WEBVTT 00:00:00.000 --> 00:00:09.280 Good morning, and welcome to the Public Utility Board meeting of the City of Denton, Monday, 00:00:09.280 --> 00:00:10.280 August 12, 2024. 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 00:00:19.000 --> 00:00:20.000 comments written down? 00:00:20.000 --> 00:00:24.000 It doesn't appear to be, so we'll move right on to the regular meeting. 00:00:24.000 --> 00:00:27.160 There are no presentations from the public. 00:00:27.160 --> 00:00:34.480 The Consent Agenda, would anyone like to pull any item from the Consent Agenda? 00:00:34.480 --> 00:00:36.480 Does not appear to be. 00:00:36.480 --> 00:00:37.480 Nice. 00:00:37.480 --> 00:00:40.120 We'll move on to items for individual consideration. 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 00:00:50.480 --> 00:00:54.520 Purchase Agreement or the Lease Agreement, then we'll need to go into closed session. 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 00:01:03.240 --> 00:01:07.520 technical questions about those, we need to move, we'll move into closed session for those 00:01:07.520 --> 00:01:08.520 items. 00:01:08.520 --> 00:01:18.360 All right, we have item, item A, which is, oh, sorry, skipped right over. 00:01:18.360 --> 00:01:24.080 So do I have a motion to approve the Consent Agenda? 00:01:24.080 --> 00:01:25.080 Second. 00:01:25.080 --> 00:01:29.800 Motion and a second, all those in favor, please say aye. 00:01:29.800 --> 00:01:30.800 Aye. 00:01:30.800 --> 00:01:31.800 Any opposed? 00:01:31.800 --> 00:01:32.800 Okay. 00:01:32.800 --> 00:01:37.640 As there is none, we will move on to items for individual consideration. 00:01:37.640 --> 00:01:41.840 Item A, consider approval of the July 22nd, 2024 minutes. 00:01:41.840 --> 00:01:43.640 Are there any changes? 00:01:43.640 --> 00:01:44.640 We have a motion. 00:01:44.640 --> 00:01:45.640 Second. 00:01:45.640 --> 00:01:46.640 And a second. 00:01:46.640 --> 00:01:48.920 All those in favor, please say aye. 00:01:48.920 --> 00:01:49.920 Aye. 00:01:49.920 --> 00:01:50.920 Any opposed? 00:01:50.920 --> 00:01:51.920 Sign the same. 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, 00:01:57.120 --> 00:02:00.960 Texas, approving the execution and delivery of a financing agreement with the Texas Water 00:02:00.960 --> 00:02:08.280 Development Board. 00:02:08.280 --> 00:02:09.280 Good morning. 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 00:02:17.600 --> 00:02:25.920 Ray Roberts was constructed in 2002, its current capacity is 20 million gallons a day. 00:02:25.920 --> 00:02:29.920 And based off of our recent master planning where we looked at our growth projections 00:02:29.920 --> 00:02:35.000 with the municipal utility districts, the development of hunter coal, and a lot of other 00:02:35.000 --> 00:02:41.480 growth within our corporate limits, we are anticipating the need for additional water 00:02:41.480 --> 00:02:43.880 treatment capacity. 00:02:43.880 --> 00:02:48.720 The planned expansion project will increase the treatment capacity at the site by 20 million 00:02:48.720 --> 00:02:54.760 gallons a day, and we're reserving capacity an additional 30 million gallons a day so 00:02:54.760 --> 00:02:59.320 we can add the capacity as we need it as growth demands. 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 00:03:03.680 --> 00:03:04.680 have 20. 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. 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 00:03:12.720 --> 00:03:19.840 the current cost of the project is roughly 195 million gallons, 195 million dollars. 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 00:03:23.720 --> 00:03:30.060 team and let him go over the financing piece of it. 00:03:30.060 --> 00:03:31.060 Good morning. 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 00:03:35.600 --> 00:03:36.600 loan. 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 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 00:03:47.560 --> 00:03:49.120 government basically. 00:03:49.120 --> 00:03:55.840 So we came back a few months ago just on the intention of applying. 00:03:55.840 --> 00:03:59.640 Now we're here for the actual signing of the financing agreement. 