Finance Audit Nov 18 2025

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Unknown: Good evening and welcome to the Finance and Audit Committee and Special Board Meeting of November 18th

SPEAKER_05: 2025 this meeting is being recorded and can be accessed on smud's website

SPEAKER_05: Please remember to unmute your microphone and when speaking in order that our virtual attendees may hear

SPEAKER_05: Microphone will display a green indicator light when the mic is on

SPEAKER_05: Members of the public attending in person who wish to speak at this meeting

SPEAKER_05: Please fill out the speakers request form located on the table outside this room and hand it to smud security

SPEAKER_05: Members of the public attending the meeting virtually that wish to provide verbal comments during the meeting

Unknown: May do so by using the raise hand feature in zoom or pressing star 9 while dialed into the telephone toll-free number

SPEAKER_05: At the time the public comment is called

SPEAKER_05: Technical support staff will enable the audio for you when your name is announced during the public comment period

SPEAKER_05: You may also submit written comments by emailing them to public comment at smud org

SPEAKER_05: Written comments will not be read into the record but will be provided to the board

SPEAKER_05: Electronically and placed into the record of the meeting if received within two hours after the meeting ends at this point will our

SPEAKER_05: Deputy general counsel, please conduct the roll call

Unknown: director rose here director Buick Thompson

Unknown: Chair kirth here all committee members are present also president or directors Herbert and vice president tomorrow

Unknown: Okay, thank you very much that establishes a quorum for the meeting item number one on tonight's agenda is to discuss approving the

SPEAKER_05: 2026 proposed smud budget including debt service pay schedule and special compensation

SPEAKER_05: With us tonight is our mr. Scott Martin our chief financial officer

Unknown: All right, can you hear me great

SPEAKER_01: You've probably already noticed some changes for tonight right out the gate, right first. I'm wearing a tie

SPEAKER_01: at director Herbert's request

Unknown: I am colorblind. So my wife did dress me so I know it does match so I'm feeling pretty good about that

SPEAKER_01: the second change for tonight is that

SPEAKER_01: Breaking with prior tradition

SPEAKER_01: I'm gonna be the only speaker tonight and I know for a fact director tomorrow's excited about that

SPEAKER_01: Okay, because he's lived through the times where I spoke for four or five hours in front of this board, right?

SPEAKER_01: So he's excited about seeing me speak for for two hours tonight

SPEAKER_01: But I am glad to be here it's great to be able to present the 2026 budget

SPEAKER_01: To the public and to our board and looking forward to a good conversation tonight. So feel free

SPEAKER_01: I definitely don't want to be up here just speaking

SPEAKER_01: So I'd prefer to have just questions as we go through. So if something comes up

SPEAKER_01: You have a question. Let's just let's just handle it handle it then so

Unknown: With that I'll just kind of kick it off, you know

SPEAKER_01: smud has had a good long history of

SPEAKER_01: Good financial performance and I would kind of chalk that up to smud's leadership over time

SPEAKER_01: the prior CFOs the staff that have been here for quite some time and have

SPEAKER_01: contributed to this very sure and

SPEAKER_01: Quality financial foundation that we've been able to develop for many many many years

SPEAKER_01: I'm grateful to be the CFO and be able to continue that and I'm thankful for all the staff that

SPEAKER_01: You know works so hard to make sure that that that financial performance continues

SPEAKER_01: And it's not just my staff, but it's really the entire organization

SPEAKER_01: The fiscal discipline that that all the business units show

SPEAKER_01: All the directors and the way they spend their budgets

SPEAKER_01: Just really appreciate the focus and the effort on

SPEAKER_01: being fiscally sound

SPEAKER_01: There are a couple of key things that we try to

SPEAKER_01: Accomplish with our budget every year and these are sort of things that don't necessarily change year to year

SPEAKER_01: Each one might be weighted a little bit differently year to year

SPEAKER_01: But each of these elements really contribute to sort of that sound

SPEAKER_01: fiscal strategy and fiscal foundation that we have

SPEAKER_01: First is really making sure we have the flexibility within our budget

SPEAKER_01: We have a lot of risks that smud faces as a utility

SPEAKER_01: I think we had a good discussion about our enterprise risk policy

SPEAKER_01: last week where Michelle Kirby

SPEAKER_01: It was here in place for Jillian rich and she had a good conversation with the board about what our new

SPEAKER_01: enterprise risk

SPEAKER_01: Policy looks like and and our new enterprise risk framework

SPEAKER_01: and

SPEAKER_01: Maintaining the financial flexibility to be able to address those risks is really really critical to ensure

SPEAKER_01: that we have

SPEAKER_01: the appropriate financial capacity

SPEAKER_01: moving forward to to continue to to

SPEAKER_01: Address those things that could potentially lead to poor financial performance

SPEAKER_01: I'll be addressing a lot of those in a few slides, but rest assured that the 2026 budget

SPEAKER_01: Continues that financial flexibility and and funding the mitigations that we need to fund in order to address risk

SPEAKER_01: In terms of strategy or being strategic, you know

SPEAKER_01: The the board can again rest assured that the 26 the 2026 budget is

SPEAKER_01: focused on meeting our strategic directions

SPEAKER_01: Fortunately throughout the year you receive the the strategic direction reports

SPEAKER_01: from from the different directors around the organization that are responsible for them and

Unknown: to date

SPEAKER_01: with all the SD reports that we've done the board has

SPEAKER_01: Seen fit to approve them as has having been met

SPEAKER_01: and that's a lot of that is due to the budget and our spending and our focus spending to make sure that we

SPEAKER_01: Achieve our strategic direction without the financial foundation and the focus spending that we have on our key

SPEAKER_01: deliverables and our critical strategies

SPEAKER_01: We would struggle to be able to meet this the board strategic direction

SPEAKER_01: So again, this this budget is built around ensuring that we can achieve those SDs and the goals within the SDs

SPEAKER_01: It's also balanced between our short and long-term needs. We have a lot of very short-term

SPEAKER_01: capital

SPEAKER_01: Needs and infrastructure needs and that's for a variety of reasons that I'll be going into again later

SPEAKER_01: But balanced against that has to be what what will we need?

SPEAKER_01: tomorrow or the next year or two or three years from now and

SPEAKER_01: making sure that we are preparing a budget and

SPEAKER_01: Avoiding debt today so that we have all the flexibility we need financial flexibility. We need to achieve

SPEAKER_01: Even more great things in the future. So this budget is really balanced between the short-term needs and those long-run

SPEAKER_01: impacts and then finally the budget really is all about our community

SPEAKER_01: That's why we exist as an organization. It's about our community our customers

SPEAKER_01: We're not for profit unity owned. So it's critical that that our budget and

SPEAKER_01: All that we do delivers value to our customers and this budget continues our our long-standing

SPEAKER_01: Performance in terms of being very affordable it supports reliability

SPEAKER_01: That benefits our customers and our community it supports our our community impact plans all of our

SPEAKER_01: Spending to ensure that our customers are well taken care of and supported

SPEAKER_01: And this budget again is really community focused. So with that, let me kind of jump into the rest of this

SPEAKER_01: next slide, please

SPEAKER_01: great, thanks

SPEAKER_01: So I thought I'd talk a little bit about

SPEAKER_01: Some of those sort of the numbers behind the the financial foundation that I've been talking about

SPEAKER_01: To the chart on the right it shows kind of where smuds rates are relative to

SPEAKER_01: the other utilities

SPEAKER_01: around the state

SPEAKER_01: In particular some publicly owned utilities as well as investor owned utility

SPEAKER_01: And if you compare us against a lot of the other utilities, we are one of the most affordable

SPEAKER_01: One of the least cost in the state and we're very proud of that performance

SPEAKER_01: It takes a lot of focused effort over a long period of time to achieve that

SPEAKER_01: and we are we are very

SPEAKER_01: Focused on continuing that performance going forward as well

SPEAKER_01: The board recently acted already to adjust these rates in 2026 and 2027

SPEAKER_01: So the budget itself is not about our rates or our revenues or anything like that

SPEAKER_01: But our rates and our revenues are driven by our costs

SPEAKER_01: Which the budget is all about and that's what the board is approving is our spending

SPEAKER_01: And so how how we're doing with our budget and how we're doing with our spending ultimately drives our for our affordability

SPEAKER_01: And the rates that our customers pay

SPEAKER_01: if you look at that chart you can see a big difference between PG&E far on the right and

SPEAKER_01: Smut on the left and that's about a 51 percent difference between

SPEAKER_01: PG&E's average rates and our average rates and that generates about 1.9 billion dollars that stays right here in

SPEAKER_01: Sacramento because of that

SPEAKER_01: Very significant difference in our rates. It's also one of the things that

SPEAKER_01: The rating agencies those that are listed there on the left at the top where it says credit ratings

SPEAKER_01: Moody's ratings S&P Global and Fitch are the three kind of main credit rating agencies and

SPEAKER_01: They all rates mud double a or a a 2 which is the equivalent rating for Moody's

SPEAKER_01: Which is a very very good credit rating and it helps keep our

SPEAKER_01: debt when we issue it as as low-cost as possible a

SPEAKER_01: Couple of things that I just want to mention about

SPEAKER_01: What the what the credit rating agencies say about smud?

SPEAKER_01: And things that contribute to those very good ratings first is they say our strong financial operations management is a plus

SPEAKER_01: Our strong financial performance again that that strong financial foundation that we have

SPEAKER_01: of meeting our minimum fixed charge ratio and of achieving our days cash and

SPEAKER_01: Of keeping our rates low all of those things are contributing to our strong financial performance

SPEAKER_01: and

SPEAKER_01: That is again something that the rating agencies look at and monitor and utilize in there and their rating of smud

Unknown: In addition to that robust liquidity. We currently have

SPEAKER_01: About a half a billion dollars in an available liquidity including commercial paper letters of credit

SPEAKER_01: That we could access on a short-term basis if we needed to all of it is available

SPEAKER_01: We have zero outstanding at this point last year. We refunded seventy five million dollars of that

SPEAKER_01: short term liquidity that gave us that

SPEAKER_01: additional capacity now, so we have the full five hundred million dollars of

SPEAKER_01: The liquidity available to us if we need it and

SPEAKER_01: they also cite our low operating costs and again our competitive rates as reasons for

SPEAKER_01: That credit rating that they've given us

Unknown: All right, let's go to the next slide

Unknown: So what is it that that we're really asking of the board and what is the kind of high-level look at the budget?

