• Subtitle
New SV Clean Energy
PowerPoint Template
Item 3
PRESENTATION
SILICON VALLEY
CLEAN ENERGY
Execute Agreements to
Enable Fourth Prepay
Transaction
Amrit Singh
Finance and Administration Committee
June 2, 2025
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Item 3
PRESENTATION
Purpose
Action: Recommend Board Authorize
CEO to Execute Agreements with
Firms Providing Services to Enable
SVCE to Execute its Fourth Prepay
Main Areas of Discussion
1. Overview of Request
2. Leverage the Prior Prepay Structure
3. Fees for Consultants and Counsel
4. Fiscal Impact
5. Next Steps
6. Appendix
Timeline of First Prepay
Details of First Three Prepays and
Cost Breakdown
Overview of Prepay Structure and
Background Information
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• Except for Moody’s all payments are contingent on
the execution of the transaction.
The agreement with Moody’s will be executed later
when there’s more certainty on the likelihood of a
transaction.
Item 3
PRESENTATION
Recommend the Board Authorize Agreements to Initiate Fourth Prepay Transaction Staff will later seek Board
authorization on the parameters of
the transaction:
Size of Bonds
Savings Threshold
Execution of Transactional
Agreements
Agreements
1. PFM Financial Advisors LLC & PFM Swap Advisors - $275,000
2. Chapman & Cutler (Disclosure/lssuer’s Counsel) - $175,000
3. Ballard Spahr (Bond and Tax Counsel) - $250,000
4. Moody’s Investor Service Inc (Credit Rating) - $321,500 Morgan Stanley Fee Structure (same as that of First Three Prepays):
• Bond underwriting fee of $5.50/bond plus underwriter expenses not to exceed $0.50/bond.
• E.g., For issuance of $1 billion in bonds, with a face value of $1000 a bond, the underwriting fee would be $5.5 million. • At this time SVCE expects the fee to be $4.50/bond with expenses not to exceed $0.20/bond, but is subject to change given deal sizing, structuring and market conditions at the time the bonds are issued. • Energy Service Revenue of $1.10 per MWh
• If floating rate debt is issued, up to a 12 basis point charge on an interest rate swap • Minimal risk to SVCE.
• All costs (underwriting, consultants, and attorneys) are paid from the bond proceeds. • The Board-designated savings target will be net of all costs.
Item 3
PRESENTATION
Recommend the Board Approve Engagement with Morgan Stanley as Prepay Supplier Request Continued
Goal
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How
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• California Community Financing
Authority (CCCFA)
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Minimal Risks
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Item 3
PRESENTATION
Review of Prepay Goal and Structure
Substantial savings with minimal risks
Reduce the cost of power
purchases by leveraging SVCE’s
ability to fund low-cost tax-exempt
debt
Gain competitive advantage
relative to Investor Owned Utilities
(lOUs)
Benefit from the spread between taxable and tax-exempt
interest rates
Use of financially engineered prepay structure*
Bonds not guaranteed by SVCE or
Bonds secured by the contractual rights and transaction cashflows Seasoned team of professionals helps guide, negotiate, and structure the transactions.
"Refer to the appendix for a more detailed overview of the prepay structure Fees (except rating agency) are contingent on the execution of the deal and paid from the bond proceeds Bonds issued are non-recourse to SVCE
SILICON VALLEY
CLEAN ENERGY 5
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Item 3
PRESENTATION
Leverage the Existing Prepay Structure
Recommend the Board Authorize Agreements to Initiate Fourth Prepay Transaction Slides in the appendix provide: Enhance the existing Prepay transaction structure Benefit from several years of effort to establish the structure Timeline of the first Prepay
transaction
Successfully executed three prepays using this structure Combined savings of three completed transactions are about $14 million annually
Details of the SVCE’s Three
Prepays transactions and cost
breakdown
Other CCAs have taken or plan to take advantage of market opportunities to execute Prepays
Overview of the Prepay
Structure
Since the execution of our first Prepay in partnership with EBCE:
3CE, Ava (EBCE), CPA, MCE, PCE, Pioneer, SCP, SDCP, VCE, have executed Prepays
Par Value of CCCFA transactions is over $18 Billion and savings of $100 million/year
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Item 3
PRESENTATION
O RFP Process
Financial Advisor and Energy Prepay Supplier
Financial Advisor
Required by MSRB
Selected PFM Financial
Advisors who provided most
qualified bid
Worked with PFM on 3 prior
deals
Energy Prepay Supplier
The investment bank that structures
the transaction and underwrites the
bonds
A handful of highly qualified and
competitive firms in this space
Selected Morgan Stanley based on:
(a) their proposal, (b) experience
working with SVCE, (c) continuity of
existing settlement structure for
portfolio management efficiencies
Except for Moody’s all payments are contingent on the execution of the transaction.
The agreement with Moody’s will be executed later when there’s more certainty on the likelihood of a transaction.
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Item 3
PRESENTATION
3rd Party Agreements to Initiate Prepay
Expected Cost of 3rd
Party Agreements is
$1,021,500
Firms Role
Proposed Fees for Fourth
Prepav
PFM Financial Advisors
LLC / PFM Swap
Advisors
Municipal Advisor: Advises prepay buyer in
negotiations, required by the Municipal
Securities Rulemaking Board (MSRB), and
on commodity and interest rate swaps.
