• Subtitle
New SV Clean Energy
PowerPoint Template
Item 3
PRESENTATION
SVCE Board of Directors
SILICON VALLEY
CLEAN ENERGY
Strategic Plan Update
June 14, 2023
May
Enterprise Risk &
Opportunities
Budget
Strategic Focus
Areas
May-Aug
Strategic Plan Input
& Updates
September
Approve Budget,
Strategic Focus
Areas
Sep-Oct
CEO evaluation&
Priorities (Sep)
Present detailed
work plan and
measures (Oct)
Oct-Sep
Implementation
Strategic Plan & Budget Timeline
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Item 3
PRESENTATION
'S April & May & Q3 - Staff input
May 26 - Executive Committee (strategic plan & budget)
June 14 - Board (strategic plan)
June 23 - Executive Committee (strategic plan & budget) August 1 - Finance Committee (budget)
August 9 - Board (budget)
Item 3
PRESENTATION
CD SVCE Planning & Budgeting Process
Budget
Comprehensive assessment of risks and
opportunities to optimally achieve mission
Organization-wide priorities and
alignment toward achieving the mission
Funding in alignment with achieving
the strategic focus areas
SVCE Mission: Reduce dependence on fossil fuels by
providing carbon-free, affordable, and reliable
electricity and innovative programs for the SVCE
community.
3 Item 3
PRESENTATION
O Strategic Work Plan & Focus Areas
SILICON VALLEY
CLEAN ENERGY
STRATEGIC PLAN
OCTOBER 2022
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4 Item 3
PRESENTATION
No Changes to Mission & Measure
MISSION:
Reduce dependence on fossil fuels by providing carbon free, affordable, and reliable electricity and innovative programs for the SVCE community MEASURE:
SVCE, working with SVCE member agencies, aspires to achieve energy and transportation GHG reductions of 30% from the 2015 baseline by 2021, 40% by 2025, and 50% by 2030 5 Item 3
PRESENTATION
Last Year’s 5 Strategic Focus Areas - FY 23
Synergy & Overlap
24x7 Clean
Energy
Customer Base
& Electrification
Inflation
Reduction Act Finance Employee
Explore 24x7 clean
energy delivery at
scale, to improve
on the current 100%
clean energy goal
Grow Customer
Base & Offerings,
Emphasize
Electrification
Accelerate
deployment of
currently adopted
decarbonization
strategies and
goals; evaluate and
capitalize on the
Inflation Reduction
Act to further
improve programs
Leverage Balance
Sheet for
Structured
Financing and use
financing solutions
to increase impact
of decarbonization
program offerings,
especially to lower-income customers
Be the Employer of
Choice, and
Increase Staffing
Synergy & Overlap
6 Item 3
PRESENTATION
FY 24 Focus Areas
FY 23
1. 24x7 Clean Energy
2. Customer Base and Electrification
3. Inflation Reduction Act
4. Finance
5. Employee
SILICON VALLEY
CLEAN ENERGY
FY24
1. Expand Clean and Reliable Grid Actions
2. Expand Customer Base & Interaction
3. Accelerate Building & Transportation Electrification
4. Implement Innovative Financing Solutions
5. Attract & Retain Employees
Supporting Work:
Risk and Opportunities being updated
Strategies (21), Measures (80) being updated
Utilize Monday.com to track during the year
Update details under each Strategic Focus Area
7 Item 3
PRESENTATION
Clean Reliable
Grid
Explore 24x7 clean
energy delivery at
scale; evaluate
SVCE role in
enhancing
distribution and
transmission
reliability
5 Strategic Focus Areas - FY 24
Synergy & Overlap
Expand Customer
Base & Interaction
Accelerate Building
& Transportation
Electrification
Innovative
Financing Solutions
Attract & Retain
Employees
Grow non-residential
customer base;
Expand Offerings &
emphasize
electrification to all
customers
Accelerate
deployment of
currently adopted
decarbonization
strategies and
goals; evaluate and
capitalize on
federal and state
funding
opportunities
Implement
innovative financing
solutions to
increase impact of
decarbonization
program offerings,
especially to lower-income customers
Be the Employer of
Choice, and
Increase Staffing
8 May
Enterprise Risk &
Opportunities
Budget
Strategic Focus
Areas
May-Aug
Strategic Plan Input
& Updates
September
Approve Budget,
Strategic Focus
Areas
Sep-Oct
CEO evaluation&
Priorities (Sep)
Present detailed
work plan and
measures (Oct)
Oct-Sep
Implementation
Strategic Plan & Budget Timeline
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Item 3
PRESENTATION
'S April & May & Q3 - Staff input
May 26 - Executive Committee (strategic plan & budget)
June 14 - Board (strategic plan)
June 23 - Executive Committee (strategic plan & budget) August 1 - Finance Committee (budget)
August 9 - Board (budget)
Item 3
PRESENTATION
APPENDIX
Explore 24x7
clean energy
delivery at scale,
evaluate SVCE
role in enhancing
distribution and
transmission
reliability
• Explore pathways to measure & achieve carbon free
24x7 for the entire portfolio and aligned with SVCE’s
mission
• Implement Google’s Carbon Free Energy (CFE)
framework and explore opportunities to offer
expanded clean offerings to other customers
• Explore VPP opportunities and how we can
demonstrate the “grid of the future”
• Explore targeted SVCE role to enhance distribution
and transmission reliability
Item 3
PRESENTATION
($) 1. EXPAND CLEAN & RELIABLE GRID ACTIONS
Grow non-residential
customer base;
Expand Offerings
& emphasize
electrification to
all customers
• Be the Supplier of Choice; attract and retain DA
customers
• Maintain competitive rates; increase customer
offerings and demand side programs
• Expand value proposition emphasizing
electrification
Item 3
PRESENTATION
02. EXPAND CUSTOMER BASE & INTERACTION
Accelerate
deployment of
currently adopted
decarbonization
strategies and goals;
evaluate and
capitalize on federal
and state funding
opportunities to
further improve
programs
• Grow our capacity and deploy programs at a much larger scale
• Operationalize equity into programs
• Assist member agencies evaluating federal and state
decarbonization policies and program impacts
• Explore opportunities to influence and partner with other organizations on supporting a clean energy workforce."
