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 >> Good morning and welcome everyone to this joint meeting of the Denton City Council and

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 Public Utilities Board. I'm Mayor Pro Tem Jesse Davis and at this time is 1132. I will

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 formally open the meeting of the City Council and introduce Chair of the Public Utilities

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 Board, Susan Parker. >> Good morning. It's 1132, so I will call

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 the Public Utilities Board meeting open. >> Very good. Thank you, Chair Parker. And

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 with that, I will move us to our one and only work session report, item 1A, ID21341, receive

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 a report, hold a discussion and give staff direction regarding processes, impacts and

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 results of service delivery during the February 2021 inclement weather event. By the following

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 departments, we'll hear from Denton Municipal Electric and the water and wastewater utilities.

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 And just for the members of the public, these are very in-depth reports we're about to receive.

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 There are breaks built in for questions. So we'll be taking -- you'll see a slide come

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 up that says breaks and questions. That's when you can expect your PUB and council members

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 to be posing the questions. And Tony, are you up?

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 >> Yes, sir. So Mayor Pro Tem, City Council members, members of the PUB, I appreciate

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 your time today, and we certainly have a lengthy presentation, about 40 slides. We're going

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 to try to go through those as efficiently as we can. Again, my name is Tony Puente. I'm

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 the executive manager for utilities for the city and also serve as the DME general manager.

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 Before I get started with the presentation, I just wanted to go through just a couple

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 of items. Just wanted to -- first of all, I want to acknowledge, you know, the trying

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 times that our customers faced during, you know, this winter storm. We know that, you

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 know, many of them suffered through extreme, you know, low temperatures. And certainly

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 some of our customers that are dependent on medical equipment, we understand that they

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 went through some very anxious times trying to sort out how to take care of themselves

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 and where to go. And so certainly want to just acknowledge our customers. I also want

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 to assure our customers that, you know, that they were certainly at the forefront of our

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 minds and our efforts throughout the storm. You know, their health and safety was certainly

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 a top priority for our team at Den Municipal Electric, and we certainly worked with many

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 of our partners across the city, especially our public safety folks, to be able to respond

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 to calls and some of the information that we were getting. I also want to assure our

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 customers -- excuse me -- that right from the very beginning, we initiated our rotating

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 outage plans. We did not hold that back. We immediately put our plan into effect. We also

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 made some adjustments to that plan, and so while we had some hard lines as we were getting

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 phone calls from our customers and requests, we did make adjustments to that in order to

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 be able to address certain things. One of the examples I've given before is that we

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 increased the outage from 30 minutes to about 45 minutes just trying to make sure that we

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 accommodated people so that they could have a little bit more time with electricity in

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 their homes and be able to warm up their homes as best that they could. Again, I want to

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 thank our public safety partners, and also just wanted to stipulate that as ERCOT was

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 allowing us to add power back onto the system, we did that. We did not hold back on that

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 power primarily, again, because of our concerns for the health and safety of our customers,

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 and so even though we knew that we may be exposed to some financial challenges going

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 forward, we did not hold that back. We continue to allow power back onto the system to be

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 able to provide it to our customers. The second item that I wanted to just briefly

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 just go through is just to thank our DME staff. As you can imagine, it was a very trying time

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 for them as well. In my view, they acted very valiantly, including the fact that many of

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 them left their own families and their own loved ones at home in the dark to be able

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 to come in and provide the services to our customers that they've always been able to

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 provide, and so I want to acknowledge their efforts and the work that they did and just

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 thank them. I will tell you, just on a personal level, that I have not worked with people

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 like this since, frankly, since I was a young 19-year-old Marine being deployed overseas

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 during the first Gulf War. I'm honored to serve with these folks. They were very valiant.

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 I will tell you that every single one of them stood their post, and they did not abandon

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 their post. Our folks did everything that they could, and I wanted to thank them, and

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 I truly believe that at the end of the day, their work and their effort saved people's

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 lives. We have a number of examples where we worked with FEMA and dialysis centers and

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 other areas of the community to try to give them at least some power, try to accommodate

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 them as best we could, and so I truly believe that our efforts did save people's lives,

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 and lastly, I'll just say that in my book, all these DMA employees and certainly all

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 our employees across the city, certainly those that we partnered with, are heroes in my book,

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 and I would hope that you would echo that as well. So with that, I appreciate your indulgence

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 with that, and I'll go ahead and initiate this presentation.

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 So just to go through the objectives, I'm going to quickly go through just a little

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 bit about DME. Hopefully, we'll answer some questions that some of our customers and community

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 members have. Then I'm going to turn it over to Chris Lutrick. He'll go through some of

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 our division reports. We'll have a break for questions on that section, and then Terry

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 Nolte will come up and present some additional division reports, and then at the end, we'll

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 just have time for questions and just general questions that you may have for me or for

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 either one of our team members. So just a little bit about DME. DME was established

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 back in 1905. That's about 116 years of local power that's been provided that the citizens

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 of Denton have chosen to have. Certainly, from our viewpoint, that provides the maximum

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 local control. DME is the sixth largest municipally owned utility in Texas. We're one of about

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 72 MOEs in the state of Texas. We make up about a third of the total ERCOT market. So

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 about two-thirds of the ERCOT market is made up of co-ops and private utilities, just to

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 give you kind of the size of our participation in the ERCOT market. Our governing body is

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 the city council. We certainly have an advisory board, public utilities board, that advises

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 to council on all things related to utilities, including DME. And council does adopt our

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 budget and rates on an annual basis. Over the last two years, our team has really tried

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 to focus DME and to be in and recognizing that we're a department of the city. We're

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 not a separate entity. And so we've driven this concept of one city, one organization.

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 And I think our staff have certainly embraced that concept. DME also has a defined service

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 territory. The main area is certainly the core of the city, but we do have extra jurisdictional

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 or ETJ areas. And then there's also some small tracts in the city of Corinth that we also

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 currently serve. So this includes single, dual, and triple certified areas. And we'll

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 talk a little bit more in the next slide about that. So this is just a map for you on areas

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 that we serve. I know we've had a lot of customers ask, well, why am I with co-serve or Encore?

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 And this really kind of shows a picture of this green teal area is the single certified

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 areas for DME, where we serve the majority of our customers. But in these outline areas,

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 we do compete in those areas in dual and triple certified areas. In some cases, we're duly

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 certified with co-serve or with Encore, or we're triply certified with those two entities

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 primarily. And the way that that works is normally that starts at the development process

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 when the developer wants to come into one of these dual and triply certified areas,

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 they work with all three companies and they make a decision as to who's going to serve

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 that particular area. I'll tell you that the vast majority of developers do choose DME.

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 And so we anticipate, just like in Hunter and Coal Ranch as an example, we're going

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 to serve the majority of those two developments that will continue to expand outside of the

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 Encore city area. And just really quick, once that decision is made on who's going to serve

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 that particular area, that dual or triple certification does not end. So that continues.

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 But as you can imagine, it's very cost prohibitive for another provider to come into that area.

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 Certainly there'll be restrictions related to available right away and such, and there'll

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 be some additional expenses that may be incurred to be able to switch. But again, I wanted

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 to just quickly just show that because I know we have a lot of customers that ask questions

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 about, well, why are my lights off or my lights on? Some of the explanations that you may

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 have been with a different provider and not the municipal electric. This is our current

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 organizational structure. I'm not going to go through it in detail, just simply to say

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 that you'll be hearing from Terry and myself again in our dual roles here. Terry does also

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 oversee the water wastewater utilities as the interim director for water wastewater,

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 but he serves as the assistant general manager for DME. And of course, I have a dual role

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 as well in that we oversee the other city utilities, including the municipal electric.

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 Over on the right-hand side, I did want to point out just quickly that over the last three

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 years now, really starting in May of 2019, we've worked to right size, not only our budget,

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 but certainly our staffing levels. We engaged an external party to help us go through and

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 look at FTE counts and just our organization in general. And so over the last two years

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 going into our 2021 budget, we did certainly see about a $9 million reduction in our operating

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 budget. And we saw about 20 positions that we eliminated in the budget. And again, we

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 did that very purposeful as part of just a wider right sizing of our budget and our organization.

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 So with that, I'm gonna turn it over to Chris Lutrik to come in and cover his areas of responsibility.

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 Thank you, Tony. Before I get started, I would just like to reiterate a few things that Tony

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 said. I'd like to thank our customers for the patience they provided us during the winter

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 event and just to reiterate what an honor it was to work next to all of our DME staff.

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 It was very trying times. As you know, a lot of the work was done outside, very demanding

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 conditions, and our guys just never back down. So this was an unprecedented event for us.

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 We never knew what the next hour might hold, but our guys were always, guys and gals were

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 always up to the task. They never back down and they did what they had to do to get the

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 job done. So again, it was just an honor to work alongside them during the event. So I'm

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 Chris Lutrik. I'm the executive manager of operations. I oversee the day-to-day electrical

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 operations of the utility, and I will be covering our DME system response to the winter event.

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 I'll start with talking about ERCOT's role during that week. As you know, that's an acronym

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 that has received a lot of media attention over the last month, and the acronym stands

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 for the Electric Reliability Council of Texas. They're a quasi-governmental organization

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 that manages the electric power to about 24 million Texans, which represents about 90%

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 of the state's electrical load and covers about 75% of the land. It is wholly contained

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 within the borders of Texas, and I should state that ERCOT does not own or operate any

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 equipment. They simply oversee the interconnection of the 17 transmission distribution service

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 providers who do own and operate the equipment and are interconnected. Their main task are

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 they coordinate the operation of more than 550 generation units. They're spread out over

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 the state of Texas. They coordinate the operation of 46,500 circuit miles of high voltage transmission

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 lines that are required to transport that power from the generators to the load centers.

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 My colleague Terry Nalte will discuss this next bullet in detail in his presentation,

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 but another function of ERCOT is they manage the financial settlement for the competitive

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 wholesale bulk power market in Texas. Here's a fraction that will become important in my

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 presentation. DME represents 0.5% of ERCOT. That allocation and obligation is assessed

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 every year, and it's based on the peak summer load of the utilities, and ours currently

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 stands at 375 megawatts. So now we'll get to the event, and again, we're talking about

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 the event starting on Saturday, February 14th, and working our way towards Thursday. I think

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 that's February 18th. So at that time, the grid was under a lot of strain. Loads were

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 very high, and ERCOT at 1.20 a.m., the reserve margins had been compromised. At that time,

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 they entered a load shed event. So as you see, the nominal frequency of the ERCOT grid

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 is 60 hertz. Small deviations above and below that are normal, but when the frequency starts

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 to vary either above or below 60 hertz, that's an indication that the grid is under stress.

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 So as you see in this 30-minute or 40-minute snapshot here, a lot of things happen. So

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 the first events here are there's generators are tripping offline. So we already were in

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 a -- our capacity reserves were compromised. We have generators tripping offline. So as

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 you'll see, the graph begins to trend downward. That means the frequency is moving away from

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 60 hertz. So right at about 1.43, you see the graph gets pretty steep. This is an indication

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 that the grid is in trouble. ERCOT orders another load shed instruction. Then again,

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 as you notice, three more generation outages occurred, and the graph gets really steep.

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 This is the time when we were headed towards a blackout condition. If ERCOT did not take

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 the proper steps to mitigate this frequency decay. So again, the first threshold was hit,

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 the 59.4 hertz. At that point, the generators can only operate for nine minutes. At that

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 point, they have protective devices called relays that would have then taken additional

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 generation that was able to function offline to protect the equipment. During the event,

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 so ERCOT ordered another big chunk of load shed that was 3,000 megawatts to try to mitigate

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 that frequency decay. And we came close because if you notice on the graph, we were below

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 that threshold for four minutes and 23 seconds before the frequency was able to start its

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 recovery. And an important note on the bottom right-hand corner is the minimum frequency

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 that was recorded was 59.302. That's an important number and I will further expand on that later

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 in my presentation. Now on to DMEs to our part of this load shed event. At the time,

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 the load shed began at 1.20 a.m. on Monday, February 15th, the city's net load was 275

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 megawatts. That probably was about 100 to 125 megawatts higher than your typical February

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 evening. And actually the previous day, which would have been Sunday morning, we set our

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 peak, our all-time winter peak of 304 megawatts. So to give you the context over the whole

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 load shed event, ERCOT ultimately required operators to shed 20,000 megawatts of power

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 from the grid. And to put that in context, at that time the total grid load was about

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 70,000. So nearly one-third of the load on the ERCOT grid was instructed to be shed.

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 To break that down to our portion again, it's based on your obligation now and that's still

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 the half a percent. So out of the 20,000 megawatts, we were required to shed 100 megawatts at

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 the peak or about 36% of the city's net load. This event that I detailed on the previous

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 slide that started at 1.20 a.m. on Monday persisted through, I believe it is 12.39 a.m.

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 on Thursday morning. So a total event duration of about 59 hours. So how did we go about

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 the load shed? We have a load shed plan. I'll start with this plan is confidential as it

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 contains critical energy and electric infrastructure information. It has our hospitals, police

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 departments, fire stations. They are identified in the plan as well as what circuit they're

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 on. So if that information was to become public, bad actors would have a roadmap for doing

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 the most sabotage or destruction to our infrastructure. Therefore those plans are confidential. So

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 that being said, the plan is updated annually along with our ERCOT emergency operation plan.

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 They're submitted to ERCOT and it contains two main components for shedding load. The

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 first is under frequency load shed. It's a pretty fancy title there and I will explain

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 that further on the next slide. And emergency load shed. That was the method that was utilized

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 during this event by our operators. And I'll finish this slide by saying that DME is obligated

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 to comply with ERCOT operating instructions. This is directed by NERC. NERC is the North

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 American Electric Reliability Council. They're a federal entity that oversees the operation

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 of electric utilities across the country. Our obligations are detailed in the ERCOT

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 operating guides and protocols. So to detail the two different methods of load shed, I'll

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 start with emergency load shed. That is a controlled rotating outage. During the event

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 we saw a lot of social media that used the word blackout. ERCOT, that means something

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 different. So to ERCOT, a blackout is if you were to go up in space and take a picture,

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 the state of Texas would be dark. At that point the grid has failed. There is no transmission

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 voltage and 24 million people are without power. So this is, I'll use the word outage or try

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 to use the word outage for the rest of the presentation. Again, they're controlled. They

200
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 are initiated by our system operations. They can be done remotely. And again, our obligation

201
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 is 5% of the total ERCOT load. And so when we're issued a directive or an instruction

202
00:20:25,840 --> 00:20:33,400
 from ERCOT, we get on a call with the other 16 TDSPs and as that graph showed, your load

203
00:20:33,400 --> 00:20:38,680
 shed instruction is 1000 megawatts. And then that was acknowledged. And then that meant

204
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 that 1000 became 5 megawatts for us. So everybody got the same instructions. They're done verbally

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 over the phone. You acknowledge it. And then you're obligated to perform that load shed

206
00:20:49,720 --> 00:20:57,280
 as soon as possible. Our plan we had in place utilizes feeders that do not contain critical

207
00:20:57,280 --> 00:21:03,720
 loads. Those are 43 feeders that we identified. They're mainly residential and commercial

208
00:21:03,720 --> 00:21:10,280
 loads. And they would be the first load that is shed when instructed by ERCOT. Our plan

209
00:21:10,280 --> 00:21:16,160
 was tweaked after the 2011 event, winter event. I think that was during the Super Bowl. That

210
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 was the last time that ERCOT had issued a load shed event. For that event, the duration

211
00:21:21,160 --> 00:21:28,240
 was six hours, about six hours. And DME's portion of that event was 20 megawatts. So

212
00:21:28,240 --> 00:21:33,720
 at that time in evaluating that, this is as bad as it can get. So we added 50% to that

213
00:21:33,720 --> 00:21:40,880
 to bump that to 30 megawatts. And to roll 30 megawatts, we have to have two blocks,

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00:21:40,880 --> 00:21:47,000
 an A and a B. So when the A is on, the B would be off. So we had to identify 60 megawatts

215
00:21:47,000 --> 00:21:54,080
 or twice your allotment for our plan. And our original plan, as Tony mentioned earlier,

216
00:21:54,080 --> 00:22:00,920
 called for a 30 minute outage. That's what we entered in this event. That was our plan.

217
00:22:00,920 --> 00:22:07,660
 The second load shed method is the under frequency load shed. As dictated here, this is the automatic

218
00:22:07,660 --> 00:22:16,320
 non-rotating outages. All TDSPs in ERCOT are required to have a minimum of 25% of their

219
00:22:16,320 --> 00:22:22,400
 load that are fed from circuits that have these protective relays on them that can sense

220
00:22:22,400 --> 00:22:30,920
 the frequency of the grid. And what this is is the grid is under a lot of stress. And

221
00:22:30,920 --> 00:22:36,340
 our relays, like the first one, the 59.3, the importance of that first number I told

222
00:22:36,340 --> 00:22:44,300
 you was 59.302. We were two thousandths of a hertz away from this group of relays opening

223
00:22:44,300 --> 00:22:50,000
 up across ERCOT. And at that point, automatically those feeders would have opened up and a minimum

224
00:22:50,000 --> 00:22:55,760
 of 5% of the load would have been shed. Again, it's a built in feature to try to save the

225
00:22:55,760 --> 00:23:01,120
 grid to avoid the blackout condition. There's three groups. So as the frequency continues

226
00:23:01,120 --> 00:23:06,160
 to decay, the next group two would open up and then group three would open up. And I

227
00:23:06,160 --> 00:23:11,800
 should note, if those relays were to open or to operate at that point, those circuits

228
00:23:11,800 --> 00:23:17,520
 are under the control of ERCOT and you cannot restore power to those circuits until ERCOT

229
00:23:17,520 --> 00:23:23,960
 issues the instruction. So again, those relays did not operate during this event and they

230
00:23:23,960 --> 00:23:28,640
 have never operated on our system. They're a very rare occurrence, but they're a last

231
00:23:28,640 --> 00:23:38,720
 ditch effort to shed load to save the grid. The next main component of the load shed plan

232
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 is it requires you to prioritize your loads. So this takes all of your customer bases and

233
00:23:43,960 --> 00:23:48,720
 you have to, it doesn't exactly tell you how you need to classify them. It just tells them

234
00:23:48,720 --> 00:23:55,560
 that you do need to classify them. So classifying the critical load, that is established by

235
00:23:55,560 --> 00:24:01,880
 the Texas Administrative Code done through the PUCT and it lists four categories of critical

236
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 load customers. The first being the critical load public safety customer. As you can imagine,

237
00:24:08,200 --> 00:24:16,320
 that's your major fire stations, police department, water treatment plants, sewage treatment plants,

238
00:24:16,320 --> 00:24:23,480
 emergency operations centers, and your major hospitals. Critical load industrial customer.

239
00:24:23,480 --> 00:24:30,440
 I don't think we have any of those on our system. They have to do with endangering public

240
00:24:30,440 --> 00:24:36,200
 in retail establishments. And then the last two classes we do have on our system, those

241
00:24:36,200 --> 00:24:41,640
 are the chronic condition residential customer and the critical care customer. These are

242
00:24:41,640 --> 00:24:49,560
 programs that customers in ERCOT can apply. There's some qualifications for them, but

243
00:24:49,560 --> 00:24:53,840
 they actually are basically notifying the utility, hey, I'm here. Here's my address.

244
00:24:53,840 --> 00:25:00,240
 And I have some medical equipment that needs to be, you know, this operates off the electrical

245
00:25:00,240 --> 00:25:08,960
 grid. But it should be noted at the bottom also in that code is a statement that says

246
00:25:08,960 --> 00:25:14,760
 designation as a critical load customer, a critical care residential customer, or a chronic

247
00:25:14,760 --> 00:25:20,800
 condition care customer does not guarantee the uninterrupted supply of electricity. That

248
00:25:20,800 --> 00:25:26,840
 was one of the questions that was out, that was floating around. For load shed, at that

249
00:25:26,840 --> 00:25:33,560
 point, you're trying to stabilize the grid. So those customers are not guaranteed. Actually,

250
00:25:33,560 --> 00:25:40,160
 any customer is not guaranteed uninterrupted supply of electricity, either via mother nature

251
00:25:40,160 --> 00:25:46,560
 with a storm or equipment failure or a rotating outage. But our load shed plan, we do take

252
00:25:46,560 --> 00:25:52,120
 those into consideration. So we have four categories that are listed here and followed

253
00:25:52,120 --> 00:25:57,460
 by basically our fifth category, which is our emergency load shed feeders. So category

254
00:25:57,460 --> 00:26:05,040
 one is our critical load public safety customers from as described right above. These are our

255
00:26:05,040 --> 00:26:12,520
 major hospitals, police department, fire stations, basically health and human services, so they

256
00:26:12,520 --> 00:26:20,360
 can continue to provide those services for our residents. Categories two, three and four

257
00:26:20,360 --> 00:26:25,560
 due to the size of this load shed event, they were in the rotation. So again, I have some

258
00:26:25,560 --> 00:26:32,720
 graphs that will detail that out. Feeder utilization during load shed, just some information about

259
00:26:32,720 --> 00:26:40,440
 our system. DME has 107 feeders that carry load. Just a quick tutorial there. A feeder

260
00:26:40,440 --> 00:26:45,920
 is basically electrical circuit that originates at a substation circuit breaker and runs out

261
00:26:45,920 --> 00:26:51,360
 into our territory to serve load. They're, they're generally pretty long, you know, three

262
00:26:51,360 --> 00:26:58,020
 or four miles, three or four miles long, they're designed to carry a maximum of 13 megawatts.

263
00:26:58,020 --> 00:27:02,480
 We tend to try to load to keep those balance at about eight so that we have some switching

264
00:27:02,480 --> 00:27:09,440
 capabilities. The feeders are segmented by switches and other equipment that can allows

265
00:27:09,440 --> 00:27:16,520
 us to intertie these circuits from one to the other. This gives us flexibility in balancing

266
00:27:16,520 --> 00:27:22,920
 our load through the different seasons, responding to outages, maintenance activities. That's

267
00:27:22,920 --> 00:27:27,800
 our flexibility. But I should say that's large sections of those circuits can be moved to

268
00:27:27,800 --> 00:27:34,200
 another one. We cannot move individual customers from one circuit to another. That can be done,

269
00:27:34,200 --> 00:27:38,760
 but it would be very expensive and you basically have to build the infrastructure to do that.

270
00:27:38,760 --> 00:27:46,600
 So that being said, 17 of the feeders on our system serve the critical infrastructure load.

271
00:27:46,600 --> 00:27:51,560
 That's the category one on the previous slide. That's your major hospitals, water, wastewater

272
00:27:51,560 --> 00:27:56,640
 facilities, police and fire. These feeders did not experience any outages during the

273
00:27:56,640 --> 00:28:03,320
 event. The remaining 90 feeders on our circuit, on our system were utilized to, to get us

274
00:28:03,320 --> 00:28:11,760
 through the rotating outages. And to put that in context, at the peak on Monday evening,

275
00:28:11,760 --> 00:28:18,880
 our load shed instruction was 100 megawatts. We had to take 230 megawatts off of our system

276
00:28:18,880 --> 00:28:26,600
 to roll over to the next 100 megawatts of load shed. So once you're in a load shed condition,

277
00:28:26,600 --> 00:28:31,040
 you cannot exceed that amount. So the load you have on, you actually have to take that

278
00:28:31,040 --> 00:28:36,280
 off. So you have both blocks off before you bring the next one on. If not, you would actually

279
00:28:36,280 --> 00:28:41,720
 be putting more load on the grid, which would, would defeat the purpose. But at that point,

280
00:28:41,720 --> 00:28:49,240
 that 230 megawatts affected about 43,000 of our customers. So we had two thirds of

281
00:28:49,240 --> 00:28:57,000
 our 60,000 customers were without power during these rotation periods. So back to our plan,

282
00:28:57,000 --> 00:29:02,760
 we originally had 43 feeders identified for load shed. That would have accommodated a

283
00:29:02,760 --> 00:29:10,000
 request of 30 megawatts. And it took an additional 47 feeders that did have critical service

284
00:29:10,000 --> 00:29:15,680
 loads. We had to put them into the mix to maintain our goal of maintaining the rotating

285
00:29:15,680 --> 00:29:24,320
 outages. This is a, this is a pretty angry looking graph, but it kind of details the,

286
00:29:24,320 --> 00:29:31,320
 the, the, the rotation cycles that we did have. So it starts on the very left at 1 26

287
00:29:31,320 --> 00:29:36,680
 a.m. on Sunday. And I know that print's very small on Sunday. You just have to take my

288
00:29:36,680 --> 00:29:42,240
 word for it. That's when we started. So we were at zero load shed. That graph I initially

289
00:29:42,240 --> 00:29:49,120
 showed you of the situation where the system was about to collapse. That's the steep incline

290
00:29:49,120 --> 00:29:56,100
 here in our load shed instruction. So ERCOT was able to use load shed to mitigate the

291
00:29:56,100 --> 00:30:02,000
 frequency decay, stabilize the grid. And then the rest of this orange line is, is our portion

292
00:30:02,000 --> 00:30:07,800
 of the load shed instruction throughout the, throughout the day. You know, during the day,

293
00:30:07,800 --> 00:30:13,400
 the load, maybe some generators come on and off. At this point, the only way ERCOT was

294
00:30:13,400 --> 00:30:21,120
 able to allow any extra load to come on the system as extra generation came on the system.

