Unknown: You
Unknown: Good evening and welcome to the Finance and Audit Committee and Special Board Meeting of November 18th
SPEAKER_05: 2025 this meeting is being recorded and can be accessed on smud's website
SPEAKER_05: Please remember to unmute your microphone and when speaking in order that our virtual attendees may hear
SPEAKER_05: Microphone will display a green indicator light when the mic is on
SPEAKER_05: Members of the public attending in person who wish to speak at this meeting
SPEAKER_05: Please fill out the speakers request form located on the table outside this room and hand it to smud security
SPEAKER_05: Members of the public attending the meeting virtually that wish to provide verbal comments during the meeting
Unknown: May do so by using the raise hand feature in zoom or pressing star 9 while dialed into the telephone toll-free number
SPEAKER_05: At the time the public comment is called
SPEAKER_05: Technical support staff will enable the audio for you when your name is announced during the public comment period
SPEAKER_05: You may also submit written comments by emailing them to public comment at smud org
SPEAKER_05: Written comments will not be read into the record but will be provided to the board
SPEAKER_05: Electronically and placed into the record of the meeting if received within two hours after the meeting ends at this point will our
SPEAKER_05: Deputy general counsel, please conduct the roll call
Unknown: director rose here director Buick Thompson
Unknown: Chair kirth here all committee members are present also president or directors Herbert and vice president tomorrow
Unknown: Okay, thank you very much that establishes a quorum for the meeting item number one on tonight's agenda is to discuss approving the
SPEAKER_05: 2026 proposed smud budget including debt service pay schedule and special compensation
SPEAKER_05: With us tonight is our mr. Scott Martin our chief financial officer
Unknown: All right, can you hear me great
SPEAKER_01: You've probably already noticed some changes for tonight right out the gate, right first. I'm wearing a tie
SPEAKER_01: at director Herbert's request
Unknown: I am colorblind. So my wife did dress me so I know it does match so I'm feeling pretty good about that
SPEAKER_01: the second change for tonight is that
SPEAKER_01: Breaking with prior tradition
SPEAKER_01: I'm gonna be the only speaker tonight and I know for a fact director tomorrow's excited about that
SPEAKER_01: Okay, because he's lived through the times where I spoke for four or five hours in front of this board, right?
SPEAKER_01: So he's excited about seeing me speak for for two hours tonight
SPEAKER_01: But I am glad to be here it's great to be able to present the 2026 budget
SPEAKER_01: To the public and to our board and looking forward to a good conversation tonight. So feel free
SPEAKER_01: I definitely don't want to be up here just speaking
SPEAKER_01: So I'd prefer to have just questions as we go through. So if something comes up
SPEAKER_01: You have a question. Let's just let's just handle it handle it then so
Unknown: With that I'll just kind of kick it off, you know
SPEAKER_01: smud has had a good long history of
SPEAKER_01: Good financial performance and I would kind of chalk that up to smud's leadership over time
SPEAKER_01: the prior CFOs the staff that have been here for quite some time and have
SPEAKER_01: contributed to this very sure and
SPEAKER_01: Quality financial foundation that we've been able to develop for many many many years
SPEAKER_01: I'm grateful to be the CFO and be able to continue that and I'm thankful for all the staff that
SPEAKER_01: You know works so hard to make sure that that that financial performance continues
SPEAKER_01: And it's not just my staff, but it's really the entire organization
SPEAKER_01: The fiscal discipline that that all the business units show
SPEAKER_01: All the directors and the way they spend their budgets
SPEAKER_01: Just really appreciate the focus and the effort on
SPEAKER_01: being fiscally sound
SPEAKER_01: There are a couple of key things that we try to
SPEAKER_01: Accomplish with our budget every year and these are sort of things that don't necessarily change year to year
SPEAKER_01: Each one might be weighted a little bit differently year to year
SPEAKER_01: But each of these elements really contribute to sort of that sound
SPEAKER_01: fiscal strategy and fiscal foundation that we have
SPEAKER_01: First is really making sure we have the flexibility within our budget
SPEAKER_01: We have a lot of risks that smud faces as a utility
SPEAKER_01: I think we had a good discussion about our enterprise risk policy
SPEAKER_01: last week where Michelle Kirby
SPEAKER_01: It was here in place for Jillian rich and she had a good conversation with the board about what our new
SPEAKER_01: enterprise risk
SPEAKER_01: Policy looks like and and our new enterprise risk framework
SPEAKER_01: and
SPEAKER_01: Maintaining the financial flexibility to be able to address those risks is really really critical to ensure
SPEAKER_01: that we have
SPEAKER_01: the appropriate financial capacity
SPEAKER_01: moving forward to to continue to to
SPEAKER_01: Address those things that could potentially lead to poor financial performance
SPEAKER_01: I'll be addressing a lot of those in a few slides, but rest assured that the 2026 budget
SPEAKER_01: Continues that financial flexibility and and funding the mitigations that we need to fund in order to address risk
SPEAKER_01: In terms of strategy or being strategic, you know
SPEAKER_01: The the board can again rest assured that the 26 the 2026 budget is
SPEAKER_01: focused on meeting our strategic directions
SPEAKER_01: Fortunately throughout the year you receive the the strategic direction reports
SPEAKER_01: from from the different directors around the organization that are responsible for them and
Unknown: to date
SPEAKER_01: with all the SD reports that we've done the board has
SPEAKER_01: Seen fit to approve them as has having been met
SPEAKER_01: and that's a lot of that is due to the budget and our spending and our focus spending to make sure that we
SPEAKER_01: Achieve our strategic direction without the financial foundation and the focus spending that we have on our key
SPEAKER_01: deliverables and our critical strategies
SPEAKER_01: We would struggle to be able to meet this the board strategic direction
SPEAKER_01: So again, this this budget is built around ensuring that we can achieve those SDs and the goals within the SDs
SPEAKER_01: It's also balanced between our short and long-term needs. We have a lot of very short-term
SPEAKER_01: capital
SPEAKER_01: Needs and infrastructure needs and that's for a variety of reasons that I'll be going into again later
SPEAKER_01: But balanced against that has to be what what will we need?
SPEAKER_01: tomorrow or the next year or two or three years from now and
SPEAKER_01: making sure that we are preparing a budget and
SPEAKER_01: Avoiding debt today so that we have all the flexibility we need financial flexibility. We need to achieve
SPEAKER_01: Even more great things in the future. So this budget is really balanced between the short-term needs and those long-run
SPEAKER_01: impacts and then finally the budget really is all about our community
SPEAKER_01: That's why we exist as an organization. It's about our community our customers
SPEAKER_01: We're not for profit unity owned. So it's critical that that our budget and
SPEAKER_01: All that we do delivers value to our customers and this budget continues our our long-standing
SPEAKER_01: Performance in terms of being very affordable it supports reliability
SPEAKER_01: That benefits our customers and our community it supports our our community impact plans all of our
SPEAKER_01: Spending to ensure that our customers are well taken care of and supported
SPEAKER_01: And this budget again is really community focused. So with that, let me kind of jump into the rest of this
SPEAKER_01: next slide, please
SPEAKER_01: great, thanks
SPEAKER_01: So I thought I'd talk a little bit about
SPEAKER_01: Some of those sort of the numbers behind the the financial foundation that I've been talking about
SPEAKER_01: To the chart on the right it shows kind of where smuds rates are relative to
SPEAKER_01: the other utilities
SPEAKER_01: around the state
SPEAKER_01: In particular some publicly owned utilities as well as investor owned utility
SPEAKER_01: And if you compare us against a lot of the other utilities, we are one of the most affordable
SPEAKER_01: One of the least cost in the state and we're very proud of that performance
SPEAKER_01: It takes a lot of focused effort over a long period of time to achieve that
SPEAKER_01: and we are we are very
SPEAKER_01: Focused on continuing that performance going forward as well
SPEAKER_01: The board recently acted already to adjust these rates in 2026 and 2027
SPEAKER_01: So the budget itself is not about our rates or our revenues or anything like that
SPEAKER_01: But our rates and our revenues are driven by our costs
SPEAKER_01: Which the budget is all about and that's what the board is approving is our spending
SPEAKER_01: And so how how we're doing with our budget and how we're doing with our spending ultimately drives our for our affordability
SPEAKER_01: And the rates that our customers pay
SPEAKER_01: if you look at that chart you can see a big difference between PG&E far on the right and
SPEAKER_01: Smut on the left and that's about a 51 percent difference between
SPEAKER_01: PG&E's average rates and our average rates and that generates about 1.9 billion dollars that stays right here in
SPEAKER_01: Sacramento because of that
SPEAKER_01: Very significant difference in our rates. It's also one of the things that
SPEAKER_01: The rating agencies those that are listed there on the left at the top where it says credit ratings
SPEAKER_01: Moody's ratings S&P Global and Fitch are the three kind of main credit rating agencies and
SPEAKER_01: They all rates mud double a or a a 2 which is the equivalent rating for Moody's
SPEAKER_01: Which is a very very good credit rating and it helps keep our
SPEAKER_01: debt when we issue it as as low-cost as possible a
SPEAKER_01: Couple of things that I just want to mention about
SPEAKER_01: What the what the credit rating agencies say about smud?
SPEAKER_01: And things that contribute to those very good ratings first is they say our strong financial operations management is a plus
SPEAKER_01: Our strong financial performance again that that strong financial foundation that we have
SPEAKER_01: of meeting our minimum fixed charge ratio and of achieving our days cash and
SPEAKER_01: Of keeping our rates low all of those things are contributing to our strong financial performance
SPEAKER_01: and
SPEAKER_01: That is again something that the rating agencies look at and monitor and utilize in there and their rating of smud
Unknown: In addition to that robust liquidity. We currently have
SPEAKER_01: About a half a billion dollars in an available liquidity including commercial paper letters of credit
SPEAKER_01: That we could access on a short-term basis if we needed to all of it is available
SPEAKER_01: We have zero outstanding at this point last year. We refunded seventy five million dollars of that
SPEAKER_01: short term liquidity that gave us that
SPEAKER_01: additional capacity now, so we have the full five hundred million dollars of
SPEAKER_01: The liquidity available to us if we need it and
SPEAKER_01: they also cite our low operating costs and again our competitive rates as reasons for
SPEAKER_01: That credit rating that they've given us
Unknown: All right, let's go to the next slide
Unknown: So what is it that that we're really asking of the board and what is the kind of high-level look at the budget?
