2008-170ORDINANCE NO. 2008- / /
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF DENTON, TEXAS
AUTHORIZING THE CITY MANAGER TO EXECUTE A SECOND AMENDMENT TO
PROFESSIONAL SERVICES AGREEMENT WITH R. J. COVINGTON CONSULTING, LLC
FOR FURTHER CONSULTING SERVICES RELATING TO TASK ORDERS NO. 07-D AND
07-F, BY APPROVING FURTHER TASK ORDER NO. 08-A, PROVIDING FOR
CONTINUING REGULATORY AND PROFESSIONAL SERVICES AT THE ELECTRIC
RELIABILITY COUNCIL OF TEXAS ("ERCOT") AND THE PUBLIC UTILITIES
COMMISSION OF TEXAS ("PUCT") RELATED TO NODAL MARKET TRANSITION
AND EVER-CHANGING DEVELOPMENTS THAT DIRECTLY AFFECT DENTON
MUNICIPAL ELECTRIC, AND OTHER RELEVANT ISSUES THAT ARISE IN THE
VARIOUS RULE-MAKINGS AND PROCEEDINGS, AND TO KEEP DME STAFF
INFORMED OF THE STATUS OF THESE MATTERS AND TO ALERT DENTON
MUNICIPAL ELECTRIC REGARDING ANY ISSUES THAT MAY AFFECT THE ABILITY
OF DENTON MUNICIPAL ELECTRIC TO SERVE ITS CUSTOMERS IN A COST-
EFFECTIVE AND COMPETITIVE MANNER, AND OTHER RELATED PROFESSIONAL
SERVICES; AUTHORIZING THE EXPENDITURE OF FUNDS THEREFOR; AND
PROVIDING AN EFFECTIVE DATE (TASK ORDER NO, 08-A - AN ADDITIONAL SUM
OF $40,000, AND WHEN TOTALLED WITH THE TASK ORDERS 07-D AND 07-F,
WHICH TOTAL $100,000 - FOR A GRAND TOTAL OF $140,000).
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 services to the City relating to Task Orders No. 07-D and No. 07-F
totaling $100,000; for an additional not-to-exceed $40,000, which includes, without limitation,
continued professional and regulatory services at the Electric Reliability Council of Texas
("ERCOT") and the Public Utilities Commission of Texas ("PUCT") related to ever changing
developments that directly affect Denton Municipal Electric ("DME") including services to keep
Denton Municipal Electric ("DME") staff informed of the status of the proceedings; and services
that will alert DME staff of any issues that may affect the ability of DME to serve its customers
in a cost-effective and competitive manner; and for other professional services; 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
1
WHEREAS, Covington has represented DME continuously and professionally over the
last eleven (11) 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. Covington's offices are located in Austin, Texas; and
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 Professional
Services Agreement; NOW, THEREFORE,
THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS:
SECTION l: The City Manager is hereby authorized to execute a Second Amendment
to Professional Services Agreement with R. J. Covington Consulting, LLC of Austin, Texas, for
professional consulting services relating to Task Order No. 08-A relating to the City and to
Denton Municipal Electric, in the further amount not-to-exceed an additional not-to-exceed
$40,000, totaling $140,000; in substantially the form of the Professional Services Agreement that
is 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 expenditure of funds as provided in the attached Professional Services
Agreement is hereby authorized.
SECTION 4: This ordinance shall become effective immediately upon its passage and
approval.
PASSED AND APPROVED this the day of '2008.
ATTEST:
JENNIFER WALTERS, CITY SECRETARY
By.
APPROVED AS TO LEGAL FORM:
JOHN KNIGHT, INTERIM COY ATTORNEY
By:
STATE OF TEXAS §
COUNTY OF DENTON §
SECOND AMENDMENT TO
PROFESSIONAL SERVICES AGREEMENT FOR CONSULTING SERVICES
PERTAINING TO DENTON MUNICIPAL ELECTRIC
THIS SECOND AMENDMENT TO AGREEMENT (the "Agreement") is made and
entered into on the day of t , 2008, 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:
ARTICLE I
EMPLOYMENT OF CONSULTANT
The CITY hereby 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, Task Order 08-A as well as previously approved Task
Orders 07-D and 07-F, with diligence and in accordance with the professional standards customarily
obtained for such services in the State of Texas.