Item 3
PRESENTATION
3. ACCELERATE BUILDING AND
TRANSPORTATION DECARBONIZATION
Leverage Balance
Sheet for Structured
Financing and use
financing solutions to
increase impact of
decarbonization
program offerings,
especially to lower-income customers
• Continue building strong financial reserves
• Attract and retain DA customers
• Implement innovative innovative financing
solutions to customers, particularly to reach
those with barriers to conventional
programs (e.g., low income, renters)
Item 3
PRESENTATION
(£) 4. IMPLEMENT INNOVATIVE FINANCE
SOLUTIONS
14 Be The Employer
of Choice, &
Increase Staffing
• Attract and Hire New Employees, passionate
about our mission and with excellent job
knowledge
• Build and maintain a high-performance
agency; preserve start-up culture of employee
innovation, engagement, and collaboration
• Continue enhancing remote, hybrid and in-person work
Item 3
PRESENTATION
0 5. EMPLOYEES
15 Item 3
PRESENTATION
STRATEGIC PLAN GOALS
3. Get great at prioritizing, and rebalancing to align work plan with higher level goals Each Goal
associated
with 1. Manage Power Supply Portfolio and Energy Risk
Measures
13. Commit to maintaining a strong financial position
14. Avoid failures in management of market, credit, liquidity, operational and enterprise risks
16. Engage regulators, legislators, and local elected officials in representing SVCE priorities
17. Develop and enhance internal processes related to Supplier Diversity. Staffing and Compliance
19. Drive SVCE's local policy objectives by leveraging key stakeholders Q WORKPLAN - 21Goals and 75 Measures
(to be updated & presented to Board in October 2022)
GOAL MEASURES
GOAL MEASURES
POWER
SUPPLY
Manage and optimize
power supply resources
to meet affordability,
GHG reduction and
reliability objectives
1. Achieve SVCE 100% < RPS mandate of 65%; n
procurement mandates
2. Meet SVCE’s standar
(i.e., GreenPrime and Gi
development of sustain
GreenPrime Direct and
custom product offerin
Acquire clean and
reliable electricity
In a cost effective,
equitable and
sustainable manner
1. Integrated Resource I
affordable, reliable, and
2030 and beyond (204
Plan for resources to
meet SVCE’s mission
while balancing
multiple stakeholder
objectives 2. Develop a platform t
distributed energy reso
operations
3. Implement process a
and policy integration t
Policy Teams
2. Implement and Operate Power Purchase Agreements
to enhance value to SVCE
3. Ensure SVCE adopts the appropriate tools, systems,
and resources to support portfolio optimization.
risk management, load forecasting, compliance, and
settlements
Monica Padilla
Director of Power Resources
SVCE’s Power Resource Team is responsible for planning, acquiring, and managing power supply resources to meet the community’s clean energy goals and state-mandated power and reliability requirements. This is done through a balanced approach which considers cost. risk, long-term value, and best fit in meeting community goals. This requires sustainable planning, innovative thinking, prudent risk management and the constant search for the best solutions. Going forward, to be successful SVCE must adapt to new climate and social challenges; customer specific needs; support region-wide decarbonization and electrification goals; integrate distributed energy resources; collaborate and leverage opportunities for joint procurement; and become technology and data driven.
3. Pursue joint procurei
resource adequacy and
through CC Power and
power partners
15. Advocate for policies that protect CCA customer investments and furthers decarbonization, grid reliability, affordability, and social equity with federal and state elected officials and regulators
10. Empower customers with the awareness, knowledge and resources needed to make effective clean energy choices
21. Enable data-driven decision-making across the organization; automate, integrate, and streamline business processes to minimize operational risk and move organization toward industry best practices from its startup phase
8. Coordinate development of decarbonization and resilience strategy, lead design of local policy and programs, and support program deployment
18. Encourage the development of regulations that proactively support the changing, evolving energy market and facilitate grid innovation
20. Ensure SVCE’s Information Technology infrastructure is secure, reliable, and disaster resilient to provide 24/7/365 online access
"The successful planning and acquisition ofclean and reliable energy serves as the foundation of SVCE's mission. Moving forward, we aspire to strengthen and diversify our portfolio with new cost-effective and innovative resources such as long-duration storage."
