Jan 23, 2023 Public Utilities Board on 2023-01-23 9:00 AM

Okay, it is nine o'clock and we do have a quorum. So call to order the Public Utilities Board for the City of Denton from Monday, January 23rd, 2023. The first item is presentations from members of the public. Is there anybody from the public who wishes to speak? Okay, I see none. Before we go into consent agenda, we're going to change up the timing of the closed session. We're moving it from the end to right before the work session. So we'll go into closed session and we'll reconvene and do the work sessions. Consent agenda, does any board member wish to pull anything from items A through F? All right, I am going to pull C. Do we have a motion to approve items A, B, D, E, and F? So moved. Moves. Do we have a second? Barbara seconds. All in favor say aye. Aye. Okay, item C. Billy had to recuse himself, so that's the reason why I pulled item C. So that's the only reason. Do we have a motion to approve item C? Moves. Do we have second? Please seconds. All in favor say aye. Aye. I will go and get -- Oh, thank you. Thanks staff. As we clear the room. That was quick. The next item is consider approval of the January 9th, 2023 minutes. Do we have any changes or corrections? All right. Do we have a motion to approve? Moves. Billy moves, Devin seconds, all in favor say aye. Aye. Management reports. Madam Chair, members of the PAB, in your management reports we did provide to you the deck reports for the month of September. The finance folks are here if you have any questions on that. For future agenda items, the only item that we have listed currently is an item for today's discussion, the finance will be doing a work session regarding DME's budget and rates. And then on the new business action item, today we also have a presentation of Greensense that we think will address items number one and number two regarding solar panels and installations and rebates. And if you recall, the last meeting we discussed the ERCOT lawsuit with you in closed session, and so that's been completed as well. So happy to answer any questions that you have, if there's anything that you'd like to add for future consideration, let us know. I have an item for future consideration. In our consent agenda was another change order for the Hickory Creek station project, and I wondered since we've had a number of them, it might be worthwhile for us to get an update and summary of the status of the project and maybe some background about how we've arrived at the project where we've required so many changes. Yeah, we'll add it to the list and we'll let Becky, our city engineer, know so she can get that back to you. No, I don't think he's talking about the Hickory GIS station. The sewer. Okay. Yeah. I just think it would be useful to get kind of an overview because we keep getting change orders on it. It's obviously the project's difficult, it's had problems, issues, change of scope or change of circumstances. I think it might be good for us and for others to get an idea of how we arrived at this situation. And don't get me wrong, I've worked on plenty of projects that have a lot of problems. A lot of change orders. Yes. We'll let Becky and her staff know and they'll get something back on the agenda for you. Thank you. Thank you. All right. Then we're into concluding items. You already added an item. Does any other board member wish to add items or have anything to say to the public? I would like to thank Ben Jumper for his service. He has resigned and there is a candidate that's going to the city council tomorrow for approval. He had conflicts with his work schedule that he just wasn't able to serve any longer. All right. So now it'll be time to go into closed session and the legal staff, our wonderful legal staff gives me this to say, the Public Utilities Board will now at 9.05 a.m. convene into a closed meeting to deliberate the closed meeting items set forth on the agenda, which include the following, A, PUB 23017, deliberations regarding certain public power utilities competitive matters under Texas government code section 551.086, consultation with attorneys under Texas government code section 551.071, and B, PUB 23018, deliberations regarding certain public power utilities competitive matters under Texas government code section 551.086, consultation with attorneys under Texas government code section 551.071. Thank you. Thank you. Thank you. Thank you. Thank you. All right. It is 9.48 and the Public Utilities Board has now reconvened from closed session and no official action was taken. We are on to our work session where we're going to receive a report, hold a discussion and give direction regarding the electric fiscal year 2022-2023 budget and rates. Good morning, Chair and PUB members, Nick Vincent, Interim Finance Director, let me get this pulled up. I like the way you put the estimated time in the discussion here. Yeah, Tony was taking bets I can get through it in five minutes. I said, okay, I'll see how fast I can get through it. Let me get this here. Hang on a second. Okay, so really let's just talk about an overview of why we're here today. We want to talk to you about the fiscal year 2022 end of year numbers, so the fiscal year that ended last September, September 2022. Talk to you about the financial assumptions included in the adopted budget. Talk to you about the updated forecast for fiscal year 2023 and we'll talk about recommendations and next steps. So this slide here is just take some numbers from the pro forma, really focus some attention to them. We're looking at some numbers that changed in fiscal year 2022, quite a bit from budget. So let me walk you through this really quick. So you can see actual sales forecast or revenue exceeded budget by 10 million. So there's two components to a residential customer's bill. Of course, you have the base revenue and you have the ECA revenue. We'll talk about that a little bit here in the forecast, but you can see base revenue exceeded forecast about $10 million. So we are continuing to see an increase in our sales of electricity in the community as we continue to grow. ECA about $1.5 million and then non-rate revenue actually increased about $50.9 million in the fiscal year 2022. There were a couple of big things that were included in that. So the city did receive revenue from the sale of the TMPA facility as about $15 million and we did have some increased revenue associated with the deck running more last fiscal year. So did have some increased run times for that facility. Purchase power, you can see down here we did purchase about $38 million more in purchase power than we originally budgeted. If you remember, we did take a budget amendment forward for electric last fiscal year to make sure we had plenty of expense authority. So it's a little bit higher energy prices and energy consumption. Then I will go to the next slide. If you have questions, just feel free to stop me. I'm not going to try to rush through it too fast here. So this slide really highlights at a really high level the assumptions that were included in the adopted budget. So you can see everything is based on megawatt hours. So MWH, you can see that right here, our sales forecast for customers. Return on investment, 6%. We did discuss this with the PB and City Council of increasing that from the three and a half to 6% and taking it forward. TMRS, so Texas Municipal Retirement System, that contribution to the retirement plan for city employees, increase from 17.65 to 18.15%. Moving over to the revised assumptions column, what we've done in an effort to really summarize what is updated in the forecast today is we've underlined the items that have changed. So we've updated our non-rate