Jul 24, 2017 Public Utilities Board on 2017-07-24 9:00 AM

In our regular meeting, our first item, we have one consent item on the consent agenda. Is there any member who'd like to have that pool for individual consideration? I have a question on that. Okay. Alright. So we'll just go right into item number A, which is consider recommending approval of a contract with Lerit, Inc. out of Cochman, Texas for the construction of the initial phase of the Hickory substation underground transmission and distribution line in an amount not to exceed $892,455. Okay. Barbie, any questions? I just wondered if we had any other responders to the proposal? Chuck Sears is going to... There were a total of six companies represented at the pre- proposal or pre-bid meeting equivalent. We had one respondent indicate they just didn't have time to do the job, and past that we just had no other respondents. That was the only one. Okay. Thank you. Yes, sir. Move approval. I have a motion to approve. Second. Second. Any further discussion? No. All in favor say aye. Aye. Any opposed? Same sign. Okay. Item A passes. Next we have consider approval of the public utility board meeting minutes of July the 10th. I did have one just clarification on those. I think I made a comment about CNG. It's listed as CNG. It's my accent. I know. All the words run together. But that's on line 28 on the first page. I would like to amend that I was not here. It says I was present. I was not present. I made up for that since I was here and not here. I'm already addressing it. Okay. So with those couple of changes, any other modifications to that? Hearing none, then those will be with those changes, those minutes will be approved as we make those couple changes there. Item B is to consider recommending approval of the electric rate ordinance for fiscal year 17-18. Good morning, board. I'm Jessica Rogers. I'm the energy services manager at Denton Municipal Electric. And you've already got to hear my spiel once on this, so I promise to keep it very short. I would just like to point out one minor change that we had since my last presentation, and that was in the language that was in the special facilities writer. Mr. Colster and I had met and we wanted to clarify some things in this writer. And so what you'll see is that we removed section two, and then that was related specifically to some billing language that is actually covered in section one. So it was just redundant. And then we added parts A and B where we clarified on sort of the track that those writers will take, depending on the value of those agreements. And so that's what it will look like once it's all cleaned up and we don't have all those strikethroughs in there. But I'm happy to answer any questions about that writer. And if not, I'll take you right back to just our brief recap slide. We're still recommending the 1% decrease, and we'll have that slight increase in the TCRF with a reduced ECA rate. But other than that, I don't have any additional slides, but I'm happy to answer any questions that you might have. Questions? I think we've seen this a couple times. I know we had some questions last time about what type of examples of businesses in each category, and I think we did that. And we included that for you, Mr. Russell. Yeah, very good. Kind of brings it into focus a little bit. Yes. Okay. Questions? Is there a motion to approve the electric rate ordinance as presented? I'll move approval. I second. Motion and second. Any other discussion? All in favor say aye. Aye. Any opposed? Same sign. Okay, thank you. Thank you. Next we have to consider recommending approval of the water , wastewater, and miscellaneous fees ordinances for '17-'18. Good morning, board members. The water utilities and wastewater utilities have a few minor changes that were made from last time. Just a quick recap on these rates and fees. Residential and commercial rates are going to remain unchanged from the prior year for water. The water tap and meter fee is an issue that we've been conversing with the council about. And you did approve changes on May 22nd of 2017. We actually presented this information to the city council on July 18 of 2017 and received direction to make a small wording change that was adjacent to the water line tap fee to clarify the tax. So that is reflected in the red line version of your backup . And we are making the same change that DME had suggested earlier with the special condition and special facilities rider. Require city manager approval for expenditures less than $ 100,000 and PUB and council approval for those over $100,000 . Just real quickly, I want to remind everyone that we are making adjustments to the wholesale rate. The wholesale rate for WW2 is going up by 3%. The raw water rate is going to be adjusted by the whatever Dallas water utility rate is. We are contritionally obligated to provide that at 85% of the Dallas water rate. And the wholesale raw water pass through the WCL rate is going to be CPI adjusted as per contract requirements. That is pretty much it for the water. I'd be happy to answer any questions on that or we can move directly into the wastewater. Questions? On the wastewater side, very quickly residential and commercial rates remain unchanged from last year. We talked last time about selling our Dino Dart Overs product. Basically this is a waste product for us. We're selling it at a little bit above what our cost is to actually transport this to where we're storing it. We revised our collection and transportation services, our SWP fee schedule to base the fees on the cost of service and remove some of the customer categories that were there. And then we're making that same change to the special condition and special facilities rider where we're putting the approval levels for less than $100,000 and greater than $100,000. So I'll be happy to answer anything on wastewater. Yes? On the Dino Dart Over, describe that to me and what people would use it for. Well, we have a vendor that is coming to get it. Typically they're going to be too large to make a good mul ch product. And we basically are just -- they're a product that is collected from our screening operation. And so we have about a 3/8 inch size screen that that material goes through after it grinds. And anything that comes off of that screen is considered to be an over. And we basically just go and store it. And we've used it for a few very limited applications on the landfill site. But right now we have a very large pile of it. We have a single vendor that approached us that wanted -- was interested in buying it. I honestly don't know what they're going to use it for. I imagine they're going to use it as some form of an amendment. They may decide to grind it again. I'm not really sure. But it's just a single individual right now that asked us to provide a rate for that waste product. It's nice to be able to sell something you don't want or cost you to store. Yes, the pile is getting very large. And we're very happy to see that going away. Questions? Okay. Yes, Laney's fees, deposits, building, billings and procedures for administrative services is a pretty easy one . No changes. So I am asking for a recommendation of approval for these