12. Enact competitive service offerings and programs that deliver measurable environmental and economic benefits
6. Manage and optimize power supply resources to meet affordability. GHG reduction and reliability objectives
4. Plan for resources to meet SVCE’s mission while balancing multiple stakeholder objectives
9. Use DAISY to enable data-driven decision-making across the organization
5. Acquire clean and reliable electricity in a cost effective, equitable and sustainable manner
11. Engage a full range of public, private, and non-profit stakeholders to leverage our decarbonization efforts
2. Maintain an enjoyable and rewarding workplace
1. Build and maintain a high-performing team
7. Work with the community to plan and track achieving energy and transportationGHG reductions of 30% from the 2015 baseline by 2021. 40% by 2025. and 50% by 2030 Explore 24x7
clean energy
delivery at scale,
to improve on the
current 100%
clean energy goal
• Explore pathways to measure & achieve
carbon free 24x7 for the entire portfolio
• Implement 24/7 service with Google and
explore with other customers
• Explore VPP opportunities and how we can
demonstrate the “grid of the future”
Item 3
PRESENTATION
0 1. 24x7 CLEAN (FY23)
17 Grow Customer
Base, Offerings, &
Emphasize
Electrification
• Be the Supplier of Choice; attract and retain DA
customers
• Maintain competitive rates; increase customer
offerings and demand side programs
• Expand value proposition emphasizing
electrification
Item 3
PRESENTATION
02. CUSTOMER BASE & ELECTRIFICATION
JFY221
Accelerate
deployment of
currently adopted
decarbonization
strategies and goals;
evaluate and
capitalize on the
Inflation Reduction
Act to further
improve programs
• Evaluate clean energy asset ownership to structurally lower costs and lower risk
• Grow our capacity and deploy programs at a much larger scale
• Operationalize equity into programs; utilize SEVI framework in double-down programs
• Assist member agencies evaluating IRA decarbonization policies and program impacts
• Evaluate policies related to the utilization of organized labor in utility-scale projects and decarbonization programs and present options to the Board
Item 3
PRESENTATION
03. INFLATION REDUCTION ACT (FY23)
Leverage Balance
Sheet for Structured
Financing and use
financing solutions to
increase impact of
decarbonization
program offerings,
especially to lower-income customers
• Continue building strong financial reserves
• Attract and retain DA customers
• Strategically use balance sheet to advance
our mission; providing innovative financing
solutions to customers, particularly to reach
those with barriers to conventional
programs (e.g., low income, renters)
Item 3
PRESENTATION
0 4. FINANCE (FY23)
20 Be The Employer
of Choice, &
Increase Staffing
• Attract and Hire New Employees, passionate
about our mission and with excellent job
knowledge
• Build and maintain a high-performance
agency; preserve start-up culture of employee
innovation, engagement, and collaboration
• Develop plans for remote, hybrid and in-person work
Item 3
PRESENTATION
05. EMPLOYEES (FY23)
New SV Clean Energy
PowerPoint Template
Subtitle
Item 4
PRESENTATION
Stress Test Analyses
SILICON VALLEY
CLEAN ENERGY
Amrit Singh
Board of Directors
June 14, 2023
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PRESENTATION
Overview of Enterprise Risk
Management (ERM) Framework
Construction of Stress Test
Scenario
Overview of Modeled Price
Collapse
Results and Implied Reserve
Targets
Next Steps
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PRESENTATION
Overview of the ERM Framework
Comprehensive organization-wide assessment of risks
Optimally manage enterprise risks to achieve the organization’s mission and goals.
1. Risk Register
Record of organization’s risks/opportunities
Lists current and additional risk mitigations
Identifies a risk owner
2. Risk Matrix
Assess the likelihood and consequence of risk
Calibrate risks
Identify risk tolerance levels
3. Stress
An essential component of ERM
Model scenarios of interrelated risks that can be
extreme but plausible
Important for commodity trading portfolios
because of the inherent weakness of market risk
measures in assessing black swans, such as
disruptions in markets
Impact/Consequence
Draft and Illustrative
Frequency/Likelihood
Insignificant Minor Moderate Major Catastrophic
Risk Easily
Mitigated
through Day-to-Day Operations
Risk is
Manageable/Low
Impact on Mission
Moderate Erosion
of
Reserves/lmpact
on Mission
Significant
Erosion of
Reserves/lmpact
on Mission
Risk of
Existence
Certain >90% chance High(l) High (2) Extreme (3) Extreme (4) Extreme (5) Likely 50%- 90% Chance Moderate (6) High (7) High (8) Extreme (10) Moderate 10%-50% Chance Low (11) Moderate ( 12) High (13) Extreme (15) Unlikely but Plausible 5%-10% Chance Low (16) Low (17) Moderate (18) High (19) Extreme (20) Rare <=5% Chance Low (21) Low ( 22) Moderate (23) High (24) High (25) •
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PRESENTATION
Stress Test
Extreme but plausible scenarios that can deplete reserves and make SVCE uncompetitive.
Insight from 2022 analyses
Last year, SVCE conducted five
stress test scenarios -four of
them were impacted by market
price uncertainties
Among them, the price collapse
scenario was the most
consequential
Price collapse scenario under an
economic recession remains as
one of the most significant risks
® Stress Test Scenarios
Extreme but plausible scenarios that can deplete reserves and make SVCE uncompetitive. • Ensure adequacy of
reserves and
organizational resiliency
* Guide development of
strategic plan
* Shape FY 22-23 budget
and reserve targets
• Price uncertainty Drives
the first 4 scenarios
Stress Scenarios for CY 2023 to CY2027 (five-year horizon):
1. Significant drop in energy prices including REC
• Higher PCIA and lower PG&E Gen Rate
2. Insufficient financial liquidity
• Price collapse triggers credit downgrade
Collateralcalls from counterpartiesand CAISO
• Increase in POLR (Provider of Last Resort)Hinding (called FSR-Financial Security Requirement)
3. PPAs default, renegotiate for higher prices, and/or delay start • RPS non-compliance penalty
• Replacemenialhigher prices
4 Load loss due to direct access and distributed load
5 Threat to Public Services or Facilities
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PRESENTATION
CD 2023 Stress Test Scenario Description
Economic Recession
Forward Energy Prices Collapse to the one percentile level Economic Recession Creates Load Loss
Customer Uncollectables Increase
Additional Financial Liquidity Stress
Increase in POLR (Provider of Last Resort) funding (called FSR -Financial Security Requirement)
Large Counterparty Collateral Postings
MTM Losses on Investments
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PRESENTATION
Past, Current, and Stress Case Modeled Commodity Prices Forward prices* are at all time
high.
Extreme case of runup in prices
Can’t predict future but price
trends could reverse, and
prices could drop equally or
more.
Prices were trading closer to
the modeled stress test levels
as recently as 15 to 18 months
ago.
* Energy forward prices used in the analyses are as
of 3/25/2023.
