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Unknown: Heather, ever after you...
SPEAKER_04: 25 seconds.
SPEAKER_08: Good evening and welcome to the Finance and Audit Committee and Special Board Meeting
SPEAKER_08: of December 9, 2025. This meeting is being recorded and can be accessed on SMUD's website.
SPEAKER_08: Please remember to unmute your microphone when speaking in order that our virtual attendees
SPEAKER_08: may hear. The microphone will display a green indicator light when the mic is on. For members
SPEAKER_08: of the public attending in person who wish to speak at this meeting, please fill out
SPEAKER_08: the speaker's request form located on the table outside the room and hand it to SMUD
SPEAKER_08: Security. Members of the public attending this meeting virtually who wish to provide
SPEAKER_08: verbal comments during committee meeting may do so by using the raise hand feature in Zoom
SPEAKER_08: or pressing star 9 while dialed into the telephone toll-free number at the time that public comment
SPEAKER_08: is called. Technical support staff will enable the audio for you when your name is announced
SPEAKER_08: during the public comment period. You may also submit written comments by emailing them to
SPEAKER_08: publiccomment at SMUD.org. Written comments will not be read into the record, but they
SPEAKER_08: will be provided to the Board electronically and placed into the record of the meeting
SPEAKER_08: if received within two hours after the meeting ends. At this point, will our Chief Legal
SPEAKER_08: Officer, Ms. Laurel Lewis, please conduct the roll call.
SPEAKER_02: Director Buie Thompson? Director Rose?
SPEAKER_08: Here.
SPEAKER_02: Chair Kurth?
SPEAKER_02: Here.
SPEAKER_02: Director Rose and Chair Kurth are present. Director Buie Thompson is absent, though I
SPEAKER_02: believe she's on her way.
SPEAKER_02: Yeah, she's very close.
SPEAKER_08: She's also present are Directors Herbert, Tamayo, Sam Bort and President Fishman.
Unknown: Okay, thank you. Director Tamayo is with us virtually. Okay. Item number one on tonight's
SPEAKER_08: agenda is to discuss SMUD's 2025 Financial Statements Independent Audit Plan. And with
SPEAKER_08: us tonight is Ms. Bethany Riers, Principal at Baker Tilly US LLP. Welcome.
Unknown: Thank you. Sorry, not good with the technology. Hi, my name is Bethany Riers. It's a pleasure
SPEAKER_07: to be here with you today to discuss the audit plan for SMUD's 2025 Financial Statement Audit.
SPEAKER_07: Do I need to do something to get the presentation?
SPEAKER_08: I think.
Unknown: Oh, okay. Thank you. So today I'm just going to briefly discuss the engagement team, go
SPEAKER_07: through the scope of the audit, the initial timeline, and then of course there's always
SPEAKER_07: a lot of required communication as it relates to the audit and a lot of things that we just
SPEAKER_07: need to make you aware of and let you know about as it pertains to your audit. So here's
SPEAKER_07: your engagement team. Everybody should look very familiar. The only new person up there
SPEAKER_07: is myself and that's because of the mandatory California required principal partner rotation.
SPEAKER_07: So I am new to the engagement. It's a pleasure to be here today in person to meet you all.
SPEAKER_07: But everyone else is the same. So you've got the same director managing the overall audit
SPEAKER_07: as well as senior manager. And of course we have Jody Dobson as the Per issuance reviewer,
SPEAKER_07: quality reviewer, and in charge of our professional practice as well as we'll be assisting with
SPEAKER_07: the single audit in the current year. We do include our contact information for you. Ultimately
SPEAKER_07: we're hired by the board. We're required to communicate directly to the board. So we
SPEAKER_07: want to make sure that if you ever have any questions or concerns you know how to get
SPEAKER_07: a hold of us. So overall, especially in this year, we've got three overall deliverables.
SPEAKER_07: There's a few more required deliverables that will be on the next slide. But the first is
SPEAKER_07: our overall audit opinion in the front of your audited financial statements. And those
SPEAKER_07: say that we are required to plan and perform the financial statement audit to ensure we
SPEAKER_07: can provide reasonable assurance that your financial statements are in compliance with
SPEAKER_07: generally accepted accounting principles and materially correct in that way. Reasonable
SPEAKER_07: assurance is not absolute assurance, but it is a very high level of assurance. In addition,
SPEAKER_07: in the current year, because SMUD has a single audit requirement, which is if you receive
SPEAKER_07: federal funding over a million dollars, you are required to go through a federal single
SPEAKER_07: audit, we've got two separate reports that we will also be providing. The first is the
SPEAKER_07: report on internal control over financial reporting on compliance and other matters
SPEAKER_07: based on an audit of financial statements performed in accordance with government auditing
SPEAKER_07: standards. Since you do have a single audit, we are required to plan and perform the audit.
SPEAKER_07: In addition to AICPA auditing standards, we're also required to perform it in accordance
SPEAKER_07: with government auditing standards. So you will receive that deliverable with the financial
SPEAKER_07: statement audit. Then once the single audit is complete, you will also receive a report
SPEAKER_07: on compliance for each major federal program and report on internal control over compliance
SPEAKER_07: required by the uniform guidance. In addition, there's a lot of required communication that
SPEAKER_07: we need to give to you. And those are the two other deliverables that we provide. Normally
SPEAKER_07: we provide you that separate report that says audit insights and results. It's got a very
SPEAKER_07: nice fancy cover. But it does have a lot of that required communication. So that includes
SPEAKER_07: communication to those charged with governance, which includes a discussion really of the
SPEAKER_07: overall audit results, if there were any audit adjustments as part of the audit, any difficulties
SPEAKER_07: with management, any other items to note significant transactions that we think you should be aware
SPEAKER_07: it will be included in that report. In addition, we are also required to review internal controls
SPEAKER_07: and procedures over the main financial areas. As part of that, if we are to note a controlled
SPEAKER_07: efficiency, that would ever rise to the level of a significant deficiency or material weakness.
SPEAKER_07: We're also required to communicate that to you, which would also be included in that
SPEAKER_07: letter which nicely I don't think you've had to worry about that for many years. So it
SPEAKER_07: should be a very nice and clean report. We have included in here non-attest services.
SPEAKER_07: We currently do not provide any non-attest services to Sacramento Municipal Utility
SPEAKER_07: District. And we do need to evaluate that if we ever were to, to ensure we can maintain
SPEAKER_07: our independence as it relates to the audit. We do just have in there proposing any correcting
SPEAKER_07: audit adjustments as necessary, just as an overall catch-all. But generally we don't
SPEAKER_07: have any to worry about. So the overall timeline, we're in the process of our preliminary field
SPEAKER_07: work. So in October through December, we're doing our planning and preliminary field work
SPEAKER_07: where we're having those discussions with management on what occurred during the year,
SPEAKER_07: planning our test of controls and walk-throughs related to those key financial areas, and
SPEAKER_07: overall getting our general risk assessment of the audit. Then of course, we've got the
SPEAKER_07: planning meeting here today in December. Final field work is scheduled for the last week
SPEAKER_07: in January and the first week in February, which is similar to prior years. And then
SPEAKER_07: of course we'll have our draft reports in February of 2026 and our overall presentation
SPEAKER_07: to you of the audit results in March. So a quick timeline, but one that we've been able
SPEAKER_07: to accomplish year to year. Other planning considerations, as part of our audit, as part
SPEAKER_07: of our planning procedures, we do assess the risk of material misstatement. That's
SPEAKER_07: why we do spend quite a bit of time going through the procedures and controls of those
SPEAKER_07: key financial areas and reviewing controls and in some cases testing controls as it seems
SPEAKER_07: necessary, as it benefits our overall audit plan. However, overall, we do not express
SPEAKER_07: an opinion on the effectiveness of your internal control, but we are required to review it
SPEAKER_07: and we do look at it quite a bit and would let you know of course if we notice any control
SPEAKER_07: deficiencies that are significant. In addition, as part of the audit, we focus on materiality.