revenue, I think the question was asked earlier, we revised the data center revenue and then of course we revised the data center expenses and we'll talk about that in the forecast here in just a second. Okay, everybody has seen this before, I think everybody was here last budgeting cycle, but this is the five-year forecast with electric utility. So I'm going to take my time and go through it here and if you have any questions, definitely ask them. 2021, so a couple of fiscal years ago, you can see how we finished the year, won't talk too much about that, that's been a couple of years ago. 2022, so this is the fiscal year we just finished, right? Here's the adopted budget and here's where the preliminary actuals are. This does say preliminary actuals because we are still in the process of putting the annual comprehensive report together, also referred to as the ACFIR. So we don't anticipate these to change, but we did want to put that caveat in there. So the adopted 2022 budget contemplated we had finished the year about $5 million positive, you can see that number right here. Where we ended up finishing the year was about $22.7 million positive, so we did have a better fiscal year ending 2022. And that's important to note, right, because that helps us play into our recommendation today that we're fixing to talk to you about. So this is very important to understand that. 2023 is circled here in this box, so you can see the adopted budget that was adopted last fall contemplated using about $15.5 million in reserves. What that did is it would leave us an ending fund balance about $125.2, as we originally were forecasting. So what's important, right, given the amount of money, the $22.7 million that DME brought in in fiscal year 2022, the fund balance actually finished better at the end of the year than we anticipated, right? So we originally are anticipating $127.7, we finished the year about $140.7. So we are anticipating using more reserves this fiscal year, so we have updated the non-rate revenue. What is included in non-rate revenue is just, it could be data center revenue, it could be data center, T-cost revenue, and some miscellaneous revenues. So I think even the DEC is included in there, so that has been updated. Now, moving to the expenses, everything for the end of your estimate that we're currently estimating is equal to budget, except data center expenses, T-cost, well, T-cost, I don't mean expenses, but anything to do with the data center mostly. So about $29 million in reserve usage. Moving down the page, we're forecasting to finish the year at about $111.7 million in reserves. Now, you know, practicality, right, how does that align with the reserve targets that the PV and City Council established a couple years ago? That is below the reserve targets. You may remember we set the reserve at 46 as a minimum and 69 as a max. And this was in response to Winter Storm URI, right? We realized that we needed to have more on hand, so we increased those reserve targets. So we're still below the reserve target. But, you know, one thing I want to note, right, there is a lot of uncertainty in this forecast. This forecast has not been updated for electric sales projections, have not been updated. So we do continue to see increased electric sales in the community. That will modify this pro forma. We have not updated our end of year estimate for O&M expenses, so operation and maintenance expenses, purchase power forecast needs to be updated, so there's a lot of things yet to be updated. Given those things that are still outstanding and coming into the summer months, we are currently not recommending a rate increase. Now, a couple things I want to say, right? Yes, sir. >> Yes. >> When do you anticipate those updates will be made in the forecast here? >> So we had that debate, Terry and I actually had the debate for a couple hours, I was joking, but it was a while, right? It is premature now to make that update. We do think those updates, or we know those updates will be included in the budget conversations. So starting, I'm looking at Danielle here, I think the first conversation we have is in May, so in May, those updates will be included in the forecast, yeah. >> I have a question also. We just approved that insurance policy last month, too. So what impact would having that mechanism have to maybe not needing as much working capital for the minimum reserves, or is it not at all? >> So I think it is the outage insurance? >> The outage insurance, yes. >> Do you want to speak to that, Tony? I don't know when it kicks in? >> So the outage insurance is just to cover the winter months in the event of an outage. So I think the new number is around 450,000, about 200,000, almost 200,000 less than what you approved once we settled that contract. So I think the impact is pretty minimal on this fund, yes, ma'am. >> Okay, I'm going to look down just for a second here, and if you have any questions, wave at me or yell. So 0% is what we're currently forecasting for this year. Now if things change, right, we can come back to the Public Utility Board, come back to City Council when we get there, talk about those rate increases. Moving into the future years, right, I think Ms. Russell had asked this question earlier, are we contemplating rate increases, and the answer is yes. Starting in fiscal year '24 through fiscal year 2026, you can see we have rate increases plugged in. This rate increase is just to the ECA rate, right, so the energy cost adjustment rate is what this is to currently. Our thought process is, right, is we have a cost of service study going on in the electric utility right now. We do anticipate finishing that within the next couple of months and bringing those recommendations forward to you as part of the budgeting process. So a couple of things need to happen, right, we do need to set the stage and talk to the Public Utility Board about the ECA rate fluctuating, moving forward. Currently it is flat, it does not adjust year to year with energy prices. That is something that needs to be addressed in this fund, right, it has vulnerability, it creates risk for this fund. So we do anticipate to talk to you about that here in the coming months. One other thing just really quick, so on the five-year forecast you can see the reserve dips down to about 91.7 million. So these rate increases may change, but our rate recommendation going forward to get that reserve above the reserve requirement in the fifth year. So it looks good from a bond rating agency perspective when we get ready to issue bonds. There is a lot of information, feel free to tell me to back up if you think of something else. So I have already said this multiple times, no mid-year rate increases is staff's recommendation currently. We do have the notice of intent for bond issuance coming forward to you, I believe the first one I got a note here, coming forward to you in March. So you will see what bond issuance we plan to issue this June for the electric utility. We will continue to update the purchase power forecast, we mentioned that earlier, look at the retail sales forecast, and then the timing of potential data center completion, and then reevaluating those future rate increases. So upcoming discussions, this starts the budget calendar, we are in that time of the year again so you will see these dates start to pop up on your future rate work session matrix. So May 22nd is the first conversation. At that meeting we will have an updated end of year forecast for you and start talking about the preliminary 2024 budget and this takes us all the way through budget and rate approval which is on July 24th for the public utility board. Yes sir. I'm just curious, the bond issuance, what