New SV Clean Energy
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Subtitle
Item 3
PRESENTATION
SILICON VALLEY
CLEAN ENERGY
FY 23-24 Proposed
Operating Budget Review
Amrit Singh
Finance and Administration Committee
August 1, 2023
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Item 3
Purpose
PRESENTATION
1. Review: Proposed fiscal year 2023-2024
(FY 24) budget
2. Action: Recommend approval to the
Board, with any suggested changes:
a) Proposed budget
b) Reserve Policy Target Levels
Main Areas of Discussion
1. Review Key Highlights
2. Proposed Budget Forecast
3. Revenue Forecast Uncertainty
4. Power Supply Cost Comparison
to FY 23 Mid-Year Budget
5. Other Operating Expenses
Increase Staffing
Merit/Cola Adjustment
Transfer to Programs
6. Review Reserve Targets
Item 3
PRESENTATION
0 FY23-24 Budget Development Timeline
May 12
High-level Budget
Framework Discussion
with Finance and
Admin Committee
Incorporate
Changes based
on BOD feedback
May/June
Budget Framework
Discussion with
Executive Committee
and BOD
August 1
Present Draft
Budget to Finance
& Admin Comm
August 9
Present Draft
Budget to BOD
Sept. 13
Present Recommended
Budget to BOD. Adopt
updated Strategic Plan
March 2024
Mid-Year Budget
Review /Adjustment
3 1. Potentially positive financial year; Results highly uncertain due to the impact of energy price volatility on revenues • Forecast year-over-year (YOY) revenues decrease ~$84 million • Energy price volatility from March 2023 to July 2023 has contributed to a downward adjustment in revenue projections of ~$140 million • High RA and RPS prices, unlike in prior years, substantially increase forecast uncertainty
• Power Supply Costs remain almost flat YOY (-0.2%)
• Lower forward energy prices and more favorable PPAs coming online help offset the increase in costs resulting from higher load, RPS, and RA prices • Contribution to reserves remains positive at $7.7 million
2. Customer Discount
• Continue the 4% discount until the new 2024 PG&E
rates are in effect
• Rest of fiscal year
• 1% discount for all customers
• 1% offered as $ bill credits to low-income
customers
• Primarily for setting the budget. Revisit (likely in
December) once there’s more certainty on PG&E rates
3. Other Changes
• 9 additional full-time positions; Adjustment of employee compensation for the cost of living and merit (~7.5%) • Delay decision on additional funding for programs or set aside for a building fund Item 3
PRESENTATION
CD Key Highlights of the Draft Budget Preview
SILICON VALLEY CLEAN ENERGY
FY 2023-24 OPERATING BUDGET
($ in thousands)
MY 2022-23 FY 2023-24
ADJUSTED PROPOSED
DESCRIPTION BUDGET BUDGET $ %
Energy Revenues 523,958 440,404 (83,554) -15.9%
Power Supply Expense 392,436 391,624 (812) -0.2%
Operating Margin 131,522 48,780 (82,742) -62.9%
Operating Expenses 27,559 32,361 4,802 17.4%
Non-Operating Revenue (Expense) 3,867 5,498 1,631 42.2% Annual Transfers and Other Expenses
Program Fund 9,765 8,874 (891) -9.1%
Nuclear Allocation 1,900 2,188 288 15.2%
Multi Family Direct Install Program 9,500 0 (9,500) -100.0% Electrification Discount Program 9,500 0 (9,500) -100.0% Customer Bill Relief 3,600 3,136 (464) -12.9%
Other 200 50
BALANCE AVAILABLE FOR RESERVES $73,365 $7,669 ($65,696) -89.5% Year over Year
Change
Item 3
PRESENTATION
Preliminary FY 24 vs FY 23 Mid-Year Adjusted Budget
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Margins Highly Uncertain
Item 3
PRESENTATION
PG&E filed its forecast of
2024 Rates on 5/15/23
PG&E Gen Rate down ~3%
PCIAdown from positive
0.28 c/kWh to negative -
0.62 c/kWh
SVCE margin up ~6% due
to negative PCIA
PG&E used 3/27 forward
prices
Prices since have decreased
"18% for 2023 and "14% for
2024
SVCE 2024 Margins since
ERRA forecast dropped -31%
SVCE Margins Y-o-Y dropped
-27%
Current 2023
Rate*
ERRA Forecast 2024 Rate** Proposed Budget
2024 Rate ***
PG&E Gen Rate:
14.96 C/kWh PG&E Gen Rate:
‘ 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) *** Using NewGen Model with 7/7/2023 Forward Curves and 10% haircut Above margin analyses ignores minor reductions for franchise fees (0.09 cf/kWh) •
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Item 3
PRESENTATION
Power Supply Costs
FY 2024 Budget Forecast vs. MY FY2023 Power Supply costs FY 24 costs, forecasted at 392 million dollars,
are estimated to be in line with FY 23 at the
Mid-Year Budget
Favorable Drivers
Drop in forward prices
More favorably priced PPAs coming online
resulting in lower need for energy supply
and environmental products
Lower CAISO non-energy costs in
FY2024 compared to MY FY2023. High
costs in MY FY2023 due to prior period
adjustments from the winter's disruption in
the natural gas market.
