2002-317ORDINANCE NO. OO � �%
AN ORDINANCE OF THE CITY OF DENTON, TEXAS AUTHORIZING THE CITY
MANAGER TO EXECUTE A PROFESSIONAL SERVICES AGREEMENT 1N THE FORM
OF FIRST AMENDED TASK ORDER NO. 02-B WITH R. J. COVINGTON CONSULTING,
LLC, FOR TRANSMISSION COST OF SERVICE AND EARNINGS REPORT FILINGS
WITH THE PUBLIC UTILITY COMMISSION OF TEXAS RELATING TO DENTON
MUNICIPAL ELECTRIC; AUTHORIZING THE EXPENDITURE OF FUNDS THEREFOR;
AND PROVIDING AN EFFECTIVE DATE.
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 consulting
services to the City relating to Denton Municipal Electric, including, without limitation, First
Amended Task Order No. 02-B for continuation of transmission cost of service and earnings
report filings with the Public Utility Commission of Texas; and
WHEREAS, on the 20th day of February, 2001, the Council approved a Professional
Services Agreement with Covington, enacting Ordinance No. 2001-084, that provided for the
addition of various Task Orders, as needed by Denton Municipal Electric, until December 31,
2002, as were approved by the Public Utilities Board ("PUB") and the Council; and First
Amended Task Order 02-B has been recommended for approval by the PUB and the same is
hereby approved by the City Council; and
WHEREAS, the City staff has reported to the City Council that there is a substantial need
for the above-described further professional services, and that limited City staff cannot
adequately perform the specialized services and tasks with its own personnel; 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, the City Council has provided in the City Budget for the appropriation of
funds to be used for the purchase of the further professional services, as set forth in the previous
enacted Professional Services Agreement; NOW, THEREFORE,
THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS:
SECTION 1: That the City Manager is hereby authorized to execute a further
Professional Services Agreement in the form of First Amended Task Order No. 02-B with R. J.
Covington Consulting, LLC, of Austin, Texas, for professional consulting services relating to
Denton Municipal Electric in the area of the transmission cost of service filing with the Public
Utility Commission of Texas, in substantially the form of the First Amended Task Order No. 02-
B attached hereto and incorporated herewith by reference.
SECTION 2: That 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 tlie professional services needed by the City for a fair and reasonable
price.
SECTION 3: That the expenditure of funds as provided in the attached Professional
Services Agreement, as manifested by additional First Amended Task Order 02-B, in the amount
of not to exceed an additional $24,000 (a total of not to exceed $67,800 when taken with Task
Order No. 02-B), is hereby authorized.
SECTION 4: That this ordinance shall become effective immediately upon its passage
and approval.
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PASSED AND APPROVED this the � da of �� � ...., 2002.
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EULINE BROCK, MAYOR
ATTEST:
JENNIFER WALTERS, CITY SECRETARY
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APPROVED AS TO LEGAL FORM:
HERBERT L. PROUTY, CITY ATTORNEY
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FURTHER ATTACHMENT TO
PROFESSIONAL SERVICES AGREEMENT
DATED FEBRUARY 20, 2001
BETWEEN THE CITY OF DENTON AND
R.J. COVINGTON CONSULTING, LLC
TASK ORDER NO. 02-B
2002 Transmission Cost of Service and Earnings Report Filings
This Attachment is an additional Task Order contemplated by and appended to the
Professional Services Agreement entered into by and between the City of Denton, Texas
and R.J. Covington Consulting, dated February 20, 2001, and approved by the City
Council by Ordinance No. 2001-084.
Work provided for in this Task Order is for R.J. Covington Consulting, LLC ("RJC") to
assist the City in the development and filing of a year 2002 transmission cost�of service
study ("TCOS") and the filing of the Annual Earnings Report with the Public Utility
Commission of Texas ("PUC").
Background
RJC prepared and filed with the PUC the Annual Earnings Report for 2001 as part of the
scope of services under Task Order O1-A. During that filing, RJC recognized issues that
needed to be addressed before a TCOS was filed. RJC worked with Staff and the City
accounting department to address these issues. It was determined through this process,
that the TCOS filing should be postponed until after the end of the fiscal year in order to
base the TCOS test year on more recent cost information.
This Task Order is to re-establish the budget needed to prepare, file and defend the TCOS
in 2002 and to prepare and file the Annual Earnings Report for 2002. The TCOS filing is
necessary because of the City's increased investment in transmission facilities and the
need to recover those costs through the ERCOT transmission facilities charges. The
services performed by RJC will include assistance in the preparation of testimony to
support the filing and testifying on issues as directed by City Staff. RJC will work with
the City in responding to Requests for Infon��ation ("RFI's") during the discovery phase
of the process, and will work the Staff and the City's attorneys during the hearings to
defend the City's position against other parties and the PUC staff. RJC will also prepare
and work with City's legal counsel to file the Annual Earnings Report for 2002. RJC will
update the filing schedules from the 2001 filing to include the 2001 fiscal year financial
and operating results and update the TCOS information based on the current TCOS case
being prepared.
