Valley Clean Energy Board Meeting – October 10, 2024
Item 14 - Receive legislative update presented by Pacific Policy Group. 1 yvonnehunterphotography.com yvonnehunterphotography.com Public Comments
2 To Provide Public Comment on any agenda item please:
➢ E-mail 300 words or less to: [email protected] OR
Join the Public Comment Queue by
➢ “Raising Hand” on Zoom Meeting
OR
➢ Press *9 if joining by phone
Emailed comments received before the item has concluded will be read into the record.
Emailed comments received after the item has concluded but before the end of the meeting will not be read but will be included in the meeting record.
Item 14 - Receive legislative update
3 2024 Session Look Back
• New Leadership and Assembly U&E Chair
• Budget Deficit of $45 Billion
• Focus Shifts from Reliability to Affordability
• Reliability improves
• Rate increase after rate increase
• Income Graduated Fix Charge “IGFC”
• NEM changes
• “Affordability Package”
• Special Session Once Again
Item 14 - Receive legislative update
4 2025-26 Session Look Ahead: Landscape
• Governor Newsom enters final two years
• All state constitutional officer races
• Many new members coming in 2025
• 2024 ends first cycle of new term limit rules
• Senator Dodd Terms Out
• Senate Leadership Transition?
• Senate Pro Tem. Mike McGuire terms out in 2026
• Budget Stability
Item 14 - Receive legislative update
5 2025-26 Session Look Ahead: Considerations
• Affordability Still a Concern
• AB 3264 Implementation
• Senate Energy and Assembly U&E Changes
• Sens. - Chair Bradford, Eggman, Min, Skinner out
• Asms. - Friedman, Holden, Ting, Wood out
• Regional Grid
• West-Wide Governance Pathways Initiative
VCE Board of Directors Meeting – October 10, 2024
Item 15 - 2024 Operating Budget Update / 2025 Preliminary Budget yvonnehunterphotography.com
yvonnehunterphotography.com
yvonnehunterphotography.com
6 Public Comments
7 To Provide Public Comment on any agenda item please:
➢ E-mail 300 words or less to: [email protected] OR
Join the Public Comment Queue by
➢ “Raising Hand” on Zoom Meeting
OR
➢ Press *9 if joining by phone
Emailed comments received before the item has concluded will be read into the record.
Emailed comments received after the item has concluded but before the end of the meeting will not be read but will be included in the meeting record.
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 8 Item 15 – 2024 Operating Budget Update / 2025 Preliminary Budget Overview
VCE’s 2024 Operating Budget net financial results are than forecasted primarily due to a significantly lower load than forecast for 2024. VCE’s short-term (2025) outlook indicates increased volatility in power market prices, Resource adequacy, and Renewable Energy Credits (RECs). VCE’s Longer-term outlook (2026-2028) indicates healthy margins/reserves.
This presentation will provide:
• Key Factors influencing short-term operating budgets
• 2024 Financials Update
• 2025 Preliminary Budget and Multi-Year Forecast Update Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 9 Item 15 – 2024 Operating Budget Update / 2025 Preliminary Budget
1. Key Factors influencing short-term
operating budgets
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 10 Item 15 – 2024 Operating Budget Update / 2025 Preliminary Budget Key factors – Operating Budgets Results
• Load Forecast - 2024 energy use has been significantly less than forecasts due to (1) residential and (2) commercial use related to agriculture due to wet and long winter, lower overall summer temperatures, and reduced heat events. • Power Prices –
• Average forward market power prices for energy have decreased from the high 2022/23 winter costs due to an abnormally wet winter and increased hydro production from 2023 and 2024.
• Average forward market prices for portfolio attributes (Resource Adequacy and Renewable Energy Credits) remain at all time highs.
• Budgeted revenues - Budgeted normalized load revenues have not fully materialized due to the lower overall load as described above.
