1 • Subtitle
New SV Clean Energy
PowerPoint Template
SVCE’s Planning & Budgeting Process
and Financial Stress Test Cases
February 26, 2024
Finance and Administrative Committee
Amrit Singh
Item 4
PRESENTATION
2 Main Areas of Discussion • FY 24-25 Budgeting & Planning Timeline
• Overview of Enterprise Risk
Management (ERM) and Stress Test
• Review Key Drivers of Financial
Risks
• Review Planned Financial Stress Test
Scenarios
• Next Steps
Purpose
Informational Item:
1. Overview of SVCE’s Planning
and Budgeting Process and
Future Committee Meetings
2. Seek Feedback on the Planned
Financial Stress Test Scenarios
Item 4
PRESENTATION
3 SVCE’s Planning & Budgeting Process
SVCE Mission: Reduce dependence on fossil fuels by
providing carbon-free, affordable, and reliable electricity and innovative programs for the SVCE community.
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
Budget
Strategic Focus
Areas
Enterprise Risk
Management
Item 4
PRESENTATION
4 FY24-25 Budgeting and Planning Process Timeline
Jan/Feb February 26th
Staff’s
Enterprise Risk
Assessments
Finance & Admin
Committee Review of
Financial Stress Case
Proposals
May
Finance and Admin and
Executive Committees Review
of Stress Case Analyses and
Budget Framework
Board Review and
Adoption of FY 24-
25 Budget and
Reserve Targets
August August 14 &
September 11
Finance and Admin
Committee Review of
Adjustment to Budget
to reflect updates to
PCIA and PG&E Gen
Rate Assumptions
December
Board
Adoption of
Adjusted
Budget
June 12
Board Review
of Financial
Stress Cases
Finance and
Admin Committee
Review of FY 24-25
Draft Budget and
Reserve Targets
November February
Finance
and Admin
Committee
Review of
Mid-Yr
Budget
March
Board
Adoption
of Mid-Yr
Budget
Item 4
PRESENTATION
5 ERM and Stress Tests
Stress Test
An essential component of ERM
• Assess the interrelatedness of risks in the
ERM framework and model extreme but
plausible scenarios resulting from one or
more risks that can have major adverse
consequences for SVCE
• Important for commodity trading portfolios
because of the inherent weakness of
market risk measures in assessing black
swans, such as disruptions in markets
A comprehensive organization-wide
assessment of risks and opportunities that
leads to a more disciplined approach to
achieving the organization’s mission and
objectives
• Ensure risks that can be optimally
managed do not derail us from
achieving the organization’s objectives
efficiently and effectively
• Aid in identifying opportunities that
affect the organization’s strategic
priorities
ERM
Item 4
PRESENTATION
6 Key Components of the ERM Framework
Risk
Register
• Record of organization’s risks
• Identify current and additional planned mitigations
• Identify risk owner
Risk Matrix
• Risk Rubric. Assess the likelihood and consequence of risk events • Calibrate risks
• Identify risk tolerance – level of acceptance
Stress
Tests
• Model scenarios (financial position, systems, and processes) of interrelated risks that are extreme but plausible
• Develop appropriate risk management strategies, including the adequacy of reserves
Unmitigated With Current Mitigations With Additional Mitigations 1 Financial Economic Recession: Prices Collapse and PCIA goes up and revenues go down Amrit Reserves to withstand the shocks; Stress Tests, Cashflow Modeling Reassess reserve adequacy Extreme (15) Extreme (14) High? (13) (Depends on Reserve Set Aside) 2 Financial Price Collapse leads to insufficient liquidity (collateral postings) Amrit Reserves to withstand the shocks; Stress Tests, Cashflow Modeling Reassess reserve adequacy High (13) Moderate (12) Low (11) 3 Financial Load Loss to due economic recession (may not be immediate financial impact) Amrit Reserves to withstand the shocks Reassess reserve adequacy Moderate (12) Low (11) Low (11) 4 Financial Bad Debt increase due to economic recession Adam Send back to PG&E after 3 months of non-payment; Reserves to withstand the shock Reassess reserve adequacy Moderate (12) Moderate (12) Moderate (12) 5 Financial Price collapse and increase in desire for DA (as PCIA goes up) subject to the DA cap Amrit Reserves to maintain competitive pricing; CPUC Decision not opening DA None Low (22) Low (22) Low (22) 6 Financial Load Loss due to DA and distributed/ behind the meter (generation and storage) Adam Custom Customer Pricing; CPUC Decision not opening DA Moderate (12) Moderate (12) Moderate (12) 7 Financial Significant PPAs default/delay/renegotiate for higher prices Monica Supplier & Technology diversity; plan for contingencies; Contractual language for delay damages and default provisions Moderate (23) Moderate (23) Moderate (23) 8 Financial Counterparty Default - Loss of MS business - Risk of losing prepay Amrit Credit risk management Update credit guidelines Moderate (23) Moderate (23) Moderate (23) 9 Financial Member agency leaving Girish Strong SVCE value proposition; Effective communication and alignment with members Moderate (23) Moderate (23) Moderate (23) 10 Financial Governance Risk (Limited knowledge of key stakeholders resulting in an uneconomic/suboptimal business model/operations; Divergent Board member objectives) Girish Continous training and stakeholder interest alignment Moderate (23) Moderate (23) Moderate (23) 11 Financial PG&E failures affect our cashflows since they are our cash register (high gas prices leading to customer bad debt, billing issues) Adam Seek fair treatment from CPUC; No residential waterfall Moderate (12) Low (11) Low (11) 12 Regulatory/Compliance POLR Proceeding - Large Tie up of Financial Reserves Amrit Hold Adequate Reserves Manage and shape regulatory proceeding against PG&E Pool Proposal Extreme (14) High (13) Moderate (18) 13 Regulatory/Compliance CPE Policy Procurement (Pumped Storage, Ofshore wind etc, more asset procurement); Loss of procurement autonomy thru backstop procurement (@ governers office) Monica Manage and shape regulatory proceeding (add more specifics?) Moderate (23) Moderate (23) Moderate (23) 14 Regulatory/Compliance RA reform, uncertainties on design and procurement targets and penalties for market structural imbalances Monica Manage and shape regulatory proceeding (add more specifics?) High (13) High (13) High (13) 15 Regulatory/Compliance Loss of PG&E hydro and Nuclear allocation Monica Manage and shape regulatory proceeding (add more specifics?) Moderate (12) Moderate (12) Moderate (12) 16 Regulatory/Compliance CPUC rejects some of our MTR contracts - especially if it's out of money Monica Manage and shape regulatory proceeding (add more specifics?) Low (17) Low (17) Low (17) 17 Regulatory/Compliance CPUC imposed hedges that may not be optimal for our portfolio Monica Manage and shape regulatory proceeding (add more specifics?) High (19) High (19) High (19) 18 Regulatory/Compliance Potential for deregistration (CPUC No longer lets us operate as an LSE) Monica Manage and shape regulatory proceeding (add more specifics?) High (25) High (25) High (25) 19 Regulatory/Compliance Green Regulatory Risk - Change in the accounting of green. REC has a definition today, Green e / Green prime - VREP has some exchange between REC and Cap/Trade, this could increase our costs in the long term. Monica Low (22) Low (22) Low (22) 20 Reputational Risk of Relevancy - IOUs power portfolio just as green. How do we distinguish ourselves? What's our value proposition?Justin Cheaper (competitive advantage thru tax exempt financing) and community benefits from programs Moderate (18) Moderate (18) Moderate (18) 21 Reputational Emissions on PCL increase; Impact on our mission and customers perception of our value proposition Adam Effective customer communications Moderate (23) Moderate (23) Moderate (23) 22 Reputational Customer Activism & Unfavorable Political scenarios derailing our mission - High PG&E T&D costs and high energy prices resulting in more customer activism and movement against electrification; customer affordability - Political environments ("Make Coal Great Again!")
- Lobbying from natural gas industry Adam Effective customer communications Moderate (23) Moderate (23) Moderate (23) 23 Reputational Aggressive SVCE electrification efforts creates customer backlash ("Let go of my gas stoves!") Justin Moderate (23) Moderate (23) 24 Reputational Daisy and 3rd Party (Calpine, other Vendors) System Failures and Data Breach - Customer Identifiable data compromised; Mandatory customer communication - Customers Opt Out
- CPUC Compliance Risk
Justin CPUC Data audit; Contract provisions Moderate (18) Moderate (23) Moderate (18) 25 Reputational Risk of not spending program dollars well (impact on the reserves - give back the reserves) Justin Moderate (23) Moderate (23) Moderate (23) 26 Reputational Grid Readiness to support our mission Justin Moderate (23) Moderate (23) Moderate (23) 27 Reputational Stranded Program Assets (technology changes, hydrogen cheaper than electricity) Justin Moderate (23) Moderate (23) Moderate (23) 28 Reputational Major Disruption of the T&D/Grid operator, Grid Reliability - affects our mission Girish Moderate (18) Moderate (18) Moderate (18) 29 Operational and Business Continuity Natural Disaster Recovery (Earthquake, flooding) - Cover key business functions (procurement, scheduling, collateral calls …) Monica Key Desk Procedures Low (22) Low (22) Low (22) Operational and Business Continuity Staff turnover Amrit - Employer of Choice Initiatives -benefits,Comp, Hybrid Work, Team Buildings Key Desk Procedures; BPO Moderate (18) Moderate (18) Moderate (18) 30 Operational and Business Continuity Cyber risks (wire fraud, social engineering, ransomware) Amrit IT IRP Plans and Tabetop exercises, VCISO, Human Firewall Trainings Moderate (18) Moderate (18) Moderate (18) 31 Operational and Business Continuity Insider Threat/Rogue Employee Amrit Code of Conduct, Risk Controls Moderate (23) Moderate (23) Moderate (23) 32 Operational and Business Continuity Physical Security/Active Shooter Amrit Staff Training Moderate (23) Moderate (23) Moderate (23) 33 Operational and Business Continuity Scheduling system failure Monica Schedule remotely Low (22) Low (22) Low (22) 34 Operational and Business Continuity Calpine system failure Adam Moderate (23) Moderate (23) Moderate (23) 35 Operational and Business Continuity Daisy Failures (Quality of data impact on Revenue forecasting) Justin Low (22) Low (22) Low (22) Proposed Stress Tests (Modeled Scenarios) Economic Recession (Price Collapse -5th percentile) Coupled with Adverse Regulatory Outcomes (POLR) Extreme (20) Extreme (20) High(19) Draft Confidential Initial Placement to Get Discussions Going Risk Matrix Placement (Impact over 5-years) Risk ID Risk Category Risk Description Risk Owner (Initial Straw Proposal) Current Mitigations (High level right now to get discussions going) Any Additional Planned Mitigations/Actions (High level right now to get discussions going) Impact/Consequence
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
Cartain >90% chance High(l) High (2) Extreme (3) Extreme (4) Extreme (5) Ukaly 5O%- 90% Chance Moderate (6) High (7) High (8) Extreme (9) Extreme (10) Modarat. 10%-50% Chance low (11) Moderate (12) High (13) Extreme (14) Extreme (15) Unlikely bu«Plausible S%-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) Past, Current, and Stress Case Modeled Commodity Prices • Forward prices are at all time
high.