ARTICLE II
SCOPE OF SERVICES
A. COVINGTON shall provide to the CITY professional consulting services pertaining to assisting
Denton Municipal Electric ("DME") in continuing existing monitoring activities at the Electric
Reliability Council of Texas ("ERCOT"), related to transition to a nodal market design in the Texas
electric market. COVINGTON will keep DME staff informed of the status of the transition design
process and will alert DUE staff of any issues that may affect the ability of DME to serve its customers
in a cost-effective and competitive manner. RJC will also assist DME staff and legal counsel re
interventions made in these proceedings. RJC will also review the future needs of DME in order to
successfully operate in the new market structure being implemented by ERCOT. The needs
assessment includes consideration of how to minimize locational marginal prices, risk management
techniques to minimize exposure to congestion costs, how to maximize the value of Congestion
Revenue Rights ("CRR" as well as other market activities needed to be successful in the new nodal
market environment. COVINGTON agrees to perform those services and tasks more particularly and
specifically described in Task Order No. 07-D and also in Task Order No. 07-F, and which new Task
Order.No. 08-A is attached hereto and incorporated herewith by reference.
1
B. To consult with the City Manager, Assistant City Manager/Utilities, the General Manager of
DME, the Utility Attorney, and any other designated administrative personnel regarding any and all
aspects of the services to be performed pursuant to this Agreement.
ARTICLE III
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 described herein in
Task Order 08-A, as well as in Task Orders No. 07-D and No. 07-F; or upon the depletion and
exhaustion of the total $140,000 not-to-exceed amount provided for by the three above referenced
Task Orders; 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.
ARTICLE IV
COMPENSATION
A. COMPENSATION TERMS:
"Direct Non-Labor Expense" is defined as that expense 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 $140,000 total,
including reimbursement for direct non-labor expense, including $20,000 for previously
approved Task Order No. 07-F within the delegated authority of the City Manager, including a
further not to exceed amount of $80,000 heretofore approved by Council in connection with
Task Order No. 07-D, and an additional not to exceed $40,000 for those services designated in
Task Order No. 08-A that is to be approved by the City Council regarding the approval of this
Agreement.
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 rendered to the CITY through its General Manager of DME. The fee bills as
submitted, shall be allowed and approved by the General Manager of DME. However, under no
2
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 or the
General Manager of DME; 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
stated, without first having obtained written authorization from the CITY.
C. PAYMENT
If the CITY fails to make payments due COVINGTON for services and expenses within forty
(30) days after receipt of COVINGTONS undisputed statement thereof, the amounts due
COVINGTON will be increased by the rate of one percent (1%) per month from the said forty
(30th) 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
performed hereunder.
ARTICLE VI
OWNERSHIP OF DOCUMENTS
3
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. COVINGTON may use and may copyright certain non-sensitive
Work Products as property of COVINGTON; 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
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. COVINGTONS liability under this Article
VIII is expressly limited to the amount of COVINGTONS 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
INSURANCE
During the performance of the Services under this Agreement, COVINGTON shall maintain the
4
following insurance 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 coverages. 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 DAMAGES
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.
5
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. 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
TERMINATION 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 tenrnation.
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, COVINGTON 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 COVINGTON, 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:
6
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: General 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 or
within three (3) days after the date of mailing.
ARTICLE XVII
ENTIRE AGREEMENT
This Second Amendment to Agreement consisting of ten (10) pages, and three (3) additional
pages consisting of the additional Task Order No. 08-A, constitutes the complete and final expression
of the agreement of the parties and is intended as a 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.
7
ARTICLE XX
DISCREVIINATION 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 XXI
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 XXII
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 XXIH
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 party 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. EDGAR 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
8
days of written request. Further, the EDGAR 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 I% or greater. If an overpayment of I%
or greater occurs, the reasonable cost of the audit, including any travel costs, must be
borne by EDGAR 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, 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
Co ulting, LLC has executed this Agreement by its duly authorized officer on this the 5t~ day of
2008.
"CITY"
CITY OF DENTON, TEXAS
A Municipal Corporation
By:
9
George C. Campbell, City Manager
ATTEST:
JENNIFER WALTERS, CITY SECRETARY
By:
APPROVED AS TO LEGAL FORM:
JOHN KNIGHT, INTERIM CITY ATTORNEY -It_Qj
By:
"COVINGTON"
R. J. COVINGTON CONSULTING, LLC
A Texas Limited Liability Corporation
By: V c'G~G./
W. C. Starnes, Vice-President
ATTEST:
By:
10
EXHIBIT "A"
SECOND AMENDMENT TO
PROFESSIONAL SERVICES AGREEMENT
BETWEEN THE CITY OF DENTON, TEXAS AND
R.J. COVINGTON CONSULTING, LLC
TASK ORDER NO. 08-A
Nodal Market Transition
The work provided for in this Task Order is directed at continuing existing monitoring activities at the
Electric Reliability Council of Texas ("ERCOT"), primarily related to transition to a nodal market
design in the Texas electric market. R. J. Covington Consulting (RJC) will keep Denton Municipal
Electric staff ("Staff') informed of the status of the transition design process and will alert DME staff
of issues that may affect the ability of DME to serve its customers in a cost effective and competitive
manner.