Unknown: So the board request is really to approve our spending of two point three about two point three billion dollars in

SPEAKER_01: 2026

SPEAKER_01: That's broken out into as you can see on the sort of the chart on the left

SPEAKER_01: It's broken out into operations and maintenance

SPEAKER_01: public goods expenses our capital expenses

SPEAKER_01: our commodity costs and our debt service that we have to pay for prior debt issuances and new debt

SPEAKER_01: payments that we're going to make in 2026

Unknown: And really what we're asking the board to do is really listed there on the right

SPEAKER_01: In terms of the budget we're asking for authority

Unknown: to make transfers between what we call the rate stabilization fund and revenue and the reason we need that is that we park some

SPEAKER_01: Revenues like our low carbon fuel standard revenues that we generate through

SPEAKER_01: LCFS credits in the rate stabilization fund

SPEAKER_01: We also have funds in the rate stabilization fund to help us balance

SPEAKER_01: our hydro

SPEAKER_01: Water years so if we have a poor water year we pull money out of the rate stabilization fund to support the organization

SPEAKER_01: We have a good water year. We put money into the rate stabilization fund. So those transfers occurred on an annual basis

SPEAKER_01: And we also have some cap and invest funds that are in the rate stabilization fund that we will transfer between there and revenue

SPEAKER_01: During the year as well. So we're asking for the authority to make those kinds of transfers rate stabilization fund

SPEAKER_01: And we also are asking for the staffing level which I'll get to in a minute

SPEAKER_01: And we are asking for the declaration to issue debt

SPEAKER_01: Which we'll need to do to operate in 2026. We'll need to go to the capital market to issue bonds

SPEAKER_01: To continue to fund our capital expenses and expenditures in 2026

SPEAKER_01: So we'll be again the board is

SPEAKER_01: Declaring that we'll issue that debt and that will be reimbursing capital expenditures for those bond proceeds

SPEAKER_01: And then we have the employee pay schedule which is required by law

SPEAKER_01: So next slide

Unknown: So you might be asking okay, what is the difference between

SPEAKER_01: Sort of the revenues that you might that you approved during the rate process

SPEAKER_01: and the

SPEAKER_01: Budget that we're asking for authority to spend. Okay, so this slide really kind of goes over that in the rate process

SPEAKER_01: You approved rates that would generate about one point nine billion dollars

SPEAKER_01: That included rates for residential service as well as for commercial service pretty much all of our customers

SPEAKER_01: And it also includes some other income

SPEAKER_01: Which would be our interest income as well as some of the revenue that we earn from our

SPEAKER_01: community choice

SPEAKER_01: aggregator service that we provide and

SPEAKER_01: It also includes some of those transfers that I just talked about from the rate stabilization fund that may occur during the year

Unknown: So all told revenue revenue is about two point one billion dollars

SPEAKER_01: expected in 2026 on top of that will be borrowing or expect to borrow about 260 million dollars and that gets you to the

SPEAKER_01: the two about the two point three billion dollar budget expenditures for the year and

Unknown: really that

SPEAKER_01: 260 million dollars

SPEAKER_01: What we're what we're really asking of the board is to be able to issue up to 400 million dollars in total debt

Unknown: We don't anticipate it being 400 million dollars. But again, we we aren't in 2026 yet. So we don't know

SPEAKER_01: What our revenues are what our expenses are what what has happened with commodity markets?

SPEAKER_01: So we can't perfectly predict that so we're asking for authority to issue up to 400 million dollars of debt again

SPEAKER_01: We intend we anticipate at this point being in the 260 million dollar range

Unknown: Yeah

Unknown: I'm just sort of curious or the intentions the borrowed 260 million. Do you know off the top of your head?

SPEAKER_02: What the maximum out we could capitalize because I know we don't we don't capitalize everything that we technically could

Unknown: That's a good question, but if our seeds that I mean our capital budget for just 2026 is 670 million

SPEAKER_01: our capital budget for 2025

SPEAKER_01: Was 600 million so you're talking about over a billion dollars, you know of

SPEAKER_01: Expenditures that we could technically we could capitalize a lot more we could capitalize a lot more. Yes

SPEAKER_01: but

SPEAKER_01: Again, that's the balance between the short term and the long term the more we capitalize today

SPEAKER_01: the lower our net income is

SPEAKER_01: the more

SPEAKER_01: Expenditures we have for interest right and bond

SPEAKER_01: Repayments and that tends to reduce our ability to spend money on other things

SPEAKER_01: Right now and also in the future because those bonds last for for 20 years, right?

SPEAKER_07: So it restricts your flexibility to spend in the future

SPEAKER_01: Really we issue debt in order to maintain our 150 days minimum cash on hand without that debt issuance

SPEAKER_01: We would not be able to maintain that that metric that metric is a really key metric for especially for the rating agencies

SPEAKER_01: if we were to violate that metric

SPEAKER_01: we would

SPEAKER_01: Significantly risk our our credit rating from each of the rating rating agencies

SPEAKER_01: and again in in

SPEAKER_01: 2026 we're asking to do the new bond transactions and we may also do some commercial paper transactions

SPEAKER_01: I mentioned we have about half a billion dollars of short-term financing

SPEAKER_01: Vehicles which include commercial paper as well as letters of credit. We may access those in

SPEAKER_01: 2026 as needed to maintain that 150 days cash

SPEAKER_01: while we say lead into our

SPEAKER_01: Eventual bond issuance that we typically do sometime in the early summer

Unknown: Okay, next slide please

Unknown: Okay, so in terms of hiring and staffing

Unknown: in

SPEAKER_01: 2025 we actually asked the board for an increase to our staffing we had a 45

SPEAKER_01: position ask in

SPEAKER_01: Increase in in 2025 a lot of those positions were for our operations

SPEAKER_01: They were intended to actually increase our number of crews

SPEAKER_01: And a lot of those positions have been hired over, you know from during

SPEAKER_01: 2025 will continue to be addressed between 25 and 2026 but for 2026

SPEAKER_01: We are not asking for any additional

SPEAKER_01: positions beyond what we

SPEAKER_01: Had asked for in 2025. Yes. Yes. I was wondering if you could just tell me a little bit about

SPEAKER_00: What the limited term positions are

Unknown: So limited term positions are often as the name suggests

SPEAKER_01: positions that would be

SPEAKER_01: temporary in nature

SPEAKER_01: So as an example, we are working on the s4 HANA upgrade

SPEAKER_01: Starting this year and we don't anticipate that s4 HANA upgrade to SAP

SPEAKER_01: Going on for many many many many years. We hope that it's fresh, right?

SPEAKER_01: We hope that it's only going to last a couple of years

Unknown: And if it does we don't need to hire permanently right to to be able to

SPEAKER_01: Do that work, but we rather hire limited term to do just that project and then those folks

SPEAKER_01: Can be released from that project

Unknown: Thank you. I guess I

SPEAKER_00: I'm interested more in knowing where those limited term positions are. Okay

SPEAKER_01: Yeah, sure. I can I can give you that kind of a breakdown

SPEAKER_01: for 2026

SPEAKER_01: the limited term positions

SPEAKER_01: 21 of them are in the operating chief operating officers area. So in Frankie's area

SPEAKER_01: That's the most the second most eight of them are in the chief diversity offers area

SPEAKER_01: Jose I don't see him here but in Jose's area

SPEAKER_01: The next highest is five in my area

SPEAKER_01: We have four within the chief customer offer officer area

SPEAKER_01: We have three in the the chief information officers area

SPEAKER_01: We have two in the CEO and general managers area and we have one in the legal and government affairs area

Unknown: And that information I believe is also that that kind of detailed information there is is available in the budget book

SPEAKER_01: So

Unknown: We aren't asking for any additional authority for 2026

SPEAKER_01: And we're keeping it it flat to 2020 2025

Unknown: So let's go to the next slide please

SPEAKER_01: All right

SPEAKER_01: This slide really compares the 2025 budget to the 2026 budget

SPEAKER_01: And gives you kind of an idea of how our major spending categories are really changing from 2025 to

SPEAKER_01: 2026 so really start at the top here and kind of walk it through as to what is what's changing and

SPEAKER_01: A little bit of why all right, so commodities

SPEAKER_01: You can see are going down by 17 million dollars

SPEAKER_01: But as Jennifer Steve o likes to say and I'm gonna quote her

SPEAKER_01: This is a geography change in the budget see so it's not all about finance and finance sometimes we do geography too, right?

SPEAKER_01: So what what's actually occurring here is we consolidated

SPEAKER_01: What we call SFA which is our joint powers authority

SPEAKER_01: into back into smud the reason we did that is because the

Unknown: Biggest asset that was in that joint powers authority was our consumers power plant

SPEAKER_01: That power plants debt had been paid as to feast was to feast this year. Okay, so after that the fees meant and the debt going away

SPEAKER_01: We had the opportunity to just consolidate that asset back into smud instead of having it housed in a in a joint power

SPEAKER_01: Authority and when we did that that moved some of the expenses

SPEAKER_01: That were originally assigned to that joint power authority and moved it to another place within the smud budget

SPEAKER_01: Okay, so what what happened was that 17 million?