• Extreme case of runup in
prices
• Most of the increase occurred
in the last 12 months.
• Can t predict future but price
trends could reverse, and
prices could drop equally or
more.
• Prices were trading at the
modeled stress test levels as
recently as 12 months ago
Item 4
PRESENTATION
7 PCIA and PG&E Gen Rate determine SVCE Rates and
therefore Revenues
Review of Key Financial Risk Drivers SVCE Gen Rate
SVCE
discount
PG&E Gen Rate: PCIA
Biggest contributor to revenue risk: PCIA and PG&E Generation Rate Uncertainty.
Revenues
PCIA
PCIA
Revenues
PG&E Rate
PG&E Rate
Revenues decline when prices decline
Item 4
PRESENTATION
8 • PCIA2025 = PCIA Balancing Account2024 + Forecast Balance • Balancing Account = (Prior Year’s Forecast Prices2024 - Actual Prices2024)* PCIA Portfolio • Forecast Balance = (Legacy Contract Costs – Forecast Prices2025)* PCIA Portfolio • PG&E Gen Rate Set Similarly
• PG&E Gen Rate = ERRA Balancing Account + Forecast Costs * Simplified representation of concepts
Price Uncertainty
Big contributor to PCIA and PG&E Generation Rate Uncertainty is 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 Next Year’s PCIA &
PG&E Gen Rate
Current Year’s actual
realized Prices
Forecast of Next » Year’s Market Prices
Item 4
PRESENTATION
9 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
2025 2025
2024
2024
Prices 'T Prices Jz
PG&E Rate 4z
SVCE Revenues Uz
PCIA 4,
PG&E RateT
SVCE Revenues
Item 4
PRESENTATION
10 2024 Financial Stress Test Proposals
• Continue to model the price collapse scenario and use it to assess adequate reserve holdings
• Model long-term load growth uncertainty and implications on procurement planning and compliance obligations; potential stranded cost risks and competitiveness if planned scenarios do not materialize Source: EIA
Henry Hub Natural Gas Spot Price
Dollars per Million Blu
15 — Henry Hub Natural Gas Spot Price
Item 4
PRESENTATION
11 Next Steps
• Present financial stress test scenario analysis results at the May meeting
• Present to the Board in June
• Use the analyses to determine the adequacy of reserve-holding targets • Other risks and opportunities identified from the ERM framework will help shape next fiscal year’s strategic focus areas and workplan
Item 4
PRESENTATION
12 Thank you! / Questions?
Item 4
PRESENTATION
We face many
risks and
opportunities!
• Financial
• Price Volatility, PCIA goes up, Counterparties Default … • Regulatory/Compliance
• POLR, CPE, RA Reform …
• Customer Opt-Out Risk
• Risk of Relevancy, “Let go of my gas stoves”, Customer Data Breach, “Make Coal Great Again!”….
• Operational and Business Continuity
• Staff turnover, Cyber Risks, Modeling Errors, Calpine System Failure, ….
• Failure to Capture Opportunities
• Attracting DA Load, Leveraging IRA, Implementing VPP, & V2X, Scaling Decarb with Innovative Financing, …
• Do they all have the same impact?
• Where’s the biggest gap?
• Which action moves the needle the most?
Item 4
PRESENTATION
14 Risk Matrix
Impact/Consequence
• Assess the likelihood (frequency of
occurrence) and consequence (impact)
• Calibrate risks/opportunities and optimally
direct resources
• Identify risk tolerance or acceptable level
of risk
• Assessment based on the subject matter
expert’s (SME) judgment
• Will continue to refine further and attempt
to quantify risks
• Significant financial risks will be explicitly
quantified and used for reserve planning,
like last year’s stress test analyses
Insignificant Minor Moderate Major Catastrophic
Risk Easily
Mitigated
through Day-to-Day Operations
Risk is
Manageable/Low
Impact on Mission
Moderate Erosion
of
Reserves/Impact
on Mission
Significant
Erosion of
Reserves/Impact
on Mission
Risk of
Existence
Certain >90% chance High (1) High (2) Extreme (3) Extreme (4) Extreme (5) Likely 50%- 90% Chance Moderate (6) High (7) High (8) Extreme (9) Extreme (10) Moderate 10%-50% Chance Low (11) Moderate (12) High (13) Extreme (14) 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) Frequency/Likelihood
Item 4
PRESENTATION
Risk Register • Risk Register:
• Records risks/opportunities
• Briefly describes each
risk/opportunity
• Lists existing and planned
mitigations
• Ranks risks/opportunities
• Identifies risk owner
• Cross-functional teams
brainstormed and identified risks
and opportunities
• Bucketed the risks into the
following categories:
• Financial
• Regulatory and Compliance
• Customer Opt-Out Risk
• Operational and Business
Continuity
• Opportunities
Risk Register
Unmitigated With Current
Mitigations
With Additional
Mitigations
1 Financial
Prices Collapse; PCIA
Increases; Revenues Decrease Amrit
Reserves to withstand the
shocks; Stress Tests, Cashflow
modeling
Reassess reserve
adequacy Extreme (15) Extreme (14) High (13)
.
7 Financial
Significant Number of PPAs
Default/Delay/Renegotiate for
higher prices
Monica
Supplier & Technology Diversity;
Plan for Contingencies;
Contractual language for delay
damages and default provisions
Moderate (14) Moderate (12) Moderate (12)
12 Regulatory/Compliance POLR Proceeding - Large Tie Up of Financial Reserves Amrit Hold Adequate Reserves
Manage and shape
regulatory
proceeding
Extreme (14) High (13) Moderate (18)
25 Customer Opt-Out
Ineffective or sluggish
spending of approved program
dollars
Justin
Program plans developed with
stakeholders, ongoing feedback
during design/management,
increased staff/resources, and
emphasizing larger-scale
programs.
