Unknown: Yah.
Unknown: I feel thej
Unknown: I'm inek
Unknown: How do I work in here?
Unknown: We're just feels
Unknown: We learn every how long
Unknown: What? Yeah.
Unknown: Okay.
Unknown: Excuse me.
Unknown: Five seconds, please. Five seconds.
Unknown: Good evening and welcome to the Finance and Audit Committee and Special Board Meeting of October 14, 2025.
SPEAKER_03: This meeting is being recorded and can be accessed on SMUD's website.
SPEAKER_03: Please remember to unmute your microphone when speaking in order that our virtual attendees may hear.
SPEAKER_03: The microphone will display a green indicator light when the mic is on.
Unknown: The members of the public attending in person who wish to speak at this meeting please fill out the speakers request form located on the table outside this room and hand it to SMUD Security.
SPEAKER_03: Members of the public attending this meeting virtually who wish to provide verbal comment during the committee meetings may do so by using the raise hand feature in Zoom or pressing star 9 while dialed into the telephone toll free number.
Unknown: At the time public comment is called. Technical support staff will enable the audio for you when your name is announced during the public comment period.
Unknown: You may also submit written comments by emailing them to public comment at SMUD.org.
SPEAKER_03: Written comments will not be read into the record but will be provided to the board electronically and placed into the record of the meeting if received within two hours after the meeting ends.
Unknown: This time will Chief Legal Officer, Ms. Laura Lewis, please connect the roll call.
Unknown: Dr. Bowie Thompson?
Unknown: Dr. Rose?
SPEAKER_15: Here.
SPEAKER_15: Chair Kurth?
SPEAKER_15: Here.
SPEAKER_15: Dr. Rose and Chair Kurth are present.
SPEAKER_15: Dr. Bowie Thompson is absent though I believe she's Bowie arriving.
SPEAKER_15: I understand she's in traffic but on the way.
SPEAKER_03: On the way.
SPEAKER_15: Also present are directors Herbert, Tamayo and Samborn.
SPEAKER_03: Okay and that establishes quorum.
SPEAKER_03: We'll move ahead then item number one on tonight's agenda is to discuss authorizing the CEO to negotiate and award contracts to GFT Infrastructure Inc, Mesa Associates Inc, HDR Engineering Inc,
SPEAKER_03: and Stantec Consulting Services Inc, collectively the contracts to provide hydroelectric design and engineering services for an approximate five year period from October 20th, 2025 to October 31st, 2030.
SPEAKER_03: For an aggregate not to exceed amount of $15 million for the contracts.
Unknown: With us tonight is Mr. Josh Langdon, Director of Power Generation.
SPEAKER_03: Welcome.
SPEAKER_03: The floor is yours.
SPEAKER_03: Thank you.
SPEAKER_09: Appreciate the introduction.
SPEAKER_09: Chair Kurth and good evening board.
SPEAKER_09: So tonight I actually have two presentations.
SPEAKER_09: Both of them are related to strategic design and engineering contracts.
SPEAKER_09: The first one is very specific to our hydro assets.
SPEAKER_09: So I'll follow the same cadence for both presentations.
SPEAKER_09: I'll provide a general background of the contract and services.
SPEAKER_09: I'll talk about the RFP strategy and overview.
SPEAKER_09: I'll talk about the business need and kind of the business benefit of these contracts.
SPEAKER_09: And then lastly I'll actually go over the results of the RFP and talk about the recommendations from there.
SPEAKER_09: So as Chair Kurth noted, the first contract is very specific to hydro generation.
SPEAKER_09: So these are design engineering services.
SPEAKER_09: We currently today have these contracts in place.
SPEAKER_09: The one thing I would mention is that these contracts are coming to the end of their term.
SPEAKER_09: So this is essentially a renewal, right?
SPEAKER_09: It's an opportunity to go back out to the market and reevaluate competitive bids to continue this service for our hydro assets.
SPEAKER_09: So as you think about these contracts, it's pretty much typical projects we do every day at our hydro units from operations and maintenance to also long term investment capital projects.
SPEAKER_09: Think of these as asset replacements, transformers doing assessments on our hydro assets to really ensure that they're reliable through 100 years of life.
SPEAKER_09: A lot of these assets are around 60 years today.
SPEAKER_09: So these hydro engineering service contracts just allow us to continue safe and reliable operations.
Unknown: So as we talked about the RFP, as I noted, the current contracts are coming to a conclusion at the end of this year.
Unknown: So in May of this year, we actually went out to the market again to reassess and evaluate new potential partners.
SPEAKER_09: So in May we issued an RFP.
SPEAKER_09: Our procurement team went out and looked at everyone in the industry that had very specific knowledge and experience managing hydro projects specifically.
SPEAKER_09: And one thing I would note is this also gave us an opportunity to revise the scope.
SPEAKER_09: There's been some changes from a FERC standpoint in our FERC licensing and dam safety initiatives.
SPEAKER_09: So it allowed us to expand the scope to include these items as well as the traditional projects we're looking at.
Unknown: Going to the next slide, some of the key benefits in the business need.
SPEAKER_09: The picture of the asset there is our Jaybird powerhouse.
SPEAKER_09: I would note, I know it's not really kosher to talk about age, but if this asset were a person, they'd be eligible for Social Security.
SPEAKER_09: So when we talk about our assets and we talk about extending the life through 100 years,
SPEAKER_09: these contracts really provide us that opportunity to ensure that our assets are reliable.
SPEAKER_09: So as I talk about expertise, under FERC's jurisdiction, they manage over 3,000 dams across North America.
SPEAKER_09: In addition to those dams, there's many more multiples of dams that these contract engineering firms really work on.
SPEAKER_09: So when I talk about a breadth and depth of knowledge and expertise, strategic partners with these engineering firms really give us the ability to leverage that expertise.
SPEAKER_09: Bring that knowledge back in house as we look at regulatory requirements that continue to change.
SPEAKER_09: These engineering firms provide a second set of eyes to ensure that our designs not only meet regulatory requirements today,
SPEAKER_09: but also the changing landscape we continue to see with greater regulatory requirements.
SPEAKER_09: The two items there with efficiency, when you think about some of the dynamics that are changing within power generation, emerging trends,
SPEAKER_09: one of the big emerging trends is the amount of time we have to execute a lot of these projects.
SPEAKER_09: A lot of these projects, we actually take planned outages on our asset and we execute these projects.
SPEAKER_09: So in the future, the luxury of having a 30 or 60 day outage may not be there.
SPEAKER_09: We acknowledge that during different times of the year when hydro assets are less needed,
SPEAKER_09: as we look at electrification and different load profiles, we know that we have to do everything we can to shrink those outage windows.
SPEAKER_09: So as we look at optimization opportunities, these contracts also provide that benefit because they allow us to scale up,
SPEAKER_09: execute a large amount of work in a short amount of time and then scale down.
Unknown: The last item I'll touch on is knowledge transfer.
SPEAKER_09: To me, this is kind of the most important component is we talk about sustainability.
SPEAKER_09: We talk about our zero carbon plan.
SPEAKER_09: One of the key kind of foundational items to that plan is reliable hydro units.
SPEAKER_09: They provide tremendous amount of ancillary services that our grid depends on.
SPEAKER_09: So as we think about extending these assets through the next, as I mentioned, 100 years,
SPEAKER_09: one of the components I would talk about, key to that sustainability effort is a sustainable workforce.
SPEAKER_09: So as we face similar challenges that every organization faces,
SPEAKER_09: we leverage these expertise that these engineering firms provide to also help develop our internal experts and engineers to help manage our assets.
Unknown: So in terms of the procurement strategy, as I mentioned, we went out for a request for proposal in May.
Unknown: Our procurement team found many bidders.
SPEAKER_09: Nine of those actually submitted proposals.
SPEAKER_09: The recommendation tonight is to move forward with the top four that scored the highest in terms of a best value.
Unknown: So in terms of themes we evaluated, very standard.
SPEAKER_09: This is the common rubric we use when we evaluate best value.
SPEAKER_09: We looked at standard mandatory requirements.
SPEAKER_09: Do these engineering companies and firms have experience with similar hydro assets?
SPEAKER_09: Do they have a depth of experience?
SPEAKER_09: And not only that, but personnel.
Unknown: Of course, we look at seed participation and economic development here locally in Sacramento.
SPEAKER_09: We also score these bidders on environmental sustainability as well, as I mentioned, company experience.
SPEAKER_09: Not only the company history, the health of the company, the viability of the company,
SPEAKER_09: but also the specific individuals that would be on the project team that would be working on our hydro assets.
Unknown: And then, of course, lastly, is commercial terms and pricing.
SPEAKER_09: So in terms of the results, as we look here, there were pretty close results in terms of the proposal amounts.
SPEAKER_09: As you look at the technical scores there, a couple stood out.
SPEAKER_09: So as we look at the overall scores, the recommendation is to move forward with the top four there.
SPEAKER_09: That's scored essentially 80 or above.
Unknown: So that concludes this presentation.
SPEAKER_09: I'm happy to entertain any questions.
SPEAKER_03: Thank you.
SPEAKER_03: Questions, please.
SPEAKER_03: Director Sam?
SPEAKER_12: Thank you.
