WEBVTT

00:00:00.000 --> 00:00:09.780
 >> Good morning and welcome everyone to this joint meeting of the Denton City Council and

00:00:09.780 --> 00:00:15.180
 Public Utilities Board. I'm Mayor Pro Tem Jesse Davis and at this time is 1132. I will

00:00:15.180 --> 00:00:20.340
 formally open the meeting of the City Council and introduce Chair of the Public Utilities

00:00:20.340 --> 00:00:26.540
 Board, Susan Parker. >> Good morning. It's 1132, so I will call

00:00:26.540 --> 00:00:32.760
 the Public Utilities Board meeting open. >> Very good. Thank you, Chair Parker. And

00:00:32.760 --> 00:00:40.320
 with that, I will move us to our one and only work session report, item 1A, ID21341, receive

00:00:40.320 --> 00:00:45.040
 a report, hold a discussion and give staff direction regarding processes, impacts and

00:00:45.040 --> 00:00:50.560
 results of service delivery during the February 2021 inclement weather event. By the following

00:00:50.560 --> 00:00:56.000
 departments, we'll hear from Denton Municipal Electric and the water and wastewater utilities.

00:00:56.000 --> 00:01:02.000
 And just for the members of the public, these are very in-depth reports we're about to receive.

00:01:02.000 --> 00:01:07.560
 There are breaks built in for questions. So we'll be taking -- you'll see a slide come

00:01:07.560 --> 00:01:12.480
 up that says breaks and questions. That's when you can expect your PUB and council members

00:01:12.480 --> 00:01:17.360
 to be posing the questions. And Tony, are you up?

00:01:17.360 --> 00:01:23.920
 >> Yes, sir. So Mayor Pro Tem, City Council members, members of the PUB, I appreciate

00:01:23.920 --> 00:01:29.120
 your time today, and we certainly have a lengthy presentation, about 40 slides. We're going

00:01:29.120 --> 00:01:34.280
 to try to go through those as efficiently as we can. Again, my name is Tony Puente. I'm

00:01:34.280 --> 00:01:40.520
 the executive manager for utilities for the city and also serve as the DME general manager.

00:01:40.520 --> 00:01:43.880
 Before I get started with the presentation, I just wanted to go through just a couple

00:01:43.880 --> 00:01:48.080
 of items. Just wanted to -- first of all, I want to acknowledge, you know, the trying

00:01:48.080 --> 00:01:53.480
 times that our customers faced during, you know, this winter storm. We know that, you

00:01:53.480 --> 00:01:57.960
 know, many of them suffered through extreme, you know, low temperatures. And certainly

00:01:57.960 --> 00:02:02.660
 some of our customers that are dependent on medical equipment, we understand that they

00:02:02.660 --> 00:02:08.880
 went through some very anxious times trying to sort out how to take care of themselves

00:02:08.880 --> 00:02:13.000
 and where to go. And so certainly want to just acknowledge our customers. I also want

00:02:13.000 --> 00:02:18.720
 to assure our customers that, you know, that they were certainly at the forefront of our

00:02:18.720 --> 00:02:25.440
 minds and our efforts throughout the storm. You know, their health and safety was certainly

00:02:25.440 --> 00:02:30.600
 a top priority for our team at Den Municipal Electric, and we certainly worked with many

00:02:30.600 --> 00:02:35.460
 of our partners across the city, especially our public safety folks, to be able to respond

00:02:35.460 --> 00:02:41.560
 to calls and some of the information that we were getting. I also want to assure our

00:02:41.560 --> 00:02:46.800
 customers -- excuse me -- that right from the very beginning, we initiated our rotating

00:02:46.800 --> 00:02:53.880
 outage plans. We did not hold that back. We immediately put our plan into effect. We also

00:02:53.880 --> 00:02:58.880
 made some adjustments to that plan, and so while we had some hard lines as we were getting

00:02:58.880 --> 00:03:02.720
 phone calls from our customers and requests, we did make adjustments to that in order to

00:03:02.720 --> 00:03:06.520
 be able to address certain things. One of the examples I've given before is that we

00:03:06.520 --> 00:03:11.640
 increased the outage from 30 minutes to about 45 minutes just trying to make sure that we

00:03:11.640 --> 00:03:15.240
 accommodated people so that they could have a little bit more time with electricity in

00:03:15.240 --> 00:03:20.680
 their homes and be able to warm up their homes as best that they could. Again, I want to

00:03:20.680 --> 00:03:29.520
 thank our public safety partners, and also just wanted to stipulate that as ERCOT was

00:03:29.520 --> 00:03:36.160
 allowing us to add power back onto the system, we did that. We did not hold back on that

00:03:36.160 --> 00:03:42.080
 power primarily, again, because of our concerns for the health and safety of our customers,

00:03:42.080 --> 00:03:47.320
 and so even though we knew that we may be exposed to some financial challenges going

00:03:47.320 --> 00:03:53.400
 forward, we did not hold that back. We continue to allow power back onto the system to be

00:03:53.400 --> 00:03:58.560
 able to provide it to our customers. The second item that I wanted to just briefly

00:03:58.560 --> 00:04:05.040
 just go through is just to thank our DME staff. As you can imagine, it was a very trying time

00:04:05.040 --> 00:04:11.680
 for them as well. In my view, they acted very valiantly, including the fact that many of

00:04:11.680 --> 00:04:16.480
 them left their own families and their own loved ones at home in the dark to be able

00:04:16.480 --> 00:04:20.520
 to come in and provide the services to our customers that they've always been able to

00:04:20.520 --> 00:04:25.000
 provide, and so I want to acknowledge their efforts and the work that they did and just

00:04:25.000 --> 00:04:29.920
 thank them. I will tell you, just on a personal level, that I have not worked with people

00:04:29.920 --> 00:04:35.440
 like this since, frankly, since I was a young 19-year-old Marine being deployed overseas

00:04:35.440 --> 00:04:41.680
 during the first Gulf War. I'm honored to serve with these folks. They were very valiant.

00:04:41.680 --> 00:04:47.480
 I will tell you that every single one of them stood their post, and they did not abandon

00:04:47.480 --> 00:04:52.000
 their post. Our folks did everything that they could, and I wanted to thank them, and

00:04:52.000 --> 00:04:56.800
 I truly believe that at the end of the day, their work and their effort saved people's

00:04:56.800 --> 00:05:02.680
 lives. We have a number of examples where we worked with FEMA and dialysis centers and

00:05:02.680 --> 00:05:07.680
 other areas of the community to try to give them at least some power, try to accommodate

00:05:07.680 --> 00:05:12.520
 them as best we could, and so I truly believe that our efforts did save people's lives,

00:05:12.520 --> 00:05:16.160
 and lastly, I'll just say that in my book, all these DMA employees and certainly all

00:05:16.160 --> 00:05:21.320
 our employees across the city, certainly those that we partnered with, are heroes in my book,

00:05:21.320 --> 00:05:26.320
 and I would hope that you would echo that as well. So with that, I appreciate your indulgence

00:05:26.320 --> 00:05:36.440
 with that, and I'll go ahead and initiate this presentation.

00:05:36.440 --> 00:05:40.280
 So just to go through the objectives, I'm going to quickly go through just a little

00:05:40.280 --> 00:05:46.280
 bit about DME. Hopefully, we'll answer some questions that some of our customers and community

00:05:46.280 --> 00:05:50.480
 members have. Then I'm going to turn it over to Chris Lutrick. He'll go through some of

00:05:50.480 --> 00:05:55.720
 our division reports. We'll have a break for questions on that section, and then Terry

00:05:55.720 --> 00:06:02.720
 Nolte will come up and present some additional division reports, and then at the end, we'll

00:06:02.720 --> 00:06:08.120
 just have time for questions and just general questions that you may have for me or for

00:06:08.120 --> 00:06:12.760
 either one of our team members. So just a little bit about DME. DME was established

00:06:12.760 --> 00:06:19.320
 back in 1905. That's about 116 years of local power that's been provided that the citizens

00:06:19.320 --> 00:06:24.520
 of Denton have chosen to have. Certainly, from our viewpoint, that provides the maximum

00:06:24.520 --> 00:06:31.880
 local control. DME is the sixth largest municipally owned utility in Texas. We're one of about

00:06:31.880 --> 00:06:39.360
 72 MOEs in the state of Texas. We make up about a third of the total ERCOT market. So

00:06:39.360 --> 00:06:44.400
 about two-thirds of the ERCOT market is made up of co-ops and private utilities, just to

00:06:44.400 --> 00:06:51.280
 give you kind of the size of our participation in the ERCOT market. Our governing body is

00:06:51.280 --> 00:06:55.880
 the city council. We certainly have an advisory board, public utilities board, that advises

00:06:55.880 --> 00:07:01.520
 to council on all things related to utilities, including DME. And council does adopt our

00:07:01.520 --> 00:07:07.040
 budget and rates on an annual basis. Over the last two years, our team has really tried

00:07:07.040 --> 00:07:12.300
 to focus DME and to be in and recognizing that we're a department of the city. We're

00:07:12.300 --> 00:07:18.040
 not a separate entity. And so we've driven this concept of one city, one organization.

00:07:18.040 --> 00:07:24.480
 And I think our staff have certainly embraced that concept. DME also has a defined service

00:07:24.480 --> 00:07:31.480
 territory. The main area is certainly the core of the city, but we do have extra jurisdictional

00:07:31.480 --> 00:07:36.880
 or ETJ areas. And then there's also some small tracts in the city of Corinth that we also

00:07:36.880 --> 00:07:41.680
 currently serve. So this includes single, dual, and triple certified areas. And we'll

00:07:41.680 --> 00:07:47.960
 talk a little bit more in the next slide about that. So this is just a map for you on areas

00:07:47.960 --> 00:07:52.160
 that we serve. I know we've had a lot of customers ask, well, why am I with co-serve or Encore?

00:07:52.160 --> 00:07:58.120
 And this really kind of shows a picture of this green teal area is the single certified

00:07:58.120 --> 00:08:04.280
 areas for DME, where we serve the majority of our customers. But in these outline areas,

00:08:04.280 --> 00:08:09.080
 we do compete in those areas in dual and triple certified areas. In some cases, we're duly

00:08:09.080 --> 00:08:13.880
 certified with co-serve or with Encore, or we're triply certified with those two entities

00:08:13.880 --> 00:08:18.520
 primarily. And the way that that works is normally that starts at the development process

00:08:18.520 --> 00:08:22.920
 when the developer wants to come into one of these dual and triply certified areas,

00:08:22.920 --> 00:08:27.280
 they work with all three companies and they make a decision as to who's going to serve

00:08:27.280 --> 00:08:32.440
 that particular area. I'll tell you that the vast majority of developers do choose DME.

00:08:32.440 --> 00:08:36.920
 And so we anticipate, just like in Hunter and Coal Ranch as an example, we're going

00:08:36.920 --> 00:08:42.760
 to serve the majority of those two developments that will continue to expand outside of the

00:08:42.760 --> 00:08:49.360
 Encore city area. And just really quick, once that decision is made on who's going to serve

00:08:49.360 --> 00:08:55.160
 that particular area, that dual or triple certification does not end. So that continues.

00:08:55.160 --> 00:09:01.400
 But as you can imagine, it's very cost prohibitive for another provider to come into that area.

00:09:01.400 --> 00:09:06.680
 Certainly there'll be restrictions related to available right away and such, and there'll

00:09:06.680 --> 00:09:11.120
 be some additional expenses that may be incurred to be able to switch. But again, I wanted

00:09:11.120 --> 00:09:14.840
 to just quickly just show that because I know we have a lot of customers that ask questions

00:09:14.840 --> 00:09:20.160
 about, well, why are my lights off or my lights on? Some of the explanations that you may

00:09:20.160 --> 00:09:26.880
 have been with a different provider and not the municipal electric. This is our current

00:09:26.880 --> 00:09:31.880
 organizational structure. I'm not going to go through it in detail, just simply to say

00:09:31.880 --> 00:09:38.400
 that you'll be hearing from Terry and myself again in our dual roles here. Terry does also

00:09:38.400 --> 00:09:43.200
 oversee the water wastewater utilities as the interim director for water wastewater,

00:09:43.200 --> 00:09:48.160
 but he serves as the assistant general manager for DME. And of course, I have a dual role

00:09:48.160 --> 00:09:54.840
 as well in that we oversee the other city utilities, including the municipal electric.

00:09:54.840 --> 00:09:59.000
 Over on the right-hand side, I did want to point out just quickly that over the last three

00:09:59.000 --> 00:10:05.400
 years now, really starting in May of 2019, we've worked to right size, not only our budget,

00:10:05.400 --> 00:10:11.260
 but certainly our staffing levels. We engaged an external party to help us go through and

00:10:11.260 --> 00:10:17.400
 look at FTE counts and just our organization in general. And so over the last two years

00:10:17.400 --> 00:10:24.040
 going into our 2021 budget, we did certainly see about a $9 million reduction in our operating

00:10:24.040 --> 00:10:30.600
 budget. And we saw about 20 positions that we eliminated in the budget. And again, we

00:10:30.600 --> 00:10:39.080
 did that very purposeful as part of just a wider right sizing of our budget and our organization.

00:10:39.080 --> 00:11:02.600
 So with that, I'm gonna turn it over to Chris Lutrik to come in and cover his areas of responsibility.

00:11:02.600 --> 00:11:09.280
 Thank you, Tony. Before I get started, I would just like to reiterate a few things that Tony

00:11:09.280 --> 00:11:13.920
 said. I'd like to thank our customers for the patience they provided us during the winter

00:11:13.920 --> 00:11:19.640
 event and just to reiterate what an honor it was to work next to all of our DME staff.

00:11:19.640 --> 00:11:26.880
 It was very trying times. As you know, a lot of the work was done outside, very demanding

00:11:26.880 --> 00:11:33.580
 conditions, and our guys just never back down. So this was an unprecedented event for us.

00:11:33.580 --> 00:11:38.840
 We never knew what the next hour might hold, but our guys were always, guys and gals were

00:11:38.840 --> 00:11:44.240
 always up to the task. They never back down and they did what they had to do to get the

00:11:44.240 --> 00:11:50.840
 job done. So again, it was just an honor to work alongside them during the event. So I'm

00:11:50.840 --> 00:11:55.400
 Chris Lutrik. I'm the executive manager of operations. I oversee the day-to-day electrical

00:11:55.400 --> 00:12:04.920
 operations of the utility, and I will be covering our DME system response to the winter event.