Offset by
Increase in load YOY (1.5%)
Increase in direct access load
Recovery from COVID
Increase in RA costs
Item 3
PRESENTATION
1 Operating Expenses and Transfers
Sources of Operating Expense and Transfer Amount Changes Operating Expenses Change (000s)* Implications/Reasons
Personnel Costs**
Increased Staffing
Annualized Positions
COLA
Merit
$4,120
$1,830
$1,490
$500
$300
9 additional PTE positions
Vacancy Savings from MY budget; Promotions/Position Upgrades
4.5% COLA
3% budgeted for merit increases (avg)
Other Expenses $681 Add’l Marketing, G&A, Professional Services *Amounts include 5% operating expense contingency
** Staff to present potential enhancements to benefits package to promote employee retention later during the fiscal year.
Transfers Amount (000s) Implications/Reasons
Programs Transfer $8,874 2% of projected revenues
Nuclear Allocation $2,188 2022 PG&E Carbon Free Allocation Customer Bill Credit $3,136 1% of projected revenues for January -September 2024 8 •
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Item 3
PRESENTATION
Staffing - 9Additional Positions Since Last FY
Current Staffing
43 full-time employees
7 current vacancies (including Senior
RegulatoryAnalyst position)
3 intern positions (open)
4 part-time employees
1 Climate Corps Fellows
2 long-term independent
consultants
Personnel Authority
CEO can approve job titles, salary ranges,
and org chart positions
Positions can be swapped/changed and
added within Board-approved budget
Additions will not exceed 10% of
authorized number shown in budget
Changes/hires communicated in next CEO
report to Board
Per CEO personnel authority, the Associate Data Scientist position is filled, and the Senior Regulatory Analyst is currently being recruited.
Proposed budget requests approval for the remaining 7 positions.
ESCR (3)
Program Marketing Specialists (3) -focused marketing efforts on program growth and adoption Decarbonization Programs and Policy (2)
Programs Specialist-Community Programs (1)- to design and implement decarbonization programs
Associate Data Scientist (1) -to support data use, visualization, and communication across the organization. (Already filled per CEO personnel authority). 4PRO (3)
Senior RegulatoryAnalyst (1) -to support engagement at CPUC, CAISO, and CEC (unfilled during FY22-23 and swapped for another position - currently being recruited under CEO personnel Authority)
Data Engineer (1) -to integrate the various wholesale and operational data streams within 4PRO ManagementAnalyst /Admin (1) -to coordinate and effectively manage 4PRO team efforts Finance & Admin (1)
Senior Financial Analyst (1)- to support the organization with budgeting, accounting, and financial analysis •
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Item 3
PRESENTATION
Review Reserve Targets
Ensure SVCE maintains sufficient reserves to
manage risks such as those modeled in the
Stress Test analysis.
Prices collapse reducing revenues and
there’s an additional draw on reserves from
an increase in financial posting requirements
to the Provider of Last Resort (PG&E).
Set reserve targets such that if the stress
scenario were to occur:
Target threshold stays above 120 Days Cash
On Hand (DCOH) for the next two fiscal years
Upper Reserve Target stays above 90 DCOH
over the next 5 fiscal years
Stress test analysis was updated with assumptions
consistent with those used to develop the
proposed budget.