SPEAKER_01: actually was

SPEAKER_01: Caused by a 27 million dollar movement

SPEAKER_01: Away from commodity into other parts of the budget as a result of that consolidation of SFA back into smud

SPEAKER_01: So if you if you take that into account

Unknown: Then really commodity costs are going up by 10 million dollars

SPEAKER_01: from 2025 to

SPEAKER_01: 2026 and the driver of that increase really continues to be market volatility and our need to

SPEAKER_01: hedge against that volatility, so we

SPEAKER_01: put some contingency funds into our budget to address the volatility that we expect within natural gas commodity and

SPEAKER_01: Energy markets and that contingency increased our our budget by about 10 million dollars for commodities this last year or for 2026

Unknown: In terms of our operating expenses you can see they're going down by 17 million

SPEAKER_01: I'd like to say that's all you know the good hard work of our staff and cutting budgets

SPEAKER_01: But the reality there is that a lot of that is labor that is going to capital

Unknown: We have a lot more capital spending and more capital projects this next year and any labor that that works on those cattle

Unknown: To some extent the labor that works on those capital projects can be capitalized as part of the project and so that that

Unknown: That transfer of the 17 million is really labor. That's going into more capital projects

SPEAKER_01: The public goods expense is increasing by 5 million dollars, and I think that's some good news for the board

SPEAKER_01: That 5 million dollars is being allocated part to energy efficiency programs part to building

SPEAKER_01: electrification and part to customer assistance programs in

SPEAKER_01: 2026 so we're seeing about a 5 million dollar

SPEAKER_01: Increase in that program spending and the incentives that we're offering within those programs in 2026

SPEAKER_01: Capital spending again going up by 60 million dollars. We have a number of really important and valuable

SPEAKER_01: Capital projects that are part of our 2026 budget and again. I need this. I just really want to stress

SPEAKER_01: this infrastructure and how critical it is to meeting our customers needs one growth and to

SPEAKER_01: to maintaining our service and keeping our reliability as as

SPEAKER_01: High as it is

SPEAKER_01: So these projects are that we're spending money on are really critical for those for those reasons a couple of the things that are

SPEAKER_01: Contributing to the increase we have a couple of really big substation projects going on one is station J

Unknown: Which is downtown?

Unknown: It's about 42 million dollars in the 2026 budget

Unknown: We have also the El Rio which is kind of the rebuild of our El Verda substation

SPEAKER_01: Which is the north part of our service territory to the tune of 37 million dollars?

SPEAKER_01: Which is again going to help us interconnect the country acres solar and battery project, which is up in Sutter County

Unknown: And we have another the 39 million dollars

SPEAKER_01: That's going to go to support the country acres solar and storage project on its own and switching station and and work

SPEAKER_01: That's going to be more on site at that project to help facilitate

SPEAKER_01: The takeaway of that energy and capacity once it's done

Unknown: So that's just a sampling of some of the things that we're doing and again critical to our meeting our RPS

SPEAKER_01: requirements

SPEAKER_01: decarbonization as well as

SPEAKER_01: Maintaining and improving our reliability of our service

Unknown: also

SPEAKER_01: In in 2026 we're seeing an increase in the debt service and as I mentioned earlier

SPEAKER_01: We do anticipate issuing some new debt in

SPEAKER_01: 2026 to help pay for some of the capital costs that we anticipate

SPEAKER_01: spending on in 2026 so that's going up by about 11 million dollars and

Unknown: Then the revenue at the bottom might wonder why is that going down so much? Well unfortunately grants

SPEAKER_01: especially from the federal government

SPEAKER_01: are are not as available as they once were given all the policy changes and and

Unknown: changes to the administration on a federal level and so we're seeing a drop in

SPEAKER_01: some of the grant revenue that we would expect from from 2025 to 2026 including the

SPEAKER_01: CCPC grant which was funding our new meter installations

Unknown: Okay, so let's go to the next slide

Unknown: All right, let's dig down a little bit more into commodities

Unknown: Just for you know to level set you know when we talk about commodities we're talking about kind of two big

SPEAKER_01: components which make up our commodity budget the first would be our fuel which is the natural gas

SPEAKER_01: So that's the natural gas cost and natural gas is not just the natural gas itself

SPEAKER_01: But it includes transportation for natural gas from where it's produced to where we consume it

SPEAKER_01: So our power plants so that's all the infrastructure that goes into

SPEAKER_01: Bringing it from its production to where it's burned

SPEAKER_01: and that's a that's a

SPEAKER_01: Very large and substantial amount of different kinds of infrastructure to do that

Unknown: And when you start talking about power costs you're really talking about all the electrical energy that we produce

SPEAKER_01: From our own power plants or that we purchase from the grid

SPEAKER_01: The capacity that's associated with all of that

SPEAKER_01: infrastructure or generation

SPEAKER_01: and then all of the renewable energy contracts and and

SPEAKER_01: projects that we own

SPEAKER_01: And then the transmission and other infrastructure and district

SPEAKER_01: You know transmission that's required to get the power from where it's again where it's produced

SPEAKER_01: To where it can come onto our system and serve our customers needs. So those are kind of the two big

SPEAKER_01: components of

SPEAKER_01: You know commodity costs and what goes into them probably one of the biggest differences to between natural gas and power

SPEAKER_01: Markets and commodities is the fact that you can store natural gas which really changes the way you can utilize it

SPEAKER_01: And manage the risk associated with it

SPEAKER_01: Versus power where power is much more difficult and expensive to store and you can't store for long periods of time

SPEAKER_01: so for instance

SPEAKER_01: with natural gas you can store gas for

SPEAKER_01: months years very long periods of time once you've injected it into the ground

SPEAKER_01: For

SPEAKER_01: power

SPEAKER_01: Typically, you know a lot of the batteries these days are in the four to six hour range and once you've spent that four to

SPEAKER_01: Six hours, you've got to recharge the battery

SPEAKER_01: So very big differences between those two kinds of commodities and it really changes kind of the risk profile

SPEAKER_01: That we have in purchasing and managing

SPEAKER_01: How we deal with both of those commodity markets

Unknown: In terms of the natural gas components, we're spending about 182 million in 2026

SPEAKER_01: That continues to fall over time as we pursue

SPEAKER_01: Additional renewable projects and as we continue to pursue our zero carbon plan that continues to to drop

SPEAKER_01: And then the power costs are about 411 million again

SPEAKER_01: The reductions that you're seeing there are really as a result of the geography change when we consolidated SFA not as a result

SPEAKER_01: of an actual decrease in commodity costs

SPEAKER_01: So let's let's go to the next slide

Unknown: All right, so this is more a look at okay, where does that money go?

SPEAKER_01: within our commodity

SPEAKER_01: portfolio and in

SPEAKER_01: 2026

SPEAKER_01: Our overall commodity portfolio is going to be about 63 percent carbon free

Unknown: And that is really made up of long-term contracts as well as our carbon free

SPEAKER_01: Hydro resources and then our own

SPEAKER_01: SMUD renewable

SPEAKER_01: Projects that we have and that includes some small

SPEAKER_01: Hydro powerhouses as well as our Solano project wind project

SPEAKER_01: You can see also looking at the chart on the right that

SPEAKER_01: That there are some reductions going on in terms of our own renewables and in terms of

SPEAKER_01: WAPA provided hydroelectric power. We have a contract with Western Area Power Administration. They provide

SPEAKER_01: Hydroelectric power from their projects in the state and

SPEAKER_01: That WAPA has forecasted a decrease of about 11 percent of their

SPEAKER_01: deliveries to SMUD in 2026 versus 2025

SPEAKER_01: So that's driving a 1% drop in the amount of hydro that we would expect to get

SPEAKER_01: overall in the portfolio from WAPA and

Unknown: Then moving over just a couple of bars there

SPEAKER_01: To the SMUD owned renewables. You can see there's a 1% drop there as well. We update every year

SPEAKER_01: the sort of the profiles and generation

Unknown: that we get from our Solano project and

SPEAKER_01: Over time we've seen just a small drop in that also

SPEAKER_01: 2024 was the year in which

SPEAKER_01: We added the and that was the latest year with information. We don't have yet full year of 2025

SPEAKER_01: But in 2024 that was the year

SPEAKER_01: Which Solano 4 was being built which came online in June. So there was

Unknown: You know that really wasn't a great year for comparison because some of the turbines in Solano 1 were being

Unknown: Were being decommissioned which reduced generation and the new turbines didn't come online until June which increased generation

SPEAKER_01: so in 2024 you ended up with a pretty lower amount in from Solano and even in 2025 with

SPEAKER_01: Solano for all online all those turbines online and producing

SPEAKER_01: We're still seeing a reduction to what we had expected to see again

SPEAKER_01: That might just be seasonal patterns of when we continue to update it over time

SPEAKER_01: and

Unknown: We'll see if that that number actually starts to go back up as Solano for

SPEAKER_01: Continues to produce into the future. We only have one year so far of history on Solano for

Unknown: And if you go a couple of slots over there to the renewable long-term contracts

SPEAKER_01: We're increasing about 3% in

SPEAKER_01: 2026 that's some good news

SPEAKER_01: We have Hatchet Ridge coming online in December of 2025

SPEAKER_01: We've got Sun's Eowyn coming on in October of 2026 and we were able to extend the keeper the Kiefer

SPEAKER_01: biomass

SPEAKER_01: contract for another couple of years it ends in 2028 because they're anticipating actually

SPEAKER_01: working with next era to take that biogas clean it up and

SPEAKER_01: Inject it into the PG pipeline

SPEAKER_01: Which potentially could be used for smud's power plants, but we'd need to negotiate a new

SPEAKER_01: Contract with Kiefer that would not be for the power but would rather be for the gas coming from the field instead

SPEAKER_01: So that's to be determined in the future

Unknown: So let's let's go to the next slide

Unknown: Alright let's talk a little bit about risks and some of the

SPEAKER_01: Mitigations that we have in place to address risks across kind of some key areas

SPEAKER_01: You can see

SPEAKER_01: kind of how we

Unknown: break out

SPEAKER_01: The bigger categories of risks on the left hand side financial reliability clean energy and technology

SPEAKER_01: And then what that risk is defined as

SPEAKER_01: for the budget and then

SPEAKER_01: Some of the mitigations that we are putting in place to address those those critical risks, so

Unknown: At the top financial

SPEAKER_01: Again, one of the things that that we feel

SPEAKER_01: Is really important about our strategy or financial strategy is keeping things as flexible as possible. So making sure that we can

SPEAKER_01: Manage any of these risks that might occur during the year whether it's from weather

SPEAKER_01: Or maybe it's from supply chains or tariffs or regulatory policy that we can financially handle

SPEAKER_01: Those risks as they occur during the year. So we put in place some some mitigations

SPEAKER_01: That we are focused on for 2025 as well as 2026 that help us to help us address those a couple of them

SPEAKER_01: Rate stabilization funds which we've talked a little bit about we did add 60 million dollars to the commodity

SPEAKER_01: Stabilization fund last last year to address the volatility in commodity markets and help

SPEAKER_01: Relieve any risk that we might have there from commodity markets turning against us and against our our hedging portfolio

SPEAKER_01: We've also adjusted our grant strategy for some of the changes on federal policy level again

Unknown: Where some of those funds have been pulled back

SPEAKER_01: We're focusing on the state and the state has some some additional funds that we might be able to go after to increase

SPEAKER_01: Those grant revenues in the future. We are focused on our op-ex opportunities

SPEAKER_01: Which continue to deliver value and reduce our costs in 2026?

