It is nine o'clock, Monday, March 23rd, and this regular meeting of the Public Utilities
Board of the City of Denton is now in session.
Do we have any presentations from members of the public?
There are none.
Moving on to the consent agenda.
Would anybody like to pull anything from the consent agenda?
No?
Then I'll entertain a motion to approve the consent agenda.
Is that a motion?
Second.
And a second.
All in favor say aye.
Aye.
Against?
I'm the same.
Passes unanimously.
Items for individual consideration, consider approval of the March 9th minutes.
So moved.
Or second?
Not a motion.
We got a second.
All in favor?
Aye.
All right.
Item B, consider recommending an adoption of an ordinance in the City of Denton to execute
a contract with Acceleron US for turbo replacement parts and service for the Denton Energy Center.
In the amount of $9,520,000 for one year.
Option of four additional years, one extension, a total of five years.
Good morning.
Excuse me.
Good morning, Chair, members of the PUP.
My name is Jose Gaitan, Executive Manager of Power Supply for DME.
I'm here to present the intricacies of this RFP that is for the turbo replacement parts
and services for the turbos at the Denton Energy Center.
So the background for this RFP is that the deck has 12 engines with two turbos each for
a total of 24 turbos.
So peak shaving operations at the Denton Energy Center causes stresses on these turbos.
Every cooling and heating cycle stresses the metals by expanding and contracting.
That expansion causes stresses on the metal, which can, over time, cause fractures.
So it is important that we have proper maintenance for these facilities, and as such, the OEM
is giving us a change in the maintenance schedule, which would basically have us look at the turbos
a little bit earlier, based on the number of start and stops, as they are seeing some
more fatigues out in the field on these turbos.
So inspections are critical for these turbos.
Again, our current engines have 13,500 hours of operations, and starts are anywhere between
3,500 and 4,000 start and stops.
It varies by engine, as we kind of vary how many hours of operations start and stop, so
we're not overhauling them all at the same time, so we can stagger the maintenance.
So based on the new service schedule that is being recommended, it's recommended that
you start looking at the turbos at the 16,000 hour mark, which is our normal recommendation
when the plant was built, or 2,500 starts.
So you can see that we're above that 2,500 start/stops.
So the manufacturer issued this bulletin in February of this year, or last year, excuse
me, to prevent a catastrophic failure, to catch it before it actually occurs.
So some of the maintenance tasks is to dismantle the turbo, check clearances, clean casings,
clean nozzles, and then assess the rotator bearing parts, which could fail.
And then make sure that the balancing is good for the turbos.
So here's some of the estimates.
So the average cost should a turbo be damaged, but repairable is 125,000 per turbo.
There are 24 of them, so we could have as much as $3 million worth of repairs.
However, a complete turbo replacement, average cost is 400,000.
So it's important that we get to those turbos serviced then before we reach a catastrophic
failure, which is what we're intending to do here.
However, as an estimate, we're expecting potentially up to 10 turbos that may need to be replaced
for a total of 4 million.
Again, that can change if we can get to them before we actually reach a catastrophic failure.
And so there in the pictures you see on the left-hand side is the turbine wheel, which
is one of the ones that gets the most amount of stress because it is on the exhaust side
of the turbo, and it has a more tendency to have stress fractures.
So this RFP is for parts and services.
Again, the ODM recommends checking the operation profile of the engine to verify if we have
reached those recommendations of at least 2,500 start stops or hours of operation.
Again, turbo overhauls will be performed by the ODM at their authorized workshop.
They will provide the field services on-site and then also provide travel and accommodations
for staff that are doing their work.
Turbo parts, components, spare parts and normal maintenance intervals, inventory checks, repairs
planned and unplanned is an estimated cost of $105,000 per unit for a five-year span
on 24 turbos for a total of $2.52 million.
So the summary of expenditure again is manufacturer and authorized repairs, restocking of critical
components, restocking critical components for unplanned maintenance, 24 turbos on 12
parts with an estimated potential complete repair or I guess a totaling of up to 10 turbos
during the life of this RFP for a total of $4 million and expected overhaul costs which
would capture all of the maintenance costs that would be needed to make sure that we
don't have a catastrophic failure for all 24 turbos.
That's $3 million, that's just regular preventative maintenance.
And then we have critical components for $2.52 million for a total of $9,520,000.
Of that, $2.5 million will be cash funded, the rest will be via 10-year bonds.
And so again, the recommendation from staff is for PEB to provide the City Council recommendation
to approve the RFP to a Celeron USA Incorporated to execute a five-year contract for the turbochargers
at the Dension Energy Center.
