WEBVTT 00:00:00.000 --> 00:00:05.940 Okay, we do have a quorum, so let's call the December 11th 00:00:05.940 --> 00:00:07.559 Public Utilities Board to order. 00:00:07.559 --> 00:00:11.189 The first item on the agenda is to receive a report and 00:00:11.189 --> 00:00:13.279 hold a discussion of the energy 00:00:13.279 --> 00:00:15.560 management organization by Deloitte. 00:00:15.560 --> 00:00:17.800 Good morning. 00:00:17.800 --> 00:00:19.039 Brian Langley, Deputy City Manager. 00:00:19.039 --> 00:00:21.489 I want to take a few minutes to provide a brief 00:00:21.489 --> 00:00:23.239 introduction on this item. 00:00:23.239 --> 00:00:26.019 As you know, we've hired Deloitte on a couple of different 00:00:26.019 --> 00:00:27.559 occasions to help us work through 00:00:27.559 --> 00:00:30.600 our energy management organization. 00:00:30.600 --> 00:00:33.240 They've done a couple of different scopes of work for us. 00:00:33.240 --> 00:00:35.329 On today's presentation, they're going to be talking to you 00:00:35.329 --> 00:00:36.439 about the benchmarking work 00:00:36.439 --> 00:00:40.710 that they did for FY 2016-17 and also the review that they 00:00:40.710 --> 00:00:42.520 had of the energy management 00:00:42.520 --> 00:00:45.250 organization and all of the procedures and policies 00:00:45.250 --> 00:00:46.560 associated with that. 00:00:46.560 --> 00:00:48.700 Stephen Engler and Tim Metz are here, and so at this point, 00:00:48.700 --> 00:00:50.000 I'll turn over the presentation 00:00:50.000 --> 00:00:51.000 to them. 00:00:51.000 --> 00:00:57.759 Thank you, Brian. 00:00:57.759 --> 00:00:59.359 Good morning, everybody. 00:00:59.359 --> 00:01:01.280 Good morning, members of the board. 00:01:01.280 --> 00:01:03.630 My name is Steve Engler, and I'm with Deloitte's energy 00:01:03.630 --> 00:01:05.519 risk advisory practice, and my colleague 00:01:05.519 --> 00:01:07.760 Tim Metz is here with me as well. 00:01:07.760 --> 00:01:10.209 And we're here to talk about risk management, and Tim could 00:01:10.209 --> 00:01:11.359 talk to you about the risks 00:01:11.359 --> 00:01:14.359 of carrying a sleeping seven-year-old down the stairs. 00:01:14.359 --> 00:01:16.840 So if he hobbles around a little bit, it's because he's got 00:01:16.840 --> 00:01:18.000 a bit of an ankle issue. 00:01:18.000 --> 00:01:21.200 So thank you for having us here this morning. 00:01:21.200 --> 00:01:23.640 Happy to walk through our prepared remarks, but please feel 00:01:23.640 --> 00:01:24.840 free to ask questions at any 00:01:24.840 --> 00:01:28.719 time or save them to the end or both. 00:01:28.719 --> 00:01:30.879 All right. 00:01:30.879 --> 00:01:32.640 Okay. 00:01:32.640 --> 00:01:36.079 I won't read the legal caveats. 00:01:36.079 --> 00:01:38.719 Just to talk quickly on what we're going to discuss here, 00:01:38.719 --> 00:01:40.040 the objectives of today, we're 00:01:40.040 --> 00:01:43.069 going to kind of reframe the question that was asked to us 00:01:43.069 --> 00:01:44.439 the last time we spoke to 00:01:44.439 --> 00:01:45.439 you all. 00:01:45.439 --> 00:01:48.170 We're going to talk a little bit about risk uncertainty and 00:01:48.170 --> 00:01:49.879 how that relates to capabilities 00:01:49.879 --> 00:01:53.200 or expectations of capabilities in an organization. 00:01:53.200 --> 00:01:55.170 And then we'll go right into the results of the risk 00:01:55.170 --> 00:01:56.159 assessment itself. 00:01:56.159 --> 00:01:59.299 We'll tell you how we did the work and some of the outcomes 00:01:59.299 --> 00:02:00.040 of that. 00:02:00.040 --> 00:02:03.099 This presentation is kind of a summary of a more detailed 00:02:03.099 --> 00:02:04.739 report that's been prepared 00:02:04.739 --> 00:02:07.840 and presented to you all. 00:02:07.840 --> 00:02:10.860 Then the next piece we'll talk about will be some 00:02:10.860 --> 00:02:13.300 discussion of the benchmark and some 00:02:13.300 --> 00:02:17.129 recommendations there, an idea for an alternative benchmark 00:02:17.129 --> 00:02:19.680 , and then we'll talk about recommended 00:02:19.680 --> 00:02:20.680 next steps. 00:02:20.680 --> 00:02:23.719 So if that's clear, then we will move along. 00:02:23.719 --> 00:02:27.349 So just to reframe and remind everybody what we were asked, 00:02:27.349 --> 00:02:29.240 essentially one question that 00:02:29.240 --> 00:02:32.460 came to us the last time we spoke was, what are the risks 00:02:32.460 --> 00:02:34.120 that we've kind of taken on 00:02:34.120 --> 00:02:37.750 as an organization by bringing the EMO activities in-house 00:02:37.750 --> 00:02:40.060 where prior they were outsourced? 00:02:40.060 --> 00:02:42.680 So that was the first part of the analysis was to frame, 00:02:42.680 --> 00:02:44.080 and we'll talk about here in 00:02:44.080 --> 00:02:48.050 a minute, what risks existed before and are there any new 00:02:48.050 --> 00:02:50.120 or changing -- any changes to 00:02:50.120 --> 00:02:55.300 that set of risks since the EMO go live. 00:02:55.300 --> 00:02:58.520 Based on those risks identified and what's been brought in- 00:02:58.520 --> 00:03:00.000 house and being managed by 00:03:00.000 --> 00:03:05.939 DME, we then used that to form the basis of our assessment 00:03:05.939 --> 00:03:08.780 and our benchmark analysis 00:03:08.780 --> 00:03:13.479 and then following that, our recommendations. 00:03:13.479 --> 00:03:16.419 And then I said the last piece of this was to take a look 00:03:16.419 --> 00:03:18.199 at some different approaches 00:03:18.199 --> 00:03:21.849 for establishing a new benchmark going forward and make 00:03:21.849 --> 00:03:24.120 some recommendations as to how to 00:03:24.120 --> 00:03:25.120 proceed. 00:03:25.120 --> 00:03:26.120 Okay? 00:03:26.120 --> 00:03:27.120 All right. 00:03:27.120 --> 00:03:30.240 Let's talk a little bit about risks. 00:03:30.240 --> 00:03:34.969 Kind of a very consulting-y slide, but I think it's good to 00:03:34.969 --> 00:03:36.439 set the stage. 00:03:36.439 --> 00:03:39.439 We sometimes mix up the words risk and uncertainty, and I 00:03:39.439 --> 00:03:41.599 think it's important to understand kind 00:03:41.599 --> 00:03:44.879 of the differences, but also how they interrelate. 00:03:44.879 --> 00:03:48.889 A risk is really the possibilities of suffering an adverse 00:03:48.889 --> 00:03:51.599 outcome, higher rates, higher fuel 00:03:51.599 --> 00:03:55.680 prices, market changes, and the impact of that on the 00:03:55.680 --> 00:03:57.080 organization. 00:03:57.080 --> 00:04:00.080 Uncertainty while similar, it really refers to unknown 00:04:00.080 --> 00:04:01.879 events where the probability is 00:04:01.879 --> 00:04:03.680 difficult to quantify. 00:04:03.680 --> 00:04:08.539 So the risk of prices falling is related to the uncertainty 00:04:08.539 --> 00:04:11.080 of how much they could fall. 00:04:11.080 --> 00:04:12.080 Okay? 00:04:12.080 --> 00:04:15.150 While they both talk about expectations in the future, it's 00:04:15.150 --> 00:04:16.680 important to remember that 00:04:16.680 --> 00:04:18.600 risk can be mitigated. 00:04:18.600 --> 00:04:21.319 On the other hand, uncertainty will always exist. 00:04:21.319 --> 00:04:24.490 So it's that risk--it's that management or the mitigation 00:04:24.490 --> 00:04:25.959 of the risks that really is 00:04:25.959 --> 00:04:30.720 one of the charges of the EMO or DME more broadly. 00:04:30.720 --> 00:04:34.029 And so that's, again, a very important underlying concept 00:04:34.029 --> 00:04:36.000 for how we proceed, not just here, 00:04:36.000 --> 00:04:39.639 but when we do this work at peer organizations as well. 00:04:39.639 --> 00:04:41.529 And then related to that, and we're going to--you know, 00:04:41.529 --> 00:04:42.920 there's been a lot of talk about hedging 00:04:42.920 --> 00:04:46.180 and kind of optimization around the assets. 00:04:46.180 --> 00:04:49.500 It's important to note that managing or mitigating a risk 00:04:49.500 --> 00:04:51.639 does not necessarily mean forgoing 00:04:51.639 --> 00:04:53.480 an opportunity. 00:04:53.480 --> 00:04:56.089 And it's the infrastructure that enables all that, which is 00:04:56.089 --> 00:04:57.199 really what we took a look 00:04:57.199 --> 00:04:59.199 at as part of DME. 00:04:59.199 --> 00:05:01.639 Does that make sense? 00:05:01.639 --> 00:05:02.639 Okay. 00:05:02.639 --> 00:05:06.839 So another consulting slide, if you will. 00:05:06.839 --> 00:05:10.189 When we do an assessment like this at an organization, it's 00:05:10.189 --> 00:05:12.480 important for us to understand what's 00:05:12.480 --> 00:05:15.790 the objective, what's the transacting mandate is a phrase 00:05:15.790 --> 00:05:18.000 we like to use a lot of the organization 00:05:18.000 --> 00:05:22.839 because that helps us kind of frame the recommendations. 00:05:22.839 --> 00:05:25.439 Just to explain this chart a little bit, if you look at the 00:05:25.439 --> 00:05:26.800 x-axis on the bottom, we've 00:05:26.800 --> 00:05:31.000 got price taker, asset optimizer, and proprietary trader. 00:05:31.000 --> 00:05:33.800 And then the y-axis talks about the capabilities. 00:05:33.800 --> 00:05:37.129 And the capabilities in this context would be things around 00:05:37.129 --> 00:05:38.959 risk oversight, reporting, 00:05:38.959 --> 00:05:42.120 governance, systems, people. 00:05:42.120 --> 00:05:45.509 As you move on the x-axis from the left to the right, what 00:05:45.509 --> 00:05:47.319 we always try to keep in mind 00:05:47.319 --> 00:05:49.959 is that the risks really for all those organizations are 00:05:49.959 --> 00:05:51.800 very similar, the types of risks that 00:05:51.800 --> 00:05:54.740 they're--that organization is exposed to. 00:05:54.740 --> 00:05:57.639 It's the implication on what that means in terms of where 00:05:57.639 --> 00:05:59.199 do your capabilities need to 00:05:59.199 --> 00:06:01.000 be will vary. 00:06:01.000 --> 00:06:04.230 So if I'm all the way on the left as a price taker, meaning 00:06:04.230 --> 00:06:05.879 that I've got a commodity to 00:06:05.879 --> 00:06:08.649 sell or a commodity to buy, I'm just taking what the market 00:06:08.649 --> 00:06:10.240 offers me in terms of prices. 00:06:10.240 --> 00:06:13.199 And I'm not trying to do too much around that. 00:06:13.199 --> 00:06:15.310 All the way on the right hand side, we're a proprietary 00:06:15.310 --> 00:06:15.800 trader. 00:06:15.800 --> 00:06:18.019 That's where you're taking probably more speculative 00:06:18.019 --> 00:06:18.680 positions. 00:06:18.680 --> 00:06:19.680 You're in the market. 00:06:19.680 --> 00:06:23.079 You're--you know, an example would be large banks or the 00:06:23.079 --> 00:06:24.959 very large integrated oil and 00:06:24.959 --> 00:06:28.959 gas companies that really are, to use the word, trading. 00:06:28.959 --> 00:06:31.769 So they've got some assets but they don't even necessarily 00:06:31.769 --> 00:06:33.319 trade around those assets. 00:06:33.319 --> 00:06:35.540 In the middle is where we find a lot of the clients that we 00:06:35.540 --> 00:06:36.160 work with. 00:06:36.160 --> 00:06:40.560 And that's probably where DME is or requires to be. 00:06:40.560 --> 00:06:44.019 And that's to optimize around the assets and the positions 00:06:44.019 --> 00:06:45.000 that you own. 00:06:45.000 --> 00:06:49.379 So somewhere in between price taker and proprietary trader 00:06:49.379 --> 00:06:52.199 is where we see your organization and 00:06:52.199 --> 00:06:56.800 that's the context that we completed the assessment on. 00:06:56.800 --> 00:06:58.680 Okay. 00:06:58.680 --> 00:07:03.350 So now let's talk about the first question which is what 00:07:03.350 --> 00:07:05.879 risks existed before the EMO 00:07:05.879 --> 00:07:10.120 is established and what risks exist post. 00:07:10.120 --> 00:07:12.939 And the takeaway to this slide, I apologize, it's a little 00:07:12.939 --> 00:07:13.600 bit busy. 00:07:13.600 --> 00:07:16.629 The takeaway to this slide is that from our perspective and 00:07:16.629 --> 00:07:18.319 looking at the business before 00:07:18.319 --> 00:07:23.240 and now, there really are no net new risks in our opinion 00:07:23.240 --> 00:07:25.759 as to what the company or the 00:07:25.759 --> 00:07:28.019 utility has been exposed to. 00:07:28.019 --> 00:07:31.439 The difference is where were those risks managed. 00:07:31.439 --> 00:07:35.329 And prior to establishing the EMO, a lot of the risks were 00:07:35.329 --> 00:07:37.139 managed by the third party 00:07:37.139 --> 00:07:40.680 through that contract that was established. 00:07:40.680 --> 00:07:43.649 First go live or in the current state, those risks while 00:07:43.649 --> 00:07:45.519 they existed before are now being 00:07:45.519 --> 00:07:48.920 actively managed by DME. 00:07:48.920 --> 00:07:51.220 All of the risks down the left-hand side, if you look in 00:07:51.220 --> 00:07:52.399 kind of the bold or the big 00:07:52.399 --> 00:07:55.699 categories and then some specifics underneath it, these are 00:07:55.699 --> 00:07:57.439 very common to any company that's 00:07:57.439 --> 00:08:00.279 exposed to the commodity markets, particularly the energy 00:08:00.279 --> 00:08:01.399 commodity markets. 00:08:01.399 --> 00:08:05.189 So when we look at a company or utility such as DME, it 00:08:05.189 --> 00:08:07.800 could be bigger or smaller, those 00:08:07.800 --> 00:08:09.199 risks are fairly common. 00:08:09.199 --> 00:08:11.670 We have market risk in the sense of what's the price of the 00:08:11.670 --> 00:08:13.279 commodity, what's the liquidity 00:08:13.279 --> 00:08:16.959 of the products and the commodities that are out there. 00:08:16.959 --> 00:08:21.060 Do we have to deal with congestion risk and does that have 00:08:21.060 --> 00:08:22.879 an impact on pricing? 00:08:22.879 --> 00:08:25.889 One of the things to point out here, just in terms of 00:08:25.889 --> 00:08:28.000 changes with the anticipated move 00:08:28.000 --> 00:08:31.629 to 70% renewable and then potentially 100% renewable, it 00:08:31.629 --> 00:08:33.320 creates kind of a different load 00:08:33.320 --> 00:08:35.360 serving risk in our perspective. 00:08:35.360 --> 00:08:38.899 In other words, the availability of the renewable resources 00:08:38.899 --> 00:08:40.960 is something that is different than 00:08:40.960 --> 00:08:43.120 fossil fuel resources. 00:08:43.120 --> 00:08:47.389 And so increasing the footprint of that type of resource in 00:08:47.389 --> 00:08:49.679 your portfolio will probably 00:08:49.679 --> 00:08:53.039 create a different type of maybe even a more complex price 00:08:53.039 --> 00:08:54.799 risk than you've experienced 00:08:54.799 --> 00:08:58.120 before and also load serving. 00:08:58.120 --> 00:09:00.940 Do we know that the sun's going to shine tomorrow or is the 00:09:00.940 --> 00:09:02.519 wind going to blow tonight? 00:09:02.519 --> 00:09:05.129 It'll change a different dynamic for what the utility is 00:09:05.129 --> 00:09:06.879 trying to manage on a day-to-day, 00:09:06.879 --> 00:09:09.480 an hour-to-hour and really minute-to-minute basis. 