1 00:00:00,000 --> 00:00:09,280 Good morning, and welcome to the Public Utility Board meeting of the City of Denton, Monday, 2 00:00:09,280 --> 00:00:10,280 August 12, 2024. 3 00:00:10,280 --> 00:00:19,000 It is 9 a.m., and we'll see if there is, are there any comments from the public or any 4 00:00:19,000 --> 00:00:20,000 comments written down? 5 00:00:20,000 --> 00:00:24,000 It doesn't appear to be, so we'll move right on to the regular meeting. 6 00:00:24,000 --> 00:00:27,160 There are no presentations from the public. 7 00:00:27,160 --> 00:00:34,480 The Consent Agenda, would anyone like to pull any item from the Consent Agenda? 8 00:00:34,480 --> 00:00:36,480 Does not appear to be. 9 00:00:36,480 --> 00:00:37,480 Nice. 10 00:00:37,480 --> 00:00:40,120 We'll move on to items for individual consideration. 11 00:00:40,120 --> 00:00:50,480 We do have a, item C and D, I believe, that if there are any questions about the Power 12 00:00:50,480 --> 00:00:54,520 Purchase Agreement or the Lease Agreement, then we'll need to go into closed session. 13 00:00:54,520 --> 00:01:03,240 Yeah, I'm just, yeah, I'm just, I'm just making sure everybody's aware that if we have any 14 00:01:03,240 --> 00:01:07,520 technical questions about those, we need to move, we'll move into closed session for those 15 00:01:07,520 --> 00:01:08,520 items. 16 00:01:08,520 --> 00:01:18,360 All right, we have item, item A, which is, oh, sorry, skipped right over. 17 00:01:18,360 --> 00:01:24,080 So do I have a motion to approve the Consent Agenda? 18 00:01:24,080 --> 00:01:25,080 Second. 19 00:01:25,080 --> 00:01:29,800 Motion and a second, all those in favor, please say aye. 20 00:01:29,800 --> 00:01:30,800 Aye. 21 00:01:30,800 --> 00:01:31,800 Any opposed? 22 00:01:31,800 --> 00:01:32,800 Okay. 23 00:01:32,800 --> 00:01:37,640 As there is none, we will move on to items for individual consideration. 24 00:01:37,640 --> 00:01:41,840 Item A, consider approval of the July 22nd, 2024 minutes. 25 00:01:41,840 --> 00:01:43,640 Are there any changes? 26 00:01:43,640 --> 00:01:44,640 We have a motion. 27 00:01:44,640 --> 00:01:45,640 Second. 28 00:01:45,640 --> 00:01:46,640 And a second. 29 00:01:46,640 --> 00:01:48,920 All those in favor, please say aye. 30 00:01:48,920 --> 00:01:49,920 Aye. 31 00:01:49,920 --> 00:01:50,920 Any opposed? 32 00:01:50,920 --> 00:01:51,920 Sign the same. 33 00:01:51,920 --> 00:01:57,120 We'll move on to item B. Consider recommending adoption of an ordinance to the City of Dittin, 34 00:01:57,120 --> 00:02:00,960 Texas, approving the execution and delivery of a financing agreement with the Texas Water 35 00:02:00,960 --> 00:02:08,280 Development Board. 36 00:02:08,280 --> 00:02:09,280 Good morning. 37 00:02:09,280 --> 00:02:17,600 I'm Stephen Gay, Director of Water Utilities, and we're, so the project overview is Lake 38 00:02:17,600 --> 00:02:25,920 Ray Roberts was constructed in 2002, its current capacity is 20 million gallons a day. 39 00:02:25,920 --> 00:02:29,920 And based off of our recent master planning where we looked at our growth projections 40 00:02:29,920 --> 00:02:35,000 with the municipal utility districts, the development of hunter coal, and a lot of other 41 00:02:35,000 --> 00:02:41,480 growth within our corporate limits, we are anticipating the need for additional water 42 00:02:41,480 --> 00:02:43,880 treatment capacity. 43 00:02:43,880 --> 00:02:48,720 The planned expansion project will increase the treatment capacity at the site by 20 million 44 00:02:48,720 --> 00:02:54,760 gallons a day, and we're reserving capacity an additional 30 million gallons a day so 45 00:02:54,760 --> 00:02:59,320 we can add the capacity as we need it as growth demands. 46 00:02:59,320 --> 00:03:03,680 So the total new capacity at the site is going to be 50 million gallons, so we currently 47 00:03:03,680 --> 00:03:04,680 have 20. 48 00:03:04,680 --> 00:03:08,300 We're going to add the 30, or if we have 30, we're going to have 20. 49 00:03:08,300 --> 00:03:12,720 And then the combined capacity is going to be right at 70 million gallons a day, and 50 00:03:12,720 --> 00:03:19,840 the current cost of the project is roughly 195 million gallons, 195 million dollars. 51 00:03:19,840 --> 00:03:23,720 So with that, I'm going to go ahead and I'm going to turn it over to Viz with our finance 52 00:03:23,720 --> 00:03:30,060 team and let him go over the financing piece of it. 53 00:03:30,060 --> 00:03:31,060 Good morning. 