Policy Feb 17 2026

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SPEAKER_01: Hi everybody, here we go.

SPEAKER_01: Good evening and welcome to the Policy Committee and Special Board Meeting of February 17, 2026.

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Unknown: This meeting is being recorded and can be accessed on SMUD's website.

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SPEAKER_01: Chief Legal Officer, please conduct the roll call.

SPEAKER_01: Director Kurz?

Unknown: Here.

SPEAKER_07: Director Rose?

SPEAKER_07: Here.

SPEAKER_07: Chair Herber?

Unknown: Here.

SPEAKER_07: All committee members are present.

SPEAKER_07: Also present are directors Fishman, Sam Bourne, and President Tamayo.

SPEAKER_07: Great.

Unknown: Item number one on tonight's agenda is to discuss the monitoring report for strategic direction SD2 which covers competitive rates.

SPEAKER_01: This will be a consent item unless we pull it off the consent calendar.

SPEAKER_01: And so we're going to ask Alcides Hernandez to give us a report.

Unknown: Good evening, Board Committee Chair, Director Herber, and the rest of Board Committee members.

SPEAKER_00: Thank you for the introduction.

SPEAKER_00: Yes, we're here tonight to provide an overview of the strategic direction to competitive rates known as SD2.

SPEAKER_00: Always excited to come here once a year to share this report with you.

SPEAKER_00: Let's dive into it.

Unknown: First, let me start off by providing you an overview of what the Board has adopted as the policies of the SD2 Board directions and rate design principles.

Unknown: The first one is that SD2 states that SMAT rates shall be 18% below Pacific Gas and Electric, or PG&E rates, on a system average basis.

SPEAKER_00: And also it states that we establish a rate target of at least 10% below PG&E publish rate for each customer class.

SPEAKER_00: SD2 also states that we should be comparable and competitive with other local utilities on a system average basis.

SPEAKER_00: And lastly, that the policy that the Board adopted established that our rate shall be designed to balance and achieve the nine goals described here in this chart and adopted by the Board.

SPEAKER_00: I'm not going to go individually on each of those goals, but the Board is aware that this has been adopted years ago and continues to be revised as time and necessities allow us to do that.

Unknown: Now, let's dive into the specific benchmark of the report.

SPEAKER_00: This table here provides an overview of the PG&E and SMAT rate comparisons.

Unknown: For purposes of simplification, we are providing here the variance, the actual dollars per KWH, which are the benchmarks that we used to compare, is actually describing the report and the details.

SPEAKER_00: So here we are comparing 2025, you see that in the middle column of the table, and just bring as a reference year 2024.

SPEAKER_00: We're pleased to report that our 2025 system average rate is 50% below PG&E average rates.

SPEAKER_00: And to put that in perspective, that translates into approximately $1.8 billion annually that stays in our community because of our lower electricity bills.

Unknown: Again, I'm going to repeat that number. It's $1.8 billion. It's a big number that we bring as a value to the community.

SPEAKER_00: And just as a reference, I was checking with Jennifer Restivo, and our plant in service is worth about $4.5 billion.

SPEAKER_00: It means that close to almost half of that is equivalent to the savings that we do due to the lower electricity rates.

Unknown: In addition to that, you can see in the table that we have different rate differences from residential, commercial.

SPEAKER_00: Residential alone is 47%. Our commercial rates vary from 43% to 58%.

SPEAKER_00: And other, which includes agricultural and street lighting, ranges from 57% to 65%.

SPEAKER_00: Overall, we are about 50%, about half of what PG&E's rates are in our territory.

SPEAKER_00: For residential, that 47% translates into about $1,350 in savings for each residential customer in an annual basis.

SPEAKER_00: Now, this chart may look familiar to you. We use this comparison when we bring great recommendations to you to show you how we will be comparing.

SPEAKER_00: So in 2025, here we are in the graph displaying an orange color, and the off blue is the 2024 as a reference.

SPEAKER_00: SMAD is highlighted to the left side of the graph in that orange rectangle.

SPEAKER_00: You see that our average system rate, which represents the entire revenue that we collect from the system infrastructure fixture, demand charges, energy charges,

SPEAKER_00: all that divided by the volume of energy that we sell in kilowatt hours, provide this benchmark that is widely accepted in industry to compare rates.

SPEAKER_00: So using that benchmark, we are very competitive in the region. In fact, we are one of the lowest in the area.

Unknown: If you can see toward the right side of the graph where PG&E's average system rates are, it's basically the double of what we have.

SPEAKER_00: This graph, we use information from the Energy Information Administration.

SPEAKER_00: So as of the time when we were able to get actual information, it was as of October of 2025.

SPEAKER_00: But it's a good representation of how our rates compare. We're very competitive.