00:12:04.920 --> 00:12:11.200
 I'll start with talking about ERCOT's role during that week. As you know, that's an acronym

00:12:11.200 --> 00:12:16.440
 that has received a lot of media attention over the last month, and the acronym stands

00:12:16.440 --> 00:12:22.440
 for the Electric Reliability Council of Texas. They're a quasi-governmental organization

00:12:22.440 --> 00:12:28.920
 that manages the electric power to about 24 million Texans, which represents about 90%

00:12:28.920 --> 00:12:36.360
 of the state's electrical load and covers about 75% of the land. It is wholly contained

00:12:36.360 --> 00:12:41.640
 within the borders of Texas, and I should state that ERCOT does not own or operate any

00:12:41.640 --> 00:12:48.240
 equipment. They simply oversee the interconnection of the 17 transmission distribution service

00:12:48.240 --> 00:12:53.880
 providers who do own and operate the equipment and are interconnected. Their main task are

00:12:53.880 --> 00:12:59.600
 they coordinate the operation of more than 550 generation units. They're spread out over

00:12:59.600 --> 00:13:07.000
 the state of Texas. They coordinate the operation of 46,500 circuit miles of high voltage transmission

00:13:07.000 --> 00:13:12.720
 lines that are required to transport that power from the generators to the load centers.

00:13:12.720 --> 00:13:19.160
 My colleague Terry Nalte will discuss this next bullet in detail in his presentation,

00:13:19.160 --> 00:13:23.920
 but another function of ERCOT is they manage the financial settlement for the competitive

00:13:23.920 --> 00:13:30.880
 wholesale bulk power market in Texas. Here's a fraction that will become important in my

00:13:30.880 --> 00:13:40.240
 presentation. DME represents 0.5% of ERCOT. That allocation and obligation is assessed

00:13:40.240 --> 00:13:44.840
 every year, and it's based on the peak summer load of the utilities, and ours currently

00:13:44.840 --> 00:13:52.240
 stands at 375 megawatts. So now we'll get to the event, and again, we're talking about

00:13:52.240 --> 00:14:00.160
 the event starting on Saturday, February 14th, and working our way towards Thursday. I think

00:14:00.160 --> 00:14:06.520
 that's February 18th. So at that time, the grid was under a lot of strain. Loads were

00:14:06.520 --> 00:14:14.200
 very high, and ERCOT at 1.20 a.m., the reserve margins had been compromised. At that time,

00:14:14.200 --> 00:14:20.560
 they entered a load shed event. So as you see, the nominal frequency of the ERCOT grid

00:14:20.560 --> 00:14:28.240
 is 60 hertz. Small deviations above and below that are normal, but when the frequency starts

00:14:28.240 --> 00:14:35.000
 to vary either above or below 60 hertz, that's an indication that the grid is under stress.

00:14:35.000 --> 00:14:41.840
 So as you see in this 30-minute or 40-minute snapshot here, a lot of things happen. So

00:14:41.840 --> 00:14:47.480
 the first events here are there's generators are tripping offline. So we already were in

00:14:47.480 --> 00:14:54.720
 a -- our capacity reserves were compromised. We have generators tripping offline. So as

00:14:54.720 --> 00:14:59.680
 you'll see, the graph begins to trend downward. That means the frequency is moving away from

00:14:59.680 --> 00:15:08.400
 60 hertz. So right at about 1.43, you see the graph gets pretty steep. This is an indication

00:15:08.400 --> 00:15:14.040
 that the grid is in trouble. ERCOT orders another load shed instruction. Then again,

00:15:14.040 --> 00:15:19.120
 as you notice, three more generation outages occurred, and the graph gets really steep.

00:15:19.120 --> 00:15:25.000
 This is the time when we were headed towards a blackout condition. If ERCOT did not take

00:15:25.000 --> 00:15:32.040
 the proper steps to mitigate this frequency decay. So again, the first threshold was hit,

00:15:32.040 --> 00:15:40.280
 the 59.4 hertz. At that point, the generators can only operate for nine minutes. At that

00:15:40.280 --> 00:15:46.920
 point, they have protective devices called relays that would have then taken additional

00:15:46.920 --> 00:15:53.320
 generation that was able to function offline to protect the equipment. During the event,

00:15:53.320 --> 00:16:00.120
 so ERCOT ordered another big chunk of load shed that was 3,000 megawatts to try to mitigate

00:16:00.120 --> 00:16:07.280
 that frequency decay. And we came close because if you notice on the graph, we were below

00:16:07.280 --> 00:16:13.000
 that threshold for four minutes and 23 seconds before the frequency was able to start its

00:16:13.000 --> 00:16:18.440
 recovery. And an important note on the bottom right-hand corner is the minimum frequency

00:16:18.440 --> 00:16:26.560
 that was recorded was 59.302. That's an important number and I will further expand on that later

00:16:26.560 --> 00:16:36.400
 in my presentation. Now on to DMEs to our part of this load shed event. At the time,

00:16:36.400 --> 00:16:44.280
 the load shed began at 1.20 a.m. on Monday, February 15th, the city's net load was 275

00:16:44.280 --> 00:16:52.300
 megawatts. That probably was about 100 to 125 megawatts higher than your typical February

00:16:52.300 --> 00:16:56.960
 evening. And actually the previous day, which would have been Sunday morning, we set our

00:16:56.960 --> 00:17:04.280
 peak, our all-time winter peak of 304 megawatts. So to give you the context over the whole

00:17:04.280 --> 00:17:12.360
 load shed event, ERCOT ultimately required operators to shed 20,000 megawatts of power

00:17:12.360 --> 00:17:19.000
 from the grid. And to put that in context, at that time the total grid load was about

00:17:19.000 --> 00:17:27.000
 70,000. So nearly one-third of the load on the ERCOT grid was instructed to be shed.

00:17:27.000 --> 00:17:32.000
 To break that down to our portion again, it's based on your obligation now and that's still

00:17:32.000 --> 00:17:40.400
 the half a percent. So out of the 20,000 megawatts, we were required to shed 100 megawatts at

00:17:40.400 --> 00:17:46.680
 the peak or about 36% of the city's net load. This event that I detailed on the previous

00:17:46.680 --> 00:17:56.240
 slide that started at 1.20 a.m. on Monday persisted through, I believe it is 12.39 a.m.

00:17:56.240 --> 00:18:04.160
 on Thursday morning. So a total event duration of about 59 hours. So how did we go about

00:18:04.160 --> 00:18:10.760
 the load shed? We have a load shed plan. I'll start with this plan is confidential as it

00:18:10.760 --> 00:18:17.720
 contains critical energy and electric infrastructure information. It has our hospitals, police

00:18:17.720 --> 00:18:23.400
 departments, fire stations. They are identified in the plan as well as what circuit they're

00:18:23.400 --> 00:18:30.240
 on. So if that information was to become public, bad actors would have a roadmap for doing

00:18:30.240 --> 00:18:38.680
 the most sabotage or destruction to our infrastructure. Therefore those plans are confidential. So

00:18:38.680 --> 00:18:44.680
 that being said, the plan is updated annually along with our ERCOT emergency operation plan.

00:18:44.680 --> 00:18:50.400
 They're submitted to ERCOT and it contains two main components for shedding load. The

00:18:50.400 --> 00:18:57.480
 first is under frequency load shed. It's a pretty fancy title there and I will explain

00:18:57.480 --> 00:19:03.720
 that further on the next slide. And emergency load shed. That was the method that was utilized

00:19:03.720 --> 00:19:10.120
 during this event by our operators. And I'll finish this slide by saying that DME is obligated

00:19:10.120 --> 00:19:16.520
 to comply with ERCOT operating instructions. This is directed by NERC. NERC is the North

00:19:16.520 --> 00:19:22.520
 American Electric Reliability Council. They're a federal entity that oversees the operation

00:19:22.520 --> 00:19:29.080
 of electric utilities across the country. Our obligations are detailed in the ERCOT

00:19:29.080 --> 00:19:35.680
 operating guides and protocols. So to detail the two different methods of load shed, I'll

00:19:35.680 --> 00:19:42.280
 start with emergency load shed. That is a controlled rotating outage. During the event

00:19:42.280 --> 00:19:47.120
 we saw a lot of social media that used the word blackout. ERCOT, that means something

00:19:47.120 --> 00:19:52.680
 different. So to ERCOT, a blackout is if you were to go up in space and take a picture,

00:19:52.680 --> 00:19:58.080
 the state of Texas would be dark. At that point the grid has failed. There is no transmission

00:19:58.080 --> 00:20:06.100
 voltage and 24 million people are without power. So this is, I'll use the word outage or try

00:20:06.100 --> 00:20:11.000
 to use the word outage for the rest of the presentation. Again, they're controlled. They

00:20:11.000 --> 00:20:18.280
 are initiated by our system operations. They can be done remotely. And again, our obligation

00:20:18.280 --> 00:20:25.840
 is 5% of the total ERCOT load. And so when we're issued a directive or an instruction

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

00:20:33.400 --> 00:20:38.680
 shed instruction is 1000 megawatts. And then that was acknowledged. And then that meant

00:20:38.680 --> 00:20:44.540
 that 1000 became 5 megawatts for us. So everybody got the same instructions. They're done verbally

00:20:44.540 --> 00:20:49.720
 over the phone. You acknowledge it. And then you're obligated to perform that load shed

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

00:20:57.280 --> 00:21:03.720
 loads. Those are 43 feeders that we identified. They're mainly residential and commercial

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

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

00:21:16.160 --> 00:21:21.160
 was the last time that ERCOT had issued a load shed event. For that event, the duration

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

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

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,

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

00:21:47.000 --> 00:21:54.080
 or twice your allotment for our plan. And our original plan, as Tony mentioned earlier,

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.

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

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

00:22:16.320 --> 00:22:22.400
 load that are fed from circuits that have these protective relays on them that can sense

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

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

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

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

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

00:22:55.760 --> 00:23:01.120
 grid to avoid the blackout condition. There's three groups. So as the frequency continues

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

00:23:06.160 --> 00:23:11.800
 should note, if those relays were to open or to operate at that point, those circuits

00:23:11.800 --> 00:23:17.520
 are under the control of ERCOT and you cannot restore power to those circuits until ERCOT

00:23:17.520 --> 00:23:23.960
 issues the instruction. So again, those relays did not operate during this event and they

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

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

00:23:38.720 --> 00:23:43.960
 is it requires you to prioritize your loads. So this takes all of your customer bases and

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

00:23:48.720 --> 00:23:55.560
 that you do need to classify them. So classifying the critical load, that is established by

00:23:55.560 --> 00:24:01.880
 the Texas Administrative Code done through the PUCT and it lists four categories of critical

00:24:01.880 --> 00:24:08.200
 load customers. The first being the critical load public safety customer. As you can imagine,

00:24:08.200 --> 00:24:16.320
 that's your major fire stations, police department, water treatment plants, sewage treatment plants,

00:24:16.320 --> 00:24:23.480
 emergency operations centers, and your major hospitals. Critical load industrial customer.

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

00:24:30.440 --> 00:24:36.200
 in retail establishments. And then the last two classes we do have on our system, those

00:24:36.200 --> 00:24:41.640
 are the chronic condition residential customer and the critical care customer. These are

00:24:41.640 --> 00:24:49.560
 programs that customers in ERCOT can apply. There's some qualifications for them, but

00:24:49.560 --> 00:24:53.840
 they actually are basically notifying the utility, hey, I'm here. Here's my address.

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

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

00:25:08.960 --> 00:25:14.760
 designation as a critical load customer, a critical care residential customer, or a chronic

00:25:14.760 --> 00:25:20.800
 condition care customer does not guarantee the uninterrupted supply of electricity. That

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

00:25:26.840 --> 00:25:33.560
 point, you're trying to stabilize the grid. So those customers are not guaranteed. Actually,

00:25:33.560 --> 00:25:40.160
 any customer is not guaranteed uninterrupted supply of electricity, either via mother nature

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

00:25:46.560 --> 00:25:52.120
 those into consideration. So we have four categories that are listed here and followed

00:25:52.120 --> 00:25:57.460
 by basically our fifth category, which is our emergency load shed feeders. So category

00:25:57.460 --> 00:26:05.040
 one is our critical load public safety customers from as described right above. These are our

00:26:05.040 --> 00:26:12.520
 major hospitals, police department, fire stations, basically health and human services, so they

00:26:12.520 --> 00:26:20.360
 can continue to provide those services for our residents. Categories two, three and four

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

00:26:25.560 --> 00:26:32.720
 graphs that will detail that out. Feeder utilization during load shed, just some information about

00:26:32.720 --> 00:26:40.440
 our system. DME has 107 feeders that carry load. Just a quick tutorial there. A feeder

00:26:40.440 --> 00:26:45.920
 is basically electrical circuit that originates at a substation circuit breaker and runs out

00:26:45.920 --> 00:26:51.360
 into our territory to serve load. They're, they're generally pretty long, you know, three

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.

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

00:27:02.480 --> 00:27:09.440
 capabilities. The feeders are segmented by switches and other equipment that can allows

00:27:09.440 --> 00:27:16.520
 us to intertie these circuits from one to the other. This gives us flexibility in balancing

00:27:16.520 --> 00:27:22.920
 our load through the different seasons, responding to outages, maintenance activities. That's

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

00:27:27.800 --> 00:27:34.200
 another one. We cannot move individual customers from one circuit to another. That can be done,

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.

00:27:38.760 --> 00:27:46.600
 So that being said, 17 of the feeders on our system serve the critical infrastructure load.

00:27:46.600 --> 00:27:51.560
 That's the category one on the previous slide. That's your major hospitals, water, wastewater

00:27:51.560 --> 00:27:56.640
 facilities, police and fire. These feeders did not experience any outages during the

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

00:28:03.320 --> 00:28:11.760
 through the rotating outages. And to put that in context, at the peak on Monday evening,

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

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,

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

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

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,

00:28:41.720 --> 00:28:49.240
 that 230 megawatts affected about 43,000 of our customers. So we had two thirds of

00:28:49.240 --> 00:28:57.000
 our 60,000 customers were without power during these rotation periods. So back to our plan,

00:28:57.000 --> 00:29:02.760
 we originally had 43 feeders identified for load shed. That would have accommodated a

00:29:02.760 --> 00:29:10.000
 request of 30 megawatts. And it took an additional 47 feeders that did have critical service

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

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,

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

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

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

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

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

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

00:30:02.000 --> 00:30:07.800
 of the load shed instruction throughout the, throughout the day. You know, during the day,

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

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.

