Mar 14, 2022 Public Utilities Board on 2022-03-14 9:00 AM

now it is okay it is nine o'clock and we do have a quorum so a call to order the Monday March 14th 2022 City of Denton Public Utilities Board the first item is presentations from members of the public is there anyone from the public that wishes to speak I see none okay we'll move on into the consent agenda does any board member wish to pull an item from A through C I see none do we have a motion to approve the consent agenda move approved very moved Barbara seconded all in favor say aye aye opposed carries next item consider the approval of the February 28th 2022 minutes were there any changes or corrections to the minutes seeing none do we have a motion to approve the February 22 thank you and a second Larry's second all in favor say aye aye opposed all right item B consider recommending the adoption of ordinance with the City of Denton for Archer Western Construction LLC and the amount of 13 million five oh nine to 21 sure good morning my name is David Brown I am construction project manager for the City of Denton utilities today I'm here to can bring to you consideration of a project over at the Pecan Creek water reclamation plant this is called the salts handling project phase 1a and it is covering the effluent filters the aeration diffusers and the digester improvements we want to talk about today is basically the plant and what's out there today the current flows we'll talk about what tcq has as far as their recommendations and their requirements and then we'll go into what the phase 1a is and the selection process for a contractor let's look at the planet the plant is a is almost 60 years old so a lot of the key components there are at that age there's separate facilities there but it's all one big facility and and those extra things are getting old those facilities are getting old so there's a multitude of things we want to do and replace like the sand filters which are currently you sand media and then of course the diffusers that are in this project and the anaerobic digester lid so with this we're going to update it for the future with this starting of this phase so if we look at the plant just what's going on there right now it's a 21 mgd plant what's permitted through tcq and a peak factor of 46 mgd so that's the peak that's the most that it can take permitted wise our flows right now at 71 percent about 12 13 million gallons per day mr. Brown quick question yes mgd is a million gallons yes sir that's many gallons per day thank you yes sir you bet so the tcq talks about it's a 75 90 rule so it's 75 percent we are required to start design on improvements at the plant so we can improve that capacity those permitted flows and at 90 percent we're need to be in construction for those so right now we're at 71 percent we're trying we're getting ahead of the curve one thing we're going to do is let's see here I'm gonna click that one thing we're going to do is a sand filter rehabilitation it's going to be replaced with what we call diamond cloth filters sit a new technology so with that improvement we'll be able to with there's four basins out there right now with sand filters with when we've improved this we'll be able to go to a capacity of 46 mgd with one of the filters out and that's per tcq so 23 mgd per basin with that we gain through the use of these diamond cloth filters with that we have like I said a capacity increase and also automatic cleaning and we're just preparing for a next phase these are things that we're going to do to be prepared for the future improvements as well so they'll coincide also we're going to change out the aeration diffusers right now they are 20 plus years old these go in aeration basins feed oxygen to the process one of the things the new diffusers they resist fouling they're made out of a membrane of rubber latex type material instead of the old ceramic so we have a longer lifespan of these membranes and also the O&M operation maintenance costs are greatly reduced also with this phase 1a we're going to replace aerum anaerobic digester lid so the both of the anaerobic digesters will be cleaned and with that a new gas lid will be built on site and installed with this lid we'll be able to capture the gas from the anaerobic digester and we're going to put it into the gas line and eventually hook up to a landfill project for Atmos gas so it would be reclaimed gas we went to competitive seal proposal and two actually two only two construction firms a bid on it and we selected Archer Western 13 million dollars five hundred nine two two one three hundred ninety five days of construction so we would like to recommend the entry contract with for the effluent filter aeration diffuser digesting improvements for the pecan Creek water reclamation plant with the Archer Western construction LLC now if there any questions be glad to answer also have a couple of gentlemen here a lot of technical expertise we'll start off here with mr. back thanks for that presentation just a quick question how much gas that's getting regenerated that you're gonna pipe over the atmosphere are we looking at what is it what kind of rate do you know exactly what you're capturing right now this is a rusty Willard he is a superintendent of a wastewater treatment okay a rusty go ahead you're flaring that off okay so now you'll be actually capturing it okay so it's the same amount but we're capturing now gotcha okay thank you I don't know if it's rusty and I had a question about the selection on the bids yes sir so you said you only had two bidders yes sir so what was your selection criteria the criteria was based on a lot of it had to first 30% personnel 30% I'll have to get you the numbers but I'll just give us a high level of the high level was that Archer Western was there already over there on site they're doing currently doing our detention facility and our pump station pecan Creek pump station there we've worked with them that that exact management those guys over there and we've had nothing but good good