2010-104ORDINANCE NO. 2010-104
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF DENTON, TEXAS
AUTHORIZING THE CITY MANAGER TO EXECUTE A FIRST AMENDMENT TO
PROFESSIONAL SERVICES AGREEMENT WITH R. J. COVINGTON CONSULTING,
LLC, AUSTIN, TEXAS FOR FURTHER CONSULTING SERVICES RELATING TO TASK
ORDERS NO. 10-D, 10-E, 10-F AND 10-G, BY APPROVING FURTHER TASK ORDERS
NOS. 10-D, 10-E, 10-F AND 10-G, REGARDING PROVIDING PROFESSIONAL
CONSULTING AND ENGINEERING SERVICES SUPPORTING DENTON MUNICIPAL
ELECTRIC; PROVIDING FOR THE EXPENDITURE OF FUNDS THEREFOR; AND
PROVIDING AN EFFECTIVE DATE (TASK ORDERS NUMBERS 10-D, 10-E, 10-F AND
10-G FOR AN ADDITIONAL AMOUNT OF NOT-TO-EXCEED $98,000 - BEING AN
ADDITIONAL SUM TO THE ORIGINAL PROFESSIONAL SERVICES AGREEMENT IN
THE SUM OF $67,000; AND WHEN TOTALLED WITH RELATED TASK ORDERS 10-A,
10-B, AND 10-C FOR A TOTAL NOT-TO-EXCEED AMOUNT OF $165,000).
WHEREAS, the City Council deems it in the public interest to continue to engage the
firm of R. J. Covington Consulting, LLC of Austin, Texas ("Covington"), to provide further
professional consulting and engineering services to the City relating to Task Orders No. 10-D
(cost functionalization - $10,000); 10-E (DME 2010 Rate Review - $52,000; 10-F Identify and
Propose New Rate Form - $20,000); and 10-G (Study of Industrial Incentive Rate Options -
16,000) totaling not-to-exceed $98,000; Covington is presently working on Task Orders 10-A,
10-B and 10-C entered into and approved by the delegated authority earlier in 2010 in the
amount of $67,000; which engagement totals a not-to-exceed amount of $165,000; and
WHEREAS, the City staff has reported to the City Council that there is a substantial need
for the above-described specialized continued professional services, that limited City staff cannot
adequately perform the services and tasks with its own personnel, and that the nexus of
Consultant's services is in the City of Austin, Texas; and
WHEREAS, Chapter 2254 of the Texas Government Code, known as the "Professional
Services Procurement Act," generally provides that a City may not select a provider of
professional services on the basis of competitive bids, but must select the provider on the basis of
demonstrated competence, knowledge, and qualifications, and for a fair and reasonable price;
and
WHEREAS, Covington has represented DME continuously and professionally over the
last twelve (12) years, and has proven to be a valuable, reliable, affordable, and competent
professional resource that has expertise in, and is well-acquainted with the electric operations as
well as the financial and regulatory framework of Denton Municipal Electric. Covington and his
staff are particularly familiar with the characteristics, operations, and present rate structure of
DME. The Covington firm is employed as a consultant by many electric utilities throughout
Texas. Covington's offices are located in Austin, Texas; and
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WHEREAS, the City Council has provided in the City Budget for the appropriation of
funds to be used for the purchase of the professional services, as set forth in the First
Amendment to Professional Services Agreement; NOW, THEREFORE,
:-I-
THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS:
SECTION 1: The City Manager is hereby authorized to execute a First Amendment to
Professional Services Agreement with R. J. Covington Consulting, LLC of Austin, Texas, for
professional consulting services relating to Task Orders No. 10-D, 10-E, 10-F and 10-G, in the
further not-to-exceed amount of $98,000; totaling an aggregate of $165,000 when adding the
work to be provided in T.O. 10-A, 10-B and 10-C under the previous Agreement, to the First
Amendment to Professional Services Agreement. The First Amended Professional Services
Agreement is substantially in the form attached hereto and incorporated herewith by reference, as
Exhibit "A."
SECTION 2: The award of this Agreement by the City is on the basis of the
demonstrated competence, knowledge, and qualifications of Covington and the ability of
Covington to perform the professional services needed by the City for a fair and reasonable
price.
SECTION 3: The further expenditure of funds as provided in the attached First
Amendment to Professional Services Agreement is hereby authorized.
SECTION 4: This ordinance shall become effective immediately upon its passage and
approval.
fN~YC
PASSED AND APPROVED this the day of )2010.
ATTEST:
JENNIFER WALTERS, CITY SECRETARY
By: (A)
APP' VEDA TO LEGAL FORM:
ANITA BURGESS, CITY ATTORNEY
By:
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STATE OF TEXAS §
COUNTY OF DENTON §
FIRST AMENDMENT TO
PROFESSIONAL SERVICES AGREEMENT FOR CONSULTING SERVICES
TO BE PROVIDED TO DENTON MUNICIPAL ELECTRIC
HIS FIRST AMENDED AGREEMENT (the "Agreement") is made and entered into on
the day of May, 2010, by and between the City of Denton, Texas, a Municipal Corporation,
with its principal office at 215 East McKinney Street, Denton, Texas 76201 ("CITY"); and R. J.