SPEAKER_01: We anticipate another 24 million dollars of potential op-ex savings

SPEAKER_01: To help us reduce our costs and keep our rates stable and low for our customers

SPEAKER_01: And again, we're going to continue to come up to hedge our our commodity costs into 2026. I do want to mention though

Unknown: When you think about hedging for commodity costs, although commodity costs can be very volatile and although we do have a hedging program

SPEAKER_01: I do want to make sure the board understands that there is no perfect way to hedge

SPEAKER_01: you cannot

SPEAKER_01: Perfectly hedge all risks that may exist within commodity costs

SPEAKER_01: So given that even though we do have a hedging program when commodity costs do turn

SPEAKER_01: Against us there is still some exposure

SPEAKER_01: That may exist even even though we do have a hedging program. That's one of the reasons

SPEAKER_01: one of the important reasons why

Unknown: we went and and

SPEAKER_01: established the

Unknown: the commodity cost stabilization fund because we wanted to ensure that even if come on even if we have a hedging program and

SPEAKER_01: Commodity costs turn against us that we'd have some funds available to help smooth out any of those impacts that might occur

Unknown: Terms of reliability

Unknown: Again, those are risks to our critical infrastructure ability to respond to outages. Yes, absolutely

Unknown: hedging yeah, I

SPEAKER_02: Guess my question would be how long how high and how long?

Unknown: Would the price of natural gas have to get to before we would see it start coming into our?

SPEAKER_02: Yeah, I guess our commodity just purchases, but then just be the general energy markets

Unknown: well, I

SPEAKER_01: Think more so then then the absolute

SPEAKER_01: Amount of the of the gas it's more the pace at which things change

SPEAKER_01: I'd probably describe so for instance. Let's go back to say December of 2022 when CPP was out and

Unknown: We were trying to deal with that in addition to a commodity market in December that took off

SPEAKER_01: Right in the middle, you know couple of a week or a week and a half into the month

SPEAKER_01: When things like that occur, it's difficult to hedge because the hedges that you create are at the month start

Unknown: So that when you when you financially settle you settle at that month start

Unknown: You don't settle every single day during the month

SPEAKER_01: So if those days look very different in the month than what occurred at the beginning of the month you can get very different

SPEAKER_01: Commodity exposure right and pay

Unknown: Far more than what your financial hedge may have covered you for okay, so things like that

Unknown: Really are

SPEAKER_01: drivers that are difficult for us to

SPEAKER_01: To try and mitigate or simply hedge with a financial product

SPEAKER_01: So yeah

Unknown: So let's let's go on to reliability

SPEAKER_01: Again some of the some of the mitigations that we have for reliability

SPEAKER_01: And I think most people have heard about the load growth that's occurring within our industry

SPEAKER_01: I think there's a lot going on in terms of AI and data centers and

SPEAKER_01: hyperscalers and significant growth and and

Unknown: Is occurring across the country? We are in California

SPEAKER_01: So we're not as exposed to that if you look across the western United States

SPEAKER_01: You know, Texas, Nevada

SPEAKER_01: some of these very lower cost

SPEAKER_01: States are really seeing

SPEAKER_01: What I would call extremely significant AI and data center growth in Sacramento

SPEAKER_01: We are seeing some definitely some interest all the way up to even 300 potentially 300 megawatts

SPEAKER_01: How much of that actually gets built and when is really a question still I wouldn't call any of it

SPEAKER_01: guaranteed

SPEAKER_01: We're certainly talking to various entities and engaging with them on whether or not they ultimately want to be here in

SPEAKER_01: Sacramento

SPEAKER_01: Certainly if you look in California

SPEAKER_01: Sacramento is a very attractive place to be if you're a data center or a hyperscaler

SPEAKER_01: You have a lot of load. We're one of the lowest cost utilities in the state or one of the greenest in the state

SPEAKER_01: We align being a public utility public the owned utility with a lot of AI data center IT type

SPEAKER_01: Objectives so, you know if you're going to locate in the state Sacramento is a very as a very good place

SPEAKER_01: We have a highly educated workforce. So yeah, there's a lot of opportunity in Sacramento if you're really in that space

SPEAKER_01: But again in terms of the Western United States

SPEAKER_01: We just we just don't have as much going on as some of the other states

SPEAKER_01: But we are looking at those load impacts. We're working with the various AI

SPEAKER_01: companies and and hyperscalers to understand when and what loads and where we're also working to

Unknown: develop hosting capacity on our system so we can kind of gear people toward where to go on our system to limit the impacts and

SPEAKER_01: We'll be developing

SPEAKER_01: policies and procedures that will institute to

SPEAKER_01: Address any, you know significant new loads that might come onto our system and impact

SPEAKER_01: Our resources or impact our need to build infrastructure or impact other customers

SPEAKER_01: In addition to that new technology platforms we have our new

SPEAKER_01: OMS coming in we we anticipate that being done by April 2026

SPEAKER_01: So ready for the 2026 end of 2026 storm season, which will be a big improvement for us

SPEAKER_01: and

SPEAKER_01: We have made significant improvements within our overall storm response process in particular and definitely adding

SPEAKER_01: Some some additional people who are going out to us damage assessors folks who at the very beginning of the process

SPEAKER_01: Who look at the damage done to our facilities and determine what the next steps need to be?

SPEAKER_01: And we've significantly improved the kind of the back end processes as well in that to ensure that we you know are focused on ERTs and

SPEAKER_01: Getting through those ERTs and reducing the impacts of of storms on our customers

SPEAKER_01: Clean energy we are looking at

Unknown: Updating the resource plan this this coming year

Unknown: So the resource plan for those that may not know is sort of our opportunity to take a holistic

SPEAKER_01: Look at what our goals are in particular our goals for for carbon reduction our goals for renewable generation

SPEAKER_01: our goals for

SPEAKER_01: Transportation or customer programs or transportation electrification all those things are part of the resource plan and

SPEAKER_01: We'll be kicking that off

SPEAKER_01: Near the end of I think it's fourth quarter of 2026

SPEAKER_01: We're looking we'll be looking for the board and engaging the community as part of that process in in late 2026 early

SPEAKER_01: 2027 and then we'll be looking for a board decision

SPEAKER_01: Late

SPEAKER_01: Spring 2027

SPEAKER_01: So that we can get ready for the the next rate process that will occur in

SPEAKER_01: Early summer that will kick off in early summer of 2027

SPEAKER_01: We anticipate that any any rate changes that we might have for 2028 and 2029

SPEAKER_01: Which should be a subject of the 27 rate process would be definitely driven by

SPEAKER_01: What's going on in the integrated resource plan?

Unknown: I just had a quick question and you might not be able to answer this but

Unknown: You know our goal is zero carbon by 20

SPEAKER_00: 30 and

SPEAKER_00: You know we're hitting right now at the end of 2025

SPEAKER_00: We're at 63 percent renewable energy if I heard you correctly

SPEAKER_00: How do you see?

SPEAKER_00: The you know

SPEAKER_00: remaining four years

SPEAKER_00: Progressing like do you see us?

SPEAKER_00: You know getting that large bulk that still has to be done

SPEAKER_00: More towards 2030 or do you see it the renewable energy slowly?

SPEAKER_00: Adding up. I'm just curious. You know what you and

SPEAKER_00: You know Laura and the rest of the executives are thinking about how that would unfold

Unknown: So great question that will definitely be part of the resource plan discussion

SPEAKER_01: Obviously, but I mean if I have to answer today based on the resources that we think are on the table

SPEAKER_01: Obviously you've seen some of the resources that we're going to be expanding in

SPEAKER_01: 2026 already as part of this pretty Sun's Ian Hatchet Ridge, right? We are striking will be bringing to the board a new

SPEAKER_01: Purchase power agreement for some additional geothermal resource as well

SPEAKER_01: and we some have some other resources build locally and

SPEAKER_01: Regionally that we're looking at to expand over this time as well, but in addition to all of that

SPEAKER_01: Kind of the key thing I think to really achieving you know that

SPEAKER_01: Substantial really big potentially absolute zero type goal is going to be that CCS project

SPEAKER_01: The CCS project with with our partner or with Cal pine

SPEAKER_01: Constellation if that gets built and developed

SPEAKER_01: And we can negotiate a a reasonable offtake agreement

SPEAKER_01: with constellation in Cal pine then

Unknown: You know we have a very significant large

Unknown: You know

SPEAKER_01: operational most of the time type resource

SPEAKER_01: That will substantially reduce carbon within the region. Yeah and for smud

Unknown: So a lot of some of it really depends on where that what happens with that project where that goes the 400 megawatt plant

SPEAKER_00: with that Cal pine is that enough to

SPEAKER_00: Catapult us to I mean it's like there's

SPEAKER_00: 37

SPEAKER_00: Percent that we've got a gain over four years is that enough to?

SPEAKER_00: Get us there in one year. It's very significant

SPEAKER_01: It's it would ultimately likely be three to three hundred fifty megawatts for smud

SPEAKER_01: Operating near

SPEAKER_01: Near all hours right probably 85 percent of the time 90 percent of the time

SPEAKER_01: So you're talking about a very significant increase to our total energy that would be near carbon free, right?

