Exhibit 5 - PresentationTerry Naulty -Denton Municipal Electric May 25, 2021
City Council Presentation ID 21-970
Denton Energy Center Forced Outage Insurance
Objectives
2
To provide price protection to the customer/owners of
DME in the event of forced outage of one or more of the
DEC generating units during period of high wholesale
prices during the summer of 2021 (June –September)
To comply with the Energy Risk Management Policy
(ERMP) approved by City Council
Winter outage insurance will be procured in December for
Jan/Feb 2022.
ID 21-970
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Any malfunction of equipment that causes a generating unit to no
longer be able to deliver energy to the ERCOT transmission grid
•Loss of fuel supply
•Engine mechanical systems
•Controls/ logic systems
•Generator systems
•Transformer systems
•Natural gas control system
•Air pollution control systems
•Cooling water systems
➢No differentiating between operator or equipment failures
Forced Outages
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Term –June 1 –September 31, 2021
•Hours insured –on-peak weekdays and/or on-peak weekends
➢Deductible Amount
•18.75 MWh (one unit for one hour)
➢Settlement Basis
•Difference in price between the spot hourly market clearing price and an established strike price
•i.e. Strike = $50/MWh, clearing price =$5,000/MWh; settlement price = ($5000 -$50)x volume impacted
➢Maximum Payout –maximum settlement for the Term
•$18.5 million
➢Premium –$629,550 -$800,000 (dependent on market day of binder)
➢Determined by bidder based upon the market price when final offers are received
➢Summer 2021 premium was $493,000 –increased volatility driving premiums up
Forced Insurance Parameters
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➢Issue request for proposals (April 2021)
➢Receive indicative offers and term & conditions (May 3rd,
2021)
•Form of Binder Agreement for each proposer
➢RFP required similar terms from each proposer
➢Obtain legal sign-off and approval (1 week)
➢Request firm offers at 8:00 AM (May 15th –May 30th)
➢Execute Binder Agreement within 30 minutes of receiving firm
pricing
➢Pay 2% insurance tax
Transaction Process
ID 21-970
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Forced Outage Insurance is a cost effective way to
manage this risk
Mandated by Energy Risk Management Policy
Transaction process requires City Council pre-
approval and authorization for execution
Process is competitive and achieves lowest cost
Staff recommends approval
Summary
ID 21-970
Questions:
7
Terry Naulty –Assistant General Manager
ID 21-970