Task Order No. 02-B
2002 Transmission Cost of Service and Earnings Report Filing
Scope of Services
Task A Anal ze ��c�l��rn Com onent �,it+�r���tives For �"��%�� Filin
1. RJC will review and analyze the Schedule C alternatives available to the City
which include:
a. Cash flow method
b. Rate of return method
c. Debt service method
2. Meet with legal counsel to discuss strategies for each approach.
Task B Pre are TCOS ����:�.t � Schedules
1. RJC will prepare filing schedules needed based on latest approved PUC TCOS
rate filing package instructions.
2. Work with staff to coordinate gathering of data and filling out of schedules for
fiscal year 2001 historic test year.
3. Review all schedules for completeness.
Task C Pre aration of 1"C"d���' Testimon
1. RJC will prepare pre-filed testimony on use of cash flow method.
2. Prepare exhibits for testimony.
3. Review testimony of other City witnesses and provide comments.
4. Work with attorneys to complete rate filing package and file at PUC.
Task D TCOS F�ling Discoverv
1. RJC will review all RFI's sent to City and assist in determining best person to
respond.
2. Work with attorneys and staff to respond to RFI's from PUC and other parties,
being sure that responses are consistent with filing.
3. If needed, RJC will prepare RFI's to serve on other parties to assist in evaluation
of other party's positions and gather information needed for cross examination of
witnesses.
Task E TCOS Hearin�s
1. RJC will review testimony and exhibits filed by PUC staff and other parties.
2 of 4
Task Order No. 02-B
2002 Transmission Cost of Service and Earnings Report Filing
2, Evaluate impacts of alternative positions of other parties.
3. Prepare rebuttal testimony and file.
4, Assist attorneys in preparing cross of PUC staff and other parties.
5. Attend hearings and present direct testimony.
6. Assist attorneys in preparing briefs.
7. Review ALJ Preliminary Order, & assist attorneys in filing exceptions.
8, Review Final Order and other documents.
9. Rework numbers for Final Order.
Task F Preparation of 2002 Annual Earnings Report
1. RJC will update Earnings Report schedules for fiscal year 2001.
2. The historic TCOS will be updated based on status of 2002 TCOS filing.
3. RJC will work with legal counsel to file the report with the PUC.
4. RJC will respond to questions from PUC staff as necessary.
Bud�et
The not-to-exceed amount for the above scope of services for both labor and out-of-
pocket expenses is $43,800. The actual costs may vary based on the level of intervention
from other parties in the TCOS filing. This budget will not be exceeded without prior
written approval of the City. RJC will bill monthly with supporting documentation of
activities performed. The termination date of this Task Order shall be on the earliest to
occur of the following events: December 31, 2002; or the exhaustion of the $43,800
amount provided for herein; or upon fifteen (15) days written notice to terminate, issued
by the Director of Electric Utilities, DME. The work being performed will be under the
supervision of the Director of Electric Utilities, DME and may be modified at any time
upon appropriate notice to RJC.
EXECUTED in four (4) original counterparts by a d�y authorized officer of RJC and by
a duly authorized officer of the City on this theo�� 1 day of March, 2002.
AUTHORIZED BY: ACCEPTED BY:
CITY OF DENTON, TEXAS R. J. COVINGTON CONSULTING, LLC
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1�i�4���u� ,. � ..�fi�_^__ Richard J, �"c� i�p,�t��s�.
City Manager "� President
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Dated: +� � �� � �
Task Order No. 02-B
2002 Transmission Cost of Service and Earnings Report Filing
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AT'TEST:
JENNIFER WALTERS, CITY SECRETARY
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APPROVED AS TO LEGAL FORM:
HERBERT L. PROUTY, CITY ATTORNEY
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FURTHER ATTACHMENT TO
PROFESSIONAL SERVICES AGREEMENT
DATED FEBRUARY 20, 2001
BETWEEN THE CITY OF DENTON AND
R.J. COVINGTON CONSULTING, LLC
TASK ORDER NO. 02-B
2002 Transmission Cost of Service and Earnings Report Filings
This Attachment is an additional Task Order contemplated by and appended to the
Professional Services Agreement entered into by and between the City of Denton, Texas
and R.J. Covington Consulting, dated February 20, 2001, and approved by the City
Council by Ordinance No. 2001-084.
Work provided for in this Task Order is for R.J. Covington Consulting, LLC ("RJC") to
assist the City in the development and filing of a year 2002 transmission cost of service
study ("TCOS") and the filing of the Annual Earnings Report with the Public Utility
Commission of Texas ("PUC").