SPEAKER_00: Our rates benchmark is 50% below Pacific Gas and Electric Company's average rates for 2025.

Unknown: I'm going to say this. Why do you think that we are so much lower than PG&E?

Unknown: It's a combination of factors. It's a combination of factors.

Unknown: And I was looking at the report just before coming to the presentation, and back 10 years ago, and the board can see that in the history of the report,

SPEAKER_00: back 10 years ago, our rates were not that much different. They were different, but not in the 50% range.

SPEAKER_00: And then if you see in that report that we shared with the board, and it's available on the Internet, that gap has grown significantly over the past 10 years.

SPEAKER_00: And over the past 10 years, a lot of things have happened.

SPEAKER_00: Among those, the wildfire mitigation has been an issue, a lot of regulation in the industry.

SPEAKER_00: But the core of that that probably causes a difference between what we provide and what a private company like PG&E and others do is that we don't have a rate of return on the rates that we collect from customers.

SPEAKER_00: And then that is significant. In fact, we issue bonds at a very competitive interest rates that keep our costs affordable.

SPEAKER_00: And other factors include that our area is very compact, that has something to do with it, compared to in the case of Pacific Gas and Electric, which is a very large territory across the California area.

SPEAKER_00: And one more that we focus on serving the community, we have factors like operational excellence, that is something that we do every time we can find a process to improve, and we have millions of dollars that we have saved.

SPEAKER_00: So all of that has created this culture that we want to be the service provider with reliability, greater reliability, and affordable rates.

SPEAKER_00: And has come to this point that we are 50%. And that's, I was making reference, that is equivalent to about half of the electric plant that we have out there.

SPEAKER_00: It's significant. It's significant over the past 80 years or so that we have been providing this service to the community. I hope that helps, Director Herbert.

SPEAKER_00: And I've been talking about average rates, but our regular customer out there, they pay bills, right? Monthly that they see is our electric bill.

SPEAKER_00: So this graph, you have seen it before, we're trying to compare here is how the average bill compares to these jurisdictions.

SPEAKER_00: So the blue represents a very low usage, the blue bar, the gray bar represent almost the average customer, residential, and the green bar, the highest user in our territory.

SPEAKER_00: On the left side, you see how small average rate for each of those three buckets of usage is pretty low. Just slightly higher than to look at the location district.

SPEAKER_00: And over the right side, you see Pacific Gas and Electric, which is the one that we normally do the benchmark, almost double of the average bills that customers see.

SPEAKER_00: So just for illustration, a customer at the average in our territory pays about $149 monthly for 750 kilowatt hours, and Pacific Gas and Electric, that will have been $311, almost the double, just to illustrate the comparison.

SPEAKER_00: Did you have a little bit of commentary about some of the other publicly owned utilities in California? I know the report focuses on these ones, but like Pasadena, Glendale, Burbank, and several others, are they in the same sort of ballpark as well?

Unknown: We, actually for different purposes, we do compare against them. We still remain among the lowest when we add all the pool of utilities.

SPEAKER_00: In this graph, because the board adopted this kind of basket of utilities regionally here in the northern California area, we bring LA, WEP, or Los Angeles because it's a large utility as a reference.

SPEAKER_00: But when we do bring the others, in fact we do that in our presentation for rating agencies, we include a larger pool, we still remain among the lowest when we do that.

SPEAKER_00: Okay, perfect. You look at this and we're at the bottom, I just want to make sure that we haven't left out the POUs that are lower than us.

SPEAKER_10: Okay, thank you.

SPEAKER_10: Yeah, Director, for Fisherman.

SPEAKER_10: I'll say this real quick, I'm just looking at LADWP, and it seems like they must have some kind of tiered rate structure or something where the higher usage really gets penalized.

SPEAKER_04: Because that's, I mean, the disparity between the mid-level range and their upper level, that's pretty high.

Unknown: That is correct, Director Fisherman. They haven't adopted it yet, like a time of day or time-based pricing. They still have tier structure.

SPEAKER_00: And they also have these fixed charge that varies by usage. So they have like four different kind of buckets of fixed charges.

SPEAKER_00: And when you compare, like in our case, which is time-based to a non-time-based, it causes those distortions.

SPEAKER_00: But in general it still shows that even if we were to do a comparison on time of day in some form of comparison, it still will show that we are lower than their average bills.

SPEAKER_04: I mean, it shows the time of day really does work. I mean, it gives people an incentive not to use electricity during those hours.

SPEAKER_04: And then, I mean, so even if they're using a lot, 1,500 kilowatt hours a month, but if they're avoiding the peak, their overall bill does not climb as much. I think that's awesome.

Unknown: That is correct. And that's something that we are very proud that we have about 97% of our customers on that time of day rate.

SPEAKER_00: Something that we do have in the industry that we have so many customers on a time of day price signal. So it's very rewarding to hear that.

