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DME reboots energy plan, seeks new general manager

Denton Municipal Electric is rebooting after major missteps led to the ouster of three high-level employees.

The reboot should bring DME a new general manager a second, independent look at the city’s energy plan by fall and a new way to evaluate the specialized group at DME that buys and sells electricity on the Texas grid.

Deputy City Manager Bryan Langley, who also is serving as interim general manager for DME, said a public component will be part of each of those new steps. A key community value is now top-of-mind at the city-owned utility, too.

“We’ll get as close to 100 percent renewable as we can,” Langley said.

As long as the lights came on and the monthly bill remained affordable, most Denton residents left worries about electric rates and reliability to city leaders — until recently.

In late 2015, Denton Municipal Electric announced its plans to buy more renewable energy from wind and solar farms. The plan to boost the city’s electric “portfolio” to 70 percent renewable energy got the public's attention because it included replacing the city’s aging coal-fired power plant with a new, natural-gas fired power plant.

The Denton Energy Center, estimated to cost between $225 million and $265 million, proved highly controversial. Some criticized the high cost of the project; others criticized DME for tying the city to fossil fuels for another 20 years. 

Construction of the plant, northwest of Denton Enterprise Airport on the city's west side, is on time and on budget, according to a Friday staff report to the city council. The plant is about 43 percent complete and is expected to be making and selling electricity by July 2018. 

For the construction of the Denton Energy Center, located on Jim Christal Road near Denton Enterprise Airport, Denton Municipal Electric received its final shipment on Monday of SCRs (Selective Catalytic Reduction equipment) pictured here covered by blue tarps. The SCRs are part of the emissions control equipment for the Denton Energy Center and were shipped in on four trucks.DRC
For the construction of the Denton Energy Center, located on Jim Christal Road near Denton Enterprise Airport, Denton Municipal Electric received its final shipment on Monday of SCRs (Selective Catalytic Reduction equipment) pictured here covered by blue tarps. The SCRs are part of the emissions control equipment for the Denton Energy Center and were shipped in on four trucks.
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After investigators uncovered contracting irregularities for the Denton Energy Center, two high-level employees were fired and former General Manager Phil Williams resigned. Although there is more work to be done on the management of DME, the rank-and-file at DME keeps the lights on and the electric rates remain stable. 

Analyzing the analysts

The group that buys and sells electricity on the Texas grid — the Energy Management Organization — likely saves money for DME ratepayers, Langley said.

However, city leaders have asked for an independent assessment of the group and the models it uses for its trading so the city's Public Utilities Board, the City Council and the public will have better information to evaluate the group, Langley said.

Deloitte, a multinational accounting and auditing firm, is performing the evaluation and writing the report for the city. 

The evaluation is important because the trading group does work required by the Texas electrical grid. If DME doesn’t do the work itself, it must pay someone else to do the work. The evaluation will help city leaders make sure DME’s analysts are buying and selling electricity in a way that is cost effective and efficient, especially when compared to outsourcing.

The evaluation also is important because the trading group eventually will be responsible for selling the electricity generated at the Denton Energy Center.

Stephen Johnson supervises the 15-person unit that buys and sells electricity for DME.
From day to day, “we protect the price we’re buying electricity at,” Johnson said.

DME buys most of its electricity through long-term contracts with power suppliers, increasingly from renewable sources, such as wind and solar farms. But sometimes the city needs more electricity than the contracts provide. Other times, the city doesn’t need as much electricity as the wind and solar farms are generating, though that’s far less common, says Jose Gaytan, an analyst in the trading group.

Some of DME's analysts have business or finance degrees. Others have engineering, math or computer science degrees. Together, they keep an eye on the Texas energy market all day, every day to make sure when costs settle, they do so at a fair price for DME and its ratepayers, Johnson said.

Denton Renewable Plan 2.0

The city sought a fresh set of eyes to evaluate its energy portfolio, too, Langley said.

DME changed the city’s energy portfolio when it proposed the Renewable Denton Plan last year.

That plan called for Denton to walk away from coal-fired power and sign enough wind and solar contracts to supply about 70 percent of the city’s power by 2019 (now expected to be 88 percent). The plan also called for the Denton Energy Center to provide some of the city’s power, except when it was cheaper for the trading group to buy power from the grid.

DME officials also expected to sell power when market conditions were right. For example, if the power plant had been in place when prices spiked several times on the Texas grid in summer 2011, DME could have made $40 million, according to Jussi Heikkinen, the senior director for business development at Wärtsilä.

Wärtsilä manufactures the engines that will become the heart and soul of the Denton Energy Center. 

Those electric sales, in turn, would help pay for the Denton Energy Center's financing and subsidize electric rates, though it was not quite clear how or when. 

An independent analyst will take a second look at that energy portfolio and make recommendations to the Public Utilities Board and the city council, information that will be available to the public, too, Langley said.

The city expects the Denton Energy Center still will be a part of that portfolio, but the emphasis will be on bringing renewable energy forward as soon as possible, Langley said.

General manager search

Denton City Manager Todd HilemanDRC File Photo
Denton City Manager Todd Hileman
DRC File Photo

City Manager Todd Hileman said this week candidates for general manager at DME can expect a public reception as part of the screening process, a step he found helpful in his own candidacy.

Many people took the time to explain their concerns about the city and its operations, giving  him a good idea what to expect when he arrived in January, Hileman said.

“The new general manager needs to hear from the public,” Hileman said.

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

FEATURED PHOTO:  Pictured on the walls of the office of the Energy Management Organization at Denton Municipal Electric, analysts on Friday monitor screens with various information to help them determine when to buy and sell electricity at the best price.
Jake King/DRC