Additional staffing,
new supporting
systems, and public
reporting on impacts.
Moderate (23) Moderate (23) Moderate (23)
.
28 Customer Opt-Out
Major disruption of the
T&D/Grid operator, Grid
Reliability - affects our mission
Girish Shape Regulatory and Legislative
Initiatives Moderate (18) Moderate (18) Moderate (18)
29 Operational and
Business Continuity
Natural Disaster Recovery
(Earthquake, flooding)
- Cover key business
functions (procurement,
scheduling, collateral calls …)
Monica System backups and desk
procedures
Add'l Desk
Procedures and
Continuity Plans
Low (22) Low (22) Low (22)
.
34 Operational and
Business Continuity
Calpine system failure Adam Moderate (23) Moderate (23) Moderate (23) Draft and illustrative
Risk Matrix Placement (Impact over 5-years)
Risk ID Risk Category Risk Description Risk Owner Current Mitigations Additional Planned
Mitigations
Item 4
PRESENTATION
New SV Clean Energy
PowerPoint Template
Subtitle
Item 5
PRESENTATION
MY 23-24 Adjusted
Operating Budget
SILICON VALLEY
CLEAN ENERGY
Amrit Singh
Finance and Administration Committee
February 26, 2024
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Item 5
PRESENTATION
Purpose
Review the Budget Timeline
Action: Recommend that the Board
Adopt Mid-Year 2023-2024(MY
24) Adjusted Operating Budget
Highlight Changes Since the
Adoption of the Adjusted Budget in
December
Compare Mid-year and Adjusted
Budget Key Line Items
Review 5-yr Reserve Projections
Provide Staffing Update
Committee Vote
Item 5
PRESENTATION
Mid Year FY23-24 Budget Approval Timeline
May May/June August August
BOD adopts the budget and
agrees to revisit additional
expenditures later in the
year when there would be
more certainty on PG&E
rates
Executive Committee and Finance
and Admin Committee review the
updated budget based on the
revised PG&E rate filing and
provide feedback on any
additional expenditures
BOD reviews and adopts
amendments to the budget
incorporating any additional
expenditures
Mid-Year Budget
Review / Adjustment
3 Excellent FY24 But Softening Margins over 5-yr Outlook • Healthy contribution to reserves of $112.6 million
• An Increase of ~ $38.8 Million from $73.8 Million at adjusted budget (approved in December 2023)
• Revenue forecast mostly remains unchanged
• A slight uptick in 2024 offset by weaker sales in Oct.- Dec. 2023 • Key Drivers of an Increase:
• Drop in Forward Energy Prices
• Cal 24 prices dropped -13.6% since the adjusted budget • Power Supply cost for Oct-Dec 2023 was -$21.2M or -21% below the adjusted budget, plus an additional $12.7 million reduction projected for Jan-Sep 2024
• $6.4M higher Investment Income
• Operating expenses decreased slightly
• Savings from staffing vacancies offset additional headcount costs • Slight increases in professional services and marketing expenses An Increase of ~$38.8 Million vs Adjusted
Budget:
• Softening energy prices negatively impacts 5-
yr outlook
• Negative contributions to reserves forecasted for FY
25 and 26.
Item 5
PRESENTATION
Mid-Year Budget Highlights
Revenues - $1.8M
Power Supply Cost
- $33.9M
Other Operating Expenses -$0.2M
Investment Income +$6.4M
Reserve Balance +$38.8M
•
•
•
SILICON VALLEY CLEAN ENERGY
FY 2023-24 OPERATING BUDGET
($ in thousands)
FY 2023-24 FY 2023-24
ADJUSTED MID-YEAR
DESCRIPTION BUDGET BUDGET $ %
Energy Revenues 554,685 552,864 (1,820) -0.3%
Power Supply Expense 399,546 365,617 (33,929) -8.5%
Operating Margin 155,138 187,247 32,109 20.7%
Operating Expenses 32,361 32,118 (243) -0.8%
Non-Operating Revenue (Expense) 6,431 12,864 6,434 100.0% Annual Transfers and Other Expenses
Program Fund 28,874 28,874 0 0.0%
Nuclear Allocation 2,188 2,188 0 0.0%
Multi Family Direct Install Program 0 0 0 -
Electrification Discount Program 0 0 0 -
Customer Bill Relief 4,300 4,300 0 0.0%
Building Fund 20,000 20,000 0 -
Other 50 50 0 0.0%
BALANCE AVAILABLE FOR RESERVES $73,796 $112,582 $38,785 52.6% Change
Item 5
PRESENTATION
Annual Budget vs. Mid-Year Adjusted Budget
Power Supply Expense
decreased by 8.5%
Supports Overall
Customer Discount of
Higher non-operating
revenue (Investment
Income) due to higher
interest rates
•
•
•
•
•
$0
$100
$200
$300
$400
$500
$600
$700
$800
FY 2023-24 FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 $ in Millions Total Adjusted Ending Reserves Target Reserves Maximum Reserves Minimum Reserves 323
Days of
Cash on
Hand
367
Days of
Cash on
Hand
285
days
120
days
490
days
Reserves Forecast
Item 5
PRESENTATION
Reserve Projection
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Item 5
PRESENTATION
EXEC (2)
Staffing
Current Budgeted
Staffing
Currently being filled under the CEO personnel authority: General Counsel, Senior Program Specialist, and Board Clerk.
