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Home My WebLink About2021-03-23 CC & PUB Joint Agenda and BackupCity Council City of Denton Meeting Agenda City Hall 215 E. McKinney St. Denton, Texas 76201 www.cityofdenton.com Council Work Session Room11:30 AMTuesday, March 23, 2021 JOINT MEETING WITH THE PUBLIC UTILITIES BOARD Note: Mayor Gerard Hudspeth, Mayor Pro Tem Jesse Davis and Council Members Birdia Johnson, Connie Baker, John Ryan, Deb Armintor and Paul Meltzer will be participating in the work session via video/teleconference. Further, the Public Utilities Board Members will be participating via vide/teleconference which will be duly noted within their respective agenda. After determining that a quorum is present, the Joint Meeting of the City Council of the City of Denton and the Public Utilities Board will be held on Tuesday, March 23, 2021, at 11:30 a.m. in the Council Work Session Room at City Hall, 215 E. McKinney Street, Denton, Texas at which the following items will be considered: WORK SESSION 1. Work Session Reports Receive a report, hold a discussion, and give staff direction regarding processes, impacts, and results of service delivery during the February 2021 inclement weather event by the following departments: 1.Denton Municipal Electric 2.Water/Wastewater Utilities ID 21-341A. The City Council and Public Utilities Board reserve the right to adjourn into a Closed Meeting or Executive Session as authorized by Texas Government Code, Section 551.001, et seq. (The Texas Open Meetings Act) on any item on its open meeting agenda or to reconvene in a continuation of the Closed Meeting on the Closed Meeting items noted above, in accordance with the Texas Open Meetings Act, including, without limitation Sections 551.071-551.086 of the Texas Open Meetings Act. C E R T I F I C A T E I certify that the above notice of meeting was posted on the bulletin board at the City Hall of the City of Denton, Texas, on the 19th day of March, 2021 at 5:00 p.m. __________________________________________ CITY SECRETARY NOTE: THE CITY OF DENTON'S DESIGNATED PUBLIC MEETING FACILITIES ARE ACCESSIBLE IN ACCORDANCE WITH THE AMERICANS WITH DISABILITIES ACT. THE CITY WILL PROVIDE ACCOMMODATION, SUCH AS SIGN LANGUAGE INTERPRETERS FOR THE HEARING IMPAIRED, IF REQUESTED AT LEAST 48 HOURS IN ADVANCE OF THE SCHEDULED MEETING. PLEASE CALL THE CITY SECRETARY'S OFFICE AT 940-349-8309 OR USE TELECOMMUNICATIONS DEVICES FOR THE DEAF (TDD) BY CALLING 1-800-RELAY-TX SO THAT REASONABLE ACCOMMODATION CAN BE ARRANGED. Page 1 Printed on 3/30/2021 1 March 23, 2021City Council Meeting Agenda Page 2 Printed on 3/30/2021 2 City of Denton Legislation Text City Hall 215 E. McKinney St. Denton, Texas 76201 www.cityofdenton.com File #:ID 21-341,Version:1 AGENDA CAPTION Receive a report, hold a discussion, and give staff direction regarding processes, impacts, and results of service delivery during the February 2021 inclement weather event by the following departments: 1.Denton Municipal Electric 2.Water/Wastewater Utilities City of Denton Printed on 3/19/2021Page 1 of 1 powered by Legistar™3 City of Denton _____________________________________________________________________________________ AGENDA INFORMATION SHEET DEPARTMENT: Finance ACM: David Gaines DATE: March 23, 2021 SUBJECT Receive a report, hold a discussion, and give staff direction regarding processes, impacts, and results of service delivery during the February 2021 inclement weather event by the following departments: 1. Denton Municipal Electric 2. Water/Wastewater Utilities BACKGROUND On February 14, 2021, severe inclement weather impacted the City of Denton and resulted in unprecedented demand for services which impacted departments city-wide. An emergency/disaster event of this magnitude required a thorough review of departmental processes, impacts, and results of service delivery. Staff in various departments have been asked to update City Council in the following areas as applicable to their respective service delivery areas (City Utilities to also update Public Utilities Board): 1. What were the intended results of your department operation/s? 2. What was supposed to happen during this weather event under your departments areas of responsibilities? 