295
00:30:21,120 --> 00:30:26,340
 So the orange line in the middle is our load shed requirement. Here on Monday evening,

296
00:30:26,340 --> 00:30:33,920
 it peaked at 100 megawatts. So, and as you can see, the blue spike was the 230 megawatts

297
00:30:33,920 --> 00:30:41,080
 that it took for us to roll on the next 100 megawatt block. So as the situation improved

298
00:30:41,080 --> 00:30:47,720
 over the 59 hours, you can see the line trending down. But this just shows one of our, one

299
00:30:47,720 --> 00:30:51,840
 of our accomplishments that I, that I'll wrap up my presentation with. We never stopped

300
00:30:51,840 --> 00:31:00,080
 rotating outages, regardless of what the load shed requirement was. Our next graph here

301
00:31:00,080 --> 00:31:06,240
 is just that prioritization that I spoke of, of our load that this details that out. Our

302
00:31:06,240 --> 00:31:11,520
 17 feeders that serve our critical load, they were not rotated. So, and then as we prioritized

303
00:31:11,520 --> 00:31:17,560
 our circuit, you see, we had to get right up to the, right up to those 17 circuits,

304
00:31:17,560 --> 00:31:24,740
 but we were able to, to, to rotate the frequency. We were able to minimize the frequency rotation

305
00:31:24,740 --> 00:31:30,800
 of our critical customers based on the amount of load shed instructions we had from ERCOT.

306
00:31:30,800 --> 00:31:35,260
 And on the right is our load shed feeders that were originally designed. They carried

307
00:31:35,260 --> 00:31:42,340
 the bulk of our rotating bulk of the, of the workload in meeting our load shed requirements

308
00:31:42,340 --> 00:31:53,080
 for this event. So onto another type of outage. So systems really weren't meant to be rotated

309
00:31:53,080 --> 00:31:58,200
 on and off as, as we were required to do. So especially with the temperatures that we

310
00:31:58,200 --> 00:32:04,160
 were facing. So this graph details our, our fuse overload. So out on our system, we have

311
00:32:04,160 --> 00:32:11,120
 some protective devices. They're usually saved for squirrel suicides. But basically they're,

312
00:32:11,120 --> 00:32:15,880
 they're, they're a dumb protective device that's, that's meant to melt out at a certain

313
00:32:15,880 --> 00:32:20,360
 power load. So it's like the old fuses you would have in your car or maybe a circuit

314
00:32:20,360 --> 00:32:25,480
 breaker at your house. Their segment, the circuit out so that if there's a fault at

315
00:32:25,480 --> 00:32:31,360
 one part, that fuse melts out and protects the rest of the circuit. At that point, we

316
00:32:31,360 --> 00:32:35,160
 normally have an outage management system. We would know that we would roll a truck that

317
00:32:35,160 --> 00:32:41,840
 replaced the fuses and the power comes back on. So I know, especially the PB talking about

318
00:32:41,840 --> 00:32:47,340
 our reliability reports, we give you the bulk of those are our outages that are repaired

319
00:32:47,340 --> 00:32:54,320
 in 35 to 45 minutes. Those are fuse replacements. But the issue we had during the rotating outages

320
00:32:54,320 --> 00:32:58,960
 is if you can imagine your house and I'm sure everybody was setting through that when your

321
00:32:58,960 --> 00:33:04,600
 power was out for an hour, you're setting there and then power is restored to your circuit.

322
00:33:04,600 --> 00:33:09,600
 All of your electrical devices came on at once. So that's the same for your neighbors.

323
00:33:09,600 --> 00:33:15,400
 That's the same for, for every one of our customers on our, on our circuits. Now while

324
00:33:15,400 --> 00:33:21,240
 we were able to handle the neighborhoods that predominantly had gas heat, the electrical

325
00:33:21,240 --> 00:33:27,360
 demand on those was much lower. Our neighborhoods that had a lot of electric heat, we struggled

326
00:33:27,360 --> 00:33:32,320
 with that. So every time we would pick that circuit back up, the cold load pickup or the

327
00:33:32,320 --> 00:33:39,040
 additional load of all of the electrical devices coming on at once was burning out our fuses.

328
00:33:39,040 --> 00:33:46,600
 So this graph represents the 172 phone calls that we received because people were letting

329
00:33:46,600 --> 00:33:52,320
 us know their power was out. We were able to verify that a lot of those, they were voicemails,

330
00:33:52,320 --> 00:33:57,600
 that their power was just in a rotating outage and it came back on. But actually 47 of those

331
00:33:57,600 --> 00:34:04,640
 calls were fuse burnouts and or transformers. And we rolled a service truck to get those,

332
00:34:04,640 --> 00:34:12,240
 those customers back on. So now on to our field operations. These are the, our line

333
00:34:12,240 --> 00:34:18,640
 and substation field crews. These are the men and women that, that replaced all of those

334
00:34:18,640 --> 00:34:24,720
 fuses and replaced transformers. And, and so in knowing, we didn't foresee the rolling

335
00:34:24,720 --> 00:34:30,640
 outages, but what we did foresee is the NOAA forecast that, that called for some freezing

336
00:34:30,640 --> 00:34:36,880
 rain that would precede the snow that we're going to receive on Sunday. That's a very,

337
00:34:36,880 --> 00:34:42,980
 that's a very treacherous travel condition for our staff. That, and also the freezing

338
00:34:42,980 --> 00:34:48,800
 rain is, is, is, they're much like tornadoes are to, to the electric utility. They're very

339
00:34:48,800 --> 00:34:54,000
 hard on your aerial equipment. The ice builds up and puts a substantial amount of weight

340
00:34:54,000 --> 00:34:58,320
 on your, on your lines and your poles. So knowing that was coming, we actually brought

341
00:34:58,320 --> 00:35:05,440
 some DME crews into Denton and we staged them in a hotel near, near our yard so that they

342
00:35:05,440 --> 00:35:12,800
 could quickly respond to any outages. We placed, we told all field personnel were put on notice

343
00:35:12,800 --> 00:35:19,880
 to be available for storm response. And due to the sub-zero temps and the forecasted windshields

344
00:35:19,880 --> 00:35:26,720
 of minus 10 to minus 15, we canceled all non-outage operations. And finally, our winter storm

345
00:35:26,720 --> 00:35:33,000
 event kicked off for us on Sunday evening. We had a piece of underground con or conductor

346
00:35:33,000 --> 00:35:39,360
 fail that ended up tripping off a one of our substation power transformers. And this led

347
00:35:39,360 --> 00:35:44,680
 to an outage in a subdivision that ended up being our most difficult to recover. And I'll

348
00:35:44,680 --> 00:35:52,000
 speak about that a little later in the presentation. So the rolling outages, as I've mentioned,

349
00:35:52,000 --> 00:35:59,920
 they commenced at 1 20 a.m. on Monday, February 15th. And as I just spoke, spoke, spoke to

350
00:35:59,920 --> 00:36:04,160
 the rolling outages during the extreme low temperatures caused numerous equipment failures.

351
00:36:04,160 --> 00:36:10,040
 That's the cold load pickup. And that's a topic that I'll keep talking about that caused

352
00:36:10,040 --> 00:36:18,200
 us quite a bit of issue. So our effort from our, from our staff took 55, 55 of our staff

353
00:36:18,200 --> 00:36:22,880
 coming from our maintenance, construction, substation and metering groups that began

354
00:36:22,880 --> 00:36:28,360
 working Sunday evening around the clock and continued working in shifts up to 16 hours

355
00:36:28,360 --> 00:36:34,080
 for the duration of the event. The primary work they performed was fuse and transformer

356
00:36:34,080 --> 00:36:39,160
 replacement. After the rolling outages come back on, customers and notify us their power

357
00:36:39,160 --> 00:36:44,880
 was out. We verify that and then we had to go get them back on. And again, our staff

358
00:36:44,880 --> 00:36:52,480
 who did a wonderful job through this worked about 174 calls during the storm event. On

359
00:36:52,480 --> 00:36:57,800
 to engineering. Our two systems, our transmission system, as you can imagine, performed quite

360
00:36:57,800 --> 00:37:03,280
 well with the amount of load shed that was on the grid. The transmission system was not

361
00:37:03,280 --> 00:37:09,840
 stressed at all. And our transmission voltage was maintained for the duration of the event.

362
00:37:09,840 --> 00:37:16,000
 Our distribution system, we had two all electric subdivisions that were on individual feeders,

363
00:37:16,000 --> 00:37:24,320
 the village of Carmel. That's the outage that kicked off the our response on Sunday evening.

364
00:37:24,320 --> 00:37:28,740
 The circuit is primarily electric heat. So when we energize the circuit for both of these

365
00:37:28,740 --> 00:37:36,160
 two subdivisions, we were unable to pick those circuits up. Our guys worked very diligently.

366
00:37:36,160 --> 00:37:40,760
 We actually end up having to segment the circuit in the field and bring it on a little bit

367
00:37:40,760 --> 00:37:45,960
 at a time. But once we did that, we could get some heat back in those houses. We could

368
00:37:45,960 --> 00:37:53,020
 better manage that situation. 11 distribution transformers failed. Probable cause was overloading

369
00:37:53,020 --> 00:37:57,680
 again for that cold load pickup, the sudden inrush of power when we were to energize the

370
00:37:57,680 --> 00:38:06,720
 circuit. Engineering. So as you've seen, we had a plan for 30 megawatts for our load shed

371
00:38:06,720 --> 00:38:12,240
 that quickly went out the window. So on the fly Monday morning, engineering developed

372
00:38:12,240 --> 00:38:17,360
 tools for our system operators to manage to be able to allow to spread those rotating

373
00:38:17,360 --> 00:38:22,560
 outages amongst our 90 remaining feeders. So that tool was invaluable. And that's what

374
00:38:22,560 --> 00:38:27,520
 our operators used to get us through this event. They provided recommendations for load

375
00:38:27,520 --> 00:38:32,720
 switching and subdivision load balancing again, primarily for those two subdivisions that

376
00:38:32,720 --> 00:38:39,160
 I previously mentioned. We had an issue with the Lake Louisville water intake facility.

377
00:38:39,160 --> 00:38:43,880
 So that's the raw water supply for the Lake Louisville water treatment plant. We actually

378
00:38:43,880 --> 00:38:49,680
 it's down on the North shore of Lake Louisville down by the I-35 bridge. We actually power

379
00:38:49,680 --> 00:38:55,040
 that from our system. So we have a circuit that runs all the way down by the DCTA through

380
00:38:55,040 --> 00:39:01,080
 Corinth to the water treatment plant. We began noticing some phase imbalance measurements

381
00:39:01,080 --> 00:39:05,800
 on our SCADA system. And so that that's an indication that something was not right. So

382
00:39:05,800 --> 00:39:11,440
 while the the pumps were still running, we had a power quality issue. We worked with

383
00:39:11,440 --> 00:39:17,000
 our colleagues at the at the water intake facility. We actually were able to take this

384
00:39:17,000 --> 00:39:21,280
 facility offline, two brief moments to try to troubleshoot the transformer to try to

385
00:39:21,280 --> 00:39:26,000
 figure out what the issue was. We weren't able to do that. We brought them back on.

386
00:39:26,000 --> 00:39:32,160
 They ran the night and it sun up. One of our crews actually found a damaged switch. It's

387
00:39:32,160 --> 00:39:38,520
 in a remote part of the circuit on Swisher Road down behind the QT. And that was causing

388
00:39:38,520 --> 00:39:43,760
 our issue. We were able to quickly get a jumper on that and restore the the power quality

389
00:39:43,760 --> 00:39:49,960
 to to the facility. And finally, engineering helped provide, as you can imagine, there

390
00:39:49,960 --> 00:39:55,400
 was we generated a lot of rolling outage data through this event. And they they helped our

391
00:39:55,400 --> 00:40:03,320
 system ops pull that into one one source. Our business services, as you could imagine,

392
00:40:03,320 --> 00:40:10,200
 our key customers were really affected by this event, as our emergency load shed features

393
00:40:10,200 --> 00:40:16,820
 are our primarily our residential and small commercial customers. Their their electrical

394
00:40:16,820 --> 00:40:21,000
 equipment at their house is better suited for a rolling outage. So your house other

395
00:40:21,000 --> 00:40:26,740
 than the code load pickup, most of your appliances are not affected by this. Whereas you have

396
00:40:26,740 --> 00:40:33,760
 sensitive electronics, you have large motors, they just cannot work through a rotating power

397
00:40:33,760 --> 00:40:38,740
 outage. So our customers started calling. We contacted them. They contacted us. Many

398
00:40:38,740 --> 00:40:43,880
 of these customers were notated were notified that they would have gas curtailment was a

399
00:40:43,880 --> 00:40:49,040
 possibility. So these customers shown here, they let us know that they were not going

400
00:40:49,040 --> 00:40:55,880
 to be a full operation or any operation during the duration of this event. So what that did

401
00:40:55,880 --> 00:41:01,960
 was basically a demand response load shed that helped that helped the grid by keeping

402
00:41:01,960 --> 00:41:07,960
 these customers or our large portion of our load. I should also note that's not on here,

403
00:41:07,960 --> 00:41:14,560
 but the target distribution center out by the airport is 100% automated facility. So

404
00:41:14,560 --> 00:41:19,580
 we were getting calls from them, our load, our rotating outages were giving them fits.

405
00:41:19,580 --> 00:41:24,120
 So there they were basically bringing their operation to a standstill. And they actually

406
00:41:24,120 --> 00:41:29,120
 proposed an idea if we could come cut them loose from the grid, they could run on their

407
00:41:29,120 --> 00:41:35,700
 generators and, and provide minimal service, minimum business function for their facility.

408
00:41:35,700 --> 00:41:41,220
 So we accommodated them, we went out, we disconnected the transformer, they ran on their generator

409
00:41:41,220 --> 00:41:45,280
 towards the end of the event, they gave us a call, we, we hooked them back up. We've

410
00:41:45,280 --> 00:41:50,080
 since had some meetings with them to see how, if this was to ever happen again, how we could

411
00:41:50,080 --> 00:41:56,480
 better work together through that situation. Customer outreach, we utilize the social media,

412
00:41:56,480 --> 00:42:02,200
 both the DME, Twitter and the city social media accounts to communicate the request

413
00:42:02,200 --> 00:42:10,000
 for conservation. This was prior to the event, and to relay ERCOT's current emergency levels.

414
00:42:10,000 --> 00:42:15,540
 We also began we have some canned messages that we began sending out the week before

415
00:42:15,540 --> 00:42:20,920
 any any winter storm saying, you know, take precautions, have water ready, that sort of

416
00:42:20,920 --> 00:42:25,000
 stuff. So we got that information out. And another thing is that that kind of evolved

417
00:42:25,000 --> 00:42:30,200
 during the event is a lot of people use Twitter. So we were able to be notified of a lot of

418
00:42:30,200 --> 00:42:37,560
 power outages via Twitter, which took some stress off of our utility dispatchers who

419
00:42:37,560 --> 00:42:43,560
 are in unindated with phone calls, as you can imagine. The last issue here is the energy

420
00:42:43,560 --> 00:42:50,440
 management back office. As Terry will detail here a little bit later. That's the the function

421
00:42:50,440 --> 00:42:55,920
 where they settle our collateral invoice payments with ERCOT. As Terry will mention ERCOT is

422
00:42:55,920 --> 00:43:00,920
 kind of like a prepay system. So nobody's extended any credit. You have to have the

423
00:43:00,920 --> 00:43:06,200
 money in place before you actually use the electricity. So they were very busy working

424
00:43:06,200 --> 00:43:11,760
 with DME management and city finance during these unprecedented times to make sure that

425
00:43:11,760 --> 00:43:19,700
 we we met all of our ERCOT obligations. Regulatory and compliance, our main issues were system

426
00:43:19,700 --> 00:43:26,280
 reliability and cybersecurity. And I'll start with here that this this next bullet point

427
00:43:26,280 --> 00:43:32,480
 is transmission operators, requirement five of the NERC. Again, that's National Electric

428
00:43:32,480 --> 00:43:39,200
 Rock North American Electric Reliability Council. Rule five states that each transmission operator,

429
00:43:39,200 --> 00:43:47,480
 generator operator, and distribution provider shall comply with each operating instruction

430
00:43:47,480 --> 00:43:51,440
 issued by its balancing authority. And in this case, the balancing authority for the

431
00:43:51,440 --> 00:43:56,840
 Texas grid is ERCOT. So we were all three of those. And we were by this requirement,

432
00:43:56,840 --> 00:44:05,320
 we were obligated to comply with those instructions. Our operators did. We complied with all ERCOT

433
00:44:05,320 --> 00:44:10,760
 load shed instructions, both to add load and to remove load during the duration of the

434
00:44:10,760 --> 00:44:16,720
 event. And therefore, with the excellent performance of our system operators, there were no observable

435
00:44:16,720 --> 00:44:22,200
 violations of the NERC requirements. And again, thank you for the patience. This is the last

436
00:44:22,200 --> 00:44:27,600
 slide. So just giving giving you a heads up. So challenges, communications were a big challenge

437
00:44:27,600 --> 00:44:34,880
 for us. Our utility dispatchers and system operators filled at almost 9000 phone calls

438
00:44:34,880 --> 00:44:43,600
 the week of February the 13th. Our normal monthly call volume is about 2100 calls. So

439
00:44:43,600 --> 00:44:49,240
 they were on the phone constantly, you know, customers looking for information. When is

440
00:44:49,240 --> 00:44:53,600
 this outage going to end? Why is it going on? Just a lot of questions that that we couldn't

441
00:44:53,600 --> 00:44:59,640
 ask. So communications with our customers and from our customers was a challenge. And

442
00:44:59,640 --> 00:45:05,760
 also the this event also brought to light that a lot of our customers that had sensitive

443
00:45:05,760 --> 00:45:10,400
 electrical needs were they probably needed on interruptible electricity did not have

444
00:45:10,400 --> 00:45:16,640
 backup generators. So therefore, they solely relied on grid power. And we weren't able

445
00:45:16,640 --> 00:45:22,400
 to provide that around the clock. Critical infrastructure and customer identification

446
00:45:22,400 --> 00:45:27,000
 process, we identified some of our critical infrastructure customers by them giving us

447
00:45:27,000 --> 00:45:31,440
 a call saying, Hey, why'd you cut my power off? We didn't know you were there. So that

448
00:45:31,440 --> 00:45:37,600
 was a a that was a learning curve for us. And I'll get to how we dealt with that on

449
00:45:37,600 --> 00:45:44,040
 on the success side. The extreme cold temperatures provided a very harsh work environment for

450
00:45:44,040 --> 00:45:50,600
 our staff, as well as our equipment. The majority of our equipment is diesel powered and it's

451
00:45:50,600 --> 00:45:57,680
 tough to get diesel engine started at five below our outage processing technology. That

452
00:45:57,680 --> 00:46:03,120
 is our outage management system that our system operators use to manage the grid. When we

453
00:46:03,120 --> 00:46:09,160
 initiated the rolling outages, it was not designed for that and it crashed. So during

454
00:46:09,160 --> 00:46:16,140
 the remainder of the of the storm event, we utilize legal pads, pins and sticky notes.

455
00:46:16,140 --> 00:46:21,600
 That's how we managed the outage. And again, I'll skip down the load shed feeder and load

456
00:46:21,600 --> 00:46:26,560
 tracking. Our skater system was functional the whole time. But as I mentioned, we have

457
00:46:26,560 --> 00:46:31,840
 107 feeders. So knowing the status of any of those feeders at any one time, it's a daunting

458
00:46:31,840 --> 00:46:39,560
 task. So we've had operators working 12 hours, who have, you know, done 12 or 14 of these

459
00:46:39,560 --> 00:46:46,920
 rotating outages. When we handed that off to the the next shift operators, we we dropped

460
00:46:46,920 --> 00:46:52,240
 a couple circuits. So we made a mistake. Those circuits experience outages longer than they

461
00:46:52,240 --> 00:46:58,040
 needed. But we were able to identify our error and we actually came up with an audit system

462
00:46:58,040 --> 00:47:03,520
 pretty quickly so that the the shift that was coming on could audit the previous the

463
00:47:03,520 --> 00:47:08,840
 previous load shed and identify the status of all feeders. And we eliminated that we

464
00:47:08,840 --> 00:47:13,080
 eliminated that error. And again, I think I've mentioned that five times a cold load

465
00:47:13,080 --> 00:47:21,000
 pickup was a was it was a struggle for us. Successes. I bolded the first two statements.

466
00:47:21,000 --> 00:47:28,720
 The first is, we maintain the ERCOT interconnect. I cannot overemphasize the misery that would

467
00:47:28,720 --> 00:47:35,320
 have bestowed all 24 million Texans if the if the grid would have failed. As I mentioned,

468
00:47:35,320 --> 00:47:39,680
 you know, you're looking at some of the coldest temperatures ever recorded in Texas, all the

469
00:47:39,680 --> 00:47:44,240
 way down to South Padre. And I'm definitely sure we would not have gotten the power back

470
00:47:44,240 --> 00:47:50,000
 on for those five days that the extreme cold temperatures were here. So we were a part

471
00:47:50,000 --> 00:47:56,480
 of that. We did our part as well as our other our colleagues that operate the grid. So that

472
00:47:56,480 --> 00:48:01,840
 was one of our bigger successes. On a more local success note, we maintain the rotating

473
00:48:01,840 --> 00:48:08,840
 outages as the aftermath of this says has been discussed. As far as I know, we're the

474
00:48:08,840 --> 00:48:14,520
 largest, we're the only utility of our size or larger that maintain rotating outages for

475
00:48:14,520 --> 00:48:19,120
 the duration of the event. Now, this was a major inconvenience for our customers. But

476
00:48:19,120 --> 00:48:24,840
 what it did do was allow us to keep heat in these houses by taking whatever power we had

477
00:48:24,840 --> 00:48:29,880
 allocated for us. And we're able to spread that amongst all of our customers. I'm fortunate

478
00:48:29,880 --> 00:48:36,880
 enough not to have DME power, I have Encore, I did not have power for 90 hours. So it's

479
00:48:36,880 --> 00:48:42,120
 it's a, that's a big, that's a big deal. It took a lot of creative thinking. And it took

480
00:48:42,120 --> 00:48:48,160
 a lot of hard work by our staff to be able to maintain those rotating outages. And I'm

481
00:48:48,160 --> 00:48:53,880
 very proud that we were able to do that. As Tony mentioned earlier, we provided some affected

482
00:48:53,880 --> 00:49:00,320
 critical care customers that weren't prepared. So we answered phone calls, an elderly gentleman,

483
00:49:00,320 --> 00:49:06,520
 he did not want 911. He did not want to go to the warming center. But he had some equipment

484
00:49:06,520 --> 00:49:11,480
 that he says wasn't charging correctly. Our lineman grabbed a small generator and extension

485
00:49:11,480 --> 00:49:16,160
 cord, drove to his house, plugged his equipment in and charged it. So there's lots of there's

486
00:49:16,160 --> 00:49:20,340
 lots of stories about that. That's what I said, I never knew what the next hour was

487
00:49:20,340 --> 00:49:27,480
 going to, to was going to have in, in, in, in store for us. But but we just tackled those

488
00:49:27,480 --> 00:49:32,000
 as they came along. We had a couple customers had some equipment, hey, can you give us an

489
00:49:32,000 --> 00:49:36,080
 extra rotation cycle, and I think we'll be good. So we were able to accommodate those

490
00:49:36,080 --> 00:49:41,840
 type of requests through the duration of the event kind of on a one off basis. One of our

491
00:49:41,840 --> 00:49:46,720
 success stories is as we identified, as Tony mentioned, a dialysis clinic that we didn't

492
00:49:46,720 --> 00:49:52,460
 know was there. Doctor left us a message we gave him a call. Hey, I have 50 patients that

493
00:49:52,460 --> 00:49:56,440
 have to have this treatment. If not, they have to go into the hospital. Is there anything

494
00:49:56,440 --> 00:50:01,040
 you can do? I don't have a generator backup. We were able to work with the doctor so that

495
00:50:01,040 --> 00:50:05,920
 he we could give him a time slot allocated during the day that we would not rotate his

496
00:50:05,920 --> 00:50:10,400
 circuits. He could get all of his patients their their treatment. And then that circuit

497
00:50:10,400 --> 00:50:16,800
 would roll in over the night hours back into the rotation. So again, that was we were able

498
00:50:16,800 --> 00:50:22,000
 to get those those patients their their needed treatment. We and we maintained our critical

499
00:50:22,000 --> 00:50:28,040
 services for our citizens. So again, I stated a couple times the hospitals, Fire Department,

500
00:50:28,040 --> 00:50:33,400
 Police Department utilities did not lose electricity. And finally, as we started out our original

501
00:50:33,400 --> 00:50:39,200
 plan of 30 minutes, through some feedback from our customers, it was not adequate. They

502
00:50:39,200 --> 00:50:43,920
 were their houses were getting colder beach rotation. So we're able to adjust that to

503
00:50:43,920 --> 00:50:51,800
 45 minutes, which seemed to seem to alleviate those, those cooling of those houses. So with

504
00:50:51,800 --> 00:50:56,680
 that, I made it to the end and I'd be glad to answer any questions.