00:30:21.120 --> 00:30:26.340
 So the orange line in the middle is our load shed requirement. Here on Monday evening,

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

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

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

00:30:47.720 --> 00:30:51.840
 of our accomplishments that I, that I'll wrap up my presentation with. We never stopped

00:30:51.840 --> 00:31:00.080
 rotating outages, regardless of what the load shed requirement was. Our next graph here

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

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

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,

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

00:31:24.740 --> 00:31:30.800
 of our critical customers based on the amount of load shed instructions we had from ERCOT.

00:31:30.800 --> 00:31:35.260
 And on the right is our load shed feeders that were originally designed. They carried

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

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

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

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

00:32:04.160 --> 00:32:11.120
 some protective devices. They're usually saved for squirrel suicides. But basically they're,

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

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

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

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

00:32:31.360 --> 00:32:35.160
 normally have an outage management system. We would know that we would roll a truck that

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

00:32:41.840 --> 00:32:47.340
 our reliability reports, we give you the bulk of those are our outages that are repaired

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

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

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.

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.

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

00:33:15.400 --> 00:33:21.240
 we were able to handle the neighborhoods that predominantly had gas heat, the electrical

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

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

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.

00:33:39.040 --> 00:33:46.600
 So this graph represents the 172 phone calls that we received because people were letting

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,

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

00:33:57.600 --> 00:34:04.640
 calls were fuse burnouts and or transformers. And we rolled a service truck to get those,

00:34:04.640 --> 00:34:12.240
 those customers back on. So now on to our field operations. These are the, our line

00:34:12.240 --> 00:34:18.640
 and substation field crews. These are the men and women that, that replaced all of those

00:34:18.640 --> 00:34:24.720
 fuses and replaced transformers. And, and so in knowing, we didn't foresee the rolling

00:34:24.720 --> 00:34:30.640
 outages, but what we did foresee is the NOAA forecast that, that called for some freezing

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,

00:34:36.880 --> 00:34:42.980
 that's a very treacherous travel condition for our staff. That, and also the freezing

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

00:34:48.800 --> 00:34:54.000
 hard on your aerial equipment. The ice builds up and puts a substantial amount of weight

00:34:54.000 --> 00:34:58.320
 on your, on your lines and your poles. So knowing that was coming, we actually brought

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

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

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

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

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

00:35:33.000 --> 00:35:39.360
 fail that ended up tripping off a one of our substation power transformers. And this led

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

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,

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

00:35:59.920 --> 00:36:04.160
 the rolling outages during the extreme low temperatures caused numerous equipment failures.

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

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

00:36:18.200 --> 00:36:22.880
 coming from our maintenance, construction, substation and metering groups that began

00:36:22.880 --> 00:36:28.360
 working Sunday evening around the clock and continued working in shifts up to 16 hours

00:36:28.360 --> 00:36:34.080
 for the duration of the event. The primary work they performed was fuse and transformer

00:36:34.080 --> 00:36:39.160
 replacement. After the rolling outages come back on, customers and notify us their power

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

00:36:44.880 --> 00:36:52.480
 who did a wonderful job through this worked about 174 calls during the storm event. On

00:36:52.480 --> 00:36:57.800
 to engineering. Our two systems, our transmission system, as you can imagine, performed quite

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

00:37:03.280 --> 00:37:09.840
 stressed at all. And our transmission voltage was maintained for the duration of the event.

00:37:09.840 --> 00:37:16.000
 Our distribution system, we had two all electric subdivisions that were on individual feeders,

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.

00:37:24.320 --> 00:37:28.740
 The circuit is primarily electric heat. So when we energize the circuit for both of these

00:37:28.740 --> 00:37:36.160
 two subdivisions, we were unable to pick those circuits up. Our guys worked very diligently.

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

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

00:37:45.960 --> 00:37:53.020
 better manage that situation. 11 distribution transformers failed. Probable cause was overloading

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

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

00:38:06.720 --> 00:38:12.240
 that quickly went out the window. So on the fly Monday morning, engineering developed

00:38:12.240 --> 00:38:17.360
 tools for our system operators to manage to be able to allow to spread those rotating

00:38:17.360 --> 00:38:22.560
 outages amongst our 90 remaining feeders. So that tool was invaluable. And that's what

00:38:22.560 --> 00:38:27.520
 our operators used to get us through this event. They provided recommendations for load

00:38:27.520 --> 00:38:32.720
 switching and subdivision load balancing again, primarily for those two subdivisions that

00:38:32.720 --> 00:38:39.160
 I previously mentioned. We had an issue with the Lake Louisville water intake facility.

00:38:39.160 --> 00:38:43.880
 So that's the raw water supply for the Lake Louisville water treatment plant. We actually

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

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

00:38:55.040 --> 00:39:01.080
 Corinth to the water treatment plant. We began noticing some phase imbalance measurements

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

00:39:05.800 --> 00:39:11.440
 while the the pumps were still running, we had a power quality issue. We worked with

00:39:11.440 --> 00:39:17.000
 our colleagues at the at the water intake facility. We actually were able to take this

00:39:17.000 --> 00:39:21.280
 facility offline, two brief moments to try to troubleshoot the transformer to try to

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.

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

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

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

00:39:43.760 --> 00:39:49.960
 to to the facility. And finally, engineering helped provide, as you can imagine, there

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

00:39:55.400 --> 00:40:03.320
 system ops pull that into one one source. Our business services, as you could imagine,

00:40:03.320 --> 00:40:10.200
 our key customers were really affected by this event, as our emergency load shed features

00:40:10.200 --> 00:40:16.820
 are our primarily our residential and small commercial customers. Their their electrical

00:40:16.820 --> 00:40:21.000
 equipment at their house is better suited for a rolling outage. So your house other

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

00:40:26.740 --> 00:40:33.760
 sensitive electronics, you have large motors, they just cannot work through a rotating power

00:40:33.760 --> 00:40:38.740
 outage. So our customers started calling. We contacted them. They contacted us. Many

00:40:38.740 --> 00:40:43.880
 of these customers were notated were notified that they would have gas curtailment was a

00:40:43.880 --> 00:40:49.040
 possibility. So these customers shown here, they let us know that they were not going

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

00:40:55.880 --> 00:41:01.960
 was basically a demand response load shed that helped that helped the grid by keeping

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,

00:41:07.960 --> 00:41:14.560
 but the target distribution center out by the airport is 100% automated facility. So

00:41:14.560 --> 00:41:19.580
 we were getting calls from them, our load, our rotating outages were giving them fits.

00:41:19.580 --> 00:41:24.120
 So there they were basically bringing their operation to a standstill. And they actually

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

00:41:29.120 --> 00:41:35.700
 generators and, and provide minimal service, minimum business function for their facility.

00:41:35.700 --> 00:41:41.220
 So we accommodated them, we went out, we disconnected the transformer, they ran on their generator

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

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

00:41:50.080 --> 00:41:56.480
 better work together through that situation. Customer outreach, we utilize the social media,

00:41:56.480 --> 00:42:02.200
 both the DME, Twitter and the city social media accounts to communicate the request

00:42:02.200 --> 00:42:10.000
 for conservation. This was prior to the event, and to relay ERCOT's current emergency levels.

00:42:10.000 --> 00:42:15.540
 We also began we have some canned messages that we began sending out the week before

00:42:15.540 --> 00:42:20.920
 any any winter storm saying, you know, take precautions, have water ready, that sort of

00:42:20.920 --> 00:42:25.000
 stuff. So we got that information out. And another thing is that that kind of evolved

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

00:42:30.200 --> 00:42:37.560
 power outages via Twitter, which took some stress off of our utility dispatchers who

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

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

00:42:50.440 --> 00:42:55.920
 where they settle our collateral invoice payments with ERCOT. As Terry will mention ERCOT is

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

00:43:00.920 --> 00:43:06.200
 money in place before you actually use the electricity. So they were very busy working

00:43:06.200 --> 00:43:11.760
 with DME management and city finance during these unprecedented times to make sure that

00:43:11.760 --> 00:43:19.700
 we we met all of our ERCOT obligations. Regulatory and compliance, our main issues were system

00:43:19.700 --> 00:43:26.280
 reliability and cybersecurity. And I'll start with here that this this next bullet point

00:43:26.280 --> 00:43:32.480
 is transmission operators, requirement five of the NERC. Again, that's National Electric

00:43:32.480 --> 00:43:39.200
 Rock North American Electric Reliability Council. Rule five states that each transmission operator,

00:43:39.200 --> 00:43:47.480
 generator operator, and distribution provider shall comply with each operating instruction

00:43:47.480 --> 00:43:51.440
 issued by its balancing authority. And in this case, the balancing authority for the

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,

00:43:56.840 --> 00:44:05.320
 we were obligated to comply with those instructions. Our operators did. We complied with all ERCOT

00:44:05.320 --> 00:44:10.760
 load shed instructions, both to add load and to remove load during the duration of the

00:44:10.760 --> 00:44:16.720
 event. And therefore, with the excellent performance of our system operators, there were no observable

00:44:16.720 --> 00:44:22.200
 violations of the NERC requirements. And again, thank you for the patience. This is the last

00:44:22.200 --> 00:44:27.600
 slide. So just giving giving you a heads up. So challenges, communications were a big challenge

00:44:27.600 --> 00:44:34.880
 for us. Our utility dispatchers and system operators filled at almost 9000 phone calls

00:44:34.880 --> 00:44:43.600
 the week of February the 13th. Our normal monthly call volume is about 2100 calls. So

00:44:43.600 --> 00:44:49.240
 they were on the phone constantly, you know, customers looking for information. When is

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

00:44:53.600 --> 00:44:59.640
 ask. So communications with our customers and from our customers was a challenge. And

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

00:45:05.760 --> 00:45:10.400
 electrical needs were they probably needed on interruptible electricity did not have

00:45:10.400 --> 00:45:16.640
 backup generators. So therefore, they solely relied on grid power. And we weren't able

00:45:16.640 --> 00:45:22.400
 to provide that around the clock. Critical infrastructure and customer identification

00:45:22.400 --> 00:45:27.000
 process, we identified some of our critical infrastructure customers by them giving us

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

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

00:45:37.600 --> 00:45:44.040
 on the success side. The extreme cold temperatures provided a very harsh work environment for

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

00:45:50.600 --> 00:45:57.680
 tough to get diesel engine started at five below our outage processing technology. That

00:45:57.680 --> 00:46:03.120
 is our outage management system that our system operators use to manage the grid. When we

00:46:03.120 --> 00:46:09.160
 initiated the rolling outages, it was not designed for that and it crashed. So during

00:46:09.160 --> 00:46:16.140
 the remainder of the of the storm event, we utilize legal pads, pins and sticky notes.

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

00:46:21.600 --> 00:46:26.560
 tracking. Our skater system was functional the whole time. But as I mentioned, we have

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

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

00:46:39.560 --> 00:46:46.920
 rotating outages. When we handed that off to the the next shift operators, we we dropped

00:46:46.920 --> 00:46:52.240
 a couple circuits. So we made a mistake. Those circuits experience outages longer than they

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

00:46:58.040 --> 00:47:03.520
 pretty quickly so that the the shift that was coming on could audit the previous the

00:47:03.520 --> 00:47:08.840
 previous load shed and identify the status of all feeders. And we eliminated that we

00:47:08.840 --> 00:47:13.080
 eliminated that error. And again, I think I've mentioned that five times a cold load

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.

00:47:21.000 --> 00:47:28.720
 The first is, we maintain the ERCOT interconnect. I cannot overemphasize the misery that would

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,

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

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

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

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

00:47:56.480 --> 00:48:01.840
 was one of our bigger successes. On a more local success note, we maintain the rotating

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

00:48:08.840 --> 00:48:14.520
 largest, we're the only utility of our size or larger that maintain rotating outages for

00:48:14.520 --> 00:48:19.120
 the duration of the event. Now, this was a major inconvenience for our customers. But

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

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

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

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

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

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

00:48:53.880 --> 00:49:00.320
 critical care customers that weren't prepared. So we answered phone calls, an elderly gentleman,

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

00:49:06.520 --> 00:49:11.480
 that he says wasn't charging correctly. Our lineman grabbed a small generator and extension

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

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

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

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

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

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

00:49:41.840 --> 00:49:46.720
 success stories is as we identified, as Tony mentioned, a dialysis clinic that we didn't

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

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

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

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

00:50:05.920 --> 00:50:10.400
 circuits. He could get all of his patients their their treatment. And then that circuit

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

00:50:16.800 --> 00:50:22.000
 to get those those patients their their needed treatment. We and we maintained our critical

00:50:22.000 --> 00:50:28.040
 services for our citizens. So again, I stated a couple times the hospitals, Fire Department,

00:50:28.040 --> 00:50:33.400
 Police Department utilities did not lose electricity. And finally, as we started out our original

00:50:33.400 --> 00:50:39.200
 plan of 30 minutes, through some feedback from our customers, it was not adequate. They

00:50:39.200 --> 00:50:43.920
 were their houses were getting colder beach rotation. So we're able to adjust that to

00:50:43.920 --> 00:50:51.800
 45 minutes, which seemed to seem to alleviate those, those cooling of those houses. So with

00:50:51.800 --> 00:50:56.680
 that, I made it to the end and I'd be glad to answer any questions.

00:50:56.680 --> 00:51:05.600
 Thank you, Chris, if you could pull the slide down for us.

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

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

00:51:14.720 --> 00:51:19.720
 by other presenters. So be careful just to contain our questions to what Chris just covered

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

00:51:25.440 --> 00:51:31.520
 utility dispatch and operations, field operations, engineering and customer relations, and regulatory

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

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

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

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.

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

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

00:52:03.720 --> 00:52:05.000
 you could go ahead and ask your questions.

00:52:05.000 --> 00:52:12.280
 - Yes, sir. I just wanted to get clarification from Chris about this duration of the event

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.

00:52:18.640 --> 00:52:25.080
 Could you clarify a little bit more about that particular trough, if you will, and the

00:52:25.080 --> 00:52:26.400
 performance of the grid?

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

00:52:34.760 --> 00:52:41.200
 below that frequency for nine minutes. So I believe the duration that that trough represents

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

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

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.

00:53:00.760 --> 00:53:01.760
 - Thank you.

00:53:01.760 --> 00:53:04.080
 - Yes, sir.

00:53:04.080 --> 00:53:12.920
 - Other questions? Council Member Meltzer.

