Finance Audit Aug 18 2026

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Unknown: we all ready

SPEAKER_11: up okay, okay, ready?

SPEAKER_11: Okay, five seconds.

Unknown: Okay. Thank you. Good evening and welcome to the Finance and Audit Committee and Special

SPEAKER_11: Board Meeting of August 18th. This meeting is being recorded and can be accessed on SPUD's

SPEAKER_11: website. Please remember to unmute your microphone when speaking in order that our virtual attendees

SPEAKER_11: may hear. The microphone will display a green indicator light when the mic is on. For members

SPEAKER_11: of the public attending in person that wish to speak at this meeting, please fill out

SPEAKER_11: a speaker's request form located on the table outside of this room and hand it to security.

SPEAKER_11: Members of the public attending this meeting virtually that wish to provide verbal comments

SPEAKER_11: during this committee meeting may do so by using the raise hand feature in Zoom or pressing

SPEAKER_11: star 9 when dialed in a telephone toll-free number at the time public comment is called.

SPEAKER_11: Technical support staff will enable the audio for you when your name is announced during

SPEAKER_11: the public comment period. You may also submit written comments by emailing them to public

SPEAKER_11: comment at SMUN.org. Written comments will not be read into the record but will be provided to the

SPEAKER_11: board electronically and placed into the record of the meeting if received within two hours after

SPEAKER_11: the meeting ends. Chief Legal Officer, please conduct the roll call. Director Kurth? Here.

SPEAKER_03: Dr. Buettomson? Present. Chair Rose? Dr. Buettomson and

SPEAKER_03: Kirtha present. Chair Rose is absent. Also present are Directors Herber to my

SPEAKER_03: own, present to my own, Director Samburn. And I understand Director Fishman will be a little bit

SPEAKER_03: late. Great. Thank you. Okay. Item number 1 is the sole discussion calendar and tonight's

SPEAKER_11: agenda and requires board action tonight. Item number 1 is to appoint the following persons

SPEAKER_11: who filed the only declaration of candidacy for SMUDs 4, 6 and 7 to serve on the SMUD Board of

SPEAKER_11: Directors for a four-year term commencing on January 1, 2027 through December 1, 2030. Pursuant

SPEAKER_11: to section 11852.5 of the Public Utilities Code. Ward 4 is Rosada Herber. Ward 6 is Dave Jamil.

SPEAKER_11: And Ward 7 is Heidi Samburn. So on Friday, SMUD did receive a certificate of facts confirming that

SPEAKER_03: only one candidate filed in SMUD wards 4, 6 and 7. And they requested that the SMUD Board appoint

SPEAKER_03: Rosada Herber to ward 4, Dave Jamil to ward 6, Heidi Samburn to ward 7 for the term, four-year term

SPEAKER_03: commencing January 1, 2027 through December 21, 2030. And so the board will be acting tonight's

SPEAKER_03: meeting. Anything else? Is there any discussion on these items? Can we vote on them individually? No. I'm

SPEAKER_07: going to say no. Have there been any cards received? I don't have any cards. I don't see any virtual hands

SPEAKER_03: raised on this item. If there are no corrections, changes or additions, I will entertain a motion to

SPEAKER_11: approve the discussion calendar. Item number 1. So moved. Second. We can't second it. So I'll second

SPEAKER_11: that. Director Rose? Director Buettomson? Yes. Director Fishman? Director Herber? Yes. Vice President

SPEAKER_03: Kurth? Aye. Dr. Samburn? Aye. President Tamayo? Yes. Discussion calendar is approved. Congratulations.

SPEAKER_03: We had some extras today. Can I just ask a question real quickly? My understanding was that the public knows that it costs

SPEAKER_02: quite a bit of money to put our names on the ballot. If I recall, it was in hundreds of thousands of dollars for each person. Is that

SPEAKER_02: correct? That is correct. Okay. Well, I just want the public to know that it's saving ratepayers money by us not being on the

SPEAKER_02: ballot. So that's a reason to do this. So I just wanted to say that so people know. Because a lot of people don't know that. All

SPEAKER_02: right. Thank you. Yes, that is correct. Yes. It's a money, significant cost savings when there is no candidates to choose from. Except one. So okay.