Unknown: We provide, as I was describing, we offer time of day. We actually have a standard time of day rate for most of our customers.

SPEAKER_00: And we recently, and the board approved last year, another version of time of day. You may remember the option for low user customers, those with electrical panels of up to 125 amps.

SPEAKER_00: So we have now two plus the alternate fixed rate.

SPEAKER_00: This one in particular is a comparison of our time of day rate or time of use rate, how PG&E calls it, and how we compare on each of those time buckets.

SPEAKER_00: In each of those, the higher bar represents the prices by PG&E, and the lower bar in the off-blue color represents SMAT.

SPEAKER_00: Just for example, in the off-peak price, where most of the time is where electricity is priced lower, ours is for example, 15 cents, and PG&E is about 46 cents.

SPEAKER_00: Just to provide an overview. So our rates are comparable and very competitive across all the different time periods.

Unknown: This slide actually, Director Fischman, goes to the point that you were making reference earlier.

Unknown: So we bring this chart on the horizontal, it's very small font to read, but it's time. So we have the 24 hours of the day.

Unknown: And on the vertical axis, you have energy, or kilowatt hours. This represents the residential low shape as we call it.

SPEAKER_00: So how the customers in aggregate consume throughout the day. This is the hottest day that we had in 2025.

SPEAKER_00: And the green line, the dotted green line, represents back in 2017 when we didn't have time of day rates.

SPEAKER_00: We have still the tier structure, and the other two lines represent in 2025 the residential usage.

SPEAKER_00: You see that it's very dramatic, the reduction that we see. And yes, weather perhaps has a factor because this is different weather for different times.

SPEAKER_00: But it still shows that in the window between 5 and 8 pm, our customers are reducing consumption.

SPEAKER_00: And in general, the low shape is very flat. So big thanks to our customers because by doing this, they are saving us to procure very expensive power,

SPEAKER_00: resource adequacy, and other number of factors, including carbon reduction. Because when they do that, we avoid to bring power from less environmental friendly power plants.

SPEAKER_00: So thank you to all our customers for staying on the time of day and helping us save electricity and system peak during the 5 to 8 period.

Unknown: So that's the end of the report. Staff recommends accepting the strategic direction to report as evidence of compliance with strategic direction to competitive rates.

SPEAKER_00: And I'll be happy to address any questions that the Board of Committee may have.

Unknown: Any more questions?

Unknown: I think it's interesting on the weekday price comparison chart, the green blue one. Our off peak and their off peak, ours is 3 times less, 15 cents versus 46 cents.

SPEAKER_10: And even the mid peak at 21 cents is less than half of their. So it's like we give the average as 50%.

SPEAKER_10: But in reality, there's a large chunk of the day, although we are often sleeping during, but morning is afternoon, right? That we're a lot less.

SPEAKER_10: It's not 50%, right? So anyway, I just thought that was sort of interesting to look at the variability within the numbers.

SPEAKER_00: This is a very good observation, Director Rose, because actually, as you see there, their time differentiation is very flat, if that's probably another observation.

SPEAKER_00: Which means customers don't have a lot of much incentive to reduce because it's relatively flat.

SPEAKER_00: Ours is not extremely peaky too. It's a decent range. I remember it came from the smart pricing option study and a lot of testing we did and ended up with this.

SPEAKER_00: And in average, we are saving about 8% of the peak. That's what that graph showed us. And it's a significant saving overall.

Unknown: And something that I wanted to update the board is, as I mentioned earlier, that the board adopted the optional rate for low user customers.

SPEAKER_00: That rate went effective in January as planned. So it's right now part of the billing system.

SPEAKER_00: Customers who are interested are being enrolled on the rate. In fact, we have about six or seven customers already on the rate.

SPEAKER_00: The features of that rate are a lower system infrastructure fixed charge of $17 compared to the $27 that the standard rate offers, with a slightly increase in the energy charges.

SPEAKER_00: And within probably two or three weeks, we are planning to send recruitment letters to the customers that we believe will benefit.

SPEAKER_00: We're doing the analytics right now. And then so we hope that number will grow and we will bring those benefits of lower bills to those customers who are eligible and have an electrical or a breaker of up to 125 amps.

SPEAKER_00: Any other questions?

SPEAKER_10: Rate making is next year, right?

SPEAKER_10: Yes.

Unknown: I just want to say that I think this is the most important thing that we do, which is to keep the rates low.

SPEAKER_01: And because of that, we continue to have very loyal customers.

SPEAKER_01: And so I want to applaud you and your team for coming up with a new rate that would help some of the customers that were complaining to me, although I don't think they've gotten on the rate yet.

SPEAKER_01: But I do think it's important that we provide choice and low rates. And your team has done that.

SPEAKER_01: So if there are no objections, this will go on the consent calendar.