SPEAKER_07: Materiality is something that is both quantitative and qualitative. So we do focus on a given
SPEAKER_07: number but we also look at the relationships and the financial statements. So if something
SPEAKER_07: looks off and may not necessarily be material, we'll likely still look at it just to kind
SPEAKER_07: of make sure that everything makes sense. Overall, too, we also communicate with management,
SPEAKER_07: unless otherwise directed. Under the section related to review of engagement letters, kind
SPEAKER_07: of goes through what management's responsibilities are as well as what our responsibilities are
SPEAKER_07: as your auditor. This information is so important that we include it in our engagement letter.
SPEAKER_07: We also include it in our audit opinion. Management is overall responsible for the
SPEAKER_07: internal control environment, for preparing the financial statements and ensuring everything
SPEAKER_07: is accurate included in those financial statements. Our responsibilities as your auditor is to
SPEAKER_07: form and express an opinion on those financial statements to let you know that they are materially
SPEAKER_07: correct and in accordance with generally accepted auditing standards or accounting standards.
SPEAKER_07: Other items to consider as part of our required communication is we are independent with respect
SPEAKER_07: to SMUD. We do use our internal audit function as part of our audit testing. This year, I
SPEAKER_07: believe they're assisting us with test controls and likely some single audit testing as it
SPEAKER_07: relates to the single audit. We only really use one specialist as part of the audit and
SPEAKER_07: that is related to the fair market of your investments and derivatives if needed to as
SPEAKER_07: part of the audit plan and bearing into account materiality. We have two significant risks noted
SPEAKER_07: as part of the audit. One is management override of controls and the second is the improper revenue
SPEAKER_07: recognition due to fraud. These are pretty standard risks. Actually, the AICPA requires us to consider
SPEAKER_07: both risks as significant for every audit. So it's something that we look at for every single
SPEAKER_07: engagement that we're on. In addition, we're also required to consider any fraud implications as it
SPEAKER_07: relates to the audit. As part of this, we do speak with the president of the board as well as other
SPEAKER_07: folks throughout the organization and in management and throughout to ask a few of the questions that
SPEAKER_07: are included on your screen, mainly to understand the overall controls around the entity and if
SPEAKER_07: there's any specific risk that anybody knows about that we need to consider as part of our
SPEAKER_07: audit. We'll take those considerations, we'll take those discussions and incorporate them in our
SPEAKER_07: audit plan and our audit programs if it makes sense. Other areas that we review, overall, we do
SPEAKER_07: look at any new governmental accounting standards that are effective in the current year. In the
SPEAKER_07: current year, luckily, there's only one and it's pretty small. It's GASB102 related to commitments
SPEAKER_07: or concentrations and constraints. Luckily, if it applies to you, it's really only a footnote
SPEAKER_07: disclosure. But as with any new governmental accounting standards, the heavy lifting is the
SPEAKER_07: interpretation and going through the analysis to determine if it applies. In which case,
SPEAKER_07: management will be determining if there are any concentrations and constraints that apply to the
SPEAKER_07: district and then going through the analysis to determine if any would require a footnote
SPEAKER_07: disclosure. In addition, we spend a lot of time looking over internal controls over financial
SPEAKER_07: reporting. So those journal entries and controls around how everything gets incorporated into your
SPEAKER_07: financial statements. Again, I mentioned consideration of fraud risks in the prior slide.
SPEAKER_07: We do an overall review of the internal information technology environment, review
SPEAKER_07: confirmations for cash, investments in debt, payroll and expenses. Really, we look at every
SPEAKER_07: major segment that's included in your financial statements to determine what needs to be reviewed
SPEAKER_07: so that we can say that that balance is materially correct and stated in accordance with GAP. In
SPEAKER_07: addition, we spend a lot of time looking over tested compliance over certain provisions of
SPEAKER_07: laws, regulations, and especially in this year, those grant agreements, and reviewing, computing,
SPEAKER_07: and substantiating all the financial statement numbers that are in your statements as well as
SPEAKER_07: everything that's included in your footnote disclosures and ensuring that it's in compliance
SPEAKER_07: with governmental accounting standards. As I mentioned, you will have a single audit in the
SPEAKER_07: current year. A single audit is really an audit of your grant compliance. So review your schedule
SPEAKER_07: of federal awards, determine which programs that you have and which will need to be tested,
SPEAKER_07: and we'll be looking at those programs and tying it back to the original grant agreement and make
SPEAKER_07: sure that you are in compliance with the main areas of that grant agreement. So overall,
SPEAKER_07: general audit plan. We've got our planning and interim field work. As I mentioned, we're in the
SPEAKER_07: process of that right now where we're working on establishing our materiality threshold,
SPEAKER_07: working on our internal control testing and designing those tests of controls, reviewing
SPEAKER_07: board minutes for any significant transactions or anything we need to be aware of when we go into
SPEAKER_07: final field work, going through any significant transactions that occur during the year and any
SPEAKER_07: other procedures that are appropriate. The final field work is where we spend probably the bulk of
SPEAKER_07: our time where for every material account that's included in your financial statements,
SPEAKER_07: we're substantiating in some way, whether through test of controls, substantive test of details,
SPEAKER_07: reviewing invoices, contracts, or substantive analytic procedures where we review what the
SPEAKER_07: account relates to, try to recalculate it based on other inputs and ensure that it makes sense
SPEAKER_07: based off of everything that we know. And then of course, audit the overall financial
SPEAKER_07: statements and footnotes that are provided by management. Lastly, we'll be finalizing as
SPEAKER_07: part of our audit completion those final reports that I mentioned, the opinion, the required other
SPEAKER_07: deliverables, reviewing attorney representation letters to see if there's any commitments or
SPEAKER_07: contingencies that also need should be included in the footnotes if they aren't already, and
Unknown: reviewing management's evaluation of subsequent events to ensure that footnote is appropriate as
SPEAKER_07: well. And then finally obtaining that management representation letter and meeting with you all
SPEAKER_07: to discuss the overall results. Okay. Lastly, I just have there's a link to some audit resources
SPEAKER_07: that's on our webpage. We have quite a lot of resources and in addition, we always have a
SPEAKER_07: utility university in October. All of those webinars are up as resources on our website.
SPEAKER_07: There was actually a really nice one this year about governance and the structure of governance
SPEAKER_07: and ensuring proper governance for utilities as an FYI. Not everyone likes to sit through CPE,
SPEAKER_07: but if you're interested, it's out there and it's free. So overall, does anyone have any
SPEAKER_07: questions for me? I'm happy to sit up here and talk about governmental accounting standards or
SPEAKER_07: auditing as long as you want. Great. Please, Dr. Herbert. Well, thank you for your presentation.
