Executive Committee Meeting
June 12, 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
o Public Comment
• Regular Agenda
• Committee Members Reports
• Adjourn
Chair Report
Item 1
CEO Report
Item 2
Peninsula Clean Energy
Open Positions
Currently posted:
oPower Resources Analyst / Specialist
oAccount Services Specialist
oSenior Analyst, Account Services
oSenior Manager, Local Power Development
Coming soon:
oCFO
5 FY 2023-2024
(July 1, 2023 – June 30, 2024)
Budget Review
Revised Draft
Peninsula Clean Energy
Schedule – Budget Review and Approval
7 • May 16, 2023 – Review Initial Draft Budget with Audit & Finance Committee • May 25, 2023 – Review Initial Draft Budget with Board of Directors • June 12, 2023 – Review Revised Draft Budget with Audit & Finance Committee • June 12, 2023 – Review Revised Draft Budget with Executive Committee • June 22, 2023 – Approve Final Budget by Board of Directors Peninsula Clean Energy
Revisions Since Initial Draft Budget
• Update to year-end FY23 forecast reflecting April 2023 financial results
• Minor adjustments to Programs Budget
• Modification to assumptions of Gov PV prepayment for
conservatism
• Minor modifications to Days Cash on Hand calculation
8 Peninsula Clean Energy
Draft Budget FY2023-2024 – Key Assumptions (Page 1 of 2) 9 Revenues
o PG&E Generation Rates – Slight decline in rates for next 4 years o January 1, 2024 – Increase 1%
o PCIA Rates – Continuing decrease in rates as of January 1, 2024 o January 1, 2024
o San Mateo – Drop to $0.00 from already low rate
o Los Banos – Drop to $0.00 from already low rate
o After 2024
o Significant increases for next 4 years, near to rates of 2022, but still not approaching rates of 2021
o Customer Rates to PCE – Relatively flat for next 3 years, then lower in 2027 and 2028 (but still well above low year of 2021)
Peninsula Clean Energy
Draft Budget FY2023-2024 – Key Assumptions (Page 2 of 2) 10 Cost of Energy –
o Budgeted at $311 million - Increase of $39 million (14%) over FY23 forecast o Overall budget includes 2 conservatism contingencies
o Energy Cost Volatility = $15 million/year
o 99% of 24x7 Hourly Renewable Project Delays = $56 million over 5 years; $770K in FY24 o Total cost is 9% higher than FY23 forecast without conservatism adders Non-expense Capital Outflows/Inflows
• Solar and Storage on Public Buildings
o Capital Outlay and Investment Tax Credit
o PV1 - $7.4 million outflow in FY24; $2.2 million ITC inflow in FY26 o PV2 - $43.0 million in FY25; $15.0 million ITC inflow in FY27 o Repayment based on usage over 20-year period
• Ongoing On-Bill Finance Programs
Peninsula Clean Energy
Revised Draft Budget (FY23 Forecast and FY24 Summary)
11 2023 2023 2023 2024
Budget Forecast Variance - Fav/(Unf) Revised Draft Budget
OPERATING REVENUES
Electricity Sales, net 364,961,141 429,685,416 64,724,275 471,670,872 Green electricity premium 2,822,550 2,999,401 176,851 2,953,162 367,783,691 432,684,817 64,901,127 474,624,034
OPERATING EXPENSES
Cost of energy 264,208,440 270,221,267 (6,012,827) 311,261,389 Staff compensation 8,583,221 7,939,828 643,393 10,922,801 Data Manager 3,600,000 3,583,331 16,669 3,871,152
Service Fees - PG&E 1,350,000 1,309,818 40,182 1,400,000 Consultants & Professional Services 1,431,813 1,001,289 430,524 1,788,491 Legal 1,474,000 1,299,487 174,513 1,574,558
Communications and Noticing 2,686,208 1,409,113 1,277,095 2,850,940 General and Administrative 2,359,806 2,286,167 73,639 4,027,236 Community Energy Programs 8,640,000 7,946,237 693,763 12,726,000 Depreciation 96,000 78,870 17,130 234,750
Total Operating Expenses 294,429,488 297,075,405 (2,645,917) 350,657,317 Operating Income (Loss) 73,354,203 135,609,412 62,255,209 123,966,717 NON-OPERATING REVENUES (EXP.)