SPEAKER_01: Oh, yes, I'm sorry.

SPEAKER_01: Sorry, I'm late in asking a question.

SPEAKER_05: So I often hear that our rates are not competitive with the rest of the country. And I'm looking at this table from the EIA, the Energy Information Administration. I think that's the right name for it.

SPEAKER_05: And obviously, California's rates, on average, are like 32 cents, twice as much.

SPEAKER_05: But compared to Oregon, ours are 16 something?

SPEAKER_05: Correct. About 17.

SPEAKER_05: Texas is 16 cents a kilowatt hour. And there's a number of states that are like West Virginia, notorious coal state, is 15.65 cents per kilowatt hour.

SPEAKER_05: So why are we being told that our rates are not comparable to the rest of the country?

SPEAKER_05: I realize that there's other states that are, you know, but really only down to like 12 or 13 cents.

SPEAKER_05: So it's not like as big of a gap as I've been thinking we had.

Unknown: I think it's when comparisons are made at a state level, when, for example, the analyst of whomever is doing analytics out there pulls all the data that represent the entire state, then it's a different benchmark because a lot of the customers are not being served by public power companies in California.

SPEAKER_00: So the majority are served by the three largest investor-owned utilities. So when you do a weighted, we call the weighted average of the three investor-owned plus the small minority, but there's still a number of utilities, more than 20, but there's still a small number in aggregate.

SPEAKER_00: So the investor-owned utilities drive that price in terms of average for the state.

Unknown: But as we compare each of those individual utilities like us, so we're not up there, so we are kind of in the middle of that average.

SPEAKER_00: I don't know if that explains.

SPEAKER_00: Do you know if the numbers that EIA provides, are those weighted by the population within each utility?

SPEAKER_00: That's correct. When they do, they represent the state, they take the three largest IOUs and all the 20 plus small utilities, and if my memory is not totally off, these small municipalities don't even serve more than 10% of the state.

SPEAKER_00: So the large majority is served by the investor-owned utilities. So when the benchmark is normally represented for California, it's in a way skewed toward the pricing from investor-owned utilities.

SPEAKER_00: But when we do compare individually, then when they're in the waiting, it shows a different picture, like in our case.

SPEAKER_00: Thank you.

Unknown: Okay, so do we have any comments from our digital folks online?

Unknown: I don't see any hands now.

SPEAKER_07: Okay, well then we'll go ahead and put this on the consent calendar for the board meeting, and thank you very much for your presentation.

SPEAKER_01: Thank you.

Unknown: Next up, item number two is to discuss the monitoring report for Strategic Direction SD3, which is access to credit markets.

SPEAKER_01: And this information will be shared with us by Jennifer Rustivo.

Unknown: Thank you, Chair Herber and good evening board.

SPEAKER_06: Jennifer Rustivo, Director of Treasury and Revenue Strategy, and I'm here tonight to show how we've met SD3 and maintained our access to credit markets in 2025.

SPEAKER_06: This access is critical to us as a utility, how we manage our cash and debt affects our rates and our day-to-day operations.

SPEAKER_06: Our budget needs a fixed charge of 1.5 times, at least.

SPEAKER_06: We balance rate impacts, debt, financial risk, flexibility, and decision-making, and we must keep at least an A, credit rating.

SPEAKER_06: SD3 guides our decisions in relation to setting our budget and our rates, decision-making on debt issuance, as well as looking at our financial risks.

SPEAKER_06: Meeting these goals keeps us flexible enough to provide reliable, affordable service to our community.

Unknown: Financial performance is important, but it's just a part of the story.

SPEAKER_06: Here are some key highlights of what we accomplished in 2025 that impact us today and benefit us in the years ahead.

SPEAKER_06: We've kept our Fitch AA rating since 2017, Moody's AA2 since 2024, S&P, also known as Standard & Poor's, has kept us at AA since 2017,

SPEAKER_06: but moved us to a negative outlook in March of 2025, along with six other not-for-profit California utilities as a result of wildfire risk concerns.

Unknown: Our fixed charge ratio is a financial metric that shows our ability to pay our debt.

Unknown: It shows how many times our operating cash flow can cover all of our debt payments, including interest and principal.

Unknown: Operating cash flow is the money we earn from providing electricity to our customers after paying the bills for commodities and operations.

SPEAKER_06: It tells us how much cash we have to invest, pay off debt, or save.

Unknown: If our fixed charge ratio was one, we would just be able to cover our debts.

Unknown: And nothing else. Having a 1.5 or higher ratio allows us to have funds to invest in our capital portfolio.

SPEAKER_06: Our actual fixed charge ratio in 2025 was 3.71 times.

SPEAKER_06: We received $93 million in investment tax credits under the Inflation Reduction Act for our Solano IV battery and Solano IV plant and our battery storage.