RJC will participate in ERCOT committees and working groups, as directed by DME staff, to
advocate positions that protect DME's ability to effectively operate in the existing wholesale electric
market and the future nodal market. While the nodal market is being developed and implemented,
there may be overlapping issues that impact the current market structure. RJC will focus on all issues
that may disadvantage DME either through changes to the current market protocols or implementation
of Public Utilities Commission of Texas ("PUC") approved nodal protocols. RJC will watch for
changes or limitations in the implementation in either existing or new protocols that may disadvantage
DME.
In addition to working on ERCOT activities, RJC will assist DME staff in beginning to prepare DME
for the new nodal market. This will include review of the future needs of DME in order to successfully
operate in the new market structure being implemented in ERCOT. The needs assessment includes
consideration of how to minimize locational marginal prices, risk management techniques to minimize
exposure to congestion costs, how to maximize the value of Congestion Revenue Rights ("CRR"), the
"permanentization" of CRR's and other market activities needed to be successful in the new nodal
market environment.
The nodal market that was originally targeted to begin January 2009 has now been postponed,
probably until mid 2009. Because of the uncertainty regarding utility requirements to meet the
requirements of the nodal market when implemented, additional funding may be required to complete
this work. RJC will focus on the issues that are important to DME in order to work effectively and
efficiently to help control budget. RJC will keep the Director of Power Supply informed of the status
of the budget, and work may be stopped at any time by notification by the Director of Power Supply to
RJC to cease work.
11
Scope of Services
Task A ERCOT Activities
Task A-1 Attend ERCOT Meetings
1. RJC will stay informed on activities at the ERCOT Independent System Operator ("ISO")
and will attend meetings, as directed by DME staff related to existing market operations and
implementation of the nodal market design.
2. RJC will participate in meetings to represent the interests of DME. The meetings that RJC
will attend include the Protocol Revision Subcommittee (PRS), Congestion Management
Working Group (CMWG), the Wholesale Market Subcommittee (WMS), the Texas Nodal
Transition Plan Task Force (TPTF), the Technical Advisory Committee JAC), and the
ERCOT Board meetings. Other committees may need to be monitored as the nodal
implementation process progresses.
3. RJC will work with DME staff to develop positions that should be advocated and strategies
for working with other ERCOT stakeholders.
Task A-2 Analyze Proposed Policies and Protocols
1. RJC will continue to review the new market design protocols as they evolve during the transition
process and identify concerns related to DME's ability to effectively function in that market.
2. RJC will meet with ERCOT staff and other stakeholders, as requested by DME staff, to discuss
nodal market transition issues and negotiate to mitigate negative impacts on DFW loads.
Task B Working With Other Affected Parties
Task B-1 Coordination With Other Market Participates
1. RJC will continue to work with other affected municipalities, organizations, cooperatives, and
associations, where appropriate, to help mitigate the impacts of the nodal market on loads in
certain areas of the state.
2. RJC will participate in meetings with other market participants, as requested by DME staff, to
discuss strategy and positions.
3. RJC will continue to develop issues, papers and statistics to assist in educating legislators,
media and other market participants on nodal market issues.
Task B-2 Work With Attorneys
L RJC will continue to work with the DME legal counsel to educate them on ERCOT related
issues and to keep them up-to-date on changes that affect DME.
2. RJC will work with DME staff and legal counsel to assist them in preparing any challenges to
the proposed nodal market design or the ERCOT proposed implementation plan to be filed
with either ERCOT and/or the PUCT.
12
Budget
This Task Order calls for a budgeted amount, not-to-exceed $40,000 for professional services and
expenses. Because of the uncertainty regarding the level of activity required of RJC, this budget is an
estimate. Additional funds may be required to complete this work. This initial budget will not be
exceeded without the prior written approval of the delegated authority of the City. RJC will bill this
Task Order monthly together with supporting documentation of activities performed. RJC will send
the monthly invoices to Phil Williams, Director, DME. The work being performed under this Task
Order will be under the supervision of the Director of Electric Utilities, and may be modified at any
time upon appropriate notice by the City to RJC.
EXECUTED this the day of 2008.
AUTHORIZED BY:
"CITY"
CITY OF DENTON, TEXAS
A Texas Municipal Corporation
ACCEPTED BY:
"Pic"
R.J. COVINGTON CONSULTING, LLC
A Texas Limited Liability Corporation
By: ` By:
George C. Campbell W. C. Starnes, Vice-President
City Manager
Dated:
Dated:
ATTEST:
JENNIFER WALTERS, CITY SECRETARY
By:
APPROVED A TO LEGAL FORM:
JOHI~ TERIlVfrCITY ATTORNEY
By:' G
13