00:09:09.480 --> 00:09:12.879 So those risks existed before, for sure. 00:09:12.879 --> 00:09:15.149 There's probably a different profile to those risks going 00:09:15.149 --> 00:09:16.399 forward as you move towards the 00:09:16.399 --> 00:09:19.480 more renewable plan. 00:09:19.480 --> 00:09:23.379 We highlight operations risk here and by operations, I don 00:09:23.379 --> 00:09:25.919 't mean running the power plant or the 00:09:25.919 --> 00:09:28.159 transmission lines. 00:09:28.159 --> 00:09:31.419 Really what this means is more the organizational 00:09:31.419 --> 00:09:34.440 activities inside the EMO, forecasting the 00:09:34.440 --> 00:09:37.669 load, forecasting the supply, looking at the market 00:09:37.669 --> 00:09:40.000 dynamics, understanding the impact 00:09:40.000 --> 00:09:44.620 of that on the position on a real-time and go-forward basis 00:09:44.620 --> 00:09:46.960 , executing, entering and 00:09:46.960 --> 00:09:50.500 settling transactions, all those things that have to happen 00:09:50.500 --> 00:09:52.000 to support the EMO and the 00:09:52.000 --> 00:09:53.840 transacting and the risk management activity. 00:09:53.840 --> 00:09:56.720 There's a key focus of our assessment and some of the 00:09:56.720 --> 00:09:58.639 recommendations will relate to 00:09:58.639 --> 00:10:01.639 that as well. 00:10:01.639 --> 00:10:05.759 A couple at the bottom that we think maybe are slightly 00:10:05.759 --> 00:10:08.799 different than before, certainly, 00:10:08.799 --> 00:10:11.850 and I mentioned already the variability risk of the 00:10:11.850 --> 00:10:14.279 renewable resources is going to create 00:10:14.279 --> 00:10:18.679 a different load profile for DME. 00:10:18.679 --> 00:10:22.879 We talked a fair amount with staff around the Givens Creek 00:10:22.879 --> 00:10:25.000 asset and prior to or I guess 00:10:25.000 --> 00:10:28.539 up until this point, this is as we understand an asset that 00:10:28.539 --> 00:10:30.360 's co-owned with three other 00:10:30.360 --> 00:10:31.519 entities. 00:10:31.519 --> 00:10:34.070 So there was, we say it was not actively managed prior to 00:10:34.070 --> 00:10:35.480 go live and that's important to 00:10:35.480 --> 00:10:39.110 point out because all those decisions weren't necessarily 00:10:39.110 --> 00:10:40.679 always in DME's hands. 00:10:40.679 --> 00:10:44.350 There had to be partner agreements as to how to move 00:10:44.350 --> 00:10:45.320 forward. 00:10:45.320 --> 00:10:48.129 I'll pause there to see if there's specific questions about 00:10:48.129 --> 00:10:49.639 any of these risks or anything 00:10:49.639 --> 00:10:54.960 I just mentioned. 00:10:54.960 --> 00:10:58.250 So again, this is the context for the assessment that we 00:10:58.250 --> 00:10:58.679 did. 00:10:58.679 --> 00:11:03.200 We looked at DME as we do many other similar organizations 00:11:03.200 --> 00:11:05.799 as to the capability to manage, 00:11:05.799 --> 00:11:09.009 monitor and mitigate these risks and really understand 00:11:09.009 --> 00:11:09.960 these risks. 00:11:09.960 --> 00:11:12.610 And again, in the context of where the organization is in 00:11:12.610 --> 00:11:14.879 terms of a transacting mandate or transacting 00:11:14.879 --> 00:11:15.879 profile. 00:11:15.879 --> 00:11:18.379 You're not trading, you're not market making, you're not 00:11:18.379 --> 00:11:19.159 speculating. 00:11:19.159 --> 00:11:23.759 So that was the context for our assessment. 00:11:23.759 --> 00:11:25.720 Okay. 00:11:25.720 --> 00:11:27.519 So what did we do? 00:11:27.519 --> 00:11:30.129 As I said, we were engaged to understand the existing 00:11:30.129 --> 00:11:32.000 energy and risk management program 00:11:32.000 --> 00:11:34.919 within DME. 00:11:34.919 --> 00:11:37.700 To do that, we were to collect and evaluate data, develop 00:11:37.700 --> 00:11:39.480 findings and make recommendations 00:11:39.480 --> 00:11:42.940 to this board and to the utility and those recommendations 00:11:42.940 --> 00:11:44.659 are available in this report 00:11:44.659 --> 00:11:48.240 and as well as a supporting detailed report. 00:11:48.240 --> 00:11:50.970 The scope included a review of governance, people, process 00:11:50.970 --> 00:11:52.159 and technology and we'll 00:11:52.159 --> 00:11:55.289 talk about that and how it ties into our capability 00:11:55.289 --> 00:11:56.559 maturity model. 00:11:56.559 --> 00:11:58.919 We specifically looked at the risk policy and the 00:11:58.919 --> 00:12:00.759 documentation supporting that. 00:12:00.759 --> 00:12:03.929 We looked again at the operations inside of DME for things 00:12:03.929 --> 00:12:05.720 like transacting processing 00:12:05.720 --> 00:12:09.240 and the entire transacting lifecycle. 00:12:09.240 --> 00:12:12.919 We talked a lot about where the utility is going in terms 00:12:12.919 --> 00:12:14.879 of the renewable dent in plan 00:12:14.879 --> 00:12:18.100 and the additions of those types of resources into the 00:12:18.100 --> 00:12:20.720 portfolio and the specific requirements 00:12:20.720 --> 00:12:22.379 that that brings. 00:12:22.379 --> 00:12:25.009 We talk a lot about the middle and the back office and just 00:12:25.009 --> 00:12:26.440 in terms of vernacular front 00:12:26.440 --> 00:12:30.250 office is the folks, that's the commercial end of the 00:12:30.250 --> 00:12:31.259 business. 00:12:31.259 --> 00:12:34.590 Middle office we refer to as the risk oversight function 00:12:34.590 --> 00:12:36.639 and then back office is typically 00:12:36.639 --> 00:12:40.200 settlements and accounting probably credit. 00:12:40.200 --> 00:12:44.029 We talked a lot with staff because as with other similar 00:12:44.029 --> 00:12:46.120 organizations, this isn't 00:12:46.120 --> 00:12:48.850 a very large organization so finding the appropriate way to 00:12:48.850 --> 00:12:50.940 create segregation between those functions 00:12:50.940 --> 00:12:53.909 is important and it sometimes poses challenges when there 00:12:53.909 --> 00:12:55.720 are fewer people to do that because 00:12:55.720 --> 00:12:58.559 sometimes you have people wearing multiple hats. 00:12:58.559 --> 00:13:01.799 And then we talked about risk reporting. 00:13:01.799 --> 00:13:05.269 The way we do the assessment is we talk to people, we 00:13:05.269 --> 00:13:07.559 assemble as much documentation 00:13:07.559 --> 00:13:12.200 as we can, we read the policies, the procedures, we ask 00:13:12.200 --> 00:13:15.519 about where the future state is, where 00:13:15.519 --> 00:13:16.519 is the utility going. 00:13:16.519 --> 00:13:18.860 Of course there's been a lot of discussion of that as of 00:13:18.860 --> 00:13:20.320 late and we were able to benefit 00:13:20.320 --> 00:13:24.019 from many of those discussions in terms of feeding our 00:13:24.019 --> 00:13:25.000 findings. 00:13:25.000 --> 00:13:27.990 And then there was a vetting process where we developed 00:13:27.990 --> 00:13:30.100 some initial recommendations, 00:13:30.100 --> 00:13:33.990 talked through those with staff and largely to make sure 00:13:33.990 --> 00:13:35.960 that we didn't get anything 00:13:35.960 --> 00:13:39.679 wrong or we didn't miss any details that are pertinent to 00:13:39.679 --> 00:13:42.279 the assessment, to our recommendations 00:13:42.279 --> 00:13:48.029 and we talked through a lot of comments and discussion 00:13:48.029 --> 00:13:50.679 around what we found. 00:13:50.679 --> 00:13:54.600 So Deloitte loves three letter acronyms so we use a CMM, a 00:13:54.600 --> 00:13:56.840 capability maturity model, 00:13:56.840 --> 00:13:59.860 to perform these assessments. 00:13:59.860 --> 00:14:02.120 And as I said we do it across four categories and that's 00:14:02.120 --> 00:14:03.840 down the left, governance, process, 00:14:03.840 --> 00:14:05.600 people and technology. 00:14:05.600 --> 00:14:09.240 And then we talk about three maturity scales. 00:14:09.240 --> 00:14:15.580 And I guess a couple things I'll point out on the scales. 00:14:15.580 --> 00:14:19.679 Just like the decision to be a price taker versus an optim 00:14:19.679 --> 00:14:22.080 izer versus a trader, neither 00:14:22.080 --> 00:14:23.399 of those decisions is wrong. 00:14:23.399 --> 00:14:26.059 It's just important to know where you are. 00:14:26.059 --> 00:14:29.059 As far as the maturity stages for an organization, there's 00:14:29.059 --> 00:14:30.960 nothing inherently wrong with being 00:14:30.960 --> 00:14:32.919 in the developing category. 00:14:32.919 --> 00:14:36.759 That's typically what we see for an organization and 00:14:36.759 --> 00:14:39.679 generally speaking we see that kind of 00:14:39.679 --> 00:14:43.120 evolution typically lasting a number of years. 00:14:43.120 --> 00:14:46.429 So you don't just start out in the middle of this maturity 00:14:46.429 --> 00:14:47.080 scale. 00:14:47.080 --> 00:14:50.389 A lot of the clients that have been up and running for some 00:14:50.389 --> 00:14:51.960 period of time, we find a 00:14:51.960 --> 00:14:54.909 lot of their activities fall generally in the prevalent 00:14:54.909 --> 00:14:56.480 scale and then leading would 00:14:56.480 --> 00:15:00.929 include kind of integrating technology and doing things 00:15:00.929 --> 00:15:03.120 more automated and more in a 00:15:03.120 --> 00:15:06.899 much more robust way that would be indicative of someone 00:15:06.899 --> 00:15:10.240 who's actively trading in the markets. 00:15:10.240 --> 00:15:12.460 When we do the assessment, we look across these four 00:15:12.460 --> 00:15:14.200 categories and in each of the categories 00:15:14.200 --> 00:15:16.659 there's a number of different elements and I think it's the 00:15:16.659 --> 00:15:17.679 last page in the report 00:15:17.679 --> 00:15:21.419 is the actual specific details of what we look at. 00:15:21.419 --> 00:15:24.250 We first look at where the organization is today and then 00:15:24.250 --> 00:15:26.320 through discussion and understanding 00:15:26.320 --> 00:15:28.940 of where the organization is going as well as our own 00:15:28.940 --> 00:15:30.919 opinion of where these capabilities 00:15:30.919 --> 00:15:35.539 need to be, we then make a recommendation as to what the 00:15:35.539 --> 00:15:37.840 future state should be. 00:15:37.840 --> 00:15:41.379 It's important again in the context of what the transacting 00:15:41.379 --> 00:15:42.879 mandate is, we don't always 00:15:42.879 --> 00:15:44.960 -- you might think that a consultant would say you always 00:15:44.960 --> 00:15:46.279 need to be in the leading practice 00:15:46.279 --> 00:15:47.279 category. 00:15:47.279 --> 00:15:49.299 In this case that's not necessarily true because there's 00:15:49.299 --> 00:15:51.259 not always return for the investment 00:15:51.259 --> 00:15:55.669 to put in processes, to put in systems, to hire a bunch of 00:15:55.669 --> 00:15:57.840 people to get to leading if 00:15:57.840 --> 00:16:00.980 the transacting profile and the risk profile doesn't 00:16:00.980 --> 00:16:02.000 warrant that. 00:16:02.000 --> 00:16:06.820 So that's important to keep in mind as we talk through the 00:16:06.820 --> 00:16:09.120 results in terms of where 00:16:09.120 --> 00:16:11.850 you think the organization is today and where it needs to 00:16:11.850 --> 00:16:13.399 be and all of that was informed 00:16:13.399 --> 00:16:16.940 by the types of risk that we just talked about, the trans 00:16:16.940 --> 00:16:19.279 acting profile that we talked about 00:16:19.279 --> 00:16:21.720 both today and where the organization is going. 00:16:21.720 --> 00:16:25.200 Anything I left out on that slide? 00:16:25.200 --> 00:16:26.200 I think so. 00:16:26.200 --> 00:16:27.200 Okay. 00:16:27.200 --> 00:16:28.200 Questions from the board? 00:16:28.200 --> 00:16:29.200 Let's get to the results. 00:16:29.200 --> 00:16:30.200 Okay. 00:16:30.200 --> 00:16:31.200 Now I'm going to hand it to Tim. 00:16:31.200 --> 00:16:36.200 So I'm going to try not to knock him over. 00:16:36.200 --> 00:16:37.200 Thanks Steve. 00:16:37.200 --> 00:16:40.240 So very similar slide to what we were looking at before. 00:16:40.240 --> 00:16:42.799 We've added a couple things here. 00:16:42.799 --> 00:16:46.279 The next column over from leading are the recommendations. 00:16:46.279 --> 00:16:49.120 So we've broken those recommendations out across each of 00:16:49.120 --> 00:16:50.120 the categories. 00:16:50.120 --> 00:16:53.759 And then we also prioritize them high, medium, and low 00:16:53.759 --> 00:16:56.080 based on our understanding of the 00:16:56.080 --> 00:16:59.460 direction that you're moving and our understanding of what 00:16:59.460 --> 00:17:01.159 's common in the industry. 00:17:01.159 --> 00:17:03.059 And then we also, to kind of link it back to the 00:17:03.059 --> 00:17:04.880 conversation where we started in terms 00:17:04.880 --> 00:17:09.089 of what are the risks inherent in the organization, also 00:17:09.089 --> 00:17:12.680 wanted to link those categories, governance, 00:17:12.680 --> 00:17:15.740 process, people, and technologies to the risks that those 00:17:15.740 --> 00:17:17.640 recommendations are addressing. 00:17:17.640 --> 00:17:20.980 I guess the last bit of context, you know, in the black 00:17:20.980 --> 00:17:23.000 circle with the C in it, that's 00:17:23.000 --> 00:17:24.880 where we plotted the current state. 00:17:24.880 --> 00:17:26.920 And then the green circle is the future state. 00:17:26.920 --> 00:17:29.740 And as Steve said, that future state was informed by our 00:17:29.740 --> 00:17:32.240 conversations with staff, our understanding 00:17:32.240 --> 00:17:35.880 of the future mandate for the energy and risk management 00:17:35.880 --> 00:17:36.720 program. 00:17:36.720 --> 00:17:39.849 So in terms of governance, you know, kind of right there in 00:17:39.849 --> 00:17:41.519 the middle of the developing, 00:17:41.519 --> 00:17:43.319 I think it's one more piece on that. 00:17:43.319 --> 00:17:45.700 Where these, kind of where the current and where the future 00:17:45.700 --> 00:17:47.079 state line up, it's certainly 00:17:47.079 --> 00:17:48.079 not a science. 00:17:48.079 --> 00:17:49.079 It's not quantitative. 00:17:49.079 --> 00:17:51.529 What we'll do is, as Steve talked about, there are a whole 00:17:51.529 --> 00:17:53.079 bunch of different subcategories 00:17:53.079 --> 00:17:54.079 under each one of these. 00:17:54.079 --> 00:17:56.660 What we'll do is we'll look at each of those subcategories. 00:17:56.660 --> 00:17:59.269 So for example, risk management committee might be one of 00:17:59.269 --> 00:17:59.680 them. 00:17:59.680 --> 00:18:02.200 And we'll, you know, based on what we've read and 00:18:02.200 --> 00:18:04.319 everything we've heard from everybody 00:18:04.319 --> 00:18:06.950 we've talked to, we'll plot where the risk management 00:18:06.950 --> 00:18:08.759 committee capabilities currently 00:18:08.759 --> 00:18:09.759 are. 00:18:09.759 --> 00:18:11.920 And we'll do that for each of the other subcategories. 00:18:11.920 --> 00:18:13.819 And then we'll go back and we'll look at governance as a 00:18:13.819 --> 00:18:15.079 whole and each of the individual 00:18:15.079 --> 00:18:19.000 items and use that information to plot it kind of at the 00:18:19.000 --> 00:18:21.319 overall governance level. 