WEBVTT 00:00:00.000 --> 00:00:26.179 Unknown: The 00:02:56.180 --> 00:03:15.939 Unknown: Thank you. 00:03:26.180 --> 00:03:27.180 Unknown: Thank you. 00:03:56.180 --> 00:03:57.180 Unknown: Thank you. 00:04:26.180 --> 00:04:39.139 Unknown: All right. 00:04:39.139 --> 00:04:42.660 SPEAKER_03: Good evening and welcome to the Finance and Audit Committee and Special Board Meeting 00:04:42.660 --> 00:04:46.139 SPEAKER_03: of October 13, 2026. 00:04:46.139 --> 00:04:49.620 SPEAKER_03: This meeting is being recorded and can be accessed on SMUD's website. 00:04:49.620 --> 00:04:53.139 SPEAKER_03: Please remember to unmute your microphone when speaking in order that our virtual attendees 00:04:53.139 --> 00:04:54.340 SPEAKER_03: may hear. 00:04:54.339 --> 00:04:57.899 SPEAKER_03: The microphone will display green indicator light when the mic is on. 00:04:57.899 --> 00:05:00.659 SPEAKER_03: For members of the public attending in person that wish to speak at this meeting, please 00:05:00.659 --> 00:05:04.699 SPEAKER_03: fill out a speakers request form located on the table outside this room and hand it to 00:05:04.699 --> 00:05:06.579 SPEAKER_03: SMUD Security. 00:05:06.579 --> 00:05:09.739 SPEAKER_03: Members of the public attending this meeting virtually that wish to provide verbal comments 00:05:09.739 --> 00:05:14.539 SPEAKER_03: during the committee meeting may do so by using the raised hand feature in Zoom or pressing 00:05:14.539 --> 00:05:18.620 SPEAKER_03: star on your phone at the time public comment is called. 00:05:18.620 --> 00:05:22.019 SPEAKER_03: Technical support staff will enable the audio for you when your name is announced during 00:05:22.019 --> 00:05:24.099 SPEAKER_03: the public comment period. 00:05:24.100 --> 00:05:29.300 SPEAKER_03: You may also submit written comments by emailing them to public comment at SMUD.org. 00:05:29.300 --> 00:05:33.820 SPEAKER_03: Written comments will not be read into the record but will be provided to the board electronically 00:05:33.820 --> 00:05:37.180 SPEAKER_03: and placed in the record of the meeting if received within two hours after the meeting 00:05:37.180 --> 00:05:39.220 SPEAKER_03: ends. 00:05:39.220 --> 00:05:42.020 SPEAKER_03: Would the chief legal officer please conduct the roll call? 00:05:42.020 --> 00:05:43.020 Unknown: Director Kurth? 00:05:43.020 --> 00:05:44.020 SPEAKER_07: Here. 00:05:44.020 --> 00:05:45.020 SPEAKER_07: Dr. Bowie-Thompson? 00:05:45.020 --> 00:05:46.020 SPEAKER_07: Chair Rose? 00:05:46.020 --> 00:05:51.300 Unknown: I am here and we expect Director Bowie-Thompson in a couple of minutes. 00:05:51.300 --> 00:05:56.540 SPEAKER_07: Councilmember Zia present or Director Herber, Sam Board and President Tamayo. 00:05:56.540 --> 00:05:57.819 Unknown: All right. 00:05:57.819 --> 00:05:58.819 SPEAKER_03: Thank you. 00:05:58.819 --> 00:06:04.300 SPEAKER_03: So, if we have item number one on tonight's agenda is to discuss approving contract change 00:06:04.300 --> 00:06:09.500 SPEAKER_03: number five to contract with Androids Hydro Corp for Community Generator One Rehabilitation 00:06:09.500 --> 00:06:15.060 SPEAKER_03: to increase the contract not to exceed amount by 1.6 million. 00:06:15.060 --> 00:06:18.660 SPEAKER_03: We have Josh Langen, our Director of Power Generation and newly appointed Chief Energy 00:06:18.660 --> 00:06:20.060 SPEAKER_03: and Grid Operations Officer. 00:06:20.060 --> 00:06:21.060 SPEAKER_03: Welcome. 00:06:21.819 --> 00:06:22.819 SPEAKER_10: Thank you. 00:06:22.819 --> 00:06:23.819 SPEAKER_10: Thank you. 00:06:23.819 --> 00:06:24.819 SPEAKER_10: And good evening, Chair Rose. 00:06:24.819 --> 00:06:25.819 SPEAKER_10: I appreciate the introduction. 00:06:25.819 --> 00:06:30.139 SPEAKER_10: Ultimately, I'm here to ask for change order number five to increase this contract. 00:06:30.139 --> 00:06:34.660 SPEAKER_10: Before I do that formally, I'll walk through and provide some context on what this project 00:06:34.660 --> 00:06:37.620 SPEAKER_10: is and some of the drivers for the cost increase. 00:06:37.620 --> 00:06:42.180 SPEAKER_10: So, as you noted, this is a generator rewind at our Camino Powerhouse. 00:06:42.180 --> 00:06:47.100 SPEAKER_10: I think what's interesting about this slide, you could kind of see the two pictures there. 00:06:47.100 --> 00:06:49.620 SPEAKER_10: This site was commissioned in the late 60s. 00:06:49.939 --> 00:06:50.939 SPEAKER_10: Right. 00:06:50.939 --> 00:06:54.540 SPEAKER_10: So, as we think about the age of this asset, over the years, there's been a number of, 00:06:54.540 --> 00:06:59.300 SPEAKER_10: of course, retrofits, upgrades to the asset and equipment just to keep it reliable. 00:06:59.300 --> 00:07:01.620 SPEAKER_10: One of those is on the generators. 00:07:01.620 --> 00:07:06.899 SPEAKER_10: So, twice before in the history of this asset, we've done a full generator rewind. 00:07:06.899 --> 00:07:11.660 SPEAKER_10: I'll get into what that means, but essentially, we're at the point where we're due for a new 00:07:11.660 --> 00:07:12.660 SPEAKER_10: rewind. 00:07:12.660 --> 00:07:15.139 SPEAKER_10: So, it's basically rehabbing, refurbishing the generator. 00:07:15.579 --> 00:07:21.819 SPEAKER_10: So, as we look at some of the components and some of the drivers of this outage in particular 00:07:21.819 --> 00:07:26.180 SPEAKER_10: and what drove some of the change orders, when we first issued the contract, we had 00:07:26.180 --> 00:07:31.139 SPEAKER_10: an opportunity to do an inspection internally and identify some improvement opportunities. 00:07:31.139 --> 00:07:35.259 SPEAKER_10: So, that's the first driver of some of the cost increases, which I'll touch on a little 00:07:35.259 --> 00:07:36.339 SPEAKER_10: bit more. 00:07:36.339 --> 00:07:39.339 SPEAKER_10: But the other component is really the tariffs around, right? 00:07:39.339 --> 00:07:42.579 SPEAKER_10: This project uses quite a bit of copper and steel. 00:07:42.779 --> 00:07:49.259 SPEAKER_10: So, those tariffs were approximately 25% from importing into the U.S. and to this project site. 00:07:49.259 --> 00:07:50.740 SPEAKER_10: So, those are the big drivers. 00:07:50.740 --> 00:07:55.779 SPEAKER_10: But as we think about the business need, right, especially as we think about continuing decarbonization, 00:07:55.779 --> 00:07:58.819 SPEAKER_10: these hydro assets are critical to that mission. 00:07:58.819 --> 00:08:03.379 SPEAKER_10: So, essentially, from a reliability standpoint, this really resets the clock and the health 00:08:03.379 --> 00:08:08.299 SPEAKER_10: of that generator and makes sure it's reliable for the next 30 to 40 years. 00:08:08.300 --> 00:08:13.060 SPEAKER_10: From a financial perspective, one of the improvements I noted, we identified an opportunity 00:08:13.060 --> 00:08:17.780 SPEAKER_10: to actually redesign this generator to actually increase the total output. 00:08:17.780 --> 00:08:23.180 SPEAKER_10: So after we finish this project, we'll actually get the potential of more energy out of this 00:08:23.180 --> 00:08:25.420 SPEAKER_10: generator than we've had in the past. 00:08:25.420 --> 00:08:29.500 SPEAKER_10: So that's another big benefit from the financial stewardship perspective. 00:08:29.500 --> 00:08:33.259 SPEAKER_10: It could add additional RA if we need additional energy. 00:08:33.259 --> 00:08:35.899 SPEAKER_10: This is a potential outcome of this project as well. 00:08:36.139 --> 00:08:40.779 SPEAKER_10: And as I already noted, from an environmental leadership and stewardship, this, of course, 00:08:40.779 --> 00:08:45.939 SPEAKER_10: having this unit reliable allows us to integrate more renewables, balance the system and the 00:08:45.939 --> 00:08:51.299 SPEAKER_10: grid, and continue to create opportunities where we could have more solar and wind in storage. 00:08:52.860 --> 00:08:56.740 SPEAKER_10: So, here's a couple of pictures just to put things into context. 00:08:56.740 --> 00:08:59.019 SPEAKER_10: On the far left, that is Camino 1. 00:08:59.019 --> 00:09:01.059 SPEAKER_10: This is where we're performing the work. 00:09:01.059 --> 00:09:04.299 SPEAKER_10: Actually, this outage just started about a week and a half ago. 00:09:04.620 --> 00:09:07.620 SPEAKER_10: We completed mechanical disassembly. 00:09:07.620 --> 00:09:10.579 SPEAKER_10: The picture on the left shows the generator rotor in there. 00:09:10.579 --> 00:09:15.939 SPEAKER_10: That currently today, that rotor is all the way out, and we're continuing mechanical disassembly. 00:09:15.939 --> 00:09:18.419 SPEAKER_10: We do have the contractor on site, Andritz. 00:09:18.419 --> 00:09:22.819 SPEAKER_10: They're starting the deconstruction before we start the rebuild. 00:09:22.819 --> 00:09:26.059 SPEAKER_10: But on the left-hand picture there, you see the windings in blue. 00:09:26.059 --> 00:09:28.979 SPEAKER_10: Essentially, those are what we're going to replace. 00:09:28.980 --> 00:09:33.300 SPEAKER_10: Also, in the middle picture, you see the rotor halfway out of the generator stator. 00:09:34.300 --> 00:09:37.460 SPEAKER_10: The red box there is a field pole. 00:09:37.460 --> 00:09:42.899 SPEAKER_10: So, part of this work, which wasn't done previously, is actually replacing all those field poles. 00:09:42.899 --> 00:09:47.740 SPEAKER_10: So, at the end of this project, we'll have a brand new generator, not only windings, the stator, 00:09:47.740 --> 00:09:49.700 SPEAKER_10: and the rotor at the field pole. 00:09:49.700 --> 00:09:53.420 SPEAKER_10: So, on the far right, you see a picture of the stator. 00:09:53.419 --> 00:10:00.219 SPEAKER_10: If you see the workers in there, that core iron is actually all redesigned and going to be replaced 00:10:00.219 --> 00:10:01.579 SPEAKER_10: part of this outage. 00:10:01.579 --> 00:10:05.059 SPEAKER_10: We actually increase the number of stator winding bars. 00:10:05.059 --> 00:10:09.579 SPEAKER_10: That actually increases the stability of the unit, which actually will result in a longer life 00:10:09.579 --> 00:10:11.819 SPEAKER_10: going forward than we've previously seen. 00:10:11.819 --> 00:10:16.099 Unknown: And then the upper right picture, that just is an example of the stator bars or the windings 00:10:16.099 --> 00:10:18.819 SPEAKER_10: that we're going to be replacing as part of this project. 00:10:19.820 --> 00:10:27.620 Unknown: So, just to provide a little bit of history, as I noted, this contract actually was awarded in June 2024. 00:10:27.620 --> 00:10:34.740 SPEAKER_10: Since that time, we did do that evaluation or that internal inspection, identified the opportunity to 00:10:34.740 --> 00:10:36.700 SPEAKER_10: actually redesign the unit. 00:10:36.700 --> 00:10:42.820 SPEAKER_10: That drove some of the initial cost increases because we had more actual bars and material. 00:10:43.140 --> 00:10:49.820 SPEAKER_10: And then as you look at here in July of 2026, that's when we identified, right, as tariffs were actually 00:10:49.820 --> 00:10:55.379 SPEAKER_10: pretty volatile and they were moving around, we got some certainty in July as material actually started 00:10:55.379 --> 00:10:56.700 SPEAKER_10: being shipped to site. 00:10:56.700 --> 00:11:02.100 SPEAKER_10: Those materials did come into the U.S., so we did have certainty on what those costs were. 00:11:02.100 --> 00:11:07.740 SPEAKER_10: So, as we look at the project schedule, the change order number five that I'm requesting moved to the 00:11:07.740 --> 00:11:14.620 SPEAKER_10: consent calendar, that's really the large component and large driver of that is the tariff impacts. 00:11:14.620 --> 00:11:21.100 SPEAKER_10: Approximately $850,000 is associated with this cost increase of 1.6. 00:11:21.100 --> 00:11:27.980 SPEAKER_10: The remainder of the amount is really, as you, any time you open up an asset, you know, there is a 00:11:27.980 --> 00:11:30.299 SPEAKER_10: potential for additional discovery work. 00:11:30.299 --> 00:11:35.060 SPEAKER_10: So, really some of the contract increase is to allow us to manage that work. 00:11:35.059 --> 00:11:40.500 SPEAKER_10: Ideally, we won't find anything and it's a full redesign and rebuild, but that provides some 00:11:40.500 --> 00:11:44.979 SPEAKER_10: opportunity should we find anything that needs to be addressed that's unexpected. 00:11:44.979 --> 00:11:50.179 SPEAKER_10: We do have the ability to manage that in real time as the outage is going on right now. 00:11:50.179 --> 00:11:55.099 SPEAKER_10: It would prevent us from having to come back to the board for an emergency increase. 00:11:55.099 --> 00:11:57.859 SPEAKER_10: So, that really concludes my presentation. 00:11:57.859 --> 00:12:00.139 SPEAKER_10: Happy to answer any questions. 00:12:00.139 --> 00:12:06.139 SPEAKER_10: And if there are no questions, I just make the recommendation that this move to the consent calendar for approval. 00:12:06.139 --> 00:12:09.220 SPEAKER_13: Just a couple of background questions. 00:12:09.220 --> 00:12:12.220 SPEAKER_13: How many pounds of copper are in this? 00:12:12.220 --> 00:12:13.419 SPEAKER_13: Oh, you know, that's a good question. 00:12:13.419 --> 00:12:14.939 SPEAKER_10: I have to get back to you on that. 00:12:14.939 --> 00:12:21.220 SPEAKER_10: But the stator bars, and they're all copper, they're approximately six and a half feet tall. 00:12:21.220 --> 00:12:22.939 SPEAKER_10: There's 210 of them. 00:12:22.939 --> 00:12:26.419 SPEAKER_10: So, we could probably do the math and figure that out. 00:12:26.419 --> 00:12:27.419 SPEAKER_10: Quite a bit of copper. 00:12:27.419 --> 00:12:28.259 SPEAKER_10: Yeah, I'd be curious. 00:12:28.259 --> 00:12:34.259 SPEAKER_13: Well, and I have to ask on Director Sanborn's behalf, we're of course recycling all the copper we're taking. 00:12:34.259 --> 00:12:35.259 SPEAKER_13: Absolutely. 00:12:35.259 --> 00:12:40.580 SPEAKER_13: Yeah, part of the project we do coordinate with our internal teams that manage the recycling of that material. 00:12:40.580 --> 00:12:42.580 SPEAKER_10: Okay, thanks very much. 00:12:46.580 --> 00:12:47.580 SPEAKER_06: Thank you. 00:12:47.580 --> 00:12:48.580 SPEAKER_06: This is a great project. 00:12:48.580 --> 00:12:52.379 SPEAKER_06: And, you know, my husband and I have rehabbed a lot of houses. 00:12:52.379 --> 00:12:58.059 SPEAKER_06: I know there's always something in the wall that you don't know when you go into a project. 00:12:58.059 --> 00:12:59.059 SPEAKER_06: So, I get this. 00:12:59.059 --> 00:13:03.859 SPEAKER_06: So, it's $850,000 or so is the hard cost for all the tariffs and the extra expenses. 00:13:03.859 --> 00:13:13.059 SPEAKER_06: And you're asking for double that just to make sure as you're in there, you can, if additional costs come up, you can deal with them. 00:13:13.059 --> 00:13:14.059 SPEAKER_10: That is correct. 00:13:14.059 --> 00:13:19.299 SPEAKER_10: That's one driver, but the $850,000 associated with the tariff, there are other costs. 00:13:19.299 --> 00:13:24.779 SPEAKER_10: As part of the redesign opportunity, we actually did defer the outage one entire year. 00:13:25.179 --> 00:13:32.579 SPEAKER_10: So, as we not only redesigned it, there was extra stator bars and more material redesign of the core iron. 00:13:32.579 --> 00:13:34.579 SPEAKER_10: So, those drove some of those costs as well. 00:13:34.579 --> 00:13:39.579 SPEAKER_10: And then we had to store material for an entire year for this year to execute the outage. 00:13:39.579 --> 00:13:45.179 SPEAKER_10: So, that kind of makes up some of the remainder of those costs that I covered. 00:13:45.179 --> 00:13:47.740 SPEAKER_06: So, you expect all of this to be expended? 00:13:47.740 --> 00:13:49.579 SPEAKER_06: This is not a buffer? 00:13:49.579 --> 00:13:50.579 Unknown: Correct. 00:13:50.780 --> 00:14:00.379 SPEAKER_10: Yeah, there is some potentially for discovery, but the large majority is for the extra material, the redesign, the storage costs, and then the tariffs. 00:14:00.379 --> 00:14:01.379 Unknown: Okay. 00:14:01.379 --> 00:14:02.379 SPEAKER_06: Well, thank you. 00:14:02.379 --> 00:14:06.379 SPEAKER_06: I look forward to getting this thing fixed and ready for the next 40 years. 00:14:06.379 --> 00:14:07.379 SPEAKER_06: Thanks. 00:14:08.379 --> 00:14:22.379 Unknown: I remember visiting this when I was a key account manager for SMUD and was just amazed by the facility. 00:14:22.379 --> 00:14:32.379 SPEAKER_08: I'm just wondering, and I know you probably said this, how often do we have to do this? 00:14:32.379 --> 00:14:37.379 Unknown: Yeah, typical generator life, and it's really the windings inside. 