Minimum 120 120
Goal (Target) 285 300
Maximum (Upper Target) 490 490
Recommendation:
Keep the existing targets
New implied targets are close to the current targets
The modeling of uncertainty in RA and RPS prices to
derive PCIAand PG&E generation rates are
conservative
Changing targets has no practical implication
5-yr forecast shows ending reserves will be
below target levels in the near term
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Item 3
PRESENTATION
Reserve Projection
Projected End of FY Reserves:
$285 Million
229 Days of Cash on Hand
SILICON VALLEY <3/ CLEAN ENERGY
Reserves Forecast
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• Delay decisions on additional funding for programs or set aside for a building fund.
• More funding for programs is needed over time but
is currently well funded to engage staff fully.
• Staff will continue assessing opportunities to
purchase a building and will later update the Board
on the next steps.
Item 3
PRESENTATION
Summary -Potentially Positive Year
But Results are Highly Uncertain
Biggest risks include late-year adjustments to PCIA
/ PG&E Gen Rate and significant volatility in energy
prices.
Keep the current customer discount rate of 4% until
new PG&E rates are enacted.
Budget 1% for the rest of the fiscal year and an
additional 1% towards bill credits for low-income
customers.
Revisit once there’s more certainty on PG&E and
PCIA rates.
Many Risks can Deplete Reserves
Market Prices SUPPLY
Reduced Revenues
via Higher PCIA and
Lower PG&E Rates;
IncreasedPower
Supply Expense
Project delays;
PPAs Default or
Renegotiate for
Higher Pnces
L&R ISSUES
IRP. RPS, RA
Reform/Penalties,
PCIA. POLR
PAYMENTS LOAD LOSS CYBER-RISK
Customer Defaults Direct Access Hardware, Software,
and Potential for and Training to combat
Expansion Ransomware and
Phishing
Rate Increasesdue
to socialized wildfire
costs.Energy Price
Increaseswill
ultimately impact
usage and
electrification
12 • Approve the Proposed FY 2023-24 Operating Budget
• Affirm the current reserve policy target levels
Item 3
PRESENTATION
® Recommendations to the Board
Item 3
PRESENTATION
Thank you! / Questions?
14 ($ in Thousands)
FY22-23 FY23-24 FY24-25 FY25-26 FY26-27 FY27-28
Operating Revenue (Adjusted Budget) (Budget) (Forecast) (Forecast) (Forecast) (Forecast) Electricity Sales, Net1
$ 531,561 $ 435,206 $ 471,956 $ 503,130 $ 515,879 $ 517,916 GreenPrime Electricity Premium 1,055 2,012 2,322 2,334 2,351 2,371 Total Operating Revenues 532,616 437,218 474,278 505,464 518,230 520,287 Operating Expense
Power Supply $ 391,261 $ 391,624 $ 400,877 $ 416,343 $ 450,677 $ 439,648 Operating Margin 141,355 45,594 73,401 89,122 67,553 80,639 Data Management 3,413 3,413 3,583 3,762 3,950 4,148
PG&E Service Fees 1,470 1,470 1,544 1,621 1,702 1,787
Staff Compensation 11,285 15,406 16,176 16,985 17,834 18,726 Consultants and other Professional Fees 8,016 8,084 8,570 9,084 9,629 10,206 Communications and Noticing 993 1,370 1,439 1,511 1,586 1,666 General and Administration 2,382 2,618 2,749 2,886 3,031 3,182 Transfers to Programs Fund 34,265 11,062 9,486 10,109 10,365 10,406 Total Operating Expenses 453,085 435,047 444,422 462,300 498,773 489,769 Operating Income 79,531 2,171 29,856 43,164 19,457 30,518 Nonoperating Revenue (Expense)
Other Income 182 50 51 51 52 52
Investment Income - 5,501 5,251 5,683 6,389 6,635
Capital Outlay & Financing Costs (200) (53) (53) (53) (53) (53) Grant Income - - - - - -
Total Non-Operating Revenue (Expense) (18) 5,498 5,249 5,681 6,387 6,634 Change in Net Position/Available for Reserves 79,513 7,669 35,104 48,845 25,844 37,152 Begin, Net Position 212,684 320,082 307,579 329,143 364,448 376,752 Adjustment for Program Expenditure2
27,886 (20,173) (13,540) (13,540) (13,540) 0
End, Net Position $ 320,082 $ 307,579 $ 329,143 $ 364,448 $ 376,752 $ 413,904
Days Cash On Hand (DCOH) at Year End $ 297,561 $ 285,058 $ 306,622 $ 341,927 $ 354,230 $ 391,383 Days of cash on hand 255 229 244 262 252 292
Each year the Board transfers funds from the Operating Budget to the Decarboniztion Programs Fund as shown in the above forecast u nder line item Transfers to Programs Fund. The line item Adjustment for Program Expenditure accounts for the difference between forecasted spend for programs versus the amount transfered to the fund. This adjustment is needed because program spending to date has been less than the amount transferred to the programs fund.