54 00:03:31,060 --> 00:03:35,600 I'm Viz Papandavong, ADF Finance, and I'm here to talk about the benefits of the SWIFT 55 00:03:35,600 --> 00:03:36,600 loan. 56 00:03:36,600 --> 00:03:42,680 So a few things, looking at the slide, divertification of our finance portfolio, and also we're 57 00:03:42,680 --> 00:03:47,560 there's a big interest saving component to this loan since it's running through the federal 58 00:03:47,560 --> 00:03:49,120 government basically. 59 00:03:49,120 --> 00:03:55,840 So we came back a few months ago just on the intention of applying. 60 00:03:55,840 --> 00:03:59,640 Now we're here for the actual signing of the financing agreement. 61 00:03:59,640 --> 00:04:04,880 This basically provides a commitment with Texas Water Development Board to kind of be 62 00:04:04,880 --> 00:04:10,880 committed to getting the loans through them basically pretty much. 63 00:04:10,880 --> 00:04:14,360 So a little bit more about the financing agreement this time around. 64 00:04:14,360 --> 00:04:19,120 So we're going to basically looking at about $10.1 million loan through the Texas Water 65 00:04:19,120 --> 00:04:22,480 Development Board, and this will be done annually. 66 00:04:22,480 --> 00:04:27,280 So the city chose to look at it on an annual basis versus committing through the whole five 67 00:04:27,280 --> 00:04:28,280 years. 68 00:04:28,280 --> 00:04:32,040 So every single year we'll come back and basically look at these dollars, looking at the five 69 00:04:32,040 --> 00:04:36,560 year schedule to say, "Hey, do we want to go through with this loan, signing the financing 70 00:04:36,560 --> 00:04:39,600 agreement and looking at the terms and saying, "Yes, we want to do this," and kind of move 71 00:04:39,600 --> 00:04:43,400 forward. 72 00:04:43,400 --> 00:04:45,160 Here is just a little bit of the timeline. 73 00:04:45,160 --> 00:04:51,920 So next week we'll go to council and get approval for finance agreement, and here is just the 74 00:04:51,920 --> 00:04:53,800 outline of the next few months. 75 00:04:53,800 --> 00:04:58,720 So if everything goes well and goes through, then we'll pretty much get the cash sum around 76 00:04:58,720 --> 00:05:05,240 at the end of the calendar year. 77 00:05:05,240 --> 00:05:11,920 And here are some just the potential penalties if we decide not to go through after signing 78 00:05:11,920 --> 00:05:13,640 the finance agreement. 79 00:05:13,640 --> 00:05:22,200 We don't anticipate that, but this is just something we want to disclose to the city. 80 00:05:22,200 --> 00:05:23,200 And that's it. 81 00:05:23,200 --> 00:05:24,200 Any questions? 82 00:05:24,200 --> 00:05:39,240 Mr. Neuquist. 83 00:05:39,240 --> 00:05:43,000 First year, 10 million, second year, 11 million, 57 million, 87 million. 84 00:05:43,000 --> 00:05:48,680 So then it all becomes an accumulation of what was the number that you said ultimately? 85 00:05:48,680 --> 00:05:49,680 195. 86 00:05:49,680 --> 00:05:50,680 195, I think. 87 00:05:50,680 --> 00:05:51,680 195 million. 88 00:05:51,680 --> 00:05:52,680 Yes, 195 million. 89 00:05:52,680 --> 00:05:53,680 Yes. 90 00:05:53,680 --> 00:06:00,600 Well, what is the payment timetable on something like that? 91 00:06:00,600 --> 00:06:03,520 So the payment timetable, I think we're looking at 30 years. 92 00:06:03,520 --> 00:06:05,440 That's what I'm going to show, a 30-year payout. 93 00:06:05,440 --> 00:06:08,440 Yes, sir. 94 00:06:08,440 --> 00:06:14,000 Thank you. 95 00:06:14,000 --> 00:06:20,440 So is the Texas Water Development Board funding competitive or better than? 96 00:06:20,440 --> 00:06:21,440 Yes. 97 00:06:21,440 --> 00:06:26,240 So with the loan getting through the Texas Water Development Board, we're getting around 98 00:06:26,240 --> 00:06:28,040 a 14% subsidy. 99 00:06:28,040 --> 00:06:33,040 And also we get a slight discount on the interest rate just for that reason because it's all 100 00:06:33,040 --> 00:06:34,480 going through the federal government. 101 00:06:34,480 --> 00:06:38,280 So they're actually issuing the loans on our behalf and we get the loan through them. 102 00:06:38,280 --> 00:06:44,840 So we get both like a rebate effectively and then also a lower interest rate? 103 00:06:44,840 --> 00:06:45,840 Correct, yes. 104 00:06:45,840 --> 00:06:51,360 And then these five years, it'll use market rate kind of each year as we go forward. 105 00:06:51,360 --> 00:06:52,360 Yes. 106 00:06:52,360 --> 00:06:53,360 Yep. 107 00:06:53,360 --> 00:06:55,240 So that's why each year we'll kind of come back and say, hey, you know, here's the finance 108 00:06:55,240 --> 00:06:59,080 agreement, sign the finance agreement, and then take a look at the terms. 109 00:06:59,080 --> 00:07:03,960 And we work with our bond council and our hilltop advisors when we're looking at these 110 00:07:03,960 --> 00:07:05,960 documents every year. 111 00:07:05,960 --> 00:07:10,320 So the interest rates for, let's say, the first year, that would be a 30-year payout. 