SPEAKER_00: I'm wondering if you would be willing to share with us without, you know, names,
Unknown: anything that you have found in an audit that made, you know, your company have to say,
SPEAKER_00: hey, you need to correct this here. I am just looking for examples. For like an audit adjustment,
SPEAKER_07: you mean? Where you would do an audit and you would find things. What might be some of the
SPEAKER_00: things you would find that were not best practices? Okay. Goodness, that's a loaded question. I can
SPEAKER_07: probably give you a lot of ‑‑ I can probably give you quite a few. One that comes to mind,
SPEAKER_07: I know we had an audit where normally it's a very clean audit, but we ended up having finding four
SPEAKER_07: audit adjustments which is very rare for that particular client. Whenever you find an audit
SPEAKER_07: adjustment, it's an indicator of a control deficiency because somewhere in your control
SPEAKER_07: structure something failed and caused that misstatement. And ultimately, since we were
SPEAKER_07: the ones that found it, it is unfortunately an audit adjustment. In that case, we went through,
SPEAKER_07: you know, what caused it. Every single audit adjustment was for a different financial statement
SPEAKER_07: segment. It wasn't just, oh, my goodness, something really got messed up in long‑term debt or, wow,
SPEAKER_07: that GASB 68 entry just didn't quite work out. So in that case, we determined that utility had a
SPEAKER_07: lot of turnover the past few years and it's been hard to find good people. And unfortunately,
SPEAKER_07: it was just a lack of training in the way that the review of journal entries was done because
SPEAKER_07: they had, you know, their peers review a journal entry and their peers were basically just signing
SPEAKER_07: off. They just weren't paying as close attention or questioning it as much as they probably should
SPEAKER_07: have. So unfortunately, in that case, we had to give them a significant deficiency in their control
SPEAKER_07: environment mainly around that review of journal entries because while overall the entries weren't
SPEAKER_07: material, they were so prevalent that we knew there was such an issue in their control structure
SPEAKER_07: that we just had to bring it to the board's attention. So that's one example of a control.
SPEAKER_07: Great. Thanks. Other questions? I don't see any more questions. Thank you very much for making the
SPEAKER_08: trip. I look forward to hearing the results of your work. Thank you very much. It was
SPEAKER_07: great to come out and see you all. I appreciate it. Thank you. Okay. Do we have any request to
SPEAKER_08: speak on item number one? No, we do not. Okay. Thanks. Let's move on to item number two then.
SPEAKER_08: Item number two is to discuss approving sign letter agreements between SMUD and the Public
SPEAKER_08: Safety Officers Association for the California Public Employees Retirement System, CalPERS,
SPEAKER_08: reporting of their holiday pay as required by the Fair Labor Standards Act and documenting the
SPEAKER_08: monetary value for the maintenance of required clothing. And this is not Matthew Powell.
SPEAKER_08: Apparently he's out tonight and Lori Rodriguez, advisor to People Services and Strategies,
SPEAKER_08: so be here to present. Thank you. Welcome. Back. Yes. Thank you very much. Chair Kurth, happy to be
SPEAKER_10: here and good evening to the board. I'm Lori Rodriguez with People Services and Strategies,
SPEAKER_10: and I'm stepping in this evening for Matthew Powell. He's home ill as well as some little ones,
SPEAKER_10: so wishing them all well. This evening I'll be presenting and requesting your approval on
SPEAKER_10: administrative compliance pertaining to California Public Employees Retirement System or CalPERS.
SPEAKER_10: You'll recall in August I was here doing a similar presentation relating to CalPERS
SPEAKER_10: reporting for our 24-7 shift employees. I'll start with a little bit of background. On a regular
SPEAKER_10: basis SMUD as a CalPERS agency reports to CalPERS employees hours and compensation for pension
SPEAKER_10: purposes. In addition to an employee's base salary being reported, there are some items of compensation
SPEAKER_10: that we refer to as special compensation. Items of special compensation are also added or included
SPEAKER_10: to a retirees pension benefit calculation. In the prior Public Safety Officers Association or PSOA,
SPEAKER_10: MOU did not meet the criteria required for reporting special compensation to CalPERS
SPEAKER_10: as defined in the government code listed here in this slide. Specifically, the definitions of
SPEAKER_10: holiday pay as well as the compensation for the maintenance of required clothing
SPEAKER_10: need to be addressed. As such, recently CalPERS has been excluding that special compensation
SPEAKER_10: for the above referenced items from employees that are retiring because they're not approved
SPEAKER_10: in writing by SMUD's board. So again, that's why I am here to seek some approval as we have taken
SPEAKER_10: some action based on learning this. Listed here are those corrected actions that SMUD has taken
SPEAKER_10: to address the need to have the definition of holiday pay and the compensation for the maintenance
SPEAKER_10: of the required clothing documented. We've negotiated side letter agreements with the
SPEAKER_10: union with the PSOA. This updates the holiday pay in the previous MOU and updates the uniform
SPEAKER_10: maintenance allowance language in the current MOU. We also connected with CalPERS in writing
SPEAKER_10: to ensure that these side letters would fulfill the required or correct the documentation issue
SPEAKER_10: that I referenced. Additionally, we have communicated with the affected employees
SPEAKER_10: sharing the issues that are at hand and the actions being taken to address here this evening,
SPEAKER_10: again, to request the board's approval of the side letters.
Unknown: So with the board's anticipated approval of the discussed documents, we do fully anticipate
SPEAKER_10: that CalPERS will now include the pay and compensation for the maintenance of the required
SPEAKER_10: clothing in the employee's final pension calculation. Those employees who recently retired
SPEAKER_10: were unable to have this included in their retirement calculation. So they'll be able to
SPEAKER_10: request CalPERS to recalculate this special compensation and have it included.
SPEAKER_10: So the requested action is for the board to approve the PSOA side letter agreements.
SPEAKER_10: That concludes the presentation. I do want to open it up for any questions should there be any.
Unknown: Okay. Thanks very much. Questions?
SPEAKER_05: Basically, you're saying our MOU agreements didn't have the right detailed wording that
SPEAKER_05: CalPERS wanted to see per the government code section that outlines that special compensation
SPEAKER_05: should be included in calculations. That's correct. Okay. Additional questions, please.
SPEAKER_13: How did that happen? Is it just an oversight? Because we do contracts all the time.
SPEAKER_13: Right. I think a couple things are at play here. I think the first one is CalPERS is increasing some
SPEAKER_10: of the auditing and triple checking on items. It was the full intention to have the language in
SPEAKER_10: the previous MOU pertaining to holiday pay. There was some nuances in the actual language itself
Unknown: that needed to be updated. They are for holiday pay in the current MOU, but they were not in the
SPEAKER_10: previous MOU for holiday pay to the extent that CalPERS was requesting that it be stated.
Unknown: So did this trigger us checking others? Or is there a chance that this could have happened in
SPEAKER_13: other agreements? I'll double check on that as far as the MOUs for the other ones. We have
SPEAKER_10: been looking at the other MOUs as well. So any time that we do receive a flag or an audit
Unknown: that comes up from CalPERS, it does then trigger us to go back and look whether it's in just one MOU
SPEAKER_10: or all three of them. CalPERS has been increasing their audits and has become, I would say, more
SPEAKER_10: sophisticated as they are doing their pension calculations and their individual audits.
Unknown: Well, that's good. So thank you. So you are checking the other ones to make sure we haven't
SPEAKER_13: made the same mistake. Okay. Did they change the language as a state worker? I know that
SPEAKER_05: staff A, changes regulatory language regularly and B, can reinterpret what existing language says.
SPEAKER_05: So it doesn't mean that we actually did anything wrong or anybody made a mistake. It certainly
SPEAKER_05: could be on the CalPERS side and we're just responding to that too. Yes, it could be language
SPEAKER_10: change. Again, it could be that in the past they did larger audits and now they are doing smaller
SPEAKER_10: individual audits. And so sometimes it is just a language change.
SPEAKER_10: Oh, please. Laurie, just to make sure I understand, both holiday pay and the clothing
SPEAKER_01: allowance or whatever you want to call it, those should have been figured in as part of their total
SPEAKER_01: compensation because it wasn't their retirement benefits would have been somewhat less. Does the
SPEAKER_01: side letters that we're talking about now, does that fix that going back into past dated so that
SPEAKER_01: they're going to be made whole? Yes, it does. So for the holiday pay, there was language in the
SPEAKER_10: prior MOU 2019 through 2022, I believe. So that language needed some additional updating. And this
SPEAKER_10: side letter does go back and update that, which will therefore allow anybody who has retired to
SPEAKER_10: have the recalculation so that that compensation can be included in their retirement. And then on
SPEAKER_10: the uniform allowance, the only language changes in our current MOU. And so that will be included as well.