SPEAKER_12: So there was a watch show on, I think it was 60 Minutes,
SPEAKER_12: and they had a gentleman on who had just left the federal government,
SPEAKER_12: and he was in charge of security for the country, basically an IT.
SPEAKER_12: And he said that China had already hacked into, I think it was 50 different cities, utilities, and been able to get in.
SPEAKER_12: And one of the things I think about when we were in these grants is, and I don't know how to look at your ass,
Unknown: to you, but I mean, just how do we protect ourselves from allowing, whether it's the consulting firms we're using
SPEAKER_12: or the equipment that we're buying and using, having other people have, apparently the Chinese are sitting,
SPEAKER_12: they get into the systems and they actually just sit there and they wait.
SPEAKER_12: And they're not sure why, but accept that maybe at some point they want to create chaos.
SPEAKER_12: And so do we gauge our consulting firms on their knowledge of this stuff?
SPEAKER_12: And I guess I just wanted to raise that, because it was very alarming.
SPEAKER_12: Yeah, no, absolutely.
SPEAKER_09: It is certainly one of the top risks any utility faces.
SPEAKER_09: I would say when we look at all our projects, when we specifically look at control systems,
SPEAKER_09: in a lot of modernization projects we're doing, we actually have different protections.
SPEAKER_09: Firewalls, we're not connected to the internet.
SPEAKER_09: Really, there's a physical barrier.
SPEAKER_09: So there's no way to really get into our control systems.
SPEAKER_09: I think from an industry perspective, I've heard some of the same information you've mentioned.
SPEAKER_09: These typically were at kind of water utility companies, but on the utility space, electric utility space,
SPEAKER_09: there's been a lot of safeguards in place and regulatory requirements to ensure that from a cyber security standpoint,
SPEAKER_09: we're updating our assets and they're also secure.
Unknown: I remember we did have one incident that was a consultant's, there was a breach,
SPEAKER_12: and there have been protocols put in place.
SPEAKER_12: I'm asking for reassurance that all our consultants are following protocols to make sure that they don't allow us.
SPEAKER_12: Yes, we continue to reinforce the contractors, some of the protocols when they're logging in or when they're sharing the incident
SPEAKER_08: that you're referring to.
SPEAKER_08: I represent one, if I remember correctly, that is sharing about their password.
SPEAKER_08: Exactly.
SPEAKER_08: And I've already chosen someone else.
SPEAKER_12: Okay. Good. Well, I mean, to me, this looks fine on the outset,
SPEAKER_12: and I always like it when we get to pick a few so that way you get to look at the ones that work best for this particular project.
SPEAKER_12: So I'll be supporting it. Thank you.
Unknown: Thank you.
Unknown: Thanks. Please.
Unknown: Thank you.
SPEAKER_10: You know, just looking at the numbers here and, you know, the difference between the fourth contractor and the fifth contractor,
SPEAKER_10: you know, isn't very much.
SPEAKER_10: Do you anticipate that you'll get some protests from this?
Unknown: You know, I don't actually.
SPEAKER_09: And right when we looked at our bids, and it's a very fundamental process we follow.
SPEAKER_09: So I think I would say as we looked at the number of projects in our portfolio,
SPEAKER_09: we tried to right size it based on not only the total contract amount,
SPEAKER_09: but the number of bidders that we're partnering with.
SPEAKER_09: So I don't anticipate any protest.
Unknown: Thank you.
Unknown: Thanks. Other questions?
SPEAKER_03: The test on the technical point, 50 points technical and several of them scored more than that, huh?
SPEAKER_09: It's a good observation. That was an error I caught just a few minutes ago.
SPEAKER_09: That should be 60. So 10 for seeds, 60 there.
SPEAKER_09: The pricing is actually 30. And then the total, of course, would be 100.
SPEAKER_09: Okay. I was really impressed that somehow.
SPEAKER_03: So that's your credit.
SPEAKER_03: Blowing you away with the technical point. Anyway, so I don't have any speakers cards at this time.
SPEAKER_03: Do we have anyone who wishes to speak on this issue?
Unknown: I don't see any hands. No, we don't.
SPEAKER_03: Okay. Thank you. Why don't we move on to item number two since you're up there waiting to go.
SPEAKER_03: Yeah, absolutely.
SPEAKER_09: So this next presentation is very similar in the fact that it's for continued contract engineering services.
SPEAKER_09: The one difference is this is very specific to geotechnical.
SPEAKER_09: And it's not specific to just our hydro units.
SPEAKER_09: It's actually used across PowerGen, whether you're talking about our gas pipeline assets,
Unknown: whether you're talking about renewable development projects.
SPEAKER_09: The geotechnical services is kind of used across the fleet of PowerGeneration.
SPEAKER_09: So as I mentioned, very similar.
SPEAKER_09: We have existing contracts for these engineering services today.
SPEAKER_09: Those are also coming to an end at the end of the calendar year.
SPEAKER_09: So we have an opportunity to go back out to the market and reevaluate the engineering firms who provide the service.
SPEAKER_09: And again, go out and find a best fit.
SPEAKER_09: So just to give you some perspective of the type of work, right, at any time we do any kind of projects that starts with looking at the geotechnical, right?
SPEAKER_09: It's looking at soil studies.
SPEAKER_09: It's looking at stability analysis.
SPEAKER_09: So really, we start that process before we start any kind of project or we're doing retrofit projects.
SPEAKER_09: So again, this is applicable across the asset portfolio.
SPEAKER_09: In addition to some of the scope I mentioned, this is also applicable to our hydro units as we do tunnel inspections, as we look at the geology around our assets.
SPEAKER_09: Certainly, there's also some benefit in projects that we implement to manage some of those risks as well.
Unknown: So very similar.
SPEAKER_09: We did issue another RFP in May.
SPEAKER_09: Again, this was very specific to a geotechnical engineering work scope.
SPEAKER_09: As we continue to look at various projects we have in our portfolio, we ensured that our scope of work was updated to reflect all the projects we see over the next ten years.
Unknown: Some of the key benefits are the same as the last one.
SPEAKER_09: I think I'll call out in a little bit of different fashion increased flexibility here.
SPEAKER_09: So when I talk about our gas pipeline assets, in some cases, the response time could be hours instead of days or weeks.
SPEAKER_09: So having strategic partners that are local that could help with geotechnical assessments.
SPEAKER_09: Certainly around our gas pipeline provides a lot of flexibility and benefit from a safety operational standpoint.
SPEAKER_09: So that is one of the key benefits.
SPEAKER_09: Maybe I'd call out that's a little bit different than the last presentation.
Unknown: In terms of the procurement strategy, we went out to bid.
SPEAKER_09: This bid event, we actually had nine vendors or engineering firms submit proposals.
SPEAKER_09: The recommendation is to actually move forward with the top six in this case rather than the top four.
SPEAKER_09: The themes evaluated were exactly the same.
SPEAKER_09: And Chair Kurth, this one has the correct point scale at the top.
SPEAKER_09: Rebalanced.
SPEAKER_09: It's balanced there.
SPEAKER_09: So as we looked at all the proposals, we again went with the best value strategy.
SPEAKER_09: We evaluated them on the criteria and again recommend moving forward with the top six here.
SPEAKER_09: So that concludes this update.
SPEAKER_09: I'll entertain any questions if there are any.
SPEAKER_09: Great.
SPEAKER_09: Questions this time?
SPEAKER_09: Please.
SPEAKER_09: How do you decide how many you're going to, like the four or the six?
SPEAKER_12: Yes.
SPEAKER_09: Some of it's kind of, I'll just say anecdotal, depending on how many projects we have in our portfolio that we think we'll have at the same time if we're looking at resource loading across the engineering firms and our internal staff.
SPEAKER_09: Some of it may have to do with if the scoring's extremely close, we may extend to an additional bidder.
SPEAKER_09: But a large amount of it has to do with the actual volume of work.
Unknown: Do they know that when they bid?
SPEAKER_12: That it's going to be six or it's going to be four?
Unknown: No, not necessarily.
SPEAKER_12: Okay.
SPEAKER_12: Interesting.
SPEAKER_12: Thank you.
Unknown: I'll ask.
SPEAKER_05: Put it under our nose.
SPEAKER_05: Why is Kleinfelder's price points half of everybody's else?
Unknown: Yeah.
SPEAKER_09: So the standard scope that we provided was very specific to geotechnical and it had various engineering, drafter, different levels.
SPEAKER_09: And that scope of work just had a number of hours for each one of those disciplines that support a geotechnical scope of work.
Unknown: And so as they evaluated and they looked at their time and materials for those different positions, quite frankly, their engineering came in quite a bit lower than the other firms.
Unknown: So their hourly pay for their engineering staff was lower than their competitors.
SPEAKER_09: So that resulted in that lower bid.
SPEAKER_09: And it's a good call out because it was substantially lower.
SPEAKER_09: I will throw in some commentary.
SPEAKER_05: I had my first experience at work with somebody sending me AI-generated product for which I could immediately tell it lacked the depth of knowledge.
SPEAKER_05: And so I don't know what's going on here.
SPEAKER_05: I'm just underpaying their engineers.
SPEAKER_05: But hopefully we continue that we don't start seeing that in what products that we receive, right?
SPEAKER_05: And that the quality of the work remains high.
SPEAKER_05: Yeah.
