Valley Clean Energy Board Meeting – Thursday, June 11, 2026 Item 12 – 2026 Summer Preparedness Outlook
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2026 Summer
Assessment
4 California 2026 Summer Overview
o CAISO and CEC report an overall positive outlook for meeting peak summer demand o Peak load forecasted at 46,844 MW on September 2 at HE18 (slightly higher than last year) o Forecast is based on 1-in-2 weather year (also known as weather-normalized) o 8,321 MW of added nameplate capacity of battery, wind, and solar expected by June 30, 2026 o Includes CAISO's 3,167 MW share of the SunZia Wind project in New Mexico, expected online May 1, 2026 o Surplus of 2,547 MW above peak forecasted summer needs o Warmer than normal temperatures expected across the Western U.S., especially the Intermountain West and PNW
o Dry water year across the West tightens hydro contributions to summer reliability o California snowpack was just 18% of average on April 1, 2026 — second lowest on record o PNW also facing below normal runoff and reduced hydro availability raising risk to imports during peak hours o As always, there remain concerns regarding a west-wide heat events, wildfires, transmission interruption, and unexpected unit outages
5 Q3 2026 Summer Temperature Outlook
6 Q3 2026 Summer Precipitation Outlook
7 Summer 2026 Western US Hydro Outlook
8 California Seasonal Water Storage
Current Level
Historical
Median
9 VCE Summer Readiness Overview
o VCE has met its Q3 2026 hedging policy requirements, with one pending position to further strengthen its summer coverage
o VCE’s Wholesale Energy Procurement Risk Management Policy hedging requirements for the summer are 80% to 130% in Q3 with at least 95% in Heavy Load Hours (Monday – Saturday 6 am to 10 pm) o VCE has fully procured all necessary RA to meet CPUC and CAISO compliance for Q3 o VCE has multiple years of summer operating history to inform hedging, risk, and procurement decisions, including both challenging and relatively mild summers o VCE and TEA have an established procedure for Volatile Incoming Pricing Event Response (VIPER) to ensure alignment on CAISO market operations and reporting in the case of a summer pricing event caused by heat or other conditions 10 CAISO 2026 September Peak Load & Resources Analysis
11 VCE 2026 Summer Energy Position
99% 102% 102%
Jul-26 Aug-26 Sep-26
0 20
40 60
80 100
120
140
Energy (MWh)
VCE Q3 2026 Monthly Energy Position (HLH)
HLH PPA Pending Hedge HLH Load
• Aquamarine Solar
• Type: 50 MW PV (Solar Only)
• Status: Operating as expected
• Indian Valley Hydro
• Type: 3 MW Hydro (short-term PPA
through September 31, 2026)
• Status: Expected to generate through
summer
• Putah Creek Solar + Storage
• Type: 3 MW PV + 3 MW 4-hour BESS
Hybrid
• Status: Operating as expected
• Resurgence Solar + Storage
• Type: 90 MW PV + 75 MW 4-hour BESS
Co-located Resource)
• Status: Operating as expected
• Tierra Buena BESS
• Type: 2.5 MW share of RA-Only 4-hour
BESS
• Status: Operating as expected
• Tumbleweed BESS
• Type: 75 MW 8-hour Battery Storage (VCE
share: 4.15% / 2.86 MW)
• Status: Entered VCE portfolio on June 1,
2026; will provide RA and dispatch
capacity for summer 2026
• Willy 9 Chap 2 (Willow Springs) Solar +
Storage
• Type: 72 MW PV + 36 MW BESS (Hybrid)
• Status: Operating as expected
12 VCE Contracted Resources
Valley Clean Energy Board Meeting – Thursday, June 11, 2026 Item 13 – 2025 Financial Audit presented by James Marta 13 yvonnehunterphotography.com
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Public Comments
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Presented by
James Marta CPA, CGMA, ARPM
VALLEY CLEAN ENERGY ALLIANCE
SUMMARY OF AUDIT RESULTS
DECEMBER 31, 2025
James Marta & Company LLP
16 Team Members
James Marta
CPA, CGMA, ARPM
Audit Partner
916-999-4180
[email protected]
Jhon Muñoz, CPA
Audit Supervisor
916-999-9618
[email protected]
James Marta & Company LLP
Agenda
• Communications with Those Charged with Governance
• December 31, 2025, Valley Clean Energy Alliance (VCE) Financial Information and Auditor’s Report
• Independent Auditor’s Report on Internal Control Over Financial Reporting
17 COMMUNICATION WITH
THOSE CHARGED WITH GOVERNANCE
18 James Marta & Company LLP 19
SCOPE OF THE
ENGAGEMENT
• Financial Audit
• Report on Internal Control Over Financial Reporting
• Report to Those Charged With Governance
James Marta & Company LLP
Professional
standards require
that we provide
you with
information related
to our audit of
VCE. This
information is
summarized as
follows:
• Responsibilities and Opinion
• Financial statements are the
responsibility of management
• Our responsibility is to express
an audit opinion
• We issued an unmodified
opinion (the best and auditor
can give)
20 James Marta & Company LLP
Planning and
Communication
• Worked closely with Mitch Sears, Edward Burnham, and the Valley Clean Energy Alliance staff.
