SMUD Board of Directors Approves 2018 Budget

Sacramento Region, CA  |  SMUD special release

Sacramento Region, CA (MPG) - The SMUD Board of Directors approved a $1.74 billion budget. The 2018 budget provides funding for all capital and operations and maintenance (O & M) programs needed to meet the Board’s Strategic Directions in the year ahead.

The 2018 budget also positions SMUD for changes coming to the utility industry so SMUD can continue to meet our community’s energy needs. The budget sets the stage for operational efficiencies and improvements, as well as expansions of customer offerings in the near future, and opens up SMUD to seek new revenue opportunities.

SMUD is in a strong financial position. SMUD has a robust cash balance and operating cash flow and will fund the majority of capital investment with cash on hand, only planning to borrow $200 million next year. Recently Fitch and S&P upgraded SMUD’s credit ratings to AA, from an already impressive AA-, while Moody’s continues to rate SMUD Aa3. This is the strongest SMUD’s credit ratings have been in 33 years.

The 2018 budget is $161 million more than the 2017 budget, due mostly to higher planned capital expenditures. SMUD continues to upgrade electrical infrastructure to maintain safe and reliable service, as well as invest in the technological foundations to meet future challenges. Offsetting these increases is a lower commodity budget due to declining natural gas costs, which SMUD locked in through hedging programs.

As the utility business evolves, SMUD is increasingly reliant on technological solutions in all business areas. As a customer-owned utility, SMUD continues to focus on improving the digital channels its customers use to do business with SMUD. The 2018 budget includes initiatives to deliver a new SMUDapp with bill pay and outage communications functionality, as well as increasingly personalized customer experiences on SMUD’s digital channels.

In 2018, SMUD embarks on exploring new business opportunities that open new markets and revenue streams. These include expanding opportunities for new revenue in traditional wholesale energy markets, such as successfully selling excess transmission capacity, plus new net revenue from non-traditional sources such as the new e-commerce solution, the SMUD Energy Store.

SMUD signed a contract in 2017 with Valley Clean Energy Alliance (VCEA) to provide Community Choice Aggregator (CCA) services. SMUD’s work with VCEA, which launches next spring, will create a new revenue stream for SMUD and creates possibilities for expansion into other CCA markets.

The capital budget includes funding for improvements and investments to support development of SMUD’s load serving capacity—the amount of power needed to meet high demand during peak summer hours—as well as continued modernization of the grid; regulatory compliance; and customers’ experience dealing with SMUD. Some major capital projects include:

·       Rebuilding Station E and Station G substations downtown.

·       Construction of the new Franklin substation in Elk Grove.

·       Rehabilitation of the SMUD Headquarters building.

·       Re-purchase of Solano Wind 3.

The O&M budget includes funding for the work associated with SMUD joining the Energy Imbalance Market (EIM) in 2019. The EIM is a real-time, wholesale power market managed by the California Independent System Operator that enables participating utilities to buy low-cost energy available across eight western states—the resulting efficiencies of pooling power resources across a wide geographic area provides cost savings and environmental benefits. Other O&M expenditures include:

·       Power plant maintenance and overhauls.

·       Repair costs due to storm and wildfire events.

·       Technological enhancements to existing electrical equipment.

SMUD customers continue to pay significantly less for electricity than most Californians, and as of November 1, 2017, about 32 percent less than residential customers who are supplied by neighboring PG&E.

As the nation’s sixth-largest, community-owned electric service provider, SMUD has been providing low-cost, reliable electricity for 70 years to Sacramento County (and small adjoining portions of Placer and Yolo Counties). SMUD is a recognized industry leader and award winner for its innovative energy efficiency programs, renewable power technologies, and for its sustainable solutions for a healthier environment. SMUD’s power mix is about 50 percent non-carbon emitting. For more information,