Ed Perkins, 20, was charged late this afternoon with possessing a concealed weapon and possessing a loaded weapon, but officials do not believe he is responsible for the shooting, the district attorney's office said.
Powell was killed at about 11:30 p.m. at this year's "Pink Saturday," a street party held the night before the San Francisco Pride Parade, when someone opened fire on the crowd at Market and Castro streets, police said.
A 19-year-old woman and 29-year-old man were also hit but are expected to survive.
Police arrested Perkins after he was found near the crime scene in possession of a .357-caliber revolver, and he was initially charged with one count of murder and several firearms violations.
Investigators, however, have determined none of the seven shots fired into the crowd were from Perkins' weapon, and no witnesses were able to put Perkins at the scene, the district attorney's office said.
Police are still looking for a suspect in the shooting.
"The San Francisco Police Department is working to apprehend the individual who marred one of our most proud celebrations by bringing deadly mayhem to our streets," San Francisco District Attorney Kamala Harris said in a statement.
Perkins will be arraigned on the gun possession charges in San Francisco Superior Court at 9 a.m. Wednesday.