Sep 11, 2017 Public Utilities Board on 2017-09-11 9:00 AM

Before we get into our agenda, I guess I want to welcome Deb Armatar. This is her first meeting as a PUB board member, so Deb, welcome. Thank you. If you want to tell us a little bit about yourself, that's kind of the tradition here. Where you from and how you got here, I guess. Well, first of all, I'm happy to be here. Thank you so much and thanks to everyone who works for our utilities. I was born in Denmark , grew up in Rhode Island. I've been a Texan since 1995. I got a job at teaching English here at UNT in 2002 and I've been living here ever since. Don't want to live anywhere else. Married to East Texan, got two Texan kids and I just love Denton. I'm thrilled to be here. So thank you. Thanks for the introduction. Okay , our first item, we have a couple of work session items. So we'll go into work session. This time item A, which is to receive a report, hold a discussion, and give staff direction regarding resource planning and power supply strategy for DME. Brian? Good morning. This is the first of two presentations we have today for some consultants doing some work for us at UNT, with DME, not UNT. I was thinking UNT as I was looking over at you. I got confused. But we've been looking at some different elements of our resource planning and our power supply and we've hired enterprise resource risk consulting to do this work for us. Larry Lawrence is here. He's gonna make the presentation and Neil McAndreys is also here. So I'll turn it over to them. I did want to mention this is part of a two-phase process that we've been looking at with enterprise risk. This is the first phase. They're not yet complete with this phase. We hope to have that completed by mid-October and in the second phase we'll be bringing back a contract for your consideration and for the City Council's consideration probably next month. So with that, I'll turn it over to Larry. Thank you, Brian. Thank you. Good morning everyone. I'm Larry Lawrence and this is Neil McAndreys. We appreciate the opportunity to be here. The intent of this presentation is we've been, we were engaged in August and so we've started work. We're gonna wrap up the deliverable for this in October but we wanted to give you an early look because we have a pretty good sense of where we're going. We need to do some additional analysis and modeling to really refine the conclusions but we have a good sense of where we're gonna go in terms of what the recommendations will be for a resource plan. So Brian thought it was a very good idea to get this to you now so we can get some feedback and be able to refine the work as we go forward here. Just a brief introduction of the organization. We do risk management consulting in a variety of areas. We haven't had a lot of clients in ERCOT so we do a variety of things for them. We help them establish power supply programs. We do resource planning. We train traders. We do a lot of outsource work for them as well so we have a lot of experience. The people that work for the organization have been in the industry for multiple decades. Experience from Wall Street, utilities in Texas. We do a lot of work in the renewable space, have been through coal, gas, and renewables so there's a lot of experience in terms of what we've covered here. And as I go through the presentation we will invite questions at any time. You don't need to to wait or hold those till later because the the answers that we could give to those questions may be just as valuable as the material that's in the presentation. So we invite this to be as much of an open discussion as possible. So we want to start with sort of a benchmark reference here. We know that Denton has some goals in terms of advancing and increasing the amount of renewables, renewable resources in your supply portfolio and so a good benchmark for this is the city of Georgetown. Neil McAndrew s here successfully helped them build their renewable resource portfolio for supplies and one of the things we want to get across here is that as much as Georgetown has made a lot of hay with the branding for being 100% renewable and that's really been a tremendous boon to the city itself and the utility, their main goal was to come up with the least cost supply. They didn't start out trying to go 100% renewable. They had a customer, they had rate payer advocates that wanted that so they were clearly open to that message but the main thing they initially looked at was least cost and fortunately it was a, I don't know what the antithesis is of a perfect storm, but it all came together for them. It met the renewable goals and met their cost goals. So they originally did not intend to go 100% renewable but when they saw how cost- effective it was and how clean the power was and especially something that doesn 't often get mentioned was the fact that it dramatically reduced the water usage, the water consumption for the power supply production as well, they opted to then kind of jump in full force and go 100%. Neil, I don't know if you want to speak to anything else about that. Neil was on the ground with them all the time and was heavily involved in that project. Right, they started off with a renewable portfolio standard or their, you know, their planning standard of 30% renewable. They also thought they were going to buy into a nuke. This was in 2008. The nuke became way too expensive but the idea was they wanted to not have emissions, not as much emissions in their new portfolio. Also Georgetown's growing at about 7% per year and has been and so they needed, they had no supply so they needed to get a supply quickly out there. Those are things that helped spur them into the decisions that they made. So we just want to establish that as a benchmark because it's well known as a city that's gone 100% renewable and so we have a lot of experience in terms of the thought process and the planning process and the implementation process for that. Further, one thing that's important is managing, because of the intermittent nature of renewable resources, it's really important to have a daily active management operation in your power supply portfolio to manage around that intermittent nature. This is something that we provide even to Georgetown on an outsour ced basis. So not saying it has to be outsourced but we do this successfully on a daily basis for Georgetown so this is something that we can help build the capabilities within the utility. So the expected essential findings here in the program, this is just what we, in terms of our first look, the first few weeks on the ground here and you're getting a sense of what's going on, is that A, it's fortunate that you're in a position where you have needs for additional power supply because costs are very low right now. Renewables are low, costs are low. So we think additional renewable resources will be found to be the least cost alternative for Denton. This will also reduce the long-term cost volatility or the cost uncertainty for Denton so there'll be a tremendous advantage in reducing the price or cost uncertainty for your power supply. The DEC, the Denton Energy Center, will assist in lowering that supply cost volatility . We're still continuing to analyze how that would best fit in with the resource plan. We will also recommend alternative ways to dispose of the prospective excess production potential. And as I mentioned before, Denton will need to develop forecasting and congestion management processes to best optimize and manage a portfolio that is substantially renewable resource, is made up of substantial amounts of renewable resources. So that's another finding and that will a lot of the detail on how that needs to be managed will also be included in our plan that we'll be delivering in October. So go ahead Neil, why don't you speak to this one in terms of the first principles here. Okay, one of the things that you have to start off with is you have to understand the rules of ERCOT. It's an energy only market. So you just buy energy, that's all you need. Other jurisdictions have capacity markets, but we don't here. We just have an energy only market. And so the first thing is you've got you have to figure out how much energy am I buying. So all the load has to do, and this is very, very consumer friendly, that's and all you have to do is buy your energy schedules, schedule against your load, and you're done basically, right. And so the other thing is you have to measure your actual risk as your load and then you have to match the energy so it's sort of equal but opposite. That's an opposition hedge, that's what hedging is all about. But the idea it's a little tricky because loads vary and so do renewables or any other generation. So you always have to forecast these so they're always matching up and you don't want too much of either one, right. They have to be balanced. The other thing is it 's very important, the other principle in the ERCOT market is it has what is known as a basis market or a congestion market and these are congestion CRRs as they're called. And what those are, they're instruments to bring whatever resource you have and translate it geographically and economically to your load. So that's one of the key things in renewables and all generation has to do this but renewables in particular because what it does is matches the whatever production that you have and serves the load directly and that's a key thing. A lot of people miss this step, large utilities and what they and we've been hired by several of them this year because they they have poor economic performance when they don't do that. The things explode on them, congestion incurs, all this other stuff and what the CRRs it turns out are really inexpensive insurance so you can ensure that the renewables actually match up with your load . So you'll see that point made several times throughout the presentation but one of the things that we also want to bring to the table for you is we've seen a lot of mistakes made especially with the municipalities and some cooperatives in Texas and how they built and then managed a renewable resource portfolio so we can help you avoid some of those mistakes that we've seen other people make. So as Neil alluded to the goal here is a balanced opposition hedge. Essentially when you have demand with insufficient resources you need to acquire sufficient resources in opposition to that demand to balance that portfolio and as Neil alluded to part of that supply piece is bringing the pricing to where your load is actually priced. ERCOT has overlapping but I hate to use the word mismatched but they're mismatched pricing points. Load is priced according to load zones across the state. Resources or production or generation production is priced at resource nodes and those don't always match. We don't have the time here but Neil could tell you an amusing story about the city of Austin who thought one of their power plants that happened to be in the city limits would be a natural offset to their load knowing to find out that that power plant which was in the city limits was priced at a different resource node and they had a tremendous pricing mismatch between those. So our goal here in terms of devising an optimal portfolio for you is to close that gap to make sure that the pricing matches that your supply and your demand are offset as efficiently as possible to reduce your cost and your cost variability. I'm gonna let Neil speak to this we're gonna in just a moment we're gonna show you sort of a slice of two different days a high load day and then a day in the spring which would have different outputs for things like wind resources, solar, how the deck might perform and so forth just to give you a picture of the things we're gonna look at and how these different resources can be applied to your load. Go ahead Neil you can describe the graph. Sure so this is wind resources produce their lowest capacity factor and their lowest output in the summer but they still produce some off peak but not so much and that's shown in red here and you can see that daily production it's U-shaped right. That's the green screen. Now solar is just the opposite and that's why you want to marry the two they're compliment perfectly complimentary it produces and this is all comes as amaz ement to some people it only produces during daylight hours right and so in its production the Sun is some of the its highest like June 22nd summer solstice and that's the highest production and so those two that's what happens sort of on a typical summer day when the wind is low. Now the wind can also blow on even on summer days or for instance the Georgetown wind last three days it 's been blowing at maximum and it's when September that's really counted to summer and so the other thing that you have is market purchases and a lot of people don't understand the market purchases are designed to dynamically fill in any gaps on your resources day to day for instance on this day you had these purple purchases at night when it's really inexpensive to fill in the gap and that's that's part of the forecasting process that you have to do now if the wind was blowing full out you wouldn't have to buy any market purchases and so that's the that's what you have to manage every day the deck which is the you know the Denton Energy Center is a peaking plant essentially and you can see that it's dispatched wherever the blue levels are now these things it's probably dispatched mostly full out during those periods so on this day though when you run the deck you also see below zero these purple numbers those were also markets but actions but they're sales you have too much generation so you're selling into the market so that's that what you try to do for 8600 hours 8760 hours a year the entire year hourly you try to match all those different resources to minimize cost and so if you think about it it's it's kind of a hard thing to do because a lot of these things vary you have to model them prices you have to model the outputs you have to brought model low and they're all under uncertainty so you can see in this little square in the bottom and right what the the relative outputs of each are solar is 21% the markets 27% the deck produces 28% and when produces 24% of their capacity and you can see that's kind of balanced and that's that's a pretty good portfolio so that means when you have a portfolio like that the variance goes down so you have a very secure supply so this is where the energy management operation yes yes sir so this this is a I'm assuming the blue line is our demand yes yeah so in a typical August day this is what it would look like that the market purchases when we when we contract market purchases do we I mean typically are we gonna say we're gonna take this this amount of energy during this August day so there may be some over purchase on that mark you're waiting as long as possible to get that forecast error down so those are likely be day ahead purchases where you can be much more precise in how much you're paying for those so it's just you buy it day to day to day hour by hour by hour so you don't you're only buying the minimum amount you need that you need and notice this is all at night most of these are at night because you have enough supplies during the daylight at night are the cheapest prices so you're only buying cheap stuff at night to fill them yeah so that 's where the deck in this case would protect you because that's likely when the highest market prices would be and you have that unit to generate power right as a substitute to buying higher price from the market yet when the deck is not economical to run you're purchasing things at night to fill in the gaps when the price is generally cheap it's also the peak time to sell the excess production that's correct well that's correct yes so this is where the energy management organization that I believe you set up and I believe the gentleman from Deloitte are going to discuss that further that's something that we 're learning more about as we get engaged here but that's something that will be a very valuable component to how you manage this because this will require active management this isn't what we would call a set and forget kind of portfolio because of the variability of the output in the need to forecast the need to purchase from the market to fill in the balance to sell excess and maximize the revenue of excess production capacity all of these things are an ongoing operation that a lot of other utilities do all the time and successfully this wouldn't be unique to you but that you do need an internal organization to do that I think it'd be more efficient than outsourcing that for example there are certain functions you might outsource but the people that are making the ultimate decision and pulling the trigger it's very useful to have that internally yes so when you talk about the market what are you talking about purchasing purchasing energy purchasing energy from I know but what kind just the market energy and market energy is composed of all the whatever is dispatching at that the ratio of you know renewables some coal some wind are not when some natural gas maybe some hydros thrown in there other other solar things whatever makes up that whole thing you're just buying a slice of it and you can't you can't avoid that yeah this is you know I just wanted to be clear yeah what we're talking about market was not more solar or more wind from somewhere else it could be but it could also be gas it could also be coal it could be correct and part of this is a function of yes that's a very good question it's a function of being in Urquhart because you essentially it's we we could spend hours talking about the way Urquhart works but you're essentially buying everything from Urquhart and selling thing everything to Urquhart and they match all that up so you're you're buying that's a good point in terms of the mix of what that can be but one way to think about it too is this is like the city of Georgetown the way they think about it is this is that as long as they purchased a hundred percent renewable relative to their energy so that let's say the planning basis so they have they have a load of 700,000 megawatt hours they bought 700,000 megawatt hours of production from then that means they're a hundred percent renewable and what happens a lot of that gets served you know it gets thrown in to Urquhart so Urquhart becomes more renewable and at times they have to buy sort of back from back from it and it's we use sort of an ATM analogy that is if you put money in your account you can pull it out but it's not necessarily the same money if you go to Mexico you're pulling out pesos and you didn't put the pesos into your account right but it's it's it's an accounting identity so you're you are and that's how most of the 100% renewables now described in around the country. So in terms of the Denton Energy Center more specifically the initial models of price suggests that the deck is likely to have excess capacity for most of the year it is a peaking plan so there 'd be many times of day in many seasons where you don't need a peaking plan. Under some prospective coal retirement schedules in other words if coal units are retired ahead of what some projections may be the deck capacity factor may end up being higher but this is an uncertainty. In either case it may be an opportunity to sell excess deck potential production on a seasonal basis to capture additional revenue to pay debt service so this is part of the mission that we have is how best to optimize that generation asset to help reduce your debt service. Because most 70% to 100% renewable portfolios produce too much renewable production during the spring and fall season may also be beneficial to sell excess renewable power during those periods. So the issue is as you saw here earlier you've got variable load but you're typically buying block power so this is part of what your organization would need to manage is selling the excess and filling in the periods of time where you have a deficit in the most efficient way possible that's part of what that needs to be done. Yeah we have a slide that shows that it's coming up. So I'll let Neil speak to this again here's April so you saw a summer day here is an April day which is typically some of your peak wind generation season. Great thanks for pointing out I didn't mention that the blue line is your load so that was kind of key. So this is an April day and in April the winds are high typically and you can see that the the wind portfolio that you have it sometimes blows all over Texas all the time and that's why it's just a straight line there and that's like I said the Georgetown wind did that like three days last three days and so what happens is you have these sales an hour those are the purple below zero during that time so you have too much wind being produced at that time. The other thing is that you have I think the scale got off a little bit our market purchases here is somehow I got off is that these are the avoided these are market purchases that aren't quite right actually this somehow this I'm sorry this I'm sorry about this slide by screwed up this slide there's whenever there is production over your blue line here we must have adjusted the line somehow and all of this will be sold off of the solar so solar you'll have slightly too much of and that will produce sales you won't buy any of these things these market purchases and so you'll have sales all through this period whenever any of the two supplies which is wind and solar is over the blue line and so what that does is your supply in the down here in this region it shows that wind provides 85 percent of your energy the deck doesn't execute at all because it's the prices are low and so it will have no production at all and the market purchases actually I don't think there will be any market purchase here and the solar produces about six percent of your supplies and there's much more sales I'm sorry about this slides we got I did this it's my we can correct that in a submit a new version yeah so this slide shows the part of the presentation if you yeah um so number one I understand how selling renewable generation works if we actually have physical solar and wind power but how exactly does that work when we're contracting out so we're buying other people's solar and wind and then where's in where's then we're selling it well you really when you buy yeah you're the owner okay yeah nobody yeah so are the only only you yeah you bought the energy at the price and you want all the environmental attributes of connected with that yes okay so it's yours and if it's in excess and only in excess you may and it happens in the spring when you have a lot of production you may know do you mind I'm sorry it's not picking you up oh sorry you you will make sales either into the market or you can you can you know if you have forecasted let's say for an entire month too much wind you