• Preliminary questions and opinions
• Ongoing accounting and allocation issues
• Compliance
21 James Marta & Company LLP
Independence Auditor remained independent under
AICPA rules
No prohibited non-audit services
provided
• We assist in drafting the financial
statement
22 James Marta & Company LLP
REPORT TO YOU - INTERACTIONS WITH MANAGEMENT
Management Consultations
with Other Independent
Accountants:
✓ None
Disagreements with
Management of Difficulties
Encountered:
✓ None
Management
Representations:
Received
James Marta & Company LLP
REPORT TO YOU
QUALITATIVE
ASPECTS OF
ACCOUNTING
PRACTICES
• Significant Accounting Policies and
Changes in Those Policies - No changes
• Management Judgments and
Accounting Estimates
• Receivables, Allowance for Doubtful
Accounts
• Appropriate and in-line with
standards
24 James Marta & Company LLP
AUDIT
PROCEDURES
• An Audit is more than just assurance regarding the fairness of presenting financial statements. An Audit involves gaining an understanding of the organization’s systems and controls.
- Understanding; systems, policies and procedures
- Tests of control
- Gathering other audit evidence, review of details, performing test calculations. - Review of accounting methods and reporting
25 James Marta & Company LLP
RESULTS OF
THE AUDIT
26 Consideration Area Result
Planned Scope and Timing Scope and timing as anticipated Findings Identified in
Performing the Audit None
Significant Adjustments or Disclosures Not
Reflected in the Financial Statements
• RJE #1: PBC - To record Nem Q4 Activity
and adjust reclass RCB - RLOC NON-USE
FEE 2025 and RCB AQUAMARINE SBLC
RENEWAL
• RJE #2: PBC - To reclass Power Costs
James Marta & Company LLP
Significant
Adjustments
27 Account Description Debit Credit
45370-0000 BANKING FEES 7,103.00
45370-0000 BANKING FEES 75,250.00
45970-0000 HEAT PUMP 7,103.00
45970-0000 HEAT PUMP 75,250.00
Total 82,353.00 82,353.00
45321-0000 SMUD - WHOLESALE ENERGY SERVIC 69,500.00
41510-0000 POWER PURCHASES 69,500.00
Total 69,500.00 69,500.00
Reclassifying Journal Entries JE # 1
PBC - To record Nem Q4 Activity and adjust reclass RCB - RLOC NON-USE FEE 2025 and RCB AQUAMARINE SBLC RENEWAL
Reclassifying Journal Entries JE # 2
PBC - To reclass Power Costs
FINANCIAL STATEMENTS
WITH INDEPENDENT AUDITOR'S REPORT
28 James Marta & Company LLP
INDEPENDENT
AUDITOR'S
REPORT
• Pages 1-3 of the Audited Financial
Statements
• Unmodified opinion (Page 1),
the best opinion that we can provide.