Assumptions: 4% overall discount relative to comparable PG&E rates for Oct-Dec 2023 and 1% for Jan-Sept 2024. FY 23-24 includes additional bill credit to low income customers totaling $3.14 million (1% of Jan-Sept 2024 Revenue). 1% discount for FY24-25, FY25-26, FY26-27 and FY27-28.
Item 3
PRESENTATION
5-Year Forecast
1 2
15 Item 3
PRESENTATION
O Current Energy Hedge Levels
Hedged 82% for FY24
Calendar
Period
ERM Min
Tolerance
ERM Max
Tolerance
Current
Prompt
Quarter (Q3
2023)
85% 110% 92%
BoY (June-Dec 2023)
80% 110% 86%
2024 70% 90% 78%
2025 55% 80% 65%
2026 50% 80% 57%
2027 50% 80% 55%
Net Open Position Tolerance and Positions
140%
120%
100%
30%
60%
40%
20%
0%
2023 Q3 2023 2024 2025 2026 2027
Base ^■Tolerance Range -o—Contracted
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Item 3
PRESENTATION
1 Power Supply Costs -Variance to June EC
7/8/2023 FY 2024 Budget Forecast vs. 6/9/2023 FY2024 Power Supply costs Increase Decrease Total
FY 24 costs, forecasted at 392 million dollars,
are estimated to be $7M higher than
projected at 6/9/2023 ($385M)
RA Costs have increased by $7M due to
increased RA market prices, new Q2-Q3 2024
deal.
Despite the forward prices decreasing, the
open position costs are offset by lower
revenues from supplies
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Item 3
PRESENTATION
Power Supply Costs -Variance to FY2024
Projections at 2023 Mid-Year Budget
FY 2024 Budget Forecast vs. Projected FY 2024 Costs at MY Budget 2023 Increase Decrease Total
450
400
350
300
250
200
FY 24 costs, forecasted at 392 million dollars,
are estimated to be $62M higher than
projected at 2023 Mid-Year Budget ($328M)
Increase in load forecast increases open
position, CAISO costs
Increased hedging since mid-year budget has
increase energy supply
New PPARio Bravo Fresno increases PPA costs
Market prices for PCC1, CF and RA costs have
increased from mid-year budget
Product MYB Price
2/2/2023 Budget
PCC1 ($/MWh) $40.00 $45.00
CF ($/MWh) $5.00 $9.00
RA($ kW-Month)
$7.50 $12.75
18 0
500
1000
1500
2000
2500
3000
3500
4000
4500
FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 Retail Sales GWh
Retail Sales Forecast
Actual 2023 OF 2022 OF
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Item 3
PRESENTATION
Medium-Term Load Forecast
In 2023, SVCE began forecasting
load in-house after using a third-party
service since inception.
The past model assumed partial
COVID-19 impacts, while the new
forecast excludes COVID-19 impacts,
assuming 100% recovery. 2023
actuals support this assumption.
FY 2025 and beyond averages 6%
above the previous forecast, largely
due to expected load growth from
electrification in the transportation
and building sectors.