00:03:59.640 --> 00:04:04.880 This basically provides a commitment with Texas Water Development Board to kind of be 00:04:04.880 --> 00:04:10.880 committed to getting the loans through them basically pretty much. 00:04:10.880 --> 00:04:14.360 So a little bit more about the financing agreement this time around. 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 00:04:19.120 --> 00:04:22.480 Development Board, and this will be done annually. 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 00:04:27.280 --> 00:04:28.280 years. 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 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 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 00:04:39.600 --> 00:04:43.400 forward. 00:04:43.400 --> 00:04:45.160 Here is just a little bit of the timeline. 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 00:04:51.920 --> 00:04:53.800 outline of the next few months. 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 00:04:58.720 --> 00:05:05.240 at the end of the calendar year. 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 00:05:11.920 --> 00:05:13.640 the finance agreement. 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. 00:05:22.200 --> 00:05:23.200 And that's it. 00:05:23.200 --> 00:05:24.200 Any questions? 00:05:24.200 --> 00:05:39.240 Mr. Neuquist. 00:05:39.240 --> 00:05:43.000 First year, 10 million, second year, 11 million, 57 million, 87 million. 00:05:43.000 --> 00:05:48.680 So then it all becomes an accumulation of what was the number that you said ultimately? 00:05:48.680 --> 00:05:49.680 195. 00:05:49.680 --> 00:05:50.680 195, I think. 00:05:50.680 --> 00:05:51.680 195 million. 00:05:51.680 --> 00:05:52.680 Yes, 195 million. 00:05:52.680 --> 00:05:53.680 Yes. 00:05:53.680 --> 00:06:00.600 Well, what is the payment timetable on something like that? 00:06:00.600 --> 00:06:03.520 So the payment timetable, I think we're looking at 30 years. 00:06:03.520 --> 00:06:05.440 That's what I'm going to show, a 30-year payout. 00:06:05.440 --> 00:06:08.440 Yes, sir. 00:06:08.440 --> 00:06:14.000 Thank you. 00:06:14.000 --> 00:06:20.440 So is the Texas Water Development Board funding competitive or better than? 00:06:20.440 --> 00:06:21.440 Yes. 00:06:21.440 --> 00:06:26.240 So with the loan getting through the Texas Water Development Board, we're getting around 00:06:26.240 --> 00:06:28.040 a 14% subsidy. 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 00:06:33.040 --> 00:06:34.480 going through the federal government. 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. 00:06:38.280 --> 00:06:44.840 So we get both like a rebate effectively and then also a lower interest rate? 00:06:44.840 --> 00:06:45.840 Correct, yes. 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. 00:06:51.360 --> 00:06:52.360 Yes. 00:06:52.360 --> 00:06:53.360 Yep. 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 00:06:55.240 --> 00:06:59.080 agreement, sign the finance agreement, and then take a look at the terms. 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 00:07:03.960 --> 00:07:05.960 documents every year. 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. 00:07:10.320 --> 00:07:11.840 Is that a fixed rate? 00:07:11.840 --> 00:07:12.840 Yes. 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 00:07:17.080 --> 00:07:18.080 it. 00:07:18.080 --> 00:07:19.080 Exactly. 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 00:07:26.160 --> 00:07:28.760 is what we're looking at, hoping that everything is low. 00:07:28.760 --> 00:07:30.560 But all of those are fixed rates. 00:07:30.560 --> 00:07:31.560 Correct, yes. 00:07:31.560 --> 00:07:32.560 Okay, thank you. 00:07:32.560 --> 00:07:33.560 Yes. 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 00:07:36.720 --> 00:07:39.280 Development Board gives us that 14% subsidy. 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 00:07:42.800 --> 00:07:43.800 government. 00:07:43.800 --> 00:07:44.800 Definitely, yeah. 00:07:44.800 --> 00:07:45.800 But you're correct. 00:07:45.800 --> 00:07:50.400 And then on the penalty page. 00:07:50.400 --> 00:07:52.220 Yes. 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 00:08:00.060 --> 00:08:06.480 like that, this seems kind of pretty onerous for an early payment. 00:08:06.480 --> 00:08:07.800 Is that correct? 