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More scrutiny ahead for Denton's solid waste department, DME

The Denton Public Utilities Board agreed Monday the city needs outside experts to assess the energy trading group at Denton Municipal Electric and to examine possible purchasing irregularities in Denton’s Solid Waste Department. 

The board also agreed with a staff recommendation to hold the line on utility rates next year. Because of changes in the electric market, the average homeowner may save a dollar or two on their electric bill next year.

A risk assessment group, Weaver, will examine purchasing, budgeting and contracting in the Solid Waste Department, according to Deputy City Manager Bryan Langley.

Weaver is a nationwide firm that offers risk advisory services. The firm has several offices across Texas, as well as on the East and West coasts. 

Langley offered few details publicly about what triggered the need for a review in the Solid Waste Department. However, he said Weaver had worked for the city before and had the expertise the city needs to examine the department's practices.  

Weaver’s review is expected to be completed by September and cost the city about $75,000. A final report will include any recommended changes. 

The purchasing and solid waste directors retired earlier this year. City Manager Todd Hileman promoted Ethan Cox as the new director of solid waste and Karen Smith as the new purchasing manager.

Langley also confirmed that Deloitte Touche Tohmatsu Ltd., a multinational auditing firm, will examine the DME group that buys and sells electricity on the Texas grid. 

Known formally as the Energy Management Organization, DME's trading group is expected to grow to 17 employees next year and cost about $4.7 million to run.

Most city electric departments hire outside firms to manage their electricity trading on the Texas grid. The buying and selling of electricity can occur in “real time” and in “day ahead” markets. Successful trading requires sophisticated computer models that may, or may not, predict what really happens in the electric market.  

DME set up its own trading group in 2014. The traders say they are saving money for ratepayers — about $13 million since taking over the work that used to be outsourced.

However, after the city launched an investigation into contracting irregularities at DME, questions arose about the trading group and its operations. 

Deloitte’s experts will look at the trading group’s performance in 2014-15 and 2015-16. The experts will assess the computer modeling the group uses to trade, Langley said.

“They will also bring back to PUB and City Council a model for 2017-18 and going forward,” Langley said.

The goal is for everyone to agree on how the trading group’s performance will be measured and evaluated, he said.

Deloitte's assessment is expected to cost $60,000, with a report delivered next month.

DME changed the way it did business after establishing the trading group, which functions like “a business within a business,” according to one employee’s LinkedIn page.

As part of that change, DME recommended the city spend about $265 million to build a new, “quick-start” power plant called the Denton Energy Center. DME said the power plant could do two things: The power plant would allow DME to buy renewable energy without having to buy insurance against price spikes, and the power plant would allow DME to catch those price spikes and make millions. 

But the trading group is a key component of that new way of doing business, since the entire package was supposed to save DME a half-billion dollars over the next 20 years.

However, the contracts to build the power plant have been subject to intense investigation over the past month.

Phil Williams, DME’s general manager, resigned in the wake of that investigation and two other high-level employees were fired.

Hileman is expected to issue a statement Wednesday on the outcome of the city’s investigation into contracting irregularities at DME.

About the Public Utilities Board

Volunteers from the community serve on the Public Utilities Board. They are appointed for four-year terms by the City Council. The board meets twice a month to review issues and policies for the city’s utility departments: water, wastewater, solid waste and electric. The board also reviews utility rates, bonds and budgets and makes recommendations for capital improvements. The board’s recommendations go to the City Council before final approval.

Two of the current board members, Barbara Russell and Randy Robinson, have served for a long time. Robinson, a banker with PointBank, has been on the board since 2006 and serves as chairman. His current term ends in 2018. Russell, a real estate agent and property owner, has served since 2009. Her term ends this year.

The next longest-serving member is Lilia Chavez Bynum, who has served since 2012. The former CEO of United Way of Denton County, she now works as a program coordinator for TWU’s Reading Recovery program. Her term ends in 2019.

Three more members also have terms ending in 2019. Brendan Carroll, an information technology consultant, and Susan Parker, an insurance agent, were appointed in 2015. Charles Jackson was appointed in 2014.

The newest member, Allen Bishop, was appointed last year. He also is a real estate agent.

PEGGY HEINKEL-WOLFE can be reached at 940-566-6881.

In the Know

Utility rates have increased for the past several years in Denton. However, city officials recommended no rate increase for 2017, which could mean a slight dip for the average homeowner's electric bill. Here's how the average bills in 2016 and 2017 compare to 2012: 

Average utility bill 2012 2016 2017
Electric $119.86 $140.47 $138.73
Water $42.35 $54.18 $54.18
Sewer $27.50 $35.55 $35.55
Solid Waste $24.40 $27.85 $27.85
Total $214.11 $258.05 $256.31

FEATURED PHOTO: For the construction of the Denton Energy Center, Denton Municipal Electric received its final shipment on Monday of selective catalytic reduction equipment, pictured here covered by blue tarp. The equipment is part of the emissions control for the center and was shipped in on four trucks.
Jake King/DRC