daily compounding, account balances and monthly effective yield published by LAIF. Interest earned on CDs is based on the fixed interest rate of each CD and is paid out in full at maturity. Interest earned on UST is based on the yield of each UST and is paid out at maturity (for terms <6mo) or biannually (for terms >6mo) Summary of Transactions (CDs)
Agenda Page 10
Staff Report – Agenda Item 4
To: Finance Committee
From: David McNeil, Chief Financial Officer
Approved By: Ted Bardacke, Chief Executive Officer
Subject: Receive and File November 2025 Financial Dashboard Date: January 28, 2026
RECOMMENDATION
Receive and file.
ATTACHMENT
1. November 2025 Financial Dashboard
Agenda Page 11
Summary of Financial Results
Definitions:
Accounts: Active Accounts represents customer accounts of active customers served by CPA per Calpine Invoice Participation Rate %: Participation Rate represents active accounts divided by eligible CPA accounts YTD Sales Volume: Year-to-date sales volume represents the amount of energy (in gigawatt hours) sold to retail customers Revenues: Retail energy sales and other (grant related) revenues less allowance for doubtful accounts Cost of energy: Includes all direct power costs incurred to serve CPA’s load Operating expenses: Includes general, administrative, consulting, payroll, and other costs required to fund operations Operating Income: Represents the difference between revenues and cost of energy and operating expenses Non-Operating Income: Interest income arising from deposits and investments net of borrowing costs and fees Investments: Liquid and high-quality securities with maturities of 91 days or more Cash and Cash Equivalents: Includes bank deposits and high quality and liquid securities with maturities of 90 days or less Year to date (YTD): Represents the fiscal period beginning July 1, 2025 YTD
November
2025
Financial Dashboard
Note: Numbers may not sum up due to rounding.
Active Accounts
1,069,463
Participation Rate
92.8%
YTD Sales Volume
4,776 GWh
November Volume
828 GWh
Res
47%
Com - Lg
22%
Com - Sm
29%
Agr/Oth
2%
In November 2025, CPA’s net position increased by $16.6 million, $12.7 million more than budgeted. Energy revenues were $93.5 million, $1.9 million (2%) lower than projected, and the cost of energy was $74.2 million, $13.2 million (15%) lower than budgeted, primarily due to lower than forecasted residential load and the non-utilization of energy contingencies.
Year to date, CPA’s net position increased by $21.7 million, $45.7 million higher than the budgeted decrease of $24.0 million. YTD revenues totaled $594.9 million, 3% less than budgeted, and YTD energy expenses were $558.8 million, 9% less than budgeted. Absent contingencies, energy costs YTD were $15.1 million (2.6%) below budget. YTD operating expenses totaled $24.1 million, 22% less than budgeted, mainly due to lower than projected spending on staffing, customer programs, and professional services expenses.
As of November 30th, 2025, CPA had unrestricted cash, cash equivalents, and current investments of $396.6 million, as well as $119.5 million available in its bank line of credit, representing 223 Days Liquidity on Hand. CPA is financially sound and in compliance with its bank and other credit covenants.
Agenda Page 12
Staff Report – Agenda Item 5
To: Finance Committee
From: David McNeil, Chief Financial Officer
Subject: Report from the Chief Financial Officer
Date: January 28, 2026
The CFO will provide an oral update on CPA’s financial operations.
Agenda Page 13
Staff Report – Agenda Item 6
To: Finance Committee
From: Jennifer Stevenson, Financial Planning & Analysis Manager Reviewed by: David McNeil, Chief Financial Officer
Approved By: Ted Bardacke, Chief Executive Officer
Subject: Two-Year Budget Cycle Proposal
Date: January 28, 2026
RECOMMENDATION
Receive presentation on a 2-year budget structure proposal and provide input.