505
00:50:56,680 --> 00:51:05,600
 Thank you, Chris, if you could pull the slide down for us.

506
00:51:05,600 --> 00:51:10,560
 And council members and board members, what I'll do, I'll just kind of remind us real

507
00:51:10,560 --> 00:51:14,720
 quickly of the topics that Chris covered. We have quite a few topics left to be covered

508
00:51:14,720 --> 00:51:19,720
 by other presenters. So be careful just to contain our questions to what Chris just covered

509
00:51:19,720 --> 00:51:25,440
 for us. There'll be lots of time to ask questions later about other items. He told us about

510
00:51:25,440 --> 00:51:31,520
 utility dispatch and operations, field operations, engineering and customer relations, and regulatory

511
00:51:31,520 --> 00:51:36,620
 compliance. And then folks who are just turning tuning in now, if you don't hear questions

512
00:51:36,620 --> 00:51:40,520
 on other topics right away, that's because we're going to get to those topics in just

513
00:51:40,520 --> 00:51:46,360
 a little while. Also, if y'all have more than say three questions, if you could hold

514
00:51:46,360 --> 00:51:52,040
 on to those, I'll ask you to ask maybe your first three questions for each presenter.

515
00:51:52,040 --> 00:51:55,880
 And then we'll kind of go through the rotation and we'll come back around for anything after

516
00:51:55,880 --> 00:52:03,720
 that just to make sure everybody has a chance. So I see Mr. Ryback has a hand up. Lee, if

517
00:52:03,720 --> 00:52:05,000
 you could go ahead and ask your questions.

518
00:52:05,000 --> 00:52:12,280
 - Yes, sir. I just wanted to get clarification from Chris about this duration of the event

519
00:52:12,280 --> 00:52:18,640
 of the 59.3 Hertz. I know that was just a small data point and everything you've covered.

520
00:52:18,640 --> 00:52:25,080
 Could you clarify a little bit more about that particular trough, if you will, and the

521
00:52:25,080 --> 00:52:26,400
 performance of the grid?

522
00:52:26,400 --> 00:52:34,760
 - Yes, sir. So at that point, that was the 59.4 that the generators can only operate

523
00:52:34,760 --> 00:52:41,200
 below that frequency for nine minutes. So I believe the duration that that trough represents

524
00:52:41,200 --> 00:52:45,920
 was four minutes and 23 seconds. So if you'll notice in there, there was a big load shed

525
00:52:45,920 --> 00:52:51,400
 block of about 3000 megawatts that seemed to do the trick and turn the tide. And as

526
00:52:51,400 --> 00:53:00,760
 the frequency began to recover and exited that 59.4 and began to recover at that point.

527
00:53:00,760 --> 00:53:01,760
 - Thank you.

528
00:53:01,760 --> 00:53:04,080
 - Yes, sir.

529
00:53:04,080 --> 00:53:12,920
 - Other questions? Council Member Meltzer.

530
00:53:12,920 --> 00:53:22,800
 I've commented repeatedly prior to this meeting about how outstanding DME staff was. Thank

531
00:53:22,800 --> 00:53:29,240
 you for giving people greater insight into that. I have a kind of a hypothetical question

532
00:53:29,240 --> 00:53:37,600
 I'm asking on behalf of some members of the public who wonder about this. Some people

533
00:53:37,600 --> 00:53:43,840
 believe because they were told by city officials at that time, mostly people who are not with

534
00:53:43,840 --> 00:53:55,200
 the city, that the deck was meant to cover us when renewable power wasn't adequate. And

535
00:53:55,200 --> 00:54:03,200
 that I'll actually quote from a Renewable Denton presentation, "We need to secure reliable

536
00:54:03,200 --> 00:54:08,480
 source of dispatchable on-demand power, something that can ramp up and down quickly in response

537
00:54:08,480 --> 00:54:14,680
 to renewable variability." So not in response to ERCOT prices. I mean ERCOT grid was mentioned

538
00:54:14,680 --> 00:54:20,800
 probably very hard to explain to the public, but a lot of people believe that our plant

539
00:54:20,800 --> 00:54:27,200
 should have protected so we wouldn't have had to do rolling blackouts. I'm just, the

540
00:54:27,200 --> 00:54:35,760
 hypothetical is if in a world that we don't live in, the plant was functioning the way

541
00:54:35,760 --> 00:54:42,760
 people were led to believe and just serving Denton, given that we had our own outage,

542
00:54:42,760 --> 00:54:48,840
 would we have avoided rolling blackouts or what would the consequence have been if we

543
00:54:48,840 --> 00:54:58,440
 were just responding to our own outage rather than the broad state of energy supply in Texas.

544
00:54:58,440 --> 00:55:03,720
 Yes, sir. Council Member Meltzer, thank you for the question. And Mr. Terry Nalti is going

545
00:55:03,720 --> 00:55:09,600
 to hop on here and provide you an answer. Yes. Can you hear me?

546
00:55:09,600 --> 00:55:13,960
 Yeah. Okay. Council Member Meltzer, so with regard

547
00:55:13,960 --> 00:55:23,280
 to the Denton Energy Center being available to serve the load of the city of Denton, I

548
00:55:23,280 --> 00:55:32,200
 think while I understand your concern and perhaps that was a message that was delivered

549
00:55:32,200 --> 00:55:38,400
 at some point in the past, what's curious to me is that all during the discussions of

550
00:55:38,400 --> 00:55:48,480
 the Denton Energy Center, Denton and the ERCOT market existed. And in that market paradigm,

551
00:55:48,480 --> 00:55:55,480
 there is no way that a single unit can be used to serve a load of an individual city.

552
00:55:55,480 --> 00:56:01,280
 It must be injected into the market and you must purchase your energy from the market.

553
00:56:01,280 --> 00:56:05,860
 And as I'll get into in my presentation later, the mechanics of the market are set up that

554
00:56:05,860 --> 00:56:11,300
 way so that as a member of ERCOT, we're able to use the transmission grid to move power

555
00:56:11,300 --> 00:56:18,920
 from remote power facilities to serve the load of the rest of the market at the lowest

556
00:56:18,920 --> 00:56:27,400
 cost. And so I would just say that if that was a statement, then it was probably incorrect.

557
00:56:27,400 --> 00:56:41,280
 It was incorrect. And that potential never existed. Secondly, local outages are dealt

558
00:56:41,280 --> 00:56:47,560
 with the same way as a large outage as we just experienced in that when we have a local

559
00:56:47,560 --> 00:56:54,560
 outage, Chris's crews are dispatched to go out and make changes to the distribution or

560
00:56:54,560 --> 00:57:03,200
 transmission system in the locality around Denton in order to try to remedy that outage.

561
00:57:03,200 --> 00:57:10,520
 ERCOT does not have employees that are dispatched out to make repairs to the grid. Each of the

562
00:57:10,520 --> 00:57:16,960
 members of ERCOT provide those services for their own transmission system and for their

563
00:57:16,960 --> 00:57:20,880
 own distribution system. Does that answer your question, sir?

564
00:57:20,880 --> 00:57:27,820
 Well, partly. I mean, first of all, I think it's helpful that we're just because we need

565
00:57:27,820 --> 00:57:32,240
 the public to trust us on so many things, especially on this topic. There's a lot that

566
00:57:32,240 --> 00:57:37,160
 they've had to just endure and there's more to come. So the public needs to know that

567
00:57:37,160 --> 00:57:44,760
 we're dealing as openly and forthrightly as possible. So I think acknowledging that the

568
00:57:44,760 --> 00:57:52,520
 tech wasn't presented in a way that mirrors the reality at the time even is important.

569
00:57:52,520 --> 00:58:00,720
 But I'm really asking for help responding to questions I get to say, well, even though

570
00:58:00,720 --> 00:58:06,360
 you and I both know it's counterfactual, you can't have the plant just support us. It doesn't

571
00:58:06,360 --> 00:58:14,640
 work that way. We're backed up by the grid. But the question that I get is, but if it

572
00:58:14,640 --> 00:58:22,360
 could, would that have worked? Would we have not had outages? And I think the fact of the

573
00:58:22,360 --> 00:58:27,600
 matter is we had an outage ourselves. So in that hypothetical world, that would have had

574
00:58:27,600 --> 00:58:33,840
 some consequences, too. And I was looking for an opinion on what would that have been?

575
00:58:33,840 --> 00:58:41,360
 And just before you try to respond, if you can, I accept on just logic that we're more

576
00:58:41,360 --> 00:58:48,000
 secure backed up, except in this one week. Theoretically, we're more secure being backed

577
00:58:48,000 --> 00:58:53,160
 up by all the production in Texas than by being backed up by just one plant. So I'm

578
00:58:53,160 --> 00:59:00,880
 not questioning that. But some people do. So I'm looking for your opinion of if that

579
00:59:00,880 --> 00:59:05,800
 were the case, it did function the way we know it couldn't, wouldn't there have been

580
00:59:05,800 --> 00:59:13,000
 consequences too? Yes, sir. So the Denton Energy Center, as you know, is a 225 megawatt

581
00:59:13,000 --> 00:59:19,000
 facility and had it been available to run and assuming that hypothetically, it was only

582
00:59:19,000 --> 00:59:24,280
 connected to the load of Denton, it would have been able to serve up to 225 megawatts

583
00:59:24,280 --> 00:59:31,120
 of load. And as Chris has indicated, the peak load was 325 megawatts. So we would still

584
00:59:31,120 --> 00:59:38,320
 have had outages in the market in in the Denton area. And as you properly point out, when

585
00:59:38,320 --> 00:59:43,800
 we lost gas pressure at the facility, and it went away, we would have had no power at

586
00:59:43,800 --> 00:59:49,320
 all zero power for the community. Okay, thanks. I appreciate that. Thanks for

587
00:59:49,320 --> 00:59:53,680
 clarifying all that. Just a quick little follow up on that before

588
00:59:53,680 --> 00:59:58,960
 we take the next question. I just want to clarify for folks watching and anyone here

589
00:59:58,960 --> 01:00:05,320
 on the panel that no one that's presenting to us today was or the personnel who are presenting

590
01:00:05,320 --> 01:00:11,840
 the deck, the Denton Energy Center back in 2016. And also point out Councilmember Meltzer,

591
01:00:11,840 --> 01:00:18,620
 I'm looking at the slide you just read from slide number two of the renewable Denton slides.

592
01:00:18,620 --> 01:00:24,120
 And there's nothing in the statement you read that says this plant will be for Denton. It

593
01:00:24,120 --> 01:00:29,680
 speaks in a very broad terms, it speaks in renewable energy, broadly, whether or not

594
01:00:29,680 --> 01:00:33,960
 someone interpreted that way, or whether or not in another conversation, even a private

595
01:00:33,960 --> 01:00:38,520
 conversation, it was presented that way. In just the statement that you read, there's

596
01:00:38,520 --> 01:00:44,000
 nothing in that statement that says to ramp up specifically Denton or to supplement specifically

597
01:00:44,000 --> 01:00:47,640
 Denton's renewables. No, I mean, if you'll allow me to respond,

598
01:00:47,640 --> 01:00:51,000
 this is not it's not that productive for us to talk about, you know, too long for about

599
01:00:51,000 --> 01:00:57,480
 what was said several years ago. But I assure you, you will not find even the mention of

600
01:00:57,480 --> 01:01:04,740
 the existence of a grid or ERCOT. I don't think that that concept was was explained.

601
01:01:04,740 --> 01:01:11,320
 So it's the really the only, you know, reasonable conclusion to the general public. But you

602
01:01:11,320 --> 01:01:16,900
 know, I'm satisfied that we've, you know, brought up the point. And it is a source of

603
01:01:16,900 --> 01:01:21,720
 why members of the public are confused. And hopefully now we've addressed that.

604
01:01:21,720 --> 01:01:25,400
 Sure, I think that's I think that's a fair enough point. Just when we get to the next

605
01:01:25,400 --> 01:01:30,320
 portion when Terry presents, I think it's important to keep the full context of that

606
01:01:30,320 --> 01:01:36,640
 conversation in mind, what public perception was, what the actual message conveyed was,

607
01:01:36,640 --> 01:01:42,040
 they very well may have been two different things. Other questions for Chris's portion

608
01:01:42,040 --> 01:01:52,440
 of the presentation. Councilmember Ryan. Thank you. Just for for public knowledge, a lot

609
01:01:52,440 --> 01:01:55,760
 of people think that if they didn't lose power during the storm, it's because they were on

610
01:01:55,760 --> 01:02:02,200
 a hospital circuit. And we have a lot of water and wastewater infrastructure throughout the

611
01:02:02,200 --> 01:02:11,560
 city that if we've got 107 feeders, on average, Chris, how many homes would that look like?

612
01:02:11,560 --> 01:02:20,200
 For per circuit? Well, we can do some quick math there, Councilmember Ryan, as we looked

613
01:02:20,200 --> 01:02:25,180
 at our data through the through the winter event here, our all electric homes, we were

614
01:02:25,180 --> 01:02:35,440
 averaging about 157 homes or customers per megawatt. For our gas heat areas, that number

615
01:02:35,440 --> 01:02:41,980
 was close to 250 homes per megawatt. So if you look at 200, and we have eight megawatts

616
01:02:41,980 --> 01:02:48,320
 per feeder, you're talking about 1600, roughly 1600 homes per feeder, just customers per feeder

617
01:02:48,320 --> 01:02:54,880
 would be a ballpark. And I bring that up simply because I had a couple of people who live

618
01:02:54,880 --> 01:03:00,840
 close to a lift station that thought that they were on a hospital circuit when they

619
01:03:00,840 --> 01:03:05,720
 were four miles away from a hospital. So there are other items that are out there that we

620
01:03:05,720 --> 01:03:10,600
 did keep on that are necessary to, you know, lift stations, you definitely don't want going

621
01:03:10,600 --> 01:03:15,120
 down during that type of a storm, either. Yes, sir, that that's correct. And as again,

622
01:03:15,120 --> 01:03:21,920
 that that mentioned that plan is confidential, but there's 17 17 feeders out there that supply

623
01:03:21,920 --> 01:03:27,120
 that that infrastructure, and we have two major hospitals. So as you can see, there's

624
01:03:27,120 --> 01:03:31,560
 there's there's a handful of circuits that aren't connected to the hospital that aren't

625
01:03:31,560 --> 01:03:38,160
 providing power to other critical loads. And as I mentioned, we can't pick and choose which

626
01:03:38,160 --> 01:03:43,280
 customers on a circuit that we can, that can we can remove power from. So yeah, we have

627
01:03:43,280 --> 01:03:49,840
 some, you know, some customers that maybe as as one side of the street is one circuit,

628
01:03:49,840 --> 01:03:53,420
 the other side of the street is the other circuit. And I know that was a point of contention

629
01:03:53,420 --> 01:03:57,520
 was they might have been on a critical circuit, and they're powered and go off, whereas across

630
01:03:57,520 --> 01:04:02,760
 the street was a different circuit. So that that that kind of explains that. But yes,

631
01:04:02,760 --> 01:04:08,800
 there are other facilities, fire stations, the water treatment plants that were that

632
01:04:08,800 --> 01:04:13,840
 were on that critical list that they they remained on during the event.

633
01:04:13,840 --> 01:04:23,400
 Okay, any other questions for Chris? I just go ahead. I see. Do I hear somebody? Councilmember

634
01:04:23,400 --> 01:04:29,240
 Johnson's at you? Yeah, good. Go ahead. I heard him say that during the during that

635
01:04:29,240 --> 01:04:33,680
 time, there was a target was called out called them out, and they were released from the

636
01:04:33,680 --> 01:04:39,240
 grid, because they had generators to back them up for a certain amount of time. Is that

637
01:04:39,240 --> 01:04:43,880
 possibly something that we could all different places could consider that would make it a

638
01:04:43,880 --> 01:04:50,800
 lighter for the load that perhaps if we were in this situation again,

639
01:04:50,800 --> 01:04:56,080
 I mean, customer Johnson, they had specialized equipment and the way they were set up is

640
01:04:56,080 --> 01:05:01,920
 if their their switches detected grid power, that their generator generators would not

641
01:05:01,920 --> 01:05:09,200
 come on. There are there are facilities in in in Denton that have backup generators,

642
01:05:09,200 --> 01:05:13,420
 where they fell over, they lose power and that generator automatically automatically

643
01:05:13,420 --> 01:05:19,200
 comes on. So that technology is out there. That was a very unique situation to disconnect

644
01:05:19,200 --> 01:05:24,440
 someone from the utility grid. But that was the only way the way their system was designed.

645
01:05:24,440 --> 01:05:30,360
 That's the only way they could run solely off of their generators was to remove the

646
01:05:30,360 --> 01:05:39,680
 our source of power from their facility. Okay, other questions for Chris? Chris, I've

647
01:05:39,680 --> 01:05:45,680
 just got a couple myself. Is it possible for someone to know, you know, the big joke kind

648
01:05:45,680 --> 01:05:49,240
 of going around social media after this was used to want to know if the house you're buying

649
01:05:49,240 --> 01:05:52,880
 was in a good school zone or not. Now you want to know if you're on a hospital feeder

650
01:05:52,880 --> 01:05:58,200
 or not. Is it possible, given the confidentiality of some of the stuff you described for us,

651
01:05:58,200 --> 01:06:03,120
 for people to know if they're on a lift station feeder, if they're on a hospital feeder or

652
01:06:03,120 --> 01:06:07,400
 something like that? No, sir, there is not that again, that that

653
01:06:07,400 --> 01:06:14,040
 plan is confidential. Probably got a lot of just real real world knowledge during this

654
01:06:14,040 --> 01:06:20,560
 event. But one thing that I have to stress is our grid is is it's not static, it's dynamic.

655
01:06:20,560 --> 01:06:25,260
 So I mentioned those connection points. So just because you're on this circuit, you know,

656
01:06:25,260 --> 01:06:29,000
 at this point doesn't mean you're going to be on there. Next year, we may have a configuration

657
01:06:29,000 --> 01:06:34,680
 change. There may be a new development come in that's outside of you that we have to rework

658
01:06:34,680 --> 01:06:40,000
 things. So it doesn't necessarily mean you stay on the same circuit. But but generally,

659
01:06:40,000 --> 01:06:47,120
 I think, speaking the hypothetically, if your power did not go out during this outage, as

660
01:06:47,120 --> 01:06:53,800
 I noted that every circuit on our system other than our critical circuits were rotated, that

661
01:06:53,800 --> 01:06:58,440
 could probably give those those customers an idea if they're on one of those circuits

662
01:06:58,440 --> 01:07:02,600
 or not as of today. Okay. And I know you described for some of

663
01:07:02,600 --> 01:07:09,160
 the challenges in in rotating those outages and keeping track of which circuits have been

664
01:07:09,160 --> 01:07:15,560
 hit and which ones hadn't. Can you tell us anything about the the criteria you use to

665
01:07:15,560 --> 01:07:19,280
 make those decisions? We know that that load shed plan is confidential and confidential

666
01:07:19,280 --> 01:07:23,600
 for a reason. But can you tell us a little bit about some of the criteria that went into

667
01:07:23,600 --> 01:07:28,840
 those decisions? As far as when we rotated or how we rotated

668
01:07:28,840 --> 01:07:33,080
 the circuits? Sure, you know, I think there are probably a lot of folks who incorrectly

669
01:07:33,080 --> 01:07:36,400
 believe you're just throwing darts at a map, you know, and that's the circuit that goes

670
01:07:36,400 --> 01:07:41,240
 out next. Can you tell us just a little bit more detail? Besides just, you know, we tried

671
01:07:41,240 --> 01:07:46,860
 not to cut the critical circuits. And there were some that we you told us about the doctor's

672
01:07:46,860 --> 01:07:50,580
 dialysis clinic that you scheduled. Can you tell us a little bit more about what some

673
01:07:50,580 --> 01:07:54,840
 of our residential customers were experiencing? Yes, sir, I can. So what our operators were

674
01:07:54,840 --> 01:07:59,600
 tasked with doing is, as I mentioned, we had two blocks. So we had an A and a B. So when

675
01:07:59,600 --> 01:08:05,280
 we initially started the load shed event, we were when we were in our plan. And at that

676
01:08:05,280 --> 01:08:11,320
 point, you would have had those circuits would have had 30 minutes on and then theoretically

677
01:08:11,320 --> 01:08:16,120
 30 minutes off. Now, there was a transition. It takes about 15 minutes for our operators

678
01:08:16,120 --> 01:08:22,680
 to actually remove the the the load that is on and replace it with the with the next block.

679
01:08:22,680 --> 01:08:29,520
 So that was our criteria is we is to alternate an on cycle with an off cycle for our for

680
01:08:29,520 --> 01:08:36,080
 our feeders. And then that was determined. So operators will go with the hundred the

681
01:08:36,080 --> 01:08:41,120
 hundred megawatt load shed. So ERCOT calls in and says who you're instructed to shed

682
01:08:41,120 --> 01:08:46,360
 one hundred megawatts of your load. Now you acknowledge that at that point, whatever your

683
01:08:46,360 --> 01:08:51,880
 system load is at that point, you must remove one hundred megawatts. So as I mentioned,

684
01:08:51,880 --> 01:08:58,320
 our feeders tend to have, you know, five megawatts to eight megawatts on it. So we had to identify

685
01:08:58,320 --> 01:09:03,400
 as close as we could the feeders that totaled one hundred megawatts. We remove those from

686
01:09:03,400 --> 01:09:07,760
 the system. So now they're in there. They're in their outage cycle. And while we were doing

687
01:09:07,760 --> 01:09:14,080
 that, we had to identify the next grouping of circuits that totaled one hundred megawatts.

