HomeMy WebLinkAbout1999-388ORDINANCE N• < %%
AN ORDINANCE OF THE CITY OF DENTON, TEXAS AUTHORIZING THE CITY
MANAGER TO EXECUTE A SECOND AMENDMENT TO THE PROFESSIONAL
SERVICES AGREEMENT FOR CONSULTING SERVICES PREVIOUSLY ENTERED INTO
BY THE CITY AND R J COVINGTON CONSULTING ON JANUARY 5, 1999, AND AS
PREVIOUSLY AMENDED BY FIRST AMENDMENT THERETO ON JUNE 1, 1999, BY
ADDING TASK ORDER NO 99-C THERETO, PROVIDING FOR ADDITIONAL
ELECTRIC INDUSTRY PROFESSIONAL SERVICES TO BE PERFORMED RELATING TO
THE POTENTIAL DIVESTITURE OF ALL OR A PART OF THE CITY'S MUNICIPAL
ELECTRIC UTILITY AND OTHER RELATED MATTERS, AUTHORIZING THE
EXPENDITURE OF FUNDS THEREFOR, PROVIDING FOR RETROACTIVE EFFECT OF
THE AGREEMENT, AND PROVIDING AN EFFECTIVE DATE
THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS
SECTION I That the City Manager is hereby authorized to execute a Second
Amendment to the "Professional Services Agreement For Consulting Services Relating to the
Denton Municipal Electric Utility" (the "Agreement"), heretofore entered into by and between
the City of Denton, Texas and R J Covington Consulting, Austin, Texas on the 5"' day of
January, 1999, (which Agreement was approved by the Council in Ordinance No 99-011,
enacted on January 5, 1999), providing for professional consulting services in the area of electric
restructuring and the potential divestiture of all or a part of the City's electric system, all as set
forth in Task Order No 99-A, and which Agreement was thereafter first amended to provide for
additional professional consulting services in the area of electric restructuring as set forth in Task
Order No 99-B, which First Amendment to the Agreement was approved by the Council in
Ordinance No 99-187, enacted on June 1, 1999 The Second Amendment to the Agreement is
set forth in Task Order No 99-C (the "Task Order"), a copy of which Task Order is attached
hereto and incorporated herewith by reference, and which Task Order provides that R J
Covington Consulting shall perform additional regulatory, technical, and related support electric
industry professional consulting services to the City, and which Task Order provides for the
payment by the City of additional fees and expenses not to exceed $ 100,000 00 respecting the
additional services to be performed by R J Covington Consulting pursuant to Task Order No
99-C
SECTION II That the expenditure of funds as provided for in the attached Second
Amendment to Agreement pursuant to Task Order No 99-C is hereby authorized
SECTION III That the above -referenced Second Amended Agreement is hereby
ratified and retroactively approved, and shall be effective from and after September 1, 1999
SECTION IV That this ordinance shall become effective immediately upon its passage
and approval /� / /L
PASSED AND APPROVED this the 1 9day of /SGCJ 1999
JAC LLER, MAYOR
ATTEST
JENNIFER WALTERS, CITY SECRETARY
By
APPROVED AS TO LEGAL FORM
HERBERT L PROUTY, CITY ATTORNEY
S \Our Documents\0rdmances\99WC2nd Amended PSA-TO 99 C DME doc
SECOND AMENDMENT TO
PROFESSIONAL SERVICES AGREEMENT
DATED JANUARY 5,1999
BETWEEN THE CITY OF DENTON AND
R J COVINGTON CONSULTING
TASK ORDER NO 99-C
Electric Industry Services
Activities to be performed under this Task Order by R J Covington Consulting (RJC)
are for the purpose of providing regulatory, technical and analytical support to the City
on activities associated with electric restructuring in Texas and on issues relating to the
City's participation in the Denton, Garland, Greenville sub -control area (DGG)
RJC will provide professional consulting services and technical support for City staff
(Staff) related to various regulatory and operational activities affecting the City Tasks
provided for in this Task Order include participation in projects, workshops and