3. What were the actual results? What actually happened under your departmental areas of responsibilities? Did you have to vary operations under these circumstances? If so, what? 4. What caused the results of your operations and what were the differences, if any. 5. What worked, what did not and why? 6. What will we sustain and what do we need to improve regarding the operations of your areas of responsibilities? At Mayor Hudspeth’s request, City Council was asked to provide any potential questions in advance of department presentations in an effort to provide streamlined discussions. Answers to questions received will be incorporated into the presentations if/when at all possible. Staff has attached the DEC presentation discussed with Council on August 18, 2020 in response to recent questions regarding this facility. Staff will be prepared to respond to any questions during the upcoming winter storm presentation. City Hall 215 E. McKinney Street Denton, Texas www.cityofdenton.com 4 EXHIBITS 1. Agenda Information Sheet 2. Presentation – Denton Municipal Electric 3. Denton Energy Center Presentation August 18, 2020 4. Presentation – Electric Fund Financial Update 5. Presentation – Water/Wastewater Utilities Respectfully submitted: Antonio Puente, Jr. Executive Manager of Utilities 5 2021 Winter Event Response Tony Puente Executive Manager of Utilities & DME General Manager March 23, 2021 Legistar ID #21-341 16 Objective •About DME –Tony Puente •Division Reports –Chris Lutrick •Break/Questions •Division Reports –Terry Naulty •Break/Questions •Conclusion/Questions –Tony Puente 2 of 40 7 About DME •Established in 1905. •6th Largest Municipally-Owned Electric Utility (MOU) in Texas. •1 of 72 MOUs in the Texas. •City Council is Governing Body and adopts annual Budget & Rates. •Department of the City (“One City, One Organization”). •Defined Service Territory –Mainly city core but some extraterritorial jurisdiction (ETJ) and northern tracts in city of Corinth. •Includes single, dual and triple certified areas. 3 of 40 8 4 of 40 9 DME Organizational Structure 5 of 40 DME General Manager Tony Puente Assistant General Manager Terry Naulty EMO (Front Office) Denton Energy Center Safety & Training Engineering Water & Wastewater Utilities Executive Manager of Operations Chris Lutrick Line Maintenance Line Construction Substations System Operations/Dispatch Executive Manager of Regulatory /Compliance Smith Day Regulatory/Risk EMO (Middle Office) General Administrative Support Compliance Executive Manager of Business Services Bill Shepherd Customer Programs, Key Accounts & Rates ERCOT Settlements (EMO Back Office) Performance Measurements / Business Metrics Metering Water & Wastewater Utilities / Solid Waste / Environ. Srvcs. & Sustain. Interim Director of Water/Wastewater Executive Manager of Utilities •FY 2018-19 •Operating Budget -$243.7 million •Staffing –187 Full Time Equivalent Positions •FY 2019-20 •Operating Budget -$232.2 million •Staffing –189 Full Time Equivalent Positions •FY 2020-21 •Operating Budget -$231.1 million •Staffing –169 Full Time Equivalent Positions 10 Division Reports –Chris Lutrick •About ERCOT (Electric Reliability Council of Texas) •Utility Dispatch & System Operations •Field Operations (Line/Substations) •Engineering •Business Services & Customer Relations •Regulatory & Compliance •Break/Questions 6 of 40 11 ERCOT 7 •Electric Reliability Council of Texas (ERCOT)–manages the flow of electric power to 24 million Texas customers representing approximately 90% of the state’s electric load and about 75% of the Texas land area. •Coordinates the operation of more than 550 generation units. •Coordinates the operation of 46,500 circuit miles of high-voltage transmission. •Manages the financial settlement for the competitive wholesale bulk-power market. •DME is 0.5% of ERCOT based on peak summer load (375 MW). 7 of 40 12 8 8 of 40 13 System Operations •ERCOT’s unprecedented load shed event began on 2/15 at 1:20am •City net load was at 275 MW (previous day set all time winter peak of 304 MW) •ERCOT required grid operators to shed 20,000 MW of about 70,000 MW •DME’s portion (0.5%) was 100 MW or 36% of city net load •Load shed event lasted approximately 59 hours 9 of 40 14 System Operations •Load Shed Plan •Confidential –Contains Critical Energy/Electric Infrastructure info •Updated annually along with the ERCOT Emergency Operations Plan •Includes instruction for Under Frequency Load shed (UFLS) and Emergency Load Shed events •DME is obligated to comply with ERCOT Operating Instructions •ERCOT Operating Guides/Protocols and NERC standards. 