19 * First 3 months of 25% FY2023 are actuals. 25% 25% 25% 25% 37% 37% 37% 37% 37%
36% 36% 36% 36% 36%
3,888 3,945 3,963 3,983 4,011
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500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
FY2023* FY2024 FY2025 FY2026 FY2027 Retial Sales GWh
Annual Retail Sales Forecast by Sector (GWh)
Small/Medium Commercial Agriculture Large Commercial Lighting and Traffic Control Residential Total Item 3
PRESENTATION
Medium-Term Load Forecast by Sector
0 50
100
150
200
250
300
350
400
450
10 11 12 1 2 3 4 5 6 7 8 9 REtail Sales GWh
Month
Monthly Retail Sales Forecast for FY2024 Compare to Historicals FY2018 FY2019 FY2020
FY2021 FY2022 FY2024
10 11 12 1 2 3 4 5 6 7 8 9 Total
FY2018 325 318 335 336 307 315 298 306 340 355 381 345 3,962 FY2019 324 314 334 336 298 304 276 299 320 337 377 340 3,859 FY2020 329 306 332 324 279 300 275 289 312 336 343 326 3,751 FY2021 310 297 337 321 279 296 275 294 321 327 351 340 3,748 FY2022 306 311 342 334 296 310 286 301 330 354 372 347 3,888 FY2024 332 322 351 335 297 311 287 302 331 355 373 348 3,945 Item 3
PRESENTATION
Q) Medium-Term Load Forecast
14 21
25 25 27 27
31 32
38 39
49 49
0 10
20 30
40 50
60 0
2 4
6 8
10 12
14 16
18 Sep-17
Nov-17
Jan-18
Mar-18
May-18
Jul-18
Sep-18
Nov-18
Jan-19
Mar-19
May-19
Jul-19
Sep-19
Nov-19
Jan-20
Mar-20
May-20
Jul-20
Sep-20
Nov-20
Jan-21
Mar-21
May-21
Jul-21
Sep-21
Nov-21
Jan-22
Mar-22
May-22
Jul-22
Sep-22
Nov-22
Jan-23
Mar-23
$MM / FTE
Rev ($MM) / FTE Cost ($MM) / FTE FTEs
Item 3
PRESENTATION
CD Revenues/FTE; Energy/FTE
Revenue and Energy Costs / FTE have remained fairly flat over time.
Accounts Revenue ($MM) Net Position
($MM) FY21-22 FY22-23 FY23-24 Budget
Revenue
($MM/FTE) FY 23
Silicon Valley Clean Energy 280,000 $365.4 $212.7 39 49 58 $7.5 Peninsula Clean Energy 300,000 $233.6 $167.7 32 39 Unavailable $6.0 Central Coast Community Energy 449,500 Unavailable Unavailable 43 43 56 Unavailable Clean Power Alliance 1,029,800 $867.6 $141.2 59 69 75 $12.6 East Bay Community Energy 640,000 $563.5 $232.5 49 68 78 $8.3 MCE 470,000 $487.7 $203.3 63 76 84 $6.4
FY22-23
CCA Comparisons
CCA Name
Staffing
Item 3
PRESENTATION
CCA Comparisons
*n/a -not available
23 Year COLA
FY17-18 3.00%
FY18-19 4.00%
FY19-20 4.00%
FY20-21 0.00%
FY21-22 5.00%
FY22-23 5.30%
FY23-24 4.33%
Item 3
PRESENTATION
Cost-of-Living & Adjustment (COLA) & Merit Increase
Proposals
Current 4.33% COLA based on SF Bay Area CPI; smoothed over trailing months; Add’l Merit/promotional increases at CEO discretion
Chart 1. Over-the-year percent change in CPI-U, San Francisco-Oakland-Hayward, CA, June 2020-June 2023
Source: U S Bureau of Labor Statistics
Consumer Price Index, San Francisco Area — U.S. Bureau of Labor Statistics (bls.gov) 24 •
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Projected margins are declining
Item 3
PRESENTATION
Prices since the initial 2024
budget run for the June
2023 Executive Committee
Meeting have decreased
^5% for 2023 and "1% for
2024
SVCE 2024 Margins since
dropped -4%
The initially proposed 2%
SVCE Customer discount for
Jan -Sep 2024 was divided:
1% to all SVCE customers
1% as an additional bill credit
distributed to low-income
customers
Proposed Budget
2024 Rate ***
‘ 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) *** Using NewGen Model with 7/7/2023 Forward Curves and 10% haircut Above margin analyses ignores minor reductions for franchise fees (0.09 cf/kWh) PG&E Gen Rate:
14.96 e/kWh
Initial Budget 2024
Rate (EC
Presentation)
Current 2023
Rate*
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Item 3
PRESENTATION
Recap: Revenue Forecast Depends on PG&E Generation and PCIA Rates
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 7/7 prices, revenues could be lower by
an estimated "31%
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-CCANewGen 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
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Item 3
PRESENTATION
Power Supply Expenses
(>90% of Expenses)
Resource adequacy requirements are
changing, and costs are high, but more
hedged next year
Issue: Volatile Power Prices Staff Recommendation Implications/Reasons Power prices are very volatile
In addition to PG&E Gen Rate and PCIA
uncertainty, power price volatility makes
energy budget projections highly uncertain
Contract delays/renegotiations further add
uncertainty
Continue hedging to current ERM
(Energy Risk Management) targets
Continue with SVCE’s 100% clean policy
Purchasing remaining carbon free
allocations expected to cost about
$2.1 million to $9.6 million depending
on PG&E allocations.