Total Nonoperating Income/(Expense) 600,000 3,033,812 2,433,812 645,192 CHANGE IN NET POSITION 73,954,203 138,643,224 64,689,022 124,611,909 Net Position at the beginning of period 174,211,272 167,670,734 (6,540,538) 300,430,872 Net Position at the end of period 248,165,475 306,313,958 58,148,484 425,042,781 Total Cash & Cash Equivalents (after GOV PV programs) 262,859,728 377,161,637 Unrestricted Cash Days on Hand 323 393
Fiscal Year Fiscal Year
FY24 Budget
Approval: Total
Operating Expenses
Peninsula Clean Energy
Revised Draft Budget FY2024-2028 – 5-year Outlook
2024 2025 2026 2027 2028
Revised Draft Budget Forecast (FY) Forecast (FY) Forecast (FY) Forecast (FY)
OPERATING REVENUES
Electricity Sales, net 471,670,872 484,233,036 482,737,236 452,054,000 402,863,671 Green electricity premium 2,953,162 2,961,637 2,978,004 2,994,557 3,019,185 474,624,034 487,194,674 485,715,240 455,048,558 405,882,856
OPERATING EXPENSES
Cost of energy 311,261,389 383,611,464 382,474,223 344,299,885 329,946,422 Staff compensation 10,922,801 11,578,169 12,272,859 13,009,231 13,789,784 Data Manager 3,871,152 4,103,421 4,349,626 4,610,604 4,887,240 Service Fees - PG&E 1,400,000 1,484,000 1,573,040 1,667,422 1,767,468 Consultants & Professional Services 1,788,491 1,091,949 1,119,665 1,168,642 1,199,674 Legal 1,574,558 1,633,099 1,707,767 1,786,843 1,870,626 Communications and Noticing 2,850,940 2,964,912 3,048,580 3,134,757 3,223,520 General and Administrative 4,027,236 3,748,298 3,929,634 4,121,293 4,336,551 Community Energy Programs 12,726,000 22,130,000 25,781,000 30,355,000 32,935,000 Depreciation 234,750 1,062,250 2,466,694 2,616,000 2,616,000 Total Operating Expenses 350,657,317 433,407,562 438,723,088 406,769,676 396,572,285 Operating Income (Loss) 123,966,717 53,787,112 46,992,152 48,278,882 9,310,571 NON-OPERATING REVENUES (EXP.)
Total Nonoperating Income/(Expense) 645,192 673,580 703,218 734,160 766,463 CHANGE IN NET POSITION 124,611,909 54,460,692 47,695,370 49,013,041 10,077,033 Net Position at the beginning of period 300,430,872 425,132,781 479,688,873 527,485,368 576,605,600 Net Position at the end of period 425,042,781 479,593,473 527,384,244 576,498,409 586,682,634 Total Cash & Cash Equivalents (after GOV PV programs) 377,161,637 385,717,729 432,714,223 493,834,456 501,025,113 Unrestricted Cash Days on Hand 393 326 362 446 464
Fiscal Year
Peninsula Clean Energy
Revised Draft Budget FY2024-2028 – 5-year Outlook
Impact of Gov PV Programs on Cash Position
2024 2025 2026 2027 2028
Revised Draft Budget Forecast (FY) Forecast (FY) Forecast (FY) Forecast (FY)
OPERATING REVENUES
Electricity Sales, net 471,670,872 484,233,036 482,737,236 452,054,000 402,863,671 Green electricity premium 2,953,162 2,961,637 2,978,004 2,994,557 3,019,185 474,624,034 487,194,674 485,715,240 455,048,558 405,882,856
OPERATING EXPENSES
Total Operating Expenses 350,657,317 433,407,562 438,723,088 406,769,676 396,572,285 Operating Income (Loss) 123,966,717 53,787,112 46,992,152 48,278,882 9,310,571 NON-OPERATING REVENUES (EXP.)
Total Nonoperating Income/(Expense) 645,192 673,580 703,218 734,160 766,463 CHANGE IN NET POSITION 124,611,909 54,460,692 47,695,370 49,013,041 10,077,033 Total Cash & Cash Equivalents (before GOV PV programs) 387,561,637 431,717,729 433,514,223 481,834,456 503,275,113 Net Gov PV Programs (Outflow)/Inflow (10,400,000) (46,000,000) (800,000) 12,000,000 (2,250,000) Total Cash & Cash Equivalents (after GOV PV programs) 377,161,637 385,717,729 432,714,223 493,834,456 501,025,113 Unrestricted Cash Days on Hand 393 326 362 446 464
Fiscal Year
24/7 Renewable Energy
Updating Strategic Priority to Deliver 100% Renewable Energy Annually by 2025 and on a 99% Time-Coincident Basis by 2027 June 12, 2023
Peninsula Clean Energy
Presentation Outline
• Background
• Challenges with meeting the 24/7 goal in 2025
• Available resources in 2027
• Benefits to shifting the 24/7 target date to 2027
• Recommendation
15 Peninsula Clean Energy
Background: 24/7 Renewable by 2025
In November 2022, the Board of Directors
adopted staff’s recommendation* on
delivering 100% renewable energy annually
on a 99% time-coincident basis by 2025.
