Audit & Finance Committee Meeting
February 13, 2023
Peninsula Clean Energy
Agenda
• Call to Order / Roll Call
• Public Comment (for items not on the Agenda)
• Action to set the Agenda and Approve Consent Items
• Regular Agenda
2. Chair Report
3. Staff Report (None)
4. FY 2022-2023 Q2 Financial Report
5. Projected Impact of 2.1.2023 PCE Rate Change on FY 2022-2023 Year End Results
6. Budget Variances Discussion
7. Committee Members’ Report
2. Chair Report
3. Staff Report
4. FY 2022-2023 Q2 Financial Report
July 1, 2022 through December 31, 2022
Peninsula Clean Energy
FY 2022-2023 Year-to-Date Actual vs. Budget
Load Performance
• Total loads year-to-date are 1.3% below budget
o Commercial and Industrial loads are just at budget
o Residential loads are 4% below budget
6 (in kWh) Actual Budget Variance
Variance as %
Budget
Commercial and Industrial 1,010,247,538 1,001,729,259 8,518,279 0.85% Residential 737,494,177 769,176,966 (31,682,788) -4.12% Total 1,747,741,715 1,770,906,224 (23,164,509) -1.31%
Year-to-date (Q2 of FY 2022-2023)
Peninsula Clean Energy
Revenue – Year-to-Date Actual vs. Budget & Monthly Trend • Revenue
o Year-to-date revenue is $5.4M
below budget, or 2% under year-to
date budget
o Revenue underperformance is
driven mostly by residential loads
and revenues coming in under
budget
7 Revenue (Last 13 months)
Actual Budget Var Fav/(Unf)
Dec-21 $16.0 $17.1 ($1.1)
Jan-22 $15.1 $17.6 ($2.5)
Feb-22 $14.1 $16.0 ($1.9)
Mar-22 $14.7 $16.8 ($2.1)
Apr-22 $26.1 $15.5 $10.7
May-22 $29.5 $19.6 $9.9
Jun-22 $36.3 $23.3 $13.0
Jul-22 $35.0 $39.2 ($4.2)
Aug-22 $37.0 $41.1 ($4.1)
Sep-22 $41.4 $39.7 $1.7
Oct-22 $32.4 $33.8 ($1.4)
Nov-22 $33.8 $31.6 $2.2
Dec-22 $35.0 $35.2 ($0.2)
December-22
Month Revenue Comparison vs Budget (in Millions)
Peninsula Clean Energy
Cost of Energy – Year-to-Date Actual vs. Budget & Monthly Trend • Cost of Energy
o Year-to-date cost of energy
expenses are $13 million over
budget, or 9% over year-to-date
budget
o The months of September and
December had the highest energy
expenses greater than budget,
given higher energy costs in those
months attributed to the September
heat events and higher natural gas
pries in December
8 Cost of Energy (Last 13 months)
Actual Budget Var Fav/(Unf)
Dec-21 $18.8 $19.3 $0.5
Jan-22 $20.3 $18.8 ($1.5)
Feb-22 $17.6 $17.2 ($0.4)
Mar-22 $18.4 $16.9 ($1.5)
Apr-22 $19.5 $16.5 ($2.9)
May-22 $19.8 $17.6 ($2.2)
Jun-22 $23.6 $18.2 ($5.4)
Jul-22 $23.1 $23.7 $0.6
Aug-22 $25.7 $26.9 $1.2
Sep-22 $36.1 $26.7 ($9.4)
Oct-22 $19.1 $21.9 $2.8
Nov-22 $21.1 $21.5 $0.5
Dec-22 $31.4 $22.8 ($8.6)
December-22
Month COE Comparison vs Budget (in Millions)
Peninsula Clean Energy
FY 2022-23 Q2 Financial Performance – Year to Date Actual vs. Budget 9 Actual Budget
Variance Favorable /
(Unfavorable)
YTD Actual as % of
YTD Budget Budget
YTD Actual as % of
Full Year Budget
OPERATING REVENUES
Electricity Sales, net $ 213,645,027 $ 219,142,719 $ (5,497,691) 97.49% $ 364,961,141 58.54% Green electricity premium $ 1,536,690 $ 1,422,832 $ 113,858 108.00% $ 2,822,550 54.44% Total Operating Revenues $ 215,181,717 $ 220,565,551 $ (5,383,833) 97.56% $ 367,783,691 58.51%
OPERATING EXPENSES