could you could sell it off and say to other munis or other people who want to increase their environmental thing because let's say you have a hundred percent renewable portfolio goal you probably wind up buying something like a hundred and twenty percent energy something like that in order to fit it in that that may be the way that it maximizes and so you're like twenty percent a little long so what you do is you you can sell that you'll either sell it into the market or you can sell it to other people in a forward basis and it just whatever is best okay so you're so you're saying it so it works of selling energy that way on the market works this kind of the same way as as selling energy that we would generate it's the same on the market it's right apples and apples and you can I and you can add you can actually add instead of having it variable you can add in a what we call affirming so and you use the deck can be used to do that and and that may create extra revenue for the deck so that you can pay down debt service that's one of the things to use it so you're really using the deck to essentially buy or to to affect renewables but we don't this is a question but we don't need the deck to do that right well there to firm it you would use the deck but you could sell it on unfurmed yes question and you know you talked about the hundred twenty percent so is the additional twenty percent that's kind of your farming part of the of the energy that you're right it says you're gonna buy excess yeah and we have a slide that shows how fitting this is kind of somewhat difficult and that is that that is one of the things one thing this this is a little something a lot I saw in some reports they were saying well you have to buy 200% or something like this this is all nonsense right you don't buy 200% the solar has a capacity factor of around 20% the wind has a capacity factor of 35% so when people say you have to buy twice the capacity in fact you're only buying 55% of the energy and the other thing is they it implies that those are additive well they're not because you can't add wind at night because it doesn't exist so that's a very misleading I've seen this in reports and I just go what are they talking about these are people who are sort of deeply ignorant or they have some kind of an agenda so the challenge here is that you've got 8,000 in a typical year you have 8,760 hours so how do you get to be a perfectly 100% match in every one of those hours you can't you're gonna have some excess in some hours and deficiency in other hours where do you draw that line as Neil said the to us the most practical way is just add up all the meg awatt hours of load you have in the year and then you take this capacity factors of these generation units and you'll you'll understand that a little better when you see a graph later and so you multiply the capacity factors by the total capacity of the units and you sum all those up and then you get your perfect opposition edge so you'll be a little long have excess in some hours some deficiencies in other hours but when we have those acts yeah when we have those excesses we can always sell those in the market absolutely and that will bull or deck or whatever exactly exactly and that's one of the that 's one of our missions is to help figure out the optimal way to dispose of that excess because that reduces your overall cost that's just part of the whole pie that you're dealing with and if you do nothing it all happens automatically both if you're don't have enough energy or cotton will make you buy to make that up if you have too much or couple buy it for you or they buy it in the market automatically yes so you're hedging you're trying to hedge against cost price yes and against demand to make sure you have enough right and not be forced to where you control your own market right is that right yes so is there a percentage a target kind of I think the Randy's question that hundred and twenty percent is it twenty one hundred and twenty percent that's kind of on a day-to-day hour-to-hour that you want to be ahead of the curve or is it 110 or does it work that's probably more if you look at it in aggregate over a year in advance you might be roughly 120 percent in terms of the way you need just to stack up your resources to meet that but going into any hour you want to be 100% 100% that's right and that's another question that we're going to answer later on you may not have specifically asked this but I'll answer it now which is you need to be a hundred percent five years out not necessarily you need to be a hundred percent ten years out not necessarily that's something that will work with you all to do to fit that but you've you've come into this in a very advantageous position because you're not full of supply yet and costs are coming down this market has really benefited energy consumers so you have a tremendous advantage in the fact that you didn't lock everything up five or ten years ago we have clients that are really dealing with that but they've got very high price power just up down the road in Austin you know they they took pride in being an early mover in renewables but they've paid five to ten times the cost of what you would be paying now it always pays my dad always told me never buy the first mile of anything I always go for the second one so you're in that position now where prices have come way down and you can take advantage of that just from the fact that you've had an open portion of your demand that has not been filled so there's a there's an efficient balance between buying too much and not buying enough that's something else will be working with your staff to try to figure out how best to fit that going forward here and that'll be part of what we recommend here so in terms of the path of what we're going to do in terms of developing recommendations for your renewable resource portfolio a we 've got the goal of least cost B we want to be diversified you already have some purchases we need to work around those Neil will speak a little more to that diversification but diversification is very important in reducing the overall risk and the variability of the portfolio its divers ification in terms of asset types solar and wind are perfectly uncorrelated so that's a great diversification but it's also diversification in terms of locations of where these production for these generation units are located and its diversification in terms of wind wind is not wind coastal wind is different from panhandle when panhandle wind is different from West Texas when in terms of how often it blows what time of day and so forth so you need diversification and all of those factors to really have a very efficient portfolio and then the renewable goal that's something that 70% 100% we need to figure that out we'll offer alternatives to that but we need to you know know where that is so then Neil will oversee this portion of the work we've done this for a lot of other people we run Monte Carlo simulation models to model the cost and the variability in the makeup of these different portfolio mixes that we'll be discussing so in terms of least cost we'll go down these things quickly in terms of the pieces of that last slide that you saw current wind resources are offered from 17 to 22 dollars per megawatt hour these are really great low prices solar is offered in the mid 20s they just these are tremendously low prices the benefit of not having locked things up a few years ago these power prices are the lowest offered in the last 50 years this is in contrast as I was mentioning earlier four years earlier who win prices were offered between 40 and 65 dollars per megawatt hour and solar was as much as five to seven times the current offers the city of Austin's Weber's ill Weberville site for example at $165 per megaw att hour subsidies for solar and winter being phased out so it's good to move now natural gas is the marginal fuel nationwide and supplies declining at current price levels while demand is increasing dramatically so you can make a fundamental case the gas prices are fairly low right now as well if gas prices go up it'll make renewables more competitive and likely be higher prices so this is really an ideal time to be in the position you're in right now to lock up additional renewables and add to the portfolio now in terms of diversification I'll let Neil speak yeah this is a chart from the independent market monitor for ERC OT and what they've done is just taken the average load for ERCOT and that's in the blue and they've showed different renewable resources the in the red is the wind coastal that's that's right on the coast of Texas and then they've on the other side of Texas on way up north is the wind up in the panhand le and that's in green and solar is in purple here and and so that's those are the different regions and you can see they're all different and they core they the big thing is the one thing that really correlates with you know peak demand is solar it has it has production during the day and so that load where load kind of goes up it also goes up if you marry that solar with the red the coastal wind you can see that that curve matches almost perfectly that this this slope on this whoops I just whoops you go back hands off the wheel for a second okay thank you you know I says that so so this curve goes down like that these two curves you know almost match that so all you have to do is you know raise this up and they'll match it perfectly basically the other thing about coastal wind which is this coastal wind notice that it produces the least off- peak and so that's when if you're if you're having to at night right so what happens there is it in competing with say some of these in the spring this has an advantage in that it doesn't produce when everybody else is over producing so what we'll go is try to measure all of these and see what the relative advantage when they fit into your portfolio and that's that's kind of a hard thing to do but it's but that's that's what we'll do and see how we can do it now on top of this you know on a daily basis we will have these dynamic purchases and that sort of thing and we've been doing that for years we do this every hour for Georgetown every day so and we've been doing it for two two point three years or something like that and so it turns out when you do that the price of your portfolio your renewables are also turn out to be the price at your loads that's the that's the goal low zone so they both match so you're perfectly hedged if gas prices go up to ten dollars you don't see any change so just to sort of reinforce some of the points that Neil was talking about we 've talked about these earlier renewables are intermittent producers and carry two risk elements but spotty hedge performance meaning that they're all they're not always there when you want them and sometimes they're there more than when you want them and the increased forecast area so that's why portfolio renewables needs to be composed of resources that are poorly correlated with each other meaning that when the Sun is shining the wind usually on average is not blowing so you've got a great offset so the main risk reduction is a combination of solar and wind but as I said earlier wind resource combinations have varying correlations due to the differences in quality and location so as you saw on that other graph that's part of the best fit analysis that we'll be conducting is how best to fit those different locations and types and qualities of wind and solar and I thought this is a really important point that Neil added here very few commodity portfolios have the opportunity of such advantageous pairing of assets you will not find I've come through oil we've done a lot of work in other areas Neil grew up in the in the cattle business you will not find such a perfectly opposing correlation to solar and wind it just doesn't exist in any other commodity complex so you have a very natural advantage here to take it to take advantage of yes so I have a question when you have storage does that decrease the problem of forecast error because you've got it you know you're not you to an extent storage we're on the cusp of storage being commercially viable it's being deployed in some areas it's not quite there I'll let Neil speak to this in a moment but typically storage would best be used to behind congestion points storage may be valuable for a few hours but this isn't like other commodities where you can just put it away for weeks and then deploy it later we're talking on an hourly basis but we do have utility scale storage that's being used well no well there are some smaller that will that will happen that's something that will happen I've done storage I wrote a thesis in graduate school on natural gas storage which LCRA was building and so I did after we built it I did all the operational things that they started and that's been going on since 20 years or so and and I've also done large case that's compressed air energy storage in other and those were utility scale like 400 megawatts and so you asked first about forecasting forecasting is key because we're basically storage takes power from one period and then it deploys in another period we have to know what the price differentials are how much you fill it up and this is difficult stuff and and then how to depose it but absolutely storage will help do that in your case here you have you know if you buy a solar thing with the deck you have too much of that you have too much certainty on peak you will you that's what you'll wind up with and so that's that's something that you'll have to consider about I wanted to point this out this is again from the 2016 state of the market report and what it does is show in 2016 by months and that the the very last chart these were there were four of them together and they're split apart but those are the months of the year and then the different zones and you'll notice you're in the north zone which is in the lower left corner and you can see that congestion for y'all is is some of the lowest and the least volatile and that's great so that means the insurance to buy for that is incredibly cheap but in renewables they come from the west and the south and so you'll quickly have to merge those two and so say half your congestion risk is easy to manage with congestion but the renewables would be more difficult to manage that but it's completely you're buying insurance essentially and so you just have to look at all the comparative costs and that sort of thing but that's there's 20 markets a year to go out in the forward markets and so you have to have a real rigid point or real well thought-out plan and execute it in a very very disciplined way to get this but when you do that again you wind up with their renewables at the loud sound at the price you want so this is yes but if we had renewable physical renewables here renewable generation well we do already but so with with our renewable generation that we have here our physical generation there's not a congestion problem that's right correct because it's being produced here so correct so that's one advantage that actually having the distributed generation has over the contracting out that's right the as long as it's not too big or cut as soon as you get over a megawatt they it's they take away that advantage from you because then they say that's a transmission thing and it might as well be an am aryllis or something okay so so but that means any rooftop as long as you don't exceed one megawatt all the rooftop solars absolutely that congestion or the basis and what we like to say is geographic basis it's the same place right yeah so you don't need a basis on that case that's right thanks so just just one very last quick thing on here as Neil alluded to the congestion risk is small here this is an advantage you have being in the north as he said the renewables are likely to come from other zones of congestion is going to be a bigger problem we've had some customers that have said we don't want to spend this money this is just an additional cost why should we buy insurance when nothing is happening here but to us this is like somebody in Houston a month ago saying you know what hadn't flooded here in ten years I don't need to pay that $ 500 a year to ensure my house when the insurance is cheap you take advantage of it insure it that's our philosophy and that's going to be something that will integrate into our plan so just to wrap this up our anticipated recommendations for the plan that we're going to be delivering in October to purchase additional wind with a lower correlation to your current wind supplies to better complete the supply hedge and achieve greater diversification purchase solar at two or more additional locations to improve aggregate reliability and that also increases your diversification 30% of the load would be purchased with short to intermediate term solar and wind contracts two to five years so you're not loading up a hundred percent too far out we'll talk about this more when we get into the deliverable portion of the report but you need to balance staying somewhat competitive versus making sure you don't have too much uncertainty there's a balance there and that can be achieved through staggering these things are laddering them through time we want to avoid known congestion areas if possible we're going to emphasize 345 KB interconnects these are higher capacity transmission lines you don't be connecting to something we 've had clients that did this and then brought us in later after they've made the decisions have connected to low capacity interconnection points and they've got tremendous congestion problems expected prices for the renewables in the mid twenty dollars per megawatt hour and we will propose a variety of alternatives for maximizing the value the deck including how to dispose of that perspective excess production potential just very lastly in a second part of our work we're going to assist we propose assist the city in revising RFPs for both renewable resources and for natural gas supplies making sure that you have the right type of supply contract for the deck is crucial to make sure it operates optimally so this is just something that we have in your on your desk in terms of a proposal to help you evaluate the offers for both renewable resources and for gas supplies that's the end of the presentation any final questions that you have if not we thank you very much for your time yes yeah earlier in the presentation you said something about you already have some some purchases and we need to work around those are you imp lying what would you say that those purchases that were made are not necessarily the ones that you would have gone with head you reasonable assumption mm- hmm yeah so I'll I'll just say that I really like the idea of of contracting out renewable portfolio management either with this group or some some other group but it it just seems to me that there's too much risk of trying to manage this in house and you know trying to reinvent the wheel the wheel and teach ourselves skills that take many many years to acquire so I'm I'm all for contracting out for these kinds of services and for the insurance I just wanted to say that just to speak about two things to that one is you've you've already the city's already contracted out to us to help design the right yes I understand I mean we're confident that you can you can acquire the skill set and the experience to do the day-to-day management we see that successfully across clients now a lot of them we advise on an ongoing basis but we think you can build that capability internally so there's two certain things yes yeah yeah yes sure yeah I mean having having somebody I'm not sure what the you know what the official terms are thank you for clarifying yeah I mean having somebody on our team around the clock yes not just yes not being entirely on our own mm-hmm thank you thank you very much thanks no any other questions from any any other board no thank you okay do we have on this item do we have anything to discuss or any direction we want to to give staff right yeah don't we already do I mean we we monitor on a minute by minute basis the energy and all don't we already pretty much have the platform and skill set we do have the platform what we're missing is a formal plan moving forward to implement so I think our team is very talented and I think that's gonna be born out in this next presentation one of the things though moving forward is just a longer-term renewable plan how we're going to operate it how we're going to manage it we very well could recommend bringing in assets such as enterprise risk to help us you know update the plan and and just have that that outside voice to bounce ideas off of but yes now we do have a very talented team in house to work with them I took a tour and it looked like yeah the stock market I mean yeah monitoring and the people I was very impressed with with what the city already has yeah I think I think the reason we brought them we brought enterprise risk in is to help us put together a formal plan moving forward and help us with that that resource allocation mix and also to make sure that our public understands what we're doing you know but moving forward what we will likely ask them to you know to help us refine the plan and make sure that we're operates officially as possible but we have no concerns about our current staff and their ability to pull this plan off their talented people and have saved quite a bit of money over the last millions of dollars right well as he said you have to have somebody here somebody's gonna be on it 24/7 to watch it third party look forward I don't know if there's no action to be taken but I look forward to the October 16th reports when it comes in 16 is when is our we don't have what's that we have a PB meeting on the 6 second meeting okay okay that's the 23rd okay to the public but also my colleagues on on pub that the impression that I got from reading this presentation in advance and hearing this today is that the the plan that we had in place called the renewable dentin plan was very very bare bones and minimalistic so I'm kind of getting the impression here that where that what we're doing now is really building a plan from the ground up is that would you say that's correct Todd I think that's fair the there was there's obviously a concept and an idea behind the energy center at this point what we're trying to do is make sure that we include pub and council in terms of adopting our renewable plan moving forward what that's going to mean in terms of a divers ification what it's going to mean in terms of future contracts contracts the renewable market as well as the important policy decision it's really not been discussed yet and that is how the deck is gonna work yes you know and how in I think there's a lot of confusion around that and we just want to make sure that that both of our governing