San Diego Community Power previews FY2027 budget as PCIA volatility threatens revenue and prompts larger reserve targets

San Diego Community Power’s board received a preliminary FY2027 operating and capital budget on May 28, as staff warned that the Power Charge Indifference Adjustment (PCIA) and wholesale market swings pose the largest near‑term financial risk to the agency.

"The FY2027 proposed budget is designed to protect affordability while continuing to deliver reliable, cleaner energy to the communities that we serve," Chief Executive Officer Karen Burns said as she introduced the package and turned the item over to finance staff.

Timothy Mangleott, senior director of finance and risk, told the board staff expect a sizable reduction in ratepayer revenue—about $250 million compared with the prior year—and are proposing a budget with a small net margin of roughly $3 million. To protect customers from market volatility, the draft trims controllable non‑energy costs, reduces the operating contribution to the capital improvement program from $22 million to $8 million, and proposes building reserves to a target range near 270–278 days cash on hand.

"PCIA by far and away is our biggest risk," Mangleott said, describing the PCIA true‑up mechanism and noting staff model a wide range of outcomes. In staff stress tests the agency’s days cash on hand could range from as low as about 156 days to as high as 455 under extreme scenarios; the board packet calls out roughly $420 million as the magnitude of PCIA‑related exposure in some scenarios.

Staff described three market scenarios: a "snapback" in which PCIA true‑ups compress the agency’s revenue even as customer retail rates fall, a reserve‑build scenario when market prices shift the other way, and a stable case. Mangleott said staff’s base case anticipates a PCIA "snapback" and that, even with squeezing revenues, customers could see materially lower rates next calendar year—staff estimated roughly a 15–20% drop in retail rates under the modeled base case.

The budget also reflects program and capital choices. The FY27 capital budget totals roughly $71.4 million (including $8 million internal funding), with $63.1 million identified for the San Diego Regional Energy Network (SD REN). Staff reported external funding in the outlook period exceeding $249 million and a five‑year CIP of about $310.7 million including carry forwards.

Non‑energy line items include a proposed personnel increase of about $4.5 million to support five additional full‑time equivalents (staff reported the agency currently has 94 employees with nine vacancies). Chris Doe, senior finance analyst, said strategic communications and outreach were relabeled from the legacy marketing category, and that customer operations costs are expected to decline in part because of changes to vendor billing constructs.

Board members pressed staff on tradeoffs between using reserves and raising rates. "PCIA has become my least favorite four‑letter word," said Director Fischer, who urged more aggressive legislative and public advocacy and asked whether lower energy costs reflected staff strategy or external market moves. Mangleott responded that staff intentionally left some positions in the open market to take advantage of lower forward prices as they materialize, and reiterated that PCIA true‑ups can blunt the benefits of lower wholesale prices for Community Power.

Staff outlined next steps: the draft will go to the Community Advisory Committee and to the Finance & Risk Management Committee for comment in June, and staff plan to return to the board in October and November after the summer load to provide updated stress tests and CPUC price benchmarks. Mangleott also said staff anticipate proposing a partial transfer—on the order of $30 million to $50 million—into a rate stabilization reserve in a later action to help smooth customer bills.

The board received and filed the preliminary budget as a "receive and file" item; final adoption remains scheduled for a subsequent board meeting after committee reviews and additional stress‑testing.