SPEAKER_06: We issued $50 million in green commercial paper last year, which was the first from any U.S. municipal electric utility.

SPEAKER_06: Quick question. That's okay.

SPEAKER_08: So, Jennifer, you mentioned under the credit ratings that S&P Global Ratings has given us a doubly negative outlook due to, did you say, bioterrorist?

SPEAKER_08: No, wildfire, sorry. Wildfire is like, what would bioterrorist say?

SPEAKER_06: Sorry if I wasn't clear.

SPEAKER_08: Wildfire risk concerns.

SPEAKER_06: Very good. But you said it was just applying to the public utility?

SPEAKER_06: They put six California not-for-profit utilities on watch.

SPEAKER_06: And why would the for-profits not have that?

SPEAKER_06: They're probably already been impacted by it.

SPEAKER_06: Okay. That's bizarre.

SPEAKER_02: Sorry, Scott Martin, CFO.

SPEAKER_02: The IOUs don't issue as much debt either, and so they're not as affected by these ratings.

SPEAKER_02: They're mostly equity-funded, so they end up with their stock value, right, that is their equity in their system.

SPEAKER_02: So it's a little bit different. They still have these ratings, but they're not as significantly influenced as S&P U's are by these ratings, because we issue debt for all of our financing needs versus the IOUs.

SPEAKER_08: Are they looking at, when they set these ratings, are they looking at our wildfire mitigation plan and all that we do to prevent these things?

SPEAKER_08: Yes, they do, and we've spent a lot of time with S&P to try and show them why SMUD is unique and different from the rest of the state.

SPEAKER_02: But given the catastrophic wildfires that we've seen in the state, especially the latest one in LA, S&P has chosen to rate us and other POUs with a negative outlook.

SPEAKER_02: They continue with the double A rating, so we're still at a double A rating with S&P.

Unknown: It's just they have a negative outlook, so they're watching us and determining if, in the future, we may deserve a downgrade.

SPEAKER_02: That's what that negative outlook means. It doesn't mean that we are downgraded. It means that they're looking at us.

SPEAKER_02: They're thinking about it.

SPEAKER_02: Yes, right.

SPEAKER_08: Okay, thank you.

SPEAKER_08: Yes, Paul.

SPEAKER_03: So I think that the latest ratings that we actually got from Fitch and Senator Poore is that I think most of the investor-owned utility in California is actually the B, Bb, Bb-minus, and they also have a negative outlook.

SPEAKER_03: So that's good.

Unknown: Yes, so we have a double A-2 rating, so I think the last time we checked is most of those investor-owned ones are either triple B or double B, and they also have a negative outlook.

SPEAKER_03: The last time we looked back and corrected them around Scott is September of total timeframe.

SPEAKER_03: So, yes, I think that is the biggest thing right now.

SPEAKER_03: Impacting all utilities in California is the threat of wildfire and the cost of actually, and I think that's why this nature is looking at some relief in terms of, I think, a joint fund or some way to look at taking the wildfire piece out of the basic rates in the kilowatt hour.

SPEAKER_03: So that's something to be looked at.

SPEAKER_02: And just again for the P to the U's, we have a fundamentally different what we call capital structure.

SPEAKER_02: So our capital structure is debt and equity, which we reinvest by cash flow for us.

SPEAKER_02: The IOU's have a very different capital structure, which includes equity as well as debt as well as cash flow.

SPEAKER_02: So it's a very different way in which we try to finance our long-term capital investments that we make. Ours is much more weighted to debt.

Unknown: Well, we look better when we're in comparison, it seems, so thank you for that.

Unknown: Well, I think that's why it's important to point out that they also have a negative outlook, but they also have the triple B, double B ratings.

Unknown: We issued $200 million in green bonds last year and rolled 100 million of existing bonds for new fixed term.

SPEAKER_06: We paid off the remaining SFA bonds, if you remember that early, which saves us on average $13.8 million every year through 2030.

Unknown: These bonds help fund our consumerist power plant and we're the last debts related to our gas power plants.

SPEAKER_06: So this gives us more opportunity to make changes or update the plant and makes our debt cleaner.

Unknown: And it also lets us bring those assets under some control, which will cut down on future administrative costs, so win-win all around.

SPEAKER_06: So why is our AA credit rating so important?

SPEAKER_06: Utilities, as Scott just talked about, utilities need a lot of money to build new projects and improve what we already have.

Unknown: We usually cover about half of these costs with the cash that we generate and borrow the rest.

SPEAKER_06: This split isn't fixed, it depends on the credit market, interest rates, and how borrowing affects our cash flow.

Unknown: Paying for all of our capital with cash flow would mean big rate increases now and wouldn't really be fair since the benefits are over many, many years.