6 Future
2024 2025 2026 2027 2028
1st Percentile Prices Modeled $ 45.0 $ 46.9 $ 48.0 $ 46.3 $ 41.4 Source: http://epis.com/powermarketinsights/index.php/2017/05/18/how-good-is-the-eia-at-predicting-henry-hub/ 70% during the 2008 financial crisis
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Item 4
PRESENTATION
Modeled Price Collapse Comparison to Past Prices
Volatility in Natural Gas Markets Translates to Volatility in Electricity Markets 2008 financial crisis natural
gas prices dropped ~70%
with a corresponding drop in
power prices
Stress test modeled price
drop from base case to the
one percentile level is about
a 44%
Depended on assessment of
current market volatility
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PRESENTATION
Base Case versus Stress Scenario
Base Case
High forward prices result in low PCIA and high
PG&E Gen rates resulting in healthy SVCE Margins
If current forward prices are realized, and other
model assumptions prevail:
Significant growth in reserves from FY2023 level of $219 million to $390 million at the end of FY2024
Continued strong growth in margins over the next 5 years Caveats:
PCIA and PG&E Gen Rate portfolio assumptions based on
public data as best modeled by NewGen Consultants
PG&E’s portfolio management strategy and portfolio contents may change from those modeled
CPUC may moderate rate impacts
Uncertainty increases further out in time
Focus on the delta of the base case to the stress
test results
Stress Case
If the modeled stress scenario were to occur,
reserves would drop from a forecast level of
$224 million at the end of FY2023 to only $39
million at the end of FY2025 (A drawdown of
$185 Million from our reserves)
Projected Days Cash on hand will also be below
the minimum target of 120 DCH
Days Cash on Hand
2024 2025 2026 2027 2028
157 ^41 (14) (62} (1Z3>
Below minimum
target of 120 DCOH.
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Item 4
PRESENTATION
1 Risk Mitigations
Best Mitigation
Hold Sufficient Reserves
Other Mitigations
Revisit the current energy hedging
strategy
Allow for loss in revenues from price
collapse to be mitigated by a reduction in
power supply costs
Challenge: Determining the level of
hedging given the uncertainty in
modeling PCIA and PG&E Generation
Rates
SVCE is spearheading analysis jointly
with CaICCA consultant, NewGen
Strategies
Use the results of these analyses to propose a reserve target for the next fiscal year’s budget
Build reserves such that if the stress scenario were to occur, reserves do not fall below the minimum reserve threshold of holding 120 DCOH over the next 2 years and 90 DCOH over the years 3 to 5
Current New Illustrative
Targets
Minimum 120 120
Goal (Target) 285 270
Maximum (Upper
Target)
490 390
The stress test analysis will be updated using prices consistent with those used to construct next year’s fiscal budget. The above table will then be revised and will be used to update the targets in the reserves policy.
Item 4
PRESENTATION
1 Next Steps
August September 13, 2023
Finance Committee and Board
review and provides staff feedback
on the proposed budget and any
changes to reserve targets
Board approves FY 2023 - 2024
budget with updated reserve
targets
10 New SV Clean Energy
PowerPoint Template
Subtitle
Item 4
PRESENTATION
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Item 4
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CD Stress Test Scenario Construction -2023
Economic Recession
Price Drop
Increase in POLR
Resource Adequacy (RA)
reform and market
uncertainties, along with
increased procurement
targets and potential
penalties, increase
procurement costs
Bad Debt @ 1%
Potential Load Loss
Large Counterparty
Collateral Postings
MTM Losses on
Investments
Scenario Construction (revenue side)
Bad Debt @ 1%
4% Discount until Dec 2023 and
1% thereafter
5% Load Loss
10% modeling error adjustment to
NewGen model forecast based on
past trends
Scenario Construction (cost side)
Energy: Statistical 1 percentile low
case prices (extreme but plausible
scenario)
RA : Fundamental Forecast based
Term : Balance of fiscal year 2023 to
FY2028 (5+years)
Price drops for all forward months to
the 1 percentile level taking into
account current forward prices
Hedges and MTR executed per ERM
thresholds (hedge to max targets)
Evaluation of Collateral postings at
stress price levels
12 Item 4
PRESENTATION
Load
(Twh)
Load Assumptions and Forecast
Historical Load (Twh) Forecasted Load Scenarios
13 Item 4
PRESENTATION
CD Days Cash on Hand CCA Comparable
SVCE Target Days on Hand is 285
CCA Published Targets
SCP 280
MCE 240
3CE 183
EBCE 183
PCE 180
SJCA 180
14 Item 4
PRESENTATION
Summary of Base Case Results
High forward prices result in low PCIA and high PG&E Gen Rates resulting in healthy SVCE Margins.