Unknown: Thank you. Okay. Is that it? Yes. Any other questions? I don't see any. Do we have any members
SPEAKER_08: of the public who wish to speak? No, we do not. Okay. Thank you. So I believe this is then off
SPEAKER_08: to the consent calendar. Appreciate it. Thank you. Item number three is to discuss authorizing the
SPEAKER_08: CEO to execute substantially in form attached firm storage services schedules with Central
SPEAKER_08: Valley Gas Storage LLC for 1 billion cubic feet of natural gas storage service for a period of
SPEAKER_08: April 1st, 2026 through March 31st, 2031 and natural gas injection services for the period
SPEAKER_08: of March 1st, 2026 through April 1st, 2026. And with us tonight is Mr. John Olson, our Director of
SPEAKER_08: Energy Trading and Contracts Technology Center. Welcome. Thank you. And welcome. Good evening,
SPEAKER_04: everybody. And thank you for the opportunity to chat with you tonight about our gas storage
SPEAKER_04: contract with Central Valley. A little bit of background. We use natural gas storage for three
SPEAKER_04: key items. It's reliability about making sure our power plants have fuel during system constraints.
SPEAKER_04: Flexibility, which means avoiding market penalties or scheduling penalties when we get into edge
SPEAKER_04: operating conditions. And then arbitrage, meaning a stable commodity cost. And what that really
SPEAKER_04: means is when you inject during times when prices are low and you pull it out when prices are high.
SPEAKER_04: But those are the three key benefits or the key reasons that we use gas storage. I want to be
SPEAKER_04: clear, this doesn't the use of storage doesn't increase the amount of natural gas that we burn.
SPEAKER_04: It doesn't necessarily reduce it. It's one of the tools that we use to manage price risk
SPEAKER_04: and reliability risk. So it has really nothing to do directly tied to increasing or decreasing the
SPEAKER_04: amount of natural gas that we burn. Additionally, the gas storage providers in California, which
SPEAKER_04: there are not very many, are subject to some very significant regulatory requirements. Everything
SPEAKER_04: from well integrity and mechanical integrity, regular reassessments, corrosion monitoring,
SPEAKER_04: storage integrity systems where they have to be able to show what their mitigation plans would be,
SPEAKER_04: inspections and regulatory access, including unannounced visits from CalGEM, and methane
SPEAKER_04: monitoring with LIDAR, timely reporting of the detected leaks, emergency response and reporting
SPEAKER_04: has to be immediate and they have a, you know, obviously have to have a plan that's filed with
SPEAKER_04: all the emergency responders in the area. Federal FIMSA standards are also need to be met.
SPEAKER_04: Transparency and oversight, especially in the last, I'd say 15 years, has become quite critical for
SPEAKER_04: all of the providers about public disclosure of anything to do with safety.
SPEAKER_04: And then obviously there's also considerations about when they come time to close
SPEAKER_04: the facilities about how do they plug them and how do they
SPEAKER_04: abandon the, you know, move off of that and abandon the facility. So there's a lot of
SPEAKER_04: requirements that they need to follow accordingly. So very, very regulated area.
SPEAKER_04: A little more context. SMUD has two storage providers with two different areas. And what we
SPEAKER_04: want to do with that, there's two purposes here. One is that the contracts expire at different
SPEAKER_04: times. So that gives us the chance to enter into a contract and then kind of get some time in
SPEAKER_04: between when we go into the next contract. And then also it's two physical different locations.
SPEAKER_04: They're relatively close in the big picture, but from the perspective of it's still a different
SPEAKER_04: facility. So if one facility was having a problem, we would still be able to pull off of the other
SPEAKER_04: facility. The contract in question is expiring or that we're here tonight to talk about is expiring
SPEAKER_04: on March 31st of 2026. We did go out with an RFO recently and we received bids from three
SPEAKER_04: Northern California storage providers. And after evaluation of all the offers, we determined that
SPEAKER_04: the Central Valley Gas Storage offer provided the superior value versus the alternatives.
Unknown: So some of the terms. It is a million decatherms of inventory. It's equivalent to a billion cubic
SPEAKER_04: feet of gas. It has an injection rate of 10,000 decatherms per day and a withdrawal rate of 20,000
SPEAKER_04: decatherms a day. And that means as gas is coming at you, how much you can put into the ground and
SPEAKER_04: then when you need it, how fast you can take it out. For context, 20,000 decatherms, if you put
SPEAKER_04: our two contracts together, it's about 40,000 decatherms. If a consumer's power plant was running
SPEAKER_04: at full load, it would be about half the gas between the two contracts. So this is about a
SPEAKER_04: quarter of the gas that would keep CPP running. Together we have enough gas to be price protected.
SPEAKER_04: This is in addition to all the hedging and risk management measures we take with natural gas and
SPEAKER_04: pricing. This is in those sometimes you have more gas than you plan to burn and sometimes you need
SPEAKER_04: additional gas. On those times when we have we need to buy more gas, if the spot market is high,
Unknown: we can just dip into storage and take it out. We don't have any price exposure. And then there's
SPEAKER_04: times where we don't need to burn as much gas, but gas contracts come at you in equal amounts every
SPEAKER_04: day of the month, of the contracted month. So you have to do something with that gas. You have to
SPEAKER_04: burn it, store it or sell it. In this case, if we're probably not burning it, prices are probably low,
SPEAKER_04: we'd rather be able to put that into storage and use it when prices are higher at a later time.
SPEAKER_04: So it's a really strong tool to use to help manage our price exposure. The contracting question would
SPEAKER_04: start in April of this coming year and then end five years later in March 31st of 2031. The price
SPEAKER_04: is $3.72 a decatherm, which if you're looking from a budget perspective, it's going to add $3.7
SPEAKER_04: million to the commodity budget for the coming or in the first year. And it's levelized. So it'll
SPEAKER_04: be that cost for every year. So the five years more is that than our expiring contract. If the
SPEAKER_05: Wild Goose contract was $2.50 a couple of years ago. Yeah, if you look at it, it is significantly
SPEAKER_04: more expensive. Some of the other, without getting into detail, some of the other contracts were 2X
SPEAKER_04: the price I'm showing you tonight. So I do think that we did bring forward the best value project.
SPEAKER_04: But when you think about gas infrastructure in Northern California in general, there's not
SPEAKER_04: more additional space that's being put into gas storage. There's no new facilities. And I would
SPEAKER_04: argue that the more intermittent that you use gas, the more you need storage. And so there's
SPEAKER_04: all of a sudden been a little bit of a rush to be able to get contracts around the gas storage
SPEAKER_04: side of things. And so it's a diminishing commodity. Therefore, the prices are going up.
Unknown: Fairly dramatic over the last five years, seven years.
Unknown: Okay. Other questions, please, Director Herbert.
Unknown: I'm just trying to think about this and maybe I'm crazy because I can be at times. But I know
SPEAKER_00: we want to be zero carbon by 2030. And that means, you know, not burning gas.
SPEAKER_00: We haven't figured out what we're going to do about Rancho Seco and, you know, the other
SPEAKER_00: plant. But we're hoping to get off gas, right? So why would we do a five-year contract
SPEAKER_00: with this much storage of gas if we're really trying to find an alternative fuel for our power
SPEAKER_00: plants that are cleaner? That's a good question. And I think that so the alternatives would be go
SPEAKER_04: for a shorter term. We had to exclude three years because then you would be in sync with the other
SPEAKER_04: expiring contract. So you don't want to you want to avoid that. To go to a two-year term
Unknown: drove up the price significantly as an alternative. And you end up with the most economic solution
SPEAKER_04: being the five-year term. But it's not just regular natural gas. It's also renewable natural gas.