112 00:07:10,320 --> 00:07:11,840 Is that a fixed rate? 113 00:07:11,840 --> 00:07:12,840 Yes. 114 00:07:12,840 --> 00:07:17,080 And then for the second year, the 11 million, that could be a different rate depending on 115 00:07:17,080 --> 00:07:18,080 it. 116 00:07:18,080 --> 00:07:19,080 Exactly. 117 00:07:19,080 --> 00:07:26,160 So that's a flexible, in a sense it looks like, of an interest rate or a combined average 118 00:07:26,160 --> 00:07:28,760 is what we're looking at, hoping that everything is low. 119 00:07:28,760 --> 00:07:30,560 But all of those are fixed rates. 120 00:07:30,560 --> 00:07:31,560 Correct, yes. 121 00:07:31,560 --> 00:07:32,560 Okay, thank you. 122 00:07:32,560 --> 00:07:33,560 Yes. 123 00:07:33,560 --> 00:07:36,720 And just to keep in mind, each year when we go through the finance agreement, Texas Water 124 00:07:36,720 --> 00:07:39,280 Development Board gives us that 14% subsidy. 125 00:07:39,280 --> 00:07:42,800 So whatever market rate is, you'll get 40% less because you're going through the federal 126 00:07:42,800 --> 00:07:43,800 government. 127 00:07:43,800 --> 00:07:44,800 Definitely, yeah. 128 00:07:44,800 --> 00:07:45,800 But you're correct. 129 00:07:45,800 --> 00:07:50,400 And then on the penalty page. 130 00:07:50,400 --> 00:07:52,220 Yes. 131 00:07:52,220 --> 00:08:00,060 So if these were paid off early, like 20 years, we refund for a better interest rate or something 132 00:08:00,060 --> 00:08:06,480 like that, this seems kind of pretty onerous for an early payment. 133 00:08:06,480 --> 00:08:07,800 Is that correct? 134 00:08:07,800 --> 00:08:14,160 Or is the termination different than an early payback? 135 00:08:14,160 --> 00:08:19,720 Steven Gay, Director of Water Utilities. 136 00:08:19,720 --> 00:08:20,720 It's different. 137 00:08:20,720 --> 00:08:25,840 That's only if we, these penalties are if we choose to not accept the monies. 138 00:08:25,840 --> 00:08:30,920 So it's anticipation of them issuing the debt, and so the further along they get down the 139 00:08:30,920 --> 00:08:34,720 path of issuing the debt, the more egregious those penalties are. 140 00:08:34,720 --> 00:08:38,520 So that's why we're coming to you now, getting the approval, we're going to get the finance 141 00:08:38,520 --> 00:08:41,320 agreement, we'll review it, and in plenty of time. 142 00:08:41,320 --> 00:08:44,400 So if we want to back out, we're going to mitigate our liability. 143 00:08:44,400 --> 00:08:45,400 Does that make sense? 144 00:08:45,400 --> 00:08:47,080 And did that answer your question? 145 00:08:47,080 --> 00:08:48,080 Yeah. 146 00:08:48,080 --> 00:08:53,600 So that this doesn't affect like early refund the bonds in 2040 or something like that. 147 00:08:53,600 --> 00:08:56,000 And then one, actually, one last question regarding water supply. 148 00:08:56,000 --> 00:09:04,040 Is this increase to 70 MGD, about what year does that put our next capacity expansion 149 00:09:04,040 --> 00:09:05,040 at? 150 00:09:05,040 --> 00:09:06,040 Oh, that's a good question. 151 00:09:06,040 --> 00:09:10,920 I might have to get back with you on that because I'm trying to think, I want to say 152 00:09:10,920 --> 00:09:15,760 just 2050 is the number that comes to mind, but I have to verify that. 153 00:09:15,760 --> 00:09:21,360 So this is like an expansion capacity for about the next 10 to 15 years. 154 00:09:21,360 --> 00:09:22,360 Easily. 155 00:09:22,360 --> 00:09:24,080 And that's why we're building it the way we're doing right now. 156 00:09:24,080 --> 00:09:25,880 So we know we're going to need the additional capacity. 157 00:09:25,880 --> 00:09:30,160 So we're building the building for up to 50 million gallons a day, but we're only putting 158 00:09:30,160 --> 00:09:33,800 in 20 today because that's what our immediate demand is. 159 00:09:33,800 --> 00:09:38,340 And then we can kind of mark, we can monitor the market and the growth patterns and things 160 00:09:38,340 --> 00:09:42,640 like that, and then we'll be set up more easily to add the capacity. 161 00:09:42,640 --> 00:09:46,560 So it's more or less adding equipment and not concrete and infrastructure and wiring 162 00:09:46,560 --> 00:09:47,560 and things like that. 163 00:09:47,560 --> 00:09:48,560 Thank you. 164 00:09:48,560 --> 00:09:49,560 Yes, sir. 165 00:09:49,560 --> 00:09:50,560 I'm so excited. 166 00:09:50,560 --> 00:09:51,560 Thank you. 167 00:09:51,560 --> 00:09:52,560 Thank you, sir. 168 00:09:52,560 --> 00:09:53,560 Oh, yeah. 169 00:09:53,560 --> 00:09:54,560 Okay. 170 00:09:54,560 --> 00:09:55,560 Anybody else? 171 00:09:55,560 --> 00:10:11,520 Oh, so we can do an early payoff and there's no penalty. 