Unknown: So the board request is really to approve our spending of two point three about two point three billion dollars in
SPEAKER_01: 2026
SPEAKER_01: That's broken out into as you can see on the sort of the chart on the left
SPEAKER_01: It's broken out into operations and maintenance
SPEAKER_01: public goods expenses our capital expenses
SPEAKER_01: our commodity costs and our debt service that we have to pay for prior debt issuances and new debt
SPEAKER_01: payments that we're going to make in 2026
Unknown: And really what we're asking the board to do is really listed there on the right
SPEAKER_01: In terms of the budget we're asking for authority
Unknown: to make transfers between what we call the rate stabilization fund and revenue and the reason we need that is that we park some
SPEAKER_01: Revenues like our low carbon fuel standard revenues that we generate through
SPEAKER_01: LCFS credits in the rate stabilization fund
SPEAKER_01: We also have funds in the rate stabilization fund to help us balance
SPEAKER_01: our hydro
SPEAKER_01: Water years so if we have a poor water year we pull money out of the rate stabilization fund to support the organization
SPEAKER_01: We have a good water year. We put money into the rate stabilization fund. So those transfers occurred on an annual basis
SPEAKER_01: And we also have some cap and invest funds that are in the rate stabilization fund that we will transfer between there and revenue
SPEAKER_01: During the year as well. So we're asking for the authority to make those kinds of transfers rate stabilization fund
SPEAKER_01: And we also are asking for the staffing level which I'll get to in a minute
SPEAKER_01: And we are asking for the declaration to issue debt
SPEAKER_01: Which we'll need to do to operate in 2026. We'll need to go to the capital market to issue bonds
SPEAKER_01: To continue to fund our capital expenses and expenditures in 2026
SPEAKER_01: So we'll be again the board is
SPEAKER_01: Declaring that we'll issue that debt and that will be reimbursing capital expenditures for those bond proceeds
SPEAKER_01: And then we have the employee pay schedule which is required by law
SPEAKER_01: So next slide
Unknown: So you might be asking okay, what is the difference between
SPEAKER_01: Sort of the revenues that you might that you approved during the rate process
SPEAKER_01: and the
SPEAKER_01: Budget that we're asking for authority to spend. Okay, so this slide really kind of goes over that in the rate process
SPEAKER_01: You approved rates that would generate about one point nine billion dollars
SPEAKER_01: That included rates for residential service as well as for commercial service pretty much all of our customers
SPEAKER_01: And it also includes some other income
SPEAKER_01: Which would be our interest income as well as some of the revenue that we earn from our
SPEAKER_01: community choice
SPEAKER_01: aggregator service that we provide and
SPEAKER_01: It also includes some of those transfers that I just talked about from the rate stabilization fund that may occur during the year
Unknown: So all told revenue revenue is about two point one billion dollars
SPEAKER_01: expected in 2026 on top of that will be borrowing or expect to borrow about 260 million dollars and that gets you to the
SPEAKER_01: the two about the two point three billion dollar budget expenditures for the year and
Unknown: really that
SPEAKER_01: 260 million dollars
SPEAKER_01: What we're what we're really asking of the board is to be able to issue up to 400 million dollars in total debt
Unknown: We don't anticipate it being 400 million dollars. But again, we we aren't in 2026 yet. So we don't know
SPEAKER_01: What our revenues are what our expenses are what what has happened with commodity markets?
SPEAKER_01: So we can't perfectly predict that so we're asking for authority to issue up to 400 million dollars of debt again
SPEAKER_01: We intend we anticipate at this point being in the 260 million dollar range
Unknown: Yeah
Unknown: I'm just sort of curious or the intentions the borrowed 260 million. Do you know off the top of your head?
SPEAKER_02: What the maximum out we could capitalize because I know we don't we don't capitalize everything that we technically could
Unknown: That's a good question, but if our seeds that I mean our capital budget for just 2026 is 670 million
SPEAKER_01: our capital budget for 2025
SPEAKER_01: Was 600 million so you're talking about over a billion dollars, you know of
SPEAKER_01: Expenditures that we could technically we could capitalize a lot more we could capitalize a lot more. Yes
SPEAKER_01: but
SPEAKER_01: Again, that's the balance between the short term and the long term the more we capitalize today
SPEAKER_01: the lower our net income is
SPEAKER_01: the more
SPEAKER_01: Expenditures we have for interest right and bond
SPEAKER_01: Repayments and that tends to reduce our ability to spend money on other things
SPEAKER_01: Right now and also in the future because those bonds last for for 20 years, right?
SPEAKER_07: So it restricts your flexibility to spend in the future
SPEAKER_01: Really we issue debt in order to maintain our 150 days minimum cash on hand without that debt issuance
SPEAKER_01: We would not be able to maintain that that metric that metric is a really key metric for especially for the rating agencies
SPEAKER_01: if we were to violate that metric
SPEAKER_01: we would
SPEAKER_01: Significantly risk our our credit rating from each of the rating rating agencies
SPEAKER_01: and again in in
SPEAKER_01: 2026 we're asking to do the new bond transactions and we may also do some commercial paper transactions
SPEAKER_01: I mentioned we have about half a billion dollars of short-term financing
SPEAKER_01: Vehicles which include commercial paper as well as letters of credit. We may access those in
SPEAKER_01: 2026 as needed to maintain that 150 days cash
SPEAKER_01: while we say lead into our
SPEAKER_01: Eventual bond issuance that we typically do sometime in the early summer
Unknown: Okay, next slide please
Unknown: Okay, so in terms of hiring and staffing
Unknown: in
SPEAKER_01: 2025 we actually asked the board for an increase to our staffing we had a 45
SPEAKER_01: position ask in
SPEAKER_01: Increase in in 2025 a lot of those positions were for our operations
SPEAKER_01: They were intended to actually increase our number of crews
SPEAKER_01: And a lot of those positions have been hired over, you know from during
SPEAKER_01: 2025 will continue to be addressed between 25 and 2026 but for 2026
SPEAKER_01: We are not asking for any additional
SPEAKER_01: positions beyond what we
SPEAKER_01: Had asked for in 2025. Yes. Yes. I was wondering if you could just tell me a little bit about
SPEAKER_00: What the limited term positions are
Unknown: So limited term positions are often as the name suggests
SPEAKER_01: positions that would be
SPEAKER_01: temporary in nature
SPEAKER_01: So as an example, we are working on the s4 HANA upgrade
SPEAKER_01: Starting this year and we don't anticipate that s4 HANA upgrade to SAP
SPEAKER_01: Going on for many many many many years. We hope that it's fresh, right?
SPEAKER_01: We hope that it's only going to last a couple of years
Unknown: And if it does we don't need to hire permanently right to to be able to
SPEAKER_01: Do that work, but we rather hire limited term to do just that project and then those folks
SPEAKER_01: Can be released from that project
Unknown: Thank you. I guess I
SPEAKER_00: I'm interested more in knowing where those limited term positions are. Okay
SPEAKER_01: Yeah, sure. I can I can give you that kind of a breakdown
SPEAKER_01: for 2026
SPEAKER_01: the limited term positions
SPEAKER_01: 21 of them are in the operating chief operating officers area. So in Frankie's area
SPEAKER_01: That's the most the second most eight of them are in the chief diversity offers area
SPEAKER_01: Jose I don't see him here but in Jose's area
SPEAKER_01: The next highest is five in my area
SPEAKER_01: We have four within the chief customer offer officer area
SPEAKER_01: We have three in the the chief information officers area
SPEAKER_01: We have two in the CEO and general managers area and we have one in the legal and government affairs area
Unknown: And that information I believe is also that that kind of detailed information there is is available in the budget book
SPEAKER_01: So
Unknown: We aren't asking for any additional authority for 2026
SPEAKER_01: And we're keeping it it flat to 2020 2025
Unknown: So let's go to the next slide please
SPEAKER_01: All right
SPEAKER_01: This slide really compares the 2025 budget to the 2026 budget
SPEAKER_01: And gives you kind of an idea of how our major spending categories are really changing from 2025 to
SPEAKER_01: 2026 so really start at the top here and kind of walk it through as to what is what's changing and
SPEAKER_01: A little bit of why all right, so commodities
SPEAKER_01: You can see are going down by 17 million dollars
SPEAKER_01: But as Jennifer Steve o likes to say and I'm gonna quote her
SPEAKER_01: This is a geography change in the budget see so it's not all about finance and finance sometimes we do geography too, right?
SPEAKER_01: So what what's actually occurring here is we consolidated
SPEAKER_01: What we call SFA which is our joint powers authority
SPEAKER_01: into back into smud the reason we did that is because the
Unknown: Biggest asset that was in that joint powers authority was our consumers power plant
SPEAKER_01: That power plants debt had been paid as to feast was to feast this year. Okay, so after that the fees meant and the debt going away
SPEAKER_01: We had the opportunity to just consolidate that asset back into smud instead of having it housed in a in a joint power
SPEAKER_01: Authority and when we did that that moved some of the expenses
SPEAKER_01: That were originally assigned to that joint power authority and moved it to another place within the smud budget
SPEAKER_01: Okay, so what what happened was that 17 million?
