1999-388AN 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 Munmlpal Electric Utility" (the "Agreement"), heretofore entered into by and between
the City of Denton, Texas and R J Covington Consulting, Austin, Texas on the 5th day of
January, 1999, (which Agreement was approved by the Council ~n Ordinance No 99-011,
enacted on January 5, 1999), providing for professional consulting services ~n the area of electric
restructuring and the potential &vest~ture of all or a part of the C~ty'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 servmes ~n the area of electric restructuring as set forth in Task
Order No 99-B, which F~rst Amendment to the Agreement was approved by the Council ~n
Ordinance No 99-187, enacted on June 1, 1999 The Second Amendment to the Agreement ~s
set forth m Task Order No 99-C (the "Task Order"), a copy of which Task Order is attached
hereto and ~ncorporated herewith by reference, and whtch Task Order prowdes that R J
Cowngton Consulting shall perform additional regulatory, techmcal, and related support electric
industry professional consulting services to the City, and which Task Order provides for the
payment by the Cxty of ad&tlonal 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 prowded for ~n the attached Second
Amendment to Agreement pursuant to Task Order No 99-C is hereby authorized
~N III That the above-referenced Second Amended Agreement xs hereby
ratified and retroactively approved, and shall be effective from and after September 1, 1999
SECTION IV That this ordinance shall become effective ~mme&ately upon its passage
and approval
PASSED ANDAPPROVEDtlusthe t/qJC--~ day of ~~ ,1999
ATTEST
JENNIFER WALTERS, CITY SECRETARY
APPROVED AS TO LEGAL FORM
HERBERT L PROUTY, CITY ATTORNEY
S \Our Doctlments\Ordlnances\99kRJC 2nd Amended PSA-TO 99 C DME doe
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
Electnc Industry Services
Activities to be performed under flus Task Order by R J Covington Consulting (RJC)
are for the purpose of providing regulatory, technical and analytical support to the City
on activzties associated with electric restructurmg m Texas and on issues relating to the
City's participatmn m the Denton, Garland, Greenville sub-control area (DGG)
RJC will provide professional consulting services and techrucal support for City staff
(Staff) related to various regulatory and operational achvlhes affecting the City Tasks
provided for m flus Task Order include participation m prolects, workshops and
rulemakmgs at the Pubhc Utility Comratssion of Texas (PUC) RJC will act as Staff
liaison to the PUC to keep Staff reformed on achvltles at the PUC, work with Staff and
their attorneys m developmg pomhons on issues, assist Staff m respondmg to issues that
affect the City and provide technical support for Staff and City's legal experts on
regulatory issues
At the Electric Rehabthty Cotmci1 of Texas (ERCOT), RJC will momtor and report on
achvlhes that are m progress to define and develop systems for retail access as
mandated m Senate Bill 7 RJC will participate on committees and workmg groups to
assist Staff m representing the interest of the City and DGG RJC will also conduct
technical analyses and studies as directed by DGG that will assist DGG m evaluating
positions and responding to market changes related to on-going restructurmg activities
Background
The PUC has, m Prolect 20970 - Plan For Implementing Senate Bill 7, lden~led 36
projects for developmg the rules and pohc~es that will shape the electric mdustry
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
compehQon, mdirectly affect the way the City and DGG will conduct its electric
bumness
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 5
and Act~wbes, and 3 ) ISO Achwt~es The rules, pohcles, procedures and systems are to
be m place by June 1, 2001, for the start of the customer choice pilot program This
means that there are mulbple pro]ects and associated rulemakmgs, as well as, multiple
ERCOT groups workmg on addressing unplementat~on issues that will affect the City's
electric system Often these projects and working groups are proceedmg simultaneously
and at a rapid pace
Some of the key issues presently bemg addressed that directly affect mumclpahbes
~nclude
When and under what rules will mumclpals be required to make transrfusslon costs
of service filmgs Th~s will affect the City's recovery of its mvestment m
transrmsslon plant for current as well as future filmgs
· Will muruclpals have access to transrmaslon 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 mun~c~pafs have to purchase renewable energy credits ~f it dec~des to opt-m to
retail access and at what price wdl those credits be available
· Will mumcipals have to purchase credits for natural gas generatton to meet state
mandates that favor natural gas over coal?
· How will umts be designated as must-run un~ts and how will they be compensated
· The costs associated with n-nplementmg customer choice, who pays, how much, and
when?
Some of the issues that are currently being addressed that wall indirectly affect
muruclpahhes are
· How ~s stranded costs allocated to customer classes for the IOU's
· How wdl the IOU's be unbundled into separate business u~uts?
· What services wdl the unbundled enbbes offer, when and where?