SPEAKER_06: On the other hand, borrowing for everything would push rates higher in the future and would live in our flexibility.

Unknown: We carefully balance these options to find the just right mix.

SPEAKER_06: That's why having reliable access to credit markets is so important for us.

SPEAKER_06: Higher credit ratings mean lower borrowing costs.

SPEAKER_06: Dropping from a AA to an A would cost roughly $242,000 per $100 million borrowed at today's rates.

SPEAKER_06: And during tough financial times, higher ratings let us borrow sooner, easier, and cheaper than other utilities.

Unknown: Higher credit ratings enhance our position as a strong counterparty, which results in lower costs for commodity procurement and reduced collateral postings.

SPEAKER_06: In recent events over the past six years, have made access to credit and managing financial risks more important than ever.

Unknown: We have various tools that provide us liquidity, such as keeping our 150 days cash, $400 million available in commercial paper, and $150 million in lines of credit.

SPEAKER_06: These protect our financial strength, keep our ratings solid, and keep our rates low.

SPEAKER_06: Jennifer, as I think about sort of a talking point around the savings with the higher credit rating,

SPEAKER_10: if it's just rounding to $250,000 per hundred million borrowed, is that per year savings?

SPEAKER_10: And so really, if you run that over 20 years, it turns into like $10, $15, $20 million in savings each time we go to the market.

SPEAKER_10: So it ends up to be a lot. It's a little deceptive, right?

SPEAKER_06: Yeah, that's true.

SPEAKER_06: If you go $250,000 on $100 million, it doesn't seem like that much, but then you start stringing it out over lifetime.

SPEAKER_10: That's true, but we have to remember that credit markets change significantly over time.

SPEAKER_02: It's a current snapshot.

SPEAKER_02: So we're in an environment in which the Fed is reducing interest rates, which is squeezing those credit spreads.

SPEAKER_02: If we get back into an environment in which the Fed is increasing rates, we can get to an environment in which those credit spreads start to really expand,

SPEAKER_02: and that number then goes significantly up.

SPEAKER_02: So right now, it may be $250,000, but in the recent past, when interest rates were going up, it was a higher number.

SPEAKER_02: So we just need to keep that in mind. It's based on the snapshot of the credit markets now.

Unknown: So question, is AA, is that the best, or is AAA the best, or what's the best?

SPEAKER_06: I believe AAA is the highest, and yeah, they all use slightly different letters, but yes, AAA.

SPEAKER_06: So we have AA plus, and we can go to AAA, but the credit spreads really dictate the need or motivation to go to those higher credit levels.

SPEAKER_02: At this point, is it worth it for SMUD to try and achieve the financial ratios, fixed charge ratio, the days cash, et cetera,

SPEAKER_02: that the credit agencies are really looking at? Is it worth it for us to try and achieve the ratios necessary to get to those higher credit ratings for the savings that's available?

SPEAKER_02: That's the question that we weigh.

Unknown: So the rating agencies give us feedback as part of their monitoring. They highlight some key credit strengths.

SPEAKER_06: So they praise our strong fixed charge ratio, healthy cash reserves, and balanced debt.

SPEAKER_06: They see our smart operations, risk planning, diverse resources, and robust wildfire prevention.

SPEAKER_06: But they also very much appreciate the work the board does to keep our rates competitive and adjust them in a timely manner.

SPEAKER_06: They do watch for wildfire risk, and California's inverse condemnation, I have a hard time saying that, rule which makes utilities responsible for prior damage even if they're not negligent.

Unknown: They watch for rising capital costs, and also the need to balance affordable rates, financial health, and environmental goals without sacrificing on any one of those.

Unknown: I've got a question about one of the bullet points on credit concerns. What do we mean by weakened competitiveness?

Unknown: So the risks that are 50% lower wasn't right. They want to make sure that we keep that lower rate advantage that we have.

Unknown: Thank you.

Unknown: There's always a little bit of schizophrenic activity there, right? Because they want us to keep lower rates so that we're more competitive, but they want our rates to be high enough that we're financially sound.

SPEAKER_09: Yes.

SPEAKER_04: And it drives me a little bit nuts that they see that as a risk when we now have about a 20-year history, at least, of doing exactly that.

SPEAKER_04: I mean, in 20 years, it probably goes back even a little bit farther.

SPEAKER_04: And then on the bottom one, choosing environmental goals or affordable rates over financial strength sort of goes to the same question.

SPEAKER_04: I mean, we talk a lot about the three stools, right? We've got to keep the lights on, and we have to keep our rates low, and we have to hit our 2030 zero carbon goal.

Unknown: Maybe it's time we add in a fourth leg to the stool that is, I think for – I don't want to speak for the rest of the board, but for me, it's always been a given that we have to keep this institution financially strong.