SPEAKER_01: actually was
SPEAKER_01: Caused by a 27 million dollar movement
SPEAKER_01: Away from commodity into other parts of the budget as a result of that consolidation of SFA back into smud
SPEAKER_01: So if you if you take that into account
Unknown: Then really commodity costs are going up by 10 million dollars
SPEAKER_01: from 2025 to
SPEAKER_01: 2026 and the driver of that increase really continues to be market volatility and our need to
SPEAKER_01: hedge against that volatility, so we
SPEAKER_01: put some contingency funds into our budget to address the volatility that we expect within natural gas commodity and
SPEAKER_01: Energy markets and that contingency increased our our budget by about 10 million dollars for commodities this last year or for 2026
Unknown: In terms of our operating expenses you can see they're going down by 17 million
SPEAKER_01: I'd like to say that's all you know the good hard work of our staff and cutting budgets
SPEAKER_01: But the reality there is that a lot of that is labor that is going to capital
Unknown: We have a lot more capital spending and more capital projects this next year and any labor that that works on those cattle
Unknown: To some extent the labor that works on those capital projects can be capitalized as part of the project and so that that
Unknown: That transfer of the 17 million is really labor. That's going into more capital projects
SPEAKER_01: The public goods expense is increasing by 5 million dollars, and I think that's some good news for the board
SPEAKER_01: That 5 million dollars is being allocated part to energy efficiency programs part to building
SPEAKER_01: electrification and part to customer assistance programs in
SPEAKER_01: 2026 so we're seeing about a 5 million dollar
SPEAKER_01: Increase in that program spending and the incentives that we're offering within those programs in 2026
SPEAKER_01: Capital spending again going up by 60 million dollars. We have a number of really important and valuable
SPEAKER_01: Capital projects that are part of our 2026 budget and again. I need this. I just really want to stress
SPEAKER_01: this infrastructure and how critical it is to meeting our customers needs one growth and to
SPEAKER_01: to maintaining our service and keeping our reliability as as
SPEAKER_01: High as it is
SPEAKER_01: So these projects are that we're spending money on are really critical for those for those reasons a couple of the things that are
SPEAKER_01: Contributing to the increase we have a couple of really big substation projects going on one is station J
Unknown: Which is downtown?
Unknown: It's about 42 million dollars in the 2026 budget
Unknown: We have also the El Rio which is kind of the rebuild of our El Verda substation
SPEAKER_01: Which is the north part of our service territory to the tune of 37 million dollars?
SPEAKER_01: Which is again going to help us interconnect the country acres solar and battery project, which is up in Sutter County
Unknown: And we have another the 39 million dollars
SPEAKER_01: That's going to go to support the country acres solar and storage project on its own and switching station and and work
SPEAKER_01: That's going to be more on site at that project to help facilitate
SPEAKER_01: The takeaway of that energy and capacity once it's done
Unknown: So that's just a sampling of some of the things that we're doing and again critical to our meeting our RPS
SPEAKER_01: requirements
SPEAKER_01: decarbonization as well as
SPEAKER_01: Maintaining and improving our reliability of our service
Unknown: also
SPEAKER_01: In in 2026 we're seeing an increase in the debt service and as I mentioned earlier
SPEAKER_01: We do anticipate issuing some new debt in
SPEAKER_01: 2026 to help pay for some of the capital costs that we anticipate
SPEAKER_01: spending on in 2026 so that's going up by about 11 million dollars and
Unknown: Then the revenue at the bottom might wonder why is that going down so much? Well unfortunately grants
SPEAKER_01: especially from the federal government
SPEAKER_01: are are not as available as they once were given all the policy changes and and
Unknown: changes to the administration on a federal level and so we're seeing a drop in
SPEAKER_01: some of the grant revenue that we would expect from from 2025 to 2026 including the
SPEAKER_01: CCPC grant which was funding our new meter installations
Unknown: Okay, so let's go to the next slide
Unknown: All right, let's dig down a little bit more into commodities
Unknown: Just for you know to level set you know when we talk about commodities we're talking about kind of two big
SPEAKER_01: components which make up our commodity budget the first would be our fuel which is the natural gas
SPEAKER_01: So that's the natural gas cost and natural gas is not just the natural gas itself
SPEAKER_01: But it includes transportation for natural gas from where it's produced to where we consume it
SPEAKER_01: So our power plants so that's all the infrastructure that goes into
SPEAKER_01: Bringing it from its production to where it's burned
SPEAKER_01: and that's a that's a
SPEAKER_01: Very large and substantial amount of different kinds of infrastructure to do that
Unknown: And when you start talking about power costs you're really talking about all the electrical energy that we produce
SPEAKER_01: From our own power plants or that we purchase from the grid
SPEAKER_01: The capacity that's associated with all of that
SPEAKER_01: infrastructure or generation
SPEAKER_01: and then all of the renewable energy contracts and and
SPEAKER_01: projects that we own
SPEAKER_01: And then the transmission and other infrastructure and district
SPEAKER_01: You know transmission that's required to get the power from where it's again where it's produced
SPEAKER_01: To where it can come onto our system and serve our customers needs. So those are kind of the two big
SPEAKER_01: components of
SPEAKER_01: You know commodity costs and what goes into them probably one of the biggest differences to between natural gas and power
SPEAKER_01: Markets and commodities is the fact that you can store natural gas which really changes the way you can utilize it
SPEAKER_01: And manage the risk associated with it
SPEAKER_01: Versus power where power is much more difficult and expensive to store and you can't store for long periods of time
SPEAKER_01: so for instance
SPEAKER_01: with natural gas you can store gas for
SPEAKER_01: months years very long periods of time once you've injected it into the ground
SPEAKER_01: For
SPEAKER_01: power
SPEAKER_01: Typically, you know a lot of the batteries these days are in the four to six hour range and once you've spent that four to
SPEAKER_01: Six hours, you've got to recharge the battery
SPEAKER_01: So very big differences between those two kinds of commodities and it really changes kind of the risk profile
SPEAKER_01: That we have in purchasing and managing
SPEAKER_01: How we deal with both of those commodity markets
Unknown: In terms of the natural gas components, we're spending about 182 million in 2026
SPEAKER_01: That continues to fall over time as we pursue
SPEAKER_01: Additional renewable projects and as we continue to pursue our zero carbon plan that continues to to drop
SPEAKER_01: And then the power costs are about 411 million again
SPEAKER_01: The reductions that you're seeing there are really as a result of the geography change when we consolidated SFA not as a result
SPEAKER_01: of an actual decrease in commodity costs
SPEAKER_01: So let's let's go to the next slide
Unknown: All right, so this is more a look at okay, where does that money go?
SPEAKER_01: within our commodity
SPEAKER_01: portfolio and in
SPEAKER_01: 2026
SPEAKER_01: Our overall commodity portfolio is going to be about 63 percent carbon free
Unknown: And that is really made up of long-term contracts as well as our carbon free
SPEAKER_01: Hydro resources and then our own
SPEAKER_01: SMUD renewable
SPEAKER_01: Projects that we have and that includes some small
SPEAKER_01: Hydro powerhouses as well as our Solano project wind project
SPEAKER_01: You can see also looking at the chart on the right that
SPEAKER_01: That there are some reductions going on in terms of our own renewables and in terms of
SPEAKER_01: WAPA provided hydroelectric power. We have a contract with Western Area Power Administration. They provide
SPEAKER_01: Hydroelectric power from their projects in the state and
SPEAKER_01: That WAPA has forecasted a decrease of about 11 percent of their
SPEAKER_01: deliveries to SMUD in 2026 versus 2025
SPEAKER_01: So that's driving a 1% drop in the amount of hydro that we would expect to get
SPEAKER_01: overall in the portfolio from WAPA and
Unknown: Then moving over just a couple of bars there
SPEAKER_01: To the SMUD owned renewables. You can see there's a 1% drop there as well. We update every year
SPEAKER_01: the sort of the profiles and generation
Unknown: that we get from our Solano project and
SPEAKER_01: Over time we've seen just a small drop in that also
SPEAKER_01: 2024 was the year in which
SPEAKER_01: We added the and that was the latest year with information. We don't have yet full year of 2025
SPEAKER_01: But in 2024 that was the year
SPEAKER_01: Which Solano 4 was being built which came online in June. So there was
Unknown: You know that really wasn't a great year for comparison because some of the turbines in Solano 1 were being
Unknown: Were being decommissioned which reduced generation and the new turbines didn't come online until June which increased generation
SPEAKER_01: so in 2024 you ended up with a pretty lower amount in from Solano and even in 2025 with
SPEAKER_01: Solano for all online all those turbines online and producing
SPEAKER_01: We're still seeing a reduction to what we had expected to see again
SPEAKER_01: That might just be seasonal patterns of when we continue to update it over time
SPEAKER_01: and
Unknown: We'll see if that that number actually starts to go back up as Solano for
SPEAKER_01: Continues to produce into the future. We only have one year so far of history on Solano for
Unknown: And if you go a couple of slots over there to the renewable long-term contracts
SPEAKER_01: We're increasing about 3% in
SPEAKER_01: 2026 that's some good news
SPEAKER_01: We have Hatchet Ridge coming online in December of 2025
SPEAKER_01: We've got Sun's Eowyn coming on in October of 2026 and we were able to extend the keeper the Kiefer
SPEAKER_01: biomass
SPEAKER_01: contract for another couple of years it ends in 2028 because they're anticipating actually
SPEAKER_01: working with next era to take that biogas clean it up and
SPEAKER_01: Inject it into the PG pipeline
SPEAKER_01: Which potentially could be used for smud's power plants, but we'd need to negotiate a new
SPEAKER_01: Contract with Kiefer that would not be for the power but would rather be for the gas coming from the field instead
SPEAKER_01: So that's to be determined in the future
Unknown: So let's let's go to the next slide
Unknown: Alright let's talk a little bit about risks and some of the
SPEAKER_01: Mitigations that we have in place to address risks across kind of some key areas
SPEAKER_01: You can see
SPEAKER_01: kind of how we
Unknown: break out
SPEAKER_01: The bigger categories of risks on the left hand side financial reliability clean energy and technology
SPEAKER_01: And then what that risk is defined as
SPEAKER_01: for the budget and then
SPEAKER_01: Some of the mitigations that we are putting in place to address those those critical risks, so
Unknown: At the top financial
SPEAKER_01: Again, one of the things that that we feel
SPEAKER_01: Is really important about our strategy or financial strategy is keeping things as flexible as possible. So making sure that we can
SPEAKER_01: Manage any of these risks that might occur during the year whether it's from weather
SPEAKER_01: Or maybe it's from supply chains or tariffs or regulatory policy that we can financially handle
SPEAKER_01: Those risks as they occur during the year. So we put in place some some mitigations
SPEAKER_01: That we are focused on for 2025 as well as 2026 that help us to help us address those a couple of them
SPEAKER_01: Rate stabilization funds which we've talked a little bit about we did add 60 million dollars to the commodity
SPEAKER_01: Stabilization fund last last year to address the volatility in commodity markets and help
SPEAKER_01: Relieve any risk that we might have there from commodity markets turning against us and against our our hedging portfolio
SPEAKER_01: We've also adjusted our grant strategy for some of the changes on federal policy level again
Unknown: Where some of those funds have been pulled back
SPEAKER_01: We're focusing on the state and the state has some some additional funds that we might be able to go after to increase
SPEAKER_01: Those grant revenues in the future. We are focused on our op-ex opportunities
SPEAKER_01: Which continue to deliver value and reduce our costs in 2026?