00:14:37.379 --> 00:14:38.379 SPEAKER_10: They all have insulation. 00:14:38.379 --> 00:14:41.379 SPEAKER_10: Typically, on average, you could get 30 years. 00:14:41.379 --> 00:14:47.379 SPEAKER_10: But as I talk about that, we do extensive testing annually to determine the health of those windings. 00:14:47.379 --> 00:14:52.379 SPEAKER_10: One thing I did skip over, we actually did have one of the windings fail in this generator a couple years ago. 00:14:52.379 --> 00:14:55.379 SPEAKER_10: We were able to do a field repair. 00:14:55.379 --> 00:15:00.379 SPEAKER_10: But that failure is really indicative of the remaining life of the asset and the other windings. 00:15:00.379 --> 00:15:06.379 SPEAKER_10: But generally, 30 years, we're thinking with the redesign, 30 to 40 years with this next iteration, right? 00:15:06.379 --> 00:15:09.379 SPEAKER_10: So we'll get us over that century mark for this asset. 00:15:09.379 --> 00:15:10.379 SPEAKER_10: Thank you. 00:15:16.379 --> 00:15:24.379 Unknown: You know, the hydro is the cheapest power that we have, and so the tariffs are, of course, unfortunate. 00:15:24.379 --> 00:15:30.379 SPEAKER_03: We see that cost very directly here, but this is still the best place to go for our power. 00:15:30.379 --> 00:15:32.379 SPEAKER_03: So I'm glad to support this. 00:15:32.379 --> 00:15:35.379 SPEAKER_03: Do we have any other public comment? 00:15:35.379 --> 00:15:36.379 Unknown: No, we do not. 00:15:36.379 --> 00:15:37.379 Unknown: Okay. 00:15:37.379 --> 00:15:38.379 SPEAKER_03: Thank you. 00:15:38.379 --> 00:15:39.379 SPEAKER_10: Thank you. 00:15:40.379 --> 00:15:41.379 Unknown: All right. 00:15:41.379 --> 00:16:08.379 Unknown: Item number two is to discuss authorizing the CEO to negotiate and award a contract to International Business Machines Corporation, IBM, for the SAP S4HANA implementation services for a period of November 1, 2026 through December 31, 2029, for not to exceed the amount of $32.18 million. 00:16:08.379 --> 00:16:09.379 SPEAKER_03: All right. 00:16:09.379 --> 00:16:12.379 SPEAKER_03: We have our Director of Enterprise Systems, Rajiv, and Governance. 00:16:12.379 --> 00:16:13.379 SPEAKER_03: Welcome. 00:16:13.379 --> 00:16:15.379 Unknown: Thank you for the introduction. 00:16:15.379 --> 00:16:23.379 SPEAKER_01: Good evening, Director Rose, Chair of Finance and Audit Committee, members of the SMART Board of Directors, and all attendees. 00:16:23.379 --> 00:16:29.379 SPEAKER_01: My name is Yooraju Palaniaput, and I'm the IT Director of Enterprise Systems, Strategy, and Governance. 00:16:30.379 --> 00:16:40.379 SPEAKER_01: I'm standing in front of you representing close to 100 employees who have worked for the last 12 to 14 months in this extensive SI selection process. 00:16:41.379 --> 00:16:53.379 SPEAKER_01: Along with me, I have Michael Chan, our co-sponsor for SAP S4HANA, and I also have Austin Sivyan from Pre-Kuruman, who has been with us throughout this journey. 00:16:53.379 --> 00:17:03.379 Unknown: I will begin by recapping the background on the systems included in this modernization effort. 00:17:03.379 --> 00:17:20.380 Unknown: You might recall that SMART has relied on SAP systems for many years to support important business functions, such as finance, supply chain, work management, customer support, and utility industry-specific functions across the organization. 00:17:21.380 --> 00:17:26.380 Unknown: Our core enterprise system was originally implemented in 1999. 00:17:26.380 --> 00:17:43.380 SPEAKER_01: We later added SAP Business Warehouse in 2004 to support reporting and analytics, and then SAP Customer Relationship Management in 2012 to support our Customer Contact Center. 00:17:44.380 --> 00:17:55.380 SPEAKER_01: These systems have served SMART well by their now aging, reaching end of mainstream maintenance support, and becoming more difficult to sustain over the years. 00:17:55.380 --> 00:18:10.380 Unknown: This project before you is intended to modernize these core systems in a phased and disciplined way, with implementation planned from early 2027 through 2029. 00:18:10.380 --> 00:18:12.380 Unknown: Let me walk you through this. 00:18:16.380 --> 00:18:23.380 Unknown: This slide summarizes the way this project is needed and the work completed to date. 00:18:23.380 --> 00:18:28.380 Unknown: There are two primary drivers for moving forward now. 00:18:28.380 --> 00:18:34.380 SPEAKER_01: First, the accessing system and the price system are nearing end of mainstream support. 00:18:34.380 --> 00:18:41.380 SPEAKER_01: Second, the current environment limits SMART's ability to take advantage of modern capabilities. 00:18:41.380 --> 00:18:52.380 Unknown: To position SMART for the future, the board previously approved a five-year agreement with SAP for the cloud-based S4HANA platform. 00:18:52.380 --> 00:18:58.380 SPEAKER_01: That approval established the core software foundation for this modernization. 00:18:58.380 --> 00:19:02.380 Unknown: Since then, we have focused on implementation readiness. 00:19:02.380 --> 00:19:24.380 Unknown: This work included a robust discovery phase, legacy system data cleanup, internal planning and alignment, organizational readiness, and preparation for the request proposal, which is RFP, for identifying a system integrator. 00:19:24.380 --> 00:19:33.380 Unknown: We also helped enterprise naming contests for this program, and the winning employee submission was ROTOHANA. 00:19:33.380 --> 00:19:40.380 Unknown: Moving forward from this presentation onwards, you may be hearing a lot about ROTOHANA. 00:19:40.380 --> 00:19:53.380 Unknown: On the last point in this slide, after an extensive and deliberate process, we identified a recommended system integrator to help SMART implement this program. 00:19:53.380 --> 00:20:01.380 SPEAKER_01: I will cover the selection process in the next few slides. 00:20:01.380 --> 00:20:06.380 Unknown: First, I will cover the scope and the implementation timeline. 00:20:06.380 --> 00:20:19.380 Unknown: And in the next slide, I will cover the overall program contracting roadmap, and then I will start covering through the details of the SI selection process. 00:20:19.380 --> 00:20:26.380 Unknown: We are planning this program in two phases to reduce risk and improve manageability. 00:20:26.380 --> 00:20:33.380 Unknown: The phase one includes core enterprise system and customer relationship management system. 00:20:33.380 --> 00:20:40.380 SPEAKER_01: This phase is currently planned for a 15-month project followed by a three-month hypercare period. 00:20:40.380 --> 00:20:45.380 SPEAKER_01: The phase two includes the business warehouse and reporting environment. 00:20:46.380 --> 00:20:51.380 Unknown: That phase is planned for nine months, followed by a hypercare period as well. 00:20:51.380 --> 00:21:04.380 Unknown: This phased approach allows SMART to manage complexity more effectively, reduce implementation risk, and stabilize each phase before moving to the next. 00:21:05.380 --> 00:21:18.380 Unknown: The last time we were here for HESFORHANA, the board has asked for a slide that puts together today's request in the context of a broader program. 00:21:18.380 --> 00:21:25.380 SPEAKER_01: Let me walk you through the four major contract components associated with the HESFORHANA program. 00:21:25.380 --> 00:21:32.380 SPEAKER_01: The first is the SAP software agreement, which was previously approved by the board. 00:21:33.380 --> 00:21:39.380 SPEAKER_01: The second is the system integrator contract, which is the approval we are seeking today. 00:21:40.380 --> 00:21:47.380 Unknown: We also expect to return to the board in the near future with two additional contracts to support the program. 00:21:47.380 --> 00:21:53.380 Unknown: One is for the independent quality assurance and project oversight, in short, PAQA. 00:21:53.380 --> 00:21:59.380 SPEAKER_01: And the second is for a specialized technical advisory support from SAP. 00:22:00.380 --> 00:22:10.380 SPEAKER_01: These additional contracts are intended to strengthen governance, risk management, and implementation quality throughout the program. 00:22:10.380 --> 00:22:19.380 SPEAKER_01: In terms of scope and or cost, these two contracts are of a much smaller magnitude compared to the first two contracts. 00:22:20.380 --> 00:22:36.380 Unknown: Before I go into the five steps integration selection process, I would like to provide some background on the activities that took place prior to developing the RFP. 00:22:37.380 --> 00:22:41.380 Unknown: To guide our selection, we focused on three key areas. 00:22:41.380 --> 00:22:52.380 SPEAKER_01: Outreach to peer utilities, consultation with industry advisors, including SAP, and lessons learned internally during the discovery phase. 00:22:53.380 --> 00:23:03.380 Unknown: We engaged the utility peers such as Nebraska Power, Public Power District, Sempra, Oklahoma Gas and Electric, 00:23:03.380 --> 00:23:08.380 SPEAKER_01: which have already implemented or are currently undergoing S4HANA project. 00:23:08.380 --> 00:23:20.380 SPEAKER_01: We also consulted industry advisors, including Gardner and Infotech, and received guidance from SAP in reviewing the RFP before it was issued. 00:23:21.380 --> 00:23:31.380 Unknown: This outreach helped us understand lessons learned, implementation risk, and the capability most important in selecting the right partner. 00:23:32.380 --> 00:23:44.380 Unknown: One of the key takeaways was the importance of choosing a system integrated with proven experience and technical expertise in implementing S4HANA within the U.S. utility sector. 00:23:45.380 --> 00:23:53.380 Unknown: As a result, we clearly reflected this in the RFP requirement and technical questions. 00:23:53.380 --> 00:24:11.380 Unknown: To ensure that only highly qualified proposers move forward in the selection process, the RFP included a minimum point threshold which required proposers to achieve 80% of the technical points available in order to qualify for commercial evaluation. 00:24:12.380 --> 00:24:21.380 Unknown: Now I would like to walk you through the structured and competitive five-step process we used, which took us a little over a year. 00:24:21.380 --> 00:24:34.380 SPEAKER_01: This process includes first, the development and issuance of the RFP, second, detailed evaluation and scoring of a vendor responses, 00:24:35.380 --> 00:24:43.380 SPEAKER_01: third, two days of on-site demonstration and oral presentation by each selected vendor, 00:24:43.380 --> 00:24:50.380 Unknown: fourth, several months of statement of work development, and finally contract negotiation. 00:24:51.380 --> 00:25:08.380 SPEAKER_01: In the last two steps, beyond multiple commercial discussions, we also concentrated on key areas such as scope normalization, resource allocation, SLAs, penalties, and milestone-based deliverables. 00:25:08.380 --> 00:25:13.380 Unknown: These are all essential criteria for ensuring the progress success of the program. 00:25:14.380 --> 00:25:27.380 Unknown: This was also a broad, cross-functional, evolving, multiple business and IT staff across smart to ensure the recommendation reflects enterprise-wide needs. 00:25:28.380 --> 00:25:45.380 SPEAKER_01: Throughout the SI selection process, as I mentioned earlier, more than 90 employees, including senior leaders, directors, managers, and subject matter experts participated in the SI selection process. 00:25:46.380 --> 00:26:01.380 Unknown: I'm going to skip ahead a little bit and start with what is at the end of the slide. 00:26:01.380 --> 00:26:07.380 Unknown: IBM is the highest rated proposal. Let me walk you through how we get there. 00:26:08.380 --> 00:26:16.380 Unknown: In October 2025, smart issued a request for proposal for S4HANA, implementation services. 00:26:16.380 --> 00:26:23.380 Unknown: Of the eight responses we received, one did not meet the mandatory requirement. 00:26:24.380 --> 00:26:32.380 Unknown: The remaining seven vendors underwent a detailed technical evaluation based on predefined criteria. 00:26:33.380 --> 00:26:51.380 Unknown: This includes product knowledge, industry experience, implementation experience, hyper-care and transition support, organizational change management, accelerator and automation, and integration tools, knowledge, and capability. 00:26:52.380 --> 00:27:08.380 SPEAKER_01: From that evaluation, three vendors were selected to proceed to the demonstration phase based on their potential to achieve the minimum technical threshold that we set up front during the RFP stage itself. 00:27:09.380 --> 00:27:24.380 Unknown: Each of these vendors then participated in extensive two days on-site demonstration and oral presentation, which accounted for 30% of the overall technical scores. 00:27:25.380 --> 00:27:44.380 SPEAKER_01: After considering both proposal scoring and on-site demonstration performance, IBM was rated the highest among the candidates and was the only vendor to meet the minimum technical threshold, achieving 80% of the available technical points. 00:27:45.380 --> 00:27:58.380 SPEAKER_08: I have a quick question, if that's okay, Mr. Chair. Can you tell us a little bit about what you asked them to do in the demo? 00:27:58.380 --> 00:28:06.380 SPEAKER_08: I'm just curious myself at what you're looking for when they come in to do the demos. 00:28:06.380 --> 00:28:07.380 Unknown: Sure. 00:28:08.380 --> 00:28:18.380 Unknown: First, for the two days, we have classified the breakout sections by workstream. How we design the workstream is by business capabilities. 00:28:18.380 --> 00:28:25.380 SPEAKER_01: And each workstreams have their specific business areas they tested. 00:28:25.380 --> 00:28:41.380 SPEAKER_01: And how we tested in the two days is by industry experience. We have a series of questions on their industry experience, what they have done, what type of tools they use to bring the S4HANA migrations. 00:28:41.380 --> 00:28:52.380 SPEAKER_01: It's a compressive process by business needs, by business modules, and also including how the change management practices they use. 00:28:52.380 --> 00:29:04.380 SPEAKER_01: And in addition to that, the project metallurgy they use, for example, we have a brown field migration, which is apple-to-apple migrations. 00:29:04.380 --> 00:29:14.380 SPEAKER_01: And the green field, which is a plain migration, and also we call brown blue field. It's another in between the brown field and green field. 00:29:14.380 --> 00:29:21.380 SPEAKER_01: So we tested them also, what kind of methodology they bring to the table, and what type of experience they have in these areas. 00:29:21.380 --> 00:29:35.380 SPEAKER_01: And in addition to that, we also tied to the utility-specific experience they're bringing to the table in order for us to have the right system integrated to help us out in this process kind of thing. 00:29:35.380 --> 00:29:36.380 SPEAKER_01: Thank you. 00:29:37.380 --> 00:29:49.380 Unknown: So to follow up on that, so of the three, after the two-day demo, it was determined that IBM would be the only one that had met the threshold. 00:29:49.380 --> 00:30:00.380 SPEAKER_05: What was the issue with Deloitte, Bushu, and HCL for them to not make it past the demo, to not be able to score their proposal? 00:30:01.380 --> 00:30:13.380 Unknown: So we had seven technical criteria, and each of these seven technical criteria, we have questions around 8 to 14 in average. 00:30:13.380 --> 00:30:24.380 SPEAKER_01: And each of these criteria that we set with the questions, IBM ranked in order all of the questions better than the second player. 00:30:25.380 --> 00:30:35.380 SPEAKER_01: And the way IBM consistently demonstrated is the ability to meet all the technical conditions that we are doing. 00:30:35.380 --> 00:30:44.380 SPEAKER_01: And in terms of Deloitte, we found there is a lack in the utility-specific experience in comes to HES for HANA. 00:30:45.380 --> 00:31:03.380 SPEAKER_01: So the methodology they're bringing to the table and the experience in the utility space specific to HES for HANA compared to IBM, they had a little bit less experience compared to IBM. 00:31:03.380 --> 00:31:09.380 SPEAKER_01: I'm just going to say, I'll let you continue a bit. 00:31:09.380 --> 00:31:15.380 SPEAKER_05: And I don't typically delve in, but I tried to find that information. 00:31:15.380 --> 00:31:21.380 SPEAKER_05: The trip list was very light, and so I didn't see any of that. 00:31:21.380 --> 00:31:25.380 SPEAKER_05: So I would like to see that before moving forward. 00:31:25.380 --> 00:31:27.380 SPEAKER_05: It was just very sparse. 