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June 11, 2013 Minutes CITY OF DENTON CITY COUNCIL MINUTES June 11, 2013 nd After determining that a quorum was present, the City Council convened in a 2 Tuesday Session on Tuesday, June 11, 2013 at 4:00 p.m. in the City Council Work Session Room at City Hall. PRESENT: Mayor Burroughs, Mayor Pro Tem Kamp, Council Member Engelbrecht, Council Member Gregory, Council Member Hawkins, Council Member King, and Council Member Roden. ABSENT: None. 1. Receive an update, hold a discussion and provide direction on the development of a Public-Private partnership for a public access natural gas fuel station and the addition of natural gas as an alternative transportation fuel for a portion of the Solid Waste and Recycling Services collection fleet. Vance Kemler, Director of Solid Waste and Recycling Services, stated that the City Council established a policy in 2005 to promote clean fleet initiatives. Kemler stated that policy also corresponded to the City’s Strategic Plan regarding sustainable economic development and environmental stewardship for improved local and regional air quality and the management of natural resources. Kemler stated that the Solid Waste and Recycling Services Department wanted to promote environmental sustainability by improving local and regional air quality through the addition of CNG as a vehicle fuel, which produced 30% less pollutants. The department also wanted to improve its operations sustainability by using local natural gas as a vehicle fuel thereby reducing the purchase of diesel fuel of which 45% was produced from foreign crude oil. They also wanted to reduce operating expenses by using the lower cost CNG fuel. He stated that the department’s proposed transition to utilize CNG as an alternative vehicle fuel would consist of modifications to the Fleet Services building to meet the code requirements for servicing CNG vehicles and would also include the installation of a small skid-mounted CNG fuel station at the Solid Waste Services facility. It would also include extending the existing 6” natural gas line south to the Solid Waste Services buildings and truck parking lot. Staff would solicit proposals to seek a service provider to construct a public access CNG and/or LNG fueling station in the vicinity of the Spencer Road and Mayhill Road intersection. Kemler stated that the estimated project costs for the Fleet Services Building modifications was $150,000 and the estimated cost for the small skid-mounted CNG fuel station was $582,000. The anticipated payback period for these was six years. The estimated project cost for the public access CNG and/or LNG station was up to $4.2 million with an anticipated payback period of 5- 7 years. Kemler stated that the annual Solid Waste diesel usage was estimated at 425,000 gallons per year with a projected cost based on $3.80 per gallon which was about $1,615,000. He stated that the annual fuel cost savings utilizing CNG for 24 trucks in FY 2015 was estimated at $379,176 and for 28 trucks in FY 2018 was estimated at $758,352. He stated that CNG fuel cost savings was based on a CNG price of $1.21 per gallon. Kemler stated that a fuel price comparison would be City of Denton City Council Minutes June 11, 2013 Page 2 $3.80 per gallon for diesel versus $1.21 per diesel gallon equivalent for CNG which resulted in a difference of $2.59 per diesel gallon equivalent. Kemler stated in anticipation of transitioning to CNG, the Solid Waste and Recycling Department had applied for two State of Texas grants associated with natural gas fueling. The City had received notification that it had been awarded the $400,000 Clean Transportation Triangle grant from TCEQ for the construction of a CNG and LNG fueling station. The proposed fueling station site was adjacent to the City’s alternative fuels station at the intersection of Mayhill Road and Spencer Road. One of the requirements of the grant was that it be a public access station. Solid Waste staff had received verbal interest from several private companies that were interested in constructing and operating a CNG/LNG fueling facility at the proposed site. The time period for completion of this project was May 2015. The second grant the City had been awarded was the Alternative Fuel and Advanced Technology reimbursement grant from NCTCOG in the amount of $200,000. This grant funding was for the purchase and installation of the first skid mounted CNG fueling station. The grant timeline for completion of this project was December 31, 2013. Kemler stated that the Solid Waste Fund would have an increased vehicle cost for CNG at $40,000 per truck. He stated that the CNG truck investment payback period was 2.9 to 3.2 years and the collection truck replacement cycle was 7 years. Grants would reduce the increased budget impact. He stated that staff would submit applications for truck reimbursements as funds became available from TCEQ, NCTCOG and the EPA. Kemler stated that staff recommended Option 1 and 2. He stated that under Option 1, staff would purchase the first group of Solid Waste Fund CNG vehicles and work with the Purchasing Department to solicit proposals for the initial mobile, skid-based slow fill CNG fueling equipment. He