00:18:21.319 --> 00:18:24.859 So as Steve mentioned, developing is not necessarily a bad 00:18:24.859 --> 00:18:27.359 thing, especially for an organization 00:18:27.359 --> 00:18:30.750 that has really just started down this path a little over 00:18:30.750 --> 00:18:31.960 three years ago. 00:18:31.960 --> 00:18:34.210 So it's, you're kind of right where we would expect you to 00:18:34.210 --> 00:18:36.079 be in that evolution of developing 00:18:36.079 --> 00:18:37.079 to prevalent. 00:18:37.079 --> 00:18:40.619 I think in terms of moving forward, what we've heard in the 00:18:40.619 --> 00:18:42.920 recommendations that we made 00:18:42.920 --> 00:18:46.880 would really move you to the right-hand side of prevalent. 00:18:46.880 --> 00:18:47.880 Seems like a big jump. 00:18:47.880 --> 00:18:50.509 I think when we get into the recommendations on the next 00:18:50.509 --> 00:18:52.680 slide, there are a lot of recommendations 00:18:52.680 --> 00:18:56.930 that can be implemented or acted on fairly easily that will 00:18:56.930 --> 00:18:58.920 have a lot of value and will 00:18:58.920 --> 00:19:01.470 really significantly move you across that evolutionary 00:19:01.470 --> 00:19:02.079 spectrum. 00:19:02.079 --> 00:19:04.079 So we'll take a look at those in a second. 00:19:04.079 --> 00:19:07.619 On the process, kind of right on the border of developing 00:19:07.619 --> 00:19:09.599 to prevalent, again, I think 00:19:09.599 --> 00:19:12.750 there are just a handful of recommendations here, only a 00:19:12.750 --> 00:19:14.680 couple high priority ones, that 00:19:14.680 --> 00:19:18.390 will have a lot of value and really help you move to the 00:19:18.390 --> 00:19:19.119 right. 00:19:19.119 --> 00:19:22.930 People, again, kind of right in the middle of developing, a 00:19:22.930 --> 00:19:24.880 couple recommendations that 00:19:24.880 --> 00:19:27.119 will help you take some big steps forward. 00:19:27.119 --> 00:19:31.450 And then on the technology side, I think there's kind of 00:19:31.450 --> 00:19:34.480 one primary recommendation that we'll 00:19:34.480 --> 00:19:37.089 talk about in terms of the system infrastructure and the 00:19:37.089 --> 00:19:38.640 tools available to staff that can 00:19:38.640 --> 00:19:42.119 have a really profound impact on the program overall. 00:19:42.119 --> 00:19:43.119 Any questions? 00:19:43.119 --> 00:19:44.119 Sure. 00:19:44.119 --> 00:19:49.519 Go ahead, if we ask the same question again. 00:19:49.519 --> 00:19:50.519 Oh, boy. 00:19:50.519 --> 00:19:53.390 Now, maybe you plan to answer this later, so if you do, 00:19:53.390 --> 00:19:55.000 then you don't need to answer 00:19:55.000 --> 00:19:56.000 this now. 00:19:56.000 --> 00:20:02.539 So of these four categories, which would you say is the 00:20:02.539 --> 00:20:06.759 biggest problem area in the status 00:20:06.759 --> 00:20:11.680 quo and which is our greatest strength in the status quo? 00:20:11.680 --> 00:20:14.079 I mean, I can get a sense just by looking at this, but 00:20:14.079 --> 00:20:15.400 going into more detail. 00:20:15.400 --> 00:20:18.009 On the other hand, if that's something you plan on talking 00:20:18.009 --> 00:20:18.720 about later. 00:20:18.720 --> 00:20:20.960 We'll go into a little bit more detail on the next slide. 00:20:20.960 --> 00:20:23.490 But I think in terms of, I wouldn't describe it as a 00:20:23.490 --> 00:20:25.400 weakness, but where I think you can 00:20:25.400 --> 00:20:28.940 make a handful of small changes and really have a big 00:20:28.940 --> 00:20:31.460 impact is on the governance side. 00:20:31.460 --> 00:20:34.000 So in terms of kind of rethinking through the risk 00:20:34.000 --> 00:20:36.319 management committee and kind of the 00:20:36.319 --> 00:20:37.720 governance hierarchy. 00:20:37.720 --> 00:20:41.180 So starting at the city council level, going down into the 00:20:41.180 --> 00:20:43.240 organization and into the day-to-day 00:20:43.240 --> 00:20:47.029 activities and oversight, I think there's a lot of benefit 00:20:47.029 --> 00:20:49.000 that can be achieved there. 00:20:49.000 --> 00:20:51.609 I think on the strength side, I think very clearly the 00:20:51.609 --> 00:20:52.359 processes. 00:20:52.359 --> 00:20:57.140 It's very clear to us that when DME started to go down this 00:20:57.140 --> 00:20:59.400 path of wanting to go live 00:20:59.400 --> 00:21:02.470 with the EMO, that there was a lot of thought given to kind 00:21:02.470 --> 00:21:04.079 of the day-to-day processes 00:21:04.079 --> 00:21:07.200 that would be needed in order to achieve that mission. 00:21:07.200 --> 00:21:10.289 And that's very clear in all the risk policy and all of the 00:21:10.289 --> 00:21:12.079 procedures manuals that we've 00:21:12.079 --> 00:21:13.759 read in that area. 00:21:13.759 --> 00:21:16.759 So it's very clear a lot of effort was put in that. 00:21:16.759 --> 00:21:19.490 Yeah, I'll just add, I'm remiss that I meant to give you a 00:21:19.490 --> 00:21:21.759 preview of the overall answer 00:21:21.759 --> 00:21:23.640 to Tim. 00:21:23.640 --> 00:21:30.710 When we started the assessment, there are certain basic 00:21:30.710 --> 00:21:34.039 things that we look for. 00:21:34.039 --> 00:21:36.380 We look forward with these assessments for an organization 00:21:36.380 --> 00:21:37.460 that has some purview over 00:21:37.460 --> 00:21:43.160 commodity price and liquidity risk management. 00:21:43.160 --> 00:21:44.359 We look for segregation of duties. 00:21:44.359 --> 00:21:45.799 We look for kind of a framework. 00:21:45.799 --> 00:21:47.920 We look for, as Tim said, processes. 00:21:47.920 --> 00:21:50.200 We look for people in certain spots. 00:21:50.200 --> 00:21:53.920 And I think in general, all of that is there. 00:21:53.920 --> 00:21:56.599 There were no gaping holes. 00:21:56.599 --> 00:21:59.369 There was nothing that jumped out as an organization or in 00:21:59.369 --> 00:22:01.480 terms of capabilities that gave us really 00:22:01.480 --> 00:22:03.240 serious concern. 00:22:03.240 --> 00:22:07.819 There are things, as Tim said, that I think can be pushed 00:22:07.819 --> 00:22:12.160 along with relatively light lifting. 00:22:12.160 --> 00:22:14.630 It seems to us that because there's been kind of an 00:22:14.630 --> 00:22:16.599 evolution in where the organization 00:22:16.599 --> 00:22:19.730 is going and the focus on renewables and there's been some 00:22:19.730 --> 00:22:21.640 personnel changes, that some of 00:22:21.640 --> 00:22:24.670 the documentation is just out of sync with what's actually 00:22:24.670 --> 00:22:25.480 happening. 00:22:25.480 --> 00:22:28.200 But again, the framework is there. 00:22:28.200 --> 00:22:31.470 And I think a lot of the recommendations really are to 00:22:31.470 --> 00:22:33.960 update the governance documentation, 00:22:33.960 --> 00:22:36.789 the policies, some of the risk limits, some of the 00:22:36.789 --> 00:22:38.920 reporting that's being done to match 00:22:38.920 --> 00:22:40.039 what's already happening. 00:22:40.039 --> 00:22:43.440 So just kind of getting that in sync and some of the things 00:22:43.440 --> 00:22:45.079 that we'll talk about. 00:22:45.079 --> 00:22:48.539 I guess the other -- I agree with Tim on core strength 00:22:48.539 --> 00:22:49.960 being processed. 00:22:49.960 --> 00:22:53.180 That's kind of the framework that we look for and that we 00:22:53.180 --> 00:22:54.119 see in place. 00:22:54.119 --> 00:22:59.160 And the people, I think, it's an experienced group. 00:22:59.160 --> 00:23:00.160 They understand the market. 00:23:00.160 --> 00:23:02.880 They understand the risks that are being managed. 00:23:02.880 --> 00:23:06.339 And pretty much without exception, what we always talked 00:23:06.339 --> 00:23:08.039 about in terms of objectives 00:23:08.039 --> 00:23:10.299 for the organization, and maybe we get into this with the 00:23:10.299 --> 00:23:11.559 benchmark a little bit, it's 00:23:11.559 --> 00:23:15.700 all about managing the price risk that flows through to the 00:23:15.700 --> 00:23:17.319 end-use customer. 00:23:17.319 --> 00:23:20.369 That's a central focus of the organization, came out in 00:23:20.369 --> 00:23:22.000 almost every discussion. 00:23:22.000 --> 00:23:25.109 And I think the experience of the group that's doing that 00:23:25.109 --> 00:23:27.319 will help as an asset to the utility, 00:23:27.319 --> 00:23:30.319 to the city. 00:23:30.319 --> 00:23:33.319 Any other questions? 00:23:33.319 --> 00:23:34.319 Okay. 00:23:34.319 --> 00:23:35.319 Okay. 00:23:35.319 --> 00:23:39.160 So now I want to take a couple minutes to walk through all 00:23:39.160 --> 00:23:42.279 of the high-priority recommendations. 00:23:42.279 --> 00:23:45.839 So again, most of them are focused in the governance area. 00:23:45.839 --> 00:23:48.859 And I'll kind of talk about the governance recommendations, 00:23:48.859 --> 00:23:50.559 I think, in four main groups. 00:23:50.559 --> 00:23:53.390 The first is related to -- and Steve mentioned this -- 00:23:53.390 --> 00:23:55.279 related to the risk policy and the 00:23:55.279 --> 00:23:59.220 governance hierarchy, the documentation that's in place, 00:23:59.220 --> 00:24:01.720 and the risk management committee. 00:24:01.720 --> 00:24:05.859 Going back and taking a fresh look at those, and really 00:24:05.859 --> 00:24:08.359 tailoring it to what's actually 00:24:08.359 --> 00:24:11.470 being done, what are the actual activities, kind of who's 00:24:11.470 --> 00:24:13.240 doing what, who's overseeing 00:24:13.240 --> 00:24:16.519 what and playing what oversight role. 00:24:16.519 --> 00:24:22.000 I think all those things were envisioned at Go Live. 00:24:22.000 --> 00:24:25.319 And over time, as the programs evolved and as you really 00:24:25.319 --> 00:24:27.359 got into the day-to-day, those 00:24:27.359 --> 00:24:28.640 things have changed a little bit. 00:24:28.640 --> 00:24:31.259 So it's simply about going back and taking a fresh look at 00:24:31.259 --> 00:24:32.720 them and understanding what 00:24:32.720 --> 00:24:34.220 needs to change. 00:24:34.220 --> 00:24:37.430 As it relates to the governance hierarchy, so currently 00:24:37.430 --> 00:24:39.240 there's the city council plays 00:24:39.240 --> 00:24:42.140 a role, you all play a role, and then within the 00:24:42.140 --> 00:24:44.759 organization, within DME, there's the 00:24:44.759 --> 00:24:48.200 strategy committee and there's the operations committee. 00:24:48.200 --> 00:24:51.839 So kind of taking a look at that and understanding and 00:24:51.839 --> 00:24:54.619 really making a decision as to what the 00:24:54.619 --> 00:24:57.359 role of the strategy committee and the operations committee 00:24:57.359 --> 00:24:59.000 are playing, and consider making 00:24:59.000 --> 00:25:00.480 that a single committee. 00:25:00.480 --> 00:25:03.000 There's a lot of overlap in who sits on both of those 00:25:03.000 --> 00:25:03.839 committees. 00:25:03.839 --> 00:25:07.240 It's our understanding that often those two committees will 00:25:07.240 --> 00:25:08.240 jointly meet. 00:25:08.240 --> 00:25:11.049 And if that's the case, recognizing the commitment of 00:25:11.049 --> 00:25:13.359 everybody's time in these matters, think 00:25:13.359 --> 00:25:16.220 about whether it just makes sense to kind of streamline 00:25:16.220 --> 00:25:17.799 that process, have a single 00:25:17.799 --> 00:25:21.089 committee with a single mission and oversight 00:25:21.089 --> 00:25:24.279 responsibility, and then simply make sure 00:25:24.279 --> 00:25:27.910 that that risk management committee regularly meets, has a 00:25:27.910 --> 00:25:29.720 standard agenda and reporting 00:25:29.720 --> 00:25:34.680 package that they follow, and just shore that piece up a 00:25:34.680 --> 00:25:36.039 little bit. 00:25:36.039 --> 00:25:39.500 The next group is update of Appendix A and Appendix E. So 00:25:39.500 --> 00:25:42.160 Appendix A is to the risk policy 00:25:42.160 --> 00:25:44.400 and it says, "Here are the limits. 00:25:44.400 --> 00:25:49.640 Here are the things that the front office or DME can't do." 00:25:49.640 --> 00:25:52.730 And Appendix E is here and talks about what the approved 00:25:52.730 --> 00:25:53.759 products are. 00:25:53.759 --> 00:25:59.799 So trading power or different fixed price instruments. 00:25:59.799 --> 00:26:00.799 Both of those exist. 00:26:00.799 --> 00:26:05.160 I think they can be built out a little bit more to be more 00:26:05.160 --> 00:26:06.319 specific. 00:26:06.319 --> 00:26:09.619 So everybody has a crystal clear understanding of what they 00:26:09.619 --> 00:26:11.279 're authorized to do up to how 00:26:11.279 --> 00:26:14.039 much they can do those types of things. 00:26:14.039 --> 00:26:17.500 And it ties to the last bullet on here in terms of reconcil 00:26:17.500 --> 00:26:19.160 ing the DOA memorandum. 00:26:19.160 --> 00:26:22.579 So delegation of authority is DOA. 00:26:22.579 --> 00:26:25.309 There's some inconsistencies in a memo that goes out on a 00:26:25.309 --> 00:26:26.720 regular basis versus what's 00:26:26.720 --> 00:26:31.880 actually in the ERMPs is the risk policy document. 00:26:31.880 --> 00:26:35.509 So making sure that those two things are synced up so 00:26:35.509 --> 00:26:37.819 everybody's on the same page. 00:26:37.819 --> 00:26:42.650 And then I guess really the third group of these is the 00:26:42.650 --> 00:26:45.720 three of the final four bullets. 00:26:45.720 --> 00:26:48.670 So starting with designing and documenting a financial 00:26:48.670 --> 00:26:50.480 hedge program, quantifying the 00:26:50.480 --> 00:26:54.240 risk profile, and then establishing risk limits linked to 00:26:54.240 --> 00:26:55.279 objectives. 00:26:55.279 --> 00:26:58.009 So that's going back to the risks that Steve talked about a 00:26:58.009 --> 00:26:59.339 little bit earlier in terms 00:26:59.339 --> 00:27:02.589 of kind of the complexity of the price risk, the 00:27:02.589 --> 00:27:05.900 uncertainty of the renewable supply, really 00:27:05.900 --> 00:27:09.589 clearly understanding what risk that introduced into the 00:27:09.589 --> 00:27:11.839 portfolio, tying it to something 00:27:11.839 --> 00:27:15.539 specific like a rate at risk, and understanding what are 00:27:15.539 --> 00:27:18.319 the types of activities or what financial 00:27:18.319 --> 00:27:21.869 risk mitigation activities might we do to help manage that 00:27:21.869 --> 00:27:23.759 supply and that price risk. 00:27:23.759 --> 00:27:26.230 And that's something that we'll come back to here in a few 00:27:26.230 --> 00:27:27.559 slides when we start to talk 00:27:27.559 --> 00:27:30.839 about the benchmark as well. 00:27:30.839 --> 00:27:33.450 On the process side, it's really about reporting and 00:27:33.450 --> 00:27:34.480 communication. 00:27:34.480 --> 00:27:40.029 So making sure that there's a singular risk metric or a set 00:27:40.029 --> 00:27:42.779 of paired risk metrics that 00:27:42.779 --> 00:27:47.289 help describe what the risk is and where you are relative 00:27:47.289 --> 00:27:48.599 to that risk. 00:27:48.599 --> 00:27:52.680 And then being able to communicate what that is and provide 00:27:52.680 --> 00:27:55.200 daily reports to all stakeholders 00:27:55.200 --> 00:27:58.059 and everybody responsible for oversight. 00:27:58.059 --> 00:28:02.680 So each day everybody's on the same sheet of music. 