order our first first part of our meeting we have a work
session with two
items scheduled item number a is to receive a report hold a
discussion give
staff direction regarding the resource planning and power
supply strategy
prepared by Enterprise Risk Consulting and Brian if you'll
do the introductions
please yes sir good morning Brian Langley deputy city
manager today we have
with us Enterprise Resource Consulting they're going to be
presenting to you
their power supply and power strategy plan that we have
previously discussed
with you a few weeks ago we have with us today Larry
Lawrence and Neil McAndreys
and so I'm going to turn the presentation over to them to
get started
good morning everyone morning I'm glad to be here again
with you as Brian
alluded to we've submitted a draft resource plan and this
is a presentation
to cover the essential elements of that and the essential
conclusions of
recommendations we are gathering some feedback and we'll be
taking into
account some of that feedback and then providing a final
version of that
excuse me let me get the keyboard ready to go here so the
presentation outline
we're going to cover five main things we're going to look
at the planning
goals the goals that we use to develop the plan the data
and data sources that
we used in the planning process in the various evaluation
factors that we took
into account to develop the recommendations for the plan
very briefly
we're going to go over the the inputs to the portfolio
modeling process that we
use to develop what we are going to recommend is the best
fit assets for the
portfolio we're going to go through some of the conclusions
from the analysis and
then provide some specific recommendations just to let you
know as
well there are a few open issues some open questions that
need to be
determined so there are a few decisions that we're going to
list at the end of
the presentation once we get those specific answers to
those questions then
we'll be able to come up with a more specific best fit
instead of
recommendations for the plan so the objectives that we have
for the planning
goals here are five we want to achieve a least cost supply
you'll see a slide
here in a little bit that shows you specifically how we
define least cost
supply we'll give you some cost comparisons so that you can
understand
where we're coming from in terms of our recommendations for
least cost assets we
want to make sure that the recommended supply plan reduces
your uncertainty and
those can be listed in several ways a we want to very
effectively match supply
assets with your load so that you have a very efficient
supply portfolio that
includes diversifying your supply resources that's another
subject that we
will address in just a little bit in the presentation we
want to reduce regulatory
risk technological risk we'll talk about those as we go
through the presentation
and your economic risk so we want to make sure that you
have a portfolio that
performs efficiently in terms of its production and
performs efficiently in
terms of economics in terms of sustainability that covers
two specific
areas one of which is environmental sustainability one
thing that often gets
overlooked and is an important aspect when you add renew
ables to a portfolio
is the fact that it reduces water usage we think that's a
very important aspect
that often gets sort of overlooked and so that's one of the
additional
sustainable advantages of a renewable asset portfolio also
from the
sustainability aspect is renewable resources are often more
simple from a
technological standpoint there's less things to break so
and there's less to
overhaul over time so just from a physical performance
stability standpoint
there also they tend to be more sustainable than some other
types of
generation resources in terms of competitiveness this is
something that we
haven't discussed too much here but we are of the opinion
that even though you
are a non-optent entity it's important to make sure that
your rates are
reasonably competitive because you may have people moving
in and out of the
territory that are comparing you to other areas where there
is competition
and we are fully supportive of municipals remaining as non-
optent
entities but we think it's a good idea to be in a position
to carry out policies
that can avoid criticism or avoid some pressure from the
outside to try to
change that status as a non-optent entity and then lastly
we want to take into
account the the operational process is going to be
necessary to operate a
renewable resource portfolio so these are the the
objectives that we kept in mind
in devising this portfolio and resource plan so the next
thing we're going to
cover are some of the data sources and the evaluation
factors we took into
account in developing the resource plan some of these
slides I'm going to go
through quickly because we do have a lot of slides and I
know we want to be as
concise time wise as possible so I'll just mention a few
things here and then
move on so we got some information from Denton in terms of
your load current
supply resources and some performance data on the deck we
relied on ERCOT data
for a lot of the information we used in devising the plan
prices from ERCOT
historical heat rates some recent modeling for market
dispatch from ERCOT
resource adequacy studies and some of the some of the
proposed improvements
and changes to ERCOT that may come down the line pretty
soon some other sources
we looked at information from the US Energy Information
Agency the Texas
Public Utility Commission and we use market prices from
things like NYMEX and
other price sources this is a recent set of data from ERCOT
that was I was
presented at a board meeting just a few months ago and this
is something that I
think is very important to keep in mind when we're modeling
the deck what I'm
we're gonna do here in this section is just give you some
some highlights of
the data and data sources that we used in devising the
resource plan and then
we'll get into these specific evaluation factors so these
graphs show the ERCOT
resource stack at two different natural gas prices the one
on the left is the
bid stack in ERCOT with natural gas prices at $2.50 per MM
BTU and the
right-hand graph is a 450 per MMBTU this is a standard two-
dimensional graph the
the horizontal scale is the load of ERCOT going up to the
right let me get see if
I can get the pointer oriented here so this is the load of
ERCOT going up to
the right and then the vertical scale is the dispatch cost
of all the resources
that ERCOT uses to meet the load demand so we've done an
approximation here
these lines on the PowerPoint are not perfect fits but we
're using an estimate
of the deck dispatch at around 10 heat rate that includes
the variable cost on
top of the actual operating heat rate of the deck so you
can see here that in a
250 market the deck would be at around a $25 cost and you
can see where it fits
into the ERCOT stack so we would be dispatched earlier but
there's not a lot
of margin in here is one of the takeaways from this if we
go over to the 450 graph
then the deck would be dispatching around $45 and it would
dispatch much
higher into the queue there would be less competition at
that point but the
the frequency or the likelihood of the dispatch would be
lower so one of the
takeaways here that's going to be a common theme you'll
hear throughout the
presentation is all these projections are very much
dependent upon the price
of gas they're hugely dependent on the price of gas how
often the deck is going
to run depends on the price of gas and none of us here can
perfectly predict
what the price of gas so a lot of the decision-making the
modeling the
expectations of the deck are mainly dependent upon what the
view is of the
price of gas and you'll see that again and that's a theme
that you will see
again and again throughout the presentation something that
we you may
get tired of us saying that but it's so important and we'll
give you some other
examples of that as we go through the presentation just
another quick look at
some other ERCOT data we base the modeling on ERCOT's
historical heat
rates and as you can see that's a pretty stable curve here
it stays pretty stable
across time and that shape of the curve is something that
we used in terms of
modeling the potential dispatch of the deck on the right
hand side this is just
a picture from ERCOT of its long-term system assessment the
ERCOT is
continually doing studies to determine what changes may
need to be made to the
market and so the key takeaways here that we wanted to just
mention here today
are that a ERCOT's expecting to continue to load growth in
seven of the eight
scenarios they considered for the long-term assessment they
're expecting
continued load growth and all of the scenarios showed
significant amount of
solar generation additions and the retirement of coal and
natural gas so
these are our expectations of ERCOT going forward more
renewables coming in
the retirement of coal and natural gas and so these are
other factors that we
took into account in developing the resource plan this
slide just shows some
examples of market data that we used again we've got a lot
of slides to go
through so I just want to give you a flavor and a sense of
the inputs that we
used in developing the resource plan the graph in the upper
left hand corner just
shows 12 month moving averages these are 12 month annual
prices so they're annual
prices for gas and power going forward so these are market
prices that we used
in the consideration of the development of the resource
plan the lower left hand
side is EIA's forecast of natural gas prices with a
confidence interval here
in the the envelope with the green let me get the pointer
working here in this
green envelope this is a confidence interval of where they
think gas prices
could be in the near term in the right hand side this is a
historical graph of
the Henry Hub spot price with the best fit trend line and
one of the things the
main takeaways to there is notice that natural gas prices
as many other
commodity markets do tend to revert to the mean so that's
something else that
we've taken into account in our expectations for natural
gas because we
also needed to have an expectation of where gas prices
might go so some of the
modeling that we've done has taken into account what we
think are some reasons
for a reasonable forecast for where natural gas goes and
that is a
determinant of the outcome of the findings and the
recommendations in the
report so speaking of those price projections this is a
graph of those
we've also taken into account what brattle used when they
had done a
previous study for you so what we found was the brattle
base case you can see
goes quite high over time and that's something that we
incorporated that into
the numbers but that's something that we think is less
likely for a couple of
reasons one is that whenever we think it's important when
somebody is
projecting prices forward market information is very
important and useful
and the highest probability of where price is going to be
tomorrow is where
it is today so there's a lower probability of prices either
rising or
falling so a we think it's important when using price
projections to use what
the market is telling us as an expectation of where the
market is going
to go forward so we've incorporated that into the base case
that's the red line
here that's our base case gas is essentially where the
market is trading
now for going forward in the time the blue line is our high
gas case and you
notice we had a question yes yes but as more and more coal
comes off and we
start using more and more natural gas for generation don't
you believe that
those prices will start increasing that is reflected in our
blue line okay and
so there are two factors in that one is there are other
factors in addition to
what you mentioned LNG exports are going to pick up we're
seeing lower drilling
rigs so commodity markets go through these cycles of excess
production and
shortages of production natural gas is set up for a
shortage we haven't seen a
tremendous price rise yet but yes if you get retirements of
coal additional
demand for gas from for generation additional demand from
gas from LNG
that's what we've modeled in this blue curve here the thing
is the the world
changed in 2008 2009 with shale so there's a tremendous
overhang of
potential production the cost of drilling has gone down so
there's a
substantial overhang of potential production so if you do
get a a short
spike and what I mean by short might be a couple of years
you're going to attract
huge amounts of additional gas production this is not
unlike what we
saw let me go back here if you look over here that we've
kind of modeled this on
what history has done before back in the 2000 time frame
when you got a
tremendous amount of additional demand and lowered supply
you got a few year
substantial bump in gas but what did it do it tended to the
go back and revert
back to the we've taken that into account thank you that's
a that was a
good question that set up what I was going to describe on
that yes yeah let
me just add one thing if you'll notice that the last two
years the average
price has been two dollars and fifty cents so all these
show higher
expectations right right yes so I just wanted to comment
that the difference is
striking between your projections and the battle
projections I know you can't
speak for a bridle but it seemed that based on what you
said and it makes
sense to me that braddle somehow didn't seem to have fact
ored in the market so I
know you can't speak for them but what since since you seem
to be making that
assumption about what about them what do you think you know
how how do you
explain that disparity on their end not speaking for them I
don't know what in
the world could they have been yeah I don't know there
there are others that
could have similar projections there are I would say this
anybody that is
forecasting the price of gas has a very high likelihood of
being wrong so it's
just a hard thing to do and we've seen optimistic forecast
from oil from others
as well that don't come true this just that's a difficult
thing to do now if
you notice that their low case which is the more purple
line is much closer to
where the market is right now so just from our perspective
we think that's
pretty reasonable and we did factor in what could be a rise
in natural gas but
given just the revolutionary nature of shale as a potential
production source
we just didn't see that being sustainable and given the the
characteristics of the commodity over decades that tends to
revert to the mean
we assumed it was a safer course of action to assume revert
to the mean and
the importance of this is these forecasts are so much of a
driver of
what the decks gonna do if you change your forecast you
change the deck out
there's just no way around absolutely thank you that makes
a lot of sense on
your blue line then you're projecting it going up and then
you see a change in
going back to the median and that's why you're above br
attle but then you come
back down because as time has shown yeah you go up and you
come back to median
I want to make sure I understood that yeah thank you so
these are the
forecasts that we used in the modeling for the process now
I will say this
you'll see this in just a moment renewables offer of a cost
advantage
right now in almost any gas case you'd have to have gas
prices be a lot lower
than they are now to even make renewables be sort of a 50/
50 proposition
so the gas price is not going to those projections none of
those projections
would affect what we're going to recommend in terms of the
additions and
the best fit assets for your to meet your renewal goals so
turning to the
evaluation factors the two main evaluation factors the two
main
objectives that we used in developing this were to achieve
a least cost supply
and to reduce these risk factors so again we wanted to
match resource
production profiles to your daily load and seasonal load
profiles taking into
account the assets that you already have for example you've
got Santa Rita wind
coming in that has a very particular West Texas type of
profile so we wanted
to find resources that were good fits and offsets to divers
ify your portfolio
we wanted to balance the need for selling excess supply and
then purchasing
shortages as much as possible and we took into account the
quality of each
resources production because different renewable resources
have different
quality factors and you'll see that in just a moment access
to transmission air
connections were important and then minimizing transmission
issues with a
particular focus on avoiding congestion costs so that will
factor into the
citing recommendations and the location recommendations
that we have and then
one more data input these are the dental load scenarios
that we took into account
in the modeling and the planning a slightly negative growth
rate a mean
annual growth of 1.6 percent and a high annual growth case
of 3 percent then we
perform the supply gap analysis we need to figure out first
what do you need
what do you have what's your load and then what do you need
just as a reminder
here that first sentence on the slide when we talk about
renewable percentages
the way we define that because there are different ways to
define that the way we
define that is we just we think an annual time frame is the
best measurement
period because then that doesn't get colored by seasonality
so if we take
annual load and then we take measured by megawatt hours and
we take the total
megawatt hours of resources that's what we're matching up
and we're talking
about 70% 100% those are the figures in the frame of
reference we're using for
that so this the next part of the slide shows your current
supply portfolio
you've got a little bit of landfill generation Santa Rita
wind coming next
year bluebell solar and then whitetail we'll talk about wh
itetail in just a
moment but you're gonna see some annual production figures
and just for you all
to know if some of you are familiar with this this annual
production figure has
been adjusted a lot of the a lot of the production values
that a developer will
tell you tend to be overstated that's just a natural aspect
we we we use the
analogy of when you go into the showroom buy a car the MPG
that's on the
stickers never the MPG you get an actual driving so there
are various factors
that can cause developers to sort of cherry pick and spin
so we've taken
into account our experience with the actual production of
say wind resources
versus what they've been offered at and we've done a
reduction here in the
annual production of megawatt hours for Santa Rita so just
to conclude on this
slide Denton's annual load for 2019 is one and a half
million megawatt hours to
give you a sense of the total that's the target we're
looking at for 2019 in
terms of our 70 to 100 percent goal counting whitetails a
renewable resource
leaves dent in at approximately 61 percent renewable
without counting it it
results in approximately 44 percent renewable and why is
this important well
it determines how you want to count that this is one of the
decisions that needs
to be made how you're going to count that to decide how
much renewable assets
you need and just as a reminder whitetail from what we the
information we
were given was originally a win deal it was converted at
some point into a 30
megawatt around-the-clock deal with Rex added given that
