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 - Good morning and welcome to the April 22nd, 2024 meeting

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 of the Denton Public Utilities Board.

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 We are called to order at 9.03 a.m.

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 Our first item of business is presentations

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 from members of the public.

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 Do we have any presentations?

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 Moving on to the consent agenda.

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 Would anybody like to pull any items

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 for further consideration?

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 - Chair, I'd like to pull up PUB 24-079.

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 - Okay, that's item C.

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 - Yes.

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 - All right, any others to be discussed?

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 Entertain a motion for the A and B.

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 - So moved.

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 - Second.

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 - Motion and a second.

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 All in favor?

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 - Aye.

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 - Opposed?

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 Motion passes.

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 And so item C of the consent agenda.

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 Consider recommending adoption of an ordinance

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 of the city of Denton,

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 authorizing the city manager to contract

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 with Mann Robinson and Son for site preparation

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 and of a concrete retaining wall

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 for the Underwood substation,

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 not to exceed $2.7 million approximately.

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 - Yes sir, Mark Zimmer, DME.

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 Happy to answer any questions you might have.

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 (laughs)

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 Could you, would you show that on Google for me as to...

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 - Yes sir, the location of the site

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 is a triangular piece of property right here

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 at the corner of Underwood and approximately 24-49.

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 - And the retaining wall will be?

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 - Retaining wall will be on the backside

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 of the property here.

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 There's a transmission line that crosses

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 the back of the property and it's right up against that.

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 - So you're following a utility easement?

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 - The retaining wall will be outside

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 of the utilities and yes, following it.

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 - Run parallel and then does it,

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 so is it a triangular shape and then it comes back

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 and hits 24-49, is that what you're thinking?

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 - Yeah, the piece of property is a triangular shape.

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 It has transmission lines on the south and on the north side.

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 Retaining wall is only on the north side.

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 - Only on the north side?

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 - Only on the north side, yes sir.

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 Yeah, it's kind of hard to see here,

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 but this is somewhat of a hill,

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 small hill that we have to cut and put a retaining wall in.

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 - Usually how, what would be the height of that retaining wall?

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 - That wall is only about six foot tall.

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 - Okay, so really it's not for security per se,

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 is it just for, will it be used as a,

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 for the water that runs off just gives it a direction

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 to go head on south into a creek and such?

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 - Right, the water all head south down into this pond area

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 down here.

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 The retaining wall is meant to keep the land

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 from shifting back down onto our site.

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 We have to cut some of this hill back

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 to make enough level land for our substation.

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 The retaining wall holds the land back

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 and also provides a way to drain the water off.

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 - Okay, thank you very much, thank you Mr. Chairman.

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 - Since we're talking about this project,

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 I was curious, what's the total footprint of the substation?

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 - The total parcel is 10 acres

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 and about half of that's encumbered by transmission lines.

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 So about five acres is what we're developing

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 for the substation.

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 - Okay, 10 acre plot, five acre of substation.

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 And is this a substation for the developments

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 that are going in?

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 - Around Hunter and Coal Ranch.

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 - Hunter and Coal Ranch?

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 - Yes sir.

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 - Okay, and what's the size of the,

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 electrically, what's the size of the substation?

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 - It's 130 AKV substation.

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 We're building it for an initial capacity

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 of serving 100 megawatts.

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 - 100 megawatts, thank you.

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 - Yes sir.

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 - Any further questions?

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 Would anybody like to make a motion?

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 - So moved.

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 - Second.

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 - We have a motion to approve recommending,

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 or recommending adoption of an ordinance

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 for construction of this retaining wall.

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 All in favor?

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 - Aye.

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 - Aye.

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 - Opposed?

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 - Thank you.

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 - Motion carries.

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 - Thank you.

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 - Moving on to items for individual consideration.

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 Our first item is approval of the April 8th minutes.

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 - So moved.

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 - Thank you, Commissioner Boyle.

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 Seconds?

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 - Second.

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 - Lee seconds.

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 All in favor?

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 - Aye.

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 - Opposed?

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 None.

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 Now items for individual consideration.

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 Item B, consider recommending adoption of an ordinance

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 for the sale and delivery of $31.5 million in revenue notes

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 and authorizing the issuance of these notes.

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 - Good morning, Randy Klingle, Treasury Manager.

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 Have a brief presentation about the bond parameters

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 and ordinance for the utility system revenue bond sale.

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 As DME has discussed in the past with this board

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 and also with council, in fiscal year 2023,

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 the energy consumption exceeded their expectations

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 in the months of July, August, and September.

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 Temperatures exceeded 110 degrees

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 well into the 30 day mark over that time period.

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 Evening prices were capped at the maximum of $5,000

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 per Bangawatt, which resulted in last fiscal year

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 a $31.26 million shortfall.

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 And as they discussed previously with you all

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 in the council is that we were gonna do

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 some short term financing to recoup that.