Cost of energy $ 156,507,649 $ 143,578,411 $ (12,929,238) 109.01% $ 264,208,440 59.24% Staff compensation $ 3,704,773 $ 4,291,611 $ 586,838 86.33% $ 8,583,221 43.16% Data Manager $ 1,763,451 $ 1,800,000 $ 36,549 97.97% $ 3,600,000 48.98% Service Fees - PG&E $ 660,550 $ 675,000 $ 14,450 97.86% $ 1,350,000 48.93% Consultants & Professional Services $ 524,138 $ 829,094 $ 304,956 63.22% $ 1,431,813 36.61% Legal $ 723,873 $ 737,000 $ 13,127 98.22% $ 1,474,000 49.11% Communications and Noticing $ 589,182 $ 1,228,854 $ 639,672 47.95% $ 2,686,208 21.93% General and Administrative $ 1,132,987 $ 1,191,000 $ 58,013 95.13% $ 2,359,806 48.01% Community Energy Programs $ 1,931,850 $ 4,320,000 $ 2,388,150 44.72% $ 8,640,000 22.36% Depreciation $ 38,147 $ 48,000 $ 9,853 79.47% $ 96,000 39.74% Total Operating Expenses $ 167,576,601 $ 158,698,970 $ (8,877,632) 105.59% $ 294,429,488 56.92% Operating Income (Loss) $ 47,605,116 $ 61,866,581 $ (14,261,465) 76.95% $ 73,354,203 64.90% NON-OPERATING REVENUES (EXP.)
Total Nonoperating Income/(Expense) $ (548,347) $ 300,000 $ (848,347) -182.78% $ 600,000 -91.39% CHANGE IN NET POSITION $ 47,056,769 $ 62,166,581 $ (15,109,812) 75.69% $ 73,954,203 63.63% Year -to-date Full Year (FY 2022-2023)
Peninsula Clean Energy
Change in Net Position
Year-to-Date Actual vs. Budget
• Year-to-date Change in Net Position is healthy at $47 million, however, is under the year-to-date budget of $62 million • Higher than budget cost of energy expenses and softness in revenue performance year-to-date dampened actual change in net position 10 Actual Budget
Variance Favorable /
(Unfavorable)
YTD Actual as % of
YTD Budget
OPERATING REVENUES
Total Operating Revenues $ 215,181,717 $ 220,565,551 $ (5,383,833) 97.56%
OPERATING EXPENSES
Total Operating Expenses $ 167,576,601 $ 158,698,970 $ (8,877,632) 105.59% Operating Income (Loss) $ 47,605,116 $ 61,866,581 $ (14,261,465) 76.95% NON-OPERATING REVENUES (EXP.)
Total Nonoperating Income/(Expense) $ (548,347) $ 300,000 $ (848,347) -182.78% CHANGE IN NET POSITION $ 47,056,769 $ 62,166,581 $ (15,109,812) 75.69% Year -to-date
Peninsula Clean Energy
Cash Position
11 Actual December 31, 2022
Total Cash/Investments Balance $ 176,921,299
Restricted by Term/Covenant
Unrestricted Cash (per Approved Reserve Policy) $176,921,299 Days Cash on Hand (per Approved Reserve Policy) 219
Approved Reserve Policy (Days Cash on Hand) 180
Unrestricted Operating Reserve Requirement (180 Days) $ 145,198,104 Unrestricted Cash in Excess of Current Reserve Policy $31,723,195 Note: Days Cash on Hand based on full-year forecast of Operating Expenses
5. Projected Impact of 2.1.2023 PCE Rate Change
on FY 2022-2023 Year End Results
Peninsula Clean Energy
Projected Impact of 2.1.2023 PCE Rate Change
on FY 2022-2023 Performance
• The PCE rate change that went into effect 2.1.2023 is projected to generate a $56.9 million positive variance in revenue when compared to the adopted budget • The rate change underpins the projected change in net position at the end of FY 2022-23 of $114 million, or $40 million more than the original budget change in net position of $74 million
• Also included in the FY 2022-2023 year-end financial projection o Actual financial performance year-to-date through December 2022 o Load forecast adjustment in second half of fiscal year to reflect actual load performance vs. budget in first half of year; commercial and industrial loads at budget and residential loads down 4% compared to budget
o Cost of energy expenses forecasted to be 8% above budget for the second half of the fiscal year, reflecting energy expenses in excess of budget in first half of year o Remaining expenses projected at monthly budget forecast for the second half of the fiscal year 13 Peninsula Clean Energy
Projected Impact of 2.1.2023 PCE Rate Change
on FY 2022-2023 Performance
14 FY 2022-2023 FY 2022-2023
Budget (FY) Forecast (FY)
Variance
Forecast vs. Budget
