2021-105 Update to DME's Electric Service Standards Line Extension PolicyDate: December 3, 2021 Report No. 2021-105
INFORMAL STAFF REPORT
TO MAYOR AND CITY COUNCIL
SUBJECT:
Update to DME’s Electric Service Standards and Line Extension Policy
BACKGROUND:
The current version of the Electric Service Standards (“ESS”) has been in effect since 2014 and
includes code, materials, and construction standards for electric distribution service; as well as
Line Extension Policy (“LEP”) related to the determination of aid-in-construction (AIC) costs
associated with the provision of electric service to new developments. Within the current
document, AIC requirements are not well organized and often ambiguous as to what is required of
DME vs. the customer or developer. This has made it difficult for developers to plan for, and
estimate, their AIC because the AIC cost is often not known until the project is designed by DME.
The LEP included with the current ESS uses a distance method to provide credit to new customers
for line extensions. The method does not provide a cap or significant limitations on the type of
construction used. As a result, existing ratepayers have assumed (subsidized) a significant share
of the burden to extend services to new customers. This burden is not equitable with the expected
rate of return from a customer, and only relies on the distances needed to extend facilities.
In order to address the subsidy of the current ESS, DME contracted with Schneider Engineering
to assist in researching industry standards and writing new documentation and polices which are
equitable, easy to understand, and consistent with other electric utilities. As a result of this effort,
DME has revised its current ESS and separated the line extension and customer aid-in-construction
requirements into a stand-alone document called the LEP.
Regulatory code, technical requirements, and instructions relating to the provision of electric
service have been consolidated into the revised ESS. The revised ESS will be updated periodically
as needed to comply with changes to the National Electric Safety Code, National Electric Code,
Denton Development Code, and other Engineering standards.
DISCUSSION:
Line extensions to serve new developments represent a significant portion of the work DME
accomplishes on a regular basis. All new development, and many service upgrades, require some
degree of extension of DME facilities. The division of responsibility for the cost of these
extensions has previously been defined in the ESS. The division of responsibilities is now placed
in the LEP. A comparison of the two are listed below.
Line extensions per the current Electric Service Standards
Up to 300 feet of primary conductor extension and 100 feet of secondary
conductor in single and multi-certified service areas at no cost to any new
customer.
Date: December 3, 2021 Report No. 2021-105
Developers/customers are responsible for all civil work but DME provides conduit
for underground service.
Single and multi-certified areas refer to Public Utility Commission of Texas defined areas that
may be served only by DME (single-certified) and areas that may be served by DME and other
providers (multi-certified). A map of these areas is included as Attachment 1.
The equipment needed to serve customers depends greatly on their load and the configuration of
the existing DME infrastructure. DME knows, historically, the cost to extend 300 feet of primary
and 100 feet of secondary can range from $10,000 to more the $100,000.
Line extensions per the new Line Extension Policy:
Developers/customers will be responsible for all line extension costs to the
new/existing service location within single certified service areas. As an economic
development inducement, DME will provide a limited credit to new/existing
services based upon the projected return on investment for competitive, multi-
certification service areas.
Developers are responsible for all civil work, including providing conduit.
Developers/customer will be responsible for all costs above the credit provided after achieving the
threshold return on investment.
DME, a jurisdictional monopoly in its single-service territory with strong demand for new services,
designed the new LEP to place the responsibility for the full cost of a line extension on the
customer and/or developer. This revised approach is consistent with other jurisdictional monopoly
electric service providers and avoids any cross subsidy from existing customers. However, in
multi-certified areas, where DME competes with CoServ and Oncor for customers, the new LEP
provides a credit up to the targeted rate of return in order to be competitive in providing service in
those areas.
Customer Aid-in-Construction in comparison with other utilities
To provide a degree of Utility Best Practice knowledge, research was completed on like
Municipally Owned electric utilities such as Austin Energy, and our service territory competitors,
CoServ Electric and Oncor. Customer AIC fees are standard in the electric utility industry. New
customers are generally expected to pay some or all the costs to extend facilities to their location.
However, credits are sometimes given in competitive markets. These credits may be based on an
allowance, a distance, or a formula. The following table provides examples of several other Texas
energy providers credit policies.