00:08:07.800 --> 00:08:14.160 Or is the termination different than an early payback? 00:08:14.160 --> 00:08:19.720 Steven Gay, Director of Water Utilities. 00:08:19.720 --> 00:08:20.720 It's different. 00:08:20.720 --> 00:08:25.840 That's only if we, these penalties are if we choose to not accept the monies. 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 00:08:30.920 --> 00:08:34.720 path of issuing the debt, the more egregious those penalties are. 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 00:08:38.520 --> 00:08:41.320 agreement, we'll review it, and in plenty of time. 00:08:41.320 --> 00:08:44.400 So if we want to back out, we're going to mitigate our liability. 00:08:44.400 --> 00:08:45.400 Does that make sense? 00:08:45.400 --> 00:08:47.080 And did that answer your question? 00:08:47.080 --> 00:08:48.080 Yeah. 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. 00:08:53.600 --> 00:08:56.000 And then one, actually, one last question regarding water supply. 00:08:56.000 --> 00:09:04.040 Is this increase to 70 MGD, about what year does that put our next capacity expansion 00:09:04.040 --> 00:09:05.040 at? 00:09:05.040 --> 00:09:06.040 Oh, that's a good question. 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 00:09:10.920 --> 00:09:15.760 just 2050 is the number that comes to mind, but I have to verify that. 00:09:15.760 --> 00:09:21.360 So this is like an expansion capacity for about the next 10 to 15 years. 00:09:21.360 --> 00:09:22.360 Easily. 00:09:22.360 --> 00:09:24.080 And that's why we're building it the way we're doing right now. 00:09:24.080 --> 00:09:25.880 So we know we're going to need the additional capacity. 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 00:09:30.160 --> 00:09:33.800 in 20 today because that's what our immediate demand is. 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 00:09:38.340 --> 00:09:42.640 like that, and then we'll be set up more easily to add the capacity. 00:09:42.640 --> 00:09:46.560 So it's more or less adding equipment and not concrete and infrastructure and wiring 00:09:46.560 --> 00:09:47.560 and things like that. 00:09:47.560 --> 00:09:48.560 Thank you. 00:09:48.560 --> 00:09:49.560 Yes, sir. 00:09:49.560 --> 00:09:50.560 I'm so excited. 00:09:50.560 --> 00:09:51.560 Thank you. 00:09:51.560 --> 00:09:52.560 Thank you, sir. 00:09:52.560 --> 00:09:53.560 Oh, yeah. 00:09:53.560 --> 00:09:54.560 Okay. 00:09:54.560 --> 00:09:55.560 Anybody else? 00:09:55.560 --> 00:10:11.520 Oh, so we can do an early payoff and there's no penalty. 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? 00:10:20.080 --> 00:10:25.240 I would defer to our finance team for that, but I would say yes. 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 00:10:29.000 --> 00:10:33.080 to get understanding if that's beneficial, you know, from a finance perspective. 00:10:33.080 --> 00:10:34.080 So... 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 00:10:40.120 --> 00:10:44.160 off eventually, because I know the city's already set and the pipeline's going, but 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. 00:10:49.200 --> 00:10:50.560 But just my own opinion. 00:10:50.560 --> 00:10:51.560 Thank you so much. 00:10:51.560 --> 00:10:55.320 Okay. 00:10:55.320 --> 00:10:57.320 My question is this. 00:10:57.320 --> 00:11:08.320 So the payback of this is based upon utility rates, impact fees, I would imagine, right? 00:11:08.320 --> 00:11:14.440 Is there any MUD district contribution rather than usage? 00:11:14.440 --> 00:11:20.820 In the development agreements that we are negotiating with the MUDs, we have provisions 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 00:11:25.440 --> 00:11:31.280 to be consistent with what the development community within our corporate limits would 00:11:31.280 --> 00:11:38.520 be paying, and furthermore, services outside of our corporate limits are charged at a premium, 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 00:11:42.680 --> 00:11:43.680 corporate limits. 00:11:43.680 --> 00:11:45.360 Does that answer your question? 00:11:45.360 --> 00:11:51.400 Yes, and it just brought up more questions in my head about MUD districts, which may 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 00:11:59.240 --> 00:12:07.400 our district or our area that have already paid their MUD district and already built 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 00:12:16.440 --> 00:12:20.880 income, correct? 