SPEAKER_05: Because my first experience was very negative.
SPEAKER_05: I went like, yeah, I could Google this too, right?
SPEAKER_05: But it's hard.
SPEAKER_05: But I'm asking you because it's hard and it doesn't exist already, which is much different than a large language model telling me something.
Unknown: So anyway, some commentary.
SPEAKER_05: Thank you.
SPEAKER_09: But that was certainly flagged and we went back to Kleinfelder and had that discussion and just made sure there wasn't a misunderstanding in terms of the scope of the work or how they did the project.
SPEAKER_06: Okay, great.
SPEAKER_03: Any other comments on this?
SPEAKER_03: Do we have any?
SPEAKER_03: I have no speaker slips.
SPEAKER_03: Do we have any public testimony?
SPEAKER_15: No, we do not.
Unknown: Okay, thank you very much.
SPEAKER_03: It's off to the consent calendar.
SPEAKER_03: Okay, item number three has been held for a different meeting.
SPEAKER_03: Item number four is to discuss authorizing the CEO to negotiate and award a sole source contract with the Sacramento Tree Foundation to provide shade trees to smud customers during the period of January 1, 2026 to December 31, 2028.
SPEAKER_03: For a not to exceed amount of $6,334,461.
SPEAKER_03: Welcome.
SPEAKER_03: Oh, I'm sorry.
SPEAKER_03: With us tonight is Dr. Mckesha Webster, director of DEIB Learning and Sustainable Communities.
SPEAKER_03: Welcome.
SPEAKER_03: The floor is yours.
SPEAKER_01: All right, thank you and good evening to everyone.
Unknown: I'm glad to be here.
SPEAKER_01: I want to take a minute before I jump in and just acknowledge some important people that are part of what I'm sharing today.
SPEAKER_01: We have some representation from our Sacramento Tree Foundation.
SPEAKER_01: Jessica Sanders, who is the executive director, is joining us online.
SPEAKER_01: So hello, Jessica.
SPEAKER_01: So happy that you were able to take some time in the middle of your travels to listen in.
SPEAKER_01: And then we have Michelle Smira, who is the Sacramento Tree Foundation board president.
SPEAKER_01: Thank you, Michelle.
Unknown: And Steve Johns.
Unknown: Steve Johns here.
SPEAKER_01: Okay, familiar name, right?
SPEAKER_01: Here at SMUD.
SPEAKER_01: But I just want to also recognize him as a part of the work.
SPEAKER_01: And he's vice president for our Sacramento Tree Foundation.
SPEAKER_01: And then finally, we've got some wonderful folks from our Sustainable Communities team, Shiloh, Betty, and Caitlin,
SPEAKER_01: who are instrumental in making sure that all of this comes together.
SPEAKER_01: So thank you all for being in attendance this evening.
SPEAKER_01: Okay, so you've introduced me.
SPEAKER_01: Yes, I am Dr. Mckesha, and I'm here to talk about some trees.
SPEAKER_01: We love it.
SPEAKER_01: I appreciate the opportunity to share with you about our shade tree program and to make this request related to the sole source contract with the Sacramento Tree Foundation to provide shade trees, fruit trees, and shrubs to customers.
SPEAKER_01: And so this first slide really is about why we do the work.
SPEAKER_01: It's the benefit that we see in this work.
SPEAKER_01: And I will not read here everything that you see, but I will also just make a nod to SD7, which is around environmental leadership.
SPEAKER_01: And that connection is really strong as we think about the work of our shade tree program.
SPEAKER_01: And so in SD7, it talks specifically about promoting the efficient use of energy by our customers.
SPEAKER_01: It talks about improving air quality and reducing greenhouse gas emissions.
SPEAKER_01: All of these things, what our wonderful trees can do for us.
SPEAKER_01: And it also talks about attracting and building partnerships.
SPEAKER_01: And obviously our partnership with the Sacramento Tree Foundation is instrumental to this work.
SPEAKER_01: And so just want to make sure that we call that out.
SPEAKER_01: We've had this partnership with our Sacramento Tree Foundation for over 35 years.
SPEAKER_01: And this relationship really has continued to evolve, working to plant species of trees and shrubs that can really flourish in all of our diverse neighborhoods.
SPEAKER_01: And that our customers have the opportunity to really participate in this, then to provide care for these resources.
SPEAKER_01: And as a part of this contract that we are working on, we really are thinking about how do we diversify the region's tree canopy by limiting planting of species that are currently over planted.
SPEAKER_01: And so what do you think about when a tree species that's over planted?
SPEAKER_01: And I got some information for that.
SPEAKER_01: If you're familiar with the London Plain tree or ornamental pears and oaks, those tend to be over planted.
SPEAKER_01: And so we're really trying to make sure that we're diversifying by bringing in, my second point, some trees that are more native to our environment and have better sustainability, better survivability.
SPEAKER_01: And so valley oaks, blue oaks, interior live oaks, if you're familiar with those species of trees, really provide that native tree canopy that we're looking for.
SPEAKER_01: And these are already trees that we're offering as a part of our shade tree program.
SPEAKER_01: And really, this category is ideal because it broadens climate-ready trees that can withstand the extreme heat here.
SPEAKER_01: I've been told not to tell my lemon tree story, so I will not tell that tonight.
SPEAKER_01: But also the drought sometimes that we experience in the winter.
SPEAKER_01: And many sites cannot accommodate native trees due to limited space or soil type, so we're really trying to think about that diversification and stewardship.
SPEAKER_01: And then finally, we want to make sure that trees and shrubs are more accessible by offering multiple planting options for every lot size, every tree species, which helps really, again, increase the number of available locations per lot to plant trees.
SPEAKER_01: You'll also see there's a chart here that talks about carbon storage and carbon avoided.
SPEAKER_01: I think this is a really important point here, again, to our why, as we think about our air quality and how this tree planting, all this work really improves air quality and reduces carbon emissions.
SPEAKER_01: So just by way of looking at the first part of this chart, we've had over 11,000 trees planted between 2023 and 2024.
SPEAKER_01: And as those trees have grown, they have contributed to 32,912 metric tons of carbon being stored.
SPEAKER_01: So just thinking about the impact of that.
SPEAKER_01: And then carbon avoidance.
SPEAKER_01: I learned a lot about carbon avoidance this evening.
SPEAKER_01: But it really is this idea that we can prevent additional greenhouse emissions, additional greenhouse gases, when we plant trees, right?
SPEAKER_01: And we keep those gases from entering our atmosphere, and that really has an important benefit when we think about all of how this comes together.
SPEAKER_01: So we are excited about the why when we think about the tree work that we are doing.
Unknown: So I want to transition really quickly to talking about some specific work that we're doing in our undercanopied neighborhoods.
SPEAKER_01: And there's a reality that exists that some neighborhoods suffer more adverse impacts from our environment than others.
SPEAKER_01: And so we are paying attention to that and really trying to do some work specifically in that area.
Unknown: Trees and shrubs have natural cooling effects.
SPEAKER_01: And I love this term about building the best urban forest.
SPEAKER_01: That's really a neat way to think about this.
SPEAKER_01: Because not only are we keeping our communities and customers cooler, but we also are offering them this best urban forest that includes trees and shrubs that are planted in their neighborhoods, around their schools, along our sidewalks.
SPEAKER_01: And there's energy savings, right?
SPEAKER_01: That is also a part of this cost savings.
SPEAKER_01: So we think about what this can mean, right, in neighborhoods.
SPEAKER_01: And we want to continue to work collaboratively with our community partners to identify undercanopied areas.
SPEAKER_01: We use our sustainable communities resource map.
SPEAKER_01: Obviously, our work with Sacramento Tree Foundation is very instrumental in that.
Unknown: We're encouraging plantings, ensuring that there's appropriate stewardship.
Unknown: And I'll talk a little bit about stewardship here in a moment.
SPEAKER_01: Once trees have been planted, how do we take care of those trees?
SPEAKER_01: How do we take care of the resources?
SPEAKER_01: And we've committed to hosting at least one planting event annually in each ward with SMUD board members.
SPEAKER_01: And you'll see lots of board members in these photos here.
SPEAKER_01: You all, so thank you so much for your participation.
Unknown: We also have our vegetation management team that comes out and, again, is talking about that survivability and volunteers from our SMUD cares.
SPEAKER_01: So all of us working together to really do this tree planting in a way that is responsible.
Unknown: So some key features of the contract that is up for your consideration is really building on earlier partnership in this space.
SPEAKER_01: And the key updates really are specifically around a change in the contract timing and expansion of the offerings.
SPEAKER_01: And so the current contract is set to end in March of 2026.
SPEAKER_01: And so this new contract is a three-year agreement that would be effective starting January 1st of 2026 and would then be ending December 31st of 2028.
SPEAKER_01: And allowing us to sort of have this three-year contract in this way aligns program service delivery with annual reporting.
SPEAKER_01: And it also allows us to think about the addition of fruit trees and shrubs.
SPEAKER_01: We've been talking about just sort of shade trees, right, but sort of adding to our repertoire.
SPEAKER_01: And this helps to lower maintenance costs.
SPEAKER_01: We've been thinking about renter-friendly options like shrubs that can be planted in pots.
SPEAKER_01: And also thinking about customers who want to shade their homes and also improve air quality and can do that in some new ways that maybe we hadn't thought about before.