stated that under Option 2, if the City Council supported the development of natural gas fueling for the community and local fleets in the area, staff would work with the Purchasing Department to solicit proposals for the CNG/LNG public access fueling facility through the RFP process. He stated that staff would not necessarily implement Option 2 until they got the proposals back because there seemed to be a wide variety of options. He stated before they moved forward with the public access facility, staff would give the Council an analysis on the proposals and get direction from the Council. Mayor Pro Tem Kamp asked about the emissions and if this would have a positive impact on the air quality. Kemler stated yes, there would be substantially lower emissions. He stated that he could get the Council more information on the comparison between diesel and natural gas in an informal staff report. Mayor Burroughs suggested that as we acquired CNG trucks, we should show on the sides of the truck that Denton was saving so many tons per year of ozone articulate matter and other pollutants by using CNG trucks. There would be multiple impacts by doing this and it would keep it consciously in the minds of the general public. It would also show where the City’s investment was. General Consensus of the Council was to move forward with Options 1 and 2. City of Denton City Council Minutes June 11, 2013 Page 3 2. Receive a report, hold a discussion, and provide staff with direction regarding the pursuit of a prepaid utilities strategy. Ethan Cox, Customer Service Manager, stated that as DME continued to deploy an advanced metering system in the City, staff had begun investigating a prepaid utility strategy. He stated that a prepaid utility strategy was a “Pay as You Go” system. For a utilities customer this meant they would pay to establish service. As they used utilities, their usage was deducted each day. The customer was responsible for monitoring their usage and their balance. As they see that balance getting a little low, they could then remit another payment to recharge the account. Cox stated that he would outline the differences between postpaid, which was typically doing business on credit which was how we did business today as a utility system, and the prepaid experience for both us and our customers. Cox reviewed the experience for a customer entering our utility system. Currently a customer that was going to do business with the City for the first time, or that might be transferring service from one address to another, or that might be returning to our utility system after an absence of a few years had to apply for service. They could call, come into the lobby, or submit an application online. Essentially what the application process entailed was that we would screen for identity theft because we were issuing credit and we wanted to identify that we were issuing credit to the appropriate party. We would also look at past payment behavior. If they had been in the utility system before, had an unpaid debt, we would address that. We would also look at credit worthiness. On the last two items, depending on what we found that would determine what needed to be paid to activate service. Cox gave an example of a returning customer that had left an unpaid balance. They were required to pay a deposit when they requested service and selected a deferred payment plan that worked for them to pay the old balance. The customer had service turned on and received a bill in 30 days. The customer forgot to pay the bill, late fees piled up and service was disconnected. Cox reviewed the same experience but with the prepaid solution. The customer would still have to apply for service. The difference was that the customer had an option now – they could do business on credit or a cash basis business, which was what prepaid was. With postpaid the customer did not have a lot of options. With prepaid the customer was only required to pay an initial prepayment. Customer Service would not require a deposit for this customer. A portion of each payment would be allocated to the debt and the rest would go towards future utility service. With the advanced metering system that was being deployed, the electric department was able to get meter reads on a daily basis. We were no longer waiting 30 days to see what happened. Customers could see what they were doing near real time and so that allowed them to adjust their behavior. The daily meter read was really critical to providing a prepaid solution. Customers could monitor their own usage. They were in control of their account. They did not have a bill. They did not have due dates. They did not have a utility telling them how much they should pay. The customer decided how much they were going to use and put down that amount of money and adjusted accordingly based on their usage. They could pay on their own schedule. City of Denton City Council Minutes June 11, 2013 Page 4 Cox stated that the prepaid system talked to two different systems to get the data that was needed to present to the customer. The first system was the billing system which contained the consumer information as well as the meter information. The other system was the advanced metering system. The challenge