58 Full-time Employees (4 Vacancies)
3 Intern positions (2 Open)
4 Part-time Employees
General Counsel (1)* - to ensure adequate legal support both in complexity and volume as the agency grows and matures
Board Clerk/Executive Admin (1)* - to assist with Board meetings and provide additional administrative support to the organization
3 Climate Corps Fellows
1 Long-term Independent Consultants
DPP (1)
Senior Program Specialist (1)* - to further support the development of the agency's increasing Decarbonization Programs
Proposed Staffing
62 Full-time Employees (8 Vacancies)
3 intern positions (2 Open)
4 Part-time Employees (1 Open)
3 Climate Corps Fellows
1 Long-term Independent Consultants
The proposed budget requests approval for an additional position 4PRO (1)
Associate Power Analyst ( ) -to support the increasing complexity of managing the energy procurement portfolio
Timeline FTE
Authorized in the Annual Budget 58
Feb’24 CEO Personnel Authority +3
Midyear Budget Request +1
Total 62
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Item 5
PRESENTATION
Summary - Despite ongoing
uncertainty, the overall financial
picture looks excellent for FY23-24
Next Steps
Staff will conduct financial stress test analyses and
recommend any updates to the reserve targets
Stress test results will be presented to the Finance
and Admin Committee and the Executive
Committee in May and to the Board in June
Staff will present the framework for developing the
next fiscal year’s budget to the Finance and Admin
Committee in May
Draft budget for FY24-25 will be presented to the
Finance and Admin Committee in August
Final FY24-25 budget will be presented to the
Board in September
Many Risks can Deplete Reserves
Market Prices
Reduced Revenues
via Higher PCIA and
Lower PG&E Rates;
IncreasedPower
Supply Expense
SUPPLY
Project delays;
PPAs Defaulter
Renegotiate for
Higher Prices
L&R ISSUES PAYMENTS LOAD LOSS CYBER-RISK
IRP, RPS, RA
Reform/Penalties,
PCIA, POLR
Customer Defaults DirectAccess Hardware, Software,
and Potential for and Trainingto combat
Expansion Ransomware and
Phishing
Rate Increasesdue
to socialized wildfire
costs,Energy Price
Increaseswill
ultimately impact
usage and
electrification
8 Recommend that the Board of Directors adopt the
Mid-year (MY) 2023-24 Adjusted Operating
Budget that projects contributing $112.6 million
to the reserves.
Item 5
PRESENTATION
Recommendation
9 Item 5
PRESENTATION
Thank you! / Questions?
10 SILICON VALLEY CLEAN ENERGY
FY 2023-24 OPERATING BUDGET
($ in thousands)
FY 2023-24
MID-YEAR
ADJUSTED
DESCRIPTION BUDGET
ENERGY REVENUES
Energy Sales 550,852
Green Prime 1,962
Other Income 50
TOTAL ENERGY REVENUES 552,864
ENERGY EXPENSES
Power Supply 365,617
OPERATING MARGIN 187,247
OPERATING EXPENSES
Data Management 3,413
PG&E Fees 1,470
Salaries and Retirement 14,818
Professional Services 8,210
Marketing & Promotions 1,250
Notifications 315
Lease 551
General & Administrative 2,091
TOTAL OPERATING EXPENSES 32,118
OPERATING INCOME (LOSS) 155,129
NON-OPERATING REVENUES
Interest Income 12,867
Grant Income 0
TOTAL NON-OPERATING REVENUES 12,867
NON-OPERATING EXPENSES
Financing 3
Interest 0
TOTAL NON-OPERATING EXPENSES 3
TOTAL NON-OPERATING INCOME
(EXPENSES) 12,864
CHANGE IN NET POSITION 167,994
CAPITAL EXPENDITURES, INTERFUND
TRANSFERS & OTHER
Capital Outlay 50
Building Fund 20,000
Transfer to CRCR Fund 0
Program Fund 28,874
Nuclear Allocation 2,188
Multi Family Direct Install Program 0
Electrification Discount Program 0
Customer Bill Relief 4,300
Other 0
TOTAL CAPITAL EXPENDITURES, INTERFUND
TRANSFERS & OTHER $55,412
BALANCE AVAILABLE FOR RESERVES $112,582
Item 5
PRESENTATION
2023-2024 Mid-Year
Adjusted Operating
Budget
($ in Thousands)
FY23-24 FY24-25 FY25-26 FY26-27 FY27-28
Operating Revenue (Budget) (Forecast) (Forecast) (Forecast) (Forecast) Electricity Sales, Net1
$ 550,852 $ 485,338 $ 494,921 $ 508,590 $ 515,415
GreenPrime Electricity Premium 1,962 2,236 2,248 2,264 2,283 Total Operating Revenues 552,814 487,574 497,169 510,854 517,698 Operating Expense
Power Supply $ 365,617 $ 417,018 $ 470,894 $ 474,812 $ 449,466 Operating Margin 187,197 70,556 26,275 36,041 68,232
Data Management 3,413 3,583 3,762 3,950 4,148
PG&E Service Fees 1,470 1,544 1,621 1,702 1,787
Staff Compensation 14,818 15,559 16,337 17,154 18,011
Consultants and other Professional Fees 8,210 8,703 9,225 9,779 10,366 Communications and Noticing 1,565 1,643 1,725 1,811 1,902 General and Administration 2,643 2,775 2,913 3,059 3,212 Transfers to Programs Fund 35,362 9,751 9,943 10,217 10,354 Total Operating Expenses 433,097 460,575 516,421 522,484 499,245 Operating Income 119,717 26,998 (19,252) (11,631) 18,453 Nonoperating Revenue (Expense)
Other Income 50 51 51 52 52
Investment Income 12,867 13,811 9,819 9,028 8,808
Capital Outlay & Financing Costs (20,053) (53) (53) (53) (53) Grant Income - - - - -
Total Non-Operating Revenue (Expense) (7,136) 13,808 9,817 9,026 8,807 Change in Net Position/Available for Reserves 112,582 40,807 (9,435) (2,604) 27,260 Begin, Net Position 324,536 463,208 493,784 454,236 443,240 Adjustment for Program Expenditure and Building Fund2
26,091 (10,231) (30,113) (8,392) (52)
End, Net Position $ 463,208 $ 493,784 $ 454,236 $ 443,240 $ 470,448
Days Cash On Hand (DCOH) at Year End $ 435,187 $ 465,763 $ 426,215 $ 415,219 $ 442,427 Days of cash on hand 367 369 301 290 323
Each year the Board transfers funds from the Operating Budget to the Decarboniztion Programs Fund as shown in the above forecast under 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. The $20 million in building Fund is assumed to be spent in FY25-26.
