Executive Committee Meeting
March 11, 2024
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 Item 1and Approve Consent Items o Public Comment
• Regular Agenda
• Committee Members Reports
• Adjourn
Chair Report
CEO Report
Peninsula Clean Energy
CEO Report
• Federal Funding Effort and Washington DC Lobby Days
o $2M earmark application to support additional low-income home upgrades (Senator Butler's office; cc’d to Senators Padilla, Duarte, Mullin, Eshoo) o Washington DC Lobby Days - March 20-22 (PCE, Ava, MCE, CPA, OCPA, SDCP and Cal-CCA)
o Representative Mullin, Representative Duarte, Representative Eshoo o Senator Butler, Senator Padilla (plus leg staff)
o DOE and administration officials
• HCD/EV L1 proposed amendment to building code
• Reach Codes- Status Update
5 Peninsula Clean Energy
CEO Report
Upcoming
- Power Resources Discussions (March/April)
- Pre-Pay Bond Discussion (April)
- JPA Amendments/Policy 16 (May)
- Customer Service Center (May)
- Budget Season (March – June)
- Set Rates for Q3/Q4 2024 (June)
- New Strategic Plan (kick off in
summer/fall 2024)
- May consider cancelling July meeting (tbd)
6 Council Briefings:
Brisbane February 15
Los Banos March 6
Hillsborough March 11
Burlingame April 1
Pacifica April 8
San Bruno April 23
Menlo Park May 7
San Carlos May 13
Atherton May 15
East Palo Alto June 4
County of San Mateo August 27
Millbrae September 10
Portola Valley September 25
Rate Setting Methodology
Executive Committee Meeting
March 11, 2024
Peninsula Clean Energy
• PCE has historically provided customers a 5% discount to PG&E’s generation rates, net of the PCIA
o Easily understandable by customers and stakeholders
o Consistent and meaningful savings
• For the first time ever, PCE elected not to adjust rates in February 2024 and rates were maintained at 2023 levels
o Analysis based on recently adopted liquidity reserve target (upper end of 250 DCOH) o Discount to PG&E greater than 10% for most customers
• PCE is considering adjusting its rate setting methodology to be more closely aligned with costs • Engaged NewGen to analyze Cost of Service ratemaking
• Recommendation based in part of PCE’s financial position, customers’ focus on costs, and results of the NewGen analysis
8 Background
Peninsula Clean Energy
NewGen Analysis
• NewGen worked with staff to develop a
financial model to calculate contribution
margins by customer class
• Allocated PCE costs (fixed and variable)
among customer classes based on
agreed-upon methodologies
• Illustrative and based on test years 2024
and 2025
• Model, once finalized, could be used to set
rates by customer class
9 Indicative
Results
Significant subjectivity to
unbundle, classify and allocate
costs among customers
Contribution margins vary
widely by customer class
(-3% - 46%)
PCE rates exceed costs
across most customer classes
Peninsula Clean Energy
Rate Setting Options
1. Current Methodology – maintain net 5% discount to PG&E generation rates
2. Cost of Service rate setting, including PCE cost allocation
3. Hybrid Approach
10 Peninsula Clean Energy
Current Methodology – Net 5% Discount
• Description: Maintain 5% discount to PG&E generation rates, net of the PCIA • Implementation: Adjust PCE rates soon after PG&E updates rates and/or the PCIA changes so that PCE customers maintain 5% discount to PG&E
Pros
• Positive, easily understandable and
consistent public relations message
• Avoids potential arguments/debates on
cost allocation
• Easy to implement
Considerations
• Revenues (and rates) set with no
connection to costs
• May not be able to generate enough
revenue to cover costs
• Rates potentially higher than necessary,
resulting in increased financial reserves
and lost savings for customers
11 Peninsula Clean Energy
Cost of Service Including PCE Cost Allocation
• Description: Rates set based on forecasted cost of service by customer class • Implementation: Estimate cost of providing service to each customer class and set rates to recover costs by customer class; adjust rates mid-year if needed based on observed costs Pros
• Rates set to recover costs on a
forecasted basis
• Financial stability and credit positive
• Could be years when PCE rates
significantly less than PG&E (>5%
discount)
• Theoretically equitable rate setting
across customers, assuming proper cost
allocation methodology
• Not beholden to PG&E rate changes
Considerations
• A lot of subjectivity allocating costs by
customer class and could be contentious
• Could be years when PCE rates higher
than PG&E
• Discount or premium to PG&E will vary
by customer class
• Requires detailed rates analysis
12 Peninsula Clean Energy
Hybrid Approach
