Valley Clean Energy Board Meeting – Thursday, December 11, 2025 Item 11 – 2026 Customer Rates & Operating Budget
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3 Item 11 – 2026 Customer Rates & Operating Budget
Overview
VCE’s longer-term fiscal outlook (2027+) indicates continued constraints due to both regulatory changes to Power Charge Indifference Adjustment (PCIA) calculations and a lower overall forward current price curve, which are driving higher PCIA rates. Existing tools, such as the Rate Stabilization Fund and rate adjustment mechanisms, provide financial management tools to help address projected volatility through 2030.
This presentation provides:
1. Background on 2026 Rates and Budget Development
2. Recommended 2026 Customer Rates
3. Proposed 2026 Budget
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4 Item 11 – 2026 Customer Rates & Operating Budget
1. Background of 2026 Rates
& Budget Development
(Preliminary Information)
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VCE’s 2026 Rates and Budget Goals
Staff’ recommended 2026 customer rates and Budget are based on adopted policies, strategic plan goals, and Board Feedback.
The proposed 2026 Customer Rates and Operational Budget include:
1. Reserves Policy
• Operational Financial Reserve minimum of 120 days
• Operational Financial Reserve Target of 180 days
• Rate Stabilization Reserve minimum of 60 days
2. Rates Policy
• Fully fund VCE's Budget including reserves
3. Strategic Plan - Financial Strength & Affordability
• Objective 1.4: Optimize VCE’s financial goals while maintaining rate affordability and competitiveness with PG&E
• Objective 1.2: Maintain investment-grade credit rating. • Objective 1.5: Develop a long range financial model for financial health and rate stability. • Objective 1.6: Develop a long term cash reserve and community investment strategy for reserve management 5 Item 11 – 2026 Customer Rates & Operating Budget
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6 Item 11 – 2026 Customer Rates & Operating Budget
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Key Factors - Preliminary draft Budget
VCE PCIA
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2026 Preliminary Budget & Rate Scenarios
o Scenario 1: Continuation
o 5% standard / 10% CARE/FERA/ Medical Baseline rate discounts to PG&E generation rate o approximately $3.8M net revenue reduction
o Scenario 2: Slight Decrease
o 2.5% standard / 5% CARE/FERA/Medical Baseline rate discounts to PG&E generation rate o Approximately $1.9M net revenue reduction
o Scenario 3: Matching & CARE/FERA discount
o Standard matching / 2.5% CARE/FERA/Medical Baseline discount to PG&E generation rate o approximately $750K net revenue reduction
9 Item 11 – 2026 Customer Rates & Operating Budget
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Table 5 – 2026 Preliminary Budget Scenario Comparison
Scenario 1
5% Standard /10%
CARE/FERA Discount 2023 2024 2025 2026 2027 2028 2029
Customer Revenue 95,430 97,979 88,670 45,010 68,100 66,180 63,750 Power Cost 68,528 64,723 57,100 53,550 54,380 58,380 60,200 Other Expenses 6,030 6,275 4,950 7,120 7,660 7,850 8,050 Net Income 20,872 26,981 26,620 (15,660) 6,060 (50) (4,500) Scenario 2
2.5% Standard /5%
CARE/FERA Discount 2023 2024 2025 2026 2027 2028 2029
Revenue 95,430 97,979 88,670 46,910 70,270 68,470 66,150 Power Cost 68,528 64,723 57,100 53,550 54,380 58,380 60,200 Other Expenses 6,030 6,275 4,950 7,120 7,660 7,850 8,050 Net Income 20,872 26,981 26,620 (13,760) 8,230 2,240 (2,100) Scenario 3
Standard Matching / 5%
CARE/FERA Discount 2023 2024 2025 2026 2027 2028 2029
Revenue 95,430 97,979 88,670 48,810 72,430 70,490 67,950 Power Cost 68,528 64,723 57,100 53,550 54,380 58,380 60,200 Other Expenses 6,030 6,275 4,950 7,120 7,660 7,850 8,050 Net Income 20,872 26,981 26,620 (11,860) 10,390 4,260 (300) * Revenues are highly subject to PG&E filings that impact generation rates and PCIA.