rate ordinances. I'd be happy to answer any other questions. Okay. Questions? Do we have a motion then to approve the water, wastewater and miscellaneous fee ordinances for '17-'18? So moved. Second. Motion and second. Any discussion? I do like the change for the under $100,000, over $100,000. I think that's a very appropriate change. All in favor say aye. Aye. Any opposed? Same sign. Okay. Motion passes. Item number or item D is to consider recommending approval for the solid waste and recycling rate ordinances for fiscal year '17-'18. These rates and fee schedules have not changed from what was presented to you on July 10th. I'll go through really quickly. All rates and fees remain unchanged from the prior year. The change that we did make was remove the reference to the general manager of solid waste and replace with director of solid waste. And we added some text to the special waste category to clarify that the charges derived for those collection and disposal of special waste fees would be based on cost of service. And those are the only changes that we have made to this particular rate and fee schedule. So I'd be happy to answer any questions on that. No? Okay. Motion? Move approval. Second. And a second from Barbara. Any discussion? All in favor say aye. Aye. Any opposed? Same sign. Okay. ACM update. Board members, in your packet you will see a summarization there of the utility rate summary. And if you have any questions, we'll be happy to answer that, but as presented earlier, there will be a slight decrease in electric rates and no changes on the water, wastewater, and solid waste rates for residents for the next fiscal year. Okay. Any questions on that item? Question on this. We show water at 9,200 gallons a month and waste at six. We actually build that on 100%. The wastewater is -- or is that the minimum we're looking at? On the wastewater side, on commercial, we're going to be building it at 95% if they're not individually metered for irrigation. On the residential side, we're going to be basing it on 100 % of the winter average. Oh, winter average. Okay. Gotcha. So that kind of explains the difference of an average bill. Okay. All right. That's the only question I had. Okay. And the next two items will be presented by Deputy City Manager Brian Langley and the Solid Waste Financial Internal Control Review and the Energy Management Organiz ational Financial Review by Deloitte. Okay. Good morning. I wanted to mention a couple of things that we're proceeding with, really under the city manager's expenditure authority, but we wanted to make you aware of it. One is related to solid waste, and as you know, we've been looking at all of our operations to improve efficiency and effectiveness, and some of the things we've been coming across with solid waste we thought could be improved, and so we wanted to spend some time with an outside firm coming in to help us to do that. And in particular, they're going to be helping us look at revenue processing and billing, the purchasing and expense processing and authorization, that process, how that's done , and how contracts are executed and managed over a period of time. Those are things, again, that we think we can improve with in solid waste, and so we've asked the accounting firm of Weaver to come in and do that. We've worked with them many times in the past and have always done a very good job, and as we work through that process and get those results, we'll come back to the PUB and council and let you guys know the improvements that we 're putting in place. And kind of in that same vein, we're working with Deloitte to help us validate some of the savings associated with the energy management organization and the DME. As you know, we have our own operation out there buying and selling energy. We think this has been very successful. Some of our own estimates estimate that we've saved about $13 million annually with that operation, but we'd like to have an outside firm come in, validate those numbers, validate the model used to calculate that, and so we'll be working with Deloitte over the next few weeks to do that. And again, bringing that back to the PUB and council to talk about that process. With Deloitte, an additional scope of the work would be also to, depending on how it goes for the past two fiscal years, would then be to engage them to have a model going forward for '17-'18 going forward that we can all agree upon and understand. So those are my two items, and I'd be happy to answer any questions that you may have. All right. Thank you, sir. Oh, we've got a question. I do have a couple questions. How were these organizations selected to do these services for us? Weaver is, in the case of Weaver, they're a firm that used to be our audit firm. We switched to a different firm in the last year or so, so we have a lot of experience with that firm, and in particular with a partner over the risk advisory services. I've used them many times in the past to help us with some internal audit type work, and so we have a lot of experience with that firm. For Deloitte, we looked at several different firms in that business and space of firms that have experience in that area and the technical knowledge to actually make those kinds of calculations. In Deloitte, in our opinion, really was the best fit. And when you say "we" and "are," who were you? The city manager and I and our staff. Yes, sir. Thank you. You're welcome. Okay. All right. Thank you. Thank you, Brian. You're welcome. And then on the new business matrix, there's nothing to report, nothing to update the board on, unless you have items that you'd like to add. Oh, yes, Barbara. I know that we've got the staging area on Loop 288 is going away. Are we moving to another site now to be more geograph ically located toward the work that's going to be done? I don't know at this point. Let me check and get back to the board. You're talking about the substation construction site? Yeah, the staging area where they piled all their stuff. Hearing nothing else then, that's all we have for the ACM update. Our next part of the meeting is a work session where we will receive a report, hold a discussion, and provide a recommendation regarding compressed natural gas, CNG, fuel ing facility at the intersection of Mayhill Road and Spitzer Road. Good morning. My name is Ethan Cox. I'm the director of solid waste. Pleasure to bring this item to you this morning. So I have a brief presentation to kind of give you an update on where solid waste is with our CNG fueling facility, as well as try to seek some direction on how the board would prefer that we pursue our options moving forward. So I'm not sure how well versed everyone is in our history with CNG. So compressed natural gas is an alternative fueling platform that you can certainly implement on any type of vehicle. It comes in handy whenever fuel prices get a little bit out of hand because CNG traditionally has been a little bit lower on a per gallon basis than say diesel or regular gasoline. That was certainly the case back in 2012. That was the first report to the Public Utilities Board and the City Council by solid waste staff. Those talks intensified in the summer of 2013 and staff received