Base Case $ millions
Revenues
Power Supply Cost
Operating Margin
Other Costs
Net Contribution to Reserves
Reserve Balance
Days Cash on Hand
Fiscal Year (BY)
1 2023 2024 2025 2026 2027 20281
$ 251 $ 573 $ 574 $ 525 $ 498 $ 471
$ 212 $ 364 $ 377 $ 387 $ 379 $ 372
$ 39 $ 210 $ 196 $ 138 $ 119 $ 98
$ 29 $ 39 $ 32 $ 32 $ 32 $ 33
$ 10 $ 170 $ 164 $ 106 $ 86 $ 66
s 219 S 390 S 554 $ 660 S 746 $ 812
353 494 575 662 732
Less uncertainty
More uncertainty
15 Item 4
PRESENTATION
Summary of Stress Test Results
Base Case Fiscal Year (BY)
2023 2024 2025 2026 2027 2028
Revenues $ 251 $ 573 $ 574 $ 525 $ 498 $ 471
Power Supply Cost $ 212 $ 364 $ 377 $ 387 $ 379 $ 372
Operating Margin $ 39 $ 210 $ 196 $ 138 $ 119 $ 98
Other Costs $ 29 $ 39 $ 32 $ 32 $ 32 $ 33
Net Contribution to Reserves $ 10 $ 170 $ 164 $ 106 $ 86 $ 66 Reserve Balance $ 219 $ 390 $ 554 $ 660 $ 746 $ 812
Days Cash on Hand 353 494 575 662 732
Stress Case Pl
BY 2023 2024 2025 2026 2027 2028
Revenues $ 242 S 333 $ 228 $ 289 $ 294 $ 280
Power Supply Cost $ 198 S 322 $ 313 $ 308 $ 306 $ 303
Operating Margin $ 44 $ 11 S (85) $ (19) $ (12) $ (23)
Other Costs $ 29 $ 39 S 32 $ 32 $ 32 $ 33
Net Contribution to Reserves $ 15 $ (29) S (117) $ (51) $ (45) $ (55) Reserve Balance $ 224 $ 196 $ 79 $ 27 $ (18) $ (73)
Reserve Balance after POLR Adjustment $ 224 $ 156 $ 39 $ (13) $ (58) $ (113) Days Cash on Hand 157 41 (14) (62) (123)| 16
Item 4
PRESENTATION
Key Takeaways-Price Uncertainty
Biggest contributor to risk: PCIA and PG&E Generation Rate Uncertainty.
PCIA and PG&E Gen Rate determine SVCE Rates and
therefore Revenues
Revenues Revenues
Revenues decline when prices decline
PG&E Gen Rate:
cn
(D
+-•
CO
o:
SVCE
discount
CD
0 LU
O
o
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Item 4
PRESENTATION
Key Takeaways - Price Uncertainty - Cont’d
Big contributor to PCIA and PG&E Generation Rate Uncertainty is Market Prices.
Next Year’s PCIA & Current Year’s actual O. Forecast of Next PG&E Gen Rate // realized Prices OC Year’s Market Prices Can’t fully bank current year’s margin
Deviations between actual and forecast costs are tracked in balancing accounts and trued up next year If prices drop, then there can be substantial draw from reserves PCIA2023 = PCIA Balancing Account2022 + Forecast Balance Balancing Account = (Prior Year’s Forecast Prices2022 - Actual Prices2022)* PCIA Portfolio Forecast Balance = (Legacy Contract Costs -Forecast Prices2023)* PCIA Portfolio PG&E Gen Rate Set Similarly
PG&E Gen Rate = ERRA Balancing Account + Forecast Costs * Simplified representation of concepts
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Item 4
PRESENTATION
Key Takeaways -Price Uncertainty - Cont’d
Price collapse poses biggest financial risk.
Revenues drop significantly
Loss of revenues far exceed
savings from lower power
procurement costs
Power procurement savings
dampened by existing hedges
2024 Prices 2024 Prices xp
2023 Prices "T
PCIA >p
PG&E Rate 'T
SVCE Revenues
2023 Prices 4^
^cia \
PG&E Rate
\^VCE Revenues
19 New SV Clean Energy
PowerPoint Template
Subtitle
Item 5
PRESENTATION
SILICON VALLEY
CLEAN ENERGY
Amrit Singh
Board of Directors
June 14, 2023
FY 23-24 Budget
Framework
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Item 5
Purpose
PRESENTATION
Discuss Budget Framework
1. 2.
3. 4.
5. Budget numbers to be computed in
July based on feedback
Methodology could be tweaked if
results from actual numbers in July do
not align with expectations
Seeking high-level feedback/validation
on principles and assumptions
Revenue Modeling
PCIA and PG&E Gen Rate
Uncertainty
Reserve Targets
Customer Discount Rate,
Additional Funding for Programs
and Set Aside for Reserves
Power Supply Costs
Other Cost Drivers
Office Space
Item 5
PRESENTATION
0 FY23-24 Budget will be ready for Discussion in August August 9
Late August Sept. 13 March 2024
Present Draft
Budget to BOD
Present Recommended
Budget to BOD. Adopt
updated Strategic Plan
Mid-Year Budget
Review / Adjustment
Incorporate
Changes based
on BOD feedback
May 12 May/June August (tbd)
High-level Budget
Framework Discussion
with Finance and
Admin Committee
Budget Framework
Discussion with
Executive Committee
and BOD
Present Draft
Budget to Finance
& Admin Comm
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Item 5
PRESENTATION
Revenue Forecast Depends on PG&E Generation and PCIA Rates PG&E Generation
Rate: 14.96 C/kWh
* Power Charge Indifference Adjustment (PCIA) is a
charge our customers pay to PG&E such that they can
recover commitments made on behalf of the customer
when they were part of PG&E’s portfolio.
