Exhibit 10(eee)

DOCKET NO. 34077

 

JOINT REPORT AND APPLICATION    §   BEFORE THE     OF ONCOR ELECTRIC DELIVERY   
§         COMPANY AND TEXAS ENERGY    §   PUBLIC UTILITY COMMISSION     FUTURE
HOLDINGS LIMITED    §         PARTNERSHIP PURSUANT TO    §   OF TEXAS     PURA §
14.101    §        

STIPULATION

The following parties have reached a settlement of all issues in this docket
concerning the report of the merger of TXU Corp., the parent of Oncor Electric
Delivery Company (“Oncor”), and Texas Energy Future Holdings Limited Partnership
(“TEF”) (the “Transaction”): TEF, Oncor, the Staff of the Public Utility
Commission of Texas (“Staff”), the Office of Public Utility Counsel (“OPC”),
Texas Industrial Energy Consumers (“TIEC”), the Steering Committee of Cities
Served by Oncor Electric Delivery Company (“Cities”), the State of Texas
(“State”), the Texas State Association of Electrical Workers (“IBEW”), Texas
Ratepayers’ Organization to Save Energy (“Texas ROSE”) and Texas Legal Services
Center (“TLSC”) (hereinafter collectively referred to as “Signatories.”). The
Signatories submit this Stipulation to the Commission as representing a just and
reasonable disposition of the issues related to this docket consistent with the
public interest. The Signatories request approval of this Stipulation and entry
of findings of fact and conclusions of law consistent with that approval.

By this Stipulation, the Signatories resolve all issues between them related to
the Application of TEF and Oncor in Docket No. 34077, and agree as follows:

I.

TEF and Oncor made the following 22 commitments in their direct and rebuttal
testimonies filed in this docket. The Signatories request that the Commission
enter the Proposed Order attached hereto as Exhibit A that reflects these
commitments and any modifications to them listed in paragraphs (23) through
(53):

 

  (1)

Name Change Commitment. On or before closing of the Transaction, the name of TXU
Electric Delivery Company will be changed to Oncor Electric Delivery Company.
Oncor’s logo will be separate and distinct from the logos of the parent,

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TXU Corp.1, the retail electric provider, which will retain the TXU Energy name
(“TXU Energy Retail”), and the power generation company, which we expect to
rename with the Luminant Energy brand (“Luminant”). In fact, the name of TXU
Electric Delivery Company was changed to Oncor Electric Delivery Company on
April 24, 2007. TXU Corp. commits to maintaining a name and logo for Oncor that
is separate and distinct from the names of TXU Corp.’s retail electric provider
and wholesale generation companies.

 

  (2) Separate Board Commitment. At closing and thereafter, Oncor will have a
separate board of directors that will not include any members from the boards of
directors of TXU Energy Retail or Luminant. This commitment is supplemented by
paragraphs (32) and (33).

 

  (3) Separate Headquarters Commitment. Within a reasonable transition period
after closing of the Transaction, not to exceed six months, Oncor’s headquarters
will be located in a separate building from the headquarters and operations of
TXU Energy Retail and Luminant.

 

  (4) No Transaction-Related Debt at Oncor Commitment. Oncor will not incur,
guaranty, or pledge assets in respect of any incremental new debt related to
financing the Transaction at the closing or thereafter. Oncor’s financial
integrity will be protected from the separate operations of TXU Energy Retail
and Luminant. This commitment is supplemented by paragraph (28).

 

  (5) Debt-to-Equity Ratio Commitment. Oncor’s debt will be limited so that its
regulatory debt-to-equity ratio is at or below the assumed debt-to-equity ratio
established from time to time by the Commission for ratemaking purposes, which
is currently set at 60% debt to 40% equity. For ratemaking purposes, in its
scheduled rate cases in 2007 and 2008, Oncor will support a cost of debt that
does not exceed Oncor’s actual cost of debt immediately prior to the
announcement of the Transaction. This commitment is supplemented by paragraphs
(36), (37), and (38).

 

  (6) Capital Expenditure Commitment. Following the closing of the Transaction,
Oncor will continue to make capital expenditures consistent with the capital
expenditures in Oncor’s business plan. Total capital spending will depend in
part on economic and population growth in Texas, as well as permitting and
siting outcomes. However, in any event, over the five years following the year
in which closing of the Transaction occurs, Oncor will make capital expenditures
in connection with its transmission and distribution business in an aggregate
amount of more than $3.0 billion. This commitment has been replaced by the
provisions of paragraph (44).