688
01:09:14,080 --> 01:09:19,560
 So at that point, we didn't look at at neighborhoods or locations or anything. The circuits became

689
01:09:19,560 --> 01:09:26,440
 solely a megawatt value. And it was like a puzzle you had to put together. What what

690
01:09:26,440 --> 01:09:32,000
 you could shed or which combination of circuits that were available. So the one that was just

691
01:09:32,000 --> 01:09:36,440
 had their power off, they're back on, they're not available now. So then it left. That's

692
01:09:36,440 --> 01:09:41,440
 the tool that I spoke to that engineering was able to make for us is, hey, these these

693
01:09:41,440 --> 01:09:47,640
 available circuits are what I have to choose from. And let's total up what our load shed

694
01:09:47,640 --> 01:09:53,280
 requirement is. And then another part of the struggle was if we had a circuit and we take

695
01:09:53,280 --> 01:09:58,400
 its five megawatts and we take that circuit off and it's now out of power for an hour

696
01:09:58,400 --> 01:10:04,160
 and we bring it back on, that five megawatts is now seven megawatts. So to bring that circuit

697
01:10:04,160 --> 01:10:08,680
 back on, we had to count it as three because when we energize that circuit is actually

698
01:10:08,680 --> 01:10:15,440
 going to be a higher value. So basically and this was a manual process, tried tried to

699
01:10:15,440 --> 01:10:21,280
 spread out the rotations amongst all the feeders in a very systematic manner. But basically

700
01:10:21,280 --> 01:10:25,840
 it was driven by the load shed instruction and the feeders that were available that totaled

701
01:10:25,840 --> 01:10:31,400
 that load shed instruction. Thank you. And I think I might have seen board member Davini's

702
01:10:31,400 --> 01:10:43,800
 hand just a moment ago. I have a sort of rookie question that has to do with the target as

703
01:10:43,800 --> 01:10:53,280
 member Johnson's asked. If a large a large customer like Target can disconnect from the

704
01:10:53,280 --> 01:10:58,960
 grid, is there a way for an individual customer to disconnect from the grid if they have rooftop

705
01:10:58,960 --> 01:11:06,800
 solar? I have a bunch of friends with rooftop solar whose solar did nothing because the

706
01:11:06,800 --> 01:11:13,840
 grid was was shut down. Is there a way of for people to generate their own electricity

707
01:11:13,840 --> 01:11:19,660
 if they have and if you've got an acre of land, you can also have your own wind turbine.

708
01:11:19,660 --> 01:11:25,560
 So is there a way for individuals to generate other than with a, you know, a diesel generator

709
01:11:25,560 --> 01:11:30,600
 or something like that? Well, thank you for the question. It's a very good question. As

710
01:11:30,600 --> 01:11:37,320
 of now, there is not. So our our solar rooftop solar customers, the 600 or so we have on

711
01:11:37,320 --> 01:11:44,080
 our system, they are interconnected to the grid by an IEEE standard. So that's an electrical

712
01:11:44,080 --> 01:11:49,840
 trade association that kind of sets the rules. So the reason that that's in place is for

713
01:11:49,840 --> 01:11:55,600
 the safety of our linemen. So if the power is disconnected, those solar panels are interconnected

714
01:11:55,600 --> 01:12:01,400
 to the grid. And if they were to produce excess, excess electricity that was not utilized by

715
01:12:01,400 --> 01:12:06,820
 the resident, that power would flow through the transformer and would energize the line.

716
01:12:06,820 --> 01:12:13,360
 So as of now for rooftop solar, that is not an option. I have tasked our engineering department

717
01:12:13,360 --> 01:12:19,080
 to take a look at that. Is there something out there that could basically is called islanding

718
01:12:19,080 --> 01:12:26,840
 would island the the the solar the the solar generation for that resident and only provide

719
01:12:26,840 --> 01:12:31,600
 power to that to that resident? I don't believe that's that's what you're speaking. Now we

720
01:12:31,600 --> 01:12:37,680
 do have quite a few customers on our grid that have generators that can run in a called

721
01:12:37,680 --> 01:12:43,560
 a standalone mode where they can power the house while connected to the to the grid.

722
01:12:43,560 --> 01:12:48,760
 So we were looking at that. I was pretty sure that was going to be a question. But as of

723
01:12:48,760 --> 01:12:53,640
 now, the interconnection standard for that is no. And the reason is because those customers

724
01:12:53,640 --> 01:13:01,400
 have the ability to sell or push that power back on to the grid by design, whereas people

725
01:13:01,400 --> 01:13:05,920
 have backup generators are not looking to sell that power. They're looking to power

726
01:13:05,920 --> 01:13:12,140
 their their home and during a power outage. That's kind of the separation in those those

727
01:13:12,140 --> 01:13:22,080
 two situations. But we are looking into it. Thank you, Chair Parker. First of all, I think

728
01:13:22,080 --> 01:13:27,240
 you did a tremendous job with that 59 hours is miserable for all of us. But could you

729
01:13:27,240 --> 01:13:33,040
 tell us hypothetically if we did not perform the way we did with the rolling outages, what

730
01:13:33,040 --> 01:13:40,680
 could have been the outcome from NERC and ERCOT? The fine there's a monetary fine that

731
01:13:40,680 --> 01:13:46,360
 could be imposed for not following the instructions. I think I've heard the it's it's capped at

732
01:13:46,360 --> 01:13:50,840
 a million dollars a day. Could it could be the fine that would be imposed on you by not

733
01:13:50,840 --> 01:13:58,560
 only NERC, but ERCOT. But but there was a again, there was a moral obligation for us

734
01:13:58,560 --> 01:14:04,080
 to comply. So the bigger picture was we had the inconvenience a lot of our customers with

735
01:14:04,080 --> 01:14:10,840
 the rotating outage. And, you know, you saw that fraction were half a percent. Encore

736
01:14:10,840 --> 01:14:17,080
 is 35%. So of that 20,000 megawatts, they had 7000 megawatts, if they would have said

737
01:14:17,080 --> 01:14:21,360
 now, we're not going to answer the call to ERCOT, we're not going to shed that load.

738
01:14:21,360 --> 01:14:25,800
 The grid would have crashed, there would have been a blackout situation. And again, then

739
01:14:25,800 --> 01:14:31,080
 all 24 million Texans would have been without power. So there was both the the regulatory

740
01:14:31,080 --> 01:14:39,280
 reasons and then it was the right thing to do is to comply with those ERCOT instructions.

741
01:14:39,280 --> 01:14:46,600
 Councilmember Armitage. Yeah, to speak to what you just said, I mean, a fine of million

742
01:14:46,600 --> 01:14:51,560
 dollars a day would have been a savings for the city of that were the only consequence.

743
01:14:51,560 --> 01:14:57,280
 But like you said, it was nowhere part of a network that holds up the whole state of

744
01:14:57,280 --> 01:15:09,240
 Texas. So I have two related questions. One about battery storage. And these are forward

745
01:15:09,240 --> 01:15:22,680
 looking questions. And another about the the national grid versus ERCOT. If we had had,

746
01:15:22,680 --> 01:15:31,680
 you know, utility scale battery storage for our generating facility, would that or to

747
01:15:31,680 --> 01:15:42,920
 what extent, you know, would that have helped both the the city and the grid in a crisis

748
01:15:42,920 --> 01:15:50,320
 like that? I realize it would not solve the problem. But I'm wondering kind of how that

749
01:15:50,320 --> 01:15:54,520
 works when you've got battery municipal battery storage, how that works as far as low load

750
01:15:54,520 --> 01:15:59,920
 shedding demands in a situation like that. And secondly, you know, as a lot of people

751
01:15:59,920 --> 01:16:10,160
 are asking, if it's my understanding that we're we're Texas, you know, or an individual

752
01:16:10,160 --> 01:16:19,680
 city hooked up to the national grid that this would not have been an issue because of, you

753
01:16:19,680 --> 01:16:29,480
 know, just as Denton has back up through the grid, through ERCOT, the national grid provides

754
01:16:29,480 --> 01:16:36,480
 an even even greater backup system that's also more heavily regulated. So I was wondering

755
01:16:36,480 --> 01:16:41,040
 if you could just, you know, you don't have to go into length of that. I realize that

756
01:16:41,040 --> 01:16:46,440
 there are a number of factors that would complicate individual cities getting on the grid. But

757
01:16:46,440 --> 01:16:54,360
 if you could just, you know, confirm that latter point about the national grid and,

758
01:16:54,360 --> 01:16:59,600
 you know, give whatever specifics you can moving forward about municipal utility scale

759
01:16:59,600 --> 01:17:04,600
 battery storage. Thanks. Thank you, Councilmember Armitage. I can speak to your second question

760
01:17:04,600 --> 01:17:10,240
 a little more confidently than I can the first one. I believe if there say there was out

761
01:17:10,240 --> 01:17:15,440
 at the deck facility, we have some utility scale, which you would be talking megawatt

762
01:17:15,440 --> 01:17:20,440
 hour battery storage, I believe that would be considered a generating asset. So that

763
01:17:20,440 --> 01:17:26,600
 those those that electricity would be generated that would be put onto the grid from that

764
01:17:26,600 --> 01:17:31,720
 batteries would be treated just like it came from the deck. So it'd be part of that market.

765
01:17:31,720 --> 01:17:37,000
 So I think it would have would have if you had theoretically had enough of it, any extra

766
01:17:37,000 --> 01:17:40,360
 generation that would have been put on the grid would have been additional load shed

767
01:17:40,360 --> 01:17:45,800
 that would have not been required. So if you can think of that at that point, secondly,

768
01:17:45,800 --> 01:17:51,600
 personal batteries. So if you would have had a say you had a battery in your home, that

769
01:17:51,600 --> 01:17:56,160
 storage, that capacity, that's not the same thing. So that would have helped with the

770
01:17:56,160 --> 01:18:03,080
 rotating outages for the individual customers that had a battery storage at their at their

771
01:18:03,080 --> 01:18:07,640
 at their residence. So if I think if that answers the question, I'm going to let Mr.

772
01:18:07,640 --> 01:18:12,240
 Nalty tackle the your first question. Thank you.

773
01:18:12,240 --> 01:18:18,960
 Yes, thank you. So first, battery storage, just a little bit more on what Chris said,

774
01:18:18,960 --> 01:18:27,840
 you know, typically battery storage is a is a short duration resource. And this event

775
01:18:27,840 --> 01:18:34,400
 lasted five days. So the longest batteries would be four hours of storage and would have

776
01:18:34,400 --> 01:18:41,360
 only provided backup or additional generation, if you will, for about a four hour period.

777
01:18:41,360 --> 01:18:46,760
 And I think as you Councilmember armature recall from the last time we we brought such

778
01:18:46,760 --> 01:18:53,360
 a proposal in front of you, the economics of batteries at this point are not they just

779
01:18:53,360 --> 01:18:58,760
 aren't cost effective relative to to others. Now, maybe this event might change that a

780
01:18:58,760 --> 01:19:04,140
 little bit, but we'll have to see. With regard to your question about interconnecting

781
01:19:04,140 --> 01:19:10,640
 to the other grid, so there are two additional grids that ERCOT could interconnect with.

782
01:19:10,640 --> 01:19:21,280
 One is the Western Energy wholesale market, and the other is the Midwest ISO. It's actually

783
01:19:21,280 --> 01:19:28,280
 a third the SPP. In, in the event that an individual city wanted to interconnect with

784
01:19:28,280 --> 01:19:33,960
 one of those, we would have to physically build a line from our system to that system.

785
01:19:33,960 --> 01:19:40,240
 And for us in Denton, it would the closest would be into Oklahoma somewhere. That process

786
01:19:40,240 --> 01:19:47,800
 would take at least 10 years to do because of all of the Federal Energy Regulatory Commission

787
01:19:47,800 --> 01:19:55,440
 regulations as well as the siting of the line and permitting. You would never want to have

788
01:19:55,440 --> 01:20:00,000
 a single point of interconnection, you'd always want to have two. So you'd have to run not

789
01:20:00,000 --> 01:20:07,080
 just one, but two lines to two desperate, disparate points in the grid to interconnect

790
01:20:07,080 --> 01:20:12,640
 with to have the level of reliability that you would want to have. And then just wanted

791
01:20:12,640 --> 01:20:18,760
 to follow up on your question about the fines. You know, you think about the fines at a million

792
01:20:18,760 --> 01:20:29,440
 dollars a day. That million dollars a day would be on top of the adverse economic consequences

793
01:20:29,440 --> 01:20:37,360
 that we suffered as a result of the loss of the deck. And then as you'll see the underperformance

794
01:20:37,360 --> 01:20:45,120
 of our renewable assets. So to think that we would be able to actually mitigate damages

795
01:20:45,120 --> 01:20:51,120
 as a result of paying fines, I think is is a little far fetched. And I'd be careful to

796
01:20:51,120 --> 01:20:58,320
 try to make sure that the public doesn't believe that that's something from a from a from a

797
01:20:58,320 --> 01:21:03,160
 just from a behavioral perspective as being a participant in ERCOT and understanding that

798
01:21:03,160 --> 01:21:09,960
 we as a as a member of ERCOT have an obligation to follow the rules because we do get the

799
01:21:09,960 --> 01:21:17,320
 benefits of the marketplace. And, you know, I would I would strongly recommend such an

800
01:21:17,320 --> 01:21:24,040
 approach. And thank you just to follow up. I was trying to make precisely that point

801
01:21:24,040 --> 01:21:31,320
 maybe sloppily. But my point being, I understand it. You know, people might be thinking that.

802
01:21:31,320 --> 01:21:39,840
 But that really is not not an ethical option or a feasible one. So I understand. I very

803
01:21:39,840 --> 01:21:46,240
 well understand that you go. Any other questions on kind of the operation side of things? We'll

804
01:21:46,240 --> 01:21:52,040
 have a presentation next on the financial side of things. Some on the deck. But anything

805
01:21:52,040 --> 01:21:58,880
 else on operations rolling outage is that kind of thing. OK, the next portion is going

806
01:21:58,880 --> 01:22:05,040
 to be pretty involved and have a lot of information. And I imagine a robust conversation following.

807
01:22:05,040 --> 01:22:10,440
 So we're going to take a short break about five minutes and we'll come back at one o'clock

808
01:22:10,440 --> 01:22:20,200
 to continue the meeting. Thank you, Mayor Pro Tem. Welcome back, everyone. Good afternoon.

809
01:22:20,200 --> 01:22:24,560
 This is a joint meeting of the Denton City Council and Public Utilities Board. We're

810
01:22:24,560 --> 01:22:29,840
 going to hear next from Terry Nolte from DME, and he's going to cover the topics of energy

811
01:22:29,840 --> 01:22:35,760
 management, the Dent Energy Center, mitigation measures and ERCOP market reforms. We're going

812
01:22:35,760 --> 01:22:40,120
 to have opportunity for questions at the break. And I believe Mayor Hutzbeth will be joining

813
01:22:40,120 --> 01:22:45,040
 us as we go through this presentation. So it will be his face you see next. And Terry,

814
01:22:45,040 --> 01:22:52,560
 it's to you. Thank you, Mayor Pro Tem. And good afternoon, Chair Parker, members of the

815
01:22:52,560 --> 01:23:00,600
 PUB and members of council. I'm going to ask your indulgence today as I am actually going

816
01:23:00,600 --> 01:23:05,680
 to read through a script that I've put together for these slides, because I want to make sure

817
01:23:05,680 --> 01:23:12,000
 that I'm covering all the information and not missing anything. So with that, I'm going

818
01:23:12,000 --> 01:23:41,880
 to pull up the presentation. Okay. Winter Storm Uri, which was the name of the named

819
01:23:41,880 --> 01:23:49,760
 storm that impacted ERCOT and the Texas markets several weeks ago was an unprecedented record

820
01:23:49,760 --> 01:23:56,280
 storm that has brought to light the magnitude of the risks that all electric generation

821
01:23:56,280 --> 01:24:02,400
 and load serving entities face. The intensity and duration of the storm coupled with market

822
01:24:02,400 --> 01:24:09,440
 design flaws, lack of regulatory intervention, unprecedented demand for natural gas resulted

823
01:24:09,440 --> 01:24:15,400
 in rolling outages, loss of life, billions in property damages, and as I will report

824
01:24:15,400 --> 01:24:21,760
 here, significant unexpected power supply expenses that will ultimately have impacts

825
01:24:21,760 --> 01:24:28,480
 to our customer owners. This presentation will briefly put Uri in perspective relative

826
01:24:28,480 --> 01:24:34,640
 to other storm events to show you how abnormal the weather event was. I'll then provide you

827
01:24:34,640 --> 01:24:40,640
 with the measures that DME had in place to manage the power supply price risk and provide

828
01:24:40,640 --> 01:24:46,360
 you with our current estimate of the financial impacts. I'll then discuss the evaluations

829
01:24:46,360 --> 01:24:53,360
 that are underway to mitigate the financial impacts of future storm events, discuss some

830
01:24:53,360 --> 01:24:58,920
 high level ERCOT reforms that we believe are needed, and finally answer questions that

831
01:24:58,920 --> 01:25:06,640
 you may have. While this discussion will look prospectively at ways to implement measures

832
01:25:06,640 --> 01:25:13,160
 to prevent future economic risks, I want to be clear that despite the measures that DME

833
01:25:13,160 --> 01:25:18,820
 will recommend today and in the future, without significant market reforms, the potential

834
01:25:18,820 --> 01:25:26,680
 for rotating outages across all of ERCOT will remain. Initial efforts that the electric

835
01:25:26,680 --> 01:25:32,760
 and gas industry are taking are aimed at providing earlier warning of potential events that could

836
01:25:32,760 --> 01:25:39,560
 result in outages due to lack of electric supply and to identify where better coordination

837
01:25:39,560 --> 01:25:45,740
 between the electric and natural gas industries have the potential to lessen the probability

838
01:25:45,740 --> 01:25:53,520
 and duration of a recurrence. Typically, the third week in February has a temperature range

839
01:25:53,520 --> 01:26:01,040
 of 37 to 60 degrees in Denton. The three days from February 14 to February 16 were the coldest

840
01:26:01,040 --> 01:26:06,960
 three consecutive days in recorded history. From an electric demand perspective, the eight

841
01:26:06,960 --> 01:26:15,800
 days from the 13th to 21st saw 42% more electric demand in Denton than average, and had the

842
01:26:15,800 --> 01:26:23,560
 rolling outages not occurred, demand would have been 70% higher than normal. Needless

843
01:26:23,560 --> 01:26:30,200
 to say, our forecasting tools failed to predict these high demands as the storm predictions

844
01:26:30,200 --> 01:26:37,920
 became stronger on Friday the 12th. We took additional price protection actions on that

845
01:26:37,920 --> 01:26:47,280
 day. For the ERCOT market, the financial impacts were nothing short of a disaster. In eight

846
01:26:47,280 --> 01:26:54,880
 days, the cost of energy and ancillary services exceeded the prior 11 years combined. And

847
01:26:54,880 --> 01:27:00,900
 as you have heard and will see later on, DME was significantly impacted by the sustained

848
01:27:00,900 --> 01:27:07,720
 maximum wholesale energy price of $9,000 per megawatt hour. I think it's safe to say that

849
01:27:07,720 --> 01:27:15,720
 no one envisioned wholesale electric market prices at the max cap for as long as it did.

850
01:27:15,720 --> 01:27:20,440
 And these events have transformed our view as well as that of the rest of the market

851
01:27:20,440 --> 01:27:28,040
 participants. The key conclusions I draw from what happened in the ERCOT wholesale market

852
01:27:28,040 --> 01:27:35,080
 are that first, the ERCOT generation portfolio is fragile, with over-reliance on intermittent

853
01:27:35,080 --> 01:27:42,480
 renewable resources that during the last two price excursions have not shown up. Secondly,

854
01:27:42,480 --> 01:27:47,440
 the market design is fundamentally flawed without sufficient economic incentives to

855
01:27:47,440 --> 01:27:54,760
 attract dispatchable generation and reserve capacity despite the $9,000 price cap. In

856
01:27:54,760 --> 01:28:01,080
 fact, historical market price formation has resulted in retirements of baseload capacity

857
01:28:01,080 --> 01:28:05,520
 that could have provided the needed reserves to have saved many lives and the economic

858
01:28:05,520 --> 01:28:14,680
 devastation. That said, this is not a phenomena that is unique to ERCOT. Third, price volatility

859
01:28:14,680 --> 01:28:21,200
 is likely to increase if continued development of intermittent resources with no ability

860
01:28:21,200 --> 01:28:31,540
 for these resources to operate when they are needed most. We have all heard legislators

861
01:28:31,540 --> 01:28:38,680
 and uninformed individuals make claims that DME was unhedged and that DME did not have

862
01:28:38,680 --> 01:28:44,000
 the ability to participate in the futures markets. I can categorically state that those

863
01:28:44,000 --> 01:28:50,360
 claims are untrue. As you know, DME has an energy risk management policy that is brought

864
01:28:50,360 --> 01:28:56,420
 before the PUB and Council each year for approval. That policy provides the necessary authority

865
01:28:56,420 --> 01:29:03,040
 for the city manager, the DME general manager, and DME staff to execute hedge transactions

866
01:29:03,040 --> 01:29:09,480
 consistent with the policy. Further, within the policy is a hedge plan that is updated

867
01:29:09,480 --> 01:29:15,440
 each year based upon market conditions. The objective of the hedge plan, implemented through

868
01:29:15,440 --> 01:29:20,700
 the authority you grant us under the energy risk management policy, is to control the

869
01:29:20,700 --> 01:29:30,600
 cost of purchase power within a range for budget and rate certainty purposes. The hedge

870
01:29:30,600 --> 01:29:36,440
 plan is premised upon weather normalized load forecast, renewable energy outputs, and futures

871
01:29:36,440 --> 01:29:42,120
 prices for electric and natural gas. While there is a band around the weather normalized

872
01:29:42,120 --> 01:29:48,400
 load forecast, in no way does it permit DME to speculate on weather events that are outside

873
01:29:48,400 --> 01:29:56,400
 a reasonable level of a probability of occurrence. URI was well outside those limits. Going into

874
01:29:56,400 --> 01:30:01,360
 the storm, DME was in compliance with the limits of the energy risk management plan

875
01:30:01,360 --> 01:30:06,760
 and the hedge plan. Compliance with this hedge plan is measured and reported by DME's risk

876
01:30:06,760 --> 01:30:12,720
 management group, who act as an independent auditor of the performance of DME's energy

877
01:30:12,720 --> 01:30:20,680
 management organization. The hedge plan is based upon monthly granularity, and inside

878
01:30:20,680 --> 01:30:26,560
 the month, the energy management organization has the ability to optimize hedges to adjust

879
01:30:26,560 --> 01:30:33,400
 them for real-time market and weather conditions. In the case of URI, additional financial hedges

880
01:30:33,400 --> 01:30:40,640
 were placed on Thursday and Friday prior to the storm. The additional hedging actions

881
01:30:40,640 --> 01:30:48,200
 performed as designed, and contributed to over $23 million in positive value. Normally,

882
01:30:48,200 --> 01:30:55,640
 the weather or wind forecast change rapidly. Normally, when the weather or wind forecast

883
01:30:55,640 --> 01:31:09,520
 change rapidly, the EMO has the ability to take price hedging actions during the storm.

884
01:31:09,520 --> 01:31:15,840
 But in this particular case, on the 15th of February was a bank holiday. The natural gas

885
01:31:15,840 --> 01:31:22,160
 and electric markets were not open, and trades on Thursday of the prior week were for four

886
01:31:22,160 --> 01:31:29,920
 days, Saturday through Tuesday. By the time Tuesday arrived, the market was trading at

887
01:31:29,920 --> 01:31:35,960
 the maximum cap for the rest of the week, and no additional risk management trades were

888
01:31:35,960 --> 01:31:45,560
 available. According to the risk management plan that DME uses is the Denton Energy Center

889
01:31:45,560 --> 01:31:51,480
 as a hedge to the intermittency of our renewables. This asset acts as a hedge against high prices

890
01:31:51,480 --> 01:31:58,720
 by starting up in five minutes and offsetting the cost of energy purchase for load. As you

891
01:31:58,720 --> 01:32:04,480
 will see, wind and solar resources, which are also hedges to our short load position,

892
01:32:04,480 --> 01:32:11,960
 did not perform. Thus, as designed, we relied upon the deck to cover the shortfall of energy

893
01:32:11,960 --> 01:32:20,660
 not generated by the renewables. As we have entered into more solar power purchase agreements,

894
01:32:20,660 --> 01:32:27,120
 and given the high wind output that is expected at night from our wind power purchase agreements,

895
01:32:27,120 --> 01:32:33,880
 when there is no wind at night, we count on the deck to provide the hedge. As you know,

896
01:32:33,880 --> 01:32:39,960
 we lost natural gas pressure and consequently our deck hedge for almost two days, and thus

897
01:32:39,960 --> 01:32:46,400
 we were buying at the maximum cap of $9,000 per megawatt hour at the same time our load

898
01:32:46,400 --> 01:32:54,640
 was the highest at night. A quick review of the current DME power supply

899
01:32:54,640 --> 01:33:00,640
 portfolio is presented here. The important point to understand is that our supply position

900
01:33:00,640 --> 01:33:10,280
 is 610 megawatts, and our normal season demand position in February is 170 megawatts. While

901
01:33:10,280 --> 01:33:16,160
 this may seem like way too much surplus, when the renewable power purchase agreements are

902
01:33:16,160 --> 01:33:22,280
 adjusted for the weather and normalized output, the predictable capacity is significantly

903
01:33:22,280 --> 01:33:29,720
 lower. Also on this slide is the actual demand versus the normal demand for this time of

904
01:33:29,720 --> 01:33:37,720
 year, and as you can see, the demand was 140% of the normal levels.