SPEAKER_04: And so I'm assuming that renewable natural gas is going to be in our portfolio for some
SPEAKER_04: quite some time, regardless of what the status of natural gas is. We use the same storage for
SPEAKER_04: renewable natural gas as you would for natural gas. I believe Gregor Tamayo has his hand up.
Unknown: Yeah. So have we had a contract with this particular company before? And the other question
SPEAKER_09: is where is this facility located? So the first question is, yes, we have, but it's been a number
SPEAKER_04: of years. This is a new provider in the last five years, but I believe our last contract,
SPEAKER_04: we've had something in the last 10 or 15 years with them. And then physical location is,
SPEAKER_04: Chad, help me out. Yeah. So the print scenario, it's on the PG&E backbone
SPEAKER_04: provider, but it would be on in Northern California.
Unknown: Yeah. I guess I want more specifics as to where it is. Are there concerns about,
SPEAKER_09: by the local community of having gas stored underneath them? And related to that, how long
SPEAKER_09: has this facility been in operation? I can get you this specific information about how long they've
SPEAKER_04: been in service. I can tell you specifically about this operation is it is an abandoned natural
SPEAKER_04: gas well. So from all the geology perspective, it is certainly a perfect candidate for storing.
SPEAKER_04: And I kind of read off some of those regulations that they're all responsible for,
SPEAKER_04: including that local public outreach. But I can tell you exactly how long, I'd have to
SPEAKER_04: get you the facts on exactly how long they've been in business at this site.
Unknown: Okay. Is that it?
Unknown: Please. President Christie.
SPEAKER_08: John, I don't expect to have specific numbers on the top of your head here, but I'm wondering,
SPEAKER_01: as we've been in this fog bank for the last two weeks or so, I'm assuming solar production is
SPEAKER_01: probably significantly less than it might have been. Is there a way to quantify that and then
SPEAKER_01: the commensurate need for our natural gas fired power plants because solar is off?
Unknown: Yeah, you raise a really good question and as you would expect, the nuanced
SPEAKER_04: answer to that is yes. And if you put some cold weather along with this, that would really spike
SPEAKER_04: things. In the last three weeks where we've kind of had this fog bank, prices have been fairly
SPEAKER_04: moderate. There's been a fair amount of wind in the Northwest. We haven't seen what I would
SPEAKER_04: consider really high prices. They have been higher than probably last a month ago. But you
SPEAKER_04: put some cold weather with this or cold weather even like in the Northwest and that's going to
SPEAKER_04: affect the price here. Southern California has had some pretty nice temperatures, so there hasn't
SPEAKER_04: been that missing component of a run on the, you know, in the gas storage situation. But in the
SPEAKER_04: event that you had low solar and a weather event somewhere, this is exactly how we would use gas
SPEAKER_04: storage. Okay, other questions? I believe that's it then on the questions. Do we have members of
SPEAKER_08: the public wish to speak on this item? I don't see any hands. No, we don't. Okay, and the disposition
SPEAKER_08: of this is to the consent calendar then. Okay, great. Thank you very much. Thank you.
Unknown: Item number four is to discuss authorizing the CEO to negotiate and award contracts to AcuRin
SPEAKER_08: Inspection Inc., Alisto Inc., Kleinfelder Inc., and Prime EPC. These are collectively called the
SPEAKER_08: contracts to provide gas pipeline owner engineering services for a five-year period from January 2,
SPEAKER_08: 2026 to January 2, 2031 and for a total aggregate not to exceed amount of five million
SPEAKER_08: dollars across the contracts. And with it tonight is Mr. Josh Langdon, our Director of Power
SPEAKER_08: Generation. Welcome. Thank you. Good evening, everyone. Thank you for the introduction of Director
SPEAKER_06: Kerr. And my name is Josh Langdon, Director of Power Generation. Thank you. Thank you, Emily.
SPEAKER_06: Director of Power Generation. And tonight I have the opportunity to really walk through an
SPEAKER_06: opportunity to continue strategic partnerships that we already have in place for engineering
SPEAKER_06: services that are very specific to our gas pipeline operation. So tonight I'll walk through
SPEAKER_06: a general background of our gas pipeline assets. I'll talk about how we leverage these engineering
SPEAKER_06: contracts today as part of our operations and reliability strategy. And I'll talk about how we
SPEAKER_06: continue, we plan to continue leveraging engineering services as part of our gas pipeline
SPEAKER_06: operation. Then I'll have the opportunity to walk through our request for proposal
SPEAKER_06: strategy and our contracting strategy. And then I'll conclude with really reviewing the results
SPEAKER_06: of our RFP. And then I'll have the opportunity to address any questions there are.
SPEAKER_06: So as just a quick background, the diagram there shows our gas pipeline operations and our gas
SPEAKER_06: pipeline assets. We start our gas pipeline system tying into actually PG&E's main gas
SPEAKER_06: backbone system. So this happens in winters. And then our gas pipeline transverses into
SPEAKER_06: Sacramento County approximately 75 total miles and terminates at each one of our thermal plants.
SPEAKER_06: So when you think about our gas pipeline operations, we've been successfully operating this asset for
SPEAKER_06: over 30 years. When you think about that operational history, there's not been one incident
SPEAKER_06: to date. And that really demonstrates the operational excellence and the focus on our
SPEAKER_06: gas pipeline operations. And part of that is because we do leverage external expertise and
SPEAKER_06: engineering contracts and services as part of our internal process. So tonight I'm happy to talk a
SPEAKER_06: little bit more about that. So in terms of these contracts and some of the key benefits they
SPEAKER_06: provide when you think about maintaining our gas pipeline system, from a regulatory standpoint,
SPEAKER_06: we are regulated at the federal level nationally through PHMSA and then at the state level through
SPEAKER_06: California Public Utilities Commission. So John touched on some of the regulatory requirements
SPEAKER_06: for gas storage. A lot of those requirements are exactly the same for our pipeline operations.
SPEAKER_06: And so part of the services we do use in terms of engineering services is we always maintain an
SPEAKER_06: audit ready posture. So we do leverage expertise in engineering services to continue to audit us
SPEAKER_06: internally and provide that peer review and that really that third party independent review of all
SPEAKER_06: our practices, our maintenance practices, our engineering design standards, make sure those
SPEAKER_06: are compliant with federal and state codes. In addition to that, as we think about our operation
SPEAKER_06: and how we operate that asset in terms of zero carbon plan, we leverage these engineering service
SPEAKER_06: contracts to really look at how we operate that not only today and maintain reliability, but how
SPEAKER_06: we're going to operate that asset in the future. So we get to leverage external expertise that look at
SPEAKER_06: systems across the U.S. and make sure we're incorporating not only regulatory compliant
SPEAKER_06: designs that meet code today, but we also have situational awareness on changes in codes and
SPEAKER_06: make sure our designs maintain compliance with those future potential code changes.
SPEAKER_06: So some of the other benefits as we think about, you know, even some of the resource utilization,
SPEAKER_06: a lot of our maintenance work on our gas pipeline system has to be in conjunction with thermal plant
Unknown: planned outages. So you tend to have a lot of work on our gas pipeline system in a short amount of
SPEAKER_06: time. So we tend to leverage also these engineering contracts to really flex up and be able to
SPEAKER_06: complete a large amount of work in a short amount of time while maintaining internal engineering
SPEAKER_06: expertise on our gas pipeline system for day in and day out operations overview. So in terms of the
SPEAKER_06: RFP, earlier this year in July we did issue an RFP. That proposal went out to 40 potential bidders.
SPEAKER_06: When we had a mandatory bid review meeting, we actually had 10 potential bidders join. We ended
SPEAKER_06: up having four proposals. And as we look at some of those services, their traditional blocking and
SPEAKER_06: tackling as you think about our asset at 30 years, we're starting to replace valves. So it includes
SPEAKER_06: engineering projects to do common asset lifecycle replacement. Again, I mentioned a couple studies.