00:31:27.380 --> 00:31:30.380 SPEAKER_05: And the reason why I asked is, and I'll do full disclosure. 00:31:30.380 --> 00:31:34.380 SPEAKER_05: I used to work IBM Deloitte Accenture. 00:31:34.380 --> 00:31:36.380 SPEAKER_05: There's five of the top players. 00:31:36.380 --> 00:31:38.380 SPEAKER_05: I've worked for three of the five. 00:31:38.380 --> 00:31:54.380 SPEAKER_05: And I guess I need to see more, and I didn't see that because I'm shocked that Deloitte and HCL, I don't know HCL as much, but at least Deloitte and Cognizant is I'm more aware. 00:31:55.380 --> 00:31:57.380 SPEAKER_05: Deloitte just did Eugene. 00:31:57.380 --> 00:31:58.380 SPEAKER_05: They did SoCal Outison. 00:31:58.380 --> 00:32:00.380 SPEAKER_05: They've done other large utilities. 00:32:00.380 --> 00:32:09.380 SPEAKER_05: I'm just very surprised that our requirements were so arduous that they couldn't meet the minimum threshold. 00:32:09.380 --> 00:32:19.380 SPEAKER_05: Seeing if you look at Gartner's Magic Quadrant and what have you, the players are IBM, Deloitte, Accenture did not bid, CapGenimai, and Tata. 00:32:20.380 --> 00:32:34.380 SPEAKER_05: And so I just will need more information after this is done because that's mind blowing to me that one of the five world's known SAP integrators can't meet our requirements. 00:32:34.380 --> 00:32:44.380 SPEAKER_05: That tells me that it may be an issue with our requirements because they seem to be fine with other very larger utilities than ourselves doing. 00:32:45.380 --> 00:32:58.380 SPEAKER_05: And if we have things that are so out of the ordinary from similar utilities, that concerns me because with these upgrades, you don't want to be what we call in consulting the purple squirrel. 00:32:58.380 --> 00:33:11.380 SPEAKER_05: You want to try to get as much as you can from the base and not go to blue and green to in depth because that's a nightmare for upgrades. 00:33:11.380 --> 00:33:15.380 SPEAKER_05: So I'm just saying that now so you can continue. 00:33:15.380 --> 00:33:16.380 SPEAKER_05: Sure. 00:33:16.380 --> 00:33:18.380 Unknown: We have a couple of slides left. 00:33:18.380 --> 00:33:22.380 SPEAKER_03: Let's get through that and then we'll have some more discussion. 00:33:22.380 --> 00:33:24.380 Unknown: Sure. 00:33:24.380 --> 00:33:37.380 Unknown: So I think so for a project of this magnitude and complexity, IBM demonstrated the capabilities, experience, knowledge, standards needed for a successful outcome. 00:33:37.380 --> 00:33:39.380 Unknown: That cost my life. 00:33:42.380 --> 00:33:45.380 Unknown: Let's get into the detail. 00:33:45.380 --> 00:33:52.380 SPEAKER_01: Remember the 80% technical threshold that I mentioned earlier. 00:33:52.380 --> 00:34:00.380 SPEAKER_01: That means a vendor had to score 48 out of 60 points or higher to qualify for commercial evaluation. 00:34:00.380 --> 00:34:06.380 SPEAKER_01: IBM was the only vendor who met the threshold with a score of 48.65. 00:34:07.380 --> 00:34:14.380 SPEAKER_01: That threshold was an important safeguard to ensure that only highly qualified firm would advance. 00:34:14.380 --> 00:34:24.380 SPEAKER_01: While only IBM advanced to commercial evaluation, staff conducted a comparative analysis of all qualified submission and pricing. 00:34:24.380 --> 00:34:36.380 Unknown: At the proposed amount of 29.26 million, when compared to the range of pricing received, IBM's price is within 12% of median. 00:34:36.380 --> 00:34:40.380 Unknown: Median was 28.72 million. 00:34:40.380 --> 00:34:48.380 SPEAKER_01: IBM's pricing is 29.26 million with 1.85 differences. 00:34:49.380 --> 00:35:00.380 SPEAKER_01: Therefore, IBM is recommended not just for its pricing, but also because of its iniquity meets the requirement technical standard for this complex project. 00:35:03.380 --> 00:35:16.380 Unknown: In summary, this contract represents a critical step forward in SMART's effort to modernize our cost systems, ensure long-term operational stability, and deliver value to our customers. 00:35:16.380 --> 00:35:26.380 Unknown: Based on thorough evaluation and strategic planning, we recommend awarding the contract to IBM a proven partner with the strongest capabilities. 00:35:26.380 --> 00:35:34.380 Unknown: Before I end my presentation, I would like to thank Ken and Souchin from IBM who are here today. 00:35:35.380 --> 00:35:48.380 SPEAKER_01: I also want to thank again to the entire 90, almost close to 100 employees who worked tirelessly in the last 12 to 14 months in this extensive RFP process. 00:35:48.380 --> 00:35:51.380 SPEAKER_01: Thank you for your consideration and support. 00:35:51.380 --> 00:35:54.380 SPEAKER_01: I'm happy to answer any other questions you may have. 00:35:54.380 --> 00:35:56.380 SPEAKER_01: That concludes my presentation. 00:35:56.380 --> 00:36:02.380 Unknown: Is there any questions? 00:36:02.380 --> 00:36:03.380 Unknown: Yeah. 00:36:03.380 --> 00:36:04.380 SPEAKER_03: And if that's okay. 00:36:04.380 --> 00:36:20.380 SPEAKER_08: And I don't know if it's okay to share the information or not because I know the process is, you know, kind of not open to everybody. 00:36:21.380 --> 00:36:25.380 SPEAKER_08: But what made IBM's score lower? 00:36:25.380 --> 00:36:28.380 SPEAKER_08: Can we go back to the score sheet? 00:36:28.380 --> 00:36:29.380 Unknown: Yeah. 00:36:29.380 --> 00:36:31.380 SPEAKER_08: On environmental. 00:36:31.380 --> 00:36:35.380 SPEAKER_08: They did 4.85 and the other two were fives. 00:36:35.380 --> 00:36:38.380 SPEAKER_08: What was going on there? 00:36:38.380 --> 00:36:39.380 SPEAKER_08: Sure. 00:36:39.380 --> 00:36:43.380 SPEAKER_01: I would like to invite Austin to answer that question. 00:36:46.380 --> 00:36:47.380 Unknown: Hello. 00:36:47.380 --> 00:36:48.380 SPEAKER_14: My name's Austin Savin. 00:36:48.380 --> 00:36:51.380 SPEAKER_14: I'm a senior procurement specialist on the IT team. 00:36:51.380 --> 00:37:02.380 SPEAKER_14: They lost .15 points in environmental because they failed to distinguish between scope one and scope two emissions in a question that asked about how they reduced those emissions. 00:37:02.380 --> 00:37:12.380 SPEAKER_14: Scope one is related to the greenhouse gas emissions caused by the direct operations of the company. 00:37:12.380 --> 00:37:20.380 SPEAKER_14: Scope two emissions are related to sort of secondary emissions from that company related to like their fleet vehicles and things like that. 00:37:20.380 --> 00:37:30.380 SPEAKER_14: And so they did explain how they reduced greenhouse gas emissions overall, but they didn't specify a difference between scope one and scope two, which is why they lost a little bit of points. 00:37:30.380 --> 00:37:31.380 SPEAKER_14: I see. 00:37:31.380 --> 00:37:32.380 SPEAKER_08: Thank you. 00:37:32.380 --> 00:37:36.380 Unknown: Thank you. 00:37:36.380 --> 00:37:43.380 SPEAKER_01: And I'd like to touch base with what Director Nancy asked. 00:37:43.380 --> 00:37:51.380 SPEAKER_01: One thing we found out during this exploration phase, not one utility followed the same methodology. 00:37:51.380 --> 00:37:56.380 SPEAKER_01: You called out Southern Cal Addison. 00:37:56.380 --> 00:38:11.380 SPEAKER_01: Southern Cal Addison, their migration is from certain platforms are from legacy system to S4, where else for us, we already have the ECC environment SAP. 00:38:11.380 --> 00:38:34.380 SPEAKER_01: And for us to move to S4HANA, we need to utilize the concept called SDT, which is migrating the existing data and the investment that we invested in this platform and save it in the newer platform with the newer data models. 00:38:34.380 --> 00:38:42.380 SPEAKER_01: So that also is a very important piece in the success of the UAT and IAT in the future. 00:38:42.380 --> 00:38:45.380 SPEAKER_01: So that's another factor we considered. 00:38:45.380 --> 00:38:51.380 SPEAKER_01: While we are looking into different utilities, we talked beyond the three different utilities as well. 00:38:51.380 --> 00:38:56.380 SPEAKER_01: And we found every utility has some differences. 00:38:56.380 --> 00:39:02.380 SPEAKER_01: So we stay closer to this utility that almost closer to our environment. 00:39:02.380 --> 00:39:16.380 SPEAKER_01: So NPPD is very close to our environment, which is moved from ECC to S4 and other utilities as well, just to give some perspective there. 00:39:16.380 --> 00:39:18.380 Unknown: I don't understand what you just said, right? 00:39:18.380 --> 00:39:29.380 SPEAKER_03: This SCE did an SDT migration and it's because they're so specialized, they were able to do it versus some other company? 00:39:29.380 --> 00:39:30.380 Unknown: Yes. 00:39:30.380 --> 00:39:31.380 SPEAKER_01: Okay. 00:39:31.380 --> 00:39:33.380 SPEAKER_03: Anything else? 00:39:33.380 --> 00:39:41.380 SPEAKER_06: So looking at the scores, so our minimum score on technical points was 48. 00:39:41.380 --> 00:39:48.380 SPEAKER_06: IBM got 48.65 and number two got 47.55. 00:39:48.380 --> 00:39:54.380 SPEAKER_06: And we're talking about a point difference and barely the winner barely got over that. 00:39:54.380 --> 00:40:07.380 SPEAKER_06: So I mean, I do understand Dr. Bowie-Thompson's question here about, like, how did one just barely get above this line? 00:40:07.380 --> 00:40:08.380 Unknown: It's very close. 00:40:08.380 --> 00:40:16.380 SPEAKER_06: And then the, I don't know, I've never kind of seen anything like this, honestly. 00:40:16.380 --> 00:40:18.380 Unknown: And the seed points are pretty close. 00:40:18.380 --> 00:40:21.380 SPEAKER_06: The environmental is almost exactly the same. 00:40:22.380 --> 00:40:25.380 SPEAKER_06: And the technical is almost exactly the same, really. 00:40:25.380 --> 00:40:28.380 Unknown: So I mean, this is a big contract. 00:40:28.380 --> 00:40:41.380 SPEAKER_06: And I don't know, it just feels a little odd to have them be that close together and have our line be that high that only one could barely eke it out. 00:40:41.380 --> 00:40:48.380 SPEAKER_01: The scores that we're displaying here is a summarize of all the total scores. 00:40:48.380 --> 00:40:53.380 SPEAKER_01: So we have seven technical criterias we set. 00:40:53.380 --> 00:41:01.380 SPEAKER_01: Each of these technical criterias, we have an average of eight to ten questions on average. 00:41:01.380 --> 00:41:09.380 SPEAKER_01: And scored by over 90 employees by work streams and by the modules they're in charge for. 00:41:10.380 --> 00:41:25.380 SPEAKER_01: So even though the point showing is one point different, underlaying is like there's a lot of folks, our employees has scored that for different criteria. 00:41:25.380 --> 00:41:38.380 SPEAKER_01: And what we found out, out of seven criteria, six out of seven in the proposals IBM was leading, compared to the second player. 00:41:38.380 --> 00:41:43.380 SPEAKER_01: And seven out of the seven, compared to the second player, IBM was leading. 00:41:43.380 --> 00:41:52.380 SPEAKER_01: So that's how this positioning of the points come up, actually, and where IBM stand out compared to the others. 00:41:52.380 --> 00:41:54.380 Unknown: Well, thanks for explaining. 00:41:54.380 --> 00:41:55.380 SPEAKER_06: Somebody has to win. 00:41:55.380 --> 00:41:58.380 SPEAKER_06: But I mean, that's pretty darn close spread there. 00:41:58.380 --> 00:42:01.380 Unknown: Let me, I'll say this, right? 00:42:01.380 --> 00:42:05.380 SPEAKER_03: I saw this for the first time last week and pre-rooped it. 00:42:05.380 --> 00:42:15.380 SPEAKER_03: My comments to staff echoed what both of everybody has said so far, which is why we got a supplemental memo briefing for this meeting. 00:42:15.380 --> 00:42:18.380 SPEAKER_03: But I will say what you said. 00:42:18.380 --> 00:42:25.380 SPEAKER_03: What questions are we asking that the top companies in the world are barely breaking 80 percent? 00:42:25.380 --> 00:42:26.380 SPEAKER_03: The one isn't. 00:42:26.380 --> 00:42:30.380 SPEAKER_03: They're barely breaking 80 percent of the technical points, right? 00:42:30.380 --> 00:42:36.380 SPEAKER_03: I've certainly ridden and scored solicitations in my career, right? 00:42:36.380 --> 00:42:40.380 SPEAKER_03: And you say, well, what are we asking for that they all forgot to include, right? 00:42:40.380 --> 00:42:45.380 SPEAKER_03: This is clearly something that they do on an everyday basis in their business. 00:42:45.380 --> 00:42:51.380 SPEAKER_03: I'm deeply concerned about not having the cost competition, 00:42:51.380 --> 00:42:57.380 SPEAKER_03: because I frankly don't know if we're getting a good deal or not, or if we're getting totally ripped off, right? 00:42:57.380 --> 00:43:01.380 SPEAKER_03: And that's, I don't think we are, but it's certainly a possibility. 00:43:01.380 --> 00:43:11.380 SPEAKER_03: And then I think for me, the larger issue is we've been seeing too many contracts with these sort of questionable points here, little things here and there. 00:43:11.380 --> 00:43:15.380 SPEAKER_03: I'd have to go back and look at our documents for the last year, 00:43:15.380 --> 00:43:19.380 SPEAKER_03: but I feel like we're seeing too many of these where we're not just saying, yeah, that's fine. 00:43:19.380 --> 00:43:21.380 SPEAKER_03: Where we're saying, hey, this looks a little odd. 00:43:21.380 --> 00:43:26.380 SPEAKER_03: And then things shouldn't be coming to the board if the scoring is going to look a little odd to us, 00:43:26.380 --> 00:43:30.380 SPEAKER_03: or we're going to bring up these comments, and that's at a higher level. 00:43:30.380 --> 00:43:34.380 SPEAKER_03: I actually really understand your concerns. I really do. 00:43:34.380 --> 00:43:44.380 SPEAKER_14: I think that one of the important things to remember here is this threshold and these questions and requirements were all written prior to the release of the RFP. 00:43:44.380 --> 00:43:51.380 SPEAKER_14: So for us to sort of try to manipulate the points awarded actually would have probably been the wrong thing to do. 00:43:51.380 --> 00:44:02.380 SPEAKER_14: And I understand that the really close scores here, CMOD, especially when they're centered around that threshold number of 48. 00:44:02.380 --> 00:44:06.380 Unknown: I'd like to point out a couple of facts that are kind of interesting here. 00:44:06.380 --> 00:44:13.380 Unknown: So in our initial written evaluations, it's common for us to get a really wonderful written evaluation. 00:44:13.380 --> 00:44:16.380 SPEAKER_14: They get a lot of time to work with their teams. 00:44:16.380 --> 00:44:21.380 SPEAKER_14: They get the best minds put together, and they deliver these really well-written proposals. 00:44:21.380 --> 00:44:27.380 Unknown: I sort of felt a sense of relief from the team when they had the chance to meet with all these vendors, 00:44:27.380 --> 00:44:36.380 SPEAKER_14: because during Deloitte's demo, to be frank with you, the team walked away from that feeling like they were not the right selection, 00:44:36.380 --> 00:44:38.380 SPEAKER_14: and their scoring reflected that. 00:44:38.380 --> 00:44:46.380 SPEAKER_14: And actually, pre-demo, just based on proposals alone, Deloitte scored 81%. 00:44:46.380 --> 00:44:48.380 SPEAKER_14: They were above the threshold. 00:44:48.380 --> 00:44:56.380 SPEAKER_14: But after they did so poorly in their demo, it brought them below that threshold, which we didn't expect, but that's how it panned out. 00:44:56.380 --> 00:45:01.380 SPEAKER_14: And actually, we were trying to be extra inclusive during this process. 00:45:01.380 --> 00:45:11.380 SPEAKER_14: HCL was just under that 80%, but we did the math and realized, hey, if they score 99 or 100 on this demo percentage-wise, 00:45:11.380 --> 00:45:17.380 SPEAKER_14: they will achieve that minimum point threshold and move forward in evaluations. 00:45:17.380 --> 00:45:20.380 SPEAKER_14: So we tried to bring all three of them forward. 00:45:20.380 --> 00:45:26.380 SPEAKER_14: The scores showed the team's feelings towards those demonstrations provided. 00:45:27.380 --> 00:45:34.380 SPEAKER_14: And again, I understand your concerns, but this is just the way that the scoring worked out. 00:45:34.380 --> 00:45:40.380 SPEAKER_14: And we're just trying to be transparent here, and we're showing the honest results. 