*This recommendation was based on mid-2022
market conditions.
16 Peninsula Clean Energy
Challenges in Achieving the 2025 Target
• Delays in resource development have resulted in fewer resources available to deliver renewable energy to PCE
by 2025 -
Global Supply Chain Disruption
Labor Shortage
Rising Financing Costs
Interconnection Delays
• Short-term contracts with existing renewable
resources are unavailable
Achieving the goal in 2025, given the limited resources that are expected to be available and online, would
be infeasible.
17 Peninsula Clean Energy
Resources Available in 2027
• Staff has been updating the 24/7 modeling with information from the 2023 RFOs and bilateral reach-outs to counterparties, and focusing on the possibility of achieving the 24/7 goal by 2027 when more resources are available:
18 Potential Resources Available in 2027
New
Mexico
Wind
Wyoming
Wind
Shaped
Renewable
New
Geothermal
Lower-Cost
Storage
Peninsula Clean Energy
Benefits to Meeting the 24/7 Goal in 2027
Shifting the 99% time-coincident renewable target year from 2025 to 2027 has the following benefits:
o Opportunity to contract a more diverse set of resources o Opportunity to avoid excessive over-procurement
o Opportunity to reduce long-term cost and risk exposure o Opportunity to build a more optimal resource portfolio 19 Peninsula Clean Energy
Recommendation to Board of Directors
Update Peninsula Clean Energy's Strategic Plan Priority to:
1. Deliver 100% renewable energy annually by 2025, and
2. Deliver 100% renewable energy annually on a 99% time-coincident basis by 2027.
20 Electricity Grid
Regionalization and AB 538
June 12, 2023
Peninsula Clean Energy
Summary
• The California Legislature is considering a
bill that would enable the State’s grid
operator (CAISO) to expand to other states
• This is a significant policy question that the
State has previously considered
• Key stakeholders are split on how the State
should approach this issue
• Staff is seeking feedback from the Board on
how PCE should approach this issue
22 Peninsula Clean Energy
The U.S. Power Grid and California
• The U.S. power grid consists of the
bulk power system, high-voltage
transmission equipment, and the
lower-voltage distribution system.
• It is broken into 3 independent grids.
o The Western Interconnect, which
includes 38 separate balancing
authorities, including CAISO.
o The Eastern Interconnect, which
includes 36 balancing authorities
o The Electric Reliability Council of Texas
(ERCOT)
• The Western Interconnect is
overseen by the Western Electric
Coordinating Council (WECC)
23 1. https://www.tanc.us/understanding-transmission/the-western-us-power-system/ Peninsula Clean Energy
Electric System Operations • The actual operations of the electric system are managed by balancing
authorities (BA), which manage the
supply and demand of energy across their
territory, and transfer of electricity with
other BAs.
• There are 38 BAs within the WECC,
representing about 20% of all generation
capacity in the U.S. and Canada.
• BAs are regulated by both the Federal
Energy Regulatory Commission (FERC)
and the North American Electric
Reliability Corporation (NERC).Operations
24 Peninsula Clean Energy
CAISO Today
25 • Overview: The CAISO is both a BA and regional transmission operator that manages the flow of electricity across the high-voltage bulk power system that makes up 80% of California’s and a small part of Nevada’s electric grid.
• Governance: CAISO is regulated by both the Federal Energy Regulatory Commission (FERC) and the North American Electric Reliability Corporation (NERC). o Unlike other RTOs, the CAISO’s 5-person governing board is appointed by the California Governor and confirmed by the Senate
• Interstate Markets: CAISO operates 2 markets that involve multiple states and participants:
o WEIM: The Western Energy Imbalance Market (WEIM), a real-time bulk power trading market that involves 19 voluntary participants (and more coming) across 10 western states o EDAM: Building on the success of WEIM, the extended day-ahead market (EDAM) is a voluntary day-ahead electricity market that CAISO will launch in early 2024 • Both market programs are designed to deliver economic, environmental, and reliability benefits to participants by increasing regional coordination
Peninsula Clean Energy
The Need to Revisit Regionalization
• California has set ambitious climate goals to
reach 100% clean energy by 2045. CPUC’s
integrated resource planning analysis shows that
the grid would need an additional 86 GWs, more
than double what is currently on the grid.
• California needs to import electricity to meet its
Resource Adequacy requirements, and to meet
the demand of extreme summer heat events.
• There are doubts as to whether California can
build the new 86 GW of resources it needs fast
enough inside California to both meet climate
goals and reliability needs if the supply of imports
begins to decline.