Assumptions: 4% overall discount relative to comparable PG&E rates for FY 23-24, FY 24-25 and FY 25-26. FY 23-24 includes additional bill credit to low income customers totaling $4.3 million. 1% discount for FY26-27 and FY27-28.
Item 5
PRESENTATION
5-Year Forecast
For forecast years FY23-24 onward:
Revenues are based on SVCE’s load
forecast and CaICCA NewGen Model
for SVCE margin analysis using
market data as of 2/10/2024
The NewGen Model headroom output
was reduced by -5% to account for
the modeling error
Power Supply Costs are based on
updated portfolio positions and latest
market data
Operating Expenses are assumed to
grow 5% / year
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Item 5
PRESENTATION
Relative to Assumptions
in the December
Adjusted Budget:
PG&E’s average
2024 generation rate
increased by about
5%
PCIA increased from
0.55d:/kWh to
I.OU/kWh
Relative to Adjusted
Budget, SVCE’s 2024
margin improved by
about 2%
The rate changes were
effective Jan 1, 2024.
Adjusted Budget 2024 Rate Current 2024 Rate
Jul-Dec 2024 Jul-Dec 2024
Rate*** Rate***
13 Final PG&E Rate Improved SVCE Margins
‘ Source: PG&E 2024 ERRA Forecast Update, released in October,2023 (Weighted for SVCE Portfolio Load) ** PG&E Jan-Jun 2024 Average Rate, effective January 1, 2024 (Weighted for SVCE Portfolio Load) *** Estimated rate, based on PG&E filings.
Above margin analyses ignores minor reductions for franchise fees (0.09 cf/kWh) Jan-Jun 2024
Rate**
PG&E Gen Rate:
Jan-Jun 2024
Rate
• Power Supply Variance
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Item 5
PRESENTATION
Energy Prices are Extremely Volatile
(expanded slide in appendix)
ATC NP15 Historical and Simulated Monthly Prices
Sep-23 Sep-24 Sep-25 Sep-26
Current Curves 2/10/2023 Budget Curves 11/10/2023
Budget Curves 7/7/2023 Budget Curves 7/7/2023 Pl
Cost of load decreased with falling prices, and
reduced sales volume
Energy supply costs increase due to new ISTs
Renewable Energy Supplies: Settled PPA
volumes differ slightly from forecast
CAISO Costs: Settled costs include accrued
expenses from summer months and energy
buy-backs, exceeding ISO charge forecast
Environmental Products: Decreased VAMO
forecast; product flows vary monthly.
Resource Adequacy: Update to RA price
assumptions surrounding the BESS fleet
Revenue from Supplies: MTM of fixed-price
contracts fall as energy prices fall
Cumulative Delta to Budget Over/(Under) ThroughSeptember 30,2024($MM) (80.0)
Decrease of $33.9M since budget 14
$72.81 $74.41
$60.21 $70.39
Item 5
PRESENTATION
Power Market Price Volatility
Prices as of the mid-year budget run 2/10/2024 are decreasing from adjusted budget assumptions from 11/10/2023, with a 5-year average decrease of 7%.
NP15 ATC $/MWh FY2024 FY2025
Adjusted Budget
11/2023
MY Budget
2/2024
15 $72.81 $74.41
$60.21 $70.39
Item 5
PRESENTATION
$/MWh
Price
Power Market Price Volatility
Prices as of the mid-year budget run 2/10/2024 are decreasing from adjusted budget assumptions from 11/10/2023, with a 5-year average decrease of 7% Current Curves 2/10/2023
Budget Curves 7/7/2023
-Budget Curves 11/10/2023
Budget Curves 7/7/2023 Pl 16
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Item 5
PRESENTATION
5-Year Forecast -Shifts in Power Supply Cost
FY Differences:
Energy costs continue to remain mostly flat due to fixed Power Purchase Agreements (PPA) coming online and forward energy prices staying flat FY2025-2026:
Environmental Products: Increase in Carbon Free (CF) costs ($8-'u$25/MWh) with increase in net open position (NOP)
Resource Adequacy (RA): Increase in RA NOP with high market prices FY 2027-2028:
Environmental products prices beginning to fall; increased PPA volumes increases RPS volumes and decreases CF volume needs
Resource Adequacy: Increase in RA NOP with High market prices 17 Item 5
PRESENTATION
Energy Risk Management Min/Max Bands
We hedge to manage market price risk. 95% of balance of Fiscal Year 24 load is hedged; 89% of balance of Calendar Year 24 is hedged.