bodies and our public fully understand how this all works and that you know that we're operating from one set of facts mm-hmm yes thank you yeah this is essentially just going to give us a formal strategy of how we're going to be moving forward with renewables and everything and exactly in a very public way yes and and as implementation of the deck and how do we how do we utilize that as well in that plan so for what it's worth and regardless of how we've come up here to this point with or without a plan the gentleman did say that we were poised in a great position to begin putting this plan on paper so however we got into this good position I guess it's fortunate that we are in the position and I think I heard him say Georgetown fell into it so maybe into it too I do remember having discussion five six years ago about solar contracts and about the time that Austin got into it and and we were looking at hundred and twenty dollars minimum at that time so now we 're talking about twenty dollars which is yeah yeah I'll go here that's good yes I'll just add to that yet we're absolutely in it clearly in it advantageous position financially in terms of purchasing renewables but of course we also are balancing that out with the the 265 million dollars bond debt for for the gas plant so that may have been of course we can't go back in time and and I'll alter the recent past but just to make sure in terms of being honest with the public that the public understands that we also have this big debt service and part of what we'll be doing it seems from from reading this report with these cheap renewables is helping to pay off the debt I know that's obvious to us just kind of stating that off for the public and I've made it you know just to put my cards on the table you know I've I've been been very vocal from the beginning in my opposition to the gas plant but I've always been thrilled with the idea of these renewables and I makes me really happy to know that we're doing this at at precisely the right time it is bittersweet for me though you know to see that all these all these gains will be you know paying off this this this burden well I think to your point we thought that you know based upon the council's goal of you know 70% renewable strategy moving forward and hopefully exceeding that you know we feel like we've got the right team in place to help us put that strategy in place they've obviously proven they can do that note with other communities but the the financial plan that's currently in place and which would be in the form of the five-year operating budget operating CIP budget that really is the those are the numbers we're trying to improve upon and so any strategy that's put in place yeah there's the debt there's mitigation for the debt service no question about it but one of the charges that we're hoping to see through this strategic planning is can we meet and exceed our financial goals and input the the DME and even more advantageous financial positions so we you know we're moving forward we 've got the variable set and I think we've got the right team in place that can can help us provide that objective third-party look and improve our financial situation that's that's the goal thank you and I would just want to see to make sure that our rate payers our residential rate payers average Joe rate payer is reaping the benefits of this savings so that your average residential rate payer doesn't feel like they're strapped with this debt I know we're all strapped with it with the debt and that's a reality but I just wanted to put that in there so that the public knows that that that that will be something that that that will be talking about trying to ease the burden on the residential rate pay ers I think once we can get to a point where PUB and council feel comfortable adopting our operational plans moving forward the strategic plan moving forward you know and we start locking down some additional renewable contracts we should be able to be in a pretty solid position late next spring to assess how our new strategy or how our strategy is going to correlate to our assumptions and I think it's I think that will be the time where we can answer that question a little bit better for you excellent well I'm not quite ready to scrap the deck at this point I think I'm looking forward to this through the report in October because I think it's going to illustrate that not just paying off debt but also the value of having a start-up during peak hours because that is the most expensive time to try to buy energy when you need it is during the summer peak hours and so if that might makes that gap I think I think the jury is still out and and that that's also the time when of course the Sun the solar is most yeah we've got the most solar we'll look forward to the report yes yes me too okay next item we have is item B Brian to receive report whole discussion give staff direction regarding the energy management organization this is the second of two presentations this morning for you from some consultants that we've hired so as we were talking about earlier with you we did create an energy management organization about three years ago we had some internal benchmarks we were using to calculate what we thought the savings of having that group in-house was but we wanted to get an independent view of that and so we hired Deloitte consulting to come in and do a review of that and so the purpose of this item is to have them present that report to you tomorrow they'll also be repeating reporting on this to the City Council so with that I'm going to introduce Steve Engler and Tim Metz from Deloitte and turn the presentation over to them thank you Brian good morning ladies and gentlemen of the board as Brian mentioned my name is Steve Engler I'm a managing director with Delo itte's energy risk advisory practice and my colleague Tim Metz is a senior manager in that same practice pleased to speak with you this morning and like the gentleman that spoke earlier please don't hesitate to interrupt with questions I apologize in advance there's a lot of numbers on a lot of these slides but we're gonna try to tell a story at the same time I love numbers before you start I have to leave at 1015 so if I get up and leave it's not your present so our attorneys require that we put a lot of verbiage upfront in the slides just to talk quickly about where we're gonna go we'll give a little bit of a background in terms of why we're here Brian gave an introduction to that effect talk about the three things that we set out to complete during this analysis and then we're going to talk about some of the details of that analysis specifically validating the model that the city's been using to calculate the savings then peel that back a little bit and look at some of the key assumptions that are in that model including the heat rate and the ancillary services and the QSE costs which we'll talk about and then the third piece was to look at on the cost side of the equation so what we're comparing to and we've got a summary at the end and some recommended next steps as well so I'm not going to read all this to you and I think this is probably familiar to all of you on the board and in the audience but dating back to 2002 when the state of Texas deregulated the energy the electric markets Denton Municipal Electric began utilizing services from several counterparties to procure energy when required to meet the demand as well as fulfill this the scheduling requirements in ERCOT beginning in 2011 DME selected a single counterparty to perform that function on their behalf and through the course of that contract it was discussed that there was potential savings by bringing that capability in-house and that's when the the Emo was was created and launched as Brian said there were some expected savings in bringing the capabilities in house and in order to monitor to calculate those savings in 2014 before the the Emo was established Denton went to that same counterparty for a quote to continue to provide those those services and that's been really the the benchmark cost that has been used in doing the savings calculation there were some budgeted savings that were put in place for fiscal 15 and fiscal 16 and in the calculation of the performance against those expectations the DME has reported savings in excess of those budgeted savings and I 'm here to foreshadow and the good news is we agree that there have been savings in excess of the budgeted amounts there are some details that could push those savings in one direction or the other okay so just to recap what we were asked to do the first piece of this is really a re performance of the calculation and the purpose of this was to check the inputs and see if that there are any really data gaps or inconsistencies or errors in the calculation of the saving using the savings using the model that's been in place here the second piece as I mentioned was to dig into the assumptions some of the underlying assumptions and understand what's driving the majority of the savings that have been reported and then finally looking at the Emo itself and it's important to keep in mind when the the function was outsourced there are a number of capabilities that we see at similar organizations that provide energy risk management and scheduling capabilities and so we were asked to do a high level assessment of those capabilities because that's really what you're in effect replacing by bringing it in-house it's important that we did not do a detailed process review kind of a front-to-back office assessment it was really what we want to do here is point out some capabilities some functions some underlying costs that we would recommend to you are in fact included in the cost side of the equation so that you truly are replacing apples with apples okay I'm going too fast slowing down I'm from New Jersey so I talked quickly okay so here's one of those numbers slides so this is the first part of the assessment and we broke it down into two time periods October 14 through September 15 and then October 15 through September 16 and the takeaway from this calculation this is where we re-performed the model and the savings calculation as performed by the city prior is that with very minor differences we were able to match the calculation of the savings in fact the difference in cost savings is you know in a small way to the good in other words you under reported the savings based on the calculation of the model that you've been using some drivers for that includes some data elements that we when we dug into the model the details of the model and found that there were some some minor anomalies but for the most part it was a given the numbers that we're talking about the differences were very minor so for the first part of this we would conclude that the calculation was done correctly and the inputs were used appropriately and that there were no data gaps to speak of so now we're going to get into the next part of the analysis and really this was to understand the key drivers of the savings and also to understand you know the sensitivity of those savings to certain inputs and I'm going to spend a minute on this slide just to make sure we're on all on the same page in terms of heat rate and heat rate is effectively a measure of the efficiency of a generation unit to convert fuel to electricity so the lower the heat rate number the better the it's there's a simplistic example here if it takes 10 units of natural gas of MMBT use to create one unit of electricity or one unit of power that would be a heat rate of 10 so the drive to build and dispatch more efficient units is hopefully has the effect of lowering the overall heat rate in a particular area so in a calculation such as the one that we were asked to to review it's the heat rate itself is a key contributor to the cost of the you know the effective cost of the contract that you were replacing another key element that that we want to make sure we emphasize is the notion of on peak versus off peak versus around the clock the on peak hours which would be the hours between 6 a.m. and 10 p.m. reflect generally the the period of highest demand for electricity and then the off peak hours obviously by by extension of that are the evening hours the overnight hours where demand is lower and then there's a notion of around the clock which would be the full 24 hour period which would be some combination of that the heat rate that was quoted in the contract extension offer by the counterparty it's important to note that that was quoted at an on peak rate whereas the product that was provided was an around-the-clock product so in our mind there's some question as to what the appropriate heat rate should be in order to perform the calculation to calculate the savings this isn't as there's not a definitive answer here and we're not asked to opine on whether the heat rate was the correct one or the incorrect one what we want to point out is that the decision of which benchmark heat rate to use is a significant driver of what the savings would be reasonable people can and do disagree on what the right heat rate should be in any given model part of our recommendations going forward is that for future benchmark comparisons that there's clear and explicit agreement on that heat rate component so that the savings as calculated you know there 's less question or less pushback so that's a key concept and what I'm going to demonstrate next is the impact that the heat rate has on the calculation and changing the heat rate has on the calculation the the red line here I'll try to walk you through these charts it's a clarified all the lines the the the blue line the blue and gray lines kind of going across through the year are forward heat rates for any particular year that that were recorded the red dotted line is the benchmark heat rate that was quoted in the counterparties contract of 15.75 by doing historic analysis of those lines with the peak you see in July in August the average forward on peak heat rate that we calculated for that time period between 13 and 14 was 12.26 so 12.26 on peak heat rate versus 15.75 it's reasonable to assume that the counterparty would have some profit margin built into the heat rate that they quoted you and in fact DME and the email have calculated kind of backed into a calculation of what we think the the profit margin was for the counterparty and that would be expected in any in any contract where they're providing all of those services to you but we point this out that there is a significant gap between the actual on peak heat rate forward heat rate versus the one that was quoted and this may be a function of the fact that it was quoted on a particular day or a particular period in time whereas we look back over that course of time over that those those years and then to take that one step further if you agree that using an around-the-clock heat rate would be a reasonable benchmark for that same time period we calculated the average forward heat rate for those for those years to be at 10.1 so you can see using the around-the-clock heat rate pushes it down even further if we then add in some profit margin and in this case we use 2.5 we rounded the 10.1 up to 10.25 just to keep the math kind of clean and then we added a profit margin of 2.5 results in the the opportunity is 12.75 as a benchmark heat rate as opposed to 15.75 as one example and then the next chart we tried to summarize what changing the heat rate does to the calculated savings the yellow highlighted lines and this is what the top tables for 2015 the bottom tables for 2016 we only highlight that one line in yellow to point back to the prior slide it's an example of what the savings would be if you agree that that's the correct heat rate to use and you can see that the change in savings is you know you know significant based on the different heat rates that you use the closer you get to the 15.75 the changes become smaller so we offer that here is something for the for the board to consider and for the EMO to work with the board and DME in terms of determining what is the correct heat rate benchmark to use and then that will adjust the savings accordingly for both of these years I'll point out that even when using a very low heat rate you know in the nines there are still savings in excess of the budgeted savings it's a question really of how much in excess of those the savings is the appropriate the appropriate analysis I'll pause there to see if there are questions on that's being a key point I've got a question the in this you may not have looked into this but the previous contract we had for for this was the I guess was the fee we paid based upon something other than ATC or was it on peak it was based on on peak so we were actually paying on peak on the one prior to 2014 that was the quote that that was offered at the point then that was for the renewal yes the contract prior to do we actually pay that yeah it appears to have been based on an on peak price as well so if you go back and you look at what the forward price for power was around the time you were negotiating that contract it does line up with the on peak power prices now the markets changed I think significantly from when those negotiations were occurring in 2010 11 to what the price dynamic was in 14 so you did see a large change in prices in 2014 which did which explains part of the difference between what explains part of the reason why it went up so much in in 2014 okay okay so the next piece of this was to break down even if you look at that adjusted cost savings those are still significant numbers and we wanted to understand what's driving the lion's share of those savings and in our analysis the large part of that answer can come back to what you were paying for ancillary services and call what they call qualified scheduling entity costs queasy costs that you were paying the counterparty versus what you actually paid in managing it yourselves so I think the the headline or the good story here is that there were significant cost savings that are driven by the fact that you do this yourself as opposed to paying somebody with a premium we looked at the ancillary service cost is quoted and then assumed some increase for 15 into 16 look back at what the ancill ary services actual needs were for for those time periods and when you calculate the benchmark cost at 525 a megawatt and then at 551 a megawatt versus what you actually paid for those time periods the rough from both years over three million dollars of that savings that that remaining savings can be attributed to basically beating the beating the quote that you got by doing it yourselves okay Jim did I say that right perfect okay okay so this this table is just intended to summarize what I just what I just mentioned if you agree that the the heat rate at that number that lower number of sorry at ten point two five plus a two point five profit margin if you agree that that's the right benchmark to use it would adjust the savings by roughly seven million and fifteen and roughly six million and sixteen still resulting in cost savings of six point one million and fifteen and six point eight million in 2016 against the benchmarks which are in the first line there two point three million for fifteen and two point or five point two million for sixteen so again I think the debate that should stem from this is what's the right benchmark going forward and we'll talk about that in our recommended next steps and then the bottom part of the table just summarizes that a healthy chunk of those savings even the adjusted savings come from the fact that you are serving as your own queasy and paying actuals for ancillary services as opposed to actuals plus a plus a margin okay all right the final part of the assessment we looked at the elements that we as a service provider would expect to have in place at an organization that's providing queasy functions as well as the typical transacting and risk oversight function that you would see for an entity that's transacting in the forward energy commodity markets so we offer these here as considerations likely these types of functions or capabilities were included in the counterparties quote for you so we would recommend that the company and that the board are comfortable or get comfortable with the fact that we are replicating all of these capabilities inside of the Emo and and we because we're consultants we break things down in governance people process and technology on the governance side and we advise clients on these these elements on a regular basis we go into organizations that trade energy and we will perform assessments as to whether or not there's there 's the appropriate level of risk oversight and governance so the governance includes things like external compliance elements as well as the internal committee structure and oversight that you have periodic assessments of the hedge strategy similar to what the gentleman spoke about earlier from the process perspective we typically see fairly rigorous internal audit oversight analysis of the cost of capital so for transacting in markets where we're required to post collateral what kind of impact is that having on the floor from a cash flow basis and the people side there's a heated debate or maybe vigorous debate in the industry around what's the right level of risk oversight for a transacting function and that I will tell you there's no clear ratio is it 10 for a 10 front office people the two middle and back office people there are no clean numbers but what I can say is that it should the the amount of oversight from back office and the middle office perspective should be driven by the type and the volume of transacting that you 're doing and that should inform how much how much oversight is required and along with that is typically some IT and development support to have the right tools and systems in place to serve that bottom right box which is ongoing position in mark-to-market reporting you want to know are we long are we short you know some of the items that the gentleman earlier spoke about are you looking at risk calculations whether that's a value at risk or maybe a gross margin at risk or some other key performance or key risk indicators these would all be elements of the I would say the the infrastructure that would be required to be in place to support the the operations of the MO from a energy management perspective but also from a risk oversight perspective yes are you saying we're not doing these things no we're saying that there in order to know that the cost side of the equation is correct we would recommend that you include the cost yes okay exactly ensure that they 're happening and ensure that the cost of being good yeah I think that's right I mean we're not suggesting that these things aren't being done okay I think in our initial review of the cost side you can't really tell when just looking at a bucket of costs you know