kinds of projects or expenses is that bond issuance looking to cover just at a high level? So great question, I can't remember off the top of my head, but I want to say $60-70 million in projects for the electric utility, it includes transmission, distribution, new construction for new developments, hopefully that answers your question, Tony did I miss something? I think the largest project for this year that we actually started and awarded contract earlier in the year or late last year was the Hickory GIS substation, that's a $40 million plus dollar construction project, but that's probably the single largest project that we have in the CIP. Going forward we're still looking at a couple of other needs, we're still kind of developing those now, but probably a couple of other substations within that next five year to ten year window, and so we'll be bringing that back to you, we're still in the development phase of that CIP. Thank you. Mr. Taylor go ahead. Thank you. Regarding DME's rates, the current residential retail rate is it approximately 10.8 cents? It's about 10.5, but then once you build in the fixed rates about 11. Okay, and the current ERCOT wide retail rate, like is, my understanding is like something like 15 or 16 cents? North of 17 cents. So I think we never want to raise rates, we want to have as efficient and cost effective and low cost as possible rates, but we don't exist independent of the oil and gas market or ERCOT or the rest of the grid. So you know I think it's pretty amazing that we are looking at holding our rates at 10.8 whenever I see a lot of electrical invoices in my job from six different electrical providers, and we've typically seen two to four cents per kilowatt hour rate increases in the last year and a half. So that we are still level and there are challenges in the budget to do that, and there's challenges in operations to keep that efficiency, but it's pretty amazing that DME has been able to keep those rates level when everybody around us has been forced to increase their rates by 20 to 40 percent often in a year or less. So I just want to commend DME's management foresight 10 years ago and five years ago and last year that has allowed us to be in a position where we don't have an ECA that went up three cents last year, which I've experienced with other utilities. And so I think this is, and even with all of the challenges faced, T-costs and other things we've covered in the closed session, it's really great to see that we can hold our rates steady this year, and a five percent rate increase next year is pretty amazing compared to what's been going on in ERCOT. And we haven't had a rate increase for, what did you say Tony, six years? At the end of this year will be six years. We've actually decreased rates four and a half percent in that time frame. That's not just for the electric utility, all utilities, right, and some utilities actually had rate decreases like solid waste, yeah, exactly. What I'll point out, Nick, if you'll go back to the forecast really quick, if you look at that estimate column down in the ending fund balance, you know, $111 million and then, you know, the bottom line reserve is, you know, $128 million where we need to be kind of the, you know, that's the floor. If you remember in the previous slide, Nick showed that our sales, you know, our revenue increased $10 million, right, just from increased usage. If that happens again this year, just that one factor alone could get us back to at least the minimum, you know, and I think that's one of the reasons why we kind of want to take a wait and see approach and see how things develop, but just that one little factor there can change the picture to try to get out ahead of a mid-year rate increase at this point to probably still a little premature. Of course, that all comes in in the summertime when we're in the middle of budget, so. Yeah, it certainly has and certainly surprised us, although I think we still have maybe another one or two cold spells predicted here before it's all said and done. Okay, that's it. No more questions. Thank you. All right, the next item. That wasn't 30 minutes, wait a minute. Nick wins the bet. Receive a presentation, hold a discussion, and give staff direction regarding proposed rates to the Green Sense Incentive Program and rates related to distributive generation from renewable sources interconnected with DME service territory. Good morning, Madam Chair, PV members, I'm Bill Shepard with DME. Today, I'm going to talk to you about our Green Sense Program, our rebate program, and the relative impacts that we're seeing at DME from those, as well as talk about some options towards the end on how we can move forward and maybe address some of the impacts that we're seeing. So from a relative standpoint, our cost comparison on the programs, you can see the Green Sense Programs on the left and the solar rebate programs on the right. From a dollar effectiveness, a dollar effectiveness per kilowatt hour, you can see that the Green Sense Programs on the left are much more effective, about six times more effective on the amount of energy that they reduce from our system versus solar. Maybe you said this already, what length of time is this? This is since 2009, thank you. So yeah, the Green Sense Programs came on board a little bit earlier than the solar program, so bringing them back to parity at 2009. So another point of distinction I want to make, too, is that three kilowatt hours that you're seeing on the dollar spent on the solar rebate program, those are offsetting dollars. So those aren't reductions of energy, that's just replacing one form of energy with the other, which is solar rooftop, which as you know, DME being 100% renewable, it's really replacing one renewable for another. Also those amount of dollars spent on the Green Sense Programs have impacted 5,700 customers versus about 600 customers on the solar. So from a dollar standpoint, the Green Sense we feel is a much more effective program. So some of the financial impacts that we see, there's two primary impacts. One is the direct costs that we're spending on the rebate dollars, which is about $500,000 per year. You can see the average rebate per system is about $5,700, so that's $5,700 per customer versus a few hundred in rebates across many, many more customers. But those rebate dollars could also be better spent sending those or redirecting those to the Green Sense Program and funding a little bit more of those more cost-effective programs. The other impact, which is a little bit more disturbing for us, is the amount of money that we're spending on the energy coming back to us. We're spending retail plus that we're giving those customers for energy they send back to us. So this past year, it was $1.7 million. That's a year ending FY22. That's since program inception of 2007. But also we're seeing that amount doubling each year. So this year, we're anticipating a little bit over a million dollars that we're going to be sending back to customers for the energy that they're giving us. So why that's disturbing to us is it's directly offsetting their fixed cost contribution or the fixed cost that they really should be paying for the system that's out there to provide energy regardless of how much they're using. So and just to put that also into context, for every $1.5 million of expenditures on DME side, it provides about a 1 percent impact upward pressure on rates. So again, with that compounding the way it is every year, and I do have a chart that'll show that out in the future years. It's pretty scary, but that'll definitely start having some direct impact on the rates that our other customers are seeing. So in that sense, I'm going to give