10 10 of 40 15 System Operations •Emergency Load Shed (Controlled Rotating Outages) •DME’s obligation is 0.5% of the total ERCOT load based on summer peak •Utilizes feeder that do not contain Critical loads (residential/commercial) •Based on 2011 events, 60 MW was included in plan •Plan called for 30-minute outage cycles •UFLS Parameters (Automatic Non-rotating Outages) •Automatic Load Shed (Underfrequency Load Shed, UFLS) •Group 1 59.3 hz = 5% of City net load •Group 2 58.9 hz = 10% of City net load •Group 3 58.5 hz = 10% of City net load •Accounts for 25% of the total real time load •No UFLS relay operations have occurred on DME System 11 of X 11 of 40 16 System Operations Classifying Critical Load -established by Texas Administrative Code, Title 16, Part II (PUCT) •4 categories of Critical Load Customers •Critical Load Public Safety Customer •Critical Load Industrial Customer •Chronic Condition Residential Customer •Critical Care Customer •Load Shed Plan •Category 1 –Critical Load Public Safety Customers •Category 2 -medical facilities, university police stations, City of Denton critical facilities. •Category 3 -county facilities. •Category 4 -Critical load industrial customers. •Emergency Load shed feeders (Critical Care Customers, Chronic Condition Residential Care Customers) •Chapter 25.497 (c)(4)Designation as a Critical Load Customer,Critical Care Residential Customer,Chronic Condition Residential Customer does not guarantee the uninterrupted supply of electricity. 12 of X 12 of 40 17 Feeder Utilization During Load Shed •DME has 107 feeders that carry load •17 Feeders serve Critical Infrastructure Loads (Major hospitals, Water/wastewater facilities, Police and Fire etc..) No outages •90 Feeders were used for this load shed event (230 MW, affecting 42,644 customers) •43 were identified to be used for load shed (Emergency load shed 60 MW) •47 were predetermined to serve critical loads 13 13 of 40 18 DME Response to ERCOT Operating Instructions 14 14 of 40 19 Load Shed by Rotation Cycles 15 15 of 40 20 Outages Due to Fuse Overload 16 16 of 40 21 Field Operations (Line/Substations) •Timeline –Sunday February 14th –Thursday 18th •DME staged crews at local hotel on Sunday afternoon •All field personnel were put on notice to be available for storm response •Due to the subzero temps and forecasted -10 to -15 windchills, all non-outage operations were halted. •Winter storm response began Sunday evening with an underground equipment failure that tripped off a substation power transformer 17 of 40 22 Field Operations (Line/Substations) •Rolling Outages commenced at 1:20am on Monday February 15th •Rolling outages during extreme low temps caused numerous equipment failures requiring response from DME field crews (Cold Load Pickup) •55 Maintenance, Construction, Substation and Metering staff began working around the clock in shifts up to 16 hours •Primary work performed was fuse and transformer replacement •Staff worked about 174 calls during the storm event 18 of 40 23 Engineering System Performance •Transmission •System performed well, no faults experienced or recorded •Transmission voltage was maintained for the duration of the winter event •Distribution •Two all-electric subdivisions (Villages of Carmel & Beaver Creek) had Cold Load Pickup problems leading to extended outages. •11 distribution transformers failed. Probable cause was overloading •Protection fuses were an issue on Cold Load Pickup 19 of 40 24 Engineering •Developed tools for System Operations to manage and spread rolling outages more evenly among all available feeders •Provided recommendations for load switching and subdivision load balancing •Provided Lake Lewisville Water Intake with power quality and reliability assistance •Provided System Operations with support to collect rolling outage data into one central repository from numerous sources 20 of 40 25 Business Services & Customer Relations •Key Accounts •Large industrial customers elected to curtail daily operations •Flowers Bakery, ACME Brick, Peterbilt, Southwire, TetraPak, GT Mall, TWU, UNT, DISD •Customer Outreach •Used DME and City social media accounts to communicate requests for conservation and relay current ERCOT emergency levels beginning Friday before the event •Began preparing customers for rolling outages and self-preparation in the week prior to the event •Energy Management Back-Office •Prepared and communicated estimates of ERCOT collateral and invoice payment requirements and worked closely with Management and City Finance to facilitate timely funding and accurate payment of all ERCOT obligations 21 of 40 26 