1 New SV Clean Energy
PowerPoint Template
Subtitle
Stress Test Analyses
Scott Wrigglesworth
Amrit Singh
Finance and Administration Committee
May 28, 2026
Item 3
PRESENTATION
2 Main Areas of Discussion
1. Review of the enterprise risk
management (ERM) framework and
key drivers of financial risks
2.5-yr Financial Base Case Forecast
Update • Updated projections compared to
Mid-Year
• Uncertainties surrounding the
financial projections
3. Stress test construction • By design, extreme but plausible
4. Compare the updated base case with
the stress test scenario
5. Recommendations
Purpose
Present findings of the stress test
analyses
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PRESENTATION
3 1. Stress Test is Part
of SVCE’s
Enterprise Risk
Management
(ERM) framework
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PRESENTATION
4 Key Components of the ERM Framework
Risk
Register
• Record of the organization’s risks and opportunities – “Living Document”
• 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) Item 3
PRESENTATION
5 PCIA and PG&E Gen Rate impact 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
• 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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6 Big Contributor to PCIA and PG&E Generation Rate
Uncertainty is Market Prices
For the most part, this year’s actual prices and the forecast of next year’s Market prices will impact next year’s rates . • 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
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7 2. 5-yr Financial Base
Case Forecast
Update
• Updated projections
compared to Mid -Year
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8 Reserve Outlook Change from Mid -Year Budget
Comparing Base Cases
$ Millions BCFY 2026 CFY 2027 CFY 2028 CFY 2029 CFY 2030 CFY 2031 Updated Base Case Reserve Balance 544 316 308 268 228 228 Mid-Year Budget Reserve Balance 492 292 271 205 154 N/A Change 52 24 37 63 74 N/A
* Earmarked funds are unspent SVCE Program Funds and Remaining Building Funds. • Mid-year budget converted to calendar fiscal
year (CFY) convention
• Reserves and Days Cash on Hand (DCOH)
improve from the Mid -year projections
• 2026 projections improve from lower
expected Financial Security Requirement
(FSR)* and power supply costs resulting
from lower market prices
• Future years’ improvements result from a
reduction in power supply expenses from
updated portfolio positions
* SVCE provides FSR to PG&E because PG&E serves as
the Provider of Last Resort (POLAR) for SVCE customers
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9 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 had a significant impact on 2026 rates due to change in rules around RA MPBs • Track Two and Track Three decisions could further introduce changes affecting PG&E rates for future years Item 3
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10 3. Stress Test
Construction • By design, they are
extreme, but
plausible scenarios
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11 Financial Stress Test Description & Key Assumptions
• Forward Energy Prices Collapse
• Around one percentile level or less (P1)
• 44% drop from the current low forward prices
• Reasonable in terms of relative comparison to observed commodity price drops from the 2008 financial crisis
• Renewable Portfolio Standard (RPS) and Resource Adequacy (RA) Prices Drop as well
• 72% drop for RPS and 24% drop for RA from the current low forward prices
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12 2008 Financial Crisis Period Natural Gas Price
Collapse
50 to
65%
Drop
Actual realized prices were much lower than the forwards prior to the collapse Historical Natural Gas Forwards before price collapse
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13 Current Market Price Collapse
Prices are currently in a drawdown roughly equivalent to the 2008 financial crisis. -57%
-86%
-79%
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14 Are Current Market Prices Already at Stressed Level? • Previous slides demonstrate that, from recent high prices, the current market prices are at stressed levels
• At these current prices, our base 5 -year financial projections have deteriorated significantly • Why the additional stress test with further collapse in prices? • Prudent risk management should consider the possibilities that financials can still worsen • Do not know if prices have reached a bottom
• During the 2008 crisis, prices kept falling beyond what appeared initially as low • “Black Swan” events can cluster and cascade
• New market dynamics – renewables with zero marginal cost • Stress scenarios are to test our financial resiliency and are not a prediction or forecast • Stress tests are designed to be extreme but plausible • Current collapse in prices demonstrates the plausibility of our past stress tests Item 3
PRESENTATION
15 Financial Stress Test Description - cont’d
• PCIA Uncertainty
• Ongoing PCIA proceeding 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 • Customer discount is modeled at 1%
• FSR
• Staff modeled the FSR postings based on the maximum within each year and assumed cash wasn’t returned until the following year
• Maximum posting of $69m in the base case and $46m in the price collapse scenario (both in 2027) • Customer Un -collectibles Increase
• Bad debt is 0.75% in the base case and 2% in the stress case Item 3
PRESENTATION
16 CPUC Procurement Order Stress Scenario
• CPUC procurement order for expected data
center load growth
• Stress scenario assumes that the load doesn’t
materialize, leading to stranded costs
• In this case, the order would negatively affect
power market prices, causing MTM losses
• Added hypothetical portfolio of PPA’s to
portfolio assuming a ramp up of 33%
requirement in 2030, 67% in 2031, and 100%
from 2032 onwards
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17 Affordability Focus Stress Discussion
• Heightened discussion in recent years on the
importance of power affordability to customers
• Increasing public pressure to decrease electricity
rates
• Political, Regulatory, Legislative and/or Customer
interests
• Can occur both in isolation and in conjunction with
other stress scenarios
• Risk mitigation: monitor sentiment closely,
especially as 2026 election approaches
Note: Staff determined that too much uncertainty remains to assert a quantitative stress on this topic.