SPEAKER_11: Item number two is to discuss ratifying the CEO's execution of emergency direct procurement contract between SMUD and WHS America. The amount of $2.5 million for fault line and

SPEAKER_11: transition joint repair for the work on 115KV line at station E to station G, line one underground high pressure oil field due to a cable fault. Your

SPEAKER_11: presenter, Joe? You don't look like Joe. You look like Eric. Eric Poff, director of transit association telecommunication and meteor

SPEAKER_11: assets will present this item. Thank you, thank you, Dr. Bowie-Thompson. So sorry to have to report, but on August 1st of 2026, we had a fault that occurred on our 115KV station E to station G line.

SPEAKER_08: And this may sound familiar. Because a year or a plus ago, we had the same fault on the same line in the basement of station G. So there's only a few contractors out there that have the capacity, the ability to do splicing on this type of 115 high pressure filled oil cable. So that is WHS.

SPEAKER_08: And once we identified, you know, immediately identified that we had a fault on this, we reached out to WHS to start mobilizing their crews to start moving towards us. We anticipate there should be here at the end of 2026. No customers were impacted. I'm happy to report that. But this is a backup line for line two. And we would want to make sure we get this back in service as soon as possible.

SPEAKER_08: As quickly as we can. Next slide. So just to give you a size and reference, if you don't recall from last year, again, this is the same line one that occurred. It was a different phase. It was B phase that faulted this time. But we are taking a big re-review, if you will, on the engineering and reevaluating the configuration of this splice joint since this is the second time it's failed.

SPEAKER_08: However, that is going to take some time. And due to the, you know, we want to have redundancy in the system. We are going back. We have all of the parts on hand that we ordered last year when this occurred to avoid any long lead times for parts. And we are going to be, as soon as WHS gets to work, we can start the repair process to start reinstalling these.

SPEAKER_08: And we are negotiating, our supply chain staff is negotiating a two-year additional warranty on the craftsmanship of this. So we are shooting for early October to get this line back in service. So we are here to ask the board for approval for our CEO, general manager, execution of an emergency direct procurement contract between SMUD and WHS. In the amount of 2.5 million for fault line and transition joint repair work for the

SPEAKER_08: 115KV station E to G line underground high pressure oil field cable. And I will pause there and ask the board if they have any questions.

Unknown: Does anybody have any questions? Okay.

Unknown: Just on the insurance and the coverage, so we are going to ask for an extra year of a warranty?

Unknown: Two years. We were just over the one-year warranty when this failed, unfortunately. So we are going to ask for a two-year warranty. And again, more importantly, look at reengineering, you know, why

SPEAKER_08: this is continuing to fail again, more importantly. Great question. With those changes, I would support. Thank you, Dr. Samberg.

SPEAKER_11: Okay. I don't believe we have any cards on this. Thank you. And then Greg asked to pause on number three. So anything else on this item, number two?

SPEAKER_03: On number two, just confirming we do not have any virtual speakers on that item.

Unknown: Okay. So we are going to skip item number three at this time. And then move to number four, which is discuss authorizing the CEO to negotiate and execute a 20-year PV power purchase agreement between SMUD and front power for 728 of lots of solar parking canopy located at Grant High School.

SPEAKER_11: In connection with their Grant High School and Solar Battery Microgrid project with a scheduled commercial operation date of November 4, 2027, a pre-pigment of a million dollars at a price of 15 cents per kilowatt per hour in support. Rachel is here, Director of Distributed Energy Solutions.

