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2003-163ORDINANCE NO. 2003- /~ ~.~ 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 CONSUl_TING, LLC FOR CONSULTING SERVICES RELATING TO TASK ORDER NO. 03-D, REGARDING ADDITIONAL PROFESSIONAL SERVICES RELATING TO THE DENTON MUNICIPAL ELECTRIC RETAIL RATE DESIGN STUDY; AUTHORIZING THE EXPENDITURE OF FUNDS THEREFOR; AND PROVIDING AN EFFECTIVE DATE. WHEREAS, the City Council deems it in the public interest to engage the firm of R. J. Covington Consulting, LLC of Austin, Texas ("Covington"), to provide professional consulting services to the City relating to Task Order No. 03-D, including, without limitation, services that relate to working with City staff, to develop rates to collect Denton Municipal Electric's revenue requirement based upon an adjusted fiscal year 2002 test year; 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 over the past seven years, and has proven to be a valuable, affordable, competent, dependable professional resource that has expertise in and is well acquainted with the electric financial and regulatory framework of Denton Municipal Electric ("DME"). Covington and his staff are familiar with the characteristics and operations of DME; 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 1: 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. 03-D, to Denton Municipal Electric, in substantially the form of the Professional Services Agreement 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 price. 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 ~g~/day of (~/,(-/~ ,2003. EULR,,rE BROCK, MAYOR ATTEST: JENNIFER WALTERS, CITY SECRETARY APPROVED AS TO LEGAL FORM: HERBERT L. PROUTY, CITY ATTORNEY S:\Our Documents\Ordinances\03~R J Covington Consulting LLC-DME-Ord Aprv TO-3-D 2003.doc 2 STATE OF TEXAS COUNTY OF DENTON PROFESSIONAL SERVICES AGREEMENT FOR CONSULTING SERVICES PERTAINING TO DENTON MUNICIPAL ELECTRIC THIS AGREEMENT is made and entered into as of the,.~----~day of June, 2003, by and between the City of Denton, a Texas 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 13276 Research Blvd., Suite 201, Austin, Texas 78750, 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: ARTICI,E l 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 highest professional standards customarily obtained for such services in the State of Texas. ARTICI,E II SCOPE OF SERVICES A. COVINGTON shall provide to the CITY professional consulting services pertaining to the preparation of a retail rate study for Denton Municipal Electric. COVINGTON agrees to perform those services and tasks more particularly described in Task Order No. 03-D 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 of the services to be performed pursuant to this Agreement. ARTICLE 111 PERIOD OF SERVICE This Agreement shall become effective upon execution by both the CITY and COVINGTON. 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. 03-D; or upon the depletion and exhaustion of the $78,600 not to exceed 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. ARTICI,E 1V 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, including reimbursement for direct non-labor expense, not to exceed $78,600 for those services described in Task Order No. 03- D. 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. Page 2 C. PAYMENT If the CITY fails to make payments due COVINGTON for services and expenses within forty (40) days aRer receipt of COVINGTON'S undisputed statement thereof, the amounts due COVINGTON will be increased by the rate of one pement (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 pement (1%) set fomh heroin 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. ARTICI,E V OBSERVATION AND REVIEW OF THE WORK COVINGTON will exemise 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. ARTTCT,E 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. ARTICI,E 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. Page 3 ARTICI,E 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 attomey'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. COV1NGTON'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 "A-" or above: 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. 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 $I,000,000 annual aggregate. 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. Page 4 ARTT~T ~ ~ 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. ARTICI~F, XT 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). ARTICT,V, XII CONSEQUENTIAL DAMAGES In no event and under no cimumstances 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. ARTICI,F, Xlll PROFF. SSICINAI ~ 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. ARTICT ~F. 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. This Agreement may be terminated in whole or in part in the event of either party substantially failing to fulfill its obligations under this Agreement. No such termination will be effected unless the other party is given: (1) written notice (delivered by certified mail, return receipt requested) of intent to terminate and setting forth the reasons specifying the nonperformance, and not less than ten (10) business days in which to cure the failure; and (2) an opportunity for consultation with the terminating party prior to termination. 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 Page 5 the CITY within 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 mm 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 sub-consultants of COVINGTON, for the accuracy and competency of their designs or other work product. ARTIOJ ,E XV[ 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: R.J. Covington Consulting, LLC Attn: Richard J. Covington 13276 Research Blvd., Suite 201 Austin, Texas 78750 City of Denton, Texas Atto: Michael A. Conduff, City Manager 215 East McKinney Street Denton, Texas 76201 All notices shall be deemed effective upon receipt by the party to whom such notice is given or within three days after the date of mailing. ARTICLE XVIT ENTIRE AGREEMENT This Agreement consisting of nine (9) pages, and three (3) additional pages consisting of Task Order No. 03-D, 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. ARTICI,E XVIII Page 6 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 unenfomeable. In such event, the party shall reform this Agreement to replace such stricken provision with a valid and enfomeable provision which comes as close as possible to expressing the intention of the stricken provision. ARTICI ,F, XIX COMPLIANCE WITH LAWS COVINGTON shall comply with all federal, state, local laws, roles, 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 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. 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. ARTICI ,F, 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. Page 7 ARTICLF. 