SPEAKER_01: We anticipate another 24 million dollars of potential op-ex savings
SPEAKER_01: To help us reduce our costs and keep our rates stable and low for our customers
SPEAKER_01: And again, we're going to continue to come up to hedge our our commodity costs into 2026. I do want to mention though
Unknown: When you think about hedging for commodity costs, although commodity costs can be very volatile and although we do have a hedging program
SPEAKER_01: I do want to make sure the board understands that there is no perfect way to hedge
SPEAKER_01: you cannot
SPEAKER_01: Perfectly hedge all risks that may exist within commodity costs
SPEAKER_01: So given that even though we do have a hedging program when commodity costs do turn
SPEAKER_01: Against us there is still some exposure
SPEAKER_01: That may exist even even though we do have a hedging program. That's one of the reasons
SPEAKER_01: one of the important reasons why
Unknown: we went and and
SPEAKER_01: established the
Unknown: the commodity cost stabilization fund because we wanted to ensure that even if come on even if we have a hedging program and
SPEAKER_01: Commodity costs turn against us that we'd have some funds available to help smooth out any of those impacts that might occur
Unknown: Terms of reliability
Unknown: Again, those are risks to our critical infrastructure ability to respond to outages. Yes, absolutely
Unknown: hedging yeah, I
SPEAKER_02: Guess my question would be how long how high and how long?
Unknown: Would the price of natural gas have to get to before we would see it start coming into our?
SPEAKER_02: Yeah, I guess our commodity just purchases, but then just be the general energy markets
Unknown: well, I
SPEAKER_01: Think more so then then the absolute
SPEAKER_01: Amount of the of the gas it's more the pace at which things change
SPEAKER_01: I'd probably describe so for instance. Let's go back to say December of 2022 when CPP was out and
Unknown: We were trying to deal with that in addition to a commodity market in December that took off
SPEAKER_01: Right in the middle, you know couple of a week or a week and a half into the month
SPEAKER_01: When things like that occur, it's difficult to hedge because the hedges that you create are at the month start
Unknown: So that when you when you financially settle you settle at that month start
Unknown: You don't settle every single day during the month
SPEAKER_01: So if those days look very different in the month than what occurred at the beginning of the month you can get very different
SPEAKER_01: Commodity exposure right and pay
Unknown: Far more than what your financial hedge may have covered you for okay, so things like that
Unknown: Really are
SPEAKER_01: drivers that are difficult for us to
SPEAKER_01: To try and mitigate or simply hedge with a financial product
SPEAKER_01: So yeah
Unknown: So let's let's go on to reliability
SPEAKER_01: Again some of the some of the mitigations that we have for reliability
SPEAKER_01: And I think most people have heard about the load growth that's occurring within our industry
SPEAKER_01: I think there's a lot going on in terms of AI and data centers and
SPEAKER_01: hyperscalers and significant growth and and
Unknown: Is occurring across the country? We are in California
SPEAKER_01: So we're not as exposed to that if you look across the western United States
SPEAKER_01: You know, Texas, Nevada
SPEAKER_01: some of these very lower cost
SPEAKER_01: States are really seeing
SPEAKER_01: What I would call extremely significant AI and data center growth in Sacramento
SPEAKER_01: We are seeing some definitely some interest all the way up to even 300 potentially 300 megawatts
SPEAKER_01: How much of that actually gets built and when is really a question still I wouldn't call any of it
SPEAKER_01: guaranteed
SPEAKER_01: We're certainly talking to various entities and engaging with them on whether or not they ultimately want to be here in
SPEAKER_01: Sacramento
SPEAKER_01: Certainly if you look in California
SPEAKER_01: Sacramento is a very attractive place to be if you're a data center or a hyperscaler
SPEAKER_01: You have a lot of load. We're one of the lowest cost utilities in the state or one of the greenest in the state
SPEAKER_01: We align being a public utility public the owned utility with a lot of AI data center IT type
SPEAKER_01: Objectives so, you know if you're going to locate in the state Sacramento is a very as a very good place
SPEAKER_01: We have a highly educated workforce. So yeah, there's a lot of opportunity in Sacramento if you're really in that space
SPEAKER_01: But again in terms of the Western United States
SPEAKER_01: We just we just don't have as much going on as some of the other states
SPEAKER_01: But we are looking at those load impacts. We're working with the various AI
SPEAKER_01: companies and and hyperscalers to understand when and what loads and where we're also working to
Unknown: develop hosting capacity on our system so we can kind of gear people toward where to go on our system to limit the impacts and
SPEAKER_01: We'll be developing
SPEAKER_01: policies and procedures that will institute to
SPEAKER_01: Address any, you know significant new loads that might come onto our system and impact
SPEAKER_01: Our resources or impact our need to build infrastructure or impact other customers
SPEAKER_01: In addition to that new technology platforms we have our new
SPEAKER_01: OMS coming in we we anticipate that being done by April 2026
SPEAKER_01: So ready for the 2026 end of 2026 storm season, which will be a big improvement for us
SPEAKER_01: and
SPEAKER_01: We have made significant improvements within our overall storm response process in particular and definitely adding
SPEAKER_01: Some some additional people who are going out to us damage assessors folks who at the very beginning of the process
SPEAKER_01: Who look at the damage done to our facilities and determine what the next steps need to be?
SPEAKER_01: And we've significantly improved the kind of the back end processes as well in that to ensure that we you know are focused on ERTs and
SPEAKER_01: Getting through those ERTs and reducing the impacts of of storms on our customers
SPEAKER_01: Clean energy we are looking at
Unknown: Updating the resource plan this this coming year
Unknown: So the resource plan for those that may not know is sort of our opportunity to take a holistic
SPEAKER_01: Look at what our goals are in particular our goals for for carbon reduction our goals for renewable generation
SPEAKER_01: our goals for
SPEAKER_01: Transportation or customer programs or transportation electrification all those things are part of the resource plan and
SPEAKER_01: We'll be kicking that off
SPEAKER_01: Near the end of I think it's fourth quarter of 2026
SPEAKER_01: We're looking we'll be looking for the board and engaging the community as part of that process in in late 2026 early
SPEAKER_01: 2027 and then we'll be looking for a board decision
SPEAKER_01: Late
SPEAKER_01: Spring 2027
SPEAKER_01: So that we can get ready for the the next rate process that will occur in
SPEAKER_01: Early summer that will kick off in early summer of 2027
SPEAKER_01: We anticipate that any any rate changes that we might have for 2028 and 2029
SPEAKER_01: Which should be a subject of the 27 rate process would be definitely driven by
SPEAKER_01: What's going on in the integrated resource plan?
Unknown: I just had a quick question and you might not be able to answer this but
Unknown: You know our goal is zero carbon by 20
SPEAKER_00: 30 and
SPEAKER_00: You know we're hitting right now at the end of 2025
SPEAKER_00: We're at 63 percent renewable energy if I heard you correctly
SPEAKER_00: How do you see?
SPEAKER_00: The you know
SPEAKER_00: remaining four years
SPEAKER_00: Progressing like do you see us?
SPEAKER_00: You know getting that large bulk that still has to be done
SPEAKER_00: More towards 2030 or do you see it the renewable energy slowly?
SPEAKER_00: Adding up. I'm just curious. You know what you and
SPEAKER_00: You know Laura and the rest of the executives are thinking about how that would unfold
Unknown: So great question that will definitely be part of the resource plan discussion
SPEAKER_01: Obviously, but I mean if I have to answer today based on the resources that we think are on the table
SPEAKER_01: Obviously you've seen some of the resources that we're going to be expanding in
SPEAKER_01: 2026 already as part of this pretty Sun's Ian Hatchet Ridge, right? We are striking will be bringing to the board a new
SPEAKER_01: Purchase power agreement for some additional geothermal resource as well
SPEAKER_01: and we some have some other resources build locally and
SPEAKER_01: Regionally that we're looking at to expand over this time as well, but in addition to all of that
SPEAKER_01: Kind of the key thing I think to really achieving you know that
SPEAKER_01: Substantial really big potentially absolute zero type goal is going to be that CCS project
SPEAKER_01: The CCS project with with our partner or with Cal pine
SPEAKER_01: Constellation if that gets built and developed
SPEAKER_01: And we can negotiate a a reasonable offtake agreement
SPEAKER_01: with constellation in Cal pine then
Unknown: You know we have a very significant large
Unknown: You know
SPEAKER_01: operational most of the time type resource
SPEAKER_01: That will substantially reduce carbon within the region. Yeah and for smud
Unknown: So a lot of some of it really depends on where that what happens with that project where that goes the 400 megawatt plant
SPEAKER_00: with that Cal pine is that enough to
SPEAKER_00: Catapult us to I mean it's like there's
SPEAKER_00: 37
SPEAKER_00: Percent that we've got a gain over four years is that enough to?
SPEAKER_00: Get us there in one year. It's very significant
SPEAKER_01: It's it would ultimately likely be three to three hundred fifty megawatts for smud
SPEAKER_01: Operating near
SPEAKER_01: Near all hours right probably 85 percent of the time 90 percent of the time
SPEAKER_01: So you're talking about a very significant increase to our total energy that would be near carbon free, right?