the wreck market in
Texas is really not that viable anymore because it was
designed as an incentive
for additional renewable production and those standards
were far exceeded
simply just through market forces there really is no
residual value to those so
we would just our recommendation would be would not to
count that as renewable
but that's a decision that the city needs to make that we
can't make on your
behalf so last bullet depending upon the classification of
white pale of white
tail didn't needs between 9 and 26 percent in additional
renewable
resources to meet the minimum goal 70% or between 39% and
56% to meet the
target of 100% so here is a summary high-level summary of
some of the
resource prices and delivery points that have been offered
to you in your recent
RFP so you've got some RFP results back in early October
and this gives you a
sense of the pricing so we just group these at a high level
the bidders are
confidential you'll see some more specific offers in one of
the last
slides when we really start honing in on some specifics
that we think are
attractive for additions to your portfolio but this just
gives you a sense
of location and type so solar you're getting prices at the
delivery node
versus prices at the North Hub West Texas coastal wind
North Texas South Texas and
panhandle wind are all there you can see these prices are
quite attractive you
got some wind prices below $20 solar prices in the mid-20s
so these prices
were used to estimate the cost of supply in our portfolio
modeling and these have
been further adjusted to the production profiles to
calculate effective costs so
the second bullet there explains that to an extent what we
mean by effective cost
is this your if you purchase a renewable resource you need
to know the production
profile and you need to know which hours of the day or
which times of use that
asset is actually producing so to compare it to a an on-pe
ak offer from
the market or a round-the-clock offer from the market those
profiles don't
always match up so we have to make an economic adjustment
because a renewable
resource may not be completely comparable to a market
purchase because
it's not going to produce all day at the same rate so a
renewable resource may be
cheaper but you might have to make up for those hours when
it's not producing
so we've done an economic adjustment to sort of put it on a
kind of an apples to
apples basis I call it green apples versus red apples and
so forth so is an
example there solar producers during the higher priced on
peak hours when wind
production typically drops off this a buyer would need at
least a 20% lower
price for West Texas wind to compete with a solar resource
so these prices have
been adjusted to calculate effective costs also in terms of
our assembly of
the recommendations for your resource plan we've also had
to take into account
that certain resources need to be placed in your portfolio
to diversify against
your load shape so for example dent will start receiving a
large West Texas wind
supply in the spring of 2018 and a solar resource in 2019
so we don't want to
recommend additional West Texas wind because that could put
you with too much
of that particular profile in your portfolio so let's talk
now about least
cost we've done a couple of approaches here the upper table
I'll go through the
columns the left-hand column shows you approximate annual
prices right now in
Urquhart about $31 for megawatt hour on peak and $27 around
the clock
representative offers from your RFP show that solar could
save you about $8 a
megawatt hour on peak and wind around five and a half
dollars per megawatt hour
so this gives us a renewable equivalent price of $23 and 21
50
correspondingly for those assets if we look at the market
heat rates for on
peak periods and the market heat rates for around the clock
and then we convert
those into their natural gas equivalent we get an
approximate price or a value
of around $2.20 per MVTU so what this is saying is that we
look at the
discount that those renewable assets offer versus the
market and we look at
the market heat rate and convert that into what the
equivalent gas price would
be to get that same value then we're looking at a $2.20 per
MVTU
gas price equivalent excuse me for these renewable assets
with a gas price in the
market a little under three dollars now so this is just one
perspective one way
to look at what least cost means these renewable assets are
offering values
that are below the price of market power and it's important
to remember that gas
is the price setter in ERCOT gas is frequently on the
margin so we were
always oriented around gas when we're thinking about the
price of the power in
ERCOT thus we can calculate these natural gas equivalency
so that gives
you a sense when we say least cost they are least cost it's
as if you're able to
buy a gas deal below the market the lower table gives you a
little bit of a
different perspective it just shows you how the market is
so sensitive to gas
and how the potential benefits of Denton adding renewable
assets to your portfolio
is dependent upon the price of gas if the price of gas goes
a lot higher say
to five dollars to the lowest row on the table you're gonna
have power prices in
the upper forty dollar range and that would give you a
benefit of over $25 a
megawatt hour so in other words if you add renewable
resources to your portfolio
and gas prices rise you're gonna have a portfolio cost it's
much lower than the
market because of the lower cost of renewables that you
added but if gas
prices fall to two dollars that's going to be above the
price of your equivalent
purchase and your purchase would be above the market so
again as we said
before it's so dependent upon where gases are going to go
what your outlook
for gas is and the outcome of natural gas in the market to
determine what
market prices are yes if you notice this is the same sort
of methodology that
Bradley used in their report basically if you have higher
gas prices and the
attendant heat rates they're produced at you you go to the
right column you
produce more return or more margin but notice this at three
dollars the margin
is 835 at five dollars which is an increase of what 67
percent or something
like that the margin is almost 26 which is 300 percent
right so it's levered in
other words the higher the gas price much more you know
much more return from
the fixed price renewables and that's good if gas prices go
up everything's
great for Denton on a high renewable but what if they don't
go up so much and
what if they go down if they go down actually you see the
return that's two
dollar gas but that's kind of remote but things can go down
just as well as they
can go up and you know you're just flat but that's also a
good thing you know
your return is negative one dollar but that's pretty small
loss but that's a
loss but it's a small loss so you know under this plan
higher gas prices equate
with a better performance that's also true for the deck but
it's particularly
true because almost all your return under this plan and
under Brattle and
both ours it depends on the renewables making return not
the deck
I won't spend too much time on this you've already seen
this I think the
last time we were here but just to make a few key points
this is an ERCOT graph
of the production profile of various renewable resources
the red is coastal
wind the purple is solar the blue wave-shaped line at the
top is typical
load and so this shows you say for a summer day what the
type of production
profiles you get versus the load profile so this is one of
the key drivers of the
resource plan is selecting assets of the right type and
with the right quantity
to achieve a diversified consistent production from your
resource portfolio
so West Texas wind is the worst match against load solar
and coastal offer the
best on-peak match against load and that also offers an
advantage because it can
displace purchases that you need to make to supplement your
on-peak
requirements during those most expensive hours coastal wind
is at a low point
doing a lower price a low production amount during lower
priced hours so
that's offers a benefit of producing less when the market
value isn't there
and so coastal wind and solar just in summary those are
very attractive they
offer low prices the production profiles are a better fit
for Denton's load and
they're a better complement to Denton's existing renewable
resources such as
Santa Rita so that's foreshadowing of where we're going to
go in terms of the
recommendations here you've also seen this chart in the
next one just a couple
of points we want to make and not spend too much time on
this graph when we were
here before just as a reminder what you're looking at the
horizontal scale
is the 24 hours across the day the vertical scale is is in
megawatts the
wave shape line across the top is load and then we have
various types of assets
that are filling the portfolio so this shows green and
solar which would be
producing during the middle of the day we've got wind which
would be producing
at higher and off peak hours and lower going on peak hours
the purple bars here
represent market purchases that would be necessary to fill
the gaps to balance
your supply requirements and then the blue bars are
representative of when the
deck would run so as you can see there are times of day
here where there's
excess production say from the deck this can be sold into
the market to produce
revenue there are times of day where market purchases are
necessary to
balance the portfolio so the takeaways here are seasonally
low wind output would
necessitate market purchases during off-peak hours and the
combination of
solar production and deck production could cause an excess
supply and that
would necessitate market sales during those higher priced
hours if we then
look at another period of the year this is a seasonal
spring period you've got a
different view here you've got a high wind season you can
see that the wind at
times is producing more than the load so there would be
sales of excess wind
capacity the deck is less likely to run your solar output
would be not
necessarily minimal but it wouldn't be nearly as much as
you would have during
the summer so you get a different profile so the takeaways
from this are
that part of the best fit in terms of the type of renewable
asset and the
quantity of that asset is to give you a portfolio that
minimizes the amount of
excess and minimizes the amount of market purchases it's
impossible to
eliminate those but we want to strike a reasonable balance
in terms of your
ongoing management of the portfolio to make it as efficient
as possible to
balance out those amounts another consideration we took
into is wind
location so wind is not wind you've seen the different
production profiles from
West Texas versus coastal those are starkly different there
are also
different factors in terms of the quality of wind at a
specific location so there
are six different wind regions in ERCOT they're not well
correlated because of
the distance between them and because Denton already owns a
large resource in
West Texas other regions will need to be considered and
those are what we're going
to offer both panhandle and coastal resources are not well
correlated with
system wide output that's a good thing because we want to
add resources that
are not necessarily correlated with what you've got that
gives you a better fit
in terms of diversification of the portfolio coastal wind
is superior to
other types of wind due to the higher capacity factor and
the greater
production during valuable on peak hours so as you can see
here these are
dispersion graphs that show the the output of the various
wind resources at
wind speeds which you would like to see is a tighter
pattern and a more
consistent pattern here and you're seeing three examples
you're seeing wind
resources from North Texas Texas Oklahoma border Abilene
and then coastal
wind and the main takeaway here without belaboring the
slides you notice that
there's a tighter diffusion pattern on the coastal wind
resource that's
indicative of more consistent and higher quality production
that's something that
is advantageous and one of the factors that we take into
account in the
resources that we recommend the reason for that is the
coastal wind is produced
by being on the coast it's the coastal land effect that
every day in the summer
and in particular as the the ground the surface of behind
the wind heats up and
creates a low pressure system whereas the water doesn't
heat up as quickly as
a result you get this low pressure high pressure situation
and it's the that you
get winds produced in the afternoon you know offshore winds
and then it reverses
at night but since it's the predominant wind direction is
from the south those
are diminished you can see that they're they're almost
symmetrical but the neat
thing about coastal it's not caused by sort of the
geographic average wind over
Texas it's cause it brings its own wind with it basically
which is kind of an
interesting concept and that's one of the reasons why it's
valuable it also
counts for capacity or cut counts it at about 56 percent of
its installed
capacity on peak during the summer whereas West Texas wind
it's 18 percent
and that's because of that same effect in terms of solar
location solar
radiance is the main is the main factor here you want to
maximize the radiance
which is going to maximize output so it's impacted by long
itude and latitude
essentially the location of it also the potential for cloud
cover and temperature
factors so for optimal radiance the best location in Texas
would be all the way
west to El Paso but El Paso is in an Urquhart but it's also
not quite that
simple yes you'd like to go as far west as you can to
maximize your radiance but
if you go too far west you get into an area that has
substantial transmission
congestion so then there's too much out there without
sufficient transmission so
the optimal location is as far west as you can go to
maximize your radiance but
to be within that border so we can minimize congestion
there's still
congestion out there but that can be managed but we don't
want to go too far
out where you're into an area that's going to subject you
to too much
congestion so the optimal balance the optimal location is
going to be
somewhere say close to Midland or a little bit east of
there to give you the
optimal location for radiance and avoiding or minimizing
congestion a
couple of other location considerations this graph on the
left with the
multicolored dots this came out recently from one of Urqu
hart's long-term system
assessment studies and this is essentially projecting where
the
additions of generation will be and the retirements of
generation so the yellow
and orange red dots that's where they're expecting
additional generation to come
in the blue dots are where they're expecting retirements
you can see the
additions are going to be out in the west and the retire
ments are going to be
mainly in the east well this is going to exacerbate some of
the transmission
problems in Urquhart from the west to east flows so if
possible it would be
good to locate new generation in the areas where the
retirement is going to
be that's really not that feasible in terms of solar but it
is feasible in
terms of wind so in terms of locations for wind coastal is
going to be on the
coast which is in the area with load growth because of say
for example LNG
exports and so forth there's load growth expected there and
you're going to get
some retirement so coastal also fits this location
optimization from the
generation retirement in additions portfolio and then
lastly you want to
have a renewable resource with a transmission interconnect
ion that is on
the correct side of the pricing clusters so we took into
account where some of
these other interconnections are and that's something that
will be part of
the RFP evaluation when you finally decide specific
resources and offers you
want to take into the transmission connection the optimal
location for
those all right this is just one single slide and we'll
move on we don't want to
belabor this just to give you a sense of all the various
factors that we took
into account of the portfolio model and we clearly look at
natural gas prices
because they're the main driver of how the portfolio would
be would perform
power prices heat rates the deck heats heat rate plus
estimate or variable
cost your load growth the various production profiles of
renewable
resources the prices of those CRR costs and prices and
basis costs in ERCOT
potential regulation changes things like marginal losses
local reserves we're
going to talk about the potential solar tariff in a little
bit because that's
one of the decisions that Denton's going to need to make
the reducing in the the
tax federal tax credits that are going away plant retire
ments renewable
saturation certain regions proposed new resources and the
Lubbock ERCOT
integration all of these things we took into account
qualitatively and
quantitatively in modeling the Denton portfolio so let's
talk about some of
the sort of conclusions that we came to in the in the in
the plan here first we
need to just talk about the concept of firming before we've
been talking about
the role of the deck in the role of market purchases and
firming so using a
specific power plant to firm in a written intermittent
resources is
necessary in a bilateral market where utility is
responsible for reliability
in its own control area but ERCOT is not a bilateral market
the ERCOT market is
designed as a power pool so it's managed as a single
control area so the ERCOT
market is designed for to use market resources from the
pool for supply
balancing or firming it's not necessary to have a specific
power plant to do
that so the primary issue here though with using those
market purchases is how
much is it going to cost it's really a cost issue what's
your least cost way to
balance your portfolio and to form those intermittent
resources and a portfolio
with 70 to 100 percent renewable resources will require a
lot of firming
so this was one of our main missions and the resource plan
is here how to develop
a resource plan and the associated portfolio management
operational process
necessary for optimal firming from a cost efficiency basis
so the deck will
clearly play a role in the renewable resource portfolio was
a cost edge
during really high priced hours but from the majority of
time it'll be less risky
and more cost efficient to use market purchases for firming
so we've used an
August day as an example to illustrate this concept so on
this graph once again
we have a 24-hour scale the 24 hours in a day and then we
have costs market costs
for power on the vertical the three different colors
indicate here where in the green this is
when you would use the market use the day ahead market to
firm or to balance
the portfolio the areas without the green this is when the
deck would likely run
and you're seeing examples of what real-time prices and day
ahead prices are
in here so I'll point out one factor here notice that
during these off-peak
hours you're really not getting much of a difference or a
premium in the day
ahead versus the real time that really shows up during the
middle of the day
and this is when the deck would be most valuable and would
be quite a resource
to be able to cover these hours so based on the modeling
that we've done the deck
using that as a sole hedge or a source for firming is not