SPEAKER_04: Because otherwise – because if we don't, it impacts rates, and it impacts our ability to keep the lights on, and it impacts our ability to be environmentally sound.

SPEAKER_04: So it sort of has gone without saying, but maybe now it's time to start saying it. That's just as important as those other three legs.

Unknown: All right.

SPEAKER_06: I would say that we've identified our financial strength. I mean, we express it as access to credit markets, but we're really talking about our financial strength, and that's a core value that we've identified.

SPEAKER_05: One of the things – Scott Martin, CFO – I just want to mention that I completely agree with what both of you have said.

SPEAKER_02: I think financial strength creates that foundation from which you're able to do everything else that the utility does – serve our customers, provide great reliability, decarbonize our energy portfolio,

SPEAKER_02: provide programs that our customers value and want and rebates that they value and want. All of these things that provide the community job opportunities and growth – these are things that the utility does based on the financial foundation.

SPEAKER_02: Without that financial foundation, a lot of these other things start to become a question rather than an opportunity.

SPEAKER_02: And I think that's what we're trying to show tonight, is that foundation that we have is very strong. We are absolutely committed to keeping it a very strong foundation so that we can do and pursue all the other important goals that the utility has.

Unknown: No pressure, Scott.

SPEAKER_08: I guess I'd also say – and maybe it's just restating what Scott says – those three stools that you mentioned, those are things that we're trying to provide to the community.

SPEAKER_05: And those are more like, this is what we want to do and then the financial strength is a prerequisite of that. So it's just not sort of in the same conceptual framework as the three stools.

SPEAKER_05: We're sort of going around the same circles here. To me it's just, you know, we – yes, the financial strength is in our strategic directives and we're getting a report on that today and we're hitting those marks.

SPEAKER_04: When we're out in public and we talk about our three – that's where I come from with the three-legged stool analogy, those are the three things that I always talk about.

SPEAKER_04: And maybe for me, I need to start also talking about we need to remain financially strong.

SPEAKER_04: And, you know, I don't know that the credit ratings are listening to this or to any other discussion we have about these things. But if you are, financial strength is very important to us.

SPEAKER_04: We will make sure they do. How about that? And our presentation will make sure they do.

Unknown: So as you can see, we're in compliance with our SD3 requirements and the staff recommends accepting SD3 access to credit markets report. So this concludes my report. Are there any other questions?

SPEAKER_01: Well, I think that is the longest presentation I've ever gotten on SD3. So –

SPEAKER_06: Sorry.

SPEAKER_01: No, no, no. Thank you. Thank you. Are there any comments from our digital –

SPEAKER_01: Can I say real quick? There's some really cool innovative work. The green bonds and the green commercial paper, the CP, I think is showing where we're able to stretch the innovation into that financial side that a normal person wouldn't think about. But it's a really good thing for sure. Thank you for that.

Unknown: Thank you.

SPEAKER_01: Any online comments or questions?

Unknown: No, I don't see any hands.

SPEAKER_07: Okay. Great. All right. Well, then this will go on the consent calendar at the next board meeting. And moving on.

Unknown: The next item on the agenda – let's see. Oh, item three is the board work plan. And we'll turn that over to our president.

Unknown: Thank you, Chair Herber. So you can see the work plan either on the screen or on your computer. I'm just going to call out a few things that are coming up. One is March 11th. We're going to have at the policy committee a discussion of the process and principles for renewable energy development.

SPEAKER_05: And we expect to have a – as part of that, we expect to receive a presentation from the folks who – well, save Coyote Creek, but it's not going to be about Coyote Creek. It's going to be about our ongoing process.

SPEAKER_05: And they will have received the benefit of getting more details on what we're already doing. So they'll – hopefully that will be reflected in their presentation.

SPEAKER_05: On the 17th of March, we're going to have an update on our solar and storage rate. And then on April 8th, we're going to have a presentation on our safety leadership, strategic directive, SD6, looking – hopefully that will be –

SPEAKER_05: very good news, as it has been the last few years. And also a heads-up, we have an opportunity – and actually I think it's an obligation to discuss board compensation and benefits.

SPEAKER_05: And so give that some thought. And on April 15th, we're going to have one of my favorites, our zero carbon plan update. And in the parking lot, there's a possibility of having a presentation on fusion.

SPEAKER_05: And then also to discuss the potential of enhanced geothermal technologies. Does anybody have any things that they think they might want to – Director Fishman.

SPEAKER_04: Thank you. Two things on my mind, President Tamayo. One, is it time for us to start discussing a land acknowledgment agreement again – or land acknowledgment statement?

Unknown: And I will just throw that out there and let the board decide if yes, now is the right time or not, with input from staff, of course. And then do we need an ad hoc to do that?

SPEAKER_04: And then also, I can't remember when the last time was. I'm wondering if it's possible to get an update on the status of the 59th Street project.