172 00:10:11,520 --> 00:10:20,080 And is it the history of this city that we do strive to make those early payoffs? 173 00:10:20,080 --> 00:10:25,240 I would defer to our finance team for that, but I would say yes. 174 00:10:25,240 --> 00:10:29,000 That just depends, like I said, you know, we have to work with our hilltop advisor just 175 00:10:29,000 --> 00:10:33,080 to get understanding if that's beneficial, you know, from a finance perspective. 176 00:10:33,080 --> 00:10:34,080 So... 177 00:10:34,080 --> 00:10:40,120 Well, I would think from a real estate thing, if I could pay off a note sooner, I'm better 178 00:10:40,120 --> 00:10:44,160 off eventually, because I know the city's already set and the pipeline's going, but 179 00:10:44,160 --> 00:10:49,200 if we could pay it off early, I can't imagine a scenario where that would not be appropriate. 180 00:10:49,200 --> 00:10:50,560 But just my own opinion. 181 00:10:50,560 --> 00:10:51,560 Thank you so much. 182 00:10:51,560 --> 00:10:55,320 Okay. 183 00:10:55,320 --> 00:10:57,320 My question is this. 184 00:10:57,320 --> 00:11:08,320 So the payback of this is based upon utility rates, impact fees, I would imagine, right? 185 00:11:08,320 --> 00:11:14,440 Is there any MUD district contribution rather than usage? 186 00:11:14,440 --> 00:11:20,820 In the development agreements that we are negotiating with the MUDs, we have provisions 187 00:11:20,820 --> 00:11:25,440 in there that they will pay impact fees for their impact to our system, and that's going 188 00:11:25,440 --> 00:11:31,280 to be consistent with what the development community within our corporate limits would 189 00:11:31,280 --> 00:11:38,520 be paying, and furthermore, services outside of our corporate limits are charged at a premium, 190 00:11:38,520 --> 00:11:42,680 so we have an additional, I guess, a rider on top of that, because it's outside of the 191 00:11:42,680 --> 00:11:43,680 corporate limits. 192 00:11:43,680 --> 00:11:45,360 Does that answer your question? 193 00:11:45,360 --> 00:11:51,400 Yes, and it just brought up more questions in my head about MUD districts, which may 194 00:11:51,400 --> 00:11:59,240 not be on the subject too much, but I'm curious for the residents that would be outside of 195 00:11:59,240 --> 00:12:07,400 our district or our area that have already paid their MUD district and already built 196 00:12:07,400 --> 00:12:16,440 their homes, and they're able to get onto our system, that's just going to be usage 197 00:12:16,440 --> 00:12:20,880 income, correct? 198 00:12:20,880 --> 00:12:21,880 Can you restate the question? 199 00:12:21,880 --> 00:12:22,880 I want to make sure I understand. 200 00:12:22,880 --> 00:12:30,480 I buy a house in a MUD district who does not have an agreement with Denton currently. 201 00:12:30,480 --> 00:12:37,320 I pay my MUD district impact fee, or whatever they call that, when you buy your house, and 202 00:12:37,320 --> 00:12:43,920 I've already built my home, so therefore, I've paid all impact fees that were necessary. 203 00:12:43,920 --> 00:12:47,800 Of course, MUD's going to hit them every year for a while. 204 00:12:47,800 --> 00:12:51,560 Do you pick up those MUD districts that have been sitting there that weren't currently? 205 00:12:51,560 --> 00:12:54,000 No, we're negotiating with all of them. 206 00:12:54,000 --> 00:12:57,880 If you did, it'd be a whole different ordeal, right? 207 00:12:57,880 --> 00:13:00,600 We'd have a different agreement, a structure with them. 208 00:13:00,600 --> 00:13:03,480 What MUD districts do you currently have agreements with? 209 00:13:03,480 --> 00:13:07,600 We don't have an agreement, well, Legends, but it's not a MUD. 210 00:13:07,600 --> 00:13:08,600 Where's Legends? 211 00:13:08,600 --> 00:13:17,920 Legends is kind of up on the west of the 35 above University, 380, it's one of the newer 212 00:13:17,920 --> 00:13:20,280 districts out there. 213 00:13:20,280 --> 00:13:27,280 We don't have a wastewater agreement with any of the MUDs currently. 214 00:13:27,280 --> 00:13:33,040 We're under negotiations and discussions with them, but nothing has been inked. 215 00:13:33,040 --> 00:13:36,880 I hope I didn't get off discussion, but it was mentioned in this, and I didn't think 216 00:13:36,880 --> 00:13:38,600 about MUDs being part of this. 217 00:13:38,600 --> 00:13:45,840 When we look at our growth, we want to look at our entire ETJ, Extraterritorial Jurisdiction, 218 00:13:45,840 --> 00:13:48,440 to ensure that we're prepared for anything. 