Any questions?
Okay, so you see this at about five-year increments?
Yes, that's what we're planning on doing this go-around.
Again, the DEC was commissioned in 2018 June, so we're starting to approach the 10-year
mark so it's, you know, we don't know if we're going to see any more, you know, the
preventative maintenance is there to capture any further failures, but they are issuing
this bulletin to start the servicing sooner rather than later, which is why we're bringing
it now as opposed to at the 16,000 hour mark, which is supposed to be in about another year
and a half, two years.
So we're coming to prevent a catastrophic failure.
So every five years, we're going to start issuing this out again.
Was that common for them to come back and say, I mean, you've got, what was it, 3,500
to 4,000 hours is what your original S was?
Yes.
And now they're saying, "Well, they're not as good as we thought they were," or...
So those, it is just a recommendation by the ODM based on what they've been seeing out
in the field, right?
Well, yeah.
And so these things can last as much as 30,000 hours, right?
So...
Well, 16, it leaves, right?
Exactly, yes.
So it's important that we start the preventative maintenance now to prevent any failures that
will lead to a catastrophic failure, which is a higher cost.
So the maintenance will hopefully prevent us from having bigger expenditures later.
Okay.
What was our original budget for that?
So the original budget was in the CIP for two years from now.
So we're accelerating the maintenance to prevent, again, those catastrophic failures before
they occur, right?
I understand.
So it was part of the CIP budget.
And Tony...
If you get a flat tire before you've planned on having a flat tire, you replace the flat
tire, but...
Yeah, I think as Jose mentioned, this bulletin came out and kind of advanced the need for
this project.
We've budgeted this money now for probably at least five or seven years.
We've had it in the CIP, and this is in conjunction with another project that will be coming to
you for overhauls.
But the total amount that we had was for fiscal year '29-'30, it was about $15 million total.
But now we're looking at a little bit more than that.
So...
But yeah, it's been in the CIP for some time.
Yeah.
Okay.
Thank you.
Just...
Good morning.
If I may, Acceleron, is this an extension of a contract we already have with them, or
is this a brand new thing?
Arthur, do we have a current contract with them?
Can you come up here?
So this is Arthur Pando, the new plant manager at the DEC.
Arthur Pando, plant manager at the DIN Ninja Center.
I can help answer any questions you all may have.
So Acceleron, do we have an existing contract besides the OME or whoever it was that brought
it to our attention, is this a brand new contract with them, or have we used them for this particular
need?
No, sir.
It'll be a brand new contract with them.
Okay.
Yes.
Could I go to...
May I?
Could you get slide three for me?
So what is the...
You may have alluded to some of this, but what do we...
Theory wise, what are we looking at as far as an expected lifetime of timeframe for these
things?
Is it by the hour?
Is it by the year?
It varies.
So we like to plan for by the hour, yes.
But based on the inspections, it can deem turbochargers to be overhauled sooner.
So main priority first is getting them inspected, checking for the damage, what the condition
is of the turbos and these rotating components, and thus then determines the life.
We've had these now, as Jose mentioned, going on almost nearing 10 years.
Original plan was probably making it to the 15, 12 year mark.
That's still what we expect.
We just need to capture it and make sure we extend the life of.
Level wise, they can go as long as up to 60,000 hours based on the service intervals happening
and being conducted.
Who have we used before this request?
Has it been in house?
It's all, yes.
All the current maintenance inspections and repairs have all been in house by plant personnel.
And so we're accelerating preventive maintenance by, forgive me, forget the hours, can we kind
of do it with something I would recognize like years?
We're accelerating the intervals by about two years.
And that's just based on the ODM recommendation that was previously been provided to us.
And they got that from what?
They got that from their own in-house inspections and then what their field service guys out
at other plants are observing.
So the contract now, how large it is based on the amount we're having to perform is why
we're bringing it to contract, just the manpower we do not have to do all 24 with the staff
we have currently.
If I may, could you go to slide five?
So where's the location of their workshop?
They are located in Florida, I believe.
They have multiple locations throughout.
Some of them are in Europe, and there is a smaller workshop where they perform minor
maintenance, just quick overhauls in Houston and Florida.
I'm just curious on that 2.5, 2 million, is that, would that be thought of as the extra
expense from what we had originally budgeted because of starting early or am I putting
that number in the wrong pigeon hole?
I'm sorry, repeat that.
So you're asking where that number stems from?
From our old way of doing our maintenance, is that this 2.5, is that the extra that we
were not ready for?
No.