direction from both the PUB and the City Council to go ahead and start pursuing public sales as well as changing our fleet over to CNG vehicles. Around that fall, solid waste staff actually went and negotiated with the firm to implement a CNG fueling station . Unfortunately, those talks fell apart shortly thereafter. And in the spring of 2014, April 2014, the department entered into a temporary fueling contract for mobile CNG fueling with the firm called Ultimate CNG or UCNG as you see on the slide. That initial contract was for a period of three years. It was kind of a holdover until we got the facility constructed. However, because project has not come along, I think the way staff saw it would. We've had to do two separate amendments for UCNG. So what started out as a hundred and twenty thousand dollar contract over a three year period has now ballooned up to about one point nine million dollars. So where we stand today, August 2016, the Public Utilities Board and also the City Council, asked was received a presentation from the Solid Waste Department and we awarded a contract to Zide Energy for the construction of the fuel ing station. That project is moving forward. What we wanted to do today is get in front of you and share some of the financial information that we've evaluated on this. We really have some decisions to make on how that station is going to be set up and how we're going to proceed from here. After the award design, the Solid Waste Department also applied for a six hundred thousand dollar grant from the Texas Commission on Environmental Quality. We received that grant that was essentially for the purchase of equipment to go into the CNG fueling facility. That did come with some stipulations, though. It required that the Solid Waste Department make public sales available for a period of no less than three years. And we say public sales. That's not contracting on an individual basis. That is full public sales. With that, there's also requirements for when the public can access that facility. It has to be no less than Monday through Friday at a minimum of eight hours a day. We can always go more than that if we wanted to, but we have to make sure that we at least have that available then . Somewhat in our favor, we don't have to have someone staffing that as a gas station attendant. We do have some pumps that come equipped with credit card readers. And so that does have some operational advantages to us. But I'll go through later in the presentation some of the challenges we see with with public sales. So what's happened since 2012 whenever this item was initially pitched to the P.B. and council? Well, obviously, all of us felt that the pump see probably seen a slight difference in gas prices between now and then . So in 2012, diesel was running about three dollars and seventy cents per gallon. CNG was at two dollars and twelve cents. There's about a dollar fifty eight cents per gallon difference between those two at the time that this was initially conceived. Fast forward to this last April. These are spot prices in that margin to shrink down to about twelve cents per gallon between CNG and diesel. And so there's very little cost advantage to running a CNG vehicle versus a diesel vehicle. The curious thing around this change in price is that the operation continued despite the changes in fuel prices to invest in CNG vehicles. We had about five to eight CNG vehicles in 2013. We have twenty four now. The cost to upgrade a CNG vehicle runs about forty thousand dollars on average. And so that's essentially the amount of money that you've got to recover from the difference in price between CNG and diesel. Another challenging thing that we've encountered over the last four years is again, we don't have our fueling facility built. And so the department has been contracted with Ultimate CNG for mobile fueling. The price per gallon using that fueling method is about three dollars and seventy five cents per gallon on average. And so that's far and above any of the fuel prices that we 've seen in the last five to six years. Diesel or CNG. In addition, that six hundred thousand dollar grant, about two hundred one thousand dollars of that has been expended. We have equipment on the ground now, fuel pumps, things of that nature that are ready to go. But again, we're going to be coming back to the city council and the P.U.B. with some purchasing type items for gas transportation and the installation of a fuel line. We wanted to have this discussion with you before we start pushing forward with those items. So I had a slide that you don't have in your backup here. Hopefully you can see this. There's a website called CNG one that allows you to do kind of some quick and dirty analysis on what my payback period is. I'm contemplating a CNG vehicle. So I'll walk you through what this looked like in 2012 and I'll walk you through what it looks like with today's prices. So if you'll kind of follow my mouse up here, we're going to be doing this analysis for one vehicle. On average, we're just going to say we're going to have about ten thousand miles per year for a solid waste vehicle . We're probably going to run between ten, twenty thousand miles per year on those vehicles. Solid waste trucks are notoriously poor in terms of fuel economy. So three miles per gallon is not far off the mark. The price at the time in 2012 was three seventy CNG at the time was two twelve and the conversion cost, as I mentioned , is about forty thousand dollars. The payback period, if you kind of circle back over here, we have about five thousand dollars in annual savings. The payback period, given those assumptions, is about seven point five nine years. Now, that's important. This is what I would deem as best condition under CNG and diesel prices. We haven't seen the price difference at a dollar fifty eight essentially since that time. The seven point five nine year payback period. Most of our solid waste trucks age out at five to seven years. So even under best conditions, you're probably not recapt uring your capital investment on your vehicle alone. The contract with Zide Energy is a two point seven million dollar investment into the station. And so the only way that you're going to pay back your station is with significant public sales. And that's under best conditions. We fast forward to twenty seventeen and all the assumptions are held the same except for our diesel cost and our gas cost. So, again, that's only a twelve cents spread between those two. The payback period balloons to a hundred years. I've only been in solid waste a short period of time, but I don't think we have any vehicles that have been in service for a hundred years. And so the point of this is that the investments that we've made, it's unlikely that we're going to recover those. Really, what we want to give you a look at today is what is our best option moving forward to try to either recoup some of our costs or escape from the conversion to CNG. Question. Yes, sir. I know for simplicity to make it ten thousand miles. But realistically, do we have any vehicles that only have ten thousand miles a year put on? We run about 40 to 50 miles per day is what staff shared with me. And so you