00:28:02.680 --> 00:28:06.220 From a technology perspective, there is currently a system 00:28:06.220 --> 00:28:08.799 in place that doesn't have the capabilities 00:28:08.799 --> 00:28:13.460 that DME needs in order to execute what they need to on a 00:28:13.460 --> 00:28:17.079 day, their daily responsibilities. 00:28:17.079 --> 00:28:20.190 And so taking a look at that, identifying what else is out 00:28:20.190 --> 00:28:21.859 there that might meet needs 00:28:21.859 --> 00:28:25.319 and finding the right fit for purpose system to support the 00:28:25.319 --> 00:28:26.960 day-to-day activities. 00:28:26.960 --> 00:28:29.880 And then finally on the people side, as was mentioned 00:28:29.880 --> 00:28:32.079 earlier, there's been some turnover 00:28:32.079 --> 00:28:34.339 roles or positions have changed. 00:28:34.339 --> 00:28:37.529 Making sure there's the right redundancy across the front 00:28:37.529 --> 00:28:39.319 and the middle and the back office 00:28:39.319 --> 00:28:43.640 such that nothing falls through the cracks and there's a 00:28:43.640 --> 00:28:46.119 consistent level of execution 00:28:46.119 --> 00:28:47.119 of the program. 00:28:47.119 --> 00:28:53.259 Can you explain a little bit more what you mean by the 00:28:53.259 --> 00:28:55.920 right redundancy? 00:28:55.920 --> 00:28:56.920 Sure. 00:28:56.920 --> 00:29:00.039 Because redundancy tends to have negative connotations. 00:29:00.039 --> 00:29:03.789 Here I see it's a positive, especially when you're talking 00:29:03.789 --> 00:29:05.079 about staffing. 00:29:05.079 --> 00:29:06.079 So if you could explain. 00:29:06.079 --> 00:29:07.079 Yeah. 00:29:07.079 --> 00:29:09.000 In this case, I think redundancy is meant to be positive. 00:29:09.000 --> 00:29:12.009 So from a middle office perspective, for example, if I've 00:29:12.009 --> 00:29:13.819 got one person that's responsible 00:29:13.819 --> 00:29:18.009 for always preparing the reports that go out on a daily 00:29:18.009 --> 00:29:20.440 basis or on a weekly basis, to 00:29:20.440 --> 00:29:23.660 the extent that that person isn't available for some period 00:29:23.660 --> 00:29:25.319 of time, I guess the question 00:29:25.319 --> 00:29:27.559 is who is going to provide those reports? 00:29:27.559 --> 00:29:31.019 So making sure that you've got staff cross-trained to step 00:29:31.019 --> 00:29:32.980 into a role that maybe is not their 00:29:32.980 --> 00:29:37.150 primary or day-to-day role, but that they can fill in the 00:29:37.150 --> 00:29:39.119 event that it's needed. 00:29:39.119 --> 00:29:42.440 And on the governance, it looks like a long list, but it's 00:29:42.440 --> 00:29:44.079 a lot of low-hanging fruit 00:29:44.079 --> 00:29:48.720 that we can implement rather quickly to get from developing 00:29:48.720 --> 00:29:51.839 to a higher level of an organization. 00:29:51.839 --> 00:29:57.130 So in reading the report, the whole report, I'm impressed 00:29:57.130 --> 00:30:00.359 with where they are for a three-year 00:30:00.359 --> 00:30:04.160 organization actually. 00:30:04.160 --> 00:30:06.799 And just a kind of overarching comment on that and to 00:30:06.799 --> 00:30:08.599 follow up on a couple of Tim's points, 00:30:08.599 --> 00:30:11.819 what we try to do is identify things here that stitch 00:30:11.819 --> 00:30:14.319 together, hopefully, logically. 00:30:14.319 --> 00:30:18.109 In my view of how this can work, you've got a policy that 00:30:18.109 --> 00:30:20.099 outlines what are the risks 00:30:20.099 --> 00:30:24.180 that we're exposed to and what's our appetite relative to 00:30:24.180 --> 00:30:25.319 those risks. 00:30:25.319 --> 00:30:28.950 What are the tools that are available to the organization 00:30:28.950 --> 00:30:30.119 to manage that? 00:30:30.119 --> 00:30:33.460 So the policy is kind of the, it's the enabler for the 00:30:33.460 --> 00:30:35.680 organization to go out and manage 00:30:35.680 --> 00:30:38.869 the risk within whatever boundaries the organization and 00:30:38.869 --> 00:30:41.240 the board and the city council ultimately 00:30:41.240 --> 00:30:42.920 set. 00:30:42.920 --> 00:30:47.089 The RMC can act as the body just to be the oversight of 00:30:47.089 --> 00:30:47.880 that. 00:30:47.880 --> 00:30:50.720 Is that happening according to how we've laid it out? 00:30:50.720 --> 00:30:54.000 Are we within our risk tolerances? 00:30:54.000 --> 00:30:57.089 If the organization says, well, there's a new type of 00:30:57.089 --> 00:30:59.039 instrument or a new transaction 00:30:59.039 --> 00:31:01.640 we want to do that's not previously authorized, that would 00:31:01.640 --> 00:31:02.960 be the body to review that and 00:31:02.960 --> 00:31:03.960 make recommendations. 00:31:03.960 --> 00:31:06.769 And I would also see that as kind of the conduit of 00:31:06.769 --> 00:31:09.319 information to both the board and the city 00:31:09.319 --> 00:31:14.069 council and establish kind of a more regular update and 00:31:14.069 --> 00:31:16.839 information flow as to where we 00:31:16.839 --> 00:31:19.569 are, where are we going, what have we done, did anything 00:31:19.569 --> 00:31:21.240 unusual happen, all those kinds 00:31:21.240 --> 00:31:22.240 of conversations. 00:31:22.240 --> 00:31:24.720 The RMC can really be the engine to do that. 00:31:24.720 --> 00:31:27.609 And then a lot of the other pieces like to mention the 00:31:27.609 --> 00:31:29.559 system, that's another part of 00:31:29.559 --> 00:31:33.190 the toolkit, if you will, just to enable the organization 00:31:33.190 --> 00:31:35.039 to, you come in in the morning 00:31:35.039 --> 00:31:38.839 and are we long, are we short, where are our prices, can we 00:31:38.839 --> 00:31:40.799 execute instruments and have 00:31:40.799 --> 00:31:43.710 them go into the system so it's all a complete system of 00:31:43.710 --> 00:31:44.359 record. 00:31:44.359 --> 00:31:46.789 Those are all the things that kind of enable that, but the 00:31:46.789 --> 00:31:48.240 governance and the policy piece 00:31:48.240 --> 00:31:52.140 of this and then executed through the RMC is really what 00:31:52.140 --> 00:31:54.079 will drive it, I think. 00:31:54.079 --> 00:31:57.240 Yeah, it's huge. 00:31:57.240 --> 00:32:03.480 And then I think we made these points a couple times. 00:32:03.480 --> 00:32:08.339 Basically, it's our observation that even though they're on 00:32:08.339 --> 00:32:10.400 the system side, there's 00:32:10.400 --> 00:32:13.000 some work that can be done there and some additional 00:32:13.000 --> 00:32:15.920 infrastructure that should be provided. 00:32:15.920 --> 00:32:18.789 The organization is generally well positioned, well 00:32:18.789 --> 00:32:20.920 structured in staff and highly capable 00:32:20.920 --> 00:32:25.079 of managing the risks that the utility faces. 00:32:25.079 --> 00:32:27.450 And then again, just kind of coming back to that technology 00:32:27.450 --> 00:32:28.839 infrastructure, putting that 00:32:28.839 --> 00:32:35.240 in place would go a long way to really supporting the day- 00:32:35.240 --> 00:32:36.559 to-day. 00:32:36.559 --> 00:32:40.019 And now we get to move on to the FY17 benchmark analysis 00:32:40.019 --> 00:32:41.960 and we'll walk through this kind 00:32:41.960 --> 00:32:42.960 of in two parts. 00:32:42.960 --> 00:32:47.200 One is looking at a couple of alternatives for FY17 that 00:32:47.200 --> 00:32:49.319 have been, I think have been 00:32:49.319 --> 00:32:52.279 proposed and then also providing an alternative view on 00:32:52.279 --> 00:32:54.279 what that benchmark might look like 00:32:54.279 --> 00:32:56.720 going forward. 00:32:56.720 --> 00:33:01.259 So first, the two alternatives that we looked at, one, 00:33:01.259 --> 00:33:04.480 option one, looks at what the day-ahead 00:33:04.480 --> 00:33:07.359 price for power was during the year in question. 00:33:07.359 --> 00:33:13.160 So in this case, we looked back starting October 1, 2016 00:33:13.160 --> 00:33:17.480 through September 30, 2017, would 00:33:17.480 --> 00:33:20.779 constitute the FY17 benchmark. 00:33:20.779 --> 00:33:22.759 And just what was the day-ahead price of power? 00:33:22.759 --> 00:33:27.549 So every day, ERCOT posts power prices for what they expect 00:33:27.549 --> 00:33:29.640 for the next day or the day 00:33:29.640 --> 00:33:30.640 ahead. 00:33:30.640 --> 00:33:33.079 So that meant if we just went back and we looked at what 00:33:33.079 --> 00:33:34.599 all of those power prices were 00:33:34.599 --> 00:33:38.990 versus how much energy or load there was, that constitutes 00:33:38.990 --> 00:33:41.400 the first part of the benchmark 00:33:41.400 --> 00:33:42.400 one. 00:33:42.400 --> 00:33:45.859 And then similarly to the contract that was previously in 00:33:45.859 --> 00:33:47.599 place, there's a heat rate 00:33:47.599 --> 00:33:52.130 adder or a premium that gets added into that to account for 00:33:52.130 --> 00:33:53.700 risk and profit. 00:33:53.700 --> 00:33:57.390 So option one, in a sense, is very similar to what the old 00:33:57.390 --> 00:33:59.640 benchmark looked like, except 00:33:59.640 --> 00:34:04.609 it's now based on the market price of power on a day-ahead 00:34:04.609 --> 00:34:05.559 basis. 00:34:05.559 --> 00:34:08.400 And so there's some advantages to this particular option. 00:34:08.400 --> 00:34:11.800 One, it's very simple to quantify and to measure. 00:34:11.800 --> 00:34:13.599 ERCOT posts those prices every day. 00:34:13.599 --> 00:34:16.639 We can go back and we can very easily capture them. 00:34:16.639 --> 00:34:18.860 We can add in the three and a half heat rate adder and we 00:34:18.860 --> 00:34:20.159 can get to what the benchmark 00:34:20.159 --> 00:34:21.159 is. 00:34:21.159 --> 00:34:23.559 There are also a couple disadvantages to that. 00:34:23.559 --> 00:34:28.380 One is that it does move with the day-ahead markets. 00:34:28.380 --> 00:34:30.989 We can only calculate it after the fact, after we know what 00:34:30.989 --> 00:34:32.400 all of those day-ahead prices 00:34:32.400 --> 00:34:34.719 were in any particular year. 00:34:34.719 --> 00:34:40.440 And it doesn't really require an active management. 00:34:40.440 --> 00:34:44.710 Because the benchmark is moving with whatever the price of 00:34:44.710 --> 00:34:47.119 power is for that year, if power 00:34:47.119 --> 00:34:50.199 prices go up, overall the benchmark would go up. 00:34:50.199 --> 00:34:54.320 If power prices go down, the benchmark would go down. 00:34:54.320 --> 00:34:59.000 That and I think given the direction that you're moving, 00:34:59.000 --> 00:35:01.639 moving further away from the previous 00:35:01.639 --> 00:35:04.730 benchmark and getting away from the idea of a three and a 00:35:04.730 --> 00:35:06.480 half heat rate adder probably 00:35:06.480 --> 00:35:07.480 makes a lot of sense. 00:35:07.480 --> 00:35:10.360 I mean, you're no longer in the situation where you have a 00:35:10.360 --> 00:35:11.840 full requirements contract 00:35:11.840 --> 00:35:14.449 with one counterparty and they're taking on a lot of those 00:35:14.449 --> 00:35:14.960 risks. 00:35:14.960 --> 00:35:17.360 You're managing those risks yourself now. 00:35:17.360 --> 00:35:20.090 And so that three and a half heat rate probably doesn't 00:35:20.090 --> 00:35:21.840 make as much sense as it used to. 00:35:21.840 --> 00:35:26.079 The second option is more of a forward-looking benchmark. 00:35:26.079 --> 00:35:30.769 So if we went out on the last day of September in 2016, we 00:35:30.769 --> 00:35:33.199 can look to the forward markets 00:35:33.199 --> 00:35:36.570 to understand what the expectation of power costs are going 00:35:36.570 --> 00:35:38.000 to be all the way through 00:35:38.000 --> 00:35:43.719 the fiscal year, all the way through September 2017 of the 00:35:43.719 --> 00:35:44.900 next year. 00:35:44.900 --> 00:35:48.900 And what we can do is we can take that forward curve and we 00:35:48.900 --> 00:35:51.159 can multiply it by the load, 00:35:51.159 --> 00:35:54.760 how much electricity you expect to need in that year. 00:35:54.760 --> 00:35:57.369 And that serves as the benchmark for on that day what it 00:35:57.369 --> 00:35:58.920 might cost to procure all of the 00:35:58.920 --> 00:36:02.760 power or all the electricity that you need in that year. 00:36:02.760 --> 00:36:05.769 And then as you go throughout the year and you buy in the 00:36:05.769 --> 00:36:08.400 day ahead markets or you know, 00:36:08.400 --> 00:36:12.340 the renewables, you have renewables at whatever the 00:36:12.340 --> 00:36:15.440 contract price is, you can then compare 00:36:15.440 --> 00:36:18.260 your actual costs back to that benchmark of what it would 00:36:18.260 --> 00:36:19.840 cost, what it would have cost 00:36:19.840 --> 00:36:23.469 to lock in all of your electricity on the day before the 00:36:23.469 --> 00:36:25.559 beginning of that fiscal year 00:36:25.559 --> 00:36:28.289 and you can get an understanding of how well you did 00:36:28.289 --> 00:36:30.000 relative to that benchmark. 00:36:30.000 --> 00:36:33.159 So again, this also has some advantages and disadvantages. 00:36:33.159 --> 00:36:36.789 The advantages is that it's market-based and it also sets a 00:36:36.789 --> 00:36:38.480 very clear target to be. 00:36:38.480 --> 00:36:41.110 Going into the year, you for the most part know exactly 00:36:41.110 --> 00:36:43.119 what it is you're managing to 00:36:43.119 --> 00:36:45.719 and you can actively manage it. 00:36:45.719 --> 00:36:50.619 The disadvantages, it doesn't consider what the objectives 00:36:50.619 --> 00:36:52.599 of the utility are, the risk 00:36:52.599 --> 00:36:53.599 or the uncertainty. 00:36:53.599 --> 00:36:56.690 So for example, if we simply have that benchmark and you 00:36:56.690 --> 00:36:58.639 know, set at the beginning of the 00:36:58.639 --> 00:37:04.059 year, even if the DME and EMO is actively managing that 00:37:04.059 --> 00:37:07.119 risk, if an event happens and 00:37:07.119 --> 00:37:10.960 prices go up, then it's going to be more costly to procure 00:37:10.960 --> 00:37:13.960 power and you may not be as accurately 00:37:13.960 --> 00:37:18.130 measuring the value that they're adding or how well they're 00:37:18.130 --> 00:37:19.960 managing those risks. 00:37:19.960 --> 00:37:23.210 So I think both of these have some advantages and they both 00:37:23.210 --> 00:37:24.840 have some flaws as well. 00:37:24.840 --> 00:37:27.059 So what we wanted to do next was then kind of look at the 00:37:27.059 --> 00:37:27.960 actual numbers. 00:37:27.960 --> 00:37:31.590 So we went back and recalculated the benchmarks and took 00:37:31.590 --> 00:37:34.079 the actual costs for the last fiscal 00:37:34.079 --> 00:37:36.519 year in order to calculate what the savings are. 00:37:36.519 --> 00:37:39.000 And similarly to what the news was the last time around, 00:37:39.000 --> 00:37:40.599 the good news is that under either 00:37:40.599 --> 00:37:43.360 benchmark there are savings. 00:37:43.360 --> 00:37:46.090 And so just to orient everybody to the slide, the top half 00:37:46.090 --> 00:37:47.519 is the calculation or the top 00:37:47.519 --> 00:37:50.239 third is the calculation of the benchmarks. 00:37:50.239 --> 00:37:53.380 And I'll come back to the one right there in the middle in 00:37:53.380 --> 00:37:54.119 a second. 