1992-106ALL00284\lT05.3A7
ORDINANCE NO. ~
AN ORDINANCE AUTHORIZING THE CITY MANAGER TO EXECUTE A CONTRACT
BETWEEN THE CITY OF DENTON AND C. H. GUERNSEY & COMPANY, RELATING
TO CONSULTING SERVICES FOR THE DESIGN OF ELECTRIC RATES; AUTHO-
RIZING THE EXPENDITURE OF FUNDS THEREFORE; AND PROVIDING AN
EFFECTIVE DATE.
THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS:
SECTION I. That the City Manager is authorized to execute the
attached agreement between the City of Denton and C. H. Guernsey &
Company relating to consulting services for the design of electric
rates.
SECTION II. That the City Council hereby authorizes the ex-
penditure of funds as set forth in the agreement.
SECTION III. That this ordinance shall become effective im-
mediately upon its passage and approval.
PASSED AND APPROVED this the¢~/~ day of~~ , 1992.
ATTEST:
JENNIFER WALTERS, CITY SECRETARY
APPROVED AS~TO LEGAL FORM.
DEBRA A. DRAYOVITCH, CITY ATTORNEY
ORIGINAL
CONSULTING SERVICES CONTRACT BETWEEN
THE CITY OF DENTON AND C.E. GUERNSEY & COMPANY
This Agreement is made between the CITY OF DENTON (City), a
municipal corporation located in Denton County, Texas, and C.H.
GUERNSEY & COMPANY, Oklahoma City, Oklahoma, (Consultant) as
follows:
CONSULTANT'S SERVICES
A. Consultant shall provide the following services to City:
1. Project electric revenue requirements, using the proposed 1993
budget as the base-year, and estimate revenues required from
all revenue sources over the following three year period.
2. Develop a cost of service study using one or more accepted
allocation techniques to estimate costs to serve each customer
rase class.
3. Develop fair and equitable rate structure(s) which produce
sufficient revenues to meet the City's current and future
needs and which will recover proportionately and equitably the
costs of services from each customer class.
4. If requested, present findings to the Public Utilities Board
or the City Council.
B. The Consultant's services will be provided in accordance with the
scope of work attached as Attachment A and incorporated in this
Contract by reference.
C. The Consultant shall exercise the same degree of care, skill and
diligence in'the performance of these services as is ordinarily
provided by a professional consultant under similar circum-
stances.
II.
COMPENSATION TO BE PAID CONSULTANT
A. The City agrees to pay the Consultant for the services performed
at the hourly rates set forth in Attachment B, but the Consultant
shall not be paid more than $19,700 for all services required to
be provided under this Agreement regardless of the number of
hours required to provide those services. The consultant shall
bill the City once a month for the hours worked to the date of
billing and the City shall pay each billing within thirty days of
receipt of an undisputed bill. Ten per cent of the total bill
for services performed will be withheld until all requirements of
this contract are met by the Consultant.
III.
TERM OF AGREEMENT
This Agreement shall begin on the date of execution and shall
continue until all services have been performed and payments made.
IV.
CONSULTANT IS INDEPENDENT CONTP. ACTOR
The Consultant is an independent contractor and shall not be
deemed to be or considered an employee of the City for the purposes
of income tax, withholding, social security taxes, vacation or sick
leave benefits, workers' compensation, or any other City employee
benefit. Consultant shall perform the services to the satisfaction
of the City Manager or his designee.
INDEMNIFICATION
The Consultant shall indemnify and hold harmless the City from
any and all damages, loss or liability of any kind whatsoever, by
reason of injury to property or third persons to the extent directly
and proximately caused by the error, omission or negligent act of
the Consultant, its officers, agents, employees, and invitees in the
performance of this Agreement, and the Consultant will, at its cost
and expense, defend and protect the City against any and all such
claims and demands.
CEOICE OF LAW AND VENUE
This Agreement shall be governed by law of the State of Texas,
and venue for its construction and enforcement shall lie in the
courts of Denton County, Texas.
PAGE 2
VII.
CANCELLATION
City reserves the right to cancel this contract at any time upon
fourteen (14) days prior notice, but Consultant shall be paid for
all services provided up to the date of cancellation.
VIII.
NOTICES
Ail notices, communications and reports required or permitted
under this contract shall be personally delivered or mailed to the
respective parties by depositing same in the U.S. mail, certified,
return receipt requested, at the addresses shown below, unless and
until either 9arty is otherwise notified in writing by the other
party at the following addresses. Ail notices shall be deemed
delivered as of the date of the receipt.