Regulatory & Compliance •Main Compliance areas Related to Winter Storm 2021 were system reliability and cyber-security. •TOP-001-4 Requirement 5 of the NERC rules: “R5. Each Transmission Operator, Generator Operator, and Distribution Provider shall comply with each Operating Instruction issued by its Balancing Authority, unless such action cannot be physically implemented or it would violate safety, equipment, regulatory, or statutory requirements.” •DME system operators performed exactly as the requirement commanded by following the Load Shed instructions directed by ERCOT (Balancing Authority). •Due to this excellent performance, there were no observable violations of the NERC requirement. 22 of 40 27 Successes and Challenges Challenges •Communication •Customers lacked back-up generators •Critical infrastructure/customer identification process •Extreme cold temperatures •Outage processing technology •Load shed was 3 times our plan •Load shed feeder/load tracking (errors) •Cold Load Pick up Successes •Maintained the ERCOT interconnect •Maintained rotating outages •Provided affected critical care customers with generators or extra rotation time •Provided affected critical customers with additional rotation times or schedule rotations to meet their needs •Maintained Critical Services (City PD, Fire, Hospitals) so affected customers could seek help. •Adjusted outage duration based on customer feedback (30 min. to 45 min.). 23 23 of 40 28 Break/Questions? 24 of 40 29 Division Reports –Terry Naulty •Energy Management •Winter Storm URI in Perspective •DME Position prior to storm •Preliminary Economic Impact •Denton Energy Center (DEC) •Mitigation Measures/Evaluations •ERCOT Market Reforms •Break/Questions 25 of 40 30 Winter Storm URI in Perspective •Average High Temp –60 degrees/Average Low Temp –37 degrees •Never has been a colder three days in a row recorded in DFW •Projected City Load Feb 14th through 19th –18,664 MWh •Actual City Load Feb 14th through Feb 19th –26,176 MWh •140% of expected load excluding, load shed (170% with load shed) 26 Dates Year Average Temperature (degrees F) Feb. 14-16 2021 10.8 Dec 22 –24 1983 11.7 Dec 23 –25 1983 12.3 26 of 40 31 Winter Storm URI in Perspective 27 •Redefines market risk to all ERCOT participants •Dwarfs all prior events by a factor of 55 •Demonstrates the fragility of the ERCOT generation portfolio •6 days cost the market more than all prior years of PURA combined 27 of 40 32 DME Position Heading into URI •February Hedge Positions were in place based upon normal weather and in compliance with the Energy Risk Management Policy •Some additional hedging trades were placed on Feb 11th and 12th in anticipation of higher-than-expected loads •Last day of trading was Friday for Saturday –Tuesday (President’s Day) •Hedging strategy relied upon the DEC being available especially at night and Renewables performing at expected levels 28 28 of 40 33 Power Supply Portfolio on February 12, 2021 Supply •Denton Energy Center –225 MW •Santa Rita Wind –150 MW •Whitetail Wind-30 MW •Longdraw Solar –75 MW •Bluebell Solar –130 MW Total Supply 610 MW Normal Peak Demand 170 MW Surplus Capacity 440 MW Demand •Typical Electric Demand - 18,664 MWh (5 days) •Actual Electric Demand – 26,176 MWh (140% of normal) 29 29 of 40 34 - 50 100 150 200 250 300 350 400 450 1 3 5 7 9 11131517192123 1 3 5 7 9 11131517192123 1 3 5 7 9 11131517192123 1 3 5 7 9 11131517192123 1 3 5 7 9 11131517192123 1 3 5 7 9 11131517192123 1 3 5 7 9 11131517192123 2/13/2021 2/14/2021 2/15/2021 2/16/2021 2/17/2021 2/18/2021 2/19/2021 DME Forecast vs Actual Load DME Weather Normal Load FCT Load Actual w/o Load Shed 30 of 40 35 Thursday Friday Saturday Sunday Monday Tuesday Wednesday Thursday Friday OffPeak Output 3,621 5,647 3,647 5,236 3,348 2,809 2,725 4,657 6,584 Error OffPeak (7,847)(6,791)(7,970)(6,116)(7,962)(1,992)(3,478)(6,146)(2,489) OnPeak Output 4,860 4,158 4,209 7,740 1,482 4,746 2,188 5,195 5,387 Error OnPeak (4,244)(7,780)(6,324)(8,055)(8,172)(1,471)(4,386)(5,625)(5,723) OffPeak High FCT 11,468 12,438 11,617 11,352 11,310 6,072 6,203 10,803 9,666 OffPeak Low FCT 3,621 5,439 3,155 5,114 3,348 2,809 2,725 4,657 6,584 OnPeak High FCT 9,104 11,938 10,533 15,795 9,654 7,455 6,574 10,820 11,596 OnPeak Low FCT 4,860 4,158 3,752 7,067 1,482 4,746 2,188 5,195 5,387 -10,000.00 -5,000.00 0.00 5,000.00 10,000.00 15,000.00 MWERCOT Wind Forecast Error (MW) Wind Resources Predictions Failed 31 of 40 36 (300.00) (200.00) (100.00) 0.00 100.00 