219 00:13:48,440 --> 00:13:55,400 When we do our impact fee analysis, we're allowed to, through I think it's 395 of the 220 00:13:55,400 --> 00:14:03,480 TAC, we're allowed to look at our Extraterritorial Jurisdiction, and I guess identify an impact 221 00:14:03,480 --> 00:14:07,080 fee in those areas, and that's what we're doing currently. 222 00:14:07,080 --> 00:14:09,320 We're doing that analysis right now. 223 00:14:09,320 --> 00:14:15,600 Quite a few moons ago, maybe 15 to 20 years ago, we did have the situation come up where 224 00:14:15,600 --> 00:14:24,560 we did stop expansion of our Pecan Creek, because we had predicted of that entire subdivision. 225 00:14:24,560 --> 00:14:27,840 Well, Pecan Creek is actually almost at capacity. 226 00:14:27,840 --> 00:14:32,760 We can only discharge about 30 million gallons a day at that site, and with the current project, 227 00:14:32,760 --> 00:14:35,880 we're going to get right up to 30 million gallons a day. 228 00:14:35,880 --> 00:14:39,660 On the wastewater side of the equation, that's why we're looking at those, basically looking 229 00:14:39,660 --> 00:14:44,280 at by basins, the Hickory Creek Basin, the Pecan Creek Basin, and the Clear Creek Basin, 230 00:14:44,280 --> 00:14:47,200 and having a plant in each one of those. 231 00:14:47,200 --> 00:14:48,200 Okay. 232 00:14:48,200 --> 00:14:49,200 All right. 233 00:14:49,200 --> 00:14:50,200 Yes, sir? 234 00:14:50,200 --> 00:14:54,520 Payments, monthly, quarterly, annually. 235 00:14:54,520 --> 00:14:58,200 Payments are semi-annually, so basically twice a year. 236 00:14:58,200 --> 00:14:59,200 Great. 237 00:14:59,200 --> 00:15:00,200 Thank you. 238 00:15:00,200 --> 00:15:01,200 All right. 239 00:15:01,200 --> 00:15:02,200 Anything further? 240 00:15:02,200 --> 00:15:05,720 Do we need action on this item? 241 00:15:05,720 --> 00:15:06,720 Yes. 242 00:15:06,720 --> 00:15:07,720 All right. 243 00:15:07,720 --> 00:15:18,960 Well, if there is not any further discussion, we'll entertain a motion. 244 00:15:18,960 --> 00:15:19,960 Second. 245 00:15:19,960 --> 00:15:24,800 We have a motion, and a second, did you get those? 246 00:15:24,800 --> 00:15:25,800 Okay. 247 00:15:25,800 --> 00:15:26,800 Any further discussion? 248 00:15:26,800 --> 00:15:29,760 If not, all those in favor, please say aye. 249 00:15:29,760 --> 00:15:30,760 Aye. 250 00:15:30,760 --> 00:15:32,520 Opposed, sign the same. 251 00:15:32,520 --> 00:15:33,520 None. 252 00:15:33,520 --> 00:15:34,520 Pass unanimously. 253 00:15:34,520 --> 00:15:39,480 Item C, consider recommending adoption of the ordinance for the City of Denton at Texas 254 00:15:39,480 --> 00:15:43,520 Home Rule Corporation, authorizing the city manager to execute amendment number three 255 00:15:43,520 --> 00:15:49,840 to the power purchase agreement between the city and Core Scientific. 256 00:15:49,840 --> 00:15:55,640 Could you read item D in as well, please? 257 00:15:55,640 --> 00:16:01,600 This is item D, PUB 24-128, consider recommending adoption of an ordinance of the City of Denton 258 00:16:01,600 --> 00:16:05,680 at Texas Home Rule Corporation, authorizing the city manager to execute amendment number 259 00:16:05,680 --> 00:16:10,320 two to the lease agreement between the city and Core Scientific, a Delaware corporation 260 00:16:10,320 --> 00:16:12,400 providing for an effective date. 261 00:16:12,400 --> 00:16:13,840 Thank you. 262 00:16:13,840 --> 00:16:14,840 Happy now? 263 00:16:14,840 --> 00:16:15,840 Yes, sir. 264 00:16:15,840 --> 00:16:16,840 Thank you. 265 00:16:16,840 --> 00:16:19,840 Thank you to the assistant general manager at DME. 266 00:16:19,840 --> 00:16:25,600 So today we're here to talk about an amendment to the power purchase agreement with Core 267 00:16:25,600 --> 00:16:31,440 Scientific and a lease amendment as well with the same entity. 268 00:16:31,440 --> 00:16:36,040 I'll give you a quick update on the project status. 269 00:16:36,040 --> 00:16:41,600 As you can see from the aerial, this is the Core Scientific project at the Denton Energy 270 00:16:41,600 --> 00:16:42,600 Center. 271 00:16:42,600 --> 00:16:45,560 The Denton Energy Center is here in the center. 272 00:16:45,560 --> 00:16:48,320 Our substation is here. 273 00:16:48,320 --> 00:16:52,280 Phase one, phase two, and phase three. 274 00:16:52,280 --> 00:16:54,640 So phase two, phase one complete. 275 00:16:54,640 --> 00:16:56,680 Phase two, about 80 percent. 276 00:16:56,680 --> 00:17:06,520 And phase three was the phase that was impacted by the bankruptcy in 2021. 277 00:17:06,520 --> 00:17:11,920 They've successfully come out of bankruptcy and are now looking to finish out the construction 278 00:17:11,920 --> 00:17:15,160 on phase three. 