whether things like independent you know the mark-to-market is being calculated independently and there's position reports so you know if you want to if you wanted to do a deeper dive on that which we recommend you know these are the types of things that we would look into okay in the spirit of telling what you're gonna tell them and tell them and then tell them one more time the takeaways from our from our assessment are that the in the performance of the model we found no significant differences or errors in calculation in peeling back the assumptions and understanding what's driving the cost savings the two main drivers are I guess two of the main elements one is determining what's the in fact the appropriate heat rate we would suggest that an on-peak heat rate is probably too high to use as a benchmark and looking at something more around the clock or maybe closer to the load pattern that you're actually using and then determining that through a historical analysis rather than a point-in-time quote doing those things we think could set the bet the heat rate benchmark for future savings calculations and and and just basically provide more clarity as to how those are being derived and what's what's driving the savings and then the second takeaway from that part of the assessment was that ancillary services and queasy costs bringing those in-house management of that in-house resulted in significant savings and then going forward we would recommend an effort to ensure that appropriate governance and oversight and those costs are being included in on the cost side of the equation including determining whether or not you've got the right dispersion or allotment I would say of professionals across the front the middle and the back office okay so in terms of next steps and we've been working with Brian and his staff on a couple of these items number one we would suggest is establishing the benchmark for fiscal 17 as we've discussed the elements of that can drive the resulting cost savings in one direction significantly or the other so establishing a clear model and agreement on the underlying components of that model we think would be a reasonable next step prior to calculating that benchmark savings Brian has also asked us and we've talked to the organization about understanding perhaps are there other risks that have been introduced to the organization by establishing the EMO like any hedge you often trade one risk for the other and then along with that an assessment of the EMOs capabilities and make sure that all of those front middle and back office capabilities are in place sufficiently to reflect the level and the type of transacting that's happening in that organization and that's the end of my prepared remarks so I'm happy to take questions so the heat rate is that something that we guess at like it's a we guess what it's going to be the next day or is it something that set that we know or you only know a historical reference in hindsight you only really know what the heat rate was from a historical when you're talking about you know in this case calculating the cost of energy we know it by looking at the historical prices so going into the contract you know there was some analysis that was done to say we can go out and we can look at today what the heat rate might be for some future period of time if we bought power today and so you know any counterparty would go out and they would look at that they would consider internal factors that they have they would factor in risk and profit margin and so that's how they probably got to the 15 75 they started with the on peak heat rate and factored in all those other considerations now after the fact we can go back and we can look at a lot of different things because now we have a lot more data we've got the forward prices you know we talked earlier about day ahead prices now we also know what the day ahead price was for a particular day and so that's why in terms of looking at it from an FY 17 perspective there's probably and you know the Emo I think has already looked at some of these a number of different ways in which an analysis you could do to inform what that benchmark should be now that you've got a lot more historical data after the fact you know but at the time they had you know a limited amount of data to do that analysis looking forward and does this does this heat rate and these calculations do these only affect purchases that we're making off the market or do they also impact our contracts that we signed for wind and solar they did not they only impacted the incremental energy that you needed once you factored in the contract you already had in place that we go out and buy off the market so was it an April month that showed us 28% off the market it was in your presentation sorry and then an August month there was none so we're still paying the Emo what are they doing on those days when we're not making any market purchases just out of curiosity yeah well I think that's a different situation I mean there I think that was a looking forward if you have more wind and you have more solar well that's where we're head yeah so I was just trying to get right my idea around what the emo is doing if we're not purchasing anything off the market well I think to the point that they made earlier there's still the forecasting there's the there's the managing the load and supply imbalance so like they're not doing anything they're just doing different things they're not making incremental market purchases maybe they're making incremental sales could be market sales okay and so when we outsource it it or in the past when we outsource it we were still paying those people the same rate even if they weren't making purchases for us you're only paying you're only paying that you're talking about the counterparty yes we hired somebody to do it are we paying them all the time or only when they make purchases only when they make purchases but our emo operates and we pay them 100% of the time but they're not always making purchases true okay well so that's a difference that's not apples and apples that's that's different right the calculation of the benchmark I think the calculation the benchmark savings takes all of that into account so it's the cost of operating the EM and maintaining the capabilities of the emo in-house over that period of time versus the what you spent on that incremental power with the counterparty so it does bring it together I understand why they probably use the 1575 because that's what they thought that was what was quoted correct but I do think it has to be around the clock to determine that heat rate and I'm the one who has to leave so I want to get my opinion out there that I really think that's where the benchmark needs to be is around the clock and then add the little bit of profit margin for the benchmarking but and I do agree with these other doing an emo risk assessment and make sure we're doing okay all we can do thank you anybody else yeah I I agree I'm I'm convinced that the around the clock is the more historically accurate more useful benchmark it's interesting to see what peak rate is but that's a very myopic slice of time point of view that doesn't give us the big picture that we want when doing this kind of work I would suggest that the heat rate reflect the actual needs right so what and so I think we can look at how much was around the clock versus how much was on peak and if if there's it might be kind of a weighted average kind of a approach so I don't think it's at one pole or the either the answer is probably so absolutely which is why which is why I made a point of saying it's interesting to see and important to see what peak rate is you want to know what the peak rate is yeah but is this the one you know the benchmark that you're gonna use so anyway I do agree with that recommendation and I would I was just curious to know so we got this on well PPU got this presentation the same time the public did that was which was Friday so we've had just the weekend to you know read up and research on all this but in my very preliminary over the weekend research it looks like most other EMOs and please correct me if I'm if I'm wrong this is a question more than a statement but it looked to me that most other groups that do this kind of work this this work use the historical but a historical perspective as a benchmark that what we've got here is kind of more of an anomaly is that correct I want to know the truth it doesn't matter to me because this is just preliminary looking around because all because these terms these terms are new to me so I was really giving myself a crash course in this over the weekend I don't know if I can comment on kind of general trends or most I think it's very common to see a product that would be quoted that would be very closely reflective of the incremental energy needs that you would have for that period of time so we would recommend matching them essentially whether everyone does I can't comment more or I mean or even so but so you don't have a sense off hand of this is the way most people do it well I remember what we're trying to do is is validate or understand a calculation that was done to understand what for the organization did we in fact say of course so there was a little bit unique to what we have of course of course yes no they had this yeah I and I appreciate that you went about this the right way I was just cute though this was a curiosity a question I tried to answer myself I wasn't satisfied with my ability to answer yeah maybe a better answer for that question come if we do the FY 17 set up of the new yes mark yes that would I would think be part of that to see are there you know leading practices that we could that we can lean on from from other organizations that are doing something excellent thank you yeah questions no okay yeah I think I like to recommend next steps I think that's especially one of the risk assessment to me it's about risk and risk reward you know I know there's savings there's obviously savings there I mean anytime there's a profit margin that you're taking out of something that I mean if nothing else it's a profit margin right on what the cost is but is that absorbing that profit margin worth the risk absolutely okay all right thank you again thank you appreciate it just one final item on this I did want to mention just like the enterprise risk consulting we do have a second phase that's mentioned here staff does recommend that we proceed with that so we'll be bringing forward a contract to you for your consideration to recommend to counsel okay do that shortly all right thank all right thank you okay next we have sorry can I just sure so where we and sorry this is my first meeting yeah so are we giving staff directive now to go ahead with the round-the-clock yeah I don't think it's not a formal vote just kind of a recommendation yeah direct yeah direct okay yeah yeah so and I so I just wanted to I want to add to that that I also since just because they raised these issues as well in the report that I like I really like the idea of doing a benchmark and now the benchmark analysis risk profile and head strategy assessment and Emo risk assessment because it I mean clearly we're still saving by doing this in-house not as much as we thought about 50% less than we thought but we're still saving so I think that's great but if we're only looking at the savings right now then I feel like we're making that same mistake of a you know my opic slice-in-time perspective and not looking at the big picture of potential risks in historic you know historically and moving forward so I really like this idea I think in terms of our obligation to ratepayers I like this idea of doing the risk analysis as well just to make to make sure and and yeah that is that that's what I wanted to add to that I don't know if now if now is the time to get others points of view on that or did you want that to wait till later but only because they mentioned it up and we've got them here I was that's what I was talking about risk reward is okay here's the risk the reward worth the risk yes what I want to know yes and that's exactly what what they're recommending yes okay excellent yeah I didn't say it is the way same way you did oh no no that's it I just wanted to be clear I didn't miss that opportunity thank you okay any other comments before we move on all right okay first on our our next on our agenda we have the consent agenda we have three items there when any any member like to pull any of those consent agenda items for individual consideration I'd like to pull a and see a and see me too that's exactly what I was gonna recommend all right we have item a and C we're gonna pull from consent is there a motion then to approve the consent agenda item with item B motion second any discussion all in favor say aye any opposed same sign okay okay item number a good morning board members and I don't have a formal presentation on either one of those items a or C they're both me but I'm happy to answer any questions that you have and sorry I introduced myself I'm Jessica Rogers I'm the energy services manager I know we've met before many times so I'm great to see you again but any any questions so basically this is the item a here is a is this the ordinance that we're putting in place for commercial for larger commercial solar installations and then that kind of just and we didn't have a ordinance in place so we're not replacing or amending one this is a brand new ordinance this is yet when we brought that target item for you at the last pub morning meeting I mentioned I'd come back to you because that was the first time that we were seeing these systems installed and that actually exceeded that 50 KW limitation and two systems that have active applications they've gone and gone through that interconnection process and have been improved and now we're in the rate setting process for those two commercial installations so this enables us to enter into a rate agreement and what we're proposing is that we would be setting them on the same distributed generation rate and that we use for residential installations oh so now my impression was that that you're talking about from reading the backup that you're talking about anything over 50 KW is you're be dealing with on a case-by-case basis right I'm sorry I was referencing back I apologize previously we had a very specific presentation about an okay got it yes this would be and we would do that on any application that comes through we would analyze it to make sure that it meets those two conditions that are outlined one if it's over 50 KW that it's not for a primary generate you're not doing it you're doing it off set your demand not to just generate yes so we do review on a case-by-case basis I apologize oh no no no my bad I think we're just giving authority to the city manager and or designate and so I'm I'm gonna have to vote no to a and I but I want to explain why I I like the idea of doing on a case-by -case basis for for 50 KW and above so that that makes sense to me whereas for under 50 having a just something regular in place what I don't like about it is I don't like the idea of the city manager having the full authority on that without it going through council and that's in no disrespect you know I love you Todd but you know I'm thinking not just about you but whoever future city managers and also you know even if we had all perfect city managers who always made the right decisions just in terms of accountability to the public and the ratepayer and checks and balances I want to see the bigger contracts that are done on a case-by-case basis which I like I want to see that go to council sure and I think that one thing that I would be comfortable with is anytime we would deviate from the norm that we would most likely bring that back from you and in the two instances that we have in front of us we would be recommending them put on the same rate that already exists so if we were gonna deviate from that in any way we would certainly want to bring that back yes yes thank you thank you any other comments questions I personally I like the the the ability to make a make a more a quicker answer as long as we have a set of standards established and that's kind of because you want to I want to encourage people to do this I want to encourage large-scale commercial distributed generation and so I like the person I like I like the fact that it's going to be a streamlined and you don't have to wait around for because I don't know I think the target even the target deal came to us kind of they kind of moved forward and it came to this last minute like we were trying to help them get their permit yeah it was kind of a last afterthought time deal so anyway it's my opinion all right any other discussion on that is there a motion move approval most approved excuse me item a and a second second from Alan discussion all in favor say aye aye any opposed no I say nay for opposed nay nay thank you that's good okay item a passes all right item number C which was pulled as well are there any specific questions about now this is just part of the same component to make this process a little more fluid this is existing yeah and in this particular process and one of the things we we talked about oh sorry maybe I talked about it with the committee on the environment as we're working towards getting a solar friendly designation and one of the sort of areas you can get points is the efficiency in which you're able to process applications for interconnection so by having an administrative process within we can help facilitate that efficiency okay and ordinarily they would have come through us and then to City Council we brought the target one forward we had a change in process and to bring that that one forward and that like I said that one was just special that it happened to be the largest one we ever had that brought forward and then we we kind of took a harder look at and we realized that we get about what we had 45 applications come this year that would be 45 individual actions for this body in the City Council and it would have to meet those schedules on top of that we we've seen a really exponential growth in application so my estimate would be 45 plus for next year and this was really just to make that process a little bit more efficient and customers won't have to meet that schedule where PB is not meeting this month and then they're offset with council which could delay it by a month to get their interconnection application approved that could delay their permit process we really want to be customer friendly on this interconnection side so that's why we were asking to approve these administratively thank you okay so my objection to see doesn't have to do with the streamlining in this case I really I think it makes absolute sense to give the city manager or his designee unilateral authority to decide because we've got a system in place not just a norm but an actual you know but from which you can deviate but just a system where you just plug in the numbers and there you go so it for see I approve of the part of this of course there are many parts to this but I approve of the part that is about streamlining it here's what I don't like I don't like that it's tied that the language in in the ordinance is tied to the tariffs and mentions the tariff which is something we're going to be discussing later on for the in that individual item I think item D maybe for individual consideration and that's all let's see on page four it says page four of the backup is there a way to show it so that I don't know the public can see maybe get that to come up which one if it would take too much time so this is the let me see what's the title it's just the agreement for interconnection and parallel operation of distributed generation this is exhibit that consent agenda see exhibit to I can do it page well thank you so much legislature should and please if anything I'm saying is wrong please let me know and don't hesitate to cut me off if I'm going off on something that's happy to answer any questions so yeah so see consent agenda you time at the actual ordinance see yeah and it's a big yeah and the agenda it's okay yes yes so on page four so this is the eight page document right on page four item number 11 a mm-hmm has a word says the city's authority the city shall not be obligated to accept or pay for produced energy from generating unit larger than 50k W separate agreements that are the next sentence for generating units from a renewable source not more than 50k W city electric tariff schedule shall apply so it's got that language about the tariff in there that's for am I you're right it's it's actually referring to schedule DGRs are distributed generation credit rates so that sets what the payback is what we're gonna credit the customer for their general yes yes so what I'm what I'm nervous about is and is because I have objections to moving from net metering to the tariff which is something we're gonna get to an item D I believe dearie oh we're not proposing any changes to no no not not here not not not in this but I 'm in this is further on today right that's also me or individual okay that that presentation that's coming up won't actually affect the DGR except for what the ECA and RCA are since they're variable so in the ECA side the customer will be paying less when they're buying energy from us and they'll see the corresponding decrease on the credit back it'll net it it'll net the same okay so they're paying less okay they're getting a little bit less back but the the rate of changes is the same on both sides of the equation okay the customer okay so this is different than what's being referred to here yes tariff schedule DGR is different than the tariff schedule yes the ones that will be yes the ones we'll be talking about later are the ECA RCA and TCRF it's a lot of acronyms I apologize thank you thank you and again so apologies we just had no that Friday you know Friday after work till today so excellent okay so that removes one of my and there was the one more objection that I had is the part on page six which is item 14 and 15 in in the same document so and I realized that this is the part about right of access and removal and inspection and disconnect ion and I do realize that this is tied into existing law can I call upon order here yeah we were talking about item three on the consent agenda right and we're discussing an exhibit that we haven't seen yet it just seems like we're straying from the topic that's actually the exhibit and item B that's okay it's all right yeah so but but this this part right here 14 and 15 is referring to a law that we is referring to ordinance that we already have on the books about right of access is that correct I don't think it says upon reasonable notice the city may send qualified representatives to the premises the city may send an employee to the premises of reasonable hours or