Date: December 3, 2021 Report No. 2021-105
Table 1 – Various Texas Energy Provider Credit Policies
Based on the research, DME proposes the following LEP conditions:
Single Certified Areas
Within single certified areas, new customers are required to pay 100% of line extension cost. This
provides for an equitable burden for new developments and DME’s existing ratepayers. It is also
consistent with the policies of other municipally owned utilities, including Austin Energy and
Garland Power & Light.
Multi-certified Areas
Within multi-certified areas, as an economic development inducement that is authorized under
Texas law, credit will be given based on a formula to achieve a target return on investment and
allows DME to be competitive with CoServ and Oncor. The competitive advantage is important
because with any development, the chosen provider takes all or most of it. It is not easy or
economical for a second provider to, after the fact, build into and serve an area already
predominantly served by other utilities. Additionally, since DME infrastructure and other fixed
costs are significant, with every additional customer, economies of scale reduce rate pressure.
For residential developments (single-family homes) in multi-certified areas, developers will be
given a credit of up to $1,400 per home. This value simplifies the estimation and planning process.
The value was calculated1 as an average, per-unit cost to extend, and complete, residential
subdivisions. The amount of credit given may be adjusted per the rate of return formula if the
estimated return on investment is higher than the target rate.
For all other residential developments as well as commercial and industrial developments in multi-
certified areas, the credits given will be based on the projected electrical loads and estimated return
on investment of the development.
Examples of developers share of line extension costs under the new LEP can be found in
Attachment 2.
1 Average of costs for 35 subdivisions completed in the DME service territory between 2015 and
2019.
Fixed Distance Fixed Allowance Formulaic Customer Pays
Oncor (small loads)
Heart of Texas
Coop
CoServ Electric
CPS Energy (residential)
Bartlett Electric Coop
Hamilton Electric Coop
Navasota Valley Electric
Coop
United CS
Oncor (large loads)
CPS Energy
(commercial)
South Plains Electric
Coop
Austin Energy
Garland Power & Light
Bryan Texas Utilities
Date: December 3, 2021 Report No. 2021-105
Transition plan
DME will implement the new policies for all requests for extension of service to new customers
or upgrading of service to existing customers beginning from the date these policies are approved
by City Council. A grace period of one (1) year will be applied to all currently active and open line
extension projects being managed by DME Engineering wherein they will continue to receive
credit or allowance they would have received under the existing line extension policy of the current
ESS.
CONCLUSION:
DME has revised the current Electric Service Standards to better facilitate the technical and
administrative needs of the City of Denton into separate documents. A major part of the revision
includes changes to the developer responsibilities associated with new the LEP. These policies
have been adjusted to place the responsibility for new development upon the developer and not
existing ratepayers. These new policies have been codified in the new DME Line Extension Policy.
STAFF CONTACT:
Jerry Fielder, P.E., Engineering Division Manager; Aaron Bennion, Engineer IV
REQUESTOR:
Staff Initiated, DME
PARTICIPATING DEPARTMENTS:
DME
STAFF TIME TO COMPLETE REPORT:
The project began in June 2020. Total staff and contractor time on this project exceeds 1000
hours.
Date: December 3, 2021 Report No. 2021-105
Attachment 1 – Certification Map
Date: December 3, 2021 Report No. 2021-105
Attachment 2 – Examples
Single Certified
Single Certified Residential Development: developer pays 100% of
construction costs.
Single certified Commercial or Industrial Development: developer pays
100% of construction costs.
Multi-Certified
Multi-certified Residential Development: DME credits up to $1,400 per
single-family home.* Developer pays any additional construction costs. (*If
size of development and home indicate a higher projected return on investment, credit may be increased
using formulaic approach.)
Multi-certified Apartment Complexes: DME calculates estimated load and
credits up to the calculated target payback. Developer pays any additional
construction costs.
Multi-certified Commercial or Industrial Development: DME calculates
estimated load and credits up to the calculated target payback. Developer
pays any additional construction costs.
All Areas
Temporary Construction: developer pays 100% of construction costs
throughout entire service area.