2016-083ORDINANCE NO. ZO16-Og3
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF DENTON, TEXAS
AUTHORIZING THE CITY MANAGER OR HIS DESIGNEEE TO EXECUTE A LETTER OF
AGREEMENT FOR CONSULTING SERVICES WITH THE BRATTLE GROUP, INC. THAT IS
SUBSTANTIALLY CONSISTENT WITH THE SCOPE OF WORK RECOMMENDED BY THE
CITY MANAGER TO THE CITY COUNCIL DURING THE WORK SESSION OF THE CITY
COUNCIL ON FEBRUARY 16, 2016, IN ORDER TO PERFORM A STUDY/ANALYSIS OF
THE RENEWABLE DENTON PLAN AND OTHER OPTIONS; PROVIDING FOR THE
EXPENDITURE OF FUNDS; PROVIDING AN EFFECTIVE DATE
WHEREAS, the City Council of the City of Denton, Texas has previously directed the City
of Denton's electric department, Denton Municipal Electric (" DME" ), to develop a comprehensive
plan to increase the amount of renewable energy in DME's energy portfolio, while at the same
time, maintaining competitive rates and reliable electric power; and
WHEREAS, DME has diligently examined numerous possible scenarios for increasing the
amount of renewable energy in DME's portfolio and has presented projected rate impacts and the
risks that are associated with each scenario to the City Council; and
WHEREAS, the City Council, after discussing and considering all of the relevant facts and
circumstances, was of the opinion that a consultant should be selected by the City Manager to
complete a study/analysis of the "Renewable Denton Plan" and other options; and
WHEREAS, the City Manager has reported to the Council his recommended choice of
consultants for this engagement, and the Council hereby confirms the recommendation of the City
Manager to enter into a letter of agreement for consulting services with The Brattle Group, Inc.; and
WHEREAS, Section 252.022(a)(4) of the Texas Local Government Code provides that a
procurement for personal, professional or planning services is exempt from the requirements of
competitive bidding; and Chapter 2254 of the Texas Government Code generally provides that a
City may not select a provider of professional services on the basis of competitive bids, but must
select the provider of professional services on the basis of demonstrated competence, knowledge,
and qualifications; and for a fair and reasonable price; and
WHEREAS, the Council hereby finds and concludes that the firm of The Brattle Group, Inc.,
Washington, D.C. (the "Firm") is appropriately qualified under the provisions of law to be retained
as a consultant by the City; and
WHEREAS, the City Council has provided in the City budget for the appropriation of funds
to be used for the procurement of the foregoing services, as set forth in the letter of agreement for
consulting services to be entered into by and between the City of Denton, Texas and The Brattle
Group, Inc.; NOW THEREFORE.
THE COUNCIL OF THE CITY OF DENTON, TEXAS HEREBY ORDAINS:
SECTION_ITl�. The recitations in the preamble are true and correct and are incorporated by
reference herewith as part of this ordinance.
1
SECTION 2. The City Manager, or his designee, is hereby authorized to execute a letter of
agreement for consulting services by and between the City of Denton, Texas and The Brattle Group,
Inc. for consulting services relating to the study, review and evaluation of the Denton Renewable
Plan in the amount of not-to-exceed $150,000; a true and correct copy of such letter of agreement is
attached as Exhibit "A" and is incorporated herewith by reference.
SECTION 3. The award of this letter of agreement is on the basis of the demonstrated
competence and qualifications of The Brattle Group, Inc. and the ability of the Firm to perform the
professional consulting services needed by the City for a fair and reasonable price.
SECTION 4. The expenditure of funds as provided in the attached letter of agreement is
hereby authorized.
SECTION 5. This ordinance shall become effective immediately upon its passage and
approval.
PASSED AND APPROVED this the ZZ,rt�✓of March, 2016.
CHRIS WATTS, MAYOR
ATTEST:
JENNIFER WALTERS, CITY SECRETARY
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March 11, 2016
Via Email
Mr. George C. Campbell
City Manager
215 E. McKinney
Denton, TX 76201
Re: Independent Review of the Renewable Denton Plan
Dear Mr. Campbell:
Thank you for contacting The Brattle Group ("Brattle") regarding the captioned matter. We understand
that the City of Denton has a need for a qualified energy consultant to review Denton Municipal
Electric's ("DME") proposed Renewable Denton Plan that calls for increasing the renewable generation
portfolio (mostly wind and solar) from the current 40% to 70% by 2019. This proposal provides
background on Brattle, our work in the electricity sector and relevant experience, suggested team of
experts, approach, timeline and budget.
