1. Topics  Renewable Energy  Electricity prices and retail competition  TXU Acquisition  Legislative Session

2. Texas Renewable Energy Program  1999 legislation introduced retail competition  Renewable issues –Renewable energy goal of 2,000 MW of new renewables by 2009 –Market-based mechanism to support efficient deployment: Renewable Energy Credits

3. Renewable Energy Credits Generators Generators earn RECs for production Customers Retailers required to retire RECs and may retire them to validate green products REP Retailers Retailers buy power and RECs

4. Renewable Capacity Goal 2003400 mw 2005850 mw 2007 1400 mw Actual 2003990 mw 20051190 mw Today 3000 mw Capacity is expected to reach 4800 mw by the end of 2007.

5. Renewable Legislation 2005  New renewable energy goal –5000 MW by 2015  Renewable targets –10,000 MW by 2025 –500 MW of non-wind by 2015  Competitive Renewable Energy Zones –Facilitate development of additional renewables that require transmission

6. Competitive Renewable Energy Zones  Coordinate transmission and generation development  Designate renewable energy zones  Develop transmission plan  Expedite licensing of transmission  Consider level of financial commitment in designating zone and licensing transmission

7. Popular Wind Areas Panhandle McCamey Central

8. Natural Gas Prices and Electric Prices in the Competitive Market

9. Residential Customer Switching

10. TXU Acquisition  KKR and Texas Pacific announced acquisition of TXU Corp.  TXU is holding company that owns generation company, electric utility, and retail electric provider  Parties are required to give notice to PUC, which determines whether acquisition is in public interest  Legislators have expressed concerns about gouging retail customers and TXU’s concentration in generation sector

11. TXU Acquisition  Legislation –PUC authority to approve or disapprove acquisition –Requirement to divest generation  PUC proposed rules –Utility must provide 6 months notice of transaction –Retail provider must demonstrate higher level of financial capacity  PUC initiated rate review

12. Legislative Issues  Price levels for retail customers  Concentration in generation sector  Discount program for low-income customers  Adequacy of generation to meet growth in demand  Emissions from projected coal plants