00:53:12.920 --> 00:53:22.800
 I've commented repeatedly prior to this meeting about how outstanding DME staff was. Thank

00:53:22.800 --> 00:53:29.240
 you for giving people greater insight into that. I have a kind of a hypothetical question

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

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

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

00:53:55.200 --> 00:54:03.200
 that I'll actually quote from a Renewable Denton presentation, "We need to secure reliable

00:54:03.200 --> 00:54:08.480
 source of dispatchable on-demand power, something that can ramp up and down quickly in response

00:54:08.480 --> 00:54:14.680
 to renewable variability." So not in response to ERCOT prices. I mean ERCOT grid was mentioned

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

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

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

00:54:35.760 --> 00:54:42.760
 people were led to believe and just serving Denton, given that we had our own outage,

00:54:42.760 --> 00:54:48.840
 would we have avoided rolling blackouts or what would the consequence have been if we

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.

00:54:58.440 --> 00:55:03.720
 Yes, sir. Council Member Meltzer, thank you for the question. And Mr. Terry Nalti is going

00:55:03.720 --> 00:55:09.600
 to hop on here and provide you an answer. Yes. Can you hear me?

00:55:09.600 --> 00:55:13.960
 Yeah. Okay. Council Member Meltzer, so with regard

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

00:55:23.280 --> 00:55:32.200
 think while I understand your concern and perhaps that was a message that was delivered

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

00:55:38.400 --> 00:55:48.480
 the Denton Energy Center, Denton and the ERCOT market existed. And in that market paradigm,

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.

00:55:55.480 --> 00:56:01.280
 It must be injected into the market and you must purchase your energy from the market.

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

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

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

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.

00:56:27.400 --> 00:56:41.280
 It was incorrect. And that potential never existed. Secondly, local outages are dealt

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

00:56:47.560 --> 00:56:54.560
 outage, Chris's crews are dispatched to go out and make changes to the distribution or

00:56:54.560 --> 00:57:03.200
 transmission system in the locality around Denton in order to try to remedy that outage.

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

00:57:10.520 --> 00:57:16.960
 members of ERCOT provide those services for their own transmission system and for their

00:57:16.960 --> 00:57:20.880
 own distribution system. Does that answer your question, sir?

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

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

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

00:57:37.160 --> 00:57:44.760
 we're dealing as openly and forthrightly as possible. So I think acknowledging that the

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.

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

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

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

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

00:58:22.360 --> 00:58:27.600
 matter is we had an outage ourselves. So in that hypothetical world, that would have had

00:58:27.600 --> 00:58:33.840
 some consequences, too. And I was looking for an opinion on what would that have been?

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

00:58:41.360 --> 00:58:48.000
 secure backed up, except in this one week. Theoretically, we're more secure being backed

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

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

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

00:59:05.800 --> 00:59:13.000
 consequences too? Yes, sir. So the Denton Energy Center, as you know, is a 225 megawatt

00:59:13.000 --> 00:59:19.000
 facility and had it been available to run and assuming that hypothetically, it was only

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

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

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

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

00:59:43.800 --> 00:59:49.320
 all zero power for the community. Okay, thanks. I appreciate that. Thanks for

00:59:49.320 --> 00:59:53.680
 clarifying all that. Just a quick little follow up on that before

00:59:53.680 --> 00:59:58.960
 we take the next question. I just want to clarify for folks watching and anyone here

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

01:00:05.320 --> 01:00:11.840
 the deck, the Denton Energy Center back in 2016. And also point out Councilmember Meltzer,

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.

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

01:00:24.120 --> 01:00:29.680
 speaks in a very broad terms, it speaks in renewable energy, broadly, whether or not

01:00:29.680 --> 01:00:33.960
 someone interpreted that way, or whether or not in another conversation, even a private

01:00:33.960 --> 01:00:38.520
 conversation, it was presented that way. In just the statement that you read, there's

01:00:38.520 --> 01:00:44.000
 nothing in that statement that says to ramp up specifically Denton or to supplement specifically

01:00:44.000 --> 01:00:47.640
 Denton's renewables. No, I mean, if you'll allow me to respond,

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

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

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.

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

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

01:01:16.900 --> 01:01:21.720
 why members of the public are confused. And hopefully now we've addressed that.

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

01:01:25.400 --> 01:01:30.320
 portion when Terry presents, I think it's important to keep the full context of that

01:01:30.320 --> 01:01:36.640
 conversation in mind, what public perception was, what the actual message conveyed was,

01:01:36.640 --> 01:01:42.040
 they very well may have been two different things. Other questions for Chris's portion

01:01:42.040 --> 01:01:52.440
 of the presentation. Councilmember Ryan. Thank you. Just for for public knowledge, a lot

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

01:01:55.760 --> 01:02:02.200
 a hospital circuit. And we have a lot of water and wastewater infrastructure throughout the

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?

01:02:11.560 --> 01:02:20.200
 For per circuit? Well, we can do some quick math there, Councilmember Ryan, as we looked

01:02:20.200 --> 01:02:25.180
 at our data through the through the winter event here, our all electric homes, we were

01:02:25.180 --> 01:02:35.440
 averaging about 157 homes or customers per megawatt. For our gas heat areas, that number

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

01:02:41.980 --> 01:02:48.320
 per feeder, you're talking about 1600, roughly 1600 homes per feeder, just customers per feeder

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

01:02:54.880 --> 01:03:00.840
 close to a lift station that thought that they were on a hospital circuit when they

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

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

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,

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

01:03:21.920 --> 01:03:27.120
 that that infrastructure, and we have two major hospitals. So as you can see, there's

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

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

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

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,

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

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

01:03:57.520 --> 01:04:02.760
 the street was a different circuit. So that that that kind of explains that. But yes,

01:04:02.760 --> 01:04:08.800
 there are other facilities, fire stations, the water treatment plants that were that

01:04:08.800 --> 01:04:13.840
 were on that critical list that they they remained on during the event.

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

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

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

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

01:04:39.240 --> 01:04:43.880
 possibly something that we could all different places could consider that would make it a

01:04:43.880 --> 01:04:50.800
 lighter for the load that perhaps if we were in this situation again,

01:04:50.800 --> 01:04:56.080
 I mean, customer Johnson, they had specialized equipment and the way they were set up is

01:04:56.080 --> 01:05:01.920
 if their their switches detected grid power, that their generator generators would not

01:05:01.920 --> 01:05:09.200
 come on. There are there are facilities in in in Denton that have backup generators,

01:05:09.200 --> 01:05:13.420
 where they fell over, they lose power and that generator automatically automatically

01:05:13.420 --> 01:05:19.200
 comes on. So that technology is out there. That was a very unique situation to disconnect

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.

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

01:05:30.360 --> 01:05:39.680
 our source of power from their facility. Okay, other questions for Chris? Chris, I've

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

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

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

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,

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

01:06:03.120 --> 01:06:07.400
 something like that? No, sir, there is not that again, that that

01:06:07.400 --> 01:06:14.040
 plan is confidential. Probably got a lot of just real real world knowledge during this

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.

01:06:20.560 --> 01:06:25.260
 So I mentioned those connection points. So just because you're on this circuit, you know,

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

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

01:06:34.680 --> 01:06:40.000
 things. So it doesn't necessarily mean you stay on the same circuit. But but generally,

01:06:40.000 --> 01:06:47.120
 I think, speaking the hypothetically, if your power did not go out during this outage, as

01:06:47.120 --> 01:06:53.800
 I noted that every circuit on our system other than our critical circuits were rotated, that

01:06:53.800 --> 01:06:58.440
 could probably give those those customers an idea if they're on one of those circuits

01:06:58.440 --> 01:07:02.600
 or not as of today. Okay. And I know you described for some of

01:07:02.600 --> 01:07:09.160
 the challenges in in rotating those outages and keeping track of which circuits have been

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

01:07:15.560 --> 01:07:19.280
 make those decisions? We know that that load shed plan is confidential and confidential

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

01:07:23.600 --> 01:07:28.840
 those decisions? As far as when we rotated or how we rotated

01:07:28.840 --> 01:07:33.080
 the circuits? Sure, you know, I think there are probably a lot of folks who incorrectly

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

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

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

01:07:46.860 --> 01:07:50.580
 dialysis clinic that you scheduled. Can you tell us a little bit more about what some

01:07:50.580 --> 01:07:54.840
 of our residential customers were experiencing? Yes, sir, I can. So what our operators were

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

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

01:08:05.280 --> 01:08:11.320
 point, you would have had those circuits would have had 30 minutes on and then theoretically

01:08:11.320 --> 01:08:16.120
 30 minutes off. Now, there was a transition. It takes about 15 minutes for our operators

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.

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

01:08:29.520 --> 01:08:36.080
 our feeders. And then that was determined. So operators will go with the hundred the

01:08:36.080 --> 01:08:41.120
 hundred megawatt load shed. So ERCOT calls in and says who you're instructed to shed

01:08:41.120 --> 01:08:46.360
 one hundred megawatts of your load. Now you acknowledge that at that point, whatever your

01:08:46.360 --> 01:08:51.880
 system load is at that point, you must remove one hundred megawatts. So as I mentioned,

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

01:08:58.320 --> 01:09:03.400
 as close as we could the feeders that totaled one hundred megawatts. We remove those from

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

01:09:07.760 --> 01:09:14.080
 that, we had to identify the next grouping of circuits that totaled one hundred megawatts.

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

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

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

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

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

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

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

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

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

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

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

01:10:15.440 --> 01:10:21.280
 spread out the rotations amongst all the feeders in a very systematic manner. But basically

01:10:21.280 --> 01:10:25.840
 it was driven by the load shed instruction and the feeders that were available that totaled

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

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

01:10:43.800 --> 01:10:53.280
 member Johnson's asked. If a large a large customer like Target can disconnect from the

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

01:10:58.960 --> 01:11:06.800
 solar? I have a bunch of friends with rooftop solar whose solar did nothing because the

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

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.

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

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

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

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

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

01:11:49.840 --> 01:11:55.600
 the safety of our linemen. So if the power is disconnected, those solar panels are interconnected

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

01:12:01.400 --> 01:12:06.820
 the resident, that power would flow through the transformer and would energize the line.

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

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

01:12:19.080 --> 01:12:26.840
 would island the the the solar the the solar generation for that resident and only provide

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

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

01:12:37.680 --> 01:12:43.560
 a standalone mode where they can power the house while connected to the to the grid.

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

01:12:48.760 --> 01:12:53.640
 now, the interconnection standard for that is no. And the reason is because those customers

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

01:13:01.400 --> 01:13:05.920
 have backup generators are not looking to sell that power. They're looking to power

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

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

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

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

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

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

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

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

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

01:14:04.080 --> 01:14:10.840
 the rotating outage. And, you know, you saw that fraction were half a percent. Encore

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

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.

01:14:21.360 --> 01:14:25.800
 The grid would have crashed, there would have been a blackout situation. And again, then

01:14:25.800 --> 01:14:31.080
 all 24 million Texans would have been without power. So there was both the the regulatory

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.

01:14:39.280 --> 01:14:46.600
 Councilmember Armitage. Yeah, to speak to what you just said, I mean, a fine of million

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.

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

01:14:57.280 --> 01:15:09.240
 Texas. So I have two related questions. One about battery storage. And these are forward

01:15:09.240 --> 01:15:22.680
 looking questions. And another about the the national grid versus ERCOT. If we had had,

01:15:22.680 --> 01:15:31.680
 you know, utility scale battery storage for our generating facility, would that or to

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

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

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

01:15:54.520 --> 01:15:59.920
 shedding demands in a situation like that. And secondly, you know, as a lot of people

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

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

01:16:19.680 --> 01:16:29.480
 know, just as Denton has back up through the grid, through ERCOT, the national grid provides

01:16:29.480 --> 01:16:36.480
 an even even greater backup system that's also more heavily regulated. So I was wondering

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

01:16:41.040 --> 01:16:46.440
 there are a number of factors that would complicate individual cities getting on the grid. But

01:16:46.440 --> 01:16:54.360
 if you could just, you know, confirm that latter point about the national grid and,

01:16:54.360 --> 01:16:59.600
 you know, give whatever specifics you can moving forward about municipal utility scale

01:16:59.600 --> 01:17:04.600
 battery storage. Thanks. Thank you, Councilmember Armitage. I can speak to your second question

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

01:17:10.240 --> 01:17:15.440
 at the deck facility, we have some utility scale, which you would be talking megawatt

01:17:15.440 --> 01:17:20.440
 hour battery storage, I believe that would be considered a generating asset. So that

01:17:20.440 --> 01:17:26.600
 those those that electricity would be generated that would be put onto the grid from that

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.

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

01:17:37.000 --> 01:17:40.360
 generation that would have been put on the grid would have been additional load shed

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,

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

01:17:51.600 --> 01:17:56.160
 storage, that capacity, that's not the same thing. So that would have helped with the

01:17:56.160 --> 01:18:03.080
 rotating outages for the individual customers that had a battery storage at their at their

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.

01:18:07.640 --> 01:18:12.240
 Nalty tackle the your first question. Thank you.

01:18:12.240 --> 01:18:18.960
 Yes, thank you. So first, battery storage, just a little bit more on what Chris said,

01:18:18.960 --> 01:18:27.840
 you know, typically battery storage is a is a short duration resource. And this event

01:18:27.840 --> 01:18:34.400
 lasted five days. So the longest batteries would be four hours of storage and would have

01:18:34.400 --> 01:18:41.360
 only provided backup or additional generation, if you will, for about a four hour period.

01:18:41.360 --> 01:18:46.760
 And I think as you Councilmember armature recall from the last time we we brought such

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

01:18:53.360 --> 01:18:58.760
 aren't cost effective relative to to others. Now, maybe this event might change that a

01:18:58.760 --> 01:19:04.140
 little bit, but we'll have to see. With regard to your question about interconnecting

01:19:04.140 --> 01:19:10.640
 to the other grid, so there are two additional grids that ERCOT could interconnect with.

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

01:19:21.280 --> 01:19:28.280
 a third the SPP. In, in the event that an individual city wanted to interconnect with

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.

01:19:33.960 --> 01:19:40.240
 And for us in Denton, it would the closest would be into Oklahoma somewhere. That process

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

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

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

01:20:00.000 --> 01:20:07.080
 just one, but two lines to two desperate, disparate points in the grid to interconnect

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

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

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

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

01:20:37.360 --> 01:20:45.120
 of our renewable assets. So to think that we would be able to actually mitigate damages

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

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

01:20:58.320 --> 01:21:03.160
 just from a behavioral perspective as being a participant in ERCOT and understanding that

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

01:21:09.960 --> 01:21:17.320
 benefits of the marketplace. And, you know, I would I would strongly recommend such an

01:21:17.320 --> 01:21:24.040
 approach. And thank you just to follow up. I was trying to make precisely that point

01:21:24.040 --> 01:21:31.320
 maybe sloppily. But my point being, I understand it. You know, people might be thinking that.