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This section provides an overview of Brattle, the proposed core team, and relevant past experience.
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The Brattle Group is an international economic consultancy active in finance, litigation, and energy. The
firm was founded in 1990 and has since grown to a staff of over 250 people with offices in Cambridge,
MA; Washington, DC; San Francisco, CA; New York, NY; Toronto, ON; London, UK; Madrid, ES; Rome,
IT; and Sydney, AU. Our professionals have advanced degrees and expertise in iinance, economics,
accounting, statistics, business administration, public policy and engineering. We bring this cross-
disciplinary expertise to our practice of assessing damages, as well as other economic and financial
questions that arise in disputes.
Our firm works on an exclusive basis with leading academics in economics and finance. Principals of our
firm include Daniel McFadden, a recipient of the Nobel Prize in 2000 for his work in economics, and
Stewart Myers, Emeritus Professor of Finance at MIT and author of the world's leading textbook on
corporate finance.
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Mr. George Campbell
March 11, 016
Page 2
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Brattle's largest industry practice area is in energy, with a strong presence in electric power. In the
electric power work, we assist regional entities such as RTOS/ISOs, electric utilities, power producers,
customers, regulators, and policy makers with planning, regulatory, and litigation support. The team
offers a range of planning, analytical, operational, and financial tools for simulating, forecasting, and
evaluating market structures, asset and contract evaluation, and the implications of proposed policies.
We have the capability to model all aspects of the electric power sector including wholesale energy,
ancillary service, and capacity markets, retirement and investment decisions, and state-level or regional
carbon markets. We have a depth of experience in restructured and traditionally-regulated wholesale
power markets across all regions of the U.S. and Canada, as well as a number of other international
markets. In addition to our in-depth market expertise, Brattle offers a range of operational and financial
tools and models for simulation of system operations, forecasting, and planning. Overall we have
substantial experience in the operations and regulation of virtually all North America regional markets
and numerous international markets. We have advised RTOs, investors, financial institutions, utilities,
natural gas and oil pipelines all along the spectrum of issues that affect them and the markets they
participate in.
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Based on our understanding your needs, a core team of two Brattle experts, Ira H. Shavel and T. Bruce
Tsuchida, will be leading this potential engagement.
Dr. Ira H. Shavel, a Principal at Brattle's Washington DC office, is an energy economist with
over 30 years of experience in the energy industry, specializing in the economics and operations
of the U.S. electric power system, generation and transmission investment, and environmental
strategy. He has performed work for a wide range of clients, including generation and
transmission companies, natural gas pipelines, marketers, developers, industry research groups, as
well as federal agencies.
Dr. Shavel has broad experience in the development of models of North American power
systems, including the Integrated Planning Model by ICF International. He has also directed
significant assignments for major electric utilities, independent transmission companies,
independent power producers and private equity on matters such as coal plant retirements, fuel
price forecasting, the benefits of new transmission lines and power plant valuation. Dr. Shavel
has testified before the Federal Energy Regulatory Commission ("FERC"), state regulatory
agencies, and the Ontario Energy Board.
Prior to joining Brattle, Dr. Shavel was a Vice President at Charles River Associates ("CRA").
While at CRA, he led the development of the National Energy and Environment Model
("NEEM") and contributed to its integration with the Multi-Region IVational Macroeconomic
Model. He earned a Ph.D. in Mathematics at the State University of New York at Stony Brook;
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Mr. George Campbell
March 11, 016
Page 3
an S.M. in Operations Research Massachusetts Institute of Technology; and an M.S. in
Mathematics Courant Institute of Mathematical Sciences.
Dr. Shavel will be the Project Director ultimately responsible for the entire engagement.