Issue: Rate Uncertainty Staff Recommendation Implications/Reasons PG&E issued the 2023 ERRA forecast
on May 15 with preliminary 2024 PG&E
generation and PCIA rate forecasts
Shows negative PCIA and about 3%
lower PG&E generation rate leading to
an overall ~3% improvement in SVCE
revenues (at current discount level)
Results already outdated, given the
high volatility in energy prices
Based on 5/11 prices, revenues could
be lower by an estimated 14-19 %
PG&E will update this forecast in the
fall. CPUC normally adopts the rate in
December based on this update
Use the latest market
data in the Cal-CCA
NewGen model after
calibrating the model to
PG&E’s forecasted
rates and accounting
for modeling error
(10% downward
adjustment on
headroom)
Likely aligns revenues
closer to rates that
PG&E will later update
Better aligns revenues
with power supply
costs
Primarily for budget¬
setting purposes
Additional
expenditures based on
headroom projections
can be made by the
Board in December
when actual PG&E and
PCIA rates are known
4 •
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Item 5
PRESENTATION
1 Issue: Update Reserve Targets Staff Recommendation Implications/Reasons 1 Ensure SVCE maintains sufficient
reserves to manage risks such as those
modeled under the Stress Test analyses
Staff will update the stress test analyses
in July using market prices consistent
with those used to develop the annual
budget
Target to keep reserves above 120 Days
Cash On Hand (DCOH) for FY 2023-
2024 and FY 2024-2025
Reset Upper Reserve Target such that
over the next 5 fiscal years reserves do
not fall below 90 DCOH
FY 24 margins not guaranteed
given true-up in 2023 for PCIA
and PG&E Gen rate
If adverse conditions
materialize, need 120 days to
reshape strategy and secure
additional liquidity
Increase upper reserve target
to take advantage of good
margin years to manage risks
over 5-year period
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Item 5
PRESENTATION
Additional Funding for Programs, Customer Discounts,
and Building Reserves
1% customer discount over 12 months of
2024 is ~$5 million*
1% discount over 9 months (Jan -Sep
2024) ~$3.5 million*
Monthly Average Bill Savings of 1%*
Discount:
Residential - ~$0.67
Small Commercial - ~$2.41
Medium Commercial -~$26.58
Issue: Balancing
Priorities
Staff Recommendation Implications/Reasons
Continue to provide
competitively-priced and
high-valued services to
SVCE customers
Funds not needed to
cover cost-of-service flow
to customers via lower
SVCE rates (discount to
comparable PG&E rates)
Cost-of-service includes
funds needed to cover
operations, meet reserve
targets, and fund
decarbonization programs
To be developed later after
completing the budget analysis
Likely to keep current discount
through the end of this year
Set a preliminary discount for
next year
Board can change the budgeted
discount rate once actual PG&E rates
are known towards the end of the
year
Staff plans to present several options
to the Board on different levels of
discount rates, additional spending
on programs, and set aside for
reserves
Reaching new target
reserve levels ensures
SVCE can withstand
adverse risk scenarios
Keeping the discount
rate to a reasonable
level
Enables additional
funding for valued
customer programs
such as
decarbonization
efforts
Ensures there’s more
organizational
resiliency to respond
to risks over the 5-yr
planning horizon
* Based on 4/27/23 Forward prices 6
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Item 5
PRESENTATION
Power Supply Expenses
(>90% of Expenses)
Issue: Volatile Power Prices Staff Recommendation Implications/Reasons Power prices are near record high levels
and are very volatile
In addition to PG&E Gen Rate and PCIA
uncertainty, power price volatility makes
energy budget projections highly uncertain
Budget will be developed based on a
snapshot of market prices in July
Currently hedged ~85%
Remaining 15% exposed to volatile market
prices
Contract delays/renegotiations further add
uncertainty
Resource adequacy requirements are
changing, and costs are high, but more
hedged next year
Continue hedging to current ERM
(Energy Risk Management) targets
Continue with SVCE’s 100% clean policy
Maintain a high customer value
proposition with 100% clean
energy and serve SVCE’s
mission
Furthers SVCE focus toward
24x7 clean energy goal
7 •
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Item 5
PRESENTATION
Other Costs
(Staffing, Cost of living/Merit, Operations)
Status Staff Recommendation Implications/Reasons
Review and assess staffing in all
areas of the organization
10 new budgeted positions
added in the FY22-23 budget
13 new staff hired since Sept
2022 (includes 1 starting later in June)
4 remaining vacancies
Adjust employee salaries for
cost-of-adjustment and
merit/promotions
Review existing employee
benefits to remain competitive
with peer CCAs
Decarb Programs continue to
ramp-quantity of rebates/
scope of outreach
Current budgeted headcount of 49
Directors are being surveyed for future
staffing needs
Adjustment for COLA
Consider basing on 6-month (Jan -June
2023) rolling average of SF Bay Area CPI -
current trailing 6-mo average is 5.48%
CEO discretion applied depending on
employee pay relative to market range,
performance, and date of hire
Any additional increases for merit and
promotions based on CEO discretion
Employee benefits -to be reviewed/
updated during budget process
Evaluate staff levels needed to:
Scale up programs team
Reduce high level of existing employee workload
Advance strategic focus area goals
Create organizational depth for business continuity
Sustained investments in cybersecurity
preparedness and business process optimization
projects
8 •
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Currrent Lease Details
Monthly Lease Cost 5.30 $/sf
Size 7,900 sf
New Lease Assumptions
New Monthly Lease Cost 7.50 $/sf (est)
Purchase Assumptions
Purchase Cost 700 $/sf (est)
Improvement Cost 100 $/sf (est)
Office Assumptions
Size 20,000 sf (est)
Location for Comps*
* further analyses to include broader service territory Sunnyvale, Mtn View, Santa
Clara, San Jose
Item 5
PRESENTATION
SVCE Office Space - Lease vs Buy
Issue: Financial Stewardship Staff Recommendation Implications/Reasons SVCE’s current lease runs
through Sept. 2025
Need time to explore
the alternatives of
buying or leasing new
space
SVCE should be prepared to
pursue attractive property
opportunities as they arise
Research alternatives
and establish an ad hoc
Committee to advise staff
and evaluate property
and financing options
Buying may be a cheaper
longer-term option
Initial back-of-the-envelope analysis
indicates a roughly 10-
year breakeven period
compared to leasing
SVCE is growing and requires
more space for employees and
expanded programs
Purchasing also enables
customization to suit the hybrid
work environment
Flexible workspace for
collaborative work
9 •
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Item 5
PRESENTATION
Next Steps
Update revenue and energy cost forecasts using
the latest prices
Develop recommendations with some options for:
Customer Discount Levels
Additional funding for Programs
Set aside for Reserves
Staffing Needs
Employee Cost of Living, Merit, and Benefits adjustments Buying versus leasing office space
May 12 May/June August (tbd) August 9
High-levelBudget
FrameworkDiscussion
with Finance and
Admin Committee
Budget Framework
Discussion with
Executive Committee
Present Draft „ . _
_ „
. Present Draft Budget to Finance _ . ..