Background
RJC prepared and filed with the PUC the Annual Earnings Report for 2001 as part of the
scope of services under Task Order O1-A. During that filing, RJC recognized issues that
needed to be addressed before a TCOS was filed. RJC worked with Staff and the City
accounting department to address these issues. It was determined through this process,
that the TCOS filing should be postponed until after the end of the fiscal year in order to
base the TCOS test year on more recent cost information.
This Task Order is to re-establish the budget needed to prepare, file and defend the TCOS
in 2002 and to prepare and file the Annual Earnings Report for 2002. The TCOS filing is
necessary because of the City's increased investment in transmission facilities and the
need to recover those costs through the ERCOT transmission facilities charges. The
services performed by RJC will include assistance in the preparation of testimony to
support the filing and testifying on issues as directed by City Staff. RJC will work with
the City in responding to Requests for Information ("RFI's") during the discovery phase
of the process, and will work the Staff and the City's attorneys during the hearings to
defend the City's position against other parties and the PUC staff. RJC will also prepare
and work with City's legal counsel to file the Annual Earnings Report for 2002. RJC will
update the filing schedules from the 2001 filing to include the 2001 fiscal year financial
and operating results and update the TCOS information based on the current TCOS case
being prepared.
Task Order No. 02-B
2002 Transmissian Cost of Service and Earnings Report Filing
Scope of Services
Task A Anal ze Return Cc►m c�a��an.t Alt�rr�akives F�ar T�.'QS �'ili�.
1. RJC will review and analyze the Schedule C alternatives available to the City
which include:
a. Cash flow method
b. Rate of return method
c. Debt service method
2. Meet with legal counsel to discuss strategies for each approach.
Task B Pre are TCOS Filin Schedules
1. RJC will prepare filing schedules needed based on latest approved PUC TCOS
rate filing package instructions.
2. Work with staff to coordinate gathering of data and filling out of schedules for
fiscal year 2001 historic test year.
3. Review all schedules for completeness.
Task C ��r�� ��wY�r�i�+��t of T�OS Testi�on
1, RJC will prepare pre-filed testimony on use of cash flow method.
2. Prepare exhibits for testimony.
3. Review testimony of other City witnesses and provide comments.
4. Work with attorneys to complete rate filing package and file at PUC.
Task D TCOS Filin Discover
1, RJC will review all RFI's sent to City and assist in determining best person to
respond.
2. Work with attorneys and staff to respond to RFI's from PUC and other parties,
being sure that responses are consistent with filing.
3. If needed, RJC will prepare RFI's to serve on other parties to assist in evaluation
of other party's positions and gather information needed for cross examination of
witnesses.
Task E TCOS Hearin�s
1. RJC will review testimony and exhibits filed by PUC staff and other parties.
2 of 4
Task Order No. 02-B
2002 Transmission Cost of Service and Earnings Report Filing
2. Evaluate impacts of alternative positions of other parties.
3. Prepare rebuttal testimony and file.
4, Assist attorneys in preparing cross of PUC staff and other parties.
5. Attend hearings and present direct testimony.
6. Assist attorneys in preparing briefs.
7, Review ALJ Preliminary Order, & assist attorneys in filing exceptions.
8. Review Final Order and other documents.
9, Rework numbers for Final Order.
Task F Prenaration of 2002 Annual Earnings Report
1. RJC will update Earnings Report schedules for fiscal year 2001.
2. The historic TCOS will be updated based on status of 2002 TCOS filing.
3. RJC will work with legal counsel to file the report with the PUC.
4. RJC will respond to questions from PUC staff as necessary.
Budget
The not-to-exceed amount for the above scope of services for both labor and out-of-
pocket expenses is $43,800. The actual costs may vary based on the level of intervention
from other parties in the TCOS filing. This budget will not be exceeded without prior
written approval of the City. RJC will bill monthly with supporting documentation of
activities performed. The termination date of this Task Order shall be on the earliest to
occur of the following events: December 31, 2002; or the exhaustion of the $43,800
amount provided for herein; or upon fifteen (15) days written notice to terminate, issued
by the Director of Electric Utilities, DME. The work being performed will be under the
supervision of the Director of Electric Utilities, DME and may be modified at any time
upon appropriate notice to RJC.
EXECUTED in four (4) original counterparts by a d}.yly authorized officer of RJC and by
a duly authorized officer of the City on this the� day of March, 2002.
AUTHORIZED BY: ACCEPTED BY:
CITY OF DENTON, TEXAS R. J. COVINGTON CONSULTING, LLC
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By: ����� y: �_:.
]4'ficZa��� 14.. f"�� � � ����� Richard J. �" k�a����a�a ����� �
City Manager '�m President
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Dated: 3�n�°°� �D �
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Task Order No. 02-B
2002 Transmission Cost of Service and Earnings Report Filing
Dated: � � �.....
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ATTEST:
JENN�ER WALTERS, CITY SECRETARY
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�Pl'���V').��� AS TO LEGAL FORM:
HERBERT L. PROUTY, CITY ATTORNEY
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