200.00 300.00 400.00 $- $1,000.00 $2,000.00 $3,000.00 $4,000.00 $5,000.00 $6,000.00 $7,000.00 $8,000.00 $9,000.00 $10,000.00 1 4 7 10 13 16 19 22 1 4 7 10 13 16 19 22 1 4 7 10 13 16 19 22 1 4 7 10 13 16 19 22 1 4 7 10 13 16 19 22 1 4 7 10 13 16 19 22 1 4 7 10 13 16 19 22 1 4 7 10 13 16 19 22 2021-02-12 2021-02-13 2021-02-14 2021-02-15 2021-02-16 2021-02-17 2021-02-18 2021-02-19Price ($/MWh)NORTH HUB Price vs DME Position HB_NORTH DME Position DME Position assuming full DEC Capacity ERCOT EEA L3 01:20 Gas Pressure drops DEC Trips Offline 18:52 Gas Returns to the DEC DEC Online, lower HSL ERCOT EEA L3 to L2 09:00 Return to Normal 10:35 32 of 4037 Supply Portfolio Performance During Load Shed Event 33 Significant Underperformance by DEC and Santa Rita cost ~ $180 million Source Fuel Capacity (MW) % of Expected Output Actual ERCOT Revenue ($) Expected ERCOT Revenue ($) DEC Natural Gas 225 26.46%88,832,420$ 203,412,033$ Santa Rita Wind 150 3.25%4,977$ 65,835,625$ Blue Bell I Solar 30 58.08%2,786,974$ 6,251,865$ Blue Bell II Solar 100 69.24%10,388,783$ 20,839,552$ Longdraw Solar 75 51.35%5,610,010$ 15,238,628$ Whitetail Wind 30 100.00%27,032,776$ 27,032,776$ Total 610 134,655,940$ 338,610,480$ 33 of 40 38 34 Preliminary Economic Impacts of URI to DME Estimated Cash Flows Variables •Resettlement by ERCOT •Ancillary Service Charges (+) •Last 32 hours of energy & AS (-) •Uplift from Defaults (-) Actual DME Load was 142% of expected levels (170% without load shed). 34 of 40 Estimated Actual Normal February Nominal Supply Performance DME Load (MWh)46,166$ 32,327$ 46,166$ Cash Paid to ERCOT (209,791,701)$ (793,892)$ (226,711,765)$ Beginning ERCOT Balance (4,882,194)$ -$ -$ Revenue from ERCOT 73,666,753$ 544,583$ 375,589,484$ Natural Gas Cost (22,500,000)$ (90,115)$ (66,902,667)$ Hedge Gains 23,200,000$ -$ 23,200,000$ PPA Costs (783,362)$ (856,960)$ (856,960)$ PPA Credit 940,956$ -$ -$ 8 Day Net Cost to DME (140,149,548)$ (1,196,383)$ 104,318,092$ 39 DEC physical damages from cooling system freeze up •Significant reduction in output capacity (2 units on outage, others derated) •Repairs estimated to take 2 weeks to complete •Long –term impacts being evaluated 35 35 of 40 40 DEC Challenges During URI •Communications •Cell / land lines not consistent during rolling outages •Equipment issues •Air compressor room ventilation louvers freezing •Cooling system transmitter scaling found to be inadequate for such an event •Could not drain all engine coolant simultaneously •Weatherization •Engine cooling system requires hardening (back-up fuel, stand alone coolant heating, increased glycol concentration or separate system for less than 19 degrees F) 36 36 of 40 41 Future Mitigation Measures/Evaluations •Dual fuel option (on site propane) •Second pipeline •Firming natural gas supplies •Swap intermittent renewables for fixed shape and price •Cost of outage insurance for winter and summer •Revised hedge targets for winter and summer -increase long position •Need for additional spinning reserve capacity •Winterization of DEC cooling systems •Winterization of wind resources •Reliance on DEC as largest hedge •Enhance weather forecasting capabilities 37 37 of 40 42 ERCOT Market Reforms Needed •Redesign of market to reflect large amount of intermittent capacity (Wind and Solar) •31,800 MW wind and 5,750 MW Solar vs. Peak demand of 74,000 MW •Retirements of fossil fuel capacity have exceeded 12,000 MW •Redesign of Credit Support Requirements •Integration of “circuit breakers” into scarcity pricing mechanism •Gas/Electric Coordination 38 38 of 40 43 What to Expect from ERCOT/Legislature/PUCT •Resettlement of Ancillary Services –TBD •Resettlement of 32 hours of energy. •Legal challenges will be forthcoming •Denton vs. ERCOT (Uplift) •Natural Gas resettlements –Price gouging/market Manipulation. •PUCT and TX RRC oversight/integration 39 39 of 40 44 Break/Questions? 