ATTACHMENTS
1. Two-Year Budget Cycle Proposal Presentation
Agenda Page 14
Two-year Budget Cycle Proposal
Finance Committee
January 28, 2026
Agenda Page 15
As CPA's business has matured with increasingly predictable multi-year planning, our annual budget structure presents opportunities for streamlining and improvement Projects are increasingly spanning multiple fiscal years and business decisions can be constrained by line-item allocations despite the existence of overall operating expense budget capacity
Staff propose a two-year budget structure, wherein the Board would approve two consecutive fiscal year budgets simultaneously, with authorization for staff to make some types of operating expense transfers subject to five specific defined constraints Under this proposal, the Board would be presented a budget amendment for the second year of the two-year cycle to update revenue, cost of energy and contribution to the net position in line with the annual rate setting process
This proposal seeks to increase agility, enhance efficiency, and optimize resources within the operating expense budget while maintaining appropriate oversight Staff seek the Finance Committee’s input on this proposal Subject to the Finance Committee’s input, Staff propose to present a proposal for moving to a two-year budget cycle to the Executive Committee in March and, potentially, the Board in April 2026
2 Summary
Agenda Page 16
Fiscal Year Constraints
• Projects – particularly involving customer programs and marketing – often span fiscal years and implementation timelines can shift based on external factors, resulting in unspent funds being re- budgeted in subsequent years Process
• The annual budget cycle takes 6 months each year, and is time intensive for Board members and Staff • As CPA’s business has matured, multi-year planning for many expense items has become more predictable
Operational Flexibility
• Budgets line items cannot be flexibly reallocated when business priorities evolve without amendments to the budget
• Business initiatives may be delayed due to budget line-item constraints, despite CPA having overall operational expense (OpEx) budget capacity
3 Context: Current Budget Environment
Two-year budget processes are commonly used in the public sector. Approximately one-third of CPA’s member communities currently use two-year budget processes including Agoura Hills, Alhambra, Claremont, Hawaiian Gardens, Lynwood, Monrovia, Moorpark, Port Hueneme, Santa Monica, Santa Paula, Thousand Oaks, and West Hollywood.
Agenda Page 17
Proposal: Adopt a 2-year budget cycle
To address operating constraints and improve organizational efficiency, staff propose the adoption of a 2-year budget cycle:
Beginning in the spring of 2026, and every two years thereafter, staff would present the Board with the next two consecutive fiscal year budgets simultaneously for approval.
The budget approvals would include authorization for staff to make the following budget transfers when reasonable and necessary to support the timely operations of CPA:
• Move budgeted line amounts between the two fiscal year budgets • Move budget amounts between OpEx lines (with limitations on Staffing and Programs budgets) Transfers would be subject to the controls and accountability conditions described in slides 9 and 10.
As part of the FY2 (e.g. second year) annual rate setting process, staff would propose that the Board amend and update FY2 budgeted revenue and cost of energy line items.
Agenda Page 18
4 5
Budget Priorities presentations
Draft Budget presentations
Proposed Budget presentations
All the same Committee and Board
interactions only now focused on two
years of business activities
Two proposed budgets presented to the
Board for approval.
Examples
FY2026 – 2027 FY2027-2028
What Does This Look Like?
Agenda Page 19
FY1 Budget Process – Same but for 2 FY Budgets
6 January – April year 0 (Staff) –Goal Setting, FY1 & FY2 Departmental Budgeting, Rate Design Planning, Energy Cost Projections & FY1 & FY2 Consolidated Budget Planning April X, year 0 (Executive Committee) – Budget Priorities April X, year 0 (Finance Committee) – Budget Priorities & Draft FY1 & FY2 Budgets May X, year 0 (Board) – Budget Priorities
May X, year 0 (Community Advisory Committee) – Draft FY1 & FY2 Budgets May X, year 0 (Executive Committee) – Draft FY1 & FY2 Budgets May X, year 0 (Finance Committee) – Proposed FY1 & FY2 Budgets June X, year 0 (Board) – Proposed FY1 & FY2 Budgets
Agenda Page 20
FY2 Budget Process - New
7 Second half of FY1 – Rate Revenue and Cost of Energy Forecasts for FY2, and updates to FY1 and FY2 Operating Expense forecasts based on FY1-to-date actuals May of FY1 (Finance Committee) – Budget status review
June of FY1 (Board) – In conjunction with the annual rate setting process, approval of an amended FY2 budget reflecting new rate revenues and new cost of energy forecasts Oct/Nov of FY2 (Finance Committee & Board) – Present an outlook for the FY2 operating expense budget in conjunction with complete and audited financial results from FY1 In addition to the planned budget amendment for FY2 to account for changes in rates and cost of energy forecasts, other budget amendments could be presented to the committees and Board if additional budget authorization is necessary, as is currently the case.