• Description: Revenue determined by cost of providing service; customer rates based on PG&E cost allocation methodology resulting in constant discount across all customers • Implementation: Estimate cost of providing service and calculate discount/premium needed to achieve desired revenues; adjust rates mid-year if needed based on actual costs Pros
• PCE rates set to recover costs on a
forecasted basis
• Financial stability and credit positive
• Could be years when PCE rates
significantly less than PG&E (>5%
discount)
• Avoids potential contention on cost
allocation and easier to implement than
cost of service ratemaking
• Consistent message across customers
Considerations
• Could be years when PCE rates higher
than PG&E
• Cost allocation based on PG&E
methodology
13 same as Cost of Service
Peninsula Clean Energy
CCA Benchmarking
“PG&E Minus” Cost of Service “Hybrid Approach”
14 Peninsula Clean Energy
Recommendation and Next Steps
Recommendation
• Adopt “hybrid” approach that includes elements of current “PG&E minus” and cost of service ratemaking methodologies
• Better ensures financial stability while maximizing discount provided to customers; also avoids subjectivity and possible contention of allocating costs among customers Next Steps
• Continue with budget process to estimate forecasted costs over 5-year period • Pending Board approval of the recommended rate setting methodology, calculate revenue and maximum discount possible while maintaining 180-250 DCOH • Board approval of budget in June, including PCE rates and resulting discount to PG&E • Update PCE rates on August 1 (June Board meeting)
• Monitor costs and PG&E rate actions throughout year and adjust rates “mid-cycle” only if needed 15 Annual NEM Cash Out
Proposed Revisions
Connor Prince
Executive Committee Meeting
March 11, 2024
Peninsula Clean Energy
Background
• Net Energy Metering customers (1.0 & 2.0) are cashed out once per year after their April billing cycle, having earned credits monthly at the retail rate.
o Applicable to NEM 1 and NEM 2 customers.
o $100 or more is issued as a check.
o $100 or less is retained in customer’s credit escrow. o Current cash out cap is $20,000.
17 Peninsula Clean Energy
Fiscal History
18 $165,117.55 $207,903.73
$716,319.07
$453,393.90
$317,797.47
$213,331.34
$1,353,845.06
$692,224.04
$534,327.25
$599,594.08
$391,052.14
$189,016.51
$-
$200,000.00
$400,000.00
$600,000.00
$800,000.00
$1,000,000.00
$1,200,000.00
$1,400,000.00
$1,600,000.00
2023 2022 2021 2020 2019 2018
NEM Annual Cash Outs
Commercial Residental
Peninsula Clean Energy
Considerations and Challenges
• 2% of checks have never been deposited.
• It costs $25 to reissue an expired check.
• On average 3-8 customers exceed the $20,000 cap each year. o Large commercial, school district, and municipal accounts. o Repeat customers
• All other CCAs have caps of $10,000 or less.
o Net Surplus Compensation (NSC) is the dominant program. o RCEA is only other CCA that still credits at retail, $5,000 cap. 19 Peninsula Clean Energy
Proposed Revisions
• NEM escrow balance of $300 or more receives a check, beginning with the 2024 annual cash out.
o Reduction of checks by more than 50% each year.
• NEM escrow balance under $300 will be issued as an on-bill credit. • Lower the cap to $10,000, starting in April 2025.
o Staff will analyze the impact in 2025 and may recommend lowering it to $5,000 in 2026.
20 Peninsula Clean Energy
Effect on Customers
• About 6,539 customers would be affected for 2024.
o 2,702 receive a bill credit instead of a rollover credit. ($0.01 to $99) o 3,837 receive a bill credit instead of a check. ($100 to $299) o About $725,000 applied as a bill credit rather than a check. 21 3028
6539
Cash Out Credit Type Differential
Check On Bill Credit
Peninsula Clean Energy
Effect on Customers (continued)
• If the $10,000 cap was put into effect in 2024:
o 1 additional customer affected, bringing the total to 5. o An additional $42,000 would be forfeited.
22 $1,874,303.45
$857,171.97
2024 Annual Cash Out Amounts
Check On Bill Credit
Peninsula Clean Energy
Customer Notification
• These updates will be implemented with appropriate communication to all our solar customers.
o Email
o Letter mailed to customers without an email address.
o Direct outreach to customers affected by the lower cap. 23 Peninsula Clean Energy
Recommendation
• Our ask to the Executive Committee is to provide a recommendation of approval of the proposed updates to the Board of Directors:
o Raising the annual cash out check threshold from $100 to $300 beginning in April 2024.
o Lowering of the annual cash out cap from $20,000 to $10,000 beginning in April 2025.
24 Adjournment