279 00:17:15,160 --> 00:17:21,640 Phase three is intended now to be converted from cryptocurrency mining to a traditional 280 00:17:21,640 --> 00:17:30,320 -- sorry, traditional tier three data center, which is a constant load. 281 00:17:30,320 --> 00:17:38,200 Unlike the cryptocurrency operation, this load would not be subject to price sensitivity. 282 00:17:38,200 --> 00:17:40,840 So they will run around the clock. 283 00:17:40,840 --> 00:17:52,480 The purpose of this entity is to begin doing artificial intelligence computations. 284 00:17:52,480 --> 00:17:59,160 So not only are we suggesting to -- or requesting a change to the power purchase agreement because 285 00:17:59,160 --> 00:18:06,040 of that different load profile, we have to provide for our protection and for there's 286 00:18:06,040 --> 00:18:11,960 a fixed price rate for this part of the operation. 287 00:18:11,960 --> 00:18:17,240 But we're also including an expansion of the leased area. 288 00:18:17,240 --> 00:18:26,120 And the expansion of the leased area is shown over here, these black rectangles. 289 00:18:26,120 --> 00:18:30,780 Those are standby generators. 290 00:18:30,780 --> 00:18:37,120 Those will be either diesel or gas fire generators to back up critical operations at the high 291 00:18:37,120 --> 00:18:40,520 performance computing phase three. 292 00:18:40,520 --> 00:18:47,440 The mauve colored rectangles here are heat exchangers. 293 00:18:47,440 --> 00:18:53,160 Currently the cryptocurrency operation runs using air cooled. 294 00:18:53,160 --> 00:18:58,720 So it takes ambient air and passes it through the processors and then exhausts the hotter 295 00:18:58,720 --> 00:19:01,380 air out through the top of the building. 296 00:19:01,380 --> 00:19:07,080 As a tier three data center, this will be an environment controlled building. 297 00:19:07,080 --> 00:19:19,940 So there will be space heating and cooling in these buildings once they're converted. 298 00:19:19,940 --> 00:19:26,200 So as a jurisdictional monopoly, DME is required to serve these loads. 299 00:19:26,200 --> 00:19:33,400 We're the only provider and as long as we can meet the demands without upgrading our 300 00:19:33,400 --> 00:19:38,200 transmission or distribution system, we have to serve the load. 301 00:19:38,200 --> 00:19:45,400 So what we're asking today is to modify the power purchase agreement to convert this high 302 00:19:45,400 --> 00:19:49,120 performance computing section to a firm tariff price. 303 00:19:49,120 --> 00:19:56,960 It will only be subject to ERCOT mandated load shed events or DME outages due to distribution 304 00:19:56,960 --> 00:20:00,920 or transmission system issues. 305 00:20:00,920 --> 00:20:05,420 The tariff price that we are proposing is one that is a cost of service base to recover 306 00:20:05,420 --> 00:20:08,880 all of our costs to serve this customer. 307 00:20:08,880 --> 00:20:13,000 And it will be a renewable energy supply. 308 00:20:13,000 --> 00:20:20,200 For the immediate term, we will be doing forward hedges in the market, buying the power we 309 00:20:20,200 --> 00:20:22,760 need to serve this entity. 310 00:20:22,760 --> 00:20:27,520 Longer term, we'll be discussing that with you at a later date as part of the debt and 311 00:20:27,520 --> 00:20:35,520 renewable resource plan chapter two. 312 00:20:35,520 --> 00:20:42,680 One thing that I think is important to understand that this is our forecasted peak demand. 313 00:20:42,680 --> 00:20:50,340 The orange line at the bottom is our forecasted peak demand for the system without the core 314 00:20:50,340 --> 00:20:53,840 phase three HPC operation. 315 00:20:53,840 --> 00:21:00,320 The blue line is with the HPC operation and then the purple line is kind of the upper 316 00:21:00,320 --> 00:21:05,800 bounds of where we could potentially be at as a system if we continue to see the high 317 00:21:05,800 --> 00:21:14,440 growth rates that we've been seeing over the last two to three years. 318 00:21:14,440 --> 00:21:19,640 So as I'm looking at this, is it fair to say that your 56% would that be the blue line 319 00:21:19,640 --> 00:21:24,000 and the 84 being the purple or do they have any correlation to those colors at all? 320 00:21:24,000 --> 00:21:25,000 That is correct. 321 00:21:25,000 --> 00:21:28,000 Oh, wonderful. 322 00:21:28,000 --> 00:21:33,200 So at the bottom you see the gray bars, that's the debt and energy center, the 225 megawatts 323 00:21:33,200 --> 00:21:36,320 of firm capacity that we have. 324 00:21:36,320 --> 00:21:43,680 The rest of our energy is filled from renewable energy power purchase agreements and or bilateral 325 00:21:43,680 --> 00:21:50,320 agreements with counterparties in the market. 