Agenda Page 21
8 How Would Transfers Work?
Agenda Page 22
Controls for inter- budget line-item transfers:
Control 1: An annual maximum transfer between OpEx lines is limited to the greater of $250K or 10% of transfer-out line’s budget
Example: Mailers with a budget of $1.4M could transfer out up to $250K Programs with a budget of $14.4M could transfer out up to $1.4M Control 2: Customer Programs budget line-item transfers out can only come from funds budgeted for program implementation and must be for expenses that further Customer Program’s projects Example: 9 months into the fiscal year the Customer Program’s team discovers that a particular neighborhood is not subscribing to a program that would benefit them because they speak a language other than the ones provided in CPA’s current translations. Programs would like to translate some informational documents into this language and mail these to that neighborhood. This campaign was not anticipated and therefore was not included in the Communications and Mailers budgets. Programs could transfer implementation budget to those budget lines to facilitate this action, rather than waiting 3 months for a new budget cycle.
Control 3: Any OpEx line budget transfers must be approved by the cost center manager and CFO 9 Controls and accountability for transfers
Agenda Page 23
Control for all transfers:
Control 4: Staffing budget line item shall not be increased by transfers, to avoid committing the Board to ongoing future expenses.
Control for inter-year transfers:
Control 5: Any movement in budget from FY2 to FY1 would require CFO approval that is grounded in a reduction in FY2’s spending plan.
Example: A new software was projected to be implemented in FY2 however the procurement went faster than expected and CPA is ready to implement in FY1 Q4. A request could be submitted to the CFO to reduce the FY2 budget and move some implementation budget into FY1, thereby avoiding a project delay.
Reporting:
Inter- budget line item and inter-year budget transfers will be reported to the Finance Committee and reflected in the Quarterly Financial Reports.
10 Controls and accountability (cont…)
Agenda Page 24
Better align budget timeline with CPA’s long-term strategy Example: Data & Systems Roadmap, Multi-year commitments for Programs (ex. Energized Communities) Provides the Board financial insight into longer term planning Increase agility to adapt to changes in project timelines Addresses concerns regarding approving the same expenses in multiple fiscal years due to project delays Increased efficiency
Preparing and reviewing two budgets at the same time will free up time and resources for the Board and Staff in FY2 without compromising fiscal discipline and oversight
Resource optimization
Use budget where and when needed to enable business decisions Enhanced engagement with FinCom and the Board:
• FY1 Budget Process (no change)
• Monthly Dashboard (no change)
• Quarterly Financial Report (no change) will include budget transfer reporting (new) • Present a budget status review at FY1 May Finance Committee meeting in anticipation of FY2 (new) • Annual outlook for the FY2 operating expense budget year in the fall of FY2 (new) 11 Opportunities with a 2-year budget
Agenda Page 25
Questions and Feedback
Agenda Page 26
Staff Report – Agenda Item 7
To: Finance Committee
From: Jennifer Stevenson, Financial Planning & Analysis Manager Reviewed by: David McNeil, Chief Financial Officer
Approved By: Ted Bardacke, Chief Executive Officer
Subject: Bad Debt Reserve and Accounts Receivable Update Date: January 28, 2026
Staff will provide a presentation on the item.
ATTACHMENTS
1. Bad Debt Reserve and Accounts Receivable Update Presentation Agenda Page 27
Bad Debt Reserve and Accounts
Receivable Update
January 28, 2026
Agenda Page 28
Overview
2 CPA’s bad debt reserve is a point in time estimate of amounts owed by customers that are not expected to be collected
The bad debt reserve is netted from accounts receivable on the balance sheet. An increase in the bad debt reserve represents a bad debt expense Bad debt expense is netted from revenue on the income statement CPA's bad debt reserve estimate methodology is adjusted to reflect customer payment behavior, CPUC mandates, and SCE’s collection activities CPA's bad debt reserves are conservatively estimated
Agenda Page 29
Gross AR Aging at 90, 120, and 150+ Days
3 Gross aged accounts receivable is before application of bad debt reserve In December 2025 total Accounts Receivable balance was $215.3M Agenda Page 30
Bad Debt Reserve – Previous Estimation Methodology
CPA routinely assesses the bad debt estimation method to see if it accurately reflects recent customer payment behaviors. If not, then a change to the estimation methodology is made.
