May 21st 2018 public utility board meeting to order. Our
first part of the
meeting is in work session. Our first item in the work
session is to receive a
report, hold a discussion, and give staff direction
regarding the wastewater and
drainage fiscal year 2018-19 operating and capital
improvement budget.
Mr. Chairman, members of the PB, my name is Tony Puente,
director of finance. We're
gonna tackle this in two phases. We're gonna go ahead and
go through the
wastewater budget which excludes the drainage component and
then we'll come
back to you and we'll go through that particular budget so
it'll be a two-part
presentation here for you.
And as you can see there's a number of staff members
present. If there's some
questions that I can't answer they'll quickly get up here
and answer them
for me. So just quickly I want to walk through the volume
forecast again very
similar to what we did with the water volume forecast. We
've kind of
we've combined this together into this presentation. As you
can see we've seen
about a about a 2% 2.2% growth in our customers for
wastewater,
residential, commercial, wholesale. The total growth it's
been about 2%. We did
see a little bit of a spike there in 2016. You ever see the
cursor up there?
Yes. So in 2016 it was a little bit of a spike, 2.7%. This
budget's kind of based
on a 2.1% growth in customers going forward. A little bit
about our treatment
plan. I will, if you look, if you saw in your backup that
is one of the major
issues that's out there for us and we'll talk a little bit
about that as far as
the risk to this fund. That plan is currently out here in
2028. We anticipate
the capacity expansion to that. About 8 MGDs is the kind of
the next phase of
that of that plant or it's a new plant, excuse me. We've
seen kind of a you know
levelized actual flow by year. Kind of came down a little
bit this past year in
2017. But generally I think we're kind of on a good trend
upwards with again
we'll be keeping an eye on kind of where those volumes are
going
forward. Continue to evaluate the need for that treatment
plant. There is a
possibility that that plant could go out a little bit
further than what we
currently anticipate but we'll be evaluating as we go
forward. Some of the
assumptions that have gone into this budget and this
forecast is that all
rates are based on cost of service. Both options that we'll
present to you
today do maintain a 1.25 debt coverage ratio that's
consistent with both our
debt policy and also our bond covenants that we have.
Annual revenue funded
capital based on asset management program. Collection
system replacement
funding target is 100% revenue funded for treatment plant
infrastructure is
25% revenue funding 25% debt funding. Those have been long
established policies
for the city as the board is aware. Reserves, there's no
changes to the
reserves. 100 to 140 day range that's about 28% to 39% of
budget expenses.
I'll show you in a forecast how we try to maintain those in
both options.
Continue to use a multi-year financial planning to minimize
those rate
increases that just simply means that we only issue the
debt when we need and
when that capital is coming forward. Rate revenue forecast
is based on a
128 GPCD per day that's a gallons per customer per day that
'll be the kind of
target that we'll be looking at evaluating as we go forward
as far as
the need for an expansion or a new plant. And then the one
thing that
almost very similar to what we did over on the water side
with customer
service. What we've done here is we're recommending to
break out the drainage
from the wastewater to better target what those reserves
are for just a
wastewater operation. We do plan to create a sub fund
within the city's
financial system to better account for those drainage
operations and the
drainage fee as well and any other revenues that are
associated with that
operation. We'll talk a little bit about that when we get
to that presentation.
For a long time we've maintained in the in the wastewater
fund one million
dollar drainage reserve and well the recommendation is to
simply move that to
this sub fund of drainage and then again just dedicated to
that drainage keep it
out of the wastewater operation. Some cost containment
strategies over the
last several months we've been looking at the CIP program
not just for this
fund but all funds across the city we've been working
closely with the
departments to understand what their needs are shortfalls
any excess balances
that may be there and how we can better utilize those going
forward. We also
included a salary savings budget again this is about one
and a half percent
it's very small a percentage but we do have turnover in
that that it does
explain some of the actuals in prior years compared to the
budgets and we'll
talk a little bit more about that here a little bit and
then we do have a reduced
revenue funded capital about 1.5 million and to level out
the the five-year
contributions that's just simply to keep some of the swings
and to better kind of
match what our cash flows are in our capital projects. Some
of the future
risks and mitigation as I mentioned there is this Hickory
Creek basin new
plant that is out there in that 10-year window it's about
an 80 million dollar
plant that's forecasted if you give me a second. Currently
we're looking at about
eight million dollars in 2024 that's for design and
potential some land
acquisition as well with the remainder to be issued 70
million in 2027 again
we'll be evaluating the debt to revenue component of that
and looking for
opportunities again that's the current plan as we continue
to look on an annual
basis on the volumes that are going through our current
plant we'll be
determining what the exact timing of that facility will be.
Contractor cost
excuse me contractor cost for CIP again we continue to see
increases in those
costs and so that's something that we have to be cognizant
about as we go
forward. O&M costs we did go through last year and again
this year pretty heavily
on on that O&M cost evaluating what's there what's needed
making reductions as
appropriate. Additional regulatory requirements again that
's always
something that's out there both with the TCEQ EPA so there
's some things that
we're continually continuously monitoring as far as this
operation is
concerned. So the two options that we wanted to present to
you option one as
you saw in your backup is includes a five percent rate
decrease that does
draw down our reserves I'll show you a little bit of what
the impact is of that
option two very similar to what we did on the water side is
a two percent rate
decrease but what we've done is we've revenue funded more
capital and and
trying to reduce and the leverage if you will the the fund
going forward from
the amount of debt that is dedicated to it. So this is the
financial forecast
with the five percent decrease. I do want to point out that
previously or last year
the forecast did include a two percent two percent two
percent for fiscal year
2020-2021-2022 along with this five percent rate decrease
we are also
proposing to eliminate those rate increases in the future.
The current
projection for our for our working capital and operating
reserves is about
twelve point seven million that's well within a well above
the maximum target
if you see here the 108 target is nine million the twelve
million that's the
range of our fund balance throughout this forecast under
this scenario we
stay above the minimum we go slightly a little bit lower
here in 2022 but then
we bump back up in 2023 our debt coverage ratios you can
see here stay
well above the 1.25 percent debt coverage requirement that
we have in our debt
policy. The option two scenario for wastewater as I
mentioned is a two
percent rate decrease this this decrease again also removes
any planned future
rate increases that were there last year again if you look
at the operating
reserves 11.3 million as well within that range and also
going forward out to
2023 we're actually back up closer to the maximum of that
particular range the
the debt coverage ratio as well in this particular scenario
stays above that
1.25 target that we have in our debt policy. The changes
that you can see will
be here in our debt service I'll go back a little bit you
'll see that in 2021
it's a seven a little bit over 7 million 6.5 million in
2021 and you can see kind
of decrease here conversely to that we've increased the
revenue debt funding
for 2019 and also for 2020 that then mitigates those future
debt debt
issuances that have been backed out as a result of this
forecast. Just going
through the budget highlights this is the detail for you on
the revenues these
revenues are a reflection of option one. Staff's
recommendation to the board
today is option one is the five percent decrease as you can
see here these are
just the detailed three-year history of our revenues and
what they've done. Same
thing with on the expense side we again this matches our
option one five percent
decrease of projection for you a recommendation for you
again three years
worth of history of expenses and where they will be in 18-
19 under that
particular scenario. So the impact the impact for you today
here is the customer
residential customer with 6,000 gallons currently the rate
of that is about the
$35.55 per month if option two is is opted that's a two
percent decrease that
would decrease that to about $34.85 and then of course
option one you know gets
you further to the left here at $33.79 option one would be
approximately a
$21 a year decrease to our customers in this particular
scenario on a 6,000
gallon 50 gallon 50,000 gallon commercial customer that
that that
customer currently is paying about $284 per month under
option two it would go
to 278 and under option one is 269 dollars I apologize we
didn't we didn't
put that on there for you so if you need those numbers just
let me know for a
commercial wastewater customer 200,000 gallon that customer
currently pays about
1,056 per month option two would go to 1,036 and under
option one the
recommendation would be a thousand and three dollars that
wraps up my portion
of the of this presentation I'll be happy to answer any
questions you have
or we can go to the departmental presentation and we can
wait to the end
whatever your pleasure might be questions on wastewater so
the just
question I had was the reserve targets are based upon on
wastewater taking the
drainage expenses out is that correct that's correct that's
correct
I'm asking yes ma'am if you want to go back to the rate
reduction slides again
do you have any concerns that you're showing negative net
income for roughly
five years at all I think certainly that that is that is a
concern that's out
there as part of this the risk we feel comfortable that
based on the current
reserve balances that we have and the fact that we'll be
coming back to an
annual base basis to reevaluate that again I think I think
the fund is is
well positioned within the reserve targets and the debt the
debt coverages
that we have long established and that our bond rating
agencies routinely look
at and and so I again I think we're in a good position with
this particular
recommendation it's really occurring because we're going to
start spending
down some of those reserves that yes a little bit too high
okay thank you
good evening mr. chair and members of the public utility
board I'm here to
give the departmental presentation for wastewater my name
is Kenny banks and
I'm the general manager of utilities want to go over a few
accomplishments for
for the wastewater department and I also have the
environmental services
department as a part of this presentation too so it's a lot
of slides
I'll try to paraphrase as much as I can we have completed
the design of the
Hickory Creek lift station replacement project and we plan
on bidding this
project in in 2018 the for actual construction we've
completed the pecan
Creek interceptor phase 4 project awarded a contract for
the Cooper Creek
interceptor phase 1 and phase 2 you'll see some of these
occurring in the CIP
update a little bit later in the presentation we did
complete the update
of our wastewater master plan model and then we are
currently working through
we've completed the acquisition of the consultant necessary
for the study for
the impact fees and we're currently working through those
impact fees now we
will hope to bring some of that information back to you in
the late
summer to early fall for the impact fee updates and then we
have maintained our
in-house construction and preventative maintenance cost to
be substantially
lower than our estimates of what it would cost us to
contract those jobs out
our goals for 1819 is to begin construction of the Hickory
Creek and
West peak flow detention facility projects these are both
projects
designed to help us shape off the peak flows of the
wastewater to allow us to
have a little bit more capacity in the system and and
hopefully use that to push
out some of those planned additional plant capacities that
we talked about a
little bit earlier begin construction of the Hickory Creek
pump station
replacement process project this is the old Alton station
that we have out there
the one that you may recall that we had some damage from a
piece of concrete
coming through it several months ago so we want to get that
rehabilitated meeting
and complete of course all of our EPA administrative order
requirements
continue to have our in-house construction be cost-
effective and
exercise our preventative maintenance costs so that we keep
our overall system
wide expenses down and then complete design and
construction of a sludge
handling project at Pecan Creek water reclamation plant
this will be a big
project for us we are hoping to be able to use this project
to replace the
existing gravity thickeners out there which will really
help us on our solids
handling and help our anaerobic digester be a lot more
efficient than it is we've
been having some challenges lately with the gravity thicken
ers due to some of
the changes that we've made to accommodate our lower
phosphorus target
and the resulting solids that have come from the change of
that process so
overall budget emphasis is to deliver cost-effective
solutions that lower our
asset lifecycle cost while continuing to reduce our impact
on the environment
preventing the overflows making sure that we're replacing
these systems at
the right time based on an actual assessment of the asset
not just based on
on an expected life we want to leverage technology and our
work processes to
enable our employees to be proactive and really service-
oriented and by by
service-oriented this I really see that as a means of being
able to minimize the
problems that we have in our system by using our asset
management so if we can
reduce our mainline service calls our sewer chokes our san
itary sewer
overflows that's a means of using that asset management
program to increase our
service to the community in terms of process improvements
our asset
management plan continues to be refined and updated and
continues to be a very
effective tool for us to reduce our O&M and combine that
with our in-house
construction and system maintenance we do want to install
as I said the
secondary sludge dewatering equipment out there for the
solids handling at the
wastewater treatment plant to help us out both with the
solids and with the
anaerobic digester so a couple of things about our position
summary you'll notice
a change in the 17 18 budget from 87.25 to the proposed 89.