SPEAKER_10: Good evening, everyone. Good to see you. Rachel Wong, Director of Distributed Energy Solutions. So you may recall that the board has expressed a lot of interest in providing solar for our schools. And this project is actually coming to fruition. So really, really happy to be here to bring you this project and to share the approach that we've been talking about for so long to develop encouraging that pairing of solar and storage and bringing that resiliency to our community.

SPEAKER_10: So as mentioned, here to ask you to authorize our CEO and General Manager to negotiate and execute upon this PPA. Next slide, please.

Unknown: So we have been really, really fortunate to have the partnership of the Twin Rivers Unified School District for many years. They've been the one to lean in with us as we think about new and innovative approaches. They were the ones that partnered with us to start on V2G school bus work, which we're continuing to do.

SPEAKER_10: And they were one of the two school districts that actually expressed some interest when we said, hey, we're looking at a different model as it relates to providing solar and storage for schools and customers. And would you be interested in helping us really demonstrate this idea?

SPEAKER_10: So tonight's request, I just want to be clear, is just for the solar portion of the project. But I am going to go over some of the details just to remind you what this project is about.

SPEAKER_10: So we've partnered with Twin Rivers on the solar and battery microgrid project at Grant Union High School. The project is going to provide renewable energy for nearby community members, support for the use of the school's gym and stadium during extended power outages.

SPEAKER_10: And during Blue Sky Operations, we can actually dispatch those batteries to support SMUD's grid through our commercial VPP offering.

SPEAKER_10: The project is located in the Del Paso Heights neighborhood, where 30% of children live below the poverty line. So this is definitely a community to help support.

Unknown: And this is parking canopy solar. So it's actually going to provide shaded parking and also help to reduce the urban heat island effect.

Unknown: Next slide.

Unknown: So what's innovative about this project and approach is that the solar and the battery are actually on SMUD's side of the meter. So it is not a behind the meter installation. The school is hosting the site. SMUD is actually purchasing all of the renewable energy, as well as the capacity and the renewable energy credits from the solar generation,

SPEAKER_10: as well as the capacity from the battery storage that's not when it's not in use for emergency purposes. As such,

SPEAKER_10: we get the energy capacity and the renewable energy attributes for the solar system. What we're doing with this generation that we're purchasing is that we're actually putting it into our

SPEAKER_10: our residential solar shares program. And the intent is

SPEAKER_10: for us to actually target market to members of the community around the Grant Union High School to be able to really participate in solar. As we've talked about leveraging residential solar shares

SPEAKER_10: to bring solar to those that can't access it, the intent is to have this solar installation and have people in the neighborhoods actually leveraging and utilizing that solar generation

SPEAKER_10: that's within their community. You may also recall that I talked about last year during our board presentation on customer programs that our residential solar shares program is targeted at low and moderate income customers. We don't limit who participates, but actually over 94% of our residential solar shares customers fall into our low and moderate income categories, where 12% of the participants are EPRA participants.

Unknown: The battery storage when it's not used for grid outages will support our commercial VPP, dispatching batteries to support the grid. But during grid outages, the microgrid is going to be islanded to support key school facilities.

Unknown: We've told you that Grant Union High School is actually already designated as an emergency shelter by the American Red Cross. And so this is really going to support that function now to provide power to those critical facilities in those emergency situations.

SPEAKER_10: And the selected vendor that we have for front energy, they have extensive experience with solar installation for schools, so they're also going to be providing a renewable energy curriculum to the school as well.

SPEAKER_10: Next slide. So this is really, and we can click to the next slide too, this is really the first phase of what we see as potential for additional work in this concept. As I mentioned, we're starting with that community solar and microgrid powered shelter to help support international solar.

SPEAKER_10: And we're going to be looking at that in emergency situations. But as you know, we've been working on vehicle to grid with the V2G school buses with Twin Rivers. And so a future phase will be looking at leveraging V2G school buses to actually add additional battery capacity to help support that resiliency.