Maintain a high customer value
proposition with 100% clean
energy and serve SVCE’s
mission
Furthers SVCE focus toward
24x7 clean energy goal
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Item 3
PRESENTATION
Other Costs
(Staffing, Cost of living/Merit, Building)
Status Staff Recommendation Implications/Reasons
Review and assess staffing in all
areas of the organization
10 new budgeted positions were
authorized in the FY22-23 budget
7 Current 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 FY22-23 budgeted headcount of 49
Proposed FY23-24 budgeted headcount of 58
9Add’l Since last Fiscal Year
1 position recently filled and 1
posted under the CEO Personnel
Authority
7 additional positions requested
Budgeted Personnel Costs include:
Salary Ranges adjusted based on 6-month
rolling average of SF Bay Area CPI- currently
"4.5% (COLA)
Additional 3% Merit increase included in
budget
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
Individual salary adjustments and promotional
recommendations based on CEO discretion
during performance review process
Individual changes based on employee pay
relative to market range, performance, and
date of hire
Emolovee benefits review and uodate
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Item 3
PRESENTATION
Additional Funding for Programs, Customer Discounts,
and Building Reserves
1% customer discount over 12 months of
2024 is million*
1% discount over 9 months (Jan -Sep
2024) ~$3.14 million*
Monthly Average Bill Savings of 1%*
Discount:
Residential - ^$0.59
Small Commercial - ~$2.14
Medium Commercial -^$23.57
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
Keep current discount through the
end of this year
Set a preliminary discount for
next year of 1% for all
customers and1% translated to
dollar bill credits for low-income
customers
Board can change the budgeted
discount rate once actual PG&E rates
are known towards the end of the
year
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 7/7/23 Forward prices 29
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Item 3
PRESENTATION
1 Issue: Review 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 updated the stress test analyses in
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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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 3
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
Staff to continue
assessing market
opportunities and return
to the Board at a later
time to Earmark a portion
of reserves for a potential
building purchase
$16MM (based on
current
assumptions) + 25%
contingency =
$20MM set aside
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
Item 3
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%-
•
•
•
•
•
•
•
Item 3
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)
<d in
E A
o co
o 15
LU DC
PCIA -0.62
C/kWh
SVCE
Gen
Rate
14.57 C/kWh
Forward Energy Prices (NP15)
2023 2024 2025 2026 2027 2028 2029
7/7 (Budget run)
On-Peak 75.14 77.99 74.06 74.30 74.55 75.91 71.67
Off-Peak 65.89 69.57 74.04 78.05 79.30 77.57 81.93
ATC (Around-the-Clock) 71.06 74.29 74.05 75.95 76.63 76.64 76.18 3/27 (ERRA run)
On-Peak 91.92 90.37 87.25 83.00 75.90 71.15 65.15
Off-Peak 79.11 81.17 85.80 82.68 83.04 78.15 79.79
ATC (Around-the-Clock) 86.27 86.33 86.61 82.86 79.04 74.23 71.58 ATC Price % change
-18% -14% -15% -8% -3% 3% 6% 50
55 60
65 70
75 80
85 90
2023 2024 2025 2026 2027 2028 2029
Forward Energy Prices (NP15)
7/7 (Budget run) 3/27 (ERRA run)
Item 3
PRESENTATION
Budget Run (7/7/2023) vs ERRA Forecast Run (3/27/2023)
O Forward Energy Price Comparison
34 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 3
PRESENTATION
O Typical Customer Bill Savings
(Current Rates)
35 Item 3
PRESENTATION
Programs capacity is increasing
$85M allocated over the last
"5 years
~$50M within last 1.5 years
Making progress in opening
funds to customers
Some programs take time to
spend budget, once open
SILICON VALLEY
CLEAN ENERGY
Programs Fund Availability
Spent: already paid out to customer or vendors
Available Now: program currently open to customers -includes available and reserved customer incentives (e.g.