$275,000
Chapman & Cutler Disclosure and Issuer’s Counsel: Provides legal counsel and prepares official
statement and prospectus
$175,000
Ballard Spahr Bond and Tax Counsel: Represent
bondholders and provide tax opinion on the
transaction
$250,000
Moody’s Investor Service
Inc
Rating Agency: Provides the credit rating for
the bonds $321,500
Total $1,021,500
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0%
10%
20%
30%
40%
50%
60%
% of Load Prepaid - 2021B % of Load Prepaid - 2023B % of Load Prepaid - 2024A % of Load Prepaid - 2025X Item 3
PRESENTATION
Prepay Load Coverage
Can easily cover >50% of load with fourth prepay
% of Load Prepaid
On average:
Prepay 1 covers about 11% of the Load
Prepay 2 covers about 12% of the Load
Prepay 3, covers about 17% of the Load
Total average load coverage is expected to
be around 50-55% of Load
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Item 3
PRESENTATION
O Fiscal Impact
Actual savings depend on market conditions - the spread between taxable and tax-exempt debt rate
Illustrative:
If we get savings of 8 to 10% for a transaction at current commodity prices, this could amount to $4-6 million savings per year
Minimal Risk to SVCE
Fees (except rating agency) are contingent on the execution of the deal and paid from the bond proceeds
Bonds issued are non-recourse to SVCE
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Item 3
PRESENTATION
O Next Steps
Request SVCE Board Approval to Execute Agreements at the June Meeting
Work with parties to structure the transaction (June -August 2025) Seek Board approval on the parameters of the transaction (August 2025)
Size of the Deal and Bond Issuance
Target Minimum Savings Threshold
Seek California Community Choice Financing Authority (CCCFA) Board Approval (August 2025)
Target bond issuance for Q3-Q4 2025. Timing will depend on market conditions.
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Item 3
PRESENTATION
Recommend for Approval
Staff requests that the Finance and Administration Committee recommend that the Board authorize the CEO to approve* or execute the following contracts for services these firms will provide to enable SVCE to execute its fourth Prepay transaction for total cost of $1,300,000, which includes about 10 percent contingency.
1. PFM Financial Advisors LLC & PFM Swap Advisors - $275,000
2. Chapman & Cutler (Disclosure/lssuer’s Counsel) - $175,000
3. Ballard Spahr (Bond and Tax Counsel) - $250,000
4. Moody’s Investor Service Inc (Credit Rating) - $321,500 Staff requests that the Finance and Administration Committee recommend that the Board approve engagement with Morgan Stanley as the Prepay Supplier with the following fee structure:
Bond underwriting fee of $5.50/bond plus underwriter expenses of $0.50/bond Energy Service Revenue of $1.10 per MWh
If floating rate debt is issued, up to 12 basis points charge on interest rate swap * CCCFA may execute
12 Item 3
PRESENTATION
Thank you! / Questions?
13 Oct-2020 SVCE Board Authorizes CEO to enter legal service agreements to finalize Prepayment Transaction (Orrick, Herrington & Sutcliffe and Chapman & Cutler LLP)
Nov-2020SVCE provides Prepay Status Report to Finance and Admin Committee Mar-2021SVCE provides Prepay Status Report to Finance and Admin Committee SVCE provides Prepay Status Report to Executive Committee April-2021SVCE Board Approves Participation in the California Community Choice Financing Authority Joint Powers Authority
Aug-2021The Finance and Admin Committee reviews the Prepay Transaction and votes to recommend Board approval. Board authorizes execution of the first Prepay Transaction subject to parameters including that bonds are not obligations of SVCE, size of the bonds, and minimum savings target.
Sept-2021Sept 9, 2021 bonds priced
Jan-2022 Power delivery under Prepay began
June-2019SVCE presents Prepay Structure Overview Presentation (developed by Goldman Sachs) to Finance and Admin Committee
Aug-2019 SVCE presents a brief verbal update on prepay process to Finance and Admin Committee
Sept-2019SVCE and PFM Financial Advisors provide update on the upcoming RFP process to Finance and Admin Committee
Nov-2019 SVCE provides Prepay RFP Overview to Executive Committee - PFM issues RFP to select Prepay Bank Supplier on behalf of EBCE and SVCE on Nov 12th
- RFP Proposals were due December 5th
Jan-2020 SVCE presents Prepay Structure Overview to Finance and Admin Committee Spring-2020SVCE and EBCE conduct RFP evaluations to select Prepay Bank Supplier July-2020SVCE and EBCE select Morgan Stanley as Prepay Bank Supplier Aug-2020 SVCE provides Prepay Status Report to Finance and Admin Committee Sept-2020SVCE provides Board with Prepay Overview on preparing for a Prepay Transaction
SVCE provides Prepay Status Report to Finance and Admin Committee Item 3
PRESENTATION
Timeline of SVCE’s First Prepay Transaction
14 Details of the First Prepay Transaction
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Item 3
PRESENTATION
Aggregate Principal Bond Amount $1,234,720,000 (SVCE and EBCE combined) Total Bond Proceeds $1,475,895,642.5 (SVCE and EBCE combined) Municipal Bond Rating A1
Green Certification Designated Green Bonds by Kestrel Verifiers Initial Bond Pricing Period
10 years.
After the initial period, bondswill be repriced per the negotiated repricing agreement, and a new discount will be established based on the then prevailing market conditions.
Final Bond Maturity Date February 1, 2052.
Discount Achieved
$4.38 per MWh, about 10% of the energy cost of SVCE’s 3-year transaction initially assigned into the Prepay.
~$1.9 million per year for SVCE during the initial bond pricing period of ten years.
Energy Volume Supported by Bond Proceeds
109 MW, of which SVCE’s share is 50 MW (about 11% of load) and EBCE’s share is 59 MW for approximately the first ten years of the transaction; after that, the same proportional volume split will be maintained between SVCE and EBCE.
15 First Prepay Transaction Cost Breakdown ($000)
Item 3
PRESENTATION
Bond and Tax Counsel: Orrick, Herrington & Sutcliffe 425 Credit Rating: Moody’s
Issuer’s Counsel and Disclosure Counsel: Chapman & Cutler LLP Municipal Advisor: Public Financial Management
Investment Advisor: Public Financial Management Asset Mgmt Trustee: Bank of New York (BNY)
Trustee Counsel: BNY Counsel
Printing Cost
Contingency/Other
Total COI
Morgan Stanley Underwriting
Total
16 Details of the Second Prepay Transaction
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Item 3
PRESENTATION
Aggregate Principal Bond Amount $841,500,000
Total Bond Proceeds $891,418,648.1
Municipal Bond Rating A1
Green Certification Designated Green Bonds by Kestrel Verifiers Initial Bond Pricing Period
6.5 years.