Unknown: Next slide. So as I mentioned, this presentation is actually approving the solar PPA portion. So getting into the details of that, as Director Bowie Thompson said, the installed capacity is

SPEAKER_10: 130 kilowatts. The price includes a $1 million upfront payment coupled with a not to exceed 15.4 cents per kilowatt hour. And the reason why we said not to exceed is that solar projects have actually had a property tax exemption in California, but that actually expires January 1st of 2027.

SPEAKER_10: There's been a lot of legislative work to try to extend it, but it's not necessarily going to play out. If that happens, if it does get extended, the price will drop down to about 13 cents a kilowatt hour.

Unknown: And the term is 20 years with an expected online date in November of 2027. So I do want to acknowledge that this price is expensive, like 15 cents a kilowatt hour or almost 16 cents a kilowatt hour is something that is higher than what we've been seeing.

SPEAKER_10: I think that's the reality of the market. We've done some market analysis, and the cost of this project at like $5.10 a watt is in line with what the CEC has seen through their solar loan program where the average cost of canopy solar, because this is canopy solar, this is not ground mount or building mount, is in that $5.60 a watt.

SPEAKER_10: So we're in line from a market pricing standpoint.

SPEAKER_10: Next slide. So we selected Forefront Power LLC based upon evaluating three different offers. Their offer had the best value, and they also had extensive and award-winning experience specifically with solar canopy projects for school districts and public agencies across California.

SPEAKER_10: So you can see on the map, and I know the text is really small, but many, many different school districts as well as public agencies in California.

SPEAKER_10: And as you know, working with school districts requires some special considerations, and this is an innovative project where we're learning as we go. That's why it's taken a lot of time from a planning standpoint.

SPEAKER_10: So that experience, not only in installation of canopy solar, but working with schools specifically was really important as we considered the different offers.

SPEAKER_10: And with that, next slide, I will ask you to authorize the Chief Executive Officer and General Manager to negotiate and execute a 20-year solar PV power purchase agreement, PPA, between SMUD and Forefront Power for a nominal 728.75-kilowatt DC solar parking canopy located at Grant Union High School in connection with the Grant Union High School solar and battery microgrid project with a scheduled commercial operation date of November 4, 2027, a prepayment of a million dollars,

SPEAKER_10: and a price of 15.47 cents per kilowatt hour substantially in the form attached, because I think the PPA was attached in the board packet. That's the mouthful.

SPEAKER_10: And with that, I will take any questions.

Unknown: Thank you, Chair Buie Thompson. I just had a few questions about this.

SPEAKER_09: And I mean, you know, every school in our service territory wants to have a solar installation. This is a huge one. I mean, 700 KW is huge.

Unknown: Yeah, actually, and if we flip back, oh, maybe two slides, you can actually see they've got both parking canopies in that parking lot in the upper left hand, and there's actually some solar canopies on the, what looks at me, left side of the stadium.

SPEAKER_10: So we actually worked with the school. I think we had certain configuration, and then there was certain, you know, wiring and things like that that might require some different work.

SPEAKER_10: So we actually worked with the school because there was some consideration of, well, maybe they might build a building or upgrade a building in a certain place of where to place those.

SPEAKER_10: But it does provide an opportunity for a little bit more.

SPEAKER_10: When we first started this model, we were thinking probably around 500 KW, just based upon what high schools potentially have as options for parking lot, but this site actually had a little bit more space.

SPEAKER_10: Right. Isn't the canopy solar like the most expensive?

Unknown: It is very expensive. So as we look at things like ground mount or roof mount, canopy solar is more expensive, and that's why you see what the, like I said, the market price is a lot more expensive.

SPEAKER_10: I think the reason why we've been going with canopy solar is, as you think about schools, and the reason why we picked high schools is because they have more space to put in PV.

SPEAKER_10: Otherwise, if you're thinking about resiliency, you're really not going to have enough space to put a large enough PV system coupled with the battery storage to really make a difference.

SPEAKER_10: And so, yes, it is expensive. It also provides that shade. So it's a function that provides some value to the school from that shading standpoint.