Mr. T. Bruce Tsuchida, a Principal at Brattle's Cambridge office, has over twenty years of
experience in utility operations, power market analysis, and power generation development for
both domestic and international markets. He specializes in the analysis of new and advanced
technologies, operational studies and ancillary service studies, market reform cost benefit
analyses, valuations of transmission and generation assets, deliverability analyses, market power
studies, and contract evaluation. He has recently completed a study reviewing the cost difference
of utility-scale and residential-scale PV systems, a study reviewing the renewable market
potential of Japan after the ongoing retail sector reform, and a study analyzing the optimal mix of
renewable resources and assessing the ancillary service needs and associated costs for a mid-size
utility. He is currently leading several studies of renewable integration and the associated
changes in utility business models for small utilities. Prior to joining Brattle, Mr. Tsuchida was a
Principal at Charles River Associates ("CR.A") where he led various regional projects involving
multiple stakeholders including the Eastern Interconnection Planning Collaborative ("EIPC"),
the series of studies evaluating the cost and benefits of the Entergy market reform (transition to
an RTO - SPP or MISO), the cost benefit study of EKPC joining PJM, and the cost beneiit study
of ERCOT's transition to a nodal market. He is one of the original members who pioneered
market reform cost beneiit studies starting from the RTO West study in 2001. He has also
performed numerous renewable integration studies, including the SPP Wind Integration Study.
Mr. Tsuchida will be the project manager and lead the day-to-day operation of the engagement
and be the key contact person of the Brattle team.
Other highly qualified Brattle staff with relevant experience will be assigned to tasks based on the needs
as they are developed in consultation with the City of Denton staff. Full resumes of individual team
members can be provided upon request.
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Brattle has performed similar services for a number of clients. Appendix-A to this letter provides a list of
such engagements that show the relevant experience. These experiences are grouped into the following
three credential categories:
� ERCOT and nodal market'
� Electric generation technologies including storage and natural gas'
� And integrating large amounts of renewable energy (utility scale) into a portfolio.
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Mr. George Campbell
March 11, 016
Page 4
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We understand that the main objective for this potential engagement is to review the Renewable
Denton Plan and options considered, and provide feedback and identify any additional options that
should be considered. The findings will be reported to the Denton City Council. We understand that the
City of Denton wishes to complete the study by the end of April. To meet that expectation, we propose
to perform the scope of work through the following four Steps with an anticipated four-week work
schedule.
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We propose to have a project kick-off ineeting at the very start of the project. It is anticipated to take
two to three hours. This kick-off ineeting will be for confirming various administrative steps and
discussion on the analysis objectives, general assumptions and methods. Topics for the administrative
steps include establishing communication channels and protocols, setting up periodic update calls (we
currently envision weekly conference calls), discussing the role of team members and identifying
relevant participant groups within the City of Denton staff and identifying lead members for
communication purposes, and setting up/agreeing on major milestones including meetings as necessary.
It is recommended we determine the availability of the City of Denton Council members for the final
presentation at this time and adjust the schedule accordingly. We will also use this opportunity to
discuss the City of Denton's current vision, preferred direction and scope, and the goal of pursuing the
Renewable Denton Plan. Through the discussion of the City of Denton's objective and current practice,
we would like to agree on core evaluation metrics (for both the benefits and associated risks) to iine-
tune our analysis. We also intend to identify necessary documents, reports, data sources to review, and
sharing timing and arrangements of such materials (inclu in any nec�ssary I� l�s) during this meeting.
While the kick-off ineeting is preferred to be done in-person, it can also be via WebEx.
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We will review the various existing documents (applicable charts, graphs, narratives, cost estimates,
spreadsheets, and other materials), and various ongoing regulatory policy changes (at a high level)
surrounding the City of Denton. This policy review helps us understand where the City of Denton is
1�.� ��� ������� .�7����tc�r��`�al���. We willlth nedn ss t ������a�ra�°r�� ���� ���t�l �� �x��� �� ����� 1�������,+ �l l� l���r����ca� k�l��� ��
�it:� ��i':" ��cµ�at�at�r �twt�''� �c�'�c'k.r�or DME staff, as nece�;���°�. [�1�+��°u ��a��a��l:�ti�:�,� ��t'w 1.��� �w��ri��, wvc� �i1� a��cif��:�:s�,�"l��
reasonableness of the analysis, its structure, and assumptions used, and identify potential risks associated
with the Renewable Denton Plan. For example, we have identified that PPAs could have a risk of large
cash outlays in the initial years when the price of natural gas is declining, as was the case in late 2015. In
other cases we have identified the most crucial assumption and risks associated with the range of such
critical assumption.
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Mr. George Campbell
March 11, 016
Page 5
Findings from this step will be shared during periodic update calls,
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Upon completion of Step 2(Review the Renewable Denton Plan), we will review the alternative options
considered by DME. Similar to the Renewable Denton Plan review, we will assess the reasonableness of
the analysis, its structure, and assumptions used, and identify potential risks associated with each
alternative option. After assessing the risks and benefits associated with each alternative option, we will
identify, if any, new alternative options that may be worth further consideration. These new alternatives
will depend on the risks and benefits observed through Step 2(Review the Renewable Denton Plan) and
Step 3(Review the Alternative Options), but also the metrics defined in Step 1(Project Kick-off
Meeting).