905
01:33:37,720 --> 01:33:44,520
 Now, this is a complicated chart, but it tells the story in one picture, and I'm going to

906
01:33:44,520 --> 01:33:57,320
 walk through it with you quickly. I'm sorry, this is not the complicated one.

907
01:33:57,320 --> 01:34:02,880
 This is actually a pretty easy one. Slide 6 here for me. Here we see the normal

908
01:34:02,880 --> 01:34:09,920
 load profile on a February day in blue, and now we superimpose the actual load that showed

909
01:34:09,920 --> 01:34:17,720
 up, and you can see it was significantly higher than normal, especially the first two days.

910
01:34:17,720 --> 01:34:26,160
 That would be Saturday and Sunday. Monday is where you see the load reductions

911
01:34:26,160 --> 01:34:36,000
 or the rolling outages took place right here. Finally, we look at the demand, what it would

912
01:34:36,000 --> 01:34:41,520
 have been had the load shedding event not taken place. Here you see that the peak demand

913
01:34:41,520 --> 01:34:49,960
 would have been 400 megawatts, which would have been an all-time new peak for DME.

914
01:34:49,960 --> 01:34:57,840
 This will change our plans for our overall energy supply as we go forward.

915
01:34:57,840 --> 01:35:02,000
 I have alluded to the lack of intermittent renewable energy generation throughout the

916
01:35:02,000 --> 01:35:07,760
 event. This slide shows you the variability in the

917
01:35:07,760 --> 01:35:15,760
 forecast of wind, and in the aircott market, the wind is very important, and it's a very

918
01:35:15,760 --> 01:35:25,640
 low-cost resource. When it doesn't show up, it usually means we're going to have shortages.

919
01:35:25,640 --> 01:35:30,800
 The chart shows the predictions of the market from Thursday the 11th to the end of the event

920
01:35:30,800 --> 01:35:35,680
 on Friday, and I'm going to click through the on-peak and off-peak forecast. We divide

921
01:35:35,680 --> 01:35:41,520
 the market into the on-peak, which is the daylight hours, through 11 p.m., and then

922
01:35:41,520 --> 01:36:00,160
 the off-peak, which is 11 p.m. to 7 a.m. Here you see the low end of the off-peak output,

923
01:36:00,160 --> 01:36:09,960
 and this blue line represents the off-peak high estimate that came in from ERCOT. It

924
01:36:09,960 --> 01:36:15,520
 would be above 10,000 megawatts of wind that would have showed up Thursday through Monday,

925
01:36:15,520 --> 01:36:25,400
 with Tuesday, Wednesday having lower levels. Here's where the actual wind low-level prediction

926
01:36:25,400 --> 01:36:31,520
 was the day before each of the days during the period, so it started out with the solid

927
01:36:31,520 --> 01:36:37,320
 blue line. What we ended up with the day of delivery or the day before delivery was this

928
01:36:37,320 --> 01:36:44,620
 dotted blue line, very large deviation in wind output. Here we see the same thing for the

929
01:36:44,620 --> 01:36:53,160
 on-peak period, where we had on-peak predicting to be peaking out on Sunday, but what in actuality

930
01:36:53,160 --> 01:37:01,640
 the revised forecast as we got into the day of delivery was significantly lower, representing

931
01:37:01,640 --> 01:37:11,320
 7,000 to 9,000 megawatts in the marketplace of wind energy that just didn't perform. These

932
01:37:11,320 --> 01:37:19,240
 bars show you the difference or the amount of error that we saw in the forecast. Wind

933
01:37:19,240 --> 01:37:24,200
 forecasting is an art more than a science. I mean, it is a science, but it has a lot

934
01:37:24,200 --> 01:37:31,560
 of art in it, and we spend a lot of time trying to predict what the wind's going to do, because

935
01:37:31,560 --> 01:37:35,320
 that tells us how much the deck is going to run and what the costs are going to be for

936
01:37:35,320 --> 01:37:42,600
 the day. We spend a lot of time looking at this. These are very large deviations, these

937
01:37:42,600 --> 01:37:51,240
 orange and gold bars, very large deviations that we saw. Now we come to the complicated

938
01:37:51,240 --> 01:37:59,680
 slide. So this slide provides the overall DME position from Friday the 12th through Friday

939
01:37:59,680 --> 01:38:06,480
 the 19th. We start with this horizontal dotted line that represents a balanced supply with

940
01:38:06,480 --> 01:38:14,040
 demand. Next, we push in the price during the period. The blue line is the price starting

941
01:38:14,040 --> 01:38:24,120
 down here going up to $1,000, peaking up here quite a bit higher, and then recovering and

942
01:38:24,120 --> 01:38:32,240
 going into Sunday and Monday, $9,000. We had some deviations. There was a market algorithm

943
01:38:32,240 --> 01:38:38,880
 problem here that was corrected by the PUCT, and then the price rocketed up to $9,000 and

944
01:38:38,880 --> 01:38:48,040
 stayed at $9,000 for the remainder of the duration of the storm. Now here we see DME's

945
01:38:48,040 --> 01:38:56,640
 position. The green line represents our physical position that we had during the storm, and

946
01:38:56,640 --> 01:39:02,520
 as you can see, the green line is above the dotted orange line for the beginning of the

947
01:39:02,520 --> 01:39:09,160
 period, all the way until we get into these deviations here where we lost gas to the Denton

948
01:39:09,160 --> 01:39:16,840
 Energy Center. Anytime the green line is above the dotted orange line, that means we have

949
01:39:16,840 --> 01:39:25,080
 surplus. Anytime it's below, that means we're in a deficit. We're buying at $9,000. Now

950
01:39:25,080 --> 01:39:30,940
 here we see the dotted line, which shows what would have happened had the deck continued

951
01:39:30,940 --> 01:39:37,360
 to operate, and that you can see that we would have been in a long position or in a surplus

952
01:39:37,360 --> 01:39:45,160
 position for the entire duration of the event. And now I want to superimpose when the – this

953
01:39:45,160 --> 01:39:52,680
 is when the load shedding started at 1.20 in the morning. Here is when the gas pressure

954
01:39:52,680 --> 01:40:00,120
 dropped for the deck. Here is when the deck tripped offline, and you can see that green

955
01:40:00,120 --> 01:40:08,320
 – solid green line goes straight down. Here is when we got gas back to the deck, and it

956
01:40:08,320 --> 01:40:14,240
 took us a full 24 hours before we were able to bring the deck back online at a reduced

957
01:40:14,240 --> 01:40:22,560
 level because of the freeze of the radiators, which I'll talk about in just a moment.

958
01:40:22,560 --> 01:40:36,280
 And the end of the load shedding event took place at 9 a.m. on Friday. Here we see the

959
01:40:36,280 --> 01:40:41,480
 performance of each of the supply assets in our portfolio during the event. And I just

960
01:40:41,480 --> 01:40:47,320
 want to point out that the percent of expected output demonstrates that during the event,

961
01:40:47,320 --> 01:40:53,960
 wind energy was practically non-existent, and solar output was just over 50 percent

962
01:40:53,960 --> 01:41:00,640
 of the expected. And recall from a prior slide, when I say 50 percent of the expected, that's

963
01:41:00,640 --> 01:41:05,480
 50 percent of a number that's significantly less than the installed capacity of each of

964
01:41:05,480 --> 01:41:14,520
 these resources. So it's a weathered, normalized output where we predict a probabilistic output

965
01:41:14,520 --> 01:41:22,240
 for each hour of each day. And these metrics are based upon, for a typical February, what

966
01:41:22,240 --> 01:41:29,680
 the output would have been. So when you see a 3.25 percent of wind, that's 3.25 percent

967
01:41:29,680 --> 01:41:35,840
 of a number that's significantly lower than 150 megawatts, which is what the wind resources

968
01:41:35,840 --> 01:41:47,320
 is capable of. The revenue numbers here are provided to contrast what the expected output

969
01:41:47,320 --> 01:41:55,480
 versus the actual output meant from a financial perspective. And as you can see, $180 million

970
01:41:55,480 --> 01:42:04,560
 of difference. Finally, this slide shows the estimated cost of the event to Denton. These

971
01:42:04,560 --> 01:42:10,720
 are estimates as we are still finalizing invoice, and as you know, there are two major potential

972
01:42:10,720 --> 01:42:17,000
 adjustments that will need to be made, depending upon whether or not ERCOT resettles the last

973
01:42:17,000 --> 01:42:22,880
 32 hours, and depending upon the outcome of our lawsuit against ERCOT. Let's go through

974
01:42:22,880 --> 01:42:31,040
 the numbers quickly. Over the event, DME paid ERCOT $209 million. After paying for energy

975
01:42:31,040 --> 01:42:36,960
 to service the demand, ancillary services, and other load-related charges, ERCOT paid

976
01:42:36,960 --> 01:42:47,040
 DME $73.6 million for the energy that we injected into the system. We started the week with

977
01:42:47,040 --> 01:42:55,520
 a cash balance at ERCOT of $4.8 million in collateral. We paid $22.5 million for natural

978
01:42:55,520 --> 01:43:05,000
 gas. We gained $23.2 million from hedging activities. Our fixed price payment for power

979
01:43:05,000 --> 01:43:17,240
 purchase agreements was $783,000, and we had a one-time PPA credit of $940,000. The net

980
01:43:17,240 --> 01:43:24,480
 cost of the week to DME was $140 million, which was sourced from our DME reserves of just

981
01:43:24,480 --> 01:43:31,600
 above $100 million and commercial paper debt. Finance will discuss the current plan for

982
01:43:31,600 --> 01:43:38,040
 reestablishing a reserve for DME, and we'll be providing a recommendation on rate impacts

983
01:43:38,040 --> 01:43:44,200
 as part of the budget discussions for next fiscal year in the coming months. I've also

984
01:43:44,200 --> 01:43:52,640
 provided two other scenarios for comparison. A normal February weather week, which would

985
01:43:52,640 --> 01:44:00,160
 have cost DME approximately $1.2 million, and a nominal supply performance scenario

986
01:44:00,160 --> 01:44:04,840
 to show what the potential outcome would have been had our supply resources been able to

987
01:44:04,840 --> 01:44:10,720
 supply their forecasted output. And as you can see, that outcome would have been much

988
01:44:10,720 --> 01:44:20,040
 better for DME. As I indicated, we'd experienced a significant

989
01:44:20,040 --> 01:44:25,880
 level of freeze damage at the deck when the units lost natural gas supply. The plant was

990
01:44:25,880 --> 01:44:32,760
 designed to withstand ambient temperatures down to 19 degrees without freeze-up. Temperatures

991
01:44:32,760 --> 01:44:38,760
 on Monday and Tuesday were sub-zero, and without heat from the engines in the coolant, our

992
01:44:38,760 --> 01:44:48,720
 radiators froze up. On the left, you see the radiator banks, which are extensive. On the

993
01:44:48,720 --> 01:44:55,280
 right, you see the radiator coolant pipe freeze damage. We have completed temporary repairs

994
01:44:55,280 --> 01:45:02,920
 on the radiators on Saturday the 20th, and the plant is now back to full capacity. However,

995
01:45:02,920 --> 01:45:11,320
 we've not determined whether these repairs are sufficient to withstand high output conditions

996
01:45:11,320 --> 01:45:17,160
 for a long period of time, and we're working on price estimates to retube the radiators

997
01:45:17,160 --> 01:45:23,760
 or replace them. The damages have initiated a claim with our insurance carriers, and we

998
01:45:23,760 --> 01:45:29,680
 are in discussions with their engineers about the long-term fix. With regard to business

999
01:45:29,680 --> 01:45:34,960
 interruption insurance, I'm disappointed to inform you that the coverage will provide

1000
01:45:34,960 --> 01:45:42,600
 no benefit for the event, since the policy has a 90-day waiting period before the coverage

1001
01:45:42,600 --> 01:45:50,160
 kicks in. We are still evaluating whether future potential losses due to damage of the

1002
01:45:50,160 --> 01:46:01,560
 radiators from the storm would be eligible for the claim.

1003
01:46:01,560 --> 01:46:06,840
 A few challenges that were identified during the storm that we addressed are shown here.

1004
01:46:06,840 --> 01:46:12,580
 As we all know now, cell towers that lost electric supply resulted in diminished cell

1005
01:46:12,580 --> 01:46:18,120
 phone coverage, and landlines were impacted as well. DME is evaluating ways to avoid these

1006
01:46:18,120 --> 01:46:23,240
 potential issues in the future. The major equipment problems identified include freeze-up

1007
01:46:23,240 --> 01:46:29,560
 of the vent system in our air compressor rooms, cooling system transmitters that froze up,

1008
01:46:29,560 --> 01:46:35,240
 and the inability to drain liquid from the cooling systems rapidly, which may have avoided

1009
01:46:35,240 --> 01:46:40,760
 some of the freezing damage. Obviously, our cooling systems will need to be weatherized

1010
01:46:40,760 --> 01:46:48,080
 and hardened as we are evaluating options. It goes without saying that we must never

1011
01:46:48,080 --> 01:46:53,320
 let this happen again, and we're aggressively looking at ways to mitigate our future financial

1012
01:46:53,320 --> 01:47:01,180
 and physical performance risk. Loss of fuel is the largest financial impact, and the options

1013
01:47:01,180 --> 01:47:07,760
 under consideration include adding backup fuel, either propane or LNG. The engines would

1014
01:47:07,760 --> 01:47:15,520
 require a modification for propane, and the air permit would also likely have to be modified.

1015
01:47:15,520 --> 01:47:23,360
 Both backup fuel options will be very expensive. There is a second pipeline on the deck property,

1016
01:47:23,360 --> 01:47:31,000
 and we are investigating the costs and benefits associated with a second pipe connection.

1017
01:47:31,000 --> 01:47:37,440
 Our current gas supply contract is a non-firm contract. Firming of gas supplies involves

1018
01:47:37,440 --> 01:47:44,640
 the purchase of firm gas transport and storage of natural gas. This option would increase

1019
01:47:44,640 --> 01:47:51,240
 the annual fixed costs of the deck in a significant manner. Not on the list is the potential to

1020
01:47:51,240 --> 01:47:57,120
 put a booster compressor on the existing pipeline, as the supplier believes there is adequate

1021
01:47:57,120 --> 01:48:03,200
 gas supply, just that high demand did not enable them to meet the inlet pressure requirements

1022
01:48:03,200 --> 01:48:07,760
 of the deck. As you saw in the prior slide, the best performing

1023
01:48:07,760 --> 01:48:17,200
 asset was our whitetail contract. It's a structured transaction that provides a guaranteed hourly

1024
01:48:17,200 --> 01:48:23,960
 volume of energy at a fixed price from a renewable asset. The energy management organization

1025
01:48:23,960 --> 01:48:32,880
 will begin analysis and seek proposals to swap some or all of our intermittent renewable

1026
01:48:32,880 --> 01:48:39,880
 positions for financially settled fixed shapes at fixed prices. Obviously, this will increase

1027
01:48:39,880 --> 01:48:47,080
 our PPA costs, as we will need to pay to have another party take on these risks.

1028
01:48:47,080 --> 01:48:51,680
 We currently purchase outage insurance for the deck in the summer months to provide a

1029
01:48:51,680 --> 01:48:58,120
 level of financial protection. We will evaluate adding winter coverage to that policy for

1030
01:48:58,120 --> 01:49:03,060
 next year. As we discussed, our current hedge plan dictates

1031
01:49:03,060 --> 01:49:09,680
 the hedging actions we must take. In consultation with the risk management committee, the EMO

1032
01:49:09,680 --> 01:49:15,280
 will evaluate and provide recommendations on changes to the hedge targets for the winter

1033
01:49:15,280 --> 01:49:22,440
 season. Intermittency of our renewable resources is something that can't be avoided. During

1034
01:49:22,440 --> 01:49:31,880
 the last two $9,000 per megawatt-hour periods, our wind PPAs have delivered no energy.

1035
01:49:31,880 --> 01:49:37,000
 We will evaluate ways to back up these resources with spending reserves from available market

1036
01:49:37,000 --> 01:49:43,680
 resources and will adjust our renewable portfolio accordingly to achieve the 100% renewable energy

1037
01:49:43,680 --> 01:49:48,520
 mandate under the Denton renewable resource plan.

1038
01:49:48,520 --> 01:49:54,960
 There's a lot of discussion in Austin about winterizing gas and power assets. We have

1039
01:49:54,960 --> 01:49:59,960
 already provided a discussion about these efforts at the deck, but we'll explore options

1040
01:49:59,960 --> 01:50:07,680
 with Santa Rita, our wind resource, and Whitetail. As part of our hedge plan revisions, we will

1041
01:50:07,680 --> 01:50:14,480
 evaluate how to diversify our risk away from the deck. This could involve swapping capacity

1042
01:50:14,480 --> 01:50:20,680
 with other gas-fired resources or putting in place financial transactions that are independent

1043
01:50:20,680 --> 01:50:27,020
 of actual deck performance. One inexpensive option we are considering

1044
01:50:27,020 --> 01:50:33,640
 is adding additional weather forecasting capabilities to the EMO. While we subscribe to services,

1045
01:50:33,640 --> 01:50:40,120
 it may be prudent to add a meteorologist to staff to develop longer-range outlooks and

1046
01:50:40,120 --> 01:50:46,120
 to run Denton-specific variations so that the EMO can take additional hedging positions

1047
01:50:46,120 --> 01:50:53,360
 prior to weather events to provide needed financial protections. All of these options

1048
01:50:53,360 --> 01:50:58,840
 will cost money, and we'll be back in front of both the PUB and the council to discuss

1049
01:50:58,840 --> 01:51:06,800
 and seek guidance and approval. Early in this presentation, I mentioned that

1050
01:51:06,800 --> 01:51:14,440
 the ERCOT market reforms are needed. Clearly, this is not a well-functioning market. When

1051
01:51:14,440 --> 01:51:22,620
 prices inside of 24 hours have ranged from $9,000 to negative $7 per megawatt, and major

1052
01:51:22,620 --> 01:51:30,480
 market participants are going bankrupt, the key items that I believe need to be addressed

1053
01:51:30,480 --> 01:51:36,120
 are, first, the market must recognize and account for large numbers of intermittent

1054
01:51:36,120 --> 01:51:46,760
 resources that are now counted on to meet peak demands. Out of a peak demand of 74 gigawatts,

1055
01:51:46,760 --> 01:51:52,040
 over 48 percent of the energy could come from renewables in ERCOT. While this certainly

1056
01:51:52,040 --> 01:51:59,000
 is meeting environmental policy objectives for Texas and has delivered low-cost energy,

1057
01:51:59,000 --> 01:52:03,360
 these resources are not dependable at peak demand times.

1058
01:52:03,360 --> 01:52:09,280
 Secondly, the uplift of defaulting parties' financial obligations to the remaining market

1059
01:52:09,280 --> 01:52:16,160
 participants is not sustainable and leverages the strong credit ratings and balance sheets

1060
01:52:16,160 --> 01:52:23,640
 of MOUs and co-ops to the benefit of the unregulated market participants. As we have claimed, this

1061
01:52:23,640 --> 01:52:31,560
 also violates the state constitution. The third item is runaway prices for protracted

1062
01:52:31,560 --> 01:52:38,080
 periods of time must be stopped, and the imposition of some type of circuit breaker into the market

1063
01:52:38,080 --> 01:52:42,560
 to protect ratepayers and market participants is needed.

1064
01:52:42,560 --> 01:52:48,000
 Fourth, because Texas relies almost exclusively on natural gas to back up the intermittency

1065
01:52:48,000 --> 01:52:53,920
 of renewables and to provide spinning reserves, better coordination between the electric and

1066
01:52:53,920 --> 01:52:59,960
 gas industries is needed to avoid a loss of life and property damages in the event of

1067
01:52:59,960 --> 01:53:08,640
 additional load shed events.

1068
01:53:08,640 --> 01:53:14,720
 Before we get to questions, I wanted to briefly discuss what we expect from the legislature

1069
01:53:14,720 --> 01:53:21,680
 and ERCOT and the PCT. ERCOT has issued an order to resettle certain ancillary costs

1070
01:53:21,680 --> 01:53:28,160
 during the EAA event, during the load shed event. This is a generating unit by generating

1071
01:53:28,160 --> 01:53:37,360
 unit exercise that will take some time. I expect this to result in a reduction to one

1072
01:53:37,360 --> 01:53:43,960
 of the components that cost us so much money, and that's a $49 million cost for ancillary

1073
01:53:43,960 --> 01:53:49,520
 services that we incurred during the period. But I can't provide any estimates at this

1074
01:53:49,520 --> 01:53:59,960
 time. Senate Bill 2142 requires the resettlement of the last 32 hours of the load shed period.

1075
01:53:59,960 --> 01:54:05,700
 The bill was passed by the Senate, is supported by the Lieutenant Governor, and has been referred

1076
01:54:05,700 --> 01:54:13,100
 to committee in the House. While it may seem just from a layman's perspective, it is extremely

1077
01:54:13,100 --> 01:54:19,520
 complicated to think about resettling this period. International markets have already

1078
01:54:19,520 --> 01:54:26,680
 settled trades based upon the cleared prices. For DME, the resettlement could cost us up

1079
01:54:26,680 --> 01:54:33,560
 to an additional $17 million, on top of the cost I've already reported. We have filed

1080
01:54:33,560 --> 01:54:38,120
 comments with the Public Utility Commission of Texas indicating that we are opposed to

1081
01:54:38,120 --> 01:54:45,040
 such a resettlement. Council has heard from legal counsel on the merits of our case against

1082
01:54:45,040 --> 01:54:50,820
 ERCOT. At this point, it is impossible to predict the magnitude of the uplift because

1083
01:54:50,820 --> 01:54:57,140
 market participants' short pays and defaults are still occurring without remedy. Two large

1084
01:54:57,140 --> 01:55:03,320
 cooperatives that have declared bankruptcy need to be settled before a reasonable estimate

1085
01:55:03,320 --> 01:55:08,740
 can be established. A number of bills have been introduced and scheduled for hearing

1086
01:55:08,740 --> 01:55:15,720
 this week that are aimed at requiring integration of the natural gas and electric regulatory

1087
01:55:15,720 --> 01:55:22,040
 bodies. It's likely that something makes it out of the legislature, and we will continue

1088
01:55:22,040 --> 01:55:29,920
 to monitor these develops and keep both of these bodies informed. And with that, Mayor

1089
01:55:29,920 --> 01:55:36,440
 Pro Tem, or Mayor, if you're here, and Chair Parker, I'm going to stop sharing and answer

1090
01:55:36,440 --> 01:55:49,160
 questions. Okay. Thank you, Terry. And thank you, Mayor Pro Tem. Appreciate your assistance

1091
01:55:49,160 --> 01:55:56,880
 with that. So we'll take questions. Let's go Commissioner Bill Cheek, and then Council

1092
01:55:56,880 --> 01:56:06,080
 Member Meltzer, and who else did I see? We'll go Commissioner Susan Parker, and then we'll

1093
01:56:06,080 --> 01:56:11,720
 get Armature, Council Member Armature. Okay. Mr. Cheek.