26 Peninsula Clean Energy
The Need to Revisit Regionalization, continued
• An existing RTO, the Southwest Power Pool (SPP), is asking Western States to join their new market, called Markets+, similar to CAISO’s WEIM and EDAM. Unlike WEIM and EDAM, Markets+ will be operated by a governance board that is not appointed by a specific state or participant. • Many WEIM participants have already made commitments to leave WEIM for Markets+, jeopardizing resources available to WEIM and CAISO.
• Supporters of regionalization have raised concerns that if California doesn’t expand to an RTO, resources across Western states will become less and less available to California.
Peninsula Clean Energy
Arguments in Support of Regionalization
28 • Improved reliability: Better coordination on Resource Adequacy by pooling generation resources across a larger region
• Accelerated decarbonization: Easier to match variable demand and renewable generation across the region; less curtailment of wind and solar resources • Improved transmission planning: Streamlining the process of long-term resource planning
• Cost reduction: Reduce transmission congestion costs, streamlining the cost of RA/operating reserve to maintain reliability, more efficient use of renewables are estimated to save $379 Million to $574 million annually for California electricity customers, approx. 4.5% of total annual costs
Peninsula Clean Energy
Key Supporters
29 Environmental
• NRDC
• Environmental Defense Fund
• California Environmental Voters
(formally CLCV)
• Ceres
Business
• CalChamber
• CA Manufacturing & Technology
Association
• CA Community Economic
Development Association
• Microsoft
• San Jose Chamber of
Commerce
• Silicon Valley Leadership Group
Energy
• CAISO
• American Clean Power
• Apex Clean Energy
• CA Energy Storage Association
• EDF Renewable Energy
• Engie North America
• Independent Energy Producers
• MCE
• Pattern Energy
• Southern California Edison
• Solar Energy Industry
Association
• CA Wind Energy Association
Peninsula Clean Energy
Arguments Against Regionalization
30 • Loss of state control: A regional board of directors will likely be less accountable to California ratepayers and California’s environmental and energy policy goals. California will likely only have one vote whereas California’s load is much larger than other Western states
• Federal oversight: FERC may have greater oversight over California policies that express preferences for renewable or carbon-free resources and is more subject to national politics and policies
• Job Creation: More projects may be built outside of California and California LSEs may purchase more of those resources
• State-level decarbonization: While more states have adopted renewable/carbon-free electricity goals, fossil fuel resources will still be more abundant across the west and therefore may be imported into California more easily
Peninsula Clean Energy
Key Opponents
31 Environmental
• Sierra Club
• Clean Coalition
• Food and Water Watch
• The Climate Center
• CA Alliance for Community
Energy
• CA Climate Voters
• CFROG
• Climate Reality Project
Ventura County
• Various 350 chapters
• All indivisible chapters
Labor
• California Labor Federation
• Coalition of California Utility
Employees
• CA State Association of
Electrical Workers
• CA State Council of Laborers
• CA State Pipe Trades Council
Ratepayer/Other
• Consumer Watchdog
• CMUA
• TURN
Peninsula Clean Energy
• Introduced by Asm. Holden, it is possibly a 2-year bill • CAISO develops and submits a governance proposal to the CEC to meet specific governance requirements (next slide)
• CEC, in consultation with CPUC and CARB, reviews the governance proposal and holds at least 5 public hearings (plus additional verification between agencies) • Legislature reviews and provides feedback on the structure • CAISO implements a governance structure, if there is intention from non-participating transmission owners to join and the FERC has approved any changes to CAISO tariff that are necessary. Open to transmission owners, retails sellers, POUs • Additional checks and balances to ensure compliance with FERC requirements, CEC, CAISO, and the Secretary of State
AB 538: Regionalization Process
32 Enable the transition of the CAISO to a regional transmission operator with independent governance. Process:
Peninsula Clean Energy
• Governance by a western states’ committee with an equal number of representatives from each state. California rep is appointed by Governor and confirmed by Senate • Open meeting standards consistent with Bagley-Keene Act plus public access to records • Maintaining state authority over state matters related to procurement policy, resource planning, and resource or transmission siting within the state, including setting resource adequacy standards, and prohibiting the operation of a centralized capacity market • Ensuring the dispatch of resources appropriately reflects the costs for resources to comply with California’s climate policies
• Establishing a clear structure for state regulators to provide guidance to the organization • Enabling participation of demand response, storage, and distributed energy resources • Maintaining California’s renewable portfolio standard compliance requirements that favor in-state renewable energy development over out-of-state development AB 538: Regionalization Process
33 Governance requirements include:
Questions and Discussion
Committee Members’ Reports
Item 5