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

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

01:21:46.240 --> 01:21:52.040
 have a presentation next on the financial side of things. Some on the deck. But anything

01:21:52.040 --> 01:21:58.880
 else on operations rolling outage is that kind of thing. OK, the next portion is going

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.

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

01:22:10.440 --> 01:22:20.200
 to continue the meeting. Thank you, Mayor Pro Tem. Welcome back, everyone. Good afternoon.

01:22:20.200 --> 01:22:24.560
 This is a joint meeting of the Denton City Council and Public Utilities Board. We're

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

01:22:29.840 --> 01:22:35.760
 management, the Dent Energy Center, mitigation measures and ERCOP market reforms. We're going

01:22:35.760 --> 01:22:40.120
 to have opportunity for questions at the break. And I believe Mayor Hutzbeth will be joining

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,

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

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

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

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

01:23:12.000 --> 01:23:41.880
 to pull up the presentation. Okay. Winter Storm Uri, which was the name of the named

01:23:41.880 --> 01:23:49.760
 storm that impacted ERCOT and the Texas markets several weeks ago was an unprecedented record

01:23:49.760 --> 01:23:56.280
 storm that has brought to light the magnitude of the risks that all electric generation

01:23:56.280 --> 01:24:02.400
 and load serving entities face. The intensity and duration of the storm coupled with market

01:24:02.400 --> 01:24:09.440
 design flaws, lack of regulatory intervention, unprecedented demand for natural gas resulted

01:24:09.440 --> 01:24:15.400
 in rolling outages, loss of life, billions in property damages, and as I will report

01:24:15.400 --> 01:24:21.760
 here, significant unexpected power supply expenses that will ultimately have impacts

01:24:21.760 --> 01:24:28.480
 to our customer owners. This presentation will briefly put Uri in perspective relative

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

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

01:24:40.640 --> 01:24:46.360
 you with our current estimate of the financial impacts. I'll then discuss the evaluations

01:24:46.360 --> 01:24:53.360
 that are underway to mitigate the financial impacts of future storm events, discuss some

01:24:53.360 --> 01:24:58.920
 high level ERCOT reforms that we believe are needed, and finally answer questions that

01:24:58.920 --> 01:25:06.640
 you may have. While this discussion will look prospectively at ways to implement measures

01:25:06.640 --> 01:25:13.160
 to prevent future economic risks, I want to be clear that despite the measures that DME

01:25:13.160 --> 01:25:18.820
 will recommend today and in the future, without significant market reforms, the potential

01:25:18.820 --> 01:25:26.680
 for rotating outages across all of ERCOT will remain. Initial efforts that the electric

01:25:26.680 --> 01:25:32.760
 and gas industry are taking are aimed at providing earlier warning of potential events that could

01:25:32.760 --> 01:25:39.560
 result in outages due to lack of electric supply and to identify where better coordination

01:25:39.560 --> 01:25:45.740
 between the electric and natural gas industries have the potential to lessen the probability

01:25:45.740 --> 01:25:53.520
 and duration of a recurrence. Typically, the third week in February has a temperature range

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

01:26:01.040 --> 01:26:06.960
 three consecutive days in recorded history. From an electric demand perspective, the eight

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

01:26:15.800 --> 01:26:23.560
 rolling outages not occurred, demand would have been 70% higher than normal. Needless

01:26:23.560 --> 01:26:30.200
 to say, our forecasting tools failed to predict these high demands as the storm predictions

01:26:30.200 --> 01:26:37.920
 became stronger on Friday the 12th. We took additional price protection actions on that

01:26:37.920 --> 01:26:47.280
 day. For the ERCOT market, the financial impacts were nothing short of a disaster. In eight

01:26:47.280 --> 01:26:54.880
 days, the cost of energy and ancillary services exceeded the prior 11 years combined. And

01:26:54.880 --> 01:27:00.900
 as you have heard and will see later on, DME was significantly impacted by the sustained

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

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.

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

01:27:20.440 --> 01:27:28.040
 participants. The key conclusions I draw from what happened in the ERCOT wholesale market

01:27:28.040 --> 01:27:35.080
 are that first, the ERCOT generation portfolio is fragile, with over-reliance on intermittent

01:27:35.080 --> 01:27:42.480
 renewable resources that during the last two price excursions have not shown up. Secondly,

01:27:42.480 --> 01:27:47.440
 the market design is fundamentally flawed without sufficient economic incentives to

01:27:47.440 --> 01:27:54.760
 attract dispatchable generation and reserve capacity despite the $9,000 price cap. In

01:27:54.760 --> 01:28:01.080
 fact, historical market price formation has resulted in retirements of baseload capacity

01:28:01.080 --> 01:28:05.520
 that could have provided the needed reserves to have saved many lives and the economic

01:28:05.520 --> 01:28:14.680
 devastation. That said, this is not a phenomena that is unique to ERCOT. Third, price volatility

01:28:14.680 --> 01:28:21.200
 is likely to increase if continued development of intermittent resources with no ability

01:28:21.200 --> 01:28:31.540
 for these resources to operate when they are needed most. We have all heard legislators

01:28:31.540 --> 01:28:38.680
 and uninformed individuals make claims that DME was unhedged and that DME did not have

01:28:38.680 --> 01:28:44.000
 the ability to participate in the futures markets. I can categorically state that those

01:28:44.000 --> 01:28:50.360
 claims are untrue. As you know, DME has an energy risk management policy that is brought

01:28:50.360 --> 01:28:56.420
 before the PUB and Council each year for approval. That policy provides the necessary authority

01:28:56.420 --> 01:29:03.040
 for the city manager, the DME general manager, and DME staff to execute hedge transactions

01:29:03.040 --> 01:29:09.480
 consistent with the policy. Further, within the policy is a hedge plan that is updated

01:29:09.480 --> 01:29:15.440
 each year based upon market conditions. The objective of the hedge plan, implemented through

01:29:15.440 --> 01:29:20.700
 the authority you grant us under the energy risk management policy, is to control the

01:29:20.700 --> 01:29:30.600
 cost of purchase power within a range for budget and rate certainty purposes. The hedge

01:29:30.600 --> 01:29:36.440
 plan is premised upon weather normalized load forecast, renewable energy outputs, and futures

01:29:36.440 --> 01:29:42.120
 prices for electric and natural gas. While there is a band around the weather normalized

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

01:29:48.400 --> 01:29:56.400
 a reasonable level of a probability of occurrence. URI was well outside those limits. Going into

01:29:56.400 --> 01:30:01.360
 the storm, DME was in compliance with the limits of the energy risk management plan

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

01:30:06.760 --> 01:30:12.720
 management group, who act as an independent auditor of the performance of DME's energy

01:30:12.720 --> 01:30:20.680
 management organization. The hedge plan is based upon monthly granularity, and inside

01:30:20.680 --> 01:30:26.560
 the month, the energy management organization has the ability to optimize hedges to adjust

01:30:26.560 --> 01:30:33.400
 them for real-time market and weather conditions. In the case of URI, additional financial hedges

01:30:33.400 --> 01:30:40.640
 were placed on Thursday and Friday prior to the storm. The additional hedging actions

01:30:40.640 --> 01:30:48.200
 performed as designed, and contributed to over $23 million in positive value. Normally,

01:30:48.200 --> 01:30:55.640
 the weather or wind forecast change rapidly. Normally, when the weather or wind forecast

01:30:55.640 --> 01:31:09.520
 change rapidly, the EMO has the ability to take price hedging actions during the storm.

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

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

01:31:22.160 --> 01:31:29.920
 days, Saturday through Tuesday. By the time Tuesday arrived, the market was trading at

01:31:29.920 --> 01:31:35.960
 the maximum cap for the rest of the week, and no additional risk management trades were

01:31:35.960 --> 01:31:45.560
 available. According to the risk management plan that DME uses is the Denton Energy Center

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

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

01:31:58.720 --> 01:32:04.480
 will see, wind and solar resources, which are also hedges to our short load position,

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

01:32:11.960 --> 01:32:20.660
 not generated by the renewables. As we have entered into more solar power purchase agreements,

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,

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,

01:32:33.880 --> 01:32:39.960
 we lost natural gas pressure and consequently our deck hedge for almost two days, and thus

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

01:32:46.400 --> 01:32:54.640
 was the highest at night. A quick review of the current DME power supply

01:32:54.640 --> 01:33:00.640
 portfolio is presented here. The important point to understand is that our supply position

01:33:00.640 --> 01:33:10.280
 is 610 megawatts, and our normal season demand position in February is 170 megawatts. While

01:33:10.280 --> 01:33:16.160
 this may seem like way too much surplus, when the renewable power purchase agreements are

01:33:16.160 --> 01:33:22.280
 adjusted for the weather and normalized output, the predictable capacity is significantly

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

01:33:29.720 --> 01:33:37.720
 year, and as you can see, the demand was 140% of the normal levels.

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

01:33:44.520 --> 01:33:57.320
 walk through it with you quickly. I'm sorry, this is not the complicated one.

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

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

01:34:09.920 --> 01:34:17.720
 up, and you can see it was significantly higher than normal, especially the first two days.

01:34:17.720 --> 01:34:26.160
 That would be Saturday and Sunday. Monday is where you see the load reductions

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

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

01:34:41.520 --> 01:34:49.960
 would have been 400 megawatts, which would have been an all-time new peak for DME.

01:34:49.960 --> 01:34:57.840
 This will change our plans for our overall energy supply as we go forward.

01:34:57.840 --> 01:35:02.000
 I have alluded to the lack of intermittent renewable energy generation throughout the

01:35:02.000 --> 01:35:07.760
 event. This slide shows you the variability in the

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

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.

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

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

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

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,

01:36:00.160 --> 01:36:09.960
 and this blue line represents the off-peak high estimate that came in from ERCOT. It

01:36:09.960 --> 01:36:15.520
 would be above 10,000 megawatts of wind that would have showed up Thursday through Monday,

01:36:15.520 --> 01:36:25.400
 with Tuesday, Wednesday having lower levels. Here's where the actual wind low-level prediction

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

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

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

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

01:36:53.160 --> 01:37:01.640
 the revised forecast as we got into the day of delivery was significantly lower, representing

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

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

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

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

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

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

01:37:42.600 --> 01:37:51.240
 orange and gold bars, very large deviations that we saw. Now we come to the complicated

01:37:51.240 --> 01:37:59.680
 slide. So this slide provides the overall DME position from Friday the 12th through Friday

01:37:59.680 --> 01:38:06.480
 the 19th. We start with this horizontal dotted line that represents a balanced supply with

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

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

01:38:24.120 --> 01:38:32.240
 going into Sunday and Monday, $9,000. We had some deviations. There was a market algorithm

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

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

01:38:48.040 --> 01:38:56.640
 position. The green line represents our physical position that we had during the storm, and

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

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

01:39:09.160 --> 01:39:16.840
 Energy Center. Anytime the green line is above the dotted orange line, that means we have

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

01:39:25.080 --> 01:39:30.940
 here we see the dotted line, which shows what would have happened had the deck continued

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

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

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

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

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

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

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.

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

01:40:36.280 --> 01:40:41.480
 performance of each of the supply assets in our portfolio during the event. And I just

01:40:41.480 --> 01:40:47.320
 want to point out that the percent of expected output demonstrates that during the event,

01:40:47.320 --> 01:40:53.960
 wind energy was practically non-existent, and solar output was just over 50 percent

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

01:41:00.640 --> 01:41:05.480
 50 percent of a number that's significantly less than the installed capacity of each of

01:41:05.480 --> 01:41:14.520
 these resources. So it's a weathered, normalized output where we predict a probabilistic output

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

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

01:41:29.680 --> 01:41:35.840
 of a number that's significantly lower than 150 megawatts, which is what the wind resources

01:41:35.840 --> 01:41:47.320
 is capable of. The revenue numbers here are provided to contrast what the expected output

01:41:47.320 --> 01:41:55.480
 versus the actual output meant from a financial perspective. And as you can see, $180 million

01:41:55.480 --> 01:42:04.560
 of difference. Finally, this slide shows the estimated cost of the event to Denton. These

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

01:42:10.720 --> 01:42:17.000
 adjustments that will need to be made, depending upon whether or not ERCOT resettles the last

01:42:17.000 --> 01:42:22.880
 32 hours, and depending upon the outcome of our lawsuit against ERCOT. Let's go through

01:42:22.880 --> 01:42:31.040
 the numbers quickly. Over the event, DME paid ERCOT $209 million. After paying for energy

01:42:31.040 --> 01:42:36.960
 to service the demand, ancillary services, and other load-related charges, ERCOT paid

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

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

01:42:55.520 --> 01:43:05.000
 gas. We gained $23.2 million from hedging activities. Our fixed price payment for power

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

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

01:43:24.480 --> 01:43:31.600
 above $100 million and commercial paper debt. Finance will discuss the current plan for

01:43:31.600 --> 01:43:38.040
 reestablishing a reserve for DME, and we'll be providing a recommendation on rate impacts

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

01:43:44.200 --> 01:43:52.640
 provided two other scenarios for comparison. A normal February weather week, which would

01:43:52.640 --> 01:44:00.160
 have cost DME approximately $1.2 million, and a nominal supply performance scenario

01:44:00.160 --> 01:44:04.840
 to show what the potential outcome would have been had our supply resources been able to

01:44:04.840 --> 01:44:10.720
 supply their forecasted output. And as you can see, that outcome would have been much

01:44:10.720 --> 01:44:20.040
 better for DME. As I indicated, we'd experienced a significant

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

01:44:25.880 --> 01:44:32.760
 designed to withstand ambient temperatures down to 19 degrees without freeze-up. Temperatures

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

01:44:38.760 --> 01:44:48.720
 radiators froze up. On the left, you see the radiator banks, which are extensive. On the

01:44:48.720 --> 01:44:55.280
 right, you see the radiator coolant pipe freeze damage. We have completed temporary repairs

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,

01:45:02.920 --> 01:45:11.320
 we've not determined whether these repairs are sufficient to withstand high output conditions

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

01:45:17.160 --> 01:45:23.760
 or replace them. The damages have initiated a claim with our insurance carriers, and we

01:45:23.760 --> 01:45:29.680
 are in discussions with their engineers about the long-term fix. With regard to business

01:45:29.680 --> 01:45:34.960
 interruption insurance, I'm disappointed to inform you that the coverage will provide

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

01:45:42.600 --> 01:45:50.160
 kicks in. We are still evaluating whether future potential losses due to damage of the

01:45:50.160 --> 01:46:01.560
 radiators from the storm would be eligible for the claim.