00:45:42.380 --> 00:45:44.380 Unknown: Yeah, I'll leave it at that. 00:45:44.380 --> 00:45:45.380 SPEAKER_14: Thank you. 00:45:51.380 --> 00:45:54.380 SPEAKER_13: Why did you have the threshold to begin with? 00:45:55.380 --> 00:45:57.380 SPEAKER_14: Sure. Yeah, I can speak to that. 00:45:57.380 --> 00:46:03.380 SPEAKER_14: These thresholds are actually an important tool for us in procurement because there will be situations where, 00:46:03.380 --> 00:46:09.380 SPEAKER_14: let's say a business unit has a decent understanding of the market, maybe some of the top players, 00:46:09.380 --> 00:46:14.380 SPEAKER_14: and the solution that they're going to get as a result, some idea of what that's going to look like. 00:46:14.380 --> 00:46:21.380 SPEAKER_14: In some cases, you'll see what could be called sort of a mom-and-pop shop, a smaller organization, 00:46:21.380 --> 00:46:28.380 SPEAKER_14: just barely meet our minimum requirements, do fairly poorly in the technical evaluation, 00:46:28.380 --> 00:46:33.380 SPEAKER_14: but then they have by far the lowest price, and they're awarded all the price points. 00:46:33.380 --> 00:46:39.380 SPEAKER_14: And so we don't want to let everyone through to pricing evaluations unless they've shown us that they're technically adequate. 00:46:39.380 --> 00:46:45.380 SPEAKER_14: And so that's the reason for the 80 percent minimum point threshold. 00:46:45.380 --> 00:46:52.380 SPEAKER_14: And I actually just remembered what I was going to say a moment ago, which was, you know, to Nancy's point, 00:46:52.380 --> 00:47:00.380 SPEAKER_14: we expect these vendors as the leaders in the world in this space to perform well, actually above 80 and maybe into the 90s. 00:47:00.380 --> 00:47:05.380 SPEAKER_14: We're actually shocked that they didn't score better than they did. 00:47:05.380 --> 00:47:13.380 SPEAKER_14: And I would say just to finish this off, that the requirements themselves weren't that restrictive. 00:47:13.380 --> 00:47:19.380 SPEAKER_14: This is a result of these proposers' responses to our questions and our score of those. 00:47:19.380 --> 00:47:26.380 SPEAKER_14: So it wasn't specific requirements that were, you know, exclusionary necessarily. 00:47:26.380 --> 00:47:36.380 SPEAKER_14: It was just their performance and our score of the performance that led to these numbers. 00:47:36.380 --> 00:47:37.380 SPEAKER_03: Director Fisherman? 00:47:37.380 --> 00:47:41.380 SPEAKER_11: Thank you. 00:47:41.380 --> 00:47:49.380 SPEAKER_11: All of the things that this organization does to keep the lights on, the IT side is probably my least knowledgeable area. 00:47:49.380 --> 00:47:53.380 SPEAKER_11: I won't even get close to using the word expertise. 00:47:53.380 --> 00:47:58.380 SPEAKER_11: And so I'm in the position of, you know, having to rely on staff and the process here. 00:47:58.380 --> 00:48:01.380 SPEAKER_11: And, you know, the explanations we've heard. 00:48:01.380 --> 00:48:04.380 SPEAKER_11: I think my colleagues have raised some great questions. 00:48:04.380 --> 00:48:11.380 SPEAKER_11: And I think the explanations we've heard are, you know, valid and kind of get to the heart of the matter that, you know, 00:48:11.380 --> 00:48:12.380 SPEAKER_11: the process is what the process is. 00:48:12.380 --> 00:48:13.380 SPEAKER_11: The scores are what they are. 00:48:13.380 --> 00:48:17.380 SPEAKER_11: And we go with the top scoring organization. 00:48:17.380 --> 00:48:19.380 SPEAKER_11: And the others didn't quite make the mark. 00:48:19.380 --> 00:48:24.380 SPEAKER_11: And I'm willing to go with that. 00:48:24.380 --> 00:48:30.380 SPEAKER_11: So that's where I am. 00:48:30.380 --> 00:48:34.380 Unknown: For me, it's not even that IBM did it. 00:48:34.380 --> 00:48:37.380 SPEAKER_05: It's just that we only got one to review. 00:48:37.380 --> 00:48:40.380 SPEAKER_05: And I think it's a fallacy of your process. 00:48:40.380 --> 00:48:41.380 SPEAKER_05: And so I'm just going to say that. 00:48:41.380 --> 00:48:49.380 SPEAKER_05: As someone who has done hundreds of these, you know, where we delivered literally four SUVs, this is back in the day, 00:48:49.380 --> 00:48:58.380 SPEAKER_05: we had to do paper, that if our top scorer is barely making it, there is a flawed process here. 00:48:58.380 --> 00:49:02.380 SPEAKER_05: And I know you had, and I read the memo, you had gobs of people. 00:49:02.380 --> 00:49:05.380 SPEAKER_05: It's more than I've seen evaluate, which I think is great. 00:49:05.380 --> 00:49:09.380 SPEAKER_05: My concern is, A, we didn't get pricing. 00:49:09.380 --> 00:49:16.380 SPEAKER_05: And maybe at the end of the day, when it all shook out, IBM probably, you know, I know the pricing. 00:49:16.380 --> 00:49:17.380 SPEAKER_05: This is within range. 00:49:17.380 --> 00:49:19.380 SPEAKER_05: It's nothing extraordinary. 00:49:19.380 --> 00:49:27.380 SPEAKER_05: My concern is that we set this up in a way that the top companies in the world and the one that we're awarding barely meets 00:49:27.380 --> 00:49:30.380 SPEAKER_05: your minimum required. 00:49:30.380 --> 00:49:31.380 Unknown: That's concerning to me. 00:49:31.380 --> 00:49:33.380 SPEAKER_05: And demos are subjective. 00:49:33.380 --> 00:49:43.380 SPEAKER_05: I sat in one here at SMUD where Siemens, which is, you know, top, bond in the demo, they had a bad day. 00:49:43.380 --> 00:49:47.380 Unknown: Luckily, you know, it wasn't the final and we were just observing. 00:49:47.380 --> 00:49:49.380 SPEAKER_05: But those are very subjectional. 00:49:49.380 --> 00:49:57.380 SPEAKER_05: The questions you ask and the team that's flown out could not be the team, you know, whatever the case is. 00:49:57.380 --> 00:49:58.380 SPEAKER_05: It's all very subjectional. 00:49:58.380 --> 00:50:07.380 SPEAKER_05: So when you get to the demo phase, what I'm concerned is the structure of it, that that's how you did this technical to get pricing. 00:50:07.380 --> 00:50:13.380 SPEAKER_05: And so just generally, whoever, I mean, I feel like there's a bit of a shuffle with procurement. 00:50:13.380 --> 00:50:16.380 SPEAKER_05: But how you set it up, I see this as flawed. 00:50:16.380 --> 00:50:18.380 SPEAKER_05: That only one makes it to the end. 00:50:18.380 --> 00:50:22.380 SPEAKER_05: This is $35 million or 32. 00:50:22.380 --> 00:50:24.380 SPEAKER_05: And that we only see pricing for one. 00:50:24.380 --> 00:50:34.380 SPEAKER_05: Again, if you had probably priced all three, most likely, IBM, because of their technical score and the other areas, right, seed was pretty high too. 00:50:34.380 --> 00:50:36.380 SPEAKER_05: They probably still would have made it. 00:50:36.380 --> 00:50:45.380 SPEAKER_05: But that's not where I have issues, is that we didn't even get to see, and you didn't get to see what that final scoring was or present that to us. 00:50:45.380 --> 00:50:55.380 SPEAKER_05: And that, to me, tells me that there's an issue with the procurement process and the questions that were delineated and that you would put this technical score the way it is, because it doesn't give me a lot. 00:50:55.380 --> 00:50:58.380 SPEAKER_05: And the thing is, I know IBM is an amazing company. 00:50:58.380 --> 00:51:00.380 SPEAKER_05: I grew up in Sunnyvale. 00:51:00.380 --> 00:51:01.380 SPEAKER_05: I've been around. 00:51:01.380 --> 00:51:04.380 SPEAKER_05: They will do a fantastic job, I am sure. 00:51:04.380 --> 00:51:12.380 Unknown: But to have our vendor squeak by at our minimum threshold tells me that there is something wrong with how we set that up. 00:51:12.380 --> 00:51:26.380 SPEAKER_05: And so I would like to see what the scoring would have been if you scored Deloitte and HCL past their demo to see at least where their pricing would have been. 00:51:26.380 --> 00:51:32.380 SPEAKER_05: I would not feel comfortable any time soon moving this, and I'm one person. 00:51:32.380 --> 00:51:48.380 SPEAKER_05: I just want to see it from my own, because I just would never have created an RFP that would have come out this way, that it was so arduous that the winner is like C minus getting across the line. 00:51:48.380 --> 00:51:53.380 SPEAKER_05: That doesn't give me faith in the process or how it ended up. 00:51:53.380 --> 00:52:03.380 SPEAKER_05: I would have hoped the top company would have been exponentially higher and well above our minimum, because when I think of minimum, I think of C-level work. 00:52:03.380 --> 00:52:09.380 SPEAKER_05: I'm reasonably on board with that, but I'd like to hear what the staff perspective is. 00:52:09.380 --> 00:52:11.380 SPEAKER_03: Is that a reasonable request that can be done? 00:52:11.380 --> 00:52:16.380 Unknown: I can just maybe comment on that a little bit. 00:52:16.380 --> 00:52:24.380 SPEAKER_07: In development of the RFP, we did consult with industry advisors, including InfoTech and Gardener, in developing the RFP. 00:52:24.380 --> 00:52:38.380 SPEAKER_07: SAP also reviewed the RFP, and we were fairly confident in what we put together, what the team put together, in the 12 months that we took to develop this RFP. 00:52:38.380 --> 00:52:47.380 SPEAKER_07: I think you've heard from staff in terms of the amount of people that were involved in the process, 96 evaluators across the organization. 00:52:47.380 --> 00:52:57.380 SPEAKER_07: We had the written piece of it, which Delight did well, and we had the oral presentations where they fell short. 00:52:57.380 --> 00:53:09.380 Unknown: When we developed the RFP and set the 80 percent threshold, I don't think anybody thought that we would only have one entity meet the threshold, 00:53:09.380 --> 00:53:15.380 Unknown: but that's what we put in the RFP, and IBM is the only one that met it. 00:53:15.380 --> 00:53:29.380 SPEAKER_07: We can certainly, I believe, bring this back in November, but my understanding is that because of what was in the RFP and the thresholds, we can't change the scores. 00:53:29.380 --> 00:53:36.380 SPEAKER_07: We'd have to start all over again with the process. 00:53:36.380 --> 00:53:45.380 SPEAKER_07: Again, we're comfortable with the pricing, although we didn't evaluate the pricing across the board, we did receive the initial pricing, 00:53:45.380 --> 00:53:54.380 SPEAKER_07: which reflected that IBM's price was among the medium, and then the team did a great job of negotiating with that pricing down. 00:53:54.380 --> 00:54:03.380 SPEAKER_07: Maybe we could provide a little bit of detail around that, and then as noted earlier, they also received a significant amount, I think the highest amount of seed. 00:54:03.380 --> 00:54:06.380 SPEAKER_07: I don't know that the outcome would have been any different. 00:54:06.380 --> 00:54:11.380 SPEAKER_05: I can't change the process, but for me, I would like to see what this would have been. 00:54:11.380 --> 00:54:26.380 SPEAKER_05: We just FY in the future, 80 percent, I've seen that, but it does not build confidence in me that the vendor that we're choosing barely made the technical score. 00:54:26.380 --> 00:54:28.380 SPEAKER_05: So there's something that went awry. 00:54:28.380 --> 00:54:32.380 SPEAKER_05: So you can guess, Gartner and whatever, but I just would like to see the numbers. 00:54:32.380 --> 00:54:43.380 SPEAKER_05: It is what it is, but just for the future, I mean, it's a problem, and I hope there is a review because our winning vendor should not have barely met our minimums. 00:54:43.380 --> 00:54:47.380 Unknown: I have both Director Kurth and Director Sam Borden. 00:54:48.380 --> 00:55:08.380 Unknown: Yeah, after hearing staff's explanation and knowing where we are and how long it took to get here, and we can't change this process, and the importance of getting this done, I mean, this is not the – as the Chair said, this is not the first time we've had a contract issue in the last few months, 00:55:09.380 --> 00:55:22.380 SPEAKER_06: and I think that's something we could maybe talk to our CEO about, and getting more confidence, or at least the information presented to us in a way we feel like we've got the whole picture in the future, or things are done in a way that we're comfortable with. 00:55:22.380 --> 00:55:35.380 SPEAKER_06: But I would be ready to move this because it sounds like this was a ton of work, and we've got a good outcome, and you're confident that this was a fair process, and we're getting a good deal. 00:55:35.380 --> 00:55:47.380 SPEAKER_06: But this is also an important thing for us to move on and get done for the reliability of our entire program, and I always say the IT system is the brains of the operation, and it is. 00:55:47.380 --> 00:55:50.380 SPEAKER_06: So I would be ready to move it. 00:55:50.380 --> 00:55:59.380 SPEAKER_06: I think we need to have a board discussion about the contracts and how we avoid these sort of situations in the future. Thank you. 00:56:00.380 --> 00:56:14.380 Unknown: Thank you. I have a question. So the two that were excluded from the commercial evaluation, how much work goes into the commercial evaluation? What was saved by not including them? 00:56:15.380 --> 00:56:26.380 SPEAKER_14: It's not so much the effort saved by SMUD staff. It's more related to us not wanting to give, frankly, a chance to someone that's not technically qualified. 00:56:26.380 --> 00:56:36.380 SPEAKER_14: So I actually have the results that Director Bowie-Thompson is looking for here, and it actually demonstrates the need for a minimum point threshold. 00:56:37.380 --> 00:56:50.380 SPEAKER_14: If we select yes and allow HCL and Deloitte to move forward, the ranking goes HCL, IBM, Deloitte. HCL has a significantly lower technical point score. 00:56:50.380 --> 00:57:05.380 SPEAKER_14: They did not meet that minimum of 80% of technical points achieved, and so we would be in that situation where we're awarding to someone because they had by far the lowest price and gained all of the price points while not doing very well technically. 00:57:05.380 --> 00:57:09.380 SPEAKER_14: And so that threshold eliminates them from consideration. 00:57:09.380 --> 00:57:10.380 SPEAKER_14: Okay. 00:57:10.380 --> 00:57:14.380 SPEAKER_14: But I can reassure you that the second place was still IBM. 00:57:14.380 --> 00:57:34.380 SPEAKER_14: Okay. Thank you. And just to the issue at hand, there's a lot of work got us to this point here, and I understand there's – it's, again, awkward or odd to have just one sort of team make it through to the end. 00:57:35.380 --> 00:57:40.380 SPEAKER_13: And so maybe there's some review there that staff needs to do to how we end up in this predicament. 00:57:40.380 --> 00:57:43.380 SPEAKER_13: But there's a lot of work went into getting us here. 00:57:43.380 --> 00:57:46.380 SPEAKER_13: We need this project to keep it scheduled. 00:57:46.380 --> 00:57:49.380 SPEAKER_13: You know, we've got a great team. 00:57:49.380 --> 00:57:50.380 SPEAKER_13: I mean, they did score the best. 00:57:50.380 --> 00:57:57.380 SPEAKER_13: So we might be a little bit worried about the price, but I understand it was leased in the median area. 00:57:58.380 --> 00:58:04.380 SPEAKER_13: And this is not the most costly item we're spending on this transition. 00:58:04.380 --> 00:58:06.380 SPEAKER_13: So thanks. 00:58:07.380 --> 00:58:20.380 Unknown: Since June of this year, till end of September, early October, we've been discussing on SOW very extensively, including commercial evaluations. 00:58:21.380 --> 00:58:28.380 SPEAKER_01: And multiple rounds of commercial evaluations was discussed to map the scope and the SOW. 00:58:28.380 --> 00:58:35.380 SPEAKER_01: So it was a pretty extensive work right after we identified the SI to work on. 00:58:35.380 --> 00:58:48.380 SPEAKER_01: Just to answer the question there from that perspective, a lot of work has gone in to ensure not only we've done the due diligence at the technical scoring level, 00:58:49.380 --> 00:58:56.380 SPEAKER_01: when the contract on SOW being planned and executed, we have to protect the program. 00:58:56.380 --> 00:59:05.380 SPEAKER_01: So we spent a lot of time discussing about SLA penalties and all the commercial related items as well. 00:59:05.380 --> 00:59:14.380 SPEAKER_01: In that discussions, we're able to bring down the original pricing from IBM down by significant dollars as well. 00:59:15.380 --> 00:59:17.380 Unknown: I just want to clarify. 00:59:17.380 --> 00:59:20.380 SPEAKER_05: I didn't mean that I wanted to bump it. 00:59:20.380 --> 00:59:25.380 SPEAKER_05: I said I would not feel comfortable voting for it next week without this information. 00:59:25.380 --> 00:59:26.380 SPEAKER_05: So I want to be clear. 00:59:26.380 --> 00:59:34.380 SPEAKER_05: I also want to be clear that I am concerned about this process because you get even better pricing when you have more people bidding. 00:59:34.380 --> 00:59:38.380 Unknown: And being said, hey, there's three bidders that have made it. 00:59:38.380 --> 00:59:42.380 SPEAKER_05: What's your best and final instead of you're the last one standing. 