SPEAKER_10: Just had a little question if that's okay, Chair.
Unknown: When I look at the numbers here for year three, that is your projection for 2028.
SPEAKER_10: And what you're saying is that out of 16,750 plantings, 13,900 will be in underserved communities.
SPEAKER_10: Correct.
SPEAKER_10: Very good. Thank you.
SPEAKER_10: Thank you for the question.
SPEAKER_01: So some other key features of the contract are expanded community and support for specific fruit tree survival and fruiting just in general.
SPEAKER_01: And understanding of what it means to grow fruit trees.
SPEAKER_01: New and expanded community partnerships to support tree and shrub plantings, as well as, again, that stewardship piece following up on our newly planted trees.
SPEAKER_01: And a continued development of a network of nonprofit partners and organizations to support education to our communities, again, in that post-planting care phase.
SPEAKER_01: And so, as was mentioned, a nod to the table here.
SPEAKER_01: This table really shows our goals for this three-year contract and that increasing the total number of plantings each year, growing from 13,500 in 2026 to 16,750 in 2028.
SPEAKER_01: We also have a goal of planting 50% stray trees, 80% fruit trees, and 100% shrubs as a part of that work in our under-canopied communities,
SPEAKER_01: which amounts to almost 14,000 trees and shrubs delivered in 2028.
SPEAKER_01: And so, a lofty goal, but one that I think we have a lot of momentum to reach.
SPEAKER_01: And so, certainly can see that happening.
SPEAKER_11: Yeah.
SPEAKER_11: Got a question.
SPEAKER_11: I've been involved in a number of tree plantings in my ward, and there's sort of an understanding.
SPEAKER_11: There's barriers, social barriers really, to tenants getting trees, landlords accepting the trees, concerns about maintenance.
SPEAKER_11: Are there things in the contract that specifically support trying to overcome some of those barriers?
SPEAKER_01: So, I talked a little bit about some of the pieces in this contract and the fruit trees and the shrub focus this time.
SPEAKER_01: And really, that is trying to get at some of what you're talking about, some of the barrier.
SPEAKER_01: And so, if we can have shrubs and pots, right, some things that are lower costs, lower maintenance, then that is an encouragement,
SPEAKER_01: I think, for individuals who might be reluctant, given certain living circumstances, to really engage in this work.
SPEAKER_01: And so, that's how we're getting at it in the contract this time.
SPEAKER_01: So, that expansion of the offering really is a part of what we're doing in that space.
Unknown: I just want to point out, I believe that Jessica is online, and she said she had her hand up because she wanted to answer Dave Tamayo's question.
Unknown: Okay.
Unknown: Bye. Can you all hear me?
SPEAKER_13: Go ahead. Yeah.
SPEAKER_13: Yes.
Unknown: Yeah. Thank you so much.
SPEAKER_13: Thank you, Tamayo. That was a wonderful question.
SPEAKER_13: So, I think that we have really considered over the years the issues that renters, especially, face with wanting to eat, but there's a lot of barriers.
SPEAKER_13: So, in this contract, as Dr. Roper talked about, there's also some additional things.
SPEAKER_13: So, we talk about irrigation as a big barrier to why people can't get treated.
SPEAKER_13: So, in this, there is irrigation support in training and building, as well as what we're piloting right now in South Sacramento, which is the creation of four foot by four foot planter boxes for trees.
SPEAKER_13: So, for a landlord, they feel temporary, but for a tenant, they feel very criminal. They feel a sense of place and belonging, and that is in its contract as well.
SPEAKER_13: So, just, I think that it's been wonderful to work with all of the SMUD teams to talk about how do we address these barriers rather than just sort of look them beside and say, next year, you know, for me, this contract is really focusing on what can we do right now to make our communities better.
SPEAKER_13: So, I hope that answered your question.
SPEAKER_13: Thank you.
Unknown: Okay. Back to you. Oh, thanks. Dr. Fishman.
Unknown: Thank you. Marky, Shannon, maybe for Jessica, too.
SPEAKER_02: For as long as I've been affiliated with the tree program in various iterations, people have wanted fruit trees,
SPEAKER_02: and the reason we've never done it before is we've been there. They're hard to take care of.
SPEAKER_02: They require annual care, and the survivability is what was at least was assumed to be an issue.
SPEAKER_02: What's changed or how is our thinking about that changed?
Unknown: I love Jessica Watson.
SPEAKER_01: Yeah, I'm happy to speak on that. So, a few things have changed. Great question, Dr. Fishman. A few things have changed, including our suppliers.
SPEAKER_13: We're getting more reliable stock. This year, we also piloted under the car smudge contract, both fruit trees and shrubs.
SPEAKER_13: So, we really wanted to test that assumption, and we've seen a really reliable, positive interventions.
SPEAKER_13: So, rather than just saying we're going to get fruit trees to everyone and peaches, as an example, who doesn't love a hot juicy peach, it's delightful, but it requires a lot of pesticides.
SPEAKER_13: So, how can we match the right fruit with the right community with the lowest intervention?
SPEAKER_13: So, we're looking at different cultivars. We're looking at having different community partners come in to help teach people how to prune and how to care for their fruit trees to not only produce the fruit that they want, but in a successful, sustainable way.
SPEAKER_09: Thank you.
Unknown: Okay.
SPEAKER_01: Back to you.
SPEAKER_03: All right.
Unknown: So, I will go to, we've been talking a lot about increasing tree survivability, and so I'll end with this slide in terms of presentation material, but we have a goal of 80% survivability by 2028.
SPEAKER_01: Right now, we are at 77%.
SPEAKER_01: And so, some of the actions you'll see there that we're taking to increase tree survivability, but we want to continue to look at creative solutions to address some of the challenges that have been brought up here, like reliable irrigation, post-tree planting care, and really to prioritize the increase of survivability of trees and shrubs, fruit trees that are planted.
SPEAKER_01: We want to continue to offer community partners opportunities to activate community spaces where trees have been planted and continue to encourage our communities to invest in the growth of trees already planted.
SPEAKER_01: So, how are we taking care of the resources that are already there and identifying spaces where we need knee trees?
SPEAKER_01: And we want to continue to cultivate our network of nonprofit partners and organizations that really help in this education, in this outreach, in this post-planting care.
SPEAKER_01: And so, Metalview Urban Tree Project, Mother Natives, City of Trees Foundation, Master Gardeners, and California Relief have already expressed interest in partnering with SMUD to really support the education and the stewardship that we're talking about in order to be able to maintain our trees.
SPEAKER_01: And so, we're excited to engage with these partners and other partners who have similar interests as we do in this space.
SPEAKER_01: All right. So, that ends the presentation part. Happy to have been able to give you a little update about what's happening with the Shea Chief Program.
SPEAKER_01: And again, ask that the board consider the authorization of the CEO and GM to award the Soul Source Contract to the Sacramento Tree Foundation.
SPEAKER_01: Thank you so much. We have questions. Please, Director Sam Borne.
SPEAKER_03: Thank you. And thank you so much for this. And I think all of us love trees and do a lot of tree planting. So, it's exciting to renew this.
SPEAKER_12: Just a couple of questions on the survivability. How many years do we follow trees right now?
Unknown: That's a good question. I don't know that I have...
Unknown: Does Jessica know?
SPEAKER_01: Jessica knows, yeah. Is she gone?
Unknown: Nope, I'm here.
SPEAKER_13: Oh, sorry. No. I know she's traveling, so I'm trying to... Yeah.
SPEAKER_13: Yeah, I'm sorry, everyone. I'm headed to a conference. So, I appreciate the flexibility.
Unknown: So, we do follow trees over the long term. One of the issues, by and large, is that previously we visited trees individually.
SPEAKER_13: Sacramento is, although it feels very small, it's actually a very large area. So, our service area is huge.
SPEAKER_13: So, one of the things that we have embarked on is sending out mailers to people or follow-up emails to say, hey, how's your tree doing?
SPEAKER_13: So, we have done that historically now for three years, and we have seen that people either respond very positively or they say, I don't know what you're talking about. I just need to tell you more about this program.
Unknown: And so, that has worked really well for us. As we're continuing this program, if someone's tree dies, we always say, and they contact us, we always go back and say, okay, let's figure out what the problem is, let's figure out how to fix it.
SPEAKER_13: Sometimes it could be that they thought they had irrigation and they actually didn't. Right now, we are looking at how do we make these trees live longer?
SPEAKER_13: Because if the trees aren't surviving, it's not a great advancement into our community. So, that's really what we're focused on in this contract, is how do we change the access points into the program and ensure our trees are surviving for the long.
Unknown: So, I would say now, I think that there are people that continue the contract, because after 30 years, and send us very lovely pictures and say, thank you so much. Our trees are thriving and now we want burning and maintenance, and we can't do that for them.
SPEAKER_13: So, we do get anecdotal stories, but we have not historically followed them the whole life cycle of the tree, but that is something we could embark on in the future.
Unknown: Well, I'm just curious, because we just did a planting of 15 trees in Maddox Park last weekend, and it was interesting because they had some young trees that had been planted not too long before we got there.
SPEAKER_12: And they were not staked correctly, there was nothing at the bottom of the tree, there was no bark, so the landscapers were running over the roots with the mowers which cut the roots open and exposed them to bugs and herbicides and anything else.
