Valley Clean Energy Board – November 10, 2022
via video/teleconference
Item 13 – Operating Budget Update 1
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Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] Overview
VCE’s short-term outlook (2022 and 2023) indicates continued volatility in power market prices due to global events outside VCE’s control. • September’s 10-day heat storm; VCE’s short-term net income impacted. • The mid/longer term outlook (2023-2025) shows VCE recovers net income, building customer rate stability, reserves, and program funds.
This presentation will provide:
• Updated Load (July)
• Updated Factors & Multi-Year Forecast Update
• Discussion
3 Item 13 – Operating Budget Update
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Forecast Actuals Forecast Actuals Forecast Actuals Forecast Actuals Forecast Actuals Forecast Actuals Forecast Actuals January February March April May June July
Retail Load (MWH)
VCE RETAIL LOAD BY CUSTOMER CLASS
Residential Agriculture Med. Commercial Large Commercial Small Commercial Industrial Lighting Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 4 Item 13 – Operating Budget Update
Month Res
Sm
Com
m
Med
Com
m
Lg
Com
m Ind Ag Light Total
1 89% 85% 94% 102% 114% 105% 89% 93%
2 89% 87% 96% 110% 119% 179% 94% 101%
3 85% 90% 95% 102% 108% 140% 100% 98%
4 89% 91% 101% 100% 106% 127% 107% 101%
5 104% 97% 96% 106% 103% 109% 117% 104%
6 108% 99% 96% 102% 97% 121% 116% 108%
7 100% 96% 80% 95% 90% 118% 116% 102%
Load
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] Key factors (Updated) – Operating Budgets Forecasts
5 Item 13 – Operating Budget Update
• PCIA and PG&E Rates - Multi-Year Forecast includes a 100% PCIA decrease (“0”) in 2023 with no rate changes.
• Analyst Forecasts are currently projecting negative PCIA rates and possible rate increases by PG&E.
• Power costs – Include ~$3M in power cost contingencies for 2023. (Increase from 2.5% in 2022 to 5% for 2023)
• Long-term power contracts (PPAs) - When VCE’s two largest PPA’s begin full deliveries in 2023: ~60% of VCE’s load served, growing to 80%+ by 2024.
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 6 Item 13 – Operating Budget Update
Updated Multi-Year Forecast
Key Factors in Multi-Year Forecast
• Multi-Year Forecast includes a 100% PCIA decrease (“0”) in 2023 with no rate changes. • Analyst Forecasts are currently projecting negative PCIA rates and possible rate increases by PG&E. • Power costs – Include ~$3M in power cost contingencies for 2023. (Increase from 2.5% in 2022 to 5% for 2023) • Long-term power contracts (PPAs). When VCE’s two largest PPA’s begin full deliveries in 2023: ~60% of VCE’s load served, growing to 80%+ by 2024.
• Based on current forecast, 2024/25 offers greater financial stability.
Description FY2019 FY2020 FY2021 FY2022 2022 2023 2024 2025 Customer Revenue 51,035 55,249 54,657 29,366 86,760 107,040 73,500 71,050 Power Cost 38,540 41,538 54,234 30,139 75,050 69,500 52,800 55,600 Other Expenses 3,850 4,346 4,267 2,285 5,080 5,938 6,100 6,178 Net Income 8,646 9,365 (3,844) (3,058) 6,630 31,602 14,600 9,272 2022
Actuals Proforma*
Preliminary
Forecast**
2023
Budget
RECOVER/BUILD RESERVES
(180+ DAYS) MAINTAIN MARGINS
*2022 Proforma - 9 months of actual financial results and three months of updated power cost forecasts. ** The preliminary forecast is based on analysis by CalCCA and MRW and power cost forwards.
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 7 Item 13 – Operating Budget Update
Operating Budget Outlook Summary (2024/2025)
• Generally, PG&E rates increase/PCIA decreases in times of rising market power costs; enhances VCE’s ability to set competitive rates for full cost recovery.
• Increased market power costs result in deferred net income through PCIA • Continued profitability and building of reserves, greater ability to provide customer programs and customer dividends.
• 2024 Credit rating - Decreases risk -> Finance Needs & Costs (Strategic Plan) • Continued climate related risk (heat/drought) – Key mitigation: additional power cost contingency
• Continued market volatility – Key mitigation: PPAs decrease financial impact / stabilize costs
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] Next Steps
• December 2022 – Adopt 2023 Budget & Rates
• Rate Adjustment System
Discussion
8 Item 13 – Operating Budget Update