00:12:20.880 --> 00:12:21.880 Can you restate the question? 00:12:21.880 --> 00:12:22.880 I want to make sure I understand. 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. 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 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. 00:12:43.920 --> 00:12:47.800 Of course, MUD's going to hit them every year for a while. 00:12:47.800 --> 00:12:51.560 Do you pick up those MUD districts that have been sitting there that weren't currently? 00:12:51.560 --> 00:12:54.000 No, we're negotiating with all of them. 00:12:54.000 --> 00:12:57.880 If you did, it'd be a whole different ordeal, right? 00:12:57.880 --> 00:13:00.600 We'd have a different agreement, a structure with them. 00:13:00.600 --> 00:13:03.480 What MUD districts do you currently have agreements with? 00:13:03.480 --> 00:13:07.600 We don't have an agreement, well, Legends, but it's not a MUD. 00:13:07.600 --> 00:13:08.600 Where's Legends? 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 00:13:17.920 --> 00:13:20.280 districts out there. 00:13:20.280 --> 00:13:27.280 We don't have a wastewater agreement with any of the MUDs currently. 00:13:27.280 --> 00:13:33.040 We're under negotiations and discussions with them, but nothing has been inked. 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 00:13:36.880 --> 00:13:38.600 about MUDs being part of this. 00:13:38.600 --> 00:13:45.840 When we look at our growth, we want to look at our entire ETJ, Extraterritorial Jurisdiction, 00:13:45.840 --> 00:13:48.440 to ensure that we're prepared for anything. 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 00:13:55.400 --> 00:14:03.480 TAC, we're allowed to look at our Extraterritorial Jurisdiction, and I guess identify an impact 00:14:03.480 --> 00:14:07.080 fee in those areas, and that's what we're doing currently. 00:14:07.080 --> 00:14:09.320 We're doing that analysis right now. 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 00:14:15.600 --> 00:14:24.560 we did stop expansion of our Pecan Creek, because we had predicted of that entire subdivision. 00:14:24.560 --> 00:14:27.840 Well, Pecan Creek is actually almost at capacity. 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, 00:14:32.760 --> 00:14:35.880 we're going to get right up to 30 million gallons a day. 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 00:14:39.660 --> 00:14:44.280 at by basins, the Hickory Creek Basin, the Pecan Creek Basin, and the Clear Creek Basin, 00:14:44.280 --> 00:14:47.200 and having a plant in each one of those. 00:14:47.200 --> 00:14:48.200 Okay. 00:14:48.200 --> 00:14:49.200 All right. 00:14:49.200 --> 00:14:50.200 Yes, sir? 00:14:50.200 --> 00:14:54.520 Payments, monthly, quarterly, annually. 00:14:54.520 --> 00:14:58.200 Payments are semi-annually, so basically twice a year. 00:14:58.200 --> 00:14:59.200 Great. 00:14:59.200 --> 00:15:00.200 Thank you. 00:15:00.200 --> 00:15:01.200 All right. 00:15:01.200 --> 00:15:02.200 Anything further? 00:15:02.200 --> 00:15:05.720 Do we need action on this item? 00:15:05.720 --> 00:15:06.720 Yes. 00:15:06.720 --> 00:15:07.720 All right. 00:15:07.720 --> 00:15:18.960 Well, if there is not any further discussion, we'll entertain a motion. 00:15:18.960 --> 00:15:19.960 Second. 00:15:19.960 --> 00:15:24.800 We have a motion, and a second, did you get those? 00:15:24.800 --> 00:15:25.800 Okay. 00:15:25.800 --> 00:15:26.800 Any further discussion? 00:15:26.800 --> 00:15:29.760 If not, all those in favor, please say aye. 00:15:29.760 --> 00:15:30.760 Aye. 00:15:30.760 --> 00:15:32.520 Opposed, sign the same. 00:15:32.520 --> 00:15:33.520 None. 00:15:33.520 --> 00:15:34.520 Pass unanimously. 00:15:34.520 --> 00:15:39.480 Item C, consider recommending adoption of the ordinance for the City of Denton at Texas 00:15:39.480 --> 00:15:43.520 Home Rule Corporation, authorizing the city manager to execute amendment number three 00:15:43.520 --> 00:15:49.840 to the power purchase agreement between the city and Core Scientific. 00:15:49.840 --> 00:15:55.640 Could you read item D in as well, please? 