After the initial period, bondswill be repriced per the negotiated repricing agreement, and a new discount will be established based on the then prevailing market conditions.
Final Bond Maturity Date July 1, 2053.
Discount Achieved
$9.77 per MWh, about 10% of the price established for energy deliveries under the power supply contract.
~$4.7 million per year during the initial bond pricing period of 6.5 years.
Energy Volume Supported by Bond Proceeds
~55 MW (about 12% of load; a slight escalation in the latter half of the transaction)
17 300
232.5
200
175
35 30.9
30 3.3
22 16.8
1,045.5
4,359.2
5,404.7
Second Prepay Transaction Cost Breakdown ($000)
Item 3
PRESENTATION
Cost of Issuance (COI) $ in 000’s
Bond and Tax Counsel: Ballard Spahr
Credit Rating: Moody’s
Issuer’s Counsel and Disclosure Counsel: Chapman & Cutler LLP Municipal Advisor: PFM Financial Advisors LLC
Investment Advisor: PFMAM (US Bank)
Trustee: BNY Mellon Corporate Trust
Trustee Counsel: Ballard Spahr
Printing Cost: ImageMaster
Green Bond Second Party Opinion: Kestrel
Contingency/Other
Total COI
Morgan Stanley Underwriting
Total
18 Details of the Third Prepay Transaction
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Item 3
PRESENTATION
Aggregate Principal Bond Amount $1,101,625,000
Total Bond Proceeds $1,165,919,381.75
Municipal Bond Rating A1
Green Certification Designated Green Bonds by Kestrel Verifiers Initial Bond Pricing Period
~8 years.
After the initial period, bondswill be repriced per the negotiated repricing agreement, and a new discount will be established based on the then prevailing market conditions.
Final Bond Maturity Date May1, 2054
Discount Achieved
$11.32 per MWh, about 13.1% of the price established for energy deliveries under the power supply contract.
~$7.7 million per year during the initial bond pricing period of 8 years.
Energy Volume Supported by Bond Proceeds
~77 MW (about 17% of load; a slight escalation in the latter half of the transaction)
19 250
273
175
155
30 41.4
30 4
66 1,041.3
5,712.1
$6,753.4
Third Prepay Transaction Cost Breakdown ($000)
Item 3
PRESENTATION
Cost of Issuance (COI) $ in 000’s
Bond and Tax Counsel: Ballard Spahr
Credit Rating: Moody’s
Issuer’s Counsel and Disclosure Counsel: Chapman & Cutler LLP Municipal Advisor: PFM Financial Advisors LLC
Investment Advisor: PFMAM (US Bank)
Trustee: BNY Mellon Corporate Trust
Trustee Counsel: Ballard Spahr
Printing Cost: ImageMaster
Contingency/Other
Total COI
Morgan Stanley Underwriting
Total
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Item 3
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 a Limited
Assignment Agreement, an energy contract to
Morgan Stanley (MS), Prepay Supplier. MS agrees
to pay the contract price to the 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 as prepayment for energy and related
products that MS will provide over the 30-year
term. Executes Prepaid Agreement.
5. SVCE and CCCFA execute a Power Supply
Agreement, where SVCE pays CCCFA the
contract price less a discount for the energy
delivered by CCCFA.
6. CCCFA uses payments from SVCE to pay interest
and principal payments to bondholders.
Morgan Stanley
(Bank
Supplier)
Prepayment $$$
MWhs+ RECs
o
CCCFA
MWhs + RECs
Contract Price
Less Discount
Contract
Price
MWhs+ RECs
Energy
Supply/PPA
Counterparty
Debt
Service
Non-Recourse
Tax-Exempt
Bonds
SVCE
Energy Supply/PPA
to be "Partially
Assigned"
21 1. Bond Issuance
2. Prepayment
3. Energy Supplier Commodity Swap
4. CCCFA Commodity Swap
5. Project Participant (SVCE)
6. Funding Agreement
7. Assigned PPAs
The cumulative effect of the Prepaid Energy
Sales Agreement, the CCCFA Commodity
Swap, the Power Supply Contract and
related documents enables CCCFA to
receive dependable Energy supplies at a
discount below market prices for sale to the
Project Participant. The resulting monthly
net revenues, regardless of changes in
Energy prices, are expected to be adequate
to pay Debt Service requirements on the
Bonds and program expenses when due.
Item 3
PRESENTATION
Overview of Prepay Structure w/SPV
Project
Participant
Fixed Price
(Monthly’)
Debt Service
CCCFA Energy Supplier
MSCG
The Bonds
PPAs
Index
Price
(Monthly)
Index
Price
(Monthly)
Prepayment
(Upfront)
Energy
(Monthly)
Index
Price
(Monthly)
Energy
(Monthly)
Energy
(Monthly)
Proceeds
[Upfront)
Fixed Price
(Monthly)
Energy
(Monthly)
Index Price
Less
Discount
(Monthly)
Index
Price
(Monthly^
Scheduled
Amounts
(Monthly)
Funding
Recipient
Funding
Agreement
(upfront)
Assigned PPAs
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Item 3
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
Part of the National Energy Policy Act of 2005
Seasoned professionals will help guide, negotiate, and structure the transactions. Fees for professionals are contingent on the completion of the deal and paid from the deal proceeds. 23 • 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:
o Must sell that commodity to their retail end-users that reside within their traditional service area.
• Prepayment transactions are legal and Codified in US Tax Law: Since first prepayments of natural gas were done in the early 1990’s, the IRS issued rules allowing tax-exempt prepayments and Congress enacted legislation specifically allowing the transactions (National Energy Policy Act of 2005; Section 1327).
Item 3
PRESENTATION
MM History and Tax Law Behind Municipal Prepaid
Energy Transactions
New SV Clean Energy
PowerPoint Template
Subtitle
Item 4
PRESENTATION
Stress Test Analyses
SILICON VALLEY
CLEAN ENERGY
Amrit Singh
Finance and Administration Committee
June 2, 2025
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Item 4
PRESENTATION
Purpose
1. Main Areas of Discussion
Present findings of the stress test
analyses
Review of the enterprise risk
management (ERM) framework and
2. 3.