COVINGTON CONSULTING, LLC, a Texas Limited Liability Corporation, with its principal
office at 11044 Research Boulevard, Suite A-325, Austin, Texas 78759, hereafter "COVINGTON";
acting herein by and through their duly authorized representatives.
WITNESSETH, that in consideration of the covenants, promises and agreements herein
contained, the CITY and COVINGTON do hereby AGREE as follows:
A R TTCT F T
EMPLOYMENT OF CONSULTANT
The CITY hereby further contracts with COVINGTON, as an independent contractor, and
COVINGTON hereby agrees to continue to perform the services herein in connection with the
Scope of Services as stated in the Articles to follow, with diligence and in accordance with the
professional standards customarily obtained for such services in the State of Texas.
ARTICLE H
SCOPE OF SERVICES
A. In addition to those Tasks set forth in Task Orders 10-A, 10-B and 10-C, COVINGTON shall
also provide to the CITY further additional professional consulting services pertaining to assisting
Denton Municipal Electric ("DME"), and COVINGTON agrees to perform those services and tasks
more particularly and specifically described in Task Orders No. 10-D, 10-E, 10-F and 10-G, which
are attached hereto as Exhibits "2," "3," "4" and "5," which are each incorporated herewith by
reference.
B. To consult with the City Manager, Assistant City Manager/Utilities, the General Manager of
DME, the Executive Manager of Power - Legislative and Regulatory Affairs (`Executive
Manager"), the Utility Attorney, and any other designated administrative personnel regarding any
and all aspects of the services to be performed pursuant to this Agreement.
A R TTCT .F. TTT
PERIOD OF SERVICE
This Agreement shall become effective upon the date of its approval and upon the issuance of
a notice to proceed by Denton Municipal Electric ("DME"). The termination date of this
Agreement shall be upon the earliest to occur of the following events: completion of the work
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of the $98,000 additional not-to-exceed amount provided for by the above-referenced Task Orders
10-1), 10-E, 10-F and 10-G, it being understood that the aggregate not-to-exceed amount of this
First Amended Agreement and the previous approved Professional Services Agreement is not-to-
exceed $165,000; or upon fifteen (15) day's written notice to terminate, issued by the General
Manager of DME. This Agreement may be sooner terminated in accordance with the provisions
hereof. Time is of the essence in this Agreement. -COVINGTON shall make all reasonable efforts
to complete the services set forth herein -as expeditiously as possible and to meet the schedule
established by the CITY, acting through its General Manager of DME, or its Executive Manager.
ARTICLE IV
COMPENSATION
A. COMPENSATION TERMS:
"Direct Non-Labor Expense" is defined as that expense, at cost, for any assignment incurred
hereunder by COVINGTON for supplies, long-distance telephone, telecopier, reproduction
expense, overnight courier, photocopy expense, transportation, travel, communications,
subsistence and lodging away from home and similar incidental expenses reasonably incurred
in connection with that assignment.
B. BILLING AND PAYMENT:
1. For and in consideration of the professional services to be performed by COVINGTON
herein, the CITY agrees to pay COVINGTON, a total fee, of not-to-exceed $98,000 including
reimbursement for direct non-labor expense regarding Task Orders 10-D, 10-E,. 10-F and 10-
G in the individual amounts set forth in the four attached Task Orders. The aggregate not-to-
exceed amount is $165,000.
2. The fee for the services described in this Agreement to be performed by COVINGTON
are to be billed at the rates previously agreed to. Billing shall be reported in minimum one-
quarter (1/4) hour increments.
3. Payments to COVINGTON will be made by the CITY on the basis of detailed monthly
statements for each of the four TO's rendered to the CITY through its General Manager of
DME, or the Executive Manager. The fee bills as submitted, shall be allowed and approved
by the General Manager of DME, or the Executive Manager. However, under . no
circumstances shall any monthly statement for services exceed -the value of the work
performed at the time a statement is rendered.
4. Nothing contained in this Article shall require the CITY to pay for any work which is
unsatisfactory as reasonably determined by the Assistant City Manager for Utilities, the
General Manager of DME, or the Executive Manager; or which is not submitted in
compliance with the terms of this Agreement. The City shall not be required to make any
payments to COVINGTON when COVINGTON is in default under this Agreement.
5. It is specifically understood and agreed that COVINGTON shall not be authorized to
undertake any work pursuant to this Agreement which would require additional payments by
the CITY for any charge, expense or reimbursement above the maximum not-to-exceed fee as
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stated, without first having obtained written authorization from the CITY.