you a comparison here. So the customer on the left is just a regular DME customer with no solar, and the one on the right is a solar customer. You can see that they pay -- there's three primary components of their bill. There's the facility charge. It's a fixed cost. There's a consumption charge, which is based on the energy that they're using. And then there's also the energy charge, which is a direct pass through. So it's what DME spends in the market to get them energy to their meter. So that total bill on the customer on the left for 1,000 kilowatt hours is $111. Now again, one more point of distinction is these customers have the identical impact to our system. So in terms of poles, wires, equipment, customer service, billing, all that kind of stuff, no matter what energy they use, they have the identical impact to our system in terms of fixed costs. So that bill on the left is $111. Same customer on the right has a solar system. They're sending 1,000 kilowatt hours back to us. You can see that we're paying them a full usage credit for that energy coming back to us. So the 6840 offsets the 6840 we just billed. And we're also paying a premium on top of the energy, which we call an RCA, or renewable cost adjustment, going back to that customer. So their net bill is about $5. Obviously they're not paying anywhere near their fixed cost contribution because the fixed cost contribution for our typical residential customer is about $62.55 a month. So a customer on the left offsetting, well, a little bit more than half of their bill is going towards that fixed cost. The one on the left is short. And quite honestly, the one on the -- our normal solar -- or our normal non-solar customers are subsidizing our PV customers because it's going to result in further and further rate pressure on their rates. So there's two main ways to address that. One is by paying a more appropriate cost for that energy coming back to us. So instead of -- let's see, can you see my -- yeah. Instead of paying this amount, just pay an energy equivalent amount for that energy coming back to us. Not a premium, but just like an ECA type amount. And then the other -- I'm sorry. Where does that go on your income statement, the return? The return -- the credit that we're paying back? >> Yeah. It's just an expense. >> So that -- so that the credit, if there is one in this one, there wouldn't be a credit, right? But if there is a credit, it goes into their bill and it just carries over. If in that particular month it generated excess power. >> And that -- on the income statement of ours, of the cities, it's an expense? >> Yeah. >> Just an offsetting expense? >> Yes. It's actually a reduction in revenue. >> Reduction in revenue. >> Yeah. >> Yeah. Okay. >> Yes. Member Ryback. >> So are we -- is DME actually getting the use of that power back or are we simply issuing a credit? The meters don't spin both ways, do they? >> So we're issuing a credit, but essentially that energy is flowing into our system. It goes into the big bucket of energy that we provide for our customers. Obviously we can't track it from one customer to the next, but it is -- it is flowing into our system. We're essentially the battery for that customer. So when it's nighttime, when it's raining, when it's cloudy, when their system's down, when their house is using more than the capability of their system, DME is there and we have to be there to provide their load. >> Okay. But technically, if my next door neighbor has solar and I don't, and they're producing more than they're consuming, we're actually consuming some of their excess power? >> It's going in the bucket. Yep. >> It's going right there. Into the bucket. >> That's right. That's right. >> Yeah. Okay. >> I'm not an engineer, so I'm not going to pretend to know the physics here, but yeah, I think in plain language that's correct. It's about one megawatt, maybe a little bit more right now total. That does interplay into our forecast on what we purchase, but because this is intermittent energy, the reality is we're filling the total load of the city, regardless of what happens, because at the end of the day, if a customer's solar power does not generate anything, they still expect DME to be there, right? So we have to be able to purchase enough load to be able to meet everybody's needs, regardless of whether it's the customer on the right or the customer on the left. Do you do some -- I mean, you can put an educated guess together, I bet, of what they're consuming to the meter, right? >> Yes, correct. And so if this customer generated one kilowatt above the thousand that they consumed, then we see that, and that's the credit that we then give them. >> Okay. Okay. >> And we have access to some customers' inverters where we can actually see how much they generated, but not all the customers. >> So we're giving them money back. Is that the incentive to have solar power? >> So there's a couple ways to incentivize solar. One of them is through having a very generous net metering, or in our case, it's a net billing structure. And then another way is through rebates. So we're going to try to address both of those with some of our options moving forward. But yes, it is a very good incentive. We're -- of our peer utilities across the state, we're probably one of the most generous paying utilities back to PV customers. >> Do they get any incentive to use solar panels when they purchase? Is there -- >> So along with our rebate, they can get a solar -- I mean, a federal tax credit for their system. Right now, it's 30%. And also, systems have been coming down in price substantially. So that's one reason why we don't feel that rebates necessary, and you'll see that in some of our options moving forward. >> Okay. Thank you. >> All right. So speaking of options, here's some of the options that we're looking at moving forward. Option one is pretty much status quo, just leave everything the same. It would be not a sustainable option for us because of the compounding effect that we're seeing year and year as more and more systems get brought on to our service territory. Option two is to sunset the solar rebate, leave everything else the same, but sunset the solar rebate and instead redirect those funds to our Greensense programs, and we have Michael Gagne and Catherine Barnett here from our sustainability group, and they can give you more detail if you'd like on what they have in mind for those dollars, but it would increase their funding from $500,000 a year to a million dollars a year for those. Now, it would not address our fixed cost problem that we're having, but it would spend those dollars more appropriately. Option three and option four both do the same with the solar rebate, they sunset the solar rebate, but option three addresses that fixed cost through paying a lower amount for the energy coming back to us. So instead of paying our retail 10.6 cents a kilowatt hour, we'd pay our ECA equivalent or 3.41 cents a kilowatt hour. So that would help because then we would be paying appropriate amount for the energy coming back to us. Option four, which we'll go into a little bit more detail in the next slide too, addresses it a different way. It addresses it through the facility charge. So we'll leave the net billing structure the same, so we'll still pay that retail amount. We will get rid of the renewable cost adjustment and make it an energy cost adjustment. So it eliminates that premium that we used to pay or that we currently pay for solar. But instead ratchets up the facility charge and starts recovering those fixed costs through the facility charge. So if I may go to the next slide, you can see that last bullet there. So starting in FY24, we'll go from 867 to 