4. 5.
key drivers of financial risks
5-yr Financial Base Case Forecast
Update
Updated projections compared to
Mid-Year
Uncertainties surrounding the
financial projections
Stress test construction
By design, extreme but plausible
Compare the updated base case with
the stress test scenario
Recap key messages and discuss
staff recommendations
Item 4
PRESENTATION
1. Review the
Enterprise Risk
Management
(ERM) framework
and Key Drivers of
Financial Risks
Item 4
PRESENTATION
CD SVCE’s 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.
Funding in alignment with achieving
the strategic focus areas
Organization-wide priorities and
alignment toward achieving the mission
4 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) Item 4
PRESENTATION
Key Components of the ERM Framework
Risk
Register
Risk Matrix
Stress
Tests
• Record of the organization’s risks and opportunities -“Living Document”
• Identify current and additional planned mitigations
• Identify risk owner
• Risk Rubric. Assess the likelihood and consequence of risk events • Calibrate risks
• Identify risk tolerance -level of acceptance
• 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
Past, Current, and Stress Case Modeled Commodity Prices 5 •
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Item 4
PRESENTATION
Review of Key Financial Risk Drivers
Biggest contributor to revenue risk: PCIA and PG&E Generation Rate Uncertainty.
PG&E Gen Rate:
SVCE
discount
O
CD
+-•
CO
Ct
CD
0 LU
O
>
cn
PCIA and PG&E Gen Rate impact SVCE Rates and therefore Revenues Revenues
Revenues decline when prices decline
Loss of revenues far exceeds savings from power purchases Power procurement savings dampened by existing hedges
SVCE has adjusted its energy portfolio to mitigate this impact to the extent possible, and as best estimated by SVCE
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Item 4
PRESENTATION
For the most part, this year’s actual prices and the forecast of next year’s Market prices will impact next year’s rates.
Big Contributor to PCIA and PG&E Generation Rate
Uncertainty is Market Prices
Next Year’s PCIA
& PG&E Gen Rate »
Current Year’s actual
realized Prices &
Forecast of Next
Year’s Market Prices
Can not bank the current year’s margin
Current year’s gain may be returned the following year
through higher PCIA and lower PG&E generation rates
Deviations between actual and forecast costs
are tracked in balancing accounts and trued
up the following year
For financial/reserve planning, greater focus
is placed on the next two years’ projections
2026 Prices 4^ 2026 Prices Jz
2025 Prices^
PCIA
PG&E Rate 4"
SVCE Revenues 4^
2025 Prices nU
^CIA 4^ \
PG&E Rate
SVCERevenues^/
7 ••
Item 4
PRESENTATION
t
2. 5-yr Financial Base
Case Forecast
Update
Updated projections
compared to Mid-Year
Uncertainties
surrounding the
financial projections
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$ Millions FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 Updated Base Case Reserve Balance 556 494 388 321 252 197 Mid-Year Budget Reserve Balance 534 471 446 465 453
Change 22 23 -58 -144 -201
Item 4
PRESENTATION
Reserve Outlook Change from Mid-Year Budget
Comparing Base Cases
Forward market price changes contribute to major
differences between the Mid-Year Budget and the
Updated Base Case
Forward Price: Reflects the current market price
for future delivery of products (Energy, rps,ra).
Forward price data is from external sources
Days Cash on Hand (DCOH)
Mid-Year Budget - DCOH (Inc. Unspent Earmarked Funds)*
Updated Base Case - DCOH (Inc. Unspent Earmarked Funds)* *
Earmarkedfundsare unspentSVCEProgram Funds andRemainingBuilding Funds. The earmarkedfundsare projectedto be nearly zero by the endof FY 2028-2029. 9 Market Price Change: Mid Year Budget (1/31) vs Updated Base Case (4/18) 2025 2026 2027 2028 2029 2030
Energy Price Change -6% 0% -5% -7% -5% -2%
Renewable Portfolio Standard (RPS) Price Change -44% -47% -46% -44% -19% -10% Resource Adequacy (RA) Price Change 0% -40% -4% 0% 0% 0% •
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Item 4
PRESENTATION
1 Market Price Change
Forward prices for products further out
in time are less liquid
Less volume traded
Higher Bid/Ask Spread
Energy prices are more liquid than RPS
& RA
Risk or distribution of prices grows over
time
Given the PCIA dynamic discussed
earlier, in managing our risks, we are
concerned with the left side of the
distribution, or prices going lower
These uncertainties are present in our financial projections The uncertainty in RPS and RA prices in recent years worked in our favor by producing higher-than-expected financial results Realized prices came in higher than expected
10 Item 4
PRESENTATION
Financial
Position
(Millions)
Growing Reserves in High Price Conditions
$600.0
$500.0
$400.0
$300.0
$200.0
$100.0
$0.0
($100.0)
The uncertainty in
RPS and RA prices in
recent years worked
in our favor.