Findings of the Step will be presented through the periodic update calls. We will try to develop tabular
summaries and graphics to the extent practically possible.
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The last step will be to summarize the findings in a report and prepare an executive summary to present
it to the Denton City Council. We will first prepare a draft report and summary and ask the City of
Denton staff for initial review. Upon receiving comments we will finalize both the report and executive
summary. The executive summary will be presented to the Denton City Council. We anticipate both the
report and executive summary to be in PowerPoint presentation format, however, it can be provided as
a Word document as well.
III�IIIW m'��� �I�
We propose to perform this study on a time and material basis. The standard USD hourly rates for Dr.
Shavel and Mr. Tsuchida are $500 and $450, respectively. We leverage our work with assistance from
Associates and Research Analysts. The hourly rates for Associates range from $300-$430, and $230-$300
for Research Analysts. We estimate Step 1(Kick-off ineeting) and 2(Review the Renewable Denton
Plan) to cost approximately $25,000.' Given that the remainder of the scope will necessarily change
upon reviewing the Renewable Denton Plan, it is difficult to provide an accurate budget estimate. To
avoid any budgetary surprises, we will update you of the costs during our weekly update call. The cost
will not exceed $150,000 without your prior authorization.
u This estimate assumes 16 hours for Dr. Shavel, 24 hours for Mr. Tsuchida, and 24 hours for a Research
Associate with the rate of $270/hour.
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Mr. George Campbell
March 11, 016
Page 6
All expenses including any travel cost incurred, and data purchase costs if Brattle is to purchase a license
to use data directly from vendors for this work, will be passed through to DME without any mark-ups
and will require pre-approved via e-mail by DME.��3
We would be delighted to discuss the scope, budget, and other terms about this proposal. Thank you for
the opportunity for Brattle to present a proposal to assist the City of Denton and Denton Municipal
Energy. We look forward to working with you.
Sincerely,
� ������� �� �� ��
Ira H. Shavel
Direct: +1.202.419.3381
Enclosures
T. Bruce Tsuchida
Direct: +1.617.234.5686
� We currently do not anticipate any licensing fees.
3 We anticipate travel cost to Denton (from the Brattle east coast offices) will be around $1,200 per person,
including airfare, hotel (single night), meals, and other miscellaneous costs, although this may vary by the
timing and length of the required trip.
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Mr. George Campbell
March 11, 016
Page 7
III'� Il�llf��; III� II�III
This Appendix lists the proposed Brattle team's core members' previous experience grouped into the
following three credential categories.
,,�. ERCOT and nodal market.
��� Electric generation technologies including storage and natural gas.
�� Integrating large amounts of renewable energy (utility scale) into a portfolio.
� �II� � ��� III�����, ���.��
The following examples are related to the ERCOT market and projects where clients have implemented
our recommendations.
� For the Public Utility Commission of Texas, Brattle experts performed the Cost-$enefit
Assessment of the Texas Nodal Market (2004, as Tabors Caramanis and Associates), followed by
an update of the study to account for changing market conditions (2008, as CRA). [2004, 2008,
Tsuchida]
� For the Texas Clean Energy Coalition and in collaboration with ERCOT, Brattle experts
performed an evaluation of potential future generation scenarios in the ERCOT footprint. The
study examined future gas and renewable power in Texas through detailed operational
simulations of several future grid expansion scenarios containing up to 43% wind and solar
penetration levels. To reliably accornmodate such high levels of renewables in ERCOT, aside
from increasing wind diversity to the extent possible, Brattle proposed and simulated the
addition of a new ancillary service requirement, namely slow non-spin reserve requirements,
which ensure that sufficient capacity is available for intra-day commitment to cover for day-
ahead renewable forecast errors. The study included a detailed evaluation of the potential for
demand response, energy efficiency and CHP in ERCOT. [2013, 2014 Shavel] A new study for
Texas Clean Energy Coalition that evaluates long-term trends in capacity expansion and
attendant carbon dioxide emissions will be coming out in the next few weeks.
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The following examples demonstrate our experience and proven record for implementing plans and
strategies and operating in the market space.