rulemakings at the Public Utility Commission of Texas (PUC) RJC will act as Staff
liaison to the PUC to keep Staff unformed on activities at the PUC, work with Staff and
their attorneys in developing positions on issues, assist Staff in responding to issues that
affect the City and provide technical support for Staff and City's legal experts on
regulatory issues
At the Electric Reliability Council of Texas (ERCOT), RJC will monitor and report on
activities that are in progress to define and develop systems for retail access as
mandated in Senate Bill 7 RJC will participate on committees and working groups to
assist Staff in representing the interest of the City and DGG RJC will also conduct
technical analyses and studies as directed by DGG that will assist DGG in evaluating
positions and responding to market changes related to on -going restructuring activities
Background
The PUC has, in Project 20970 - Plan For Implementing Senate Bill 7, identified 36
projects for developing the rules and policies that will shape the electric industry
leading up to retail access on January 1, 2002 These projects will either directly affect
the City's municipal electric system and DGG operations, or by shaping and defining the
competition, indirectly affect the way the City and DGG will conduct its electric
business
The shaping of the industry is taking place at several levels on a very fast paced
schedule This includes, 1 ) PUC Projects leading to Rulemakmgs, 2) Other PUC Dockets
1 of 6
and Activities, and 3 ) ISO Activities The rules, policies, procedures and systems are to
be in place by June 1, 2001, for the start of the customer choice pilot program This
means that there are multiple projects and associated rulemakmgs, as well as, multiple
ERCOT groups working on addressing implementation issues that will affect the City's
electric system Often these projects and working groups are proceeding simultaneously
and at a rapid pace
Some of the key issues presently being addressed that directly affect municipalities
include
• When and under what rules will municipals be required to make transmission costs
of service filings This will affect the City's recovery of its investment in
transmission plant for current as well as future filings
• Will municipals have access to transmission to transport power from existing
resources, or will they have to go to the market and purchase special congestion
management rights to transport that power on a firm basis
• Will municipals have to purchase renewable energy credits if it decides to opt -in to
retail access and at what price will those credits be available
• Will municipals have to purchase credits for natural gas generation to meet state
mandates that favor natural gas over coal?
• How will units be designated as must -run units and how will they be compensated
• The costs associated with implementing customer choice, who pays, how much, and
when
Some of the issues that are currently being addressed that will indirectly affect
municipalities are
• How is stranded costs allocated to customer classes for the IOU's
• How will the IOU's be unbundled into separate business units?
• What services will the unbundled entities offer, when and where?
• What Code of Conduct will be adopted for IOU's and how will the PUC determine
the Code of Conduct for municipalities that opt -in to retail access
Some of the other activities at ERCOT that will affect municipalities and DGG operations
include
• Moving from multiple control areas to a single control area
• How scheduling of loads and generation will work in a retail environment
• How settlement will work to track and reconcile costs and how municipalities will fit
into that process
• How can the City and DGG best position itself in the evolving market?