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 00:16:01.600 --> 00:16:05.680 at Texas Home Rule Corporation, authorizing the city manager to execute amendment number 00:16:05.680 --> 00:16:10.320 two to the lease agreement between the city and Core Scientific, a Delaware corporation 00:16:10.320 --> 00:16:12.400 providing for an effective date. 00:16:12.400 --> 00:16:13.840 Thank you. 00:16:13.840 --> 00:16:14.840 Happy now? 00:16:14.840 --> 00:16:15.840 Yes, sir. 00:16:15.840 --> 00:16:16.840 Thank you. 00:16:16.840 --> 00:16:19.840 Thank you to the assistant general manager at DME. 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 00:16:25.600 --> 00:16:31.440 Scientific and a lease amendment as well with the same entity. 00:16:31.440 --> 00:16:36.040 I'll give you a quick update on the project status. 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 00:16:41.600 --> 00:16:42.600 Center. 00:16:42.600 --> 00:16:45.560 The Denton Energy Center is here in the center. 00:16:45.560 --> 00:16:48.320 Our substation is here. 00:16:48.320 --> 00:16:52.280 Phase one, phase two, and phase three. 00:16:52.280 --> 00:16:54.640 So phase two, phase one complete. 00:16:54.640 --> 00:16:56.680 Phase two, about 80 percent. 00:16:56.680 --> 00:17:06.520 And phase three was the phase that was impacted by the bankruptcy in 2021. 00:17:06.520 --> 00:17:11.920 They've successfully come out of bankruptcy and are now looking to finish out the construction 00:17:11.920 --> 00:17:15.160 on phase three. 00:17:15.160 --> 00:17:21.640 Phase three is intended now to be converted from cryptocurrency mining to a traditional 00:17:21.640 --> 00:17:30.320 -- sorry, traditional tier three data center, which is a constant load. 00:17:30.320 --> 00:17:38.200 Unlike the cryptocurrency operation, this load would not be subject to price sensitivity. 00:17:38.200 --> 00:17:40.840 So they will run around the clock. 00:17:40.840 --> 00:17:52.480 The purpose of this entity is to begin doing artificial intelligence computations. 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 00:17:59.160 --> 00:18:06.040 of that different load profile, we have to provide for our protection and for there's 00:18:06.040 --> 00:18:11.960 a fixed price rate for this part of the operation. 00:18:11.960 --> 00:18:17.240 But we're also including an expansion of the leased area. 00:18:17.240 --> 00:18:26.120 And the expansion of the leased area is shown over here, these black rectangles. 00:18:26.120 --> 00:18:30.780 Those are standby generators. 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 00:18:37.120 --> 00:18:40.520 performance computing phase three. 00:18:40.520 --> 00:18:47.440 The mauve colored rectangles here are heat exchangers. 00:18:47.440 --> 00:18:53.160 Currently the cryptocurrency operation runs using air cooled. 00:18:53.160 --> 00:18:58.720 So it takes ambient air and passes it through the processors and then exhausts the hotter 00:18:58.720 --> 00:19:01.380 air out through the top of the building. 00:19:01.380 --> 00:19:07.080 As a tier three data center, this will be an environment controlled building. 00:19:07.080 --> 00:19:19.940 So there will be space heating and cooling in these buildings once they're converted. 00:19:19.940 --> 00:19:26.200 So as a jurisdictional monopoly, DME is required to serve these loads. 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 00:19:33.400 --> 00:19:38.200 transmission or distribution system, we have to serve the load. 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 00:19:45.400 --> 00:19:49.120 performance computing section to a firm tariff price. 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 00:19:56.960 --> 00:20:00.920 or transmission system issues. 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 00:20:05.420 --> 00:20:08.880 all of our costs to serve this customer. 00:20:08.880 --> 00:20:13.000 And it will be a renewable energy supply. 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 00:20:20.200 --> 00:20:22.760 need to serve this entity. 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 00:20:27.520 --> 00:20:35.520 renewable resource plan chapter two. 00:20:35.520 --> 00:20:42.680 One thing that I think is important to understand that this is our forecasted peak demand. 