VCE Community Advisory Committee Meeting - Item 8 - Cost-Based Rate Structure

Sep 20, 2026

VCE Community Advisory Committee meeting materials for October 28, 2021 present Item 8 on a Cost-Based Rate Structure. The overview reviews forecasting assumptions, prior implementation and strategic plans, and key financial drivers including power market cost increases, PCIA levels, scheduled PG&E generation rate changes, and forecast/model errors. Updated budget and forecast tables compare adopted vs corrected projections for FY2019–FY2024. The document proposes a cost-based rate policy and implementation procedure for 2022–2023 and outlines reserve targets and customer rate structure design.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages21

Reading Time53 min

AccessFree to download

Item 8 – Cost-Based Rate Structure

Overview

Purpose

Background

Background/Review

Budget and Updated Forecast

Rate Actions Taken by Other CCA’s

Proposed Cost-Based Rate Policy

Proposed Cost-Based Rate Structure

VCE Community Advisory Committee Meeting October 28, 2021 via video/teleconference Item 8 – Cost-Based Rate Structure 1 [yvonnehunterphotography.com](yvonnehunterphotography.com) 1 Public Comments To Provide Public Comment on any agenda item please: ➢ E-mail 300 words or less [to:](to: meetings@valleycleanenergy.org)[ ](to: meetings@valleycleanenergy.org)[meetings@valleycleanenergy.org](to: meetings@valleycleanenergy.org) 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 8 – Cost-Based Rate Structure Overview • Background • Proposed Cost-Based Rates Policy • Proposed Cost-Based Rates Structure • Recommendation/Next Steps Purpose: Revise VCE’s rate policy and customer rate structure enabling VCE to offer additional customer choice and set rates calibrated to actual cost and reserve requirements rather than indexed only to PG&E’s generation rates + PCIA. Item 8 – Cost-Based Rate Structure Background • All electric utilities develop forecasts based upon informed technical estimates. Forecasts incorporate factors such as future weather, load, market power prices, and other business conditions. Actual outcomes inevitably vary and in extreme instances, outcomes may vary significantly. • 2017-VCE Implementation Plan: Program rates must collect sufficient revenue from participating customers to fully fund VCE’s budget, including the need to establish sufficient operating reserve funds. • 2020 – Strategic Plan: Maintain financial stability while continuing to offer customer choice, competitive pricing and establishment of local programs. • 2018 – 2021 -VCE has systematically analyzed policy options and implemented strategies to stabilize customer rates, reduce cost, and manage reserves. • e.g.: Discontinue rate discount; scaled back REC purchases; sign longterm renewable PPA’s • 2020-2021 – Initiated research/development of cost-based rates and expanded customer rate structure 4 Item 8 – Cost-Based Rate Structure Background/Review • Primary financial drivers remain the same from April/May 2021 analysis included in FY 2021/22 budget adoption • Power market costs continuing to increase above forecast increases (short-term 2022 prices +57% since May 2021); VCE hedging strategy • PCIA remaining high in 2021 at approx. $33.5M (+165% v. 2020 PCIA) • Additional financial drivers impacting short and longer-term outlook • Scheduled Fall 2021 PG&E Generation Rate increase (1.5%) delayed • Error in financial estimations overvalued positive impacts of VCE’s longterm PPA’s • Short-term outlook (2022 and 2023) continued volatility with associated financial challenges – Approx. $13M in additional forecasted costs; requires corrective action on rates to ensure cost recovery. • Longer-term outlook (2024+) increased stability and cost certainty due to long-term PPA’s and cost-based rate structure; rebuilt reserves + positive margins. Item 8 – Cost-Based Rate Structure Budget and Updated Forecast | |

FY2019 FY2020 FY2021 FY2022
Actuals
51,035 55,249 55,080 53,534 38,540 41,538 54,318 54,548
3,850 4,346 4,267 4,857
8,646 9,365 (3,505) (5,871)

Actuals

ACTUALSUNAUDITED

ACTUAL YTD Aug 31 (2 MO) + FORECAST (10 MO) | Forecasted FY2023 FY2024
59,100 59,600 53,800 49,600
5,100 5,200
200 4,800

Forecasted | | --- | --- | --- | | Adopted Budget FY 2022 (June 2021) | | | | Revenue
Power Cost
Other Expenses | | | | Net Income | | | | | | | | Corrected Model
(October 1 Power Curve) | FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 51,035 55,249 55,080 53,534 59,100 59,600 38,540 41,538 54,318 57,592 62,223 51,062 3,850 4,346

FAQs

What is the purpose of the proposed cost-based rate structure for VCE?

Revise VCE’s rate policy and customer rate structure so VCE can offer more customer choice and set rates aligned with actual cost and reserve requirements rather than only indexing to PG&E generation rates plus PCIA.

Which factors are highlighted as key financial drivers affecting the forecast?

The materials cite rising power market costs versus forecast, the remaining high PCIA in 2021, delayed scheduled PG&E generation rate increases, forecast/model estimation errors, and short- to longer-term volatility affecting cost recovery.

What operating reserve targets are included in the proposed implementation procedure?

For budget years 2022 and 2023, the plan targets rebuilding a minimum operating reserve of 30 days cash by end of 2023 and a targeted reserve of 60 days cash by end of 2023, with higher targets beginning in 2024.

Sep 20, 2026

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