If intended for City, to: If intended for Consultant, to:
City of Denton C.H. Guernsey & Company
Lloyd V. Harrell, City Mgr Suhas P1 Patwardhan, Vice Pres.
215 E. McKinney 3555 Northwest 58th Street
Denton, TX 76201 Oklahoma City, OK 73112
EXECUTED this the J~u~J/day of ~,~ , 1992.
CITY OF DENTON, TEXAS
HARRELL, CI~YMANAGER
ATTEST:
JENNIFER WALTERS, CITY SECRETARY
DEB~kDP~AYOVITCH, CITY ATTORNEY
PAGE 3
C.H. Guernsey & Company, CONSULTANT
Vice President
Director, Energy Division
PAGE 4
ATTACHMENT A
SCOPE OF WORK
1. Financial Analysis
The Consultant shall review the electric utility's historical
and future revenue requirements and expenses. The Study shall
anticipate costs and revenue requirements and develop rates to
be applied for the next 3 fiscal years. Projected future
capital and operating expenditures will be provided by the
Utility Staff, but shall be reviewed and analyzed by the
Consultant.
The rates shall be designed to provide revenue such that bond
rate covenants are met. Bond covenants require that pledged
revenues be 1.25 times average debt service requirements.
However, revenues shall also be such that net income is
sufficient to allow an annual transfer from the Electric Fund to
the General Fund equal to six percent (6%) of net investment.
2. Rate Design Structure
The Consultant shall evaluate the cost associated with serving
all the various identifiable classes of customers. Rates shall
be designed to recover such associated customer class costs as
much as possible, however, recognizing such rate making
principals as moderating any significant changes of historical
rates.
Customer classes shall be of similar description to current
rate-making practices of area utilities and the Texas Public
Utility Commission, to the extent that such classes are
applicable to the City of Denton's electrical system.
Rate structure design shall consider the following areas of
concern to the utility:
a. Cost of Service
The rates charged for providing electrical service to each
class of electric customers, to the maximum extent
practicable, should reflect the costs of providing
electrical service to such class.
b. Demand Charge Customers
PAGE 5
The Consultant shall review for appropriateness the minimum
primary service requirements of 750 KW for the General
Service Primary (GP) and Large Primary (LP) rate and the 20
KW exclusion for the General Service Commercial (GS) rate.
c. Seasonally Adjusted Rates
The Consultant shall review and consider rates charged for
providing electric service to each class of electric
consumer on a seasonal basis which reflects the costs of
providing service to such class of consumers at different
seasons of the year to the extent that such costs vary
seasonally for the electric system.
d. Load Management Techniques
The Consultant shall review Denton's load management
techniques and make recommendations for improvement.
e. Demand Ratchet
The Consultant shall review and consider the system demand
related costs and the existing summer peak demand ratchets
and determine whether the ratchets adequately track customer
class costs. Such analysis will include recommended
changes in the application of the ratchet by customer class.
f. General Service
The Consultant shall review and consider the effect of the
existing rate structure on General Service customers who
have a relatively large energy usage in proportion to their
demand. A rate design should consider establishing a
separate large general service rate class.
g. Local Government Rate
The Consultant shall review and consider the rate for local
government service to determine whether the existing rate is
recovering costs of providing electrical service to the
customers included in the rate class.
h. The Consultant shall consider other utilities' rate
structures for the purpose of designing City of Denton rates
that are highly competitive.
3. Rate Making Standards
PAGE 6
The Consultant shall address the number of rate classes
that currently exist and the feasibility of reducing the
number of classes currently established as rate schedules,
or where appropriate, establishing a new rate class.
4. Reporting Requirements
a. Schedule
Preliminary review and development of revenue and
expense projections shall be completed by August 1,
1992. A draft final report shall be due within 7 days
of approval of draft report. A final report shall be
delivered by August 24, 1992. The final report shall
include:
0 An Executive Summary of key points and
recommendations.
0 Supporting exhibits, schedules, figures, and work
papers.
0 A discussion of the assumptions and principal
considerations.
0 A review of the study methods.
0 An explanation of the data requirements and
sources.
0 A listing of conclusions and recommendations.
b. The Consultant shall provide the City of Denton with
twenty-five (25) copies of the final Utility Rate Study
report. After delivery of the final report, the
consultant shall present the report to the Public
Utility Board or City Council, as designated by the
Executive Director of Utilities.
PAGE 7
V. PROFESSIONAL SERVICE FEES'
Princip~l~ $100 per hour
Sellior Col~ul!gn~ $7~ per hour
Analysz ' $~0 per hour
Clerical $30 per hour
Mr. Patwardhan, Mr. Stover
Mr. Hopp~, Ms. Lambert