1094
01:56:11,720 --> 01:56:19,560
 Thank you, Mayor. Question for Terry. I wanted to ask you to expand a little bit more on

1095
01:56:19,560 --> 01:56:31,280
 the natural gas, or lack thereof. Question of why exactly was gas cut off to the plant,

1096
01:56:31,280 --> 01:56:41,400
 and what were we paying over the normal, timely prices at peak time for natural gas once it

1097
01:56:41,400 --> 01:56:48,120
 turned back on? Yes. So the Denton Energy Center tripped on

1098
01:56:48,120 --> 01:56:57,440
 a low pressure from the gas pipeline. I don't remember the specific time, but it was Tuesday

1099
01:56:57,440 --> 01:57:05,880
 morning. In discussions with the pipeline provider, or the gas provider, they are still

1100
01:57:05,880 --> 01:57:12,000
 at a loss as to why pressure was low. It's a new section of pipe that's been built, and

1101
01:57:12,000 --> 01:57:15,680
 they believe that the pressure should have been sufficient. However, we do have the data

1102
01:57:15,680 --> 01:57:23,140
 needed to support that the units could not be started back up because of low pressure.

1103
01:57:23,140 --> 01:57:33,640
 During that time, we were paying just absolutely outrageous prices. Normally gas this time

1104
01:57:33,640 --> 01:57:40,040
 of year would be trading prior to the event was trading right around $3 a million BTU.

1105
01:57:40,040 --> 01:57:49,520
 We paid as high as $700 a million BTU during the event.

1106
01:57:49,520 --> 01:57:58,280
 Is there any chance that we had curtailment from the gas company, and that's the reason

1107
01:57:58,280 --> 01:58:04,760
 for the low pressure? We have not been able to verify that we were

1108
01:58:04,760 --> 01:58:10,600
 curtailed in our discussions with the gas pipeline company. They have claimed that there

1109
01:58:10,600 --> 01:58:19,720
 was no curtailment. They believe that it was just the demand on the gas system from all

1110
01:58:19,720 --> 01:58:28,440
 the home heating and other electrical demand that the system just couldn't keep up with

1111
01:58:28,440 --> 01:58:35,840
 the demand, and that's why the pressure dropped. And I should also point out that obviously

1112
01:58:35,840 --> 01:58:43,920
 with the rolling outages, this phenomenon was experienced by dozens of plants around

1113
01:58:43,920 --> 01:58:51,560
 the Aricot market. We have Councilmember Meltzer, Commissioner

1114
01:58:51,560 --> 01:59:02,920
 Parker, Armature, and then, Mr. Rybak, I see you there after Councilmember Armature.

1115
01:59:02,920 --> 01:59:14,240
 Thank you. I would just like to unpack the dynamics of what happened a little further.

1116
01:59:14,240 --> 01:59:22,960
 Our contracted resources weren't performing, and the deck had that interruption, so we

1117
01:59:22,960 --> 01:59:27,400
 had to go to the market without a hedge, and the prices were super high.

1118
01:59:27,400 --> 01:59:34,400
 Now, the prices were super high. Why? Was it because the other power providers

1119
01:59:34,400 --> 01:59:39,680
 in the grid were paying super high prices for natural gas?

1120
01:59:39,680 --> 01:59:48,760
 Yeah, so the price is actually derived from an equation that is run by Aricot every five

1121
01:59:48,760 --> 01:59:56,020
 minutes based on the relationship of supply and demand. And when there's not enough supply

1122
01:59:56,020 --> 02:00:03,200
 to meet demand, certain scarcity price adders are added to the equation.

1123
02:00:03,200 --> 02:00:10,320
 But it's the essence of the equation that a greater incentive would be needed to get

1124
02:00:10,320 --> 02:00:19,480
 providers to produce, and does the price need to be higher because they were facing high

1125
02:00:19,480 --> 02:00:22,640
 natural gas prices? You follow me? Why do they need it?

1126
02:00:22,640 --> 02:00:29,200
 I do, yes. And so in the summer, for example, in the summer of 2019 where we saw $9,000

1127
02:00:29,200 --> 02:00:39,460
 prices, gas prices were at normal levels, yet we saw $9,000 prices because supply did

1128
02:00:39,460 --> 02:00:46,720
 not meet the demand. And any time that supply is less than demand

1129
02:00:46,720 --> 02:00:56,520
 or is close to a level that could cause these types of rolling outages, the Aricot algorithm

1130
02:00:56,520 --> 02:01:04,800
 produces a price that's $9,000 or a high price. It could be less than $9,000, maybe $1,000.

1131
02:01:04,800 --> 02:01:10,920
 And it's a function of that relationship between the supply and the demand and how much reserve

1132
02:01:10,920 --> 02:01:17,160
 capacity remains online for that five-minute period.

1133
02:01:17,160 --> 02:01:25,080
 So it's staying high for an extended period of time. And the algorithm is saying, well,

1134
02:01:25,080 --> 02:01:34,320
 two things. Demand is still high, and supply is not coming on. Is that more or less what

1135
02:01:34,320 --> 02:01:43,440
 you mean? And why wasn't supply coming on? Supply was not coming on because it wasn't

1136
02:01:43,440 --> 02:01:49,200
 physically capable of producing. Either it had no fuel or it had no wind or there was

1137
02:01:49,200 --> 02:01:57,160
 no sun, and therefore it couldn't keep up with an all-time record peak demand.

1138
02:01:57,160 --> 02:02:04,680
 And I want to quickly point out, it wasn't just renewable resources that were down.

1139
02:02:04,680 --> 02:02:11,200
 It was everything, correct. Who benefited from the price being that high

1140
02:02:11,200 --> 02:02:17,320
 for that long? Who backed up the Brinks truck to City Hall?

1141
02:02:17,320 --> 02:02:22,680
 I wish I knew the answer to that question. I don't know the answer to that question.

1142
02:02:22,680 --> 02:02:33,680
 I think that will be something that the PUCT, the legislature, and even FERC, once the investigations

1143
02:02:33,680 --> 02:02:39,240
 are over, will know the answer to that question. And we do know that some speculators made

1144
02:02:39,240 --> 02:02:48,640
 big money. And that would be speculation by trading companies, by hedge funds that are

1145
02:02:48,640 --> 02:02:55,640
 in the business of taking on risk for profit. And through the financial markets, they made

1146
02:02:55,640 --> 02:03:00,680
 bets that prices would be high. They didn't know they were going to be this

1147
02:03:00,680 --> 02:03:05,960
 high for as long as they were, but they made bets that prices would be high and it paid

1148
02:03:05,960 --> 02:03:16,040
 off for them. This is all taking place during a declared

1149
02:03:16,040 --> 02:03:24,400
 disaster. So I imagine that's the foundation for a price gouging investigation, where you

1150
02:03:24,400 --> 02:03:34,160
 can't charge $100 a gallon for gas when people are fleeing a tornado or something like that.

1151
02:03:34,160 --> 02:03:40,960
 As far as the legislative environment, is there any appetite at all? We don't know where

1152
02:03:40,960 --> 02:03:47,360
 the windfall profits went, but given that it was during a declared disaster, not just

1153
02:03:47,360 --> 02:03:53,400
 in the last 32 hours, it was declared on the 12th and renewed on the 15th or 17th, is there

1154
02:03:53,400 --> 02:04:00,280
 any appetite at all for any kind of a clawback of windfall profits wherever they fell?

1155
02:04:00,280 --> 02:04:04,920
 My understanding, Council Member Meltzer, is that if there were going to be an investigation

1156
02:04:04,920 --> 02:04:11,440
 on price gouging, that would have to be initiated by the attorney general's office. And I'm

1157
02:04:11,440 --> 02:04:16,320
 not aware that that investigation has begun. I know there are requests for information

1158
02:04:16,320 --> 02:04:21,280
 that have come from the attorney general to various market participants.

1159
02:04:21,280 --> 02:04:30,920
 I'll pause. All right. And then Commissioner Parker.

1160
02:04:30,920 --> 02:04:35,240
 I've been getting several questions, because everybody knows I moved here from the frozen

1161
02:04:35,240 --> 02:04:43,720
 tundra of Minnesota, that the wind, was it a lack of wind, or was it that the turbines

1162
02:04:43,720 --> 02:04:50,760
 weren't working? And what can we do to ensure that winterization is better? Another question

1163
02:04:50,760 --> 02:04:59,520
 I have is our deck, the utility I came from, has the exact same engines. And it gets cold

1164
02:04:59,520 --> 02:05:07,280
 in Minnesota, and they don't fail. So can you explain what the differences are? I believe

1165
02:05:07,280 --> 02:05:14,720
 it's that we design them differently. You design for heat here, redesign for cold there.

1166
02:05:14,720 --> 02:05:21,160
 And then, I think you already covered it, but if you could talk about it one more time,

1167
02:05:21,160 --> 02:05:29,480
 is how much did we lose because the gas wasn't, gas pressure wasn't there and we tripped off,

1168
02:05:29,480 --> 02:05:35,600
 how much money did we not get to sell into the market that could have maybe made this

1169
02:05:35,600 --> 02:05:40,720
 as less devastating as it is? Was that way too many all at once?

1170
02:05:40,720 --> 02:05:46,760
 No, I think I got them. Hopefully I can, so the answer to your question on wind is a combination

1171
02:05:46,760 --> 02:05:53,240
 of both. As we went into the, on Thursday and Friday, we were predicting low wind output

1172
02:05:53,240 --> 02:05:59,280
 for the weekend, and even into into Monday, relative to what normal wind levels would

1173
02:05:59,280 --> 02:06:07,320
 have been. So nine, 10,000 megawatts of wind relative to what we would normally see, which

1174
02:06:07,320 --> 02:06:15,840
 would be significantly double that, triple that number. What happened was as the precipitation

1175
02:06:15,840 --> 02:06:23,120
 came in, and much like when you get on a plane in a snowstorm or before you pull away from

1176
02:06:23,120 --> 02:06:28,120
 the gate, shortly after you pull it, you know, they de-ice the wings on the plane to keep

1177
02:06:28,120 --> 02:06:35,040
 them from freezing up. Same phenomena here. Ice got on the blades and the blades were

1178
02:06:35,040 --> 02:06:45,120
 then no longer safe to operate. And so that's what happened in the case of Santa Rita. They

1179
02:06:45,120 --> 02:06:53,160
 physically could not operate because there was frozen ice on the blades. So that was

1180
02:06:53,160 --> 02:07:01,160
 a phenomenon that was seen across the marketplace. We are looking at what is done in the northern

1181
02:07:01,160 --> 02:07:10,280
 climes where we see that. My understanding though is that in Minnesota, Iowa, those places,

1182
02:07:10,280 --> 02:07:17,800
 that type of precipitation is not common. And so normally it would be snow, which doesn't

1183
02:07:17,800 --> 02:07:24,880
 freeze on the blade, whereas freezing rain would, and that's what we had. And so they,

1184
02:07:24,880 --> 02:07:31,360
 the cost to install heaters, for example, on those blades is prohibitive and is not

1185
02:07:31,360 --> 02:07:40,020
 normally done. For the deck, you are correct. We designed the deck, as I mentioned, for

1186
02:07:40,020 --> 02:07:47,520
 a 19 degree minimum temperature. That's the, that's a decision that was made back during

1187
02:07:47,520 --> 02:07:55,200
 the design phase for the deck. It could have been designed to go down to zero or sub zero.

1188
02:07:55,200 --> 02:08:01,320
 The output would be adversely affected because as you add more glycol to the coolant systems,

1189
02:08:01,320 --> 02:08:07,440
 you get less heat transfer and that would reduce the output. What was a 225 megawatt

1190
02:08:07,440 --> 02:08:13,380
 output would probably drop down below 200 if we had glycol concentrations that were

1191
02:08:13,380 --> 02:08:21,720
 sufficient to keep us below zero. As far as the amount of money that the deck, the deck

1192
02:08:21,720 --> 02:08:28,360
 not being able to run, it's a significant number. I can get back to you with a specific

1193
02:08:28,360 --> 02:08:35,080
 number. I think of it in terms of gross margin. The amount of money would have made above

1194
02:08:35,080 --> 02:08:40,920
 operating costs because we were paying very high costs for gas at that time. And that

1195
02:08:40,920 --> 02:08:49,640
 number was probably north of $50 million. Thank you. Okay. Thank you. And Council Member

1196
02:08:49,640 --> 02:09:02,880
 Armature. Yes. So I have two questions. I'll ask the bigger one first. Given the high and

1197
02:09:02,880 --> 02:09:10,240
 variable price of gas and are limited, in fact, the non-existence of any kind of control

1198
02:09:10,240 --> 02:09:23,280
 that we have over the price of gas together with the cost of the maintenance and operation

1199
02:09:23,280 --> 02:09:35,200
 of the Denton Energy Center in relation to its revenue leading up to and of course including

1200
02:09:35,200 --> 02:09:47,520
 the recent Snowpocalypse, Snowvid event. And also, you know, given our limited ability,

1201
02:09:47,520 --> 02:09:56,340
 in fact, in capacity to regulate weatherization of renewable resources for those entities

1202
02:09:56,340 --> 02:10:04,800
 that we contract with, right? We can't tell them, you know, now you have to go winterize

1203
02:10:04,800 --> 02:10:11,120
 your wind generation facilities if they're not our facilities. So given all of those

1204
02:10:11,120 --> 02:10:18,400
 factors that I know, you know, you're so well aware of, you know, why are we not consider

1205
02:10:18,400 --> 02:10:26,940
 or I should say, are we considering investing in renewable, in weatherized renewable generation

1206
02:10:26,940 --> 02:10:37,880
 sources as well as battery storage, but especially the weatherized renewable generation sources

1207
02:10:37,880 --> 02:10:46,600
 which are not dependent on fossil fuel to run and would presumably, you know, would

1208
02:10:46,600 --> 02:10:54,480
 satisfy that, you know, at the proper scale, that generation work requirement of ERCOT

1209
02:10:54,480 --> 02:10:59,000
 to be hooked up to the grid. Just wondering if you could speak to that, why we're not

1210
02:10:59,000 --> 02:11:04,720
 looking there. Sure. That's a good question and I think the

1211
02:11:04,720 --> 02:11:14,080
 answer is pretty simple. We have looked at other sources of renewable energy in different

1212
02:11:14,080 --> 02:11:23,280
 regions of Texas in order to get some regional diversity. The wind farms in South Texas and

1213
02:11:23,280 --> 02:11:29,780
 along the coast did fairly well during this episode. As you may be, as you may remember,

1214
02:11:29,780 --> 02:11:37,600
 Councilmember Armenter, we had evaluated coastal wind last year and we found that it did not

1215
02:11:37,600 --> 02:11:44,160
 compete well from a financial perspective with other sources of renewable energy that

1216
02:11:44,160 --> 02:11:49,600
 we were evaluating pursuant to an RFP. We may now have to go back and relook at the

1217
02:11:49,600 --> 02:11:58,680
 way we evaluate those bids to see if perhaps there is an allowance for the fact that these

1218
02:11:58,680 --> 02:12:06,480
 performed well, but I will tell you that the sellers, the owners of those will also re-evaluate

1219
02:12:06,480 --> 02:12:10,480
 the value that they bring to the market and so their offer prices are probably going to

1220
02:12:10,480 --> 02:12:16,840
 be significantly higher. But I think the one point that everyone needs to keep in mind

1221
02:12:16,840 --> 02:12:24,240
 is that regardless of the renewable resource that we contract with, what history has shown

1222
02:12:24,240 --> 02:12:32,240
 us in the last two years is that at times of critical need, they don't show up because

1223
02:12:32,240 --> 02:12:38,680
 they are by nature intermittent and they can only produce during times when the wind is

1224
02:12:38,680 --> 02:12:46,120
 blowing and the sun is shining. And no matter what we do, we have to have a provision to

1225
02:12:46,120 --> 02:12:52,080
 back up that intermittency, and that's what the DEC is intended to do.

1226
02:12:52,080 --> 02:12:59,720
 So I would like to just respond to that and then ask my second question. Of course, I

1227
02:12:59,720 --> 02:13:07,880
 understand that renewable energy is intermittent, but it's also my understanding that when the

1228
02:13:07,880 --> 02:13:15,160
 city invested in enterprise consulting to help balance our renewable portfolio, they

1229
02:13:15,160 --> 02:13:22,840
 explained how a balanced renewable portfolio that includes coastal wind, and that was the

1230
02:13:22,840 --> 02:13:29,040
 key for coastal wind for them, it costs a little bit more. And I see what you're saying.

1231
02:13:29,040 --> 02:13:32,820
 It makes sense that the price would go up now that people are seeing or understanding

1232
02:13:32,820 --> 02:13:39,800
 more of the value of coastal wind and there will probably be more of a demand for it.

1233
02:13:39,800 --> 02:13:49,920
 But coastal wind as part of a balanced portfolio, together with the backup that a grid is at

1234
02:13:49,920 --> 02:14:04,240
 least supposed to provide, covers that limitation of the intermittent nature of those renewable

1235
02:14:04,240 --> 02:14:10,040
 resources. Gas, as we found out, is also intermittent, dependent on pricing and availability, also

1236
02:14:10,040 --> 02:14:18,040
 being a finite limited resource. So that's just kind of my two cents on the matter, but

1237
02:14:18,040 --> 02:14:26,960
 I'm glad that we will be going back and re-looking at how we evaluate the fiscal responsibility

1238
02:14:26,960 --> 02:14:32,960
 of investing in coastal wind, because I continue to believe that even though it costs more,

1239
02:14:32,960 --> 02:14:39,700
 it is a good investment for part of our backup plan. So my next question, which is a simpler

1240
02:14:39,700 --> 02:14:47,440
 one, or at least a smaller one, is related to Commissioner Parker's question about winterization

1241
02:14:47,440 --> 02:14:54,640
 of wind. I'm not going to repeat her question because you answered it, but I'm wondering

1242
02:14:54,640 --> 02:15:03,000
 if you could speak about what you mentioned about the consideration of possibly hiring

1243
02:15:03,000 --> 02:15:16,560
 an in-house meteorologist to consider weather issues and to what extent we know the weatherization

1244
02:15:16,560 --> 02:15:24,200
 of those wind contracts that we contract with. In other words, I would imagine that a meteorologist

1245
02:15:24,200 --> 02:15:28,400
 would think, okay, because of the weather and because we have these contracts with these

1246
02:15:28,400 --> 02:15:34,960
 wind generation facilities that are not properly weatherized, it's going to affect us in this

1247
02:15:34,960 --> 02:15:42,360
 that way. Are those contractors transparent with, maybe not with the public, but at least

1248
02:15:42,360 --> 02:15:48,840
 with the cities they contract with, about their weatherization? And to what extent would

1249
02:15:48,840 --> 02:15:55,100
 a meteorologist be able to help us better prepare for that?

1250
02:15:55,100 --> 02:16:01,480
 The concept of bringing a meteorologist on board to help us to better predict weather

1251
02:16:01,480 --> 02:16:11,160
 is really focused on taking real-time actions to hedge price risk based upon those weather

1252
02:16:11,160 --> 02:16:20,200
 forecasts. And I would not tie it to the physical assets themselves, the renewable assets. Under

1253
02:16:20,200 --> 02:16:27,440
 our power purchase agreements, our suppliers are not obligated to provide us a quantity

1254
02:16:27,440 --> 02:16:34,120
 of energy over any particular period of time. It's a take and pay contract, so we pay for

1255
02:16:34,120 --> 02:16:40,080
 the energy as it's delivered. And so if we were to insert contract provisions that said

1256
02:16:40,080 --> 02:16:44,960
 you must be able to perform at this level during these periods of time, that would change

1257
02:16:44,960 --> 02:16:50,840
 the economics and the risk profile for that particular generator. And we would have to

1258
02:16:50,840 --> 02:16:56,680
 renegotiate those contracts almost entirely. So while I understand what you're saying,

1259
02:16:56,680 --> 02:17:02,360
 I just want to make sure you're clear, I'm clear, that the concept of bringing somebody

1260
02:17:02,360 --> 02:17:07,840
 on board as a meteorologist would be more to increase what we were able to do, which

1261
02:17:07,840 --> 02:17:15,400
 was to put hedges in place that achieved $23 million of value. We would do more of that

1262
02:17:15,400 --> 02:17:24,640
 proactive hedging in real time in order to recognize the risks that we face with the

1263
02:17:24,640 --> 02:17:32,240
 intermittency of our renewables. And as you point out, the potential for a gas interruption.

1264
02:17:32,240 --> 02:17:39,000
 Thank you for that. That makes me think of a third question. I know Mayor Pro Tem mentioned

1265
02:17:39,000 --> 02:17:45,000
 in the previous segment, we could each ask three questions. I don't know if I can ask

1266
02:17:45,000 --> 02:17:49,040
 that now. Mayor Hudspeth, or should I wait until --

1267
02:17:49,040 --> 02:17:54,400
 Yes, go right ahead. Okay. Thank you. This is when you were talking

1268
02:17:54,400 --> 02:17:59,820
 about contracts, it made me think, and please let me know if this would be a better question

1269
02:17:59,820 --> 02:18:08,680
 for a later segment of the presentation, but it seems apt to me right now. Has his staff

1270
02:18:08,680 --> 02:18:14,960
 investigated our contracts with Wartsilla, the gas plant manufacturer, and also Burns

1271
02:18:14,960 --> 02:18:22,040
 McDonald, the contractor who helped set it up? I know this was before you got here, that

1272
02:18:22,040 --> 02:18:29,560
 those contracts were established, but to see if there's anything in those contracts that

1273
02:18:29,560 --> 02:18:37,040
 could have possibly misrepresented, you know, the preparedness of the DEC, you know, for

1274
02:18:37,040 --> 02:18:41,640
 such an event. I'm not saying there is. I'm just curious. I thought now might be a good

1275
02:18:41,640 --> 02:18:47,760
 time to ask. We've accepted the facility, and the warranty

1276
02:18:47,760 --> 02:18:54,080
 periods are over for the DEC and for the equipment there. So I would not suggest that there be

1277
02:18:54,080 --> 02:19:02,280
 an opportunity to do what you're suggesting. Okay. And so that takes us to -- and, Lee,

1278
02:19:02,280 --> 02:19:06,520
 help me enunciate your last name right. You are correct, Ryback.

1279
02:19:06,520 --> 02:19:11,320
 Okay. Thank you, sir. No, thank you. I appreciate it. Terry, I've

1280
02:19:11,320 --> 02:19:16,960
 got a real nerdy engineering question for you. When you were talking about the problems

1281
02:19:16,960 --> 02:19:24,060
 with the DEC, the one thing that caught my attention was a cooling system transmitter scaling.

1282
02:19:24,060 --> 02:19:29,600
 So I'm curious if you could clarify that. And secondarily, you talked about some heat

1283
02:19:29,600 --> 02:19:37,120
 exchanger mitigation to overcome the very cold temperatures and the -- obviously, the

1284
02:19:37,120 --> 02:19:42,880
 heat exchanger is full of water. So what are those strategies, and could you just expound

1285
02:19:42,880 --> 02:19:50,880
 on that a little bit? Sure. The transmitter scaling issue was really

1286
02:19:50,880 --> 02:19:58,240
 freezing up of the transmitters and the ice that was forming inside of the transmitters

1287
02:19:58,240 --> 02:20:03,360
 themselves or the sensors, the sensing probes for temperature. We couldn't get an accurate

1288
02:20:03,360 --> 02:20:12,960
 temperature reading on the liquid that was in the radiator systems. The mitigation, as

1289
02:20:12,960 --> 02:20:19,320
 we think about the long-term fix for the damage that was caused, there are two options, really.

1290
02:20:19,320 --> 02:20:27,520
 One is to replace the end tubes. So these are cooling systems where there's a manifold

1291
02:20:27,520 --> 02:20:35,640
 where the heated fluid comes in, passes all the way through the heat exchanger and comes

1292
02:20:35,640 --> 02:20:44,760
 back. And at each end, there's a tube, you know, a 90-degree, 180-degree tube that bends

1293
02:20:44,760 --> 02:20:50,680
 around to return the liquid. That's where we saw the bulk of the damage.