the least cost or
lowest risk option the deck is going to run but most of the
time per over 75% of
the hours it's going to be cheaper to firm the renewable
resource portfolio
using market purchases than with a deck so the low heat
rate associated with most
of those hours in the dam will allow the firming using
market purchases and
at a lower cost than the deck while also avoiding
congestion and price risk so to
summarize some of the takeaways here on the deck looking at
the advantages and
the disadvantage of the plant the deck is a heat rate hedge
so it will be very
useful when you get times where the heat rate rises in the
market that's the
greatest value that it's going to add to your portfolio it
'll also provide a
long-term hedge benefit in the event of accelerated
retirement of conventional
generation resources and we're seeing that just recently we
've seen some
announcements of additional coal generation resource retire
ments the
disadvantages are that is a higher heat rate generators
generator so it offers
no pricing power no real competitive advantage ERCOT
manages the system so
that heat rates don't vary much you saw earlier that heat
rate curve from ERCOT
that showed that heat rates were very stable so you need
some unusual market
drivers to raise the heat rate to really make the deck to
be the most valuable
resources can be so our runtime estimation based on the
natural gas price
projections that you saw and you'll see those again is that
the deck would be
projected to run between 12 and 20 percent of the time
which would be the
equivalent in any year of 13 to 1700 hours per year that
would be based on
those high and low gas cases that we used in the analysis
but there are some
additional ways to get value from the deck so we think that
Denton should be
prepared to sell deck output forward winter if there's a
spike in natural gas
prices or a spike in heat rates those are times where that
does occasionally
happen in the forward market and there would be an
advantageous time to take
advantage of that and sell deck output in the forward
market if didn't has an
excess supply say for example if you've got a summer day
with high coastal or
solar output during the day then the deck can be sold into
the day ahead
market to produce revenue during higher priced hours the
deck can also be used
to sell firming services to other organizations looking to
add renewable
resources we are aware of some organizations that may be
looking for
those sorts of opportunities so it is an opportunity out
there to to monetize the
deck and it may also be beneficial to sell excess renewable
power during
periods of excess supply and then you could use the deck to
firm the
transaction now that doesn't mean the deck would
necessarily always be needed
to firm the transaction because if you for example sell
excess renewables and
you sell them on a firm basis it's up to your operators to
then determine what
the least cost at the time is to firm it it still might be
cheaper to use the
market to firm that power but the deck is always there as a
resource so from
a firming standpoint you've really got a two-part process
here you always want to
look to the market to see what the cost of the market is
most of the time the
market's going to be cheaper for firming the deck will be a
valuable resource
though in those higher priced hours to add to reduce your
firming costs just to
add to this even though you sell the deck as a firming
resource doesn't mean
it runs anymore it runs every year ERCOT determines how
much it runs that's kind
of a fixed thing that's outside of your control and so what
you're doing is just
selling a piece of your expected value out there in a
financial sense so it
doesn't actually use consume fuel for this it's just you're
selling the the
fact that you have this firming resource out so it's kind
of a virtual resource
would you can you go back a slide to this one or I'm sorry
go forward go to the
the advantages disadvantages slide there we go
it would you say that from a fiscally conservative point of
view and from a
risk management point of view the disadvantages are greater
than the
advantages of the deck that all depends on what the price
of gas is yeah well
yes and and so there is no concrete answer to that question
but I'm saying
and that's why I mentioned risk management because risk
management takes
into account that yeah you see what I'm saying I do and I
would also say this we
have a variety of clients that we've worked with over the
years and one of
the chief challenges we have in working with those clients
is to determine what
their risk tolerance is I would term it risk intolerance
but nobody asked me
they coined the phrase before I came around we call it in
risk intolerance
you'll have very conservative organizations and
organizations that
are willing to take more risks and so it really depends on
that value set as to
what they feel more comfortable in terms of reducing their
risks yes so there's a
spectrum there of choices yes yeah and it's it's what is
clear to me from from
this presentation is that the renewable dentin plan was and
the purchase of the
Denton Energy Center was built on a very high risk tolerant
very risk friendly
philosophy and there's nothing that we can do about that
now but I
appreciate your focus on risk management and fiscal conserv
ativism because we
work we have not yet seen that we didn't see that in the
past in
presentations on this subject so thank you you're welcome
my guess is that we
were not privy to the thought process behind that other
than you know like
reading the Brattle report I would just estimate that that
anybody who wanted
that probably felt comfortable with a physical asset in
order to do that and
there are people that feel that way and that's just that's
just a preference and
that's just a preference is Denton a load-serving entity
and what are the
requirements under FERC and NERC if they are that you are a
load-serving entity
and isn't it better to have a physical asset because of the
penalties that you
could have in the future from FERC and NERC if there was
something to go wrong
we're in ERCOT we are not really regulated by FERC right we
are ERCOT you
know we don't have essentially interstate trade and
electricity so what
so you're a load-serving entity from ERCOT ERCOT is an
energy only market
and they score you on how how well you schedule energy or
resources against your
load and so as long as you do that you get a score of a
hundred percent right
where does physical resources add into them well they could
be they can be
resources at time but if they don't have the deck doesn't
have any energy
associated with it it has a heat rate so you can't really
use that as an energy
only resource in ERCOT to serve your load-serving
obligations is that clear
kind of sort of most of the market just I mean all the
retail without physical
assets behind ERCOT how are they going to firm anything ERC
OT it's a it's all
been socialized it's all been pooled you may have a
resource but ERCOT really is
the one who operates it and I remember a while ago that
they were very concerned
they didn't have enough capacity to be able to serve taxes
that's always the
story almost universally all over the country and they they
all have a reserve
margin and so that's that's true that's always an issue but
you can always
if you go out and buy your own resources a wind resource
will fill your needs
over the long term I understand and for the record I'm very
even favorable of a
lot of renewables no but but and so you can just simply you
know solar plus wind
that's just as as a matter of fact that will serve your
load in terms of an
expected value better than the deck will because the deck
doesn't have any energy
associated with it it's a heat rate call now it's good if
you think that the will
run out of capacity but let's say if you run out of
capacity this the deck
doesn't really serve Denton it serves I know so we're all
in the same boat right
and no small entity like Denton building resources is going
to fix that it's a
comprehensive big thing so this is where some people make
mistakes they think
that somehow by building a physical you know steel on the
ground that that helps
them and you're better off potentially buying natural gas
because that's where
all the risk is the actual if you go look at what Larry had
this the dispatch
heat rates don't vary very much in right cut that's because
all these units that
we built we have this huge unit build out and they're fixed
and they keep
operating day after day after day and what they're
concerned is they're
getting crowded out by renewables so ERCOT is incredibly
safe you know this is
the thing if you're worried about becoming short you
shouldn't unless
things change dramatically then they have a process to keep
units from being
retired and that's what Vistra just announced it's going to
retire for
instance a sandow plants Monticello and and Big Brown what
ERCOT may came in and
say no you're not going to you're required to keep these on
RMR status
that means reliable reliability must run because if you do
this you're going to
create local congestion and we there's a you know safety
aspect to it so they
won't let them retire and that process so think about it we
you know if you
retire coal units at some point they just say stop don't
retire those units
so it's there's a safety factor in that a lot of people don
't consider and then
what they do is they say here's an RMR you get all your
costs are are you know
included plus a return so people say well great now I have
a asset that was
losing money now it makes money so people will turn those
into RMR status
so just sort of conclude to some of the questions in here
we have a particular
expectation of where gas prices may go others have a
different expectation and
the relative weight of these advantages and disadvantages
tilts depending upon
where gas prices go and that's something that is just a
preference to whoever
thinks about where gas prices are going to go gives you the
the relative weight
of those advantages or disadvantages so speaking of that
this is just yes question
just just following up on what you were just saying would
you would you say that
the renewable dentin plan as it was previously imagined mis
represented how
ERCOT works I don't know if it misrepresented it it depends
on how
people felt that the way that the market would work so it
could be in a view on
that we haven't really dealt deeply it's a lot of what we
've seen in terms of
the dentin renewable resource plan were some PowerPoint
slides that gave some
expectations of what the portfolio yeah and that's as I
understand it that's
pretty much so we didn't really see a lot of detail in
there that could really
put that together yeah and and and there wasn't the I'll
just just in terms of
me communicating to the public who's watching and trying to
piece together
right because I think people are trying to piece together
what we're hearing now
versus what we heard in the past you know what we heard in
the past was that
ERCOT needs this this this gas plant and that without the
gas plant dentin is in
danger of not being reliable and ERCOT itself the grid is
and what I hear what
you're saying is that ERCOT takes care ERCOT takes care of
it ERCOT is is in
no risk of you know running out of power and if they and
and we would know and
and and we'll know if we're needed to to build a gas plant
for them yes one
thing that I think that's very important as we go forward
and the PUC is talking
about this right now and that is this as we go forward
there's a huge ERCOT
and the PUC have been focused basically on building assets
all the assets they
see all the resources that you see in the in the but that's
all on the supply
side they have not been focusing on the demand side and
efficient market design
requires that you focus on both sides so there is a price
that I would and most
people would if you saw prices too high and you were your
rates reflected that
you turn off your load and that hasn't been integrated in
the market but it
could be in the near future so this is one of the things
about how the market
is designed as you go forward this demand side resources
and management is
so important and so this is one of the risks I think about
going out and
committing anything to building physical resources what if
everybody has an app
on their phone it's connected to their smart thermostat and
you start cycling
air conditioner or there's a lot more work on commercial
and industrial loads
to do the same thing we see a lot of that activity in the
market now where
people are trying to do something called Lars load acting
as resources and other
programs which will lower the demand and we and that's one
thing I don't think
really was discussed that much in the Brattle report but it
's something that's
coming we just don't we had discussions about my inside
management we did a lot
of commercial businesses the experience that I have had
they're not going to
shift their production and do all kinds of changes to meet
some of that we tried
very aggressively where I came from and it just didn't
happen on the industrial
side it happened on the residential side because that was a
little bit easier to
manage but we just couldn't get some of the industrials to
do it and it depends
on the nature of your customer base and and so I do you do
have some large loads
and this may be something that develops in the future we
did address this in
the written report we don't have a slide on this we think
there are a lot of
advantages to pursuing demand response and demand side
management programs in
terms of where we saw the media priorities are you've got
renewable
resources coming online in a few months you've got an
accelerated goal to reach
70% so we saw that just we've referred to in the report
from the 80/20 rule we
had that we had to really take the big pieces immediately
which is really
addressing how you fill out the supply portfolio from a
renewable perspective
then your timeline to go on to a hundred percent during
that I think that would be
where you would really deserve a greater focus because it's
gonna take a longer
lead time to plan some of those demand side resources you
've got to really
integrate that into your rate incentives and that's not
something that you can
make immediate decision on we've seen utilities out there
act too early in
some of these areas and really spend a lot of money so it's
always good to sort
of wait for some of these technologies to come into play
and maybe a second
generation gives you a much better cost efficiency there so
we would we would
just caution that that would be something to plan out I
think it could make a
really important contribution to how you get up to your 100
% goal but that's
going to require a longer lead time a longer planning and a
longer deployment
for those types of resources whereas here you know to get
to 70% even to a
hundred percent immediately we were really focusing on the
big immediate
things that can be done to fill out the portfolio and if I
remember Brian weren't
we going to be able to go to like 88% because of the price
change that had
occurred between what we thought five months ago to today
yes I think that was
the the figures that we used back a few months ago we came
back to and we're in
just a moment you're gonna see some slides on what we
suggest as an
adoption path for this and we don't see any reason for you
to hold back I think
you can really accelerate what you're doing here because of
the advantages and
there are some arguments for accelerating it because of
some changes
that may be coming down pretty soon we're gonna we're gonna
especially the tariffs
on solar yes we're gonna cover those here very very soon
excuse me yes can you go to slide 15 the the seasonal
summer this one and yes
yes so the blue is the Denton Energy Center so yes the
vertical bars why do
we turn it on then you want to turn it on to maximize this
slide why do we turn
it on you don't turn it on okay so here's the dispatch
because the at that
time the whatever you've been in it let's say you let's see
what's the price
there the price is let's say $35 and that means it's more
than a 10 heat
break that's why they turn it on is because that meets you
've been in a
curve essentially and and during this this was a really
high priced August day
August is okay prices okay and so those things may have
been so can you go back
to your disadvantages advantages slide sure so then in
those situations it does
offer some kind of pricing power and competitive absolutely
at those hours
yes it does so then actually for the 12% to 20% of the time
that you estimate
that it is running or will run it will be offering pricing
power and competitive
yes at those that actually for nearly possibly 25% of the
time a quarter of
the time it will be that will be an advantage not a
disadvantage correct
absolutely and I'm not sure that's far different in
percentages from what we
were told no if I'm not mistaken I think it's pretty close
said 17 17 so yeah it
all depends on the gas price right sure so you so you've
actually nearly said
the same exact thing we were told in the renewable debt and
project and
technically then ERCOT is depending on us to firm up their
entire system
some granular data we haven't been given before yes but the
12 to 15 12 to 20% I
mean that's not far off from 17 and I would think you would
find in just a
moment we're gonna show you some projections of what we
think the value
of the portfolio is going forward with the renewables and I
think a lot of that
modeling very much lines up with what brattle it is just a
different gas price
assumption the whole different whole difference is just the
gas price
assumption yeah absolutely and and just to amplify what you
were asking about
just on this graph here that shows in the white during this
particular day
that is when the deck is the least cost firming resource
rather than the market
that's when it offers an advantage to you and so just go
ahead you make your
point and then I'll but annually that will still represent
that 12 to 20%
this is just kind of a quibble it actually doesn't give you
a power price
it gives you a heat rate and what's the difference in that
time put my mind
around heat rate I think professionals do that right yeah
it means your margin
basically yeah if I get just if the price is a hundred
dollars for the deck
and the markets 110 you get a $10 you know you don't get a
hundred dollars and
so that's one of the things about that's how the price has
slipped is a hundred
dollars a good hedge we would say if our average price is
25 not really that's
where we're saying this is a little bit you have to think
about this and and
that's how it works and then just what I was going to
conclude there and say is
that you know we say we see our mission and what we've done
in the resource plan
here is how does the deck fit into the portfolio you know
we're not sitting
here making any decisions about the deck it's how do you
best optimize it how do
we maximize the value of that how does it best serve Denton
going forward given
you're committed to it and so it's just that balance of
market purchases versus
the deck which is the least cost alternative at the time
you need it for
that but simultaneously when it is in excess you need to be
whoops I'm going
the wrong way you need to be maximizing sorry I'm off here
15 what you need to