00:59:43.380 --> 00:59:46.380 SPEAKER_05: Or however you phrased it, maybe you didn't tell IBM that they were the last. 00:59:46.380 --> 00:59:47.380 SPEAKER_05: I hope you didn't. 00:59:47.380 --> 00:59:52.380 SPEAKER_05: But I just, you know, this is yet another contract. 00:59:52.380 --> 00:59:57.380 SPEAKER_05: I get lots of great minds, but you see what happened, right? 00:59:57.380 --> 00:59:58.380 SPEAKER_05: This is not ideal. 00:59:58.380 --> 01:00:04.380 Unknown: It's not ideal to not have several people fighting for a final product. 01:00:04.380 --> 01:00:11.380 SPEAKER_05: And I'm sorry, 45, being 75%, this also tells me that our, however was scored, 01:00:11.380 --> 01:00:17.380 SPEAKER_05: was challenging because HCL also is a very capable company. 01:00:17.380 --> 01:00:21.380 SPEAKER_05: And so I just want to be clear that I just wanted to be on public record. 01:00:21.380 --> 01:00:35.380 SPEAKER_05: I'm not pleased with how this was set up from the get go because the results have shown that there was something flawed in the process that our top bidder barely meets our 80%. 01:00:35.380 --> 01:00:38.380 SPEAKER_05: And so I just want the number so I can see what it would have been. 01:00:39.380 --> 01:00:51.380 SPEAKER_05: I know you verbally said it, but I'd like to see the finances because I've always been on the other side too, given more when I've known there's more people with possibly better pricing. 01:00:55.380 --> 01:00:57.380 Unknown: I have one more comment, right? 01:00:57.380 --> 01:01:01.380 SPEAKER_03: And for me, I call it OPM, other people's money, right? 01:01:01.380 --> 01:01:04.380 SPEAKER_03: And there's a lot of money up here relative to our overall budget. 01:01:04.380 --> 01:01:05.380 SPEAKER_03: It's not, but it's a lot of money, right? 01:01:05.380 --> 01:01:07.380 SPEAKER_03: And it's coming from our rate payers. 01:01:07.380 --> 01:01:11.380 SPEAKER_03: And so I feel a strong fiduciary to ensure we're getting the best value possible. 01:01:11.380 --> 01:01:15.380 SPEAKER_03: And I know, like, on this contract, the price points are 25. 01:01:15.380 --> 01:01:17.380 SPEAKER_03: Most of our contracts, it's no more than 40. 01:01:17.380 --> 01:01:27.380 SPEAKER_03: I think that's potentially one area that we definitely want to take a look at in the long run, not for this one, to make sure we're getting good pricing on our contracts. 01:01:27.380 --> 01:01:31.380 SPEAKER_03: It's something that's concerning me, and we're going to have a budget presentation that we need to get to. 01:01:31.380 --> 01:01:35.380 SPEAKER_03: And you're going to hear me going on about budget benchmarking too, right? 01:01:35.380 --> 01:01:39.380 SPEAKER_03: Like, we need to follow the dollars and cents. 01:01:39.380 --> 01:01:53.380 SPEAKER_03: It sounds like if you email over some of this cost data, it will be because I'm okay at taking this to the board meeting, but I would also like what Director Bowie-Thompson is asking for. 01:01:53.380 --> 01:01:55.380 SPEAKER_03: Is there any other comment? 01:01:55.380 --> 01:01:58.380 SPEAKER_03: Director Tamayo, Director Herver, are you both on board with moving this forward? 01:01:58.380 --> 01:02:00.380 SPEAKER_03: Do you have any other comments? 01:02:00.380 --> 01:02:05.380 Unknown: I am on board with moving it forward. 01:02:05.380 --> 01:02:12.380 SPEAKER_08: I join Director Fishman in not understanding the IT world. 01:02:12.380 --> 01:02:17.380 SPEAKER_08: But I do think it is important that we move forward. 01:02:17.380 --> 01:02:29.380 SPEAKER_08: I do trust that staff has done a good job and picked the provider that they think is best. 01:02:29.380 --> 01:02:42.380 SPEAKER_08: I do think Director Bowie-Thompson's concerns about the process should be looked at, but I'm on board. 01:02:42.380 --> 01:02:43.380 Unknown: Okay. 01:02:43.380 --> 01:02:45.380 SPEAKER_03: It sounds like we'll help you on the consent calendar. 01:02:45.380 --> 01:02:46.380 SPEAKER_03: Thank you. 01:02:46.380 --> 01:02:47.380 SPEAKER_03: It's your email. 01:02:47.380 --> 01:02:48.380 SPEAKER_03: All right. 01:02:48.380 --> 01:02:49.380 SPEAKER_03: Thank you, guys. 01:02:49.380 --> 01:02:50.380 SPEAKER_03: And thank you, everybody. 01:02:50.380 --> 01:02:53.380 SPEAKER_03: And no, as you pointed out, there's like 100 staff involved in this over, like, a year. 01:02:53.380 --> 01:02:55.380 SPEAKER_03: So it's a lot of work. 01:02:55.380 --> 01:02:56.380 SPEAKER_03: That's for sure. 01:02:56.380 --> 01:02:57.380 SPEAKER_03: I appreciate it. 01:02:57.380 --> 01:02:58.380 SPEAKER_03: I've been in these processes before. 01:02:58.380 --> 01:03:02.380 SPEAKER_03: I know how much work it is on the staff's side. 01:03:02.380 --> 01:03:03.380 Unknown: Okay. 01:03:03.380 --> 01:03:05.380 SPEAKER_03: Is there any public comment on that item? 01:03:05.380 --> 01:03:06.380 SPEAKER_03: No, there's not. 01:03:06.380 --> 01:03:07.380 SPEAKER_03: Okay. 01:03:07.380 --> 01:03:08.380 SPEAKER_03: I didn't think so. 01:03:08.380 --> 01:03:09.380 Unknown: So let's jump. 01:03:09.380 --> 01:03:11.380 SPEAKER_03: Item number three has been pulled. 01:03:11.380 --> 01:03:13.380 SPEAKER_03: So let's jump to item number four. 01:03:13.380 --> 01:03:20.380 SPEAKER_03: And this is a budget preview from Michelle Kirby, our Director of Enterprise, Energy, and Planning. 01:03:20.380 --> 01:03:21.380 SPEAKER_03: Welcome. 01:03:21.380 --> 01:03:23.380 Unknown: Thank you, Director Rose. 01:03:23.380 --> 01:03:25.380 SPEAKER_04: And good evening, board members. 01:03:25.380 --> 01:03:27.380 SPEAKER_04: As you mentioned, my name is Michelle Kirby. 01:03:27.380 --> 01:03:30.380 SPEAKER_04: I'm Director of Enterprise, Strategy, and Planning at SMUN. 01:03:30.380 --> 01:03:34.380 SPEAKER_04: I'm here to provide the board with our preview of our 2027 proposed budget. 01:03:34.380 --> 01:03:38.380 SPEAKER_04: This is the first time I'll be here in front of the board, really the opportunity for us 01:03:38.380 --> 01:03:43.380 Unknown: to give you an early preview and get the board's feedback and any questions you may have before 01:03:43.380 --> 01:03:47.380 SPEAKER_04: I come back with a full presentation in November. 01:03:47.380 --> 01:03:51.380 Unknown: Please note that we are still finalizing the budget. 01:03:51.380 --> 01:03:55.380 SPEAKER_04: So I'll go through a lot of numbers, but some of them may change before I come back in November 01:03:55.380 --> 01:03:58.380 SPEAKER_04: for the full presentation. 01:03:58.380 --> 01:03:59.380 Unknown: All right. 01:03:59.380 --> 01:04:00.380 SPEAKER_04: Next slide, please. 01:04:00.380 --> 01:04:01.380 SPEAKER_04: All right. 01:04:01.380 --> 01:04:05.380 SPEAKER_04: The agenda for tonight, I'll start with MUD's 2027 priorities. 01:04:05.380 --> 01:04:10.380 SPEAKER_04: We'll go over our major initiatives and spending and talk about how we maintain our financial 01:04:10.380 --> 01:04:11.380 SPEAKER_04: security. 01:04:11.380 --> 01:04:14.380 Unknown: Then I'll go over our 2027 budget summary. 01:04:14.380 --> 01:04:18.380 SPEAKER_04: We'll go over our O&M, our capital, and our commodity spend. 01:04:18.380 --> 01:04:20.380 SPEAKER_04: And then the next steps in the process. 01:04:20.380 --> 01:04:24.380 SPEAKER_04: And I finished the presentation tonight with our key messages. 01:04:24.380 --> 01:04:26.380 Unknown: Next slide. 01:04:26.380 --> 01:04:28.380 Unknown: All right. 01:04:28.380 --> 01:04:32.380 SPEAKER_04: I want to start by emphasizing that the board's vision and strategic direction are really 01:04:32.380 --> 01:04:35.380 SPEAKER_04: what drives MUD's priorities and our initiatives. 01:04:35.380 --> 01:04:42.380 SPEAKER_04: While we recently welcomed our new CEO and three new executives to the team, our commitment 01:04:42.380 --> 01:04:48.380 SPEAKER_04: to the community and as our stewards of a vital community asset remain the same as we 01:04:49.380 --> 01:04:51.380 SPEAKER_04: deliver a balanced energy transition. 01:04:51.380 --> 01:04:57.380 SPEAKER_04: So each of the priority areas that you see above are representative of all of the strategic 01:04:57.380 --> 01:05:02.380 SPEAKER_04: direction as you see noted in any of those boxes in the four areas. 01:05:02.380 --> 01:05:08.380 Unknown: So as part of our foundation, we invest heavily in our grid infrastructure, providing power 01:05:08.380 --> 01:05:11.380 SPEAKER_04: and service to our customers that they can count on. 01:05:11.380 --> 01:05:16.380 SPEAKER_04: And it is important for us to build a sustainable future with our green or clean energy 01:05:16.380 --> 01:05:17.380 SPEAKER_04: investments. 01:05:17.380 --> 01:05:21.380 SPEAKER_04: And that's whether that be through the energy contracts that we procure or the programs 01:05:21.380 --> 01:05:26.380 SPEAKER_04: that we ask our customers to join in this journey along with us. 01:05:26.380 --> 01:05:32.380 SPEAKER_04: Customer, delivering an excellent customer service is really critical to us, and we want 01:05:32.380 --> 01:05:35.380 SPEAKER_04: to ensure that our customers get the value for what they pay. 01:05:35.380 --> 01:05:39.380 SPEAKER_04: Along with that, it's important for us to invest in our employees, our culture, and 01:05:39.380 --> 01:05:41.380 SPEAKER_04: making MUD the best place to work. 01:05:41.380 --> 01:05:46.380 SPEAKER_04: Because we know that employee experience directly translates into our customer and 01:05:46.380 --> 01:05:48.380 SPEAKER_04: community experience. 01:05:48.380 --> 01:05:53.380 Unknown: As for the economic engine, MUD has an important role to play in our economic development, 01:05:53.380 --> 01:05:58.380 SPEAKER_04: and there are significant benefits not just to MUD but the greater region as a whole. 01:05:58.380 --> 01:06:04.380 SPEAKER_04: Underscoring all of that is supporting our priorities as prudent financial strategy. 01:06:04.380 --> 01:06:09.380 SPEAKER_04: The financial discipline we institute today will preserve our ability for our customers 01:06:09.380 --> 01:06:17.380 SPEAKER_04: to affordably and invest into customer affordability and invest in our reliable and sustainable 01:06:17.380 --> 01:06:19.380 SPEAKER_04: future for tomorrow. 01:06:19.380 --> 01:06:23.380 Unknown: So as a community owned not-for-profit utility, we're committed to keeping our rates low while 01:06:23.380 --> 01:06:28.380 SPEAKER_04: providing the most value for every dollar that we spend. 01:06:28.380 --> 01:06:30.380 Unknown: Next slide, please. 01:06:30.380 --> 01:06:32.380 SPEAKER_04: Thank you. 01:06:32.380 --> 01:06:33.380 SPEAKER_04: All right. 01:06:33.380 --> 01:06:35.380 SPEAKER_04: Reliability is critical to our customers. 01:06:35.380 --> 01:06:39.380 SPEAKER_04: Therefore, we continue to invest in our infrastructure and maintain a reliable grid for today and 01:06:39.380 --> 01:06:41.380 SPEAKER_04: into the future. 01:06:41.380 --> 01:06:43.380 SPEAKER_04: You can see at the top here a large investment. 01:06:43.380 --> 01:06:47.380 SPEAKER_04: We have $185 million for our substation capital. 01:06:47.380 --> 01:06:52.380 SPEAKER_04: We're spending that across our different substations. 01:06:52.380 --> 01:07:01.380 SPEAKER_04: So we have a substation J, $68 million, and that's to support our expanding downtown network. 01:07:01.380 --> 01:07:08.380 Unknown: And we're finishing up our substation upgrade in El Rio or the Alberta substation in the north area. 01:07:08.380 --> 01:07:15.380 SPEAKER_04: And when that comes online in 2027, that will help us interconnect our Country Acres renewable project in 01:07:15.380 --> 01:07:17.380 SPEAKER_04: the north area. 01:07:17.380 --> 01:07:23.380 SPEAKER_04: The last one on there is $20.5 million for the UC Davis Medical Center primary and backup service. 01:07:23.380 --> 01:07:29.380 SPEAKER_04: We're supporting UC Davis as they move from their co-gen plant as part of their zero carbon plan. 01:07:29.380 --> 01:07:36.380 SPEAKER_04: The great thing about this is this project is fully reimbursable. 01:07:36.380 --> 01:07:40.380 SPEAKER_04: And so we'll get upfront payments from UC Davis. 01:07:40.380 --> 01:07:46.380 SPEAKER_04: So we're not having our ratepayers shoulder the burden of providing this service. 01:07:46.380 --> 01:07:53.380 Unknown: As we go down the list, we have $64 million for our Folsom Administrative Office Building Project. 01:07:53.380 --> 01:08:01.380 SPEAKER_04: And this is really to continue this project and ensure that we're providing a new reliable operations building. 01:08:01.380 --> 01:08:08.380 Unknown: $50 million for our vegetation management, making sure that we're removing any hazardous overgrowth around our 01:08:08.380 --> 01:08:14.380 SPEAKER_04: infrastructure, providing public safety, and reducing our wildfire risk. 01:08:14.380 --> 01:08:17.380 SPEAKER_04: This one I like to highlight is the OPEX. 01:08:17.380 --> 01:08:26.380 SPEAKER_04: And the other thing in here is our staff was able to negotiate lower cost contracts for our vegetation management for the 01:08:26.380 --> 01:08:29.380 SPEAKER_04: same amount of work that we're doing. 01:08:29.380 --> 01:08:32.380 SPEAKER_04: We have $36 million for pole and cable replacements. 01:08:32.380 --> 01:08:39.380 SPEAKER_04: And again, this is also an opportunity where we're able to leverage the grants that we get from our CERI grant from the CEC. 01:08:39.380 --> 01:08:44.380 SPEAKER_04: About $9 million more of grant funds will offset that $36 million cost. 01:08:44.380 --> 01:08:52.380 SPEAKER_04: As well as our grid infrastructure, as you guys mentioned earlier this evening, our technology infrastructure is very critical. 01:08:52.380 --> 01:09:01.380 SPEAKER_04: So as we were just discussing, we have $34 million for our S4 HANA upgrade to ensure that we're upgrading our core operations. 01:09:01.380 --> 01:09:09.380 Unknown: And the last item on the list under infrastructure is $5 million for our dam safety. 01:09:09.380 --> 01:09:11.380 Unknown: Yes. 01:09:12.380 --> 01:09:16.380 Unknown: I think these things, this is just a general comment on budget stuff. 01:09:16.380 --> 01:09:18.380 SPEAKER_06: We get these millions thrown out. 01:09:18.380 --> 01:09:24.380 SPEAKER_06: And without context of what it was against the last budget, like for vegetation management, is that up? 01:09:24.380 --> 01:09:25.380 SPEAKER_06: Is that down? 01:09:25.380 --> 01:09:26.380 SPEAKER_06: If so, how much? 01:09:26.380 --> 01:09:30.380 SPEAKER_06: That would be helpful to just give context about. 01:09:30.380 --> 01:09:31.380 SPEAKER_04: Absolutely. 01:09:31.380 --> 01:09:37.380 SPEAKER_04: So when I come back in November, a lot of the slides you'll see that comparison, especially at the high level of what was our O&M 01:09:37.380 --> 01:09:41.380 SPEAKER_04: spend last year and comparably to this year, I'm happy to answer those questions. 01:09:41.380 --> 01:09:47.380 SPEAKER_04: For veg management, we're about $1.7 million less than we were last year in terms of those costs. 01:09:47.380 --> 01:09:48.380 SPEAKER_04: Surprising. 01:09:48.380 --> 01:09:49.380 SPEAKER_06: Okay. 01:09:49.380 --> 01:09:54.380 SPEAKER_06: And then like for dam safety, why just dams? 01:09:54.380 --> 01:09:59.380 SPEAKER_06: It feels like people are shooting at substations, transformers. 01:09:59.380 --> 01:10:03.380 Unknown: There's a tax coming, it seems like, for all of our hardware. 01:10:04.380 --> 01:10:05.380 Unknown: Yes. 01:10:05.380 --> 01:10:09.380 SPEAKER_04: So actually, I don't know, this slide looks like one of our not updated slides. 01:10:09.380 --> 01:10:12.380 SPEAKER_04: So we do incorporate it later with all of our hydro improvements. 01:10:12.380 --> 01:10:19.380 SPEAKER_04: But in terms of our facilities costs, we also do cover some of the safety, physical safety. 01:10:19.380 --> 01:10:30.380 SPEAKER_04: I just think that's something that we have to really pay attention to in this next budget, is making sure we've hardened everything for safety with all the threats out there in the world and people targeting utilities. 01:10:30.380 --> 01:10:31.380 SPEAKER_06: Okay. 01:10:31.380 --> 01:10:32.380 SPEAKER_06: Thank you. 01:10:32.380 --> 01:10:36.380 SPEAKER_06: And more if I could, again, our chief energy and grid operations officer. 01:10:36.380 --> 01:10:43.380 SPEAKER_10: So the dam safety and that portfolio of projects really comes out of a FERC obligation, so regulatory obligation. 