Period Year ERM Min
Tolerance
ERM Max
Tolerance
SVCE Total
Hedge %
Balance of
Year 2024 80% 110% 89%
Year 2 -
2025 2025 70% 90% 71%
Year 3 -
2026 2026 55% 80% 62%
Year 4 -
2027 2027 50% 80% 69%
Year 5 -
2028 2028 50% 80% 73%
Net Open Position Tolerance and Positions
140%
120%
100%
40%
20%
DM
2024 Q2 2024 2025 2026 2027 2028
Bass Tolerance Range — Cemtraded
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Item 5
PRESENTATION
Operating Expenses
FY Budget
Updated
Costs
Data Management (Calpine)
$3.4MM
Billing (PG&E)
$1.5MM
G&A / Lease
$2.6MM
Staffing
$15.4MM
Professional Services
$8MM
Communications / Noticing
$1.3MM
MY Budget Changes
Unchanged
Unchanged
Slight increase of $25k for additional
membership fees
Decreased by $588k due to
Oct’23-Dec’23 vacancies savings of $1M
Additional 4 FTE expense offsetting
savings by -$412k
Increased by $126kfor additional professional
consulting services
Increased by $194kfor additional program
marketing materials and increased postage
19 • Subtitle
New SV Clean Energy
PowerPoint Template
Item 6
PRESENTATION
Review of Completed 3rd
Prepay Transaction
Amrit Singh
Finance and Administration Committee
February 26, 2024
VALLEY
ENERGY
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Item 6
PRESENTATION
Purpose
Goals of Prepay
Informational Item: Report Out of
the Completed Third Prepay
Transaction
Summary of Executed
Transactions
Board Authorized Execution
Parameters
Next Steps
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Item 6
PRESENTATION
Review of Prepay Goal and Benefits
Goal
Reduce the cost of power purchases by leveraging SVCE’s ability to fund low-cost tax-exempt debt Prepays grant CCA’s competitive advantage relative to lOUs Target Benefits
Savings over the 30-year term around 8% - 10% per year on power quantities delivered under the pre-pay structure
Approximately 3 MM to $4 MM per year in savings
Favorable risk allocation where SVCE only pays for energy that is delivered (same as contracts today)
Debt is non-recourse to SVCE
SILICON VALLEY
CLEAN ENERGY 3
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Item 6
PRESENTATION
Board Authorized Execution Parameters
Aggregate Principal Amount of bonds to not exceed $1.5 billion Execution contingent on achieving savings of at least 8 percent under the power supply contract for the initial bond reset period Bonds not be guaranteed obligations of SVCE
SILICON VALLEY
CLEAN ENERGY 4
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Item 6
PRESENTATION
Summary ofI
New Prepay:
Series 2024A
Prior Prepays:
Series 2021B
~$1.2bn total
$4.38/MWh savings
46% share; split with
Ava
Series 2023B
~$850M total
$9.77/MWh savings
ransaction
$1.1bn deal size
13.1% discount (BOD authorization was 8%)
$11.31/MWh
$7.7M annual average savings through 2032
18% of load coverage
Combined, all three prepays provide:
41% of load coverage
$14.3M in annual average savings during initial
bond reset periods
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Item 6
PRESENTATION
Next Steps
Work with CCCFA on ongoing annual disclosure requirements Assign existing or new Power Purchase Agreements (PPA) into the Prepay before the end of this year, when the initially assigned contract ends
Analyze the Power Procurement Portfolio and Continue to monitor the Prepay Market for Additional Opportunities
SILICON VALLEY
CLEAN ENERGY 6
Item 6
PRESENTATION
Thank you! / Questions?
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Item 6
PRESENTATION
Review of Prepay Background Info.
Goal: Reduce the cost of power purchases
Savings achieved by leveraging SVCE/CCCFA’s ability to fund low-cost tax-exempt interest rates Used since the 1990s for natural gas transactions
Codified in the US Tax law
Municipal electric and gas utilities (and tax-exempt entities such as CCAs) in the US can prepay for a supply of electricity or natural gas from a taxable (corporate) entity and fund that prepayment with tax-exempt municipal bonds:
Must sell that commodity to retail end-users within their traditional service area.
Since the first prepayments of natural gas were done in the early 1990s, the IRS issued rules allowing tax-exempt prepayments, and Congress enacted legislation specifically allowing the transactions (National Energy Policy Act of 2005; Section 1327).
A seasoned team of professionals will help to guide, negotiate, and structure the transactions.
Fees for professionals are contingent on the completion of the deal and paid from the deal proceeds.
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Item 6
PRESENTATION
Overview of Prepay Structure
Term: 30-year with bonds repricing every 5-10 years
depending on the optimal spread between taxable
and tax-exempt interest rates.
Process:
1. SVCE partially assigns, using Limited Assignment
Agreement, energy contract to Morgan Stanley
(MS), Prepay Supplier. MS agrees to pay contract
price to energy supplier.
2. CCAs created CCCFA, a separate legal entity that
can issue tax-exempt debt.
3. CCCFA issues non-recourse tax-exempt bonds.
Bonds not guaranteed by SVCE or CCCFA.
Bonds secured by the contractual rights and transaction cashflows; Bonds carry MS credit ratings.
4. CCCFA pays bond proceeds, net of transaction
fees, to MS as prepayment for energy and related
products that MS will provide over the 30-year
term. Executes Prepaid Agreement.
5. SVCE and CCCFA execute Power Supply
Agreement, where SVCE pays CCCFA contract
price less discount for energy delivered by
CCCFA.
6. CCCFA uses payments from SVCE to pay interest
and principal payments to bondholders.
Complicated financially-engineered structure. The Essence:
Take advantage of our tax-exempt status without taking debt on our balance sheet
Capture the value derived from the spread between taxable and tax-exempt interest rates and use it to reduce the cost of power purchases Substantial savings with minimal risks
9 1
• Subtitle
New SV Clean Energy
PowerPoint Template
Policy Review
Update
Finance and Administration Committee
February 26, 2024
Item 7
PRESENTATION
2 The Project
Policy Maintenance
To ensure compliance, good business practices and
transparency, policies are approved by the board and shared publicly on our website.
