Valley Clean Energy Board Special Meeting – June 15, 2023 Item 15 – 2023 Mid-Year Financials Update 1
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Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 3 Item 15 – 2023 Mid-Year Financials Update
Overview
VCE has transitioned to positive financial stability post COVID-19. VCE continues to payoff debt, build cash reserves, increase customer option programs while remaining competitive with PG&E. VCE Staff continues to monitor and update the Board on budget performance for long-term financial sustainability and customer affordability.
This presentation will provide:
• Background of 2023 Budget Development
• 2023 Financials Update and additional factors
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 4 Item 15 – 2023 Mid-Year Financials Update
Key Factors included in the 2022 Budget Adoption
• CARE / FERA – Incorporated a 2.5% rate credit
• Power Cost Contingencies – increased from 2.5% in 2022 to 5% in 2023 for $3.4M
• Financial Reserves. Incorporated a 2023 target of 180 days for operating cash • PG&E Rate Adjustments – 3% increase – Approximately $2M in revenue • PCIA. PCIA: 88% reduction (net zero charge) – Approximately +$17M in net revenue.
• 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 2023 Budget, 2024/25 offers greater financial stability Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 5 Item 15 – 2023 Mid-Year Financials Update
2023 Budget Proforma Update (4 Months Actuals – unaudited)
APPROVED
2023 BUDGET
2023 Proforma
(4 Month Actuals +
Description 8 Month Budget) Variance
Revenue $ 109,500 $ 107,373 $ (2,127)
Power Cost $ 71,650 $ 73,088 $ (1,438)
Other Expenses $ 6,430 $ 6,400 $ 30
Net Income $ 31,420 $ 27,885 $ (3,535)
Note: The table does not account for anticipated increased power market price and resource adequacy costs Key Highlights
• Revenues are lower than forecasted in January primarily due to: (1) model error which has been ID’d and corrected and (2) lower load during mild wet winter. • Power Costs have been higher than budgeted due to higher natural gas prices and lower winter temperatures.
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 6 Item 15 – 2023 Mid-Year Financials Update
Updated Multi-Year Forecast – 2023 Budget Adoption Forecast 2023 Proforma
(4 Month Actuals + Actuals 8 Month Budget)
2023 Budget
Forecast*
Description 2022 2023 2024 2025
Revenue 85,323 107,373 75,500 73,050
Power Cost 75,130 73,088 54,150 57,100
Other Expenses 4,469 6,400 6,800 7,100
Net Income 5,724 27,885 14,550 9,300
Note: The table does not account for updated forward power market price fluctuation and resource adequacy costs *2023 Budget forecast include customer rates, PCIA, and power costs as forecasted in the VCE Budget Adoption Reserve Building Maintain Margin
Policy Key Highlights
• VCE expects additional 2023-2025 power cost increases due to higher resource adequacy and winter gas prices • VCE has the ability to increase 2024/2025 revenues for cost recovery (incl. cash reserve) and remain competitive • Decreased net income and cash reserves in 2023 could delay investment grade credit rating to 2025/2026 Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 7 Item 15 – 2023 Mid-Year Financials Update
Factors Impacting Forward Power Costs
• Supply chain & Interconnections have significantly delayed renewable projects expected to go online in 2022-2024. (Renewable Energy & RA Prices) • Winter gas short squeeze crests in December 2022. Low Pacific Northwest water year compounding supply concerns for gas and power
• Geopolitical Climate. The conflict in Ukraine continues to impact current and forecast energy prices and availability. (Natural Gas Prices)
Other Considerations – Increased Power Market Prices
Continued high power costs result in stabilized PG&E rates and VCE’s ability to set competitive rates for cost recovery.
• PCIA is currently forecasted to continue to decrease in 2024 • PG&E Bundled Rates are currently forecasted to decrease approximate 4% in 2024 Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 8 Item 15 – 2023 Mid-Year Financials Update
2023/24 Power Price Forecasts (Winter is the New Summer) Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 9 Item 15 – 2023 Mid-Year Financials Update
Next Steps
• Review and update Revenue Model as required.
• Utilize 2023 Power Cost contingency $3.4 for cost stabilization. • Review increased power cost impacts through Rate Adjustment System Likely deferral and maintain rate stabilization to prioritize affordability. • September - Return to Board with Power Cost forecast update. • October - Begin 2024 budget process.
Discussion