29 James Marta & Company LLP
MANAGEMENT’S
DISCUSSION &
ANALYSIS
(MD&A)
• Pages 4-7
• Financial Highlights
• Condensed financial statements and graphs plus narrative about why balances changed from prior years
• Analysis of balances and transactions
• Facts or conditions that are expected to have a significant effect 30 James Marta & Company LLP
STATEMENT OF
NET POSITION
31 Assets up $30.7M
(Better rates, cost
management, and
positive operation of
$32M)
Liabilities down
$1.3M (decrease in
accrued cost of
electricity reduced in
overall cost and PY
penalties)
Net position is
up $32M
$103,007,520
$7,716,748
$95,290,772
$72,275,518
$9,011,806
$63,263,712
$-
$20,000,000
$40,000,000
$60,000,000
$80,000,000
$100,000,000
$120,000,000
Total Assets Total Liabilities Net Position
Statement of Net Position
2025 2024
James Marta & Company LLP
STATEMENT OF
NET POSITION
32 2025 2024
ASSETS
Current assets
Unrestricted Cash $ 78,634,729 $ 51,943,413
Accounts receivable, net of allowance 10,162,025 8,769,456 Accrued revenue 3,763,678 3,449,298
Prepaid expenses 194,033 100,022
Other current assets and deposits 1,806,883 1,806,883
Total Current Assets 94,561,348 66,069,072
Restricted assets:
Cash in - debt service reserve fund 1,100,000 1,100,000 Total Restricted assets 1,100,000 1,100,000
Noncurrent Assets
Other noncurrent assets and deposits 7,346,172 5,106,446 Total Noncurrent Assets 7,346,172 5,106,446
TOTAL ASSETS $ 103,007,520 $ 72,275,518
LIABILITIES
Current Liabilities
Accounts payable $ 292,537 $ 749,431
Accrued cost of electricity 3,510,965 4,504,376
Accrued payroll 120,845 151,475
Other accrued liabilities 3,792,401 3,606,524
Total Current Liabilities 7,716,748 9,011,806
NET POSITION
Net position
Restricted 1,100,000 1,100,000
Unrestricted 94,190,772 62,163,712
TOTAL NET POSITION $ 95,290,772 $ 63,263,712
James Marta & Company LLP
STATEMENT OF
REVENUES,
EXPENSES,
AND CHANGES
IN NET
POSITION
33 Primary drivers: • Electricity sales and
costs
• Conscious pricing
decisions
• Management of
electricity cost
• As you build capital,
investment revenue
may contribute more. $88,425,788
$57,996,956
$1,598,228
$32,027,060
$97,979,268
$71,948,029
$949,832
$26,981,071
$(1,000,000)
$19,000,000
$39,000,000
$59,000,000
$79,000,000
$99,000,000
$119,000,000
Operating Revenues Operating Expenses Nonoperating Revenues(Expenses) Change in Net Position Statement of Revenues, Expenses and Changes in Net Position 2025 2024
James Marta & Company LLP
STATEMENT OF
REVENUES,
EXPENSES,
AND CHANGES
IN NET
POSITION
34 2025 2024
OPERATING REVENUE
Electricity sales, net $ 88,399,258 $ 97,905,798
Other revenue 26,530 73,470
TOTAL OPERATING REVENUES 88,425,788 97,979,268
OPERATING EXPENSES
Cost of electricity 52,406,469 64,722,705
Contractors 2,579,679 3,132,155
Staff compensation 1,708,045 1,700,719
Program expenses 140,509 1,328,152
General and administrative 1,162,254 1,064,298
TOTAL OPERATING EXPENSES 57,996,956 71,948,029
TOTAL OPERATING INCOME (LOSS) 30,428,832 26,031,239
NONOPERATING REVENUES (EXPENSES)
Investment income 1,598,228 949,832
TOTAL NONOPERATING REVENUES (EXPENSES) 1,598,228 949,832 CHANGE IN NET POSITION 32,027,060 26,981,071
Net position at beginning of period 63,263,712 36,282,641 Net position at end of period $ 95,290,772 $ 63,263,712 James Marta & Company LLP
STATEMENT OF
CASH FLOWS
35 $25,093,088
$1,598,228
$26,691,316
$23,513,648
$949,832
$24,463,480
$-
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
Operations Investing Change in Cash
Statement of Cash Flows
2025 2024
James Marta & Company LLP
STATEMENT OF
CASH FLOWS
36 2025 2024
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from electricity sales $ 86,689,468 $ 99,737,078 Payments for security deposits with energy suppliers (2,239,726) (3,212,842) Payments to purchase electricity (53,397,039) (65,977,872) Payments for contract services, program expenses, general, and administration (4,247,470) (5,498,575) Payments for staff compensation (1,738,675) (1,607,611) Other cash payments 26,530 73,470
Net Cash Provided (Used) by Operating Activities 25,093,088 23,513,648
CASH FLOWS FROM INVESTING ACTIVITIES
Interest income 1,598,228 949,832
Net Cash Provided (Used) by Investing Activities 1,598,228 949,832 NET CHANGE IN CASH AND CASH EQUIVALENTS 26,691,316 24,463,480 Cash and cash equivalents at beginning of period 53,043,413 28,579,933 Cash and cash equivalents at ending of period $ 79,734,729 $ 53,043,413 Operating income (loss) $ 30,428,832 $ 26,031,239
(Increase) decrease in net accounts receivable (1,392,569) 1,830,526 (Increase) decrease in net accrued revenue (314,380) (15,264) (Increase) decrease in prepaid expense (94,011) (57,853) (Increase) decrease in other assets and deposits (2,239,726) (3,212,842) Increase (decrease) in accounts payable (456,894) 303,375 Increase (decrease) in accrued payroll (30,630) 93,108
Increase (decrease) in due to member agencies - (4,132) Increase (decrease) in accrued cost of electricity (990,570) (1,255,167) Increase (decrease) in other accrued liabilities 185,877 (215,360) Increase (decrease) in user taxes and energy surcharges (2,841) 16,018 Net Cash Provided by Operating Activities $ 25,093,088 $ 23,513,648
RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES
Adjustments to reconcile operating income to net cash provided (used) by operating activities:
James Marta & Company LLP
INDEPENDENT
AUDITOR’S
REPORT
ON INTERNAL
CONTROL AND
COMPLIANCE
• No Material Weaknesses identified
• No instances of noncompliance
identified
37 James Marta & Company LLP
We would like to thank Mitch Sears, Edward
Burnham, and the Valley Clean Energy Alliance
staff for their assistance during the audit
process.