___
„ A
“
.
_ Budget to BOD & Admin Comm
Late August Sept. 13 March 2024
Incorporate
Changes based
on BOD feedback
Present Recommended
Budget to BOD. Adopt
updated Strategic Plan
Mid-Year Budget
Review / Adjustment
Present draft budget for Finance Committee review in early August and then to the Board Recommend the Board adopt the budget in September
10 Item 5
PRESENTATION
Thank you! / Questions?
11 Item 5
PRESENTATION
0 SVCE Planning & Budgeting Process
Budget
Comprehensive assessment of risks and
opportunities to optimally achieve mission
SVCE Mission: Reduce dependence on fossil fuels by
providing carbon-free, affordable, and reliable electricity and innovative programs for the SVCE community.
Organization-wide priorities and
alignment toward achieving the mission
Funding in alignment with achieving
the strategic focus areas
12 •
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Item 5
PRESENTATION
Current 2023 Rate vs PG&E 2024 ERRA Forecast
PG&E filed it’s forecast of 2024
Rates on 5/15/23 Current 2023 Rate* ERRA Forecast 2024 Rate** PG&E Gen Rate decreased
3%
PCIA reduced from positive
0.28 c/kWh to negative -0.62
C/kWh
PG&E ERRA forecast is based
on 3/27/2023 forward market
prices
Represents weighted average
customer billing rate decrease
of -3% from 14.36 C/kWh to
13.95 C/kWh
SVCE gen rate is higher than
Customer Billing Rate due to
negative PCIA
SVCE gen rate up ~3.5%
E
2 5
o 15
• Source: PG&E 2023 Average Rate, effective January 1, 2023 (Weighted for SVCE Portfolio Load) " PG&E 2024 ERRA Forecast, released on 15th of May.2023 (Weighted for SVCE Portfolio Load) Above margin analyses ignores minor reductions for franchise fees (0.09 c/kWh) PG&E Gen Rate:
14.96 C/kWh
4% SVCE discount
PG&E Gen Rate:
14.54 <t/kWh
4% SVCE discount
(Illustrative)
PCIA -0.62
C/kWh
SVCE
Gen
Rate
14.57 C/kWh
Item 5
PRESENTATION
PG&E 2024 ERRA Forecast vs NewGen Model Run
Using 3/27/2023 Forward Prices
ERRA Forecast 2024 Rate* NewGen Model 2024 Rate**
NewGen Model
has approximately
3 - 5% modeling
error
PG&E Gen Rate:
14.54 C/kWh
4% SVCE discount
(Illustrative)
‘PG&E 2024 ERRA Forecast, released on 15th of May,2023 (Weighted for SVCE Portfolio Load)
"Using NewGen Model (version 3.4) with 3/27/2023 Forward Curves (Weighted for SVCE Portfolio Load)
Above margin analyses ignores minor reductions for franchise fees (0.09 <t/kWh) PG&E Gen Rate:
15.28 C/kWh
5%-
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Current
Gen Rate
PG&E ERRA
Forecast
(3/27/23)
NewGen
Run
(5/11/23)-
No Haircut
NewGen
Run
(5/11/23)-
5% Haircut
NewGen
Run
(5/11/23)-
10% Haircut
PG&E Gen Rate (₵/KWH) 14.96 14.54 14.21 13.50 12.79
Customer Rate Discount*** -4% -4% -4% -4% -4%
Customer Billing Generation Rate 14.36 13.95 13.65 12.96 12.28 PCIA (₵/KWH) 0.28 -0.62 0.93 0.89 0.84
Headroom (₵/KWH) 14.08 14.57 12.71 12.08 11.44
Headroom Delta from Current Rates 0% 3% -10% -14% -19%
Estimated 2024 $M Delta from Current
Rates - 17.3 (48.8) (71.4) (94.0)
* Source: Official PG&E Rates for 2023 (Weighted for SVCE Portfolio Load) ** Source: PG&E 2024 ERRA Forecast released on May 15 and NewGen model runs (Weighted for SVCE Portfolio Load) *** Customer discount for 2024 is illustrative and will be determined later this year.
