2006-114
ORDINANCE NO. 2006- //4-
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF DENTON, TEXAS
AUTHORIZING THE CITY MANAGER TO EXECUTE A PROFESSIONAL SERVICES
AGREEMENT WITH R. J. COVINGTON CONSULTING, LLC FOR CONSULTING
SERVICES RELATING TO TASK ORDER NO. 06-E PROVIDING FOR DEVELOPMENT
OF PURCHASED POWER AGREEMENT FOR NODAL MARKET FOR DENTON
MUNICIP AL 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 further
professional consulting services to the City relating to Task Order No. 06-E; which includes,
without limitation, services for development of revised contract structure for a future nodal
market and to developing contract language to implement developed contract structure for
Denton Municipal Electric; and
WHEREAS, the City staff has reported to the City Council that there is a substantial need
for the above-described specialized professional services, and that limited City staff cannot
adequately perform the 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, Covington has represented DME continuously and ably over the last ten
(l0) 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's operations are
located in Austin, Texas. Covington and his staff are particularly familiar with the
characteristics, operations, and present rate structure ofDME: 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 I: That the City Manager is hereby authorized to execute a Professional
Services Agreement with R. J. Covington Consulting, LLC of Austin, Texas, for professional
consulting services relating to Task Order No. 06-E relating to the City and to Denton Municipal
Electric, in an amount not to exceed $45,000; in substantially the form of the Professional
Services Agreement that is attached hereto and incorporated herewith by reference as Exhibit
"A,"
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 the professional services needed by the City for a fair and reasonable
pnce.
SECTION 3: That the expenditure of funds as provided in the attached Professional
Services Agreement is hereby authorized.
SECTION 4: That this ordinance shall become effective immediately upon its passage
and approval.
PASSED AND APPROVED this the
I1d
1. - day of
1!(tu{-
C~~cL
,2006.
EULINE BROCK, MAYOR
ATTEST:
JENNIFER WALTERS, CITY SECRETARY
BY~^'~'t\jl>~*,' 0)
APPROVED AS TO LEGAL FORM:
EDWIN M. SNYDER, CITY ATTORNEY
By/WWQA~
S:\Our Documents\Ordinances\06\R J Covington Consulting LLC-DME.Ord Aprv TO 06-E 2006.doc
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STATE OF TEXAS
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COUNTY OF DENTON
PROFESSIONAL SERVICES AGREEMENT FOR CONSULTING SERVICES
PERTAINING TO DENTON MUNICIPAL ELECTRIC
THIS ,AGREEMENT is made and entered into on the .2.!!!! day of ~ '
2006, by and between the City of Denton, Texas, a Municipal Corporation, with its p Cl al 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 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 II
SCOPE OF SERVICES
A. COVINGTON shall provide to the CITY professional consulting services pertaining to
development of a purchased power agreement for nodal market and for development of contract
language to implement developed contract structure respecting Denton Municipal Electric
("DME"), and providing analysis thereon. COVINGTON agrees to perform those services and
tasks more particularly and specifically described in Task Order No. 06-E attached hereto and
incorporated herewith by reference.
B. To consult with the City Manager, Assistant City Manager/Utilities, the Director of Electric
Utilities, the Utility Attorney, and any other designated administrative personnel regarding any and
all aspects ofthe services to be performed pursuant to this Agreement.
ARTICLE III
PERIOD OF SERVICE
This Agreement shall become effective on the date this Agreement is approved and upon the
issuance of a notice to proceed by DME. The termination date of this Agreement shall be upon the
earliest to occur of the following events: completion of the work described herein and in the
attached Task Order No. 06-E; or upon the depletion and exhaustion of the $45,000 not-to-exceed
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amount provided for herein; or upon fifteen (15) day's written notice to terminate, issued by the
Director of Electric Utilities, '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 Director of Electric Utilities,
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:
I, For and in consideration of the professional services to be performed by COVINGTON
herein, the CITY agrees to pay COVINGTON, a total fee, including reimbursement for direct
non-labor expense, not to exceed $45,000 for those services described in Task Order No, 06-
E,
2, The fee for the services described in this Agreement to be performed by COVINGTON
are to be billed the rates as set forth in Exhibit "A" attached hereto and incorporated herewith
by reference, 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 Director of Electric Utilities, The fee bills as
submitted, shall be allowed and approved by the Director of Electric Utilities, 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 City Manager or the Director of Electric
Utilities, 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,
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C. PAYMENT
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 (I %) 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
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.
