2001-145 O IN CE NO
AN ORDINANCE OF THE CITY OF DENTON, TEXAS AUTHORIZING THE CITY
MANAGER TO EXECUTE A PROFESSIONAL SERVICES AGREEMENT IN THE FORM
OF TASK ORDER NO 01-B WITH R J COVINGTON CONSULTING FOR SERVICES
RELATING TO OVERALL RESTRUCTURING IMPLEMENTATION FOR DENTON
MUNICIPAL ELECTRIC, AUTHORIZING THE EXPENDITURE OF FUNDS THEREFOR,
AND PROVIDING AN EFFECTIVE DATE
WHEREAS, the City Counml deems it in the public interest to engage the firm of R J
Covington Consulting, of Austin, Texas ("Covington"), to provide consulting services to the City
relating to Denton Mumclpal Electric, including, without limitation, overall restructunng
lmplementatlon, and
WHEREAS, the City staffhas reported to the City Council that there is a substantial need
for the above-described 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, 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 authonzed to execute a Professional
Services Agreement in the form of Task Order No 01-B with R J Covington Consulting, of
Austin, Texas, for professional consulting services relating to Denton Mumclpal Electric in the
area of overall restmctunng service, ~n substantially the form of the Task Order No 01-B
attached hereto and incorporated herewith by reference
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 ablhty of
Covington to perform the professional services needed by the City for a fair and reasonable
price
SECTION 3 That the expenchture of funds as provided m the attached Professional
Services Agreement is hereby authorized
SECTION 4 That th~s ordinance shall become effectxve ~mmedmtely upon tts passage
and approval
PASSED AND APPROVED th~s the ~ day of ~ ,
2001
EULINE BROCK, MAYOR
ATTEST
JENNIFER WALTERS, CITY SECRETARY
APPROVED AS TO LEGAL FORM
HERBERT L PROUTY, CITY ATTORNEY
S \Our Documents\Ordmanees\01\Covmgton Consultmg PSA-DME TO No 01 B ord doc
ATI'ACHMENT TO
PROFESSIONAL SERVICES AGREEMENT
DATED MARCH 6, 2001
BETWEEN THE CITY OF DENTON AND
R J COVINGTON CONSULTING
TASK ORDER NO 01-B
Electric Regulatory and Restructuring Services
Tasks provided for in this Attachment are dxrected at assisting the City staff
(Staff) in three main areas These are as follows
1 PUC/ERCOT/Legislative Assistance
2 Implementation of Transition Power Agreement
3 Review of Financial Model
pU C/ERCOT/Legislatlve Assistance
This area of activity includes participation at the Public Utility Comn'usslon of
Texas (PUC) and at the Electric Reliability Council of Texas (ERCOT) on issues
affecting the City ERCOT has filed a set of Protocols with the PUC for approval
The Protocols are procedures and policies that will guide the operahons of the
electric market in ERCOT The PUC is in the process of approving these
Protocols and subsequently revising its Substanhve Rules to incorporate the
Protocols The C~ty has been active in protecting its interest in the development
of the Protocols and will need to follow the process through the revision to the
PUC Substantive Rules to insure the gains it has made are preserved in the final
rules and procedures Of particular importance are the rules that affect utilities
with generating resources outside its ERCOT congestion zone (such as Gibbons
Creek) and rules that affect the distribution of costs for lntrazonal congestion,
ERCOT administrative fees, and the handling of other market related costs that
will continue to directly affect the City even after the sale of Spencer and the
hydroelectric generating assets In addition, changes to PUC Substantive rules
affecting transmission cost of service (TCOS) will directly affect the City's TCOS
filing This is also a legislative session year and legislation enacted this summer
can lead to additional changes in ERCOT Protocols and PUC rules These and
other regulatory related activities will directly and indirectly affect the City's
municipal electric system and its ability to contribute to the funding of City
operations
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Implementation of Transition Power Agreement
In addition to the regulatory issues, this Task Order will provide for assistance to
Staff to facilitate the transition after the sale of the Spencer and hydroelectric
generating assets RJC will work with Staff and the new suppher to coordinate
implementation issues which can include issues associated with billing,
metering, settlement and other Qualified Scheduling Entity (QSE) issues RJC
will also work with DME staff to monitor for a few months the wholesale
supplier costs to insure it meets the Transition Power Agreement (TPA) terms
and insure that the appropriate Staff is familiar with the mechanics of the billing
under the TPA so that they can continue auditing the TPA on a monthly basis
Review of Financial Model
In this area of activity, RJC will work with staff in reviewing and fine tunang
DME's financial model to facilitate budgeting and forecasting under the new
supply arrangement, as well as looking at other changes that may be needed to
incorporate recent industry changes RJC may also work on other activities as
ldenhfied by the Director of Electric Utdlt~es