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18 PCIA Reopening Stress Discussion
• Ongoing CPUC proceedings on amendments to
PCIA calculation
• Currently three tracks that address RA MPB,
REC’s vintages, and wholesale changes
• Impacts could be across a spectrum of positive
to negative for CCAs
• Relatively uncorrelated with other stress
scenarios
• Risk mitigation: SVCE staff actively engaged in
OIR proceedings
Note: Staff determined that too much uncertainty
remains to assert a quantitative stress on this
topic.
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19 4. Comparing the
Updated Base
Case with the
Stress Test
Scenarios
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20 Reserve Outlook Under Base and Primary Stress Scenario: P1 Price Collapse • Updated Base Case - SVCE draws ~$63 million a
year on average from reserves under the current
operating framework
• Financially, SVCE is well -positioned to continue to
monitor market developments and implement any
of the financial levers that staff have been
developing with the Finance and Administration
and the Executive Committees and with the Board
of Directors.
• Under the base case scenario
• DCOH remains above the minimum threshold of 120
• DCOH remains ~279 through the end of 2028
• Under the stress case scenario
• DCOH remains above the minimum only through the
end of 2028 and falls below it from 2029 onwards
$
Millions BCFY2026 CFY2027 CFY2028 CFY2029 CFY2030 CFY2031 Primary Stress Scenario: P1 Price
Collapse Reserve Balance 564 264 147 (9) (136) (251)
Updated Base Case
Reserve Balance 544 316 308 268 228 228
Change 20 (53) (162) (276) (364) (479)
Note: DCOH and reserve balances exclude cash from projected FSR postings.
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21 Reserve Outlook Under Alt. Stress Scenario: Procurement Order • Identical assumptions to price collapse stress scenario (P1 prices) except for the addition of hypothetical PPA’s
• 33% of total order MW in 2030 and 67% in 2031
• Added hypothetical PPA’s to current portfolio:
• Geo: 20 MW
• Solar: 130 MW
• OOS Wind: 20 MW
• BESS: 130 MW
• Modeled after current PPA assets
• Stranded cost impact of the unfulfilled load:
• ~$20m increase in power supply costs in 2030 and ~$38m in 2031
• 2032 and beyond (ongoing) is approximated at ~$57m/yr based on P1 price collapse scenario prices
• Under the stress case scenario
• Lower reserves than the price collapse scenario from 2030 onwards
• DCOH remains above the minimum only through the end
of 2028 and falls below it from 2029 onwards Note: DCOH and reserve balances exclude cash from projected FSR postings.
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22 5. Recommendations
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PRESENTATION
23 Recommendations
• With 2027 projected to be the worst financial year, monitor market developments shaping the outcome of 2027 PCIA and PG&E generation rates and changes in 5 -year forward market prices
• The 2027 budget will also be up for approval in December, when there’s more certainty on next year’s rates
• Seek Board approval of the Financial Levers Playbook and implement as Necessary
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24 New SV Clean Energy
PowerPoint Template
Subtitle
Appendix
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PRESENTATION
25 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 (ERM)
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26 FSR Assumptions
In the updated base case and all stress tests, EOY FSR postings are based on the required postings from January 1 st in the following year Item 3
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27 Modeled Energy Price Collapse
The modeled 44% energy price collapse is within the observed 50 -65% decline in natural gas prices during the 2008 financial crisis period.