could technically be under ten thousand miles. We may have some that go up to twenty thousand miles per year. So we can certainly run this scenario with a few other variables. The principles remain the same is your payback period. If we run this out at twenty thousand, thirty thousand miles, you're probably going to cut this in half. And in that scenario, you would have some payback and you would be able to pay down some of your other investments and investment at two point seven million dollars over twenty years. It's you would have to maintain something like this dollar fifty eight spread to see that actually happen. And with fuel prices where they are, it's very unstable. We ran some sensitivity analysis on the differences between CNG and diesel. We're 95 percent certain that the max that you would see in terms of difference is about seventy five cents per gallon. And that's based on the three year historical gas prices that can be blown out of the water. But understanding that trying to sustain a dollar fifty eight percent gallon difference between diesel and CNG over a 20 year period, I wouldn't be comfortable making that assumption. How come you didn't use the three dollars and seventy five cents per gallon for mobile fueling instead of the we certainly could. I mean, that's what we're actually paying. We're not really paying to 15. That's correct. I mean, this is this is pretty close. But again, this is looking at a payback period. We know we're operating at a loss right now for the UCNG. If you're interested in seeing that, we can certainly go back and run that through over the next couple of slides. I will show you kind of through a pro forma what the financial outlook looks like. And so hopefully we'll answer that question. OK, thank you. So in the next couple of slides, we do have some pro formas . I want to walk through this, make sure that everyone understands kind of how these are laid out before we dig into the numbers. So with any pro forma, you're going to have your revenues, your expenditures, your net income or loss. In addition to that, one of the things that we've added in here is fuel cost savings for the purpose of these pro forma is we're comparing these to a baseline fuel cost. So everything on this slide is what our options are versus market price, the spot rate for diesel. And so down to the net income or loss, this is what we're projecting for the next five years on our options. The fuel cost and savings is really kind of a soft cost savings. And I'll explain that a little more when we get there. We've looked at four different scenarios in terms of what are our best options moving forward. Number one here in this column says mobile fueling. That is what we are currently doing. That is the three dollars and seventy five cents per gallon . Number two is retrofit and convert our entire twenty four vehicle fleet to diesel. We kind of looked at that and said, how do we get out of this the fastest way possible? That's what that represents. Number three and number four, both of those contemplate building the alternative fuel station as was approved by the PUB and council last August. In those, the only difference between options three and options for option three is for our use only. Option four is for public sales. And so with all of these, we have revenues up here that we do recognize city of Denton fuel sales for options three and options for. But we do not recognize public fuel sales because even if we offer those, we believe those to be very de minimis. We have a number of factors working against us that kind of give us pause to have any projection for revenue that we feel confident in. So let me walk through this real quickly. We mentioned that we had the two hundred one thousand dollars from this TCEQ grant that we've already expended. If we are not going to offer public sales, we would need to return that. We need to refund it. And so that's why this is a negative in these first three scenarios, because we're not offering public sales. Under the expenditure side, this is really just a mix of fuel purchases, operations and maintenance. And then you have some debt service down here on those last two lines that say CNG station in line. We do have some sunk cost. We have equipment on the ground that we've already purchased with debt. We also have the incremental truck cost. There's those twenty four vehicles at forty thousand dollars each that we've paid for the upgrade on. So that's what's represented in that line. So let's take scenario one. We run this out over the next five years. If we do nothing, if we stay with the mobile fueling platform, which we would not recommend, we're looking at a loss of about four million four point one million dollars. When we add in the difference, Brandon, to your point a moment ago, what is the difference between the three seventy five per gallon that we're paying versus diesel? It's about one point nine million dollars over the next five years. So it is a significant difference. So all that totaled out, you get about a six million dollar loss. Option number two is retrofit and convert to diesel. Again, we're eliminating most of the CNG cost here except for our sunk cost. But one item here, the incremental truck cost, we we we're not confident in this projection. We can certainly sharpen our pencils on this if you want some additional detail. But to reconvert a CNG vehicle back to diesel is going to run fifty to eighty thousand dollars each. And one of the reasons why we would not recommend that option is because we don't know what that truck's performance is going to look like after we've we've done that conversion. We think it's going to require some significant work and we may be better off just totally replacing the vehicles ahead of time. So that brings you to a two point five million dollar loss. Station option three station for COD use only. The only difference between option three and option four is the grant funds of about six hundred thousand dollars. So in this scenario we'd be refunding our portion of the grant and we would not be realizing the remainder as you have an option for. And so you get about a one point four million dollar loss compared to diesel here. One point one overall because you do get some price break for CNG to diesel in both of these scenarios. And again if you do public sales you realize the grant funds. So that's down to about five hundred twenty seven thousand. I know that's a lot of information to take in. Are there any questions on any of the assumptions or any of the calculations in here? What's the cost of the truck? I may need a little bit of help on that. Nick do you do you know off the top of your head? I'd say around roll off trucks are around one hundred and sixty to one hundred eighty front loaders. Questions? All right. I've got a question on fuel cost savings. So if we're looking at a bottom line let's say let's take number three here of one point one million. What what would the price of diesel have to be to bring the fuel cost savings to say cut that in half and maybe get it to where the word public sales would be per gallon. We have to go back and look at that now. Now under this analysis the assumptions that we have under fuel