We've been ready for it, but up to getting into the larger hours, it has all been very
small maintenance intervals, so a couple sensors, maybe cleaning some oil pipes, some O rings
here and there.
When we creep into the higher hours of the intervals, you start getting into the major
components, nozzle rings, casings, and bearings.
And if I could go page six.
And Rob, just so, so we've been budgeting about $15, $17 million at the exact number
in these turbos and these overhauls projects, now we're looking closer to $20 million.
That's about a $3 to $5 million increase now that we're starting to get these actual proposals
and actually firming those numbers up.
That $2.5 million, just as a reminder, during Yuri, after Yuri, if you remember, Brazos
didn't pay their bill and there was a settlement, that's where that 2.5 million is coming from.
We've been holding onto that 2.5 million for these projects and our hope is to continue
to add additional cash into that pot and try to minimize how much debt we're issuing for
these projects.
And then if I may ask, because that leads to my question on the original amount of let's
say $15 million or such, what time period was that to cover?
That was going to start in fiscal year '20, we were going to plan to issue that beginning
in fiscal year '29 and '30, but because of this new bulletin, we've had to accelerate
that sooner.
But that number was, the thought was a 10-year type of use.
Yeah, correct.
But now we're seeing that that may be accelerated due to ...
Due to wear and tear.
Thank you.
I needed the right term.
I didn't want to be ignorant.
I think it's important to understand, right, so the bulletin is based on inspections and
experiences that have been seen with these types of engines and other plans, right?
They're going to have to come in and look at these specific engines and then give us
those recommendations, but we're planning for the worst, right?
So then my last question, well, probably not, but I'm going to ask this one.
We've had our own self-contained maintenance program on this.
We are now coming into a phase where we're asking an outside source to do it and we've
possibly shortened the time frame to five years, let's say, versus six or seven years
for regular maintenance, and I don't want to hold you to those numbers, but I'm looking
at ... We're looking at a five-year increment on all of this, even though we're doing these
extensions one year at a time?
Correct.
The one-year increment is kind of offset, so yes, we will perform the services to get
them inspected and such, and then year two, year three is the planned and unplanned maintenance
scope of it.
So now we're just upkeeping the stuff that we can perform in-house with, and then around
year three, yeah, about in three, four is when we would do the second.
So then that's why the cost would go up to around 20 million you're talking about.
Well, and the turbos aren't going to all be done all at once, right?
They're going to be phased in over that period of time, and it may take longer.
And that's why it's a five-year type term.
And so we're paying that nine million whether they're replacing turbos or not within that
period, but they're doing inspections?
Is that what we're saying?
Sure.
No.
We won't be paying the nine million whether they do or don't.
It's all based on...
If it's needed.
Correct.
Thank you for your information.
So basically, this whole budgetary thing is based on, yeah, it hadn't happened yet, but
they're telling us to look a little earlier now.
Yes, sir.
And we'd like to keep replacing motors, of course, or they would.
And not all the costs are going to hit all at once.
So we've tried to...I've asked Arthur to look at it as crystal ball and tell me, hey, if
you can cash flow this, how can you cash flow this over five years so that I'm not issuing
everything all at once, and it could potentially give us time to look at revenue funding some
of this.
You know, not to get ahead of Matt, but there'll be some financial policy recommendations
that are going to be coming to you, and we're going to be targeting some amount annually
that we're going to cash fund in our CIP, and this is one of the projects that we would
look at, cash funding versus debt funding.
Yeah, good.
Just based on my ignorance of the plant and how it operates, do these motors, are they
pretty even in the amount of hours?
I mean, they all run at the same time, right?
Correct.
You start one, you start them all.
In terms of dispatch, they are dispatched by aggregate.
So we could start, and each aggregate consists of three units per aggregate.
So aggregate A is one, two, three, B is four, five, six, so on and so on.
So there is times that, yes, that we could be called upon and say, hey, start aggregates
only, A and B is one through six, seven through 12 will stay down.
You just roll them?
Yes.
Yeah, we try and keep them.
So you don't, one is not start every time, it may be six that starts again.
Correct.
Okay.
So the EMO tries to start up one aggregate, see if the price holds.
If the price holds, then we bring up the next one, and then we just keep adding them in
until we make sure that the price is going to hold.
That way we avoid a start and stop unneeded and avoids this type of premature wear and
tear type of thing.
So we do try to vary the hours by aggregate.
Okay.
Got it.
I just have a question more on the 10-year bond of this.
So we're financing 10 years worth, or we're financing five years of service over 10 years.
What happens after the five years?