SPEAKER_01: And imported from them so it yes, it would be a it would be a substantial change
Unknown: for sure, yes
Unknown: Okay
SPEAKER_01: So I think we were talking about clean energy yeah, all right, so just one other thing maybe underneath the the clean energy
SPEAKER_01: topic some of the mitigations that we're doing
SPEAKER_01: Is managed charging and smart panels? I think it's a really
SPEAKER_01: Important for the board to kind of understand that that managed charging really helps us shape
SPEAKER_01: When demand exists within our system and as we continue to add more and more
SPEAKER_01: EVs to the system if all those EVs really pile on their charging on the peak times
SPEAKER_01: We would have a significant infrastructure issue. We would have to add a lot more spending a lot more
SPEAKER_01: Infrastructure a lot more generation to address
SPEAKER_01: That EV load, but if we can take that EV load and spread it out outside of our peak times
Unknown: Then we have more ability to manage it and less need for significant new infrastructure investments just to handle the peak
SPEAKER_01: Okay
SPEAKER_01: So this managed charging was a pilot. It's now expanding to a full program
Unknown: So right now in 2025, it's got 2,000 customers on it. It's worth a few megawatts
SPEAKER_01: but in
SPEAKER_01: 2026 we anticipate bringing that number five-fold increase to 10,000 cars on that program and
SPEAKER_01: You know somewhere between 15 to 20 megawatts worth of load
SPEAKER_01: That would be managed and moved around based on
Unknown: Based on that number of cars on the program. We again we continued we want to continue to expand this
Unknown: So that we can support customers both getting what they want from their electric vehicle
SPEAKER_01: The low cost the reliability from their electric vehicle the charging that they need
Unknown: But at the same time a lower and lesser impact on our overall infrastructure
SPEAKER_01: Okay, so that's that's really where this managed charging
SPEAKER_01: Program comes in and then the smart panel pilot another really important pilot
SPEAKER_01: I know Laura and her team have been kind of focused on this
SPEAKER_01: we're doing a pilot to try and
SPEAKER_01: Avoid the need for very expensive
SPEAKER_01: upgrades to a panel
Unknown: So a customer who may want to electrify or buys a new EV
Unknown: May I may be adding load right to their home
SPEAKER_01: and
Unknown: That may you know if an electric just comes out electrician comes out and just looks at the situation
SPEAKER_01: May he may say well, let's let's just upgrade this panel because you've added all this new load
Unknown: what the smart panels do is instead of just
SPEAKER_01: They pretty much allow you to add the new load
Unknown: But then they manage the load within the home so that the peak on that panel doesn't exceed the panel capacity
Unknown: Versus not smart panels which cannot do that
Unknown: Right. So this is a really big
SPEAKER_01: significant new potential opportunity and technology solution
Unknown: To all those very expensive panel upgrades that people have been needing to go through because of electrification or because of adding an EV within their home
Unknown: Okay, so piloting 80 of them in 2026
SPEAKER_01: We'll see how that pilot goes and then from there. We'll look to expand and
SPEAKER_01: again another way in which we can really optimize the grid rather than you know have a significant impact on the grid as people electrify
Unknown: Finally technology a
Unknown: Lot of the mitigations that we're doing we have a lot of new platforms going into place
SPEAKER_01: Within a smud including our significant SAP upgrade s for Hana
SPEAKER_01: We've got the whole digital platform transformation within customer going on with the SEW platform
Unknown: We have our OMS upgrades. We still have our derms system being
SPEAKER_01: Worked on and new phases of derms being implemented. So there's there's a lot of technology going on around the organization
SPEAKER_01: All of which we hope will improve our efficiency will allow us to take advantage of the new AI
SPEAKER_01: Opportunities that are coming
SPEAKER_01: And really focus on potential use cases with AI that could give us
SPEAKER_01: Hopefully significant savings going forward into the future
Unknown: All right, so let's go on to the next slide here
Unknown: Yep, great. All right. So what what do we where do we spend the major amounts of our?
SPEAKER_01: O&M
Unknown: Well, if you take a look at the big pie chart to the or sorry not the pie chart but the table to the right
Unknown: We spend about 309 million in in power gen and grid operations and maintenance and
SPEAKER_01: again, these these are critical expenditures really for us to be able to
Unknown: For us to be able to maintain and improve the reliability within our system
SPEAKER_01: So they're really they're really critical and necessary for you know, our customer service and our high quality customer service a couple of the things that
SPEAKER_01: we spend on including
SPEAKER_01: You know line maintenance
SPEAKER_01: Substation maintenance all those go into this power gen
SPEAKER_01: Maintenance all goes into this line item as well
SPEAKER_01: Again to help maintain a reliability for our customers
SPEAKER_01: a couple of
SPEAKER_01: Other expenses on here 285 million dollars for core operation support including our customer
SPEAKER_01: support functions as well as our IT support functions and all of what we call our corporate services functions our corporate services functions are really
SPEAKER_01: things like finance legal
SPEAKER_01: Marketing and community relations those kinds of functions within the organization. So
SPEAKER_01: Those are all the the
SPEAKER_01: kind of core corporate services areas
SPEAKER_01: we
SPEAKER_01: Also have about 89 million dollars in sorry
SPEAKER_01: Yeah, 89 million dollars in terms of electrification energy efficiency. We talked a little bit about those programs our veg management
SPEAKER_01: we're trimming north of 90,000 trees again in
SPEAKER_01: 2026 so 51 million dollars and we do have a focus on
SPEAKER_01: On wildfire here and trimming and focusing on the right of ways, especially up in the Europe. We have our greatest wildfire risk
SPEAKER_01: we still do all of our line inspections and our lidar work and
Unknown: Focus on the entirety of the right of way as we go along the whole Europe system. We're also installing some new technology
SPEAKER_01: Out there this year with grid where as a partner we have 500 devices that we're going to be installing on various
Unknown: Towers and poles that are in the u-arp area and those can help monitor
SPEAKER_01: sort of conditions and pre-worn of any conditions that may
SPEAKER_01: Ultimately lead to a a fire or failure or a spark or something like that
SPEAKER_01: So those where we have high hopes for that new technology
SPEAKER_01: To help us reduce our risks in in 2026 as well
SPEAKER_01: and
SPEAKER_01: then
SPEAKER_01: We've got our wildfire and property insurance this year we were very fortunate with our wild and wildfire insurance renewal we
SPEAKER_01: Were able to expand our wildfire insurance coverage, but also stay within the 2026 budget for our wildfire insurance
SPEAKER_01: So it actually you know, I don't want to say that the wildfire insurance market is turning or has you know
Unknown: Gotten significantly better, but it is definitely improved. I'll say from where it has been
SPEAKER_01: So our wildfire insurance program actually has has benefited from that this year and then
SPEAKER_01: In addition to that we have all of our community investments that we are doing
SPEAKER_01: Including all of our community impact plan as well as
SPEAKER_01: all of our investments and workforce development
SPEAKER_01: For our under-resourced communities to the tune of 42 million. So those are just some of the things that are going on within our O&M budgets
SPEAKER_01: Let's go to the next slide
Unknown: Alright so let's let's go a little deeper in some of the initiatives that we have within the O&M category
Unknown: If you look at the chart on the right
SPEAKER_01: You can see our days away restricted time and the total number of people that had days away restricted time
Unknown: from 2003 to September of 2025 through September of 2025 and you can see there's been a pretty significant
SPEAKER_01: reduction about 90% between 2003 and September of 2025
Unknown: That has really been driven by a change in our culture
SPEAKER_01: That change in culture has been built around our safety for life initiative
SPEAKER_01: And it's been a focus of all of our management. It's been a focus of all of our crews
SPEAKER_01: It's been a focus of all the safety team
SPEAKER_01: And that has really helped to support our overall reduction that we're seeing in DART
SPEAKER_01: However in September 2025, we still had through September 2025
SPEAKER_01: We still had 10 people who went out on DART injuries this year and for those 10 people
SPEAKER_01: No matter what our culture may be and how much we want to get to zero
SPEAKER_01: They were still injured when they ended the workday
Unknown: So it's really where our real focus is to make sure we get to absolutely zero incidents
SPEAKER_01: And getting there is gonna is gonna take a lot
SPEAKER_01: It's gonna take
SPEAKER_01: Continuing to change and improve our safety culture
SPEAKER_01: And continuing to be very innovative about the way we drive safety within the organization
Unknown: one of the things that we are doing in
SPEAKER_01: 2026 is
SPEAKER_01: Improving some AI capabilities within our safety management system
SPEAKER_01: And start using those for field ergonomic evaluations where again in the field they do a lot of crouching bending reaching twisting, right?