CPA’s bad debt reserve calculation methodology establishes fixed bad debt reserve percentages representing the probability of non-payment, which are applied to AR grouped into different delinquency or aging buckets, such as “current”, “1-30 days past due”, “31-60 days past due”, etc.
CPA updated the bad debt reserve percentages for both active and inactive accounts in March 2020 and November 2023. CPA’s bad debt reserve percentages as of November 2023 are applied below to demonstrate bad debt calculations using illustrative AR balances.
Example (for illustration only)
Agenda Page 31
4 Bad Debt Reserve – New Estimation Methodology
In June 2025 CPA observed new customer payment trends for some active residential accounts:
• 27% of active residential debt belonged to customers with debt aged greater than 120 days • 25% of active residential debt belonged to customers on payment arrangements Based on these observations and correspondence with SCE regarding their collection trends, an updated non- payment estimation method was implemented for active residential accounts beginning June 2025 as follows:
1. Current (B): active accounts that are settling debts in full by 120 days and are not on payment arrangements (no change)
2. Extreme Delinquency (C) – accounts that have debt aged greater than 120 days and are not on payment arrangements (49% probability of non-payment)
3. Payment Arrangement (D) – accounts on payment arrangements (80% probability of non-payment) Example (for Illustration only)
Agenda Page 32
5 Bad Debt Reserve
6 CAPP 1.0 funds
CAPP 2.0 funds
$18.7M entry
due to change
in methodology
July - Dec 2025
Budgeted Bad Debt Expense $14,655,000
Actual Bad Debt Expense $6,375,630
difference $8,279,370
The new bad debt estimation
methodology is not reflected in
the FY2025-26 budget because
it was developed after the
budget had been approved by
the Board.
For the first 6 months of this
fiscal year, the bad debt expense
is lower than budgeted due to:
• lower than budgeted
revenues in the first half of
the fiscal year
• the June 2025 $18.7M
adjustment
Agenda Page 33
Customer Disconnections
Disconnection process:
• A very low number of residential accounts actually get disconnected by SCE; the majority of accounts that receive disconnection notices enroll in a payment arrangement Payment plans/arrangements:
• In 2025 the CPUC mandated that 2-year plans be offered to residential customers • There is no penalty for defaulting on a payment arrangement Customer Protections mandated by the CPUC:
• Customers on payment arrangements can not be disconnected • CARE, FERA, and some Medical Baseline accounts can not be disconnected • In some instances customers must be reconnected after making a low, or no, payment Customer protections limiting disconnections have slowed the collection of accounts in arrears.
Staff will continue to monitor regulatory changes impacting collections and update the bad debt expense methodology to reflect the continuing changes in customer payment behavior.
Agenda Page 34
7 Collections
8 Active commercial and residential customer
accounts are collected by SCE.
CPA is able to pursue collections on inactive
customer accounts once they are returned by
SCE to CPA.
Returned customer debt data provided by
SCE has historically been insufficient for
pursuing collections due to report timing and
data quality issues.
A new agreement concluded by CPA and SCE
in late 2025 requires SCE to return customers
in a more timely and efficient manner and
provide better data, which is intended to
enable CPA to implement a collections
program subject to the Board approved
Collections Policy. Validation of the new data
provided by SCE is currently in progress.
Agenda Page 35
Questions?
Agenda Page 36
Regulatory changes - Detail
Payment plans/arrangements:
• CPUC mandated 2-year plans be offered to residential customers. AMP currently is set to expire October 1, 2026. NEM, DA, and master metered customers are not currently eligible for AMP.
Customer Protections mandated by the CPUC:
• Extreme weather event protections (i.e. winter 2025 high winds and fires) • Customers on payment plans/arrangements can not be disconnected • CARE, FERA, and some Medical Baseline accounts can not be disconnected • AMP customers who face disconnection for the first time can reconnect with no penalty, just a payment plan in place.
• 3-months following the first reconnection, if the customer is disconnected again, the utility must reconnect the customer and maintain their payment plan, provided that the customer pays the balance accrued during the plan period or an amount agreed upon by the utility and customer • On October 14, 2025 the Commission issued an email ruling asking parties to comment on a procedural path forward for AMP, CBO Arrears Case Management Program, and the PIPP Pilot.
We anticipate further changes to these programs in a formal procedural process in 2026.
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