Exhibit 1 - Agenda Information SheetCITY OF DENTON
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AGENDA INFORMATION SHEET
DEPARTMENT: Procurement
DCM: David Gaines
DATE: June 7, 2022
SUBJECT
Consider adoption of an ordinance of the City of Denton, a Texas home-rule municipal corporation,
authorizing the City Manager to execute a contract with Allegro Development Corporation, for the Energy
Trading and Risk Management Application for Denton Municipal Electric, which is the sole provider of
this software, in accordance with Texas Local Government Code 252.022, which provides that procurement
of commodities and services that are available from one source are exempt from competitive bidding, and
if over $50,000, shall be awarded by the governing body; providing for the expenditure of funds therefor;
and providing an effective date (File 7916 – awarded to Allegro Development Corporation, in the eight (8)
year not-to-exceed amount of $1,658,561.00). The Public Utilities Board recommends approval (7 - 0).
INFORMATION/BACKGROUND
Denton Municipal Electric (DME) procured an Energy Trading Risk Management (ETRM) system as
recommended by an outside consultant (Deloitte) in June of 2020. The purpose of this application is to help
track portfolio positions and movements in market prices, quantify the risk associated with hedging
activities, and provide the appropriate level of internal controls and oversight needed to support DME’s
Energy Risk Management Policy. The current contract is for three years expiring in 2023.
The function of the ETRM is to assist with compliance with the DME Risk Policy which calls for the
management of key areas of DME’s energy portfolio, including but not limited to:
• Controls Compliance
• Hedge Target Compliance
• Portfolio Competitiveness
• Credit Exposure
Implementation of the ETRM took place between September 2020 and February 2021, and the time and
cost came to twice the original estimate. The major contributor was that this was the first implementation
done during the pandemic for everyone who was involved, and standard implementation plans and
timetables did not hold true. Core functionality was achieved in February of 2021, but additional
enhancements and customization that boost its usefulness continue. Those efforts have been ongoing post-
basic implementation and will continue for the rest of 2022.
Typically, industry operators will deploy an ETRM system like this one for at least 7 to 10 years before
entertaining a new replacement. Replacement is primarily driven by technology advancements and
City Hall
215 E. McKinney Street
Denton, Texas
www.cityofdenton.com
efficiency improvements that make a new system a prudent choice after a cost/benefit analysis. The
Technology Services Department conducted a lifecycle analysis taking into consideration the cost of
replacement and the cost of implementation. They concluded that the ETRM system had a lifecycle of 10
years and that it would not be economically advantageous to replace the application before seven years.
Year Description Price
FY 2022 Annual License $158,800
FY 2023 Annually & CPI (7.5%) $170,482
FY 2024 Annually & CPI (est 7.5%) $183,513
FY 2025 Annually & CPI (est 7.5%) $197,277
FY 2026 Annually & CPI (est 7.5%) $212,978
FY 2027 Annually & CPI (est 7.5%) $227,978
FY 2028 Annually & CPI (est 7.5%) $244,076
FY 2029 Annually & CPI (est 7.5%) $263,457 NTE: $1,658,561
Due to the nature of the contract, the vendor will only execute agreements every two (2) years, and we are
seeking approval from Council to execute them accordingly until it has met their lifecycle. Technology
Services has given this item a 10 year lifecycle.
Section 252.022 of the Local Government Code provides that procurement of sole source commodities and
services are exempt from competitive bidding, if over $50,000, shall be awarded by the governing body.
PRIOR ACTION/REVIEW (COUNCIL, BOARDS, COMMISSIONS)
On May 23, 2022, the Public Utilities Board (PUB) recommended this item to the City Council for
consideration.
RECOMMENDATION
Award a contract with Allegro Development Corporation, for the Energy Trading and Risk Management
Application for Denton Municipal Electric in an eight (8) year not-to-exceed amount of $1,658,561.
PRINCIPAL PLACE OF BUSINESS
Allegro Development Corporation
Dallas, TX
ESTIMATED SCHEDULE OF PROJECT
This is an eight (8) year contract.
FISCAL INFORMATION
These services will be funded from Denton Municipal Electric account 600005.7804. Requisitions will be
entered on an as-needed basis. The budgeted amount for this item is $1,658,561.
EXHIBITS
Exhibit 1: Agenda Information Sheet
Exhibit 2: Original Contract
Exhibit 3: Ordinance and Contract
Respectfully submitted:
Lori Hewell, 940-349-7100
Purchasing Manager
For information concerning this acquisition, contact: Smith Day, 940-349-7561.
Legal point of contact: Marcella Lunn at 940-349-8333.