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ARTICLE VIII
INDEMNITY AGREEMENT
COVINGTON shall indemnity 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 ofthis Agreement. COVINGTON'S liability
under this Article VIII is expressly limited to the amount of COVINGTON'S 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 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 nA_n 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 $1,000,000 annual
aggregate.
D. COVINGTON shall furnish insurance certificates or insurance policies at the CITY's request
to evidence such coverages. The insurance policies shall name the CITY as an additional
insured on all such policies to the extent legally possible, and shall contain a provision that
such insurance shall not be canceled or modified without thirty (30) days prior written notice
to CITY and COVINGTON. In such event, COVINGTON shall, prior to the effective date
of the change or cancellation, deliver substitute policies furnishing the same coverage to the
CITY.
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ARTICLE X
ARBITRATION AND ALTERNATE DISPUTE RESOLUTION
The parties agree to settle any disputes under this Agreement by submitting the dispute to
arbitration or other means of alternate dispute resolution such as mediation. No arbitration or
alternate dispute resolution arising out of or relating to, this Agreement involving one party's
disagreement may include the other party to the disagreement without the other's approval.
ARTICLE XI
LIMITATION OF LIABILITY
To the extent permitted by law, the total liability of COVINGTON to CITY for any and all
claims arising out of this Agreement, whether caused by negligence, errors, omissions, strict
liability, breach of contract or contribution, or indemnity claims based on third-party claims, shall
not exceed one million dollars ($ I ,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.
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 serviccs. No other warranty or guarantee, exprcsscd or implied, is made with respect to
thc scrviccs furnished under this Agreement and all implicd warranties are disclaimed.
ARTICLE XIV
TERMINATION OF AGREEMENT
A. Notwithstanding any other provision of this Agreement, either party may terminatc this
Agreement by giving thirty (30) days advance written notice of termination to the other party.
8. 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: (I) written notice (delivered by certified mail,
return receipt requested) of intent to terminate and setting forth the reasons spccifYing 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 complction of the services to bc providcd hcreunder,
COVINGTON shall immediately cease all scrvices and shall render a final bill for services to
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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:
To COVINGTON:
To CITY:
RJ. Covington Consulting, LLC
Attn: Richard J. Covington, President
11044 Research Blvd., Suite A-325
Austin, Texas 78759
City of Denton, Texas
Attn: City Manager
215 East McKinney Street
Denton, Texas 76201
and to
City of Denton, Texas
Attn: Director of Electric Utilities
901-A Texas Street
Denton, Texas 76205
All notices shall be deemed effective upon reccipt by the party to whom such notice is given
or within three days after the date of mailing.
ARTICLE XVII
ENTIRE AGREEMENT
This Agreement consisting of nine (9) pages, and two (2) additional pages consisting of Task
Order No. 06-E, constitutes the complete and final expression of the agreement ofthc parties and is
intendcd as a complete and exclusivc statement of the terms of their agrccmcnts and supersedes all
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prior contemporaneous offers, promises, representations, negohahons, discussions,
communications and a/,'feements 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.
ARTICLE XX
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 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 othelWise) without the prior written
consent of the CITY.
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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 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. COVINGTON agrees that CITY shall, until the expiration of three (3) years after the final
payment under this Agreement, have access to and the right to examine any directly pertinent
books, documents, papers and records of COVINGTON involving transactions relating to
this Agreement. COVINGTON agrees that the CITY shall have access during normal
working hours to all necessary COVINGTON facilities and shall be provided adequate and
appropriate working space in order to conduct audits in compliance with this section. The
CITY shall give COVINGTON reasonable advance notice of any intended audits.