be maximizing the revenue opportunities for this even if it
's in excess it's it's
the sort of thing where when the when the the opportunities
there you're taking
it full advantage of that opportunity so that's to maximize
the value just one
question and it if you go back to that slide I'm sorry this
one yeah that's
perfect just as so we're saying okay we this is during the
blue period there is
when the deck deck is engaged yes and then that is a that's
a one-day sample
now annually we're talking again what 15 20 percent or 20
percent of the time
runtime so I guess the question is if we look at it if we
're looking at it as
number of hours as a percentage of number of hours in a day
or a year or
whatever it is versus a percentage of what is the actual
load that we're using
or having the purchase or for the for the didn't load you
got the didn't load
so the load in August for instance would be a lot more than
the load in April yes
so can we can we look at from an annual basis just I'd just
like to see the
percentage of our annual power purchases of how it breaks
out I think we're
looking at the run hours and we've got that but I'm more
interested in what the
percentage of the load we're using yeah and that would be
then a function of
what renewable resources what the type you put in the
portfolio and the
quantity so that once we get a little closer to getting a
specific recommendation
fit we can run those so we could say okay a you're
producing this much for
your resources be this many hours or market purchases see
this many hours are
deck we can come up with that once we get a particular
portfolio and actually
maybe even reflected in megawatt hours absolutely that's
how we count that
you're doing yeah yeah but it's far smaller than 15 percent
maybe 5 percent
or something yeah 7 percent okay and that's because a lot
of it's so a lot of
it sold as you can see below there right yeah even though
those August days but I
think I'm still I'd still think that's an interesting thing
we need to look at
it are these all these projections based on current
population current demand
current load or do they project an increase you know the
city of Denton most
cities spend a lot of time trying to promote industry
promote jobs so people
have more income you got to have the resources and you need
the
diversification and be able to provide the energy and I
like the word hedge
because my world hedges a lot which is finance you need to
be able to have the
different resources you have the hedge and you have a city
trying to bring in
more people more industry create more jobs the more you can
offer and assure
them of all the different resources including the plant to
me that makes a
positive impact it's not just about tunnel vision here we
hedge we do this
we have a ton of options and but it would seem to me that
these numbers are
going to change if you said in 20 years the city didn't is
going to be 30% 40 50
percent larger or some major industries come in here and
that load changes and
and the cost of doing it then under crisis is a lot more
than spending the
money up front today well as of inflation because of the
cost of putting
in equipment prices are going to go up yeah you're at your
average annual growth
rate for let's say the last ten years about 1.6 percent and
that that's our
base case as we go through it is 1.6 percent one of the
things and the other
thing is in terms of economic development ours is at least
cost
solution and in our experience in attracting economic
development stuff and
that sort of thing they look at your rate and your cost if
it's the lowest
they like that then that a secondary consideration is how
green are you and
Georgetown can tell you that they have a branding of being
100% green and that
has helped them with economic development tremendously so
your your
point is well taken I think that in terms of our modeling
we have to model
what your typical growth rate has been you can always
incorporate a scenario
higher load growth but I don't know if that would be enough
to change the
resource quantity right now but it's a it's a good thing to
consider for the
future and that is a scenario because if your load growth
starts to increase then
the plan has to be adapted. All right the reason this slide
here is repeated is
that it's going to reference this next slide here for the
benefits of the
renewable portfolio and we want to be careful with our
words here you know
these are benefits I'm always hesitant when you're talking
about a hedging
entity a load serving entity when you start using the words
losses and
profits and returns and so forth you know the for-profit
entity you're trying
to manage to serve your load on a least cost basis so when
we are using the word
benefit we're using the word benefits of the portfolios as
designed here versus
the alternatives there from the marketplace so this slide
just shows
four different scenarios which are based on these four
different natural gas
forecasts so we've got the high gas case that we have again
just to remind that
that just models in an expectation of a rise in natural gas
prices and then a
reversion to the long-term mean our as the high gas case
our low gas case is
essentially a projection based on current market prices and
then we
incorporated the brattle low case and the brattle base case
into these
projections as well so the top two areas that the upper
half of the tornado
diagram here are using those different gas cases to project
the potential
benefits of the deck using the brattle gas cases and our
gas cases and the
bottom half is the total system benefits through the
additions of the renewable
resources that are proposed for the system you want to
speak to that anymore
just in the sense of the portfolio makeup so the for ours
what we did is we
took a hundred percent goal and that was achieved in 2024
so you went to a 70% in
19 per year renewable portfolio standard and then as soon
as the white tail fell
falls off it falls off in that year we will replace it with
the renewables and
that puts you at a hundred percent in between your year in
the 80s and so
that's a little bit different than what happened with a br
attle but it and what
it does is it allows you to get because they're lower cost
you get a better more
benefits earlier on in the planning horizon now if you
notice if we used our
model and used brattles total system benefits that come out
to be look pretty
darn close right so we given those gas prices we would
calculate almost the
same benefits what the main thing that we did is and this
is also true for the
deck to there we have these benefits for the deck the top
thing and it's not too
far off from the bridle deck now one thing I want to note
if you go look at
their things we put this all in 2008 and 18 real dollars or
constant dollars
dollars of the day they use nominal dollars inflated
dollars and if you
don't know the inflation rates you don't really know what
the price is so this is
something that we kind of corrected and we think so now
this is all on apples to
apples comparison thank you so let's get down to some of
the considerations for
selecting renewable resources and our recommendations for
those so didn't can
reach its 70% goal with additional renewable resources from
the current RFP
submissions there are very attractive offers for power in
the current RFP the
additional energy to reach the goal ranges from
approximately 9% to 27%
as we stated earlier this depends on whether or not why a
tail is designated
as a renewable resource the current portfolio as it stands
now falls far
short of a balanced and diversified portfolio because solar
is over only 30
megawatts and you've got a large chunk of West Texas wind
in there so those
things need to be balanced out the the deck is a heat rate
resource and
therefore doesn't contribute an energy hedge during peak
hours it's a heat
rate hedge only until the price of gas is known for that
this leaves Denton
with a on peak energy supply gap so a minimum of 90 120 meg
awatts of solar
would help balance the portfolio so that's going to be the
one of the chief
recommendations we're gonna make to reach the 70% goal in a
minimum another
70 megawatts of solar should be considered as an addition
to the
portfolio if white tail is not counted then another 120 meg
awatts of solar
should be considered with rent representing the balance of
energy to
reach the 70% goal. What's important about this if you
think about the
solar on peak that's what's completing the energy hedge
that is missing with
the deck so that's why you would purchase it and you say
well why should
we purchase this don't are we covered with the deck well
this has a price
associated with it the price is $2.20 natural gas equival
ency that's
incredibly cheap this is a discount you can't get in the
market only and it's a
renewable that follows our load profile yeah yeah and so we
see this as a it's
kind of a belt and suspenders kind of thing but the solar
is certainly the
belt and deck is the suspenders in this case. Now one
consideration here is a
potential solar tariff and I'll let Neil speak to that in
just a moment but there
are several things to consider that you might be able to do
because of that one
is that you might just take an approach that in your
contract and you're not
going to accept any tariff risk there is there's not enough
that's concrete yet
about the potential tariff there is the opportunity chance
that it may be
somewhat retroactive which is a little bit tricky you do
have some solar
suppliers that have stockpiled cells so they may be able to
either designate
that or if they're really that confident in when the timing
of those souls are
cells are if you can get them contractually to commit to
that that
would be a recommendation on our part so this is a bit of a
cloud overhanging the
the potential acquisition there an alternative we would be
to acquire more
coastal wind as you saw coastal wind has an on-peak profile
doesn't perfectly
match solar but it would be a reasonable offset yes I think
I saw come back to
the tariff do we know approximately what we think that
would increase yes the
cost yes we don't know exactly because it's a tariff and
there's quotas and
it's just as complicated as can be but I've heard it
increases the price from
say $25 delivered to the hub north to 40 so what does that
convert back to the
gas price of gas it makes it it makes it more expensive
yeah it's over doing the
math in my head okay yeah but it would make it non-compute
would make it that
attractive at that okay yeah it's still you'd be paying a
premium yeah to add
that in to reach your goals so all the more reason to it's
not our risk is
yours correct so coastal does have some of the
characteristics of summer wind so
you can increase the coastal and not do as much solar or
solar at all if that is
a important risk consideration for Denton you could
consider utility scale
wind resources with a storage component that could also add
a lot of cost though
and that's something that storage is intriguing this is the
next massive
revolution in this business but you're just now in the cusp
of it so once again
we've got that where's the price factor you know we're not
in the second-gen
generation yet where this becomes price competitive or didn
't could wait after
reaching the 70% goal it's tariff prices and supplies read
just to marketing
conditions or the tariff is no longer an issue so that's
just one other
consideration here you get to 70% you wait see what happens
to the solar and
then you could add more solar later once you get from want
to go from the 70 to
100% level not exactly a risk but other factors like this
that could be
potential purchase accelerators are the retirement of
conventional fossil fuel
generation if enough of that's retired that reduces the
resource base and the
cost base and could raise overall prices and because
renewable developers are in
there right now well we'll look at the second bullet there
the reduction of the
producer tax credit a lot of the developers in a hurry to
get in under the
the finish line before the tax credits go away there's a
lot of competitive
offers right now but those might go away after the tax
credits go away and if
prices are higher because of the retirements of
conventional generation
renewable prices might be higher so this conceptually could
be a really good time
to strike because of the timing of these things right now
and low natural gas
prices if they got your natural gas prices rise then there
's less competition
for these renewable resources and then the prices may rise
in your RFP so
you're seeing very attractive prices now there are a lot of
factors here that
make this appear to be a good time from a price standpoint
so those factors
could be potential purchase accelerators one other thing
this isn't a major point
but I wanted to include this here very briefly we talked a
little bit about
having to correct for what producers claim to be the output
of renewable
resources well they may also pick certain years and so
forth renewable
resources are variable wind speeds do vary this is a graph
from ERCOT that's
showing the variable variability of winds over the year so
you can get amount
of wind production varying by as much as 15% so if Denton
wants to reach a goal of
70% are you reaching 70% on average and then are you
willing to tolerate being
less than 70% in a year that the wind doesn't blow as much
or do you need to
overshoot the goal so that even in a low wind year you're
still reaching 70% this
is just one of those calibration questions that we can't
answer for you
this is just a value decision that didn't needs to make you
want to ensure
you're 70% or you want to get to 70% based on the average
profile and then be
willing to say well some years a little under 70 some years
a little over 70 or
whatever the goal tends to be just an additional
consideration there in terms
of the quantity that you really target when you go after
these resources so the
next three slides here show some adoption paths we've got
graphs here
these are graphs the horizontal scale is across years and
the vertical scale is in
the number of megawatt hours so what the big takeaways here
are the red vertical
bars represent quantities of renewable purchases that you
would make in those
years to reach your goals your load is in the light blue
shaded area that
reflects your load growth as we've used it for the base
case here and then
you're seeing the additions of renewables what that does to
the
portfolio and your fixed price exposure where that fixed
price exposure can vary
from the portfolio is in something like whitetail because
if you're not
considering it as a renewable resource and if you get to
say 70% renewables you
really have may have 88% fixed price exposure because of
having whitetail in
the portfolio in addition to the amount of renewable
resources that you add so
say that again I can't get my head around it yeah so if you
add enough
resources to get to 70% in your portfolio and you don't
count whitetail
as a renewable resource that's additional supply so if you
get to 70%
renewable but then you also have whitetail in there you may
have 88% fixed
price exposure even though you're only at 70% is a quantity
of renewable
resources that reflects the peak that's that gap in the
upper left hand corner
where your fixed price exposure exceeds the renewable
resource amount so this is
what we've termed the gradual adoption path this is where
you would execute on
low-cost alternatives in the present to get to 70% then
additional renewable
purchases would be made to reach 100% by 2024 and whitetail
ends in
2023 so that's when those two lines would resolve and meet
and as I said in
this example whitetail is not included as a renewable
resource and alternative
this could be the early adoption path and we like this path
because we think
the time is right it's a good time to strike so this is
something that we
would recommend this is when you reach the 100% renewable
goal faster by 2020
so this would though result in excess power supply of 18%
through from the
years 2020 to 2023 again this is not including whitetail as
a renewable
resource this is getting to 100% renewable faster you're
effectively for
a few years at 118% but with the addition of enough solar
where you would
have the excess power would be on peak and that's not a bad
time of use to have
excess power so then you could sell or monetize that excess
power and get
revenue for that you want to speak now I think you're on
this yeah then just the
third alternative is the early adoption counting whitetail
if you chose to
count whitetail you'll see now that the the line there
showing the amount that
you have has resolved there so including whitetail as a
supply as a renewable
resource would also accelerate the number single to 2020 it
would require
replacement of the whitetail piece in 2024 the principal
advantage of this is
you don't have that 18% excess of fixed price risk but
given what we see in
terms of the attractiveness of the prices out there and the
various factors
to consider this is what we would suggest if you ask us our
opinion would
be the early adoption path so these are just some
alternatives that you all need
to take into account in this some other considerations I
don't want to belabor
this slide they're just just to give you a sense there's
some alternative
configurations here to reaching some of those megawatt-hour
targets here if you
go to 100% renewable you could do it by 180 megawatts of
solar with 150 of
coastal if you chose to emphasize coastal more you could
get to the same
place with 120 megawatts of solar in 200 megawatts of
coastal just some more
considerations that we've listed here just wanted to give
you a flavor for
that so let's now get down to specific recommendations in
the decision so we're
finally wrapping this up here because of the confidential
ity of the RFP process
we've just labeled some of these companies bidders one two
and three but
these are these are some of the biggest suppliers out there
these are serious
players with those offers so you see some wind resources
solar resources
prices at the bus bar prices at the North Hub we just to
highlight the the
sort of craziness and how people will price in congestion
notice bidder number
two on the second row we got 1335 at the bus bar into $30
at the North Hub that's
a substantial amount of congestion that's how they're
pricing in if you
ask them to take that risk that's how they're going to
price it in so one of
the key considerations here and one of the things that we
've stressed
continually is CRR management is your congestion management
because we feel
you can do that much more cheaply then they're going to
price it in now there
may be some cases here where they're doing it at a pretty
efficient way and
it may be to your benefit to go ahead and take the power of
the bus bar and
let them take the congestion risk because they've priced it
in fairly but
if you're getting a huge gap there it would be more
efficient for you to take
that on yeah so for example what he's saying bidder three
and yellow where
you've got the price of the bus bar of 2150 that's the
solar resource the next
to the bottom line and the price of the North Hub of $23
that may be something
where it's just to your advantage to take it at the hub
because that's
something that that that slight price premium in the
congestion market might
not be worth it so again these are some value
considerations that need to be