38 James Marta CPA, CGMA, ARPM
QUESTIONS?
39 Valley Clean Energy Board Meeting – Thursday, June 11, 2026 Item 14 – Mid-Year Financials Update
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Public Comments
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➢ E-mail 300 words or less to: [email protected] OR
If in person, complete a COMMENT CARD
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Join the Public Comment Queue by
➢ “Raising Hand” on Zoom Meeting
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➢ Press *9 if joining by phone
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Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 42 Item 14 – 2026 Mid-Year Financials Update : Overview Overview
VCE Staff continues to monitor and update the Board on budget performance for long-term financial sustainability and customer affordability.
Mid-year financial findings:
• 2026 load actuals have been lower than forecasted due to wet winter and lower spring temps.
• Regulatory actions are having a significant impact on Revenue forecasts.
This presentation includes:
• Summary of 2026 Budget Development
• 2026 Financials Update
• Long-term Financial Forecast
• Recommendation & Discussion
Note: Technical abbreviations are defined on slide 11
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 2026 Rates & Budget Summary: Key objectives
The 2026 customer Rates and Budget were based on adopted policies, strategic plan goals, and Board Feedback.
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, using rate stabilization funds
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 43 Item 14 – 2026 Mid-Year Financials Update : Budget Development -
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
F A F A F A F A F A F A F A F A F A F A F A F A
January February March April May June July August September October November December MWh Lighting Industrial Large Commercial Med. Commercial Small Commercial Agriculture Residential Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] Item 14 – 2026 Mid-Year Financials Update : Load Update VCE Retail Load Update
2026 Forecast vs. Actuals 2026 Forecast
27% of VCE’s
Annual Load
73% of VCE’s
Annual Load
44 Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 45 Item 14 – 2026 Mid-Year Financials Update : Proforma 2026 Budget Proforma Update (4 Months Actuals – unaudited) Key Highlights
• Revenues are more favorable than forecasted primarily due to final rates and a cool spring. • Power costs are in line with the budget due to mild temperature variations in winter and lower energy prices.
Description Variance
Revenue $ 45,274 $ 49,721 $ 4,447
Power Cost $ 53,800 $ 53,280 $ 520
Other Expenses $ 7,220 $ 7,220 $ -
Net Income $ (15,746) $ (10,779) $ 4,967
APPROVED
2026 BUDGET
2026 Proforma
(4 Month Actuals +
8 Month Budget)
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 46 Item 14 – 2026 Mid-Year Financials: Long-term Forecast Long-term Outlook (No action recommended)
• Current forecasts have improved, but are expected to be less favorable • PCIA OIR Track 2 - The proposed decision in Track 2 is expected to have additional impacts on the REC values included in the 2027 ERRA proceeding. • PCIA OIR Track 3 – “comprehensive review” to consider updates and • Improving existing rules (Including recent decisions) • Mitigating rate volatility
• Ensuring indifference (PG&E bundled vs CCA unbundled) • Lower Energy Prices = Higher PICA & Lower PG&E Gen - Decline in Energy price projections (~36% decrease since 2026 budget adoption) risk rate competitiveness • VCE’s Reserves allow us to maintain strong balances while absorbing a forecasted net loss of up to ~$16M in 2026 (Updated forecasted at ~$10.7M). • PPA Extensions / Renewals – Current market prices for PPAs are significantly higher than those currently contracted.