44%
Drop
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28 Updated Base Case Result Summary
Base Case as of March 21
• Sale of any excess monthly RA
• 1% discount to PG&E rates
• Bad debt is 0.75%
• FSR posting of up to ~$69m (in 2027)
• Investment yields in the 3 -4% range
year-over-year
• 2% of revenues represented in “other
costs” to fund programs
• No CARE/FERA monthly bill credit
Updated Base Case Days -Cash -On-Hand Reserve Levels
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29 Primary Stress Test Result Summary
Price Collapse Stress Scenario – P1 Prices
• No sale of any excess monthly RA
• 1% discount to PG&E rates
• Bad debt is 2%
• FSR posting of up to ~$46m (in 2027)
• 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
Financial Stress Test Case Days -Cash -On -Hand Reserve Levels Item 3
PRESENTATION
30 Alt. Stress Test Result Summary
Price Collapse Stress Scenario – P1 Energy, Historical Low RA, RPS, CF Prices • No sale of any excess monthly RA
• 1% discount to PG&E rates
• Bad debt is 2%
• FSR posting of up to ~$58m (in 2027)
• 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
Financial Stress Test Case Days -Cash -On -Hand Reserve Levels Item 3
PRESENTATION
31 Alt. Stress Test Result Summary
CPUC Procurement Order Stress Scenario
• Hypothetical PPA’s added to portfolio
• P1 prices
• No sale of any excess monthly RA
• 1% discount to PG&E rates
• Bad debt is 2%
• FSR posting of up to ~$46m (in 2027)
• 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
• Ongoing stranded cost impact of the unfulfilled
load is approximated at ~$57m/yr based on P1
price collapse scenario prices
Procurement Order Stress Test Case Days -Cash -On -Hand Reserve Levels Item 3
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32 All Stress Scenarios Results Summary
Note: DCOH and reserve balances exclude cash from projected FSR postings.
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33 Mid-Year Budget - Prior FY Convention
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• Subtitle
New SV Clean Energy
PowerPoint Template
Approving the Financial Levers
Playbook
Justin Zagunis and Monica Padilla
Finance and Administration Committee
May 2026
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PRESENTATION
2 • Recap levers and feedback
• Recommendation for Board
• How June’s approval will work
Agenda
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Recap
3 Item 4
PRESENTATION
4 Recap: SVCE’s Mission and Value Prop
MISSION: reduce dependence
on fossil fuels by providing
carbon free, affordable and
reliable electricity and innovative
programs for the SVCE
community.
Customer-Facing
Value Proposition
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5 Recap: SVCE’s Customers
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6 Recap: Forecasted Gap and Cost Components
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7 Recap: Continue to Find Ways to Close the
Gap, Including Pre-Pays, Opex Efficiencies
Data Management
9%
PG&E Service Fees
4%
Salaries and Retirement
44%
Professional Services
25%
Marketing & Promotions
5%
General and Administration
13%
Operating Forecasted Expense, 5-yr Avg
• Non-Supply Operating
Expenses represent
~10% of Budget
• ~$40M per year; ~1
cent per kWh
• 25%-50% non-discretionary expenses
• Continued savings
potential from prepays
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8 • Important to mission
• SVCE core role
• Small long-term $
impact to changing
• Ideally don’t adjust
Clean Energy Lever – Feedback
Don’t
Change
Minimize If
Needed
Current: 106% clean energy based on annual retail sales Item 4
PRESENTATION
9 Decarb Programs Lever – Feedback
Don’t
Change
Minimize If
Needed
• Important to mission
• Only SVCE is doing in a
big way, locally
• Small long-term $
impact to changing
• This is how much to
fund, Decarb Plan is
what to fund
• Ideally don’t adjust
Current: annually fund programs at 2% of retail revenues (~$7M/yr); projected use of existing program reserves is ~$19M/yr
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10 Rates Lever – Feedback
Don’t
Change
Raise If
Needed
• Not meaningfully
impacting affordability
(directly)
• Keep CARE/FERA
discount
• Competitiveness is
important
• Ongoing $ impact
• Ideally don’t adjust
Current: 1% discount to PG&E generation rate
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11 • 98% of customer accounts are on GreenStart
~60% Renewable Portfolio Standard (RPS) + 100% clean @ 1% discount to PG&E • GreenPrime
100% RPS @ 0.74 ¢/kWh premium compared to GreenStart
• GreenPrime Direct
Custom arrangement for large commercial customers – must cover all costs, be 100% clean, and commit to a term/contract
Split Product Offerings: Keep Customer
Choice While Raising Rate if Needed
Current:
Split Product Concept:
