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2003-192FILE REFERENCE FORM I 2003-192 I Additional File Exists Additional File Contains Records Not Public, According to the Public Records Act Other FILE(S), · Date Initials First Amendment to Agreement - Task Order No. 05-B (original is attached) 03/07/05 JP~ ORDINANCE NO. 2003- /qA 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. 03-F, REGARDING THE 2003 TRANSMISSION COST OF SERVICE FILING AT THE PUBLIC UTILITY COMMISSION OF TEXAS RELATING TO DENTON MUNICIPAL ELECTRIC; AUTHORIZING THE EXPENDITURE OF FUNDS THEREFOR; AND PROVIDING AN EFFECTIVE DATE. WHEREAS, the City Council deems it in the public interest to engage the from ofR. J. Covington Consulting, [,LC of Austin, Texas ("Covington"), to provide professional consulting services to the City relating to Task Order No. 03-F, includ'mg, without limitation, services that relate to transmission cost of service ("TCOS") filing schedules; analyze return component alternatives for TCOS filing; preparation of TCOS testimony; TCOS filing discovery; and participation in TCOS hearings before the Public Utility Commission of Texas; 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 competitiv9 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 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 Consult'rog, LLC of Austin, Texas, for professional consulting services relating to Task Order No. 03-F, 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 /7~ day of Off4q./~ ~, ,2003. EULINE BROCK, MAYOR ATTEST: JENNIFER WALTERS, CITY SECRETARY By:~j~) ~../~ 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-F 2003.doc 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 BNd., Suite 20l, 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: ARTIC!,E ! 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 li SCOPE OF SERVICES A. COVINGTON shall provide to the CITY professional consulting services pertaining to the preparation of a transmission cost of service filing for Denton Municipal Electric. COVINGTON agrees to perform those services and tasks more particularly described in Task Order No. 03-F 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. ARTICI,E 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-F; or upon the depletion and exhaustion of the $106,100 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 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 heroin, the CITY agrees to pay COVINGTON, a total fee, including reimbursement for direct non-labor expense, not to exceed $106,100 for those services described in Task Order No. 03- F. 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 after receipt of COVINGTON'S undisputed statement thereof, the amounts due COVINGTON will be increased by the rate of one percent (1%) per month fi.om 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 (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. ARTICI,lq, 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. ARTICI,E Vl 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 ARTTCI,E VTll 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. 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 pa~. '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. ARTICI.F. 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 Carders 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. Professional Liability Insurance with policy limits of not less than $1,000,000 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 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 altemate 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,E 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). ARTICI.E XIT 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. ARTICI,E 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 X1V TERMINATION OF AGREEMENT 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 smwices 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 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. ARTICI.E 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. ARTICI .E 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: R.J. Covington Consulting, LLC Arm: Richard J. Covington 13276 Research Blvd., Suite 201 Austin, Texas 78750 City of Denton, Texas Attn: 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. ARTICI.E XVII ENTIRE AGREEMENT This Agreement consisting of nine (9) pages, and four (4) additional pages consisting of Task Order No. 03-F, 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. Page 6 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. ARTICI,E 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. ARTICI ,E 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. AR TICI,F, 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 cona'actual 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,E 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 ARTIC. I .I~ 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. ARTTCI ,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 Demon 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 carded 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. 