C. PAYMT ENT
If the CITY fails to make payments due COVINGTON for services and expenses within forty
(40) days after receipt of COVINGTON'S undisputed statement thereof, the amounts due
COVINGTON will be increased by the rate of one percent (1%) per month from the said forty
(40th) day, and in addition, COVINGTON may, after giving ten (10) days' written notice to
the CITY, suspend services under this Agreement until COVINGTON has been paid in full
all amounts due for services, expenses and charges provided. - However, nothing herein shall
require the CITY to pay the late charge of one percent (1 set forth herein if the CITY
reasonably determines that the work of COVINGTON is unsatisfactory, in accordance with
this Article IV, Compensation, and the CITY notifies COVINGTON in writing of any such
defect.
ARTICLE V
OBSERVATION AND REVIEW OF THE WORK
. COVINGTON will exercise reasonable care and due diligence in discovering and promptly
reporting to the CITY any defects or deficiencies in his work or the work of any subconsultants that
is performed hereunder.
ARTICLE VI
OWNERSHIP OF DOCUMENTS
All documents, analyses and other data prepared by COVINGTON under this Agreement
("Work Products") are instruments of service and are and shall remain the property of CITY.
COVINGTON shall have the right to make and retain copies and use all Work Products; provided,
however, the use shall be limited to the intended use for which the services and Work Products are
provided under this Agreement. COVLGTON may use and may copyright certain non-sensitive
Work Products as property of COVINGTON, but not confidential materials; provided that prior
written approval is obtained from CITY, whose approval shall not be unreasonably withheld, and
providing that copywriting will not restrict CITY'S right to retain or make copies of the Work
Products for its information, reference and use on the Project or services under the Agreement.
The Work Products shall not be changed or used for purposes other than those set forth in this
Agreement without the prior written approval of COVINGTON. If CITY releases the Work
Products to a third-party without COVINGTON' S prior written consent, or changes or uses the
Work Products other than as intended hereunder. CITY does so at its sole risk and discretion and
COVINGTON shall not be liable for any claims or damages resulting from or connected with the
release or any third party's use of the Work Products.
ARTICLE VII
INDEPENDENT CONTRACTOR
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COVINGTON shall provide services to the CITY as an independent contractor not as an
employee of the CITY. COVINGTON shall not have or claim any right arising from employee
status.
ARTICLE VIII
INDEMNITY AGREEMENT
COVINGTON shall indemnify and save and hold harmless the CITY and its officers, agents,
and employees from and against any and all liability, claims,, demands, damages, losses and
expenses, including but not limited to court costs and reasonable attorney's fees incurred by the
CITY, and including without limitation, damages for bodily and personal injury, death and property
damage, and damage for professional malpractice resulting from the negligent acts or omissions of
COVINGTON or any subconsultants, in performance of this Agreement. COVINGTON'S liability
under this Article VIII is expressly limited to the amount of COVINGTON'S required minimum
insurance coverage as set forth in Article IX.
Nothing in this Agreement shall be construed to create a liability to any person who is not a
party to this Agreement and nothing herein shall waive any of the party's defenses, both at law or
equity, to any claim, cause of action or litigation filed by anyone not a party to this Agreement,
including the defense of governmental immunity, which defenses are hereby expressly reserved.
ARTICLE IX
INSUR INCE
During the performance of the Services under this Agreement, COVINGTON shall maintain
the following insurance, as a minimum, at all times with an insurance company licensed to do
business in the State of Texas by the State Insurance Commission or any successor agency that has
a rating with Best Rate Carriers of at least an "A-" or above:
A. Comprehensive General Liability Insurance with bodily injury limits of not less than
$500,000 for each occurrence and not less than $500,000 in the aggregate, and with property
damage limits of not less than $100,000 for each occurrence, and not less than $100,000 in
the aggregate.
B. Automobile Liability Insurance with bodily injury limits of not less than $500,000 for each
person and not less than $500,000 for each accident; and with property damage limits of not
less than $100,000 for each accident.
C. Professional Liability Insurance with policy limits of not less than $1,000,000 annual
aggregate.
D. COVINGTON shall furnish insurance certificates or insurance policies at the CITY's request
to evidence such coverage. The insurance policies shall name the CITY as an additional
insured on all such policies to the extent legally possible, and shall contain a provision that
such insurance shall not be canceled or modified without thirty (30) days prior written notice
to CITY and COVINGTON. In such event, COVINGTON shall, prior to the effective date of
the change or cancellation, deliver substitute policies furnishing the same coverage to the
CITY.
ARTICLE X
ARBITRATION AND ALTERNATE DISPUTE RESOLUTION
The parties agree to settle any disputes under this Agreement by submitting the dispute to
arbitration or other means of alternate dispute resolution such as mediation. No arbitration or
alternate dispute resolution arising out of or relating to, this Agreement involving one party's
disagreement may include the other party to the disagreement without the other's approval.
ARTICLE XI
LIMITATION OF LIABILITY
To the extent permitted by law, the total liability of COVINGTON to CITY for any and all
claims arising out of this Agreement, whether caused by negligence, errors, omissions, strict
liability, breach of contract or contribution, or indemnity claims based on third-party claims, shall
not exceed one million dollars ($1,000,000).