rapport with those guys and they have lots of experience in doing slant sand filters and plant work so they're mainly a group that does a lot of plant work okay so basically you've got a good working relationship with yes sir so what was the rest of the criteria you were kind of going criteria was on pricing they came in under bid on the main okay bid and then also on the so they were within 25,000 on the the alternate so Laurie Hill on the purchasing manager and it's an exhibit to list all the criteria and how they scored them but we had the key personnel was 20% quality reputation and ability to complete similar projects in on schedule and within budget was 30% detailed schedule and written plan was 15 their safety record was 5 and then the price was 30 okay I mean 25,000 on 13 million that's a push thank you we excuse me we usually get to see that because it's kind of hard to grasp I mean the confidence is sure is not questionable but we usually get to just look at it yeah it was okay I like my mistake that's okay any other questions I can help with are we gonna have any supply chain issues that you're aware of I can't guarantee that but they are we've had some questions come in on the pre-bid you know with questions like hey we need to jump on this and get some lead time so I think they're and I know that he has put in the lead time on there to get some equipment all right I know that's a problem it is just about everything we're doing a lot of things even was projects that are going on right now and can this postpone the next plant needing to be built can some of this we are that's one of we will have another project of course this is a this is a phased approach it's actually a solids handling and this is phase 1a of it the next phase of that will be coming up shortly will be a first first more solids handling for belt presses etc then there is going to be another project coming up with a head works in the plant which will help with expansion as well but this this is starts us off and will coincide with a technology coming forward okay thank you other questions go ahead so you're looking at this phase 1a it's 13 and a half million dollars so what's your projection for the total refit of the plant over phase 1 a B and I presume phase 2 I mean just ballpark give it total first the total solids handling this is solids hanging project is around 54 million dollars okay this is about a third of it down yes sir yeah I'm sorry that's also a small capacity upgrade for the plant yes we're currently working on a wastewater master plan and we'll be getting that to y'all the group soon and then also there's another project that will be coming on this is is to start off our capacity upgrades and certainly you're aware that this is going to be heading that way with all the growth so this is started off couldn't plan ahead we appreciate it thank you all right do we have a motion to approve item B motion so moved okay Lee moved Larry second all in favor say I think I motion carries thank you management reports madam chair and members of pub so a couple items on management report the first one is on the future agenda items so the things that we've listed on here is just to make you aware that we have budget presentations coming to you generally speaking we'll have a couple of those we'll go through the budget for each of the utilities the operating budget and the CIP budget as well and hopefully affords you the opportunity to have some good discussion on that and then around the 11th of July then we'll be asking you to to give a recommendation to the council on on those budgets and also any rate ordinances that may be applicable as as you may be aware we are required by state law to furnish the the the adopter the city manager proposed budget to the council by July 31st and so so that's kind of the time frame but our hope is that we'll have all the information to you well in advance that you can review it and we can go through those presentations it'll be a water wastewater solid waste electric and also customer service which is primarily funded by the utilities so that's what's kind of on your agenda over the next you know couple of couple of months and then on future agenda items we still have these two items we're still kind of actively working on those I can tell you that on the DME side we've kind of run into a little bit of hiccups here and trying to make sure that we get that information but but we are working on it hope to get that to you I've been also the sustainability committee before too long so with that happy to answer any questions that you may have on any of that any questions okay then concluding items does any board member wish to have something added to an agenda or have any public comments to be made looks like no all right then we're on to the work session receive a report hold a discussion and give staff direction regarding the audit project 0 to 5 energy portfolio management renewable energy offset goals and if we start going getting into an area where it's a competitive discussion we will go into closed session well after after after talking with the city attorney we we don't have the language in there but we oh we did to go into closed session but we don't think that we will so we'll we'll try to stay away from that but if but if something does come up we can always follow up through a legal status report for you but medicine Rorschach the city auditor is is on zoom she was unable to be here with us this morning but she'll be going through that presentation and Terry Nolte and myself are here to you know go into any questions that you may have that medicine is not able to respond to yes hello can y'all all hear me yes okay great awesome I'm sorry I couldn't be there I wish I could but it was unfortunate so as Tony said I'm Madison Rorschach the city auditor I'm gonna present our findings so let me just share my screen that way you all can see the presentation all right let's green I'm having a little bit of trouble hearing this presentation Madison he where