FiscalYear
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Item 4
PRESENTATION
Other Uncertainties: Modeling & Other Risks
Financial projections are made with the best available data and information Market (Forward) Prices
NewGen Strategies & Solutions model to forecast PCIA and PG&E Generation Rates PCIA is a “black box”
PG&E generation portfolio data needed to forecast PG&E generation rates are not available SVCE power supply portfolio positions and other operating expenses can change PG&E, with PCIA and its generation portfolio data, cannot accurately predict next year’s rates when it issues its mid-May ERRA forecast Regulatory and Legislative changes have a significant impact PCIA Order Instituting Rulemaking (OIR) Proceeding
Track One decision can have a significant impact on next year’s rates Track Two decision could further introduce changes affecting future year’s rates 12 •
Item 4
PRESENTATION
3. Stress Test
Construction
By design, they are
extreme, but
plausible scenarios
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Item 4
PRESENTATION
Financial Stress Test Description & Key Assumptions
Forward Energy Prices Collapse
Around one percentile level or less
Reasonable in terms of relative comparison to
observed commodity prices resulting from the
2008 financial crisis (explained further in latter slides) Renewable Portfolio Standard
(RPS) and Resource Adequacy
(RA) Prices Drop as well
Power Price Base Case and Stress Case
NP15 Stress Test Forward
RPS $/MWh
RA $/MW-Day 2026 2027 2028 2029
Base Case RPS MPB Stress Case RPS MPB
NP15 Historical Spot Settle NP15 Base Forward
—Base Case RA MPB ^—Stress Case RA MPB 14
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Item 4
PRESENTATION
* Financial Stress Test Description- cont’d
PCIA Uncertainty
A proceeding reopened this year, which further increases financial uncertainty Both stress and base case are based on the current methodology Customer Discount for both the Base Case and Stress Case Current 4% customer discount continues to the end of Dec. 2025 (this includes 3 months of the next fiscal year), along with monthly low-income customer bill credits
After Dec. 2025, the customer discount is modeled at 1% One-time bill customer credit, approved for the current fiscal year, of $35 million is issued in August 2025 Other Potential Business Operating and Regulatory Risks As modeled in prior stress tests, staff continued to model the requirement of a one-time cash draw equivalent to two months of procurement under the very low-price scenario as a proxy for other potential business operating and regulatory risks -- $70 million
Customer Un-collectables Increase
Bad debt is 0.75% in base case and 2% in stress case
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Item 4
PRESENTATION
Modeled Stress Energy Prices
Demonstrating the reasonableness of modeled stress prices by comparing to the relative observed natural gas price collapse from the 2008 financial crisis During a relatively short period of time, commodity prices (oil, natural gas, and electricity prices) collapsed (both on the forward and spot markets) A more relevant comparison for stress testing would appear to be comparing forward electricity prices prior to the collapse to the actual spot market prices Forward electricity prices were not as liquid as natural gas Staff could not obtain these prices for this comparison Natural gas prices, as shown in the next slide, are highly correlated with electricity prices
16 Item 4
PRESENTATION
$/MMBtu
Natural Gas and Electricity Prices are Highly Correlated Gas and Power are Correlated
$14 $300
17 $/MWh
Item 4
PRESENTATION
$/MMBtU
Financial Crisis Period Natural Gas Price Collapse
Forward as of Dec 2007 Forward as of Dec 2006 Forward as of May 2008 HH Historical Spot Settle 18 Item 4
PRESENTATION
CD Modeled Energy Price Collapse
The modeled 47% energy price collapse is within the observed 50-65% decline in natural gas prices during the 2008 financial crisis period.
47%
Drop
NP15 Historical Spot Settle NP15 Base Forward NP15 Stress Test Forward 19 Item 4
PRESENTATION
QfJ Past MPB, Current, and Stress Case Modeled RPS and System RA Prices
Modeled stress test price declines relative to the modeled current forward prices, on average, for RPS is 62%, and for RA is 31%
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
—Historical RPS MPB Base Case RPS MPB —Stress Case RPS MPB System RA MPBs
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Historical RA MPB Base Case RA MPB —Stress Case RA MPB
20 Item 4
PRESENTATION
4. Comparing the
Updated Base
Case with the
Stress Test
Scenario
•
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$ Millions FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 Stress Test Scenario Reserve Balance 560 449 253 103 -48 -180 Updated Base Case Reserve Balance 556 494 388 321 252 197 Change 4 -45 -135 -217 -300 -377
Item 4
PRESENTATION
Reserve Outlook Under Base and Stress Scenario
Updated Base Case (as of 4/is> - SVCE draws ~$70 million a year on average from reserves under the current
operating framework
All customer rates are at a competitive advantage (1%)
relative to PG&E Rates
Programs are funded at 2% of revenues
The current earmarked funds, mostly for programs,
currently around ~$100 million, are spent by the end of fiscal year 2028-29
Financially, SVCE is well-positioned
DCOH remains above the minimum threshold of 120
DCOH remains ~350 through the end of Sept. 2027
*
Earmarkedfundsare unspentSVCEProgram FundsandRemainingBuilding Funds. The earmarked fundsare projectedto be nearly zero by the endof FY 2028-2029.