Note: 1% discount represents ~ $4.6M at current estimated 2024 rates CY 2023* CY 2024**
Item 5
PRESENTATION
Market Prices Since PG&E’s ERRA Forecast Date has Dropped On average, prices are down
"10%
Reduces SVCE headroom
from current rates by "14-19%
Based on 5/11 market prices
Budget will be based on
market prices in July
Prices are extremely volatile;
RPS premium and RA prices
difficult to estimate
Like last year, staff
recommends adjusting
NewGen Model results by 10%
to account for modeling error
15 Current Gen
Rate
PG&E ERRA
Forecast
(3/27/23)
NewGen
Run
(3/27/23)-
No Haircut
NewGen
Run
(3/27/23)-
5% Haircut
NewGen Run
(3/27/23)-
10% Haircut
NewGen Run
(5/11/23)-
No Haircut
NewGen
Run
(5/11/23)-
5% Haircut
NewGen Run
(5/11/23)-
10% Haircut
PG&E Gen Rate (₵/KWH) 14.96 14.54 15.28 14.52 13.75 14.21 13.50 12.79 Customer Rate Discount*** -4% -4% -4% -4% -4% -4% -4% -4% Customer Billing Generation Rate 14.36 13.95 14.67 13.93 13.20 13.65 12.96 12.28 PCIA (₵/KWH) 0.28 -0.62 -0.30 -0.29 -0.27 0.93 0.89 0.84 Headroom (₵/KWH) 14.08 14.57 14.97 14.22 13.47 12.71 12.08 11.44 Headroom Delta from Current Rates 0% 3% 6% 1% -4% -10% -14% -19% Estimated 2024 $ Delta from Current Rates - 17.3 31.5 4.8 (21.8) (48.8) (71.4) (94.0) CY 2023* CY 2024**
Current
Gen Rate
PG&E ERRA
Forecast
(3/27/23)
NewGen
Run
(3/27/23)-
No Haircut
NewGen
Run
(3/27/23)-
5% Haircut
NewGen
Run
(3/27/23)-
10% Haircut
NewGen
Run
(5/11/23)-
No Haircut
NewGen
Run
(5/11/23)-
5% Haircut
NewGen
Run
(5/11/23)-
10% Haircut
PG&E Gen Rate (₵/KWH) 14.96 14.54 15.28 14.52 13.75 14.21 13.50 12.79 Customer Rate Discount*** -1% -1% -1% -1% -1% -1% -1% -1% Customer Billing Generation Rate 14.81 14.39 15.13 14.37 13.61 14.07 13.37 12.66 PCIA (₵/KWH) 0.28 -0.62 -0.30 -0.29 -0.27 0.93 0.89 0.84 Headroom (₵/KWH) 14.08 15.01 15.43 14.66 13.88 13.14 12.48 11.83 Headroom Delta from Current Rates 0% 7% 10% 4% -1% -7% -11% -16% Estimated 2024 $ Delta from Current Rates - 32.8 47.8 20.3 (7.1) (33.6) (57.0) (80.4) * Source: Official PG&E Rates for 2023 (Weighted for SVCE Portfolio Load) ** Source: PG&E 2024 ERRA Forecast released on May 15 and NewGen model runs (Weighted for SVCE Portfolio Load) *** Customer discount for 2024 is illustrative and will be determined later this year.
Note: 1% discount represents ~ $4.6M at current estimated 2024 rates CY 2023* CY 2024**
Item 5
PRESENTATION
CD Additional Headroom Analyses
Table 1: Illustrative Customer Discount at 4%
Table 2: Illustrative Customer Discount at 1%
16 SVCE PG&E SVCE PG&E SVCE PG&E SVCE PG&E
Rate Schedule (eff. Jan 1, 2023) E-TOUC E-TOUC B-1 B-1 B-10 B-10 B-19S B-19S Average Usage (kWh/month) 491 491 1,851 1,851 19,390 19,390 148,625 148,625 Annual Peak Demand (kW) 499 499
PG&E Electric Delivery $ 93.36 $ 93.36 $ 334.88 $ 334.88 $ 3,484.91 $3,484.91 $18,457.74 $18,457.74 Electric Generation $ 71.63 $ 76.66 $ 258.55 $ 276.71 $ 3,319.99 $3,550.05 $20,835.80 $22,292.26 PG&E Added Fees (PCIA, Franchise) $ 1.96 $ - $ 7.09 $ - $ 91.06 $ - $ 564.78 $ - Average Total Cost $ 166.95 $ 170.02 $ 600.52 $ 611.59 $ 6,895.96 $7,034.96 $39,858.32 $40,750.00 Average Monthly Savings $ 3.07 $ 11.07 $ 139.00 $ 891.68 Residential Small Commercial Medium Commercial Large Commercial Item 5
PRESENTATION
(^) Typical Customer Bill Savings
(Current Rates)
17 Item 5
PRESENTATION
Hedged 85% for FY24
O Current Energy Hedge Levels
Table 1Calendar Year Energy NOP Tolerance Bands
Period* Minimum
Tolerance
Maximum
Tolerance
Prompt Quarter 85% 110%
Current Balance
of Year
80% 110%
Year 2 70% 90%
Year 3 55% 80%
Year 4 50% 80%
Year 5 50% 80%
Net Open Position Tolerance and Positions
120%
40%
20%
0%
2023 Q 2023 2024 2025 2026 2027
Base ^■Tolerance Range -O-Contracted
18 SILICON VALLEY CLEAN ENERGY
MY 2022-23 OPERATING BUDGET
($ in thousands)
MY 2022-23
ADJUSTED
DESCRIPTION BUDGET
ENERGY REVENUES
Energy Sales 522,853
Green Prime 1,055
Other Income 50
TOTAL ENERGY REVENUES 523,958
ENERGY EXPENSES
Power Supply 392,436
OPERATING MARGIN 131,522
OPERATING EXPENSES
Data Management 3,413
PG&E Fees 1,470
Salaries and Retirement 11,285
Professional Services 8,016
Marketing & Promotions 862
Notifications 131
Lease 525
General & Administrative 1,857
TOTAL OPERATING EXPENSES 27,559
OPERATING INCOME (LOSS) 103,963
NON-OPERATING REVENUES
Interest Income 3,870
Grant Income 0
TOTAL NON-OPERATING REVENUES 3,870
NON-OPERATING EXPENSES
Financing 3
Interest 0
TOTAL NON-OPERATING EXPENSES 3
TOTAL NON-OPERATING INCOME
(EXPENSES) 3,867
CHANGE IN NET POSITION 107,830
CAPITAL EXPENDITURES, INTERFUND
TRANSFERS & OTHER
Capital Outlay 200
Transfer to CRCR Fund 0
Transfer to Program Fund 9,765
Nuclear Allocation 1,900
Multi Family Direct Install Program 9,500
Electrification Discount Program 9,500
Customer Bill Relief 3,600
Other 0
TOTAL CAPITAL EXPENDITURES, INTERFUND
TRANSFERS & OTHER $34,465
BALANCE AVAILABLE FOR RESERVES $73,365
Item 5
PRESENTATION
2022-2023 Mid¬
Year Operating
Budget
19