- Good morning and welcome to the April 22nd, 2024 meeting
of the Denton Public Utilities Board.
We are called to order at 9.03 a.m.
Our first item of business is presentations
from members of the public.
Do we have any presentations?
Moving on to the consent agenda.
Would anybody like to pull any items
for further consideration?
- Chair, I'd like to pull up PUB 24-079.
- Okay, that's item C.
- Yes.
- All right, any others to be discussed?
Entertain a motion for the A and B.
- So moved.
- Second.
- Motion and a second.
All in favor?
- Aye.
- Opposed?
Motion passes.
And so item C of the consent agenda.
Consider recommending adoption of an ordinance
of the city of Denton,
authorizing the city manager to contract
with Mann Robinson and Son for site preparation
and of a concrete retaining wall
for the Underwood substation,
not to exceed $2.7 million approximately.
- Yes sir, Mark Zimmer, DME.
Happy to answer any questions you might have.
(laughs)
Could you, would you show that on Google for me as to...
- Yes sir, the location of the site
is a triangular piece of property right here
at the corner of Underwood and approximately 24-49.
- And the retaining wall will be?
- Retaining wall will be on the backside
of the property here.
There's a transmission line that crosses
the back of the property and it's right up against that.
- So you're following a utility easement?
- The retaining wall will be outside
of the utilities and yes, following it.
- Run parallel and then does it,
so is it a triangular shape and then it comes back
and hits 24-49, is that what you're thinking?
- Yeah, the piece of property is a triangular shape.
It has transmission lines on the south and on the north side.
Retaining wall is only on the north side.
- Only on the north side?
- Only on the north side, yes sir.
Yeah, it's kind of hard to see here,
but this is somewhat of a hill,
small hill that we have to cut and put a retaining wall in.
- Usually how, what would be the height of that retaining wall?
- That wall is only about six foot tall.
- Okay, so really it's not for security per se,
is it just for, will it be used as a,
for the water that runs off just gives it a direction
to go head on south into a creek and such?
- Right, the water all head south down into this pond area
down here.
The retaining wall is meant to keep the land
from shifting back down onto our site.
We have to cut some of this hill back
to make enough level land for our substation.
The retaining wall holds the land back
and also provides a way to drain the water off.
- Okay, thank you very much, thank you Mr. Chairman.
- Since we're talking about this project,
I was curious, what's the total footprint of the substation?
- The total parcel is 10 acres
and about half of that's encumbered by transmission lines.
So about five acres is what we're developing
for the substation.
- Okay, 10 acre plot, five acre of substation.
And is this a substation for the developments
that are going in?
- Around Hunter and Coal Ranch.
- Hunter and Coal Ranch?
- Yes sir.
- Okay, and what's the size of the,
electrically, what's the size of the substation?
- It's 130 AKV substation.
We're building it for an initial capacity
of serving 100 megawatts.
- 100 megawatts, thank you.
- Yes sir.
- Any further questions?
Would anybody like to make a motion?
- So moved.
- Second.
- We have a motion to approve recommending,
or recommending adoption of an ordinance
for construction of this retaining wall.
All in favor?
- Aye.
- Opposed?
- Thank you.
- Motion carries.
- Thank you.
- Moving on to items for individual consideration.
Our first item is approval of the April 8th minutes.
- So moved.
- Thank you, Commissioner Boyle.
Seconds?
- Second.
- Lee seconds.
All in favor?
- Aye.
- Opposed?
None.
Now items for individual consideration.
Item B, consider recommending adoption of an ordinance
for the sale and delivery of $31.5 million in revenue notes
and authorizing the issuance of these notes.
- Good morning, Randy Klingle, Treasury Manager.
Have a brief presentation about the bond parameters
and ordinance for the utility system revenue bond sale.
As DME has discussed in the past with this board
and also with council, in fiscal year 2023,
the energy consumption exceeded their expectations
in the months of July, August, and September.
Temperatures exceeded 110 degrees
well into the 30 day mark over that time period.
Evening prices were capped at the maximum of $5,000
per Bangawatt, which resulted in last fiscal year
a $31.26 million shortfall.
And as they discussed previously with you all
in the council is that we were gonna do
some short term financing to recoup that.