for the City was that we did not have one utility. For a lot of customers, we were billing for five services – electric, water, wastewater, drainage and solid waste. The only one that used the AMI system was electric. The City had non-metered and non-AMI services. For solid waste, wastewater and drainage usage, most of the cost for the consumer was fairly predictable and could be prorated over a 30- day period and charged daily. Water meters were manually read so monthly meter reads would still be completed. Staff could look at estimating usage based on prior readings and prorate and charge on a daily basis. If the amount was less than the estimate, that amount could be trued up on the next month with a new estimate. Benefits of the prepaid utility system included reduced electric consumption by 10-12%. Customers were more aware of how much electric they were using so they tended to use less. It improved cash flow for the City as well as debt recovery. There were reduced mailing and collection costs and fewer adversarial interactions. Benefits for the customer included no monthly bills, flexible payment schedule, no deposits, no late fees, and more control of their usage and account. For Customer Service, their customer base had a 2% annual growth rate over the last five years. Every month, Customer Service talked to 47% of the customer base. Requests for payments, balance inquiries, fees/deposits, payment arrangements and reconnecting service were responsible for 53% of time. Cox stated that in terms of cost and cost recovery, staff wanted a vendor that would host the information so that the City only had to purchase software that would integrate with the City’s current system. Many of the models that were being looked at charged by the customer that used the system. On average it cost about $84 annually per prepaid customer. Only 7-10% of the customer base on the residential side would be charged. This was not something all rate payers should pay for. Staff suggested that the City recover some of those costs through a facility fee of $7 per month. Cox stated that if the Council supported the prepaid strategy, staff would issue a Request for Proposal and provide the Council with a vendor recommendation for consideration and then a pilot program would be launched. Council Member Hawkins asked if the payment kiosks would be bilingual. Cox stated yes. Mayor Pro Tem Kamp asked about the main concerns of the Public Utilities Board. Cox stated that they wanted to make sure that the payment options were the same for postpaid customers and prepaid customers. City of Denton City Council Minutes June 11, 2013 Page 5 Council Member Roden asked how many customers had the smart meters. Phil Williams, General Manager, stated that out of approximately 48,000 customers about 28,000 of them had smart meters. General consensus of Council was for staff to proceed with the prepaid utilities strategy. 3. Under Section 551.042 of the Texas Open Meetings Act, respond to inquiries from the City Council or the public with specific factual information or recitation of policy, or accept a proposal to place the matter on the agenda for an upcoming meeting AND Under Section 551.0415 of the Texas Open Meetings Act, provide reports about items of community interest regarding which no action will be taken, to include: expressions of thanks, congratulations, or condolence; information regarding holiday schedules; an honorary or salutary recognition of a public official, public employee, or other citizen; a reminder about an upcoming event organized or sponsored by the governing body; information regarding a social, ceremonial, or community event organized or sponsored by an entity other than the governing body that was attended or is scheduled to be attended by a member of the governing body or an official or employee of the municipality; or an announcement involving an imminent threat to the public health and safety of people in the municipality that has arisen after the posting of the agenda. Council did not have items for future agendas. Following the completion of the Work Session, the Council convened into Closed Session to discuss the following: 1. Closed Session A. Certain Public Power Utilities: Competitive Matters – Under Texas Government Code Section 551.086. 1.Receive a presentation from Denton Municipal Electric (“DME”) staff regarding public power competitive matters concerning power supply alternatives, purchase power agreement opportunities, future energy sources, renewable energy resources, and alternatives for generation resources, in order to supply the future energy needs of Denton Municipal Electric. Discuss, deliberate and provide staff with direction. B.Deliberations regarding Personnel Matters – Under Texas Government Code Section 551.074. 1.Review and discuss the duties and goals for the City Manager, City Attorney, and Municipal Judge. City of Denton City Council Minutes June 11, 2013 Page 6 Following the completion of the Closed Meeting, the Council convened in open session at 7:30 p.m. and adjourned. ____________________________________ MARK A. BURROUGHS MAYOR CITY OF DENTON, TEXAS ____________________________________ JANE RICHARDSON ASST. CITY SECRETARY CITY OF DENTON, TEXAS