SPEAKER_06: Also looks at how we're going to operate our gas pipeline with, you know, the mindset of zero carbon
SPEAKER_06: plan. So in terms of the RFP and the procurement strategy, it follows very standard procurement
SPEAKER_06: strategy in terms of the themes we evaluated. As we always do, we have a mandatory requirement in
SPEAKER_06: terms of evaluating the bidders, just making sure they have the expertise and the experience that
SPEAKER_06: we expect from our strategic partners. Of course, we also look at seed participation. In terms of
SPEAKER_06: environmental sustainability, we also evaluate the potential engineering firms on their posture,
SPEAKER_06: their procedures, and how they're really driving down incidents in terms of environmental incidents.
SPEAKER_06: And then we also look at the actual qualifications of the engineers within these companies and the
SPEAKER_06: engineers that will be working on our projects and ensure that they're not only licensed engineers,
SPEAKER_06: but they have years of experience working on transmission gas pipeline systems. And of course,
SPEAKER_06: in terms of the best value, we always look at commercial terms and pricing.
Unknown: So as we evaluated these results, again, as I noted, we had four potential strategic partners
SPEAKER_06: submit bids. In terms of the technical evaluation, we had a pretty similar review on all four.
SPEAKER_06: Two of the four did provide seed participation. So that was a bonus for at least two of the four.
SPEAKER_06: And in terms of pricing, there was one somewhat of an outlier with a CUREN. The reason we decided to
SPEAKER_06: move forward with them, they also provide one of the key requirements that we need, which is only
SPEAKER_06: provided by one of the other providers, and that's from a code and compliance perspective. They have
SPEAKER_06: the expertise and the credentials to do internal audits of our internal operation and maintenance
SPEAKER_06: practice. So we decided to include them as well. So in terms of, I guess, just concluding,
SPEAKER_06: my recommendation is to continue negotiation and finalize contracts with these four engineering
SPEAKER_06: firms. And the recommendation is to move agenda item four to the consent calendar. Happy to
SPEAKER_06: address any questions. Thank you. If you have questions, please.
SPEAKER_13: Hi, Josh. Nice to see you again. I have a couple of questions, actually. So on one of the slides,
SPEAKER_13: we talked about the pipelines. I did not see one going up to McClellan, the peaker plant,
SPEAKER_13: in my ward. And I was just curious how the gas gets there if it's not on that pipeline.
Unknown: Yes. So the gas provider from our McClellan peaker is actually PG&E. So our gas pipeline
SPEAKER_06: does not physically connect to that one site, but our other thermal plants, of course, it is.
SPEAKER_06: Thank you. And then another question is, we've heard repeatedly from our customers,
SPEAKER_13: their concern about leaking from natural gas pipelines. And what are we doing? I didn't see
SPEAKER_13: anything in there about not just maintaining, but ensuring that we're not off, you know,
SPEAKER_13: there's no leaks. Yeah. Yeah. So our natural process, part of our FEMSA requirements, we do
SPEAKER_06: routine inspections. We have also different technologies. We're part of our gas control
SPEAKER_06: system. We actually detect any leak electronically through our control system. So we continue to
SPEAKER_06: monitor any potential leaks through inspections. But if there happens to be any leaks, we're
SPEAKER_06: alerted by our power system operations teams in real time. And we dispatch and investigate
SPEAKER_06: those leaks and address them. Some of the projects I didn't tie on, I've spoke to in the past,
SPEAKER_06: as we talk about fugitive emissions and reducing any emissions out of our pipeline,
SPEAKER_06: one of the projects we've continued to deploy is in our actuators for our valves. Those traditionally
SPEAKER_06: are controlled by gas pressure. So there is a small amount of gas relief associated with actuating a
SPEAKER_06: valve. We've been actually replacing those with electronically power electric powered actuators to
SPEAKER_06: remove even the small amount of fugitive emissions. So we continue to look at opportunities to improve
SPEAKER_06: our any gas leak, whether it's planned or unplanned. And that's just part of what we
SPEAKER_13: generally do. It's not part of these contracts. So thank you for that. And last but not least,
SPEAKER_13: if that's okay, just looking at the chart, we've got two that don't have any seed points at all.
SPEAKER_13: And one that's very expensive and it has no seed, but it has the qualifications that the other one
SPEAKER_13: has to do something. But that's a significant increase in price over the others. And I just,
Unknown: I guess, do you want to speak to that? Yeah. Yeah. So you hit on the key component, which is from
SPEAKER_06: a PHMSA and audit perspective, they do have the expertise and the credentials to do internal
SPEAKER_06: audit of our process. We actually do have a tri-annual audit coming up in 2026 by CPUC.
SPEAKER_06: So as we prepare for that audit, one of the services we will be looking at is performing
SPEAKER_06: a third party independent review of our processes and our systems ahead of that CPUC audit. So
SPEAKER_06: ACRIN can provide that service. So that is one of the main drivers why we decided to include them.
Unknown: But one of the things I'll note, Director Sanborn, is entering into contracts with all four of these
SPEAKER_06: strategic partners doesn't require us to use them. When we have specific job scopes that come up,
SPEAKER_06: we actually do bid them out again internally within power generation and our gas pipeline
SPEAKER_06: operations team to all the four that have contracts. And then each one is evaluated on a best value.
Unknown: Okay. Thank you very much.
SPEAKER_13: Okay. A couple of just follow-up comments. I certainly echo the Director Sanborn,
SPEAKER_05: that we rarely see a recommendation to approve a contract with numbers in the 50s and 60s.
SPEAKER_05: But you addressed it in your original comments. There's specific needs that you're trying to
SPEAKER_05: address and have backed up for. So I understand that. That certainly catches our eye. The other
SPEAKER_05: question I've been reading in our monthly operations reports, the ongoing work we're
SPEAKER_05: doing in continuous emission monitoring for methane leakage. And you mentioned in terms of
SPEAKER_05: like the actuators as well. So I'm sort of curious if we put out like a report, either our own or
SPEAKER_05: independent report, about actual gas leakage out of our own pipeline system. I had heard
SPEAKER_05: from somebody else, but the Air District was making comments about
SPEAKER_05: a source of air pollution in the county being our gas pipelines, which I would disagree with in
SPEAKER_05: principle. Other than we've had this discussion multiple times for multiple years, right? You
SPEAKER_05: simply assign some emission factor for each mile of pipeline you have. And so whether you actually
SPEAKER_05: leak or not, or you spend any time actually monitoring your pipeline, you still assign some
SPEAKER_05: leakage amount. And I'd be really curious to have some kind of like paper or some kind of study or
SPEAKER_05: report that would give us a better understanding of what actual emissions are versus whatever
SPEAKER_05: model has been produced. Yeah, Director Rose, you're spot on. Currently we do report fugitive
SPEAKER_06: emissions in a industry standard per mile of pipeline. Of course, those aren't indicative
SPEAKER_06: of our actual any leaks that we do see. One of the things I'm happy to report in 2025,
SPEAKER_06: we were focused on how do we actually calculate real leaks, potential leaks from our system.
SPEAKER_06: Of course, when we do any maintenance in our system, SMUD has been kind of proactive and first
SPEAKER_06: in class in terms of evacuating the entire gas pipeline and not venting that gas, which historically
SPEAKER_06: is a normal practice in maintaining gas pipelines. So we currently now compress that gas and re-inject
SPEAKER_06: it to the system. So even in our maintenance practices, we don't have any leaks. But I would
SPEAKER_06: say also we're looking at technology to improve and be able to detect any leaks and measure that,
SPEAKER_06: be able to change our reporting requirements or our standard approach to actually report
SPEAKER_06: leakage versus a standard industry accepted per mile rate. So Paul, something I think to think
SPEAKER_05: about, right, is what can we do to have a third party say you're doing, you don't have any
SPEAKER_05: emission leakage that we can hold up as we hear this over and over again? Okay.