made by Denton to best fit this so just to go over this
here so this would entail
a purchase of approximately 30 to 40 percent of load in
2019 with additional
renewable resources we think the useful portfolio divers
ification could be
achieved with approximately 75 megawatts to 100 megawatts
of coastal and
approximately 90 to 120 megawatts of additional solar
resources to meet the
70% goal some amount not all but some amount of North Texas
one can be
substituted for coastal because the two resources are close
in cost this is just
an adjustment that would need to be made so our preference
is 200 megawatts of
West Texas solar within a congestion region so you wouldn't
be penalized with
that and then 150 of wind which could possibly be split
between locations
depending upon cost equivalency one more thing I want to
add here that's not on
the slide we've just recently been approached by another
municipality that
would be willing to go in with you on a solar resource and
solar in particular
benefits from cost scaling so because of the equipment so
there could be somebody
that might want to partner with you maybe on a 50/50 basis
and this could
reduce the cost even further if you're willing to do that
that's not reflected
in these prices by the way so the optimal solar location
was you talked
about it'd be close to Midland but east to get into a less
congestion pricing
region and then Denton is going to need to hedge both its
load from the hub
north to your load zone and from the resource node to the
hub north with CRRs
for the upcoming Santa Rita wind as well as your solar farm
so those are your
recommendations and then just a summary here of decisions
and then we're at a
close here so some of the decisions are should you count
quiet tail as a
renewable resource yes or no if not you're gonna have to
entail additional
fixed price risk some of the answers to this once we get
these answers back then
we can give you a more concrete specific recommendation for
the portfolio makeup
well didn't choose to delay solar purchases because of the
potential
federal solar tariff would you delay them substitute
coastal and so forth
that's another value decision that the organization needs
to make should didn't
accelerate renewable purchases especially wind resources
because of the
attractiveness of the timing you may want to accelerate
that that's that's
our recommended early adoption path there's no reason to
wait at 70% prices
look attractive you can go there faster so that also then
impacts that last
decision should you move for the date of the 100% renewable
goal and with that we
are at the end of the presentation so any follow-on
questions we can answer
the 18% risk is there a proximate dollar amount that is
all part yes the dollar amount would be 18% of your load
your load is 1.5 5
million so whatever that is that's about 300,000 and the
current price is $27 so
300,000 that's 7.5 million or something like that so that's
roughly the risk out
there on the portfolio the fixed price risk but again it
depends on the price
it depends on the price expectations so if you have that
extra fixed price risk
and then gas prices go up you're actually getting a benefit
to having
that extra 18% of gas prices go down you're at risk so it
really depends on
taking that base value that Neil calculated his head and
then saying okay
where could gas prices go higher low that gives you the
range of potential
outcomes some of them could be unintended benefits and
going back to
your the gas price model it was a blue line in the graph
there was a short-term
rise and then yes and then a drop yeah right that you yeah
so if that happened
and that's just a case we use we're not necessarily
predicting sure I understand
but if that's a case you use that would actually be quite
advantageous that
would almost perfectly overlap the time that you would have
that additional
dropped in 2024 okay good pretty good point five here the
dollar map no oh he
just calculated it would be the the base value to be about
seven point five
million per year but here's the thing going back to some of
those other slides
that we had what's gas gonna do if gas prices go up you get
a benefit on having
an extra 18% of gas prices go down it's gonna be a
detriment to that
so once again it kind of depends on what that gas price is
and the chairman here
just said well looking at that high gas case we had where
there was the gas
price rise for a few years that would ideally overlap with
that but that's
that's just a scenario that's not sure thank you yeah any
other questions yeah
this is for clarification for the public so just to be
clear so a hundred percent
renewable does not refers specifically as you're using that
term to Denton's
portfolio right meaning that is in use for Denton right how
much how much where
our power that we're using in Denton to turn on the lights
here in Denton is
coming from correct that's right so if you've got a certain
expectation of
megawatt hours of consumption in a year if you buy enough
renewable resources
with a projected production output of that same number of
megawatt hours if
those completely match then we would say you would be a
hundred percent yes yes
so it but that means some days were not and some days were
that's right more
than that but that's right and that's why we use annual
because if you start
picking a season you introduce seasonality in the distance
too much
variability so annual is really the shortest time period
you can do that
really smooths all that but moment to moment hour to hour
season to season
you're a lesson hundred percent you'll more than a hundred
percent yeah I had a
follow-up but really I had it no I was just gonna say that
I had read an article
not too long ago about Georgetown talking about a hundred
percent being a
hundred percent renewable and that actually that was more
marketing than
reality depends on how you define that because I would say
right now they may
be more than a percent yeah but because of the fact that at
times they would
have to purchase other in order because of you know the
lack of wind or the lack
of Sun or whatever that it wasn't always a hundred percent
unless you and so
that's kind of the scenario that I see for us as well is
that we could say
we're a hundred percent because we were trying to reach
that goal but in reality
we we wouldn't be that what we have suggested is the best
you can do under
the current market structure under which you have to
operate and you don't have
choice about that the only alternative would be is if you
ended up somehow
opting out of Urquhart which you couldn't do and then you
had enough wind
and solar so that at the absolute minimum you had that
generator hooked
directly into your own unique grid that's the only way you
could absolutely
ensure that because there will be times where you have to
purchase from the
market there's just no other way around that regardless of
the structure so this
is the best you can do given the reality that you operate
in. The fact is from
their definition they're always a hundred percent renewable
because they
purchased resources to fully supply their load and they're
over a hundred
percent so it's not marketing it's in actuality they have a
financial position
where they bought this stuff they own it it's they're
committed there's a real
wind farm or there's a real solar farm that they get that
output from now this
this other thing it's all commingled into the marketplace
and that's that's
one of the things but in from accounting and business sense
they are a hundred
percent renewable but no one is can be a hundred percent
renewable in the real
time in a physical sense that's under Urquhart. Not under
Urquhart. Our physics doesn't allow for that.
Well politics. So just to be clear for the ratepayers so a
hundred percent
renewable in 2020 means that we will no longer be using the
gas plant for power
in Denton it's only for selling after 2020. That's a
complicated answer
because remember that in Urquhart all the energy goes into
the pool and comes out.
So yeah it comes back to us because we're under Urquhart.
Remember that in any in any
hour when your portfolio forecast is not sufficient to meet
your load you have to
make up the difference and you have alternatives you can
just go into the
real time you could go into the day ahead but then the
question is okay what
is that gonna cost versus your resource? Absolutely. When
it's cheaper to
buy rather than run the deck you buy. When it's cheaper to
run the deck than to
buy you run the deck anytime you have a shortage. Yes. That
's just however that
wants to be portrayed that's just the reality of the least
cost supply
balancing that needs to occur. Yeah yeah so I'm just so I'm
I'm thrilled about the
the how soon we can meet our hundred percent renewable goal
and I support
your all of your recommendations so I don't mean the
following to be anti a
hundred percent renewable but just in terms of being clear
to the public and
also finding just getting your your sense of this to
confirm for me that we
are so we've paid we've taken out this you know 260 million
dollar bond for
this gas plant that the public was told was needed for
reliability in Denton and
now it is now finally we have someone standing behind that
that podium and
saying no you don't need it for reliability ERCOT takes ERC
OT takes
care of that and we are now it seems paying this 260
million dollar we're 260
million in the hole with with interest for the bonds for
essentially you know
two for using two years for using this for two years
directly to Denton and I
do understand that after that sure it comes back to us gets
filtered through
through ERCOT and and I think the public has a sense of how
that how that works
but is that would you say that that's inaccurate I would
say you're going to
use the deck to its best capability as long as the deck can
operate unless
unless you make a different choice so it's not a two-year
horizon it's over
the horizon sure sure but it's for these two years that I
mean it's after two
years assuming that we go with this well remember that you
will always have a
firming requirement no matter it you would have to probably
purchase I don't
know if Neil can make an estimate you might have to go 180%
or 225% renewable
not to have to firm anything so that you would have an
excess in every hour but
one during the year oh yeah I understand that but it will
always be used as a
firming resource regardless well but but by ERCOT and as
you as you made clear
ERCOT takes care of firming for us the firming yeah the
issues the cost that
that to us and that's the sole thing is how much is it
going to cost to make up
that portfolio well I think you made the statement earlier
in which I completely
agree with if it costs less to run deck than it is to
purchase in the market we
run that right if it costs more we purchase right but there
's always when
we say ERCOT takes care of the firming they take care of it
but at what price
right that's right so we've got to that's how we manage
that's right our
market purchases and the deck that's right so going back to
something we've
talked about earlier which is sort of the risk preference
or the the risk
intolerance there are some people in the marketplace that
feel more comfortable
having an actual power plant that they can use to dispatch
instead of paying
the higher cost market purchase and the exposure to risk
they yep right it's a
cost risk is what it really is you're not going to run out
of power just at
what price are you gonna have to pay for that so some
organizations prefer that
because that makes them feel more comfortable others don't
need to go
there that's simply just a value decision and that is a
risk preference
of whoever has made that sort of decision that's just a
portfolio design
aspect we see both out there in our client base so opposed
to two years now
to the end of time relatively speaking that serves as that
word I like hedge
against cost always it's a hedge against high heat rates
and high gas costs
because you have to pair the cost but yes it's a hedge
against those higher
to the end of time or however long it lasts yeah yeah it
really isn't a hedge
it's a partial heads or incomplete hedge or an imperfect
hedge when people say
it hedges this it really you have to be that's where the
risk comes in this is
this is what happens well it's a diversification in her
choice yes
your heat rate exposure right so if you if you took for
example a year like 2011
which was a really crazily high priced year with high heat
rates that's a great
year to have that sort of a engine there but that was when
the heat rates and it
does it's it's really not I would say that you know given
up are these
distribution of prices that we've seen these profiles as Br
attle calls and it
it's not necessarily the the value of the deck is the fact
that it makes it
easy to do a lot of things with renewables it makes it
easier so you have
purchased that and you can now manage all those renewables
most efficiently so
it does even even after you know two years even though if
we're solar it
doesn't have the you know if we can still buy solar
inexpensively it it still
will act as that but you may get out there with 100% solar
and realize that
the deck isn't dispatch very much and then you'll have
another question to
what you want to do with it so to your question slide the
last one yeah let's
talk about why we wouldn't or would not include whitetail
you mentioned 30% of
it or something is Rex or something and we're Rex arm it
was it's now a 30
megawatt around the clock deal that's firm that has Rex
added to it okay so if
you go back several years ago you've only find we wrote a
paper for the
Mitchell Foundation advocating the development of a power
product which
would be used we call it renew 50 which could be used to
take Rex and add that
to conventional power to help reduce the emissions exposure
but that was when the
Rex were a viable instrument that's before you'd gotten so
much renewable in
the marketplace that's when it had a lot of value so that's
really only changed
within maybe the last three to five years that's correct
that's correct so
then somebody's whose head was maybe in the game ten years
ago this idea of
firming or hedging our own renewable portfolio with our own
gas plant that
might have actually been something that would have struck
as a great idea
so I mean since there are other people today that might
think since what was
being offered at the time was being backed by around the
clock anyway right
if you're talking about that specific transaction well not
that transaction but
just the way the market was at the way the market yes and
the viability of the
Rex and the design of renewable standards and what those
were incentivized to do
there was definitely a value to that but the marketplace
got far ahead of that
target so those certificates really don't have much of a
value so it's
really a matter of perception you know do you believe that
that caught the
addition of Rex to that specific resource makes it
renewable or not some
people would say yes some people would say no in terms of
us as professionals
and risk professionals we would say that could entail a
potential reputation risk
so we would not recommend going there but you still could
okay well that's why
our relations did not count white tail or the we would we
call ourselves 70% or
100% that's what it needs to be not some concept of okay we
're really only that's
our recommendation yes that's I don't want to mislead that
we're something
that we're not right so then if that if that's the case
then the question is okay
how fast you want to get to a hundred are willing to go 118
% right from a from
a cost exposure standpoint for a few years to get to a
hundred percent faster
or not if you're telling us gas is gonna go up you know if
I could tell you that
wouldn't be sent here the podium I'd be some boat in the
Caribbean and a
trading account I'm not so sure our community would think
that white tail is
truly a renewable resource and that's our recommendation is
not to count it
that way I just think that's a lower risk position going
that's a value
question and the council's gonna have to chime in on that
even the Brattle report I
mean in a number of ways this presentation diverges from
the Brattle
report but as Brandon was saying and as you yourself said I
mean there's so much
that is that is the same it's just kind of your projections
are more conservative
and and conclusions somewhat somewhat different but even
the Brattle report
didn't count you know Rex as renewables which is why the Br
attle report ended up
changing the way we as a community talked about our
portfolio I have a
question about divesting engines specifically do we need
all 12 engines
and 250 megawatts to take advantage of the deck in the way
that you're talking
about taking advantage I've had a number of people tell me
that they were shocked
to see you know 250 megawatts for a load of this size how
many engines would we
need and do we need all do we need all 12 and if not then
how many do we need
and by how many do we need what I mean is in order to take
advantage of the
deck the way that you're talking about it so we can use it
for this small
period of time each year yeah it it depends on the hour but
if someone
brought us in and said you know design a help us figure out
what sort of a
firming plant we might need for that sort of thing we
probably wouldn't
recommend that size it is large on a proportional basis so
to me the question
is all right you're committed to it now what's the best way
to monetize this
thing going forward through all the different options and
if you could sell
the engines at a way that would be higher value than what
you might project
it would run over several years and sell the excess power
that's it's really just
that's a sales decision optimizing the value so how many
megawatts do would do
we need I'll let you speak I'll just say again that's a
cost thing because you
know you don't technically need any it's just a matter of
the deck is yeah cost
I know but when I say need I mean need defined as in order
to take advantage of
it in the way that you say it depends how much what's your
ratio to solar to
wind is as you saw that wind can have you know 15 percent
year-over-year but it
also can you know depending on how many wind resources you
have if you had wind
in North Texas and West Texas in South Texas and in the
coastal and that that
would provide diversification so you wouldn't need as much
you'd have a
steady flow most of the time and which but it's discounted
and then how much
solar is on top of that and that also you know depends on
cloudiness and stuff
like that but if you put that together in your load it's
probably something
between 50 megawatts and well all right 50 to 150 megawatts
something like that
somewhere's in that range the the actual installed I
believe is 225 megawatts not
250 but so what we're looking when we were looking at this
we could say look
there's a piece of this that you could one of the things
you could do is go to
other munis and say we can help you firm your renewables
for a price and then you
make sure that the price that that is a nice price and what
their advantage is
they don't get any debt services service and so it could be
a just a two or three
year arrangement and you could sell off this excess and
then you know and
what you're doing is your your risk has just been divers
ified for that.