DaysCashon Hand (DCOH)
Updated Base Case - DCOH (Inc. Unspent Earmarked Funds)* StressTest - DCOH (Inc. Unspent Earmarked Funds)* Under the stress case scenario
DCOH remains above the minimum through the end of
Sept. 2027, and starting late 2028 or around the start of 2029, funds start getting depleted
22 Item 4
PRESENTATION
5. Recap Key
Messages and
Discuss Staff
Recommendations
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Item 4
PRESENTATION
O Recap of Key Messages
SVCE regularly assesses and prioritizes risks and opportunities (ERM, Strategic Focus Areas, Budget) PCIA and PG&E generation rates have a big impact on SVCE’s financial health Uncertain market prices significantly impact them
Lots of uncertainty in financial planning, and uncertainty increases further out in time Market prices, more illiquid RA and RPS markets, modeling with limited data, regulatory and legislative changes, including PCIA OIR Can not bank on the current year’s margin
Because rates are based on forecasted market prices, gains in one year could be returned the following year via higher PCIA and lower PG&E generation rates when market prices are trued up
Greater focus on the next two years’ financials
Stress tests by design are extreme but plausible
Attempted to demonstrate the plausibility and reasonableness of the stress test construction through comparisons with data from the financial crisis period
Next two fiscal years (Oct 2025 to Sept 2027)
Under the base case, reserves at or above the target of 350 DCOH Through the end of the 5-year forecast period (Sept 2030), at 153 is above the minimum target of 120 DCOH Even under the extreme but plausible stress test scenario, reserves are at 193, above the minimum threshold of 120 DCOH through the end of the next two fiscal years
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Item 4
PRESENTATION
CD Recommendations
With forecast reserves remaining at or above
350 DCOH over the next two fiscal years, no
major changes are recommended for
developing the budget for approval in
September
As in the past, adjust the budget in
December when there’s more certainty on
next year’s rates
Potential financial levers and areas of
focus:
Further increase financial liquidity given
greater uncertainty
Bank Line of Credit
Reassess rate discounts and rate
design along with customer product
offerings
With a 5-year outlook that suggests a shift
from contributing to drawing from reserves,
staff will assess the financial levers
25 Item 4
PRESENTATION
PM Comparison of Sept Adopted Budget Revenue with
Mid-Year Budget Adjustment
For the most part, differences reflect revenue projections using forecast PCIA and PG&E generation rates and the actual rates adopted in January* $(50)
2020Sept 2021Sept 2022Sept 2023 Sept 2024Sept
Difference $(13) $46 $40 $112 $82
Budget Adopted in September $264 $339 $484 $440 $441
Mid Year (March) Adjusted Budget $252 $386 $524 $553 $524 * While rate projections will contribute to the largest differences, other factors could also contribute, such as realized load or changes in load forecast, liquidated damages collected, and GreenPrime premium changes. 27 Item 4
PRESENTATION
SVCE
Gen
Rate
%
Over
PG&E
Gen
Rate
O DCOH Target Maintenance Rate Impact
(Illustrative)
Rate % Over PG&E to Maintain Target 5 Year DCOH
40%
35%
30%
25%
20%
15%
10%
5%
0%
-5%
Base Case Stress Test Case
120 DCOH 180 DCOH 240 DCOH
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Item 4
PRESENTATION
1 Financial Stress Test Result Summary
Stress TEST
No sale of any excess monthly RA
2025 $35MM customer bill credit in August
2025
1% discount to PG&E rates for 2026 forward
Bad debt is 2%
Business and regulatory uncertainty of
$71MM (2 months of costs)
Investment yields in the 3-4% range year-over-year
2% of Revenues represented in ‘other cost’ to
fund programs
No CARE/FERA monthly bill credit
Current Portfolio I Pl Prices | OperatingLoad
BFY2025 2026 2027 2028 2029 2030
Revenues $ 186 $ 215 $ 148 $ 198 $ 229 $ 253
Power Supply Costs $ 127 $ 269 $ 282 $ 294 $ 313 $ 333
Operating Margin $ 59 $ (55) $(135) $ (96) $ (84) $ (80) Other Costs S 31 $ 56 $ 61 $ 54 $ 67 $ 53
Counterparty Collateral Outflow $ - $ - $ - $ - $ - $ - Net Contribution to Reserves $ 28 $(111) $(196) $ (150) $(151) $(133) Reserve Balance $ 560 $ 449 $ 253 $ 103 $ (48) $(180)
Reserve after Risk Adjustment $ 377 S 182 AJ(252)
Days Cash on Hand 4231 193 34 (114) (238]
Financial Stress Test Case Days-Cash-On-Hand Reserve Levels 30 Market Price and Market Price Benchmark (MPB) Change: Mid Year Budget (1/31) vs Updated Base Case (4/18) 2025 2026 2027 2028 2029 2030
Energy Price Change -6% 0% -5% -7% -5% -2%
Renewable Portfolio Standard (RPS) Price Change -44% -47% -46% -44% -19% -10% Resource Adequacy (RA) Price Change 0% -40% -4% 0% 0% 0% RPS Forecast MPB Change % 0% -2% -46% -44% -19% -10%
RPS Final MPB Change % -4% -38% -46% -44% -19% -10%
System Forecast RA MPB Change % 0% -5% -4% 0% 0% 0%
System Final RA MPB Change % 0% -35% -4% 0% 0% 0%
Item 4
PRESENTATION
CD Forward Market Price Change
(Comparing Prices from Mid-Year Budget with those from the Updated Base Case) 31 Item 4
PRESENTATION
Price Trends
RPS 2026
1/2/2025 2/2/2025 3/2/2025 4/2/2025 5/2/2025
32 CCA Min Target Max Actual Actuals as of
SVCE 120 350 500 339 Mar-25
SCP 180 280 365 280 Nov-24
MCE n/a 240 n/a 291 Mar-24
EBCE (AVA) 91 183 274 265 Dec-23
PCE n/a 180 250 393 Dec-24
SJCA n/a 180 n/a n/a n/a
SDCP n/a 180 n/a 242 Jul-24
CPA 109 150 n/a 181 Dec-24
3CE n/a 183 281 226 Sep-21
min
Target Max Actual Min Max Range
SVCE with actuals as of Mar-25350 500 339 380
SCP with actuals as of Nov-24280 365 280 185
MCE with actuals as of Mar-24240 291
EBCE (AVA) with actuals as of Dec-23 182.5 273.75 265 182.5 PCE with actuals as of Dec-24180 250 393 250
SJCA with actuals as of n/a 180
SDCP with actuals as of Jul-24180 242
CPA with actuals as of Dec-24150 181
3CE with actuals as of Sep-21182.5 281 226 281
2025 Update
0 100
200
300
400
500
600
SVCE with
actuals as of
Mar-25
SCP with
actuals as of
Nov-24
MCE with
actuals as of
Mar-24
EBCE (AVA)
with actuals
as of Dec-23
PCE with
actuals as of
Dec-24
SJCA with
actuals as of
n/a
SDCP with
actuals as of
Jul-24
CPA with
actuals as of
Dec-24
3CE with
actuals as of
Sep-21
Peer CCAs Days Cash on Hand
Min Max Range Target Actual
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Item 4
PRESENTATION
Days Cash on Hand Comparison
The actual DCOH shown
for SVCE excludes unspent
earmarked funds ( ~$100
million), mainly allocated
but unspent program
dollars. The DCOH
including earmarked funds
is 435.
Some CCAs hold additional
funds in rate stabilization
funds that may not be
accounted for in the table.