1N 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.J. Covington Consulting, LLC has executed this Agreement by its duly authorized officer on this the/q~/~ day of June, 2003. Page 8 ATTEST: JENNIFER WALTERS, CITY SECRETARY APPROVED AS TO LEGAL FORM: HERBERT L. PROUTY, CITY ATTORNEY By: CITY OF DENTON, TEXAS A Municipal Corporation "COVINGTON" R.J. COVINGTON CONSULTING, LLC A Texas Limited Liability Corporation ATTEST: Richard J. Cov~gton, Pr~'~dent By: Nqr'3x-- S:\Our Doc u ments\Contrac ~\03 ~d Covington Consulting LLC~PSA-TO 03-F-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-F 2003 Transmission Cost of Service Filing 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, on even date herewith, and approved by the Denton City Council. The work provided for in this Task Order is for R.J. Covington Consulting, LLC ("RJC") to assist staff in the development and filling with the Public Utility Commission of Texas ("PUC") a 2003 transmission cost of service study ("TCOS") based on a Fiscal Year (FY) 2002 test year. The TCOS filing is necessary because of the City's increased investment in transmission facilities and the need to recover those costs through the Electric Reliability Council of Texas ("ERCOT") postage stamp transmission facilities charges. The filing will also incorporate updated transmission plant records that more accurately reflect the actual Denton Municipal Electric ("DME") transmission plant in service. The updated plant records will increase the TCOS to a level more in line with actual costs. The services performed by RJC will include preparation of all necessary rate filing schedules and work papers, the preparation of testimony and exhibits to support the filing, and testifying in support of the rate-filing package at the PUC. RJC will work with the City in responding to Requests for Information ("RFI's") during the discovery phase of the process, and will work the Staff and the City's attorneys during the hearings to defend the City's position against other parties and the PUC staff. Scope of Services Task A Prepare TCOS Filing Schedules 1. A data request for FY 2002 data needed to complete the TCOS filing will be prepared and discussed with staff. 2. Data provided will be reviewed for anomalies, discussed with staff, and adjusted as needed. 3. DME data will be adjusted for known and measurable changes for the rate year. Task Order No. 03-F 2003 Transmission Cost of Service Filing 4. ILIC will prepare the TCOS rate filing schedules based on the latest approved PUC TCOS rate filing package instructions. 5. All schedules will be reviewed for completeness and presentation appearance. Task B Analyze Return Component Alternatives For TCOS Filing 1. In preparing the TCOS schedules, RJC will review and analyze the Schedule C alternatives available to the City, which include: a. Cash flow method b. Rate of return method c. Debt service method RJC will discuss with staff and legal counsel the appropriate approach to use based on dollars derived from each alternative, staff's past actions, and DME's long-term approach to financing plan additions. Task C Preparation of TCOS Testimony 1. RJC will prepare pre-filed direct testimony to support the rate-filing package. 2. DME staff testimony will be reviewed and commented on for coordination with RJC testimony. 3. Exhibits will be prepared to support the testimony and rate-filing schedules. 4. RJC will work with the City's attorneys to complete the rate-filing package and file it at the PUC. Task D TCOS Filing Discovery 1. RJC will review all RFI's sent to City and will assist in determining best person to respond. 2. 1LIC will work with attorneys and staff to respond to RFI's from PUC and other parties, being sure that responses are consistent with filing. 3. If needed, RJC will prepare RFI's to serve on other parties to assist in evaluation of other party's positions and gather inforu~ation needed tbr cross examination of witnesses. 2 of 4 Task Order No. 03-F 2003 Transmission Cost of Service Filing Task E TCOS Hearings 1. RJC will review testimony and exhibits filed by PUC staff and other parties. 2. The impacts of alternative positions of other parties will be evaluated. 3. Rebuttal testimony will be prepared and filed if needed to address issues raised in other parties' pre-filed testimony. 4. With the City's attorneys, PJC will participate with parties in settlement discussions to attempt to settle the case without going to hearings. 5. PJC will assist attorneys in preparing cross-examination of PUC staff and other parties. 6. The hearings will be attended to present direct testimony and assist attorneys on technical issues. 7. RJC will assist attorneys in preparing briefs. 8. The Administrative Law Judge's Preliminary Order will be reviewed in order to assist attorneys in filing exceptions. 9. The Final Order and other docket related documents will be reviewed. 