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