ARTICLE XII
CONSEQUENTIAL DAI AGES
In no event and under no circumstances shall COVINGTON be liable to CITY -for any
interest, loss of anticipated revenues, earnings, profits, or increased expense of operations, or for any
consequential, indirect or special damages.
ARTICLE XIII
PROFESSIONAL STANDARDS
COVINGTON will perform services under this Agreement with the degree of skill and
diligence normally practiced by-professional engineers or consultants performing the same degree
of similar services in the State of Texas. No other warranty or guarantee, expressed or implied, is
made with respect to the services furnished under this Agreement and all implied warranties are
disclaimed.
ARTICLE XIV
TERIMIti ATION OF AGREEMENT
A. Notwithstanding any other provision of this Agreement, either party may terminate this
Agreement by giving thirty (30) days advance written notice of termination to the other party.
B. This Agreement may be terminated in whole or in part in the event of either party
substantially failing to fulfill its obligations under this Agreement. No such termination will
be effected unless the other party is given: (1) written notice (delivered by certified mail,
return receipt requested) of intent to terminate and setting forth the reasons specifying the
nonperformance, and not less than ten (10) business days in which to cure the failure; and (2)
an opportunity for consultation with the terminating party prior to termination.
C. If this Agreement is terminated prior to completion of the services to be provided hereunder,
COVINGTON shall immediately cease all services and shall render a final bill for services to
the CITY within thirty (30) days after the date of termination. The CITY shall pay
COVINGTON for all services properly rendered and satisfactorily performed and for
reimbursable expenses to termination incurred prior to the date of termination in accordance
with Article IV, Compensation. Should the CITY subsequently contract with a new
consultant for the continuation of services on the Project, COVL,iGTON shall cooperate in
providing information. COVINGTON shall turn over all documents prepared or furnished by
COVINGTON pursuant to this Agreement to the CITY on or before the date of termination,
but may maintain copies of such documents for its use.
ARTICLE XV
RESPONSIBILITY FOR CLAIMS AND LIABILITIES
Approval by the CITY shall not constitute nor be deemed a release of the responsibility and
liability of COVINGTON, or any subconsultants of COV NGTON,. for the accuracy and
competency of their designs or other work product.
ARTICLE XVI
NOTICES
All notices, communications, and reports required or permitted under this Agreement. shall be
personally delivered or mailed to the respective parties by depositing same in the United States mail
at the address shown below, certified mail, return receipt requested unless otherwise specified
herein. Mailed notices shall be sent to the parties-at the following addresses:
To COVINGTON:
R.J. Covington Consulting, LLC
Attn: Richard J. Covington, President
11044 Research Blvd., Suite A-325
Austin, Texas 78759
To CITY:
City of Denton, Texas
Attn: City Manager
215 East McKinney Street
Denton, Texas 76201
and to
City of Denton, Texas
Attn: Mike Grim, Executive Manager, DME
1659 Spencer Road
Denton, Texas 76205
All notices shall be deemed effective upon receipt by the party to whom such notice is given.
ARTICLE XVII
ENTIRE AGREEMENT
This further Agreement, consisting of ten (10) pages, plus four (4) additional Task Orders,
numbers T.O. 10-D, 10-E, 10-F and 10-G (in addition to initial T.O. 10-A, 10-B and 10-C),
constitutes the complete and final expression of the agreement of the parties and is intended as a
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complete and exclusive statement of the terms of their agreements and supersedes all prior
contemporaneous offers, promises, representations, negotiations, discussions, communications and
agreements which may have been made in connection with the subject matter hereof.
ARTICLE XVIII
SEVERABILITY
If any provision of this Agreement is found or deemed by a court of competent jurisdiction to
be invalid or unenforceable, it shall be considered severable from the remainder of this Agreement
and shall not cause the remainder to be invalid or unenforceable. In such event, the party shall
reform this Agreement to replace such stricken provision with a valid and enforceable provision
which comes as close as possible to expressing the intention of the stricken provision.
ARTICLE XIX
COMPLIANCE WITH LAWS
COVINGTON shall comply with all federal, state, local laws, rules, regulations, and
ordinances applicable to the work covered hereunder as they may now read or hereinafter. be
amended.
A R TTCT F YY
DISCRIMINATION PROHIBITED.
In performing the services required hereunder, COVINGTON shall not discriminate against
any person on the basis of race, color, religion, sex, national origin or ancestry, age, or physical
handicap: .
ARTICLE =
PERSONNEL
A. COVINGTON represents that he has secured, or will secure at his own expense any
additional personnel required to perform all the services required under this Agreement. Such
personnel shall be subconsultants of COVINGTON, and shall not be employees or officers of,
nor have any contractual relations with the CITY. COVINGTON shall inform the CITY of
any conflict of interest or potential conflict of interest that may arise during the term of this
Agreement.
B. All services required hereunder will be performed by COVINGTON or under his supervision.
All personnel engaged in work shall be qualified and shall be authorized and permitted under
state and local laws to perform such services.