Actual YTD
August 31 (8 MO)
+ Forecast (4 MO)
Proposed
Budget Preliminary Forecast*
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11 Item 11 – 2026 Customer Rates & Operating Budget
1. Background of 2026 Rates
& Budget Development
(Updated Information)
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Recommended 2026 Rate & Budget – Updated
o As noted in the November draft budget, reduced forward power market prices have been outpaced by significant decreases in net revenues due to 2026 PCIA rate increases. The net result is a forecasted net loss of $15.8M for 2026.
Key Assumptions included:
o 2026 Customer Rates (VCE & PG&E Comparison) - VCE will set customer rates lower than costs, using rate customer dividends funds and a portion of rate stabilization funds to fully fund VCE's Budget and maintain the investment-grade credit rating.
o 2026 PCIA Forecast –The updated PCIA increased from ~.0101 KW/$6.5M to .031KW/$22M o 2026 Customer Rates Forecast – The updated forecast for PG&E rates results in a projected 31% generation rate decrease (offset by non-VCE portions of the bill such as transmission and distribution charges). 12 Item 11 – 2026 Customer Rates & Operating Budget
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Recommended
5% Standard /10%
CARE/FERA Discount 2023 2024 2025 2026 2027 2028 2029
Customer Revenue 95,430 97,979 88,050 45,274 68,250 66,350 66,890 Power Cost 68,528 64,723 55,302 53,800 54,380 56,800 58,500 Other Expenses 6,030 6,275 4,950 7,220 7,660 7,850 8,050 Net Income 20,872 26,981 27,798 (15,746) 6,210 1,700 340 Actual YTD
Sept. (9 MO)
+ Forecast (3 MO)
Proposed
Budget Preliminary Forecast*
Updated Multi-Year Forecast
Programs, +180 Days Operating Cash,
+60 Days Rate Stabilization
Maintain Customer Discounts, Program, Cash
Reserve Targets
Note: Forecasted financials are based on the most current available data and assumptions. These scenarios rely on future rate adjustments, reserves, or both to mitigate future power cost volatility. * The preliminary forecast is based on analysis by CalCCA, MRW, and TEA and power cost forwards.
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$28.21 $28.30
($15.74)
$6.21
$1.71 $0.34
($20.0)
($15.0)
($10.0)
($5.0)
$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
$35.0
2024 2025 2026 2027 2028 2029 Millions
Annual Net Margin
Net Margin
$98.7
$87.9
$45.3
$68.3 $66.3 $66.9
$0.0
$20.0
$40.0
$60.0
$80.0
$100.0
$120.0
2024 2025 2026 2027 2028 2029 Millions
Retail Revenue By Product
Revenue - Base Green Revenue - Standard Green Revenue - Ultra Green ITEM X – SHORT TITLE AND SLIDE DESCRIPTION [CALIBRI (BODY) 29 FONT (NOT BOLD)]
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2024 2025 2026 2027 2028 2029 2030
Fund Balance ($million) $34.18 $35.58 $42.49 $41.93 $42.29 $42.65 $42.63 Days Cash on Hand (Actual) 174 212 249 244 235 231 226
Days Cash on Hand (Minimum) 120 120 120 120 120 120 120 Days Cash on Hand (Target) 180 180 180 180 180 180 180
0 50
100
150
200
250
300
$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
$35.0
$40.0
$45.0
Days
$ millions
Operating Reserve Fund Balance
2024 2025 2026 2027 2028 2029 2030
Fund Balance ($million) $12.28 $33.80 $21.50 $21.50 $21.50 $18.58 $14.46 Days Cash on Hand (Actual) 63 202 126 125 120 100 77
Days Cash on Hand (Minimum) 60 60 60 60 60 60 60
Days Cash on Hand (Target) 60 60 60 60 60 60 60
0 50
100
150
200
250
$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
$35.0
$40.0
Days
$ millions
Rate Stabilization Reserve Fund Balance
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2. Recommended 2026
Customer Rates
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VCE 2026 Proposed Rates - Key Drivers
VCE has incorporated the following assumptions in its updated financial forecasts for 2026 (assuming PG&E rates/PCIA are implemented on January 1, 2026):
• PCIA: 201% increase over 2025 PCIA - Results in approximately -$15.5M in revenue for 2026 • PG&E Bundled rates (PCIA & Generation): 31% decrease – Results in approximately -$23M lower revenue for 2026
NOTE: The VCE generation charges, plus PCIA and franchise fees, are approximately 40% of the average residential electricity bill. PG&E’s Transmission, Distribution, and other charges account for the remaining 60% of the total electricity bill. The total charges to customers in 2026 may not decrease due to higher charges for transmission and distribution
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18 Item 11 – 2026 Customer Rates & Operating Budget
VCE 2026 Rates Summary
The rates (and budget) approach allows VCE to offer more affordable customer rates and higher renewable content than PG&E while positioning itself to maintain its investment-grade credit rating, meet operational and rate stabilization minimum targets, execute VCE programs, and absorb the forecasted PCIA increases and power market volatility to achieve long-term rate stability.