SPEAKER_12: So, I was curious, how much care do we make sure that these people are getting to plant and stake correctly, and how long do we track them?
SPEAKER_12: Because to me, a 20% fail rate, I know this is getting better, but that's still higher than I would, obviously we'd all like to have a higher number survive.
SPEAKER_12: So, that was just one question. The other one was, fruit trees have had them downtown, I can tell you they attract rats.
Unknown: If you don't properly pick up that fruit, they are a rat food, and that is something that is real.
SPEAKER_12: And so, we just have to train people about making sure that fruit is picked up and making sure they don't get so big that they just leave all the fruit at the top, and then that ends up being a heyday for an infestation downtown.
SPEAKER_12: So, are we doing anything on that or training?
SPEAKER_12: Okay, so I'm seeing nodding heads, so that's something everybody's aware of.
SPEAKER_12: And then, tree types, I noticed there wasn't a western redbud, which surprised me, because they're 10 to 20 feet tall, they're beautiful pink flowers, they host native bees, and they're absolutely gorgeous native trees, so I didn't see those on the list, I'm just throwing it out there, letting our technical people know.
SPEAKER_12: Be curious. And then, on the shrubs, I just love that we're adding shrubs. It's just, I think, long overdue, and hopefully will help protect the trees too, if we can plant them below.
Unknown: Anyway, thank you so much. I love tree foundation, obviously, for this contract, so thank you to all the staff that went into it.
SPEAKER_03: Okay, other questions, please.
Unknown: Thank you. Actually, this really isn't a question, as much as it is a comment.
SPEAKER_10: You know, I know I'm not on the tree foundation two by two, because I felt like, you know, other board members should get the opportunity to experience the wonderful tree foundation.
SPEAKER_10: But I'm very pleased about a couple of different things that our teams have really put a focus on. One is the fruit trees, and even though I know they do attract rats, if you have folks who are responsible and they know what they're doing, fruit trees can be so wonderful.
SPEAKER_10: Also, the shrubs, that was something that we had hoped would go forward, and it did, and so I think that's wonderful too.
Unknown: And lastly, I just want to say, you know, we know that trees are one of the easiest ways to engage our customers around our 2030 zero carbon plan.
SPEAKER_10: So I'm glad to see that we have a robust contract, and I hope that we continue in the future. Thank you.
Unknown: Please, Vice President Tamaia.
SPEAKER_11: I've got a request, and I'm guessing that we're going to approve this contract on Thursday.
SPEAKER_11: So once we have that in place, I was hoping that we could get some sort of social media piece that we can share with our constituents.
Unknown: Thanks.
SPEAKER_03: Thanks.
SPEAKER_02: I've got to be a contrarian, because, you know, everybody loves smud shade trees.
SPEAKER_02: But somehow saying, I got my shrub at smud, it just doesn't roll off the tongue.
SPEAKER_02: I'm just going to have to get used to them.
SPEAKER_02: Think of them as really tiny trees.
SPEAKER_03: Yeah, that helps.
SPEAKER_03: Okay.
SPEAKER_03: Dr. Rose.
SPEAKER_03: Yeah, I'm a little torn.
SPEAKER_05: I love the tree foundation, and I love that the program saves people money, absorbs carbon, right, cools our communities.
SPEAKER_05: It's a real win-win. I just noticed that the budget is about 50% higher, about $2 million higher than it was during the last renewal.
SPEAKER_05: And so I was wondering if there's a little bit of—and I noticed that there's no budget slide on this one versus the presentation a few years ago.
SPEAKER_05: So I wonder if there's a little commentary about this cause.
Unknown: Yeah, so one is the addition of fruit trees and shrubs, so just expanded options.
SPEAKER_01: But we do have—let me see.
SPEAKER_01: So just to give a little bit of background, and you spoke to this.
SPEAKER_01: So the contracts have sort of vacillated.
SPEAKER_01: 2023, we were at $1,600,000 in 2024, an increase of $1,824,000.
SPEAKER_01: And then in 2025, which is where we currently are, we have $1,904,000 and some change.
Unknown: And so this annual budget is at $2,011,000 annually, so that's a total of the $6 million that you see.
SPEAKER_01: So we looked at the total contract costs. It was $3.8 million, but it probably wasn't necessarily specific years, and you just listed out that as a very clear, very modest normal correction, right?
SPEAKER_05: Okay, that makes me feel better about it. Thank you for that.
SPEAKER_05: Yeah, absolutely.
Unknown: Thanks. Other questions, comments?
Unknown: Well, thank you very much. I guess I need to make a comment or two.
Unknown: I remember reading a story from John Muir when he first arrived in the Sacramento Valley area.
Unknown: Right down on the valley floor, there were actually very few trees.
SPEAKER_03: There were trees along the rivers, the willows and the redwoods—or, I'm sorry, the willows and the Fremont cottonwoods.
SPEAKER_03: And then, of course, there were the valley oaks, but at first they called Sacramento the city of the plains.
SPEAKER_03: And so when you look around Sacramento today, one of the important things to remember is it takes three years to plant a tree.
SPEAKER_03: Sticking it in the ground and walking away doesn't help. It's not going to last long, so it takes people to plant these trees.
Unknown: And when you look around at the huge canopy of trees that we enjoy today, somebody took the time to plant them and care for them and make them survive and give this gift on to all of us.
Unknown: The Sacramento Municipal Utility District has been sponsoring this project with Sacramento Tree Foundation for a good long time and very proud that we're continuing to do that.
SPEAKER_03: And I guess in response to Director Rose's thought, this budget seems too small to me because anything that gets us several pictures of Director Herbert and Tamayo with shovels should be worth a great deal of more money to the region.
SPEAKER_03: With that, thank you very much. I expect we'll be-
SPEAKER_10: I'll second that motion for increasing the budget teasing.
SPEAKER_03: Yes, do we have public comment on this?
Unknown: No, I don't see any hands.
SPEAKER_03: Okay, thanks. I have no speaker slips.
SPEAKER_03: So with that, where are we at here?
SPEAKER_03: Ah, item number five. To discuss casting vote on the Sacramento Local Agency Formation Commission, the LAFCO ballot regarding the election of a special district representative, two seats, and the alternate special district representative, one seat.
Unknown: And with us to discuss this tonight is our Chief Legal Officer, Ms. Laura Lewis.
SPEAKER_15: Thank you. Can we go to the next slide?
Unknown: So the board has an opportunity to vote for LAFCO special district representative.
SPEAKER_15: The votes are due in writing by November 21st at 5 p.m.
SPEAKER_15: So there's three things that you get to vote on.
SPEAKER_15: One is a special district representative and there's two seats available there.
SPEAKER_15: The other one is the alternate special district representative.
SPEAKER_15: So if we go to the next slide.
Unknown: These are the nominees for the four-year regular term.
SPEAKER_15: So Gay Jones with the Sacramento Metropolitan Fire District, she's the incumbent.
SPEAKER_15: Jim Frazier with the Herald Fire Protection District.
SPEAKER_15: And Robert Weikert with the Sacramento Suburban Water District.
SPEAKER_15: And I think I'll pause here to allow the board to discuss the candidates before I move on, if that's maybe the easiest way to get to the board.
SPEAKER_15: The board will, the committee will discuss these candidates here.
SPEAKER_15: The actual vote will take place on Thursday.
SPEAKER_15: I wanted to give the board an opportunity to discuss the candidates.
SPEAKER_03: Okay, great. Do we have discussion? Director Herver?
Unknown: Yes, so is it correct that these are the only three we can pick from?
Unknown: For the four-year regular term.
SPEAKER_15: Okay. I just want to say I know Gay Jones very well.
SPEAKER_10: She has been on several of the CAPTA CAP trips and has been very responsive to questions.
SPEAKER_10: And so I have a tendency to support her.
SPEAKER_10: But I'm just throwing my two cents in here.
Unknown: Thank you. Other comments at this time?
SPEAKER_03: Director Rose.
SPEAKER_05: Gay's been in the seat for a long time and all my years being elected.
SPEAKER_05: She's done a fabulous job, which I'm up to somewhere around 18 these days.
SPEAKER_05: So I would totally think we should support Gay.
Unknown: Great. Other comments?
SPEAKER_03: Weigh in on that one too.
SPEAKER_03: I know all three folks and think they're great folks, but Gay's been doing us a good job here.
Unknown: Okay. Next slide.
SPEAKER_03: Next.
SPEAKER_03: Alex.
SPEAKER_15: Next is the Special District Representative.
SPEAKER_15: This is a two-year term.
SPEAKER_15: And the nominees are Bo Reynolds of the North Highlands Recreation and Park District, our own Brandon Rose, Jim Frazier with the Harold Fire Protection District, and then again Bob Weicker with the Sacramento Suburban Water District.
Unknown: Hmm. I don't know. I'll have to think about this one a while.
SPEAKER_03: Okay. I think it's clear.
SPEAKER_03: Yeah, I think it's clear too.
SPEAKER_15: The board did nominate him, so that would be consistent.
SPEAKER_15: Okay. And the next slide is the Alternate Special District Representative.
SPEAKER_15: This is the four-year term.
Unknown: Is it Sharlaya Moore with the real name?