5 and then in the 18
19 budget we're actually not adding positions there we're
simply moving
positions from our field service technical group that were
housed in
water over into wastewater to have that be a complete
wastewater crew
essentially the the transfer from water to cover the cost
of those positions
will make this a budget neutral decision we did add a point
to five FTE you'll
notice that that difference there that was to take a three-
quarter time
position that we had to a full-time position so five-year
plan again a lot of
details here I wanted to again point out the idea of the
group assignments that
you'll see here basically that that will let you go through
the full budget that
you've been given to understand where each one of these
individual assignment
categories are being costed out in the CIP plan basically
this gives our overall
CIP plan as well as our revenue sources and the major
projects that have
outlined here are basically the Hickory Creek detention
facility and lift
station as we've already talked about we talked about the
solids handling the
West wet weather peak flow we've got a large number of
interceptor projects
that are that are coming up basically all four phases of
the Hickory Creek
interceptor are planned within this five-year CIP so this
will basically
start out at the at 377 and basically take that Hickory
Creek interceptor line
in a variety of different pipe sizes all the way to the 380
crumb interceptor so
quite a large series of changes basically just give you a
sense of it
interceptor one is a 1400 foot line replacement intercept
interceptor two is
eleven thousand two hundred feet interceptor three is
eighty seven hundred and then interceptor four is ninety
one hundred so quite a large number of big projects coming
coming up provided you the CIP map similar to what we did
with water this is color-coded by each of the individual C
IP years so you can see exactly where that project has been
planned where it's located in the city of what's the IP
year it's it's assigned to
so that's short and sweet on the wastewater presentation I
'd be glad to
answer any questions anyone has
yes ma'am yes under the the wastewater five-year capital
plan slide this one the
one it's before the ad right before that the category
number 24 the
miscellaneous category I was wondering if you could just
say a little something
to us in the public about what what what kinds of
assignments would fall under
that miscellaneous category yes do you have a sense of what
the major ones would
be under miscellaneous the short answer is it's everything
that's not in any of
the other the first beginning there are two projects that
are really tied to
this Street Department projects so they were not assigned
as a capacity upgrade
so they put them in a miscellaneous project there and
beyond that you know we
have there are times when we have the field service has to
go out and do some
some work on a sewer line that is not part of the CIP so we
put some money out
there for that anything you'd like to share anything worth
sharing about the
the variance you know from year to year anything
interesting about the reasons
for the on the collection system the upgrade projects are
the ones you know
which are the large interceptor sewer projects that can you
talk about oh sorry
sorry I'm sorry I mean under the miscellaneous category
from year to year
so for 2019 the projected for under 30,000 and then 2020
260 okay right here
yeah all right yeah in this year right here you know that
is where we have the
street projects there that are tied to that beyond that it
's pretty consistent
as you can see right about $260,000 so it's a certain
amount of money we put in
there so if you have to do something that is not funded
through the collection
system upgrade or field service replace we can you know
manage to do those projects
thank you so you're so you're saying PS as you get a little
further out it gets
harder to predict I mean these we know we're gonna have
street repairs all
wrong but there may or may not be wastewater expenditures
associated with
those until we your time about the miscellaneous yeah and
the miscellaneous
yes in generally you know after first two or three years it
's kind of hard to
predict yeah what we have to do even that happens even with
the major
projects because we don't know capacity wise are we going
to hit that where they
we will need that project or not so it becomes a little
more difficult okay any
other questions I guess the the one question I had was kind
of an overall
goes back to Susan's comment about you know budgeting a
loss and I'm all in
favor of rate decreases whenever we can do it I just want
to want to make sure
that because you know we had a two point a two percent
increase last year right
and so or this year yes and so we're going that's a seven
percent swing I
guess if you will if we do a five percent this year and
just to clarify
your last last year we had a we had a zero rate increase we
had projected a
two percent okay that's okay yes okay and that's sort of
the point of these
budgets as we're looking out four and five years is you go
back on an annual
basis and you'll read you'll refine those estimates moving
forward the
strategy with wastewater is identical to that with water is
we know we've got
some significant capital projects coming down the road we
're trying to manage the
debt service line item is as much as we can so you'll
notice in the five-year
rate decrease the debt service falls off down to about five
point three million
dollars going as high as seven point three million in 2022
that's really the
number after we take a look at our policies the debt
service coverage and
and the and the reserves that we're most concerned about in
both of those funds
we know that in the next five years or so after out there
that we've got major
projects coming forward and we're trying to create as much
capacity as we can so
as to not have a situation in the mid 2020s where we get
into a rate shock
scenario because we're talking both those projects are
going to be
significant certain tens of millions of dollars so that's
really what's driving
us we'll go back in next year we're trying to we're trying
to revenue fund
as much capital as possible stay away from certificates of
obligation and and then when we actually need those dollars
to create the
capacity in both water and wastewater treatment plants it's
there and
hopefully manage the rate increase that's going to be
necessary at that
time so the negative numbers don't bother us too much the
the dollars are
there to draw it down we're still having a fairly robust C
IP and planning for
for our next treatment plan expansion so we feel like we're
in good this this
fund in particular we're in really good shape yeah I know I
guess the not too
distant future we had we really had to step up the capital
improvement program
and wastewater because of the compliance with EPA
requirements and right TCEQ and
all that and so I just want to make sure we're not putting
any of that at risk
right well it is a self-correcting process every year we
are looking at
biggest miniatures on the on the water side we're looking
at it's going to be
close to with design and construction close to a hundred
million dollars and
on the wastewater side we're looking at about 78 million
for the plant
expansion that's that's planned I do think there's some
capacity to push that
out further on the wastewater side depending on how things
go with solid
solids handling and some of the things that we were doing
with the PS of
particulars do with his group and the in system storage
capacity to be able to
make the existing concrete plant last longer so it but
those are two projects
that are out there looming and we definitely have our eyes
on them as
we're going forward is that part of the collection
collection capital
improvements is it with that is a collection system or is
that yes yes I
mean it did the the the plant design and the and the actual
construction of the
plan is outside of this five-year IP but yes it would be in
that in that category
okay all right any other questions no
okay talk real quick about the environmental services and
sustainability
department you have a question I was just gonna say I mean
I support the five
percent rate decrease it seems like a great idea for the
ratepayers and and
very sensibly planned for I'm not worried you know looking
at how we're
doing going forward so it seems like a great plan and thank
you um I've been
before the board and talked about environmental services
and
sustainability for the last several budget cycles it's a
little bit of a of
an odd division because it's kind of spread among the
organization and so we
thought we'd kind of just go through it in a fairly high
pass level and kind of
show you the major elements of it and then you can see the
individual FTEs by
functional area so now through some reorganizations we have
landfill
regulatory compliance as a as a component of environmental
services
generally speaking we that's the same approach that we've
used on the water
and wastewater side where environmental services handles
the regulatory arm of
the of the organization we've got the water laboratory
wastewater laboratory
industrial pretreatment and watershed protection that are
all under either the
water fund wastewater fund or the drainage fund watershed
protection is
also the group that does the stormwater compliance for the
city and then we've
got the sustainability department as well a couple of foot
notes there the the
FTEs by functional area are going to be a part as I've
stated of the water
wastewater solid waste fund FTE counts but there's a couple
of other issues
that I'd like to point out the reduction of the FTEs on the
landfill regulatory
compliance was due to the fact that we had basically
cancelled the landfill
mining operation and so there were two FTEs that were no
longer needed there
the sustainability increase of three FTEs was just simply a
component of an
environmental or an organization into the environmental
services department so
those positions do not represent new positions to the FTE
new positions to
the city rather they represent new positions just to
environmental services
basically this is the the arrangement of the reporting
structure so there's two
major arms one under the assistant director of
environmental services Deborah
Vieira that has the majority of the regulatory compliance
the laboratory the
pretreatment and watershed groups and then the
sustainability side is under
the management of Catherine Barnett and that includes keep
it beautiful which is
the main reason for the change the FTEs and sustainability
and then also the
sustainability recycling and marketing group so
accomplishments for 1718 we
achieved a three star certification star is a community
rating for
sustainability a three rating for a city our size is very
very good so usually
you don't see that except on larger cities so we're doing
very well there
completed review and final approval of sub chapter 17 of
the development code
regarding environmentally sensitive areas that was a very
large project that
Deborah Vieira oversaw and got through to completion we met
or exceeded all our
requirements to retain our designation of a high performing
pretreatment
program we've received a zero compliance history score
which sounds really bad
but that's actually really good I really would like to
petition the TCQ to change
that scoring because it sounds bad but zero zero means we
didn't have any
violations we implemented the energy star portfolio manager
to track our
municipal building energy use so we're doing that that's
going to be an
interesting project because it feeds in and gives us a
little bit better data on
our greenhouse gas inventory for the for the city as well
as helping us track our
energy usage and see where we might be able to implement
some savings and then
we coordinated with SECO the Texas State Energy
Conservation Office to actually
come here and help us conduct energy audits for 10 of our
higher usage
municipal buildings and we have a set of recommendations
for for those some of our
goals for 1819 is to revise our air quality action plan
basically this plan
is a component of our overall greenhouse gas emissions our
idea there is to
basically build that out further so it's not just dealing
with greenhouse gas
emissions we'll be working on that through the committee on
the environment
we do need to draft a stormwater ordinance for industrial
sites and our
utility inspections to basically address some of our new
requirements for our MS4
municipal separate storm sewer permit we now have
responsibility underneath the
new permit to actually inspect linear projects which are
typically franchises
like gas utilities and cable utilities in addition to the
inspections that we
have to do for all the active construction sites in the
city so it's a
it's becoming a larger and larger program as the
regulations continue to
to evolve we want to draft and approve technical criteria
manuals for managing
environmentally sensitive areas this is one of the things
that we said we would
do with the committee on the environment for sub chapters
17 revisions complete
our updates to the sustainability plan adopt and implement
we've had several
public meetings and public surveys on that so we're in
process right now of
working through that particular plan we're going to expand
our sustainability
education series to include some some youth programs we
this one is one I had
to look at my cliff notes on the roots and shoots program
this is this is kind
of an interesting one it's it's an outgrowth not pardon the
pun of the of
the sustainable schools program we've done a lot of work
with community
gardens and and school-based composting this one is
basically community
volunteerism school volunteerism and so it kind of gives
the next level to
incorporate some of our already existing recycling and
community gardens and and
programs along those lines so we've been working with the
ISD to build that that
program out it's actually a program that is from the Jane
good all
association so you may be familiar with it it's a it's a
pretty neat what it
looks like so we want to complete the gas well inspection
contract haven't
really gone over this too much with the public utility
board the gas well
inspections was also moved under the environmental services
group so we have
an outside contract right now that's performing a lot of
those inspection
services for us and we want to evaluate that program and
make a recommendation
to City Council that will be coming up here very shortly
and then one of the
things that we've continued to try to do is improve that
public education for
gas well inspections we've done a lot of revisions to the
website a lot of
additional information on our enhanced monitoring that you
can access now on our
mapping application on that website see any of that data
for any well that you
have an interest in so we have a lot of performance
measures within the
organization I won't bore you with going through all these
except to say that
we're generally on target our green sense rebating fund
expenditure is still
a little bit on the low side but we always make that up in
the third
quarter because almost all of the the requests for that and
the request for
audits come in during the summer months not too surprising
so the illicit
discharge reported per number resolved of course we want to
to keep that at a
at a hundred percent average turnaround time for results
for residents with