• Move the default GreenStart to a premium and create new opt-down at a discount to PG&E (less clean, program ineligibility)
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12 Financial Forecast Has Been Changing Since
March
Midyear
Estimate
Current
Estimate
Variance
FY2026 ($12,000,000) $4,000,000 +$16,000,000
FY2027 ($131,000,000) ($143,000,000) -$12,000,000
Change in Net Position / Available for Reserves (still using Oct-Sep fiscal year) Power supply cost forecast has come down, resulting in improved ‘Change to Net Position’ estimate for FY2026 and a worse number for FY2027 Data as of May 13th
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0 100
200
300
400
500
600
700
FY2026 FY2027 FY2028 FY2029 FY2030
Days Cash on Hand (DCOH)
DCOH Forecast by End of Year (incl. unspent program dollars) 13 • New rate proceedings
• Large load legislation
• Updated IRP runs
• New procurement orders
• Credit rating improvement
• Integrated Decarb Plan
discussions
• Continued review of opex and
increased efficiencies
Other Things Have Been Changing Since
March
Max
Target
Min
Base Case
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Recommendation and
projected impacts
14 Item 4
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15 • Ongoing search for cost savings and efficiencies
• Maintain current levels of clean, programs, and rate discount (at minimum)
• If needed, introduce split product offerings to assess opt-out risk and interest:
• One cheaper than PG&E but less clean and no program participation • One same as current default but at premium
• Scale up costs for both products over time if needed
• Incorporate small reduction/pause in programs
And direct staff to plan to continue as-is for 2026 and 2027 Staff Recommends the Finance and Administration
Committee Recommend the Board Approve the
Playbook of:
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How this “playbook”
approval will work
16 Item 4
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17 1. Get “playbook” approved today – capturing priorities between levers
2. Staff monitors financial situation
3. At every future budget decision, staff will propose changes based on this playbook if needed (along with alternatives)
4. New Integrated Decarb Plan will lay out how SVCE can prioritize across programs portfolio at any expenditure level
Direction Today (June), Action in the Future
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PRESENTATION
0 100
200
300
400
500
600
700
FY2026 FY2027 FY2028 FY2029 FY2030
Days Cash on Hand (DCOH)
Example 1 DCOH Forecast by End of Year
(incl. unspent program dollars)
18 Scenario: next few years happen as forecasted
Example 1: Continued Decline Path A
• 2026 and 2027: continue as-is, with efficiency
improvements and cost savings
• 2028: new split products
• Default: 4% premium, clean and eligible for programs
• Opt-down available at 1% discount, some emissions, and ineligible for programs
• FY28 sees a 5% program spend reduction
• 2029: raise rates
• Default: move to 8% premium
• Opt-down: 3% premium for opt-down
• FY29 sees a 10% programs spend reduction
• 2030+: new proposals based on conditions
Will revisit during FY if needed
Base Case
Example Forecast
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0 100
200
300
400
500
600
700
FY2026 FY2027 FY2028 FY2029 FY2030
Days Cash on Hand (DCOH)
Example 2 DCOH Forecast by End of Year
(incl. unspent program dollars)
19 Scenario: next few years happen as forecasted
Example 2: Continued Decline Path B
• 2027: take action to introduce split products one
year earlier than previous example
• 2028: stay with those products; no increase
• 2029: stay with those products; no increase
• 2030+: new proposals based on conditions
Will revisit during FY if needed
Base Case
Example Forecast
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0 100
200
300
400
500
600
700
FY2026 FY2027 FY2028 FY2029 FY2030
Days Cash on Hand (DCOH)
Example 3 DCOH Forecast by End of
Year (incl. unspent program dollars)
20 Scenario: FY2027 is negative, but later years improve Example 3: Delayed Improvement
• 2026 and 2027: continue as-is, with efficiency
improvements and cost savings
• 2028: new split products:
• Default: 4% premium, clean and eligible for programs
• Opt-down available at 1% discount, some emissions, and ineligible for programs
• FY28 sees a 5% program spend reduction
• 2029: lower rates
• Default: move to 1% discount
• Opt-down: 4% discount for opt-down
• Return to full programs spend
• 2030+: new proposals based on conditions
Will revisit during FY if needed
Base Case
Example Forecast
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Re-stating recommendation
and discussion
21 Item 4
PRESENTATION
22 • Ongoing search for cost savings and efficiencies