SPEAKER_01: And imported from them so it yes, it would be a it would be a substantial change

Unknown: for sure, yes

Unknown: Okay

SPEAKER_01: So I think we were talking about clean energy yeah, all right, so just one other thing maybe underneath the the clean energy

SPEAKER_01: topic some of the mitigations that we're doing

SPEAKER_01: Is managed charging and smart panels? I think it's a really

SPEAKER_01: Important for the board to kind of understand that that managed charging really helps us shape

SPEAKER_01: When demand exists within our system and as we continue to add more and more

SPEAKER_01: EVs to the system if all those EVs really pile on their charging on the peak times

SPEAKER_01: We would have a significant infrastructure issue. We would have to add a lot more spending a lot more

SPEAKER_01: Infrastructure a lot more generation to address

SPEAKER_01: That EV load, but if we can take that EV load and spread it out outside of our peak times

Unknown: Then we have more ability to manage it and less need for significant new infrastructure investments just to handle the peak

SPEAKER_01: Okay

SPEAKER_01: So this managed charging was a pilot. It's now expanding to a full program

Unknown: So right now in 2025, it's got 2,000 customers on it. It's worth a few megawatts

SPEAKER_01: but in

SPEAKER_01: 2026 we anticipate bringing that number five-fold increase to 10,000 cars on that program and

SPEAKER_01: You know somewhere between 15 to 20 megawatts worth of load

SPEAKER_01: That would be managed and moved around based on

Unknown: Based on that number of cars on the program. We again we continued we want to continue to expand this

Unknown: So that we can support customers both getting what they want from their electric vehicle

SPEAKER_01: The low cost the reliability from their electric vehicle the charging that they need

Unknown: But at the same time a lower and lesser impact on our overall infrastructure

SPEAKER_01: Okay, so that's that's really where this managed charging

SPEAKER_01: Program comes in and then the smart panel pilot another really important pilot

SPEAKER_01: I know Laura and her team have been kind of focused on this

SPEAKER_01: we're doing a pilot to try and

SPEAKER_01: Avoid the need for very expensive

SPEAKER_01: upgrades to a panel

Unknown: So a customer who may want to electrify or buys a new EV

Unknown: May I may be adding load right to their home

SPEAKER_01: and

Unknown: That may you know if an electric just comes out electrician comes out and just looks at the situation

SPEAKER_01: May he may say well, let's let's just upgrade this panel because you've added all this new load

Unknown: what the smart panels do is instead of just

SPEAKER_01: They pretty much allow you to add the new load

Unknown: But then they manage the load within the home so that the peak on that panel doesn't exceed the panel capacity

Unknown: Versus not smart panels which cannot do that

Unknown: Right. So this is a really big

SPEAKER_01: significant new potential opportunity and technology solution

Unknown: To all those very expensive panel upgrades that people have been needing to go through because of electrification or because of adding an EV within their home

Unknown: Okay, so piloting 80 of them in 2026

SPEAKER_01: We'll see how that pilot goes and then from there. We'll look to expand and

SPEAKER_01: again another way in which we can really optimize the grid rather than you know have a significant impact on the grid as people electrify

Unknown: Finally technology a

Unknown: Lot of the mitigations that we're doing we have a lot of new platforms going into place

SPEAKER_01: Within a smud including our significant SAP upgrade s for Hana

SPEAKER_01: We've got the whole digital platform transformation within customer going on with the SEW platform

Unknown: We have our OMS upgrades. We still have our derms system being

SPEAKER_01: Worked on and new phases of derms being implemented. So there's there's a lot of technology going on around the organization

SPEAKER_01: All of which we hope will improve our efficiency will allow us to take advantage of the new AI

SPEAKER_01: Opportunities that are coming

SPEAKER_01: And really focus on potential use cases with AI that could give us

SPEAKER_01: Hopefully significant savings going forward into the future

Unknown: All right, so let's go on to the next slide here

Unknown: Yep, great. All right. So what what do we where do we spend the major amounts of our?

SPEAKER_01: O&M

Unknown: Well, if you take a look at the big pie chart to the or sorry not the pie chart but the table to the right

Unknown: We spend about 309 million in in power gen and grid operations and maintenance and

SPEAKER_01: again, these these are critical expenditures really for us to be able to

Unknown: For us to be able to maintain and improve the reliability within our system

SPEAKER_01: So they're really they're really critical and necessary for you know, our customer service and our high quality customer service a couple of the things that

SPEAKER_01: we spend on including

SPEAKER_01: You know line maintenance

SPEAKER_01: Substation maintenance all those go into this power gen

SPEAKER_01: Maintenance all goes into this line item as well

SPEAKER_01: Again to help maintain a reliability for our customers

SPEAKER_01: a couple of

SPEAKER_01: Other expenses on here 285 million dollars for core operation support including our customer

SPEAKER_01: support functions as well as our IT support functions and all of what we call our corporate services functions our corporate services functions are really

SPEAKER_01: things like finance legal

SPEAKER_01: Marketing and community relations those kinds of functions within the organization. So

SPEAKER_01: Those are all the the

SPEAKER_01: kind of core corporate services areas

SPEAKER_01: we

SPEAKER_01: Also have about 89 million dollars in sorry

SPEAKER_01: Yeah, 89 million dollars in terms of electrification energy efficiency. We talked a little bit about those programs our veg management

SPEAKER_01: we're trimming north of 90,000 trees again in

SPEAKER_01: 2026 so 51 million dollars and we do have a focus on

SPEAKER_01: On wildfire here and trimming and focusing on the right of ways, especially up in the Europe. We have our greatest wildfire risk

SPEAKER_01: we still do all of our line inspections and our lidar work and

Unknown: Focus on the entirety of the right of way as we go along the whole Europe system. We're also installing some new technology

SPEAKER_01: Out there this year with grid where as a partner we have 500 devices that we're going to be installing on various

Unknown: Towers and poles that are in the u-arp area and those can help monitor

SPEAKER_01: sort of conditions and pre-worn of any conditions that may

SPEAKER_01: Ultimately lead to a a fire or failure or a spark or something like that

SPEAKER_01: So those where we have high hopes for that new technology

SPEAKER_01: To help us reduce our risks in in 2026 as well

SPEAKER_01: and

SPEAKER_01: then

SPEAKER_01: We've got our wildfire and property insurance this year we were very fortunate with our wild and wildfire insurance renewal we

SPEAKER_01: Were able to expand our wildfire insurance coverage, but also stay within the 2026 budget for our wildfire insurance

SPEAKER_01: So it actually you know, I don't want to say that the wildfire insurance market is turning or has you know

Unknown: Gotten significantly better, but it is definitely improved. I'll say from where it has been

SPEAKER_01: So our wildfire insurance program actually has has benefited from that this year and then

SPEAKER_01: In addition to that we have all of our community investments that we are doing

SPEAKER_01: Including all of our community impact plan as well as

SPEAKER_01: all of our investments and workforce development

SPEAKER_01: For our under-resourced communities to the tune of 42 million. So those are just some of the things that are going on within our O&M budgets

SPEAKER_01: Let's go to the next slide

Unknown: Alright so let's let's go a little deeper in some of the initiatives that we have within the O&M category

Unknown: If you look at the chart on the right

SPEAKER_01: You can see our days away restricted time and the total number of people that had days away restricted time

Unknown: from 2003 to September of 2025 through September of 2025 and you can see there's been a pretty significant

SPEAKER_01: reduction about 90% between 2003 and September of 2025

Unknown: That has really been driven by a change in our culture

SPEAKER_01: That change in culture has been built around our safety for life initiative

SPEAKER_01: And it's been a focus of all of our management. It's been a focus of all of our crews

SPEAKER_01: It's been a focus of all the safety team

SPEAKER_01: And that has really helped to support our overall reduction that we're seeing in DART

SPEAKER_01: However in September 2025, we still had through September 2025

SPEAKER_01: We still had 10 people who went out on DART injuries this year and for those 10 people

SPEAKER_01: No matter what our culture may be and how much we want to get to zero

SPEAKER_01: They were still injured when they ended the workday

Unknown: So it's really where our real focus is to make sure we get to absolutely zero incidents

SPEAKER_01: And getting there is gonna is gonna take a lot

SPEAKER_01: It's gonna take

SPEAKER_01: Continuing to change and improve our safety culture

SPEAKER_01: And continuing to be very innovative about the way we drive safety within the organization

Unknown: one of the things that we are doing in

SPEAKER_01: 2026 is

SPEAKER_01: Improving some AI capabilities within our safety management system

SPEAKER_01: And start using those for field ergonomic evaluations where again in the field they do a lot of crouching bending reaching twisting, right?

SPEAKER_01: It just presents a much higher risk and so we're utilizing those AI functions within our safety management system to help support

SPEAKER_01: those assessments and

SPEAKER_01: Again drive that safety culture to to help us to get to that absolute zero number

Unknown: We also have you know again contractor and public safety

SPEAKER_01: Focus we have more field observations of contractor safety going on in 2026

SPEAKER_01: Public safety really has to do with some of our coordination with our emergency responders

SPEAKER_01: Especially as we expand our battery and solar capacity

Unknown: At country acres we're gonna have our first utility scale solar project at 172 megawatts

SPEAKER_01: and

SPEAKER_01: That that storage project we want to make sure that you know

SPEAKER_01: it's it's it's safe and

SPEAKER_01: Operate safely and that we are working with our emergency responders in case of any accidents or our potential challenges there that they are well

SPEAKER_01: Aware of how to manage it and take care of it safely

SPEAKER_01: And keep our employees and themselves and the public safe. So

Unknown: That's going on in 2026

Unknown: In terms of grid reliability

SPEAKER_01: Again, the wildfire I think we've talked about we've talked about the managed electric vehicle charging a little bit and the expansion of that program

SPEAKER_01: And are maintaining and improving our assets that are that are currently on our system

SPEAKER_01: in terms of our skilled workforce, we are

SPEAKER_01: Working to

SPEAKER_01: Developing programs and rolling those out to

SPEAKER_01: In 2026 to

SPEAKER_01: focus on

SPEAKER_01: stem education with with kids

SPEAKER_01: In addition to work with our partners to train about a thousand new people

SPEAKER_01: To potentially take careers in the energy space

SPEAKER_01: We're also continuing with our line work or scholarship

SPEAKER_01: That scholarship it started last year with about 600 total applicants and it ended with five hires for SMUD, which is great to see

SPEAKER_01: It really reached out to typically

SPEAKER_01: Underserved and underprivileged kind of areas that would people that may never even have

SPEAKER_01: You know considered themselves as

SPEAKER_01: You know

Unknown: Trained for a lineman type position and they went through the program and were able to be hired

SPEAKER_01: So it's it's a it's a great program. That's been

SPEAKER_01: Expanding

SPEAKER_01: You know our outreach to our community and then again the we prosper together grant. It's a partnership with

SPEAKER_01: With just my mind with Valley Vision

SPEAKER_01: My brain is going been talking too long

SPEAKER_01: With Valley Vision

SPEAKER_01: To again expand workforce training programs in Sacramento and develop

SPEAKER_01: Community talent to help improve our our stem education

Unknown: Let's go to the next next slide

Unknown: Again some more

SPEAKER_01: On em initiatives our IR plan our IRP plan update is going to happen next year as I mentioned