01:10:43.380 --> 01:10:52.380 SPEAKER_10: Recently, we performed comprehensive inspections of all our dams and they identified some items that were actually going to mitigate and reduce the risk there. 01:10:52.380 --> 01:11:01.380 SPEAKER_10: So those dam safety projects really border some compliance requirements as we work with our regulators and our license requirements there. 01:11:02.380 --> 01:11:03.380 SPEAKER_10: But- 01:11:03.380 --> 01:11:07.380 SPEAKER_06: Federal compliance thing more than it is, are just trying to hurt and protect our system. 01:11:07.380 --> 01:11:08.380 SPEAKER_06: That's correct. 01:11:08.380 --> 01:11:13.380 SPEAKER_10: It's not directly related to like a physical or cyber security risk, but- 01:11:16.380 --> 01:11:18.380 SPEAKER_02: I'm a member of the chief diversity officer. 01:11:18.380 --> 01:11:30.380 SPEAKER_02: When we go through the SC16 presentation, we'll be able to provide an overview of the existing safety mitigation measures we have, both at the cyber and physical security, which will incorporate what Josh discusses well. 01:11:30.380 --> 01:11:31.380 SPEAKER_02: They'll be more comprehensive. 01:11:31.380 --> 01:11:33.380 SPEAKER_02: So we'll go through that as well. 01:11:33.380 --> 01:11:39.380 SPEAKER_02: But I think you also hear Michelle talk about there'll be an overall umbrella discussion in budget as well. 01:11:42.380 --> 01:11:43.380 Unknown: All right. Thank you. 01:11:43.380 --> 01:11:44.380 SPEAKER_04: Let's go to the next slide, please. 01:11:46.380 --> 01:11:47.380 Unknown: All right. 01:11:47.380 --> 01:11:55.380 SPEAKER_04: We're committed to a continuous decarbonization, advancing our clean energy transition while keeping affordability, reliability, and sustainability in balance. 01:11:56.380 --> 01:12:01.380 SPEAKER_04: Our clean energy future entails much more than just removing carbon from our power supply. 01:12:01.380 --> 01:12:05.380 Unknown: Electrification of both buildings and vehicles are an important part of our budget. 01:12:05.380 --> 01:12:10.380 Unknown: And you'll see that reflected here as they're two of our largest carbon emitting sectors in California. 01:12:10.380 --> 01:12:23.380 Unknown: At the top, you see over 270 million for renewable commodity contracts, such as our Senzia Wind, Country Acres that'll be online next year, and Dry Creek for our solar and battery projects. 01:12:24.380 --> 01:12:29.380 SPEAKER_04: We're spending 55 million for customer building electrification and energy efficiency. 01:12:29.380 --> 01:12:35.380 SPEAKER_04: We want to continue to be a leader in the region's transformation to a clean power city for our customers. 01:12:36.380 --> 01:12:47.380 SPEAKER_04: This $55 million includes launching new rebates, developing a contractor tool for customized proposals, and updating our smart home offerings so we can serve our multifamily and affordable housing projects. 01:12:48.380 --> 01:12:55.380 SPEAKER_04: And I think for context, I want to recall Director Sanborn, I think we spent about $47 million last year in this area. 01:12:56.380 --> 01:13:02.380 SPEAKER_04: And all of these, in building electrification, load flex, and electric vehicles, we are spending more this year than we did last year. 01:13:04.380 --> 01:13:08.380 SPEAKER_04: And that aligns with our commitment to the community in terms of decarbonization. 01:13:09.380 --> 01:13:18.380 Unknown: All right. We continue to invest in our local, sorry, in our hydro capital improvements and upgrades. We have $49 million there. 01:13:19.380 --> 01:13:23.380 SPEAKER_04: And that was inclusive of the previous dam safety that actually got moved to the slide. 01:13:24.380 --> 01:13:34.380 SPEAKER_04: So here we're wanting to extend the life of our existing assets. You heard a presentation from Director Langdon earlier. 01:13:35.380 --> 01:13:42.380 SPEAKER_04: And this is really supporting the maintenance of one of our cleanest resources, our hydro assets in Europe. 01:13:43.380 --> 01:13:50.380 SPEAKER_04: We're continuing to upgrade our legacy fire protection systems at all of our powerhouses and our transformer replacement projects. 01:13:52.380 --> 01:14:03.380 Unknown: All right. We're spending $31 million for local and regional renewable projects to meet our California RPS. 01:14:04.380 --> 01:14:09.380 SPEAKER_04: We're going to be doing a couple of our best standards. And this one is, I really want to note, is Country Acres. 01:14:10.380 --> 01:14:17.380 SPEAKER_04: We're bringing on our 344-megawatt solar and 172-megawatt four-hour battery project in Q1 of 2027. 01:14:18.380 --> 01:14:23.380 SPEAKER_04: So this will power the equivalent of 105,000 homes in Sacramento region with renewable energy. 01:14:24.380 --> 01:14:32.380 Unknown: We're continuing to promote electric vehicle adoption with $20 million in our customer electric transportation programs. 01:14:33.380 --> 01:14:42.380 SPEAKER_04: With a whole host of programs, some of the highlights will be launching our customer EV app alongside our public charging network program with pricing discounts for our low-income customers. 01:14:43.380 --> 01:14:55.380 Unknown: We'll reinstate our dealership engagements, increase our charge at home electric circuit incentives up to $750, and we're launching our residential EV managed charging programs. 01:14:56.380 --> 01:15:02.380 SPEAKER_04: And under this bucket, we'll also continue to finish out our two EV grants, the FAST and the REACH 2.0 grant. 01:15:02.380 --> 01:15:17.380 SPEAKER_04: So we will see our DC FAST chargers in Q1 of next year at high traffic corridors in areas like the Sacramento Airport, Amtrak, and Sac State. 01:15:18.380 --> 01:15:27.380 SPEAKER_04: As part of the REACH 2.0 grant, we expect to put in 400 new level two chargers in multifamily housing and strategic neighborhoods throughout the city of Sacramento. 01:15:28.380 --> 01:15:34.380 Unknown: We have $15 million for our customer load flexibility, including our batteries. 01:15:35.380 --> 01:15:42.380 SPEAKER_04: So we're continuing our popular My Energy Optimizer, MEO Partner Plus, our battery incentives that were very popular this year. 01:15:43.380 --> 01:15:48.380 SPEAKER_04: It will be a slightly lower incentive as we go into next year, but are continuing that popular program. 01:15:49.380 --> 01:15:58.380 Unknown: We're also launching our commercial virtual power plant, our commercial VPP pilot, and we're getting offering incentives to expand our battery options. 01:15:59.380 --> 01:16:11.380 SPEAKER_04: And our last item on there is $5 million as we enter the extended day ahead market in, I think, I believe the end of 2027. 01:16:12.380 --> 01:16:18.380 SPEAKER_04: So that will give us the opportunity, possibly purchase lower price commodities during certain hours of the day. 01:16:19.380 --> 01:16:20.380 Unknown: Quick question on this slide. 01:16:22.380 --> 01:16:28.380 SPEAKER_11: $55 million for building electrification, $20 million for EV electric vehicle stuff. 01:16:29.380 --> 01:16:34.380 SPEAKER_11: We get more bang for the buck carbon reduction wise from EVs and buildings, I think. 01:16:35.380 --> 01:16:37.380 Unknown: And I'm wondering why that disparity in spending. 01:16:37.380 --> 01:16:40.380 SPEAKER_11: If you can explain it or somebody else sitting around the dais? 01:16:41.380 --> 01:16:43.380 Unknown: I'd have to get back to you on that. 01:16:44.380 --> 01:16:47.380 SPEAKER_04: I know these are kind of the split between the two that we've historically had. 01:16:48.380 --> 01:16:54.380 SPEAKER_04: And as I mentioned, as you look back, and I can as we'll talk in November, looking at those budgets, we are increasing both of them. 01:16:55.380 --> 01:17:00.380 SPEAKER_04: I'm assuming, I mean, building electrification is still more expensive and harder. 01:17:01.380 --> 01:17:02.380 SPEAKER_11: So it costs more. 01:17:03.380 --> 01:17:05.380 SPEAKER_11: And I'm fine with that if that's the reason why. 01:17:05.380 --> 01:17:06.380 SPEAKER_11: Just a question. 01:17:07.380 --> 01:17:10.380 Unknown: Yeah, my recollection was that was what Dr. Ayala told us. 01:17:11.380 --> 01:17:12.380 SPEAKER_06: Yes, yeah. 01:17:13.380 --> 01:17:18.380 SPEAKER_11: I mean, EVs or vehicle emissions are still, I mean, it's the lion's share of the carbon. 01:17:19.380 --> 01:17:20.380 SPEAKER_11: So just a question. 01:17:21.380 --> 01:17:22.380 SPEAKER_11: Thank you. 01:17:24.380 --> 01:17:25.380 Unknown: Thank you. 01:17:26.380 --> 01:17:27.380 Unknown: All right, next slide. 01:17:30.380 --> 01:17:32.380 Unknown: All right, when we talk about customer employee care. 01:17:32.380 --> 01:17:42.380 SPEAKER_04: As I mentioned, when we ensure that our employees' work experiences are better, safer, and easier, we can see that translate into delivering exceptional care for our customers and our community. 01:17:43.380 --> 01:17:54.380 SPEAKER_04: So we'll talk about what we're investing in this area, about $21 million for our community impact plan that we continue to fund into the future and our community engagement. 01:17:55.380 --> 01:18:16.380 SPEAKER_04: So we're continuing our business and residential electrification walks, standing up new partnerships with healthcare organizations that help educate our customers on the non-energy benefits of electrification, especially with those customers with certain health conditions, and then partner them with SMUD and some of our incentives and rebate programs. 01:18:17.380 --> 01:18:20.380 Unknown: And we'll continue our solar and storage for nonprofits pilot program. 01:18:21.380 --> 01:18:24.380 SPEAKER_04: We're investing $11 million for our employee training and engagement. 01:18:25.380 --> 01:18:46.380 SPEAKER_04: That includes a whole host of opportunities, SMUD's Power Academy to maintain our apprentice pipeline, our career development and learning, and investing a lot in our change management team to help the organization navigate a lot of the process and technology transformation that we'll have in 2027, as well as our employee engagement activities. 01:18:47.380 --> 01:18:58.380 SPEAKER_04: We're investing $8.4 million in our customer assistance programs, so that's continued support of our customer energy delivery and our residential assistance delivery, or kind of our standard program offerings there. 01:18:59.380 --> 01:19:05.380 Unknown: And we're investing $3.4 million in our digital customer experience improvements. So this is really online. 01:19:06.380 --> 01:19:16.380 SPEAKER_04: So we are improving our My Account experience for our customers, and we'll finish our migration of our residential customers from the old platform to the new My Account. 01:19:17.380 --> 01:19:29.380 SPEAKER_04: We're also implementing this phase two improvements that were requested by customers, so that includes increased accessibility to some of our programs and offerings on a mobile device. 01:19:30.380 --> 01:19:35.380 SPEAKER_04: And we'll be implementing our community assistance agency portal. 01:19:38.380 --> 01:19:43.380 Unknown: All right. It's one of investing $1.7 million in our regional workforce development. 01:19:44.380 --> 01:19:52.380 SPEAKER_04: This includes partnering with more than 50 education and workforce organizations and training thousands for careers in our clean energy economy. 01:19:53.380 --> 01:20:01.380 SPEAKER_04: We host regional STEM events, and we work with our Sac State students and really want to ensure that they can explore different career pathways. 01:20:02.380 --> 01:20:13.380 SPEAKER_04: On the regional workforce efforts, excited to talk about serving our underserved communities to look at career opportunities in the energy industry. 01:20:14.380 --> 01:20:28.380 SPEAKER_04: So this includes things like the Utilities Vegetation Management Program, our partnership with the sheet metal local 101 to train more HVAC technicians and promote our heat pump conversions, and a four-year electrician pathway support program. 01:20:29.380 --> 01:20:35.380 SPEAKER_04: Additionally, we're making SEED, our SEED program, easier for our local and small businesses to interact with us. 01:20:36.380 --> 01:20:46.380 SPEAKER_04: We're launching a new video registration tutorials, and we're also translating our new campaign and outreach materials into 10 different languages so our customers can interact with us. 01:20:47.380 --> 01:20:52.380 SPEAKER_04: Finally, we're spending $1.7 million in community and solar partnerships with schools. This is our Solar for Schools program. 01:20:53.380 --> 01:21:06.380 SPEAKER_04: We're working with two school districts, Sacramento City Unified and Twin Rivers Unified School District, and combining solar and energy storage systems at both Hiram Johnson and Grant Union High School. 01:21:07.380 --> 01:21:21.380 Unknown: The final priority area that I'll talk about tonight is our economic engine, where we're powering the Sacramento region for a more prosperous, resilient, and sustainable future. 01:21:22.380 --> 01:21:32.380 SPEAKER_04: Keeping our rates affordable means that customers are able to keep more of their household income and 1.5 billion stays in our community to support our families. 01:21:33.380 --> 01:21:42.380 SPEAKER_04: According to a study conducted by GSEK, SMUD generates an average annual impact of $3.4 billion in our local economy through our operations and contracting activities. 01:21:43.380 --> 01:21:49.380 SPEAKER_04: We believe that impact can be even greater with all of our partnerships with our nonprofits and community outreach efforts. 01:21:51.380 --> 01:21:57.380 Unknown: How do we power the economic engine? We have $29 million for our diversified business under SD19. 01:21:58.380 --> 01:22:10.380 SPEAKER_04: That's where we're providing operational support to our community-choice aggregators, and we're building strategic partnerships to support those that have shared goals around advancing new technologies and strengthening the local economy. 01:22:11.380 --> 01:22:17.380 SPEAKER_04: Like the image you see there of Peak Energy, our partnership with them, and I think many of you attended the ribbon cutting in July. 01:22:18.380 --> 01:22:25.380 Unknown: So, Peak Energy is bringing the region's first commercial gigafactory for sodium ion batteries to the Sacramento region. 01:22:26.380 --> 01:22:33.380 Unknown: We'll invest $7 million for research and development for emerging technologies that benefit our customers and our community. 01:22:34.380 --> 01:22:36.380 SPEAKER_04: We've got a lot of cool pilot projects coming into the next year. 01:22:37.380 --> 01:22:52.380 SPEAKER_04: The Smart Panel Cluster Pilot, we're deploying the SPAN smart panels at heavily loaded transformer locations so that we can leverage load flexibility of the smart panels to alleviate some of our distribution capacity constraints. 01:22:53.380 --> 01:23:11.380 Unknown: We're doing school bus demos and trying to demonstrate our ability to implement our V2G or vehicle to grid, so taking the batteries and putting that back onto our grid, and our managed charging, or V1G demonstrations, where we can manage the best time that they charge the school buses. 01:23:12.380 --> 01:23:20.380 SPEAKER_04: We're working with Peak Energy on the construction of a 750kW 9-megawatt-hour demonstration battery at the hedge facility. 01:23:21.380 --> 01:23:24.380 Unknown: And a whole host of other pilots that we have. 01:23:25.380 --> 01:23:43.380 SPEAKER_04: We'll invest $3.3 million for programs that bring our customers along with us on our journey towards our sustainability goals, such as the My Energy Optimizer Program, which helps our customers save money as they turn their customer thermostats down just a few degrees during peak event days. 01:23:44.380 --> 01:24:05.380 Unknown: Finally, we plan to invest $2.3 million for economic development to strengthen our economic health, investments in our Sustainable Communities Program, through initiatives such as the Regional Economic Development Implementation of the Newmark Study, and our Regional Startup Ecosystem, which fosters business growth, innovation, and talent development. 01:24:06.380 --> 01:24:13.380 SPEAKER_04: Alright, the study you just mentioned, the Newmark Study. 01:24:15.380 --> 01:24:17.380 Unknown: Have you been presented with that? 01:24:17.380 --> 01:24:20.380 SPEAKER_06: Sure. I was able to come in as Chief Diversity Officer. 