So that would be another strong recommendation we would
have if you get
to that because there are muni municipalities out there
looking to
increase their renewable resources and they realize they're
going to be in a
similar circumstance with a more variable production output
with
more need for firming so that could be a valuable service
you could provide to
other municipalities to help them increase their renewable
resources and
increase the overall renewable content of ERCOT. Well sure
and I think that my
sense is that that was the goal from the beginning to sell
power elsewhere it's
yeah you know there are obvious you know negative
consequences for people who are
breathing in those emissions but that's I know that's a
whole other whole other
story but I do understand that and that was the intention
from the beginning to
sell. Remember when you sell it you don't increase the
dispatch you
don't increase the emissions that's that's the goal we hope
so so you're not
you know not worse off doing that. I mean worse off than
not having it at all.
Yeah and so there are ways to generate revenue from it
without it running.
Yeah well like he's saying you could sell firming services
and then you could
buy market purchases you could sell firming services to get
revenue off the
deck and then when you have to actually deliver the power
to somebody you just
buy it from the market if it's cheaper than running the
deck or if the deck
that this is a higher level of sophistication but there are
organizations out there would take a plant like that and if
the heat rates
rise in the Ford markets they could sell against that when
the heat rates fall
they buy it back and that's it and you're actually that's
called asset
optimization you're trading in the market against an asset
that never runs
but yet you're producing revenue. I understand so just to
clarify for the
public and also for myself so when we're selling power you
know and an electron
is an electron doesn't matter from what kind of source it's
coming from so as
long as we provide the kind of as long as we provide the
amount of power. As long
as you said if you've contractually arranged for a hundred
percent or 70
whatever your goal is that's the best you can do in this
market setup to meet
that goal. Yeah so it doesn't matter to the buyer where
that's coming from
just as it doesn't matter to ERCOT. That's right. Thank you
. A couple more.
When do we think that the federal solar tariff discussion
will conclude? What is
your recommendation on that? When is the wall gonna be
built? You know I don't
know it's all that stuff you know so that's a great
question.
That's a great question with a really difficult answer. The
actual
hearings are in place now and they started in June and they
're
winding up basically so it's it's gonna be fairly soon and
let's say sometime
this quarter next quarter. Okay. I have a question about so
we're talking about
how our portfolio might look you've mentioned Georgetown's
portfolio and how
they made their purchases and then we talk about ERCOT and
how they have how
they dispatch everybody's generating sources or resources
so do they does
ERCOT look at what percentage of generating resources have
to be
something that can they can turn on and it will always work
? I mean because like
as we're adding renewable resources obviously ERCOT's not
gonna let 100%
of the generations of resources be renewable because we've
just discussed
that you can't always do that you gotta buy power from the
market so where do
they see or do they have some kind of overall plan about
how they're looking
at how renewables are keeping going? They have a plan for
every minute.
So spend just a minute explaining that. I'm just trying to
think about how that impacts you know when you
when you build something that might last 20 or 30 years you
really have to think
20 or 30 years out. Well yes they have that and they have a
great thing that discusses this in
depth it's called a long-term assessment you saw that those
red and blue
that's an excerpt from it it's really well written and what
they did is they
they're talking about market forces and how you know coal
units are retiring but
at the same time natural gas units are being built they're
kind of replacing
each other and at the same time there's more renewables
being brought on
particularly solar. Solar is one that is particularly
desirable now in a relative
pricing thing and so that's what they look at and then they
run models to make
sure everything is secure all the time and and so it works
it works you know
the the security is really high all the time and that's
what their job is and
that's so they go out to 20 35 and they make sure that
every hour you are
secured no matter what the renewable portfolio percentage
is and they're
they're saying I'm trying to think right now they still
have coal out there you
know but I think it's about eight to ten thousand has been
retired by something
like 20 21 and that will leave probably about half to 60
percent still operating
and then at the end of the term even more retirements occur
so it's a gradual
thing on both the integration of the renewables and the
solar and the natural
gas and and they do it under different gas prices so just
one more thing on
that Urquhart is an energy only market so it's designed
that that market signal
is all it is needed to signal to the market when additional
generation is
there that's the only incentive to bring generation so they
don't always they're
they're trying to project what the portfolio might be in
the future but
what Neil alluded to what they're really concerned about is
operational
reliability so they don't necessarily have a cap or a
target on how many
renewables that come in but they're going to really make
sure that there are
certain units that are designated must run to alleviate
congestion and to
manage the the market efficiently until having a sufficient
reserve margin one
of the things though that's interesting is there have been
predictions for years
that you're going to see more instability in markets as
more renewable
resources come in and ironically that hasn't happened yet
we were just
discussing this the other day it may be just because you're
getting enough solar
in here solar is a beautiful offset to wind and it only
leaves a little bit on
the margin that needs to be filled in so if enough solar
comes in and a natural
balance to win it's a really nice setup for stability going
forward and maybe
more answer that you want so on this August day that you
have the graph for
where we're dispatched where ERCOT is dispatching the deck
the heat index has
risen and made the deck a viable option for the market
essentially so are all
the get are all the coal plants run in full tilt at this
time okay so the their
gas the the coal plants are running full tilt and then
these the gas plants would
be dispatched because it becomes marketable basically so we
were talking
about renewables and which really the thrust is the
environment for that but
we really haven't talked much about the environment in
these discussions so so
from the standpoint of emissions so on that hot August day
turning on the gas
plants really doesn't do much for emissions because all the
coal plants
are already running right so as coal plants are decomm
issioned as the older
coal plants are decommissioned and something like the deck
then it seems
like then its viability or marketability comes on sooner it
also burns cleaner
than a 30 year old coal plant that we're using is that not
correct that's correct
yeah yeah so if coal gets retired and the deck runs sooner
because of its
relative advantage at that time because of the way the
resource stack looks
it's replaced something that is bigger polluters and the
water use and the
water use yes yes and that's right that's not to be
overlooked that often
gets overlooked that's important aspect and so one of the
things that we keep
talking about is the dollar value and within our community
and within the
ratepayers and just the general public there are some
people that would pay
more for cleaner energy that the cost doesn't really matter
to them if you
could say that you're reducing instances of asthma or
hospital visits for you
know for whatever so I just I guess I just wanted to say
that yeah it's
interesting that if you look at the retail market in the
past few years when
retailers have actually offered a green premium product
people don't go for it
they say they want it but when it comes to paying for it
the track record isn't
there yeah I do I do I just wanted to go back because I
hate to quote articles
and say I read this article without knowing it and I found
it it's from UT
News and this is in July 2017 so it's fairly recent but I
wanted to read just
one paragraph and then the ending paragraph and it says for
Georgetown and
Aspen 100% renewable means that those cities purchase as
much renewable
electricity as they can get it does not mean that all the
power they consume
comes from renewable sources however that's because there
are times when
renewable power isn't available on windless nights for
example when that
happens both cities consume non-renewable power from the
regional grid
and that's where I was getting the it's kind of marketing
that's a hundred
percent renewable but then it goes on and at the very end
it says for the time
being it's much cheaper to back up renewable power with
natural gas or
other forms of non-renewable generation perhaps by 2045
that no longer will be
true so 2045 is when they're saying that and that's kind of
the lights probably
when batteries storage will be really great right right
right yeah so that's
where okay so I just wanted to yeah so I just think you
have to you know be
careful how you represent that absolutely you know but if
you clear
with the goal I think right right and I'm and I just for
the record I would
love to be at a hundred percent renewable and but and I
know that it's
it's a path that we're going to but I want to do it you
know economically
feasible in a cost-effective manner well what a Georgetown
and Aspen didn't buy
as much as they could they could have bought a lot more but
they bought what
they felt was the lower you know least cost so they only
bought to their needs
and that that was a little bit different from what that
article said and so that
the the other thing is these prices that you see there aren
't any cheaper prices
out there there isn't anything that competes with this no
for anything for
a nuke for coal for a combined cycle for peaking plant for
the deck it's all
cheaper lots cheaper right and so that's what you need to
keep in mind so if
going to 70% is like saying you know you have to consider
going to a hundred
percent is less expensive or a lower rate than a 70% rate
so if you're
interested in lowering your cost to your customers that's
something you may
consider now it has an attendant risks within but it's the
cheapest alternative
so do you need these decisions today to finish your report
is that no no no
yes and they're gonna be asked to mark the city council but
you know sooner
rather than later would be good because the RFP is there
the results are in so
sooner rather than later yes right I just want I just want
to make a couple
comments about that it's a great question we are presenting
this I don't
think I mentioned this we're presenting the same
presentation to council tomorrow
to get their feedback this has been a very good discussion
to get your feedback
and then we want to come back to you at some point once we
have some of this
input once we have had more of an opportunity to look at
the RFPs and
bringing back a plan that both the PB and the City Council
could formally
approve so we'll be working on that and bringing something
back to you in the
next couple of months with that information I just have one
point the key
point you just brought up was the fact that the rate payer
is who we need to
look out for and I think we would like to see the impact of
going to a hundred
percent sooner and not counting white tails renewable on
the rates at that
during that gap time because this might be the least cost
but what does that
mean to the rates okay okay well hopefully you've taken
from
our comments some some getting some feedback from it I mean
any while the
father here any other questions I'm sure we'll get to see
them again at some
point
all right very good okay thank you thank you very much and
I'll also say before
we end the discussion I support the early adoption path
just based on what I
what I see here but I do I appreciate your I think that's a
good question
about rates I would like to see that too but it seems to be
definitely the
financially responsible thing for us and also I found it
very interesting what
you had to say about a city offering solar to go into us on
a solar project
recent recently yeah is that I see no I haven't any of
those specific
conversations we'll follow up with enterprise risk and and
see what those
possibilities are and bring back that for this yeah because
that's really
exciting and that's also something that could really save
us it would save us
money and be good for our environment too okay very good
well that took up
we're only on our second item now okay item B in the work
session is to receive
report hold discussion and provide staff direction
regarding the solid waste
department and watershed protection divisions community
sponsorship program
well good morning my name is Ethan Cox I'm the director of
solid waste I have a
very brief presentation for you this morning to talk about
sponsorship
programs for both the solid waste department as well as the
watershed
division in addition to myself the assistant director of
environmental
services Deborah Vera is here I'll do my best to kind of
get through the
presentation but both she and I are available for questions
if you have any
so as we go through this at this presentation looks very
familiar it's
probably because this is almost an exact carbon copy of the
one that you received
from Denton municipal electric a few weeks ago I just
refresh your memory both
the PB and the City Council received or provided direction
to DME that we wanted
the program to continue but at the same time that DME was
going to reduce their
budget in terms of the sponsorships that they were
supporting in addition to
that there was also specific criteria and also an approval
process that was
presented and approved by the PUB or it's up for approval
by PUB today and
council tomorrow I believe similarly solid waste our
sponsorship budget is a
little bit lower than the DME's but the principles are the
same it is there to
promote recycling responsible waste practices what you see
typically is we
have a number of nonprofits that we support there's some
community events
that I'll talk about in a few moments and there's also some
industry sponsorships
that we do as well in the solid waste industry watershed
sponsorships are very
similar that's to promote the pollution prevention storm
water water quality
awareness it's also to meet the city's MS4 permit
requirements and the two
budgets you can see there solid waste over the last couple
years we've ranged
between twenty to thirty thousand dollars each year and
watershed is about
half of that one of the similarities between the solid
waste sponsorships and
watershed sponsorships is keep them beautiful plays an
important role in
both keep them beautiful also knows KDB is a 501 c3 meaning
it's a nonprofit
they do a lot of work that really has some synergies with
both solid waste as
well as watershed actually within the KDB contract with the
city the solid
waste department is to provide or is obligated to provide a
ten thousand
dollar sponsorship directly to KDB each and every year that
goes toward their
program of services in addition to that both solid waste
and the watershed
division we provide financial aid to some of the
sponsorship events like red
bud festival the great American cleanup and also the
environmental education
program so that makes up the lion's share of both of our
sponsorship programs in
addition to that in solid waste we do have a number of
community events I
believe an exhibit to in your backup we kind of give you a
breakdown of what we
sponsored in the past what I would say to that is some of
those events I don't
know know that they necessarily lived up to this is a
something that we feel like
there's some synergies there for solid waste and so we are
going to reevaluate
those I think two or three within that list really meet
that level they are
501 c3 is there about renewable resources and things of
that nature so
to that end we are going to be reducing our budget and
solid waste next year to
about fifteen thousand dollars we feel like that provides
adequate coverage for
some of those events that we want to sponsor in addition to
that on the
community events side one of the things that I would say is
solid waste focus
instead of sponsorships will be how can we make sure that
we have adequate
resources there for those events that the waste is being
disposed correctly and