40 of 40 45 1 FY 2020-21 Budget Presentation Electric Denton Energy Center Proforma Discussion ID 20-1523 46 2 Sources of Value Not Reported in DEC Proforma •Avoided Renewable Energy Purchases –without the DEC, DME would have to purchase 70% to 80% more renewable energy to achieve 100% renewable energy supply per the Denton Renewable Resource Plan •800 –900 MW of renewable capacity to serve peak load of 375 MW •Current contracted capacity = 460 MW •With the DEC total supply = 685 MW •$18 to $20 million in incremental annual energy purchases vs. $9 to $20 million in 2016 proforma •Day Ahead to Real Time Savings -$3.3 million actual vs. $2.3 million forecasted in 2016 47 3 DENTON ENERGY CENTER PROFORMA 2018-19 2019-20 2019-20 2020-21 2021-22 2022-23 2023-24 ACTUAL BUDGET ESTIMATE PROPOSED PROJECTED PROJECTED PROJECTED DEC REVENUE $37,482,022 $25,073,394 $25,073,394 $24,545,418 $21,024,916 $16,788,653 $14,291,590 EXPENDITURE SUMMARY Energy Expense $6,954,969 $12,475,775 $11,000,000 $10,346,819 $9,634,260 $8,357,820 $7,274,907 Personal Services 1,672,131 2,222,681 $1,800,000 1,790,473 1,844,187 1,899,513 1,956,498 Materials & Supplies 160,109 440,503 388,701 1,717,383 1,606,598 1,429,753 1,208,952 Maintenance & Repair 109,388 560,109 560,109 558,765 575,528 592,794 610,578 Insurance 487,272 501,079 1,081,597 1,114,045 1,147,466 1,181,890 1,217,347 Miscellaneous 539 1,984 1,211 - - - - Operations 212,170 480,000 375,908 333,252 343,250 353,547 364,153 Debt Service - Principal 5,972,399 7,474,166 7,474,166 7,854,729 8,257,354 8,683,616 9,129,576 Debt Service - Interest 7,576,989 9,804,032 9,804,032 9,430,324 9,037,587 8,624,720 8,190,539 Transfer to Vehicle Replacement - 39,205 39,205 26,671 26,671 26,671 26,671 Transfer to Capital Projects 120,000 15,000 15,000 15,000 15,000 15,000 15,000 Transfer to Tech Services - 12,347 12,347 214,898 219,196 223,580 228,051 DEC EXPENDITURES $23,265,966 $34,026,881 $32,552,276 $33,402,359 $32,707,097 $31,388,904 $30,222,273 Non Debt Expenses 9,716,578 16,748,683 15,274,078 16,117,306 15,412,156 14,080,568 12,902,157 DEC NET INCOME $14,216,056 ($8,953,487)($7,478,882)($8,856,941)($11,682,181)($14,600,251)($15,930,683) Additonal Sources of Value DA-RT Spread 3,300,000 3,300,000 3,300,000 3,300,000 3,300,000 3,300,000 3,300,000 Avoided Renewable Energy Purchases 9,030,472 9,598,704 8,919,011 11,579,168 18,000,000 18,000,000 18,000,000 ADJUSTED NET INCOME $26,979,888 $4,868,598 $4,740,129 $7,320,160 $11,301,540 $8,780,831 $7,859,683 48 4 DEC Proforma Shutdown Scenario (debt only) DENTON ENERGY CENTER PROFORMA Shut Down of Facility 2018-19 2019-20 2019-20 2020-21 2021-22 2022-23 2023-24 ACTUAL BUDGET ESTIMATE PROPOSED PROJECTED PROJECTED PROJECTED Debt Service - Principal 5,972,399 7,474,166 7,474,166 7,854,729 8,257,354 8,683,616 9,129,576 Debt Service - Interest 7,576,989 9,804,032 9,804,032 9,430,324 9,037,587 8,624,720 8,190,539 DEC EXPENDITURES $13,549,388 $17,278,198 $17,278,198 $17,285,053 $17,294,941 $17,308,336 $17,320,115 DEC NET INCOME ($13,549,388)($17,278,198)($17,278,198)($17,285,053)($17,294,941)($17,308,336)($17,320,115) Additional Renewable Energy Purchases (9,030,472) (9,598,704) (8,919,011) (11,579,168) (18,000,000) (18,000,003) (18,000,007) Lost DEC Energy Gross Margin (27,765,444) (8,324,711) (9,799,316) (8,428,112) (5,612,760) (2,708,085) (1,389,433) ADJUSTED NET INCOME ($22,579,860)($26,876,902)($26,197,209)($28,864,221)($35,294,941)($35,308,339)($35,320,122) ADJUSTED NET INCOME WITH DEC $26,979,888 $4,868,598 $4,740,129 $7,320,160 $11,301,540 $8,780,831 $7,859,683 INCREMENTAL COST W/O DEC $49,559,748 $31,745,500 $30,937,338 $36,184,381 $46,596,481 $44,089,171 $43,179,805 Percent Increase in Energy Cost Adjustment 86%58%57%65%82%74%69% Average home monthly increase (1250 kwh/mo)37.04$ 24.99$ 24.35$ 27.85$ 35.09$ 31.51$ 29.43$ Annual Increase cost per resident/year $ 444.51 $ 299.88 $ 292.24 $ 334.25 $ 421.12 $ 378.16 $ 353.15 49 55 Summer 2019 and 2020 Performance Without the DEC •July and August 2019 •Purchase 200 MW of 7x16 Hedge •Use renewable contracts for load service •Sell surplus hedge into real-time market •Buy short position from real-time market •Purchase Power Costs -$ 29.4 million •DEC Savings = $18.3 million •July and August 2020 (through 8/13) •Purchase 200 MW of 7x16 Hedge •Use renewable contracts for load service •Sell surplus hedge into real-time market •Buy short position from real-time market •Purchase Power Costs -$18.2 million •DEC Savings = $12.4 million With the DEC •July and August 2019 •Mild Temps until Mid-August •Price Spikes Mid to Late August •Record Electrical Demand in ERCOT •Denton peak demand less than 2017 •Purchase Power Costs -$11.1 million •July and August 2020 (through 8/13) •Mild Temps •No price spikes •Record Electric Demand in ERCOT •Denton peak of 355 MW vs all time high of 372 MW •Purchase Power Costs -$5.8 million 50 6 Questions? 