00:37:54.119 --> 00:37:57.130 The middle of the slide is what the actual costs were as 00:37:57.130 --> 00:37:58.760 provided by DME and then the 00:37:58.760 --> 00:38:02.420 bottom third are the savings under each of the different 00:38:02.420 --> 00:38:03.300 options. 00:38:03.300 --> 00:38:07.280 So to kind of go back up to the top, that middle row here, 00:38:07.280 --> 00:38:09.320 what we did is we took option 00:38:09.320 --> 00:38:12.320 one, and as I mentioned before, about the three and a half 00:38:12.320 --> 00:38:13.840 heat rate adder, we simply 00:38:13.840 --> 00:38:17.300 took that out and said what would the day ahead benchmark 00:38:17.300 --> 00:38:18.760 have been if you didn't include 00:38:18.760 --> 00:38:22.719 that premium for risk and profit. 00:38:22.719 --> 00:38:26.500 And used that as just kind of another comparison or another 00:38:26.500 --> 00:38:28.280 alternative to look at. 00:38:28.280 --> 00:38:32.239 And as you can imagine, when you take that adder out, the 00:38:32.239 --> 00:38:34.400 savings on option one dropped 00:38:34.400 --> 00:38:37.539 from about 10.3 million to about 2.4. 00:38:37.539 --> 00:38:40.880 So the difference is purely related to that three and a 00:38:40.880 --> 00:38:42.420 half heat rate adder. 00:38:42.420 --> 00:38:46.179 And then when you compare that to the option two, which was 00:38:46.179 --> 00:38:48.239 the forward curve benchmark, 00:38:48.239 --> 00:38:54.539 the 10.3 savings under option one would have been $4 00:38:54.539 --> 00:38:55.800 million. 00:38:55.800 --> 00:38:57.679 So just a little bit over $4 million. 00:38:57.679 --> 00:39:01.920 So either way you look at it, there are savings relative to 00:39:01.920 --> 00:39:04.280 either of those benchmarks. 00:39:04.280 --> 00:39:05.280 So pause for a second. 00:39:05.280 --> 00:39:06.280 See if there are any questions. 00:39:06.280 --> 00:39:13.400 Okay. 00:39:13.400 --> 00:39:17.030 So I wanted to think about it a little bit differently for 00:39:17.030 --> 00:39:17.880 a second. 00:39:17.880 --> 00:39:22.420 And if we go back to what's the purpose of the cost savings 00:39:22.420 --> 00:39:24.719 calculation, is it simply 00:39:24.719 --> 00:39:25.719 to save costs? 00:39:25.719 --> 00:39:27.599 Is it to add value? 00:39:27.599 --> 00:39:30.409 So if you assume, and we talked to, Steve mentioned earlier 00:39:30.409 --> 00:39:31.780 , when we had conversations 00:39:31.780 --> 00:39:36.619 with staff, it was very clear that the objective was to 00:39:36.619 --> 00:39:40.800 manage the cost to end users, to customers. 00:39:40.800 --> 00:39:44.599 And so if you assume that in order to assess the 00:39:44.599 --> 00:39:48.000 performance and the value of DME, kind 00:39:48.000 --> 00:39:50.809 of what we think the benchmark calculation, this cost 00:39:50.809 --> 00:39:52.840 savings calculation is doing, well, 00:39:52.840 --> 00:39:55.139 then it probably makes a lot of sense to think about it in 00:39:55.139 --> 00:39:56.679 terms of what the desired outcomes 00:39:56.679 --> 00:40:02.050 are and how well DME and the EMO does achieving those 00:40:02.050 --> 00:40:03.480 outcomes. 00:40:03.480 --> 00:40:07.019 And so if we hypothesize a couple, what would be considered 00:40:07.019 --> 00:40:08.800 good outcomes, one might be 00:40:08.800 --> 00:40:12.320 stable electricity rates when prices rise. 00:40:12.320 --> 00:40:15.780 Another might be competitive and lower rates when prices 00:40:15.780 --> 00:40:16.320 fall. 00:40:16.320 --> 00:40:19.869 So in other words, if you're protecting your customers 00:40:19.869 --> 00:40:21.920 against rising prices, you don't 00:40:21.920 --> 00:40:25.750 want to be blind to the fact that prices might fall and now 00:40:25.750 --> 00:40:27.880 you're passing along a higher 00:40:27.880 --> 00:40:31.519 than market rate of electricity to your customers. 00:40:31.519 --> 00:40:36.320 So it's really managing the pair of those objectives. 00:40:36.320 --> 00:40:38.320 And so how do you go about accomplishing this? 00:40:38.320 --> 00:40:41.860 Well, one, you hypothesize a set of paired objectives and 00:40:41.860 --> 00:40:43.440 you make sure that they're 00:40:43.440 --> 00:40:44.440 market compatible. 00:40:44.440 --> 00:40:49.059 In other words, if I'm managing too aggressively to prevent 00:40:49.059 --> 00:40:51.519 higher prices, am I losing out 00:40:51.519 --> 00:40:55.530 on opportunities to pass along lower prices to my customers 00:40:55.530 --> 00:40:55.820 ? 00:40:55.820 --> 00:40:58.550 And so the way that you make them market compatible is the 00:40:58.550 --> 00:41:00.599 second piece of this, which is by having 00:41:00.599 --> 00:41:03.809 a hedge strategy and risk limits that have been 00:41:03.809 --> 00:41:07.099 demonstrated to achieve those objectives. 00:41:07.099 --> 00:41:10.730 So you might do that by going back and looking over time 00:41:10.730 --> 00:41:12.960 and quantifying how a particular 00:41:12.960 --> 00:41:16.849 hedge strategy achieve those two objectives across a range 00:41:16.849 --> 00:41:18.199 of market prices. 00:41:18.199 --> 00:41:20.929 And the good news is that if we look back over the last 10 00:41:20.929 --> 00:41:22.320 to 15 years, we've got a 00:41:22.320 --> 00:41:25.519 number of times when prices were really high and they moved 00:41:25.519 --> 00:41:27.119 really low or they went from 00:41:27.119 --> 00:41:29.440 low to high and vice versa. 00:41:29.440 --> 00:41:32.530 So it gives you a lot of data with which to understand that 00:41:32.530 --> 00:41:32.800 . 00:41:32.800 --> 00:41:35.690 And then the last piece, the way that you accomplish this 00:41:35.690 --> 00:41:37.800 is by having the risk infrastructure. 00:41:37.800 --> 00:41:41.780 So the ability to capture transactions, understand, 00:41:41.780 --> 00:41:45.039 quantify your risk, monitor where you are, 00:41:45.039 --> 00:41:48.929 so that when the time comes, you know when to act and you 00:41:48.929 --> 00:41:50.239 know how to act. 00:41:50.239 --> 00:41:52.769 And so kind of taking it back to the benchmark, it's really 00:41:52.769 --> 00:41:54.199 the first two of these, one and 00:41:54.199 --> 00:42:00.989 two here, that would form the basis for the benchmark and 00:42:00.989 --> 00:42:04.599 how you assess performance. 00:42:04.599 --> 00:42:08.139 So the way that you do that is kind of taking it back to 00:42:08.139 --> 00:42:09.599 the objectives. 00:42:09.599 --> 00:42:12.599 And really, it's -- we talked about two, I guess it's 00:42:12.599 --> 00:42:14.320 really three of them, and I'll 00:42:14.320 --> 00:42:18.400 explain why in a second, but they kind of all work together 00:42:18.400 --> 00:42:20.559 in order to provide a balanced 00:42:20.559 --> 00:42:21.559 approach. 00:42:21.559 --> 00:42:24.780 So the first is setting an objective around what we call 00:42:24.780 --> 00:42:26.639 portfolio risk or managing the 00:42:26.639 --> 00:42:27.920 customer's rate of risk. 00:42:27.920 --> 00:42:31.699 So if we don't want to pass along more than a certain 00:42:31.699 --> 00:42:34.840 percentage rate increase to customers, 00:42:34.840 --> 00:42:37.239 how do we manage that? 00:42:37.239 --> 00:42:42.179 Recognizing that you're going to have a lot of fixed price 00:42:42.179 --> 00:42:44.480 supply and recognizing that 00:42:44.480 --> 00:42:47.360 you might hedge at really high prices and then prices fall. 00:42:47.360 --> 00:42:50.090 The second piece of it is managing the hedges that have 00:42:50.090 --> 00:42:51.019 been executed. 00:42:51.019 --> 00:42:55.579 So if I bought power at $80 and the price of power today is 00:42:55.579 --> 00:42:58.159 $50, what should I do about 00:42:58.159 --> 00:42:59.159 that? 00:42:59.159 --> 00:43:01.659 How do I manage that or how do I prevent that outcome from 00:43:01.659 --> 00:43:02.360 occurring? 00:43:02.360 --> 00:43:05.670 And then the way that you do that is by having an options 00:43:05.670 --> 00:43:07.679 budget available to manage the 00:43:07.679 --> 00:43:08.679 tension between the two. 00:43:08.679 --> 00:43:11.289 And so what we mean is that, you know, every hedge that I 00:43:11.289 --> 00:43:12.760 place to protect against higher 00:43:12.760 --> 00:43:16.599 prices creates a likelihood or a probability that I might 00:43:16.599 --> 00:43:17.920 have been wrong. 00:43:17.920 --> 00:43:24.110 So options are the way in which you can balance those 00:43:24.110 --> 00:43:25.920 things out. 00:43:25.920 --> 00:43:28.539 And so when, you know, when you kind of take it through 00:43:28.539 --> 00:43:30.440 that process in the end, you know, 00:43:30.440 --> 00:43:34.000 this is, if you will, the benchmarks that you establish. 00:43:34.000 --> 00:43:37.070 So I might have my--the first piece of my benchmark might 00:43:37.070 --> 00:43:38.440 be I'm going to manage my 00:43:38.440 --> 00:43:41.980 energy cost adjustment so that the cost of serve customers 00:43:41.980 --> 00:43:43.639 don't increase by more than 00:43:43.639 --> 00:43:47.550 X percent with some confidence, with some level of 00:43:47.550 --> 00:43:48.800 confidence. 00:43:48.800 --> 00:43:51.429 The second piece of it is I'm going to manage my fixed 00:43:51.429 --> 00:43:53.460 price transactions that so customer 00:43:53.460 --> 00:43:56.690 rates aren't more than X percent above whatever the market- 00:43:56.690 --> 00:43:57.679 based rate is. 00:43:57.679 --> 00:44:00.360 So that's the competitive objective. 00:44:00.360 --> 00:44:03.519 And then finally, I'm going to set aside, you know, $500, 00:44:03.519 --> 00:44:05.199 000 in options premiums to 00:44:05.199 --> 00:44:07.559 manage the tension between the two. 00:44:07.559 --> 00:44:10.840 And so you set these at the beginning of the year. 00:44:10.840 --> 00:44:13.449 Everybody--you know, there's general agreement as to what 00:44:13.449 --> 00:44:14.880 those limits are and what you're 00:44:14.880 --> 00:44:15.880 managing to. 00:44:15.880 --> 00:44:18.360 And at the end of the year, as you go back and you take a 00:44:18.360 --> 00:44:20.079 look at it, you can very clearly 00:44:20.079 --> 00:44:22.690 measure, "Well, this year, you know, I said I was going to 00:44:22.690 --> 00:44:23.960 manage to a 3 percent rate 00:44:23.960 --> 00:44:24.960 increase. 00:44:24.960 --> 00:44:28.050 I actually only had to pass along a 1 percent year over 00:44:28.050 --> 00:44:29.440 year rate increase. 00:44:29.440 --> 00:44:32.980 And here's why, because these are the activities that I did 00:44:32.980 --> 00:44:33.239 . 00:44:33.239 --> 00:44:36.449 Here's the outcomes that we realized as a function of them 00:44:36.449 --> 00:44:36.800 ." 00:44:36.800 --> 00:44:39.079 In some years, it might be that prices fell. 00:44:39.079 --> 00:44:41.639 And so, you know, what you'll be able to say in that case 00:44:41.639 --> 00:44:43.239 is, "Well, the market fell by 00:44:43.239 --> 00:44:44.519 5 percent. 00:44:44.519 --> 00:44:47.590 And because I was actively managing my portfolio and my 00:44:47.590 --> 00:44:49.599 exposure, I was able to pass along 00:44:49.599 --> 00:44:55.000 4.5 percent of that 5 percent drop in market prices." 00:44:55.000 --> 00:44:58.820 And then you can also very clearly say, "I spent $200,000 00:44:58.820 --> 00:45:00.559 in options to do so, you know, 00:45:00.559 --> 00:45:03.039 less than the $500,000 that I budgeted at the beginning of 00:45:03.039 --> 00:45:03.599 the year." 00:45:03.599 --> 00:45:06.610 And so then each year, you'd come back and you'd reconsider 00:45:06.610 --> 00:45:08.280 these objectives, you'd reset 00:45:08.280 --> 00:45:10.420 the limits of what you're managing to, and at the end of 00:45:10.420 --> 00:45:11.760 the year, you can very clearly 00:45:11.760 --> 00:45:14.860 measure where you are relative to those objectives and 00:45:14.860 --> 00:45:15.880 those limits. 00:45:15.880 --> 00:45:19.690 And so this is the direction that we would recommend moving 00:45:19.690 --> 00:45:20.000 . 00:45:20.000 --> 00:45:24.539 You know, it's more -- it provides a very clear benchmark 00:45:24.539 --> 00:45:27.159 across multiple dimensions. 00:45:27.159 --> 00:45:30.239 It's -- you know, you can come to agreement on what those 00:45:30.239 --> 00:45:32.159 inputs are prior to the beginning 00:45:32.159 --> 00:45:35.260 of the year, and then you can very clearly measure them 00:45:35.260 --> 00:45:36.840 after the fact as well. 00:45:36.840 --> 00:45:43.320 Steve, anything you'd add? 00:45:43.320 --> 00:45:47.239 All right. 00:45:47.239 --> 00:45:51.489 So in terms of next steps, this is one that we had talked 00:45:51.489 --> 00:45:53.760 about at the last meeting we 00:45:53.760 --> 00:45:54.760 presented. 00:45:54.760 --> 00:45:57.570 I think if you -- you know, if you think about what the FY 00:45:57.570 --> 00:45:59.619 17 benchmark, you know, is now 00:45:59.619 --> 00:46:02.750 and what you -- the direction you might take it, maybe for 00:46:02.750 --> 00:46:04.599 FY18, this would be what we 00:46:04.599 --> 00:46:08.559 would recommend -- the process we would recommend going 00:46:08.559 --> 00:46:11.000 through in order to be able to come 00:46:11.000 --> 00:46:13.869 to agreement on what those objectives are and then set 00:46:13.869 --> 00:46:15.800 realistic and market-compatible 00:46:15.800 --> 00:46:16.960 risk limits. 00:46:16.960 --> 00:46:20.050 So it would be about understanding what the exposure of the 00:46:20.050 --> 00:46:21.639 current portfolio of supply 00:46:21.639 --> 00:46:25.809 and load is, understanding how different hedge strategies 00:46:25.809 --> 00:46:28.000 help you manage the exposure in 00:46:28.000 --> 00:46:32.000 supply and load, and then using that hedge strategy to set 00:46:32.000 --> 00:46:33.960 risk limits, update those 00:46:33.960 --> 00:46:38.260 objectives so that everybody, you know, has a known set of 00:46:38.260 --> 00:46:40.320 objectives and limits that 00:46:40.320 --> 00:46:45.079 they're managing to as you go into the next fiscal year. 00:46:45.079 --> 00:46:47.199 Okay. 00:46:47.199 --> 00:46:49.800 Discussion? 00:46:49.800 --> 00:46:54.139 Well, I just want to say I appreciate the board's indul 00:46:54.139 --> 00:46:57.639 gence for fairly detailed information. 00:46:57.639 --> 00:47:00.269 I also want to thank Stephen and Tim for all their work on 00:47:00.269 --> 00:47:01.440 this and our staff. 00:47:01.440 --> 00:47:04.050 They've been great to work with, very professional and 00:47:04.050 --> 00:47:05.800 comprehensive in their approach. 00:47:05.800 --> 00:47:08.090 We've got a number of things to bring back to the board and 00:47:08.090 --> 00:47:09.199 the City Council and talk 00:47:09.199 --> 00:47:10.199 about that. 00:47:10.199 --> 00:47:12.090 We're going to be doing that in pretty quick order, in 00:47:12.090 --> 00:47:13.599 particular on the governance issues. 00:47:13.599 --> 00:47:18.519 This is something on the management policy that we have. 00:47:18.519 --> 00:47:20.980 We created that back in 2014, but really hadn't had a 00:47:20.980 --> 00:47:22.559 discussion with the board or council 00:47:22.559 --> 00:47:23.559 since that time. 00:47:23.559 --> 00:47:26.429 So we want to have a good discussion of what's appropriate, 00:47:26.429 --> 00:47:28.019 what are the recommendations 00:47:28.019 --> 00:47:30.309 that we want to put in there, and then on at least an 00:47:30.309 --> 00:47:31.800 annual basis come back and talk 00:47:31.800 --> 00:47:34.840 about that every year of what do we need to tweak, what are 00:47:34.840 --> 00:47:36.280 areas that we can improve 00:47:36.280 --> 00:47:38.570 on and how can we manage that differently, and to keep that 00:47:38.570 --> 00:47:39.719 really front and center for 00:47:39.719 --> 00:47:41.480 both the board and the City Council. 