1945, we'll go another bump in '25 and essentially get us up to our equivalent fixed cost recovery in FY28 of $62.55. So regardless of the energy that PV customer uses, that facility charge is going to kick in and we'll be more apt to recover those fixed costs. And again, that's paying for the fixed costs of our entire system that right now they're not paying for the system, basically, that's there to support them when it's cloudy. Exactly. Exactly. We have a fixed cost of our system that we spread across all of our customers, but it's the customers that typically use energy, the PV customers, that oddity out there that is actually selling energy back to us. So they're not paying their fair share. So Madam Chair, just really quick on the $500,000, a couple of things. As you may know, the cost of solar panels in the last 10 years has drastically decreased. So the free market out there has done a much better job than the $500,000 that we offer. And then the federal government has also increased its credit. This $500,000 is an annual expenditure to DME. When we say sunset, all we mean is we discontinue the rebate and we shift those dollars to what we believe are more effective programs. The other thing too, roughly in the last two years, we have as many customers that install rooftop solar without the rebate as we do with the rebate. And I can tell you, every single one of those customers that does not get a rebate calls us and complains about the fact that they didn't get the rebate, which is understandable. But again, I think that the market coupled with what the federal government has done has certainly had a much bigger impact in people being able to install rooftop solar. Obviously our very generous payment of that power has also been a huge incentive. And that's why we're proposing to step into that over a period of time. And certainly those will be decision points going forward. We looked at solar energy for a long time because it was so expensive. And finally got to be what was deemed an acceptable price range when the city got into it. What amount of non-solar energy rebates are issued every year? Do we max out that fund every year? The green sense. So it's not quite maxed out every year, but I know that they're looking at focusing more on some of the programs that are more readily taken up by customers. But Mr. Gagne is here and he can answer anything specifically if you'd like. So I'm just wondering if we move the half million dollars from solar to green sense efficiency, if we're only giving out $400,000 in green sense rebates, then increasing the budget line doesn't increase uptake of energy efficiency? Well I think he has some ideas in mind. One is making a bigger impact on low income customers through some new programs. So but I don't want to steal any of Michael's thunder. Could you tell us a little bit about that? Is that another slide? Yes. Yeah, I've got some backup slides here. Okay. I'll let you get to it. Well and as Michael's coming up, you know, remember too that, you know, Catherine's coming up. But if you remember, we, you know, the city purposely went out and hired a director specific for environmental service and sustainability to have that renewed focus on that. What we're planning to do, you know, the green sense, these incentives, even though we've worked with Catherine and those folks, the idea here is to shift all of that responsibility for the green sense program over to Michael's group so that they can give it the attention that it needs because frankly, I think it'd be in a DME. There's probably a little bit of incentive to not spend some of those dollars to get the budgetary benefits and so again, we want to shift it to where there's the appropriate level of attention and I think that's what they're proposing so. I've got three of your slides loaded. Catherine, is this your first time you've ever stood in front of the PUB and presented something? I believe so. Probably not in the last 20 years. I don't think I've presented in the last 20 years maybe. Maybe 15. We all know you, of course. I managed to stay away from it for that long. No, on the green sense program, we know that there's some room to increase our rebates. We were expending all of the funds so we ratcheted down the dollar amounts several years ago, probably four or five years ago now, but we know that we can make some gains there because of inflation. We need to increase those numbers so that we're paying a relative percent the same as we were four years ago. With the new energy efficiency ratings on the HVAC systems that have just gone into effect in January, I think that we're going to see some increased costs there as well. So expanding the HVAC, offering a higher level for a heat pump rebate, windows, insulation. We were looking at the electric hot water heaters, adding some more rebates that we haven't had in the past so that we can expend those dollars. So I'm trying to read that over there. That's not in the slide deck that I have. So that's future, I guess, basically it goes up like $100, like 30% up to $500 now, like 30% up to $600, or am I seeing that correctly? So the energy efficiency is really great. The cheapest kilowatt is the kilowatt you never have to buy, right? Lowers our demand, lowers our transmission charges, lowers the median and 90th percentile load on our distribution transmission equipment, et cetera. So it's really, really great. I think my biggest mental challenge I'm having is, so in solar, people are installing systems for 250 a watt, they're getting 50 cents back or something like that. They were getting 25% of the value up to a pretty big dollar amount. Like on windows, I did the arithmetic on the $500 figure, now looking at a $600 figure. My house has 23 windows. I got a quote to go to low-E vinyl, modern, efficient windows, and it was basically $800 a window. So if I replace two windows, I have more than maxed out the rebate. And so it would take me 11 years to get the full, take full advantage of the rebate, or I get about a 3% discount on my $16,000 window upgrade. Air conditioning system, if I'm looking at like an 18 sear heat pump to replace my three ton, I have two, a three ton and a four ton, but like three tons is really old. It's $11,000, and I get like a $300, or maybe it's a $400 rebate. That's 2%, or it's not making me go, gee, I'm going to go from a 13 sear to an 18 sear, because it's such a tiny amount. And it's not a homeowner going, man, I can take advantage of this, and over the next five years, my power bill will be lower, and this rebate will help offset it, especially lower income. If you can afford the efficiency, you are going to buy the efficiency anyway. I wonder if there's, and I realize we don't want to run out of all of the funds in the first month of the year, but make this more significant, where it might cover 10% or 15% of these efficiency projects that are the best thing possible for DME and for Denton. I think we can run some numbers and see what the budget looks like and what we would expend if we increase those. And was there, you mentioned, I believe you mentioned targeting for lower income folks or maybe inefficient, I don't know if there's a way to say like inefficient homes get a better benefit, or if that's too hard to prove and audit? Well, we've had some success working with some multifamily properties and doing full scale insulation, maybe solar screens, not windows, insulation, HVAC rebates, and we've been earmarking some for multifamily, and we've been expending most of that through the years. So I think if we target some of those projects and some low income, and maybe we've looked at the tiered program based on income, we just have to have staff to verify