01:24:21.380 --> 01:24:39.380 SPEAKER_02: So, one of the efforts that SMUD has been working with as part of our regional partnership for economic development is we've worked with GSEK and with Valley Vision on commissioning a study on how we can identify how to better bring economic development dollars to the entire six county region. 01:24:40.380 --> 01:24:50.380 SPEAKER_02: Newmark is the consulting firm that put the study together and laid out some key criteria that we could do to better compete with similar sized markets in the West Coast. 01:24:51.380 --> 01:25:00.380 SPEAKER_02: So, really this is a focus on activating on those priority areas. Workforce development is a key area. There's also regional alignment around core goals. 01:25:01.380 --> 01:25:07.380 SPEAKER_02: The peak example that's here on the screen is the example of the type of businesses we want to align around. 01:25:08.380 --> 01:25:12.380 SPEAKER_02: So, the executing on the study is a holistic economic development approach for the region. 01:25:13.380 --> 01:25:14.380 Unknown: Is that a comment? 01:25:15.380 --> 01:25:26.380 SPEAKER_02: Yes, the study was completed, I want to say second quarter of this year, and was essentially commissioned by GSEK and Valley Vision with support from SMUD. 01:25:26.380 --> 01:25:31.380 SPEAKER_02: And it includes SAC County, City of Sacramento, Folsom, including a number of regional partners. 01:25:32.380 --> 01:25:34.380 SPEAKER_02: So, that money would go to implementing it? 01:25:35.380 --> 01:25:37.380 SPEAKER_02: Yes, our component of implementing that plan. 01:25:38.380 --> 01:25:39.380 SPEAKER_02: Gotcha, thank you. 01:25:40.380 --> 01:25:41.380 Unknown: Thank you. 01:25:42.380 --> 01:25:43.380 Unknown: Alright, next slide. 01:25:44.380 --> 01:25:53.380 Unknown: So, I've covered our major initiatives and our spending areas, but really what enables us to entertain all of this work is our prudent financial strategy. 01:25:53.380 --> 01:25:58.380 SPEAKER_04: Keeping our rates manageable, or cost manageable, ensures the rate stability for our customers. 01:25:59.380 --> 01:26:00.380 SPEAKER_04: So, how do we go about doing that? 01:26:01.380 --> 01:26:12.380 SPEAKER_04: The organization has implemented strategic planning and prioritization tools that help us scenario plan and determine how we best balance our spend in our regulatory compliance versus the board's strategic directives. 01:26:13.380 --> 01:26:19.380 SPEAKER_04: We're constantly balancing our funding, our short-term needs, versus preparing for our long-term goals. 01:26:20.380 --> 01:26:28.380 SPEAKER_04: We have an OPEX team that's dedicated to driving initiatives that reduce costs and finding opportunities to increase efficiency across the board. 01:26:29.380 --> 01:26:41.380 SPEAKER_04: And the outcomes of that is really focusing on keeping our O&M dollars low or stable, and that's our O&M dollars are really what has the biggest impact on our rate increases. 01:26:42.380 --> 01:26:43.380 SPEAKER_04: So, it's a very important area. 01:26:43.380 --> 01:26:54.380 SPEAKER_04: We also have a dedicated grant strategy team, and their focus is on obtaining both state and federal grant funding to offset our existing O&M and capital expenses. 01:26:55.380 --> 01:27:03.380 SPEAKER_04: Finally, we have several rate stabilization funds that help us manage changing business conditions, market volatility. 01:27:04.380 --> 01:27:13.380 SPEAKER_04: If we have a low water year, we can go and leverage our stabilization funds so that we're not having to go back to our customers and ask for rate increases. 01:27:14.380 --> 01:27:19.380 SPEAKER_04: So, as you can see, rate stability and customer affordability are top of mind for us. 01:27:20.380 --> 01:27:29.380 SPEAKER_04: We have taken several measures to ensure strategic investment planning and minimal impact to our customers in times of market volatility and resource uncertainty. 01:27:31.380 --> 01:27:32.380 Unknown: Next slide, please. 01:27:34.380 --> 01:27:39.380 Unknown: All right. So, I will give you an overview of our 2027 budget summary. 01:27:40.380 --> 01:27:46.380 SPEAKER_04: These are an overview of our major initiatives by funding type. It's not an exhaustive list, so if you add them all up, they don't need to call the number at the top. 01:27:47.380 --> 01:27:50.380 SPEAKER_04: Otherwise, it would be a very long list of, you know, one and two million dollar pieces of work. 01:27:51.380 --> 01:27:57.380 SPEAKER_04: So, on the left, you'll see our O&M and public good budget. We have 879 million for 2027. 01:27:58.380 --> 01:28:12.380 SPEAKER_04: Some of the highlights in the O&M and public good are power generation and grid operations and maintenance at 378 million, our customer in building electrification and energy efficiency at 55 million, property casualty and other insurance at 52 million. 01:28:13.380 --> 01:28:25.380 SPEAKER_04: And as I mentioned earlier, our veg management costs at 50 million, and community impact plan and engagement at 21 million in our customer electric transportation programs at 20 million. 01:28:26.380 --> 01:28:34.380 Unknown: On the right-hand side in the green, you'll see our capital investments of 673 million in 2027. 01:28:35.380 --> 01:28:46.380 SPEAKER_04: Some big areas are our substation capital, 185 million on our big substation upgrades that I mentioned earlier, and 67 million on our capacity and new service projects. 01:28:47.380 --> 01:28:58.380 SPEAKER_04: 64 million on our Folsom administrative office building, 49 million on hydro capital improvements, and 36 on pull and cable replacement, and 31 on our renewable projects. 01:28:59.380 --> 01:29:11.380 Unknown: The last bucket in that yellow golden color is 636 million dollars for our commodity, 271 million of that on clean energy commodities. 01:29:11.380 --> 01:29:20.380 SPEAKER_04: So that's wind, solar, biogas, and battery storage, all to help support our clean energy transition goals. 01:29:23.380 --> 01:29:25.380 Unknown: Any questions? 01:29:27.380 --> 01:29:29.380 Unknown: Okay, next slide. 01:29:30.380 --> 01:29:36.380 Unknown: So tonight is the first of several opportunities. We'll get to talk about the budget. 01:29:37.380 --> 01:29:43.380 SPEAKER_04: As I mentioned tonight, just a high-level preview of our priorities and our major spend areas. 01:29:44.380 --> 01:29:56.380 SPEAKER_04: I will be back on November 17th serving in the interim CFO role and present you to the full 2027 proposed budget with all of the details and comparisons to last year. 01:29:56.380 --> 01:29:59.380 SPEAKER_04: And we'll get into some of the pro forma financial statements. 01:30:00.380 --> 01:30:09.380 SPEAKER_04: Before that, we want to make sure that we post all of the materials available to the public November 11th. Those will be available on smud.org. 01:30:10.380 --> 01:30:19.380 SPEAKER_04: And you should have received inquiry from the board office inviting you to talk to staff between the first two weeks of November prior to our next committee meeting. 01:30:20.380 --> 01:30:27.380 SPEAKER_04: If you want to talk to us, ask questions, give us some feedback, and we're happy to delve into those details with you and the finance staff. 01:30:30.380 --> 01:30:40.380 SPEAKER_04: Like I said, I'll come back November 17th, and then I'll be here one more time on December 10th to get the board's vote for approval of the SMUD budget for 2027. 01:30:41.380 --> 01:30:46.380 Unknown: All right. My last slide here. 01:30:47.380 --> 01:30:59.380 SPEAKER_04: As I wrap up tonight, I want to reiterate that our priorities, approach, and continued commitments into 2027 as stewards of a vital community asset, we have strong investment in our infrastructure. 01:31:00.380 --> 01:31:04.380 SPEAKER_04: It is important for us to maintain a reliable grid, not only for today, but into the future. 01:31:05.380 --> 01:31:18.380 SPEAKER_04: SMUD's commitment to clean energy investments along with community involvement are key to delivering our balanced energy transition as we move from a sprint to 2030 to enabling continuous decarbonization. 01:31:19.380 --> 01:31:29.380 SPEAKER_04: It's critical for us to deliver exceptional customer and employee experiences. The care that we show our people will translate directly into the care they show for our community as a whole. 01:31:30.380 --> 01:31:38.380 Unknown: All of this comes together as we fuel our economic engine to power the Sacramento region for a more prosperous, resilient, and sustainable future. 01:31:39.380 --> 01:31:52.380 Unknown: After tonight's presentation, I hope you find that our budget is reflective of our commitment to execute on SMUD's vision while maintaining our prudent financial management to ensure we're able to continue to offer affordable rates to our customers. 01:31:53.380 --> 01:31:58.380 Unknown: Thank you for your time. That concludes my presentation. I'm happy to answer any questions you may have. 01:32:01.380 --> 01:32:09.380 Unknown: All right. Does there any? I know we have one public comment. I have a couple of questions and some commentary. Does anybody have anything? 01:32:10.380 --> 01:32:19.380 SPEAKER_03: A couple of things. One, on the building electrification number, I suspect there's some grant money in there. It seems much higher than we would normally spend. 01:32:20.380 --> 01:32:22.380 SPEAKER_03: I'll sit down with you guys before the budget meeting. 01:32:23.380 --> 01:32:35.380 SPEAKER_03: But that caught my eye. I think the investment in the hydro is a good thing. Certainly, the facilities are getting old. It's important that we continue to invest in them and make that a priority. 01:32:36.380 --> 01:32:45.380 SPEAKER_03: I'll be curious to hear a little bit about what our natural gas spend number is estimated for next year as well, something I look at. 01:32:46.380 --> 01:33:04.380 SPEAKER_03: And then in terms of savings and benchmarking and just general inflation fighting, which is a never-ending battle, you mentioned the OFDEX, but I'll be curious to see some details around what are some of our successes in the OFDEX over the last previous budget year. 01:33:05.380 --> 01:33:20.380 SPEAKER_03: And some of the areas we're focusing on in the future. And then there was no mention of AI. And I'll be curious to have a touch on our plan on how AI can help us reduce our costs and improve our level of service as well. 01:33:21.380 --> 01:33:32.380 SPEAKER_03: And those are the main things that pop into my mind with this. But it's overall, it's good. It's pretty standard. Lights on, keep the rates affordable. 01:33:32.380 --> 01:33:41.380 SPEAKER_03: And the only other thing that I can think of off the top of my head is, and I mentioned this in the past, how do we make sure we're connecting our budget R&R actions to our rate making? 01:33:42.380 --> 01:33:55.380 SPEAKER_03: It is perhaps one of the largest flaws in the state's regulatory IOU system with the PUC. They've definitely been following, if you follow that body of politics, they're definitely following a lot more closely than they used to. 01:33:55.380 --> 01:34:06.380 SPEAKER_03: But it's still, I think, a significant weakness. And I think it's something that we certainly have far less of, but it's certainly something for us to continue to think about as we move forward as well. 01:34:07.380 --> 01:34:08.380 SPEAKER_03: Absolutely. 01:34:09.380 --> 01:34:13.380 Unknown: With that, do you want to make a comment before we hear? 01:34:14.380 --> 01:34:27.380 SPEAKER_06: Yeah, I'm going to, I've asked for a briefing on this because I do have some other questions. But one of the things, I have boards and I, when I present them with the new budget, I will show them, here's the previous budget that we approved, here's where we landed. 01:34:28.380 --> 01:34:35.380 Unknown: And this is why I'm presenting you with this budget. Based on your changes in policy. So that would, again, give context. 01:34:36.380 --> 01:34:37.380 Unknown: Sure. 01:34:37.380 --> 01:34:47.380 SPEAKER_06: How did we do on our last one? And going into this one, what are we going to change and why? So anyway, that's to prepare you for those questions when I have my briefing. Thank you. 01:34:50.380 --> 01:34:59.380 SPEAKER_03: Let's go ahead and take the public comment. I have just one card from David Wright. So please come up. David, you know the rules. 01:35:00.380 --> 01:35:02.380 SPEAKER_09: I know the drill. Hi, everybody. 01:35:03.380 --> 01:35:22.380 Unknown: On a positive note, a fun note, I enjoyed the October 1st absolute festival Smud threw over in the adjacent building. I brought an Afghan friend. He's a refugee and he is studying to be an electrician. 01:35:23.380 --> 01:35:38.380 Unknown: Has worked for the U.S. Army as an electrician. And he hopes one day that he could work for Smud. I hope he can achieve that dream. Anyway, we had a great time. It was quite the festival. 01:35:39.380 --> 01:35:55.380 Unknown: Less positively, it was kind of a slap in the face. We can see the zero carbon cards as they fall, but we were blindsided by CEO Anguis. 01:35:56.380 --> 01:36:12.380 Unknown: We recently stated publicly that Smud is abandoning the 2030 zero carbon plan. This was not well done. And it's questionable to me whether she really has the authority to do that without the board say so. 01:36:13.380 --> 01:36:30.380 SPEAKER_09: So it affects Smud's image and the trust that the public has in Smud's actions and policies. Discussion about this within the community is pretty hot. You probably will hear more about that. 01:36:31.380 --> 01:36:48.380 SPEAKER_09: I very much hope that the board members will have very frank discussions with the CEO about this abrupt and uncollaborative and frankly arrogant unveiling unilateral. 01:36:49.380 --> 01:37:13.380 Unknown: So maybe this staff title shift is why the zero carbon plan seems not very explicit in the budget presentation. Given the long-term benefits and the savings that come from zero carbon energy, I feel like Smud and the board need to invest more boldly in zero carbon spending despite apparent headwinds. 01:37:14.380 --> 01:37:37.380 Unknown: On another topic, PPAs, power purchase agreements. I think there's a significant enterprise risk here. Energy contractors could fail or find richer buyers or upon renewal jack up the cost of the contract because Smud's in a bind in a corner that needs to buy their energy. 01:37:38.380 --> 01:37:56.380 SPEAKER_09: I'd suggest Smud needs more Smud-owned energy, owned and operated. Batteries and including customer installed batteries and geothermal seem like promising no carbon solutions or low carbon if you include embodied carbon. 01:37:57.380 --> 01:38:02.380 SPEAKER_09: Okay, the construction may be contracted out, but Smud owns and operates. Thank you. 01:38:03.380 --> 01:38:26.380 Unknown: All right, thank you for that. I think there was some media attention today. I have not had a chance to go through my email thoroughly personally as that is at work all day, but tomorrow night is the Integrated Resource Plan public kickoff, which we have been saying that is going to help chart our direction on the 2030 plan. 01:38:27.380 --> 01:38:35.380 SPEAKER_03: So I think that's probably what the staff presents tomorrow night and we'll have a very lively and active discussion. 01:38:38.380 --> 01:38:41.380 SPEAKER_07: I just wanted to say we do have one other public comment. 01:38:42.380 --> 01:38:45.380 Unknown: Could I respond briefly to Mr. Wright? 01:38:46.380 --> 01:38:47.380 Unknown: Briefly, yes. 01:38:48.380 --> 01:39:00.380 Unknown: I don't believe we're abandoning the zero carbon plan. I think we're recognizing that 2030 was a very, very aggressive goal and that we're going to keep working towards that goal and it may take us a couple of extra years to get there. 01:39:01.380 --> 01:39:16.380 SPEAKER_11: I think we're also recognizing that the costs have risen to work towards that goal and that if we spend the money that it would require to meet the 2030 goal, we're going to require rate increase. 01:39:17.380 --> 01:39:22.380 SPEAKER_11: We're going to require increases that none of us on the board are willing to impose on our customers and frankly none of our customers are willing to bear. 01:39:23.380 --> 01:39:40.380 SPEAKER_11: So it's imperative that we keep rates low, not just because it's the right thing to do, but because we can actually reduce carbon by far more by incentivizing electrification of vehicles and buildings than we can by shutting off our power plants completely. 