drinking water complaints we had a less than 24 hour we've
actually shaved that
down to 18 so that's typically you'll get a response back
before the end of
the next business day the number of effluent discharge
violations that
regulated industrial sites we always like to keep it zero
we're running about
about two per quarter now which is not a bad number but one
we need to work on a
little bit and the number of on-site sanitary sewer
facilities part of the
pretreatment program actually regulates on-site sanitary se
wers so you wouldn't
think that there would be a lot of those in the city of
Denton but our
annexations have really incorporated quite a few of those
so we're we're
sitting at about 750 on-site sanitary sewer facilities that
we go by and
inspect and regulate so we're at a hundred percent right
now of our
complaints abated per number received so a couple of cost
containment strategies
just real quick we reviewed our water sample collection and
analysis we tend
to do this every few years because redundancies have this
nasty habit of
creeping in and so we're able to shave some of those off
and save about
nineteen thousand dollars in cost savings without comprom
ising any of our
quality control or pollution prevention responsibilities
and then we reduce those
two FTEs that I mentioned earlier under the landfill
regulatory compliance with
landfill mining so completed projects we finished the 301
East McKinney Street
property remediation the property right across from us
through the Texas
Commission on Environmental Quality Voluntary Cleanup
Program restructured
the rates for private waste haulers to provide a little bit
more equity there
and bring us more in line with other municipalities we also
increased
opportunities for the smaller haulers there's a an
adjustment that's been
made that makes it that a little bit more a little bit
easier to bear because
they have a tendency to be obviously not a the larger more
profitable businesses
we consolidated the recycling education and outreach and
keep it in beautiful
under sustainability as I mentioned earlier we're currently
renovating our
renovated a building at the wastewater treatment plant into
a field laboratory
this really helps us improve our analytical efficiency and
helps us keep
the the high-end laboratory equipment from from the field
equipment we
installed a permanent odor control vapor system along the
south and east
perimeters of the landfill we were using portable units
before you actually have
an item tonight about about some of that odor control
equipment that Ethan's
going to bring forward future projects always looking to
improve our mosquito
surveillance and response plan that's also one that
environmental services is
responsible for continue to develop our laboratory
information management system
and really use that to produce information automated
reports etc and
then also streamline the transfer of information the TCQ is
getting more and
more up to speed on acceptance of digital reporting and so
that's been a
really nice system there's no lost in the mail lost in the
building issues to
deal with and then of course ensure the compliance with our
new monitoring
requirements under our landfill municipal solid waste
permit so that's
pretty much it for environmental services I'd be happy to
answer any
questions anyone has
yes sir questions no I just oh okay I'm just gonna ask for
questions from
anybody no okay thank you thank Tony's gonna take the right
image now
well as I mentioned at the beginning of our presentation we
've kind of
separated this out to just bring a little more transparency
to it
Daniel Kramer is our new deputy director of operations he's
sitting right over
there and he'll be coming up when we get to the department
al section to go
through that particular section I'll cover the the
financial section of this
presentation if you recall back a few months ago we did
come to to the board
with a recommendation to utilize some dollars that we had
in our CIP that had
accumulated as a result some of these transfers and we use
that to bridge the
gap of some more 2014 bond program projects that were
drainage related the
council did approve the use of those funds back on the 8th
of May and so
those projects one of them being the Hinkle project with
Magnolia drainage
project which is a major project with project that was very
important to the
citizens as part of that program we'll be one of those
projects about 1.7
million will be coming from that drainage channel rehab
fund to to bridge
the gap on that and so anyways want to point out that for
you so just a little
bit of history here of the of the drainage believe it or
not this predates
me so I started with the city back in 99 so but anyways so
this drainage program
prior to 1999 was funded from the general fund it was
subsequently moved
from the general fund into the wastewater fund and it was a
mixture of
funding for for that function at that time about 70% of the
funding came from
water about the other the other 30% came from wastewater
and then late in in 2000
there was a recommendation to implement a drainage fee
identified the the actual
program what the cost would be that would be included in
that and and also
established the the the level of revenue that would be
needed to fund those some
of the operations that were included it was of course the
drainage operation
maintenance component the stormwater program street
sweeping program and also
to fund a limited capital program these are minor capital
projects where where
maybe debt is infeasible or economical and it's easier to
just utilize a
revenue funding those projects and we'll talk a little bit
about some of those
projects going forward for you so in January of 2002 the
council did approve
a drainage free a drainage fee in the city of Denton that
eliminated the need
to to fund that these functions from water and wastewater
and that has
continued to today I will I will tell the board I will say
to the board that
since 2002 those fees have not increased and we are
currently making no
recommendations on increasing or decreasing those fees some
of the cost
containment strategies again these are very similar to what
you've seen with
water and wastewater we continue to look at turnover we
have had turnover in in
that particular operation again is just part of the
management of that operation
we also do fund small capital improvement program projects
this year
as I mentioned we did fund some some projects that related
to the 2014 bond
program and it also utilizing mapping to reduce personnel
time so some of the
assumptions again that have gone into into this forecast no
change in the
current fee schedule again that's been in place since 2002
and I'll recommend
any changes the drainage fee is calculated based on a
square footage of
impervious surface and apologize that we had a misspell in
there incorrect word
but it's a surface drainage reserve as I mentioned earlier
to you as part of the
wastewater presentation we are showing it as a reserve in
this particular
function and then the drainage revenue for the drainage fee
can only be used
for drainage as I mentioned to you already the items that
it could cover
and there is no recommended changes for the use of that
drainage fee revenue
some of the risks and mitigations that we're doing of
course we have aging
infrastructure there are a number of channels and lines
that need to be
replaced and upgraded there's public safety concerns as
well regarding some
of the road crossings and pipes and relate to some of the
smaller projects and
contractor costs of course are always something for us to
think about as as we
look at these projects just quickly this particular
function this particular cost
center is a self balancing as you can see here the revenue
that's generated
either goes to pay for O&M any transfers that we may have
for some of our
internal service funds also to service the debt and in any
any additional
revenue goes into revenue funding of capital and it goes
into our capital
program again no rate increases no changes in the rates for
that's being
recommended at this time we do show the reserve of a
million dollars here to my
knowledge we've never used that particular reserve but it's
something
that we've maintained for just just in case so that is the
the the forecast for
you some of the budget highlights for 18 19 we're
projecting about a four point
seven million dollars of drainage fee revenue that will
come into that to fund
that operation we also have about three hundred thousand
dollars of a transfer
in that's to cover some of the cost of programs like
mosquito abatement and
some of these environmental services functions that dr.
Banks just spoke with
you about in a small amount related to auction proceeds
that's when we sell
surplus vehicles or vehicles that are no longer needed for
the city and also
miscellaneous equipment this gives you some of the budget
highlights for for
this function as I mentioned to you we do have turnover in
this fund we have
seen some turnover we've also moved previous costs that we
had here for the
street superintendent that is no longer overseeing this
operation we've moved
that those expenses out of there but again we also now have
you know Daniel
Kramer who's over that overseeing that area that his costs
are embedded in this
1.8 million so that's pretty much it again I mentioned to
you this is a
self-balancing operation function cost center for the city
any money above and
beyond those normal operating costs are transferred over
into our capital
project fund to fund smaller capital projects and Daniel go
through a little
bit and talk to you about some of those planned projects so
unless you have any
questions or if you have any questions if you don't I can
turn it over to
Daniel yes ma'am I have a question under the future process
improvement but I'm
not sure if this a question for you or yeah Daniel will
come up here he'll go
through that he'll be happy to okay thanks
evening ladies and gentlemen my name is Daniel Kramer I'm
the deputy director of
operations for the streets and drainage department here for
the city of Denton
okay so drainage goals and the compliment accomplishments
some of the
ones we've been working on for this physical year have been
the Canton
Berry excuse me can't Mary court storm drains expenses you
know year-to-date
we're sitting about eighty six thousand out of the budget
150 and that one's
planned to be completed in June Kingswood expense the Kings
wood court we
also have expenses at about 31,000 and that one is complete
out of a budget
50,000 and for the Rockwood we also is in design and that
is scheduled as long
as everything holds together be done in September with
about 20 close to 27,000
out budgeted 350,000 for now for design some of the goals
for 1819 will be the
South Bell storm drains and that is in design for future
starting at the first
of 2019 and the Smith excuse me Smith storm drains and that
is planned on
being the in the fall have some we're waiting on atmosphere
right now to move
one of their gas lines for us for that one and the oak tree
and Choctaw the
jobs have not officially been set up but they're scheduled
for the summer of 19
some of the budget emphasis for drainage is to improve the
storm drain system to
prioritize the citizens from potential flooding risk
maintain the storm drain
system reducing amount of silt and debris going to the lake
so clean out
our channels maintain our channels making sure they all
stay clean we get
all that out there reduce the standing water to minimize
the mosquito population
in the area and also maintain regulatory compliance with
the TCEQ municipal
separate stormwater system MS4 permit for the watershed
protection some of
the process improvements we've completed mapping the storm
water system from Pecan
Creek the guys have been out working on that when the
weather has been a little
off whatever they'll go out and verify all of our drains
all of our stuff make
sure that we have all the information in there all the pipe
sizes and all that
improve inlet inspection processes utilizing mapping same
with that to
verify that'll help us be able to create our work orders
and keep all of our
system digitalized so we know where everything is and what
all of our
systems are and what state they're in at all times and
customer response tracking
working on that if we have any issues or anything coming up
from our customers we
can get out there we can take a look at it document it all
so that we have that
there for us future process improvements is keep going
forward on the mapping for
the Cooper Creek and Hickory Creek to continue that process
and utilize the
mapping system to track stormwater assist inspections and
analyze need for
adding additional street sweeper for the future growth and
then update the
drainage CIP plan for current needs and future replacement
of aging
infrastructures for our position summary as Tony mentioned
earlier in the 2017
2018 budget the reduction in the head was our street
superintendent which was
brought out of drainage and he's no longer over that and
then for the
addition of our one one FTE in the 18 and 19 is for the
watershed stormwater
protection super for the intern for that one so currently
for our five-year
capital plan our main ones that we're sitting at are the
Choctaw drainage
which the drainage project was not on the original list but
it was triggered
from some neighborhood associations recent out to the
council the primos
promos development designed the discharge from their
detention pond onto
the street and caused a lot of water flowing through the
neighborhood so with
the text that also improved highway 380 to create
additional flow through the
creek this neighborhood does not have an underground water
system and Creek
crossings are undersized so that's where that one comes
into play we also had the
the oak tree drainage system which has been on the list and
was originally
listed as white Creek drainage improvements the storm drain
pipe
beginning at Audrey Lane is a metal pipe that is failing
the neighborhood does
not have an underground system from the intersection of P
aisley to Malky up to
Oak Creek there's been numerous complaints over the years
mostly in the
summer and June storms so engineering has has done the
preliminary analysis
and costs for this project King's detention pond and out
fall project
analysis has also been determined for the structure is
needed to help reduce
the flow discharge from the pond to maximize the efficiency
and also the main
pecan which is main pecan project is starting preliminary
design of the
channel from downstream of sycamore Street which was built
to the hundred
year storm system up to frame Street this will this project
is going to help
determine the future funding to relieve the downtown
flooding along Hickory
McKenney Bell so some of the some of the 2014 bond funder
projects that we've had
which is only about ten point nine million dollars have
been the Eagle
Drive improvements Magnolia Street the peck for drainage H
ickory Street
drainage Oak Street and South Bell drainage most of those
are still in in
progress is also here's a map it's kind of a little hard to
see up on the
screen but we got some of the areas that we had from the
bond funding projects
for those and some of the future projects that we need to
look at in
the future on the next section which is unfunded we didn't
have on the last bond
but we got another twenty six point nine million of
projects to help get the whole
city out of the hundred year flood plan that we'll be