income, and that's the hard part, is building those programs and being able to administer every step of it. Going forward, you know, if that's what the program looks like, if we have the additional funding, then we're committed to making that work, but I think there's ways to do it. We know the areas where we have more inefficient housing in town through our audit program. We've identified a lot, so there's some communication we can do at the neighborhood level to let folks know that these programs exist. Maybe it's landlords that we're reaching out to and letting them know, you know, whenever I go to a house that has no insulation and a nine sear four ton unit that's on its last leg and has been for the last three years, you know, there's ways that we can reach out to those landlords and, you know, make the program available. I think a couple of things. What this does is one, if in fact we go this direction, again, this is a summary of some ideas that this group has, certainly between now and October 1st, when the budget goes into effect, they would bring forward kind of the specifics about what these programs may be. You would have an opportunity to make those kind of, you know, recommendations and changes to the program, but what this $500,000 does by shifting it here, there's a much broader number of customers that will have access to this versus somebody being able to install a $20,000 or $30,000 system on their home. And let's be honest, some homes in Denton without modifications to their roof are not going to be able to install a $20,000 or $30,000 system. The other thing that I'll mention to you is that, you know, many of our customers that are doing these solar systems, I mean, they're issuing a second mortgage, right? I mean, they're financing these systems for 20 or 30 years, right? And so you talk about a 10-year, 11-year payback, I mean, you know, so there's some issues with that too, but again, by putting it here, it gives access to a much broader base of customers. And so from a subsidy standpoint, it kind of takes that subsidy issue away because, again, the same people that are paying for it are the same people that are now have access to the system versus what we have today. Yeah. And I definitely think that this is more democratic and it does incentive, like you said, solar sells itself already. The challenge is on the energy efficiency, $300 back on a $10,000 upgrade, which probably requires a home improvement loan, is not really an incentive. The people are already making that decision. So again, you're just giving a little bit of money to the person who's already willing to do that upgrade. So I think, I don't know what it would look like, but I would love to see something that was 10% of, you know, this broad category, 15% up to a total cost of $5,000. And so if you're, whether you're, or something along those lines, you're doing windows, you're doing air conditioning, you're doing whatever. And those have to be efficient, not CER 14, but I don't know, whatever the energy star for CER 18 or something like that. And I totally agree that solar has its own economics and doesn't need the subsidy that it needed whenever it was $8 a lot. Right. Right. So do you have a question? Well, I don't have a question so much as a comment, but one of the reasons the HVAC costs so much today is that we can't use the old refrigerants anymore. So the indoor and the outdoor unit and all the interconnecting piping all out of go. So it's not an apples and oranges thing. You're replacing your windows. It's just the windows. Well, when you replace your air conditioning system, you have to replace everything having to do with it, where you could choose to do two windows or seven windows or just the windows upstairs of the bedroom or, you know, whatever permutation, but you're going to replace the 19-year-old seven and a half unit that's been on its last leg for three years, you're going to spend $11,000 or $12,000 because you've got to do the whole shooting match. So maybe the HVAC rebate really isn't much of an incentive, I think, to your point. Whereas the windows, you've got some flexibility. You could say, well, I'll just do the windows here or the windows there. That's right. The HVAC system, you're kind of -- you're stuck, so it's a real problem. I don't know about the other programs, the radiant barrier and duct cleaning or duct work insulation or whatnot, but I know with the units that the cost of replacement has gone way up because of the requirement to come change out the refrigerants. So it's had a huge impact. So as you consider changes to the program and if this money gets shifted over, I would personally recommend you look at something a little more financially beneficial, maybe based on Asian sear difference or something. Like a swimming pool? Swimming pool. That'll cool you down. Oh, yes, sir. It will. But if it's a heat pump replacement, it won't heat me up. And you mentioned about the income verification. We're already using what's -- the name is escaping me for people who need help with their bills and they're doing the income -- is there another partnership that we could do there? There is and I've had talks with Krista Foster about borrowing her list of customers and taking a look at those bills and seeing where we might be able to do energy efficiency improvements. So yes, definitely partnership and crossover there. It always seems like the people who need it the most are the ones who can't afford it. Right. Exactly. If we could somehow get a little balance to that, that would be wonderful. The other thing too -- Bill's going to come back up here, but the other thing that I'll mention to the PAB is that we are also taking this same item through the Sustainability Framework Advisory Committee. We had one meeting with them. They asked us questions and we're scheduled to go back to them with this. So we're kind of running a parallel. Obviously, these are two independent bodies and so ultimately, whatever recommendation comes from the PAB, the Sustainability Committee, we will take those and let the council know what you recommended. Okay. Yeah, but to Member Taylor's point, you know, the free ridership is always a tricky thing to deal with when you're talking about incentives and folks, we have to walk the line between who's really going to make that decision anyway or who is going to be steered into a more efficient decision by a few hundred bucks or $1,000. So it's a tough one because you don't technically want to pay free riders. You want to pay the folks that are on the fence, so, but I have faith that the sustainability group will come back with some really good options for those added dollars if they were to get them. So with that, you see staff's recommendation as option four is that phased in facility charge approach and we'd love to get some direction from this board on what you would like us to bring forward to City Council and have I answered all your questions? I think so. Do you have any other questions? Yeah. So I was going through the staff report and you were talking about moving to the ECA for purchase value. What is it? Offset value or whatever you want to call it for solar arrays. I think I have two big concerns about that. First is some people have taken out 10 or 20 year loans. They made large financial decisions based on these rates and an expectation of being able to cover their cost. So it's a huge shock to say to somebody who took out a home improvement loan last year and balanced their electric bill and their loan payment to be the same or five percent cheaper or whatever that okay now we're going to only give you a third of what we said we were going to give you in credit. So I think any program