ARTICLE NMI
ASSIGNABILITY
COVINGTON shall not assign any interest in this Agreement and shall not transfer any
interest in this Agreement (whether by assignment, novation or otherwise) without the prior written
consent of the CITY.
ARTICLE XXIII
MODIFICATION
No waiver or modification of this Agreement or of any covenant, condition, limitation herein
contained shall be valid unless in writing and duly executed by the parry to be charged therewith
and no evidence of any waiver or modification shall be offered or received in evidence in any
proceeding arising between the parties hereto out of or affecting this Agreement, or the rights or
obligations of the parties hereunder, and unless such waiver or modification is in writing, duly
executed; and, the parties further agree that the provisions of this section will not be waived unless
as herein set forth.
ARTICLE XXIV
MISCELLANEOUS
A. The CITY shall have the right to audit and make copies of the books, records and
computations pertaining to this agreement. COVINGTON shall retain such books,
records, documents and other evidence pertaining to this agreement during the contract
period and five years thereafter, except if an audit is in progress or audit findings are yet
unresolved, in which case records shall be kept until all audit tasks are completed and
resolved. These books, records, documents and other evidence shall be available, within
ten (10) business days of written request. Further, COVINGTON shall also require any
and all subcontractors or subconsultants, material suppliers, and other payees to retain all
books, records, documents and other evidence pertaining to this agreement, and- to allow
the CITY similar access to those documents. All books and records will be made
available within a fifty (50) mile radius of the City of Denton, Texas. The cost of the
audit will be borne by the CITY unless the audit reveals an overpayment of 1% or
greater. If an overpayment of 1% or greater occurs, the reasonable cost of the audit,
including any travel costs, must be borne by COVINGTON which must be payable
within five (5) business days of receipt of an invoice from the CITY.
Failure to comply with the provisions of this section shall be a material breach of this
contract and shall constitute, in the CITY'S sole discretion, grounds for termination
thereof. Each of the terms "books", "records", "documents" and "other evidence", as
used above, shall be construed to include drafts and electronic files, even if such drafts or
electronic files are subsequently used to generate or prepare a final printed document.
B. Venue of any suit or cause of action under this Agreement shall lie exclusively in Denton
County, Texas. This Agreement shall be governed by, and construed in accordance with the
laws of the State of Texas.
C. COVINGTON shall commence, carry on, and complete the work required by this
engagement with all applicable dispatch, in a sound, economical, efficient manner and in
accordance with the provisions hereof. In accomplishing the work, COVINGTON shall take
such steps as are appropriate to ensure that the work involved is properly coordinated with
related work being carried on by the CITY.
D. The CITY shall assist COVINGTON by placing at COVINGTON's disposal all available
information pertinent to the work required by this engagement, including previous reports,
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any other data relative to the project and arranging for the access to, and make all provisions
for COVINGTON to enter in. or upon, public and private property as required for
COVINGTON to perform services under this Agreement.
E. The captions of this Agreement are for informational purposes only and shall not in any way
affect the substantive terms or conditions of this Agreement.
IN WITNESS WHEREOF, the City of Denton, Texas has caused this Agreement to be
executed in four (4) original counterparts, by its duly authorized City Manager; and R.J. Covington
Consulting, LLC has executed this Agreement by its duly authorized officer on this the day
of May, 2010.
"CITY"
CITY OF DENTON, TEXAS
A Municipal Corporation
By:
GEORGE C. CAMPBELL, CITY MANAGER
ATTEST:
JENNIFER WALTERS, CITY SECRETARY
By: ~t,
APPR VEDA TO LEGAL FORM:
ANITA BURGESS, CITY ATTORNEY
By: f
"COVINGTON"
R. J. COVINGTON CONSULTING, LLC
A Texas Limited Liability Corporation
By:
KARL N A, PRE ENT
9
ATTEST:
By:
10
EXHIBIT 2
TO THE
PROFESSIONAL SERVICES AGREEMENT
BETWEEN THE CITY OF DENTON, TEXAS AND
R.J. COVINGTON CONSULTING, LLC
TASK ORDER NO. DEN 10-D
DN E 2010 Rate Review
(Cost Functionalization)
Work provided for in this Task Order is for R.J. Covington Consulting, LLC ("RJC") to
work with Denton Municipal Electric ("DME") staff in functionalizing system costs to
the Power Supply, Transmission, and Distribution functions and allocate Common costs
in a manner consistent with the Public Utility Commission of Texas ("PU CT")
Transmission-Cost of Service ("TCOS") guidelines. These functionalized costs will; 1)
provide preliminary data for determining if a full or interim TCOS filing before the PUC
is needed, and 2) provide the detail required for purposes of assigning costs in the retail
class cost of service analysis and segregate those costs appropriately recovered from
other utilities for use of DME's transmission system. To prepare the study, RJC will
submit a data request. to DME for information required, review all data received for
consistency, and either directly assign or allocate costs to the Power Supply,
Transmission, and Distribution functions.