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 47 Item 14 – 2026 Mid-Year Financials: Long-term Forecast $28.21
$32.03
($10.74)
$11.26
$4.52
$2.70
($8.88)
($12.20)
($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 2030 2031 Millions
Annual Net Margin
Net Margin
Note: VCE’s forecasts include current approved customer rate discounts and updated third-party analyst information.
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 48 Item 14 – 2026 Mid-Year Financials: Long-term Forecast Additional Considerations for Reserve Balances
Credit Rating and Financing Costs: Strong reserves support VCE’s current “A-“ credit rating, which reduces borrowing costs and enhances VCE’s ability to invest in long-term clean energy initiatives.
Rate Stabilization: Cash reserves act as a primary financial buffer against market volatility, regulatory changes, and unexpected cost increases.
Customer Dividends: Dividend Reserves safeguard rate competitiveness and rate stability for all VCE customers with emphasis on VCE’s at-risk community.
Regulatory Compliance and Risk Management: Adequate reserves ensure compliance with financial risk management policies and provide flexibility to respond to unforeseen events.
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 49 Item 14 – 2026 Mid-Year Financials: Next Steps / Discussion Next Steps
• Monitor and update the Board on current year financial performance and decisions impacting PCIA and Generation rates.
• October Update – Release of CPUC proposed decisions to evaluate revenue/cost impacts for long-term financial strength.
• November – Preliminary 2027 Budget Update
• December 2026 – Proposed 2027 Customer Rates and Budget Recommendation & Discussion
Continue Current 2026 customer rate discounts:
• 5% for all (Standard Green/Ultra Green)
• 10% for CARE/FERA customers for the
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 50 Item 14 – 2026 Mid-Year Financials Update : Abbreviations • Power Charge Indifference Adjustment (PCIA) – An exit fee calculated by the Investor-Owned Utility / PG&E. • Energy Resource Recovery Account (ERRA) –ERRA tracks the difference between the utilities’ authorized revenue recovered in customer rates and the actual cost of power. • California Public Utilities Commission (CPUC) – Primary regulator for electric utilities in the state of California.
• Order Instituting Rulemaking (OIR) is an active proceeding initiated by the CPUC to update and reform PCIA and ERRA policies.
• Resource Adequacy (RA) – To ensure load-serving entities have enough power contracted to meet demand.
• Market Price Benchmarks (MPB) – Average price of tradable commodities, such as RECs, RA, and energy, that are used in the annual ERRA proceeding forecast. • Renewable Energy Certificates (RECs) – A certificate of proof that electricity was generated from an eligible renewable source.
Valley Clean Energy Board Meeting – Thursday, June 11, 2025 Item 15 – 2025 Draft Net Margin Allocation
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Public Comments
52 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)] 53 Item 15 – Draft Allocation of 2025 Net Margin: Overview Overview
Annually, VCE conducts a review and allocates its net margin from the previous fiscal year.
VCE’s audited 2025 financial statements resulted in $32 M net income. Taking into account the Dividend Program parameters, as well as available and forecast cash reserves, Staff is recommending allocations towards cash reserves, programs, and continued customer rate discounts.
This presentation will provide:
• Summary of 2025 Net Margin
• Present the 2025 Net Margin Allocation Scenarios
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 54 Item 15 – Draft Allocation of 2025 Net Margin: Dividend Program Dividend Program Formula:
• Every year, the audited Net Margin (Less Principal Debt Payments) is to be allocated amongst Cash Reserves, Local Programs Reserve, and Customer Dividends, at the Board’s discretion • Require a minimum 5% net margin before considering if any dividends are paid Based on the audited 2025 Financial Statements, the conditions above have been met, including our Reserve Policy Minimums.
Table 1 - 2025 Beginning Reserve Balance
Description
2025 Beg.
Cash Balance Days Cash
Minimum
Reserve Policy
Operating Reserves - 2025 Beginning Balance 43,314 220 120* Local Programs Reserves - 2025 Beginning Balance 2,709 14 0 Customer Dividend Reserves - 2025 Beginning Balance 3,856 20 0 Rate Stabilization Reserves - 2025 Beginning Balance 12,284 62 60 Total Unrestricted Cash 62,163 316 180
*VCE Operational Cash Reserve Target is 180 days.