that does this would have to have a grace period and a long phase out for existing customers. I think maybe not 20 years but it has to be enough where they can see it coming and not everybody is a wealthy individual in Forest Ridge putting a 20kW array up. Some people are it was a stretch for them to get the loan and they did it because it would lower their electric bill. And so then to be like okay now your electric bill is going up by 30% or 50% or 60%. That smacks of unfairness to me. So if we phase out the RCA it has to have some kind of long phase out for existing customers second on the ECA value is like three cents a kilowatt something like three and a half or whatever 3.41 per kilowatt hour yeah 3.4 per kilowatt and I you know that that represents our West Texas wind power and our coastal wind power and solar and that we purchased and some transmission costs there but whenever I just took the what is it called PV watts online average output average monthly output for Denton 76201 you know south facing and I multiplied that times the real-time settlement price in our cot for 2022 and it it was seven cents a kilowatt hour last year just in what somebody's south-facing rooftop array would have sold for in the real-time. So we are undervaluing now 2022 might be an expensive year but want to look at 2021 let's look at all of 2021 and if we are moving to a paying the actual with the value we need to pay the actual value so that RTSPP offset is one piece and it's like well maybe we we already bought solar from West Texas for that house well now we can sell that solar on the real-time market for that price additionally you mentioned like you don't design for the for the production of solar in the distribution you design for the maximum load that that house might have if that systems off but you're all already modeling for about a megawatt of distributed generation and that does lower distribution costs that doesn't mean you have less wires and poles and it doesn't mean the one-hour peak hour a year is lower but it does mean the median the average the 90th percentile hour the 99th percentile hour those are all lower load and lower wear and tear and less heat on your transformers and so forth so and there is some t-cost benefit even though it might be minor so I don't feel it's fair to just say we're going to go with this 3.4 cents because it wouldn't take a lot of effort to come up with a more reasonable number that really does represent the benefit to DME in the cost cost have to have a certain amount of remembering that it's a lot cheaper to produce 400 megawatts than it is to produce one megawatt yeah just the cost of the major production too I don't know how I don't know how to account for the difference of those costs but I mean it's a lot like I said it's a lot cheaper you know in my business a lot cheaper to produce 400,000 tons of hot mix than it is to produce 40,000 tons of hot mix I had that argument with the city before. So before I before I let Terry come up here because I think he's chomping at the bit to talk to you about the our renewable market that we're seeing and how it relates to our customers rooftop so getting back to the customers that have already made the investment so there was no guarantee when they made that investment that rate structure would be the same as a matter of fact their interconnection agreement does state something to that effect but to to look at grandfathering is essentially what you're saying it's a very tricky thing to do from a billing standpoint and a consistency standpoint across the the rest of the rate so it's it is something that we need to look at but I could tell you from a technical standpoint it'd be very very tough to to do from a billing standpoint. I just wanted to chime in that it might be easier to sell option three to the general public in so much as it's a wee bit less confusing than option four because I your your rate ratcheting and you're doing so you know successor generation charge so forth I think that the phase three although it's less beneficial to DME you know overall would be a lot easier sell to the public you're just saying okay we're gonna sunset this we're gonna sunset that and shift that money over a different direction you know over time whatever that time frame is you know 22 through 23 through 27 or whatever numbers you come up with but if you tell people you're gonna sunset something and it's just going to end at a given time or be phased out in a given ramped down rate I think that's a lot easier sell than option four I think option four is shifting not only shifting burden cost burden but also shifting it in a way that may be more difficult for average homeowner to understand the benefit thereof so just suggestion on my part I mean there's a lot of details to this and not really a bad idea shifting from where the money's going now to where you'd like it to go but I think it would be an easier sell in option three than it is in option four so that'd be my okay I have a question then on option four those people being impacted by the phased in was just the people who have currently who have solar who are not paying their fixed costs is that correct right we're talking about how many customers there's a little over a thousand customers that have solar some have varying degrees of what they send back to us so those thousand customers the low income people who still can't pay their bills are subsidizing that because they're not paying the fixed costs of the system correct correct and I think Terry still wants to address member Taylor's comments about the market yes Terry Nalti assistant general manager so mr. Taylor your your I don't quibble with your numbers but I do want to take a different perspective because if I were to install a rooftop solar system on my home I'm installing it primarily to offset the utility expense that I would pay DME which at 10.8 cents is more than the seven cents that you you stated so if we're sizing these things correctly to meet our our home peak demands or average peak demands then the benefits still accrues to the to the homeowner because they're offsetting their utility bill the other point is that I would make is that in the ECA not only are you paying the real are we trying to recover our real-time cost of purchase power but we're also trying to recover the losses that we that we experience from the off-peak wind energy that we're selling at a loss so if we're buying wind energy for thirty dollars a megawatt hour under a long-term contract and at two o'clock in the morning the price is negative five dollars and it's running that's $25 that we have to collect from someone to cover that expense so the ECA itself is not a a true indicator of what the spot market price is for electricity also that seven cents that you quoted includes a lot of you know hours that are high-priced and our studies have shown that and I think Bill included in in the backup of large long paper on how we see these things perform generally during those high price periods people are pulling energy to support their their home use air conditioner cycling on refrigerators whatever and despite the fact that they size the units to to meet an average household demand during those peak periods they're pulling energy and I think you know our cost to serve that customer to enable him to to pull that energy is still sixty two fifty five per month for fixed costs and and so I'm not sure a program as you had mentioned number one it'd be extremely difficult to administrate as Bill has mentioned from a billing perspective and number two it doesn't really reflect what our true costs are with the true value of that surplus energy that's being pushed back into the system