cost savings is a difference of about twenty two cents per gallon. Like I said we did some sensitivity analysis that got it up to seventy five cents a gallon. In the scenarios that we ran I don't think that we had anything that would have covered our losses here. Now if you want to cut that in half. Yeah I'm just trying to see. If you're looking at about three times the difference you'd be about sixty sixty six cents difference between diesel and CNG to cut that in half is what I would guess. In option number four then the only difference is the full grant. Correct. And we're assuming there's no public sales. That's correct. Okay. I want to make sure that's. One of the things I will mention with public sales and I'll talk more about this in a few slides is we're not confident in the expenses listed here. We think there's going to be additional expense beyond what we projected. Devils in the details with this type of stuff. None of us have ever run a gas station. And so we are somewhat inexperienced in this. And so I'll kind of run through a few of those things in a couple of slides. Some potential gotchas with public sales that we may not have anticipated. Just one more question. Is CNG fuel cleaner than diesel? For that I've had Dr. Banks help me out a little bit with this. Kenny do you want to talk a little bit about the environmental differences between the two. So I thought that question might come up. And so I put together a presentation on it. Not an easy question to answer. And I'll kind of walk through how I try to analyze it. There's a lot of new software programs that are out right now. Argonne laboratories has been running a program called greet. Which is the greenhouse gas regulated emission and energy use and transportation program. And one of the interesting parts about this is that this particular program is used to perform what's referred to as wells to wheels analysis. So there's several different components of operation of a vehicle and evaluating the environmental impacts of a fuel platform. And so you've got the actual environmental impacts associated with obtaining the fuel and processing that fuel and delivering that fuel to a pump. You've got the component from the pump to the use in the vehicle itself. And then you've got the sum of those two which is basically the total operation. So I thought that was the best way to try to look at this situation. A lot of different analyses can be done in this. I basically went with the wells to wheels analysis. We used a 2015 platform vehicle refuse truck of the appropriate weight of the trucks that we use. This gives you a screenshot of what the analyses look like. And you can see that we can look at all different types of emissions, water use, you name it. It's a very extensive analysis. Give you a real quick look at some of the high points of what the output that I chose to look at. I really wanted to focus on volatile organic compounds, carbon monoxide, nitrogen oxides. These two are some of your main precursors to ozone. And then I also wanted to look at a couple of the elements that deal with greenhouse gas emissions like methane emissions, carbon dioxide, and nitrogen oxides. So this table is kind of hard to make a direct comparison. So what I tried to do is look at it on a percentage basis. Hopefully that will be a little bit easier to kind of asc ertain what's going on. Basically, if you look at the total energy, the B20 platform, which is what we use in our vehicle, biodiesel, is about 82%. This is a B20 comparison to compress natural gas. So any number lower than 100% will tell you that the B20 is a lower emitting or lower energy consumption. Anything greater than 100% would tell you that the CNG is the lower option. So in looking at the volatile organic compounds, we're actually seeing quite a bit less produced by the CNG platform. Much less carbon monoxide produced. Interestingly, in operation, it's going to produce about twice the amount of nitrogen oxides. But if you look at the total wells to wheel analysis, it's actually only about 10% or 11% more. Sorry, I'm having some mouse problems here. PM10, particulate matter of 10 microns or greater. B20 produces about the same amount when in operation, but about half again as much when you're looking at the overall full life cycle. Similar situation with particulate matter of 2.5 microns. Sulfur dioxide, B20 is slightly higher. This one is the very interesting part. When you look at the methane emissions, B20 produces much less methane when operating and for the full life cycle when compared to a compressed natural gas platform. CO2 is slightly higher. And then nitrogen oxides produces more when operating and then more for full life cycle. So what I tried to do is give you a sense from a ground level ozone standpoint, you're going to have slightly higher nitrogen oxides. We have a tendency, depending on the model that you look at , for this area to be nitrogen oxide limits. So limited. Some models would suggest that we're transitional, keeping in mind that you've got to have both volatile organic compounds and nitrogen oxides to form ozone. It's more about the relative proportion of them. So it's again a little bit less on the volatile organics. So those times where volatile organic limited, it would actually be better for nitrogen oxide, which is, I would argue, for our area tends to be the larger predominant type of ozone formation. You're going to have a tendency to see a slightly greater effect from full life cycle comparing B20 to compressed natural gas. However, if you look at the global warming potential, especially on a 20-year basis, that methane production makes a very large difference when you're comparing these two fuel platforms. And so your net global warming potential on a 20-year basis is going to be substantially higher for compressed natural gas. On a 20-year basis, it's going to, I'm sorry, on a 100-year basis rather, it's going to be almost a wash. So that's a very rough thumbnail sketch of kind of the difference between the two. So in summary, I would say that from a ground level ozone, it's slightly more impactive to go with a B20. But keep in mind that that gap has closed substantially. And I think it's fair to point out it's closed substantially since when this was evaluated in 2012. The newer diesel engines have a lot more emission controls on them. There are additives that are provided in those engines that are designed to try to deal with some of these contaminants . But the global warming potential in terms of greenhouse gas emissions from comparing the B20 platform to compressed natural gas, compressed natural gas is going to have a greater impact, especially on a 20-year basis. It's about a wash on a 100-year basis. So very brief, very high-level overview, but I'd be happy to try to answer any questions. What do you mean when you say biodiesel uses less energy? Does that mean that it stores more and is more efficient? It has to do with the energy of production and the energy of use. So on a per gallon equivalent, you're actually going to use a little bit more CNG than you are with biodiesel. And then it also has to do with the processing and the transport of that fuel as well. And so