10. The TCOS numbers in the Final Order will be evaluated for accuracy and for compliance with the Commission's final decisions. Budget The not-to-exceed amount for the above scope of services for labor and expenses is $106,100. This budget will not be exceeded without prior approval of the City of Denton. RIC will bill monthly with supporting documentation of activities performed. The actual costs may vary based on problems encountered with DME accounting data and the level of intervention from other parties in the TCOS filing. This budget will not be exceeded without prior xvritten approval of the City of Denton. 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 upon depletion and exhaustion of the $106,100 not to exceed amount; or upon fifteen (15) days written notice to terminate, issued by the Director of Electric Utilities, DME. The work being 3 of 4 Task Order No. 03-F 2003 Transmission Cost of Service Filing 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 in four (4) original counterparts by a duly authorized officEr,of RJC and by a duly authorized officer of the City of Denton, Texas on this the /'~t~,~ day of June, 2003. AUTHORIZED BY: CITY OF DENTON, TEXAS Dated: (/ ACCEPTED BY: R. J. COVINGTON CONSULTING, LLC By: Dated: ATTEST: JENNIFER WALTERS, CITY SECRETARY ROVED AS TO LEGAL FORM: HERBERT L. PROUTY, CITY ATTORNEY S:\Our Docu ments\Contracts\03~RJ C TO 03-F 2003-TCOS Filing.doc 4 of 4 STATE OF TEXAS § COUNTY OF DENTON § FIRST AMENDMENT TO PROFESSIONAL SERVICES AGREEMENT BETWEEN THE CITY OF DENTON, TEXAS AND R.J. COVINGTON CONSULTING, LLC TASK ORDER NO. 05-A Continuation of Services re Transmission Cost of Service Filing This First Amendment to Professional Services Agreement is a Task Order that is contemplated by and related to the Professional Services A~reement providing for a not-to-exceed amount of $106,100 earlier entered into on the 17 day of June, 2003 by and between the City of Denton, Texas ("City") and R.J. Covington Consulting, LLC, ("RJC"), and as approved by the Denton City Council in Ordinance No. 2003-192. The work provided for in this Task Order 05-A is for RJC to continue to assist staff and the City's attorneys in supporting the 2003 transmission cost of service study ("TCOS") before the Public Utility Commission of Texas ("PUC"). The TCOS filing is requesting a rate increase from the City's current TCOS of $995,010 to the requested TCOS of $3,955,195. This $2,960,185 increase is necessary because of the City's increased investment in transmission facilities and the need to recover those costs through the Electric Reliability Council of Texas ("ERCOT") postage stamp transmission facilities charges. This filing also incorporates updated transmission plant records that more accurately reflect the actual Denton Municipal Electric ("DME") transmission plant in service. RJC has worked extensively with City staff in developing supporting documentation for the City's true investment in transmission facilities to file with the PUC. Discussions with PUC staffhave been prolonged due to the extensive adjustments proposed by the City to their plant, and the PUC staff's unfamiliarity with municipal financing of the municipal utility plant. This task order includes additional work with PUC staff, and the development of rebuttal testimony to respond to staff's recommendations regarding the cost of capital that should be allowed as the result of the City's use of the "Cash Flow Method" in developing its requested revenue requirement. Scope of Services Task A - TCOS Filing Schedules 1. Continue to update City's filed TCOS schedules based on information provided by City staff. Task Order No. 05-A Continuation of Transmission Cost of Service Filing 2. Assist City's attomeys in the filing of revised schedules, as needed. Task B - Development of Rebuttal Testimony 1. RJC will review the PUC stafffiled direct testimony and analyze it as compared to the approach used by DME. 2. RJC will develop rebuttal testimony to address deficiencies in the PUC staff filed direct testimony. 3. Working with staff and legal counsel, RJC will coordinate its rebuttal testimony with that of other witnesses. Task C - TCOS Hearings 1. With the City's attorneys, RJC will participate with parties in settlement discussions to attempt to settle the case without going to hearing(s). 2. RJC will assist attorneys in preparing cross-examination of PUC staff and other parties. 3. The hearings will be attended to present direct testimony and to assist attorneys on technical issues. 4. RJC will assist attorneys in preparing briefs. 5. The Administrative Law Judge's Preliminary Order will be reviewed in order to assist attorneys in filing exceptions. 6. The Final Order and other docket-related documents will be reviewed. 