SPEAKER_01: We've got a number of new resources that are part of our O&M expenditures, which include all of our purchase power agreements

SPEAKER_01: Not our capital investments. These are the purchase power agreements in terms of load flexibility. We are

SPEAKER_01: Expanding our load flexibility programs which include our thermostat programs our battery programs and our commercial programs

SPEAKER_01: from 80 megawatts in 2025 to near 100 megawatts next year, which is a significant increase

SPEAKER_01: Over where we are right now and is going to help us manage the grid differently and save in terms of resource adequacy costs

SPEAKER_01: In terms of technology. We are focused on our critical infrastructure protection program, which includes

SPEAKER_01: You know more safeguards for our bulk electric system assets that the NERC

SPEAKER_01: Requires us to keep safe and protected

SPEAKER_01: So we're working on some some additional IT protections for those for access to that data and use of that data

SPEAKER_01: By third parties as well as within SMUD

Unknown: We have our zero trust security model and I I'm gonna bungle the what that means

SPEAKER_01: so I'll just point the board back to what we talked about in in our security and

SPEAKER_01: and

SPEAKER_01: Briefing that we had cybersecurity briefing that we just had

SPEAKER_01: I think it was last was that last week. Yeah last week

SPEAKER_01: Okay, so I would point the board toward toward those briefings and all that was shared in those meetings

SPEAKER_01: There's a lot going on in cybersecurity space. Certainly we have significant risk there

SPEAKER_01: But we also have significant investments within our our program and with our people

SPEAKER_01: and

SPEAKER_01: We are focused on making sure that we are keep our data safe and keep SMUD safe

SPEAKER_01: With our cybersecurity program. We're also working on the smud org redesign, which is a holistic redesign of

SPEAKER_01: smud org. I know ferris and his team have been

Unknown: Anxious to get that going. We had a little bit of a delay with the RFP, but it's now progressing

SPEAKER_01: And we look forward to seeing a totally different smud org and a more engaging

SPEAKER_01: smud org with all of our customers once it's redesigned and

Unknown: We are also upgrading our customer interconnection experience. This has to do with all of our

Unknown: all of our interconnection policies and and process that goes into

SPEAKER_01: Interconnecting say new solar

Unknown: New solar on a rooftop or a battery or something like that and we're taking a look at those processes to streamline them

SPEAKER_01: Improve them and make them more efficient for our customers

SPEAKER_01: Okay, next next slide

SPEAKER_01: Some additional O&M initiatives

SPEAKER_01: We are taking a look at our commercial and residential electrification work again as part of the IRP as I mentioned earlier

SPEAKER_01: We are looking at what your goals be in terms of electrification

SPEAKER_01: What your goal goals be for carbon reduction based on electrification either in the home or with transportation?

SPEAKER_01: That's all going to be part of the

SPEAKER_01: Update to the IRP. So it's going to be an opportunity for the board to

Unknown: Obviously weigh in and make decisions about where we want to go as a utility in this space

SPEAKER_01: Moving forward we continue with our

SPEAKER_01: Electrification focus again, as I mentioned earlier, we're expanding our electric kitchen spending in

SPEAKER_01: 2026 to continue to

SPEAKER_01: electrify homes and businesses across

SPEAKER_01: Sacramento

Unknown: We have 1600 community events. I know Rhonda and her team are doing a great job

SPEAKER_01: in engaging with our community and getting us all out into the community and and

SPEAKER_01: Attending community events. I see the board members at a number of these community events

SPEAKER_01: I know you all attend them on a monthly basis many of them on a monthly basis

SPEAKER_01: And so I know you're all familiar with all that we do within the community. That is absolutely going to continue

SPEAKER_01: We have additional outreach that we are going to be doing with low to moderate and income eligible customers in particular

SPEAKER_01: We're taking a look at are we gonna get ready to issue an RFP or as they are for you in the issued brainy

SPEAKER_01: for the

SPEAKER_01: Okay for direct installations where we're going to work with contractors to

SPEAKER_01: and our energy specialists when energy special it goes out to give a

SPEAKER_01: low moderate income or income eligible type customer a

SPEAKER_01: energy assessment at their home that that then

Unknown: Person can then contact directly the the

SPEAKER_01: Contractor that can come directly in and work with the customer to install those measures that would best help them to reduce their energy

SPEAKER_01: Use and and become more efficient. So it's really kind of linking those energy specialists in that process with our customers with

SPEAKER_01: contractors to make it more seamless to

SPEAKER_01: Help support our customers and decarbonization and energy efficiency. We're also adding new

SPEAKER_01: bundles to our

SPEAKER_01: energy store that will help, you know, say low moderate income customers who are you know, looking at our energy store to

SPEAKER_01: Go for bundles that would

SPEAKER_01: Help them reduce their energy quickly and simply by just selecting the bundle within our energy store

Unknown: Of course, we have our community impact plan

SPEAKER_01: We're expanding the electrification efforts into those residential communities. I think many of you probably were part of those community walks

SPEAKER_01: That we had done as part of the community impact plan. We continue will continue to do that outreach

SPEAKER_01: we're also doing outreach along the

SPEAKER_01: commercial corridors with our PBIDS

SPEAKER_01: and engaging with them, especially in those underserved areas to

Unknown: Engage with the commercial customers on electrification and adding efficiency measures within their buildings

Unknown: We're also again I mentioned some of the customer

SPEAKER_01: Changes that we're doing for our low and moderate income customers. We're adding some additional assistance

SPEAKER_01: Like in our shade sheet program

SPEAKER_01: We are offering shrubs and pots for renters so that folks don't actually have to plant something in the ground

SPEAKER_01: But then can instead just get a pot with it with their shrub or something like that or a tree small tree

SPEAKER_01: to support their

SPEAKER_01: carbon reduction

Unknown: We are also

SPEAKER_01: Expanding our solar for schools for nonprofits. We did three

SPEAKER_01: Nonprofits this year with solar for schools as part of our community impact plan next year. We're looking at expanding that to

SPEAKER_01: three to six

Unknown: as part of that program

SPEAKER_01: Which includes installing solar and storage at a nonprofit site?

SPEAKER_00: Scott I I just want to jump in here and say that I really appreciate

SPEAKER_00: Staff's response to the board's request to have more solar installations on

SPEAKER_00: nonprofits and schools, I mean, I think school is like a

SPEAKER_00: Schools are like a deep hole that we'll never be able to

SPEAKER_00: To fill but it's nice to see some

SPEAKER_00: Nonprofits also get some attention. So just want to say I'm I'm glad for that

Unknown: great

SPEAKER_02: Yes, you have the community impact plan budget total right there. It's about 14 million dollars

SPEAKER_01: for

SPEAKER_01: 2026 yeah, and it comes out of our that's one of the transfers that occurs within the

SPEAKER_01: rate stabilization fund because those funds that have actually been set aside already to help fund the community impact plan I

SPEAKER_01: Think we have about I'm gonna say 44 million dollars in there now

Unknown: Yeah, Danielle's giving me a yes. So

SPEAKER_01: That's a guarantee we got 44 million dollars set aside for the community impact plan and

SPEAKER_01: We anticipate a current spending that'll last probably through 2028 ish. Yeah

Unknown: Okay, let's go to the next slide

Unknown: All right, let's talk a little bit about our capital highlights

Unknown: We currently

Unknown: Are going to be spending about or in 2026 about 186 million dollars on our substation builds and

SPEAKER_01: improvements

SPEAKER_01: Again, some of those are our station J downtown the 42 million the El Rio

SPEAKER_01: improvements in the Alberta area

Unknown: For 37 million. We're also improving

SPEAKER_01: UCD medical center. We're building

Unknown: Some additional we're doing some work at a substation to expand it and then installing line capacity for

SPEAKER_01: UCV med center, so they're slowly going to be reducing their current natural gas kojin and

Unknown: As they reduce that kojin load and backup load they're gonna they're gonna cut over to our service over a period of time

SPEAKER_01: At the end of all of this

SPEAKER_01: They're going to be completely electrified and their kojin will be no longer in use which is a very significant reduction to

SPEAKER_01: local carbon

SPEAKER_01: as part of that part of that

SPEAKER_01: retirement

Unknown: So that's some of that's just some of the spending that we're doing in terms of substations

SPEAKER_01: if you take a look at facilities and fleet as well as

SPEAKER_01: kind of our full submit administrative operations building between the two were at 127 million for

SPEAKER_01: 2026 again now I'm almost 90 million dollars for the full submit administrative opera

SPEAKER_01: It's hard to say that word full submit administrative operations building

Unknown: That's this in 2026 that's the bulk of the spending for that project and

Unknown: We're also doing 70 million dollars for new and enhanced technology including 24 million dollars to kick off the s4 Hana

SPEAKER_01: Upgrade for our current SAP system. We're doing

SPEAKER_01: number of new resource projects

SPEAKER_01: I mentioned some of those are ready to 59 million dollars. We've got cable and pole replacements

SPEAKER_01: 31 million dollars we have 850 poles and about 200,000 feet of cable

Unknown: that we're planning to do in

SPEAKER_01: 2026 with that money and then we have all the new services and capacity projects that we also have

SPEAKER_01: As part of the budget for 2026. So let's go to the next slide

Unknown: All right, these are some of the capital initiatives that we have within the 2026 budget so let's

SPEAKER_01: go

SPEAKER_01: through some of these

Unknown: First off I think I've mentioned our L Rio substation upgrades and our station J upgrades and then some of the downtown proactive transformer replacement

SPEAKER_01: These are transformers that are pre 1990

SPEAKER_01: That need to be replaced that are aging infrastructure and we just are working at slowly replacing them

SPEAKER_01: They're not failing necessarily, but we're working to replace those transformers as they as they get older

SPEAKER_01: We

Unknown: Also have a number of additional projects in in design in 2026 for future years

SPEAKER_01: We've we've ordered a number of spare transformers

SPEAKER_01: We're spending about 26 million dollars for new spare

SPEAKER_01: transformers in 2026 that are gonna be delivered in q1 q2 of 2026 and one in

SPEAKER_01: 2027 and again, we're doing the 200,000 feet circuit feet and 850 poles