Unknown: And we can either do that in a committee meeting or by memo, whatever seems to be easiest and most efficacious for staff.

Unknown: So I'll ask Paul, do you have any comment on either the land acknowledgment or the 59th Street project ideas?

Unknown: Yeah, I think it's time to probably restart the conversation with the tribes. I mean, because we've been working with them.

SPEAKER_03: And so I think we can actually approach them again and say, you know what, we have some finale from a smut perspective from Cowardee Creek and so it's time for us to start the conversation.

SPEAKER_03: And we'll bring that back to the ad hoc chair and then see where we go from here.

SPEAKER_03: Is the ad hoc still in place? I guess it is, yeah.

SPEAKER_04: Yes, I'm the chair and Dave Tamayo and Rob Kurth. We went through quite a bit of training, learned a lot of things we had not realized before, came up with a statement.

SPEAKER_01: And then it kind of went into limbo because of other things that were happening.

SPEAKER_01: But we've been waiting for this time and I agree with you 100 percent. The time is now.

Unknown: So Paul, since Rosanna's the chair and she and I discussed this over the weekend, I think we're both interested in restarting it.

SPEAKER_05: Restarting that so maybe you could work with Rosanna to coordinate how we'll reach out to the tribes.

SPEAKER_03: So that would be the action I know for us is to restart. I know I'm looking at Scott Martin right now who has been talking to the tribes.

SPEAKER_03: And so we'll go ahead and restart that process. And then bring back the results back to the board, obviously, to the ad hoc and back to the full board.

SPEAKER_03: And then the second one on the 59th Street, we can probably start with a memo. And if the board, after you looked at the memo and said, you know what, we want more information, maybe we want to have a committee meeting discussion, we can certainly get that agendaized and put it on the calendar.

SPEAKER_03: But right now, why don't we start with the memo?

SPEAKER_04: I'm going to just put a few thoughts down, some questions that I have in my head about the project. I'll send them to you. Is that all right?

SPEAKER_04: Yeah, that'd be great. That'd be great. We actually have some questions, send it to me. So we try to answer that as part of the memo.

SPEAKER_03: And then what it is is obviously after we send the memo, if the board have additional questions, they can actually send it back to us also. And we try to get it answered.

Unknown: Yeah, and I also just want to say I'm very interested in the remediation of the toxics. And so I'd like detail about that as opposed to just saying it's going to be cleaned up, you know, because there's a lot more that goes to it.

SPEAKER_03: Well, we're planning on giving you a detailed memo on all the stuff that we know about. And then in addition to the toxics, I know we've been working with the whole level it should be, you know, and we're able to get movements on it, you know, from the Department of Toxic Substance.

SPEAKER_03: So we'll give you a detailed memo and then answer the questions. If you have some questions you want us to answer in the memo, just send it to me.

SPEAKER_03: And then we'll make sure those get actually answered. And then I'm sure maybe after you read the memo, if there's no question, we'll get those answered too.

Unknown: Thank you.

SPEAKER_03: Director Sanborn, did you want to?

SPEAKER_08: Yeah, I agree with both of those. And then so we invested a lot of time, energy, and money in the mobility center, which then changed to CalEPIC. So I'd really like an update on what's going on over there too. I did go to visit and see some things, but I'd just like to know what's happening with that.

SPEAKER_08: So one way or the other, whether it's a presentation or a memo, that would be fine.

Unknown: Okay, so that's something I know Laura Ingres' team is actually working. I know CalEPIC just got a $4 million grant from the CEC.

SPEAKER_03: Yes, it does.

SPEAKER_03: And so, yeah, so we're actually looking at, you know, what is the, you know, after they get the grant, what does it actually look like? And what business model does it need to go forward? And then we'll bring those, obviously, those things back to the Board.

Unknown: Thank you.

Unknown: Thank you.

SPEAKER_05: Anything else? Any other bright ideas?

Unknown: I think those are good things to talk about. Thank you.

SPEAKER_05: All right.

SPEAKER_01: Okay, well then I just want to see if we have any cards for items not on the agenda.

Unknown: No, we do not.

SPEAKER_01: Okay.

SPEAKER_01: And let's see.

Unknown: The last thing on the agenda is to provide a summary of committee direction.

Unknown: Staff will reopen discussions with the tribes and the land acknowledgment statement and reconnect with ad hoc chairs to restart the process.

Unknown: Staff will provide an email update on the status of the 59th Street project, including detail about the remediation of the toxic substances. And staff will provide an update on the status of CalEPIC.

Unknown: Great. Thank you.

SPEAKER_01: And I would just like the public to know that written comments received on items not on the agenda will be included in the record if we receive them within two hours of the end of this meeting.

SPEAKER_01: And the meeting is now adjourned.