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
Consulting, LLC has executed this Agreement by its duly authorized officer on this the _ day
of , 2006.
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ATTEST:
JENNIFER WALTERS, CITY SECRETARY
By:
APPRO AS TO EGAL FORM:
EDWIN M. SNYDER, CITY ATTORNEY
By~QQ
"CITY"
CITY OF DENTON, TEXAS
A Municipal Corporation
By:
"COVINGTON"
R. J. COVINGTON CONSULTING, LLC
A Texas Limited Liability Corporation
By: ~~~
Bill S ames, VIce PresIdent
S:\Our Documents\Contracts\06\RJ Covington Consulting LLC-PSA-Contract Ncgot-TO 06-E DME.doc
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ATTACHMENT
PROFESSIONAL SERVICES AGREEMENT
BETWEEN THE CITY OF DENTON TEXAS AND
R. J. COVINGTON CONSULTING, LLC
TASK ORDER NO. 06-E
DEVELOPMENT OF PURCHASED POWER AGREEMENT FOR NODAL
MARKET
This Task Order is directed at assisting Denton Municipal Electric ("DME") to work with
respondents to DME's previously issued RFP for Purchased Power in developing a
Purchased Power Agreement ("PPA") that will afford DME an energy price based on
current or future gas prices, at DME's option, and a fixed multiplier which will remain in
effect during, the anticipated initial implementation of the nodal market design. In
addition, R. J. Covington Consulting, LLC ("RJC") will assist DME in working with
respondents to developing contract language that will effectively allow the respondent to
scrve as DME's agent for scheduling both load responsibility and DME's owned
generation resource production in a manner that reduces DME's exposure to potential
energy price differences bctween DME's load points in North Texas and the price of
energy at DME's generation resource points.
Task I
Development of Revised Contract Structure for Future Nodal Market
I. Conversion of zonal market terms and conditions to accommodate nodal
market design rcquirements per nodal protocols approved by the Texas
Public Utility Commission on March 8, 2006.
2. Work with respondents to define rights and responsibilities of each party
under nodal market design.
3. Determine cost responsibility of each party for purchase of power,
scheduling of DME load, and scheduling of DME owned generation
resource projection, and financial settlement with ERCOT under
developed structure.
4. Work with respondents to finalize structurc of PPA under future nodal
market.
Task 2
Develop Contract Language to Implement Developed Contract
Structure
I. Draft contract language to capture rights and responsibilitics of respondent
and DME under revised contract structure for futurc nodal market.
2. Submit contract language to both respondent and DME for review and
editing.
3. Work with both parties to finalizc contract language.
4. Develop final PP A contract for execution by DME and respondent.
Budget
The not-to-excced budget for the above scope of services for both labor and out-of-
pocket expenses is $45,000. This amount will not be exceeded without prior written
approval of the City of Denton, Texas. This scope of services budget assumes that RJC
continues to act as primary contact with respondent and that DME will assist in
negotiations if particular issues develop that involve policy issues that require DME
attention.
RJC will bill this Task Order monthly, with supporting documentation of activities
performed. The work performed will be under the supervision of the Director of Electric
Utilities, and may be modified at any time upon appropriate notice to RJC.
EXECUTED this 2fUiday of ~ar ' 2006.
AUTHORIZED BY:
ACCEPTED BY:
CITY OF DENTON, TEXAS
A Municipal Corporation
R. J. COVINGTON CONSULTING, LLC
By:
1
By:
4tifJ ~
BILL S"VARNES
ITS VICE PRESIDENT
HOWARD MARTI
INTERIM CITY MA
ATTEST:
JENNIFER WALTERS, CITY SECRETARY
BY~~~^\~~~
APPROVED AS TO LEGAL FORM:
EDWIN M. SNYDER, CITY ATTORNEY
By AJ\1~ 'fJ-Q
S:\Our Documents\Contracts\06\R J Covington -TO No 06-E RFP -PPA.doc
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