1294
02:20:50,680 --> 02:20:56,160
 And so the mitigation might be to be able to go in and just replace those end tubes

1295
02:20:56,160 --> 02:21:03,000
 rather than the radiators themselves. We do not believe that there's damage to the long

1296
02:21:03,000 --> 02:21:10,000
 runs that run through the radiator fins themselves. Right, through the coil tubes themselves.

1297
02:21:10,000 --> 02:21:13,640
 Yep. Okay. Has any thought been given to providing

1298
02:21:13,640 --> 02:21:18,680
 some kind of heat source at the base of the heat exchanger in an emergency event like

1299
02:21:18,680 --> 02:21:22,720
 this, of course? Yes, sir. That's what we're considering is

1300
02:21:22,720 --> 02:21:31,800
 we'll be doing an analysis, engineering analysis of whether adding heat or adding additional

1301
02:21:31,800 --> 02:21:40,520
 glycol concentrations or having the ability to evacuate that liquid very quickly in the

1302
02:21:40,520 --> 02:21:45,640
 event that it drops below design temperatures. And we'll do a net present value analysis

1303
02:21:45,640 --> 02:21:53,040
 to bring it back to you and give you our recommendation on the path to proceed.

1304
02:21:53,040 --> 02:21:57,440
 Oh, thank you very much. I appreciate it. Mr. Mayor and Madam Chairman, I'm going to

1305
02:21:57,440 --> 02:22:01,840
 have to step away for a few minutes. I beg your indulgence, but I shall return.

1306
02:22:01,840 --> 02:22:08,120
 Thank you. Mayor Pro Tem Davis, then Commissioner Solve,

1307
02:22:08,120 --> 02:22:14,640
 and then Ben, did I see your hand? Okay. Yeah. And then Ben, thank you.

1308
02:22:14,640 --> 02:22:20,400
 Thank you, Mayor. Terry, my first questions are about the legislature. First, on the resettlement

1309
02:22:20,400 --> 02:22:25,720
 bill, we know that the Senate passed their bill that's now over to the House to do. The

1310
02:22:25,720 --> 02:22:32,720
 House is going to kind of take a longer look at it, I think, than the Senate probably did.

1311
02:22:32,720 --> 02:22:37,520
 And you already said that it's hard to say exactly how people are going to benefit or

1312
02:22:37,520 --> 02:22:42,720
 exactly what Denton's going to have to give up if we resettle those 32 hours. But can

1313
02:22:42,720 --> 02:22:48,840
 you can you break down for us why those 32 hours are the time period that's being looked

1314
02:22:48,840 --> 02:22:55,800
 at for resettlement? And in a general sense, who would benefit? We know the municipal operators

1315
02:22:55,800 --> 02:23:00,960
 like Denton stand to lose in a resettlement. Who stands to benefit in a general sense if

1316
02:23:00,960 --> 02:23:07,200
 that market is resettled? That's a great question. So the bill has been

1317
02:23:07,200 --> 02:23:13,240
 referred to state affairs, we understand that state affairs will take their time to gather

1318
02:23:13,240 --> 02:23:21,640
 additional information before they hear the bill and before they take a vote on it. So

1319
02:23:21,640 --> 02:23:28,560
 the reason why the 32 hours is under consideration is that beginning at our at that 32nd hour

1320
02:23:28,560 --> 02:23:36,320
 before the end of the event, there was adequate reserve capacity in the market, where ERCOT

1321
02:23:36,320 --> 02:23:45,380
 could have started to bring load back on. ERCOT chose at that point to keep the prices

1322
02:23:45,380 --> 02:23:53,380
 at $9,000 to send a signal to the marketplace for load not to come back into the market.

1323
02:23:53,380 --> 02:24:00,120
 So if you think about a large industrial customer that say has three, 400 megawatts of load

1324
02:24:00,120 --> 02:24:06,560
 in a single location, were they to come back on all of a sudden and absorb whatever that

1325
02:24:06,560 --> 02:24:11,520
 reserve capacity was in the market, and then another generating unit would have tripped

1326
02:24:11,520 --> 02:24:19,240
 off, they would have been back into rolling outages again. And so ERCOT decided that they

1327
02:24:19,240 --> 02:24:28,120
 would not release the $9,000 until such time as they had adequate reserve capacity online

1328
02:24:28,120 --> 02:24:35,040
 to assure that when those when that load came back on, there would be sufficient resources

1329
02:24:35,040 --> 02:24:41,560
 with adequate reserves to meet the demand. And that's been referred to by the lieutenant

1330
02:24:41,560 --> 02:24:49,840
 governor as a mistake. You know, it's been been referred to by ERCOT as the way the market

1331
02:24:49,840 --> 02:24:56,040
 works. And so there's a big debate about whether that should happen or not. I hope that answers

1332
02:24:56,040 --> 02:25:03,360
 your question. The winners and losers, I'm sorry. So so the winners on that would be

1333
02:25:03,360 --> 02:25:10,520
 the folks that were buying energy from the market at $9,000, they would their bill would

1334
02:25:10,520 --> 02:25:19,480
 be lowered. In our case, we were, we had brought the deck back online, we were running at minimums,

1335
02:25:19,480 --> 02:25:24,520
 because all the energy that we could produce was not needed, there wasn't sufficient demand

1336
02:25:24,520 --> 02:25:31,060
 in the marketplace for us to run them up to full output. And so we were being paid a standby

1337
02:25:31,060 --> 02:25:38,480
 charge or a reserve charge for the difference between the level that we were putting out

1338
02:25:38,480 --> 02:25:43,280
 and the maximum that they could achieve at that time. And it's that difference where

1339
02:25:43,280 --> 02:25:48,260
 we were being paid $9,000 for energy that we actually were not generating, we're sitting

1340
02:25:48,260 --> 02:25:55,400
 there as a reserve unit, as were other units in the market. That's those are the people

1341
02:25:55,400 --> 02:26:02,520
 that would be the losers. Okay, and I guess can you, is it possible to break that down

1342
02:26:02,520 --> 02:26:09,440
 further from we know, the folks who are buying power off the market? Did that does that mean?

1343
02:26:09,440 --> 02:26:16,720
 Are those mostly municipal operators? Are they? Are they mostly privately held companies?

1344
02:26:16,720 --> 02:26:23,360
 Or is it just everybody at that time? Yeah, so I should clarify that, just to be clear,

1345
02:26:23,360 --> 02:26:30,920
 everybody buys from the market. So everybody's buying the $9,000 price at the time. The question

1346
02:26:30,920 --> 02:26:38,040
 is, what are you injecting to offset that $9,000 price that you're you're paying? So

1347
02:26:38,040 --> 02:26:43,960
 if you had no generation, you weren't inputting anything into the market to offset that expense,

1348
02:26:43,960 --> 02:26:49,320
 you would be a winner in a resettlement. If you had generation that you were injecting

1349
02:26:49,320 --> 02:26:58,880
 back into the market, you would be a loser in that resettlement. Okay. And we kind of

1350
02:26:58,880 --> 02:27:03,360
 talked briefly about ERCOT reforms that are in the legislature. And the speaker proposed

1351
02:27:03,360 --> 02:27:09,600
 a package of bills that kind of address things generally. He's got one proposal that includes

1352
02:27:09,600 --> 02:27:15,480
 changing the governance of ERCOT just a little bit, you know, putting some consumer representatives

1353
02:27:15,480 --> 02:27:20,000
 on there, that kind of stuff. But is there any are there any serious efforts in Austin

1354
02:27:20,000 --> 02:27:25,440
 to restructure ERCOT, not just change the board up, but to restructure ERCOT, what it

1355
02:27:25,440 --> 02:27:31,400
 does and how it does business? You know, we, as you're probably aware, Mayor Pro Tem, we

1356
02:27:31,400 --> 02:27:40,200
 do employ a lobbyist firm to help us with our work in Austin. And I think their perspective

1357
02:27:40,200 --> 02:27:47,720
 is that because this is so complicated, and because the market is to change the market

1358
02:27:47,720 --> 02:27:54,080
 design, to the extent it probably needs to be changed, is such an undertaking, it's not

1359
02:27:54,080 --> 02:28:00,800
 likely that there's enough time in the regular session to make those kind of wholesale changes.

1360
02:28:00,800 --> 02:28:06,360
 And so what we're hearing is that they'll go through the remainder of the session in

1361
02:28:06,360 --> 02:28:13,820
 a fact gathering manner. And then could be a special session in which we'd see the kind

1362
02:28:13,820 --> 02:28:19,800
 of changes that I think you're alluding to. Okay. And last question, if I could, Mayor?

1363
02:28:19,800 --> 02:28:25,560
 Yes, sir. So I'm trying to kind of bring everything you're telling us about our financial picture,

1364
02:28:25,560 --> 02:28:33,320
 our generation picture, the wind resources that performed in a disappointing way, the

1365
02:28:33,320 --> 02:28:37,880
 situation at the deck that didn't energy center with the gas supply. And I keep going back

1366
02:28:37,880 --> 02:28:44,800
 to your graph, your slide that had the dotted line of our position or our breakeven position,

1367
02:28:44,800 --> 02:28:50,800
 and then the green line that showed our position over time. And I mean, tell me if I'm wrong

1368
02:28:50,800 --> 02:28:55,560
 here, but it looks like up until the moment that that low pressure tripped in the gas

1369
02:28:55,560 --> 02:29:00,720
 line, and we lost gas at the deck, up until that moment, we were in a very good financial

1370
02:29:00,720 --> 02:29:04,680
 position. We were in a very good generation position. We're all suffering through the

1371
02:29:04,680 --> 02:29:11,880
 rolling blackouts that are rolling outages that ERCOT was prescribing us to do. But up

1372
02:29:11,880 --> 02:29:16,800
 until that moment, the city of Denton and DME financially was doing everything exactly

1373
02:29:16,800 --> 02:29:21,680
 as we should. I think that's an accurate statement. I would

1374
02:29:21,680 --> 02:29:27,440
 point out that during those first two days, Saturday and Sunday, demands were significantly

1375
02:29:27,440 --> 02:29:32,960
 higher than what we had expected. And so we were buying energy from the market at the

1376
02:29:32,960 --> 02:29:42,560
 then spot market price wasn't 9000. But it was 1000 to 2000 $3,000 at times. So no matter

1377
02:29:42,560 --> 02:29:49,080
 what we are the way that our generation portfolio had performed, the fact was we were having

1378
02:29:49,080 --> 02:29:57,400
 to meet 40% more demand than we had planned on. And so, as I mentioned, we did take some

1379
02:29:57,400 --> 02:30:03,200
 action on Thursday and Friday and putting hedge transactions in, recognizing that the

1380
02:30:03,200 --> 02:30:11,360
 demand would be higher. And those those actions paid off. You know, we did realize gains on

1381
02:30:11,360 --> 02:30:17,340
 those transactions. So we would have been okay. I'm not saying that we would have came

1382
02:30:17,340 --> 02:30:24,640
 out, you know, making money. But we would have certainly been well within the reserves

1383
02:30:24,640 --> 02:30:28,800
 that we have set aside for these types of events. Thanks.

1384
02:30:28,800 --> 02:30:36,960
 Okay, Commissioner Soff. Yeah, Terry, thank you for your presentation.

1385
02:30:36,960 --> 02:30:46,280
 It answered most of my questions and very, very informative. My question is, is this

1386
02:30:46,280 --> 02:30:55,260
 will the vulnerabilities that have been exposed by this extreme weather be incorporated into

1387
02:30:55,260 --> 02:31:03,580
 a long range resilience strategy plan that will address the continuing impacts of climate

1388
02:31:03,580 --> 02:31:10,840
 change on our area? Well, I can speak to kind of the long range

1389
02:31:10,840 --> 02:31:17,880
 as I mentioned early in my presentation, the fact that the unabated demand would have been

1390
02:31:17,880 --> 02:31:26,600
 400 megawatts, we will plan to meet that demand and we will set up our our supply portfolio

1391
02:31:26,600 --> 02:31:34,040
 to meet that demand. With regard to your question about climate change, I think, you know, depending

1392
02:31:34,040 --> 02:31:43,400
 on who you read and who you listen to, while this was a very cold event, many scientists

1393
02:31:43,400 --> 02:31:48,840
 have said it's a result of climate change because of the changing climate. It causes

1394
02:31:48,840 --> 02:31:57,880
 these types of volatility in weather patterns. And we don't know definitively whether that's

1395
02:31:57,880 --> 02:32:03,960
 true or not. But in any case, all we can do is prepare for that, which we believe could

1396
02:32:03,960 --> 02:32:12,280
 happen in the future. And obviously, this is a wake up call for all of us that these

1397
02:32:12,280 --> 02:32:18,360
 episodes of winter cold weather, whether they're repeatable or not, and only time will tell

1398
02:32:18,360 --> 02:32:23,640
 whether they're repeatable. We need to be prepared for them. And and we will do that.

1399
02:32:23,640 --> 02:32:28,280
 We will be prepared for them. It will be not without cost, but we will be prepared for

1400
02:32:28,280 --> 02:32:33,360
 them. Thanks. I think precaution is the best policy.

1401
02:32:33,360 --> 02:32:42,340
 And just as one quick observation, if I may, I hope that this also will jumpstart further

1402
02:32:42,340 --> 02:32:52,840
 efforts within the city for energy conservation and building codes that are more more appropriate

1403
02:32:52,840 --> 02:32:58,900
 for colder weather rather rather than just heat. So, I mean, it's a it's a huge picture.

1404
02:32:58,900 --> 02:33:04,060
 And I hope that this will initiate a lot more discussions about what the city as a whole

1405
02:33:04,060 --> 02:33:13,720
 can do to lessen the impacts of these things. Thank you. Okay. And Commissioner Jumper.

1406
02:33:13,720 --> 02:33:22,520
 Yeah. Hi. So, I was curious to get a little more information about, I guess, the practice

1407
02:33:22,520 --> 02:33:28,240
 of hedging. You know, I'm new to the board, but a couple of days just doesn't seem like

1408
02:33:28,240 --> 02:33:32,940
 a whole lot, given the things we know about Texas with drought and hurricanes and tornadoes

1409
02:33:32,940 --> 02:33:42,020
 and such. Is that a standard that what I feel like is a relatively short time? Is that a

1410
02:33:42,020 --> 02:33:47,440
 standard practice? What are what are other places doing? Are we doing better or worse?

1411
02:33:47,440 --> 02:33:53,320
 What can you answer to any of that? So what do you if I could just get one clarifying

1412
02:33:53,320 --> 02:33:59,000
 when you say a couple of days, what are you referring to? Oh, so you had mentioned you

1413
02:33:59,000 --> 02:34:06,280
 bought prepaid on Thursday or Friday through the following Tuesday for energy. So that

1414
02:34:06,280 --> 02:34:11,000
 it doesn't feel like a very long time to me. But give me a point of reference. Yeah. So

1415
02:34:11,000 --> 02:34:18,600
 the markets trade in you can buy and hedge a year at a time, a quarter at a time, a month

1416
02:34:18,600 --> 02:34:25,360
 at a time, a week at a time, a day at a time, balance of the week, all those products trade

1417
02:34:25,360 --> 02:34:33,560
 in the marketplace. And so depending on what risk you're trying to cover, you can transact

1418
02:34:33,560 --> 02:34:41,080
 on any of those temporal periods. So in our hedging plan, because we look at monthly,

1419
02:34:41,080 --> 02:34:48,080
 our monthly exposure, we generally are doing monthly transactions, some annual transactions

1420
02:34:48,080 --> 02:34:56,920
 because we do hedge out into the future, a significant amount. In this particular case,

1421
02:34:56,920 --> 02:35:02,480
 what was unique about it not only was the weather abnormal, and just, you know, an eight

1422
02:35:02,480 --> 02:35:08,340
 sigma or a black swan event from a probability perspective, the fact that it occurred over

1423
02:35:08,340 --> 02:35:15,600
 a long weekend that was a bank holiday, exacerbated our ability to actually react to the changing

1424
02:35:15,600 --> 02:35:22,320
 weather. And if you may recall, the week running up to the storm, the weather forecast kept

1425
02:35:22,320 --> 02:35:29,240
 getting colder and colder and colder. And the weather kept moving out one more day, one

1426
02:35:29,240 --> 02:35:34,560
 more day, and then it would be colder and then it'd be one more day. And so, you know,

1427
02:35:34,560 --> 02:35:41,320
 we try to be judicious, the use of our dollars that we have available to go out and do these

1428
02:35:41,320 --> 02:35:46,540
 hedges, we don't want to get too far in front of it, because if we buy at a high price,

1429
02:35:46,540 --> 02:35:50,280
 and then the weather doesn't come in, we find ourselves in a position where we have to liquidate

1430
02:35:50,280 --> 02:35:57,560
 into a much lower price market and lose money that way. And likewise, we don't want to not

1431
02:35:57,560 --> 02:36:04,980
 hedge and expose ourselves to significant financial risk. Now, if we had a crystal ball,

1432
02:36:04,980 --> 02:36:10,500
 and we knew that that gas demands would be at all time highs, and that we had the potential

1433
02:36:10,500 --> 02:36:17,320
 to lose pressure, we would have taken more aggressive actions the prior week. But there's

1434
02:36:17,320 --> 02:36:25,640
 just no way to, you know, in the trading business, you can look back, you don't want a Monday

1435
02:36:25,640 --> 02:36:31,400
 morning quarterback, but you want to look back to learn. You don't want to second guess,

1436
02:36:31,400 --> 02:36:34,880
 because you try to make the best decisions that you can given the facts that are in front

1437
02:36:34,880 --> 02:36:36,360
 of you at the time.

1438
02:36:36,360 --> 02:36:44,600
 Thank you. So kind of follow up to that, would you be able to say like, what percentage of

1439
02:36:44,600 --> 02:36:53,240
 our purchases are hedged or in real time or whatnot? What can you speak to that?

1440
02:36:53,240 --> 02:36:59,120
 Yes, I can. There, we're kind of venturing off into an area that's commercially competitive

1441
02:36:59,120 --> 02:37:10,320
 information that's protected under the under the appropriate acts or sections of the statute.

1442
02:37:10,320 --> 02:37:21,600
 But we, we, we hedge almost 100% of our expected demand and our expected generation.

1443
02:37:21,600 --> 02:37:31,400
 Okay. Thank you. Okay, no other question. Okay, anyone. So let's go Councilmember Ryan,

1444
02:37:31,400 --> 02:37:35,480
 and then we'll see if there's any other questions before we circle back. And after Councilmember

1445
02:37:35,480 --> 02:37:39,960
 Ryan, can someone orient me? So we have a three o'clock meeting that we need to start.

1446
02:37:39,960 --> 02:37:44,440
 So I need someone to kind of orient me on where we are and bring me up to speed, but

1447
02:37:44,440 --> 02:37:46,480
 Councilmember Ryan.

1448
02:37:46,480 --> 02:37:52,440
 Thank you, Mayor. Terry, you mentioned a couple of times about the possibility of resettlement

1449
02:37:52,440 --> 02:37:58,640
 of ancillary services. And we can all understand supply and demand. We can definitely debate

1450
02:37:58,640 --> 02:38:02,600
 how far that price should be able to go to. That's definitely something to talk about.

1451
02:38:02,600 --> 02:38:09,480
 But what is involved in ancillary services? And because I noticed they made a huge jump.

1452
02:38:09,480 --> 02:38:17,080
 Yeah, they did. It's a great question. It's not an easy answer. So ancillary services

1453
02:38:17,080 --> 02:38:23,440
 are the types of non-energy products that the grid needs in order to remain reliable.

1454
02:38:23,440 --> 02:38:31,340
 There are four main types. One is reg up or regulation up. One is regulation down. One

1455
02:38:31,340 --> 02:38:44,800
 is spinning reserve. And the fourth one is regulation, type of regulation. The fourth

1456
02:38:44,800 --> 02:38:51,000
 type of regulation I'm drawing a blank on right now, responsive regulation. So we think

1457
02:38:51,000 --> 02:38:56,400
 about it since we can't really store electricity in a meaningful way. Yes, there is battery

1458
02:38:56,400 --> 02:39:05,620
 technology. But by and large, supply must meet demand at every millisecond. And so as

1459
02:39:05,620 --> 02:39:13,720
 people turn on lights, turn on motors, you're increasing the demand or decreasing the demand.

1460
02:39:13,720 --> 02:39:18,760
 And the spinning generators in the grid have to be able to react to that. So ERCOT has

1461
02:39:18,760 --> 02:39:25,360
 set up these four products called ancillary services to enable them to call on reg up,

1462
02:39:25,360 --> 02:39:31,440
 reg down, spinning reserve in order to meet that variation in the demand and in the generation.

1463
02:39:31,440 --> 02:39:37,080
 So if you lose a generator in the grid, you have to bring another one up to take its place.

1464
02:39:37,080 --> 02:39:42,280
 And that's what ancillary services are. They actually clear in a competitive market. There's

1465
02:39:42,280 --> 02:39:48,720
 bids and offers, and they're cleared in the day ahead market based upon bids and offers

1466
02:39:48,720 --> 02:39:56,360
 that are in the marketplace. Typically, those would be right around the same price as energy,

1467
02:39:56,360 --> 02:40:04,480
 which would be in the $20 to $30 a megawatt hour range. But we saw prices as high as $24,000

1468
02:40:04,480 --> 02:40:09,800
 a megawatt hour for some of these ancillary services during the storm event.

1469
02:40:09,800 --> 02:40:16,480
 Okay, so that would be like when they were paying us to be on stand for full generation,

1470
02:40:16,480 --> 02:40:23,560
 but we were only at partial. Yes. So we were responsive reserve at that point. Okay. And

1471
02:40:23,560 --> 02:40:31,640
 then my other question, when it comes to winterization, you know, we see the coolant and the oil and

1472
02:40:31,640 --> 02:40:35,560
 that the contracts come through for that. How often do we change the coolant? And is

1473
02:40:35,560 --> 02:40:40,480
 that something that potentially October, November, when we're not up, we could increase it to

1474
02:40:40,480 --> 02:40:47,120
 you know, a zero or 10 below and then water it back down, you know, come March.

1475
02:40:47,120 --> 02:40:52,940
 That's a great question. And we obviously that was one of the things that was debated

1476
02:40:52,940 --> 02:41:01,080
 when the deck was being designed. And yes, you can have a separate standalone mix of

1477
02:41:01,080 --> 02:41:06,160
 glycol and water to be able to get you to sub zero temperature. The problem is, is that

1478
02:41:06,160 --> 02:41:15,880
 once you convert to that, the residual glycol and materials that are in that mix tend to

1479
02:41:15,880 --> 02:41:21,960
 coat certain areas, and you lose capacity. So once you make that decision, you can no

1480
02:41:21,960 --> 02:41:31,660
 longer achieve that full output that 225 megawatts of output, it gets rated down to 200 or so,

1481
02:41:31,660 --> 02:41:37,880
 if we're to go to that. So you'd be you've had paid, you effectively have paid for 225.

1482
02:41:37,880 --> 02:41:42,880
 But you can only realize 200.

1483
02:41:42,880 --> 02:41:48,720
 And then lastly, I don't know if you want to make comment on this, but I was in a public

1484
02:41:48,720 --> 02:41:54,320
 meeting a couple weeks ago, and Representative Patty, who's the chair of the State Committee,

1485
02:41:54,320 --> 02:41:58,600
 State Affairs Committee was there and was talking about this and basically said it was

1486
02:41:58,600 --> 02:42:03,960
 everything from the well head to the light switch that we had problems with. And one

1487
02:42:03,960 --> 02:42:11,920
 I'd never even thought of was that the gas companies did not indicate to the electric

1488
02:42:11,920 --> 02:42:17,200
 companies what were their compressor stations were that push the gas through the pipes.

1489
02:42:17,200 --> 02:42:21,640
 And those compressors went down. And that was a reason why we did see low pressure on

1490
02:42:21,640 --> 02:42:22,640
 the gas lines.

1491
02:42:22,640 --> 02:42:28,200
 It's absolutely correct. So there were a number of electric compressors that were not

1492
02:42:28,200 --> 02:42:35,080
 considered critical load. And so when the rolling outages hit, those compressors were

1493
02:42:35,080 --> 02:42:42,760
 in those outages, and they could no longer compress the gas and push it down the pipe.

