San Diego Community Power proposes a new reserves range and 225‑day target amid PCIA volatility

San Diego Community Power finance staff proposed to the Finance & Audit Committee a fourth revision to the agency’s reserves policy that would redefine reserves and raise the agency’s target cash buffer to reduce exposure to volatile market‑price benchmarks and the Power Charge Indifference Adjustment (PCIA).

"We’re proposing a range, of 180 days up to 270 days cash on hand," said Timothy Mangalmont, Director of Finance, who briefed the committee on a multi‑pronged quantification of agency risks. Mangalmont said staff recommended a new target of 225 days cash on hand informed by stress testing and peer benchmarking.

Mangalmont identified the PCIA — the state‑mandated mechanism that reconciles power‑purchase costs and CPUC market‑price forecasts and true‑ups — as the agency’s largest single risk. In the presentation staff quantified the PCIA exposure as large (presented in slides at about $420,000,000) and said combined risks totaled roughly $771,000,000 in the agency’s bottom‑up quantification.

Staff presented two illustrative stress tests. One, modeled on 2021 low market prices, showed a potential $331,000,000 loss — roughly 120 days cash on hand under the team’s assumptions — before recovery over subsequent years. A second scenario combining a drop in customer participation and higher uncollectable rates produced an illustrative $238,000,000 shortfall, or about 99 days of cash on hand.

Jeff Spangler, who co‑presented validation and policy language, said staff recommends changing the reserves definition from "net position" to "unrestricted cash, cash equivalents, and investments not encumbered by legal agreements" to align reporting with rating‑agency practice. Staff also proposed an upper band that would allow the board to designate excess above the maximum for strategic investments or for a rate‑stabilization tranche to smooth rates in volatile years.

Committee members asked for additional detail on how PCIA forecasts and true‑ups flow into customer bills and on the timing of forecasts versus when a true‑up hits agency rates; staff said the CPUC market‑price benchmark process and lag structure make PCIA an inherently multi‑year exposure and offered to provide further data and modeling.

What’s next: The reserves policy amendment was presented for committee consideration; staff indicated the item would be validated before a board vote and that they would return with supplemental materials, including a rate‑stabilization policy proposal and detailed stress‑test outputs.