The table may or may not
include bank lines of credit
for the other CCAs
34 New SV Clean Energy
PowerPoint Template
Subtitle
Item 5
PRESENTATION
SILICON VALLEY
CLEAN ENERGY
Amrit Singh
Finance and Administration Committee
June 2, 2025
FY 2025-26 Budget
Framework
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Item 5
Purpose
PRESENTATION
Discuss Budget Framework
Seeking high-level feedback/validation
on principles and assumptions
Budget numbers to be computed in
June/July based on feedback
Methodology could be tweaked if
results from actual numbers do not
align with expectations
1. Revenue Modeling
PCIA and PG&E Gen Rate
Uncertainty
2. Reserve Targets
3. Customer Discount Rate,
Additional Funding for Programs,
and Set Aside for Reserves
4. Power Supply Costs
5. Other Cost Drivers
Item 5
PRESENTATION
FY25-26 Budget Ready for Review in August
Budget Framework Full-Year Update
May June August August September
Adjusted December Budget’
Oct 1st November December February
3 Discuss the high-level
budget framework
with the Finance and
Admin Committee
Review the mid-year
budget with the Finance
and Admin Committee
Present the mid¬
year budget to
the BOD for
approval
Present the
adjusted
budget to the
BOD for
approval
Review adjustments to the
budget to reflect updates to
PCIA and PG&E gen rate
assumptions with the Finance
and Admin Committee
Fiscal Year
Start
The BOD adopts the budget
and agrees to revisit December
when there would be more
certainty on PG&E Gen and
PCIA rates
Discuss the high-level
budget framework with
the BOD
Review the draft budget Present the draft
with the Finance & budget to the BOD
Admin Committee
Mid-Year Budget”
March
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Item 5
PRESENTATION
Revenue Forecast Depends on PG&E Generation and PCIA Rates PG&E 2025 Gen
c
cn
CD
E
o
to
O
LU
O
Rate: 15.17 c/kWh*
4% SVCE discount
* All rates are weighted for SVCE load.
** Power Charge Indifference Adjustment
(PCIA) is a charge our customers pay to PG&E
so that PG&E can recover commitments made
on their behalf when the customer was part of
PG&E’s portfolio.
Issue: Rate Uncertainty Staff Recommendation Implications/Reasons PG&E filed its 2026 ERRA
forecast on May 15 with
preliminary 2026 PG&E
generation and PCIA rate
forecasts
PG&E will update this
forecast in the fall after
CPUC issues market price
benchmarks (MPBs). CPUC
normally adopts the rate in
December based on this
update
Lots of Uncertainty!
PCIA Changes
Energy Price Volatility
Market prices have
dropped below those
used by PG&E in the
ERRA forecast
Use the latest market data in the Cal-CCA/NewGen Strategies model that will be updated to calibrate to the
2026 ERRA forecast (non-price data)
PG&E’s ERRA update seems to include
regulatory rule interpretations favorable to
them
If these interpretations do not prevail, this
impact could increase their generation rate
from those shown in their forecast
Key Model Input: Forecast MPBs
Power Prices - market traded forward
prices
Renewable Portfolio Standard (RPS)
and Resource Adequacy (RA) Prices
Illiquid markets
CPUC established a
methodology for MPBs
SVCE attempts to forecast
MPBs with limited data
Uses the latest data to
adjust rates forecasted by
PG&E
Better aligns revenues
with power supply costs
used in the budget
Primarily for budget¬
setting purposes
Revenues will be
adjusted in December
when there’s more
certainty about rates
Customer rates and other
key decisions dependent
on financial projections
can be made by the
Board in December when
there’s better PG&E and
PCIA rates data
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Item 5
PRESENTATION
2026 Revenue Projections: Highly Uncertain
Probable Scenarios
Staff’s attempt to model probable
scenarios results in a Fiscal Year 2025-26
revenue forecast ranging from $280
million to $375 million
Note the customer rates decline in all
scenarios relative to current rates (~15% to
30%)
Under some scenario comparisons (2
compared to 3, and 4 compared to 5), customer
rates stay the same, but SVCE revenues
drop. In these scenarios, costs are shifted
from PG&E bundled customers to SVCE.
These estimates will change as more
information becomes available from the
PCIA regulatory proceeding, and from
market price updates
The best estimate will become available
towards the end of the year when the
CPUC issues MPBs, which are expected
to incorporate PCIA changes from Track 1
of the regulatory proceeding, and PG&E
files updated rates using those MPBs
2 PG&E 2026 ERRA
Forecast
i% SVCE discount
tn
£0
ID
0)
Illustrative:$520 M
$375M
PCIA 1.02c/kWh
w
tn
IO
co
o
LU
O 0>
o'
o
re
O'
0)
0 L1J
U
o
a
O'
a>
0 <D
0 Cl
<4
<u
E
o
PG&E Gen Rate:
12.79 C/kWh
a>
E
o
to
Q
LU
0 >
0 2026 FY Revenue $445M Comparisonat 2025rates. Scenarios:
SVCE 2026 Rate
Forecast <s/16)
2025 (current) Rate"
PG&E Gen Rate:
15.17 0/kWh
3 5
SVCE 2026 Rate
PG&E Gen Rate:
SVCE discount
O1
m
<u CM
0 $345M $300M $280M
0 UJ
0 o
to
Ur
re
o'
<u
0 Forecast with
Potential PCIA
Changes (5/16)
SVCE 2026 Rate
Forecast with Potential
PCIA Changes and
Preliminary
Calibration to ERRA
Forecast (5/16)
PG&E Gen Rate:
SVCE 2026 Rate
Forecast with
Preliminary
Calibration to
ERRA Forecast
(5/16)
PG&E Gen Rate:
10.89 e/kWh
The rates and illustration above exclude minor franchise fees (0.1 d/kWh), which are accounted for in the revenue projections.
These scenarios and their impact on rates and revenues are based on the best available information, market data, and the CaICCA/NewGen Strategies & Solutions model, with staff ‘s approximations to estimate the impact of certain key variables.
The PCIA Track 1 proposed decision came out on May 23, 2025, and staff did not have sufficient time to review the decision.