SPEAKER_01: to

SPEAKER_01: support reliability and in 2026 as well

SPEAKER_01: in terms of our power generation assets

Unknown: We have transformer generator

SPEAKER_01: Upgrades going on a community white rock and Union Valley some control center control center system upgrades

SPEAKER_01: Across the system and we have some hydraulic power unit replacements. I believe at four facilities in

SPEAKER_01: 2026 let's go to the next slide

Unknown: All right additional capital initiatives

SPEAKER_01: We have the

SPEAKER_01: under clean and proven clean proven technology or proven clean technology

SPEAKER_01: Category we have the country acres project which again is being interconnected through the Alberta substation and in addition we have some site work for

SPEAKER_01: Switch yards and things like that that are going to be developed in 2026

SPEAKER_01: I think it's about 39 million dollars that is going to be spent on country acres again country acres is the

SPEAKER_01: 344 megawatt solar and 172 megawatt battery project that is currently being developed in Sutter County

SPEAKER_01: We also have a number of different projects that are going kind of through the

SPEAKER_01: California environmental quality act process as well as other permitting that is required

SPEAKER_01: for those projects which includes our dry Creek project, which is a

SPEAKER_01: 160 megawatt battery facility that is going to be located at our at our current Rancho

SPEAKER_01: Seiko to solar project which is 160 megawatt solar project at Rancho Seiko

SPEAKER_01: which will

SPEAKER_01: serve to

SPEAKER_01: Help us, you know utilize that that solar when we when we actually need it especially across the peak times

SPEAKER_01: And we have some other green energy projects that we're taking a look at locally

SPEAKER_01: some solar projects some other solar and battery projects that we are looking at that are

SPEAKER_01: Kind of in that CEQA early permitting stage that we're spending money on to help prepare for you know, the coming years and project development

Unknown: In terms of facilities and security really the big one there is again that full administrative operations building

SPEAKER_01: Which is the bulk of the spending is in 2026. It's our new operation center. That's going to be out in the Folsom area

SPEAKER_01: It's going to replace the current EMC that is just adjacent to our campus here

SPEAKER_01: That building is aged and needs to be replaced and will be replaced with a state of the art fully secure

SPEAKER_01: Operation center which will serve our operations group for many many many years into the future. It's absolutely critical building it operates the

SPEAKER_01: The SMUD system right and ensures, you know the safe operation and

SPEAKER_01: Reliable operation of our system for our customers. So it's really critical that building

SPEAKER_01: We have a number of facilities and security enhancements going in in in 2026, but we're also electrifying SMUD's fleet

SPEAKER_01: We've ordered a number of F-150s. We hope that those electrified F-150s actually end up showing up

SPEAKER_01: We'll see but yeah, we intend to

SPEAKER_01: Hopefully get delivery of those F-150s

SPEAKER_01: All right. Next next slide. I think I'm almost done. So

Unknown: Last slide for our initiatives again in the IT space

SPEAKER_01: A number of our capital initiatives upgrading s4 HANA in phase one

SPEAKER_01: We have the SAP analytics class SAP analytics cloud was the SAC planning that is actually a replacement of our financial

SPEAKER_01: Tool that we use to do all of our kind of financial planning and analysis work

SPEAKER_01: Within our organization so that was that one's kind of a big one for me and my group

SPEAKER_01: We're actually doing that first out the gate before the s4 HANA

SPEAKER_01: Process and upgrade is going to take place

SPEAKER_01: So we're really excited about that because we're gonna have a much better tool some AI

SPEAKER_01: opportunities and hopefully really improve our our financial efficiency in terms of how we

Unknown: How we analyze our our budget how we track our budget how we look at variances how we?

Unknown: How we plan going forward and look at different scenarios for our budget

SPEAKER_01: Grid transformation, of course the extended day ahead market is coming in 2027

SPEAKER_01: So we're starting work on some IT upgrades that are necessary to help prepare ourselves for that

Unknown: Again, I mentioned all mess and derms. Oh mess will be done. Hopefully in April and derms is kind of an ongoing

SPEAKER_01: Development and we'll be doing phase four and phase five

Unknown: With the derm system and then our customer experience technology a very significant change

SPEAKER_01: Going on within the customer area on the digital platform transformation and to the my account

SPEAKER_01: Component of our of our residential portal

SPEAKER_01: and that customer experience technology is really going to be an ongoing SE

SPEAKER_01: SEW transformation of

SPEAKER_01: Most of the most of the digital platforms that we use within customer

SPEAKER_01: Let's go to the next slide

Unknown: All right, let's talk very quickly about our

SPEAKER_01: Income statement you can't have a budget meeting without an income statement, right? I mean come on

Unknown: Gotta have an income statement

SPEAKER_01: So if you look at the

SPEAKER_01: Kind of I've gone over a lot of these changes already

SPEAKER_01: But I do want to draw the attention to the net income line, which is a second from the bottom

Unknown: Okay, that line right there

SPEAKER_01: You can see is increasing by 109 million from where we stood in 2025 planned at 117 million. You might think well

SPEAKER_01: That's that's quite a jump

SPEAKER_01: And really what is positive net income help us to do it really is three things

SPEAKER_01: Okay, first it helps us meet those minimum financial metrics and ratios that is that solid financial foundation?

SPEAKER_01: That is really important for the rating agencies and for our debt holders

SPEAKER_01: People don't want to hold the debt of an organization that is not financially sound

Unknown: Right. So just to have set be able to sell our debt in the market. We need to hit these financial ratios and

SPEAKER_01: And in addition to that to maintain our credit rating, which makes our debt much cheaper

SPEAKER_01: We need to hit these financial ratios

SPEAKER_01: So we need to have net income in order to ensure we hit those financial metrics in addition to that

SPEAKER_01: Net income really helps us manage our current and future financial risks

Unknown: Any changes that occur to our revenue or to our costs within a single year net income can somewhat absorb that right?

SPEAKER_01: Ask ask acts as a buffer

SPEAKER_01: For any additional increases in expenses or reductions in revenue in a single year and

Unknown: Then finally net income really helps us offset our capital costs

SPEAKER_01: And as I described earlier, we are seeing a significant increase in our capital costs and infrastructure needs but driven by our

SPEAKER_01: Focus on making sure our reliability is maintained and improved

SPEAKER_01: Over time and so those infrastructure needs are partially offset by this additional net income

SPEAKER_01: So let's go to the next slide. I think I can kind of talk you through this one fairly quickly, too

SPEAKER_01: So you can see at the very top

SPEAKER_01: This is what we call our cash flow statement and it really shows with the connection between net income and our capital

SPEAKER_01: Expenditures. Okay. So if you see at the top we start our year with about 487 million dollars in cash that

SPEAKER_01: Maintains our minimum 150 days

SPEAKER_01: Ratio that is critical for again maintaining our financial stability and our bond ratings. Okay

Unknown: So we start off with 497 million and then through our operations

Unknown: we generate some revenues from our customers by billing and we spend money on commodities and other expenses and

SPEAKER_01: The net of those operations gets us another 587 million dollars. Okay, just walking down the right hand of this table

Unknown: However

SPEAKER_01: That 587 million dollars is not enough to go pay for

SPEAKER_01: All of our principal and interest on debt. We've already issued which is 210 million dollars

SPEAKER_01: you can see that under the financing category and

SPEAKER_01: The additional capital expenditures that we have to make within 2026 to the tune of 670 million dollars

Unknown: which means

SPEAKER_01: That despite our net income of 109 million, which is part of that 587 million that we generate from our operations

SPEAKER_01: Despite that we still have to go out and borrow

SPEAKER_01: because we're spending

SPEAKER_01: 670 million dollars on capital and again that infrastructure critical to our reliability. Okay

SPEAKER_01: so we end up borrowing about 260 million just to keep our

SPEAKER_01: minimum days cash at that 150 level

SPEAKER_01: So at the end of the at the end of the day

SPEAKER_01: You can see if you if you kind of go down to the bottom there

SPEAKER_01: The ending unrestricted cash balance as of December 26 is

SPEAKER_01: 483 million dollars we started with 487 we end the year with 483. So we're actually reducing our cash balances by 4 million dollars

SPEAKER_01: Despite our net income during the year and again that net income is getting spent to a large extent on the capital

SPEAKER_01: Expenditures and the principal and interest payments on our previous debt

Unknown: So I hope that helps kind of walk through

SPEAKER_01: Kind of where that net income goes and why we need it and its purpose

SPEAKER_01: Again, just high level net income really helps us support our investments in infrastructure

SPEAKER_01: It's critical to support our financial ratios

SPEAKER_01: Our our credit rating and the reliability of our system. Okay without net income all of those would be at risk

Unknown: All right, so let's go to the next next slide

SPEAKER_01: All right, where are we in the timeline?

SPEAKER_01: We did the high level overview in October tonight

SPEAKER_01: on November 18th, we're doing the kind of

SPEAKER_01: Presentation an outline of the 26 proposed budget and then on December 11th

SPEAKER_01: We will look to you all to vote and approve the 2026 budget as is outlined here

Unknown: and next slide

Unknown: That is about it again our budget what are the key things that it does and delivers in

SPEAKER_01: 2026

SPEAKER_01: first

SPEAKER_01: We are we are not-for-profit. We are community focused

SPEAKER_01: community owned

SPEAKER_01: Everything that we do is for our customers this budget delivers on programs on services on technology platforms on

SPEAKER_01: Incentives that are going to help our customers

SPEAKER_01: That are going to support what they want from their utility

SPEAKER_01: What they demand from us as an organization?