Unknown: And that's why the model has been from the beginning canopy, but recognizing that canopy solar is expensive.

Unknown: And another question I have is, the million dollars, is that coming from SMUD?

SPEAKER_09: Yeah. So the reason why we structured it with a $1 million buy down and then the solar price is, you'll see that annual cost is $170,000, was really, it was able to, as we think about budgeting, was able to kind of fit into our budgeting.

SPEAKER_10: So by doing that buy down and then having that 15 cents, 15.47 cents. So Scott, if you want to speak to that.

SPEAKER_10: Yeah. Scott Barton, CFO. The million dollars is from what we call the AB32 funds. So we have allowances that are given to us by their resources board.

SPEAKER_06: And we, because we have been fairly aggressive about decarbonizing our portfolio, we have excess allowances that are sent to us by their resources board.

SPEAKER_06: And we sell those allowances, generate revenue, and then have to spend that money on the statutory requirements to meet our decarbonization goals.

SPEAKER_06: So any project that would reduce carbon can be supported by those sales of those allowances. And this is one of those projects that we're using those funds on.

Unknown: I see. Is this our first solar project with a school under the new program?

SPEAKER_09: This is the first one with this model where we are doing it in front of the meter. Yes.

Unknown: All right. Well, I love solar. I'd like to see solar everywhere. This seems a little expensive, but, you know, as long as we can keep adding more solar in our service territory, I think that's a good thing. So thank you.

SPEAKER_09: Thank you. Great presentation. It's so exciting to see this finally coming to fruition. Yeah. One question on the term. So is there a reason it's 20 years? I know a lot of our solar projects are 30 years.

SPEAKER_02: And that could also help, you know, spread the costs. So I think just working with the developer, the PPA term was 20 years. But it does have within the PPA an option to extend beyond that as well.

SPEAKER_10: Is it like one year, five year options? Is it? I don't remember what the term was it up to 10. Okay. I think I've got like people. Yeah. It's 10 10 more years. So we have an option to renew for two or three years. We have the option to go to 30. Yeah. Okay.

SPEAKER_02: Well, I love this. And I really love how the solar shares can be literally shared with the regional folks who are under resourced and really need this kind of support. So and it's a not to exceed a number, even though. Yeah. So hopefully the state will pass the bills. The bill actually in process right now. Is it just waiting to get to the address?

SPEAKER_02: I think I don't know, Laura, if you've been tracking it or not, it seems like it's a little pessimistic that it will actually get extended, although it has been extended. Like this is something that's been extended over multiple times. But I haven't heard the latest. Yeah, we can check on the status of that. Okay. That would be good to know because we are at the end of session. There's only a couple weeks left. And if there's anything smud can do to help push that through, that would give us a break on that. Save us a couple cents. Kill what? That'd be great. Thank you. Anybody else?

Unknown: Rob?

Unknown: Sure. Everybody else has done. So as I know, I've told you many times and I'm absolutely sure you've forgotten. I'm on the Twin Rivers Citizen Bond Oversight Committee watching over the money that's spent on the two bonds that were passed in the Twin Rivers District on the same ballot. So pretty extraordinary to see all the host of projects that are going on within the district and all the steady improvements that have been

SPEAKER_07: happened there. With us tonight is Ryan DeGio with the Twin Rivers District. He's overseeing all of that huge construction project that's going on there. And I have to tell you how proud I am. My dad went to Grant when it was first opened many, many years ago. And I went to Norde Del Rio now closed along with our former CEO and General Manager, Paul Lau. Grant has more or less adopted us as their alumni now. And I think he's

SPEAKER_07: been working with us since the high school shut. And so just to see this continuity of progress in a community that most folks don't expect wonderful things from, but we'll just continue to prove them wrong. And with that, I'll be happy to move this item.

Unknown: Anybody? Dave?

Unknown: Yeah, hi. Yeah, thank you very much for moving this along. What is the capacity of the batteries here?