SPEAKER_15: Yeah, Linda Elverda, Recreation and Park District.
SPEAKER_15: She's the incumbent, and then Jim Frazier with the Harold Fire Protection District.
Unknown: Okay. Comments at this time?
SPEAKER_12: I know Sharlaya from the Lunch Bunch, which gets together every month in the North Highlands area, and she's always been very community-oriented.
SPEAKER_12: I don't know Jim, so I can't speak to that, but I do know Sharlaya is a very, very caring person and does a good job at organizing things, so I would think she would do a good job.
Unknown: I didn't notice she was rerunning, so I pulled the nomination for this position, so I would totally support us voting for her.
Unknown: Okay. Please.
SPEAKER_02: Just a quick question, Laura. I mean, we will obviously vote as a board on these nominations, but then SMUD gets one vote for each of those positions. Is that correct?
SPEAKER_02: That's correct.
Unknown: And the vote will take place on Thursday night at the meeting.
SPEAKER_03: Okay. And at the meeting, you'll need a nomination and a second and then a vote.
SPEAKER_03: Yes.
Unknown: Okay. Great.
SPEAKER_03: Do we have any public comments on this item?
Unknown: No, we do not.
Unknown: Okay. Well, thank you very much, then. I think we know what we're looking forward to that night.
SPEAKER_03: Item number six is to provide a board with a preview of SMUD's 2026 proposed budget.
SPEAKER_03: And with us tonight, we have Michelle Kirby, Director of Enterprise Strategy and Planning. Welcome.
Unknown: Good evening, President Bishman, Chair Kurth, and SMUD board members. I am Michelle Kirby, Director of Enterprise Strategy and Planning.
SPEAKER_00: I would like to ask tonight to provide the board with a preview of SMUD's 2026 proposed budget.
SPEAKER_00: The budget incorporates many of the things that the board sees here tonight, the contracts and authorizations, and my intention is to provide you with a high-level preview of our 26th budget and ensure the board has the opportunity for providing any feedback.
SPEAKER_00: Please note, we're still finalizing the budget, so some of the numbers you see tonight might change before we get to the November presentation in detail.
Unknown: All right. As a community-owned, not-for-profit utility, we're committed to keeping our rates low while providing the most value for every dollar we spend.
SPEAKER_00: We are working hard to ensure that Sacramento is a better place for our customers and community, and we stay financially disciplined, making strategic investments and tradeoffs, balancing our financial impacts while still making progress towards our goals.
SPEAKER_00: I'll start tonight with a high-level review of SMUD's priorities for 2026 and then highlight some of our new initiatives and our major areas of spend.
Unknown: And many of the projects I'll mention you may have heard before, they're multi-year projects. You'll probably hear them again in the future as well.
Unknown: This year, we experienced quite a bit of uncertainty and volatility with the change administration, so we'll talk a little bit about how SMUD ensures financial security and how we mitigate risk.
SPEAKER_00: And I'll end the presentation with the 2026 budget summary and our next steps in the process.
SPEAKER_00: Next slide, please.
SPEAKER_00: All right. Those boards' vision and strategic direction drive SMUD's priorities and our key initiatives.
SPEAKER_00: Each of the priority areas that I'll discuss tonight do represent several of our strategic direction in each one of these areas.
SPEAKER_00: In 2026, we will continue to invest in clean energy as well as our grid infrastructure, and we remain focused on making a positive impact in our community.
Unknown: Next slide, please.
Unknown: We continue to focus on the board's clean energy vision, making progress towards our zero-carbon plan with large clean energy investments, including $39 million in the construction of our country acres,
SPEAKER_00: 344 megawatts solar, and 172 megawatts four-hour battery project.
SPEAKER_00: That's expected to be online in 2027, and this will power the equivalent of 105,000 homes with renewable energy.
Unknown: Our budget also includes $18 million to expand our local and regional renewables.
SPEAKER_00: Those projects meet our California Renewable Portfolio Standard, or RPS, mandates, and the goal of 60% by 2030.
SPEAKER_00: These efforts include things like CEQA permitting and construction activities for projects where SMUD is the lead agency, such as Solano 5, Oveja Ranch, Dry Creek, and Curry Creek.
SPEAKER_00: In 2026, we're also planning to spend about $4.5 million in preparation for involvement in the extended day ahead market.
SPEAKER_00: So in the future, this could allow us to take advantage of lower-price commodities during certain hours.
Unknown: Next slide, please.
Unknown: Our clean energy future entails more than just removing carbon from our power supply.
SPEAKER_00: Electrification of both buildings and electric vehicles are an important part of our strategy.
SPEAKER_00: They're two of the largest carbon-emitting sectors in California.
SPEAKER_00: So you can see we're spending $49 million on building electrification to continue to fund SMUD's strategy to be a leader in the region's transformation for a clean power city for all our customers.
SPEAKER_00: You may recall that our program delivery team recently reached an exciting milestone.
SPEAKER_00: More than 20,000 gas-fired space and water heating systems were replaced with high-efficiency electric heat pumps.
SPEAKER_00: That saves our customer an average of $500 per year on their utility bill.
SPEAKER_00: We continue to promote electric vehicles, spending about $16 million on customer electric vehicle programs and a million dollars on SMUD's own electric EV fleet.
SPEAKER_00: We'll be launching the customer EV app alongside our public charging network program with pricing discounts for our low-income customers.
Unknown: We'll also be developing program options for our commercial EV and workplace charging.
Unknown: And we continue to fund our load flexibility programs.
SPEAKER_00: This includes our battery incentives for a total of $13 million.
SPEAKER_00: Our customers now participate in multiple programs and own multiple technologies in their home.
SPEAKER_00: So in 2026, you'll see that we'll be streamlining the customer experience and moving to a single vendor approach for our multiple DER, or Distributed Injury Resource Management programs.
SPEAKER_00: So the customer doesn't have to go to multiple vendors to sign up for thermostat in their battery storage. They can all do it in one.
Unknown: We'll also be operationalizing our managed EV charging program and working on a commercial virtual power plant, or VPP, pilot,
SPEAKER_00: and begin offering incentives to expand our battery options to additional customer segments.
Unknown: Finally, we're spending $1.4 million in community solar partnerships with schools.
SPEAKER_00: We're coordinating with local school districts, the Sacramento City Unified School District and Twin Rivers United School District to scope solar for school projects.
SPEAKER_00: These efforts seek to combine both solar and energy storage to maximize resiliency and sustainability benefits for our educational facilities.
Unknown: Next slide, please.
Unknown: Maintaining world-class reliability is critical to our success. Therefore, we're continuing to invest in our infrastructure to maintain a reliable grid.
SPEAKER_00: We're planning to invest $186 million for our substation capital spending. These include large projects like the Station J addition that will support our downtown area growth for the foreseeable future.
Unknown: El Rio substation upgrades, that will help us interconnect the aforementioned Country Acres project and improve reliability in the North.
SPEAKER_00: Natoma is part of our service territory, Metro Air Park and Sacramento Airport.
SPEAKER_00: We also have the UCD Med Center primary and backup service.
SPEAKER_00: So if you may recall earlier this year, you approved UCD expanding their new hospital tower and they want to partner with SMUD to provide both primary and backup power, replacing their onsite cogent plant as part of their zero carbon plan.
Unknown: And the last one on our substations would be our Station G expansion.
SPEAKER_00: And so this is to support the downtown central business district. And finally, we are including spend for purchase of spare transformers.
SPEAKER_00: With our recent supply chain shortages, long lead time, we want to make sure we have those transformers available for these future projects.
Unknown: We're also investing $89 million in our Folsom administrative office building project.
SPEAKER_00: This is going to provide for design and construction of a new reliable redundant critical operations building for grid operations.
SPEAKER_00: And we're continuing to update our hydro system with $40 million in capital and $32 million in pole and cable replacement.
SPEAKER_00: So in addition to investments in our grid infrastructure, we also invest in SMUD's technology infrastructure.
Unknown: After a lot of planning, we're embarking upon the replacement of our foundational ERP solution and investing $29 million to upgrade our SAP ECC to S4 HANA.
Unknown: We'll also continue the implementation of our next generation grid edge intelligence meter deployment, spending about $8 million and $3 million on our outage management system or OMS replacement, improving visibility to outages,
SPEAKER_00: and estimated response times, which is especially important as we go in a fresh storm season and extreme weather events.
Unknown: Next slide, please.
Unknown: All right. We continue to make meaningful investments in our community, especially in our under-resourced communities to ensure their participation with us is in support of the clean energy future.
SPEAKER_00: We're investing $14 million in our community impact plan.
SPEAKER_00: In 2026, this is going to include such initiatives as expanding our electrification efforts into additional residential communities and launching new customer assistance programs that include opportunities for low to moderate income customers and renters and growing our solar and storage for nonprofit program.
SPEAKER_00: SMUD is investing $1.5 million in our regional workforce and economic development.
SPEAKER_00: We're partnering with more than 50 education and workforce organizations to train thousands for careers in our clean energy economy and hosting several STEM events that inspire over 20,000 of our students annually and creating hands-on pathways, such as the Line Worker Scholarship Program and our engineering partnerships with Sac State.
Unknown: Through these initiatives, such as the Regional Economic Development Implementation with our new MARC study and the regional startup ecosystem, we're fostering business growth, innovation, and talent and development in the Sacramento region.