326 00:21:50,320 --> 00:21:59,640 So the changes, we've established a new demand based rate for the HPC operations in phase 327 00:21:59,640 --> 00:22:00,640 three. 328 00:22:00,640 --> 00:22:07,440 We've added an early termination fee to protect our customers if for some reason the core 329 00:22:07,440 --> 00:22:10,240 HPC load were to go away. 330 00:22:10,240 --> 00:22:16,340 We are adding some telemetry requirements to know the status of the backup generation 331 00:22:16,340 --> 00:22:22,040 and we're amending the load shed language to be consistent with their protocols. 332 00:22:22,040 --> 00:22:28,440 For the lease, we're amending the lease to add an additional 5.5 acres which is required 333 00:22:28,440 --> 00:22:34,360 for those backup generators and heat exchangers. 334 00:22:34,360 --> 00:22:37,640 And with that I'll be glad to answer any questions you might have. 335 00:22:37,640 --> 00:22:42,240 Mr. Rayner? 336 00:22:42,240 --> 00:22:45,560 The last slide you had on the 5.5, is that a ground lease? 337 00:22:45,560 --> 00:22:46,560 It is. 338 00:22:46,560 --> 00:22:48,480 It is a ground lease. 339 00:22:48,480 --> 00:22:52,640 So we already have a ground lease out there for 31.5 acres. 340 00:22:52,640 --> 00:22:54,640 We're just adding another 5.5 to that. 341 00:22:54,640 --> 00:22:56,600 And what is the term on that? 342 00:22:56,600 --> 00:23:01,080 That's 14 years with a 14-year option to extend. 343 00:23:01,080 --> 00:23:06,120 And it's coincident with the existing lease. 344 00:23:06,120 --> 00:23:08,880 And then my other question is on the early termination. 345 00:23:08,880 --> 00:23:15,960 So I understand Core, Core Scientific, did they go into bankruptcy or were they involved 346 00:23:15,960 --> 00:23:16,960 with that? 347 00:23:16,960 --> 00:23:17,960 They were. 348 00:23:17,960 --> 00:23:22,080 In late 2021 they declared Chapter 11 bankruptcy. 349 00:23:22,080 --> 00:23:26,400 They have emerged as quite a strong entity now. 350 00:23:26,400 --> 00:23:31,840 And I'll just point out that even through the bankruptcy, the city was able to collect 351 00:23:31,840 --> 00:23:32,840 all amounts due. 352 00:23:32,840 --> 00:23:35,800 There was no loss as a result of that. 353 00:23:35,800 --> 00:23:40,280 And that's what I was curious, because of already having that strike, rightfully so 354 00:23:40,280 --> 00:23:45,640 or not, as the early termination fee, was it, would it be fair to say it was beefed 355 00:23:45,640 --> 00:23:48,160 up a little bit because of that situation? 356 00:23:48,160 --> 00:23:49,160 It was. 357 00:23:49,160 --> 00:23:51,940 So it's specific to the Phase 3 operation. 358 00:23:51,940 --> 00:23:52,940 Only? 359 00:23:52,940 --> 00:23:54,600 Only to the Phase 3 operation. 360 00:23:54,600 --> 00:23:55,600 We beefed that up. 361 00:23:55,600 --> 00:24:00,480 That's where we have the most price risk, since it is a more of a fixed-price offer 362 00:24:00,480 --> 00:24:02,600 like our normal load that we-- I got you. 363 00:24:02,600 --> 00:24:03,600 Thank you. 364 00:24:03,600 --> 00:24:04,600 Question? 365 00:24:04,600 --> 00:24:05,600 Mr. Taylor? 366 00:24:05,600 --> 00:24:06,600 Good morning. 367 00:24:06,600 --> 00:24:07,600 Morning. 368 00:24:07,600 --> 00:24:17,280 You know, I see all those generators, and I think that that might be a really good opportunity 369 00:24:17,280 --> 00:24:22,000 for demand response or behind-the-meter load reduction. 370 00:24:22,000 --> 00:24:27,880 And I just want to make sure that we're offering our large customers terms that would allow 371 00:24:27,880 --> 00:24:33,560 them to do that and maybe split the revenue or split the savings in cases that prices 372 00:24:33,560 --> 00:24:34,560 do get really high. 373 00:24:34,560 --> 00:24:41,260 You know, we could-- DME could allow them to reduce their load, and we could sell back 374 00:24:41,260 --> 00:24:48,120 some of our forward purchases while the customer could avoid, you know, or get paid basically 375 00:24:48,120 --> 00:24:49,720 to run their own equipment. 376 00:24:49,720 --> 00:24:51,240 That's a great idea. 377 00:24:51,240 --> 00:24:53,600 And yeah, we are pursuing that. 378 00:24:53,600 --> 00:24:59,440 Obviously, what CORE wants to do is get this lease and the PPA amendment in place. 379 00:24:59,440 --> 00:25:07,280 They have a contract with a large, high-tech business to try to get this thing up and running. 380 00:25:07,280 --> 00:25:12,680 Those types of arrangements on the demand side-- obviously, there are demand-side programs 381 00:25:12,680 --> 00:25:13,960 in ERCOT. 