00:47:41.480 --> 00:47:42.960 But we've got a lot of work to do. 00:47:42.960 --> 00:47:45.239 We'll be bringing this back in future meetings with you. 00:47:45.239 --> 00:47:48.260 Again, just want to say thank you for your time, and Tim 00:47:48.260 --> 00:47:50.039 and Stephen, thank you for all 00:47:50.039 --> 00:47:51.039 your work. 00:47:51.039 --> 00:47:54.039 Thank you. 00:47:54.039 --> 00:48:00.179 Just in terms of I'm thinking what's a good nutshell bumper 00:48:00.179 --> 00:48:02.880 sticker takeaway for me to 00:48:02.880 --> 00:48:09.440 explain to a layperson who doesn't have time to read all of 00:48:09.440 --> 00:48:10.480 this. 00:48:10.480 --> 00:48:15.380 And I haven't yet been asked, so what do you, by the public 00:48:15.380 --> 00:48:19.199 , what do you think of this report? 00:48:19.199 --> 00:48:21.739 And I just wanted to run by you what I was thinking of 00:48:21.739 --> 00:48:23.440 saying, and so you could let me 00:48:23.440 --> 00:48:28.760 know if this was a correct assessment or not. 00:48:28.760 --> 00:48:31.500 My sense, and I think this is a little different than what 00:48:31.500 --> 00:48:33.280 Susan's sense of it, but maybe this 00:48:33.280 --> 00:48:37.519 is just two sides of the same coin, I'm not sure. 00:48:37.519 --> 00:48:41.929 From reading the report and from hearing your presentation 00:48:41.929 --> 00:48:44.760 that this is not a diagnosis of 00:48:44.760 --> 00:48:46.400 a terminal illness, right? 00:48:46.400 --> 00:48:51.619 It's not, so this is not your, this is a sick organization 00:48:51.619 --> 00:48:54.480 and it's in serious trouble, 00:48:54.480 --> 00:48:59.340 but rather, and this is what I was planning on telling 00:48:59.340 --> 00:49:02.639 people if this is correct, rather, 00:49:02.639 --> 00:49:06.530 you're in pretty good health, but you don't have a doctor 00:49:06.530 --> 00:49:08.360 and you need a doctor and a 00:49:08.360 --> 00:49:13.000 health plan in place and you're very lucky that you've been 00:49:13.000 --> 00:49:15.199 doing well so far and we're 00:49:15.199 --> 00:49:19.500 going to be fine as long as we have these things in place 00:49:19.500 --> 00:49:20.840 that we need. 00:49:20.840 --> 00:49:24.469 And so anyway, is that, or if you would want to tweak that, 00:49:24.469 --> 00:49:26.280 I mean, I'm not interested 00:49:26.280 --> 00:49:27.800 in hearing that that's a good example. 00:49:27.800 --> 00:49:30.409 I'm just thinking is this right and if it's not, well, what 00:49:30.409 --> 00:49:31.760 would be good, you know, in 00:49:31.760 --> 00:49:34.940 one sentence, kind of analogy for somebody who really doesn 00:49:34.940 --> 00:49:36.320 't have the time to go into 00:49:36.320 --> 00:49:39.280 this at the level of detail that we do. 00:49:39.280 --> 00:49:41.889 I think it's a fair comment and, you know, in the doctor 00:49:41.889 --> 00:49:43.360 analogy, that's the kind of 00:49:43.360 --> 00:49:46.989 the governance and the policy infrastructure that needs a 00:49:46.989 --> 00:49:47.719 refresh. 00:49:47.719 --> 00:49:49.519 I think that's accurate. 00:49:49.519 --> 00:49:53.150 I think in general what I suggested, the assessment of the 00:49:53.150 --> 00:49:55.480 capabilities and then the benchmark 00:49:55.480 --> 00:50:00.070 discussion, they come together in terms of as an 00:50:00.070 --> 00:50:03.760 organization and as, you know, what 00:50:03.760 --> 00:50:07.840 are the objectives of DME as an organization through the 00:50:07.840 --> 00:50:10.280 city and what's the ultimate kind 00:50:10.280 --> 00:50:12.960 of metric or measurement of success. 00:50:12.960 --> 00:50:15.429 And if as an organization you can define that and that 00:50:15.429 --> 00:50:17.079 might be, you know, what are the 00:50:17.079 --> 00:50:20.619 rates that our citizens ultimately pay for electricity and 00:50:20.619 --> 00:50:22.159 there are other factors as 00:50:22.159 --> 00:50:24.489 well as where does that electricity come from and all those 00:50:24.489 --> 00:50:25.800 discussions around renewable 00:50:25.800 --> 00:50:27.360 are built into it as well. 00:50:27.360 --> 00:50:31.780 But I think gaining consensus on that ultimate objective 00:50:31.780 --> 00:50:34.800 can help then drive, you know, what's 00:50:34.800 --> 00:50:38.260 the framework within which we're going to expect the DME 00:50:38.260 --> 00:50:39.800 and the EMO to operate and 00:50:39.800 --> 00:50:43.019 as an aside, we started just talking about DME and then 00:50:43.019 --> 00:50:44.760 kind of this EMO is a separate 00:50:44.760 --> 00:50:47.000 entity I think should go away as a concept. 00:50:47.000 --> 00:50:51.480 I think it's all within, you know, the utility. 00:50:51.480 --> 00:50:55.380 If we can define the objective that will enable as a risk 00:50:55.380 --> 00:50:57.880 oversight function you to define 00:50:57.880 --> 00:51:00.739 what are the parameters within which they are going to 00:51:00.739 --> 00:51:02.360 operate and it also will help 00:51:02.360 --> 00:51:05.269 define how do we do and all those discussions kind of after 00:51:05.269 --> 00:51:06.760 the fact in the first part of 00:51:06.760 --> 00:51:10.309 the work that we did which is, you know, kind of digging 00:51:10.309 --> 00:51:12.280 into a calculation and you can 00:51:12.280 --> 00:51:15.449 always debate like the different variables that are used to 00:51:15.449 --> 00:51:16.679 do that calculation. 00:51:16.679 --> 00:51:20.219 Our recommendation to think about a performance-based 00:51:20.219 --> 00:51:23.480 benchmark is, you know, in some ways a departure 00:51:23.480 --> 00:51:26.500 from the cost-based benchmark that I think has been in 00:51:26.500 --> 00:51:28.320 place to date but maybe gets the 00:51:28.320 --> 00:51:31.389 organization back into the singular focus of we're trying 00:51:31.389 --> 00:51:32.840 to protect our rate payers 00:51:32.840 --> 00:51:35.849 and the citizens and they're not paying, you know, above a 00:51:35.849 --> 00:51:37.119 certain amount or that they 00:51:37.119 --> 00:51:41.369 can benefit from, you know, from market moves that are in 00:51:41.369 --> 00:51:42.400 our favor. 00:51:42.400 --> 00:51:47.309 I think that kind of as a goal post is the key takeaway for 00:51:47.309 --> 00:51:49.559 me and I think in order to 00:51:49.559 --> 00:51:52.670 get there, back to your question, the framework is there, 00:51:52.670 --> 00:51:54.599 the people are there, that, you 00:51:54.599 --> 00:51:57.960 know, it's kind of -- it's there. 00:51:57.960 --> 00:52:00.849 I think the goal is to identify what ultimately are we 00:52:00.849 --> 00:52:02.920 measuring and that will fill in some 00:52:02.920 --> 00:52:03.920 of the blanks. 00:52:03.920 --> 00:52:06.119 Very long-winded answer to your question. 00:52:06.119 --> 00:52:08.079 And, Deb, we're more in agreement than not. 00:52:08.079 --> 00:52:09.079 Yes. 00:52:09.079 --> 00:52:12.269 And I think I would just add one, you know, one piece to 00:52:12.269 --> 00:52:13.840 that and it's -- I don't think 00:52:13.840 --> 00:52:18.079 it's everything's your way or because you've been lucky. 00:52:18.079 --> 00:52:20.690 I think it's -- to date it's been a lot of individual, you 00:52:20.690 --> 00:52:22.039 know, a lot of individual 00:52:22.039 --> 00:52:24.849 effort and I think the governance recommendations I think 00:52:24.849 --> 00:52:26.760 will help make it less of an individual 00:52:26.760 --> 00:52:29.780 effort and more an organizational effort which I think will 00:52:29.780 --> 00:52:31.559 streamline and make that process 00:52:31.559 --> 00:52:37.280 easier and more transparent. 00:52:37.280 --> 00:52:42.190 We're lucky that we have the people who have been able to 00:52:42.190 --> 00:52:46.000 make these decisions on staff. 00:52:46.000 --> 00:52:48.960 That's all we have for you. 00:52:48.960 --> 00:52:49.960 All right. 00:52:49.960 --> 00:52:50.960 Thank you very much. 00:52:50.960 --> 00:52:51.960 Thank you. 00:52:51.960 --> 00:52:56.670 And I've been told that we are going to pull the closed 00:52:56.670 --> 00:52:59.199 meeting item and so that brings 00:52:59.199 --> 00:53:02.440 us down to the consent agenda and I've been asked to pull 00:53:02.440 --> 00:53:04.000 item B. That should -- oh, I'm 00:53:04.000 --> 00:53:05.000 sorry. 00:53:05.000 --> 00:53:06.000 Just curious how come we're pulling that. 00:53:06.000 --> 00:53:07.000 Larry, how come we're pulling the closed meeting? 00:53:07.000 --> 00:53:07.570 We can't put in a note, sir, so we decided years ago we'd 00:53:07.570 --> 00:53:08.000 take off those agendas. 00:53:08.000 --> 00:53:09.000 Okay. 00:53:09.000 --> 00:53:10.000 So it's a -- will be discussed by Council tomorrow? 00:53:10.000 --> 00:53:11.000 No. 00:53:11.000 --> 00:53:12.000 It's not. 00:53:12.000 --> 00:53:13.000 It's not. 00:53:13.000 --> 00:53:21.469 They're getting their -- they're going back to the old 00:53:21.469 --> 00:53:24.000 first. 00:53:24.000 --> 00:53:25.000 Thank you. 00:53:25.000 --> 00:53:26.000 Thank you. 00:53:26.000 --> 00:53:27.000 Okay. 00:53:27.000 --> 00:53:28.000 Consent agenda. 00:53:28.000 --> 00:53:30.039 Then we've been asked to pull item B off the consent agenda 00:53:30.039 --> 00:53:31.119 because that should have been 00:53:31.119 --> 00:53:34.039 an item for individual consideration. 00:53:34.039 --> 00:53:36.840 So that leaves one item A on the consent agenda. 00:53:36.840 --> 00:53:42.679 Does anybody wish to pull it? 00:53:42.679 --> 00:53:45.679 Or a motion to approve the consent agenda item A? 00:53:45.679 --> 00:53:47.679 I move. 00:53:47.679 --> 00:53:48.679 Okay. 00:53:48.679 --> 00:53:50.679 Do I have -- 00:53:50.679 --> 00:53:51.679 Second. 00:53:51.679 --> 00:53:52.679 Okay. 00:53:52.679 --> 00:53:53.679 All in favor? 00:53:53.679 --> 00:53:54.679 Aye. 00:53:54.679 --> 00:53:55.679 Aye. 00:53:55.679 --> 00:53:56.679 Okay. 00:53:56.679 --> 00:53:57.679 Items for individual consideration. 00:53:57.679 --> 00:53:59.679 Should we take B first? 00:53:59.679 --> 00:54:00.880 Okay. 00:54:00.880 --> 00:54:08.420 So we'll be taking, well, the consent agenda item B. I don 00:54:08.420 --> 00:54:09.400 't know how to say it, so -- 00:54:09.400 --> 00:54:10.400 All right. 00:54:10.400 --> 00:54:32.840 Tidistus, City Engineer. 00:54:32.840 --> 00:54:36.719 I've also got the project manager, Lee Perry, here. 00:54:36.719 --> 00:54:40.860 I'm bringing to you today a project that is currently on 00:54:40.860 --> 00:54:41.719 our CIP. 00:54:41.719 --> 00:54:45.320 It was a bond funded project, I believe. 00:54:45.320 --> 00:54:48.440 Pack four, phases one and two, you've actually seen before. 00:54:48.440 --> 00:54:51.309 We came last month and actually got council to -- and you 00:54:51.309 --> 00:54:52.840 all to award the contract to 00:54:52.840 --> 00:54:57.349 move forward with construction on that piece of the project 00:54:57.349 --> 00:54:57.679 . 00:54:57.679 --> 00:55:01.159 Ultimately, this was all supposed to be one project. 00:55:01.159 --> 00:55:04.789 But for a lot of different reasons, funding being one piece 00:55:04.789 --> 00:55:06.480 of it, we were -- we weren't 00:55:06.480 --> 00:55:09.360 able to do all of that project at one time. 00:55:09.360 --> 00:55:12.130 Time has just not been our friend on some of these projects 00:55:12.130 --> 00:55:12.400 . 00:55:12.400 --> 00:55:16.119 So what we have today is the second phase of that project 00:55:16.119 --> 00:55:18.320 asking for the design contract 00:55:18.320 --> 00:55:20.559 to go forward. 00:55:20.559 --> 00:55:26.360 So this project in general -- let me go back a little bit 00:55:26.360 --> 00:55:27.320 here. 00:55:27.320 --> 00:55:29.719 It's a project that, like I said before, connects to the 00:55:29.719 --> 00:55:31.960 project that's currently going to construction. 00:55:31.960 --> 00:55:34.500 It'll start construction shortly after the first of the 00:55:34.500 --> 00:55:36.000 year, which runs primarily through 00:55:36.000 --> 00:55:37.000 downtown. 00:55:37.000 --> 00:55:39.219 And let's skip past a couple of slides here and get to the 00:55:39.219 --> 00:55:39.559 map. 00:55:39.559 --> 00:55:41.920 It's a little easier to follow. 00:55:41.920 --> 00:55:45.949 So phases one and two, the creek itself, peck four, Pecan 00:55:45.949 --> 00:55:48.159 Creek, tributary four is what 00:55:48.159 --> 00:55:50.519 that really stands for. 00:55:50.519 --> 00:55:54.150 Ties into Pecan Creek, a little bit off the screen here, 00:55:54.150 --> 00:55:56.079 comes up, crosses Locust and 00:55:56.079 --> 00:55:58.159 Elm and then follows to the north. 00:55:58.159 --> 00:56:01.699 And the creek itself actually runs through a couple of 00:56:01.699 --> 00:56:03.519 channels up north of Oak. 00:56:03.519 --> 00:56:09.599 No, we didn't make it that far, sorry. 00:56:09.599 --> 00:56:12.210 Up to Mulberry and then it goes just north of Mulberry, 00:56:12.210 --> 00:56:13.679 comes back across Carroll and 00:56:13.679 --> 00:56:16.920 all the way back over through this neighborhood. 00:56:16.920 --> 00:56:19.320 Is that Prairie Street? 00:56:19.320 --> 00:56:20.320 Bernard, sorry. 00:56:20.320 --> 00:56:24.400 It gets all the way back over to Bernard. 00:56:24.400 --> 00:56:27.130 Part of what happens here, and you don't see it on this map 00:56:27.130 --> 00:56:28.760 , is there is a floodplain that 00:56:28.760 --> 00:56:32.760 takes in a very large amount of this entire area, trying to 00:56:32.760 --> 00:56:34.480 outline it here as best I 00:56:34.480 --> 00:56:37.000 can so you can get a sense of the area. 00:56:37.000 --> 00:56:39.730 It takes into account a very large area of downtown and it 00:56:39.730 --> 00:56:41.079 inundates quite a few homes 00:56:41.079 --> 00:56:44.389 in the neighborhood back to the west of Carroll, this area 00:56:44.389 --> 00:56:45.400 back in here. 00:56:45.400 --> 00:56:48.800 So a lot of homes drain into this creek. 00:56:48.800 --> 00:56:51.320 What this project will do is it will remove a good number 00:56:51.320 --> 00:56:52.599 of those homes, I think all 00:56:52.599 --> 00:56:55.059 of the homes out of the floodplain, and then it removes the 00:56:55.059 --> 00:56:56.539 vast majority of the businesses 00:56:56.539 --> 00:56:59.630 out of the floodplain by taking everything into a box 00:56:59.630 --> 00:57:01.800 instead of it being an open channel. 00:57:01.800 --> 00:57:04.690 It brings it into a box so all those buildings, all the 00:57:04.690 --> 00:57:07.039 vacant land that's there for development 00:57:07.039 --> 00:57:10.679 in the downtown area on that south side is now available to 00:57:10.679 --> 00:57:11.800 be developed. 00:57:11.800 --> 00:57:13.739 We can do a lot more with it since it will be out of the 00:57:13.739 --> 00:57:15.079 floodplain and the floodway. 