really is it you know theoretically on this side of the room yeah they're they're looking for some direction oh yeah I don't like I like to that like the simplicity of number two honestly but threes well my comment would be on the difference thing like option four and option three if we get sunset out this net billing structure and sunset out the rebate so we can ship the money we're going to stop having the if we're not paying the net billing thing then we're going to get back a lot of that revenue we're currently losing if I understood the thing correctly and that to me is a benefit of two ways one it's easy to understand and two it's going to increase the revenue that DME receives which will help pay for some of this fixed costs we're currently not recovering so to me it's a win-win but that's just my viewpoint on the matter yeah I mean member Ryback makes a great point as a matter of fact option three was the option we went forward to the sustainability framework advisory committee to just pay a more appropriate rate for the energy coming back to us that is a rip the band-aid off approach it ironically doesn't sound like that but it is because what it does is it directly let me see if I can get to that slide so it directly reduces those golden bars that you see those that's the net metering credits that we project are going to happen over the next several years and those are substantial dollars and if we did pay that 3.4 cents that would go down instantly we would think it's about a $700,000 a year savings to DME now it's a savings that's that's not a redirecting of funds to green cents or whatnot that's a savings so yes that is a very effective approach the only caveat there is as these systems get cheaper as batteries get cheaper more and more folks are going to go towards the Tesla walls and whatnot and then we won't see any energy coming back to us so yeah well and again that's that's why we're here is to try to to try to impact it where's my mouse down here instead of really having a big problem to worry about up there but if we don't see any energy coming back to us or flowing from us if they get the batteries then all we have to lean back on then is the facility charge so from a more long-term perspective it might be a better move well we feel it is a better move to to start impacting that facility charge and in a phased approach and and this is really you know one of the one of the reasons why we're addressing this with you is that you know while a million dollars a day you know you know we could we could probably you know work through that through our financial processes the reality is by 2028 when it's seven million dollars or potentially more depending on where this is if there is no change to to the program it'll it'll pose a real significant financial impact to the fund and again if there is no change that's okay we just want to make sure that the what the board and the council understand that by 2028 you know we're talking a significant impact you know and we're talking a rate increase and the rate increase would be to everybody that does not have rooftop solar under the current configuration right because any increase that I do yes they're paying more for the power but they're also getting rebated more as well right and so so if you have rooftop solar you're you're naturally hedged right you're you're insulated for any rate increases in the future the way that it's structured today right I could live with three or four I'm good with that my opinion is four but I I'll live with three I just look at the longer yeah and and I know the fixed costs of a utility right right now that impact to the customers and yes it it does feel a little unfair to to your point but there's only a handful of them now versus four or five years again from here if we kick the can it'll be several thousand or more that we'll have to deal with pulling that band-aid or starting a corrective measure yeah I think there's something needs to be done I think but I'm curious is it a net real-time or net monthly on the it's a net monthly net monthly yeah so it ebbs and flows throughout the month I mean so the phase four option four is a net monthly like they can take their power bill to zero their their energy charge to zero yes they're their energy charge can be zero but then we'll be recovering the facility charge which will stage up and so this is another interesting question if it costs sixty dollars sixty-two dollars whatever it was per house then why are the high-use houses subsidizing the low-use houses like energy-efficient homes are more expensive so a cheap rent house with no insulation where they've got a three dollar a month electric bill they're subsidizing the very nice brand-new efficient home on the facility charges because that efficient home is only paying fifty dollars a month eight nine months of the year all right so I think if we if we look at if we want to make this fair then and if that is our facility charge then perhaps our bill is not nine dollars and ten and a half cents it should be sixty dollars and four cents or whatever whatever that number is would also be like instead of just saying well solar has to pay all of their facility charges small use high-efficiency homes you get a pass you know like if that if we want to make our our facility charges cover all of our infrastructure and then you know incremental incremental energy use is paid for it because energy is cheap most of the time you know that then that would also be more fair than you know you did you made a decision five years ago to put solar two years ago to put solar on your house well now we're gonna we're gonna add fifty dollars a month to your bill and we're not gonna do the same financial thing that you made the decision to put solar on your house like well you're touching on a rate maker's nirvana is to you know actually charge true cost of service and it would be wonderful if if that facility property taxes than you do right so there's there's cross subsidies that happen everywhere I mean of course our our business customers are subsidizing our residential customers they're not quite paying their cost of service either so but those are things that as rate makers we try to to make little tweaks here and there and adjust but it's the way the rate structures have been built along the years with utilities and I'm not gonna I'm gonna say everything but it's the way it's always been done but it's sort of the way it's always been done there's an assumed load factor by a residential customer class that that's how we recover some of those fixed costs is through the energy assumptions that they're gonna be using throughout the year so this is a way to true up the solar piece but yeah there's still work to be done on the regular rates as well and that and that discussion regarding all the other customers again we're not picking on solar customers is this this is just the focus today will be part of that wider rates discussion that Nick referred to earlier the reality is is that our fixed charge is is too low certainly comparative to other utilities but certainly compared to what our cost of service is did you get what you need I think so it sounds like you all are supportive of three or four essentially trying to address the fixed cost shortfall that we're seeing and in those two helped to do that and I anticipate I mean obviously we have a another presentation to make to FSAC and let them know sort of where we're headed but then the ultimate discussion and decisions could be made by the City Council and you know they'll probably see these same options and and weigh in all right thank you all right 1054 we are adjourned see when you're not here I don't get to do