SPEAKER_06: Yeah. Maybe one other addition. It's very routine that we use LiDAR technology to detect any
SPEAKER_06: fugitive emissions or any leaks. We continue to look at technology investments, even satellite
SPEAKER_06: LiDAR that could be able to detect leaks on our system. We currently use all of those technologies
SPEAKER_06: to monitor our system. And so that's why I'm pretty confident to say as we actually have the
SPEAKER_06: means to measure, it'll be less than the industry per mile standard that we're using today.
SPEAKER_06: Perfect. Thank you. Okay. Thanks very much. Do we have public comment on this item?
Unknown: I do not see any. No, we don't. Okay. Great. Just a couple of curiosity questions. Of course.
SPEAKER_06: What's the diameter of the pipes? How big are they? So between 20 and 24 inches. Okay. Yes.
SPEAKER_06: They operate at our max allowable pressure of 700 pounds. Okay. So up to two feet in diameter,
SPEAKER_08: up to 700 pounds. Yep. Okay. Not to be taken lightly. How many terms of line pack can you
SPEAKER_05: store on that? I wonder. Yeah. Okay. Well, that's it. Thanks very much. And I believe
SPEAKER_08: this too is off to the consent calendar. Yeah. Thank you. Thank you very much.
SPEAKER_08: Next up is item number five to discuss approving an increase to aggregate contract not to exceed
SPEAKER_08: amount for environmental compliance and program development services for contracts with AECOM
SPEAKER_08: technical services, Kleinfelder Inc., Brown, and Caldwell. These are collectively the contracts
SPEAKER_08: by $2.2 million from $8.8 to $11 million across the three contracts. And with us tonight is Ms. Emily
SPEAKER_08: Bikini. Make sure you get your title right. Interim Director of Safety, Environmental,
SPEAKER_08: and Real Estate Services. Welcome. Great. Thank you, Director Kurth. Good evening, everyone. My
SPEAKER_11: name is Emily Bikini and I'm the Interim Director of Safety, Environmental, and Real Estate Services.
SPEAKER_11: And I'm here tonight to request a group award contract change that will allow for an additional
SPEAKER_11: $2.2 million in funding. In 2019, the environmental services team released a request for proposal
SPEAKER_11: to conduct compliance and program development services or for compliance and program development
SPEAKER_11: services and awarded contracts to the three most qualified proposers, AECOM, Kleinfelder, and Brown,
SPEAKER_11: and Caldwell. This was initially a three-year contract with the option to extend and it's
SPEAKER_11: ultimately been extended through September of 2026. We also initially had $8 million approved.
SPEAKER_11: We increased that contract amount by the general manager contingency earlier this year to bring
SPEAKER_11: us up to $8.8 million. The environmental compliance work that's performed under this contract includes
SPEAKER_11: items like soil testing, management and disposal, air quality sampling, water quality protection
Unknown: for a variety of our internal business units, including substation and line. And then we have
SPEAKER_11: a few environmental remediation projects that this supports. We also support our real estate services
SPEAKER_11: team during land acquisitions. And then if approved, the additional funding will continue
SPEAKER_11: to support our remediation efforts, the stormwater compliance we have for a variety of projects.
SPEAKER_11: Again, that property acquisition support, continued execution of our soil management program
SPEAKER_11: and other regulatory compliance programs. We do intend to release a request for proposal
SPEAKER_11: in early 2026 to replace this contract and this funding will help us bridge that gap.
Unknown: Emily? Yes.
Unknown: I just wanted to ask if you could give me an example of what environmental due diligence looks
SPEAKER_00: like and then the other thing is I wanted to hear more about the soil management program.
SPEAKER_00: Sure. So the environmental due diligence process is what we call a phase one environmental site
SPEAKER_11: assessment and then if needed we do a phase two assessment. The phase one goes through
SPEAKER_11: it's both a paper exercise and a field exercise. We research records to determine prior uses of the
SPEAKER_11: site, whether there have been any recorded contamination or cleanup efforts. And then we
SPEAKER_11: also go out to the site to take a look to see do we see old paint cans, for example, or old barrels
SPEAKER_11: that could be leaking hazardous materials. And then that identifies whether or not there's a
SPEAKER_11: potential wreck. What does that stand for? Darn. A potential environmental contaminant on the site
SPEAKER_11: that we would want to be aware of before we purchase the property. It may mean if we were to
SPEAKER_11: purchase the property then we would have remediation efforts that we would need to undertake, cleanup
SPEAKER_11: efforts that we would need to undertake before we could build on it. And then your second question
Unknown: was about our soil management plan. What is the program and what is an example of this?
Unknown: Okay. On many of our substation sites we have to excavate soil out to build our substations. And
SPEAKER_11: it's also on a variety of other projects. We might have extra soil. We have to test that
SPEAKER_11: soil to see if it's contaminated. And then if it's contaminated we have to work with landfills
SPEAKER_11: to ensure that it's properly disposed. Most of the time our soil is clean. And so we're able to
SPEAKER_11: either dispose of it at Kiefer landfill or we are stockpiling soils out at our Jackson bulk
SPEAKER_11: substation property where we'll be able to use it when we build that substation in the future.
Unknown: Thanks. So as soon as I hear landfill my ears go up. So I'm surprised we'd bring clean soil to
SPEAKER_13: a landfill. Are they using it for cover? They do use it for cover. But where we can we prefer to
SPEAKER_11: stockpile it at our own facilities. So for those who don't know, landfills are required to have
SPEAKER_13: daily cover over the trash so they don't have birds and rodents and so forth. And sometimes they use
SPEAKER_13: soil that's delivered to them as an alternative soil cover. So that's a good, I mean it's a use.
SPEAKER_13: It still ends up in the landfill though. Right. So I mean the highest and best use of a clean soil
SPEAKER_13: is back out being clean soil. Absolutely. So are we trying to? Absolutely. Okay. Yeah. We know
SPEAKER_11: that we're going to need a fair amount of soil imported for the future build out of the Jackson
SPEAKER_11: substation. And so we have been stockpiling soil for that future use so that we'll have it when
SPEAKER_11: we need it. I was going to say we can reuse it ourselves and we have a lot of land to store it.
SPEAKER_13: Okay. Great. Thank you. And then we have done that. We have been able to use it at other
SPEAKER_11: substation sites in the past where we needed fill material.
Unknown: Just so, Emily, I feel like we've had some very similar contracts but I think they were specifically
SPEAKER_05: for CEQA. This is not CEQA work. This is specifically like environmental remediation
SPEAKER_05: and sort of study. That's correct. This is separate from the CEQA contracts
SPEAKER_11: in support of environmental compliance. So stormwater air quality.
Unknown: Okay. Other questions? Seeing none, do we have public testimony on this item?
SPEAKER_08: No, we do not. Okay. Then I believe that concludes the item. Thank you very much. We'll see this off
SPEAKER_08: to the consent calendar. Item number 6 is to provide the board with SMUD's financial results
SPEAKER_08: from the 10-month period ending October 31, 2025 and a summary of SMUD's current power supply costs.
SPEAKER_08: And with us tonight is Jennifer Restivo, our Director of Treasury and Revenue Strategy. Welcome.
Unknown: Good evening, board members. I'm Jennifer Restivo, Director of Treasury and Revenue Strategy,
SPEAKER_12: and I'm here to present the 10-month financial results for the month ending October 31st
SPEAKER_12: on behalf of Lisa Limcaco. So our October financial highlights, our customer revenues are
SPEAKER_12: $1,580,000,000, which is $4,000,000 higher than the budget. And this is really due to higher
SPEAKER_12: commercial revenues than budgeted. Commodity costs of $483,000,000 are $47,000,000 lower than the plan.