any time without notice and the event of an emergency or hazardous condition as determined by the city the city shall have access to customers premises for any reasonable purpose and connection or or inspection and then the next part is about the city can terminate this agreement at will and without cause just with 30 days prior notice and it's my understanding and correct me if I'm wrong that this is just kind of replicating what we already have written into that the the ordinance 20 2010 - 92 it is slightly different in this case and this is an actual that references I believe to metering yes and the service connection this is an actual generating device oh of course that has certain hazards and safety hazards that it can create and so I don't know if Brent wants to add anything from an engineering perspective but when we have a generating device on a line and we may have workers in the area you may not be at home we may need to enter your premises to make sure that that generation device is disconnected and not pushing back in that would endanger the lives of any line workers that may be working in that area so that that's why those clauses are in there and then the terminations of the agreements it just lays out some conditions under which we're not arbitrarily deciding to terminate agreements and it just lays out a couple conditions that need to be met but then but it 's the part of it without cause that it gives me pause that that makes me nervous that at will or without cause I mean why why put that in if there's if there if it's never going to be done arbitrarily then why put that is there a way that could be deleted pretty much legal phrase I don't know if our attorney would if that could be if that could be struck if you if you had in there that you had to have cause and what is cause and that that deletes that argument from any kind of legal liability I mean that's kind of standard it's it's not it doesn't say you can just go for no reason well but no that's not what it means what it means is we have no obligation to to establish that that we have to that and Larry may be explained a little better but it's not it's a it's a it's a legal yeah it's a legal standard I guess if you will that we a hurdle that we don't have to meet if we feel like we needed to do it and again this is we're not talking about disconnecting somebody's power we're talking about disconnecting the devices that generate into our system so we we need to have the ability to go in and do it and terminate it yeah I'm just asking I just want to be sure and again this is not not just for my benefit but for for people who are considering so are yeah exactly solar generation and people who already have it I'm just concerned about that you know we very much we can modify this however the the board sees fit this was the direction we were given from a policy point purview from DMA mm-hmm and I'm not exactly certain what that you know what they base their policy decision on on that so you know I would expect there's a similar clause for just having utilities connected to the outside of your house that you can that they can come and if your house if the meter is causing some kind of issue or you're having some kind of back load that they can come without cause and stop it from happening well I want to make sure I understand your point on this is I think your concern is that the city at some point can just unhook somebody that has put the solar unit on their house for no reason yeah yeah it's just arbitrary it's just arbitrary yeah and I don 't think you know again I'm Brent you're walking out here I'm not sure Brent Heath executive manager for energy delivery this is an interesting question actually case in point a couple years ago we were looking through some information that we were reading and there was one installation that had been known to cause problems a photovoltaics system it was one single element within the inverter and so we went to look to see did we have any of those on our system as lo and behold we did so we contacted the home owner they didn't know anything about it we contacted the installer they didn't know anything about it so for safety reasons we went ahead and padlocked it disconnected it until we could make sure that it wouldn't have made issue yes okay so thank you yeah and so I like that because I like that you went and the first thing you did was you contacted the owner and then you contact the installer so I approve of that and I understand that there's need for that what I'm nervous about having on the books is you know if it is this possibility of you know doing it with without cause whatever that means legally why put that in there if there's never going to be an arbitrary I mean because I can't that 's what I'm not understanding so maybe so if it is a legal something legal that illegal term I'm not understanding then I want to know but if there's if there's no good reason for that then for the sake of the rights of people who are currently have have distributed generation and considering it I would like to see that part about with that cause struck all right that was just a suspicion that we had from reading the information so we want to make sure it was safe contact the homeowner notify them contact the installer and make it safe for everybody yes determine yes it was an issue or not and they did go ahead and replace that that piece yes and that and I love and it's extremely important thank you yeah that's extremely important so it's just it's a little detail of it and sorry to hold up the proceedings with it but it seems well I think what you need to do you need to read that sentence in in context with our paragraph is when you go into the next part provided however this agreement shall not automatically terminate upon the disconnection of electric electric service to the house because they're del inquent the closing of their account a change in ownership it goes on that impacts what that first sentence says first since gives a ride to the utility to go in there by giving written notice about what they're going to do and I think mr. Heath explained that perfectly adequately about how why they're doing that and that's there's a caveat on that that's remainder of the paragraph yeah and you know the last caveat though is just kind of the failure to comply with all terms of this agreement and there are so many terms and then a number 14 it says the city may send an employee to the premises at any time without notice now of course it says in the event of emergency or hazardous condition is determined by the city so but you know so on the one hand we're saying without notice on the other hand we're saying notice is given it's those parts so I hope I'm making this clear for me it's just the privacy privacy rights issue I completely understand and agree that it's important to have for the city to have control this is our it's feeding into our system and we want to make sure it's safe for everybody and for the linemen but in terms of the owners rights I'm just not comfortable with that come entering their private citizens premises without notice and the part about without cause and having the term so loose is to be you know that the failure to comply with all the terms of this agreement well I think staff has given an adequate explanation but you have emergencies come up you have an energy producing device that's placed on a house that's pushing energy back in to DME's grid and I think both mr. Heath and miss Rogers has explained you're gonna have it you're gonna have employees out there working is on a regular basis just doing their work or an emergency basis that they have to get back there the homeowners not there that needs to be turned off they don't want to get out there and get lit up yes when they're because you know that privacy concern is it becomes a lot less yeah I mean this is oh yeah they're coming into this and it's same thing with the metering and so you've got a balancing there and there is not going in there at will oh yeah whenever they want yeah I think we've I think we all understand the risk and the positions that everybody's having here what I'd like to do is either move move this forward with a motion either way thank you I've moved that we approve as presented okay is there a second second any other discussion all in favor say I aye any opposed nay just because of that with one night that cause sorry Adam see passions I think procedurally though what you could have done is made a motion with the amendments that you would have liked to have seen so you could have per se I'm saying that you wanted to move that along definitely to see if you got support for your yeah yeah my sense was it was that nobody else had that concern which is why I didn't make that that motion so thank you everybody for individual next we have individual items item number a which is the minutes from the public utility board meeting of August 14th 2017 these have been distributed in advance are there any corrections changes comments on these hearing none those stand approved as presented next item we have is item number B which is not item B it's not a number to receive report hold discussion provide recommendation regarding solid waste departments landfill mining operation good morning morning so we have a presentation to give you a little bit of an update and seek some direction on our landfill mining operation at solid waste before I do that I do want to mention that we did send out some corrections over the weekend I want to apologize for that but it felt like those changes were significant enough that we needed to get that to you ahead of today's meeting in addition I realize that there's been a newspaper article as well as a lot of good discussion of social media over the weekend and so I feel it's important to mention that you know this is a project that has really kind of been a passion project for solid waste and a number of members in the community for a number of years and so really if I do my job correctly today this is going to be kind of a fair and balanced approach to not just looking at the benefits of what landfill mining can potentially bring but also analyzing the risk and some of the challenges that are inherent in a project like this as well I also mentioned that a number of our staff members have worked a lot of long hours on this and we also want to thank Weaver and their folks for helping us out with this analysis Nick Gunson David Duggar here from the solid waste department today as well lastly before you get started this is kind of a complex analysis and so out of the interest of time I'm going to try to keep this at a fairly high level but we'll certainly entertain any questions that you have there's essentially a couple of key assumptions that really swing the original analysis to the current analysis and I will spend a bit more time on that so without further ado a few things conceptually that you'll really kind of need to wrap your head around as we go through this presentation is some of the benefits that might be realized by doing a landfill mining operation first of which is airspace recovery and when you own and operate a landfill as the city does it's really an asset to our ratepayers into our community and so making good use of our airspace is paramount makes basically makes that asset lengthens that life and make sure that it's there for future generations and in addition you can also put a revenue value on that airspace essentially that's the backbone how the solid waste department generates revenue you also have reduced environmental risk when you look at a cell like the cell that is being contemplated for landfill mining that's what we call a pre-subtitled D landfill cell which means that there's a clay liner at the bottom of this cell that is essentially at a medium risk for failure for groundwater contamination to some other hazards over the next 30 to 60 years and then lastly you also have the recovered material revenue and so in order to get to your airspace recovery you essentially would have to mine up this material and divert it versus rebury it to recognize those airspace savings to do that the the original pro forma assumed that we would be liquidating that or selling it for a profit and so those are really kind of the key benefits that you may or may not seen in meetings past one thing I will mention is that a pro forma was conducted on this previously but we don't believe that that was presented to the pub or the City Council and so I want to make that clarification and so as we go through the presentation we'll give you a look at that original pro forma as well as our updated assumptions excuse me aside from the benefits you also have a number of assumptions or risk factors this would be a very risky project if we do take it on and we feel like that's really important that we acknowledge these and that we talk about our assumptions as we deal with them first of which is the timeline associated with the project like this this is not one or two year project it potentially will run multiple years perhaps even a couple of decades that's really a function of our processing capacity when I say capacity it's really function of how quickly can we mine up the old landfill material process it divert it get it to its final destination that's a component or the components to really impact that are going to be your workforce how quickly can they process that and your equipment you also have the composition of what's in the landfill you have a little image here and you can kind of see there's a variety of waste in there we do have some good data that we feel like we could work off of UTA did a number of samples at our site we have some reliable data on that front but there are also a number of unknowns the core samples that they conducted could not penetrate all the material found in the land cell and so the material that they come penetrate our assumptions are that could be metal wood large pieces of concrete all those are kind of unknown quantities to us as we look at this you also have the condition of the material and when we talk about diverting material if we're going to be selling that on the market if that materials contaminated we need to know that there's material testing that may need to take place and much like any market the commodities market for recyclables they're going to be picky about the products that they choose contamination is something that someone buying these materials are going to look at and so that does affect your market potential and you're trying to sell these recyclable materials lastly you have material price volatility recyclables are a commodity market there's some risk there it's something we deal with today but you also have to factor in these other risk factors before we can even get to that so as we go through the next few slides essentially what we're going to be trying to do is tackling the key risk factors or assumptions that were made in the original analysis versus our current analysis as we work through this we found that our assumptions in some cases were very different than the original analysis and that's really the value of having weaver come in and challenge our assumptions and really talk us through or us talk them through here's what our thinking was here's the original thinking you know where's your comfort level and your confidence level on this so on on each of these slides I'm going to go through the current assumptions down here and then I 'll tie it into the data that we have up here in the table so the first assumption that we have all these benefits up here are they're tangible benefits but understand that that's not necessarily a money coming in annually these are benefits that would only be recognized if we complete the project in its entirety I'll talk a little bit more about timelines but you can see some bullet points here that these numbers are 10-year numbers neither the original analysis or the current analysis would be complete the project would not be completed 10 years so our first assumption that we have here is everybody air space is a value is a function of material diverted and the revenue potential of that airspace so there's two key assumptions that are there under the original analysis the first assumption was that we would divert at least 75% of the material that we mine we feel that that's a little bit optimistic that's something that we come from conferred with weaver on our analysis was that about 50% would be diverted about 50% of what's in the landfill right now is what's called small objects that is your degraded material your soil things that are too small for us to process and divert through any other means if you're going to sell that soil like I said it's probably gonna need to be tested to some degree we just assumed in our analysis that that's probably not how we would treat that material so as you can see with that that that 75% to 50% has a decidedly decided impact on that the other thing and this is the correction that you received via email over the weekend when we ever looked at this they really looked at well how much waste can we fit into a cubic yard of airspace which is how we value the revenue potential the original assumption and the assumption that we were operating on up until last week was we could fit about 1,300 pounds into a cubic yard of airspace recent survey data came back on our landfill site and said you're really probably going to be looking at closer to 1,100 so we've recommended that we write that down and we made that correction and that's kind of the net difference between the 14 million that was originally in the presentation and the 8.7 that's here now the other assumptions here land land value is applicable if a land purchase is avoided so reclaimed airspace or reclaim land value a lot of landf ills that pursue landfill mining they're landlocked they have no growth potential in the out years they're basically up against a wall if they want to continue to operate and so land reclaim land value is very important for them because otherwise they're gonna have to go purchase land and do a green field a green field investment in that that's not really the case with us we have about 17 to 20 more years of life potentially in our existing development and we also have permitted expansion that's going through the TCEQ right now so we didn't feel like that was worth realizing as a benefit lastly on this slide you have avoided post closure enclosure a quick word on that closure and post closures really like a retirement fund for your landfill and a lot of privately owned landfills and see will file bankruptcy and walk away and leave it as a liability for the community to deal with we can't be that irresponsible we must have funds available to close our landfill site whenever we're finished filling it with waste and so we must recognize that we must put those funds back the original analysis assumed that these values were not just for the cell that we would be mining but for the entire site to recognize that as a benefit you would essentially have to never close the entire side to do that you would be mining perpetually not just the cell but all the other cells in the side we felt strongly that that is not a benefit that we could recognize in fact we had another consultant run a post closure analysis they felt like there's actually a net liability for mining this particular cell if we were to do it and so we feel strongly that that should be removed we had weaver look at it they felt the same way so that is not recognized in our current analysis so as you take all that in consideration the the benefits which again would be recognized at the end of the process has been written down pretty dramatically from the original analysis to our current review of the benefits and that takes us next to our material sales analysis which is another area where our assumptions differ ed quite substantially from the original pro forma I'll just run through quickly our assumptions down here and then I'll walk you through all this data that's up here in this table all the data on this slide is from the original analysis and so I want to make sure that a spend a little bit of time talking about why we felt our assumptions were different our current assumption is that the UTA landfill composition research is reliable UTA did a number of borings and core samples at our side essentially picking spots out around the location drilling down and analyzing okay what kind of material are we dealing with right here what's the condition of that material so one of the things that you would see when you go through the UTA research there's a phrase that pops up again and again and it's waste is heterogeneous which basically is another way of saying that no two bags of waste are the same the components and the contents are very different and that really plays out when you look at those core samples from UTA that being said we still feel like their research is valuable because we feel like over time if we mined the entire location we would probably get pretty close to the figures that they gave us we thought they gave us a representative sample our next assumption was that the market wants clean material a lot more recycling material is made available today cardboard paper we do a much better job as a society today of recycling material than we did back when this landfill was being filled up this site closed in 2000 except to waste well back into the 80s and so understand that when we bring this material to market some recycling vendors they struggle with the contamination that's in your blue cart today they may not accept all that material and so what we're going to be bringing to market will be inferior to even the contamination that they're used to seeing in addition about 30 to 50 percent of the material be degraded or those small objects like I talked about a little bit earlier soil coming old with decomposed waste we also have an assumption that the tetrapack and bulky materials I'll talk more about those in just a second are complete unknowns this is material that the boring could not get down and penetrate and so we know something's there but we don't know exactly what it is the volume or the composition or the condition of it and so those are really complete unknowns for us and highly speculative if we move forward with this lastly and I'll tie this into the the table above the original pro forma have banked on revenue for the liquid ation or sell of recyclable commodities to be about $44 per ton understand that today on relatively clean material that we get out of our building materials recovery operation as well as the cart material that we divert to Pr att we get on average about $22 per ton so essentially for the original pro forma revenues to be realized we would have to get twice what we're getting for relatively clean material now we don't believe that's achievable so I'll go through real quickly on this table the