you're going to use a little bit less there, too, overall. Okay. And can you back up one slide? This one? No, one slide. This one. So is there such thing as a grid-dependent refuse truck? Because that says grid-independent. They don't have that as an option in there, so I'm not really sure what that means. That is a -- yeah, yeah. I don't know if there is an intention at some point. This program has been around for a while and has had some various updates. I have a feeling that they're adding these in there with the anticipation that at some point there will be a platform like that, and that way they can convert back and forth with older versions. That would be my guess. Okay. I just saw that. Right. Just so I can get my head around it. So basically what you're saying, and I'm trying to get it all down to the layman's terms, what we're saying is that CNG is not as clean as diesel? I don't know if I would say that. What I would say is that when we've evaluated these two fuel platforms, at least my perspective when we've looked at them, we've been mainly focused on the operation of the vehicle and the production of ground-level ozone. That's kind of been the focus. And the operation of the vehicle is what, five years? Yes, but keep in mind this is on a per-mile basis. So it doesn't, in terms of the number of miles that it's on a per-mile basis. And basically it would be this multiplied by whatever miles the vehicle has put on. So effectively this is a way to normalize those platforms and kind of take the relative miles driven by each one out of the equation. So we're assuming they're driven the same miles and to make it easy we're just going to put it in a single per-mile emission for each fuel platform. So circling back, I think that the original intention was to look at it from an impact to ozone. And although biodiesel platforms and diesel platforms in general have closed that gap, they still are going to be on average and keeping in mind that we're focusing on nitrogen oxides because nitrogen oxides tend to be the limiting factor in this area, but not always. Sometimes it's volatile organic compounds. And basically what we're seeing here is if you look at the actual operation, a biodiesel is going to produce quite a bit more, about double nitrogen oxides. But if you look at the entire fuel cycle, taking into account the obtaining of this material all the way through the full process, that gap is actually pretty small. It's only about 11 percent greater. So I would say from an ozone standpoint, a B-20 vehicle is going to be slightly worse than a CNG vehicle today. In terms of greenhouse gas emissions, fuel, full cycle, everything from fuel use all the way back to the well itself, with the estimations in this model, would suggest that the greenhouse gas potential of a CNG vehicle is greater than a biodiesel vehicle on a 20-year basis. Those emissions, some molecules like methane, don't last as long in the atmosphere as other molecules like nitrogen ox ides. That's why you have to look at it at a 20-year basis and a 100-year basis or whatever year factor makes sense. Any other questions? It also reminds you, when you speak, make sure your light is green so we pick you up on the recording. Well, I guess the idea of CNG, it's not really an economic decision, obviously, unless you look at it as what's the best way, what's the least cost of it. I guess throwing in the option of biodiesel versus, because really you're picking up your emissions savings from the production side. Right. It's where that is. Right. Okay. Anybody else? Thank you. All right. So back to the financial picture a little bit. So this is, again, a baseline compared to diesel. From a staff perspective, what we wanted to present to you is what we believe to be the most viable options moving forward. And so for our next pro forma, we're actually going to subtract out the mobile fueling. Obviously, we need to get off that platform as fast as we can. And then we also took out... Go ahead, Charlie. We're probably going to ask the same question. Go. I have one question before you move forward. Option number two, where you retrofit your entire fleet, I guess. Did you look at it on the basis of attrition of your vehicles since they normally only last, what, say, five to seven years? Right. This was a very quick and, I mean, this is an estimate. So I think that's one option that we could certainly go back and take a look at if you're interested in that is which vehicles do we want to allow to just go ahead and replace today? I will say this, that we have had some recent purchases on this that's going to make that very costly. Most of our older vehicles, I think we've probably got about eight to 12 that would probably be good candidates for just let's just go ahead and replace it now, you know, a couple years early. But at least half of those 24 vehicles have been purchased in the last two to three years. And so you're going to be upside down on your financing of that. And you're going to be incurring some additional cost. It's certainly an option. It's just not one that we put a lot of pen to pad on. This was kind of our estimate on just straight retrofit for those vehicles. And the total fleet is 24 or is there more than 24 in the fleet? There's 24 CNG's as we talked today. We've put the stops on any additional investments in CNG. But what is our total fleet? So we have some diesel. This is about 40% of our fleet. Okay. Right now. Now that does not include light duty vehicles like pickup trucks, cars, things like that. This is really just our operation trucks. So this station would only be servicing about 40% of our fleet? Well, that station currently services our fleet today because it has other pumps and stuff. The new pumps would service 40% of our fleet. The $2.7 million investment that we're talking about, it would be for 40%. And what our recommendation would be, not to get too far ahead of ourselves, but we would recommend aging out this fleet until gas prices would dictate that we can recover at least our incremental cost for conversion. We're not even covering that cost right now. And so it's a financial loser unless there's a big enough margin to cover that conversion cost. And back to option two, I think I heard you say you would not recommend trying to switch them back to diesel because you don't know what you're going to get operation ally once you've done that. Yeah, it's something we haven't fully vetted, and I'm not sure of too many folks out there that have gone through that hassle. I know when we talked to fleet, we talked to them just briefly about this, and the warning lights were flashing all over the place whenever that conversation came up. I think, to Mr. Jackson's point, if that's something we want to entertain, if we want to try to step away from as many of these vehicles as fast as possible, probably the best option would be to go ahead and replace a few early and then allow those others to age out to such a point to where it makes a little bit more sense financially . Barbara. Is there a market for us to sell the ones we have? So this is another bit of bad news. There's not a huge market out there for CNG. There's not a lot of cities that are on this. I