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