so as we see those opportunities we definitely want to jump
on that it may
not be a sponsorship that may just be something that we
choose to participate
operationally and to help that event out we do have some
industry organizations
in there as well much like DME and so as those come up what
we would recommend is
that we follow the exact same guidelines that you've seen a
couple of times now
that is sponsorships over twenty five hundred dollars would
come to the PB and
Council for approval and then you have the qualifying
criteria which we've
talked a little bit about that we also have a quarterly
report that we have
provided the PB and Council if and when those sponsorships
do arise so I said
this is going to be a short presentation I'm trying to live
up to my promise I
recommendations today is this solid waste not in this
budget year but on the
the next proposed budget we are going to reduce from twenty
two thousand to
fifteen thousand that allow us to cover the KDB sponsors
hips as well as a few
others that we feel are important we want to maintain the
watershed
sponsorships again those are almost exclusively a hundred
percent keep it in
beautiful programs like I said that there's there is some
synergies there
that we feel are important and we'll also adhere to the
proposed policy and
criteria that you've seen previously with that next steps
unless there's any
questions or concerns alternative direction we're going to
take this to
council next week have them review this and then we will
circle back with the
resolution for both PB and council to approve so with that
I'll stand for any
questions questions you know one thing we we wanted to do
was the statements we
made is let's be consistent the way we do things and I
think this kind of
follows that pattern we need to be consistent throughout
the city on these
type of things so not making any judgment on who to give
money to or who
not just be consistent that makes me feel better about
copying bronze
presentation
greatest form of flattering right yeah that's right still
shamelessly I do thank
you I appreciate your you know looking at this list towards
trying to in the
future focus more on entities that specifically have to do
with solid
waste I when I saw that list I was surprised to find only
well three total
and two current entities on that list that have directly to
do with recycling
or just solid waste in general so you know I appreciate
that that this is
something that staff already saw and in terms of what we're
spending now out of
that $22,000 we're only spending about 6,000 on on entities
that specifically
have to do with solid waste so this is a program that I
believe is really in need
of reform so I support you on that and I had a question
about the the keep dent
and beautiful ordinance that was attached and and I'm
asking this really
because I I don't know the I don't know the answer why does
keep why it is is keep dent and why does keep dent and
beautiful need money from solid waste and the watershed
fund instead of all from the general fund does this have
something to do with them being a nonprofit and how does
that work if you could just accept yeah and hopefully I don
't
butcher this I've fairly new at our relationship with Katie
B however my
understanding is a lot of the keep America beautiful
foundations which keep
dent and beautiful as a part of they can be independent 100
% probably funded or
they can be kind of a private public partnership which is
what we have here
years ago keep them beautiful was in the general fund under
the parks department
I believe I can't remember exactly when that change
occurred but we made a
transition over to solid waste and you know looking back at
that just my
personal opinion is there are some synergies with solid
waste I think we
have essentially the same goals in mind is we want to make
sure that we're
managing our waste responsibly and we want a beautiful
community and so with
that the arrangement that we have between solid waste and
keep dent and
beautiful is we support the operations and then the board
and the foundation
actually support the program of services and so as you look
at sponsorships that
is the one area where we somewhat jump across those lines
and say in addition
to that this particular program or this particular activity
has some synergies
with our department and what we intend to do and so we feel
like a sponsorship
is appropriate you know we will certainly take pub and
council direction
if that's something that we wish to reevaluate or discontin
ue we feel like
it's it's something that the Red Bud Festival did the great
American cleanup
those are things that support our purpose as well and so
that's where it
makes sense to us and and I myself I'm a big supporter of
the great American
cleanup and have participated in that with my children's
school and food keep
them beautiful and it does a really good job on a number of
levels so I I do
appreciate that I didn't mean to suggest that I wanted to
you know I that was
just a genuine question about you know whether there was a
need for that or not
the the funding to come from solid waste as opposed to
general fund thanks well
and to follow up on that I believe that these are
activities or events that are
funded by not just ourselves the watershed department I
believe Denton
municipal electric is supported some of those as well and
so it isn't just solid
waste that's footing the bill for that I believe that there
are contributions
across the organization in some cases okay other questions
no thank you very
good thank you thank you okay that's the that's the end of
our work session we
okay everybody okay to move straight into regular meeting
okay just push
forward all right so the regular meeting side we have first
our consent agenda
two items on the consent agenda is there any member who
would like to have one or
both or or none of these taken out and considered on an
individual basis I'd
like to have none that's not really an option I just you
said I would try to use
it let me rephrase that or the reading items that anybody
wants to take out a
consider individually I would like be taken out but not
because I don't need
any more I don't think more explanation on that is needed
we've been over that
but just because I had planned to vote no on that for
reasons I've stated on
other occasions okay so item B is taken out for individual
and in in that case
is there a motion on item a most approval motion to approve
item a is
there a second second seconded pick any discussion no all
in favor say aye aye
any opposed same sign okay item a passes item B which is to
consider recommending
approval of a resolution of the city of Denton Texas appro
ving the Denton
Municipal Electric sponsorship program guidelines and
application process this
is the item that we had talked to you on a couple of
different occasions about we
had a couple of work session or two about it and it was
there was only four
members that were here at the last meeting so it only
received three
affirmative votes we wanted to bring it back to the full
board four votes are
required to pass the item be happy to answer any questions
okay seeing that
this was bringing every them into consistency with the rest
of the city I
move approval okay okay we have a motion and a second for
approval any discussion
hearing none we'll go to the vote all in favor say aye aye
any opposed nay one
nay six ayes one nay motion passes okay
going into the second part of the agenda first item we have
is to receive
nominations and elect a secretary for the public utilities
board somebody want
to explain what what those duties are the secretary
position is a charter
required position we do have someone who takes minutes here
can make and takes
those so there's no minutes that are required but it's a
position required in
the charter it doesn't serve as the third level in the
event that the chair
and vice chair are missing that they that's correct yes
yeah it is that
stated in the Charter or is that just assumed I'm not sure
we can look and see
fine assumption yeah I think that's very good we came to
the last time we went
through this yeah yeah you guys should all read it though
if you haven't read
it's only it's only happened once that I could ever
remember with the secretary
I think I was secretary at the time so okay but anyway that
's you were absent
the other time is Barbara the chair meeting oh they see
okay okay anybody
other than Randy and myself and Susan correct right so
there's nobody absent
that we can know nobody's absent so we'll solicit
nominations for to a
secretary of the board no I nominate Brendan okay we have a
nomination and a
second for Brendan Carroll or their other nominations
somebody want to second that I second that and second it
very good okay so we
have one nominee for secretary of the book of utility board
that being Brendan
Carroll any discussion on that all in favor say aye any
opposed none opposed so
congratulations mr. secretary we'll try to try to make sure
that my services are
never needed that's a harsh way of saying it okay next item
we have were
the to consider approval of the public utility board
meeting minutes of October
the 9th 2017 are there any changes corrections comments I
have a comment I
just want to say that Kim I've just been so impressed by
the minutes that you
take and how detailed they are and I really appreciate that
and I hope that
members of the public you know in addition to going back
and looking at
the videos go and read the minutes because it really it
does not simply read
like the agenda well and this very very good and that's not
easy to do I could
not do them the minutes of our meeting also go into the
workbook for the City
Council yes so I really appreciate that and that is not
easy to do yeah I agree
I have one question which I guess if I'd taken Brendan's
chart and followed read
the charter the answered the two items that were failed on
the 3o vote is that
in the charter that requires the quorum is for and I think
after research if
there is a if there is less than four votes there's some
other recuses
themselves or abstains that does not count as a vote my
understanding no
that's my understanding as well it requires a majority of
the full board so
if there's seven members you have to have four votes to
pass an item for
affirmative for affirmative or for negative votes correct
okay I would like
to see the record reflect that there was abstention on
those two yeah because
just you abstained you didn't say no yeah as opposed to
saying yeah maybe only
three people here right right okay we can make that change
okay any other
comments changes I guess since we're making changes to the
minutes we need a
motion to approve those as corrected move approval as
corrected second and a
second any discussion yes how will you denote an abstention
she sits behind you
do a verbal thing how will she know who abstained future if
we're gonna say that
we're gonna record abstentions which is fine with me I don
't care I'm just
saying that if you don't have a verb some way to any abst
ention you know if
you don't have a way to do that she's not gonna know who
how to yeah I think
it's I think it's a requirement or if it's Robert's rule of
order if he's
abstaining it needs to be record you need to note yourself
you need to
declare that yeah it's just like a recusal sure okay okay
okay that's a
good idea okay any other discussion all in favor of the
minutes as as changed
say aye aye any opposed okay thank you okay item C is to
receive report hold
discussion and provide staff with direction concerning the
approval of
contract for the supply of water treatment chemicals for
the city didn't
water production and water reclamation departments in the
amount not to excuse
me for each item in the four-year not to exceed amount of
seven million twenty
six thousand one hundred dollars good morning my name is
Tim Fisher I'm
director of water utilities we use water treatment
chemicals at both the water
treatment plants and then also in the water reclamation
plant though these are
routine budget items annual chemical budgets and the actual
purchases vary
from year to year there's three variables that kind of
affect that
treated water volumes vary because of seasonality and
weather patterns
chemical dosages can also change because water quality
changes and so the biggest
impact that we have on treatment chemicals are the coagul
ants that we use
so when the turbidity is high due to runoff we'd have
higher doses some of
the other chemicals are less variable as far as our doses
and then we do see
price fluctuations with chemicals we didn't see them post
Katrina and read
reach some highs but then they stabilized and came back
down we
basically did production and reclamation division chemicals
was one package water
production represents about 70% of the total purchases of
the water treatment
process is a little bit more intensive that way and then
the treatment
chemicals have to be NSF 60 certified to comply with state
and federal so as an
additive to your drinking water they have to be NSF
certified we do this is a
good competitively bid process qualified low bidders are
awarded the contract
we've been doing multiple year contracts where each year we
use the same bed
there's a modest cost inflation embedded in that bid
process this for references
we bid back in 2012 and 2015 and so this is a 2017 bid and
then they're both both
all these purchases are done through purchase orders and
they're funded
through the annual budgets we have a exhibit one in your
backup that is a
summary we actually did 15 chemicals and had 19 vendors and
that was pretty big
big bid spread so exhibit one kind of shows the low bidder
in every case the
only exception of that was potassium permanganate which did
not meet our
specification so anyway staff recommends approval of the
bid and I'll have any
questions I'll try to answer can you go back to the prior
just the one just
before well now it was a purchase chemical purchase by year
pardon there
was one that said chemical purchase by year I think there
was a graph in there
I just saw oh there there you go come to cost that's that's
just a history for
production of what I just sent each year I just wanted to
see that as a
comparison and it just shows the variability that we have
and then also
you know the primary coagulant of which iron is one of the
major ones that has
probably the bigger dosage fluctuation year to year and the
caustic is the one
where we see probably a much bigger price fluctuation
historically cost of
cost it fluctuates quite a bit no we just issue purchase
orders typically
annually and then at the beginning of the fiscal year will
reissue those
through purchase orders and then we also monitor what the
market is with other
water treatment plants in the area in the Metroplex as far
as what they use
and if we see that it's advantageous then we'll go out to b
ids again and it's
really locking in the unit cost pardon it's really locking
in the unit's cost
per chemical what we're gonna pay per unit for the chemical
versus overall
yeah yeah we're not we're just making it because you don't
know how much you're
gonna need yeah we're gonna make an estimate on the
purchase orders and if
at the end of the fiscal year we don't spend it we don't
buy it if we have to
increase that amount we have the flexibility under this
approval process
to do that we're just curious because that if we spent
roughly 750 is it
seven hundred fifty thousand dollars in chemical costs for
2017 in a four-year
not to exceed of seven million okay this is just the water
production piece of
it so it doesn't reflect the purchases from reclamation
okay also this one is
only water correct correct the other thing is is the
calculation of
authorization over the four-year period was based on a
preliminary estimate this
for the bid purposes and so it probably exceeds what we
will actually spend are
you seeing any price increases are they fairly stable from
what they have been
I know this is very good I just want to know if we're
spending more we're
spending less on chemicals going forward assets well that
this would potentially
suggest that we're gonna be spending slightly more but the
this is a long
term history of a grouping of them ferric is one of the
bigger players
again you can see caustic with the big price fluctuations
bike that we have
so it's settling down it's up slightly this is another
grouping of chemicals
the cost of ammonia is actually down a little bit this year
we don't use much
of that so that kind of goes back to this stack bar chart
of all the
different components okay okay any other questions I have a
motion for item C
recommend approval motion to approve approval of item C's
or second second
second discussion all in favor say aye aye any opposed same
sign hearing none
item a or excuse me item C passes thank you thank you
thanks Tim item D is to
receive report holder discussion and provide staff with
direction concerning
the approval of a public works contract for directional
boring services for DME
and other utility departments with CNC directional boring