So we're looking at a five year term
to accommodate for the $31.26 million,
which would equal about a $7 million debt service payment
for DME, which they do have allocated in their budget.
And my next step is that we will have the May sale
for the $31 million and we will receive those proceeds
in mid-June, excuse me.
And those are all the slides I have
for my short presentation.
- I have a question. - Yes, sir.
- A little maybe out of left field, but just for my knowledge.
So we're issuing bonds to pay for a shortfall
in revenue based on this power surge and power demand.
In general accounting practice,
you're not generally allowed to use debt to pay
for operating costs, so I'm just curious how this falls
under any general accounting practices.
- My understanding, I may ask someone to elaborate
that this is purchase power, so it has an exception
by the AG's office.
- Okay, so it's an exception
based on this power purchase.
Okay, well, thank you.
- Any further questions?
So I have one, could you go back to the table
of the payment schedule there?
- Yes.
- So I guess this would be a question for you.
Tony, are we in a situation now with our increased rates
that we will likely avoid this condition going forward?
- Well, just as a reminder,
so the increase in rates that we did,
we increased the ECA to recover purchase power expenses,
the TCRF to recover transmission expenses.
This payment, these payments are considered fixed expenses
and they would be on the base rate side.
In the presentation that we made,
we calculated that we would need an additional
five and a half percent increase to the base rate.
We're currently looking at it.
We're working with finance subject to forecast.
Looks like we might be able to mitigate some of this.
I think that the issue going forward is
that if we forego doing rate increases,
we're gonna be back in the same situation
where we were this past year where all of a sudden
we're doing a 20% rate increase and there's rate shock.
So we're trying to look at this kind of long-term
to see how can we spread this out.
But likelihood is we are gonna be proposing
an additional increase to base rates
here in the next few months when we come back to you.
And at that time, we'll be able to kind of break that out
for you, but we will likely be looking at another base rate
increase associated not just with this,
but also with winter storm yearly debt that we had.
Again, and a lot of different moving pieces
with the data center, the new data center that we have,
how do we utilize those revenues?
And so there'll be some options that we're gonna be discussing
with the PB and the council on how do we fund this
going forward.
- I have a question also.
In terms of typical years, 30 days over 110 degrees,
is that normal, abnormal?
And if so, how abnormal is it?
- Yeah, I don't have my weather guys here,
but pretty abnormal.
I think the last time that we saw temperatures like this
was back in 2011.
In 2011 was pretty hot, actually hotter than this year.
So current forecasts are that we're probably looking
at a mild type of a summer.
So hopefully we won't experience this again.
But again, as we continue to see more and more renewables
out in the market and a lot of uncertainty
is still in the market because of some of the changes
or cuts doing, can't give you any guarantees
that we won't see another type of cost increase again
this coming year.
- A cost event.
- Yeah, correct.
- Thank you.
- So this is a five year term?
- Yes, sir.
- And is that interest rate about 30%?
If my eyeball math is correct,
total interest, total cost of--
- It's about five and a quarter a year.
- Five and a quarter a year, so total cost is about 30%
to service over the life of that.
Okay, so in the next five year term,
if we do not look at different ways of preventing
these events from happening from a cost shock perspective,
we are likely going to experience this again.
Is that what you're saying?
- Unknown.
I think one of the things that we have been talking about
is looking at our current fund balance,
looking at the possibility of establishing
some type of rainy day fund.
We can have a pot of money for these types of events
and kind of self finance them going forward.
But again, when you're looking at that
along with rate increases, people start asking questions.
Will you have this pot of money over there?
Warranty using it to...
So again, a lot of things to consider
and that's something that we are looking at.
- Okay, thank you.
- Any further questions?
Motion to approve.
Do we have a second?
- Second.
- We have a motion and a second.
All in favor?
- Aye.
- Motion carries.
And our final items for individual consideration
are management reports.
- Yeah, Mr. Chair and members of the POB,
really not any changes to the documents
that we sent you the last time around.
So certainly happy to answer any questions you may have
or if there's new items that you'd like to see.
Certainly happy to do that.
- Seeing none, I would entertain a motion to adjourn.
- So moved.
- Thank you.