00:57:15.079 --> 00:57:17.599 The floodway is the key factor there. 00:57:17.599 --> 00:57:20.329 On the map there is a floodway, the FEMA map today, there's 00:57:20.329 --> 00:57:21.440 a floodway that runs through 00:57:21.440 --> 00:57:23.880 downtown, prevents a lot of development. 00:57:23.880 --> 00:57:26.880 Not put a structure in the floodway. 00:57:26.880 --> 00:57:30.769 So what this project does, phase one and phase two, is this 00:57:30.769 --> 00:57:32.320 green and blue line. 00:57:32.320 --> 00:57:35.260 That is ongoing right now, we'll be going to construction 00:57:35.260 --> 00:57:35.719 soon. 00:57:35.719 --> 00:57:38.159 Phase three and four, there's a couple of lines here. 00:57:38.159 --> 00:57:41.469 This yellow line is the original projection of phase three 00:57:41.469 --> 00:57:43.360 and phase four goes from Carroll 00:57:43.360 --> 00:57:46.300 back to the west to tie into the open channel just through 00:57:46.300 --> 00:57:47.599 this neighborhood. 00:57:47.599 --> 00:57:49.820 Now this, it's kind of a misnomer through here, I believe 00:57:49.820 --> 00:57:51.039 this is just a little drainage 00:57:51.039 --> 00:57:54.400 ditch, is that correct? 00:57:54.400 --> 00:58:03.679 That picks that up. 00:58:03.679 --> 00:58:06.329 It's a bit of a channel, but it is out of the floodplain by 00:58:06.329 --> 00:58:07.760 the time we get in there. 00:58:07.760 --> 00:58:11.139 So what we're looking to do with this project, and you'll 00:58:11.139 --> 00:58:13.159 see a dashed purple line here. 00:58:13.159 --> 00:58:16.050 As we originally looked at this project, it was remove the 00:58:16.050 --> 00:58:17.719 floodplain, putting the boxes 00:58:17.719 --> 00:58:20.969 in underneath the road, which is a lot easier for us to 00:58:20.969 --> 00:58:23.079 access because you know you're not 00:58:23.079 --> 00:58:25.110 going to get buildings, you're not going to get a lot of 00:58:25.110 --> 00:58:26.519 structures or homes or businesses 00:58:26.519 --> 00:58:28.360 that we got to interrupt to get in there. 00:58:28.360 --> 00:58:31.130 It's bad enough to interrupt traffic, we definitely don't 00:58:31.130 --> 00:58:32.960 want to do that on private property. 00:58:32.960 --> 00:58:35.730 The problem we're running into is you still have what's 00:58:35.730 --> 00:58:37.440 left of this channel that we can't 00:58:37.440 --> 00:58:40.440 completely take away because you still have to allow those 00:58:40.440 --> 00:58:42.300 homes and those businesses that 00:58:42.300 --> 00:58:45.139 have traditionally not had anywhere to drain other than 00:58:45.139 --> 00:58:46.920 that creek, we can't completely 00:58:46.920 --> 00:58:47.920 take it away. 00:58:47.920 --> 00:58:50.750 So we're still going to catch that water in this channel 00:58:50.750 --> 00:58:52.360 left on the north side here. 00:58:52.360 --> 00:58:55.420 So an alternative proposal, and that's part of the reason 00:58:55.420 --> 00:58:57.400 why the contract for basic services 00:58:57.400 --> 00:59:01.860 is just over $900,000, is to look at both the yellow ph 00:59:01.860 --> 00:59:04.000 asing and the purple to say that 00:59:04.000 --> 00:59:07.650 may be a better alignment from the standpoint that it still 00:59:07.650 --> 00:59:10.119 provides a lot better and potentially 00:59:10.119 --> 00:59:13.800 a lot less construction cost to us by leaving this drainage 00:59:13.800 --> 00:59:15.519 channel in place as much as 00:59:15.519 --> 00:59:17.000 possible. 00:59:17.000 --> 00:59:19.989 By the time we take the vast majority of the floodplain out 00:59:19.989 --> 00:59:21.559 , this really just becomes a 00:59:21.559 --> 00:59:22.800 little collector ditch. 00:59:22.800 --> 00:59:25.760 It's not a floodplain prone area. 00:59:25.760 --> 00:59:28.280 So that's why you see these two alternatives here. 00:59:28.280 --> 00:59:30.829 It's also partially why you see a little bit higher 00:59:30.829 --> 00:59:32.840 contract cost than we potentially would 00:59:32.840 --> 00:59:34.119 have seen. 00:59:34.119 --> 00:59:37.469 We also have, I need to go backwards, we got our slides a 00:59:37.469 --> 00:59:39.320 little bit out of order, I'm 00:59:39.320 --> 00:59:41.619 sorry about that. 00:59:41.619 --> 00:59:44.840 Some project costs as we estimate right now are looking at 00:59:44.840 --> 00:59:47.079 1.2 million for design, which 00:59:47.079 --> 00:59:49.639 is what you have before you right now. 00:59:49.639 --> 00:59:51.360 That takes into account quite a few items. 00:59:51.360 --> 00:59:55.059 Now if you look at what that really runs on a project that 00:59:55.059 --> 00:59:57.019 's not that unusual to see it 00:59:57.019 --> 01:00:01.010 running in the 10 to 12% range, when you also consider that 01:00:01.010 --> 01:00:03.320 there's a lot of potential properties, 01:00:03.320 --> 01:00:05.519 there's a couple of different scenarios we need to look at. 01:00:05.519 --> 01:00:07.980 And we've got some construction costs or construction 01:00:07.980 --> 01:00:09.480 administration services built 01:00:09.480 --> 01:00:10.480 into that contract. 01:00:10.480 --> 01:00:12.920 So the consultant will be working with us hand in hand 01:00:12.920 --> 01:00:14.519 through the construction phase 01:00:14.519 --> 01:00:18.000 to make sure this project gets done timely and effectively. 01:00:18.000 --> 01:00:21.539 A little bit spent on that will usually, by and large, save 01:00:21.539 --> 01:00:23.000 you quite a bit during the 01:00:23.000 --> 01:00:25.280 construction phase. 01:00:25.280 --> 01:00:28.469 We are looking at potentially $300,000 in property acquis 01:00:28.469 --> 01:00:29.000 itions. 01:00:29.000 --> 01:00:30.440 That's that purple line that you saw. 01:00:30.440 --> 01:00:32.199 We're meant to continue to get some easements. 01:00:32.199 --> 01:00:36.099 We are working with the county to try to get some 01:00:36.099 --> 01:00:38.920 additional aid and help there. 01:00:38.920 --> 01:00:41.530 And then the construction costs right now are currently 01:00:41.530 --> 01:00:43.280 projected at $9.3 million. 01:00:43.280 --> 01:00:44.940 So it's an expensive box. 01:00:44.940 --> 01:00:48.340 Anytime you start putting boxes of this size in, they're 01:00:48.340 --> 01:00:49.699 always expensive. 01:00:49.699 --> 01:00:51.400 We are going through the process. 01:00:51.400 --> 01:00:53.920 What's in that number is a contingency factor. 01:00:53.920 --> 01:00:56.320 So we're trying to give you the worst case scenario of what 01:00:56.320 --> 01:00:57.360 we think this is going to 01:00:57.360 --> 01:00:58.360 be. 01:00:58.360 --> 01:01:01.480 Of course, we will analyze all options to try to keep that 01:01:01.480 --> 01:01:03.320 cost down as much as possible. 01:01:03.320 --> 01:01:07.559 We are proposing to have Fris and Nichols, who did the 01:01:07.559 --> 01:01:10.019 design for phases one and two, 01:01:10.019 --> 01:01:13.309 they picked up where T. Nolan Perkins did the study for the 01:01:13.309 --> 01:01:14.760 entire street stretch of 01:01:14.760 --> 01:01:16.559 this creek. 01:01:16.559 --> 01:01:19.699 They picked up and did the design for the PEK4 phase one 01:01:19.699 --> 01:01:21.260 and two construction. 01:01:21.260 --> 01:01:23.659 So that is part of the reason why we selected them for 01:01:23.659 --> 01:01:25.559 three and four, is it's just a natural 01:01:25.559 --> 01:01:26.719 extension of this project. 01:01:26.719 --> 01:01:29.139 So instead of getting somebody else on board which would 01:01:29.139 --> 01:01:30.880 have taken longer, we'd potentially 01:01:30.880 --> 01:01:33.659 have some conflicts between the two, just trying to get 01:01:33.659 --> 01:01:35.360 them to marry up their designs. 01:01:35.360 --> 01:01:38.119 It kept this in one shop and kept it moving forward. 01:01:38.119 --> 01:01:39.119 They were very qualified. 01:01:39.119 --> 01:01:42.329 We used them on multiple occasions and they are known 01:01:42.329 --> 01:01:44.559 throughout the state for this type 01:01:44.559 --> 01:01:47.559 of work and more. 01:01:47.559 --> 01:01:50.719 We ran through quite a bit of that. 01:01:50.719 --> 01:01:53.840 So our recommendation is that we would ask you to approve 01:01:53.840 --> 01:01:55.440 this contract or recommend 01:01:55.440 --> 01:01:58.349 approval to counsel this contract for $1.2 million with Fr 01:01:58.349 --> 01:01:59.239 is and Nichols. 01:01:59.239 --> 01:02:01.460 If you have any questions, I'm here to answer any questions 01:02:01.460 --> 01:02:02.159 you might have. 01:02:02.159 --> 01:02:05.159 I'm going to leave Perry's here as well. 01:02:05.159 --> 01:02:06.159 Yes sir. 01:02:06.159 --> 01:02:11.650 So the way I see this is by doing this, you talk about 01:02:11.650 --> 01:02:14.480 removing the floodplain. 01:02:14.480 --> 01:02:18.400 Which allows land to be developed. 01:02:18.400 --> 01:02:20.670 So you have the cost side, but now you're going to have a 01:02:20.670 --> 01:02:21.400 revenue side. 01:02:21.400 --> 01:02:25.190 Because then with the developed land, you'll have increased 01:02:25.190 --> 01:02:26.440 property taxes. 01:02:26.440 --> 01:02:30.710 You'll be able to basically pay for over time the cost of 01:02:30.710 --> 01:02:31.920 doing this. 01:02:31.920 --> 01:02:35.760 And to the homeowners, it would seem like if they can even 01:02:35.760 --> 01:02:38.039 get insurance, their insurance 01:02:38.039 --> 01:02:40.389 cost, at least in that area, is going to go down because 01:02:40.389 --> 01:02:41.719 they're not being paid enough 01:02:41.719 --> 01:02:42.719 floodplain. 01:02:42.719 --> 01:02:43.719 Yes sir. 01:02:43.719 --> 01:02:44.719 So a lot of benefits for all of this. 01:02:44.719 --> 01:02:47.449 It also improves our rating standing with the Federal 01:02:47.449 --> 01:02:49.159 Emergency Management Agency. 01:02:49.159 --> 01:02:50.159 Okay. 01:02:50.159 --> 01:02:51.159 Thank you. 01:02:51.159 --> 01:02:52.159 Go ahead, Dan. 01:02:52.159 --> 01:02:55.159 I just want to clarify the construction costs. 01:02:55.159 --> 01:02:56.159 Yes sir. 01:02:56.159 --> 01:02:59.079 So is this, they've been approved or not approved? 01:02:59.079 --> 01:03:00.519 For this project, no. 01:03:00.519 --> 01:03:01.519 This is three and four. 01:03:01.519 --> 01:03:03.239 For phase one and two, yes. 01:03:03.239 --> 01:03:04.239 That contract asks. 01:03:04.239 --> 01:03:09.280 So you're going to present these in the 2020 bond package? 01:03:09.280 --> 01:03:12.159 Unless we can find other sources of funding, yes sir. 01:03:12.159 --> 01:03:15.320 We're constantly looking for other ways to fund this work. 01:03:15.320 --> 01:03:18.050 Grants, wherever we can find out their partnerships, we're 01:03:18.050 --> 01:03:19.159 constantly looking. 01:03:19.159 --> 01:03:22.190 But yes, right now the only source of funding we know of 01:03:22.190 --> 01:03:24.519 would be a 2020 debt program. 01:03:24.519 --> 01:03:28.409 So Derek, the one and two, the phase one and two was 01:03:28.409 --> 01:03:31.039 supposed to do the same things that 01:03:31.039 --> 01:03:32.880 you're saying the three and four is doing. 01:03:32.880 --> 01:03:33.880 Yes. 01:03:33.880 --> 01:03:36.380 So when did we realize that one and two wasn't going to do 01:03:36.380 --> 01:03:37.840 exactly what we thought it was 01:03:37.840 --> 01:03:38.840 going to be? 01:03:38.840 --> 01:03:40.880 I'm not sure how far back that history goes. 01:03:40.880 --> 01:03:43.159 I know when I got here in July, we went through and started 01:03:43.159 --> 01:03:44.760 going through every single project 01:03:44.760 --> 01:03:48.719 to look on how far they can go. 01:03:48.719 --> 01:03:50.719 And this was one of the first ones we looked at and said, " 01:03:50.719 --> 01:03:51.800 We're not going to get that 01:03:51.800 --> 01:03:52.800 far." 01:03:52.800 --> 01:03:55.170 I knew that, but to answer your question on how far back 01:03:55.170 --> 01:03:56.440 that went, I don't know. 01:03:56.440 --> 01:03:57.440 Okay. 01:03:57.440 --> 01:03:58.440 Okay. 01:03:58.440 --> 01:03:59.440 Thank you. 01:03:59.440 --> 01:04:00.440 Deb, did you have a question? 01:04:00.440 --> 01:04:01.440 Oh yes, I did. 01:04:01.440 --> 01:04:04.579 Well first I wanted to say thank you for this and thanks 01:04:04.579 --> 01:04:06.639 for pulling this from the consent 01:04:06.639 --> 01:04:07.639 agenda. 01:04:07.639 --> 01:04:10.250 I was going to ask to have it pulled and I was already 01:04:10.250 --> 01:04:11.800 planning on voting yes for it, 01:04:11.800 --> 01:04:14.530 but because of the cost, but also because it's such an 01:04:14.530 --> 01:04:16.159 important and timely issue. 01:04:16.159 --> 01:04:20.329 And I think it's important that the public see what the 01:04:20.329 --> 01:04:23.559 city is doing for flood preparedness. 01:04:23.559 --> 01:04:24.559 Yes. 01:04:24.559 --> 01:04:27.789 As most of you probably saw, there was a recent article in 01:04:27.789 --> 01:04:29.880 the Denton Record Chronicle about 01:04:29.880 --> 01:04:34.150 flood preparedness in Denton and a lot of people in the 01:04:34.150 --> 01:04:37.199 community were expressing concerns 01:04:37.199 --> 01:04:38.199 about that. 01:04:38.199 --> 01:04:41.170 So it's really reassuring to see that we have such plans in 01:04:41.170 --> 01:04:42.599 place moving forward. 01:04:42.599 --> 01:04:46.829 And it is a big expense, but it is extremely important as 01:04:46.829 --> 01:04:48.960 Alan was saying in all kinds 01:04:48.960 --> 01:04:54.989 of ways and in addition to the ways that Alan said it, save 01:04:54.989 --> 01:04:57.599 lives and save homes. 01:04:57.599 --> 01:05:04.659 And my question was, how is this plan connected to, or is 01:05:04.659 --> 01:05:08.639 this plan connected to a larger 01:05:08.639 --> 01:05:13.460 city-wide flood preparedness plan moving forward as 01:05:13.460 --> 01:05:17.559 considering all the growth that we're having 01:05:17.559 --> 01:05:22.030 in other parts of town, for instance around Bucky, the B 01:05:22.030 --> 01:05:24.320 ucky's area there was a lot of 01:05:24.320 --> 01:05:28.440 concern about the drainage of the homes around there. 01:05:28.440 --> 01:05:34.599 Is this tied into a larger plan for flood preparedness city 01:05:34.599 --> 01:05:37.480 -wide or is that something 01:05:37.480 --> 01:05:42.400 that would be created at a later date? 01:05:42.400 --> 01:05:44.800 It is something that we're working on and developing. 01:05:44.800 --> 01:05:48.429 It is one of those key components that after the 2007 01:05:48.429 --> 01:05:50.440 floods that this was one of those 01:05:50.440 --> 01:05:54.739 areas that was identified real quickly that it was an issue 01:05:54.739 --> 01:05:55.079 . 01:05:55.079 --> 01:05:57.710 So yes, you have some revenue benefits on this, but the 01:05:57.710 --> 01:05:59.039 primary cause of this was a 01:05:59.039 --> 01:06:02.079 safety project and that's where this comes from. 01:06:02.079 --> 01:06:04.719 We are looking at all of our floodplains. 01:06:04.719 --> 01:06:06.400 We are required to do so annually. 01:06:06.400 --> 01:06:10.570 We are in a, because we are members of the community rating 01:06:10.570 --> 01:06:12.519 system with FEMA, we have 01:06:12.519 --> 01:06:15.320 to go through an annual audit process. 