SPEAKER_01: It just presents a much higher risk and so we're utilizing those AI functions within our safety management system to help support
SPEAKER_01: those assessments and
SPEAKER_01: Again drive that safety culture to to help us to get to that absolute zero number
Unknown: We also have you know again contractor and public safety
SPEAKER_01: Focus we have more field observations of contractor safety going on in 2026
SPEAKER_01: Public safety really has to do with some of our coordination with our emergency responders
SPEAKER_01: Especially as we expand our battery and solar capacity
Unknown: At country acres we're gonna have our first utility scale solar project at 172 megawatts
SPEAKER_01: and
SPEAKER_01: That that storage project we want to make sure that you know
SPEAKER_01: it's it's it's safe and
SPEAKER_01: Operate safely and that we are working with our emergency responders in case of any accidents or our potential challenges there that they are well
SPEAKER_01: Aware of how to manage it and take care of it safely
SPEAKER_01: And keep our employees and themselves and the public safe. So
Unknown: That's going on in 2026
Unknown: In terms of grid reliability
SPEAKER_01: Again, the wildfire I think we've talked about we've talked about the managed electric vehicle charging a little bit and the expansion of that program
SPEAKER_01: And are maintaining and improving our assets that are that are currently on our system
SPEAKER_01: in terms of our skilled workforce, we are
SPEAKER_01: Working to
SPEAKER_01: Developing programs and rolling those out to
SPEAKER_01: In 2026 to
SPEAKER_01: focus on
SPEAKER_01: stem education with with kids
SPEAKER_01: In addition to work with our partners to train about a thousand new people
SPEAKER_01: To potentially take careers in the energy space
SPEAKER_01: We're also continuing with our line work or scholarship
SPEAKER_01: That scholarship it started last year with about 600 total applicants and it ended with five hires for SMUD, which is great to see
SPEAKER_01: It really reached out to typically
SPEAKER_01: Underserved and underprivileged kind of areas that would people that may never even have
SPEAKER_01: You know considered themselves as
SPEAKER_01: You know
Unknown: Trained for a lineman type position and they went through the program and were able to be hired
SPEAKER_01: So it's it's a it's a great program. That's been
SPEAKER_01: Expanding
SPEAKER_01: You know our outreach to our community and then again the we prosper together grant. It's a partnership with
SPEAKER_01: With just my mind with Valley Vision
SPEAKER_01: My brain is going been talking too long
SPEAKER_01: With Valley Vision
SPEAKER_01: To again expand workforce training programs in Sacramento and develop
SPEAKER_01: Community talent to help improve our our stem education
Unknown: Let's go to the next next slide
Unknown: Again some more
SPEAKER_01: On em initiatives our IR plan our IRP plan update is going to happen next year as I mentioned
SPEAKER_01: We've got a number of new resources that are part of our O&M expenditures, which include all of our purchase power agreements
SPEAKER_01: Not our capital investments. These are the purchase power agreements in terms of load flexibility. We are
SPEAKER_01: Expanding our load flexibility programs which include our thermostat programs our battery programs and our commercial programs
SPEAKER_01: from 80 megawatts in 2025 to near 100 megawatts next year, which is a significant increase
SPEAKER_01: Over where we are right now and is going to help us manage the grid differently and save in terms of resource adequacy costs
SPEAKER_01: In terms of technology. We are focused on our critical infrastructure protection program, which includes
SPEAKER_01: You know more safeguards for our bulk electric system assets that the NERC
SPEAKER_01: Requires us to keep safe and protected
SPEAKER_01: So we're working on some some additional IT protections for those for access to that data and use of that data
SPEAKER_01: By third parties as well as within SMUD
Unknown: We have our zero trust security model and I I'm gonna bungle the what that means
SPEAKER_01: so I'll just point the board back to what we talked about in in our security and
SPEAKER_01: and
SPEAKER_01: Briefing that we had cybersecurity briefing that we just had
SPEAKER_01: I think it was last was that last week. Yeah last week
SPEAKER_01: Okay, so I would point the board toward toward those briefings and all that was shared in those meetings
SPEAKER_01: There's a lot going on in cybersecurity space. Certainly we have significant risk there
SPEAKER_01: But we also have significant investments within our our program and with our people
SPEAKER_01: and
SPEAKER_01: We are focused on making sure that we are keep our data safe and keep SMUD safe
SPEAKER_01: With our cybersecurity program. We're also working on the smud org redesign, which is a holistic redesign of
SPEAKER_01: smud org. I know ferris and his team have been
Unknown: Anxious to get that going. We had a little bit of a delay with the RFP, but it's now progressing
SPEAKER_01: And we look forward to seeing a totally different smud org and a more engaging
SPEAKER_01: smud org with all of our customers once it's redesigned and
Unknown: We are also upgrading our customer interconnection experience. This has to do with all of our
Unknown: all of our interconnection policies and and process that goes into
SPEAKER_01: Interconnecting say new solar
Unknown: New solar on a rooftop or a battery or something like that and we're taking a look at those processes to streamline them
SPEAKER_01: Improve them and make them more efficient for our customers
SPEAKER_01: Okay, next next slide
SPEAKER_01: Some additional O&M initiatives
SPEAKER_01: We are taking a look at our commercial and residential electrification work again as part of the IRP as I mentioned earlier
SPEAKER_01: We are looking at what your goals be in terms of electrification
SPEAKER_01: What your goal goals be for carbon reduction based on electrification either in the home or with transportation?
SPEAKER_01: That's all going to be part of the
SPEAKER_01: Update to the IRP. So it's going to be an opportunity for the board to
Unknown: Obviously weigh in and make decisions about where we want to go as a utility in this space
SPEAKER_01: Moving forward we continue with our
SPEAKER_01: Electrification focus again, as I mentioned earlier, we're expanding our electric kitchen spending in
SPEAKER_01: 2026 to continue to
SPEAKER_01: electrify homes and businesses across
SPEAKER_01: Sacramento
Unknown: We have 1600 community events. I know Rhonda and her team are doing a great job
SPEAKER_01: in engaging with our community and getting us all out into the community and and
SPEAKER_01: Attending community events. I see the board members at a number of these community events
SPEAKER_01: I know you all attend them on a monthly basis many of them on a monthly basis
SPEAKER_01: And so I know you're all familiar with all that we do within the community. That is absolutely going to continue
SPEAKER_01: We have additional outreach that we are going to be doing with low to moderate and income eligible customers in particular
SPEAKER_01: We're taking a look at are we gonna get ready to issue an RFP or as they are for you in the issued brainy
SPEAKER_01: for the
SPEAKER_01: Okay for direct installations where we're going to work with contractors to
SPEAKER_01: and our energy specialists when energy special it goes out to give a
SPEAKER_01: low moderate income or income eligible type customer a
SPEAKER_01: energy assessment at their home that that then
Unknown: Person can then contact directly the the
SPEAKER_01: Contractor that can come directly in and work with the customer to install those measures that would best help them to reduce their energy
SPEAKER_01: Use and and become more efficient. So it's really kind of linking those energy specialists in that process with our customers with
SPEAKER_01: contractors to make it more seamless to
SPEAKER_01: Help support our customers and decarbonization and energy efficiency. We're also adding new
SPEAKER_01: bundles to our
SPEAKER_01: energy store that will help, you know, say low moderate income customers who are you know, looking at our energy store to
SPEAKER_01: Go for bundles that would
SPEAKER_01: Help them reduce their energy quickly and simply by just selecting the bundle within our energy store
Unknown: Of course, we have our community impact plan
SPEAKER_01: We're expanding the electrification efforts into those residential communities. I think many of you probably were part of those community walks
SPEAKER_01: That we had done as part of the community impact plan. We continue will continue to do that outreach
SPEAKER_01: we're also doing outreach along the
SPEAKER_01: commercial corridors with our PBIDS
SPEAKER_01: and engaging with them, especially in those underserved areas to
Unknown: Engage with the commercial customers on electrification and adding efficiency measures within their buildings
Unknown: We're also again I mentioned some of the customer
SPEAKER_01: Changes that we're doing for our low and moderate income customers. We're adding some additional assistance
SPEAKER_01: Like in our shade sheet program
SPEAKER_01: We are offering shrubs and pots for renters so that folks don't actually have to plant something in the ground
SPEAKER_01: But then can instead just get a pot with it with their shrub or something like that or a tree small tree
SPEAKER_01: to support their
SPEAKER_01: carbon reduction
Unknown: We are also
SPEAKER_01: Expanding our solar for schools for nonprofits. We did three
SPEAKER_01: Nonprofits this year with solar for schools as part of our community impact plan next year. We're looking at expanding that to
SPEAKER_01: three to six
Unknown: as part of that program
SPEAKER_01: Which includes installing solar and storage at a nonprofit site?
SPEAKER_00: Scott I I just want to jump in here and say that I really appreciate
SPEAKER_00: Staff's response to the board's request to have more solar installations on
SPEAKER_00: nonprofits and schools, I mean, I think school is like a
SPEAKER_00: Schools are like a deep hole that we'll never be able to
SPEAKER_00: To fill but it's nice to see some
SPEAKER_00: Nonprofits also get some attention. So just want to say I'm I'm glad for that
Unknown: great
SPEAKER_02: Yes, you have the community impact plan budget total right there. It's about 14 million dollars
SPEAKER_01: for
SPEAKER_01: 2026 yeah, and it comes out of our that's one of the transfers that occurs within the
SPEAKER_01: rate stabilization fund because those funds that have actually been set aside already to help fund the community impact plan I
SPEAKER_01: Think we have about I'm gonna say 44 million dollars in there now
Unknown: Yeah, Danielle's giving me a yes. So
SPEAKER_01: That's a guarantee we got 44 million dollars set aside for the community impact plan and
SPEAKER_01: We anticipate a current spending that'll last probably through 2028 ish. Yeah
Unknown: Okay, let's go to the next slide
Unknown: All right, let's talk a little bit about our capital highlights
Unknown: We currently
Unknown: Are going to be spending about or in 2026 about 186 million dollars on our substation builds and
SPEAKER_01: improvements
SPEAKER_01: Again, some of those are our station J downtown the 42 million the El Rio
SPEAKER_01: improvements in the Alberta area
Unknown: For 37 million. We're also improving
SPEAKER_01: UCD medical center. We're building
Unknown: Some additional we're doing some work at a substation to expand it and then installing line capacity for
SPEAKER_01: UCV med center, so they're slowly going to be reducing their current natural gas kojin and
Unknown: As they reduce that kojin load and backup load they're gonna they're gonna cut over to our service over a period of time
SPEAKER_01: At the end of all of this
SPEAKER_01: They're going to be completely electrified and their kojin will be no longer in use which is a very significant reduction to
SPEAKER_01: local carbon
SPEAKER_01: as part of that part of that
SPEAKER_01: retirement
Unknown: So that's some of that's just some of the spending that we're doing in terms of substations
SPEAKER_01: if you take a look at facilities and fleet as well as
SPEAKER_01: kind of our full submit administrative operations building between the two were at 127 million for
SPEAKER_01: 2026 again now I'm almost 90 million dollars for the full submit administrative opera
SPEAKER_01: It's hard to say that word full submit administrative operations building