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 So we're looking at a five year term

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 to accommodate for the $31.26 million,

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 which would equal about a $7 million debt service payment

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 for DME, which they do have allocated in their budget.

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 And my next step is that we will have the May sale

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 for the $31 million and we will receive those proceeds

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 in mid-June, excuse me.

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 And those are all the slides I have

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 for my short presentation.

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 - I have a question. - Yes, sir.

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 - A little maybe out of left field, but just for my knowledge.

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 So we're issuing bonds to pay for a shortfall

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 in revenue based on this power surge and power demand.

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 In general accounting practice,

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 you're not generally allowed to use debt to pay

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 for operating costs, so I'm just curious how this falls

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 under any general accounting practices.

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 - My understanding, I may ask someone to elaborate

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 that this is purchase power, so it has an exception

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 by the AG's office.

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 - Okay, so it's an exception

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 based on this power purchase.

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 Okay, well, thank you.

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 - Any further questions?

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 So I have one, could you go back to the table

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 of the payment schedule there?

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 - Yes.

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 - So I guess this would be a question for you.

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 Tony, are we in a situation now with our increased rates

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 that we will likely avoid this condition going forward?

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 - Well, just as a reminder,

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 so the increase in rates that we did,

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 we increased the ECA to recover purchase power expenses,

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 the TCRF to recover transmission expenses.

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 This payment, these payments are considered fixed expenses

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 and they would be on the base rate side.

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 In the presentation that we made,

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 we calculated that we would need an additional

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 five and a half percent increase to the base rate.

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 We're currently looking at it.

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 We're working with finance subject to forecast.

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 Looks like we might be able to mitigate some of this.

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 I think that the issue going forward is

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 that if we forego doing rate increases,

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 we're gonna be back in the same situation

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 where we were this past year where all of a sudden

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 we're doing a 20% rate increase and there's rate shock.

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 So we're trying to look at this kind of long-term

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 to see how can we spread this out.

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 But likelihood is we are gonna be proposing

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 an additional increase to base rates

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 here in the next few months when we come back to you.

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 And at that time, we'll be able to kind of break that out

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 for you, but we will likely be looking at another base rate

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 increase associated not just with this,

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 but also with winter storm yearly debt that we had.

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 Again, and a lot of different moving pieces

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 with the data center, the new data center that we have,

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 how do we utilize those revenues?

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 And so there'll be some options that we're gonna be discussing

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 with the PB and the council on how do we fund this

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 going forward.

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 - I have a question also.

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 In terms of typical years, 30 days over 110 degrees,

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 is that normal, abnormal?

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 And if so, how abnormal is it?

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 - Yeah, I don't have my weather guys here,

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 but pretty abnormal.

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 I think the last time that we saw temperatures like this

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 was back in 2011.

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 In 2011 was pretty hot, actually hotter than this year.

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 So current forecasts are that we're probably looking

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 at a mild type of a summer.

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 So hopefully we won't experience this again.

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 But again, as we continue to see more and more renewables

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 out in the market and a lot of uncertainty

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 is still in the market because of some of the changes

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 or cuts doing, can't give you any guarantees

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 that we won't see another type of cost increase again

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 this coming year.

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 - A cost event.

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 - Yeah, correct.

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 - Thank you.

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 - So this is a five year term?

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 - Yes, sir.

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 - And is that interest rate about 30%?

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 If my eyeball math is correct,

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 total interest, total cost of--

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 - It's about five and a quarter a year.

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 - Five and a quarter a year, so total cost is about 30%

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 to service over the life of that.

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 Okay, so in the next five year term,

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 if we do not look at different ways of preventing

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 these events from happening from a cost shock perspective,

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 we are likely going to experience this again.

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 Is that what you're saying?

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 - Unknown.

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 I think one of the things that we have been talking about

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 is looking at our current fund balance,

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 looking at the possibility of establishing

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 some type of rainy day fund.

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 We can have a pot of money for these types of events

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 and kind of self finance them going forward.

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 But again, when you're looking at that

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 along with rate increases, people start asking questions.

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 Will you have this pot of money over there?

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 Warranty using it to...

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 So again, a lot of things to consider

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 and that's something that we are looking at.

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 - Okay, thank you.

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 - Any further questions?

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 Motion to approve.

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 Do we have a second?

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 - Second.

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 - We have a motion and a second.

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 All in favor?

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 - Aye.

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 - Aye.

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 - Motion carries.

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 And our final items for individual consideration

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 are management reports.

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 - Yeah, Mr. Chair and members of the POB,

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 really not any changes to the documents

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 that we sent you the last time around.

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 So certainly happy to answer any questions you may have

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 or if there's new items that you'd like to see.

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 Certainly happy to do that.

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 - Seeing none, I would entertain a motion to adjourn.

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 - So moved.

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 - Thank you.