FutureFit Homes), or funds contracted with a vendor (e.g. eHub, fleet electrification support) Available Soon: currently in a planning phase, but will launch by ~June 2024 Future/Still Planning: programs that won’t launch until after June 2024 and funds not currently earmarked for a program 36 •
•
•
•
-
-
-
Item 3
PRESENTATION
There is a need for continued program funding
2025 goal for SVCE territory: emissions 40% below 2015 levels (currently at 29% below) Illustrative Budgeting Example: $100M
Sample # Units Portion of reduction needed for
2025 goal*
2021 emissions % below 2015 levels (weather
and other factors also influence) 29%
10,000 HPWH rebates, with emergency
replacement support ($50M) +0.3%
10,000 smart L1/L2 outlets at multifamily, with
some rebates and education ($50M) +0.7%
TOTAL, for $100M, below 2015 levels "30%
Looking to other SVCE programs, market,
other actors (e.g. IRA) to help hit 2025 goal "10%
‘Assumptions:
1 HPWH replaced avoids "1.4 MTCO2e annually
Every smart L1/L2 outlet installed leads to 1 new EV (from gas car) immediately 1 EV avoids 3 MTCO2e annually
Even $100M will just be incremental
We are one part of the ecosystem in hitting goals,
and rely on many actors to help our region
SVCE works on addressing barriers and “friction” as
well as rebates - needed to help all customers
Plan to explore funding and financing to reach larger
scales and funnel through current programs
37 Item 3
PRESENTATION
Example program funding packages
Showing possible # units that would result, based on draft allocations Package A $40M
Expand some current building
and EV charger programs
650 HP HVAC, 500 HPWH, 200 panel,
750 circuit and 100 gas meter rebates
100 income-qualified homes fully electric,
1,500 emergency HPWH installs
Hundreds to thousands more equipment
in support of new, local policies
130 multifamily sites with 9 L2s or 20 L1s,
with education for 1,200 residents and
500 EV rebates for low income
Package B $80M
PackageA+
More program expansion and
new approaches/topics
Dozens of large C&l engaged for load
reduction and electrification
700 HP HVAC, 600 HPWH, 200 circuit
and 400 point-of-use water heaters as
small/medium businesses
200 homes fully electrified, clustered in
neighborhoods (pilot zonal electrification)
eHub 2.0, multiple campaigns for electric
tech (e.g. induction) awareness and 10
major grants for local CBOs
15 DCFC hubs with 20 ports each, with
affordable rates for local residents
Partner with several organizations on
workforce development-1,000 new
trainees
Package C $120M
Package B +
More new approaches/topics
More resilience projects at community
facilities
Handful of complete electrification
projects at public facilities
50,000 controlled smart thermostats
Flexible funds to reinforce existing
programs based on uptake/interest
38 Item 3
PRESENTATION
Example program funding packages
To be considered later in the year
Package A $40M
Expand some current building
and EV charger programs
Add funds to FutureFit Home rebates
Provide emergency water heater support
and an SVCE “turnkey” pathway
Add funds to support local policy
adoption
Add funds to multifamily EV charging
rebates
Package B $80M
PackageA+
More program expansion and
new approaches/topics
Package C $120M
Package B +
More new approaches/topics
Large C&l-focused rebates Add funds to community resilience grants Add funds to small/med business
electrification rebates
Public facility complete electrification
pilots
Neighborhood electrification pilot Smart thermostat “virtual power plant” Expand website to eHub 2.0 Keep some flexible funds to deploy opportunistically
Add funds to Priority Zone DCFC
charging program
Workforce development partnerships 39
Item 3
PRESENTATION
0 SVCE Planning & Budgeting Process
Budget
Comprehensive assessment of risks and
opportunities to optimally achieve mission
Organization-wide priorities and
alignment toward achieving the mission
SVCE Mission: Reduce dependence on fossil fuels by
providing carbon-free, affordable, and reliable electricity and innovative programs for the SVCE community
Funding in alignment with achieving
the strategic focus areas
40