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 00:20:50.340 --> 00:20:53.840 phase three HPC operation. 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 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 00:21:05.800 --> 00:21:14.440 growth rates that we've been seeing over the last two to three years. 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 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? 00:21:24.000 --> 00:21:25.000 That is correct. 00:21:25.000 --> 00:21:28.000 Oh, wonderful. 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 00:21:33.200 --> 00:21:36.320 of firm capacity that we have. 00:21:36.320 --> 00:21:43.680 The rest of our energy is filled from renewable energy power purchase agreements and or bilateral 00:21:43.680 --> 00:21:50.320 agreements with counterparties in the market. 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 00:21:59.640 --> 00:22:00.640 three. 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 00:22:07.440 --> 00:22:10.240 HPC load were to go away. 00:22:10.240 --> 00:22:16.340 We are adding some telemetry requirements to know the status of the backup generation 00:22:16.340 --> 00:22:22.040 and we're amending the load shed language to be consistent with their protocols. 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 00:22:28.440 --> 00:22:34.360 for those backup generators and heat exchangers. 00:22:34.360 --> 00:22:37.640 And with that I'll be glad to answer any questions you might have. 00:22:37.640 --> 00:22:42.240 Mr. Rayner? 00:22:42.240 --> 00:22:45.560 The last slide you had on the 5.5, is that a ground lease? 00:22:45.560 --> 00:22:46.560 It is. 00:22:46.560 --> 00:22:48.480 It is a ground lease. 00:22:48.480 --> 00:22:52.640 So we already have a ground lease out there for 31.5 acres. 00:22:52.640 --> 00:22:54.640 We're just adding another 5.5 to that. 00:22:54.640 --> 00:22:56.600 And what is the term on that? 00:22:56.600 --> 00:23:01.080 That's 14 years with a 14-year option to extend. 00:23:01.080 --> 00:23:06.120 And it's coincident with the existing lease. 00:23:06.120 --> 00:23:08.880 And then my other question is on the early termination. 00:23:08.880 --> 00:23:15.960 So I understand Core, Core Scientific, did they go into bankruptcy or were they involved 00:23:15.960 --> 00:23:16.960 with that? 00:23:16.960 --> 00:23:17.960 They were. 00:23:17.960 --> 00:23:22.080 In late 2021 they declared Chapter 11 bankruptcy. 00:23:22.080 --> 00:23:26.400 They have emerged as quite a strong entity now. 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 00:23:31.840 --> 00:23:32.840 all amounts due. 00:23:32.840 --> 00:23:35.800 There was no loss as a result of that. 00:23:35.800 --> 00:23:40.280 And that's what I was curious, because of already having that strike, rightfully so 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 00:23:45.640 --> 00:23:48.160 up a little bit because of that situation? 00:23:48.160 --> 00:23:49.160 It was. 00:23:49.160 --> 00:23:51.940 So it's specific to the Phase 3 operation. 00:23:51.940 --> 00:23:52.940 Only? 00:23:52.940 --> 00:23:54.600 Only to the Phase 3 operation. 00:23:54.600 --> 00:23:55.600 We beefed that up. 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 00:24:00.480 --> 00:24:02.600 like our normal load that we-- I got you. 00:24:02.600 --> 00:24:03.600 Thank you. 00:24:03.600 --> 00:24:04.600 Question? 00:24:04.600 --> 00:24:05.600 Mr. Taylor? 00:24:05.600 --> 00:24:06.600 Good morning. 00:24:06.600 --> 00:24:07.600 Morning. 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 00:24:17.280 --> 00:24:22.000 for demand response or behind-the-meter load reduction. 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 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 00:24:33.560 --> 00:24:34.560 do get really high. 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 00:24:41.260 --> 00:24:48.120 some of our forward purchases while the customer could avoid, you know, or get paid basically 00:24:48.120 --> 00:24:49.720 to run their own equipment. 00:24:49.720 --> 00:24:51.240 That's a great idea. 00:24:51.240 --> 00:24:53.600 And yeah, we are pursuing that. 00:24:53.600 --> 00:24:59.440 Obviously, what CORE wants to do is get this lease and the PPA amendment in place. 