51 11 ELECTRIC FUND FINANCIAL UPDATE CITY COUNCIL MEETING MARCH 23, 2021 1 52 2 ELECTRIC FUND FINANCIAL UPDATE •Pre-Winter Storm Financial Condition •Post-Winter Storm Financial Condition •Financial Uncertainties and Rate Impact •Winter Storm Calendar and Next Steps 53 33 PRE-WINTER STORM FINANCIAL CONDITION •The Electric Fund had in excess of $100 million in operating reserves. This was above the current reserve targets of $36.9 million to $48.5 million. •Debt coverage ratio exceeded the 1.25 target. •Total annual debt service payment amount of $49.50 million. •No Extendable Commercial Paper (ECP) issuance. •Operating Reserve Targets ➢Minimum –16% operating expenses ➢Maximum –22% operating expenses Actual Purchased Power Expense Fiscal Year Amount FY 2018 $76.6 FY 2019 $97.1 FY 2020 $63.8 FY 2021 (Budget)$83.3 Financial Overview 54 44 •City incurred $209.8 million in collateral and ancillary charges •The City issued $100 million in Extendable Commercial Paper (ECP) to meet cash requirements. •Standard and Poor’s downgraded the City’s bond rating ➢Fitch placed Texas Public Utilities on negative credit watch. •The Finance Department started an in-depth analysis of: ➢Fund Balance policy analysis is focused on determining the appropriate amount of cash needed for daily operations and disaster response. ➢Capital Program and other operating expense analysis. Financial Overview Bond Rating Standard and Poor’s Fitch Long Term Short Term Long Term Pre-Storm AA-A-1+A+ Post-Storm A+A-1 A+ POST-WINTER STORM FINANCIAL CONDITION ERCOT Expense/Revenue Collateral & Ancillary Charges ($209.8) Expenses ($28.2) Credits $97.8 Net Expense $140.2 55 55 FINANCIAL UNCERTANTIES & RATE IMPACT 5 Current Issuance Possible Issuance •Uplift and Market Re-Pricing –The City is uncertain how this will impact the Electric Fund. •ECA rate will need to be adjusted based on the total debt issuance ➢Pass through costs of electric load purchases including purchased power, power production, renewable energy credits, and other ERCOT charges. Applies to all DME customers and charged per kWh. ➢ECA rate has remained unchanged since Fiscal Year 2018. Possible IssuanceShort-term •$100 million of Commercial Paper notes may be refunded with long-term revenue bonds. Long-term •Additional bond issuances of $40 -$60 million may be necessary as uplift and market re-pricing finalized. 56 66 WINTER STORM CALENDAR AND NEXT STEPS Winter Storm Financial Events Action February •City declares local emergency in response to winter storm •Financial Disaster Plan Implemented •Purchased Power Expense •Issuance of Extendable Commercial Paper (ECP) •City incurred $209.8 in collateral and ancillary charges •$100 million in ECP issued to meet cash needs March •City’s bond rating downgraded by Standard and Poor’s •Fitch placed the City’s Utility System on a negative credit watch list •Possible impact to bond rates •May require $140-$160 million in long-term bond issuance April •Work to determine the full impact of uplift and market repricing •Discuss options to refund ECP, and possible uplift, re-pricing expenses •Discuss electric rate adjustments •Complete an in-depth fund balance and capital program analysis •Staff will seek direction from the PUB and City Council in April 57 77 QUESTIONS? 58 Winter Storm Report Pritam Deshmukh & Terry Naulty Water/Wastewater Utilities March 23, 2021 Legistar ID 21-341 1 of 12 59 Agenda Water •Operations •Impact •Change in Operation •Cause •Lessons Learned/Improvements Wastewater Public Communication/Boil Water Advisory Lessons Learned and Improvement Opportunities What Worked 2 2 of 12 60 Water Department Operations 3 •Treatment: Two water treatment plants function normally to produce a typical winter demand of 13-15 MGD •Ray Roberts: 3-5 MGD •Lake Lewisville: 10 MGD •Storage Capacity (25 MG): •5 Elevated (11 MG) •3 Ground Storage Tanks (Clear wells 14MG) •Distribution Pressure: between 50 to 80 psi. •Metering: Approx. 39,000 residential meters 3 of 12 61 What Happened and Why 4 WHAT HAPPENED Not able to maintain constant treatment plant output •Rolling Power Outages and Freezing Peak water demand 100% higher than normal (30 MGD) due to ‘dripping faucets’ despite conservation requests Why •Treatment: •Ray Roberts treatment facility had severe impacts due to rolling outages •5 outages in 6 hours on Monday (2/15) •Ozone Generator failure •Failure of Backup Generators •Frozen chlorine feed lines •Lake Lewisville treatment facility •Intake pump issues (Electrical Phase Imbalance) •Limited water production capacity •Resulted in water production capacity that could not match demand for three days (Mon -Wed) 4 of 12 62 What Happened and Why 5 •Storage: Significant drop in water levels at all storage facilities (10 to 15% full) •Distribution: Higher than normal main breaks due to freezing temperatures •Avg 3 breaks/week •Feb 13 to Feb 20 had 16 water main breaks •Metering: Significant increase in calls from residents primarily to turn water off or report leak •Avg 90 tickets/week •Feb 13 to Feb 20 had 740 tickets •Other: •Staffing •Unreliable Communication •Transportation 5 of 12 63 Mitigation -Change in Operation 6 •Issued notice requesting residents to conserve water •Treatment: •Ray Roberts treatment facility •Monday (2/15) afternoon switched to Generators •Continuous power supply restored. •Replaced damaged electronic components for the Ozone Generator •Changed the chlorination process -began using bleach to chlorinate •Lake Lewisville treatment facility •Electric Supply Phase Imbalance -Water and DME staff worked tirelessly for three days trouble shooting and implementing interim solutions until they found and fixed the issue. •Focused on stabilizing plant operations and increasing water production capacity to meet the demand -30 MGD 6 of 12 64 Mitigation -Change in Operation 7 •Storage: Constantly tracked water levels at all storage facilities and isolated/removed the Roselawn tank from the system. •Distribution: Deployed wastewater crews to help with the considerable high number of main breaks •Metering: Significant increase in calls from residents •Significant overtime to address shut off water (280 hrs OT) (maintain/improve tank levels) •Customer service staff helped with the increase call volume (80 hrs OT) •Wastewater staff helped with the considerably high number of resident concerns 7 of 12 65 Pecan Creek Basin Hickory Creek Basin Cooper Creek Basin Clear Creek Basin Robson Ranch 8 Wastewater Department Operations •Weather Impacts •PCWRP saw 45% increase in flows as compared to normal Feb week •Sludge line freeze up at PCWRP •Filter backwash system freeze up at Robson Ranch reclamation plant •Bio-diesel and diesel fuel thickening impacted generators used for lift stations impacted by rolling outages. •All issues were handled without incident •Staff provided assistance to Water Production 8 of 12 66 Timeline –Public Communication 9 Date and Time Water System Status Public Notification 02-16-21 6:49pm Water Levels in Storage Tanks begin dropping below acceptable levels Conserve water notice 02-17-21 3:09pm Water Levels in Storage Tanks improving (at 20%) Conserve water notice 02-17-21 5:38pm Pressure drop below 20 psi Boil water notice 02-19-21 1:21pm Pressure stabilized and Levels in Storage Tanks steadily increasing (at 65%). Sampling and Analysis Boil water notice update 02-20-21 7:49am Water Quality Results received Saturday (2/20) morning Boil Water Notice Cancelled 9 of 12 67 Action Items and Improvement Opportunities 10 Issue Description Options/Solutions Public Communication Messaging Clarity Pre-determined messages Timing of Notices Improved SOP/Emergency Plans Social Media Response Policy Issues (PIO) Weatherization RR Chlorine System Redesign/Weatherize (RR Regulatory Upgrade) Tank Level Instruments Weatherize/Power Supply WW Sludge Line Solids Handling Project Robson Ranch Backwash Decommissioning in 2022 Flushing Truck Bay Backup Generator for heating the storage bays Power Supply RR Back-up Generators Upgrade Generator Controls (RR Regulatory Upgrade SOW) Critical Load Designation Verify critical load designation annually LL Intake Pumps Resolved Boil Water Advisory Conflicting Information New Communication Protocols for loss of pressure vs. Main Break Ability to Boil Water without Electricity Bottled Water/In-house capabilities Other Chemical Inventory Set new Winter Inventory Levels Emergency Planning and Management Develop and Implement Incident Command System (NIMS) Staffing-I&C Personnel Review Staff Levels/Cross Training Locating Facilities (meters, waterlines, etc.) Geocode water/wastewater infrastructure, update GIS database Diesel Fuel gelling Additives 10 of 12 68 What Worked 11 •Our Amazing Staff and their dedication •Teamwork •Our in-house lab helped us quickly turnaround the results and remove the boil water advisory •Staff from several departments came together for helping the water department staff to address the issues •Strong Leadership Team (CMO) that Constantly Supported Staff •Constant and clear lines of communication among City staff •Constant communication with residents C O M M U N I C A T I O N 11 of 12 69 Questions 12 12 of 12 70