Unknown: And this is due to milder weather this year, leading to favorable power market conditions to
SPEAKER_12: procure power and lower fuel costs due to lower fuel prices. Our other operating expenses of $807,000,000
SPEAKER_12: are $84,000,000 lower than budgeted, primarily due to these three areas. Our transmission and
SPEAKER_12: distribution expenses are lower due to lower transmission fees than planned and lower
SPEAKER_12: vegetation maintenance costs due to onboarding a new vendor this year. Our administrative and
SPEAKER_12: general expenses are lower than planned due to slow starts on various projects like the SAP S4HANA
SPEAKER_12: pre-work, agile product teams, and the extended day head market. And this is partially offset by
SPEAKER_12: higher public good costs due to more participation in our low income building
SPEAKER_12: electrification program, such as the community impact plan, Meadowview project.
Unknown: Our other revenues of $161,000,000 is $114,000,000 higher than plan. And this is really a function
SPEAKER_12: of the $91,800,000 payment we received under the Inflation Reduction Act. You might also know it is
SPEAKER_12: the IRA, which is a direct pay program for clean energy tax credits, which was linked to the
SPEAKER_12: Solana for Wind Farm project. This leads to a $435,000,000 net income, which is $269,000,000
SPEAKER_12: better than budget. I haven't asked in all year long, it's been only six months, but you're more
SPEAKER_05: on the budget side. Why did we not budget the expected payment for the completion of Solano?
SPEAKER_05: So we like to budget conservatively and at the point with which we did the budget, we didn't know
SPEAKER_12: if we would get it. And so from a budget perspective, it's far more dangerous to budget
SPEAKER_12: revenue that may not occur because you spend it.
SPEAKER_12: I totally agree with you. It's been a crazy policy year, guessing where things are going.
SPEAKER_05: So we always tend to be very conservative when budgeting because if you don't have a signed
SPEAKER_12: contract, if you don't have a guarantee that you'll get that money, you don't want to count on it.
Unknown: Okay, this next slide shows energy sources for the month of October and year to date.
SPEAKER_12: And so you can see that in October, hydrogenation was higher due to unplanned outage at the Jones
SPEAKER_12: Fork powerhouse that required water to be diverted downstream. Thermal generation was down due to
SPEAKER_12: lower load and a planned outage at the Cosumnes power plant, leading to higher net purchase power.
SPEAKER_12: For year to date, due to the milder weather that we've had this year, hydrogenation and
Unknown: thermal generation are below budget due to favorable market prices to procure power.
Unknown: I'm sorry, what powerhouse went out or what water hydro, what was that?
SPEAKER_13: So it was not in the budget, but it was planned after the budget was done. But to do an outage
SPEAKER_12: at Jones Fork powerhouse necessary for debris removal. So they had to lower the water levels
SPEAKER_12: at Ice House reservoir, which involved releasing more water through the generator than initially
SPEAKER_12: scheduled. So it wasn't anticipated when we did the 2025 budget last year, but it was planned for
SPEAKER_12: this year. So this is purely compared to the budget. Okay, thank you.
Unknown: Okay, this chart shows our delinquencies as of October 31st by account type. So the balance has
SPEAKER_12: increased by $7 million from September to approximately $49 million. This large increase
SPEAKER_12: is primarily due to the increase in the summer bills and potentially the 43 day federal government
SPEAKER_12: shutdown that may have contributed to more accounts moving to delinquency in October.
Unknown: Currently, we have about $15.6 million of the delinquency balance with payments plans
SPEAKER_12: outstanding as of October. And about 68% of the delinquency balance is made up of our residential
SPEAKER_12: and EPR customers. As of December 1st, cumulative precipitation is approximately 10 inches. So you
SPEAKER_12: can see that's the black line if you can read it, which is above where we were last year,
SPEAKER_12: which was the green line. And we're at 95.3% of average to date. And this is about 17% of
SPEAKER_12: the entire water year average of 56.9 inches. The forecast for the next two weeks is no rain.
Unknown: You can see here that snowpack is 13.3% of average at our snow sensors. And the storage reservoirs
SPEAKER_12: are at 64% of full capacity. Fingers crossed. Yes. As of October 2025,
SPEAKER_12: RURP and WAPA hydro performance are actually forecasting to be 203 gigawatt hours lower than
SPEAKER_12: budget for the year. However, the forecast of $517 million for commodity is lower than budget by 93
SPEAKER_12: million due to the mild weather we've had this year, which has led to lower load and lower market
SPEAKER_12: prices for power. There have been no changes to the hydro rate stabilization or the WAPA rate
SPEAKER_12: stabilization fund. And we will not be adjusting those balances until April of 2026.
Unknown: And lastly, days cash on hand as of October is 239 days, which is above the October budget. The
SPEAKER_12: projected days cash for the rest of the year is 194 days cash, which is coming in higher than budget
SPEAKER_12: of 164 days and above the minimum of 150 days. The projection for December includes no commercial
SPEAKER_12: paper outstanding at year end. And that concludes my report. Are there any questions?
Unknown: Thank you very much. Additional questions? Do we have public testimony on this item?
Unknown: No, we do not. Okay. Thank you. That concludes the item then. Item number seven is an internal
SPEAKER_08: audit services report. This is an availability item for the Rancho Saco Quality Assurance,
SPEAKER_08: the joint poll processing and the customer assistance medical equipment device rate.
Unknown: There's not a presentation on this item. Does anyone have questions on those audit reports?
Unknown: Okay. Seeing none, thank you very much. Do we have public testimony?
SPEAKER_02: No, we do not. Next up on the agenda is public comment for items not on the agenda. And I have
SPEAKER_08: not received any speaker requests at this time. Do we have anyone else wishes to speak?
Unknown: I'm not seeing any hands. No. Okay. Thank you. Let's see. Written comments,
SPEAKER_08: let me remind folks that written comments received on items not on the agenda will be included in the
SPEAKER_08: record if received within two hours of the end of the meeting. The last item on the agenda is to
SPEAKER_08: provide summary of committee direction. The only item I have is that staff will provide
SPEAKER_02: information to the board with respect to how long the Central Valley Gas Storage has been in service.
Unknown: That sounds familiar. Mr. Tamayo, is that your question?
Unknown: Yeah, that was. I had also asked if there had been, if we'd looked into any concerns
SPEAKER_09: from the community where that facility is located regarding, I guess, environmental concerns.
SPEAKER_09: Okay. Okay, great. Thanks, Dr. Tamayo, clarifying that. Okay. I think that's it on committee
SPEAKER_08: direction. Next up is the announcement of the closed session agenda. Number one, we have a
SPEAKER_08: conference with real property negotiators pursuant to Government Code Section 54956.8
SPEAKER_08: for property. The assessor's parcel number 0730080081-0 in Sacramento County. The SMUD
SPEAKER_08: negotiator is Emily Bikini, Interim Director of Safety, Environmental, and Real Estate Services.
SPEAKER_08: And the negotiating parties are the Frank Family Trust and Paul Frank. And under negotiation are
SPEAKER_08: the price and terms. Item number two is a public employee performance evaluation pursuant to
SPEAKER_08: Government Code Section 54957, the CEO and general manager, the chief legal and government affairs
SPEAKER_08: officer, and C, the special assistant to the board. And we will reconvene after the closed session
SPEAKER_08: because I believe there will be items to report out. And with that, thank you. We're going to
SPEAKER_08: adjourn to closed session of December 9th and report that after our closed session, the board
SPEAKER_08: provided direction to staff with regards to item one and took no action with regard to item two.
Unknown: And with that, since there's no further business, we're adjourned.