Favorable/(Unfavorable)
OPERATING REVENUES
Electricity Sales, net $ 364,961,141 $ 421,696,236 $ 56,735,095 Green electricity premium $ 2,822,550 $ 2,939,324 $ 116,774 $ 367,783,691 $ 424,635,560 $ 56,851,869
OPERATING EXPENSES $ -
Cost of energy $ 264,208,440 $ 287,763,345 $ (23,554,905) Staff compensation $ 8,583,221 $ 6,866,267 $ 1,716,954
Data Manager $ 3,600,000 $ 3,473,451 $ 126,549
Service Fees - PG&E $ 1,350,000 $ 1,290,550 $ 59,450
Consultants & Professional Services $ 1,431,813 $ 1,121,522 $ 310,291 Legal $ 1,474,000 $ 1,516,623 $ (42,623)
Communications and Noticing $ 2,686,208 $ 1,541,761 $ 1,144,447 General and Administrative $ 2,359,806 $ 2,277,867 $ 81,939 Community Energy Programs $ 8,640,000 $ 4,198,590 $ 4,441,410 Depreciation $ 96,000 $ 86,147 $ 9,853
Total Operating Expenses $ 294,429,488 $ 310,136,125 $ (15,706,637) Operating Income (Loss) $ 73,354,203 $ 114,499,435 $ 41,145,232 NON-OPERATING REVENUES (EXP.) $ -
Total Nonoperating Income/(Expense) $ 600,000 $ (98,347) $ (698,347) $ -
CHANGE IN NET POSITION $ 73,954,203 $ 114,401,088 $ 40,446,885
5. Discussion Framework for Budget Variances
Peninsula Clean Energy
Budget Variances – Framework to Discuss Budget Variances • Key Considerations when viewing and discussing budget variances o Timing - of budget and projection development, adoption, and comparing actual performance vs. budget or projections
o Nature of the variance - positive or negative, one-time or structural o Tools to address variances - What tools do we currently use and what else can we develop and use to address such variances
16 Peninsula Clean Energy
Budget Variances – Timing
Framework to Discuss Budget Variances
• Annual Budget and four additional years of financial projections are adopted by the PCE Board in June of each year
o Provides a snapshot in time of our projected revenues and expenses for the next 12 months – and a projection of our full financial picture over an additional four-year period
o The basis for these revenue projections are grounded in our assumptions on forecasted loads and rates, and the fundamental basis for our expenditure projections is driven by cost of energy – a point in time view, that is assessed at quarterly variance reporting periods
17 Peninsula Clean Energy
Budget Variances – Nature of Variances
Framework to Discuss Budget Variances
• Nature of Variances – Revenues or Expenses; Favorable or Unfavorable o Revenue Side –
o Rates - PG&E Generation Rate assumptions, PCIA rate assumptions o Load Forecast – assumptions
o Expenditure Side –
o Cost of Energy – Significant market price fluctuations that may be seasonally or weather driven, or other external factors that swing significantly o Ability to expend budget at a pace that was projected • Nature of Variances - One-time vs. Structural
o Are these variances one time – or are they ongoing and structural? Do we shift our underlying assumptions, if so, when and how?
18 Peninsula Clean Energy
Budget Variances – Tools to Address Variances
Framework to Discuss Budget Variances
• Tools to address variances
o Regular variance reporting
o Cash position
o Budget contingencies
o Mid-year budget adjustments
o Multi-year financial forecasts, adjustments to, sensitivity scenario planning o Rate changes
o Rate Stabilization Funds, Rate Setting Framework that may be different from what is in place today
• Further Discussion and use of these tools in PCE’s budget development process – Next Audit and Finance Committee Meeting May 8, 2023 19 6. Committee Members’ Reports