Scope of Services
Task A Data Collection and Review
1. RJC will provide DME staff a data request to obtain: a) plant and expense data for
FY 2009, b) outstanding revenue bond principal, interest and other bond related
expense detail, c) other cash flow information such as General Fund Transfers and
Construction Funded by Internally Generated Cash information, and d) allocation
factor information such as payroll by function and, if available, vehicle miles
driven by function, office space square footage, etc.
2. The data will be reviewed and discussed with staff. The review is necessary to
spot check the data to insure that corrections of known past problems in DME
FERC reported data were completed and insure that the data ties back to the
City's Comprehensive Annual Financial Report ("CAFR").
3. RJC will review with DME staff new construction projects and financing for
those projects since the last TCOS, Docket 30358.
Task Order No. DEN 10-D
DN E 2010 Rate Review
(Cost Functionalization)
Task B Assign or Allocate Cost to Functions
1. Plant and expense data by will be directly assigned by function where applicable.
2. Allocation factors will be developed from the payroll by function, vehicle miles
driven by function, office space square footage, and other data as required.
I Common costs such as General Plant and Administrative and General Expenses
will be allocated to functions.
4. Revenue bond principal, interest and data will be analyzed and assigned to
functions.
5. Other cash flow information will be directly assigned to functions.
Task C Preliminary Retail Revenue Requirement and TCOS- review
1. Develop unadjusted retail revenue requirement.
2. Review transmission function revenue requirement with DME staff and determine
need to investigate TCOS filing before PUCT.
Budget
The budget for the above scope of services for labor and expenses is $10,000. The actual
costs may vary if significant issues with DME accounting data are encountered, but the
budget will not be exceeded without prior approval of the delegated authority of DME.
RJC will bill monthly with supporting documentation of activities performed. The work
being performed will be under the supervision of the DME Finance and Accounting
Manager and may be modified at any time upon appropriate notice to RJC.
EXECUTED this `Y3ay o 2010.
2 of 3
Task Order No. DEN 10-D
DME 2010 Rate Review
(Cost Functionalization)
AUTHORIZED BY:
CITY OF DENTON, TEXAS
A Texas Municipal Corporation
By: ~ e
George C. Campbell,
City Manager
Dated:)
ATTEST:
ACCEPTED BY:
R.J. COVINGTON CONSULTING, LLG
By: L~~
ar1J.Nae a,
President
I It()
Dated: qla
APPROVED AS TO LEGAL FORM:
JENNIFER WALTERS, CITY SECRETARY A1NITA BURGESS, CITY ATTORNEY
By: J L J A Jjax~
Dated:
By:
Dated:
3 of 3
EXHIBIT 3
TO THE
PROFESSIONAL SERVICES AGREEMENT
BETWEEN THE CITY OF DENTON, TEXAS AND
R.J. COVINGTON CONSULTING, LLC
TASK ORDER NO. DEN 10-E
DME 2010 Rate Review
(Retail Electric Rate Study)
Work provided for in this Task Order is for R.J. Covington Consulting, LLC ("RJC") to
work with Denton Municipal Electric ("DME") staff in developing a retail costing and
pricing analysis.
The total revenues received from electric services should be sufficient to cover the direct
costs of providing service and to make a contribution toward the recovery of fixed costs
and overhead. For a municipal electric utility such as DME, revenues must also be
sufficient to provide for a reasonable contribution toward the General Fund or to
otherwise support the general operation of the City of Denton. The DME budget
provides the source for determining these costs of providing electric service. The budget
identifies the revenues that must be produced by the utility's electric rates.
Electric rates should ideally be designed to promote specific goals and objectives of the
electric utility. A utility's prices should reflect a careful balancing of often competing
objectives, including the need to reflect costs, respond to customer needs and preferences,
recognize the unique circumstances of the utility, promote fairness, and meet
competition, all while avoiding undue impact upon customers.
Based upon the unique factors of DME, RJC will, in cooperation with DME staff,
determine the best approach for meeting the system's goals and objectives and will
ensure that the proposed rates consistently further those goals. RJC will then design rates
and determine the impact upon the utility and its customers.
Task Order No. DEN 10-E
2010 Rate Review
(Retail Electric Rate Study)
Scope of Services
Task A - Billing Determinant Derivation, Proof of Revenue and Pro-forma
Adjustments
DME raw billing data will be used to develop cost allocation percentages and the
billing determinants to derive retail rates. The raw billing data includes: monthly
number of bills, kWh consumption, kW or kVa billing demands where applicable,
base rate and ECA revenue. RJC will develop adjustments to test year billing data to
annualize sales and revenue to reflect customer growth and normalized weather.
Task B - Revenue Requirement Analysis
The functionalization analysis addressed in Task Order TODEN 10-D will assign
FY2009 booked costs such that costs attributed to wholesale transmission customers
will be removed from the retail analysis. RJC will define the revenue requirement on
the basis of these functionalized FY2009 costs, adjusted for known and measurable
changes. RJC will analyze and employ pro-forma adjustments for known and
measurable changes in costs to develop an adjusted fiscal year revenue requirement.