Unknown: That's this in 2026 that's the bulk of the spending for that project and
Unknown: We're also doing 70 million dollars for new and enhanced technology including 24 million dollars to kick off the s4 Hana
SPEAKER_01: Upgrade for our current SAP system. We're doing
SPEAKER_01: number of new resource projects
SPEAKER_01: I mentioned some of those are ready to 59 million dollars. We've got cable and pole replacements
SPEAKER_01: 31 million dollars we have 850 poles and about 200,000 feet of cable
Unknown: that we're planning to do in
SPEAKER_01: 2026 with that money and then we have all the new services and capacity projects that we also have
SPEAKER_01: As part of the budget for 2026. So let's go to the next slide
Unknown: All right, these are some of the capital initiatives that we have within the 2026 budget so let's
SPEAKER_01: go
SPEAKER_01: through some of these
Unknown: First off I think I've mentioned our L Rio substation upgrades and our station J upgrades and then some of the downtown proactive transformer replacement
SPEAKER_01: These are transformers that are pre 1990
SPEAKER_01: That need to be replaced that are aging infrastructure and we just are working at slowly replacing them
SPEAKER_01: They're not failing necessarily, but we're working to replace those transformers as they as they get older
SPEAKER_01: We
Unknown: Also have a number of additional projects in in design in 2026 for future years
SPEAKER_01: We've we've ordered a number of spare transformers
SPEAKER_01: We're spending about 26 million dollars for new spare
SPEAKER_01: transformers in 2026 that are gonna be delivered in q1 q2 of 2026 and one in
SPEAKER_01: 2027 and again, we're doing the 200,000 feet circuit feet and 850 poles
SPEAKER_01: to
SPEAKER_01: support reliability and in 2026 as well
SPEAKER_01: in terms of our power generation assets
Unknown: We have transformer generator
SPEAKER_01: Upgrades going on a community white rock and Union Valley some control center control center system upgrades
SPEAKER_01: Across the system and we have some hydraulic power unit replacements. I believe at four facilities in
SPEAKER_01: 2026 let's go to the next slide
Unknown: All right additional capital initiatives
SPEAKER_01: We have the
SPEAKER_01: under clean and proven clean proven technology or proven clean technology
SPEAKER_01: Category we have the country acres project which again is being interconnected through the Alberta substation and in addition we have some site work for
SPEAKER_01: Switch yards and things like that that are going to be developed in 2026
SPEAKER_01: I think it's about 39 million dollars that is going to be spent on country acres again country acres is the
SPEAKER_01: 344 megawatt solar and 172 megawatt battery project that is currently being developed in Sutter County
SPEAKER_01: We also have a number of different projects that are going kind of through the
SPEAKER_01: California environmental quality act process as well as other permitting that is required
SPEAKER_01: for those projects which includes our dry Creek project, which is a
SPEAKER_01: 160 megawatt battery facility that is going to be located at our at our current Rancho
SPEAKER_01: Seiko to solar project which is 160 megawatt solar project at Rancho Seiko
SPEAKER_01: which will
SPEAKER_01: serve to
SPEAKER_01: Help us, you know utilize that that solar when we when we actually need it especially across the peak times
SPEAKER_01: And we have some other green energy projects that we're taking a look at locally
SPEAKER_01: some solar projects some other solar and battery projects that we are looking at that are
SPEAKER_01: Kind of in that CEQA early permitting stage that we're spending money on to help prepare for you know, the coming years and project development
Unknown: In terms of facilities and security really the big one there is again that full administrative operations building
SPEAKER_01: Which is the bulk of the spending is in 2026. It's our new operation center. That's going to be out in the Folsom area
SPEAKER_01: It's going to replace the current EMC that is just adjacent to our campus here
SPEAKER_01: That building is aged and needs to be replaced and will be replaced with a state of the art fully secure
SPEAKER_01: Operation center which will serve our operations group for many many many years into the future. It's absolutely critical building it operates the
SPEAKER_01: The SMUD system right and ensures, you know the safe operation and
SPEAKER_01: Reliable operation of our system for our customers. So it's really critical that building
SPEAKER_01: We have a number of facilities and security enhancements going in in in 2026, but we're also electrifying SMUD's fleet
SPEAKER_01: We've ordered a number of F-150s. We hope that those electrified F-150s actually end up showing up
SPEAKER_01: We'll see but yeah, we intend to
SPEAKER_01: Hopefully get delivery of those F-150s
SPEAKER_01: All right. Next next slide. I think I'm almost done. So
Unknown: Last slide for our initiatives again in the IT space
SPEAKER_01: A number of our capital initiatives upgrading s4 HANA in phase one
SPEAKER_01: We have the SAP analytics class SAP analytics cloud was the SAC planning that is actually a replacement of our financial
SPEAKER_01: Tool that we use to do all of our kind of financial planning and analysis work
SPEAKER_01: Within our organization so that was that one's kind of a big one for me and my group
SPEAKER_01: We're actually doing that first out the gate before the s4 HANA
SPEAKER_01: Process and upgrade is going to take place
SPEAKER_01: So we're really excited about that because we're gonna have a much better tool some AI
SPEAKER_01: opportunities and hopefully really improve our our financial efficiency in terms of how we
Unknown: How we analyze our our budget how we track our budget how we look at variances how we?
Unknown: How we plan going forward and look at different scenarios for our budget
SPEAKER_01: Grid transformation, of course the extended day ahead market is coming in 2027
SPEAKER_01: So we're starting work on some IT upgrades that are necessary to help prepare ourselves for that
Unknown: Again, I mentioned all mess and derms. Oh mess will be done. Hopefully in April and derms is kind of an ongoing
SPEAKER_01: Development and we'll be doing phase four and phase five
Unknown: With the derm system and then our customer experience technology a very significant change
SPEAKER_01: Going on within the customer area on the digital platform transformation and to the my account
SPEAKER_01: Component of our of our residential portal
SPEAKER_01: and that customer experience technology is really going to be an ongoing SE
SPEAKER_01: SEW transformation of
SPEAKER_01: Most of the most of the digital platforms that we use within customer
SPEAKER_01: Let's go to the next slide
Unknown: All right, let's talk very quickly about our
SPEAKER_01: Income statement you can't have a budget meeting without an income statement, right? I mean come on
Unknown: Gotta have an income statement
SPEAKER_01: So if you look at the
SPEAKER_01: Kind of I've gone over a lot of these changes already
SPEAKER_01: But I do want to draw the attention to the net income line, which is a second from the bottom
Unknown: Okay, that line right there
SPEAKER_01: You can see is increasing by 109 million from where we stood in 2025 planned at 117 million. You might think well
SPEAKER_01: That's that's quite a jump
SPEAKER_01: And really what is positive net income help us to do it really is three things
SPEAKER_01: Okay, first it helps us meet those minimum financial metrics and ratios that is that solid financial foundation?
SPEAKER_01: That is really important for the rating agencies and for our debt holders
SPEAKER_01: People don't want to hold the debt of an organization that is not financially sound
Unknown: Right. So just to have set be able to sell our debt in the market. We need to hit these financial ratios and
SPEAKER_01: And in addition to that to maintain our credit rating, which makes our debt much cheaper
SPEAKER_01: We need to hit these financial ratios
SPEAKER_01: So we need to have net income in order to ensure we hit those financial metrics in addition to that
SPEAKER_01: Net income really helps us manage our current and future financial risks
Unknown: Any changes that occur to our revenue or to our costs within a single year net income can somewhat absorb that right?
SPEAKER_01: Ask ask acts as a buffer
SPEAKER_01: For any additional increases in expenses or reductions in revenue in a single year and
Unknown: Then finally net income really helps us offset our capital costs
SPEAKER_01: And as I described earlier, we are seeing a significant increase in our capital costs and infrastructure needs but driven by our
SPEAKER_01: Focus on making sure our reliability is maintained and improved
SPEAKER_01: Over time and so those infrastructure needs are partially offset by this additional net income
SPEAKER_01: So let's go to the next slide. I think I can kind of talk you through this one fairly quickly, too
SPEAKER_01: So you can see at the very top
SPEAKER_01: This is what we call our cash flow statement and it really shows with the connection between net income and our capital
SPEAKER_01: Expenditures. Okay. So if you see at the top we start our year with about 487 million dollars in cash that
SPEAKER_01: Maintains our minimum 150 days
SPEAKER_01: Ratio that is critical for again maintaining our financial stability and our bond ratings. Okay
Unknown: So we start off with 497 million and then through our operations
Unknown: we generate some revenues from our customers by billing and we spend money on commodities and other expenses and
SPEAKER_01: The net of those operations gets us another 587 million dollars. Okay, just walking down the right hand of this table
Unknown: However
SPEAKER_01: That 587 million dollars is not enough to go pay for
SPEAKER_01: All of our principal and interest on debt. We've already issued which is 210 million dollars
SPEAKER_01: you can see that under the financing category and
SPEAKER_01: The additional capital expenditures that we have to make within 2026 to the tune of 670 million dollars
Unknown: which means
SPEAKER_01: That despite our net income of 109 million, which is part of that 587 million that we generate from our operations
SPEAKER_01: Despite that we still have to go out and borrow
SPEAKER_01: because we're spending
SPEAKER_01: 670 million dollars on capital and again that infrastructure critical to our reliability. Okay
SPEAKER_01: so we end up borrowing about 260 million just to keep our
SPEAKER_01: minimum days cash at that 150 level
SPEAKER_01: So at the end of the at the end of the day
SPEAKER_01: You can see if you if you kind of go down to the bottom there
SPEAKER_01: The ending unrestricted cash balance as of December 26 is
SPEAKER_01: 483 million dollars we started with 487 we end the year with 483. So we're actually reducing our cash balances by 4 million dollars
SPEAKER_01: Despite our net income during the year and again that net income is getting spent to a large extent on the capital
SPEAKER_01: Expenditures and the principal and interest payments on our previous debt
Unknown: So I hope that helps kind of walk through
SPEAKER_01: Kind of where that net income goes and why we need it and its purpose
SPEAKER_01: Again, just high level net income really helps us support our investments in infrastructure
SPEAKER_01: It's critical to support our financial ratios
SPEAKER_01: Our our credit rating and the reliability of our system. Okay without net income all of those would be at risk
Unknown: All right, so let's go to the next next slide
SPEAKER_01: All right, where are we in the timeline?
SPEAKER_01: We did the high level overview in October tonight
SPEAKER_01: on November 18th, we're doing the kind of
SPEAKER_01: Presentation an outline of the 26 proposed budget and then on December 11th
SPEAKER_01: We will look to you all to vote and approve the 2026 budget as is outlined here
Unknown: and next slide
Unknown: That is about it again our budget what are the key things that it does and delivers in
SPEAKER_01: 2026
SPEAKER_01: first
SPEAKER_01: We are we are not-for-profit. We are community focused
SPEAKER_01: community owned
SPEAKER_01: Everything that we do is for our customers this budget delivers on programs on services on technology platforms on
SPEAKER_01: Incentives that are going to help our customers
SPEAKER_01: That are going to support what they want from their utility
SPEAKER_01: What they demand from us as an organization?
