2018-093 DEC Impact on DME FinancialsDate: July 20, 2018 Report No. 2018-093
INFORMAL STAFF REPORT
TO MAYOR AND CITY COUNCIL
SUBJECT: Denton Municipal Electric FY 2018-19 Proposed Budget and CIP
BACKGROUND: The purpose of this report is to respond to questions asked by Council during the May 22 meeting regarding the impact of the Denton Energy Center on DME’s financials.
DISCUSSION:
The DME FY 2018-19 Proposed Budget and CIP were presented to Council on May 22. During the meeting, Council requested that staff provide additional detail regarding the impact of the
DEC on DME’s financials. Exhibit 1 attached is a proforma reflecting DME’s current financials
which include the DEC. Exhibit 2 attached lists the assumptions of the DME Proforma with the DEC excluded, and Exhibit 3 attached is a proforma with the DEC excluded.
ATTACHMENT: Exhibit 1 – DME Proforma with DEC Exhibit 2 – Assumptions for DME Proforma without DEC Exhibit 3 – DME Proforma without DEC
STAFF CONTACT: Antonio Puente, Jr., Director of Finance (940)-349-7283 Antonio.Puente@cityofdenton.com
George Morrow, DME General Manager
(940)-349-8487 George.Morrow@cityofdenton.com
Exhibit 1
Actual Estimate Proposed Projected Projected Projected Projected
2017 2018 2019 2020 2021 2022 2023
Revenues
Non-DEC Base Rate Revenues $87.3 $55.0 $48.2 $48.5 $58.0 $67.2 $69.6
DEC Revenues - 31.0 36.3 37.1 28.7 20.8 19.6
TCRF Revenues 4.2 5.6 - - - - -
ECA Revenues 49.4 50.7 51.0 52.5 54.9 58.6 59.5
Rate Revenues $141.0 $142.2 $135.5 $138.1 $141.6 $146.6 $148.7
Non-DEC Non-Rate Revenues 31.6 40.9 43.8 46.6 51.9 59.8 62.1
Subtotal $172.6 $183.2 $179.3 $184.7 $193.5 $206.4 $210.7
Planned Use of Reserves - 14.0 27.9 - - 0.5 -
Total Revenues $172.6 $197.2 $207.2 $184.7 $193.5 $206.9 $210.7
Expenditures
Non-DEC Purchased Power $88.8 $67.5 $30.9 $23.2 $24.9 $30.7 $32.6
DEC Fuel - 9.1 15.0 17.7 13.6 11.4 10.3
Total Purchased Power and Fuel $88.8 $76.6 $45.8 $40.9 $38.5 $42.1 $42.9
Transmission of Power 4.2 5.6 12.5 13.0 13.5 14.0 14.5
Operations & Maintenance 22.4 30.2 34.4 35.0 36.1 37.1 38.2
Cost of Service Transfers 12.4 12.5 14.2 14.6 15.0 15.5 15.9
ROI & Franchise Fee 13.1 14.0 15.1 15.5 16.1 16.9 17.3
Non-DEC Debt Service 29.1 34.4 36.2 31.8 31.9 31.8 31.1
DEC Debt Service - - 4.5 17.7 17.7 17.7 17.6
Operating Expenditures $81.3 $96.6 $116.8 $127.6 $130.2 $132.9 $134.6
Debt Defeasance - - 28.6 - - - -
Revenue Funded Capital - 24.0 15.9 15.2 24.4 31.8 23.0
Non-Operating Expenditures - $24.0 $44.5 $15.2 $24.4 $31.8 $23.0
Total Expenditures $170.1 $197.2 $207.2 $183.7 $193.1 $206.9 $200.4
Net Income $2.5 $0.0 $0.0 $1.0 $0.3 $0.0 $10.3
Base Average Revenue $/kWh 0.0602 0.0582 0.0565 0.0565 0.0565 0.0565 0.0565
Transmission Cost Recovery Factor $/kWh 0.0029 0.0038 0.0000 0.0000 0.0000 0.0000 0.0000
Energy Cost Adjustment $/kWh 0.0361 0.0341 0.0341 0.0346 0.0357 0.0376 0.0376
Total Average Revenue $/kWh 0.0992 0.0961 0.0906 0.0911 0.0922 0.0941 0.0941
FYE Fund Balance including ECA Balance $87.3 $73.3 $45.5 $46.5 $46.9 $46.4 $56.7
Debt Coverage Ratio - 1.25 1.54 1.70 1.78 1.64 1.82 1.98 2.04
DME Proforma with DEC Revenue and Expenses
Exhibit 2
No DEC Proforma Assumptions
To illustrate the impact of removing the DEC on the DME Financial Forecast, the below
assumptions have been used. Aside from these assumptions all other variables are held constant
in this model. A decision to move forward without the DEC would require additional financial
and policy discussion.