• Maintain current levels of clean, programs, and rate discount (at minimum)
• If needed, introduce split product offerings to assess opt-out risk and interest:
• One cheaper than PG&E but less clean and no program participation • One same as current default but at premium
• Scale up costs for both products over time if needed
• Incorporate small reduction/pause in programs
And direct staff to plan to continue as-is for 2026 and 2027 Staff Recommends the Finance and Administration
Committee Recommend the Board Approve the
Playbook of:
Item 4
PRESENTATION
Today we are seeking a recommendation
for approval
Exec Committee
Oct 2025
Board
(introduction to
concepts)
Dec 2025
Exec Committee
Finance & Admin
Board
(specific modeled
scenario)
Feb/Mar 2026
Exec Committee
Finance & Admin
Board
(final decisions on
preferred approach)
May/Jun 2026
Board Study Session
(initial feedback on
values and priorities)
Dec 2025
Board (as
needed,
incorporate in
budget)
Sep 2026+
*Timeline subject to change
Item 4
PRESENTATION
24 • September 2026: Approve Stub Budget (Oct to Dec 2026) • October 2026: Integrated Decarb Plan Approval
• December 2026: CFY2027 Budget Approval
• June 2027: Midyear Budget Adjustment
• December 2028: CFY 2028 Budget Approval
Next Steps After Playbook Approved
Item 4
PRESENTATION
Thank you
25 Item 4
PRESENTATION
1 New SV Clean Energy
PowerPoint Template
Subtitle
Budget Framework
Amrit Singh
Finance and Administration Committee
May 28, 2026
Item 5
PRESENTATION
2 Main Areas of Discussion
1. Review Transition to Calendar Fiscal
Year Period
2. Stud Period Budget Development
3. Revenue and Rates
2. Reserve Targets
3. Power Supply Expenses
4. Other Major Cost Categories
Purpose
Discuss Stub Period Budget
Framework (Oct 2026 to Dec
2026)
Item 5
PRESENTATION
3 Recap – Transition to Calendar Year Fiscal Period
1) Recap:
• New calendar year (Jan to Dec) fiscal period
begins January 1, 2027
• Current fiscal year that began on October 1,
2025, ends September 30, 2026
• Need a transition period (Oct 2026 to Dec 2026),
Stub Fiscal Period , budget
2) Stub Period Budget Timeline and Actions:
• May 2026 (this meeting) : Finance and Administration
(F&A) Committee reviews the proposed Budget
Framework
• Aug 2026 (next meeting) : F&A Committee reviews the
budget for recommendation for Board adoption
• Sept 2026: Board reviews Budget for Adoption
3) First Calendar Year Annual Budget Timeline and Actions:
• Aug 2026 (next meeting) : F&A Committee reviews the proposed budget framework • Nov 2026: F&A Committee reviews the budget for recommendation for Board adoption • Dec 2026: Board reviews Budget for Adoption
Item 5
PRESENTATION
4 • A 3 -month period budget requires more precision on the timing of expenses • For example, payment for renewable energy certificates (REC) occurs over a 12 -month period, but highly uncertain to isolate to a month because timing depends on when RECs are transferred to SVCE. Similarly, other expenses are typically managed on a 12 -month period. • SVCE’s revenues and expenses vary by season
• No prior 3 -month comparison for the Committee and Board to review for approving a 3 - month budget
Stub Period Budget Development & Approval
Item 5
PRESENTATION
5 Revenue Forecast And Rates
** 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.
PG&E 2026 Gen
Rate: 11.49 ¢/kWh*
1% SVCE discount
PCIA** 3.56
¢/kWh SVCE Gen Rate
7.82 ¢/kWh
SVCE Customer Billing Gen Rate 11.38 ¢/kWh
* All rates are weighted for SVCE load.
• SVCE’s rates are expected to be set for the calendar year to align with PG&E’s generation rate and PCIA changes in January • PG&E’s generation rates and PCIA charges are not expected to change until January 2027
• Seek approval to continue with the rates approved for implementation in January 2026:
• 1% discount to PG&E’s applicable generation rates
• $12 monthly bill credit to CARE and FERA low -income customers • GreenPrime rate premium at $0.0074/kWh ($7.40/MWh)
Item 5
PRESENTATION
6 Reserve Targets
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 CFY 2027 and 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, staff
recommends not updating the reserve
targets.
• Stress test analyses would imply raising the
upper target from 500 to ~650 DCOH;
however, the new implied target level of .
• Changing the upper 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
Item 5
PRESENTATION
7 Power Supply Expenses
(~90% of Expenses)
Issue: Volatile Prices Staff Recommendation Budget Policy & Contingency • 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
2026
• 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
• Staff will continue to further refine
methodologies and update the estimated
parameters
• SVCE’s clean policy
• For 2026, SVCE is projected to be at 102%
clean portfolio position, with Board goal of
106%.