SPEAKER_00: Our integrated grant strategy framework entails aligning with our regional and technology partners, aligning our state funding opportunities with SMUD's clean energy vision.
SPEAKER_00: In 2026, you'll see $12 million in our electric vehicle research and infrastructure grants.
SPEAKER_00: That includes FAST, Reach 1 and Reach 2.0 grants, installing DC FAST chargers and high transit locations, partnering with Mutual Housing in city Sacramento to install several hundred level 2 chargers throughout our service territory.
Unknown: Next slide, please.
SPEAKER_00: To increase our financial security, we set aside funds for future use.
SPEAKER_00: When we're fortunate enough to receive one-time income, such as the clean energy investment tax credits that we received recently from our Solano Four-Wind project, we can use these dollars to fund our reserves.
Unknown: So this process reduces our financial risk and helps us stabilize and ultimately mitigate future increases for our customers.
SPEAKER_00: You'll see the funds that we have set aside here.
SPEAKER_00: We have $25 million in our insurance reserve that helps us to reduce the impact of rising insurance costs, $60 million in our commodity stabilization fund to help in times of high market volatility or extended outages, $81 million in our hydro rate stabilization fund offsetting low water years,
SPEAKER_00: as well as $18 million in the WAPA rate stabilization fund for low water years with our federal hydropower.
SPEAKER_00: Finally, we set aside $70 million in our rate stabilization fund to ensure it gets customer rate impacts when low generating revenue isn't as expected.
SPEAKER_00: So as you can see, our rate stability and customer affordability are top of mind.
SPEAKER_00: We've taken several measures to ensure minimal impact to our customers in the face of things like market volatility or resource uncertainty.
Unknown: Next slide, please.
Unknown: Here's a summary of our 2026 proposed budget.
SPEAKER_00: It's important to know where we're spending our money and where it hits our income statement for O&M and public good and our balance sheet for capital.
SPEAKER_00: So you can see up here, we have $841 million for O&M and public good.
SPEAKER_00: Some key spending areas are $251 million for power gen and grid operations and maintenance,
SPEAKER_00: $57 million for energy efficiency solutions and building electrification,
SPEAKER_00: and $27 million for investment in our under-resourced community engagement and our community impact plan.
Unknown: On the capital side, you see we have $666 million, $57 million going into clean energy investments,
SPEAKER_00: $218 million in our distribution and substation investments, and $52 million in our capacity and new service projects.
SPEAKER_00: And as I mentioned before, $89 million in our full-summon administrative office building.
Unknown: Finally, you'll see commodity costs of $593 million to maintain our reliable grid and maintain our renewable portfolio standard state mandates
SPEAKER_00: and support our SMUD 2030 zero carbon goals.
SPEAKER_00: What you'll see is about $296 million of that is clean energy resources like wind, solar, geothermal,
SPEAKER_00: hydropower, battery storage, and biogas.
SPEAKER_00: So as I said at the beginning, we're continuing to finalize our budget, so you may see some of these numbers slightly adjust as we get to November.
SPEAKER_00: Next slide, please.
SPEAKER_00: So next steps.
SPEAKER_00: Tonight's the first of several opportunities for you to view and share our budget.
SPEAKER_00: So October 14th, this is our high-level preview of our spending priorities this evening.
SPEAKER_00: On November 12th, you'll see the budget materials available and posted on smud.org, and November 18th, we've condensed the presentation down from two nights down to one night.
SPEAKER_00: You'll have Scott and his leadership team come back and present the full detailed budget, and December the board will vote to approve SMUD's 2026 budget.
SPEAKER_00: And between now and that November 18th meeting, feel free to reach out if you want to meet with us and staff about any questions about the budget in advance of the November 18th meeting.
SPEAKER_00: All right.
Unknown: Next slide.
SPEAKER_00: So as I wrap up tonight, I want to reiterate some of our key messages and our continued commitments going into 2026.
SPEAKER_00: Community involvement is key to our clean energy future for the Sacramento region, and we have strong investment in our infrastructure, maintaining a reliable grid for the future.
SPEAKER_00: Through prudent financial management, we're making sure that we're focusing on our key priorities and meeting our key financial metrics.
SPEAKER_00: Our budget should be reflective of executing upon SMUD's vision to provide reliable, affordable, and equitable energy.
Unknown: As I said, you'll have more opportunities to hear about our budget or the details, and I just want to thank you for your time.
SPEAKER_00: And this concludes my presentation.
SPEAKER_00: If you guys have any questions, please let me know.
SPEAKER_05: Do I see any questions?
SPEAKER_03: Director Rose.
SPEAKER_03: Thank you.
SPEAKER_05: Thank you for that.
SPEAKER_05: We have a couple of sort of questions and thoughts.
SPEAKER_05: One of them is trying to get a better idea of what our cash flow position will be and what the fixed charge ratio with the flight going into next year, and what would flow over that and what are our borrowing plans and capital plans.
Unknown: Do you want to talk to that, Scott?
SPEAKER_00: Yeah, so Scott and Arnti, but yeah, so because this is the preview, we haven't quite finished all of the budget decisions.
SPEAKER_04: We're looking at the financial statements of spending as well as finalizing revenue and looking at our overall capital requirements and things like that.
SPEAKER_04: We haven't produced the financial statements yet, so the cash flow statement and the income statement and things like that, but we will bring those financial statements and review them with the board at the November meeting.
SPEAKER_04: So we'll have all that detail available for the board for review and ask questions about that at that time.
SPEAKER_04: In addition to that, we're reaching out to each of you to have sort of pre-discussions to talk about the budget and go through the detail and kind of walk through any questions you might have, things like that.
SPEAKER_04: So we'll be doing that as well.
SPEAKER_05: And then just to remind them definitely, and they were talking about this last year, definitely looking at areas where we potentially have done some benchmarking.
SPEAKER_05: It's just areas that we can make sure that we're being lean and efficient, right? We don't want to be wasteful. We don't want to cut so that we're not doing our job and arming reliability, but we also want to make sure we're giving it good, hard luck.
SPEAKER_05: And as we did that during COVID and as we're starting to get years away from those fire drills, I definitely want to make sure we're continuing to be cognizant of that.
SPEAKER_05: Okay, thank you. I'll wait for that couple of hours.
SPEAKER_03: Please, President Fishman.
SPEAKER_02: I'm looking at slide eight with all the different rate stabilization funds in the insurance reserve. I mean, it's great to have that much money in the bank. It's a cushion. It feels pretty good.
SPEAKER_02: I mean, are we at the right levels? Are we limited in any way by how much we can put in those funds? And at what point do we say maybe we have enough or too much?
SPEAKER_04: So we are constantly looking at the risks that the organization faces in order to appropriately address those risks with our financial reserves.
SPEAKER_04: In terms of the insurance market, it has, especially in California, the risks have continued to grow. I think this year and last year obviously have only added to those very significant risks that being a utility in California, we face those risks.
SPEAKER_04: And unfortunately, whether we like it or not, things like insurance or wildfire risk or even financial risk or market risk, we get painted with the same color as other utilities within the state.
SPEAKER_04: Although I feel very strongly we are unique, we make our case that we are definitely unique and we work very hard to make sure we are appropriately addressing risks within Sacramento.
SPEAKER_04: But these funds are one of the ways, just one of the means that we have for addressing all the various kinds of risks that we face and that California faces in general.
SPEAKER_04: With that said, we are reviewing where we are with each of these funds. We're likely to bring back to the board in November potentially some additional set of sides that we may want to do within one or more of these funds.
SPEAKER_04: And the most important thing to note potentially is particularly within the insurance area, as we've seen risks within insurance change substantially.
SPEAKER_04: And also within the commodity area. Because again, we still see, although commodity markets have been relatively tame this year and last year we've benefited from that.
SPEAKER_04: We certainly don't expect that that's going to always be the case and that the volatility within the market can get extreme as we've experienced in the past.
SPEAKER_04: And we just want to make sure that we have the appropriate level of reserves to address those extreme conditions that we know will occur at some point again.
Unknown: Is there any legal limit on how much money you can put into these funds?
Unknown: Not necessarily. The board can act when we bring these recommendations to you to set aside these funds to the appropriate level that we justify.
Unknown: And let me just add, I think, without...
SPEAKER_04: I don't want to answer for Laura though. I don't know if Laura has it.
SPEAKER_04: That is correct.
SPEAKER_04: I don't think most of our customers even think about it. But if they did think about it, they would be very pleased that we're providing this number shock absorber so that they don't want to have that great fluctuation that we might otherwise have to move sometimes in a year without it.
SPEAKER_02: So it's just another way we're providing value that most customers don't even realize we're ending.
SPEAKER_07: Yes, absolutely.
SPEAKER_07: I think the first thing I want to comment on on this one is that I think we go through great care in terms of looking at how much money we need to preserve.
SPEAKER_07: I think it's always a very good reminder. I think Director Booyou-Thompson classified 2022 as the dumpster fire year when we actually lost CPP.
SPEAKER_07: Remember that year we lost $180 million. And then on top of that we had the crazy heat wave.
SPEAKER_07: And then the commodity prices that actually went 10 times what's normal. We lost $20 million in November and $40 million in December.