looking at coming up in
the future for the next bond election that we're going
through so I just want
to throw some of that out you know the Cooper Creek
improvements for Mingo Road
Sherman Drive peck for drainage three and four and also pe
can Creek and those
are some of the locations for those areas up there okay
are any questions
yeah the 2014 projects that you just listed are those all
complete no sir not
all of them we are still working on some of those are in
process for those can you
tell us a little bit about their completion and I do not
have those all
those numbers in front of me at the moment I can't get back
to you on that
sir I can tell you that Magnolia's in the process progress
right now I'll combine
that with the Hinkle Road projects that would be started I
'm hoping this fall
and I believe peck for council just amended the budget for
that but what the
peck for is it's the the major trunk line downtown
basically we've got we had
enough money to get to from the east to get to Elm Street
so that is under will
be under construction this year we just put a put together
a engineering
contract to take that major project from Elm to Carroll and
to get it designed so
it's ready for the next bond package so ran out of funding
in order to build
that however we'll get the design on this on the books and
if we've got a way
to we can find it before funded before the next bond
package you will otherwise
it'll be one of the very first things that we recommend the
other ones are all
either in Southville also was under construction so several
of those are in
the works right now and we just actually evil I can tell
you we just had a a
couple of easement swaps orchestrated by a City Council in
order to make that
project move forward as well so almost all of those are
either in design under
construction will be completed the next year or two okay
okay
I have one more question yes sir you mentioned the mapping
of the assets that
you had there were some accomplishments there and then
future efforts would be
to continue mapping do you have a any kind of percentage
estimate about how
many of the assets you have mapped or how many are left un
mapped or anything
like that well what we have we've mapped the whole pecan
Creek I don't have the
exact number of percentage versus the whole city versus
what we have and have
not done with me I can't get back to you on that but we're
doing it as in
sections so we can get a full complete section one at a
time okay thank you
sir I have a question that's as much for us here on pub is
for anyone from the
public watching and that is you mentioned that that a
number of the
drainage project were initiated by neighborhood
associations or residents
or businesses in the area coming forward and you know
calling these issues to
your attention is there you know if there's anybody
listening who who has a
drainage concern in their area what would you say is the
best way to see
that that's addressed by the city to go through council and
for them to directly
contact their council people to directly contact the
department some
combination of both deformant neighborhood association
going as an
individual etc just based on you know what you've seen and
which which
squeaky wheels have you know most quickly gotten it gotten
the grease and
gotten the attention what we normally do is our calls will
come in to our our
drainage manager Clark Olson doll he does get a lot of the
calls for any
kind of issues or anything that we have going on he will
document all those and
put them in a file and we'll look at the the cost analysis
based on what it is
and you know where it's at if we have funding for it if it
's something that we
can easily take care of or if we have to go out and put it
on an actual bigger
project for bonds or you know we'll do that basic analysis
you know that's
probably one of the best ways that we can get a hold of it
that way is just
call through the department you know or it can go through
council members and it
will trickle down through the through the ranks and we will
get a hold of that
and go through there okay thank you thank you I had a
second question go
ahead then my second question is a more specific question
about I'm under the
future process improvement one of the items was to analyze
the need for adding
additional streets street sweeper due to anticipated growth
yes and I was just
wondering you know if you have any projection for that in
terms of the
likelihood that that that will be needed and the timeline
for the the process of
analyzing that need right okay um currently we are we are
looking into it
there's a lot of new subdivisions that are being built in
in the system and
they do not turn over to us normally till they're building
out the final phase
and towards the end because as that time goes on as
construction still going on
there's still a lot of construction debris that gets all up
in the machines
and we get all the drainage and runoff and everything from
the construction
sites so those usually come in on the last phase so I don't
have those numbers
for you right now but we are looking at all the roads that
are coming in and it
kind of bears into is you know us as you know the council
and staff how often we
want these streets swept you know what's the you know do we
want them once a month
do we want them twice a month three times a month you know
how often we want
right now we run to two street sweepers and they run five
days a week I think
four or five days a week constantly on that to do all the
street sweeping that
we have right now we can still get more capacity out of
them it just means some
that we will not hit as often as we normally do so I will
have to get those
numbers for you can tell you how many streets that we will
be having come up
and how many we hit on a regular basis and what kind of
numbers we can look at
for that I know that you know that to determine the cost if
it's decided that
another street sweeper is necessary you'd have to do an RFP
but what just
roughly you know would you estimate is the cost of it the
range of it cost for
those numbers I can't tell you an exact number right now I
prefer not to say
being this is a new environment I don't want to throw out
that number I will get
that information thank you this is this is a fun part of
the reason that we
didn't recommend any changes to the fund balances it
probably hasn't been as
managed as aggressively as we would like the past and so a
lot of questions
you're asking they're asking and we're putting together
specific plans in terms
of ways which should be the service level in the community
you know do we
have a strong management plan maintenance plan we're
viewing this is
just an area where the crews historically there's even
turnover
they've gotten moved over to other things and it's probably
not it's not
not as much of a specific plan in there as we would like to
see so that's really
their charge over the next year is to get all those
questions and answer it
in a plan a better plan in place me it seems like this is
really headed in the
right direction big it's a big project to tackle it's city
wide but it looks
really good this place this may seem absurd but I'm gonna
say it anyway when
you're evaluating your streets street sweeper the future
purchase if you've
decided to make a future purpose purchase you might look at
one that can
get close enough to cul-de-sacs because they don't really
actually make it
through the cul-de-sac and that debris ends up staying
there because they can't
get close enough to the curved road and then the other
thing you might do is
publish when you're gonna be on somebody's street so they
could like move
their car so that all the leaves would get street swept
instead of him just
going around them and then they just leave the leaves there
sorry I just
streets we want to get the debris off because it plugs up
everything else so it's
not to keep the street clean it's to keep the stormwater
system clean it's a
very visual service so yes you see the street sweeper
coming I have one
question on this may be a Tony question but on the five-
year forecast drainage
forecast we're showing in 2023 and obviously the debt
service is going down
every year but it's zero in 2023 but we just we're just not
doing the 2014 CIP
projects and those are bond funded so is that are we saying
that that debt
service associated with that is going away or is that being
paid somewhere
else the debt service that's associated you know with with
this payment here
we're CEOs and some Geos that were issued some time ago so
so they're in
the 2014 bond program that is all paid out of the general
debt service fund and
and the tax rate currently we left that at zero one of the
things that we did
talk with the council briefly about when we discussed the
use of the channel
rehab money is the possibility of issuing some limited debt
in the future
but I think that goes with better evaluating this operation
making sure
that we understand what all the needs are out there
certainly if there's an
opportunity to revenue fund something we would obviously
would prefer that
especially for some of these smaller projects right but but
again it's
currently there are no plans to issue an additional debt
and so we just left that
at zero for now okay so it's these are larger projects that
really fall under a
general obligation traditionally that's been traditionally
that's been that's
been the case simply because of the magnitude of those
projects from a from
a dollar perspective all right very good well mr. chairman
and members of the
board that that concludes our our presentation for for the
wastewater fund
that includes drainage as I mentioned what what we are
seeking from you is
direction you know our recommendation again is is a five
percent decrease in
rates with no increases in the future at least planned
currently addition to that
we are recommending no changes to the drainage fee the the
next steps for us
would be to come back to the board sometime in July to have
you formally
approve this budget and also the corresponding rate ordin
ances that will
detail out what the actual rate impacts would be of this
this forecast or this
this budget so if you have any questions I'll be happy to
entertain any questions
you may have questions I didn't have a question I have more
of a comment of
when we were gonna get back to five or two so yeah we know
that that says five
I'm still nervous about five versus two percent but I I
trust you've run the
numbers and like you said you're gonna come back next year
I hope it doesn't
swing five percent the next time I don't think it will so I
don't think we keep
our customers money any longer than we should so I'll
support the five percent
other comments
I think I said before I'm all for any kind of any kind of
rate reduction we
could do and if we could do five percent still maintain the
integrity of the
wastewater system where we're we're not any anything we've
done from a compliance
accomplishment over the last few years you I don't want to
interrupt the
program and you've already told me we weren't so so as long
as that's is that I
you know again I think it's a it's a healthy fun we made
some arrangements to
take some of the operating expense out of wastewater and so
that that puts our
puts our reserves at a better really a high level I think
based upon what it
looks like going forward and we're freeing up room for debt
service if we
need to do something in the future important same very
similar to what we
get on the on the water side yes ma'am right okay all right
thank you Tony and
Daniel and Daniel and Daniel thank you okay next item we
have in the work
session is to receive a report hold a discussion and give
staff direction
regarding the Denton municipal electric fiscal year 2018-19
operating budget
capital improvement program and renewable resource plan so
mr. chairman
members of the board again Tony pointed director finance
again very similar
presentation but quite a bit more slides we we we do have
George Morrow our
general manager will be is here and we'll be walking
through a number of
sections of this slide he and I did have to arm wrestle a
little bit for you know
for all the good slides I told him next year will be
different but we also have
some consultants here from ERC that are also gonna assist
us in walking through
the deck performer as well we've asked him to come in and
and evaluate that to
provide at least a second pair of eyes not just for for the
board but also the
council and certainly our citizens so just really quickly
want to you may have
a lot of questions on some of these items so I wanted to
let you know just
right here on slide one that they're coming up right and so
I just want to
give you kind of the order certainly if we need to get out
of order I will be
happy to do that I will be going through the load forecasts
for this fund also
with our financial assumptions we did have some requests
regarding commercial
and residential rates and how those compare and George will
come up here and
and talk through that there's also some some
recommendations that we're gonna
be making to the board to the council regarding the ECA and
and also the
related to that is the the TCRF the transmission cost
recovery factor that
we'll be discussing with you again we'll go through the
financial forecast talk a
little bit about about the debt for this fund where the
fund was as of 930 17 and
where we anticipate it would be at the end of 19 930 19
based on the
recommendations that we're making to you today George will
then come back up here
talk to you a little bit about purchase power some of the
changes in that that
are frankly driving some of this forecast we'll talk to you
as well about
the the deck performer that's the debt energy center and
then finally George
will go through the departmental presentation section
including the
capital improvement program so just very quickly here for
you again our customers
by class we see about a 2% increase in our in our customers
there's been
certainly some spikes that have been slowed down a little
bit because of the
recession and some of the slows down in the housing market
as that continues to
to increase we're likely to see continued increases in our
customer base
just quickly we are projecting 361 megawatt peak for 2019 I
think you're
familiar with some of the some of the articles and some of
the news stories
about what's anticipated for the summer this year so we are
ramping up and
anticipating some heavy usage of electricity this this
coming year some
of the financial assumptions and and again we'll go through
some of the
details we part of part of this this forecast that does
include the payoff of
28.6 million dollars of what's called the scrubber debt it
was debt that we
issued back in 2010 that's related to the TMPA facility if
approved by both
the board and the council we would come back sometime in
February to call that
debt provide notice to to investors so that they're aware
that we'll be calling
that debt and then cash fund that in in the first part of
2019 we will send that
cash payment to to our paying agent who then will disperse
that out to the
investors and then that debt will will be paid off we are
recommending no
changes to the base rates for for this fund there is a
suspension of the TCRF
that is driving what our customers will see as far as their
rates and a decrease
the ECA will be maintained at the current level and again
that is the
level that we reduced last year if you recall and the so we
are recommending
