2018-032 DEC CostsDate: March 16, 2018 Report No. 2018-032
INFORMAL STAFF REPORT
TO MAYOR AND CITY COUNCIL
SUBJECT:
Denton Municipal Electric Denton Energy Center (DEC) Cost
EXECUTIVE SUMMARY:
City Council requested an explanation of the fixed and variable cost for the DEC. Fixed costs
are expenses that have to be paid, independent of the plant operating. Fixed costs are those that
do not change when energy is produced and/or the costs required for the plant to be ready to
operate. Variable costs are those costs incurred as the plant operates and produces energy. Total
variable costs increase as more energy is produced.
BACKGROUND:
Fixed Costs consist of the following types of expenses:
Debt Service
Labor and Benefits
Property Insurance
Operations & Maintenance Expenses:
o Materials & Supplies
Office Supplies, Postage, Uniforms, Janitorial Supplies, Radio Supplies
o Maintenance & Repair
Office Machines/Furniture, Building and Equipment, Lawn Service
o Operations
Licenses, Dues, Vehicle Gas and Maintenance, Professional Services,
Travel, Training, Utility Services, Cost of Service Transfers
Variable Costs consist of the following consumable expenses:
Fuel
Oil
Chemicals for operating
Generating Equipment- Maintenance Cost
o The maintenance on this type of equipment is variable since it is based on the hours
of operation. Therefore the more the DEC operates, the more “hour-based”
maintenance intervals occur. During the annual budgeting calculations, we base
maintenance costs on either projected utilization or allowed permit hours. (Normal
maintenance levels are at 50 hours, 150 hours, 500 hours and 1000 hours of
operation.
DISCUSSION:
The fixed costs will have to be paid regardless of the level of plant operation. When the plant
runs and produces energy, revenues from sale of energy to the ERCOT market, offsets fixed
costs.
Date: March 16, 2018 Report No. 2018-032
Total variable costs increase as production of energy increases, i.e. more fuel, chemicals, etc. are
used to produce more megawatts (MWs). Revenues from the sale of energy to the ERCOT
market will offset the variable costs.
The DEC is more economic and efficient for DME’s ratepayers the more it operates.
CONCLUSION:
DEC budget will be further discussed during the DME budget presentations in May and June
with PUB and City Council respectively.
ATTACHMENT:
Attached are DEC Fixed and Variable cost detail for FY 17-18 Budget and preliminary FY 18-19
Proposed Budget.
STAFF CONTACT:
Antonio Puente, Director of Finance
George Morrow, DME General Manager
FY 2017-18 FY 2018-19
Adopted Proposed
FIXED COST
ANNUAL DEBT SERVICE - 4,452,083
INTEREST EXPENSE & FISCAL CHARGE -$ 4,452,083$
LABOR 1,240,351 1,320,788
BENEFITS 483,596 546,079
CAPITAL LABOR (1,292,960) -
PERSONAL SERVICES 430,987$ 1,866,867$
INSURANCE 216,680$ 353,351$
OFFICE SUPPLIES 11,300 14,500
UNIFORMS 10,000 26,544
PROTECTIVE CLOTHING 10,000 11,500
COMPUTER FORMS & SUPPLIES 1,000 -
BOOKS & MAGAZINES 1,000 2,550
SMALL TOOLS & INSTRUMENTS 5,000 5,000
MEDICAL SUPPLIES 5,000 2,500
FREIGHT - 5,500
JANITORIAL SUPPLIES 15,000 10,000
MECHANICAL- ELECTRICAL - 20,000
SPECIAL COMPRESSED GAS - 5,500
OUTSIDE SUPPLIES 200,000 -
RADIO SUPPLIES - 1,600
FURNITURE & FIXTURES 25,000 -
OFFICE MACHINES 10,000 -
RADIOS - 3,500
ELECTRIC INVENTORY PURCHASE - 30,000
MATERIALS AND SUPPLIES 293,300$ 138,694$
FURNITURE & FIXTURES 15,000 -
OFFICE MACHINES 10,000 6,000
MACHINERY & EQUIPMENT 200,000 -
OTHER 5,000 -
BUILDING & EQUIPMENT 10,000 2,000
OUTSIDE CONTRACTED SERVICES - 165,500
MAINTENANCE & REPAIR 240,000$ 173,500$
SAFETY AWARDS - 1,984
HIRE OF EQUIPMENT 5,000 5,000
LICENSES 100,000 50,000
STATE/REGULATORY FEES - 5,000
DUES 5,000 -
LAUNDRY SERVICES 3,000 -
EMPLOYEE RECRUITMENT 5,000 2,000
EMPLOYEE TRAINING 15,000 8,000
VEHICLE GAS & OIL 2,500 4,250
VEHICLE MAINTENANCE 2,500 1,200
JANITORIAL SERVICES - 14,400
MOWING EXPENSE - 2,000
OUTSIDE CONTRACT SERVICE 175,000 27,500
TRAVEL EXPENSE 50,000 5,800
SCHOOLS & SEMINARS 50,000 20,000
DENTON ENERGY CENTER - EXPENSES
3/16/2018 4:17 PM
FY 2017-18 FY 2018-19
Adopted Proposed
DENTON ENERGY CENTER - EXPENSES
ELECTRICAL SERVICES 15,700 644,000
WATER & WASTEWATER SERVICES 15,000 15,000
SOLID WASTE COLLECTIONS 6,500 6,500
TELEPHONE - FIXED COST 7,000 7,000
TELEPHONE - LONG DISTANCE 1,500 500
OPERATIONS 458,700$ 818,150$
CAPITAL TOOLS & EQUIPMENT 15,000 15,000
FIXED ASSETS 15,000$ 15,000$
Total Fixed Cost 1,654,667$ 7,819,629$
FY 2017-18 FY 2018-19
Adopted Proposed
VARIABLE COST
GENERATING MACHINERY - 85,000
CHEMICALS 25,000 1,832,000
FUEL*1,700,000 14,530,252
Total Variable Cost 1,725,000$ 16,447,252$
GRAND TOTAL 3,379,667$ 24,266,881$
3/16/2018 4:17 PM