RJC's work will focus on activities at the PUC and at ERCOT to address restructuring
and regulatory issues RJC's activities will include
1) Attending workshops hosted by PUC and ISO
2of5
2) Address issues at ERCOT that affect City and DGG costs, such as ERCOT policies
on redispatch of generation due to transmission constraints
3) Participating on relevant PUC and ISO committees to discuss and debate issues and
develop positions
4) Analyzing proposed rules filed by PUC and policies presented by ISO
5) Preparation of comments to be filed at the PUC to present the City s position on
issues
6) Analyzing comments filed by other parties on issues affecting City
7) Working with City Staff and legal team to develop responses to positions taken by
other parties adverse to the City's positions
8) Providing technical support to Staff and the City's legal team on issues before the
PUC and the ISO
9) Maintaining information on activities at the PUC, ERCOT ISO and the Legislature
that supports effective representation on issues in these and related proceedings
associated with restructuring in Texas
10 )Meeting with ERCOT staff to discuss operational concerns of City and DGG
11 ) Meeting with representatives of other utilities and other market segments to discuss
proposed rules and procedures that may impact the City and DGG
12 )Keep Staff informed of issues needing their attention and assisting Staff in preparing
for deregulation
Scope of Services
Task A Attending Workshops At PUC And ISO
RJC will stay informed on activities at PUC and ISO and will attend workshops as
needed
When appropriate, RJC will participate in workshops to represent interest of City
based on directions of Staff
Staff will be briefed on issues addressed and positions taken by parties at
workshops
Task B Participation On Committees Task Forces and Working Groups
1 RJC will participate on PUC and ERCOT committees, task forces and working groups,
as approved by Staff , in order to evaluate issues and support solutions to the larger
group that will reflect the City's and DGG's position on issues being addressed
2 Staff will be kept informed of issues being addressed in committees and positions of
parties
3 RJC will discuss with Staff positions which should be taken and strategies for working
with parties involved
3of5
Task C Analyze Proposed Rules and Policies
The proposed new rules and rule changes from the PUC and associated proposed
policies from the ISO will be analyzed
RJC will discuss proposed new rules and changes to existing rules with Staff, helping to
identify areas of concern and preparing positions on rules that represent interests of
City
RJC will meet with PUC staff as appropriate to discuss the proposed rules and present
the City's concerns regarding PUC staff proposals
Task D Preparation of Comments
1 RJC will prepare or assist in preparing comments to be filed with PUC representing
City's position on issues brought up in proposed rules
2 These comments will be coordinated through Staff and the City's legal team
3 RJC will assist the City's legal team as necessary in the preparation of and filing of
comments
Task E Work With Staff And Legal Team
1 RJC will have continuing communication with Staff and the City's legal team in order
to monitor proposed industry changes and address those issues affecting
municipalities
2 An on -going dialog will be maintained with Staff and the legal team in order to
evaluate changing proposals and evaluate potential effects on City operations
3 Information necessary to supplement and support the decision making process will be
provided as requested
4 RJC will be available to discuss with the Utility Board and City management activities
at PUC and the ISO as requested from time to time by Staff
5 As directed by Staff, RJC will coordinate and support other consultants, attorneys, and
lobbyists used by the City in order to insure coordination of planning and other
activities
Task F Technical Support
1 RJC will provide technical support to the City's legal team to assist in the evaluation
of proposals and the potential impact on the City under different scenarios
2 RJC will provide technical support to Staff, providing information as requested from
time to time to assist Staff in its evaluations and planning processes
3 RJC will evaluate scenarios and proposals from perspective of City utility and as a
member of TMPA
4 Workpapers will be developed to support the analysis and will be provided to City
upon request
4of5
5 Presentations to Staff will be made as appropriate to discuss results of analyses and
recommended strategies based on the results
Budget
The budget for the above scope of services for labor and expenses is difficult to estimate
due to the fact that the implementation rulemaking proceedings are lust beginning
There are 36 PUC projects that have been identified to implement retail competition, and
numerous ERCOT committees working to address the details of how retail access will
work Costs for RJC labor and expenses under the Task Order will be shared with the
Cities of Garland and Greenville based on percent splits as approved by the three Cities
RJC recommends a budget of $100,000 for labor and expenses be approved This
budget will not be exceeded without prior approval of the City RJC will bill monthly
with supporting documentation of activities performed The work being performed will
be under the supervision of the Director of Electric Utilities and may be modified at any
time upon appropriate notice to RJC
EXECUTED this lqth day of 199]
AUTHORIZED BY
CITY 011'
By
Dated
ATTEST
JENNIFER WALTERS
CITY SECRETARY
ACCEPTED BY
R J COVINGTON CONSULTING
APPROVED AS TO LEGAL FORM
HERBERT L PROUTY
CITY ATTORNEY
By 7 By n'
edfAuDated
5of5