to maintain that particular level of the ECA there is an
update to these ECA
ordinance that will include the net expenses of the deck as
part of the
purchase power portfolio for the city and George will come
up here and talk a
little bit about that as well as ERC reduced purchase power
cost we're seeing
that as a result of some of our more recent contracts for
solar and wind
energy and so those are reflective here and then one of the
major items is a
reduction in the overall CIP program for for the Electric
Department we'll talk
to you in conjunction tonight there'll be a consideration
for a budget amendment
seeking authority to draw down 34 million dollars to fund a
34 million
dollar capital improvement program in in the current year
that includes also 10
million dollars of excess revenue bonds to the system
revenue bonds from the deck
facility that have that we do not anticipate using those
for the deck
facility that we're planning to use use for other electric
system improvements
that's part of your budget amendment for your consideration
later tonight and
part of this forecast that is a reduction of a plan 54
million dollar CEO
issuance that was originally planned for for this fund
again now we plan to
utilize 34 million dollars George will talk a little bit
about that when he
comes up here and then to debt fund portion of the
transmission system going
forward but to continue to draw down rate stabilization to
cash fund the
remainder of the CIP and so there'll be a huge decrease in
the planned debt
issuances for this fund compared to what we presented to
you last year so how are
we able to do this so for 2018-19 what's included is a
decrease of about 33
million dollars in in purchase power costs some of those
are attributable to
a a projected net income to the deck facility about 20
million dollars part
of it is related to the fact that we are still currently
not paying debt on that
facility George again I'll walk through that
performer with you and also a reduced TMPA related expenses
about 22 million
dollars we have a reduced CIP program that carries forward
not just in 18-19
but the five years of this program but for 2018-19 we are
projecting a decrease
from 45 million dollars to about 23 million dollars in that
program and then
finally as I mentioned just a few minutes ago we part of
the recommendation
is to fund cash fund 24 million dollars in in currency IP
we've not included any
of this and the CEO issuance at the council will consider
tomorrow but we
also recommend utilizing about 10 million dollars that we
're currently
projecting in savings from the deck operation we issued
those utility system
revenue bonds that are eligible and not just for the deck
operation but for any
other utility system electric system projects as we're
planning the
recommendations to shift those to fund the normal CIP for
this fund some of the
future emphasis is you know continued management of the
transmission
distribution system expansion program we'll talk to you a
little bit further
about that O&M of the deck energy center is certainly
something that will
continue to evaluate we are staffing up to run that
facility update the energy
risk management policy that's phase two of that process
also to bid and acquire
modern a modern energy trading and risk management system
this ETRM and then the
next item is the acquisition of new renewable energy
products to meet the
100% renewable goal that you're very familiar with continue
to to monitor and
enhance the reliability of our system including circuit swe
eps that's done by
our DME distribution crews and then to manage the overall
power supply
portfolio you know under constraints of course by ERCOT so
what you have up here
is what the impact would be of what we're proposing in this
forecast the DME
currently for a residential customer for that utilizes
about twenty twelve hundred
kilowatt hours pays about $129.26 under this recommendation
that
would decrease to $124.24 a month about 3.5% decrease in
your backup we did not
include the city of Georgetown we did have a request to
include that so that's
here now and certainly city of Georgetown is to the right
even of our
current rates certainly going forward yes ma'am so that
there's no anticipated
base rate increase but what about can you say speak to the
any anticipated
changes in cost of service adjustment I realize that you
that that can't be
predicted that far out so so that is part of our one of our
other slides and
George will talk about that there will be an update to that
so this gives you
you know this was this was as of May 3rd where DME
currently is is this this
green line just want to note that but you know about 26
entities five of those
being cities certainly fall to the right of where our
current rates are certainly
if we move forward with the with the with the current
recommendation that
would add on about another seven that would be to the right
of this and that's
based on the current rates that are published out there yes
ma'am does that
include commercial and residential rates is that lumping
those together this is
just residential yes correct but there but there would also
be an impact on
non-commercial rates yes ma'am so I asked George to come up
here and kind of
walk you through kind of the next few slides Tony thank you
good evening
George moral general manager of DME I just want to make a
few comments about
the cost of service and the rate design we're not making
any recommendations at
this point to change anything on the rate design once you
change some things
on the rate design then what you run into is some folks
that do very well I
call them winners and then you'll have some losers it will
have a zero sum
revenue requirement but when you would start playing and
moving the rates
around then we're gonna have some folks that will be
impacted pretty
significantly I looked at the 2013 cost of service study
and we have a draft or
early stage 2018 cost of service study and what I found is
what I mentioned in
that second bullet is that the residential customers are
paying less
than what you would call their full cost of service their
mathematically
calculated cost of service be honest with you that's no
different than any
other place I've been I've been with quite a few municipal
utilities and
especially municipal utilities that tends to be we we tend
to be sympathetic
to the residential customers and and they tend to get
favored in the in the
rate design process and of course if they're getting
favored that means the
commercial are paying probably a little bit more than the
cost of service so both
of those studies it seems that gap has closed a little bit
and how you do that
cost of service is you're looking at the contributions of
the of the customer
profiles when they use their electricity how they use it
and the costs that we
incur during those different time periods and the and and
and trying to do
an analysis of what what's a fair share for the residential
customers and
commercial so that's what I had to offer today in this
particular slide we do
have a in the wintertime we do have this declining block
rate once you use so
much in the wintertime you'll get a break that in part is
to recognize that
we have some residential customers that do use electric
heat and they can be
significantly impacted in the wintertime without that kind
of a cost break and so
when we did a survey of an about a dozen utilities out
there we found it broke
every which way maybe a third had a rate design similar to
us where they
differentiated winter summer and gave a declining block
discount which is what we
give to residential customers others had a flat rate you
know probably goes back
to what they've been doing for a long time they just
decided to go that way
and some have the increasing block rate so as you use more
electricity your price
goes up so there's actually no perfect way to do it but our
customers I think at
this point are what I'm saying that they're used to our
rate design and if
we move it let's say we were to move the residential rates
up you know that
would have a significant impact on some parts of that class
questions so when
you say that the commercial customers paying more than
their pure pure share
versus yes for the cost of service excuse me versus some
residential
customers are paying less are these customer commercial
customers and
residential customers kind of considered equal in terms of
their importance as
customers to DME or our residential customers considered
more important
because the residents you know including those residents
that are you know
business owners etc because they're the the citizen owners
of DME or is that not
factored in it's it just looked at in terms of you know
share of DME's cost I
be surprised if that was a factor I think all of our
customers are important
to us and rate design is more of an art than a science and
I think you know back
when they these rates were designed they've probably been
this way for a
long long time that was you know that was the policy at the
time maybe even
the cost of service showed these were the appropriate rate
design at the time
but it's over time maybe that's that's changed a bit so
that the residential
customer rates could be higher based on the cost of service
that's a policy
decision we're not making that recommendation and I can
tell you again
just celebrated my 40th year in the business we've never
really gone and try
to do anything dramatic with respect to rate design because
of what I said folks
get used to there's certain paying a certain amount of
their bill and once we
you know favor one one direction that it in a zero-sum game
then it gets made up
someplace else well so that's the trickiness of playing
with the rate
design yeah I was thinking more you know in terms of making
the in the future you
know as we've we've talked about recently when looking to
the the study
that's going to be done of the whole I forget the name of
the study but the you
know financial structure of DME and for our various
utilities looking at that
you know the cost effectiveness and management and risk and
so on looking
into the possibility of reversing the rate structure so
that the commercial
users have a have a higher rate versus residential users
having a lower rate
like what we have in water because even even if it measures
and I mean that
makes sense to me because the commercial users use more and
that
residential users use less but it would certainly encourage
conservation and be
be better for our residential customers although of course
like you said you
know then the commercial customers would be would end up
paying more so on a pure
cents per kilowatt hour basis that commercial customers pay
less but they
still pay that's what you're saying I just for the
everybody so but their
cost of service they could actually pay even less than that
so based on their
their usage profile when they're using how much they use
they tend to have
higher load factors or capacity factors they tend to use
power you know during
times when it's less expensive so they get that break and
also what you mentioned
economies of scale so yes you know I think when you when
you start looking at
cost of service there's so many things that go into it that
like you say it
could be the time the time of the day that is being used it
could just be the
sheer volume that there that people use commercial versus
residential that
drives down the cost per delivery of a kilowatt hour not a
pure cost
but cost of like like you say the pure share of the cost
which includes all
fixed cost infrastructure and all that so that's exactly
correct thank you and
it is more of an art than a science it is an art and it's
you know it's it can
be local desires you know you can provide that input to us
and the council
can provide that input and and we can you know look at
other scenarios if that
was important if that accomplished something that the board
or the council
wanted to come now you said the gap is closing so that is
something that we can
look at in the future is if that's the policy that we want
to get that gap
closer we can do that but you would never do that in one
year you would do
that over time that would be because the impact is just too
much thank you so we
we do a cost of service analysis every five years and the
18 do we know when
that's going to be I'd say we have something in a couple of
months okay we
have some draft results and preliminary results we're kind
of vetting through it
making sure yeah it makes less so I had one other slide
that I'm going to talk
about here I think I'll turn it back over to Tony for a
minute so we have an
ECA energy cost adjustment every place I've been has had
energy cost
adjustments because of the nature of power costs they're
extremely volatile
and the energy cost adjustment makes sure customers pay no
less nor any more
than our actual cost of power so when we looked at that
closely in conjunction
with this budget we noticed it did not really reference a
project like the deck
the debt and energy center didn't include you know clearly
that deck debt
and operating expenses so we'd like to come back at a later
date update that
rate schedule that would include the deck and and reaffirm
I think our
desire that we're going to look at that on a regular basis
quarterly and to the
extent costs go down see if we can share that on a
quarterly basis if the cost
go up and we need to go the other direction so all of that
what I remember
from my time in designing I've designed a couple of these
in places I've been the
rating agencies require these basically they love them
especially for municipal
utilities because of the volatility again of that purchase
power market they
so it's important that we have one but it's important also
that we operate it
and I've been talking to folks here about that operated as
if it's you know
if it goes up it goes up if it goes down it goes down and
and I think that in the
long run that's how we're planning to operate the ECA there
's a little bit of
a balance there right now we're planning to draw that down
and that's part of the
strategy for keeping the ECA fixed as long as we can right
now it's at point
zero three four one we'd like to keep it there and that
will generate with the
suspension of the TCRF factor that will generate that three
and a half percent
rate decrease for for residential customers going forward
wanted to show
the formula also I guess with this conversation so it's
your projected
energy costs and revenues and the balancing account so if
it costs less
than a prior period then you credit that to the ECA and
reduce it that way and if
it costs more than the balancing cap will be positive and
you add that back
in you divide it by kilowatt hours and that's the that's
the ECA now the
proposed calculation is the same but we'll just add the
deck expenses in
there and it will include all the revenues and that's going
to be
particularly attractive for a few years because as was
mentioned we have little
or no debt service in 19 I think we have about 4 million
and then it goes up after
that so there's going to be a significant amount of
revenues this year
next year associated with the deck operation so that could
be credited back
in that particular formula for instance question I just
want to clarify you're
going to treat it as a strict pass-through so when we are
when we need
more money we're going to get more money when we have more
than we need we're
going to give it back so you're going to treat it as a past
that's my
philosophical recommendation I think we're gonna it will