commodity assumptions up here are essentially what I've just talked through this is original pro forma data these are the materials that were assumed to be in the landfill I mentioned that we felt like the UTA assumptions could be or the UT findings could be counted on the problem with the composition numbers here these percentages and why they're in red is these are not representative of what we saw in the UTA reports doesn't mean that there's not data to support these assumptions we 've just been unable to locate it had conversations with the UTA professor and it's really speculation on our part on where these numbers came from down below these you see the Tetra pack and the recoverable materials and these are blank and highlighted in blue the reason why is like I said earlier we have no idea what's in there from a composition standpoint a little bit more information on the Tetra pack we believe that there's a substantial quantity of that material in there from a bulky recoverable materials standpoint the definition of that is that could be old brush it could be big pieces of metal or concrete it could be old furniture refrigerators cars you name it it's it's kind of a mixed bag and so trying to tie down composition on that is is really going to be a big gamble and that takes us over to sellable material which is really you know out of this material that we recover how much of that is going to be marketable that we think we can sell on the open market to our knowledge based on what I've seen there's really not been any thorough analysis done on this the reason why I feel like these are complete unknowns is we don't have any contracts with any vendors to purchase this material and so we are again going to be taking what we believe to be an inferior product to market and then trying to get it liquidated offside the numbers over here in the far right column these are the original pro forma total revenue figures I think some of these are probably within a reason I will say this that there's a lot of research out there that says when you do a landfill mining project do not count on the revenues to really the float the project most of your gains is going to be an airspace that's really why you do this or is to address some of those environmental concerns like we mentioned at the outset understand that on this pro forma that there's a substantial amount of revenue that's counted on here and the concerning factor or the concerning part for us in our analysis was that the lion's share of this revenue about 60 to 70 percent was in the areas that we felt were most speculative and so these areas right here the Tetra Pak the bulky recoverable materials there are huge quantities assumed for this and it's also assumed that we 're going to be able to get a certain dollar amount for that we don't feel any level of confidence in these numbers here today and so we wrote those down as part of our analysis I'm going too fast you have questions please stop me all right so this is essentially the final pro forma this is kind of the before and after the original analysis versus our current analysis real quickly I want to remind everyone that this is 10 year total so this is an apples-to -apples comparison I mentioned the time factor on this project is this is not a quick project to undertake it's multi-year but the original analysis assumed that we'd be processing it much faster than our current analysis and you see down here that the original had us about 69 percent complete after 10 years the project would be done in about 14 was that that analysis ours is a little bit less optimistic we'd be about 52 percent complete at the 10 -year mark we think it's going to take at least 19 years to do this I'll talk about more operational challenges on the next slide even when we were looked at this they felt like this was was very optimistic that there's a number of challenges that we're going to have to contend with as we get into it so you can see the benefits which we've just walked through there's a sizable difference in the original analysis versus ours we did strip out a number of expenditures trying to reach break even on this so we eliminated some overhead we didn't purchase some pieces of equipment so that has some reductions and impact them a lot of these numbers throughout unfortunately we still could not approach a break even on this at a 10-year period so this is really the the original analysis and this is what we believe we'd be looking at after 10 years on this again I 'll re-emphasize that you only recognize the airspace and benefits value once you complete the project and so this is not cash flow coming in you'd essentially be operating this project at a loss for a 10-year period before you start realizing any of that benefit in our analysis about a 19-year period some additional risk and challenges that I want to point these out because these were not a component of either of the pro formas essentially we got to some of this and we can tighten some of these up but especially from a financial perspective of where this is right now we really didn't see the value and continuing to do that until we had some type of policy discussion with the PUB and the council number one is equipment failure and replacement we have a number of pieces of equipment that are going to be critical components of this project we must count on some of those being down at some point of time even if we have five pieces of equipment they're down 1% independent of one another then we're at 95% of our production capacity right off the job this is a very rugged environment this equipment is only warrantied for about one year or a thousand hours so even the manufacturers look at this and say that you're gonna have some challenges dealing with what you you're cont ending with out there at ten years I would assess that we probably have to replace a couple of pieces of equipment at least at 19 to 20 years you're probably gonna have to replace all of it at some point that's not been factored in there's some environmental risks that we have not put a dollar amount on yes we could address the clay liner but there's also some some methane gas in this that has not been pulled out yet and so as we get in there start digging some of that will be released and we'll have to contend with that some way you also have the potential of running into some toxic materials some contaminated materials as well that kind of ties into the next item which is the health and safety of our workers out there we have a lot of cost or expense tied into this for safety equipment but again we solid waste is a hazardous profession as is this would increase that a little bit and we need to look at it workforce loss is really something that is is a component of what happens when someone when attrition happens when someone leaves how long does it take us to fill that position do we want to give people breaks and lunches do we want to give them second vacation time in an operation sense if you don 't account for those things one of two things will happen your productivity is going to go way down or your expense is going to go way up as you try to compensate for it understand that it has not been built into this model yet lastly you have material testing and storage we do have some storage contemplated but what we see in another landfill mining operations is this is a challenge that a lot of them contend with and then there's inventory and logistics assuming that we are able to sell these materials on the market we need to devise an inventory system for that we need to be able to account for it effectively the biggest challenge that we will run into from a financial standpoint is if we are shipping this to someone there will be a logistics expense for us if we're asking someone to come pick it up off site then they were going to pay us less than they would on the open market so with all these what I would say is kind of a blanket statement is this has not been factored into the pro forma when we talked with Weaver about this information essentially the way that we view this and they agree is our current analysis from an expenditure standpoint maybe even from a benefit standpoint is is a bit too optimistic and that it may need to be written down if we get serious about pursuing this project so that brings us to options or recommendations you know one of the things I will say is I realized that landfill mining it has a number of good benefits it's a passion project for a number of people in the organization there's folks in the community they're very passionate about that you know we didn't take this process lightly I know staff spent a lot of hours on it Weaver took it very seriously as well so when we looked at our options here we really balanced what are the benefits with the potential risks the hazards the cost and really where we stand to staff today is is we would recommend option one which would be eliminate the operation doesn't mean that we step away from exploring some of the benefits that our possibilities out there if we want to address that liner we can certainly go do some research and see what are some better ways that we can go about doing that if we do eliminate the operation we have kind of prepared for this moment a little bit internally already we've stopped some orders for equipment we've been diverting staff to other operations as vacancies come up we think that if we stop today on the operation there would be about a 1.4 million dollar write-down on revenues we don 't think we would realize that anyhow but we also think that day zero we could probably reduce expenditures by about 2 million and the vast majority of our own M could be reduced within about a six-month period the one exception of that would be the debt service on the equipment that we've already purchased I believe in your backup that's about 3.5 million dollars for that equipment the good news is it does have some utility in our other operations at the site and so it's not really a strained asset we wouldn't be forced into liquid ating that we can certainly put that to use in other operations if we do that then what we recommend what we're what is currently underway as we're doing a department wide equipment analysis and where there's redundancy or not enough utility to justify the expense we'll be salvaging some of that other equipment as well so over the next 8 to 12 months we think that there will be an equipment reduction site wide option 2 is obviously to proceed with landfill mining and it's something that we understand the benefits to this project but we also make sure that if we proceed with that that both the board the council all of us go in with eyes wide open and understand that we have a number of risk challenges and financial issues that we would need to deal with if we go that route so I know I blew through this very quickly there 's a lot to unpack here I'm happy to stand for any questions that you might have questions first one concerns the previous pro forma when was it prepared and who put it together for us I'm not exactly sure on on the who I've talked with staff I know that the previous director had a hand in that I know there was some input from UTA we've had a number of internal discussions as we go through that and we've really had some challenges as staff understanding where some of those assumptions came from so it's to be honest it 's a bit of a clouded picture on that there were a number of different versions of that pro forma the one that I've represented here was dated 2017 I believe was March April timeframe so it was being updated up until this last spring as I visited with staff on this I think there's been a number of different points of view or a number of different opinions on where the data came from we struggled with some of these assumptions quite frankly and that's why we really felt it was important especially given the differences between the original and the current analysis to have weaver help us out with this thanks for your question yes the second question concerns the clay liner do we have environmental monitoring in place - we have groundwater wells I'm gonna defer to David Dougher he's our facility manager to come up and help answer that question doesn't work my name is David Dougher I'm an MSW facility manager from city of Denton we do have groundwater wells that are located all the way around that site basically when we incorporated into our 1590 - a site it basically left the line of wells on the backside so that side is monitored for groundwater after it passes by the landfill to be looked at in our every six months so but outside of that we have methane monitors around it as well but that's the extent of that monitoring that we have okay so if we don't do the landfill mining now is this something that we're just delaying and we're gonna have to do later on or is this something that's just going to be laid to rest forever and ever amen I wouldn't say that we would lay it to rest and and I think part of the benefit to having the equipment still on site and use in other operations is we may have a different way to approach this project that is a little bit more fiscally responsible and may be able to reduce some of the risk a number of projects have removed and relocated waste and address the liner issues that we had talked about that's something that we've talked about has some cursory discussions about internally the biggest thing that we feel is a challenge with mining is this currently proposed is the timeline that we're looking at with any project the longer you go the more risk you incur the more cost you incur and I think that we also need to recognize that we're not going to totally eliminate the risk of groundwater contamination by putting a geosynthetic liner in there we will reduce it we had one of our engineers look at the potential of groundwater contamination and he basically assessed this as medium risk which would be you know there's a potential that this liner could fail in a 30 to 60 year timeline so we think it's worth taking a look at we don't want to say that this is basically going to be shelved and never brought back up again we just think that if we are going to reintroduce it again if that's the direction from the PB and the council that it would probably be in a different kind of a different design if you will does that answer your question so you're basically you're just looking for better market a better mark time when the market is more conducive to doing this so what you're saying is that at this point in time it's not conducive based on what 's out there in the market as far as what we will be able to get on a return at this point in time that may be in a couple of years things will change other things will get invented or whatever to be able to do this a little bit more effectively I don't know that I would say that that's a function of the market I think it's really of how the project is conceived is if we conceive this project that we're going to be relying on you know material sales to bridge the financial gap I talking to Weaver and some of the discussions and review that we've done this is probably we really can't bank on the commodities market coming back around to us on this doesn't mean that it won't like I said that mark is volatile but understand that especially for a lot of recycling vendors they are really looking for clean clean product so much so that they 're contracting directly with manufacturers to get it straight out of their side versus contending with what's coming out of the blue cards and so I don't think again never say never but I think looking at the recyclable commodities I don't think that that's something that we're holding our breath that that will come back around to us that being said if we can find a way to reduce the expense on this and address the environmental concerns and I think that's something we definitely are open to that makes sense yeah and because that's that's basically my concern is the environmental concerns of waiting on you know for a little bit later but you were saying medium concerns on the failure of this right this is that I mean medium concerns just sounds really yeah and I don't want to it doesn't sound good I don't want to assume how medium is defined by our engineer what I will say is this is one of probably hundreds maybe even thousands of pre-subtitled D landfills and not only Texas but around the nation and so we're not the only one faced with these types of issues there are remediation strategies if we run into issues I mean all those incur a cost and an expense I will also say that there are probably other ways for us to tackle addressing that installing a new line or if that's what we decide to do to be honest we haven't done a lot of due diligence on that but that's something that we do intend to take some action on following this okay one other question as far as the methane mining is that continuing at this point we will we this cell notwithstanding the remainder of ourselves are enhanced leachate recirculation cells ELR which those are basically designed to increase the production of methane gas so we continue to draw off of that there is some electricity that's generated as a result and the remainder is flared the methane output on this is much reduced because a lot of the materials already decomposed to my knowledge and David I'm kind of looking for you over there we're not doing any active pull of methane off of this site currently is that correct we have several groundwater I mean methane wells on top that are that we're drawing off of in some of the preparation that Ethan mentioned about the mining we did take some of those offline which we would add back on back on to the methane system so it is active it has because of the age of the site it has peaks and valleys so they can draw methane off of it for a while and then it will the methane will fall off and then they'll let it build and then they'll pull it again so it's somewhat active back and forth with those guys so if we if we do nothing let's say we do nothing and it comes time to decomm ission our current landfill can we leave this cell the way it is certainly there there's a subtitle D sites that are closed permanently that they go through the closure and post closure protocol that's certainly an option here the one thing that's in our site plan is that we would put waste on top of this if we were to do that we would need to put an intermediate liner between this cell in any waste that was up above it and again that's something that before we get to that point we feel like we really need to evaluate do we need to address that liner before moving in that direction to us that's probably a cost-bene fit analysis that we would prepare assuming we hadn't addressed it before that but you believe we could leave it with the clay liner and decomm ission it right if we were closing yeah does that cost more money to decommission a cell compared to ones that have the other liner we actually just finished a study on on closure post closure with a consultant and they actually believe the cost would be higher for dealing with the mined cell versus the un min ed cell okay okay and one more question so part of this is a was a miscalcul ation of how much waste fits in airspace so how does this impact our regular operations I mean it seems like we should have a calculation that we're using already absolutely have we been using the wrong calculation all along or not one that was in line with our consultants so so the the not a waste that you can compact into a cubic yard especially for both the original and the current analysis is not necessarily what's in the ground now what's our compaction rate going to be when we're putting waste back into the landfill the original assumption was that we'd be about 1,300 pounds per cubic yard we felt like that was too high simply because our target internally is about 1,200 you can certainly get much more compression on that depending on the type of landfill site that you run ours like we mentioned is really designed to recirculate liquids within the cell decompose that faster generate gas get compression that way as a result our goal is right around 1,200 cubic yards we recently had a site survey that was in the 1,100 to 1,200 range to be conservative we've overlooked at this and said don't use the 1,300 that was originally conceived you need to adjust this back to the 1,100 to be consistent with that other study okay okay any other questions yeah I had two questions one about the concern about safety to workers this was so recently you and Charlie and I we went on a tour of the facilities and there were some workers that that we saw who were going through materials and picking things out right where were they doing landfill mining I mean because of the impression I get here is that that hasn 't started yet so okay yeah they were actually working our building materials recovery operation okay which is probably a good kind of visual comparison for what would be done on this I think the big difference between the building materials recovery and mining is that the BMR folks are using or basically dealing with fresh material that hasn't been impacted with a lot of the waste in the site so typically what we would probably equip these folks with would be some stuff that kind of knocks down some of the odors some of the gas some of the other things that they might be exposed to so you'd have a little bit higher level of materials to kind of knock down that risk yeah so there's less of a has because I immediately thought of the you know those people and I'm trying to remember if they were wearing you know protective you know if they had a master anything we definitely have to have that in this operation would be our so it's gonna be a very dusty environment at the very least yeah yeah and the other question that I had you had said that weaver and correct me if I heard this wrong we that weaver said that if you were gonna do this this wouldn't be the cell to do it on did they have a suggestion for did they say it would be better to do it on this other cell or if you did want to do landfill mining it would be better to do it over here no that this is probably the only cell that 's really a candidate for landfill mining this is what a dry cell which does not have the liquid component in it this preserves some of the materials that are in there so there's a higher opportunity to divert it you get into any LR cell water that's gonna be really wet and so I think again that's that 's one of the things that when we looked at is this is not something that we're going to mine every side on the landfill it's just really this cell that would be the best candidate for it yeah thank you okay there's no other questions is there a motion either way on this it's kind of a rough one because I like the idea of landfill mining understand but it doesn't really seem like it doesn't seem like it's worth the money to do it you