think Terrell and San Antonio are the two that we have as examples. Last week, we got $60,000 each for a pair of diesel front load or rear load trucks. I haven't verified this, but we heard that a similar CNG vehicle brought $1,000. So that's hearsay. I'll put that caveat out there, but we think that the salvage value of these are going to be significantly less than diesel just because the demand isn 't there. So in the older CNG models die, we will replace them with what? With diesel? We would go back to diesel would be our recommendation, absolutely. So for this pro forma, again, we took out options one and two just because we don't see those as very viable. So really what we're left with is completing the construction of the station. The real policy question for the PUB and what we propose to the council is, do you want to move forward public sales or not? And again, for the purposes of this pro forma, all that that's contemplating is that $600,000 in grant funds. The difference in this pro forma versus the other one is, to Mr. Caroll's point a little bit earlier, what does it look like comparing to what we're doing today? And so all these numbers are the same down to the net income, net loss. The difference is your fuel costs/savings. And so by pressing forward, completing the station, you do save about $1.8 million over the next five years by getting off the mobile fueling platform. And so if you take that angle in the analysis, if you don't compare it to what we would pay diesel wise, if you compare it to mobile fueling, there is a bit of a rosier picture here. And so if we use it for city of Denton use only, we would estimate about a $390,000 net positive to this. If we do public sales, again, you're adding the $600,000 or so in grant funding. I mentioned earlier that there are some additional considerations if you want to do public sales. And again, this is stuff that all of us are a little bit out of our depth on, to be honest with you. Competition, right now there is absolutely, in my understanding, zero infrastructure, zero pumps in the city of Denton for CNG. That's kind of why we are where we are. If QT had some pumps right now or loves, then that's what we would be recommending. However, if we install this station, we want to offer public sales and QT puts one in behind us, then public sales evaporates because we're never going to compete with them on a cost basis. Plus, you can also go get some Twizzlers and some beef jer ky at the service station that we're not going to be selling at our place. Administrative costs, we don't know exactly what those are, but it's not a stretch to think that we're going to need at least a full-time employee to manage the operational expenses with this, the maintenance. You know, if you have a full-time employee, $50,000 to $60, 000 a year, we're going to buy it into that $600,000 very quickly. There's also going to be advertising costs, promotional costs, security costs, card processing costs. Even though we don't have a gas station attendant, about 2 to 3% of every transaction is going to go to the card processors. It may be more than that. You're absolutely right. One of the things that do give me a little bit of concern, and maybe I'm just being paranoid, but security is an issue . You look at some of the gas stations with the skimmers they put on there, and to take advantage of the card swipes, we 're going to have to install security cameras. If we're not open 24/7, we're going to need to limit public access. We also have a number of other facilities out there that, you know, our customers are going to understand the difference between our CNG pumps and our other fuel pumps. That's going to be a challenge that someone rolls up to the wrong pump and starts fueling or is frustrated that they can't get gas out of a particular pump. Again, we're not going to have an attendant down there to guide them and tell them. Why would we have other kinds of pumps there? They're there today. Now, we have an alternative fuel island. When you come into the entrance of our facility, this would be adding on to those existing pumps. And then lastly, there's liability concerns. I'm not sure what our insurance looks like on the alternative fuel station. That's something we can go back and take a look at. But with having public access to that facility, that's something that will need to be reevaluated. So with all those, I don't want to presume, but I would speculate that $600,000 in grant funds, we will easily exceed that with all these additional considerations over the next five years. And based on that, that's why we as staff are recommending we go ahead and push through with the fuel station. We use it for city of Denton purposes, return the grant funds. The nice thing about the fuel station is if market prices do return in our favor, this is an option there for us. What I recommend upgrading a solid waste truck, the operation of those vehicles doesn't make sense unless there 's a huge difference between CNG and diesel. However, light duty vehicles and other vehicles in our fleet, we can certainly take a look at and make sure they make financial sense if we want to go that route. So next steps, we do have this up for council discussion tomorrow. So whatever your recommendation is, we'll be sure to share that with council. If we do press forward with the station, we do have a couple of things that we need to get back in front of the PV and the council. One being a gas delivery agreement, which would be the transport of the gas through the gas lines, likely through Atmos. And then also a gas purchase agreement, we'll have to go out and secure rights to purchase the gas that we're going to use for this facility. And if everyone's in agreement with that, we'll also initiate the gas line construction and get rolling on that so that we can get off of the mobile fueling as quickly as possible. So with that, I'll be happy to stand for any additional questions you have. >> Comments? Go ahead. >> Brendan, has anybody researched if there are any compressed natural gas stations available for our use in the area? >> We've looked into it, I think the closest that we have, and I'm going to look at Nick to see if he had a head nod or head shake. We did approach LAWs. We had heard that that was a possibility. LOVs, Truck Stop, I believe there's a new facility being built off of Loop 288 and I-35. My understanding is there's nothing imminent. It's not necessarily tied into their roadmap for that facility. It's just a possibility. And so that is one of the things that I would encourage you to consider is if we want to hold out and go investigate that further, we're certainly happy to do so. But what I would say is most every situation we're going to encounter, they're going to have the ramp up and build out time that we have. And for them, they're going to look at it and see if it makes financial sense. Our understanding is there's no guarantees of any pump development in the Denton area right now. UPS uses CNG. Do they have a fueling station on Shady Sh ores or wherever? I'm not sure. I know they advertise on the side some of their vehicles use CNG. I haven't heard that, but we can certainly investigate that . I