stay flat at the
moment for this I'm going to try to keep it flat for this
next budget year we
were starting with a positive balance and when we ran all
the numbers that
looked like we couldn't keep it flat but it but as soon as
we burn it through
the money we have then I'd like to I'd like to go to a more
exacting call it a
pure ECA yeah I think I think in the past we've we used to
call it over
collected and under collected and that's essentially what
we're same thing we're
talking about is you're over collected if you've collected
more than what your
energy cost actually is for this period and so and there's
always been a target
I can't remember at some point we put a target on it where
we didn't get let it
get over yeah there was a band there was it was if I recall
it was plus five and
minus five like a ten million dollar window we never wanted
to be under
collected more than negative five million nor over
collected more than five
million right and so so we may be looking at a different
band or different
way of looking at that yeah I'm open-minded that just as
long as it does
self adjust to some regular degree and I think I think like
say it's good for
both the financial security of the agency as well as the
customers they're
they're getting back in real time anything we can save if
the market turns
in our favor for instance and our power costs go down then
we can share that on
a real-time basis is is now the appropriate time to ask
about the TCRF
sure suspension of that so kind of I know that's kind of
walked through that
I know so the TCRF revenue that's the TCRF revenue we
collect from our
customers is that correct right so a couple of years ago
you established the
TCRF because we were our expenses were going up for
transmission and we really
didn't have a pot of money to compensate for that so
establish the TCRF which I
think was great we just at this point in time felt like we
could afford to
suspend it for this year where there's a couple of
different ways we could have
accomplished the same thing but we didn't really want to
play with the base
rates or touch the base rates and it was the right amount
of money was in that
pot there's about five and a half million dollars in the T
CRF for FY 19
that now we can return to customers basically and not
collect it this next
year we're hoping we can go forward the same way and I
think that's in our plan
but we'll be revisiting that each and every year if we can
continue to do that
we would if they do go up and we're not able to continue
the suspension that one
possibility is that we could roll it into the ACA at some
point or leave it
out there by itself I think that'd be a decision you guys
we talk about it some
later date and you could help me make a recommendation in
that regard so so just
to be sure the TCRF that's not that has nothing to do with
T cost reimbursements
no that's on the flip side that's our share of the T cost
that we pay other
utilities right yes and it's rising and it will be
continuing to project it to
rise right the amount we're being assessed for our share of
the grid out
there in air cot so folks like us are putting in new
projects and charging
that back to the to the electric utilities in the state so
there's a
reduction because I know a lot of the the capital projects
I guess are
classified as transmission cost so it is a reduction in
those play in hand-in-hand
with suspension of that of that fee are you saying our
transmission projects for
our CIP yes it's being reduced has no effect so these are
our share of what
the other utilities in state are investing well I'm talking
about our TCRF
right right that we charge that piece of the right right it
was meant to
compensate for our expenses for the state allocation of
cost to us our our
transmission costs that we were charged correct yes so
versus what we charge
others that's a different pot so this would be what we're
paying to use maybe
some expenses and transmission at City of Austin put in for
instance or encore
or others we get our fair share of that right build each
year so that's what
that was nothing to do with our particular CIP investment
okay all right
we'll keep we'll keep marching on I'll let Tony back
okay so so which have here in front of you we provide in
your backup it's just
our current forecast for this fund again as as George
mentioned this does include
the suspension of the TCRF going forward no proposed
changes to to base rates and
we do attempt at least you know over the next couple years
to to try to maintain
that that ECA and and and hopefully in the future look at a
more mathematical
calculation of of that ECA adjustment the 19 proposed
budget does include this
28 point million dollars to defuse the debt that's the 2010
scrubber debt we
did also talk to you about the decrease in purchase power
that you'll that you
see here this plan does include a drawdown of of reserves
in 1718 to about
13.8 million and in 19 another 27.6 million we are
targeting that reserve
the operating reserve for this fund to about 40 million
dollars is what we
would target over the plan year again in some of these
years we're certainly a
little bit above that but that's that is the plan or the
recommendation for you
the debt coverage for this fund per our debt policy is 1.25
similar to all other
utilities and this plan certainly projects to maintain us
above above that
particular measure and just just as a note with some of the
revamping that we
did of our revenue bond ordinance the rainy bomb ordinance
on the utility
system a revenue debt for the deck only requires a one-t
imes coverage so this is
certainly well above that that requirement I guess my eyes
drawn down
to 1.01 in 18 in 18 yeah yeah mr. Chairman we had we had
looked at this we
probably need to go back and take a closer look at that
calculation to make
sure that that that there's no error in that so there might
be an error in that
that's good that's correct so so for for a bond covenant
requirements we do look
at the entire utility system that's made up of electric
water and wastewater the
three combined utilities are you know are above the 1.25
but we'll certainly
take a look at that at that calculation a little bit closer
make sure it's
correct and the debt coverage I'm sorry and the debt
coverage for the deck kicks
in and 19 or 20 the debt cover the debt coverage service
the debt service for
19 20 is when it really goes up to just under 18 okay so as
I mentioned earlier
this is the the picture for you what the total debt for DME
was at 930 17 this
does not include any of the the recommendations that are
being made we
just wanted to let you know just as a reference point where
we were so that
include about nine hundred and thirty nine million of
principal and interest
for our our operation there's an additional sixty point
five million of
TMP a debt that's paid through our purchase power expenses
on our in our
budget and so this is where we were in that in that budget
as of 930 17 slightly
over a billion dollars so I know this is a very busy
spreadsheet for you but I
did want to just for reference point 1718 here's a nine
nine hundred and
thirty nine million of principal and interest that would be
out that was
outstanding at the beginning of the fiscal year we are at
the end of fiscal
year 18 19 with the proposed pay down of the of the scrub
ber debt 28.6 million we
will be down to about 848 million dollars in debt does not
include the 60
million that is out there and TMP a that's paid through
purchase power I did
want to point out that one of the positive things of paying
down this
28.6 million is that we will save about 3.7 million dollars
in interest that
the city will not have to pay on that debt by by paying it
off early so so
again that was part of our recommendation last year and and
and we
still think economically it makes sense for us to to
recommend this for your
consideration today and George will come back up here and
talk to you about the
purchase power unless you have questions about the debt
could you say a little
something about how the DME the total DME debt compares to
the total debt for
the city just so people can you know the public and kind of
put that in in
perspective certainly by far the the the largest amount of
our outstanding debt I
don't have the exact percentage for you today but it's
certainly you know the
largest amount of debt that we have out there primarily as
a result of the 200
million that we had issued for the deck for the deck yeah
yeah so close to a
billion I mean it's gone down citywide from a billion to
under a billion but
but for DM in for DME itself it's still close to a billion
so yeah that's and
part of the strategy here too and the recommendation for
the forecast and in
moving to more of a cash funding of our of our of our CAP
program is to continue
to deliver this fund just like we're doing with some of the
other funds and
so over over the over the five-year forecast if you look at
a 2010 20-year
projection you'll see continual decrease of that I think
once we get to a more
reasonable level of debt then we'll you know we may come
back in a future day to
look at additional debt in debt issuances but that would be
in the
future but for the next five years the plan would be to
minimize the amount of
debt that's being issued and brought on at the same time
you'll continue to see
debt to decrease and as opportunities come up to
potentially pay down
additional debt we'll certainly be looking at that as well
and so tell me
if this is skipping ahead too much but it's applying to the
to the debt excuse
me it looks like you know based on what we saw in the
backup for today that the
deck will be bringing in net about 10 million a year so you
know originally we
had been told that the deck would end up paying for itself
you know in relatively
short time but at that rate it this rate now you know given
these new figures it
looks like it wouldn't be for you know I don't know 20 22
23 years something like
that so whatever is gonna make up that debt service it's
not gonna be primarily
from the deck and and a couple of slides we'll certainly
dig into that with you
probably answer your questions a little bit more succinctly
okay thank you so you
know the most significant part of our budget is purchase
power you know
figuring out what the markets are gonna do and and you know
we buy our load from
the market and all of our resources are sold to the market
so there's kind of a
netting thing going on so the keys key assumptions in the
purchase power
forecast was the deck being operational by July and we're
hoping earlier than
July Gibbons Creek will be operational through September
and I recall you were
with me to recommend we continue that at least through
September we use forward
air cod market prices as per the standard and pours global
forecast and
we try to match it up with past market profiles to map out
the costs and
revenues going forward we have the bluebell solar one
project operational by
January of 2019 that's be our first solar Santa Rita wind
became operational
in April that's gonna be a nice resource for us
particularly this summer we have
gas prices as per NYMEX forward curve and the other
transportation and adders
that you're familiar with also all of our resources are
pretty well locked in
per contract so all of our renewables so we know what those
prices are and you
mentioned talked earlier Tony did about the load forecast
which we updated and
we had that validated by an outside entity so it was
mentioned earlier about
the the revenue assumptions how much the deck might
generate how much TMP a might
generate as well as all of our resources what's the you
know what is the value of
all those that operate going forward and right now we're
forecasting a fairly
high market it's you've heard about the scarcity of power
this summer so market
prices have gone through the roof so to speak question
because what will actual
prices be the day of will they be the same as the forwards
we're looking at
right now what they decline so there's a whole lot of
subjectivity there we're
doing our best and and we consulted with our outside
council also our outside
consultants on this so one thing we did is we ran a
scenario where we soften the
market forecast we reduced the deck revenue by about 11
million dollars just
to see what would happen everything else reduced okay the
cost of our load that
we purchased as well as all of our other resources and we
found there was only a
very nominal increase in the net purchase power budget
about 2 million and
18 and 2.6 million and 19 if it turned out to be a lot
bigger or worse than
that and we probably would have come in with a more of a
conservative forecast
so right now we're sticking with the market forwards that
we're seeing out
there that have been validated to us and knowing that if
for some reason the
market doesn't develop like they're predicting that the
impact will be
fairly modest and will you know probably come back at some
point in time and
make an adjustment on our budget some of the deck
assumptions you've heard us
talk before average heat rate of 8300 BTUs per kilowatt
hour tests so far make
that look good we're going to be coming in under that
talked about natural gas
prices we're not predicting any maintenance or forced out
ages for 19
brand-new unit like having a brand-new car I think it's
going to operate we
reserve a part of the deck capacity for providing ancillary
services in the
market we have an ancillary service requirement and we're
going to use the
deck for that talked about forward market price profiles
deck operating
hours limited as you know by the missions permit that will
be about 3100
hours we're not predict that would be about 35% capacity
factor our
presumption for this next year is a substantially less than
that so even in
the best case where we're looking at a lot of revenue for
18 and 19 we're going
to be well under that 3100 hours we look at variable O&M so
what are all the
costs that are impacting the deck such as the the SCR
catalyst the ammonia that
you approved recently the lube oil contract you approve
some of that gets
consumed and all of the other variable expenses out there
we add that to the
fuel price and we say okay this is the number we have to
get when we sell power
to the market we have debt service and of course we talked
about that already
and there's other deck related expenses the the people who
are going to be
there operating the plant and other types of expenses at
the plant so all
that's rolled together in the pro forma and this is what
resulted out of that at
the top you see the revenue and that includes energy
revenue as well as
ancillary services and then you have all the expense
categories below we talked
in FY 19 about the debt and you can see the 4.4 million
there that would be what
what our schedule is for debt that year and then moving
forward we broke out
principal and interest in two pieces you'll see that's that
will be about
17.6 million pretty well fixed going forward so we
incorporated that and
you can see then we sum up all the expenditures you've got
a kind of a net
income board member referenced earlier that first two years
we look pretty
good at this time we're seeing predicting that you know all
of the debt
cannot be covered by the market revenues but a substantial
part can in 1920 for
instance the third column we're predicting not being able
to cover 1.8
million with the current crystal ball that we have forward
but we're still
covering the other part of that 17.6 million debt service
so we're covering