• Staff continues to evaluate opportunities
to contract to 106% clean for the calendar
year.
• Contract delays/renegotiations further
add uncertainty and the variable
intermittency of the resources may vary
against forecasted volumes on a monthly
and annual basis.
• Generally contingencies are not included in the
power supply budget to account for volatile
prices but are accounted for in the budget
policy
• The budget policy grants the CEO authority to
overspend the total annual budget for energy
purchases by the lesser of 10% of the annual
power supply budget, or $30 million
• The $30 million was established for a 12 -month
period
• Seek approval that the above provision of the
budget policy for the stub period be suspended
and instead the following be applicable:
The CEO is granted authority to
overspend the total stub period
budget for energy purchases by
15% of the stub period power
supply budget.
Item 5
PRESENTATION
8 Considerations Recommendation During Transition
Benefit Open
Enrollment
• Open enrollment will not be an issue, staff will continue to follow calendar year open enrollment cycle, which algins better now with calendar fiscal year budget • Staff will discuss with the Committee any proposed changes or considerations in August as part of the annual budget framework discussion
Salary Adjustments
(COLA/Merit)
• Normally addressed Oct 1 st every year
• To align with the new fiscal period, Staff plans to review any COLA/Merit adjustments in August with the Committee as part of the annual budget framework discussion. • Staff will evaluate possible proration to account for the 3 -month transition period Transfer to
Programs
• Continue with the current Board policy to transfer 2% of revenues to Programs Fund • For the Stub period, 2% of stub period revenues will be transferred to Programs Fund Operating
Expenses other
than Power Supply
• Staff is developing detailed Q4’26 stub period budget forecast which will account for seasonal fluctuations on operating expenses
• Concurrent efforts are underway to sharpen, review, and ensure precision on projected operating expenses going forward
• Along with the above efforts, staff proposes to continue to add a 5% contingency Other Major Cost Considerations
Item 5
PRESENTATION
9 • Proposal to Compare Proposed Stub Period to Actual
Expenditures for the same period in 2025
• Not a perfect comparison – given expenses are usually accounted/budgeted for over a 12 -month period
Stub Period Budget Comparison
Item 5
PRESENTATION
10 Next Steps
• Present draft stub period budget for the Committee’s review in August
• The board reviews and adopts the Stub Period budget in September
Item 5
PRESENTATION
11 Thank you! / Questions?
Item 5
PRESENTATION
12 Transition Timeline and Plan
New Fiscal Period Starts January 1, 2027
December 2026
Board:
• Adopts the
Proposed Budget
for Calendar Fiscal
Year 2027 ,and
2027 Customer
Rate Proposals
Board:
• Reviews Stress
Test Analyses
• Optional: Reviews
Budget
Framework for
Stub Period
Board:
• Adopts the Proposed 3 -month
Stub Period Budget
Finance and Admin Committee:
Executive Committee (Optional):
• Reviews and recommends that the
Board adopt the Proposed Budget
for Calendar Fiscal Year 2027 and
Customer Rate Proposals
Board:
• Adopts Mid -
Year Budget
(FY25 -26)
• Receives
Audited
Financials for
the last fiscal
year. (FY24 -25)
January 2026 February 2026
Staff:
• Enterprise Risk
Assessments
(ERM)
Finance and Admin Committee:
• Reviews Proposed Financial Stress Test
Scenarios
• Reviews and Recommends the Mid -Year
Budget Update to the Board
May 2026
Finance and Admin Committee:
• Reviews and recommends that the Board adopt the
Proposed Budget for October 2026 to December
2026, a 3 -month stub fiscal period budget .