he's having a little hard time hearing okay can you hear me better now okay was that yes or no sorry that's a yes okay great all right so this this report details our findings from the second phase of this project phase one one which we presented to you earlier covered energy portfolio transaction administration and so this one covers renewable energy offset goal so it as I said we've generally evaluated compliance cities renewable energy offset goal so historically city has issued have adopted a series of plans to achieve that have been aimed at achieving a 100% renewable energy goal of achieving a hundred percent renewable energy for all DME ratepayers achievement of which is primarily the responsibility of DMEs energy management organization through the management of the city's energy portfolio since the most recent plan the Denton renewable resource plan was adopted the city has increased its renewable energy production by almost 30% and so as part of this review we evaluated how the room renewable energy goal energy goal is progress is calculated monitored and reported so to begin we found that in general there's no formal definition in a city policy or internal DME procedure for how renewable energy off for how the renewable energy offset goal progress should be calculated in addition DME has not established any standard operating procedures outlining how the renewable energy offset goal should be monitored or reported and so we recommended that they should define how the renewable energy offset goal is calculated because it will help promote transparency and simplify the monitoring and reporting process for DME staff in addition we found that the Denton renewable resource plan should be updated to reflect expected load increases and regulatory changes that for the future and then finally we found that in the general electric industry renewable energy certificates are generally used to account for and make renewable energy power claims according to industry best practices institutions or companies should retire recs or which means to formally remove them from the market in order to ensure their renewable power usage claims are being properly supported that being said the city of Denton is not required to retire recs as part of the state's state of Texas's recs program and as a utility has different reasons for making renewable power usage claims than a company would for example and so for that reason we're recommending that the city evaluate the costs and benefits of retiring recs specifically retirement of recs would likely simplify the reporting process and increase transparency as annual retirements would be publicly reported by ERCOT okay and maybe this isn't time to ask but I don't understand retiring recs can you elaborate on that just a little bit because my understanding is once we purchased them they're in motion and to retire them did we did we not fully use them or yeah so the rec program is essentially accounting system that the state of Texas's uses to require most energy providers to support renewable energy production so most people in on in most market participants in ERCOT's market are required to purchase and retire which is basically to tell ERCOT hey we purchase these and we were saying we're using them and nobody else can use them so when you retire a rec it takes it out of circulation so that it can't be purchased by anybody else and they can't make a claim that that's it's been used by them but it's still a functional item that can be used by the person who purchased it it's so it's kind of Tony or Terry step in please if you would like to but it's it's kind of like a receipt that just says okay I'm sorry it's like it's like math to me I always had a hard time with that good morning at Terry and all thesis at DME so the rec program was established as part of the the competitive retail market in Texas we don't participate in the competitive retail market work what's called a non opt-in entity so we don't participate in competitive retail but in competitive retail markets they are required to have a certain percentage of the energy that they supply to their customers to be renewable and so the rec program is the mechanism that ERCOT uses to certify compliance with that renewable percentage so when a rec is awarded to a renewable resource for each megawatt of generation from that resource it's deposited into an account for that resource in our case they're they're into the generators resource account and then transferred to us as we take power off the resource and actually happens quarterly those are awarded by ERCOT based upon the actual generation of the renewable resource so the rec once it's in the once it's issued has a three-year life and for those competitive retailers because they have a compliance requirement every year they must retire them in the year or after the year that they serve the load that they served because we don't participate in that competitive retail market there is no such requirement for us to retire the rec so we have traditionally just let them expire at the end of three years rather than to make the actual retirement request so if they're retired does that mean we can't count them in as part of our energy offset we do count them as part of our energy or offset we just internally track them to make sure that in the year they were generated they're counted against the energy that we actually consumed in that year okay and mr. Beck what I'll what I'll what I'll say is too so in in this rewriter or this update to the dental renewable resource plan we do plan to make that a topic of discussion and so I want to be clear that DME has not sold any of the wrecks that it owns as part of our PPAs right we retain them and we hold them until they expire we do not actually go in and physically retire them in this account right and so I wanted to make sure that that you're clear about that what I will tell you is that there is a monetary value to those wrecks right as Terry has mentioned we are not required by Urquhart to