1494
02:42:42,760 --> 02:42:47,400
 There has been a very concerted effort in the last three weeks to identify all those

1495
02:42:47,400 --> 02:42:54,200
 locations and to change that classification to make them critical loads.

1496
02:42:54,200 --> 02:43:06,120
 Okay. Miss Miss City Manager, can you orient me on where we are? Or I don't know who's

1497
02:43:06,120 --> 02:43:10,120
 running the presentation that just want to get a feel for how much time so we're to almost

1498
02:43:10,120 --> 02:43:11,120
 230 now?

1499
02:43:11,120 --> 02:43:12,120
 Yes.

1500
02:43:12,120 --> 02:43:18,360
 Yes, Mayor, we have another presentation, the water wastewater and then we have the

1501
02:43:18,360 --> 02:43:23,280
 finance portion. So I think what we'll do if you're amenable is go forward with the

1502
02:43:23,280 --> 02:43:28,640
 finance presentation, see how that works out, and then look and see if we have time for

1503
02:43:28,640 --> 02:43:30,040
 the water wastewater.

1504
02:43:30,040 --> 02:43:31,040
 Okay.

1505
02:43:31,040 --> 02:43:38,680
 Yes, we'll be glad to bring the water wastewater back at a later date if that's what's needed.

1506
02:43:38,680 --> 02:43:45,680
 Okay. So looking to my peers, your thoughts, and the board members just want to get a feel

1507
02:43:45,680 --> 02:43:49,680
 for everyone's thoughts.

1508
02:43:49,680 --> 02:43:57,000
 Mayor, I'm amenable to that here in the finance piece. And we have the backups on the water

1509
02:43:57,000 --> 02:44:01,080
 wastewater that we've read to prepare. So we have a little bit of information already

1510
02:44:01,080 --> 02:44:03,880
 and we could maybe hear them another day.

1511
02:44:03,880 --> 02:44:10,520
 Okay. All right. Any anyone any Yes, by means, Miss Parker.

1512
02:44:10,520 --> 02:44:15,760
 I agree with what Jesse said. Let's do the finance and we can circle back with wastewater

1513
02:44:15,760 --> 02:44:22,200
 and all the information we need. Got it. See Karen. Thank you. Okay. Thank you, Barbara.

1514
02:44:22,200 --> 02:44:29,160
 Okay, then. Yeah, we'll do that. We'll proceed to the financial presentation. Okay, Cassie

1515
02:44:29,160 --> 02:44:33,720
 Ogden is here to present the finance presentation.

1516
02:44:33,720 --> 02:44:40,600
 Cassie Ogden, Director of Finance. I'm here to talk about the electric fund financial

1517
02:44:40,600 --> 02:44:50,760
 update. So let me share my screen and we'll get started.

1518
02:44:50,760 --> 02:44:57,720
 So we're going to go quickly through the where the fund was pre winter storm, post winter

1519
02:44:57,720 --> 02:45:04,400
 storm, kind of the current state in our uncertainties and then next steps along with kind of a calendar

1520
02:45:04,400 --> 02:45:12,680
 for you. So going into the before the winter storm and the electric fund was in a we felt

1521
02:45:12,680 --> 02:45:18,120
 like a good place given the healthy fund balance. We were in excess of 100 million in our in

1522
02:45:18,120 --> 02:45:24,120
 our fund balance, which was well above our reserve targets of 36 to 48 million. We had

1523
02:45:24,120 --> 02:45:29,640
 we exceeded our debt coverage ratio of 1.25 target. We had an annual debt service payment

1524
02:45:29,640 --> 02:45:35,160
 of 49 and a half million. You may remember our commercial paper program was approved

1525
02:45:35,160 --> 02:45:40,200
 in January, right before the winter storm and we had not issued any commercial paper

1526
02:45:40,200 --> 02:45:45,760
 notes. And as you see on the screen, our actual purchase power expenses for previous years

1527
02:45:45,760 --> 02:45:55,360
 were between 60 to 90 million for the entire year going into the storm. So post winter

1528
02:45:55,360 --> 02:46:02,520
 storm, as you've already heard Terry talk about, we incurred 209.8 million in collateral

1529
02:46:02,520 --> 02:46:09,520
 and ancillary charges for Urquhart, which was substantially higher than what we've paid

1530
02:46:09,520 --> 02:46:15,760
 in previous years combined. We had we in order to meet our cash flow needs, we did issue

1531
02:46:15,760 --> 02:46:21,040
 a hundred million dollars of commercial paper notes, which we discussed with city council

1532
02:46:21,040 --> 02:46:29,280
 on February 19th, that Friday of the of the storm. And along with the the notes issuance

1533
02:46:29,280 --> 02:46:38,480
 S and P downgraded the utility system debt rating from a negative to a plus. They also

1534
02:46:38,480 --> 02:46:44,880
 placed 21 other entities on credit watch with a negative implication. And along with bitch

1535
02:46:44,880 --> 02:46:52,320
 place, all Texas public utilities on a negative credit watch. Before the winter storm, finance

1536
02:46:52,320 --> 02:46:58,640
 had started a fund balance policy analysis to determine the appropriate amount of cash

1537
02:46:58,640 --> 02:47:04,920
 on hand required for the electric fund. Obviously given the conditions of the winter storm,

1538
02:47:04,920 --> 02:47:10,760
 that fund balance analysis and our assumptions have changed as a result. And so now we are

1539
02:47:10,760 --> 02:47:16,040
 we're going back to the table and looking at what the correct fund balance needs to

1540
02:47:16,040 --> 02:47:24,760
 be given the winter storm and the possibilities surrounding our cash flow. And we I do want

1541
02:47:24,760 --> 02:47:30,160
 to note we did discuss with our financial advisors yesterday, the hundred million dollars

1542
02:47:30,160 --> 02:47:35,560
 of commercial or I'm sorry, a fund balance that we had going into the storm is likely

1543
02:47:35,560 --> 02:47:43,400
 going to be the minimum fund balance target going forward for the electric fund. So current

1544
02:47:43,400 --> 02:47:49,980
 state where we're at, we did issue the hundred million dollars of commercial paper notes.

1545
02:47:49,980 --> 02:47:55,760
 We will be bringing back to council and PB for consideration, refunding those with long

1546
02:47:55,760 --> 02:48:02,060
 term revenue bonds. Additionally, given the additional expenses and kind of uncertainty

1547
02:48:02,060 --> 02:48:09,880
 with the uplift and the market repricing, we may have to issue additional bonds to for

1548
02:48:09,880 --> 02:48:18,240
 40 to 60 million for those expenses if they're incurred. And how do we pay for all of these

1549
02:48:18,240 --> 02:48:25,560
 expenses? Well, we are looking at an ECA rate adjustment based on the total debt issuance.

1550
02:48:25,560 --> 02:48:31,560
 So refunding the commercial paper notes with long term revenue bonds will allows us to

1551
02:48:31,560 --> 02:48:38,680
 spread the costs over several years instead of all in one year. So we're looking at how

1552
02:48:38,680 --> 02:48:45,680
 do we do that across multiple years instead of doing one large rate increase in a single

1553
02:48:45,680 --> 02:48:50,520
 year. But we're still working through those recommendations and we want to bring we're

1554
02:48:50,520 --> 02:48:59,120
 planning to bring something back to PB and council in April. And so next steps. Obviously,

1555
02:48:59,120 --> 02:49:05,200
 we've we've gone through the winter storm incurred expenses to date to meet our purchase

1556
02:49:05,200 --> 02:49:12,960
 power needs. We the city has the utility system was downgraded by S and P's were on the negative

1557
02:49:12,960 --> 02:49:19,680
 watch list for Fitch. We still are uncertain on the total amount that is going to be required

1558
02:49:19,680 --> 02:49:27,120
 long term. As we work through that, we're going to bring back recommendations for PB

1559
02:49:27,120 --> 02:49:35,840
 and council discussion regarding rate adjustments and fund balance analysis and our capital

1560
02:49:35,840 --> 02:49:49,280
 program. And with that, I am I'll pull it down. Okay. Thank you. Questions for staff.

1561
02:49:49,280 --> 02:49:58,180
 Okay, Councilor Meltzer. Thank you. I'm sure you know the question on everyone's mind is

1562
02:49:58,180 --> 02:50:04,040
 how much will my rates go up? I heard you clearly say we don't know yet. You must have

1563
02:50:04,040 --> 02:50:11,040
 some idea it's unlikely to be less than X. It's unlikely to be more than Y. Can you give

1564
02:50:11,040 --> 02:50:18,240
 us any kind of, you know, what's the plausible range? Sure. So we have been running all kinds

1565
02:50:18,240 --> 02:50:23,240
 of scenarios regarding what possible debt service would look like and how it would impact

1566
02:50:23,240 --> 02:50:31,280
 the fund to just give you a range $100 million of our long term debt based on our current

1567
02:50:31,280 --> 02:50:38,040
 market conditions and our bond rating would give us we're approximating about 3.5% interest

1568
02:50:38,040 --> 02:50:43,960
 on a 20 year note, which would be almost $6 million a year for the fund in debt service

1569
02:50:43,960 --> 02:50:53,000
 payments. So that would be for an average residential customer, about a 5% increase.

1570
02:50:53,000 --> 02:51:00,560
 So if we look at the 140 million worst case scenario for 20 year, it's about $8 million

1571
02:51:00,560 --> 02:51:08,700
 a year for the fund in annual debt service payment, which is about a 7% increase for

1572
02:51:08,700 --> 02:51:13,480
 average residential customer. Obviously that that changes across the different customer

1573
02:51:13,480 --> 02:51:20,080
 classes. And that's very tentative. That's just where we are right now. But we will definitely

1574
02:51:20,080 --> 02:51:25,920
 bring back recommendations. I really appreciate your kind of putting some expectation out

1575
02:51:25,920 --> 02:51:36,560
 there. Thank you. Okay. Any other questions? Mayor Pro Tem Davis. Thank you, Mayor. Just

1576
02:51:36,560 --> 02:51:42,240
 to follow on to that. I also really appreciate the range. I know that nobody's trying to

1577
02:51:42,240 --> 02:51:46,880
 hold the finance department to to that. It's all dependent on so many things right now.

1578
02:51:46,880 --> 02:51:54,040
 But as that narrows some, would it be possible to produce something for us a little table

1579
02:51:54,040 --> 02:52:00,960
 on how those percentages would impact the different rate tiers? You know, we will sometimes

1580
02:52:00,960 --> 02:52:05,880
 get things expressed in dollar amounts to the average based on the average residential

1581
02:52:05,880 --> 02:52:11,320
 bill, that kind of stuff. Something like that might be helpful just as much as we can knowing

1582
02:52:11,320 --> 02:52:15,520
 that we can't guarantee any of that. Absolutely. That's part of what we plan to bring back

1583
02:52:15,520 --> 02:52:27,880
 in April. Okay. Any other questions for staff? Seeing none. Oh, okay. Yep. Miss Commission

1584
02:52:27,880 --> 02:52:34,920
 Devaney. Devaney. Sorry, another rookie question. What's uplift? Can you explain the just explain

1585
02:52:34,920 --> 02:52:40,200
 the term? I could Google it, but I would hate to see everything that would come in. I'm

1586
02:52:40,200 --> 02:52:44,000
 going to tell Terry I would pitch him the hard questions. So I'm going to put that over

1587
02:52:44,000 --> 02:52:53,040
 the theory and let him Yes, good afternoon. Uplift is a term of art that we have kind

1588
02:52:53,040 --> 02:53:01,440
 of coined. It's in the ERCOT protocols. It represents the short payments that ERCOT does

1589
02:53:01,440 --> 02:53:10,800
 not receive from its market participants. So in this case, right now, there's $3.2 billion

1590
02:53:10,800 --> 02:53:20,040
 of nonpayment in the ERCOT market for this event. A good deal of that is associated with

1591
02:53:20,040 --> 02:53:27,320
 the two bankruptcies that I mentioned, two cooperative bankruptcies. And until those

1592
02:53:27,320 --> 02:53:33,000
 bankruptcies are settled, and we see how much they actually pay, it's not going to be zero.

1593
02:53:33,000 --> 02:53:40,080
 It'll be some number above zero. We won't know exactly how much short pay will be uplifted

1594
02:53:40,080 --> 02:53:50,040
 to the rest of the market. So it means distributed to the rest of the market. Yes, ma'am. It's

1595
02:53:50,040 --> 02:53:56,760
 allocated on a pro rata share based upon your level of market participation. Okay. And as

1596
02:53:56,760 --> 02:54:04,120
 you're probably aware, we have filed a lawsuit against ERCOT to dispute the the legality

1597
02:54:04,120 --> 02:54:14,240
 of that practice. Okay, thank you. And Terry, if if you get a call from a confused UNT reporter,

1598
02:54:14,240 --> 02:54:19,980
 I explained it as though 10 people go to eat at Outback Steakhouse and only eight of them

1599
02:54:19,980 --> 02:54:32,280
 have money. And the other, the bill for the 10 gets dispersed among the eight. Great analogy.

1600
02:54:32,280 --> 02:54:41,840
 So buyer beware. Okay, any other questions? Before I come back to you, let me see anyone

1601
02:54:41,840 --> 02:54:52,860
 else. Okay, Councilmember Meltzer. So you know, the massive part of the heist, if you will,

1602
02:54:52,860 --> 02:54:57,960
 could only be addressed, I think, through, well, either the Attorney General take action

1603
02:54:57,960 --> 02:55:04,880
 or as far as I know, the legislature taking action to say, you know, people shouldn't

1604
02:55:04,880 --> 02:55:09,280
 be backing up the Brink's truck during a declared disaster. I don't know if the legislature

1605
02:55:09,280 --> 02:55:15,920
 will have the courage to take that on. But at what point do we know if there'll be action

1606
02:55:15,920 --> 02:55:20,640
 on that front or not? At what point do we say time, you know, it's just not going to

1607
02:55:20,640 --> 02:55:30,440
 happen. And we have to figure out other ways to resolve the financial impact. So we do

1608
02:55:30,440 --> 02:55:36,580
 know the 100 million. That's, that's what we've already expensed. We do have those commercial

1609
02:55:36,580 --> 02:55:44,400
 notes outstanding. So that is the immediate need right now. The 40 to 60 million range

1610
02:55:44,400 --> 02:55:50,760
 that I gave you in the presentation. That's really what's uncertain. But let's say the,

1611
02:55:50,760 --> 02:55:58,560
 you know, not just 32 hours were unwound, but the entire period of the declared disaster,

1612
02:55:58,560 --> 02:56:03,320
 that would address the 100 million as well. I'm not saying it reverses it and now we're

1613
02:56:03,320 --> 02:56:13,640
 plus, but you know, I mean, that would be the point of addressing the full range of,

1614
02:56:13,640 --> 02:56:20,720
 you know, the event would be to restore, you know, to the injured market participants like

1615
02:56:20,720 --> 02:56:26,440
 us. So that's what I'm asking even about the 100 million. At what point do we say there's

1616
02:56:26,440 --> 02:56:34,160
 no chance that won't happen? I guess I might try to answer the question. Councilmember

1617
02:56:34,160 --> 02:56:41,240
 Meltzer, I think, you know, the reality is, is that if, if the market were, if, if somehow

1618
02:56:41,240 --> 02:56:48,440
 the market were going to be resettled to a cost based settlement, so the fact that many

1619
02:56:48,440 --> 02:56:56,760
 participants paid astronomical numbers for natural gas is going to result in very high

1620
02:56:56,760 --> 02:57:01,560
 prices for electricity that was purchased in the spot market, whether it was real time

1621
02:57:01,560 --> 02:57:09,880
 or day ahead. So, as I mentioned, we paid as high as $700. So unless the gas piece is

1622
02:57:09,880 --> 02:57:16,000
 unwound as well, which I'm saying it should be. Yeah, I just don't know. You know, natural

1623
02:57:16,000 --> 02:57:25,480
 gas is a internationally traded commodity and to, to unwind that is just, I mean, it's,

1624
02:57:25,480 --> 02:57:31,200
 I can't see how it's going to be done because that money has already been settled and it's

1625
02:57:31,200 --> 02:57:40,280
 been dispersed around the globe to try to recapture that money by, by clearing entities,

1626
02:57:40,280 --> 02:57:46,440
 by brokers, by all the people that are involved in that market is just a daunting task that

1627
02:57:46,440 --> 02:57:51,660
 I don't know that quite frankly, there'd be legal right to be able to do that or even

1628
02:57:51,660 --> 02:57:57,800
 how they would be able to do it. So while, while I think your point is a good one, that

1629
02:57:57,800 --> 02:58:05,220
 if, if it were totally unwound, I think, you know, the fact, fact is that we, we bought

1630
02:58:05,220 --> 02:58:11,400
 more energy than we sold, probably would say that our bill would be lower, but that, that's

1631
02:58:11,400 --> 02:58:15,640
 about the extent of which I can kind of speculate on, on your question.

1632
02:58:15,640 --> 02:58:21,360
 You know, my, my question was about when, when do we know there's no chance of anything

1633
02:58:21,360 --> 02:58:27,300
 happening legislatively? I would guess after the end of the session, if, if that, if that

1634
02:58:27,300 --> 02:58:32,640
 Senate bill is not passed, then I guess we would know at that point. Okay, because that

1635
02:58:32,640 --> 02:58:37,200
 could have some bearing on, you know, at what point we would want to take action that would

1636
02:58:37,200 --> 02:58:44,960
 potentially affect customers. Thank you. Okay. All right. So any other questions before we

1637
02:58:44,960 --> 02:58:51,840
 close this, this segment out, get ready for our three o'clock meeting. Okay. Well, comes

1638
02:58:51,840 --> 02:58:57,840
 from Armitage. Yeah. Could you go into just, just a little

1639
02:58:57,840 --> 02:59:05,720
 more detail with the time constraints in mind, obviously about, you know, the, the differences

1640
02:59:05,720 --> 02:59:18,000
 between paying off revenue bonds versus commercial paper. You mentioned the time. What, what

1641
02:59:18,000 --> 02:59:25,040
 other differences are there? Sure. So our commercial paper notes, they

1642
02:59:25,040 --> 02:59:29,600
 are premature after 90 days. We do have an extendable program, so we can extend them

1643
02:59:29,600 --> 02:59:40,920
 for up to 270 days. And then we could make the decision at that point to roll to another

1644
02:59:40,920 --> 02:59:52,680
 note or we could refund with revenue bonds. And per our, per the guidance in the, by the

1645
02:59:52,680 --> 02:59:59,000
 statutes, we have to, if we refund, we have to use revenue-funded bonds.

1646
02:59:59,000 --> 03:00:09,440
 And so of course, so revenue bonds obviously paid for with DM, DME revenue versus commercial

1647
03:00:09,440 --> 03:00:17,800
 paper or CO, DO bonds could be from the entire general fund. So when we talk about transferring

1648
03:00:17,800 --> 03:00:23,480
 to revenue bonds, you know, regardless of the amount and the time we're talking about

1649
03:00:23,480 --> 03:00:31,240
 rate payers, you know, being, being responsible for, for paying that off, is that fair to

1650
03:00:31,240 --> 03:00:34,840
 say? Yes, I think that's fair to say the commercial

1651
03:00:34,840 --> 03:00:42,280
 paper program that was approved that we did issue the notes through was specific to utilities.

1652
03:00:42,280 --> 03:00:48,720
 So it was contemplated or set up for electric water, wastewater, and it is paid through

1653
03:00:48,720 --> 03:00:53,000
 by rates. Okay.

1654
03:00:53,000 --> 03:01:00,560
 Can you just, can you explain exactly why, not that I'm doubting it, I just, just need

1655
03:01:00,560 --> 03:01:08,760
 to learn more, you know, why could we only refinance with revenue bonds and not, you

1656
03:01:08,760 --> 03:01:14,160
 know, some other kinds of bonds that state law, federal law.

1657
03:01:14,160 --> 03:01:18,000
 I don't know, David, if you want to take this one. It's my understanding. That's a statute

1658
03:01:18,000 --> 03:01:23,400
 requirement that because it's, it's the commercial paper program is established for our utility

1659
03:01:23,400 --> 03:01:31,120
 system. We have to, if we were to refund for, with revenue bonds, I mean, with, if we were

1660
03:01:31,120 --> 03:01:35,960
 to refund with bonds, it has to be revenue bonds because those are backed by utility

1661
03:01:35,960 --> 03:01:40,000
 rates. Sure. Now David Gaines, assistant city manager

1662
03:01:40,000 --> 03:01:46,480
 and everything Cassie said is correct. Our bond council did inquire that, raise that

1663
03:01:46,480 --> 03:01:51,160
 exact question to the attorney general to say confirmation. The attorney general's office

1664
03:01:51,160 --> 03:01:56,440
 did confirm that we would have to take revenue bonds out to pay back the commercial paper

1665
03:01:56,440 --> 03:02:00,600
 because it's utility backed commercial paper. Okay.

1666
03:02:00,600 --> 03:02:07,200
 All right. Thank you. Just to, I'll just mention, you know, I, I like a council member Meltzer.

1667
03:02:07,200 --> 03:02:11,880
 I'm sure like, you know, most people here, you know, concerned about the impact on our,

1668
03:02:11,880 --> 03:02:17,440
 on our rate payers. And I know staff is too. So we'll, we'll be watching those calculations

1669
03:02:17,440 --> 03:02:23,160
 very closely moving forward. Okay. Mayor Pro Tem.

1670
03:02:23,160 --> 03:02:28,880
 I just want to add to what David said about the statutory requirements. Not every DME rate

1671
03:02:28,880 --> 03:02:33,880
 payer is a city of debt and taxpayer and not every city of debt and taxpayer is a DME rate

1672
03:02:33,880 --> 03:02:41,360
 payer. So it would be, I think unethical for us to shift a major debt burden from rate

1673
03:02:41,360 --> 03:02:49,280
 payers over to taxpayers with general revenue bonds. So I'm, I'm, I'm glad that the statute

1674
03:02:49,280 --> 03:02:53,440
 makes us keep it siloed that way because we also have rate payers that are quite large,

1675
03:02:53,440 --> 03:02:59,340
 you know, UNT, Walmart, Target, distribution centers. That's a different base of people

1676
03:02:59,340 --> 03:03:03,960
 who are paying for that debt that we're talking about now than the folks who pay for our general

1677
03:03:03,960 --> 03:03:11,520
 revenue debt. Okay. Thank you. Assuming no other questions.

1678
03:03:11,520 --> 03:03:22,360
 Okay. Great. Thank you. Thank you, Cassie. And so Ms. City, Ms. City Manager, you'll

1679
03:03:22,360 --> 03:03:26,200
 bring back the other presentation. Is there anything else we need to take up before we

1680
03:03:26,200 --> 03:03:30,280
 adjourn for a short break before we come back at three?

1681
03:03:30,280 --> 03:03:36,440
 No, Mayor, if you're amenable to this, I think what we'd like to do is if you're on board

1682
03:03:36,440 --> 03:03:40,560
 with this is schedule another joint meeting like this so we could share it also with the

1683
03:03:40,560 --> 03:03:45,840
 Public Utilities Board at the same time. So they could hear this as well. I mean, obviously

1684
03:03:45,840 --> 03:03:50,480
 it could be shared with them at another meeting, but I do think there is value in discussion

1685
03:03:50,480 --> 03:03:56,280
 between the two, the board as well as the council. And we could find a time maybe to

1686
03:03:56,280 --> 03:04:02,480
 do the water/wastewater item together. Sure. Yeah. And there may be more known at

1687
03:04:02,480 --> 03:04:07,420
 that point as well to answer some of the legacy questions. So that'd be a good opportunity.

1688
03:04:07,420 --> 03:04:13,940
 Thank you, Mayor Pro Tem Davis, for kind of bringing us to the fore to get scheduled.

1689
03:04:13,940 --> 03:04:19,320
 And thank you for filling in. Okay. Well, with that then, yes, we'll do that. But thank

1690
03:04:19,320 --> 03:04:27,080
 everyone. Sorry for missing some of it, but did enjoy the conversation. So at I'm going

1691
03:04:27,080 --> 03:04:34,000
 to conclude this joint session on the City Council end at 2 46pm.