This adjusted fiscal year revenue requirement will be employed in RJC's class cost of
service and rate design efforts.
Task C - Class Cost of Service Analysis
RJC will prepare and present a class cost-of-service study detailing costs by rate class
and cost component (i.e. customer, energy, and demand). The study will employ
DME's most current fiscal year booked information and will provide results using
data from the most current historical period with adjustments for known or
anticipated changes as discussed in Task B - Revenue Requirement Analysis.
Task D- Propose and Design Modifications to Existing Rate Structures
RJC will develop reasonable revisions to each of DME's current rate schedules. RJC
may also suggest various other rate structures to best capture cost-of-service and
market demand differences among individual customers within a class. The rates
developed by RJC will be sufficient to fully recover DME's revenue requirement
while also remaining competitive with the rates charged by neighboring retail electric
service providers.
2 of 4
Task Order No. DEN 10-E
2010 Rate Review
(Retail Electric Rate Study)
Task E - Bill Impact and Competitive Assessment
RJC will prepare detailed bill impact, price comparisons, and typical bill analyses for
each rate schedule. These analyses will compare the present and proposed rates to the
rates of other electric providers at varying usage levels and load factors. These
price/usage comparisons will be used to assess how competitive DME rates are in
relation to neighboring utilities and to determine the impact of the rate proposals upon
existing customers.
In order to prepare this Competitive Assessment, DME will provide comparable rate
information, including power cost recovery, fuel adjustment factors, or other such
factors, from other targeted municipal utilities, competitive retailers, and electric
cooperatives.
Task F - Bill Presentation and Tariff Availability
RJC will review, and modify where necessary, each tariffs availability clause to
remove any ambiguity regarding tariff application. Where alternative tariffs may
apply, restrictions will be identified to eliminate conflicting interpretations.
RJC will also review sample bills and, in consultation with DME, recommend
consolidation of information or, if appropriate, detailed recognition of charges such a
regulatory fees over which DME has no control.
Budget
The budget for the above scope of services for labor and expenses is $52,000. The actual
costs may vary if significant issues with DME raw billing data are encountered, but the
budget will not be exceeded without prior approval of the delegated authority of DME.
RJC will bill monthly with supporting documentation of activities performed. The work
being performed will be under the supervision of the Executive Manager - Power,
Legislative & Regulatory Affairs and maybe modified at any time upon appropriate
notice to RJC.
EXECUTED this -day of , 2010.
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Task Order No. DEN 10-E
2010 Rate Review
(Retail Electric Rate Study)
AUTHORIZED BY: ACCEPTED BY:
CITY OF DENTON, TEXAS R.J. COVINGTON CONSULTING, LLC
A Texas Municipal Corporation
By: By:
George C. Campbell,
City Manager
Dated:
ATTEST:
JENNIFER WALTERS, CITY SECRETARY
By:
Dated:
Karl J. Nal
President
Dated:
APPROVED AS TO LEGAL FORM:
ANITA BURGESS, CITY ATTORNEY
By:
Dated:
4of4
EXHIBIT 4
TO THE
PROFESSIONAL SERVICES AGREEMENT
BETWEEN THE CITY OF DENTON, TEXAS AND
R.J. COVINGTON CONSULTING, LLC
TASK ORDER NO. DEN 10-F
DME 2010 Rate Review
(Identify and Propose New Rate Forms)
Work provided for in this Task Order is for R.J. Covington Consulting, LLC ("RJC") to
work with Denton Municipal Electric ('*DME") staff to investigate innovative options to
existing rates that will provide incentives to existing DME customers to encourage
energy efficiency and to shift usage to off-peak periods. These alternative rates may
include Time-of-Day rates, Standby rates, Demand Response rates and other rate forms
that may be advantageous for both DME and its customers.
It is anticipated that these alternative rate design efforts will be undertaken after the
completion of the cost of service and traditional rate design tasks have been completed.
Scope of Services
Task A -Determine Goals, Identify Target Customers & Equipment Capability
Working with DME staff. RJC will determine goals to be achieved by new rate
offerings; the ability of DME installed equipment to support the alternative rate
design, and the appropriate classes of customers for which to design the rates.
Task B - Gather System and Customer Data
RJC will analyze individual and rate class data to estimate potential impacts of
alternative rates on specific consumer markets. RJC will employ DME specific
customer data to the extent practicable and will estimate data when necessary. Any
available load research information that is specific to DME's customers and provided
by DME will be considered in RJC's consulting efforts.
Several innovative rate designs require extensive load data, knowledge of customer's
operations, and other information that may not be reasonably available. In such cases,
Task Order No. DEN. 10-F
2010 Rate Review
(Identify and Propose New Rate Forms)
RJC will attempt to estimate billing data for those pricing alternatives. DME will
provide load data by individual customer and by class when available and will
provide alternative data such as wholesale delivery point or substation feeder data for
representative customer types as needed to develop reliable load and pricing
information.