retire them so in the event that we wanted to monetize them we could but you could be in a situation potentially where we've counted them towards our hundred percent goal and then we sell them to company X or entity X and then they also count them so there's a potential for double counting of those wrecks right and so that's part of the consideration is that you know there's a there's a monetary value to them that could potentially be beneficial to to our ratepayers and but once you retire them that you no longer have that opportunity so that's what we're saying is we're gonna bring that up bring that back for discussion and get direction and certainly if it's the policy makers decision for us to retire them and no longer do what we've been doing then we will certainly do that just understand that now you've taken potentially one more tool budgetary tool out of that toolbox for us the policy maker being being the PB and City Council ultimately I am presuming that an REC or REC is a renewable energy credit correct okay and that renewable energy credit is issued by Urquhart yes sir okay thank you yep okay go ahead Madison okay and I just want to say we're we brought this up as part of our audit report because in the industry most people are required to retire RECs in order to count them towards their renewable energy goal offset goal but that's not true for the city so I just wanted to make that clear but we also found the same costs and benefits that Tony just outlined and so that's why it's not our recommend it is not our recommendation at the city retire RECs only that we evaluate the cost and benefits because there are some transparency benefits and simplify potential simplification of the reporting process if we do retire RECs I'll share my thank you for that clarification all right okay so just moving on to the next slide due to kind of this lack of clarity in the policy about how the renewable energy offset goal progress is calculated we calculated it in three different ways and compared it to D&E's total load as shown in the figure on the slide so the direct generation line which you can see my mouse is this red line down here the bottom line it was based on all of the megawatt hours that the city paid its renewable PPA generators so that line captures only energy delivered to the grid are really purchased by us from pure renewable energy providers the second line the all RECs line which is this kind of gray line that is right here if you can see it was calculated based on the total number of RECs in the city's ERCOT REC account so that line captures all of the RECs transferred to the city from his PPA generators including RECs that the city did not actually receive physical energy from and then finally the D&E's calculation line which is this yellow line that's kind of you can see those follows the blue line which is the load and is a little bit above at the end is how D&E calculates its renewable energy offset is there a question yes there's another question Madison go ahead Lee so I'm assuming from this graph that this is where D&E is using the RECs is in these calculations and this is pretty much your only utilization of them well so so the the REC is is in essence the evidence of the renewable energy that was producing what we state is that you know for every one megawatt of renewable energy we get one REC right I think what what's important in this graph to understand is that that red line the actual generation the difference between the actual generation and the RECs and this was likely before before you came on but back in 2019 we had a discussion with the council that we have 30 megawatts in a in a PPA where we where it's not tied to energy that we've contracted for right and so so we asked the council to allow us to count that towards our energy towards our renewable energy goal and in essence that difference between the generation and the REC is those 30 megawatts about 300 megawatt hours right Terry a year that that we're counting currently because of that contract and in essence what we told the council is we can go out there and we can contract for it for direct energy but we've already paid for these 30 megawatts of RECs right so that's about a two million dollar if I recall of additional cost that we would be incurring for rate payers as the council was good with us counting that towards our goal understanding that that contract is going to expire probably in 2023 and 2023 and so we're already actively looking to replace that with actual energy that's tied to RECs all right thank you yes sir go ahead Madison you may be on mute sorry about that as Tony mentioned some of the the yellow line accounts for PPA generators differently their generation so some of them are measuring direct generation from the red line and then some of them are measuring are measured using RECs from the city's account because some of them don't actually have generation direct generation associated with those RECs and so actually based on our assessment of DME's calculation it ensures that megawatt hours of electricity are not double counted and it is likely the most accurate method given this the structure of the city's current PPA agreements that Tony mentioned and then and including some potential data discrepancies that we noticed noted in our previous presentation to you all and so using DME's calculation practice to measure renewable offset the city's offset offset a hundred and one percent of their of its total load during calendar year 2021 so in summary we issued a total of four recommendations to DME all of which were concurred and based on their responses we believe the identified risk will be appropriately addressed and we're planning to conduct a follow-up review in 18 to 36 months in conjunction with the first phase of this audit project so we'll have one follow-up report at the end of this and that is the end of my presentation other questions all right thank you all right thank you so much well that is it do we have a motion to adjourn 931 oh very good thank you