Scope of Services
Task A PUC~RCOT/Leglslatlve Assistance
Task A-1 Attendxng Workshops At PUC And ERCOT
1 RJC will stay informed on activities at the PUC and ERCOT Independent
System Operator (ISO) and will attend workshops as needed
2 When appropriate, RJC will participate in workshops to represent interests of
City based on directions of Staff
3 RJC will work with Staff in developing positions which should be taken and
strategies for working with parties involved
Task A-2 Analyze Proposed Rules and Policies
1 Proposed new rules and rule changes from the PUC and associated proposed
policies from the ISO will be analyzed
2 RJC will discuss proposed new rules and protocols, and changes to existing
rules and protocols with Staff, helping to identify areas of concern and
preparmg positions that represent the interests of the City
3 RJC will meet with PUC staff and other parties as appropriate to discuss
proposed rules and protocols, and present the City's concerns regarding such
proposals
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Task A-3 Preparation of Comments
I RJC will prepare or assist m preparing comments to be filed with the PUC
representing City's position on issues brought up m proposed rules and
dockets
2 These comments wrll be coordinated through Staff and the City's legal team
3 RJC will assist the City's legal team as necessary in the preparation and filing of
comments
Task A-4 Work W~th Staff And Legal Team
1 RJC will have continuing commurucation with Staff and the City's legal team in
order to momtor proposed industry changes and address those issues affecting
muruclpahties
2 An on-going dialog will be maintained with Staff and the legal team in order to
evaluate changing operating and market reqmrements and conditions, and
evaluate potential effects on City operahons
3 Information necessary to supplement and support the decision making process
will be provided as requested
Task A-5 Techmcal Support
1 RJC will prowde technical support to the City's legal team to assist tn the
evaluation of proposals and the potential impact on the City under different
scenarios
2 RJC will provide technical support to Staff, providing reformation as
requested from time to time to assist Staff in its evaluations and planning
processes
3 RJC will evaluate scenarios and proposals from perspective of City utihty and
as a member of TMPA
Task B Implementation of Transition Power Agreement
Task B-1 Change-Over Issues
1 RJC will work with Staff and supplier as needed to coordinate the change-over
of the Spencer and hydro generation tnto a purchase power contract
2 This may include issues between the ISO, supplier and DME, or other tssues
that arise in connection with the lmplementatton of the TPA
3 In particular, TPA issues such as penalties associated wtth scheduhng and
unit availablltty concerns for Gibbons Creek, as well as other contract terms will
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be discussed with the appropriate Staff that will be responsible for monitoring
compliance of DME and supplier to TPA terms
Task B-2 Administration of TPA BIlhng
1 RJC will momtor the bllhng from supplier for the first few months to insure
the bdhng terms are properly implemented between City and power supplier
2 RJC will assist Staff in developing auditing procedures for auditing monthly
bdhng and work with Staff in automating the audit process
Task C Review of Financial Model
Task C-1 Rewew of Financial Model
1 RJC will work with Staff to review the DME financial model and incorporate
changes needed to model and forecast power bflhng under the TPA
2 RJC will also discuss with Staff other possible changes needed to reflect
changing ERCOT operations and market conditions, particularly in the area of
how changing gas prices will affect power billing to DME, new ERCOT fees to
look for, and new loss allocations within ERCOT
Task C-2 Natural Gas Forecast
1 RJC vail provide a forecast of natural gas prices to use in the financial model
2 The forecast will include a range of prices based on scenarios identified by
Staff
3 RJC will assist Staff in reviewing the financial model to insure assumptions
regarding gas prices and electric prices are consistent for each identified scenario
Budget
Based on prior experience in working with these issues, RJC recommends a
budget of not to exceed $75,000 for labor and expenses be approved This budget
will not be exceeded without prior approval of the City RJC will bill monthly
w~th supporting documentation of activities performed The work being
performed will be under the supervision of the Director of Electric Utlhtles and
may be modified at any time upon appropriate notice to RJC
EXECUTED thls.~t~ day of ~ ,2001
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AUTHORIZED BY ACCEPTED BY
CITY OF DENTON, TEXAS R J COVINGTON CONSULTING
Dated. ~/~/J~, ~ I k. Dated
ATTEST APPROVED AS TO LEGAL FORM
JENNIFER WALTERS HERBERT L PROUTY
CITY SECRETARY CITY ATTORNEY
S \Our Documents\Contracts\ 01 \ R~ck Covington Consulting Task Order 01 B doc
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