VCE 2026 Rates Recommendation
Approve 2026 VCE Customer Rates:
1. Standard Green Rates (default rate): 5% Discount to PG&E’s 2026 generation Rates i. 10% Discount to PG&E 2026 Rates for CARE/FERA and Medical Baseline customers i. Base Green Rate (Opt-down rate option): discount of 2.5% to PG&E 2026 generation ITEM X – SHORT TITLE AND SLIDE DESCRIPTION [CALIBRI (BODY) 29 FONT (NOT BOLD)]
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3. Proposed 2026
Operating Budget
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2026 Budget (Proposed) & Multi-Year Forecast - Key Factors • 2026 Customer Rates (VCE & PG&E Comparison) VCE will set customer rates to collect sufficient revenue from participating customers to fully fund VCE's Budget using customer dividends and a portion of rate stabilization funds. • 2026 PCIA Forecast –PCIA increased from ~.0101 KW/$6.5M to .031KW/ $22M 2026
• Customer Rates Forecast –The updated forecast for PG&E rates results in a projected 31% generation rate decrease (offset by non-VCE portions of the bill such as transmission and distribution charges).
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21 Item 11 – 2026 Customer Rates & Operating Budget
2026 Budget (Proposed)
• 5% rate discount for Standard
Green (Total Bill)
• 10% rate discount for CARE/FERA
and Medical Baseline customers
• Maintains ~180+ days cash
operating reserves and +60 days
cash Rate Stabilization Reserves
through 2026.
• $1.5 M in Customer Programs
VALLEY CLEAN ENERGY
2026 BUDGET SUMMARY ACTUAL YTD
RECOMMENDED APPROVED SEPT. (9 MO) RECOMMENDED
BUDGET + FORECAST (3 MO) BUDGET
2025 2025 2026
OPERATING REVENUE $ 101,200 $ 86,950 $ 45,274
OPERATING EXPENSES:
Cost of Electricity 64,000 55,900 53,800
Contract Services 2,640 2,390 2,750
Outreach & Marketing 370 350 400
Programs 2,170 520 1,250
Staffing 2,100 1,850 2,180
General, Administration and other 1,560 990 1,890
TOTAL OPERATING EXPENSES 72,840 62,000 62,270
TOTAL OPERATING INCOME 28,360 24,950 (16,996)
NONOPERATING REVENUES (EXPENSES)
Interest income 990 1,358 1,250
Interest expense
TOTAL NONOPERATING REV/(EXPENSES) 990 1,358 1,250
NET MARGIN $ 29,350 $ 26,308 $ (15,746)
NET MARGIN % 29% 30% -35%
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Other Considerations – Other Operating Expenses
Proposed costs in this category of expenses include:
• Maintain VCE’s investment grade credit rating
• $1.25M in customer programs related to Charge Your Ride, Panasonic, and other programs to be allocated to specific programs throughout the year. • $500K estimated IT enhancements for ERP and Programs support • Additional costs related to the scheduled Marketing and Programs Plan Updates, including customer focus groups
• 3.5% annual salary/benefits, and contractor inflation rate based on the 2025 3.5% inflation rate.