would think that those would be some important things to look at. I would also think we would consider how much would it cost to purchase our own mobile fueling truck and fuel them ourselves. I mean, I know there's mileage and all that. There's got to be some kind of break even there. But if it's worth it to this other company to do it, then it may actually give us a better bottom line. That's one of the scenarios we've actually talked about. I haven't seen how they construct their per gallon cost or cost recovery. A big portion of what we pay them, I would imagine, is the transportation of the fuel to us. But that's definitely something, if that's the direction of the board, we're happy to go back and evaluate as an option . I think it would just be nice to make sure we covered all our bases so we made the best choice from all the available choices. Yeah, I think that that part of the piece of the puzzle seems to be the only one profitable at this point. Yeah. We'll bring it to you. If somebody like Luz or QT, if a retailer doesn't find the potential in making money off of it, then it can't be made at this point. And that's a function of the cost of diesel and what you can charge. Yeah, I think there's probably, I know you all have looked at this every way you can, just want to make sure before we bite off a capital expenditure that we're not going to, if we're going to be going back and leaning more back to diesel, biodiesel fleet, then we don't want stranded capital cost out there. We may already have it, I don't know. Right. And, you know, as far as taking, you know, the TCEQ grant, I think that we don't really see public sales as viable. I don't know that I'm not sure we should have a conscience, but in the spirit of the grant, you know, it's for public sales. If it's really not viable, then that may be something we just let it go. One of the things I would throw in on public sales is the grant requires full public sales. If we return the grant, there's nothing that stops us as an organization from saying we're going to do public sales on our own terms. Sure. We've had a number of institutions approach our outreach department and say, hey, well, how are you guys coming with CNG? Everyone, to your point about the retail sales, everyone is waiting for someone to put in the infrastructure because that's the stranded capital that no one's going to recover by doing it on their own. That's the position that we're in. And so if we do complete the facility, we can certainly entertain those offers. We can approach some institutions like a UPS or DCTA and say, hey, we have this facility. We're open for business. And we could do that on a contract basis if that's something we wanted to entertain. Yeah. It makes it a little bit more controllable for us. Yeah, absolutely. Barbara? If I understand, the reason we considered CNG was because it was cleaner and it was more economical. And if I understand you now, you're telling us that with what they've done with diesel, that it's made it more attractive. Is that correct? I don't want to speak for Dr. Banks. I think it really -- can you correct me if I'm wrong? It really comes down to what do you want your environmental impacts to be? I think they're kind of negligible at this point, if I'm not speaking on a turn on that. And now the finance part of it is not there. Right. Right. And again, the gap has closed substantially between the biodiesel and CNG. And it really boils down to which environmental impact are you more concerned about. If you're concerned about the ground level ozone issue, CNG is a slightly better performer, but that gap has closed substantially since 2012. If you're looking at it from a greenhouse gas emissions standpoint, CNG is actually a worse platform from that perspective than B20 on a -- especially on the short term, 20 years or so. So it's kind of a mixed outcome, but the new diesel platforms are not nearly as impacted from an ozone standpoint as the ones that we were looking at back in 2012 . Okay. Thank you. Sure. Hi. Yes, Susan. Back to the grant, what other hooks do they have administratively? My experience with grants is they're really not worth the money. They're just -- you're reporting back to them for 20 years or whatever on this grant. Yeah. We've looked into it. I think the major one is that we are dedicated to this for three years. Now, if we get two years in and decide that we're out, then it is prorated in terms of what we would be refunding and returning. I think the real kickers with this is we could require people to register to use the site, but that doesn't limit access. It is anyone that wants to use it is really -- because when we looked at this, we thought if we could restrict public use to just those folks that know what they're doing out there, that we can get out and train them. These are only the pumps that you use and only during these hours. But with full public access, that brings into a lot of those uncertainties and risks that we had talked about. And so I'm not sure that there's additional hooks in there. I think the three years is the one thing that -- And then you have to prorate it back. Then you have to prorate it back. And there are reporting requirements that we would have for at least that three-year period that they want to see some data on how well this thing is performing. And I think back to Randy's point, it is still tax money should we really be spending it. Right. Ethan, can you remind me what the initial assumption was in terms of public sales when this concept was initially created? In terms of revenue generation? Yeah. An estimate of it was at least $180,000 to $250,000 in the first couple of years, and that would balloon up to about half a million dollars in the out years. I don't think we get anywhere close to scratching that surface. I don't know off the top of my head what the margin was on that, but again, remember, we're buying this at cost. We're not going to get a quantity break, and we're also not going to see the additional revenues from the sale of the twizzlers and beef jerky like QT does. And so our profits are going to be solely based on what we can realize in terms of the margin on the fuel itself. So it's not something that is going to automatically flip this picture around for us, unfortunately, it would be my guess. Yeah, not until there's a price increase, there's a cost increase in diesel. I mean, right now, it's just too close. There's not a demand for it. Right. For that. Okay. Any other questions, comments, direction? What's our recommendation? So we will continue. We'll continue planning the options, and we'll also touch base with some of our larger commercial customers here and see if there's a possibility of reaching a deal to share any infrastructure they might have. And as part of that analysis, we'll bring it back. Yeah, good. Any add ons to that? Thank you very much. Okay. Thank you. Okay. Any items, any, any comments or inquiries from the public utility board or the public of any clarification on any policy or any upcoming meeting or to put place them out on the agenda for an upcoming meeting. General comments. Hearing none. Okay. All right. At this time, we'll go into closed meeting at 10 08.