Task C - Present Options to DME
RJC will provide a summary of the impact of potential alternative rate design options
identified in previous tasks. RJC will also work with DME staff to develop the detailed
tariff for selected rates and revise the existing DME tariff to incorporate these rates.
Budget
The budget for the above scope of services for labor and expenses is $20,000. The actual
costs may vary if significant issues with individual customer or system data are
encountered, but the budget will not be exceeded. without prior approval of the delegated
authority of DME. RJC will bill monthly with supporting documentation of activities
performed. The work being performed will be under the supervision of the Executive
Manager - Power, Legislative & Regulatory Affairs and may be modified at any time
upon appropriate notice to RJC.
EXECUTED this~rday o ~,2010.
2of3
Task Order No. DEN 10-F
2010 Rate Review
(Identify and Propose New Rate Forms)
AUTHORIZED BY:
CITY OF DENTON, TEXAS
A Texas Municipal Corporation
By:
George C. Campbell,
City Manager
Dated: //0
ACCEPTED BY:
R.J. COVINGTON CONSULTING, LLC
By:
Karl J. Na
President -
Dated: qla 111,
ATTEST: APPROVED AS TO LEGAL FORM:
JENNIFER WALTERS, CITY SECRETARY ANITA BURGESS, CITY ATTORNEY
B
Dated:
l~
By:
/112
Dated: q1z
3of3
EXHIBIT 5
TO THE
PROFESSIONAL SERVICES AGREEMENT
BETWEEN THE CITY OF DENTON, TEXAS AND
R.J. COVINGTON CONSULTING, LLC
TASK ORDER NO. DEN 10-G
Study of Industrial Incentive Rate Options
Work provided for in this Task Order is for R.J. Covington Consulting, LLC ("RJC") to
work with Denton Municipal Electric ("DME") staff to explore opportunities to increase
the customer base of DME in designated industrial park territory and undeveloped land
areas by development of new incentive rates for large DME customers. The primary
purpose of these incentive rates will be to increase the customer base of DME that would
provide incremental jobs to the Denton area as well as incremental additions to the
Denton tax base. The addition of new large businesses to Denton will benefit all DME
customers as well as the citizenry of the City by increasing the City's tax base and
providing a larger customer base over which to spread utility costs.
It is anticipated that these industrial incentive rate efforts will be undertaken after the
completion of the cost of service and traditional rate design tasks have been completed.
Scope of Services
Task A - Identify Characteristics of Potential Customers and Define Target Market
Working with DME staff, RJC would identify key characteristics of potential customers
to provide a framework for defining an enhanced array of utility services to the industrial
park and other areas that may represent future revenue sources for both DME and the
City. These characteristics may include the size and load factor of the customer, the type
of industry the customer operates within, the utility. requirements of the customer, the
number of potential jobs and the potential increase of taxable revenue base, and whether
the customer already receives other benefits from the City, among the potential criteria.
Task B - Identify Options for Development of Incentive Rates
Review existing DME large customer rates and identify other incentives that will allow
for full rate recovery of incremental expenses while offering potential savings for
Task Order No. DEN 10-G
Study of Industrial Incentive Rate Options
incremental load. Also identify ways that DME could offer additional future savings by
redesigning supply options. Energy charge rebates and alternative rate options such as
Heating and Cooling District discounts may also be evaluated. Emphasis will be placed
on options that minimize the reliance on City debt obligations to develop this enhanced
utility infrastructure.. The potential incremental benefits of identified incentive rates will
be quantified and compared to the estimated potential costs of implementation.
Task C - Present Options to DME
RJC will provide a summary of potential new rates identified in previous tasks, along
with potential costs and benefits of implementation. RJC will also work with DME staff
to develop the detailed tariff for selected rates and revise the existing DME tariff to
incorporate these rates.
Budget
The budget for the above scope of services for labor and expenses is $16,000. The actual
costs may vary if significant issues with individual customer or system data are
encountered, but the budget will not be exceeded without prior approval of the delegated
authority of DME. RJC will bill monthly with supporting documentation of activities
performed. The work being performed will be under the supervision of the Executive
Manager - Power, Legislative & Regulatory Affairs and may be modified at any time
upon appropriate notice to RJC.
EXECUTED this-'day of 010.
2of3
Task Order No. DEN 1 Q-G
Study of Industrial Incentive Rate Options
AUTHORIZED BY:
CITY OF DENTON, TEXAS
A Texas Municipal Corporation
By:
George C. Campbell,
City Manager
Dated:
ATTEST:
JENNIFER WALTERS, CITY SECRETARY
By.
Dated:
'P
ACCEPTED BY:
R.J. COVINGTON CONSULTING, LLC
By:
Karl J. Nal
President
Dated:
APPROVED AS TO LEGAL FORM:
ANITA BURGESS, CITY ATTORNEY
By:
Date
3 of 3