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. ARTICI.F. XXIV MISCELLANEOUS 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. 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. 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. The CITY shall assist COVINGTON by placing at COV1NGTON'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. 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 original counterparts, by its duly authorized City Manager; and R.Jz,~C,~vington Consulting, LLC has executed this Agreement by its duly authorized officer on this the,.,d, ez__-c~ day of June, 2003. Page 8 "CITY" CITY OF DENTON, TEXAS A Municipal Corporation Michael A. Conduff, Ci~_.~ager ATTEST: JENNIFER WALTERS, CITY SECRETARY APPROVED AS TO LEGAL FORM: HERBERT L. PROUTY, CITY ATTORNEY By: "COVINGTON" R.J. COVINGTON CONSULTING, LLC A Texas Limited Liability Corporation ATTEST: Richard J. CovinIffon, Pres~[,exlq S:\Our Documents\Contracts\03\RJ Covington Consulting LLC-PSA-TO 03-D-2003-DME.doc Page 9 ATTACHMENT PROFESSIONAL SERVICES AGREEMENT BETWEEN THE CITY OF DENTON, TEXAS AND R.J. COVINGTON CONSULTING, LLC TASK ORDER NO. 03-D Denton Municipal Electric Retail Rate Study This Attachment is a 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, L.L.C. on even date herewith, and approved by the Denton City Council. The work provided for in this Task Order 03-D is for R.J. Covington Consulting, LLC ("RJC"), to work with the City staff in order to develop rates, to collect Denton Municipal Electric's ("DME") revenue requirement based on an adjusted fiscal year 2002 test year. The rate design effort will include discussions with staff regarding rate and tariff concerns, developing proposed rates based on desired changes and quantifying impacts on customers for consideration by DME staff. This Task Order provides for the following work to be performed by RJC: 1. Complete a detailed review of customer billing data to identify and, with the assistance of City staff, resolve billing anomalies. 2. Develop bill frequencies for each of the customer classes based on the billing determinants, as adjusted based on the customer account review. Analyze DME's fiscal year 2002 revenue requirement based on operating expenses for FY's 2001, 2002, and Budget 2003 and considering customer growth patterns, and weather. 4. Develop customer class revenue responsibilities based on the allocation of revenues used to set current rates. Based on DME management's rate design objectives, RJC will develop rates to meet these objectives and the assigned revenue responsibility for each customer class. lof4 6. Tariff sheets will be modified as appropriate to reflect final rate design changes. 7. RJC will discuss with staff methods to assess monthly billing data, and provide spreadsheet templates to use as a billing audit tool and a mechanism to enable timely rate design review in the future. Scope of Services Task A Billing System Account Review Analysis 1. For each customer class, create test revenue calculations based on tariff language against actual revenue for each account and each month of FY 2002. Identify for each class possible billing anomalies based on test revenue calculations, e.g. GSS block extender issue, minimum bill not applied, or multiple facilities charges assessed on one account. For each anomaly, reach consensus on appropriate billing calculations and determine resulting customer classification (e.g. single or three-phase), billing days, KW, and KWH. 4. For each customer class, recompute revenue based on resolution of billing anomalies. Task B Bill Frequency Development 1. Convert corrected billing data for each month of FY 2002 to monthly and annual bill frequencies for each customer class with specificity required to compute and vary facilities charges, demand charges, and energy charges. 2. Create formulas within frequency tables to allow modifications in factors such as GSS block extenders, KWH block sizes, seasonal rates and minimum bill specifications. Task C Class Revenue Assignments 1. Develop adjusted FY 2002 revenue requirements based on FY 2001 and 2002 actual results and 2003 Budget. 2 of 4 2. Perform assessment of possible impact of customer growth (customer count and KWH) by class. 3. Consider the effect of weather on billing determinants and expenses on the revenue requirements by customer class. Determine need to make adjustments to relative revenue contributions of each customer class under current rates from the 1998 study to take into account customer growth and weather variations, if material, by class. 5. Based on relative revenue contributions from the 1998 study, as adjusted if required, develop FY 2002 revenue requirements for each customer classes. Task D Rate Design For each customer class, develop proposed rates for meeting designated class revenue targets using the current rate design. Construct bill impact analyses of present versus proposed rates based on changes in revenue requirement and billing determinants. For each customer class, identify class rate design features that may be varied, including minimum bill structure, proration of facilities, energy or demand charges, block sizes, block extenders, seasonal rates, and rate schedule consolidation (such as R1 and R2). 3. Develop spreadsheets by class to enable modeling of identified rate design variations to meet designated revenue targets. 4. Develop bill impact analyses for alternative rate designs considered. 5. For each rate schedule, develop Excel spreadsheet templates for monthly data entry to enable timely bill accuracy checks and rate design assessments. 6. After rate level and rate design changes determined, develop new tariff language for each customer class. Budget The not-to-exceed amount for the above scope of services for both labor and out-of- pocket expenses is $78,600. This budget will not be exceeded without prior written approval of the City of Denton. 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: the date of completion of the work described herein; or 3of4 upon the depletion and exhaustion of the $78,600 not to exceed 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 under this Task Order will be under the supervision of the Director of Electric Utilities, DME and may be modified at any time upon appropriate written notice to RJC. EXECUTED in four (4) original counterparts by a duly authorized o~,,ce.j: of RJC and by a duly authorized officer of the City of Denton, Texas on this the~'~5 day of June, 2003. AUTHORIZED BY: ACCEPTED BY: CITY OF DENTON, TEXAS Michael A. Conduff City Manager R. J. COVINGTON CONSULTING, LLC By: Richard J. C~ngton V President Dated: Dated: ATTEST: JENNIFER WALTERS, CITY SECRETARY APPROVED AS TO LEGAL FORM: HERBERT L. PROUTY, CITY ATTORNEY S:\Our Documents\Contracls\03~JC TO 03-D 2003-DME Electric Rate Design,doc 4 of 4