quite a bit of it and we're only not recovering a part and
then it gets a
little worse going forward because we're we're seeing the
market getting back to
more normal condition there'll be some incentives for folks
to put in more
power plants out there try to manage their load because
there's going to be
very costly summer this year and next year and and we think
eventually that
market's going to get back to normal so there's going to be
a bigger gap out
there but even at the far end look at 2021 22 and 2022 23
we're still covering
at that point even about 6 million of the debt we're upside
down the 12 was
also mentioned long term it's about things about 17 years
out there because
that the debt service didn't start right away so it's a 20-
year revenue bond but
the debt didn't start to like the third year so there's
only going to be 17 more
years at that point in time that 18 million dollars
disappears so that helps
the economics at that point we'll go back to you know where
it probably flips
the other direction and we're making more money than we're
then we're taking
in the other thing is you know be honest with you who can
predict the markets
even one year this you know we have to do we have to make a
projection and
projections are going to be what they're going to be wrong
and so yes I think I'm
going back to Deb's question about that we were going to
save so much money I
think that's maybe a better word this is how much we're
going to be able to cover
the debt but if we didn't have the deck we'd be at the
mercy of the markets and
I what's that piece it I think that's where they were
trying to make those
assumptions when we were looking at the deck that's missing
from here this is
what it's costing us but what could it have cost us if we
had to go to the
market for everything so you know the answer to that yeah
yeah who knows now
in our in our forecast that top line is sort of what we're
getting the value for
the deck so if we needed that to offset like our load
purchases that would be
what we would end up paying is that top line so we did try
to account for that
when we did that net income at the bottom but again who can
predict right
you know it probably wouldn't take many hours of the
maximum price at aircott to
generate a tremendous amount of money and I don't think
that's going to happen
this year but there's some folks that think it could and so
as more and more
these big units retired so this year we had over 5,000 meg
awatts of
conventional power plants retiring who knows what the next
shoe will drop and
that that's what's generating the crisis right now in the
market and it could
happen again others say hey we can't afford to compete with
that that cheap
natural gas can't afford to compete with the deck for
instance or some of the
renewables that are coming in and other other generation
may may disappear so I
I don't think any of us will know I I think she had a good
question and I'm
just trying to put the pieces together so we have did a
sort of a
straightforward income cost analysis but the jury's out
exactly how the deck
will perform this is certainly more conservative than what
was probably
predicted way back when yeah George what can I go back to
that just a second so
the revenue the deck revenue at the top goes from you know
31 million this
primarily this summer I guess it is yes part year part year
and then to 19 in
2022 23 so is that is that a function of the price we think
we're trying to
project with the price of it was what that electricity
generation be worth
right or is it volume is there a constant volume here is it
all 3100
hours no the volume when you read out there's probably only
half of what it is
in the 19 timeframe because it reacts to the market and
when the market says it
will make a profit it runs and so we basically we got back
to a normal and
these are projections that others are making for us and
helping us when we got
out there ways we thought it we went back to the market
that we saw in 15 16
and 17 much more normal market and who knows and so you're
not being called on
as much because the market doesn't need you market does not
need us and then the
pricing doesn't support a lot operating a lot less as much
as a half yeah you're
not producing at a profit correct I'm just trying to get a
sense of how
conservative this is if it's conservative realistic or
middle of the
road it gets more conservative as we go out okay and right
now we think there's
some haze on the crystal ball but we see it pretty good for
this summer and next
year yeah you know based on what everybody is saying and we
're gonna
watch it pretty carefully and and I'm sure we'll be back
talking to you about
how that deck actually did this summer including all our
resources you know
how's the how's the coal plant can operate we're kind of
counting on it
also to generate some revenue and and operate and it has
started up it's going
through its testing for summer it all seems to be well but
we really need that
unit also to run to you know to get the kind of performance
that we need for our
budget for this next year so and that's why we talked so
much about the purchase
power and some of the and some of the budget stuff got a
few other slides if I
jump to them and I'll happen to answer any more questions
but so here's our our
position summary we're adding two positions to the deck
right now it can
only operating two shifts and we'd like to be able to if we
find out this summer
it supports it to add a couple of additional positions
gives us 24 hour
coverage right now we'll have to you know run some overtime
with people in
order to get to that 24 hour coverage I think normally well
we're gonna find out
how how that's needed and then we've shifted a number of
other positions to
some centralized city functions about nine other positions
have moved have
moved elsewhere a few other slides that you saw probably in
some of the other
presentations today and I think Tony touched on these one
of the biggest
objectives we have is to implement the Denton renewable
resource plan get us to
100% renewable by 2020 everything is on target for that
where you've recommended
approval and the council did approve blue bales solar -
that's going to be a
great resource for us we're in the final stages of
evaluating the proposals from
the New Bronzeville's RFP they look they look really good
and so we're excited
about that and then we'll have one other tranche that will
be looking at some
coastal wind and we'll be going forward with that here when
we close the door on
the on the New Bronzeville's continuing to work on the as
Tony mentioned our T&D
program we've as you saw in the report we've downsized our
capital program we
tried to live within the financial realities that we have
we're trying to
put more cash into it over the budget horizon we're
actually funding a hundred
million dollars of cash to carry that budget plus the 24
million that Tony
talked about for this year that you'll be asked to approve
that transfer to us a
little later in the in your in your program and and and
really the key here
is maintaining competitive rates we're actually getting
more attractive every
day the competitive suppliers are hurting out there because
a lot of them
are not hedged quite as well as we are we're gonna actually
be hedged quite
well this year they're gonna be going to the face of that
heavy market I have one
company that I'm familiar with very well a private supplier
that their rate piece
other than the T&D part has gone up 48% in the last two
months and I think we're
gonna start seeing a lot of these other competitors start
moving to the left of
us and we're going to be moving to the to the other side of
the of the rate
thing and getting much more attractive so that's a key
driver for us is to keep
costs down which means we can keep rates down Denton Energy
Center has reached
mechanical completion we're running all of the tests right
now performance tests
heat rate tests emissions tests preliminary basis look
really really good
much more testing to go and we've continued our T&D group
our engineering
group to put in into service many more pieces of the T&D
expansion program we
actually have a wonderful T&D system out there it's going
to be a great system
that's going to stand the stead for Denton for many many
many years and and
very proud to be a part of that there's a lot of great work
that has gone on
there's been a massive amount accomplished over the last
five years
and folks involved in that deserved a quite a bit of credit
it's it to get
this thing done and then you heard about us moving to the
platinum level for
reliability and that's going to be even more of a focus for
us going forward
because we think that's what the customers see and that's
what they want
is increased reliability we have budgeted some money to do
a LED streetlight
retrofit program talk with the folks just even today we
want to come back to
the PUB and get your input of hey where might we spend that
money we're probably
looking at main thoroughfares and maybe some other
residential areas to start
with but maybe there's some priorities that you have or
some thoughts you have
about where increased lighting levels and more efficient
lighting levels would
make sense to you just I think that that can really be a
beneficial program for
that for the utility and for the customers so I'm gonna
just move past
this or actually something that you said during the last
slide you I think if I
heard you correctly you mentioned something about the
preliminary
emissions testing being underway so if you could clarify
because there had you
know had been some confusion about what yeah so if you
could say you know what
the difference is between this preliminary emissions
testing and the
emissions testing versus just testing the engines because
we had emailed back
and forth and yeah if you could just clarify that right and
maybe we weren't
clear way back when so when we were talking about the
engines testing
starting but testing includes tune-ups for emissions and
tune-ups of the engine
so there is an element of that before you run the official
formal emissions
tests you do run some some informal testing and we're
seeing some really
incredible results of NOx being eliminated from the the a
irstream as a
result of this SCR system we have out there so I you know
we'll see the
official results and I think I think we're all gonna be
pretty happy about
that but let's wait and see what how that turns out okay so
what so we'll see
the results of that preliminary those that preliminary
emissions testing that
that comes with the testing of the engines I mean I'll tell
you what I what
I was told so Chris you're here you can validate so we took
a look at the air
emissions right from the deck 88 parts per billion NOx and
then after the
treatment by the SCR's less than one part per billion so we
went from 88 to
less than one so I've that just seemed like a dramatic
result but let's see how
the official test turn out so that kind of gives us some
indication that the
engines and the system is working and that's for NOx for
not you said and did
you do for VOC's no I don't know do we
will come up who's this young man
his limit yes sir we've started the the emission testing so
if you we sent out
the the testing plan so all of the eight or nine components
that are in our air
permit are all being tested at the same time so at this
point we've completed
the hundred percent test which is required by the TCEQ so
some of the data
is preliminary you can see it coming out they still have to
do some calculations
and make those official and we'll have that in about ten
days ten days the some
of the tests the particulate matter actually has to dry in
a lab for eight
days so that's why there would be about a two-week
turnaround till we'll get the
draft report so we'll get that all back and then we'll
present that to the PEB
and the council when we can get on the agenda there but but
that testing is
ongoing we'll have about eight more days so we're actually
testing some of the
other engine loads in the same manner that we had to do for
the TCEQ so we'll
have a full spectrum of tests that we'll be able to report
that data okay
thank you thank you that makes sense thanks
everything's looking good so the numbers are coming in
there have been no
concern so we have as you know Wardzilla has to make ready
they have to make
right they have to meet the limits there have been no
issues there they're
they're coming in at numbers that are that are incredible
so so they're
meeting the numbers that's specified in the contract
excellent things see why I don't have to actually know
everything because we have
somebody like Chris on staff okay so I was moving along and
here's our capital
plan and I think the rest of this report will talk about
the capital program
169 million over the five-year planning horizon 107 of it
paid for by revenue
and that means about 35% of it at this point we're looking
at needing to
finance and we're gonna try to be minimizing that because
as was pointed
out earlier that you know we have a significant debt load
out there and and
part of it is not spending as much and what you do spend we
're trying to write
the check for and not borrow that money so it's kind of a
two-part strategy and
and again I appreciate all the folks at DMA that are
working with us hard to
try to recast the program in a way that doesn't adversely
impact our our
transmission distribution system and I think we've kind of
accomplished that at
this point I'm glad you said that because that was going to
be my question
right that's a pretty large reduction but it is not going
to impact
reliability right so that's also my concern and I've tried
to evaluate that
every different approach that I could and I feel good at
this point that a
lot of the program was getting us ready for five ten and
even twenty years down
the road and we could you know it just made sense to do a
lot of things at the
same time if you could if you had a big bank account and
there's some
efficiencies and and just going forward and building a lot
of substations and
and lines and so forth but at the end of the day I think at
the end these are
this will be a cost-effective way to do this because we're
not actually paying
rent on facilities that aren't really critical to serving
customers for that
five ten and twenty year period so but there's still a lot
to do our folks
will be busy for the next five years so I think we have
some nice copies of
these maps Mary so it might be a little difficult to see so
we've got a couple
of maps for you this you probably used to this if you've
had our budget
presentations in the past these are our feeder extensions
and improvements so by
color coding you're looking at the seven different major
feeder improvement
programs the one I like is this one this shows our planned
residential and
commercial developments sometimes you might be wondering
hey what's going on
in Denton and this second map is actually very interesting
you can look
at the key on the left and residential commercial programs
that are being
planned out there so let's see Jerry anything you want to
add about what you
have to you good okay all right well there's a lot of work
here and there's a
lot of planning you know our number one priority beyond
keeping the lights on
almost every minute of the day is serving new customers so
if you look at
the map that that's the red the green and the blue you can
actually see the
things that are happening right now all the different new
customers that our CIP