Regular maintenance on these policies is required to ensure continued compliance, adherence and updates as needed.
Setting an annual cadence for review & revision, as well as prioritizing time and space for this requirement is a priority Item 7
PRESENTATION
3 Current Policy Metrics
SVCE’s Public Facing, Board Adopted Policies – Current State Row Labels Count of Policies
Additional 3
Finance 13
G&A 9
HR 8
IT 15
Grand Total 48
6%
27%
19% 17%
31%
SVCE Policy Breakdown
Additional
Finance
G&A
HR
IT
Item 7
PRESENTATION
4 CCA Comprehensive Policy Metrics
Policy Categories
0 10 20 30 40 50 60
AvA
MCE
OCPA
PCE
SDCP
SFCP
Sonoma CP
SVCE
Additional Finance G&A HR IT Power Services and CEO spending Additional Customer Service
Finance G&A
HR IT
Power Services and CEO spending
Item 7
PRESENTATION
5 How Many Policies Should We Have?
The Right Ones
Policy - a general written document that establishes a
standard by which the institution manages its affairs
• mandates, specifies, or prohibits conduct in order to enhance the institution’s mission, ensure coordinated compliance with applicable laws and regulations, promote operational efficiency, and/or reduce institutional risk
• Ex: Energy Risk Management, Procurement Policy, Investment, Financial Reserves, Customer Confidentiality
Item 7
PRESENTATION
SILICON VALLEY
CLEAN ENERGY
6 Policies, Standards and Procedures
The Right Ones Approval Document Characteristics
Board Policy
• Transparency: Public
• Purpose: Mandates or prohibits guiding agency standards • Detail: Low
• Significant importance (risk, fiscal, customer impact) • Few details on execution
Executive Staff Standard
• Transparency: workforce
• Purpose: Outlines an operational rule, mandate, or expectation • Detail: Medium
• May change often under operational authority to keep up with needs Executive Staff Procedure
• Transparency: workforce
• Purpose: details the means, tools, and process to meet the standard or policy • Detail: Very high
• Changes very frequently
Item 7
PRESENTATION
SILICON VALLEY
CLEAN ENERGY
7 Use color
change to
indicate new
topic, etc.
(Optional!)
SVCE has 2 to 3
times more
public facing
policies than
other CCAs
Additional Customer Confidentiality Policy
Additional Non-Standard Pricing Agreement Policy
Additional SVCE Risk Management Policy
Finance Accounting Policy
Finance Budget Adoption, Control, and Reporting Policy
Finance Capital Projects Policy
Finance Capitalization Policy
Finance Chart of Accounts Policy
Finance Customer Generation Rates
Finance Debt Limitations
Finance Delinquent Accounts & Collections Policy
Finance Files & Records Management Policy
Finance Financial Reserves Policy
Finance Investments Policy
Finance Purchasing Card Policy
Finance Purchasing Policy
G&A California Public Records Act Policy
G&A CEO Absence Policy
G&A Chair and Vice Chair Vacancy Policy
G&A Charging Station
G&A Code of Ethics
G&A Hybrid Meetings Policy
G&A Ticket and Pass Distribution Policy Pursuant to FPPC Regulation 18944.1 G&A Travel and Meeting Expense Reimbursements for Employee Policy G&A Vehicle Use Policy
HR Cash In Lieu Of Health Benefits
HR Fitness Reimbursement Benefit
HR Paid Time Off (PTO) Cash-Out Option Policy
HR Recruitment Policy
HR Smartphone Stipend Policy
HR Tuition Assistance Policy
HR Unpaid Personal Leave Policy
HR Volunteer Time Off Policy
IT Access Control Policy
IT Clean Desk Policy
IT Data Breach Policy
IT Disaster Recovery Policy
ITE-mail Use Policy
IT Information Systems Use Policy
IT Internet Usage Policy
IT IT Asset Management Policy
IT IT Satisfaction Policy
IT IT Security Plan Policy
IT Malware Defense Policy
IT Password Protection Policy
IT Security Audit Policy
IT Threat-Risk Assessment Policy
IT Workstation Security for HIPPA Policy
Additional
Finance
G&A
HR
IT
Item 7
PRESENTATION
8 Policies, Standards and Procedures
Examples – Future State - HR
Exec Staff
Exec Staff
Board Personnel
Authority
Benefits
Standard
Cash in Lieu
Procedure
Fitness
Reimbursement
Procedure
Recruitment
Standard
Recruitment
Incentive
Procedure
Item 7
PRESENTATION
9 Policies, Standards and Procedures
Examples – Future State - IT
Exec Staff
Exec Staff
Board Information
Technology
Policy
IT Security
Plan
Standard
Password
Protection
Procedure
Clean Desk
Procedure
Informations
Systems Use
Standard
Email Use
Procedure
Item 7
PRESENTATION
10 Next Steps Part I Title of the Page
Review, revise, realign, reassign
48 policies become ~21 policies + standards + procedures Current State
Policy
Consolidate
7 14%
Policy
21 44%
Standard
11 23%
Standard
(Employee
Handbook)
9 19%
FUTURE
Item 7
PRESENTATION
SILICON VALLEY
CLEAN ENERGY
11 Next Steps Part II Title of the Page
Revised policies will be
brought for board adoption
List of retired, realigned
policies will be reviewed
Return annually for policy
updates and review
Ok, 14, 67%
Update, 7,
33%
POLICIES
Item 7
PRESENTATION
©
SILICON VALLEY
CLEAN ENERGY
12 Questions?
Feedback?
Item 7
PRESENTATION