LLC I'm assuming
this a three-year or five-year it is actually a five-year
five-year here in
the word yeah wording of it it says three-year and then in
the numerical it
says five five okay it is actually a five-year so a five-
year not to exceed
amount of three million dollars that is correct I'm Rowdy
Patterson I'm
superintendent of distribution for didn't municipal
electric didn't
municipal electric isn't the only ones that use this boring
contract base water
and water department also use it but we are the biggest
user so we're the ones
making the presentation a little bit of background the city
has utilized
contractors for the installation of underground since 2000
with the rapid
growth that we were seeing at the time and the city's
desire to install
underground utilities we went to a contract for these
services we use them
to install underground facilities and all new subdivisions
no we no longer
have any overhead subdivisions that come in that are brand
new we also put it in
locations that are feasible we did a major underground
reconstruction in on
the Hickory Street project we're doing some around UNT
right now helping with
that RFP 6516 includes the labor equipment tools
supervision and as well
as all administrative and insurance costs incurred by the
contractor
necessary to complete all these installations they're also
they also are
are supervised by city staff and I brought one of the guys
with me Craig
Stastny he is our contractor coordinator over this contract
and the one we'll be
talking about next. Request for proposals were sent to 464
prospective suppliers
of this item in addition specifications were placed on
materials management
website suppliers could download the advertised we also
advertised in the
newspaper we only received three proposals which is pretty
common for us
I mean this is about what we get every time we go out for
bid for this they
were we we evaluated the proposals based on advertised
criteria including price
project schedule compliance with specifications and
indicators of
probable performance best and final offer was made by all
three that proposed
put in proposals and CNC directional boring was ranked the
highest in
determined to be the best back value for the city and y'all
have an exhibit that
shows all of that. Here are some active projects that this
contract will be used
on as you can see UNT where we do a lot of work with UNT
that's one of the major
projects there's several 1515 out towards Airport Road we
're looking at
taking some stuff underground across the highway there just
numerous projects and
we also this product this contract will be in conjunction
with all of our
maintenance boards that we do to replace direct buried
cable we no longer
utilize direct buried cable in in in our underground system
some of y'all are new
to the public utilities board so I just wanted to kind of
go over what is
directional drilling it's commonly it's horizontal
directional drilling or HDD
and it's a stirruble trenchless method of installing
underground pipe condor
or cables in a shallow arc a longer prescribed bore path by
using a surface
launch drilling rig with minimal impact on the surrounding
area that's one of
the main reasons we use directional drilling is because it
going under a
roadway we don't have to open cut 380 Carroll Boulevard
something like that it
helps a lot or if you have a lot of landscaping you don't
have to repair the
landscaping when you dig through there you can actually go
under the pipe that
we use can be PVC polyethylene that just talks about the
different types of
pipe the one misconception is that directional drilling is
easier if you
the softer the soil is and that's that's incorrect it's
actually easier to drill
in rock or a harder type of material because as you as you
're drilling you
have the the outer wall stays intact where with sand or
anything like that
that outer wall will fall down and it creates a vacuum and
it keeps you from
being able to pull your pull your product back this is just
a little
picture of what you know how directional drilling looks you
can actually steer
this I mean you can actually it has a pitch and it has a
curve and it has a
turn so you can actually steer it along the path now you
can't make a big sharp
turn like that but you can make a wide sweeping arc the
head on the on the
drilling rigs that are used here in Denton by us they have
a paddle on that
can help you to steer it that's that's how they steer it
they actually just
push it and and don't turn it and it guides it in a
direction that's just a
picture of what one typically looks like going in the
ground that's the other
thing for it you don't have a lot of open trench you have a
receiving pit and
a starting pit that's all you have recommendation is the
award of a
contract to CNC directional drilling in the five-year not
to exceed amount of
three million dollars which is based on previous spend
history over the last
contract period this contractor was the lowest cost respond
ent who also had the
highest evaluated score any questions were they the last
contract winner no
they were not GTI was our last contract winner and they
they were a little bit
higher they were a little bit higher I think no actually
they were about 19%
higher that's why if it would have been close we probably
would have liked to
have stayed with somebody that we were familiar with but it
wasn't even close
so we couldn't I couldn't justify considering them okay
questions no is
there a recommendation or approval motion to approve their
second second
and a second discussion I do want to ask one thing how you
evaluated bringing
that service in-house instead of contracting that out we
actually did
that about 25 years ago and it wasn't a pretty sight it was
it was fairly new at
the time it's something that you have to continually do it
's kind of like being
a lineman you have to continually work on the lines you
have to continually do
that job and we don't actually do enough of it to keep
somebody busy in doing it
that much so you kind of lose you know you you lose that
edge we after we
bought we did actually buy a big machine we brought it in
we utilized it after we
lost several fifteen thousand dollar boar heads we decided
that probably
wasn't the best idea so we that's when we decided to
contract it out but I
guess at some point though like 25 years ago we probably
weren't putting that
much we were actually doing about as much as we're doing
now just for the
simple fact that we were just starting to put some of the
South Ridge and that
top stuff okay and underground okay thank you to go back
okay other comments
then all in favor of the motion say aye aye any opposed
okay motion passes item
number E which is a receive report whole discussion provide
staff with direction
concerning the approval of RP number 65 18 and recommend
award of a contract for
the purchase of underground electric installation services
for DME to FX 5
construction and excavation in a contract that amount not
to exceed six
million dollars this would be a three-year contract is that
correct that's
correct again the background is the same for this because
it is the
underground the only difference is you know when we were
talking about the the
boring versus open trench there's certain times that boring
is not it's
it's it won't work for us and I'll show you some pictures
here in a minute that
will go along with that the wording is pretty much all the
same this but this
is our fp 65 18 it includes the same type of labor tools
equipment and
everything to be supplied and also Craig is also our
contract coordinator on that
request were sent out to 325 prospective suppliers on this
one and we only
received three again so it's that's kind of I mean we've
got and they're not the
same three there are three different ones so it's kind of I
don't understand
that are we just a three strike town or what is it we
received best and final
offers we clarified some line item pricing there was some
there was some
large discrepancies between two two separate bidders and we
wanted to make
sure that like I tell everybody we can get the best price
in here but if
somebody's low balling us on a price and they can't make
money we're not going
to need one of us is going to win in the end because they
're not going to be able
to fulfill their contract so we had to go back in and kind
of meet with those
people and talk about that FX five ended up being the high
strength and the
lowest price again just as CNC was only only first one here
's just a little
picture of the Winko distribution center whenever we
installed all this and this
kind of tells you why we couldn't use a directional
drilling you can see this
is taken from from the air but you can see the ditch and
the piping in there
well that that little diagram shows you how many six inch
conduits we installed
there to get that in in a directional drilling it's almost
impossible because
of how much dirt you have to displace here's another
picture of Winko where we
covered this mainline duck with concrete here's a pull box
out at the new loves
going in off of 35 and 77 with some conduit coming out of
it another picture
where they're back filling and you can see the pipe
sticking up in the
foreground that's where we're going to set a piece of
switch gear here are
forecasted projects for the URD as you can see there's
quite a few UNT projects
substation feeders coming out of Jim Crystal and Locus
several tie feeders
and then some apartments Buc-Ease is included and then the
most of these are
subdivisions that that we have forecasted in the future
our recommendation is to ward the contract FX-5
construction in the
three-year not to exceed amount of six million dollars
which is based again on
previous spend history and they were the best value that we
had any questions
questions I don't really have a question on the contract
but how what is our
percentage of underground now we have 57% of our our
distribution lines are
underground we have 800 miles of total distribution and we
have about four
hundred and fifty nine miles of that 459 of that is
actually underground okay
very good other questions is there a recommendation motion
second of a
motion to approve item II in a second further discussion
all in favor say aye
any opposed same sign thank you thank y'all thank you guys
for sticking around
to realize you're gonna be yeah that's what I said thank
you okay next is item
F which is ACM update just a few items for you today we
have a couple of
articles that we're providing to you item one is a
wastewater article that
we had on our asset management system we were featured in
that particular
magazine and just wanted to bring that to your attention we
also had a
request from member Armantor for the utility dive article
so we've included
that in your backup for your review and I wanted to point
out that we've began
to include the future agenda items list for those of you
who are familiar with
the council agenda we have future items list that we also
publish for the council
of just kind of what we think is the tentative schedule for
some different
topics coming forward those items tend to move around
sometimes from for
different reasons but what we wanted to try to provide you
with some type of a
schedule of what we think items are going to be over the
next few months
obviously there will have to be some changes to that but we
thought that
would be helpful for you as you look at your your work here
on the board and
then finally we had the new business matrix some of the
items that have been
requested we've provided a couple of memos in that section
with just some
answers to some requests for information that you've had
over the last few weeks
and we'll continue to provide that information as as we get
those from the
board so that's all I have for you today unless there's any
questions
question question I assume this is a typo on the new
business action items
list on number 11 says we'll provide informal staff report
to be be on
October 17th and that means November 7th so that mean
November 7 yes yes you're
correct I believe that is a type of October 17th but just
wanted to yes I
don't believe we've provided that yet okay thank you thank
you okay you know
the questions about the ACM report oh I'll just say just a
comment I just want
to say congratulations to Denton Wastewater on that article
that was
really interesting and I encourage people to read that also
great stuff that
they're doing over there and yeah thanks
yes we'll recognize PS he's in the back there okay conclud
ing items if there's
any anything to add comments public recognition for going
forward future
agenda items we'd like to see on there on the agenda now's
the time to bring
those up I had several um number one I would like us to
have a discussion on
the possibility of holding our meetings in the evening
thank you I was gonna say
that oh yeah we can't decide but we'll put it yeah I think
the benefits of
that are obvious to the public and future members of pub my
second thing
and these are in no particular order but I'm reading off a
list that I made I was
wondering if staff if Todd if you or Brian could ask our DM
E lineman if they
if there's any interest in helping out in Puerto Rico like
they did with
Houston area many parts of Texas affected by the hurricane
and in Florida
doesn't that typically that request comes from Puerto Rico
that's that's
typically how it's done we've gotten requests from
different agencies I think
there's probably some logistical issues of getting
equipment there but we can
certainly yeah we couldn't bring our line truck and kind of
and a kind of
question packed into there was I was also curious if there
had been any
requests but but even if there hadn't I was wondering if
there was and
specifically an interest among the linemen just you know
just hearing them
talk about the work they did it obviously was it was such
hard work but
it was so really gratifying for them to be able to do that
and as one of the
presenters said at the council meeting last week that you
know when we get
someone else's back it also means that they have our back
and I know that
people are all over Denton are concerned you know many
people here have have ties
to Puerto Rico or the area so anyway and then the other my
other two issues that
I would like to see discussed in future both about billing
one I was approached
by a rate payer about it DME billing issue that I hadn't
been aware of and
she she told me that that she would prefer in terms of her
payment schedule
when she gets paid for work versus when her husband paid
gets work she would
prefer to get get billed at a certain date but when she
asked DME can you
switch my billing date she was told and I didn't have time
to guess for proof of
this this was literally in the grocery store but just just
yesterday but or the
day before yesterday but she was told that if you want to
switch your your
billing date you'll have to switch your neighborhood that
your neighborhood gets
built in this date so I know how you know how our customer
service is so eager as
we saw from the presentation to be flexible I was wondering
if this is
indeed the policy or if there was some misunderstanding and
and if it is indeed
the policy if there could be a change where we could have
customizable billing
due dates so anyway sorry that was so long but but that but
that was the issue
and I'm just assuming that it doesn't affect this just this
one person that it
affects more and then the final issues is about about
wastewater billing and this
is something else that I was not aware of until a rate
payer approached me about
it apparently because there there's a 30-day
grace period whereby you know if you don't pay your bill by
a certain amount
you get some sort of extra charge and this rate payer had a
question that I
thought was a good one and I want want to pose that if we
could see if there
could be a rule put in place whereby wastewater bills would
would not exceed
water usage so in other words because he missed the 30-day
grace period because I
think he was out of the country or something like that this
had happened
to him in the past it happened recently you know he ended
up having to pay for
water that he didn't use so I was just want just having a
some sort of work
session on how those how wastewater bills are determined
and what the
rationale was behind the grace period and how it could end
up a situation like
that
yep it's during the yeah yes do you want it yeah
oh yeah that's true that's true nevermind yes if I could
clarify there
there rules there were several questions that this board
had about some of the
credit and collections processes we also had a similar
discussion with the
council there were some questions that they had some of
those were about the
schedules I'll look at these questions that you've offered
here and try to bring
all that back and we can have the discussion at one time
excellent excellent
thank you so much okay all right anything else sir motion
to adjourn so
moved second second and a second all in favor say aye aye
any opposed same sign
thank you