SPEAKER_01: And that we expect to deliver to them to improve their satisfaction

SPEAKER_01: And keep their value for what you pay very very high

SPEAKER_01: Secondly our budget is focused on infrastructure

SPEAKER_01: Making sure that we can fund those key and critical investments that are necessary to maintain and improve their reliability of the system

SPEAKER_01: We've known over a lot of the infrastructure that we are spending our money on all of which is critical for our reliability

SPEAKER_01: And necessary for our reliability without it our reliability would be at stake

SPEAKER_01: And then prudent financial management again, that's one of

SPEAKER_01: Kind of an indicator of prudent financial management

Unknown: One indicator would be how well are we meeting those financial ratios and you could see throughout this presentation that we are going to meet

SPEAKER_01: Our financial ratios, and that's very important

SPEAKER_01: That's one very important indicator of our financial management again

SPEAKER_01: I went over some of the things that the credit agencies look at this budget is built around making sure we deliver on those items

Unknown: So that so that at the end of the year those credit rating agencies and when we go out to the market in

SPEAKER_01: Early summer to get new bonds that credit rating agencies are going to continue to rate us a very high

SPEAKER_01: Level so that we can make our debt as cheap as possible right and as a little cost as possible for our customers

SPEAKER_01: That's what prudent financial management does for us at the end of the day and then of course it executes on our strategy and the

SPEAKER_01: Vision set by the board we fund what needs to be funded to ensure that we can deliver on all the SDs

SPEAKER_01: I'm happy to say in the time that I've been at smud. I've never seen

SPEAKER_01: an SD

SPEAKER_01: Presentation where the board said you haven't met the objectives, and I think staff takes all of that very very seriously

SPEAKER_01: when we come to these

SPEAKER_01: committee meetings to present on those SDs we do it with full intention of completely meeting the vision and

SPEAKER_01: the purpose of

SPEAKER_01: Those SDs as established by the board and this budget helps us to do that and serves as that foundation to allowing us to do it

SPEAKER_01: So

SPEAKER_01: That I think is it for me

Unknown: Hour and a half done I

Unknown: Beat two hours I

Unknown: Call that a win you know my column some way

SPEAKER_05: Questions additional questions

SPEAKER_05: A couple of comments

SPEAKER_02: One I just a couple things I wanted to make sure the most of keep an eye on

SPEAKER_02: Is the role of rooftop solar right we've seen some some movement and

SPEAKER_02: supporting solar on

SPEAKER_02: Schools and nonprofits. I definitely want us to

SPEAKER_02: continue to look at

SPEAKER_02: That rooftop local rooftop solar market

SPEAKER_02: With the shifting incentives

SPEAKER_02: I don't know for exactly meeting our target, so it's something

SPEAKER_02: I think we need to take maybe take a look at or think about

SPEAKER_02: And I also know we have

SPEAKER_02: Potentially we have our

SPEAKER_02: analysis due

SPEAKER_02: next year on

SPEAKER_02: The export rate as well, so hopefully we're probably we're on track to meet our goals for that

SPEAKER_02: I also wanted to know make sure you know we mentioned it a little bit in here our investments in our hydro operations

SPEAKER_02: There's definitely somewhere we

SPEAKER_02: You know can't under invest in those areas as well to make sure we keep an eye on those areas

SPEAKER_02: We've had a lot of investments into the

SPEAKER_02: Surrounding environment up there in the campgrounds in the roads a lot most most of that work is done now

SPEAKER_02: Sure the facilities will need some of that money and work as well

SPEAKER_02: And the last thing I was curious if we don't know how our progress on doing some benchmarking over the last years

SPEAKER_02: Last year or so has gone. I've talked about a few times this last year

Unknown: So we have definitely looked at benchmarking and

SPEAKER_01: We've spent some time

SPEAKER_01: Evaluating various processes within the organization

SPEAKER_01: Probably say that a lot of the opportunities are coupled with some of the investments that we're making in our IT

SPEAKER_01: platforms and potentially

SPEAKER_01: You know opportunities with AI

SPEAKER_01: so as those tools get developed and as we pursue the various use cases that we might see within

SPEAKER_01: within AI

SPEAKER_01: We would anticipate starting to take advantage of some of the

SPEAKER_01: You know efficiency and operational savings that we might might be able to achieve that

Unknown: Okay

Unknown: Please

Unknown: Well, I want to say that

SPEAKER_00: It's

SPEAKER_00: Really good to have I think this new way of presenting the budget

SPEAKER_00: It's helpful to see the different categories where we're spending money

SPEAKER_00: I do wish there

SPEAKER_00: You know was a bigger role for the board to comment on some things that we'd like to see

SPEAKER_00: and I know we have

SPEAKER_00: but

Unknown: It also would be nice to see a little bit more of

SPEAKER_00: Where some of our investment is going like I'd you know

SPEAKER_00: I was just me probably but I like to dig deeper down into the community involvement and

SPEAKER_00: The infrastructure investment. Those are two areas that are real

SPEAKER_00: Important to me. So anyway, I I think it's a good budget. I think it's solid and

SPEAKER_00: You and your team have done a good job

Unknown: And you like my time right and you like my tie right

Unknown: Well, I do like the time but I gotta tell you an hour and a half

SPEAKER_00: I don't care what Dave tomorrow says

Unknown: Okay

Unknown: Other questions comments at this time, I believe we have someone from the audience with a raised hand

Unknown: That is correct we have someone named John who has his hand raised if you can have him muted so he can provide his comment

Unknown: Hello, this is John Weber. Can you hear me? Yes, I

Unknown: Would just like to say I I can't see his tie, but the presentation was outstanding

SPEAKER_04: And

SPEAKER_04: It was good to hear about the electric F-150s, I can't wait to see him on the road

SPEAKER_04: hopefully they'll show up and I was really excited to learn about the managed charging for EVs being

SPEAKER_04: Expanded next year. I think it was fivefold. I think that'll be really important

SPEAKER_04: Another thing I found out there's a company called SIG energy. They're currently installing

SPEAKER_04: Bi-directional EV chargers and their North American headquarters is located in Gold River

SPEAKER_04: So I think we should take advantage of them. Maybe have them do a presentation to the board at some point

SPEAKER_04: Since they're a local company and we'd like to see them succeed and help our economy and thank you very much. Have a good evening

Unknown: Okay, thank you very much

SPEAKER_05: I believe we have additional another comment from Ricardo Martinez if we could unmute Ricardo so he can provide comment

Unknown: Can you hear me

Unknown: Yes, good evening

SPEAKER_03: Congratulations on what a great presentation

SPEAKER_03: I I too don't know what your title looks but I'm a I'm a tie buff and my wife's told me to stop buying ties

SPEAKER_03: So whatever tie you have I congratulate you

Unknown: I

SPEAKER_03: Have a question regarding

SPEAKER_03: this for Hannah

SPEAKER_03: Enhancements I see that it's the 70 million dollars and 24 million dollars are being

Unknown: Put aside for the s4 Hannah is is is that

SPEAKER_03: something that

Unknown: you're gonna do internally or is this a

Unknown: System integrator that's going to come in and you're gonna split

SPEAKER_03: the 24 million between a system integrator and

SPEAKER_03: Internal staff because I also paid attention that you're you're hiring limited term positions, but specifically for this could you elaborate on it?

Unknown: Go ahead. Yes, we're hiring a system integrator. I believe the RFP is already out on the street

SPEAKER_01: And it will also be supported by by smud staff as internal experts on the processes that we're going to be

SPEAKER_01: upgrading and changing as a result of the

SPEAKER_01: implementation of the new software

SPEAKER_01: And it's going to take a significant lift from both SAP and their experts as well as our IT folks

Unknown: Great. Well continue doing a great job and keep my rate flow. Thank you very much. Thank you for your call. Mr. Martinez

SPEAKER_05: Do we have one more?

Unknown: It's all I see. Okay, that's it

Unknown: Okay, well, I'm sorry we can't continue this a little longer but we've run out of questions, okay

Unknown: Item number two

SPEAKER_07: Pardon

Unknown: Item number two is to discuss approving the 2026 proposed joint power authority budgets a the

SPEAKER_05: 2026 proposed Northern California energy authority

SPEAKER_05: budget and item B

SPEAKER_05: 2026 proposed Northern California gas authority number one budget and

SPEAKER_05: Mr. Scott Martin continues to be our presenter

Unknown: Gosh, I'm back. Huh?

SPEAKER_01: You get more get more

SPEAKER_01: You thought you were done

SPEAKER_01: All right, I'm expecting the total to be four hours

SPEAKER_03: Hey

SPEAKER_03: Dave

SPEAKER_03: Dave I've got you don't know how many slides I have in this have 45 slides left to go and that's one years I

SPEAKER_01: suspect you were

SPEAKER_01: So just very quickly

SPEAKER_01: We need to approve the NCGA and NCAA budgets as well

SPEAKER_01: NCGA is the Northern California gas authority number one, which was created in 2007. It's a J. It's a joint powers authority

Unknown: Where we

SPEAKER_01: Provide prepaid gas or we paid for for gas on a prepaid basis to a counterparty who then gives us a big discount

SPEAKER_01: On gas that gets delivered to us over time. Okay, that's the that's the concept of it

SPEAKER_01: Same thing with the Northern California energy authority. It's the same thing but with a different counterparty. It was developed in 2018

SPEAKER_01: And the board just needs to prove that the debt service

SPEAKER_01: Payments of 34 million and 32 million again when we do these deals we issue debt through these JP a's

SPEAKER_01: that debt

Unknown: That we the money we generate from that debt

SPEAKER_01: Goes to the counterparty and then they deliver a gas to us at a discount over a specified period of time

SPEAKER_01: Okay, so that that's the way the transaction works

SPEAKER_01: So we need to approve the debt payments that we make to support the transaction

Unknown: as part of these two

SPEAKER_01: JP a's but Scott we're on is it in the budget book where that debt

Unknown: How much that debt is like what bond issuance that debt falls under?

SPEAKER_02: It's not sort of sort of maybe some question. No. Yeah that that's actually on the balance sheet on our balance sheet

SPEAKER_01: But it doesn't show up

SPEAKER_01: in terms of the debt payments that that smud is making because this is a separate JP a

SPEAKER_01: right

Unknown: But ultimately it's gonna so the total debt flows out of smud. Yes, so it shows up on our balance sheet. Okay. Yes

Unknown: Okay, do we have additional questions or comments on this

Unknown: Not seeing any public testimony in there is none, okay great

Unknown: Well, I think it's been discussed whoa

Unknown: Okay

SPEAKER_05: Next item on the agenda is the public comment for items not on the agenda

SPEAKER_05: I don't believe we have any speakers cards for this to me. Are there your belief is accurate

Unknown: Okay, great

Unknown: So we have not received any requests

SPEAKER_05: And as a reminder written comments received on items not on the agenda will be included in the record if received within two hours

SPEAKER_05: Of the end of the meeting and the last item on the agenda is to provide a summary of committee direction

Unknown: The direction tonight, okay

SPEAKER_05: Then with that I believe there's no further information come for the board tonight we're adjourned

Unknown: You