Ron and I reviewed the credit aspects of the EEI document that you sent. Our
redlined changes are attached.  If you have no objections to these changes,
we will then forward the document for counsel review.
1. We changed the party to notify in the event of default to our General
Counsel.
2. Under Article 5, we changed the Cross Default Amount ratings thresholds
from "below BBB+" to "below A-" to remedy the gap that otherwise would exist
from A- or higher and below BBB+.
3. Under Section 5.6. we added language to exclude our Joint Powers Agencies
from setoff provisions. Currently, they do not make sales to outside parties
since SMUD takes all their output. Since they are separate entities with
their own bond indentures, we believe it best not to include them as if they
were corporate affiliates.
4. On page 6, "Transfer Date" the time allotted is two days after receipt
from posting party. As we are currently organized and staffed, we would find
that timeline difficult to meet especially if we were providing a LOC. We
would prefer to have the time extended to 10 days.
 <<SMUD Redline EEI (5.9.01).doc>>

 - SMUD Redline EEI (5.9.01).doc