Unknown: We'll actually bring back the battery to the, we'll communicate once we're kind of a little bit closer relative to the operating agreements with the battery. So we'll bring that back to you.

SPEAKER_10: Okay, thank you.

Unknown: Okay.

Unknown: Okay.

Unknown: You said you had a speaker?

Unknown: Yeah, we do have a hand raise from John.

Unknown: Hello, can you hear me?

Unknown: Yes, yeah.

Unknown: Yes, we can hear you.

SPEAKER_04: Okay, I couldn't hear you. Okay. Good evening, Chair board and committee members. This is John Weber. And I think it's a great idea to do solar over parking lots. I think it's wonderful to do it at a school.

SPEAKER_04: I do have a question about the orientation of the panels, because that has a lot to do with the value of the electricity generated at the site. So I'm hopeful the orientation will be southwest or west maximize generation during peak time.

SPEAKER_04: That would give, that would also maximize the value of the PPA. So please consider the orientation of the panels before approving this project. Thank you.

SPEAKER_03: I do not see any other hands now.

Unknown: Thank you. I think that was it for that item.

SPEAKER_11: So number six.

SPEAKER_11: Item number six is to provide board with SMUD's financial results from six month period and June 30th, the summary of SMUD's current power supply. George Bond, Director of Accounting, will be here.

SPEAKER_01: Okay. Good evening, SMUD board. George Bond, Director of Accounting, here to cover the topic of financial results and power supply costs through June.

SPEAKER_01: We'll start with financial highlights. So customer revenues is $853 million. This is $15 million over plan or approximately 2%. Driven largely by residential usage is a little bit higher.

SPEAKER_01: One metric we track is air conditioning days. So how many days do we need to run the air conditioner? And this year is about 20% above the average through June from the data that I've seen.

Unknown: Commodity expenses are $268 million. $6 million or 2% below plan. That's largely driven by the fact that we have lower fuel costs than what's in the budget.

SPEAKER_01: Driven by lower thermal generation as well as low market power prices. We'll get into that a little bit more later. Other operating expenses, $507 million.

SPEAKER_01: That variance has actually crept up over the last couple of months. That's now $29 million under, which is about 5% lower than plan.

SPEAKER_01: That's driven by some under spending and customer services around timing around grants and some programs. T&D maintenance. There's some veg maintenance and substation maintenance that are a little below plan.

Unknown: And then public good expenses are below plan. That's due to some lower program participation and timing of some project work.

SPEAKER_01: Overall we're at $113 million through June of net income. Our budget is $57 million through June. So we're almost exactly for the math people almost exactly double our budget. $57 million was the budget. We're $56 million over that.

Unknown: Energy sources. We'll start with the chart on the left, which is the month of June. The little blue area is hydro and we're pretty well below plan for hydro in June. It's just not really great hydro conditions right now. Low precipitation for the year.

SPEAKER_01: No snow pack whatsoever to speak of. So that's driving that. The orange is thermal Jan. The green is purchase power and those are largely offsetting variances. We're under and thermal. We're over in purchase power.

SPEAKER_01: That's because low market power prices are making it more economical for us to buy in the market rather than generate thermal power.

SPEAKER_01: Going over to the right, that's year to date. Those largely followed the month to date. They're pretty much the same stories. Just again, not great hydro conditions right now. And low market pricing making it economical to buy power.

Unknown: Delinquencies. We're at $20 million. About 70% of that is residential and EPR. About 8 million of that is payment plans right now. A couple things just to note, you'll see we always get that peak obviously around September or October. And then it kind of gradually comes back down. Right now we're at 20 million. This time last year we were at 22 million for comparison. And then you'll start to see that number peak up again in July.

SPEAKER_01: I've already seen the numbers a little bit higher in July. Not much to speak of on the next few slides. Precipitation has not changed in the last month. It's about 90% of average and about 90% of the entire water year. So again, it's been a fairly dry year. Snowpack is completely gone. That's 0%. And the storage reservoirs are hanging in there at about 85% of capacity.