01:39:40.380 --> 01:39:52.380 SPEAKER_11: So this is not an abandonment of that goal. It's a recognition that we need to pivot a little bit to keep moving towards that goal and we will continue to work towards it. It just may take us a little longer than we'd hoped. 01:39:54.380 --> 01:39:56.380 Unknown: We have another online comment. 01:39:58.380 --> 01:39:59.380 Unknown: Yes, John. 01:40:03.380 --> 01:40:04.380 Unknown: John, are you there? 01:40:05.380 --> 01:40:07.380 Unknown: Yes, this is John Weber. Can you hear me? 01:40:08.380 --> 01:40:09.380 SPEAKER_00: Yes, go ahead. 01:40:11.380 --> 01:40:20.380 Unknown: Good evening, Chair, board and committee members. Thank you for the presentation. The budget is the most important document an organization creates. 01:40:21.380 --> 01:40:34.380 SPEAKER_00: It is a value statement. It assigns money to what it values. It doesn't assign money to things it doesn't value. It must prioritize different things to fund some things and not to fund other things. 01:40:35.380 --> 01:40:52.380 Unknown: In the 2026 draft budget, there was over $35 million for communications and marketing. Smud is a monopoly. $0 should be spent on marketing. Instead of media messaging saying how great Smud is, those dollars should be spent making Smud great. 01:40:53.380 --> 01:41:04.380 SPEAKER_00: I counted 21 power purchase agreements. PPAs are like renting a house for 20 years. After the 20 years, you have to keep renting the house or find another house to rent. 01:41:05.380 --> 01:41:09.380 SPEAKER_00: Yes, you had a place to live, but you were left with nothing when the agreement is over. 01:41:10.380 --> 01:41:24.380 Unknown: Smud needs to own a bigger share of its generation. That way it can design exactly to meet Smud's customer needs. It also means Smud will have an asset generating electricity long after a PPA would have expired. 01:41:25.380 --> 01:41:33.380 SPEAKER_00: This should have been done in the past when interest rates were close to zero. It was a lost opportunity. Don't lose it in the future. 01:41:34.380 --> 01:41:52.380 Unknown: On page 10 of the presentation named Next Steps, I don't see any public meetings or places for public comment. This is the most important documents, Bud creates, and there are no public input sessions beyond normal committee and board meetings. 01:41:53.380 --> 01:42:07.380 SPEAKER_00: It is also interesting to note that there is opportunity for budget detail inquiries from November 4th through the 13th, but the budget material won't be available until the 11th. 01:42:07.380 --> 01:42:22.380 SPEAKER_00: That only allows two days to review about a 100 page document. Please hold at least one public meeting after the budget is available and at least allow two weeks after the budget is available for comments. 01:42:23.380 --> 01:42:36.380 SPEAKER_00: Please also post all comments from the board and from the public at the end of the draft budget and publish a red lined budget so the board and the public can see what changes were made based on the comments. 01:42:37.380 --> 01:42:38.380 SPEAKER_00: Thank you. 01:42:39.380 --> 01:42:54.380 Unknown: Thank you, John. Just a reminder, many of our PPAs have purchase options built into them at various points in the contract. Generally, whatever is most advantageous to SMUD is how they're designed. 01:42:54.380 --> 01:43:04.380 SPEAKER_03: If you want more information, I'm sure the staff can volunteer them. Dive into the details of how those contracts are structured. 01:43:04.380 --> 01:43:18.380 SPEAKER_03: Just a reminder, this was a pre-budget meeting. The actual budget meeting is in November. And then the actual final approval of the budget is not until December. 01:43:18.380 --> 01:43:30.380 SPEAKER_03: We added this pre-meeting a few years ago to make sure there's plenty of time for the public to look at it and give some early feedback to the staff. 01:43:31.380 --> 01:43:37.380 SPEAKER_03: Just remember, this is going to be wanted for almost two more months. Thank you for your comment, for sure. I appreciate it. 01:43:41.380 --> 01:43:44.380 SPEAKER_03: I don't see any other questions or comments tonight. Michelle, thank you. 01:43:47.380 --> 01:43:50.380 Unknown: Then we have one more item. 01:43:51.380 --> 01:44:11.380 Unknown: I'll tell you we have two, but number six will be quick. Item number five is to provide the board with SMUD's financial results for the eighth month period of August 31, 2026 and a summary of the current power supply costs. 01:44:11.380 --> 01:44:12.380 SPEAKER_03: Good evening, George. 01:44:13.380 --> 01:44:18.380 SPEAKER_12: George Bond, Director of Accounting and Controller. Good evening, Chair Rose and SMUD Board of Directors. 01:44:18.380 --> 01:44:27.380 SPEAKER_12: I'm here to take you through the eight-month period ending August 31st on financials and power supply costs. 01:44:29.380 --> 01:44:36.380 SPEAKER_12: We'll start with the financial highlights. Customer revenues is $1.33 billion. That's very close to plan. 01:44:36.380 --> 01:44:43.380 SPEAKER_12: So in terms of what we budgeted versus where we've actually come in, we're $1 million lower than budget, which is 0.1 percent. 01:44:43.380 --> 01:44:49.380 Unknown: Slightly lower commercial and industrial sales and slightly higher residential sales, largely offset. 01:44:49.380 --> 01:44:57.380 Unknown: Commodity expenses is our biggest budget variance year-to-date. The gross number is $387 million. 01:44:57.380 --> 01:45:01.380 SPEAKER_12: It's $28 million lower than budget, which is about 7 percent. 01:45:01.380 --> 01:45:10.380 SPEAKER_12: That's largely driven by some very favorable market pricing, which is causing us to generate less thermal power, reducing fuel expense. 01:45:10.380 --> 01:45:17.380 Unknown: And then other operating expenses is $704 million. That's about 1 percent lower than plan. 01:45:17.380 --> 01:45:23.380 SPEAKER_12: That's kind of all the other things. Most of the other things not comprised in the commodity, in the revenue section. 01:45:23.380 --> 01:45:30.380 Unknown: We're a little bit under in public good and customer, primarily around some program and project timing. 01:45:30.380 --> 01:45:38.380 SPEAKER_12: And then there's been some efficiencies, as Michelle described, on veg maintenance and some other things that are reducing costs a little bit. 01:45:38.380 --> 01:45:44.380 SPEAKER_12: Our total net income year-to-date is $280 million. The plan was $235 million through August. 01:45:44.380 --> 01:45:48.380 SPEAKER_12: So right now we have a $45 million favorable variance. 01:45:48.380 --> 01:45:58.380 SPEAKER_12: And that was really very important when we just saw the capital spending, which was $687 million proposed like shear. 01:45:58.380 --> 01:46:04.380 SPEAKER_03: And here is the net income. So you can do the quick math on that. 01:46:04.380 --> 01:46:08.380 SPEAKER_03: There's still a lot in the capital budget that potentially gets borrowed. 01:46:08.380 --> 01:46:15.380 SPEAKER_03: So it's be assured SMUD is not making lots of money that this slide may lead somebody to believe. 01:46:15.380 --> 01:46:19.380 SPEAKER_12: Yeah, absolutely. Thank you. 01:46:19.380 --> 01:46:23.380 Unknown: Energy sources. This just describes where we've been getting our energy from. 01:46:23.380 --> 01:46:27.380 SPEAKER_12: We'll start with the blue section on the bottom, which is hydro. 01:46:27.380 --> 01:46:32.380 SPEAKER_12: So the left-hand part of the slide is the month of August. The right side is year-to-date. 01:46:32.380 --> 01:46:43.380 SPEAKER_12: We're well under in hydro, and this is just due to some less than ideal hydro conditions, low precipitation, no snowpack remaining, et cetera. 01:46:44.380 --> 01:46:49.380 SPEAKER_12: The orange is thermal generation. We're also well below in thermal generation. 01:46:49.380 --> 01:46:55.380 SPEAKER_12: And that is largely because of these favorable market prices that I described earlier. 01:46:55.380 --> 01:47:01.380 SPEAKER_12: And in turn, those favorable market prices are driving up our net purchase power, which is in the green. 01:47:01.380 --> 01:47:05.380 SPEAKER_12: So you can see that's well above plan. 01:47:05.380 --> 01:47:09.380 Unknown: We talk about delinquencies every month here. 01:47:10.380 --> 01:47:19.380 SPEAKER_12: We're at $33 million. As of August 31st of customer delinquencies, about three-quarters of this is residential and EPR related. 01:47:19.380 --> 01:47:28.380 Unknown: For context, August of 2025 was $37 million. So we're about 10 percent lower than we were last year this time. 01:47:28.380 --> 01:47:36.380 SPEAKER_12: So I think that's with the economy and everything right now, I think that's a good trend that we're lower in terms of that balance. 01:47:36.380 --> 01:47:43.380 SPEAKER_12: And then just the natural progression as we hit the summer months is what we're seeing with that increase in July and August. 01:47:43.380 --> 01:47:51.380 Unknown: Commodity budget, we're forecast to come in at $583 million versus a budget of $593 million. 01:47:51.380 --> 01:47:58.380 Unknown: Again, largely driven by what I discussed before about low fuel costs and favorable market pricing. 01:47:58.380 --> 01:48:04.380 Unknown: On the bottom right, that's a chart showing our predicted hydro forecast. 01:48:04.380 --> 01:48:10.380 Unknown: Right now we're still coming in a projection of 190 gigawatt hours under plan by the end of the year. 01:48:13.380 --> 01:48:22.380 Unknown: Days cash on hand. So we have a metric here. We like to stay, well, we need to stay at 150 days of cash on hand. 01:48:22.380 --> 01:48:31.380 Unknown: And you can see right now we're at 238 year-to-date, which is actually just coincidentally happens to be our plan. 01:48:31.380 --> 01:48:37.380 Unknown: At the end of the year we're forecasted at 192 days. That's a little bit lower. 01:48:37.380 --> 01:48:41.380 SPEAKER_12: That's due to the timing of some capital spending and some other factors around the end of the year. 01:48:41.380 --> 01:48:50.380 Unknown: But again, well above our 150-day threshold. We've paid off all of our commercial paper, so there won't be any of that outstanding at the end of the year. 01:48:50.380 --> 01:48:57.380 SPEAKER_12: And again, that big bump in green in the middle was a bond issuance that we had in July. 01:48:57.380 --> 01:49:00.380 SPEAKER_12: So with that, I can take any questions. 01:49:00.380 --> 01:49:09.380 Unknown: Any commentary on the WAPA? And the WAPA number, it's held up much better than I would have suspected given the poor hydro year. 01:49:09.380 --> 01:49:17.380 SPEAKER_03: And then you see that reflected in the deposit being made of 2.9 million. So it's interesting. 01:49:17.380 --> 01:49:20.380 Unknown: Are you asking why that would be favorable? 01:49:20.380 --> 01:49:21.380 SPEAKER_12: Is there any commentary? Yeah. 01:49:21.380 --> 01:49:24.380 SPEAKER_12: Yeah. I actually will have to get back to you on that. 01:49:24.380 --> 01:49:33.380 SPEAKER_12: I'm not entirely clear why the WAPA is favorable and the UARP is unfavorable on that, but I can get back to you on that. 01:49:33.380 --> 01:49:35.380 Unknown: John? 01:49:35.380 --> 01:49:41.380 Unknown: I still have to read. Chief integrated planning and market strategy officer generalism. 01:49:41.380 --> 01:49:47.380 SPEAKER_15: So the state system actually had a pretty decent winter, comparatively speaking. 01:49:47.380 --> 01:50:01.380 SPEAKER_15: They left the runoff season with the reservoirs in really good condition, and they were able to add from their initial forecast, they actually added generation into it afterwards. 01:50:01.380 --> 01:50:05.380 SPEAKER_15: So they just had a little better situation. 01:50:05.380 --> 01:50:08.380 SPEAKER_15: Cool. Thank you. 01:50:08.380 --> 01:50:11.380 Unknown: I don't see anybody else? 01:50:12.380 --> 01:50:21.380 Unknown: Just looking at these numbers, I guess this explains why John Olson got a promotion because he saved us $28 million. So nice going. 01:50:21.380 --> 01:50:25.380 SPEAKER_11: Yeah. 01:50:25.380 --> 01:50:30.380 Unknown: All right. Is there any public comment on this item? 01:50:30.380 --> 01:50:32.380 Unknown: No, there's not. 01:50:32.380 --> 01:50:33.380 SPEAKER_07: Okay. Thank you. 01:50:33.380 --> 01:50:35.380 SPEAKER_03: Thank you. 01:50:35.380 --> 01:50:49.380 SPEAKER_03: And then just real quick, our last item, item number six, is just an informational item if there's any questions on the status of recommendations on the third quarter 2026 internal audit services report. 01:50:49.380 --> 01:50:53.380 SPEAKER_03: And I don't have any. I reviewed it. Most of us do offline. 01:50:53.380 --> 01:50:57.380 SPEAKER_03: All right. And with that, is there any comment? 01:50:57.380 --> 01:50:59.380 SPEAKER_03: There was just a hand raised. 01:50:59.380 --> 01:51:01.380 SPEAKER_07: This might just be a. 01:51:01.380 --> 01:51:03.380 SPEAKER_03: Yeah, I'm sorry. 01:51:03.380 --> 01:51:09.380 SPEAKER_07: Looks like there's a hand raised. I believe it's for this public comment period from John. 01:51:09.380 --> 01:51:12.380 SPEAKER_07: I don't think it's on the prior item. 01:51:12.380 --> 01:51:15.380 Unknown: Let's see. 01:51:15.380 --> 01:51:18.380 Unknown: Hello, this is John again. Can you hear me? 01:51:18.380 --> 01:51:20.380 SPEAKER_00: Hey, John. Yep. 01:51:20.380 --> 01:51:23.380 Unknown: Good evening, Chair, board and committee members. 01:51:23.380 --> 01:51:28.380 SPEAKER_00: This will be short. Please place plug-in solar in the parking lot. 01:51:28.380 --> 01:51:37.380 Unknown: I know staff is working on policy for plug-in solar. The state law goes into effect on January 1st, 2027. 01:51:37.380 --> 01:51:51.380 SPEAKER_00: Since smud meters are bi-directional, I would assume any amount of excess generation that goes back into the grid would end up going back into the house at some point during the same calendar day. 01:51:51.380 --> 01:52:02.380 Unknown: I would not think customers will be looking for any kind of dollar credit. I would think they would like to see any excess generation go to offset their daily use. 01:52:02.380 --> 01:52:07.380 Unknown: This policy should be crafted with input from the board and the public. 01:52:07.380 --> 01:52:13.380 SPEAKER_00: Smud should consider selling plug-in solar systems at Smud's online store. 01:52:13.380 --> 01:52:20.380 SPEAKER_00: Smud can also encourage customers to mount them west facing in the summer to help during peak demand. 01:52:20.380 --> 01:52:29.380 SPEAKER_00: These plug-in solar systems will help achieve Smud's climate goals. The SMUD board declared a climate emergency in July of 2020. 01:52:29.380 --> 01:52:34.380 SPEAKER_00: The emergency has only gotten more urgent since then. Thank you and have a good evening. 01:52:34.380 --> 01:52:43.380 Unknown: Thank you, John. And I just pulled up the work plan from last week's meeting. The balcony solar is in our parking lot. So it will come up at some point soon. 01:52:43.380 --> 01:52:46.380 SPEAKER_03: But thank you for that. There's some good comments there. 01:52:46.380 --> 01:52:51.380 SPEAKER_03: Are there any other comments before we close out? No, there's not. 01:52:51.380 --> 01:52:55.380 SPEAKER_03: Okay. And then is there any summary of community direction? 01:52:55.380 --> 01:53:02.380 Unknown: Yeah. Staff will provide information related to the pounds of copper required for the community rehabilitation project. 01:53:02.380 --> 01:53:10.380 SPEAKER_07: Staff will provide additional technical scoring and pricing information to the board related to the S4 HANA system integrator contract. 01:53:10.380 --> 01:53:19.380 SPEAKER_07: And in the budget presentation, staff will explain why we're spending more on building electrification and energy efficiency than on transportation electrification, 01:53:19.380 --> 01:53:28.380 Unknown: what our natural gas spend is, some successes in operational excellence, comparisons of previous budget, and how AI can help us reduce costs. 01:53:28.380 --> 01:53:36.380 Unknown: That's fine. I think for me, those comments were from them to think about in the final budget presentation. 01:53:36.380 --> 01:53:37.380 SPEAKER_03: Correct. 01:53:37.380 --> 01:53:50.380 SPEAKER_03: Okay. With that, just a reminder that written comments received on items not on the agenda will be included in the record if received within two hours at the end of the meeting. 01:53:50.380 --> 01:53:54.380 SPEAKER_03: And with that, we will be adjourned. Thank you, everybody. 01:54:06.380 --> 01:54:08.380 Unknown: Thank you.