382 00:25:13,960 --> 00:25:19,200 Unfortunately, right now, there's very little incentive for people to participate, because 383 00:25:19,200 --> 00:25:25,120 unless the utility-- in the-- I should put it this way-- in the competitive markets, 384 00:25:25,120 --> 00:25:27,400 there is more of an incentive. 385 00:25:27,400 --> 00:25:32,700 In the MOU markets, like Denton, where everything is vertically integrated, there really is 386 00:25:32,700 --> 00:25:34,480 very little incentive. 387 00:25:34,480 --> 00:25:39,920 However, for these types of facilities that have this backup generation, we will be exploring 388 00:25:39,920 --> 00:25:42,040 those types of options. 389 00:25:42,040 --> 00:25:46,840 We just don't have any big customers right now on the system that would be able to participate 390 00:25:46,840 --> 00:25:47,840 in a meaningful way. 391 00:25:47,840 --> 00:25:52,160 Thank you. 392 00:25:52,160 --> 00:26:01,740 So that was along the same lines as the question I was going to ask was-- are they-- this may 393 00:26:01,740 --> 00:26:03,120 be a closed session item. 394 00:26:03,120 --> 00:26:06,720 I'll just not ask it, because that really answered my question. 395 00:26:06,720 --> 00:26:07,720 Thanks, Terry. 396 00:26:07,720 --> 00:26:08,720 You're welcome. 397 00:26:08,720 --> 00:26:09,720 I just said it. 398 00:26:09,720 --> 00:26:10,720 I'm thinking through it. 399 00:26:10,720 --> 00:26:11,720 All right. 400 00:26:11,720 --> 00:26:12,720 Any other questions? 401 00:26:12,720 --> 00:26:23,680 It doesn't look like we're going into closed session, so can we-- you want to do them separately? 402 00:26:23,680 --> 00:26:24,680 Yes. 403 00:26:24,680 --> 00:26:25,680 OK. 404 00:26:25,680 --> 00:26:32,600 With the presentation last meeting and this meeting, I think I've satisfied all my questions 405 00:26:32,600 --> 00:26:36,040 regarding the revised PPA. 406 00:26:36,040 --> 00:26:41,240 So I move approval of item C, the revised PPA for phase three. 407 00:26:41,240 --> 00:26:42,240 OK. 408 00:26:42,240 --> 00:26:44,120 I have a motion. 409 00:26:44,120 --> 00:26:45,320 Any second? 410 00:26:45,320 --> 00:26:46,320 Second. 411 00:26:46,320 --> 00:26:49,120 I have a second for Mr. Rayner. 412 00:26:49,120 --> 00:26:51,360 Any further discussion? 413 00:26:51,360 --> 00:26:54,040 There being none. 414 00:26:54,040 --> 00:26:56,960 All those in favor of item C, please say aye. 415 00:26:56,960 --> 00:26:57,960 Aye. 416 00:26:57,960 --> 00:26:58,960 Any opposed? 417 00:26:58,960 --> 00:26:59,960 Sign the same. 418 00:26:59,960 --> 00:27:00,960 There are none. 419 00:27:00,960 --> 00:27:01,960 All right. 420 00:27:01,960 --> 00:27:04,120 Is there a motion for item D? 421 00:27:04,120 --> 00:27:08,080 I think there are package deals, so I'll move for approval of item D. 422 00:27:08,080 --> 00:27:09,080 I have a motion. 423 00:27:09,080 --> 00:27:10,080 Second. 424 00:27:10,080 --> 00:27:13,880 I have a second for Mr. Newquist. 425 00:27:13,880 --> 00:27:15,760 All those in favor, please say aye. 426 00:27:15,760 --> 00:27:16,760 Aye. 427 00:27:16,760 --> 00:27:17,760 Any opposed? 428 00:27:17,760 --> 00:27:18,760 Sign the same. 429 00:27:18,760 --> 00:27:21,200 There being none, we'll move on to item E, management reports. 430 00:27:21,200 --> 00:27:22,200 Mr. Puentes. 431 00:27:22,200 --> 00:27:28,160 Mr. Chair, members of the board, just to your future agenda items, we don't have anything 432 00:27:28,160 --> 00:27:29,160 listed on there. 433 00:27:29,160 --> 00:27:32,820 That means that we won't have items on the agenda, but certainly not any items at this 434 00:27:32,820 --> 00:27:36,160 point that we want to specifically highlight for you. 435 00:27:36,160 --> 00:27:39,760 And then on the new business action matrix, we still have the one item for fleet. 436 00:27:39,760 --> 00:27:44,560 I have been in communication with the fleet manager, and he is working on that and anticipates 437 00:27:44,560 --> 00:27:47,320 having that to you before that October date. 438 00:27:47,320 --> 00:27:51,400 So with that, if you have any other questions or any other requests, I'm really happy to 439 00:27:51,400 --> 00:27:53,800 talk through with you. 440 00:27:53,800 --> 00:27:54,800 Anyone? 441 00:27:54,800 --> 00:27:55,800 Bueller? 442 00:27:55,800 --> 00:27:56,800 No? 443 00:27:56,800 --> 00:27:57,800 All right. 444 00:27:57,800 --> 00:28:02,240 Looks like we've made it through. 445 00:28:02,240 --> 00:28:07,640 If there is no further discussion, I'll entertain a motion to adjourn. 446 00:28:07,640 --> 00:28:08,640 I'll move. 447 00:28:08,640 --> 00:28:09,640 All right. 448 00:28:09,640 --> 00:28:14,800 I don't think we all have to be in favor, so we'll be adjourned. 449 00:28:14,800 --> 00:28:15,000 Thank you.