SPEAKER_01: Commodity budget. So I won't talk about the chart on the left. That hasn't changed since March 31st when we did the balance of the transfers. Going to the right, commodity cost is projected to be $11 million over budget at the end of the year. That's driven by the fact that our hydro forecast, as I said before, not great hydro right now. And that bears out in our forecast as well. And since hydro is such inexpensive power, when we can't generate it, we can't

SPEAKER_01: generate hydro. We end up theoretically having to then go in and buy more expensive power or generate more expensive power. So that drives the budget up a little bit. And then if you look at the chart at the bottom, you can see we're projecting to be 200 gigawatt hours under on hydro at the end of the year. That number might actually get a little bit lower even as we go. And then the last slide here is days cash. So we're for June 30th and for December 31st, we're above the

Unknown: budget on days cash. That's driven by the fact that we budgeted a $250 million bond issuance. And it came in when it was all said and done and the dust settled, we ended up with $284 million. So that is kind of driving up that days cash a little bit. That peak that you see the green peak in the middle, that is the $284 million that came in from the bond offset by the fact that we paid off $100 million in commercial paper. And so that means we'll go into the end of the year

SPEAKER_01: well above our 150 days of cash at about 219 days. We won't have any commercial paper outstanding at that point either. So I can take questions.

SPEAKER_01: Do you have any questions? Any cards? We have no virtual comments either. Okay. Thank you. Item number seven is the internal audit services report. It says the recommendations report for the second quarter of 2026, the green energy annual

SPEAKER_11: verification and the low carbon fuel standard program. Claire Rogers, director of internal audit services. She doesn't have her presentation, but she's here to answer any questions. I just want to say that I'm sorry I wasn't able to make your retirement party today. Thank you for the great work you've done for us and the people that you have trained on your team that will continue to work with you. Thank you.

SPEAKER_09: And I'll continue in your footsteps. Thank you, Claire. I believe this is one of your last, I think the board meeting will be your last, correct? So it's your winding down, it's the last committee meeting. Any cards? Anybody else? Laura? I don't see any hands now. Okay. So we will circle back to number three since director Fisherman is here. So back to number three, authorizing the CO to

SPEAKER_11: initiate board contracts to Sierra national construction and Doug vercamp general engineering for civil annual construction services for a three year period from September 1st, 2026 to her first 2029. But two optional one year extensions for an aggregate not to exceed of $250 million across these two. Eric is back here. Director of substation, telecommunications and metering assets. Thank you, chair. Bowie Thompson.

SPEAKER_08: So give you a little bit of description of what this contract supports. I really want to emphasize it's a whole bunch of civil construction. I think everybody's aware at Spud we don't have a civil construction team like we have an electrical construction team. So we are completely dependent on contracts like these to support our civil

SPEAKER_08: infrastructure work. And I described this as like heavy civil construction. Not only does it support numerous distribution construction projects like bulk substations that we have coming up in the next few years like station J, station B construction, Jackson bulk sub. There are some big projects that are coming down the pipe that this particular contract will support.

SPEAKER_08: There's a whole list here of just various jobs that this would do. This is a great picture of station G of us adding the fifth bank at station G coming safely off of the little boy truck onto its pad where it will be serving for many decades to come. So these are just some examples that that we are utilizing this contract for.

SPEAKER_08: Next slide. So I want to really highlight some of the innovations that the team used during this contract. We if you think of it last our last contract was a hundred million dollar civil annual construction and the kind of how we went through that evaluation process is listed there kind of on the blue and then several of the innovations that we implemented into this 250 million dollar contract.

SPEAKER_08: On the right, so I want to take you through some of them. The contract baseline you'll see as I mentioned is bigger and we did that very much on purpose in the attempt to attract more competition, more bidders to this. And we I believe we are we're successful as Doug beer camp was the first time we've been able to attract to bid on a Bali civil contract here.