• Reviews the Budget Framework for Calendar Fiscal
Year 2027
Finance and Admin Committee:
1) Review Stress Test Analyses
2) Reviews Budget Framework for the
Stub Period
June 2026
August 2026 September 2026 November 2026
Audit Committee:
• Receives Audited Financials for the last
fiscal year. (FY24 -25)
March 2026
Audit Committee:
• Kicks off the Audit for Fiscal
Year 25 -26
Item 5
PRESENTATION
1 New SV Clean Energy
PowerPoint Template
• Subtitle
Amending Budget and Financial
Reserves Policies to Increase
Contingency for Power Supply Costs
Scott Wrigglesworth
Amrit Singh
Finance and Administration Committee
May 28, 2026
Item 6
PRESENTATION
2 Main Areas of Discussion
Purpose
Action: To enable increasing the Power
Supply Budget Contingency, staff
recommends that the Board approve
amending:
1. Financial Policy 2: Budget
Adoption, Control and Reporting
("Budget Policy")
2. Financial Policy 9: Financial
Reserves ("Reserves Policy")
1) Proposed changes to the Budget
Policy
2) Proposed changes to the Financial
Reserves Policy
3) PCIA financial hedge Impact
requiring an increase in power
supply contingency
Item 6
PRESENTATION
3 Budget Policy Change
• Energy Risk Management Policy (ERMP)
changed in March 2025 to account for the
financial hedge impact from the PCIA
• Reduces physical hedges (e.g., less
purchase of fixed price power)
• Budget volatility is higher with the reduced
physical hedging
• Based on staff’s analyses, as provided in the staff
report, staff propose increasing the highlighted
numerical thresholds in the policy to 15% and
$50 million
Power/Energy Purchases Contingency Section:
• The nature of the power markets is one of rapid changes in prices and market volatility. The ability to quickly adapt to those changes is important for maintaining consistent power delivery to customers.
Therefore, the CEO is granted authority to overspend the total annual budget for power supply purchases by the lesser of 10% of the annual power supply budget, or $30 million, without Board approval provided the over expenditure is due to higher energy costs or greater customer demand. Overspending for these purposes may require use of reserves and the conditions on use of reserves as stated in the Financial Reserves Policy apply, where reserves cannot be drawn down more than 10% of the year’s budgeted cost of power supply or $30 million, whichever is less, nor below the baseline Minimum Operating Reserve level without Board approval.
Item 6
PRESENTATION
4 Financial Reserves Policy Change
• Increase the highlighted numerical thresholds in
the policy to 15% and $50 million
Conditions for Use of Reserve Section:
• The reserves may be drawn down upon by the CEO during the year, up to the lesser of 10% of the year’s budgeted cost of power supply, or $30 million, to:
o Cover increases in power supply expenses due to spikes in costs and/or due to higher customer demand;
o Provide necessary funds to make up for unanticipated revenue shortfalls;
o Meet any margin or collateral posting requirements under energy supply contracts; and,
o Provide resources to meet emergency expenditures.
Item 6
PRESENTATION
5 Impact on Finances and Budget from Changes to ERMP
Reduces overall Financial Volatility but Increases Budget Volatility Before ERMP Changes
+ =
After ERMP Changes
Prices
Prices
+ =
+ =
Impact on SVCE's
Financials Over 2 Years Budget Next Year's PCIA
Budget Next Year's PCIA
Impact on SVCE's
Financials Over 2 Years + =
Prices
Prices
+ =
+ =
Higher Financial
Volatility
Lower Financial
Volatility
Lower Budget
Volatility
Higher Budget
Volatility
Simplified example to demonstrate key concepts
1. Flat lines indicate low
volatility (not zero)
2. Not possible to be fully
hedged to eliminate all
volatility
3. Only demonstrates the
impact of energy prices;
budgets and finances
are affected by other
variables
4. Energy hedge impact
from PCIA relies on
staff’s best, but
imperfect, estimates;
PCIA is a black box
5. RA, RPS, and GHG
also impact budget and
PCIA
1 2
3 4
Item 6
PRESENTATION
6 Adjusting SVCE’s Energy Hedges to Account for PCIA
Continued on next slide
Simplified
illustration to
demonstrate key
concepts.
Financial hedges are achieved without taking delivery or ownership of the energy. PCIA is a financial hedge because CCAs do not deliver or settle energy from the PCIA portfolio, but achieve the same economic result as if CCAs had delivered or settled energy at the CAISO market through the financial charge levied via the PCIA rate. 30% Exposed to Market Price Risk
Physical Hedge Sta ff es ti m a tes fi n a n ci a l h ed g e i m p a ct fr o m P CI A to b e 30% 70% Hedged
Financial Hedge
After ERMP Change
(Accounting for PCIA Financial Hedge Impact)
Before ERMP Change
E.g. Fixed
Price
Power
Purchases
E.g. Fixed
Price
Power
Purchases
Target Hedge Level:
Suppose 100%
Target Hedge Level:
Suppose 100%
Assumes hedges executed at the time budget levels are computed.