01:46:01.560 --> 01:46:06.840
 A few challenges that were identified during the storm that we addressed are shown here.

01:46:06.840 --> 01:46:12.580
 As we all know now, cell towers that lost electric supply resulted in diminished cell

01:46:12.580 --> 01:46:18.120
 phone coverage, and landlines were impacted as well. DME is evaluating ways to avoid these

01:46:18.120 --> 01:46:23.240
 potential issues in the future. The major equipment problems identified include freeze-up

01:46:23.240 --> 01:46:29.560
 of the vent system in our air compressor rooms, cooling system transmitters that froze up,

01:46:29.560 --> 01:46:35.240
 and the inability to drain liquid from the cooling systems rapidly, which may have avoided

01:46:35.240 --> 01:46:40.760
 some of the freezing damage. Obviously, our cooling systems will need to be weatherized

01:46:40.760 --> 01:46:48.080
 and hardened as we are evaluating options. It goes without saying that we must never

01:46:48.080 --> 01:46:53.320
 let this happen again, and we're aggressively looking at ways to mitigate our future financial

01:46:53.320 --> 01:47:01.180
 and physical performance risk. Loss of fuel is the largest financial impact, and the options

01:47:01.180 --> 01:47:07.760
 under consideration include adding backup fuel, either propane or LNG. The engines would

01:47:07.760 --> 01:47:15.520
 require a modification for propane, and the air permit would also likely have to be modified.

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,

01:47:23.360 --> 01:47:31.000
 and we are investigating the costs and benefits associated with a second pipe connection.

01:47:31.000 --> 01:47:37.440
 Our current gas supply contract is a non-firm contract. Firming of gas supplies involves

01:47:37.440 --> 01:47:44.640
 the purchase of firm gas transport and storage of natural gas. This option would increase

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

01:47:51.240 --> 01:47:57.120
 put a booster compressor on the existing pipeline, as the supplier believes there is adequate

01:47:57.120 --> 01:48:03.200
 gas supply, just that high demand did not enable them to meet the inlet pressure requirements

01:48:03.200 --> 01:48:07.760
 of the deck. As you saw in the prior slide, the best performing

01:48:07.760 --> 01:48:17.200
 asset was our whitetail contract. It's a structured transaction that provides a guaranteed hourly

01:48:17.200 --> 01:48:23.960
 volume of energy at a fixed price from a renewable asset. The energy management organization

01:48:23.960 --> 01:48:32.880
 will begin analysis and seek proposals to swap some or all of our intermittent renewable

01:48:32.880 --> 01:48:39.880
 positions for financially settled fixed shapes at fixed prices. Obviously, this will increase

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.

01:48:47.080 --> 01:48:51.680
 We currently purchase outage insurance for the deck in the summer months to provide a

01:48:51.680 --> 01:48:58.120
 level of financial protection. We will evaluate adding winter coverage to that policy for

01:48:58.120 --> 01:49:03.060
 next year. As we discussed, our current hedge plan dictates

01:49:03.060 --> 01:49:09.680
 the hedging actions we must take. In consultation with the risk management committee, the EMO

01:49:09.680 --> 01:49:15.280
 will evaluate and provide recommendations on changes to the hedge targets for the winter

01:49:15.280 --> 01:49:22.440
 season. Intermittency of our renewable resources is something that can't be avoided. During

01:49:22.440 --> 01:49:31.880
 the last two $9,000 per megawatt-hour periods, our wind PPAs have delivered no energy.

01:49:31.880 --> 01:49:37.000
 We will evaluate ways to back up these resources with spending reserves from available market

01:49:37.000 --> 01:49:43.680
 resources and will adjust our renewable portfolio accordingly to achieve the 100% renewable energy

01:49:43.680 --> 01:49:48.520
 mandate under the Denton renewable resource plan.

01:49:48.520 --> 01:49:54.960
 There's a lot of discussion in Austin about winterizing gas and power assets. We have

01:49:54.960 --> 01:49:59.960
 already provided a discussion about these efforts at the deck, but we'll explore options

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

01:50:07.680 --> 01:50:14.480
 evaluate how to diversify our risk away from the deck. This could involve swapping capacity

01:50:14.480 --> 01:50:20.680
 with other gas-fired resources or putting in place financial transactions that are independent

01:50:20.680 --> 01:50:27.020
 of actual deck performance. One inexpensive option we are considering

01:50:27.020 --> 01:50:33.640
 is adding additional weather forecasting capabilities to the EMO. While we subscribe to services,

01:50:33.640 --> 01:50:40.120
 it may be prudent to add a meteorologist to staff to develop longer-range outlooks and

01:50:40.120 --> 01:50:46.120
 to run Denton-specific variations so that the EMO can take additional hedging positions

01:50:46.120 --> 01:50:53.360
 prior to weather events to provide needed financial protections. All of these options

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

01:50:58.840 --> 01:51:06.800
 and seek guidance and approval. Early in this presentation, I mentioned that

01:51:06.800 --> 01:51:14.440
 the ERCOT market reforms are needed. Clearly, this is not a well-functioning market. When

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

01:51:22.620 --> 01:51:30.480
 market participants are going bankrupt, the key items that I believe need to be addressed

01:51:30.480 --> 01:51:36.120
 are, first, the market must recognize and account for large numbers of intermittent

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,

01:51:46.760 --> 01:51:52.040
 over 48 percent of the energy could come from renewables in ERCOT. While this certainly

01:51:52.040 --> 01:51:59.000
 is meeting environmental policy objectives for Texas and has delivered low-cost energy,

01:51:59.000 --> 01:52:03.360
 these resources are not dependable at peak demand times.

01:52:03.360 --> 01:52:09.280
 Secondly, the uplift of defaulting parties' financial obligations to the remaining market

01:52:09.280 --> 01:52:16.160
 participants is not sustainable and leverages the strong credit ratings and balance sheets

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

01:52:23.640 --> 01:52:31.560
 also violates the state constitution. The third item is runaway prices for protracted

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

01:52:38.080 --> 01:52:42.560
 to protect ratepayers and market participants is needed.

01:52:42.560 --> 01:52:48.000
 Fourth, because Texas relies almost exclusively on natural gas to back up the intermittency

01:52:48.000 --> 01:52:53.920
 of renewables and to provide spinning reserves, better coordination between the electric and

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

01:52:59.960 --> 01:53:08.640
 additional load shed events.

01:53:08.640 --> 01:53:14.720
 Before we get to questions, I wanted to briefly discuss what we expect from the legislature

01:53:14.720 --> 01:53:21.680
 and ERCOT and the PCT. ERCOT has issued an order to resettle certain ancillary costs

01:53:21.680 --> 01:53:28.160
 during the EAA event, during the load shed event. This is a generating unit by generating

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

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

01:53:43.960 --> 01:53:49.520
 services that we incurred during the period. But I can't provide any estimates at this

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.

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

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

01:54:13.100 --> 01:54:19.520
 complicated to think about resettling this period. International markets have already

01:54:19.520 --> 01:54:26.680
 settled trades based upon the cleared prices. For DME, the resettlement could cost us up

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

01:54:33.560 --> 01:54:38.120
 comments with the Public Utility Commission of Texas indicating that we are opposed to

01:54:38.120 --> 01:54:45.040
 such a resettlement. Council has heard from legal counsel on the merits of our case against

01:54:45.040 --> 01:54:50.820
 ERCOT. At this point, it is impossible to predict the magnitude of the uplift because

01:54:50.820 --> 01:54:57.140
 market participants' short pays and defaults are still occurring without remedy. Two large

01:54:57.140 --> 01:55:03.320
 cooperatives that have declared bankruptcy need to be settled before a reasonable estimate

01:55:03.320 --> 01:55:08.740
 can be established. A number of bills have been introduced and scheduled for hearing

01:55:08.740 --> 01:55:15.720
 this week that are aimed at requiring integration of the natural gas and electric regulatory

01:55:15.720 --> 01:55:22.040
 bodies. It's likely that something makes it out of the legislature, and we will continue

01:55:22.040 --> 01:55:29.920
 to monitor these develops and keep both of these bodies informed. And with that, Mayor

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

01:55:36.440 --> 01:55:49.160
 questions. Okay. Thank you, Terry. And thank you, Mayor Pro Tem. Appreciate your assistance

01:55:49.160 --> 01:55:56.880
 with that. So we'll take questions. Let's go Commissioner Bill Cheek, and then Council

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

01:56:06.080 --> 01:56:11.720
 get Armature, Council Member Armature. Okay. Mr. Cheek.

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

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,

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

01:56:41.400 --> 01:56:48.120
 turned back on? Yes. So the Denton Energy Center tripped on

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

01:56:57.440 --> 01:57:05.880
 morning. In discussions with the pipeline provider, or the gas provider, they are still

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

01:57:12.000 --> 01:57:15.680
 they believe that the pressure should have been sufficient. However, we do have the data

01:57:15.680 --> 01:57:23.140
 needed to support that the units could not be started back up because of low pressure.

01:57:23.140 --> 01:57:33.640
 During that time, we were paying just absolutely outrageous prices. Normally gas this time

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.

01:57:40.040 --> 01:57:49.520
 We paid as high as $700 a million BTU during the event.

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

01:57:58.280 --> 01:58:04.760
 for the low pressure? We have not been able to verify that we were

01:58:04.760 --> 01:58:10.600
 curtailed in our discussions with the gas pipeline company. They have claimed that there

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

01:58:19.720 --> 01:58:28.440
 the home heating and other electrical demand that the system just couldn't keep up with

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

01:58:35.840 --> 01:58:43.920
 with the rolling outages, this phenomenon was experienced by dozens of plants around

01:58:43.920 --> 01:58:51.560
 the Aricot market. We have Councilmember Meltzer, Commissioner

01:58:51.560 --> 01:59:02.920
 Parker, Armature, and then, Mr. Rybak, I see you there after Councilmember Armature.

01:59:02.920 --> 01:59:14.240
 Thank you. I would just like to unpack the dynamics of what happened a little further.

01:59:14.240 --> 01:59:22.960
 Our contracted resources weren't performing, and the deck had that interruption, so we

01:59:22.960 --> 01:59:27.400
 had to go to the market without a hedge, and the prices were super high.

01:59:27.400 --> 01:59:34.400
 Now, the prices were super high. Why? Was it because the other power providers

01:59:34.400 --> 01:59:39.680
 in the grid were paying super high prices for natural gas?

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

01:59:48.760 --> 01:59:56.020
 minutes based on the relationship of supply and demand. And when there's not enough supply

01:59:56.020 --> 02:00:03.200
 to meet demand, certain scarcity price adders are added to the equation.

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

02:00:10.320 --> 02:00:19.480
 providers to produce, and does the price need to be higher because they were facing high

02:00:19.480 --> 02:00:22.640
 natural gas prices? You follow me? Why do they need it?

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

02:00:29.200 --> 02:00:39.460
 prices, gas prices were at normal levels, yet we saw $9,000 prices because supply did

02:00:39.460 --> 02:00:46.720
 not meet the demand. And any time that supply is less than demand

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

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.

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

02:01:10.920 --> 02:01:17.160
 capacity remains online for that five-minute period.

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,

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

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

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

02:01:49.200 --> 02:01:57.160
 no sun, and therefore it couldn't keep up with an all-time record peak demand.

02:01:57.160 --> 02:02:04.680
 And I want to quickly point out, it wasn't just renewable resources that were down.

02:02:04.680 --> 02:02:11.200
 It was everything, correct. Who benefited from the price being that high

02:02:11.200 --> 02:02:17.320
 for that long? Who backed up the Brinks truck to City Hall?

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.

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

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

02:02:39.240 --> 02:02:48.640
 big money. And that would be speculation by trading companies, by hedge funds that are

02:02:48.640 --> 02:02:55.640
 in the business of taking on risk for profit. And through the financial markets, they made

02:02:55.640 --> 02:03:00.680
 bets that prices would be high. They didn't know they were going to be this

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

02:03:05.960 --> 02:03:16.040
 off for them. This is all taking place during a declared

02:03:16.040 --> 02:03:24.400
 disaster. So I imagine that's the foundation for a price gouging investigation, where you

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.

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

02:03:40.960 --> 02:03:47.360
 the windfall profits went, but given that it was during a declared disaster, not just

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

02:03:53.400 --> 02:04:00.280
 any appetite at all for any kind of a clawback of windfall profits wherever they fell?

02:04:00.280 --> 02:04:04.920
 My understanding, Council Member Meltzer, is that if there were going to be an investigation

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

02:04:11.440 --> 02:04:16.320
 not aware that that investigation has begun. I know there are requests for information

02:04:16.320 --> 02:04:21.280
 that have come from the attorney general to various market participants.

02:04:21.280 --> 02:04:30.920
 I'll pause. All right. And then Commissioner Parker.

02:04:30.920 --> 02:04:35.240
 I've been getting several questions, because everybody knows I moved here from the frozen

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

02:04:43.720 --> 02:04:50.760
 weren't working? And what can we do to ensure that winterization is better? Another question

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

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

02:05:07.280 --> 02:05:14.720
 it's that we design them differently. You design for heat here, redesign for cold there.

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,

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,

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

02:05:35.600 --> 02:05:40.720
 as less devastating as it is? Was that way too many all at once?

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

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

02:05:53.240 --> 02:05:59.280
 for the weekend, and even into into Monday, relative to what normal wind levels would

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

02:06:07.320 --> 02:06:15.840
 would be significantly double that, triple that number. What happened was as the precipitation

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

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

02:06:28.120 --> 02:06:35.040
 them from freezing up. Same phenomena here. Ice got on the blades and the blades were

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

02:06:45.120 --> 02:06:53.160
 physically could not operate because there was frozen ice on the blades. So that was

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

02:07:01.160 --> 02:07:10.280
 climes where we see that. My understanding though is that in Minnesota, Iowa, those places,

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

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,

02:07:24.880 --> 02:07:31.360
 the cost to install heaters, for example, on those blades is prohibitive and is not

02:07:31.360 --> 02:07:40.020
 normally done. For the deck, you are correct. We designed the deck, as I mentioned, for

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

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.