know I mean it's hard to say that really one way or another but it's kind of a bummer well I think the I recall a little bit of my thought process when we first talked about this peeling thing was was the recovery of recovered airspace and I see now from 25.3 million 8.7 difference yes a deal breaker yeah that's kind of the the mining of them in the resell of the recyclables was one thing but it was kind of an added benefit I guess if you will so I'll just say that I too really like the idea of landfill mining and up until before this came out it was one of the things that I would always brag about that I was really excited about this project when I heard about it and it's very sad to me to hear that this came from data that was not substantiated so I had a question about that in a statement I guess I'll just say the statement first just to say you know in terms of staff morale that I'm I'm still so I'm so happy that people work so hard on this and that it's not their fault that this was bad data they were working on and that regardless of what happens in terms of next steps the problem that that this is is is solving even though we don 't have as you say there's not we don't have a landlocked issue problem but any way to reuse and reduce and recycle benefits our environment there are people when we went and visited the landfill I saw I hadn't quite realized even though I've been there before I hadn't been up high and I hadn't realized that there is a trailer park next right next door so people who live right there so whatever we can do to reduce the waste would would be really good and I just want to thank everybody who works so hard on it the question that I have and this might be kind of more a question for legal than for you well so first of all I'm glad to know in terms of the finance whatever financial damage that's been done that's irrecoverable I'm glad to know the equipment is not stranded assets but I'm wondering this UTA professor who gave us this data that can't be substantiated was there a contract that was entered into with this professor as a consultant that we can get refunded on and were there conditions on the sales of any conditions on the sales of equipment in terms of contracts made on the equipment that were tied into this data that now turns out to be insubstantiated you can probably see where I'm going with that question yeah in terms of the equipment there's no direct link to the data and also say from UTA's perspective the biggest piece of data that we received from UTA is really your composition information and again this is not representative of what UTA provided I'll show you kind of behind the slide this is the boring data collection they provided to us it's a bit of an eye chart but essentially this is the type of data that we looked at and said if we were going to proceed with this we feel like this is data that we could feel confident about in proceeding understand that there's a number of other assumptions that were made in the original pro forma also in our pro forma that UTA didn't really provide an opinion on and so I don't want to assume that they they provided bad data I just I'm not sure that they were asked to look at it to be honest okay so some of these miss the errors were likely made I mean this was already clear I just wanted to be sure how if there were any consulting contracts so there were no consulting contracts that we paid we do have an agreement and Larry I don't know if you want to speak to it but we do have an agreement with UTA that we're currently part of it 's a multi-year agreement three years we're in the last year of that agreement right now we also have been in some type of consultant in our local type of arrangement with UTA for a number of years as well okay yeah thank you and just to be clear I'm not looking to point fingers whose fault is it but to say mistakes were made is there any way to get to get money back Ethan I think it's important to share with the PUB regarding some interest question I mean you did meet with the UTA professor and they in fact disagreed with the assumptions put in that they were way too aggressive yes so I I don't I wouldn't I don't think we can go back and blame blame them they're good clearly there was clearly a decision made as far as how optimistic the assumptions were in order to you know and and I think the thing both PUB and council have to make the decision on is this worth you know a million to million and a half dollars a year loss and some communities that may be fine for the environmental reason that you know rationale but we wanted to make sure you had the facts he did circle back and speak with UTA we did bring in an outside accounting firm to make sure that we weren't missing something and tried to build in as many checks and balances for our data to you as possible but I just wanted to clear that out that we don 't believe that the UTA professor in any way misled our staff yes thank you and if that UTA professor is watching maybe the question is and you've read so 14 million over 10 years or a million for let's say that's off and it's 2 million a year yeah where we thought there may be some revenue offsetting of the cost there's not and so the question is is it worth spending a million four to two million for life safety and environmental or not right and and and is that a risk that needs to be addressed or not especially based on a medium I mean a medium chance that it could well I think the policy question initially was was not framed in the way that we would frame it today and I think the the question is that may be an acceptable cost from an environmental perspective a philosophical perspective for a community that's fine but we wanted to be sure before we move forward and potentially hit the you know encourage some of these losses that we're talking about and the impact of the ratepayers that you were aware of it there's really not a right answer here but we felt like the pro forma so off that we really knew that you needed the opportunity to think about it yeah as far as the environmental potential environmental benefits go it 's as far as I'm concerned that you know any situation where there are potential environment when when potential environmental hazards actually I would say very real environmental hazards exist as a result of doing this business that has environmental benefits that is a situation where to me the cons would outweigh the the pros in terms of both you know the actual safe physical safety of worker the workers uncovering methane and and toxic materials and just having all that released into the atmosphere so I want to make you know that clear to you know people who are watching in the media or whatever that that there are environmental hazards and I would hope if at some point down the line we consider doing this in some other way that a that we would look into doing this you know contracting out and I realize it's for another discussion but you know contracting out with a company that is well trained in dealing with these environmental hazards because I wouldn't want to put any any of our workers at risk but that there are it's not just environmental benefits versus financial hazards there are environmental hazards too and I 'm I'm so sorry about that okay do we have again I'll ask is there a motion either way on this I mean for to go with option number one option one okay which is to eliminate the landfill mining is there a second second in a second any further discussion I think that when we bring it up in the future maybe we can have some some additional details of the of what the costs are to manage this cell the way it is and when we're done with it what the cost will be to dec ommission it because there's some you know there's lots of unknowns but those things it seems like we can put you know some kind of detail on certainly I know we already have some other landfill out in East Ninton that is still our environmental responsibility that we'd kind of don't know what we're really doing with and it would just be nice to know that we're doing what we're supposed to be doing and knowing how much it's gonna cost to do the things that we're supposed to do we should have most of those figures fairly close at hand we'll check with staff and some of the consultants I just think that would help weighing you know if we already know we're gonna spend seven million to dump it then we know that we need to do something with it we can save some money by improving you know what it costs to decommission it we'll provide that to the pub okay thank you all right all in favor say aye any opposed same sign motion passes thank you very much thank you okay next we have item C which is receive report hold a discussion we have a we have another okay all right very good I just looked at the clock and there's another there's another committee meeting here at 12 so item C receive report hold discussion provide staff direction regarding municipal electric community sponsorship program well I know it is getting late and when you've had a lot of discussion today I will go through this very quickly this just to continue our discussion the community sponsorship program as a reminder we had a hundred thousand dollars budgeted for for these and DME these funds had typically been used for nonprofit organizations and sometimes other city departments is the list in the backup shows the purpose of these ostensibly was to provide a similar benefit as what you'd find an investor-owned utilities over the past few years we've spent about 42 to 64 thousand dollars per year again you have that detail in your backup other city sponsorships do require a City Council approval process these sponsorships have an application process selection criteria and a formal agreement that's entered into we did not have that and that's one of the reasons that we want to bring this forward to you so in August we presented this information both to the PUB and City Council the direction from both of both this board and the City Council was that there was an intent to continue the program there was a need to continue that but the council did request that we provide them with some information on citywide sponsorships received from these organizations from other different departments and proposed policy guidelines so in your backup you have the different sponsorships that have been received by other different departments so you can see that but in terms of the sponsorship policy what we're recommending is that we reduce the budget from a hundred thousand to fifty thousand which would most more closely align it with what's been spent what's needed to be spent in prior years that no funding be given to internal departments and the reason for this is there is a budget process for those internal processes if they need funds for a particular program then we can bring that forward through the budget process and asking another City Department to fund that really complicates that matter the criteria that we would propose is that each organization would be a non-profit of 501c3 organization must be a non-discriminatory organization it must the sponsorship must further some type of charitable cause or public interest in the community and that the organization will be required to recognize the City of Dinn and DME and any kind of marketing materials that they have so a lot of times you'll find these are tables that are purchased for an event to raise money for an organization and a purpose in the community but this the D ME and the City of Denton be specifically recognized in that effort we do have some other industry related organizations such as the Texas Lyman rode o the municipal safety exchange and etc other other types of organizations in DME that we think also should be allowed these are sponsorships to promote safety in the industry and those organizations do that we'd recommend that sponsorships over $2,500 be presented to PUB and a council for approval specifically but anything less than that could be approved administratively by staff and we'll bring forth if this is agreeable to you we bring forward a policy that would articulate that and that finally the list of organizations that receive a sponsorship whether they're over $2,500 or less that they were reported to the PUB and council on a quarterly basis so you'd have a running list of what's been applied for and what's received an application excuse me a sponsorship so that's the recommendation if you're in agreement with this we'll take this forward to council for their concurrence and then bring back a formal policy to proceed forward questions yeah no question I have some comments but I think would after a motion be better time sure yeah I've got a question Brian on this one the dollar amount was that from 150 I mean if we spent 60 these numbers I don't want to split hairs but from 105 to 50 is that kind of based upon something that we've done in the past taking out the inner department yes sir so we've typically spent spent less than $50,000 a year for our past year yes sir we spent 64,000 but that included $10,000 going to the CVB which is separately funded from the city and that some of those interdepartmental transfers I was talking about okay so that's the number we feel like is appropriate given what we've been asked to do in the past certainly if we were asked to do more we could always bring that back and having a discussion about that and this this program in these programs they're different than the program we sponsor to assist people to pay their electric yes sir that is that is completely separate yes sir and you're thinking of the plus one program which is for citizens that are in need of assistance with the utility bills yes sir and do you how do you see the council do you see them approving this in a closed session an open session and sure it'd be certainly be an open session item the discussion that we've had with PB has also been an open session item so there's no reason at all to have that as close would that give the public an option to discuss it because that would kind of almost politicize the decision instead of making it more of a well at this point it's been a work session so it hasn't been open to public comment if any kind of action was to take place where they would formally approve a policy that then certainly citizen comments would be allowed and accepted on those but that's that's the process would be following right now okay and I would say also just in addition to that council does have individual sponsorships that that are put on the consent agenda and they're out in public as well which has not been an issue and they typically do require that there be the requisite paperwork in justification sent in after the fact to justify the payment but it really hasn't been much of an issue on the on their other issue grants we also have an example parks and recreation department they do these types of sponsorship agreements and they are formally approved by the council on the agenda as well as the council contingency items that Nick Todd was referencing okay thank you okay actually I do Brandon's question reminded me it made me think of a question that is also like that question of more of a procedure procedural than as opposed to a substantive question so I realize that PUB has already approved and I believe council has to approve to continue this program that has already happened so I I happen to be I happen to disapprove of this program all altogether for specific reasons but my sense is that and correct me if I'm wrong that it would be it's too late in the game for me to I can't make a motion to reduce the budget of this program to zero because I object to it and see if there's a discussion on that right it's too late in the game for that is that correct I think basically what we're voting on the day is kind of a procedural how we do this for the budgets already been approved recommended and approved yes it's there yes yes so yeah thank you for clarifying that was my understanding in the I guess just to further that to the council did want to continue the program along with PUB so they just we were asked specifically to bring back those requirements and how the program would be authorized for both so that's the action item today so any comments I have about this I will save it for after but the motion is me thank you okay other questions their motion motion to prove I'm sure yes second any other discussion yeah yeah I just wanted to to state the reason why I object to this program even though I understand council has already approved it and I hope that next time this issue comes before us that will consider this this question again maybe a year from now I guess would be the timeline all of these these these charities seem like very good causes to me so I don't have a problem with that but I believe that the purpose of pub of any public utility should be local control and saving money for ratepayers and also the along with the local control the environmental benefits safety issues and reliability issues that we get from having our own utility so I have nothing against in fact I'm a proof of all these charities I would have liked to see them go through council instead particularly at this time when we've got our this unprecedented debt burden that we've got with the gas plant regardless of whether you're for or against the gas plant we still have this debt burden and so I don't like the message that it sends to ratepayers who are struggling to residential ratepayers struggling to to pay their their utility bills to see that we're giving away to other charities and we have have people in need you know and I'm you know it's like this our plus one program help keep the lights on for a dent in family in need this I feel should be the job of and I realize we do do this to a certain extent our rates could be higher but if we have extra money that where we could be using any more 50,000 that's 50,000 more that we can use to reduce reduce rates and not stick residents who are struggling to pay the bills with this debt burden so sorry for all that those words but that's my way of explaining to you all and to the public what my objections are so thank you okay all right we have a motion and second any other comments all in favor say aye aye any opposed okay motion carries item number item D is to receive report hold discussion consider recommending adoption of a resolution proving the fiscal year 2017-18 green sentence incentive program the green sense and sort of program manual and distributed generation manual yes and board members I promise to give you a very short presentation on this be respectful of your time I know we've been here for a long time but if you have any questions as I'm going through this please feel free to stop me and so we are going to be looking at the green sense incentive program and distributed generation the first thing I'll do is I'll bring Katherine Barnett up here sustainability is our partner in this program with DME and they actually manage the energy efficiency side so I'll turn it over her and then I'll come back and walk you through pretty quickly the proposed changes that we have Mike please yeah thank you I was just going to say this just explains the rebates that were handed out last year so since it applied we did 461 rebates these are the categories and the dollar amounts if you have any questions about that I can answer them or we can just move on through and you can email me if you have any from the backup any questions on any of this make sense that HVAC would be 48% in Texas just out of curiosity how many requests for funding did we not fund like I mean I don't know if we know the number but we will talk about that okay we did quite a bit of advertising that we were getting ready to run out of funds and the funds were getting short so people weren't applying as much as we had last year after we ran out so yeah so we didn't have as many rejections the sheer so I don't really know how many okay okay that just be interesting to know how many we can't fund okay so switching over to the greens and incentive program this is just a history I just wanted to bring this up because the program has existed in its sort of formal capacity since 1998 so FY 2018 will be our 20-year sort of celebration of the program it has taken on many different iterations over the time and that's that's what we want to continue to do is be flexible and change as new products come available that we can use this incentive program to make those available to our customers so currently the incentive program includes the free home energy audits the energy efficiency rebates for residential multifamily and small commercial are a standard offered incentive which is an energy efficiency rebate program for our medium and large customers our incentive for engineering audits and it includes our COTS ERS response it also includes our solar program I've separated that out because we'll talk about it a little a little set up in a little bit and so getting back to board member Carol's question about how much could we have funded if we had funded all of the requests we received this year that's one of the changes we're proposing so we did have about $90,000 worth of solar installations we weren't able to rebate and we had about $ 10,000 of energy efficiency programs we weren't able to rebate so what we've asked asking is to increase our budget by a hundred thousand dollars would increase the solar budget by 90,000 and we'd increase the energy efficiency rebate by 10,000 the good news is that we're going to be able to repurpose dollars from an existing project within energy services so we don't have to actually fund an additional hundred thousand dollars so we're really excited about that but as you can see the budget has grown over time so we're really happy that the demand has continued to grow yeah I just wanted to to thank you guys for putting this together it was really exciting to read and see how competitive our rebates are this is something to be really proud of so I support these incentives this is a small thing that somebody had mentioned to me I don't even know it's a good idea but I wanted to just toss it out there the electric car oh that's on next slide yeah this is this this is part of this right this would be the time yes so somebody had mentioned to me I don't know if it 's reasonable but that there's some language in there about that says you know you get this $300 rebate if you recharge your car between these certain hours and he had suggested that it might be fairer or more realistic to change that to you know customers should try to to do it during those hours so that people so anyway you can you can see where he was going to me that sounded reasonable but I'm just wondering what you thought we were asking for a commitment and from the customer to charge their their the electric vehicles and off-peak hours the reason for that being is that the more that they populate the