· What Code of Conduct wrll be adopted for IOU's and how wrll the PUC determine
the Code of Conduct for mumclpahhes that opt-m to retail access
Some of the other act~wt~es at ERCOT that will affect mumclpahbes and DGG operations
mclude
· Moving from multiple control areas to a smgle control area
· How scheduling of loads and generation wdl work m a retail environment
· How settlement will work to track and reconcile costs and how muruclpaht~es will f~t
mto that process
· How can the City and DGG best poslbon itself m the evolvmg market?
RJC's work will focus on achvlt~es at the PUC and at ERCOT to address restructurtng
and regulatory ~ssues RJC's achwhes will mclude
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 transrmssIon constraints
3 Participating on relevant PUC and ISO comrmttees to discuss and debate issues and
develop positions
4 Analyzmg proposed rules fried by PUC and policies presented by ISO
5 Preparation of comments to be hied at the PUC to present the City's position on
issues
6 Analyzing comments filed by other parties on msues 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 techrucal support to Staff and the City's legal team on issues before the
PUC and the ISO
9 ) Maintaining reformation on activities at the PUC, ERCOT ISO and the Legislature
that supports effective representation on issues m these and related proceedings
associated with restructuring m Texas
10 )Meeting with ERCOT staff to discuss operational concerns of City and DGG
11 )Meeting with representatives of other utihties and other market segments to discuss
proposed rules and procedures that may mapact the City and DGG
12 )Keep Staff reformed of issues needing their attention and assisting Staff m preparing
for deregulation
Scope of Services
Task A Attend,,~g Workshops At PUC And ISO
1 RJC will stay reformed on activities at PUC and ISO and will attend workshops as
needed
2 When appropriate, RJC wdl participate m workshops to represent mterest of City
based on directions of Staff
3 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 wtll participate on PUC and ERCOT committees, task forces and working groups,
as approved by Staff, m order to evaluate msues and support solutions to the larger
group that will reflect the City's and DGG's position on ~ssues being addressed of
2 Staff wgl be kept reformed of ~ssues being addressed m comnuttees and positions
part~es
3 RJC will dmcuss w~th Staff positions which should be taken and strategaes for working
with parties revolved
3 of§
Task C Analyze Proposed Rules and Policies
1 The proposed new rules and rule changes from the PUC and associated proposed
pohcms from the ISO will be analyzed
2 RJC will chscuss proposed new rules and changes to ex~stmg rules with Staff, helping to
identify areas of concern and preparing positions on rules that represent interests of
3 RJC will meet with PUC staff as appropnate to discuss the proposed rules and present
the City's concerns regarding PUC staff proposals
Task D Preparation of Comments
1 RJC wdl prepare or assist m prepanng comments to be filed with PUC representing
City's position on ~ssues brought up m proposed rules
2 These comments will be coordinated through Staff and the City's legal team
3 RJC will assist the Caty's legal team as necessary m the preparabon of and fflmg of
conunents
Task E Work With Staff And Legal Team
1 RJC will have continuing commurucabon with Staff and the City's legal team m order
to momtor proposed industry changes and address those ~ssues affecting
mttruclpahties
2 An on-going chalog will be maintained w~th Staff and the legal team m order to
evaluate changing proposals and evaluate potenbal effects on City operabons
3 Informabon necessary to supplement and support the decision making process will be
provided as requested
4 RJC will be available to chscuss with the Utrhty Board and City management activities
at PUC and the ISO as requested from tune to tn'ne by Staff
5 As chrected by Staff, RJC ~ coordinate and support other consultants, attomeys, and
lobbyists used by the City m order to insure coordination of plarmmg and other
activities
Task F Technical Suppor~
1 RJC will provide techmcal support to the City's legal team to assist m the evaluation
of proposals and the potential impact on the City under different scenarios
2 RJC will provide techrucal support to Staff, providing mformabon as requested from
t~me to me to assist Staff m ~ts evaluations and planning processes
3 RJC will evaluate scenarios and proposals from perspective of City unity and as a
member of TMPA
4 Workpapers w~ll be developed to support the analysis and w~ll 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 rulemakmg proceedings are just begmnmg
There are 36 PUC projects that have been identified to implement retail competition, and
numerous ERCOT comrmttees working to address the details of how retarl 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 sphts 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
AUTHORIZED BY ACCEPTED BY
CITY OF DENTON, TEXAS R J COVINGTON CONSULTING
Dated-~)~,~d~ /~/JJ~)q Dated
ATTEST APPROVED AS TO LEGAL FORM
JENNIFER WALTERS HERBERT L PROUTY
CITY SECRETARY CITY ATTORNEY
5of5