• 5% administrative contingency rate for unanticipated expenses.
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Operating Budget Outlook Summary
Staff is recommending a 2026 Budget at a level that will be fully funded by using a portion of the rate stabilization fund, offer more affordable rates to VCE customers with additional financial relief to CARE/FERA and Medical Baseline customers, while maintaining VCE’s A-investment grade credit rating.
VCE 2026 Operating Budget Recommendation
Approve 2026 Budget with $46.5 M of operating revenues and $62.3 M of operating expenses for a net loss of $15.8 M.
Valley Clean Energy Board Meeting – Thursday, December 11, 2025 Item 12 – GHG Free Attributes (2026)
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Public Comments
25 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)] 26 Item 12 – GHG Free Attributes (2026)
Agenda:
• Background and Site
Locations
• Hydropower Reform
• VCE’s Allocation History
• Benefits and Key Points
• Staff’s Recommendation
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Background Information:
In 2019, following discussions with CCAs, PG&E offered to allocate GHG-free resources to CCAs and other eligible LSEs.
GHG-free resources:
1) Large hydroelectric – 30
MW or more
2) Nuclear
• Diablo Canyon
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Item 12 – GHG Free Attributes (2026)
PG&E’s Allocated Resources:
• 27 large hydro resources
• Located in Nevada, Amador,
Shasta, Fresno, and Plumas County
• 2 top resources: North Fork
Feather River in Plumas and Pit
River in Shasta
28 Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] Item 12 – GHG Free Attributes (2026) Example of Hydropower Reform:
Pit River
• Largest River in Northeastern CA
• Heavily dammed for hydropower
• In the early 90’s PG&E had few environmental
requirements
• Starting in 2003, PG&E has minimum flow
requirements, natural run requirements, and
stewardship funding/management duties
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Item 12 – GHG Free Attributes (2026)
PG&E’s Allocated Resources Continued:
• 1 nuclear resource
• Diablo Canyon near San Louis
Obispo
• Over 2000 MW capacity
• 5 other nuclear power plants have
been decommissioned over the last
several decades
30 Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] Item 12 – GHG Free Attributes (2026) VCE’s Allocation History:
• 2020 – 24,000 MWH - First year of attributes
• 2021 – 37,382 MWh
• 2022 – 53,886 MWh
• 2023 – 83,073 MWh
• 2024 – 79,109 MWh
• 2025 – 111,882 MWh (Estimated)
• 2026 – Forecast available in Mid-December
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Attribute Allocation:
• Allocation amount is the amount of GHG-Free Energy generated from the non-RPS-eligible resources at each LSE’s allocation ratio • Allocation ratio is the monthly % share allocated to each LSE using the LSE’s load forecast for PCIA-paying customers responsible for the cost of the non-RPS-eligible resources and the total forecasted load for PCIA-paying customers responsible for the cost of the resources Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] Item 12 – GHG Free Attributes (2026) 3 3
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34 Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] Item 12 – GHG Free Attributes (2026) Key Points:
• Free product: no additional cost to VCE (VCE customers already paying for it)
• Will increase VCE’s carbon free position and improve our emissions rate • VCE staff has the option of selling the large hydro allocations • Made $250,000 in 2025
• Many CCAs – including MCE, SCP, PCE, Ava, DCE, Pioneer, RCEA, and SVCE – continue to accept the nuclear attributes
• Prior years nuclear was not allocated to LSEs for RA purposes. Now LSEs must take the nuclear RA allocations.
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CAC Recommendation:
At the November 20th CAC Meeting, the committee moved to accept the staff recommendation of accepting both the hydro and nuclear allocations from PG&E
• The vote was 5-1-0 with 5 ayes, 1 no, and 0 abstains
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Item 12 – GHG Free Attributes (2026)
Staff Recommendation:
• Accept the 2026 allocation of large hydro GHG-free attributes and the 2026 allocation of nuclear power GHG-free attributes;
• Allow the Executive Officer to enter into an agreement(s) with PG&E to accept the 2026 Large Hydro and Nuclear GHG-free allocations.