SPEAKER_01: And that we expect to deliver to them to improve their satisfaction
SPEAKER_01: And keep their value for what you pay very very high
SPEAKER_01: Secondly our budget is focused on infrastructure
SPEAKER_01: Making sure that we can fund those key and critical investments that are necessary to maintain and improve their reliability of the system
SPEAKER_01: We've known over a lot of the infrastructure that we are spending our money on all of which is critical for our reliability
SPEAKER_01: And necessary for our reliability without it our reliability would be at stake
SPEAKER_01: And then prudent financial management again, that's one of
SPEAKER_01: Kind of an indicator of prudent financial management
Unknown: One indicator would be how well are we meeting those financial ratios and you could see throughout this presentation that we are going to meet
SPEAKER_01: Our financial ratios, and that's very important
SPEAKER_01: That's one very important indicator of our financial management again
SPEAKER_01: I went over some of the things that the credit agencies look at this budget is built around making sure we deliver on those items
Unknown: So that so that at the end of the year those credit rating agencies and when we go out to the market in
SPEAKER_01: Early summer to get new bonds that credit rating agencies are going to continue to rate us a very high
SPEAKER_01: Level so that we can make our debt as cheap as possible right and as a little cost as possible for our customers
SPEAKER_01: That's what prudent financial management does for us at the end of the day and then of course it executes on our strategy and the
SPEAKER_01: Vision set by the board we fund what needs to be funded to ensure that we can deliver on all the SDs
SPEAKER_01: I'm happy to say in the time that I've been at smud. I've never seen
SPEAKER_01: an SD
SPEAKER_01: Presentation where the board said you haven't met the objectives, and I think staff takes all of that very very seriously
SPEAKER_01: when we come to these
SPEAKER_01: committee meetings to present on those SDs we do it with full intention of completely meeting the vision and
SPEAKER_01: the purpose of
SPEAKER_01: Those SDs as established by the board and this budget helps us to do that and serves as that foundation to allowing us to do it
SPEAKER_01: So
SPEAKER_01: That I think is it for me
Unknown: Hour and a half done I
Unknown: Beat two hours I
Unknown: Call that a win you know my column some way
SPEAKER_05: Questions additional questions
SPEAKER_05: A couple of comments
SPEAKER_02: One I just a couple things I wanted to make sure the most of keep an eye on
SPEAKER_02: Is the role of rooftop solar right we've seen some some movement and
SPEAKER_02: supporting solar on
SPEAKER_02: Schools and nonprofits. I definitely want us to
SPEAKER_02: continue to look at
SPEAKER_02: That rooftop local rooftop solar market
SPEAKER_02: With the shifting incentives
SPEAKER_02: I don't know for exactly meeting our target, so it's something
SPEAKER_02: I think we need to take maybe take a look at or think about
SPEAKER_02: And I also know we have
SPEAKER_02: Potentially we have our
SPEAKER_02: analysis due
SPEAKER_02: next year on
SPEAKER_02: The export rate as well, so hopefully we're probably we're on track to meet our goals for that
SPEAKER_02: I also wanted to know make sure you know we mentioned it a little bit in here our investments in our hydro operations
SPEAKER_02: There's definitely somewhere we
SPEAKER_02: You know can't under invest in those areas as well to make sure we keep an eye on those areas
SPEAKER_02: We've had a lot of investments into the
SPEAKER_02: Surrounding environment up there in the campgrounds in the roads a lot most most of that work is done now
SPEAKER_02: Sure the facilities will need some of that money and work as well
SPEAKER_02: And the last thing I was curious if we don't know how our progress on doing some benchmarking over the last years
SPEAKER_02: Last year or so has gone. I've talked about a few times this last year
Unknown: So we have definitely looked at benchmarking and
SPEAKER_01: We've spent some time
SPEAKER_01: Evaluating various processes within the organization
SPEAKER_01: Probably say that a lot of the opportunities are coupled with some of the investments that we're making in our IT
SPEAKER_01: platforms and potentially
SPEAKER_01: You know opportunities with AI
SPEAKER_01: so as those tools get developed and as we pursue the various use cases that we might see within
SPEAKER_01: within AI
SPEAKER_01: We would anticipate starting to take advantage of some of the
SPEAKER_01: You know efficiency and operational savings that we might might be able to achieve that
Unknown: Okay
Unknown: Please
Unknown: Well, I want to say that
SPEAKER_00: It's
SPEAKER_00: Really good to have I think this new way of presenting the budget
SPEAKER_00: It's helpful to see the different categories where we're spending money
SPEAKER_00: I do wish there
SPEAKER_00: You know was a bigger role for the board to comment on some things that we'd like to see
SPEAKER_00: and I know we have
SPEAKER_00: but
Unknown: It also would be nice to see a little bit more of
SPEAKER_00: Where some of our investment is going like I'd you know
SPEAKER_00: I was just me probably but I like to dig deeper down into the community involvement and
SPEAKER_00: The infrastructure investment. Those are two areas that are real
SPEAKER_00: Important to me. So anyway, I I think it's a good budget. I think it's solid and
SPEAKER_00: You and your team have done a good job
Unknown: And you like my time right and you like my tie right
Unknown: Well, I do like the time but I gotta tell you an hour and a half
SPEAKER_00: I don't care what Dave tomorrow says
Unknown: Okay
Unknown: Other questions comments at this time, I believe we have someone from the audience with a raised hand
Unknown: That is correct we have someone named John who has his hand raised if you can have him muted so he can provide his comment
Unknown: Hello, this is John Weber. Can you hear me? Yes, I
Unknown: Would just like to say I I can't see his tie, but the presentation was outstanding
SPEAKER_04: And
SPEAKER_04: It was good to hear about the electric F-150s, I can't wait to see him on the road
SPEAKER_04: hopefully they'll show up and I was really excited to learn about the managed charging for EVs being
SPEAKER_04: Expanded next year. I think it was fivefold. I think that'll be really important
SPEAKER_04: Another thing I found out there's a company called SIG energy. They're currently installing
SPEAKER_04: Bi-directional EV chargers and their North American headquarters is located in Gold River
SPEAKER_04: So I think we should take advantage of them. Maybe have them do a presentation to the board at some point
SPEAKER_04: Since they're a local company and we'd like to see them succeed and help our economy and thank you very much. Have a good evening
Unknown: Okay, thank you very much
SPEAKER_05: I believe we have additional another comment from Ricardo Martinez if we could unmute Ricardo so he can provide comment
Unknown: Can you hear me
Unknown: Yes, good evening
SPEAKER_03: Congratulations on what a great presentation
SPEAKER_03: I I too don't know what your title looks but I'm a I'm a tie buff and my wife's told me to stop buying ties
SPEAKER_03: So whatever tie you have I congratulate you
Unknown: I
SPEAKER_03: Have a question regarding
SPEAKER_03: this for Hannah
SPEAKER_03: Enhancements I see that it's the 70 million dollars and 24 million dollars are being
Unknown: Put aside for the s4 Hannah is is is that
SPEAKER_03: something that
Unknown: you're gonna do internally or is this a
Unknown: System integrator that's going to come in and you're gonna split
SPEAKER_03: the 24 million between a system integrator and
SPEAKER_03: Internal staff because I also paid attention that you're you're hiring limited term positions, but specifically for this could you elaborate on it?
Unknown: Go ahead. Yes, we're hiring a system integrator. I believe the RFP is already out on the street
SPEAKER_01: And it will also be supported by by smud staff as internal experts on the processes that we're going to be
SPEAKER_01: upgrading and changing as a result of the
SPEAKER_01: implementation of the new software
SPEAKER_01: And it's going to take a significant lift from both SAP and their experts as well as our IT folks
Unknown: Great. Well continue doing a great job and keep my rate flow. Thank you very much. Thank you for your call. Mr. Martinez
SPEAKER_05: Do we have one more?
Unknown: It's all I see. Okay, that's it
Unknown: Okay, well, I'm sorry we can't continue this a little longer but we've run out of questions, okay
Unknown: Item number two
SPEAKER_07: Pardon
Unknown: Item number two is to discuss approving the 2026 proposed joint power authority budgets a the
SPEAKER_05: 2026 proposed Northern California energy authority
SPEAKER_05: budget and item B
SPEAKER_05: 2026 proposed Northern California gas authority number one budget and
SPEAKER_05: Mr. Scott Martin continues to be our presenter
Unknown: Gosh, I'm back. Huh?
SPEAKER_01: You get more get more
SPEAKER_01: You thought you were done
SPEAKER_01: All right, I'm expecting the total to be four hours
SPEAKER_03: Hey
SPEAKER_03: Dave
SPEAKER_03: Dave I've got you don't know how many slides I have in this have 45 slides left to go and that's one years I
SPEAKER_01: suspect you were
SPEAKER_01: So just very quickly
SPEAKER_01: We need to approve the NCGA and NCAA budgets as well
SPEAKER_01: NCGA is the Northern California gas authority number one, which was created in 2007. It's a J. It's a joint powers authority
Unknown: Where we
SPEAKER_01: Provide prepaid gas or we paid for for gas on a prepaid basis to a counterparty who then gives us a big discount
SPEAKER_01: On gas that gets delivered to us over time. Okay, that's the that's the concept of it
SPEAKER_01: Same thing with the Northern California energy authority. It's the same thing but with a different counterparty. It was developed in 2018
SPEAKER_01: And the board just needs to prove that the debt service
SPEAKER_01: Payments of 34 million and 32 million again when we do these deals we issue debt through these JP a's
SPEAKER_01: that debt
Unknown: That we the money we generate from that debt
SPEAKER_01: Goes to the counterparty and then they deliver a gas to us at a discount over a specified period of time
SPEAKER_01: Okay, so that that's the way the transaction works
SPEAKER_01: So we need to approve the debt payments that we make to support the transaction
Unknown: as part of these two
SPEAKER_01: JP a's but Scott we're on is it in the budget book where that debt
Unknown: How much that debt is like what bond issuance that debt falls under?
SPEAKER_02: It's not sort of sort of maybe some question. No. Yeah that that's actually on the balance sheet on our balance sheet
SPEAKER_01: But it doesn't show up
SPEAKER_01: in terms of the debt payments that that smud is making because this is a separate JP a
SPEAKER_01: right
Unknown: But ultimately it's gonna so the total debt flows out of smud. Yes, so it shows up on our balance sheet. Okay. Yes
Unknown: Okay, do we have additional questions or comments on this
Unknown: Not seeing any public testimony in there is none, okay great
Unknown: Well, I think it's been discussed whoa
Unknown: Okay
SPEAKER_05: Next item on the agenda is the public comment for items not on the agenda
SPEAKER_05: I don't believe we have any speakers cards for this to me. Are there your belief is accurate
Unknown: Okay, great
Unknown: So we have not received any requests
SPEAKER_05: And as a reminder written comments received on items not on the agenda will be included in the record if received within two hours
SPEAKER_05: Of the end of the meeting and the last item on the agenda is to provide a summary of committee direction
Unknown: The direction tonight, okay
SPEAKER_05: Then with that I believe there's no further information come for the board tonight we're adjourned
Unknown: You