� For project developers, owners, potential off-takers and lenders, Brattle experts have perforrned a
number of renewable and storage asset evaluations, with many of the projects being located
within ERCOT. Evaluations include portfolios of wind, solar, wind and/or solar combined with
storage of various types, or storage alone. These projects involved evaluating the potential value
of the savings associated with the portfolio, analysis of ancillary service impacts, correlation of
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various wind sites, transmission congestion modeling, potential for curtailments and energy
market impacts, and capacity market impacts. Geographical regions of these studies cover the
U.S., China, Japan, and the Caribbean. [2005-2015, Shavel, Tsuchida]
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• For a small Asian nation, we have helped assess the maximum economically allowable renewable
penetration level where the marginal cost of integrating renewable resources become larger than
the marginal benefit brought by the renewable resource. The study for this nation that is
predominantly thermal powered and has limited import and export limits investigates the
various benefits and costs, including change in ancillary service needs, and further discusses
various potential cost allocation methods aimed to avoid future over-builds. [2016, Tsuchida]
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• For an overseas utility, Brattle experts studied the options for unbundling the vertically
integrated utility and the potential impact unbundling may have in developing higher
penetration levels of renewable resources, which is driven by the government's long-term policy
goal. [2016, Tsuchida]
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Mr. George Campbell
March 11, 016
Page 9
and benefit evaluations of renewables integration. Several technologies were analyzed to
improve wind integration, including different types of storage and demand management
solutions. Including the approved second wind plant, several solar plants, and other innovative
technology options, Aruba is expected to attain nearly 50% energy from renewable resources by
2018. Brattle experts are also part of an international consortium assembled by the Aruban
government to prepare a roadmap for Aruba (known as the Aruba Renewable Integration Study)
to achieve the ultimate goal of becoming 100% oil-fuel free (for energy and water production).
[2013-2015,Tsuchida]
� For First Solar, Brattle experts compared the cost of utility-scale solar systems and residential-
scale solar systems. The comparison was done using the Xcel Energy Colorado system, an average
size western utility, as a test bed. The study confirmed that on a per MWh basis, utility-scale
solar is approximately half the cost of residential-scale systems and can also provide 50% more
benefits in reduction of fuel consumption and emissions. [2015, Tsuchida]
� For the Advanced Energy Economy Institute, Brattle experts prepared a white paper exploring
how the ERCOT and Xcel Energy Colorado are successfully integrating variable renewable
energy (primarily wind power) into their regional grids. ERCOT and Xcel Energy Colorado
already manage large volumes of wind power while matching generation with demand in real
time—an ironclad physical law of electricity grids. To allow continued growth of renewable
power as envisioned under the federal Clean Power Plan and state renewable power mandates,
other grid operators will have to contend with the same challenges that these two grid operators
are facing successfully. [2015, Tsuchida]
� For Vestas Mediterranean, Brattle experts evaluated wind integration issues in Costa Rica and in
Caribbean islands, looking for approaches including storage technologies to increase the
operational ability of these systems to integrate wind power. The studies included interviews
with a range of utility staff in the region, a detailed production simulation of wind integration in
a Caribbean island of up-to 60% wind penetration, and cost- benefit evaluations. [2012,
Tsuchida]
� For the Kansas Electric Transmission Authority ("KETA"), Brattle experts evaluated five 345kV
EHV transmission projects and their potential benefits from enabling increased wind penetration
in Kansas. Study results were presented to KETA members, which included two state senators
and two state representatives. [2011, Shavel, Tsuchida]
� On behalf of a merchant transmission company, Brattle experts modeled the impact of extra
high-voltage ("EHV") transmission overlays in the Midwest, primarily to serve the expanding
fleet of wind generators in the northern plains on future generation capacity expansion using
proprietary optimization models. A model to analyze the relative value and cost of storage and
natural gas to balance a system with varied levels of renewable generation capacity, primarily
wind, was developed and utilized for select studies. [2010, Shavel] '
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IN WITNESS HEREOF, the City of Denton, Texas has executed has executed this Letter
Agreement by and through its duly authorized undersigned City Manager on this the �?�
day of March, 2016.
CITY OF DENTON, TEXAS
A Texas Municipal Corporation
�� "�.������ ���.,,�
By��. .� ����' � �������� ����" �"'� ..�
{.����(���;.��� C. C"�l'+��'1��.��1��, CITY ]V���"��ER
ATTEST:
JENNIFER Vu'�I�'T�?��, CITY SECRETARY
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:
.�P'1���� ��'1��.�� � TO LEGAL FORM:
r'1 �I r� BURGESS, CITY ATTORNEY
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