SPEAKER_07: And it's because of this prudent practice that we had. We wanted to feel utilities that didn't have an emergency rate increase or big huge rate increases for our customers.
SPEAKER_07: And I think this is really why I think we're constantly looking at it. In fact, me and Scott just talked about the whole commodity budget.
SPEAKER_07: I think the last couple of years it's been low. But we also remember what happened in November, December 2022, where for really no practical reason, the market went completely upside down.
SPEAKER_07: And I know Laura's team does a tremendous amount of job working with Scott's team in terms of finding out what is the right amount of reserve that we actually keep.
SPEAKER_07: And then to address those extreme emergencies when it happens. And I think they've done a fabulous job doing it.
SPEAKER_07: If you actually look at our rates, we really have been keeping our rates fairly stable, fairly below inflation.
SPEAKER_07: And if you actually compare us with the rate increases with other utilities, I think we've done quite well.
SPEAKER_07: It's really because of all this financial hedging, the financial reserve that we have.
SPEAKER_07: So as Scott said, I think you heard Michelle talk about when we actually got the $91 million for Solano IV, we really actually put it in the reserve because of the fact that those are one-time savings.
SPEAKER_07: We want to put it in the bank so that to address those unforeseen emergencies.
SPEAKER_07: And just a great question. I just want to make sure the public hears that.
SPEAKER_07: Let me get hype in though. As I said, this was the solar industry five years ago when we were doing solar modeling.
SPEAKER_05: When you get a bunch of money back from a federal tax credit, that should go to the cost of the facility and not go on and junk it.
SPEAKER_05: And so I just wanted to throw that out there.
SPEAKER_05: So just...
Unknown: One other thing that I didn't want to mention that it's really important to the rating agencies that address our debt, that we have these appropriate reserves.
SPEAKER_04: They definitely look at this as another means of SMUD being financially sound.
SPEAKER_04: They mention it. They definitely focus on it. They're definitely interested in it.
SPEAKER_04: And it's definitely one of the reasons why Moody's, say for instance, this year reaffirmed our rating.
SPEAKER_04: So I think it's really critical to signal to the market that we are not only financially healthy on a year-to-year basis that we have, but that we also have the appropriate reserves to handle significant risks.
Unknown: And having good bond rating lowers our borrowing costs, and we've got quite a capital budget out in front of us that saves customers quite a bit of money in the long run.
Unknown: And I was just going to add that the climate's just going to get worse.
SPEAKER_12: I mean, they just came out with another report that we've passed a tipping point on.
SPEAKER_12: The ocean has now become too acidic, and they foresee a lot of coral bleaching, a lot of fish dying.
SPEAKER_12: They just had a giant fish to kill.
SPEAKER_12: Like Michigan, white fish just completely collapsing, and this stuff is starting to happen.
SPEAKER_12: But it's because the ocean is warm, and we're going to see a lot more weather.
SPEAKER_12: We were lucky this year, but we've had years that are pretty bad, and we have to make sure we have banking.
SPEAKER_12: We're ready for it when it comes.
Unknown: Okay. Other questions or comments this time from the board?
Unknown: Do we have members of the public who wish to address this?
Unknown: I don't see any hands. No, we do not.
Unknown: Okay. Well, this is the opening. We'll see lots more. Thank you for the presentation. We appreciate it.
Unknown: I think we're up to item number seven now, is to provide the board with SMUD's financial results from the eight-month period ending August 31, 2025, and a summary of SMUD's current supply costs.
SPEAKER_03: With us tonight is Ms. Lisa Limcaco, our director of accounting and controller. Welcome.
SPEAKER_03: Good evening, Chair Kirk and SMUD Board of Directors.
SPEAKER_14: I am going to go over the August financial results.
SPEAKER_14: So starting with August, for the month, it was pretty warm compared to June and July, but we are still below plans.
SPEAKER_14: So customer revenues at $1,260 million, $19 million higher than planned, still due to the commercial customers revenue being above planned.
SPEAKER_14: Then we have commodity costs, $375 million, $26 million under budget, still due to milder weather this year.
SPEAKER_14: It did drive the favorable market prices, as well as we have lower fuel costs.
Unknown: Then we have other operating expenses, $638 million, $64 million below budget, still due to three areas, transmission and distribution costs still being below budget, due to reduced transmission fee costs, as well as lower vegetation maintenance costs.
SPEAKER_14: Then we have administrative and general costs being below budget due to delay in projects in the EDAM, as well as the S4HANA pre-work.
SPEAKER_14: And then offsetting that, public good expense being higher than planned, due to the increased participation in low income building electrification programs, for example, the MetaView project.
SPEAKER_14: And then finally we have $144 million, non-operating revenues, $106 million higher than planned, due to the $94 million that we received for the S4HANA.
SPEAKER_14: All leading up to $382 million of net income.
Unknown: Next we have August energy sources, and again, the month of August was hotter, but still below plan and below load.
SPEAKER_14: So August month to date is similar to August year to date.
SPEAKER_14: Hydro and thermal generation is below plan, due to the purchase power at favorable market prices, and so that led to the increase in purchase power for the year and for the month.
Unknown: Next we have delinquency by account type. It has increased $4 million from August to September, leading to about $42 million of delinquency as of September 30th.
SPEAKER_14: This is also due to the summer bills, even though it's not as hot as last year, the bills are higher, so we will see the increase in the delinquency.
Unknown: As of September, we did have $14 million of delinquency balance in payment plans.
Unknown: And then about 73% of the delinquency balance is in EPR and residential customers.
Unknown: In our commodity budget, mitigations and forecasts, due to the lower hydro for the year, we do see that UARP and WAPA is below plan of 244 gigawatt hours.
SPEAKER_14: However, our commodity forecast is still below budget of about $88 million due to the favorable market prices.
Unknown: And then finally we have days cash on hand. August actuals is actually right at budget, 229 days.
SPEAKER_14: And then as of the end of the year, projected to be at 182 days, compared to budget of 164 days, and there is no outstanding CP at the end of December.
SPEAKER_14: And that concludes my presentation.
SPEAKER_03: Thank you very much. Questions?
Unknown: Really quick on the first main data slide. Are we expecting some of these projects, this is through August, are we expecting some of these projects that were delayed to still catch up this year?
SPEAKER_05: Because that was the main, the blue box.
SPEAKER_05: Go back.
Unknown: I know that S4 is still behind and will be less than what was planned. On the EDAM, I believe it's been delayed, correct?
SPEAKER_14: Yes, that's correct.
SPEAKER_15: So that's a little low, and the customer revenue was a little higher than budget, because it's a $100 million difference from July to August on the net income.
SPEAKER_05: Which is great, because then the cash flow is staying high and we're not needing to go out and borrow, like we were expecting.
SPEAKER_05: Okay, thank you.
Unknown: You're welcome.
SPEAKER_04: Yeah, Scott Martin, that's exactly right. What happens when we run a little higher on net income, that's exactly what happens, is we don't go out and borrow.
SPEAKER_04: So you can see the cash flow situation is better than budget at this point.
SPEAKER_04: So we haven't been issuing any CP, and we actually only went out for $200 million in total financing this year.
SPEAKER_04: Total new net money, which was about $150 million less than what we had anticipated.
SPEAKER_04: So we borrowed substantially less this year than what we had thought, and we're looking at next year as well.
SPEAKER_04: We're going to be coming to the board, obviously, in November to ask for authorization for borrowing for 2026.
SPEAKER_04: And we'll hedge that a little bit, depending on how normal circumstances are between now and 2026.
SPEAKER_04: But we would expect borrowing to be hopefully below as well in 26, given the cash flow.
SPEAKER_05: Good, thank you for that.
SPEAKER_03: Okay, thanks very much.
Unknown: And that concludes that item.
SPEAKER_03: Item number eight is the Internal Audit Services Report, the Status of Recommendations Report for Q3 2025, and the California Energy Commission Power Source Disclosure Program.
SPEAKER_03: This is an opportunity item, if any board members have questions of Claire at this time.
Unknown: Claire Rogers, our Director of Internal Audit Services, is here.
SPEAKER_03: I have no questions, but I noticed that you see how this do another redesign of the power source disclosure requirements.
SPEAKER_05: So I thought that was interesting. There's a lot on that. There's a lot on there these days when I got my start.
SPEAKER_03: Thanks, thank you very much.
SPEAKER_03: Speakers? I have none.
SPEAKER_15: No, we have no public comment.
SPEAKER_03: Okay, great.
SPEAKER_03: And the next item is public comment for items not on the agenda. Do we have speakers for that item?
SPEAKER_15: I do not see any hands now.
Unknown: Okay, then last up, let me give a reminder. Written comments received on items not on the agenda will be included in the record if received within two hours of the end of the meeting.
SPEAKER_03: And the last item is to provide a summary of committee direction.
Unknown: I do not have anything.
Unknown: Okay. So that concludes the agenda, but it should not pass without notice that Crystal Henderson and staff managed to come up with exactly the right length of time this meeting would last.
SPEAKER_03: So congratulations, you're batting a thousand.
SPEAKER_03: We did have some committee direction in my request to get the social media.
SPEAKER_11: Yeah, I think that that was something that was going to happen.
SPEAKER_15: Doesn't happen.
SPEAKER_03: Okay, sorry about that. With that then, we are adjourned.