02:07:55.200 --> 02:08:01.320
 The output would be adversely affected because as you add more glycol to the coolant systems,

02:08:01.320 --> 02:08:07.440
 you get less heat transfer and that would reduce the output. What was a 225 megawatt

02:08:07.440 --> 02:08:13.380
 output would probably drop down below 200 if we had glycol concentrations that were

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

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

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

02:08:35.080 --> 02:08:40.920
 operating costs because we were paying very high costs for gas at that time. And that

02:08:40.920 --> 02:08:49.640
 number was probably north of $50 million. Thank you. Okay. Thank you. And Council Member

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

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

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

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

02:09:35.200 --> 02:09:47.520
 the recent Snowpocalypse, Snowvid event. And also, you know, given our limited ability,

02:09:47.520 --> 02:09:56.340
 in fact, in capacity to regulate weatherization of renewable resources for those entities

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

02:10:04.800 --> 02:10:11.120
 your wind generation facilities if they're not our facilities. So given all of those

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

02:10:18.400 --> 02:10:26.940
 or I should say, are we considering investing in renewable, in weatherized renewable generation

02:10:26.940 --> 02:10:37.880
 sources as well as battery storage, but especially the weatherized renewable generation sources

02:10:37.880 --> 02:10:46.600
 which are not dependent on fossil fuel to run and would presumably, you know, would

02:10:46.600 --> 02:10:54.480
 satisfy that, you know, at the proper scale, that generation work requirement of ERCOT

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

02:10:59.000 --> 02:11:04.720
 looking there. Sure. That's a good question and I think the

02:11:04.720 --> 02:11:14.080
 answer is pretty simple. We have looked at other sources of renewable energy in different

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

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,

02:11:29.780 --> 02:11:37.600
 Councilmember Armenter, we had evaluated coastal wind last year and we found that it did not

02:11:37.600 --> 02:11:44.160
 compete well from a financial perspective with other sources of renewable energy that

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

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

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

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

02:12:10.480 --> 02:12:16.840
 be significantly higher. But I think the one point that everyone needs to keep in mind

02:12:16.840 --> 02:12:24.240
 is that regardless of the renewable resource that we contract with, what history has shown

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

02:12:32.240 --> 02:12:38.680
 they are by nature intermittent and they can only produce during times when the wind is

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

02:12:46.120 --> 02:12:52.080
 back up that intermittency, and that's what the DEC is intended to do.

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

02:12:59.720 --> 02:13:07.880
 understand that renewable energy is intermittent, but it's also my understanding that when the

02:13:07.880 --> 02:13:15.160
 city invested in enterprise consulting to help balance our renewable portfolio, they

02:13:15.160 --> 02:13:22.840
 explained how a balanced renewable portfolio that includes coastal wind, and that was the

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.

02:13:29.040 --> 02:13:32.820
 It makes sense that the price would go up now that people are seeing or understanding

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.

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

02:13:49.920 --> 02:14:04.240
 least supposed to provide, covers that limitation of the intermittent nature of those renewable

02:14:04.240 --> 02:14:10.040
 resources. Gas, as we found out, is also intermittent, dependent on pricing and availability, also

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

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

02:14:26.960 --> 02:14:32.960
 of investing in coastal wind, because I continue to believe that even though it costs more,

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

02:14:39.700 --> 02:14:47.440
 one, or at least a smaller one, is related to Commissioner Parker's question about winterization

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

02:14:54.640 --> 02:15:03.000
 if you could speak about what you mentioned about the consideration of possibly hiring

02:15:03.000 --> 02:15:16.560
 an in-house meteorologist to consider weather issues and to what extent we know the weatherization

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

02:15:24.200 --> 02:15:28.400
 would think, okay, because of the weather and because we have these contracts with these

02:15:28.400 --> 02:15:34.960
 wind generation facilities that are not properly weatherized, it's going to affect us in this

02:15:34.960 --> 02:15:42.360
 that way. Are those contractors transparent with, maybe not with the public, but at least

02:15:42.360 --> 02:15:48.840
 with the cities they contract with, about their weatherization? And to what extent would

02:15:48.840 --> 02:15:55.100
 a meteorologist be able to help us better prepare for that?

02:15:55.100 --> 02:16:01.480
 The concept of bringing a meteorologist on board to help us to better predict weather

02:16:01.480 --> 02:16:11.160
 is really focused on taking real-time actions to hedge price risk based upon those weather

02:16:11.160 --> 02:16:20.200
 forecasts. And I would not tie it to the physical assets themselves, the renewable assets. Under

02:16:20.200 --> 02:16:27.440
 our power purchase agreements, our suppliers are not obligated to provide us a quantity

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

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

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

02:16:44.960 --> 02:16:50.840
 the economics and the risk profile for that particular generator. And we would have to

02:16:50.840 --> 02:16:56.680
 renegotiate those contracts almost entirely. So while I understand what you're saying,

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

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

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

02:17:15.400 --> 02:17:24.640
 proactive hedging in real time in order to recognize the risks that we face with the

02:17:24.640 --> 02:17:32.240
 intermittency of our renewables. And as you point out, the potential for a gas interruption.

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

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

02:17:45.000 --> 02:17:49.040
 that now. Mayor Hudspeth, or should I wait until --

02:17:49.040 --> 02:17:54.400
 Yes, go right ahead. Okay. Thank you. This is when you were talking

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

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

02:18:08.680 --> 02:18:14.960
 investigated our contracts with Wartsilla, the gas plant manufacturer, and also Burns

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

02:18:22.040 --> 02:18:29.560
 those contracts were established, but to see if there's anything in those contracts that

02:18:29.560 --> 02:18:37.040
 could have possibly misrepresented, you know, the preparedness of the DEC, you know, for

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

02:18:41.640 --> 02:18:47.760
 time to ask. We've accepted the facility, and the warranty

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

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,

02:19:02.280 --> 02:19:06.520
 help me enunciate your last name right. You are correct, Ryback.

02:19:06.520 --> 02:19:11.320
 Okay. Thank you, sir. No, thank you. I appreciate it. Terry, I've

02:19:11.320 --> 02:19:16.960
 got a real nerdy engineering question for you. When you were talking about the problems

02:19:16.960 --> 02:19:24.060
 with the DEC, the one thing that caught my attention was a cooling system transmitter scaling.

02:19:24.060 --> 02:19:29.600
 So I'm curious if you could clarify that. And secondarily, you talked about some heat

02:19:29.600 --> 02:19:37.120
 exchanger mitigation to overcome the very cold temperatures and the -- obviously, the

02:19:37.120 --> 02:19:42.880
 heat exchanger is full of water. So what are those strategies, and could you just expound

02:19:42.880 --> 02:19:50.880
 on that a little bit? Sure. The transmitter scaling issue was really

02:19:50.880 --> 02:19:58.240
 freezing up of the transmitters and the ice that was forming inside of the transmitters

02:19:58.240 --> 02:20:03.360
 themselves or the sensors, the sensing probes for temperature. We couldn't get an accurate

02:20:03.360 --> 02:20:12.960
 temperature reading on the liquid that was in the radiator systems. The mitigation, as

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.

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

02:20:27.520 --> 02:20:35.640
 where the heated fluid comes in, passes all the way through the heat exchanger and comes

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

02:20:44.760 --> 02:20:50.680
 around to return the liquid. That's where we saw the bulk of the damage.

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

02:20:56.160 --> 02:21:03.000
 rather than the radiators themselves. We do not believe that there's damage to the long

02:21:03.000 --> 02:21:10.000
 runs that run through the radiator fins themselves. Right, through the coil tubes themselves.

02:21:10.000 --> 02:21:13.640
 Yep. Okay. Has any thought been given to providing

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

02:21:18.680 --> 02:21:22.720
 this, of course? Yes, sir. That's what we're considering is

02:21:22.720 --> 02:21:31.800
 we'll be doing an analysis, engineering analysis of whether adding heat or adding additional

02:21:31.800 --> 02:21:40.520
 glycol concentrations or having the ability to evacuate that liquid very quickly in the

02:21:40.520 --> 02:21:45.640
 event that it drops below design temperatures. And we'll do a net present value analysis

02:21:45.640 --> 02:21:53.040
 to bring it back to you and give you our recommendation on the path to proceed.

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

02:21:57.440 --> 02:22:01.840
 have to step away for a few minutes. I beg your indulgence, but I shall return.

02:22:01.840 --> 02:22:08.120
 Thank you. Mayor Pro Tem Davis, then Commissioner Solve,

02:22:08.120 --> 02:22:14.640
 and then Ben, did I see your hand? Okay. Yeah. And then Ben, thank you.

02:22:14.640 --> 02:22:20.400
 Thank you, Mayor. Terry, my first questions are about the legislature. First, on the resettlement

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

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.

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

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

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

02:22:48.840 --> 02:22:55.800
 at for resettlement? And in a general sense, who would benefit? We know the municipal operators

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

02:23:00.960 --> 02:23:07.200
 that market is resettled? That's a great question. So the bill has been

02:23:07.200 --> 02:23:13.240
 referred to state affairs, we understand that state affairs will take their time to gather

02:23:13.240 --> 02:23:21.640
 additional information before they hear the bill and before they take a vote on it. So

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

02:23:28.560 --> 02:23:36.320
 before the end of the event, there was adequate reserve capacity in the market, where ERCOT

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

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.

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

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

02:24:06.560 --> 02:24:11.520
 reserve capacity was in the market, and then another generating unit would have tripped

02:24:11.520 --> 02:24:19.240
 off, they would have been back into rolling outages again. And so ERCOT decided that they

02:24:19.240 --> 02:24:28.120
 would not release the $9,000 until such time as they had adequate reserve capacity online

02:24:28.120 --> 02:24:35.040
 to assure that when those when that load came back on, there would be sufficient resources

02:24:35.040 --> 02:24:41.560
 with adequate reserves to meet the demand. And that's been referred to by the lieutenant

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

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

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

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

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,

02:25:19.480 --> 02:25:24.520
 because all the energy that we could produce was not needed, there wasn't sufficient demand

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

02:25:31.060 --> 02:25:38.480
 charge or a reserve charge for the difference between the level that we were putting out

02:25:38.480 --> 02:25:43.280
 and the maximum that they could achieve at that time. And it's that difference where

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

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

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

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?

02:26:09.440 --> 02:26:16.720
 Are those mostly municipal operators? Are they? Are they mostly privately held companies?

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,

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

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

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,

02:26:43.960 --> 02:26:49.320
 you would be a winner in a resettlement. If you had generation that you were injecting

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

02:26:58.880 --> 02:27:03.360
 talked briefly about ERCOT reforms that are in the legislature. And the speaker proposed

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

02:27:09.600 --> 02:27:15.480
 changing the governance of ERCOT just a little bit, you know, putting some consumer representatives

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

02:27:20.000 --> 02:27:25.440
 to restructure ERCOT, not just change the board up, but to restructure ERCOT, what it

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

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

02:27:40.200 --> 02:27:47.720
 is that because this is so complicated, and because the market is to change the market

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

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.

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

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

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?

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,

02:28:25.560 --> 02:28:33.320
 our generation picture, the wind resources that performed in a disappointing way, the

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

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,

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

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

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

02:29:00.720 --> 02:29:04.680
 position. We were in a very good generation position. We're all suffering through the

02:29:04.680 --> 02:29:11.880
 rolling blackouts that are rolling outages that ERCOT was prescribing us to do. But up

02:29:11.880 --> 02:29:16.800
 until that moment, the city of Denton and DME financially was doing everything exactly

02:29:16.800 --> 02:29:21.680
 as we should. I think that's an accurate statement. I would

02:29:21.680 --> 02:29:27.440
 point out that during those first two days, Saturday and Sunday, demands were significantly

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

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

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

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

02:29:57.400 --> 02:30:03.200
 action on Thursday and Friday and putting hedge transactions in, recognizing that the

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

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

02:30:17.340 --> 02:30:24.640
 out, you know, making money. But we would have certainly been well within the reserves

02:30:24.640 --> 02:30:28.800
 that we have set aside for these types of events. Thanks.

02:30:28.800 --> 02:30:36.960
 Okay, Commissioner Soff. Yeah, Terry, thank you for your presentation.

02:30:36.960 --> 02:30:46.280
 It answered most of my questions and very, very informative. My question is, is this

02:30:46.280 --> 02:30:55.260
 will the vulnerabilities that have been exposed by this extreme weather be incorporated into

02:30:55.260 --> 02:31:03.580
 a long range resilience strategy plan that will address the continuing impacts of climate

02:31:03.580 --> 02:31:10.840
 change on our area? Well, I can speak to kind of the long range

02:31:10.840 --> 02:31:17.880
 as I mentioned early in my presentation, the fact that the unabated demand would have been

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

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

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

02:31:43.400 --> 02:31:48.840
 have said it's a result of climate change because of the changing climate. It causes

02:31:48.840 --> 02:31:57.880
 these types of volatility in weather patterns. And we don't know definitively whether that's

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

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

02:32:12.280 --> 02:32:18.360
 episodes of winter cold weather, whether they're repeatable or not, and only time will tell

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.

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

02:32:28.280 --> 02:32:33.360
 them. Thanks. I think precaution is the best policy.

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

02:32:42.340 --> 02:32:52.840
 efforts within the city for energy conservation and building codes that are more more appropriate

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.

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

02:33:04.060 --> 02:33:13.720
 can do to lessen the impacts of these things. Thank you. Okay. And Commissioner Jumper.

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

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

02:33:28.240 --> 02:33:32.940
 a whole lot, given the things we know about Texas with drought and hurricanes and tornadoes

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

02:33:42.020 --> 02:33:47.440
 standard practice? What are what are other places doing? Are we doing better or worse?

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

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

02:33:59.000 --> 02:34:06.280
 bought prepaid on Thursday or Friday through the following Tuesday for energy. So that

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

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

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

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

02:34:33.560 --> 02:34:41.080
 on any of those temporal periods. So in our hedging plan, because we look at monthly,

02:34:41.080 --> 02:34:48.080
 our monthly exposure, we generally are doing monthly transactions, some annual transactions

02:34:48.080 --> 02:34:56.920
 because we do hedge out into the future, a significant amount. In this particular case,

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

02:35:02.480 --> 02:35:08.340
 sigma or a black swan event from a probability perspective, the fact that it occurred over

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

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

02:35:22.320 --> 02:35:29.240
 getting colder and colder and colder. And the weather kept moving out one more day, one

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,

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

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,

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

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

02:35:57.560 --> 02:36:04.980
 hedge and expose ourselves to significant financial risk. Now, if we had a crystal ball,

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

02:36:10.500 --> 02:36:17.320
 to lose pressure, we would have taken more aggressive actions the prior week. But there's

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

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,

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

02:36:34.880 --> 02:36:36.360
 of you at the time.