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 11 Item 15 – 2024 Operating Budget Update / 2025 Preliminary Budget
2. 2024 Financials Update
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] Item 15 – 2024 Operating Budget Update / 2025 Preliminary Budget VCE Retail Load Update (Forecast v. Actual)
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000 Forecast Actuals Forecast Actuals Forecast Actuals Forecast Actuals Forecast Actuals Forecast Actuals Forecast Actuals Forecast Actuals Forecast Actuals Forecast Actuals Forecast Actuals Forecast Actuals January February March April May June July August September October November December MWh Lighting Industrial Large Commercial Med. Commercial Small Commercial Agriculture Residential 12 Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 13 Item 15 – 2024 Operating Budget Update / 2025 Preliminary Budget 2024 Budget Proforma Update (8 Months Actuals – unaudited) Key Highlights
• Budgeted Revenues - Lower than normalized load has resulted in lower revenues. • Power Costs – Lower near term power costs have been outpaced by RA and Renewable Energy Credits prices.
Description Variance
Revenue $ 103,881 $ 103,478 $ (403)
Power Cost $ 75,200 $ 80,490 $ (5,290)
Other Expenses $ 6,800 $ 6,250 $ 550
Net Income $ 21,881 $ 16,738 $ (5,143)
APPROVED
2024 BUDGET
2024 Proforma
(8 Month Actuals +
4 Month Budget)
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 14 Item 15 – 2024 Operating Budget Update / 2025 Preliminary Budget
3. 2025 Preliminary Budget and Multi-Year Forecast Update 2023 CPI Trend (Prior Year) 2024 CPI Trend (Current Year) Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 15 Item 15 – 2024 Operating Budget Update / 2025 Preliminary Budget Inflation costs drivers have become more stable
~-4%
~-4%
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 16 Item 15 – 2024 Operating Budget Update / 2025 Preliminary Budget • RA Contributions from
PPAs have been
outpaced by RA cost
increases
• Forecast for future
years (2026-2028)
reduced pricing
• CPUC is currently
reviewing possible
increases for Load
Serving Entity (LSE) RA
requirements
Resource Adequacy (RA)
2024 RA Trend (Current Year – Slice of Day Market)
2023 RA Trend (Prior Year – Traditional RA Market)
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 17 Item 15 – 2024 Operating Budget Update / 2025 Preliminary Budget *The table does not account for increased power market prices, heat-wave or drought load impacts, renewable energy credits, and resource adequacy costs above 5% budgeted contingencies.
Reserve Building (+180 Minimum) Net Margin Policy Targets VCE Multi-Year Outlook
Key Highlights
• VCE expects continued 2025 power cost volatility due to higher resource adequacy. • VCE has the ability to continue cost mitigation by adjusting RPS (sell RECS), Net Margin, and reserve targets.
Description 2022 2023 2024 2025 2026 2027 2028
Customer Revenue 85,323 95,430 103,478 88,900 97,500 99,900 100,400 Power Cost 75,130 68,528 80,490 67,420 79,400 75,800 72,900 Other Expenses 4,469 6,030 6,250 7,200 7,200 7,920 8,712 Net Income 5,724 20,872 16,738 14,280 10,900 16,180 18,788 2022 Proforma
(8 Month Actuals +
Actuals 4 Month Budget) Preliminary Forecast*
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 18 Item 15 – 2024 Operating Budget Update / 2025 Preliminary Budget Other Considerations
• Lower Power Prices - Generally, decreased power costs decrease PG&E rates, increase PCIA, and decrease VCE’s ability to set competitive rates. These impacts are normalized by VCE's Power Purchase Agreements and hedging strategies. • Budget Other operating expenses (not including power costs) are nearly flat compared to the 2023 budget, reflecting only a 3% increase
• 2025 Programs Expenditures – VCE continues to make significant contributions in support of customer programs. VCE anticipates spending $1M in designated program funds in 2025 from non-reimbursable programs and $2M including reimbursable programs (i.e. grants)
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 19 Item 15 – 2024 Operating Budget Update / 2025 Preliminary Budget Next Steps and Discussion
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 20 Item 15 – 2024 Operating Budget Update / 2025 Preliminary Budget Next Steps
2024 Budget
• October 2024 – Preliminary Update - Includes additional power cost activities for RA & energy
• November 2024 – Budget Update
• Includes updated ERRA (PCIA and PG&E Bundled Rates) proceeding • Includes additional Budget Scenarios for discussion and feedback • December 2024 – Recommended 2025 VCE Customer Rates and Budget for Adoption
Discussion