Item 6
PRESENTATION
7 Adjusting SVCE’s Energy Hedges to Account for PCIA
Continued from previous slide
Price Increase Scenario Impact on Power Supply Cost
Budget $350 million $350 million
Acutal $350 million $400 million
$0 -$50 million
Price Decrease Scenario Impact on Power Supply Cost
Budget $350 million $350 million
Acutal $350 million $300 million
$0 $50 million
Financial Impact Over 2 years
Price Increase Scenario
Power Supply Cost $0 -$50 million
Next Year's PCIA $50 million $50 million
$50 $0
Price Decrease Scenario
Power Supply Cost $0 $50 million
Next Year's PCIA -$50 million -$50 million
-$50 million $0
Before ERMP Change After ERMP Change
(Accounting for PCIA Financial Hedge Impact)
Greater Financial
Certainty
Greater Budget
Certainty
Simplified
illustration to
demonstrate key
concepts.
Item 6
PRESENTATION
8 Recommendation
• Staff requests that the Finance and Administration Committee (Committee) recommend that the SVCE Board of Directors (Board) approve amendments to the following Board-adopted policies, Finance Policy 2: Budget Adoption, Control and Reporting (“Budget Policy”) and Finance Policy 9:
Financial Reserves (“Financial Reserves Policy”), as follows:
• Finance Policy 2: Budget Adoption, Control and Reporting: Increase the contingency amount for power purchases, allowing the Chief Executive Officer (CEO) to overspend the total annual power supply budget by the lesser of 15% of the annual power supply budget or $50 million without Board approval, provided the overspending is due to higher power supply portfolio costs or increased customer demand (Staff Report Attachment A, redline). • Financial Policy 9: Financial Reserves: Enable the reserves to be drawn down by the CEO during the fiscal year, up to the lesser of 15% of the year’s budgeted cost of power supply, or $50 million (Staff Report Attachment C, redline). • Recommend that the staff request Board approval via the consent calendar Item 6
PRESENTATION
9 Thank You/Questions
Item 6
PRESENTATION
• Subtitle
New SV Clean Energy
PowerPoint Template
GASB 96 – Subscription-Based IT
Arrangements (SBITAs)
Finance and Administration Committee
Amrit Singh
May 28, 2026
Item 7
PRESENTATION
What is GASB 96? (Background)
• GASB 96 covers “Subscription-Based IT Arrangements (SBITAs)” such as cloud software and certain IT services
• Software-as-a-service (Saas) – Recognize these as assets and liabilities • Examples: Microsoft 365, Salesforce, or Customer Program Software • The rule says treat these like leases: record an intangible asset (right to use per contract, not owned assets) and a liability (future payments) Item 7
PRESENTATION
Establishing an SBITA Threshold for Capitalization
• Costs at or below the threshold are expensed, and above are capitalized • Ensures consistent accounting treatment
• Avoid administrative and auditing costs from capitalizing small items • SVCE’s current capitalization threshold is $5,000 for capital assets • Applicable for tangible assets such as IT equipment, Automobiles, and Furniture Item 7
PRESENTATION
Guidance on Setting Threshold
• Government Finance Officers Association guidance on capitalization thresholds supports establishing different thresholds for different classes of assets • Does not provide a specific threshold
• Supports not capitalizing small-value items that are immaterial • Supports periodic review of capitalization threshold
• Governmental Accounting Standards Board (GASB)
• Does not prescribe a threshold
• Allows management judgment to balance administrative cost versus materiality on the financial statements
4 Item 7
PRESENTATION
Proposed threshold: $250,000
• GASB 96 application entails an administrative, accounting, and audit effort much higher than for our capital assets, which have a $5,000 threshold
• Detailed contract analyses with ongoing reassessment (renewals, term changes, modifications, payment changes)
• Staff anticipates that 5-10 contracts annually could be below this threshold • Impact on balance sheet (Statement of Net Position) will be small • SVCE’s net position was $507 million as of September 30, 2025 • SVCE will annually evaluate SBITAs below the threshold in the aggregate for materiality and, as appropriate, will propose financial statement presentation and disclosure information Item 7
PRESENTATION
Recommendation
• Recommend that the Board of Directors approve SVCE’s Capitalization policy as shown in the redlined version of Attachment A of the accompanying staff report that includes minor changes to delineate between capital assets and intangible assets subject to capitalization per applicable GASB standards, and the following change for SBITAs:
SBITA agreements must be capitalized if the net present value of future subscription payments per contract exceeds $250,000. SVCE will annually evaluate sub-threshold SBITAs in the aggregate for materiality and, as appropriate, will consider financial statement presentation and disclosure information.
• Recommend that the staff request Board approval via the consent calendar Item 7
PRESENTATION