Staff plans to discuss preliminary findings at the meeting. For developing the annual fiscal year budget, staff will use an updated NewGen Solutions model incorporating the latest information as of the budget preparation date. •
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Item 5
PRESENTATION
Issue: Update Reserve Targets Current Methodology Proposal Ensure SVCE maintains sufficient
reserves to manage risks such as
those modeled under the stress
test analyses
If adverse conditions materialize,
allow for at least 120 days to
reshape the strategy and secure
additional liquidity
The upper reserve target enables
the agency to take advantage of
good margin years to manage risks
over a 5-year period
Target to keep reserves above
120 Days of Cash On Hand
(DCOH) for FY 2025-2026 and FY
2026-2027 under the modeled
stress scenario
Set the upper reserve target such
that over the next five fiscal years,
reserves do not fall below 90
DCOH under the modeled stress
scenario
Given the current financial outlook, which is
driven by a combination of unusually
uncertain dynamics (regulatory, high price volatility, modeling assumptions, and insufficient market price or illiquid products such as RPS and RA), staff recommends not updating the
reserve targets.
Stress test analyses would imply raising the
upper target from 500 to ~800 DCOH;
however, the new implied target level of 380 is
close to the current target of 350 DCOH
Changing the target has no practical
implication, given that the financial outlook
does not support contributing to reserves
Stress test is an important factor, but other
considerations, such as guidance from credit
rating agencies, also matter.
Current targets support such guidance
6 •
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Item 5
PRESENTATION
Additional Funding for Programs and Customer Discounts
1% customer discount over 12 months of
2025 is ~$5.5 million
Monthly Average Bill Savings of 1%
Discount:
Residential - ~$0.80
Small Commercial - ~$2.80
Medium Commercial -~$35
Staff Recommendation Implications/Reasons
Continue to provide
competitively-priced and
high-valued services to
SVCE customers
Keeping reserves at or
above target levels ensures
SVCE can withstand adverse
risk scenarios and helps
maintain/improve credit
ratings
Cost-of-service includes
funds needed to cover
operations, meet reserve
targets, and fund
decarbonization programs
Funds not needed to cover
cost-of-service flow to
customers via lower SVCE
rates (discount to comparable
PG&E rates)
Issue: Balancing
Priorities
Keeping the discount rate at
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
To be developed later after
completing the budget analysis
Likely to keep current discount
through the end of this year
Recommend preliminary rate
recommendations for next year
The Board can change the
budgeted customer rate at the
December meeting when there’s
better data on the likely 2026
PG&E Generation and PCIA rates
Staff may also present additional
customer rates and financial
strategies depending on
outcomes from the PCIA
Proceeding and potentially others,
and further energy market/price
changes
7 •
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Item 5
PRESENTATION
(rj Power Supply Expenses
("90% of Expenses)
Issue: Volatile Prices Staff Recommendation Implications/Reasons Power prices are very volatile and have
declined significantly.
In addition to power price volatility, recent
volatility in RA and RPS prices makes budget
projections highly uncertain
Budget will be developed based on a
snapshot of market prices in June/July
2025
Contract delays/renegotiations further add
uncertainty
Continue hedging to current ERM (Energy Risk
Management) targets
In 2025, with Board approval of the Energy Risk
Management Policy update, staff incorporated
estimated contributions towards hedges from
PCIA and PG&E Gen Rate
Staff will continue to further refine methodologies
and update the estimated parameters
SVCE’s clean policy
For 2025, given the strong hydro year, SVCE is
expecting to be at 106% clean portfolio position
At-risk contract delays can require the
purchase of additional clean resource
attributes
For 2026, contract delays can impact the need
for additional clean resource attributes. Staff is
actively tracking the need and will look to fill
those positions as they arise, and will budget for
this potential need.
Balance the customer value
proposition of providing clean
energy with greenhouse gas
reduction benefits.
8 •
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Item 5
PRESENTATION
Other Costs
(Staffing, Cost of Living/Merit, Operations)
Status Staff Recommendation Look Ahead
Hire identified roles from mid-year budget
approvals, and continue to assess staffing
needs semi-annually.
3 hires since October 2024
5 new positions added in Midyear
6 vacancies (4 new and 2 backfills)
Adjust employee salaries for cost-of-living
and merit/promotions
Current budgeted headcount of 70 (67 FT/ 3
PT)
Adjustment for COLA
Propose to continue using the 6-month
(Jan - June 2025) rolling average of SF
Bay Area CPI- current trailing 6-month
average is 2.45%
Additional increases for merit and promotions
based on the CEO’s discretion
CEO discretion applied depending on
employee pay relative to market range,
performance, and date of hire
Continuing to evaluate staffing levels to:
Create effective work environment for new
building
Adequately resource for rate design and
monitoring
Reduce the high level of existing employee
workload
Advance strategic focus area goals
Create organizational depth for business
continuity
Continue to invest in cybersecurity
preparedness, aligned with mitigating risk with
Data Team’s cloud initiatives and data security.
9 •
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Item 5
PRESENTATION
Next Steps
Further analyze PG&E’s recently issued
ERRA forecast of 2026 generation and
PCIA rates, and CPUC’s proposed
decision on PCIA Track One proceeding
Update changes to PCIA methodology
from the Proposed Decision/Final Decision
Present draft budget for Finance
Committee review in early August and
then to the Board
The board adopts the budget in
September
May June August August September
Oct 1st November December February March
FY25-26 Budget Ready for Review in August
Discuss the high-level
budget framework
with the Finance and
Admin Committee
Review the mid-year
budget with the Finance
and Admin Committee
Discuss the high-level
budget framework with
the BOD
Review the draft budget Present the draft The BOD adopts the budget with the Finance & budget to the BOD and agrees to revisit additional Admin Committee expenditures later in the year
when there would be more
certainty on PG&E rates
Fiscal Year Review adjustments to the Present the
Start budget to reflect updates to adjusted
PCIA and PG&E gen rate budget to the
assumptions with the Finance BOD for
and Admin Committee approval
Present the mid¬
year budget to
the BOD for
approval
10 Item 5
PRESENTATION
Thank you! / Questions?
11