1. Total revenue remains the same without DEC because rates charged to customers are not
changed in this forecast. This results in the significant under-collection of the ECA from
2018 – 2020.
2. DEC Fuel expense, debt service and operating costs are eliminated.
3. Purchased Power costs are increased since more energy will be purchased at market
prices.
4. Debt defeasance of $28.6 Million for the 2010 TMPA Scrubber is deferred beyond the
current planning horizon.
5. Revenue funded capital is eliminated for 3 years (2019 – 2021), and the required debt for
these capital expenses is added. Partial funding of Capital Improvement Program is
included in 2022 and 2023.
Exhibit 3
Actual Estimate Proposed Projected Projected Projected Projected
2017 2018 2019 2020 2021 2022 2023
Revenues
Base Rate Revenues $87.3 $86.0 $84.5 $85.6 $86.7 $88.0 $89.2
TCRF Revenues 4.2 5.6 - - - - -
ECA Revenues 49.4 50.7 51.0 52.5 54.8 58.6 59.4
Rate Revenues $141.0 $142.2 $135.5 $138.1 $141.6 $146.5 $148.6
Non-Rate Revenues 31.6 40.9 43.8 46.6 51.9 59.8 62.1
Subtotal $172.6 $183.2 $179.3 $184.6 $193.4 $206.4 $210.7
Planned Use of Reserves (Exp - Rev)- 34.0 - - - - -
Total Revenues $172.6 $217.2 $179.3 $184.6 $193.4 $206.4 $210.7
Expenditures
Purchased Power $88.8 $98.5 $67.2 $60.4 $53.6 $51.5 $52.2
Transmission of Power 4.2 5.6 12.5 13.0 13.5 14.0 14.5
Operations & Maintenance 22.4 28.3 30.8 31.4 32.3 33.3 34.3
Cost of Service Transfers 12.4 12.4 14.2 14.6 15.0 15.5 15.9
ROI & Franchise Fee 13.1 14.0 15.1 15.5 16.1 16.9 17.3
Debt Service 29.1 34.4 36.2 38.1 39.4 41.0 40.5
Operating Expenditures $170.1 $193.2 $176.0 $173.0 $170.0 $172.2 $174.6
Debt Defeasance - - - - - - -
Revenue Funded Capital - 24.0 - - - 31.8 23.0
Non-Operating Expenditures - $24.0 - - - $31.8 $23.0
Total Expenditures $170.1 $217.2 $176.0 $173.0 $170.0 $204.0 $197.6
Net Income $2.5 $0.0 $3.3 $11.7 $23.5 $2.4 $13.1
Base Average Revenue $/kWh 0.0602 0.0582 0.0565 0.0565 0.0565 0.0565 0.0565
Transmission Cost Recovery Factor $/kWh 0.0029 0.0038 0.0000 0.0000 0.0000 0.0000 0.0000
Energy Cost Adjustment $/kWh 0.0361 0.0341 0.0341 0.0346 0.0357 0.0376 0.0376
Total Average Revenue $/kWh 0.0992 0.0961 0.0906 0.0911 0.0922 0.0941 0.0941
FYE Fund Balance including ECA Balance $87.3 $53.2 $41.6 $35.6 $45.5 $36.5 $39.3
Debt Coverage Ratio - 1.25 1.54 1.12 1.51 1.71 2.00 2.25 2.32
DME Proforma without DEC Revenue and Expenses