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

02:36:44.600 --> 02:36:53.240
 our purchases are hedged or in real time or whatnot? What can you speak to that?

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

02:36:59.120 --> 02:37:10.320
 information that's protected under the under the appropriate acts or sections of the statute.

02:37:10.320 --> 02:37:21.600
 But we, we, we hedge almost 100% of our expected demand and our expected generation.

02:37:21.600 --> 02:37:31.400
 Okay. Thank you. Okay, no other question. Okay, anyone. So let's go Councilmember Ryan,

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

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.

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

02:37:44.440 --> 02:37:46.480
 Councilmember Ryan.

02:37:46.480 --> 02:37:52.440
 Thank you, Mayor. Terry, you mentioned a couple of times about the possibility of resettlement

02:37:52.440 --> 02:37:58.640
 of ancillary services. And we can all understand supply and demand. We can definitely debate

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.

02:38:02.600 --> 02:38:09.480
 But what is involved in ancillary services? And because I noticed they made a huge jump.

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

02:38:17.080 --> 02:38:23.440
 are the types of non-energy products that the grid needs in order to remain reliable.

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

02:38:31.340 --> 02:38:44.800
 is spinning reserve. And the fourth one is regulation, type of regulation. The fourth

02:38:44.800 --> 02:38:51.000
 type of regulation I'm drawing a blank on right now, responsive regulation. So we think

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

02:38:56.400 --> 02:39:05.620
 technology. But by and large, supply must meet demand at every millisecond. And so as

02:39:05.620 --> 02:39:13.720
 people turn on lights, turn on motors, you're increasing the demand or decreasing the demand.

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

02:39:18.760 --> 02:39:25.360
 set up these four products called ancillary services to enable them to call on reg up,

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.

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.

02:39:37.080 --> 02:39:42.280
 And that's what ancillary services are. They actually clear in a competitive market. There's

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

02:39:48.720 --> 02:39:56.360
 that are in the marketplace. Typically, those would be right around the same price as energy,

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

02:40:04.480 --> 02:40:09.800
 a megawatt hour for some of these ancillary services during the storm event.

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,

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

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

02:40:31.640 --> 02:40:35.560
 that the contracts come through for that. How often do we change the coolant? And is

02:40:35.560 --> 02:40:40.480
 that something that potentially October, November, when we're not up, we could increase it to

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.

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

02:40:52.940 --> 02:41:01.080
 when the deck was being designed. And yes, you can have a separate standalone mix of

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

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

02:41:15.880 --> 02:41:21.960
 coat certain areas, and you lose capacity. So once you make that decision, you can no

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,

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.

02:41:37.880 --> 02:41:42.880
 But you can only realize 200.

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

02:41:48.720 --> 02:41:54.320
 meeting a couple weeks ago, and Representative Patty, who's the chair of the State Committee,

02:41:54.320 --> 02:41:58.600
 State Affairs Committee was there and was talking about this and basically said it was

02:41:58.600 --> 02:42:03.960
 everything from the well head to the light switch that we had problems with. And one

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

02:42:11.920 --> 02:42:17.200
 companies what were their compressor stations were that push the gas through the pipes.

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

02:42:21.640 --> 02:42:22.640
 the gas lines.

02:42:22.640 --> 02:42:28.200
 It's absolutely correct. So there were a number of electric compressors that were not

02:42:28.200 --> 02:42:35.080
 considered critical load. And so when the rolling outages hit, those compressors were

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.

02:42:42.760 --> 02:42:47.400
 There has been a very concerted effort in the last three weeks to identify all those

02:42:47.400 --> 02:42:54.200
 locations and to change that classification to make them critical loads.

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

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

02:43:10.120 --> 02:43:11.120
 230 now?

02:43:11.120 --> 02:43:12.120
 Yes.

02:43:12.120 --> 02:43:18.360
 Yes, Mayor, we have another presentation, the water wastewater and then we have the

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

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

02:43:28.640 --> 02:43:30.040
 the water wastewater.

02:43:30.040 --> 02:43:31.040
 Okay.

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.

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

02:43:45.680 --> 02:43:49.680
 for everyone's thoughts.

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

02:43:57.000 --> 02:44:01.080
 wastewater that we've read to prepare. So we have a little bit of information already

02:44:01.080 --> 02:44:03.880
 and we could maybe hear them another day.

02:44:03.880 --> 02:44:10.520
 Okay. All right. Any anyone any Yes, by means, Miss Parker.

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

02:44:15.760 --> 02:44:22.200
 and all the information we need. Got it. See Karen. Thank you. Okay. Thank you, Barbara.

02:44:22.200 --> 02:44:29.160
 Okay, then. Yeah, we'll do that. We'll proceed to the financial presentation. Okay, Cassie

02:44:29.160 --> 02:44:33.720
 Ogden is here to present the finance presentation.

02:44:33.720 --> 02:44:40.600
 Cassie Ogden, Director of Finance. I'm here to talk about the electric fund financial

02:44:40.600 --> 02:44:50.760
 update. So let me share my screen and we'll get started.

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

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

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

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

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

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

02:45:29.640 --> 02:45:35.160
 of 49 and a half million. You may remember our commercial paper program was approved

02:45:35.160 --> 02:45:40.200
 in January, right before the winter storm and we had not issued any commercial paper

02:45:40.200 --> 02:45:45.760
 notes. And as you see on the screen, our actual purchase power expenses for previous years

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

02:45:55.360 --> 02:46:02.520
 storm, as you've already heard Terry talk about, we incurred 209.8 million in collateral

02:46:02.520 --> 02:46:09.520
 and ancillary charges for Urquhart, which was substantially higher than what we've paid

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

02:46:15.760 --> 02:46:21.040
 a hundred million dollars of commercial paper notes, which we discussed with city council

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

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

02:46:38.480 --> 02:46:44.880
 placed 21 other entities on credit watch with a negative implication. And along with bitch

02:46:44.880 --> 02:46:52.320
 place, all Texas public utilities on a negative credit watch. Before the winter storm, finance

02:46:52.320 --> 02:46:58.640
 had started a fund balance policy analysis to determine the appropriate amount of cash

02:46:58.640 --> 02:47:04.920
 on hand required for the electric fund. Obviously given the conditions of the winter storm,

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

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

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

02:47:24.760 --> 02:47:30.160
 to note we did discuss with our financial advisors yesterday, the hundred million dollars

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

02:47:35.560 --> 02:47:43.400
 going to be the minimum fund balance target going forward for the electric fund. So current

02:47:43.400 --> 02:47:49.980
 state where we're at, we did issue the hundred million dollars of commercial paper notes.

02:47:49.980 --> 02:47:55.760
 We will be bringing back to council and PB for consideration, refunding those with long

02:47:55.760 --> 02:48:02.060
 term revenue bonds. Additionally, given the additional expenses and kind of uncertainty

02:48:02.060 --> 02:48:09.880
 with the uplift and the market repricing, we may have to issue additional bonds to for

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

02:48:18.240 --> 02:48:25.560
 expenses? Well, we are looking at an ECA rate adjustment based on the total debt issuance.

02:48:25.560 --> 02:48:31.560
 So refunding the commercial paper notes with long term revenue bonds will allows us to

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

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

02:48:45.680 --> 02:48:50.520
 year. But we're still working through those recommendations and we want to bring we're

02:48:50.520 --> 02:48:59.120
 planning to bring something back to PB and council in April. And so next steps. Obviously,

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

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

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

02:49:19.680 --> 02:49:27.120
 long term. As we work through that, we're going to bring back recommendations for PB

02:49:27.120 --> 02:49:35.840
 and council discussion regarding rate adjustments and fund balance analysis and our capital

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.

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

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

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

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

02:50:18.240 --> 02:50:23.240
 of scenarios regarding what possible debt service would look like and how it would impact

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

02:50:31.280 --> 02:50:38.040
 market conditions and our bond rating would give us we're approximating about 3.5% interest

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

02:50:43.960 --> 02:50:53.000
 payments. So that would be for an average residential customer, about a 5% increase.

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

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

02:51:08.700 --> 02:51:13.480
 average residential customer. Obviously that that changes across the different customer

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

02:51:20.080 --> 02:51:25.920
 bring back recommendations. I really appreciate your kind of putting some expectation out

02:51:25.920 --> 02:51:36.560
 there. Thank you. Okay. Any other questions? Mayor Pro Tem Davis. Thank you, Mayor. Just

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

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.

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

02:51:54.040 --> 02:52:00.960
 on how those percentages would impact the different rate tiers? You know, we will sometimes

02:52:00.960 --> 02:52:05.880
 get things expressed in dollar amounts to the average based on the average residential

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

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

02:52:15.520 --> 02:52:27.880
 in April. Okay. Any other questions for staff? Seeing none. Oh, okay. Yep. Miss Commission

02:52:27.880 --> 02:52:34.920
 Devaney. Devaney. Sorry, another rookie question. What's uplift? Can you explain the just explain

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

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

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

02:52:53.040 --> 02:53:01.440
 of coined. It's in the ERCOT protocols. It represents the short payments that ERCOT does

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

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

02:53:20.040 --> 02:53:27.320
 the two bankruptcies that I mentioned, two cooperative bankruptcies. And until those

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.

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

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

02:53:50.040 --> 02:53:56.760
 allocated on a pro rata share based upon your level of market participation. Okay. And as

02:53:56.760 --> 02:54:04.120
 you're probably aware, we have filed a lawsuit against ERCOT to dispute the the legality

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,

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

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.

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

02:54:41.840 --> 02:54:52.860
 else. Okay, Councilmember Meltzer. So you know, the massive part of the heist, if you will,

02:54:52.860 --> 02:54:57.960
 could only be addressed, I think, through, well, either the Attorney General take action

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

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

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

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

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

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

02:55:36.580 --> 02:55:44.400
 notes outstanding. So that is the immediate need right now. The 40 to 60 million range

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,

02:55:50.760 --> 02:55:58.560
 you know, not just 32 hours were unwound, but the entire period of the declared disaster,

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

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,

02:56:13.640 --> 02:56:20.720
 you know, the event would be to restore, you know, to the injured market participants like

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

02:56:26.440 --> 02:56:34.160
 no chance that won't happen? I guess I might try to answer the question. Councilmember

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

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

02:56:48.440 --> 02:56:56.760
 participants paid astronomical numbers for natural gas is going to result in very high

02:56:56.760 --> 02:57:01.560
 prices for electricity that was purchased in the spot market, whether it was real time

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

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

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,

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

02:57:31.200 --> 02:57:40.280
 been dispersed around the globe to try to recapture that money by, by clearing entities,

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

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

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

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

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

02:58:11.400 --> 02:58:15.640
 about the extent of which I can kind of speculate on, on your question.

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

02:58:21.360 --> 02:58:27.300
 happening legislatively? I would guess after the end of the session, if, if that, if that

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

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

02:58:37.200 --> 02:58:44.960
 potentially affect customers. Thank you. Okay. All right. So any other questions before we

02:58:44.960 --> 02:58:51.840
 close this, this segment out, get ready for our three o'clock meeting. Okay. Well, comes

02:58:51.840 --> 02:58:57.840
 from Armitage. Yeah. Could you go into just, just a little

02:58:57.840 --> 02:59:05.720
 more detail with the time constraints in mind, obviously about, you know, the, the differences

02:59:05.720 --> 02:59:18.000
 between paying off revenue bonds versus commercial paper. You mentioned the time. What, what

02:59:18.000 --> 02:59:25.040
 other differences are there? Sure. So our commercial paper notes, they

02:59:25.040 --> 02:59:29.600
 are premature after 90 days. We do have an extendable program, so we can extend them

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

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

02:59:52.680 --> 02:59:59.000
 statutes, we have to, if we refund, we have to use revenue-funded bonds.

02:59:59.000 --> 03:00:09.440
 And so of course, so revenue bonds obviously paid for with DM, DME revenue versus commercial

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

03:00:17.800 --> 03:00:23.480
 to revenue bonds, you know, regardless of the amount and the time we're talking about

03:00:23.480 --> 03:00:31.240
 rate payers, you know, being, being responsible for, for paying that off, is that fair to

03:00:31.240 --> 03:00:34.840
 say? Yes, I think that's fair to say the commercial

03:00:34.840 --> 03:00:42.280
 paper program that was approved that we did issue the notes through was specific to utilities.

03:00:42.280 --> 03:00:48.720
 So it was contemplated or set up for electric water, wastewater, and it is paid through

03:00:48.720 --> 03:00:53.000
 by rates. Okay.

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

03:01:00.560 --> 03:01:08.760
 to learn more, you know, why could we only refinance with revenue bonds and not, you

03:01:08.760 --> 03:01:14.160
 know, some other kinds of bonds that state law, federal law.

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

03:01:18.000 --> 03:01:23.400
 requirement that because it's, it's the commercial paper program is established for our utility

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

03:01:31.120 --> 03:01:35.960
 to refund with bonds, it has to be revenue bonds because those are backed by utility

03:01:35.960 --> 03:01:40.000
 rates. Sure. Now David Gaines, assistant city manager

03:01:40.000 --> 03:01:46.480
 and everything Cassie said is correct. Our bond council did inquire that, raise that

03:01:46.480 --> 03:01:51.160
 exact question to the attorney general to say confirmation. The attorney general's office

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

03:01:56.440 --> 03:02:00.600
 because it's utility backed commercial paper. Okay.

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.

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,

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

03:02:17.440 --> 03:02:23.160
 very closely moving forward. Okay. Mayor Pro Tem.

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

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

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

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

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,

03:02:53.440 --> 03:02:59.340
 you know, UNT, Walmart, Target, distribution centers. That's a different base of people

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

03:03:03.960 --> 03:03:11.520
 revenue debt. Okay. Thank you. Assuming no other questions.

03:03:11.520 --> 03:03:22.360
 Okay. Great. Thank you. Thank you, Cassie. And so Ms. City, Ms. City Manager, you'll

03:03:22.360 --> 03:03:26.200
 bring back the other presentation. Is there anything else we need to take up before we

03:03:26.200 --> 03:03:30.280
 adjourn for a short break before we come back at three?

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

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

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

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

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

03:03:56.280 --> 03:04:02.480
 do the water/wastewater item together. Sure. Yeah. And there may be more known at

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.

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.

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

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

03:04:27.080 --> 03:04:34.000
 to conclude this joint session on the City Council end at 2 46pm.