01:06:15.320 --> 01:06:18.489 And usually the five-year audit, because a five-year is a 01:06:18.489 --> 01:06:20.480 very detailed audit of everything 01:06:20.480 --> 01:06:23.349 we've done from a permitting standpoint with developers, 01:06:23.349 --> 01:06:24.920 with homeowners that have come 01:06:24.920 --> 01:06:27.800 in, they're wanting to build a brand new home. 01:06:27.800 --> 01:06:30.409 And on an annual basis, we just do a double check, make 01:06:30.409 --> 01:06:32.079 sure are we still doing everything 01:06:32.079 --> 01:06:33.199 that we thought we would do? 01:06:33.199 --> 01:06:35.829 And it requires us to look forward on what are we going to 01:06:35.829 --> 01:06:37.400 do over the next five years. 01:06:37.400 --> 01:06:40.619 So yes, this is a part of that plan, but it's an ongoing 01:06:40.619 --> 01:06:42.440 process for us of what needs to 01:06:42.440 --> 01:06:43.440 be done next. 01:06:43.440 --> 01:06:44.440 Yes, ma'am. 01:06:44.440 --> 01:06:46.960 Okay, any further questions? 01:06:46.960 --> 01:06:55.800 Do we have a motion to approve? 01:06:55.800 --> 01:06:56.800 And a second? 01:06:56.800 --> 01:06:57.800 Second. 01:06:57.800 --> 01:06:59.800 All in favor? 01:06:59.800 --> 01:07:00.800 Aye. 01:07:00.800 --> 01:07:02.800 Any further discussion? 01:07:02.800 --> 01:07:07.039 Let's see, then. 01:07:07.039 --> 01:07:10.349 Item A, consider the approval of the public utility board's 01:07:10.349 --> 01:07:11.079 minutes. 01:07:11.079 --> 01:07:16.639 Were there any changes that anybody saw? 01:07:16.639 --> 01:07:22.559 Okay, then it's approved as presented. 01:07:22.559 --> 01:07:27.730 And item for individual consideration B, receive a report 01:07:27.730 --> 01:07:30.920 and discussion, hold a discussion 01:07:30.920 --> 01:07:33.530 and provide staff direction concerning the approval of a 01:07:33.530 --> 01:07:34.960 contract for the radio network 01:07:34.960 --> 01:07:41.800 design and installation services. 01:07:41.800 --> 01:07:42.800 Good morning. 01:07:42.800 --> 01:07:43.800 My name is Tim Fisher. 01:07:43.800 --> 01:07:45.280 I'm director of water utilities. 01:07:45.280 --> 01:07:51.360 I've got a brief presentation on this project. 01:07:51.360 --> 01:07:55.590 The water production division uses licensed and unlicensed 01:07:55.590 --> 01:07:58.320 microwave radios for communications 01:07:58.320 --> 01:08:00.800 between their various facilities. 01:08:00.800 --> 01:08:05.280 Some of those are permanent or are staff 24/7, others are 01:08:05.280 --> 01:08:06.360 unstaffed. 01:08:06.360 --> 01:08:09.579 We use that communication system for the supervisory 01:08:09.579 --> 01:08:12.480 control and data acquisition or SCADA system, 01:08:12.480 --> 01:08:16.439 but we also use them for the security cameras and then for 01:08:16.439 --> 01:08:17.880 access control. 01:08:17.880 --> 01:08:22.779 The existing system tended to center around the northwest 01:08:22.779 --> 01:08:25.319 elevated storage tank up near 01:08:25.319 --> 01:08:32.399 loop 288 and interstate 35 on the northwest side of TAN. 01:08:32.399 --> 01:08:35.300 That tower was our highest tower and gave us the best line 01:08:35.300 --> 01:08:36.760 of sight to all the various 01:08:36.760 --> 01:08:41.770 locations until recently when we added the elevated storage 01:08:41.770 --> 01:08:44.479 at the southwest upper pressure 01:08:44.479 --> 01:08:50.079 plain, so that's a similar height location. 01:08:50.079 --> 01:08:55.720 Basically this is a shot of the northwest tower. 01:08:55.720 --> 01:08:58.960 Radio equipment is very small, compact. 01:08:58.960 --> 01:09:03.380 It's not real visible unless you look hard for it. 01:09:03.380 --> 01:09:08.279 Very directional from point to point. 01:09:08.279 --> 01:09:11.819 Arcadis Engineering, which is actually at the time was 01:09:11.819 --> 01:09:14.000 Malcolm Kearney, Arcadis later 01:09:14.000 --> 01:09:18.159 bought them out, did a SCADA master plan for us in 2012. 01:09:18.159 --> 01:09:22.000 One of the purposes of that study was to give us some 01:09:22.000 --> 01:09:25.399 assistance in how we sustain, maintain, 01:09:25.399 --> 01:09:29.670 and improve that system and then also how to budget for 01:09:29.670 --> 01:09:31.439 capital projects. 01:09:31.439 --> 01:09:36.090 A critical component of this was trying to develop improved 01:09:36.090 --> 01:09:39.159 reliability through redundancy. 01:09:39.159 --> 01:09:45.390 This is basically a redundant radio based system and a plan 01:09:45.390 --> 01:09:45.819 . 01:09:45.819 --> 01:09:48.119 This is the existing system. 01:09:48.119 --> 01:09:54.060 It all tends to direct its signal to northwest and then to 01:09:54.060 --> 01:09:58.039 each one of the various locations. 01:09:58.039 --> 01:10:02.239 The revised system will basically add a duplication in 01:10:02.239 --> 01:10:05.520 pathways and provide the redundancy that 01:10:05.520 --> 01:10:09.159 we're looking for reliability. 01:10:09.159 --> 01:10:14.220 So that helps us eliminate a single point of failure and 01:10:14.220 --> 01:10:17.560 gives us additional redundancy. 01:10:17.560 --> 01:10:21.600 We're proposing to use Johnson Technical Services. 01:10:21.600 --> 01:10:26.579 They're a Dallas-Fort Worth based area, a radio network 01:10:26.579 --> 01:10:27.800 provider. 01:10:27.800 --> 01:10:32.399 They are used by Denton County, DISD, City of Denton. 01:10:32.399 --> 01:10:35.159 They're also I think used by the Upper Trinity recently. 01:10:35.159 --> 01:10:37.479 They had a fiber based system. 01:10:37.479 --> 01:10:41.840 They were getting fiber cuts so they went to a radio based 01:10:41.840 --> 01:10:43.319 backup system. 01:10:43.319 --> 01:10:46.399 Project budget was 220. 01:10:46.399 --> 01:10:50.119 This is being procured through a Texas Department of 01:10:50.119 --> 01:10:53.560 Information Resources contracting mechanism 01:10:53.560 --> 01:10:57.100 very similar to a buy board so it meets the legal 01:10:57.100 --> 01:10:59.359 requirements for bidding. 01:10:59.359 --> 01:11:03.640 And with that I'll answer any questions that you might have 01:11:03.640 --> 01:11:03.960 . 01:11:03.960 --> 01:11:07.500 Is the water service or is that the only communication that 01:11:07.500 --> 01:11:08.720 happens on this? 01:11:08.720 --> 01:11:13.319 It is specific to the water department's needs, yes sir. 01:11:13.319 --> 01:11:17.960 And it's very focused on the security camera systems that 01:11:17.960 --> 01:11:18.880 we have. 01:11:18.880 --> 01:11:21.920 That was one of the bigger bandwidth issues that we needed. 01:11:21.920 --> 01:11:25.159 But then also for the control system. 01:11:25.159 --> 01:11:31.210 Some of our pump stations have supervisor decisions turn 01:11:31.210 --> 01:11:34.079 pumps on and off as opposed 01:11:34.079 --> 01:11:35.079 to having things automated. 01:11:35.079 --> 01:11:38.710 So those are run at the two treatment plants where we have 01:11:38.710 --> 01:11:40.680 staff and operations staff. 01:11:40.680 --> 01:11:42.479 Thank you. 01:11:42.479 --> 01:11:45.720 Any further questions? 01:11:45.720 --> 01:11:47.960 Move approval. 01:11:47.960 --> 01:11:48.960 Okay. 01:11:48.960 --> 01:11:51.960 Motion to approve. 01:11:51.960 --> 01:11:52.960 Move. 01:11:52.960 --> 01:11:54.680 Oh, he moved. 01:11:54.680 --> 01:11:55.680 We need a second. 01:11:55.680 --> 01:11:56.680 I'm sorry. 01:11:56.680 --> 01:11:57.680 All in favor? 01:11:57.680 --> 01:11:58.680 Aye. 01:11:58.680 --> 01:11:59.680 Okay. 01:11:59.680 --> 01:12:00.680 Thank you. 01:12:00.680 --> 01:12:01.680 Thank you. 01:12:01.680 --> 01:12:02.680 ACM, you're on, Maureen. 01:12:02.680 --> 01:12:03.680 All right. 01:12:03.680 --> 01:12:04.680 Thank you. 01:12:04.680 --> 01:12:12.090 Members of the board, in your packet there is a memorandum 01:12:12.090 --> 01:12:14.960 from George Morrow. 01:12:14.960 --> 01:12:18.350 He's our new general manager of DME and here to provide you 01:12:18.350 --> 01:12:20.079 with information about the 01:12:20.079 --> 01:12:21.359 Tesla roof tiles. 01:12:21.359 --> 01:12:24.430 If you have any specific questions related to what's in the 01:12:24.430 --> 01:12:26.039 memorandum, George is here 01:12:26.039 --> 01:12:28.039 to answer those questions if you have them. 01:12:28.039 --> 01:12:30.430 I'm just so surprised with all the roofs that had to be 01:12:30.430 --> 01:12:32.000 replaced that nobody replaced it 01:12:32.000 --> 01:12:37.800 with a solar roof. 01:12:37.800 --> 01:12:41.520 As far as, oh, I'm sorry. 01:12:41.520 --> 01:12:45.449 I would just like to just to say welcome to George and we 01:12:45.449 --> 01:12:47.640 're so happy to have you here. 01:12:47.640 --> 01:12:52.539 Yeah, if you wouldn't mind saying a little something to us 01:12:52.539 --> 01:12:54.880 and to the public about this 01:12:54.880 --> 01:12:57.880 memo. 01:12:57.880 --> 01:13:01.159 Thank you for that opportunity, George Morrow, general 01:13:01.159 --> 01:13:02.239 manager of DME. 01:13:02.239 --> 01:13:05.640 Yeah, I'm very happy to be here in Denton. 01:13:05.640 --> 01:13:07.119 This is the start of my third week. 01:13:07.119 --> 01:13:10.239 I'm fighting down the urge to think I know everything 01:13:10.239 --> 01:13:12.399 already because every day I learn, 01:13:12.399 --> 01:13:14.199 wow, I'm so far down the learning curve. 01:13:14.199 --> 01:13:16.000 There's a huge process here. 01:13:16.000 --> 01:13:18.829 It looks like you were in competent hands in the interim 01:13:18.829 --> 01:13:19.439 period. 01:13:19.439 --> 01:13:23.239 I want to compliment the work that Brian has done. 01:13:23.239 --> 01:13:26.439 Everyday amazed that he is carrying all these different 01:13:26.439 --> 01:13:28.520 buckets of projects and things and 01:13:28.520 --> 01:13:31.800 he's done an extremely great and competent job. 01:13:31.800 --> 01:13:34.300 I think our staff very much appreciated his leadership 01:13:34.300 --> 01:13:35.720 during the interim period. 01:13:35.720 --> 01:13:40.039 They're also looking forward to the new general manager. 01:13:40.039 --> 01:13:42.460 There's a lot of prescriptive things that we want to get 01:13:42.460 --> 01:13:43.720 moving forward that I've learned 01:13:43.720 --> 01:13:48.939 from looking at some of the public utility board background 01:13:48.939 --> 01:13:51.119 and hope to be in front of 01:13:51.119 --> 01:13:55.979 you many times as we move forward the organization during 01:13:55.979 --> 01:13:58.319 this transition period. 01:13:58.319 --> 01:14:02.970 Thank you all for your support during that pretty complex 01:14:02.970 --> 01:14:04.880 interview process. 01:14:04.880 --> 01:14:06.920 One of these days my goods will get here. 01:14:06.920 --> 01:14:08.920 Thank you again. 01:14:08.920 --> 01:14:12.619 I'd like to thank Brian too for the -- I know how hard that 01:14:12.619 --> 01:14:14.520 is to wear that many hats. 01:14:14.520 --> 01:14:15.520 So thank you. 01:14:15.520 --> 01:14:16.520 Thank you. 01:14:16.520 --> 01:14:17.520 Appreciate it. 01:14:17.520 --> 01:14:20.520 I'm glad George is here. 01:14:20.520 --> 01:14:25.470 And then the only other thing I'd just bring your attention 01:14:25.470 --> 01:14:27.560 to is this is the last meeting 01:14:27.560 --> 01:14:30.359 of the calendar year for the PUB. 01:14:30.359 --> 01:14:33.760 Our next meeting will be January the 8th at 9 a.m. 01:14:33.760 --> 01:14:36.489 And then again, just a reminder that we'll be moving to an 01:14:36.489 --> 01:14:38.039 evening meeting on the second 01:14:38.039 --> 01:14:39.039 meeting of the month. 01:14:39.039 --> 01:14:42.039 So the January 22nd meeting will be at 6 p.m. 01:14:42.039 --> 01:14:43.399 We're actually going to be in this room. 01:14:43.399 --> 01:14:46.529 We're able to make arrangements with another conflict, 01:14:46.529 --> 01:14:48.399 another committee that meets in 01:14:48.399 --> 01:14:49.399 this room. 01:14:49.399 --> 01:14:54.460 So we'll be in this meeting room from here on out as far as 01:14:54.460 --> 01:14:57.640 evening and morning meetings. 01:14:57.640 --> 01:14:59.640 Okay. 01:14:59.640 --> 01:15:01.640 Demetrius. 01:15:01.640 --> 01:15:07.859 I believe with the exception of the DME substation costs, 01:15:07.859 --> 01:15:11.800 which I know George is working on and 01:15:11.800 --> 01:15:15.159 will be bringing forward some information to the board here 01:15:15.159 --> 01:15:16.920 in the near future, I believe 01:15:16.920 --> 01:15:20.380 everything is covered on the matrix from the things that 01:15:20.380 --> 01:15:22.600 have been requested in the past. 01:15:22.600 --> 01:15:26.399 I think, Brandon, I still owe you some information 01:15:26.399 --> 01:15:30.159 regarding metrics on viewership and downloads. 01:15:30.159 --> 01:15:31.760 And we've been working on that. 01:15:31.760 --> 01:15:34.529 And so we'll get that to you, get that to the board under 01:15:34.529 --> 01:15:35.520 separate cover. 01:15:35.520 --> 01:15:39.600 And then we'll add that to the as part of an update at the 01:15:39.600 --> 01:15:41.520 next board meeting on the 01:15:41.520 --> 01:15:45.329 matrix just so you have that information so the public can 01:15:45.329 --> 01:15:46.560 have it as well. 01:15:46.560 --> 01:15:48.520 Okay. 01:15:48.520 --> 01:15:49.960 Then we're on to concluding items. 01:15:49.960 --> 01:15:51.960 Is there any items that? 01:15:51.960 --> 01:15:52.960 Deb? 01:15:52.960 --> 01:15:53.960 Yes. 01:15:53.960 --> 01:16:00.319 I had a suggestion. 01:16:00.319 --> 01:16:04.819 I know that we have a policy where we don't turn off the 01:16:04.819 --> 01:16:07.600 power for people in conditions 01:16:07.600 --> 01:16:09.800 of extreme weather. 01:16:09.800 --> 01:16:12.560 And that's a very good thing. 01:16:12.560 --> 01:16:19.060 And I was wondering if we could consider in the future 01:16:19.060 --> 01:16:23.159 having some kind of grace period 01:16:23.159 --> 01:16:30.159 at universal times of extreme financial difficulty as well, 01:16:30.159 --> 01:16:34.119 meaning specifically this time of 01:16:34.119 --> 01:16:38.399 year, the December, the holiday season, you see a lot of 01:16:38.399 --> 01:16:41.640 people, spending goes up, consumption 01:16:41.640 --> 01:16:45.649 goes up, and everybody is enjoying the holidays, but it's 01:16:45.649 --> 01:16:48.539 also a really stressful time financially 01:16:48.539 --> 01:16:50.960 for a lot of people. 01:16:50.960 --> 01:16:58.239 And even poor people are buying gifts for their families. 01:16:58.239 --> 01:17:04.210 And I think it would make a big difference with not much of 01:17:04.210 --> 01:17:07.119 a loss, as I understand it, 01:17:07.119 --> 01:17:12.829 to consider a grace period of December for people who pay 01:17:12.829 --> 01:17:14.159 deposits. 01:17:14.159 --> 01:17:22.960 We can certainly bring back a discussion of that item. 01:17:22.960 --> 01:17:25.960 Any other items? 01:17:25.960 --> 01:17:30.159 All right. 01:17:30.159 --> 01:17:31.159 Approval to adjourn? 01:17:31.159 --> 01:17:32.159 So moved. 01:17:32.159 --> 01:17:33.159 Second? 01:17:33.159 --> 01:17:34.159 Second. 01:17:34.159 --> 01:17:35.159 Okay. 01:17:35.159 --> 01:17:36.159 We're adjourned. 01:17:36.159 --> 01:17:44.159 [end of transcript]