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. 00:25:07.280 --> 00:25:12.680 Those types of arrangements on the demand side-- obviously, there are demand-side programs 00:25:12.680 --> 00:25:13.960 in ERCOT. 00:25:13.960 --> 00:25:19.200 Unfortunately, right now, there's very little incentive for people to participate, because 00:25:19.200 --> 00:25:25.120 unless the utility-- in the-- I should put it this way-- in the competitive markets, 00:25:25.120 --> 00:25:27.400 there is more of an incentive. 00:25:27.400 --> 00:25:32.700 In the MOU markets, like Denton, where everything is vertically integrated, there really is 00:25:32.700 --> 00:25:34.480 very little incentive. 00:25:34.480 --> 00:25:39.920 However, for these types of facilities that have this backup generation, we will be exploring 00:25:39.920 --> 00:25:42.040 those types of options. 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 00:25:46.840 --> 00:25:47.840 in a meaningful way. 00:25:47.840 --> 00:25:52.160 Thank you. 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 00:26:01.740 --> 00:26:03.120 be a closed session item. 00:26:03.120 --> 00:26:06.720 I'll just not ask it, because that really answered my question. 00:26:06.720 --> 00:26:07.720 Thanks, Terry. 00:26:07.720 --> 00:26:08.720 You're welcome. 00:26:08.720 --> 00:26:09.720 I just said it. 00:26:09.720 --> 00:26:10.720 I'm thinking through it. 00:26:10.720 --> 00:26:11.720 All right. 00:26:11.720 --> 00:26:12.720 Any other questions? 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? 00:26:23.680 --> 00:26:24.680 Yes. 00:26:24.680 --> 00:26:25.680 OK. 00:26:25.680 --> 00:26:32.600 With the presentation last meeting and this meeting, I think I've satisfied all my questions 00:26:32.600 --> 00:26:36.040 regarding the revised PPA. 00:26:36.040 --> 00:26:41.240 So I move approval of item C, the revised PPA for phase three. 00:26:41.240 --> 00:26:42.240 OK. 00:26:42.240 --> 00:26:44.120 I have a motion. 00:26:44.120 --> 00:26:45.320 Any second? 00:26:45.320 --> 00:26:46.320 Second. 00:26:46.320 --> 00:26:49.120 I have a second for Mr. Rayner. 00:26:49.120 --> 00:26:51.360 Any further discussion? 00:26:51.360 --> 00:26:54.040 There being none. 00:26:54.040 --> 00:26:56.960 All those in favor of item C, please say aye. 00:26:56.960 --> 00:26:57.960 Aye. 00:26:57.960 --> 00:26:58.960 Any opposed? 00:26:58.960 --> 00:26:59.960 Sign the same. 00:26:59.960 --> 00:27:00.960 There are none. 00:27:00.960 --> 00:27:01.960 All right. 00:27:01.960 --> 00:27:04.120 Is there a motion for item D? 00:27:04.120 --> 00:27:08.080 I think there are package deals, so I'll move for approval of item D. 00:27:08.080 --> 00:27:09.080 I have a motion. 00:27:09.080 --> 00:27:10.080 Second. 00:27:10.080 --> 00:27:13.880 I have a second for Mr. Newquist. 00:27:13.880 --> 00:27:15.760 All those in favor, please say aye. 00:27:15.760 --> 00:27:16.760 Aye. 00:27:16.760 --> 00:27:17.760 Any opposed? 00:27:17.760 --> 00:27:18.760 Sign the same. 00:27:18.760 --> 00:27:21.200 There being none, we'll move on to item E, management reports. 00:27:21.200 --> 00:27:22.200 Mr. Puentes. 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 00:27:28.160 --> 00:27:29.160 listed on there. 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 00:27:32.820 --> 00:27:36.160 point that we want to specifically highlight for you. 00:27:36.160 --> 00:27:39.760 And then on the new business action matrix, we still have the one item for fleet. 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 00:27:44.560 --> 00:27:47.320 having that to you before that October date. 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 00:27:51.400 --> 00:27:53.800 talk through with you. 00:27:53.800 --> 00:27:54.800 Anyone? 00:27:54.800 --> 00:27:55.800 Bueller? 00:27:55.800 --> 00:27:56.800 No? 00:27:56.800 --> 00:27:57.800 All right. 00:27:57.800 --> 00:28:02.240 Looks like we've made it through. 00:28:02.240 --> 00:28:07.640 If there is no further discussion, I'll entertain a motion to adjourn. 00:28:07.640 --> 00:28:08.640 I'll move. 00:28:08.640 --> 00:28:09.640 All right. 00:28:09.640 --> 00:28:14.800 I don't think we all have to be in favor, so we'll be adjourned. 00:28:14.800 --> 00:28:15.000 Thank you.