7. The TCOS numbers in the Final Order will be evaluated for accuracy and for compliance with the Commission's final decisions. Budget The not-to-exceed amount for the above scope of services of Task Order No. 05- A for labor and expenses is an additional $23,100. This budget will not be exceeded without prior approval of the City of Denton, Texas. RJC will bill monthly with supporting documentation of activities performed. The termination date of Task Order No. 05-A shall be on the earliest to occur of the following events: the date of completion of the work described herein; or upon depletion and exhaustion of the $23,100 not to exceed amount; or upon fifteen (15) days written notice to terminate, issued by the Director of Electric Utilities, DME. The work 2 of 3 Task Order No. 05-A Continuation of Transmission Cost of Service Filing being performed will be under the supervision of the Director of Electric Utilities and may be modified at any time upon appropriate notice to RJC. All other provisions of the Professional Services Agreement, between RJC and the City, dated June 17, 2003 shall continue to be applicable except as specified hereinabove. EXECUTED in four (4) original counterparts by a duly authorized o~cer of RJC a~ by r} duly authorized official of the City of Denton, Texas on this the r/~ day of I ~ I~ Cc,~ ,2005. AUTHORIZED BY: ACCEPTED BY: CITY OF DENTON, TEXAS R. J. COVINGTON CONSULTING, LLC Dated: ~ I-~1 o< Dated: [ I -- ATTEST: JENNIFER WALTERS, CITY SECRETARY APPROVED AS TO LEGAL FORM: HERBERT L. PROUTY, CITY ATTORNEY By: S:\Our Documents\Contracts\05~RJC TO 05-A DME,doc 3 of 3 MEMORANDUM TO: Tom Shaw, Purchasing Agent FROM: Michael S. Copeland, Utility Attorney SUBJECT: First Amendment to Professional Services Agreement (T.O. No. 05-A) City of Denton, Texas/R.J. Covington Consulting, L.L.C. (RJC) Letter of Clarification - Task Order Number No. 05-B (fi.om 05-A) DATE: March 18, 2005 The above First Amendment to Agreement (the "Agreement") was considered by the City Manager, within his delegated authority, on March 7, 2005, and approved on the same date. The City Manager has signed the above First Amendment - Task Order No. 05-A, with a NTE $23,100 amount. However, it has come to my attention this week that there akeady is a Task Order No. 05-A, which I was unaware of. It is on Order Number 121507 000 OP - a $4,400 purchase order, within the Director's authority. Enclosed herewith for your file is an executed original of the Letter of Clarification signed by Howard Martin, as Acting City Manager on March 18, 2005. This corrects and clarifies the Task Order lettering. The $4,400 Task Order No. 05-A will remain unchanged. However, the $23,100 Task Order (which apparently in the process of being issued) has been re-lettered for administrative and billing purposes as "Task Order No. 05-B." There are no other changes being made. By copy of this memorandum I am providing Jan Hill, Denton Municipal Electric with one copy of the original executed Letter of Clarification. Jan will retain that original for her contract administration file. I will mail an original of the above Letter of Clarification to Rick Covington of the Firm. The City Secretary will be furnished an original of the above Letter of Clarification for her records. Task Order No. 05-B will be administered through Denton Municipal Electric (Jan Hill/Sharon Mays). I have copied Jan with this memorandum and am hereby requesting that her department make the appropriate changes on her records and secure the issuance of a purchase order regarding the Agreement. Thank you for your assistance in this matter. MSC/mc Attachment CCi 4/_~oward Martin, Assistant City Manager/Utilities unifer Walters, City Secretary (w/executed original of letter) Rick Covington, R.J. Covington Consulting, LLC., Austin, Texas (w/executed original) Jan Hill, Administrative Assistant, DME (w/executed original of letter) S:\Our Doeuments\CorrespondenceWiemos\05~Shaw-RIC TO 05-B-Letter of Clarification- DME.doc Mr. Mike Copeland, Utility Attorney Utility Administration City of Denton, Texas 215 East McKinney Street Denton, Texas 76201 De. Mike: It has come to my attention that we have inadvertently used the same task order number ("T.O. No. 05-A") for two projects. Both of these projects are associated with work on the City's transmission cost of service filing, but for different areas of support for that filing. The first task order was for "Regulatory Support for Fixed Asset Cost Separation Study". I have received the purchase order, Order Number 121507 000 OP, for that task order. That project has a budget of $4,400 as was within the Director's signature authority. The other task order is "Continuation of Services re Transmission Cost of Service Filing." The budget for that task order is $23,100. I have not received a purchase order for this one, but did get a copy of the signed task order from you, by memo dated March 7, 2005. This is the T.O. that I propose changing the description on. I am requesting that we change the description on the $23,100 task order to "T.O. No. 05- B" rather than T.O. No. 05-A as was approved by the City Manager. The $4,400 task order will remain unchanged. This will only change the task order number on the larger task order to include the "B" designation rather than the "A" designation. If this is acceptable to the City of Denton, I will make that change in our accounting and billing records. If you agree to this change of description, please sign below and return a signed copy to me. I apologize for the oversight and hope this will not inconvenience you or the City. Sincerely, Richard Covington Acceptance: CITY OF DENTON, TE~24.S 11044 Research Blvd., Suite A-325 Amen, ~ 78759 Date: (512) 331-4949 Fax: (512) 331-5743 www. RJCovington. com