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 55 Item 15 – Draft Allocation of 2025 Net Margin: Dividend Program Formula
The dividend program formula is as follows:
Net margin up to 5% is to be allocated as
follows:
o At least 5% (of the 5%) to LPR for
program implementation
o Up to 95% (of the 5%) to
Operational Cash Reserves (Until
180-day Target is met)
Net margin over 5% is to be allocated as
follows:
o 50% to Operational Cash Reserves
(Until 180-day target is met)
o 25% to Rate Stabilization (Until 60-
day minimum is met)
o Board Discretionary Allocation after
minimums have been met
VCE Dividend Program – Draft 2025 Allocation (Table 2)
Valley Clean Energy
Description
2025
Financials
($1,000s)
Electricity Sales 90,024
Operating Expense 57,997
Operating Margin 32,027
Principal Debt Payments -
Adjusted Net Margin less principal Debt Payments 32,027 Adjusted Net Margin Percentage 35.58%
Allocation Amount <=5% 4,501
Allocation Amount > 5% 27,526
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 56 Item 15 – Draft Allocation of 2025 Net Margin: Key Considerations Key Considerations:
• Rate Competitiveness - Current forecasts from analysts show additional changes in PCIA (increasing) and PG&E rates (decreasing) • Power Costs - regulatory pressures (increased costs = decreased days cash on hand)
• VCE’s current minimum 120-day (180 Target ) operating cash reserve target and minimum 60-day rate stabilization reserves
• Continues VCE’s current renewable standard green portfolio with discounts.
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 57 Item 15 – Draft Allocation of 2025 Net Margin: Net Margin up to 5% Allocation of Net Margin up to 5%
• VCE's minimum allocations result in $245,000 to Local Programs. • Additional discretionary $2,025,000 to Local Programs • Additional discretionary $2,251,000 to Operational reserves Allocation of Net Margin up to 5% (Table 3)
Note: Additional operational reserves provide flexibility and help maintain VCE’s credit rating. Additional local programs reserve allows for multi-year planning during years that no allocation may be made.
Allocation of Net Margin up to 5% Percentage
Allocation
Amount
Operating Days
Cash
Total
Operating Days
Cash
Operating Reserves Allocation 50% 2,251 11 231
Local Programs Allocation 50% 2,251 11 25
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 58 Item 15 – Draft Allocation of 2025 Net Margin: Net Margin above to 5% Table 4 - Scenario 1 - Allocation of Net margin above 5% Allocation of Net Margin above 5% Percentage
Allocation
Amount
Operating Days
Cash
Total
Operating Days
Cash
Operating Reserves Allocation 0% - 0 230
Local Programs Allocation 0% - 0 25
Customer Dividends 0% - 0 20
Rate Stabilization Allocation 100% 27,526 140 202
Note: Rate Stabilization reserves provide the most flexibility. Rate Stabilization funds can be reallocated during the 2027 Rates and Budget process. The 2026 adopted budget forecasts a ($15.8M) net loss using a part of this forecasted allocation. Current 2027 forecasts do not include market price benchmarks or peak-season usage.
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 59 Item 15 – Draft Allocation of 2025 Net Margin: Net Margin above to 5% Table 4 - Scenario 2 - Allocation of Net margin above 5% Allocation of Net Margin above 5% Percentage
Allocation
Amount
Operating
Days Cash
Total
Operating
Days Cash
Operating Reserves Allocation 0% - 0 0
Local Programs Allocation 0% - 0 0
Customer Dividends 15% 4,129 21 31
Rate Stabilization Allocation 85% 23,397 119 130
Scenario 2 decreases the Rate Stabilization allocation in Scenario 1 and increases the customer dividend fund proportionately. This approach strengthens expectations that VCE may continue its discount program into 2027, providing added reassurance regarding rate stability and ongoing customer benefits despite a challenging market outlook.
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 60 Item 15 – Draft Allocation of 2025 Net Margin: Summary Discussion Summary
Staff believe that both scenarios represent a disciplined and financially prudent approach to building reserves and preserving long-term rate relief.
Staff Recommendation (Scenario 2)
Adopt a resolution approving the allocation of the $32M 2025 Audited Net Margin as follows:
1. Minimum allocation of $225,000 to the Local Programs Reserve (LPR)
2. Discretionary allocation of $2,026,000 to the LPR
3. Discretionary allocation of $2,251,000 to Operational Reserves
4. Discretionary allocation of $4,129,000 to Customer Dividend Reserves
5. Discretionary allocation of $23,397,000 to Rate Stabilization Reserves