budget needs to extend service to those customers and it's
a lot of
information in a short period so down the road if there's
questions and you
guys want to talk any more about some of these things we
can we can program that
for you
this one's a little more clear up there you've seen this
before this is our the
major transmission and substation facilities you know the
biggest change
in our system was moving from 69 kb to 138 that was a
massive undertaking
required us to upsize a lot of facilities you know replace
older 69 kb
substations that were not capable of being run at the 138
so and as we talked
before the big purpose of this particular arrangement is
for Denton to
be a conduit of power to folks to the east of us when you
look at the growth
rates of the you know the Prosper's and the Frisco's and it
's a pretty amazing
and I think Denton is slowly moving in that direction our
growth rates are are
moving forward as you can tell from that when that one map
that showed all of the
new things happening in town so so still a lot of work out
there I like this thing
this is in your packet today it's also in the presentation
if you want to know
when a certain substation is going to be built what's the
time frames for that
you can follow the money you can see Hickory will be
starting hard toward
that in 2019 I think Hickory is going to be a major
important substation that's
going to help us you know enhance the capacity and
reliability of the inner
city in Denton and so I'm looking forward to seeing that
project moving
forward I'm gonna ask a question wasn't maybe I'm getting
my substations mixed
up wasn't the Hickory gonna be a larger price tag than that
am I am I mixing up
my substations oh gotcha
good point very good question so so all this information is
there I it wouldn't
make sense for me probably to go through it at this point
in time but we're
always available to you have questions you know shoot them
to us and we'll get
you the responses so I say still a lot of a lot of work
that we're going to be
undertaking going forward so and with that I'll turn it
back to Tony
so mr. chairman and board members just as a reminder we do
have our consultants
here they're available if you if you have any questions I
do want to
go back to the slide again just to reiterate our
recommendations today for
you include the payoff of twenty eight point six million
dollars in that TMPA
related callable debt what we call the scrubber debt that
would be part of the
recommendation no changes to to the base rates there is a
recommendation
recommended suspension of the tcrf that as we talked about
the impact to
residential customers is about three and a half percent
decrease in rates
maintaining the ECA at zero three four one and in addition
to that we would
recommend making a change to these ECA rate ordinance that
would allow us to
include the net deck expenses in that calculation so and
and finally the the
other recommendation that's included in the forecast is
that we would cash fund
certainly all of the distribution related projects for DME
and then we
would use a combination of revenue funding and debt funding
of the
transmission debt going forward at least within that five-
year window so that
that wraps up our recommendations for you certainly if you
have any questions
of staff or of our consultants we're here to for that
purpose
chairman questions I know that's and that's a lot of a lot
of information
this is not the last time we'll see this either before we
that's correct and just
so the board knows we will be presenting this to the
council tomorrow night along
with the with the budget amendment that we're also
proposing for you tonight the
council will also consider that tomorrow we did let the
council know that we were
making this presentation and any recommendation from the
board we would
let them advise them of that tomorrow okay yes I like to
ask the consultants
just because because they're here I'd be curious to know
your take on the role of
the deck in debt reduction versus the role of our solar and
wind contracts and
paying into that that debt reduction
good evening specifically with regard to the debt reduction
that's not something
that we've looked at we were asked to look at projections
for deck revenue and
the net effect of that so that's what we looked at and we
had some discussions
with regard to financial projections related to market
expectations and
forward prices going out into time so any translation of
that into the effect
on debt is something that your staff has done so that wasn
't that wasn't sort of
an arm-per-tip yeah yes so what so what what do you see as
the cycle for the
life cycle of this kind of gas plant in terms of
profitability that depends on
where prices are going to go in our discussions with the
staff you know one
of the points we made is that this is probably the greatest
period of
uncertainty we've seen in the market about 20 years George
had indicated
you've had 5,000 megawatts of generation that has been
retired or threatened to
be retired a lot of changeover in the technology I think
this is a point that
Neil has made recently which is that 20 years ago you had a
substantial change
in technology when gas was coming in to really compete with
coal now you've got
renewables coming in competing with gas and coal is going
out so that
uncertainty makes it very challenging to do financial
projections and if you look
at some of the projections that were in the in the
presentation those reflect
sort of the lower gas case that was in the Brattle report
the lower gas case
that was in our renewable resource presentation as well so
I think that's
something that is likely to be sustained there's a lot of
gas that doesn't even
have a place to go right now in West Texas because so much
the the pervian is
just a huge activity of new drilling so I think that low
gas case that we had
integrated into our presentation in our projections I think
is the best case to
be considered going forward right now you've got this
uncertainty a lot of
fear in the market that's driving prices up over the next
couple of years in the
foreign markets that can always happen again but I think
how George's
projections had gone to resolving to a lower gas case I
think is the best
estimation going forward okay thank you thanks a lot
Mr. Chairman any other questions or questions from anyone
any suggestions
directions we want to give at this point
I think do you want to see these easy come back more often
in the future
yes ma'am certainly our recommendation is that that would
come back to you
quarterly and also to the council on a quarterly basis yes
correct yeah I think
that probably has been the ECA has been such a stable at a
such a stable level
for so long and it really had didn't did not need to be
addressed often and I
think that's a good suggestion I think we'll see a lot more
volatility so we
may be forced to look at it okay all right thank you Tony
thank you
bonus points for anybody who can refold the maps I could
very good okay okay
so we can now go into the regular meeting unless I'll let y
'all make the
call if you want to take a break and then come back in
about 10 minutes or
if y'all just want to push through the agenda push through
okay very good okay
in our regular meeting then we have a consent agenda we
have four items on the
consent agenda for consideration is there any member of the
board that would
like to have any of these items pulled for individual
consideration don't throw
anything at me B it's a quick question okay all right so B
is pulled any
individual member who would like to pull items a C or D off
the consent okay
hearing none is there a motion then for the remaining
consent agenda items a C
and D move approval have a motion and the second any
discussion all in favor
say aye any opposed okay item B you said who's here for B
anybody here for B it's
a really quick question Ken the price differential was so
huge how do we know
they can really do it for 297,000
those are usually always a mystery for all of us also but
this company in
city form was formed in 1980 and they have done millions
and millions of feet
of this all over the US and outside the country so we have
absolutely no doubt
and they're from Missouri I'll move approval okay
quick question was answered and Susan's made a motion to
approve is there a
second second Charlie any discussion all in favor say aye
any opposed same side
okay under items for individual consideration we have the
minutes of the
public utility board of May the 7th 2018 that it part of
your backup are there
any changes questions suggestions on those minutes hearing
none is there a
motion then to approve the minutes as presented recommend
approval and a
second second and a second any discussion on those all in
favor say aye
any opposed same sign item number B which is to consider a
recommendation to
adopt an ordinance of the city of Denton Texas amending the
fiscal year 2017 18
budget an annual program of services of the city of Denton
to allow for an
adjustment to the electric fund of 24 million dollars for
the purpose of
funding capital improvement projects and solid waste fund
of seven hundred and seventy four thousand six hundred
eighty two dollars for the purpose of funding a reimburse
ment to electric declaring a municipal purpose providing a
severability clause providing an open meetings clause
providing for an effective
date so mr. chairman Tony pointed director finance just
really quickly we
talked at length about the 24 million dollars we would have
to amend the
budget to have the authority to then transfer that from the
operating budget
to the capital improvement program if part of your backup
we've included with
you the detailed listing of the projects that would be
funded total of 34 million
the remaining 10 million would come from the the excess
revenue bonds from the
deck to complete that that program of 34 million many of
those projects are
actually already underway and are in desperate need of this
funding in
addition this budget amendment also amends the solid waste
fund to have the
appropriation to be able to transfer the portion of the
substation project that
does not include these missus primarily the land back over
to the electric fund
slightly or slightly over seven hundred thousand dollars
and just so the board
knows that's already factored into the performer for
electric again a small
amount but it's already part of that as well so if you have
any questions I'll
be happy to answer any questions you may have just a
question on the the original
54 million dollars what was the what was the plan as far as
how much of that was
debt how much was revenue funded on that the entire amount
would have been CEOs
okay that was the plan so we're basically taking that
essentially to 10
million we're training we're using the decks CEO that's 10
million of that
revenue bonds revenue bonds yes sir we would use that to
fund that CIP okay so
that's a net savings of 44 million dollars in debt
basically that's correct
all right any other questions no is there a motion then on
item B
approval we have a motion and to approve in a second any
discussion all in favor
say aye opposed same sign okay item C is to consider
recommending adoption of an
ordinance in the city of Denton Texas the Texas Home Rule
municipal corporation
authorizing the city manager to execute a contract for odor
neutralizer
chemicals with probe America ink for the landfill providing
for the expenditure
funds therefore and providing an effective date in the
three-year not to
exceed amount of 130 thousand dollars good evening members
of the board my
name is Ethan Cox I'm the director of solid waste this is
an item that we had
brought forward for your consideration about a month ago it
's backed by popular
demand I appreciate you have some very informative
questions last time and I
apologize for not being prepared to answer those so we did
go back and
review some of the safety and concerns regarding the use of
this chemical the
chemical again is is aero pure it's brought forward by a
firm known as probe
America what I've included in your packet tonight is the
safety data sheet
that that's basically put together for any firm that
manufacturers or utilizes
chemicals there's a few sections in there that if you're
interested I would
emphasize kind of taking a look at namely that section two
that is basically
identifying is this a hazardous substance it is most
definitely not in
addition sections eight which requires personal protection
for handling this
material this material requires no personal protection for
use of our staff
and then section 11 which is all the toxicological
information just to kind
of briefly go through some of the high points here the
arrow pure mixture is
100% biodegradable it's non carcinogenic non-acid non
acidic non hazardous
non-irritant it's also safe for use in the food industry
there was one other
firm that put in for this I do not have the SDS sheet for
them but one of the
reasons our firm selected arrow pure is because it was much
safer than what
we've used in the past and they feel confident that this is
the best option
for us moving forward so with that I'll be happy to stand
with stand for any
questions that you might have so it was more pure
appropriate in this case is this product aerated typically
what we'll do you do
have some some machines on site that can spray this into
the air a lot of times
we mix it with the water for our water trucks so we're
doing dust suppression
and odor suppression at the same time we found with some of
the the stuff that
we were spraying into the air it just wasn't quite as
effective as we would
like so essentially what we're doing is a two-prong
approach we have the
perimeter wall or the perimeter fence that sprays some mist
to try to knock it
down on the perimeter this is used more in direct contact
with the waste and on
the roads surrounding the active working face
in terms of the MSDS that though the SDS my understanding
and I may have to
refer to dr. Banks on this a little bit most of the SDS is
done through
laboratory testing I believe in the SDS sheet that you have
there or the packet
that I gave you there are some testing firms in the back
part of that so
laboratory reports etc that are included in that you see
that in your packet
it is this this firm the firm is based out of the UK Aerop
ure America is their
North American arm of the organization I notice we first
just berry yes it's kind
of like going to the dentist you get a mix of I don't know
if there is a taste
taste testing or anything like that but we'll give it a
shot I just want to say
thank you very much for going back and doing that going
through that due
diligence I really appreciate it it does relieve my mind
quite a bit certainly
appreciate that
to prove
second Mr. Chairman members of the board I'll be real quick
really the only thing
to report is in your in your agenda packet is the PCW RP
wet article that
was provided by PS Aurora if you have any questions mr. or
is here to answer
those but other than that nothing else to report
very good closing items and a section 551 to take a look at
the public specific
facts and information the recitation policy or accept the
proposals place the
matter on the agenda for upcoming
saw the ACM for future
guess for me I would just like to see and for the public
the results of their
preliminary emissions testing that they've done with the
with the engine
testing you know item by item knocks VOCs and that would
just be interesting
be good to see for the public thanks I move we adjourn
I'll second