SPEAKER_08: They've done a lot of work up at the your but so we were definitely counted as a success. And then also one of the things that we were able to do was having more negotiating power to utilize the terms and conditions for smud having a larger dollar contract on the craft labor. This is an area where we've really identified in this new contract of where the the markups are allowed.

SPEAKER_08: We only this contract was very clear that only being able to mark up on base pay versus base pay and plus plus fringe. So more advantageous to smud the equipment materials. It's just more transparency on what materials could be marked up in this contract. And then finally the escalation. I think was one of the bigger wins that we had in this contract.

SPEAKER_08: We are using a mathematical index based escalation formula versus the other contract didn't have that and we were just kind of receiving annual increase requests. So those are just a few innovations here. One of the other innovations that was used here was we used a real live example versus a hypothetical contract or a job for them to bid on.

SPEAKER_08: This real live example we have exactly what came in to weigh against what the contractors were bidding against. So it ensured that they had a real execution of a real world example that they were bidding on and we were able to really go through the bids in a much more thorough way utilizing a job that we had just completed.

SPEAKER_08: But just some quick numbers for you. We had 73 contractors notified, 20 contractors attended the pre-proposal conference and we received 11 proposals. So let's take a look. Those are those 11 proposals that we received. And as you as as chair Bowie Thompson mentioned, we are wanting to award both Sierra National Construction and Doug Bear Camp General Engineering for the

SPEAKER_08: board. This as you can see there is quite a big price difference outside of those bids and that is why we are recommending to the board that we select those two top bidders. So let me pause there and ask if there are any questions from the board.

Unknown: Just so that I'm clear, you're choosing two because you feel like you'll have a whole bunch of work to do or do they compete against each other to do the work or what's going on there?

SPEAKER_09: Yeah. Thank you for the question. So, Director Herber, we believe just the value here at SMUD, again if you look at the money on the proposal amounts between the top two bidders and just the next bidder down, it is between $25 million and $43 million of difference. So that was the main driver to answer your question of why we're recommending the top two bidders.

Unknown: And the reason why you're not just recommending one bidder is?

SPEAKER_09: We think we have enough work with those major bulk substations coming up that we can definitely keep the top two bidders busy.

SPEAKER_08: Thank you.

SPEAKER_08: Great question. Thank you.

Unknown: The last thing I want to do is get in the way of construction that we need to keep our system running. I have heard some concerns from people outside of SMUD and not directly related to this contract. And for that reason, I'm just going to ask that we don't put this on consent and hear a presentation on Thursday and give – I know one person in particular couldn't be here tonight but wants to speak to us on Thursday and give some information.

SPEAKER_05: So there's that person a chance to be here and hear – have this item separate from the rest of the consent item and sent calendar.

SPEAKER_08: Understood. Director Fisherman.

SPEAKER_11: Anybody have any other comments? Okay. Do we have any cards or anything on this?

SPEAKER_03: No, I do not see any cards or hands raised with this item.

SPEAKER_03: So this will be moved off, right?

SPEAKER_11: Okay.

SPEAKER_11: Thank you.

SPEAKER_11: On discussion.

SPEAKER_05: I'm sorry to make you wait and sorry to make you come back on Thursday but thank you.

Unknown: Okay. I think we went through. So the next is public comment for items not on the agenda.

Unknown: I do not see any hands raised.

Unknown: Okay. And I have not received any cards.

SPEAKER_11: Written comments received on items not on the agenda will be included in the record and received two hours at the end of the meeting. I believe there was one item on the summary of the meeting.

SPEAKER_11: Yeah. We'll confirm whether the California property tax exclusion for new solar construction is going to be extended.

SPEAKER_03: I do know that there was a bill that would have extended the deadline but that was held in committee in May 2026 but I'll make sure there's nothing else that's come up since then.

Unknown: Okay. That's it.

Unknown: Is it?

Unknown: Is it?

Unknown: Yes.

Unknown: Great. Thank you.