Do we take out another bond for another five years?
Well, I think ideally, one, so anything that is maintenance related, and that's what he's
identified here, right?
So we're targeting that two and a half million for critical components of normal maintenance
to be the cash funding component, then we're only funding the major capital assets with
10-year bonds.
Now, the idea would be is that, you know, that you do this five years, it doesn't come
around in another five, maybe 10 years, right?
So you're staggering.
So why 10 years, right?
10 years, what we're trying to do, at least this is kind of the intent, is we issued bonds
for the DEC in 2017, right?
Those were 20-year bonds.
They pay off in 2037 by limiting the life of the new bonds that we issue, we're trying
not to expand the outstanding debt for the DEC beyond 2037, right?
That's kind of the intent.
So if we had to come back here again in five years, we'd likely be looking at five-year
debt, not 10-year debt, if that was even possible.
But I think given some of the financial strategies, what we're actually talking about, at least
internally at DME, is, hey, can we build some type of cash fund that's just for capital
and minimize how much debt we're issuing for the DEC?
Yes.
I mean, and that's fundamentally what I'm thinking, is I don't want to pay 10 years
for something that I've got five years of life out of.
It just doesn't make sense that way for us, for taxpayers to continually pay interest
on a bond for an asset that's fully depreciated and no longer in use.
Now, we're talking about components of the DEC, in total, the plan has more of a 30-to-50-year
life on it, right?
And so the reason we do these things is to continue to expand the life of the overall
facility.
So we don't anticipate another five years financing another X million dollars for 10
more years?
No, probably not.
I mean, I'd have to go back and look at our CFP where we program it, but that's probably
outside of that next 10-year window.
Okay.
Thank you.
I do have one question.
The original recommendation was 16,000 hours and 2,500 cycles.
We're only at 13,000 hours and 3,500 cycles, our cycles are way up.
Now that we have this experience, moving forward, do we have strategies to try to limit all
that uptime down time?
I guess that's when the components are that susceptible, right?
Getting hot, cooling off and things like that, or is it just is what it is and that's the
way it's going to be?
I mean, Arthur's job out in the plant and the guy's plant is to be ready to go whenever
we need them, right?
So whenever we get that price single, it needs to be ready to go, right?
And so we put a lot of pressure, unfortunately, on those guys out there.
But yeah, so the goal is to try to have this facility ready to go at a moment's notice.
And so following those bulletins, if they've changed, it's part of that strategy, right?
And so we were based on hours.
Now there's these hours and this 2,500 measure that it was before, 3,500.
And so now of the two, which one's going to have this plan ready to go sooner?
One more question, if I may.
So was the Acceleron, was that the lowest bidder?
Or do we use the bidding process for something like this?
Yes, we did use the bidding process.
They were the lowest.
How many bids did we ask?
I believe we had three come in.
Was it two?
Uh-oh.
Lori Hill, Purchasing Manager.
They evaluated two vendors for this.
Familiar with both of them?
Yes.
Yes, they were.
And this was the only vendor that actually bid all lines and could provide all products.
Thank you.
That's what I was going to say.
When I looked at the evaluation, the other one didn't really fill it out.
Thank you, Mr. Chair.
Any other comments?
Do you want to undertake a motion?
We have a motion and a second.
All in favor?
Aye.
Any opposed?
Passes.
With that, we'll move on to Item C, Tony, Management Reports.
Yes, sir, Mr. Chair.
I'm a member of the PB, so I don't have a lot for you.
No changes to the future agenda items.
Obviously, I'm going to keep just talking about reminding you about budget items.
Budget items are those that are going to be coming to you.
Make sure you make note of those specific dates.
And then for new business action items, you know, we hope to provide the right information
that was requested at your next meeting in April.
I think given the fact that we had our Chair and Vice Chair out today, that probably makes
sense for that.
So it was not planned that way, but certainly worked out that way.
And the Water Wastewater Department on April 13th will also be bringing to you a work session
item.
And the only thing that I'll mention as well, DME is also looking at maybe adding some type
of quarterly type of update for you as well, kind of the way that the Water Wastewater
has done this.
We're still kind of working through that internally, but my hope is that by the next meeting, we'll
add that to your calendar as well and just, you know, bring you information on items that
may be of interest.
So if you have thoughts on things that you want to know about within DME or even Solid
Waste, please let us know.
We can try to get those items scheduled.
Fantastic.
Appreciate your help on that.
I know that getting those updates is going to be important.
I think we've all been looking forward to it.
And with that, we're adjourned.
So it shall be.
We are adjourned.