more cars and more people come home from work and they plug it in that's in our highest demand period of time the higher energy costs at that time which could drive rates up so we're asking for a commitment from our customers to charge during off-peak I understand the language concern the reality would be that I wouldn't know I wouldn't be able to tell that yes that's where that I can look at a customer's history and if I know that they purchased a car and I see that spike at that time I have a pretty good indication so it is more of a commitment just from that that's that sounds reasonable to me thank you sure and so back on the three changes that we're proposing the first will be the HVAC rebate we're moving to we'd like to move to a graduated structure where smaller HVAC units get a smaller rebate as opposed to the larger HV AC units this will enable more customers to qualify for the rebate it allows for more impactful rebates for the larger units and the smaller units make them kind of fit the rebate fit the size of the HVAC again the electric vehicle rebate addition we're proposing $300 the reason for that number the research we did it takes about three dollars to charge an electric vehicle that gets a 70 mile radius that's pretty typical so that's about the first hundred charges of that vehicle so about three months of that vehicle and and one thing we are looking at with those is to sort of grandfather in existing vehicles to have a 30-day window that someone who had already owns that vehicle could qualify for the rebate and then we're looking at removing and two of our demand response programs that we have our for CP in our spot price program we have no participation in these programs and we really don't have any interest in participation in these programs the reason being is that these are for larger scale customers they do cost benefit analysis and right now the way the programs are structured they they just don't make sense so we want to take them down sort of put them to the side and spend the next year and as part of our cost of service study as part of our ongoing energy service efforts to really examine a way to make demand response work in Denton so any questions on those okay and the last thing that I'll talk about will be a distributed generation and when we talk about distributed generation we're talking about any electrical generating facility on the customer side of the meter most commonly we're going to be talking about solar installations when we're talking about so who this impact this manual is going to impact the most but I will tell you that all distributed generation solar wind storage and generate you know natural guest owners they all need to go through the same process so this is currently what the process looks like today it's pretty complicated and you deal with about four or five different departments at any given time we want to make that process again back to the earlier discussion we had as efficient as possible so what we're proposing to do is separate out distributed generation to its own manual customers get to file one application gets to talk to one department and we'll walk them through the entire process hopefully speeding up their ability to get through their permitting an application to their installation much faster oh wrong way as I said again I said this is kind of our motto in this one document one location customer friendly let's get these solar installations installed and help our customers as fast as we can so we're really excited and we think this will help streamline the process both on staffs in and for the customer this is important for our soul smart designation we're seeking a bronze designation by having a separate distributed generation manual we'll be able to achieve that bronze designation and then we'll start working towards that silver designation after that but all of these efficiencies that we're putting in place will help us get there and I think that's it question questions I don't know of any indent and yet but I know a handful of people that are looking at the solar city roof tiles do you suppose that those will fit into this manual that you just presented to us they would they would be just as any other solar products that we'd have they would work through the distributed generation mean so everybody's all ready to evaluate those and let people start putting them on their roofs I won't speak for engineering all I'll make sure since they have to do that my I mean what I mean I'm not sure how they're technically different than a standard panel other than they're going to look different I'm not sure on the engineering side what changes that may cause but there there would be the same and that there'd be a panel and an inverter and they would be installed I'm again I'm not sure how that would look for designing on the engineering side but from for the program perspective they'd be treated the same and so are we ready for them sorry I don't mean to make you get up we need a no Brandon that's a very good question now we are ready for the program we're also ready to start investigating the products Tesla has come out with some that you may be familiar with along with some other companies as well so yes we're very interested in trying to get some folks that are interested in putting those on give us the specifics and we will take a look at that from an engineering perspective make sure that the inverters whether they be a single inverter or micro inverters that they all will work together and meet the IEEE 1547 and the UL 1741 codes can it can anybody speak to permitting building permitting any of those code enforcement are those departments ready for them to be installed okay that's fine we would help them do that process good question yeah they do we do assist building inspections and permitting whenever any of the current any standard sort of solar perm itting goes on so do they evaluate the load of the panels and get some kind of engineering sign off they have engineering stamp designs yes and our engineering department absolutely approves all of them okay thanks okay other questions yes so there's a really big issue a really big change being proposed in the distributed generation manual that if I heard correctly didn't seem to be addressed in that the presentation and it's something I'm concerned about and that is the move for distributed generation under 50 kW to from a net met ering system to a tariff system is that is I understood it that that's part of the that's not a change that's current that that's the rule today and that's the rule moving forward is that just that 50 kW systems need a special agreement oh yes yes so so but the net metering I mean it looked to me so and correct me if I'm wrong that we are moving away that what's being proposed in that green sense manual redline for and the earth the proposed distribution the distributed generation manual is to do away with the it is to impose this tariff by which if you produce over a certain amount will only pay you this much no what we're proposing and what current schedule DGR set it just says that if you are system sized over 50 kW that we're gonna look we're gonna take a harder look at it you're not automatically going to be put on the same rate as a residential system doesn't mean that you won't be put on that rate it just means we have to look at it a little bit further and then we'll put you on that same rate if we deem it necessary okay so there's no there's no change so all this stuff about let's see on that and I'm just taking the time to do this because I ran this by some people I know who have solar generation the business about let's see where do they have it where we're reducing the if somebody can help me out there what page is the tariff on the red line the greens and since in a program manual doesn't actually set the rate the rate book sets the distributed generation rate where's the tariff set it's set in our I have my handy dandy rate book up here and thank you sorry there was some so that's part of the right ordinance in this right yeah yes this is yeah oh yes yes okay and so the tariff it's just a credit and it's just a credit rate it's not actually any additional cost to the customer it's simply what they're paid back for generation and any system under 50 KW defaults to this any system over 50 KW we're gonna evaluate and make sure that it meets conditions that yes those conditions and if it does we would recommend at this time we would recommend them going on the same rate okay yes okay they just the the way it's currently written is we have to we have to do that separately because we need to take a little bit harder look at that system to make sure that they're meeting those conditions a system that's 50 KW on a thousand square foot house probably isn't gonna meet those conditions yeah oh yeah and that that all makes perfect sense to me okay so did I miss read I guess I'm kind of looking at there's some people here who have anybody else who has solar who noticed this tariff that was that was just something that I had planned to ask about that concerned me but okay so I'm very glad sorry for taking the time for that but that's okay I'm very glad to learn that there's no not a change from no we're not net metering no okay and we actually have what's called you net billing does the term that we use is net billing net billing yes but we're not proposing a change at this time okay no thank you it will be treated exactly the same thank you very very much sir and thank you for taking the time for that that's that's a big relief thank you okay is there a motion then on this item don't ever make it worn out yet yeah we recommend the adoption of this resolution okay and second second second any further discussion all in favor say aye any opposed same sign motion passes item number item e is to consider recommending approval of the fiscal year 2017-18 energy cost adjustment renewal cost adjustment and transmission cost recovery factor yes board members I have good news this will be a very quick presentation this is all information that you've seen before we stated what these rates were going to be proposed that when we did the ratebook adoption this is just the formal recommendation of these rates to council so I'll just go back over those pretty quickly for you and just a reminder of what each component is ECA are the energy cost adjustment is the portion of the rate in which we recover our actual energy costs RCA is our debt it's ECA plus the adder to recover the variable rent costs and our transmission cost recovery factors the portion of the rate in which we recover our transmission costs that's the portion of the transmission cost in which we expend not our investment in our own in our own transmission but when we have to pay into ERCOT to pay for our portion of t-costs so and we do review these monthly and quarterly and that's not actually accurate and we review these pretty much all the time and to make sure that we're meeting the financial conditions that are set in the rate writers and then when we meet those conditions we obviously need to come back to you guys and make a recommendation quarterly and if we don't come back with a recommendation then it's because we want to hold that rate steady and as we proposed previously we're looking at reductions in both the ECA and the RCA from 361 to 341 and then from 4.01 to 3.81 and then the TCRF does vary by class we went over a few of those big classes before but this is just to give you a breakdown of how detailed we get in dividing that cost fairly among our different rate classes so we do get in very much in the weeds in this so we wanted to make you guys aware that sometimes you just see the residential rate or a commercial rate we go through and we break it down break down that cost by rate class and we do break it down also by the billing unit under which a rate a customer would fall so a residential customers build on KWH a larger commercial customer is going to be built on KW or KVA and the next steps will we'll be taking these forward to City Council on September 19th with the full rate book and to seek approval and then we'll come back in the first quarter of 2018 to have a more full discussion about the over and under collection of the balancing accounts and with that I recommend approval and stand for questions I got a question over over and under collection is that will that discussion be at what point does it trigger coming back automatically or just a report it will it'll come back for a discussion we we do have some some kind of some of those conditions that we needed to come back we wanted to finish the fiscal year summer being the the most expensive period of time so we wanted to make sure we made it through summer and then we'll bring it back end of so end of quarter four we'll get the results we'll come back in q1 okay good one one question is this are these consistent with the figures we saw when we were doing the budget yes yes these reductions are how we achieved that 1% rate reduction overall was those decreases in ECA and RCA okay questions no is there a motion to recommend approval motion to recommend approval is there a second second and a second any other discussion all in favor say aye aye any opposed same sign okay motion passes thank you thank you item F is to consider recommending adoption of an ordinance to approve a uniform emergency aid agreement for the provision of aid by DIC Municipal Electric Brian very timely subject yes sir this is my final presentation for the day you'll be glad to know I don't have any PowerPoint slides so I'll make it quick as you know from time to time in years past we've had storms that have occurred hurricanes like we're going through this summer we've had to dispatch crews to help repair some of that infrastructure in other parts of the country we have dispatched two crews as I mentioned to you last week to go to Florida to respond to Hurricane Irma as we were going through that process we realized that we had agreements in place when we did that but it never really been brought through the PUB and the City Council for approval to authorize the city manager or his designee to approve those agreements so this is what this is meant to do is to formalize that arrangement so that in the future in times of emergency either the city manager or myself as acting general manager of DME could authorize these services to be performed and to be reimbursed once those services are performed so that's the purpose of this item and I'll be happy to answer any questions that you may have questions no are any of these agreements reciprocal no they don't but they could similarly similarly come back and propose to us if we ever needed help to propose a very similar agreement to us but we don't do it on on a reciprocal basis typically what happens is through the TPPA or the APPA a request goes out for assistance and then through that process the cities try to work out some arrangements with each other to respond but it doesn't have a reciprocal feature okay okay then is there a motion on this item recommend approval second and a second discussion all in favor say aye aye any opposed same sign thank you thank you motion passes ACM update board members with the interest of time the five items that you have listed here on your agenda they're included in your packet if you have any questions we have staff here to answer any of your questions as you saw there's a news article that was forwarded by Brian Langley that was sent on by new board member Armit ter and then we have Jessica Rogers here to answer any questions about the wireless node electric rates and Chuck Springer here to answer questions about the third quarter financial report I'll just say that I included that article that was about gas plants gas power plants are retiring all over the country and renewables pose zero threat to reliability the reason I included dot was because it came from a tray I forget the name of it but it's a just a generic utilities trade news source that has no as far as I know anyway no particular agenda it's not an environmental group so to me that causes a concern that just I hope is on our radar with the gas plant you know is this the best time to build a new gas plant and take on this kind of debt burden at a time when the trend is that they're retiring all over the country and considering that so much of the argument on taking on this 200 plus million dollar burden had to do with the renewables posing a threat to reliability now it just seems to be kind of standard knowledge that they don't so I just just wanted people to be aware of that and I hope that staff is taking that into account as we plan for the future of this gas plant and what to do about it thank you for including it I'm sure that the enterprise risk consulting will have that in their recommendations as we go forward addressing that okay any other questions on any of the any of the five items okay hearing none then completing items any comments from public utility board members or about maybe future agenda items or any announcements that need to be made at this point well I wonder if we might receive I'm sorry I always ask you guys to bring me some data but about about the the costs that we 've actually taken on with the Denton Energy Center you know back in the day we got lots of numbers showing us you know how much the ratepayers could be expected to pay for their utilities if we can move forward at business as usual if we did 70% renewables if we did 30% renewables and you know if those numbers have changed it would be nice to know we keep hearing this burden of debt and those numbers suggested that the financial burden that we were assuming was less by the by moving with the Denton Energy Center I just want to see that those numbers are still the same a big part of enterprise risks the scope that there for this next phase will be in fact to help us double check our pro forma as I stated earlier we're using the original pro forma that on the deck that you've all seen is sort of the guidepost and the challenge has been is are there ways of through the through the strategic plan reducing our costs potentially which would mitigate that debt payment even more and is there anything that we need to be concerned about probably the biggest variable in all this was the anticipated credit back from ERCOT for the peak generation and how that offsets the debt service payments so that is going to be enterprise risk major variable that they'll be studying and you'll all get a report back on that our second phase as we determine how the the Energy Center will be used and and how it will actually function the ERCOT market there's clearly still a lot of confusion out there about when the deck would be potentially called into service how it would be used and and so we've asked them to double check the assumptions and double check our financial estimates so you will have an answer to your question okay thank you okay so to two issues one that I would like I would like to see a staff presentation and discussion on our ordinance 2010-292 and which includes a at the very end of that ordinance there's a right of entry clause about that DME can has the right to enter the property and shut off the power if people haven't paid their bill the reason I'm bringing this up is is because I know that years ago there was a lot of citizen opposition to this and concern that it was unconstitutional and I'm not a constitutional law expert but it seems like it's now would be a good time as we're getting a new director for DME to start really examining this law and to look at every aspect of it and to see if we want to take to keep it on the books or to change it I 'll just mention one there's a lot of things on in this law but another thing I 'm concerned about in addition to the right of entry clause at the end of the ordinance is that there's something in there about if you're late on your payment there's something like you have to pay something like three months of you know three months worth of payments or you know something like that and I just want what we would like to see a rundown on that I don't know when's the last time PUB has had that but that's something I'd like to see and then and then the second I'm thinking maybe the maybe the I know Ethan was over customer service at the time when we looked at the that's actually a prepaid account where you pay you pay your utilities and then yes and then it gets you as it gets used it reduces what your credit is yeah yeah and we could we could probably get it's been a couple years since we looked at that yeah thank you yeah that would be excellent excellent if anything just for you know for clarity and so we know what is on what's on the books and then the second thing was so it sounded like Todd that you had mentioned that in the spring is when rates for DME will be re-examined is that what did I hear you right yeah I think we've got we 've got a number of steps in place over the next few months before we could answer the question that you brought up earlier and that is to make sure that we get our strategic strategic plan in place for renewables we've got a couple we've got at least one RFP out right now that we've asked the group to help us with you know as you learn today about diversifying your win for instance and so once those contracts the additional contract is put into place and how we're going to operate the energy center because that flows right into Brendan's question regarding the the ERCOT credits we'll be able to revise our financial assumptions and look for any discrepancies or you know either improvement or not yeah excellent yeah thank you so one issue that I would like to be looked into along the way by staff and you know at some point us here in PUB when the time comes is why our rates for DME are such that the discounts go to the the bigger users who have the special agreements and why the residential ratepayers who are a hundred percent of our DME citizen owners even though they they're just as you know small as smaller percent much smaller percentage of our energy users and why they have to for the most part pay a higher rate and I was recently pleased to learn in water or have confirmed for me rather by looking over the water department's rate structure and by touring that department that they have kind of a reverse model where to encourage conservation and also to ease the burden on on you know middle-class working class and struggling ratepayers they have the bigger users pay more what you know why we can't do that in DME I'd like that at least to be looked into the possibility of making the the logic behind that rate those two rate structures more uniform maybe there's a good reason for it that I don't understand but I would at least like some consideration of that thanks okay anybody else nope we have a motion to adjourn motion that we adjourn second all in favor say aye aye any opposed thank you