 

  (7) DSM/Energy Efficiency Commitment. Over the five years following the year
in which closing occurs, subsidiaries of TXU Corp. will expend an aggregate of
at least $200 million on DSM over the amount included by the Commission in
Oncor’s rates. This commitment will approximately double the level of spending
on DSM currently

 

1 As a result of the closing of the Transaction on October 10, TXU Corp. is now
named Energy Future Holdings Corp. (“EFH Corp.”). Any current references to TXU
Corp. in this Stipulation are to EFH Corp.

 

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included in Oncor’s rates. Oncor will not seek to recover in rates any of the
$200 million in incremental DSM expenditures. This commitment is supplemented by
paragraphs (41) and (42).

 

  (8) Service and Safety Commitment. Oncor will support the inclusion of
negotiated commitments with appropriate stakeholders regarding reliability,
customer service and employee safety in any final order regarding the
Transaction issued pursuant to PURA § 14.101. Those negotiated commitments are
reflected in paragraphs (46), (47), and (48).

 

  (9) Rate Case Commitment. If, for any reason, the Commission has not initiated
a general rate proceeding for Oncor or its predecessor prior to July 1, 2008,
Oncor will not later than that date file a general rate case consistent with its
currently effective settlement agreement with certain municipalities.

 

  (10) Continued Ownership Commitment. TEF will hold a majority of its ownership
interest in Oncor, in the current regulatory system, for a period of more than
five years after the closing date of the Transaction.

 

  (11) Holding Company Commitment. A new holding company, Oncor Electric
Delivery Holdings, will be formed between TXU Corp. and Oncor.

 

  (12) Independent Board Commitment. Each of Oncor Electric Delivery Holdings
and Oncor will have a board of directors comprised of at least nine persons. A
majority of the board members of each of Oncor Electric Delivery Holdings and
Oncor will qualify as “independent” in all material respects in accordance with
the rules and regulations of the New York Stock Exchange (“NYSE”) (which are set
forth in Section 303A of the NYSE Listed Company Manual and in Exhibit FMG-2 to
the Direct Testimony of Frederick M. Goltz filed in this proceeding), from TXU
Corp. and its subsidiaries (including TXU Energy Retail and Luminant), TPG, and
KKR. Consistent with TEF’s commitments, the directors of Oncor and Oncor
Electric Delivery Holdings will also not include any members from the boards of
directors of TXU Energy Retail or Luminant. This commitment is supplemented by
paragraph (32).

 

  (13) Affiliate Asset Transfer Commitment. Neither Oncor Electric Delivery
Holdings nor Oncor will transfer any material assets or facilities to any
affiliates (other than Oncor Electric Delivery Holdings, Oncor, and their
subsidiaries, which are hereinafter referred to as the “Ring-Fenced Entities”),
other than such transfer that is on an arm’s length basis consistent with the
Commission’s affiliate standards applicable to Oncor, regardless of whether such
affiliate standards would apply to the particular transaction.

 

  (14) Arm’s Length Relationship Commitment. Each of the Ring-Fenced Entities
will maintain an arm’s length relationship with the TXU Group consistent with
the Commission’s affiliate standards applicable to Oncor.

 

  (15)

Separate Books and Records Commitment. Each of the Ring-Fenced Entities will

 

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maintain accurate and appropriate detailed books, financial records and
accounts, including checking and other bank accounts, and custodial and other
securities safekeeping accounts that are separate and distinct from those of any
other entity.

 

  (16) Oncor Board’s Right to Determine Dividends Commitment. The Oncor Board,
comprised of a majority of independent directors, will have the sole right to
determine dividends. This commitment is supplemented by paragraphs (23) and
(34).

 

  (17) Capital Expenditures Within Oncor Service Territory Commitment. The $3
billion minimum commitment for Oncor capital expenditures over the five years
following the Transaction will be spent within the traditional Oncor system, and
that amount does not include any transmission projects to be constructed by
Oncor as a result of the Commission’s decision in its Docket No. 33672,
Commission Staff’s Petition for Designation of Competitive Renewable Energy
Zones. This commitment is modified by paragraphs (44) and (45).

 

  (18) No Transaction Costs to Oncor Commitment. None of the fees and expenses
nor any incremental borrowing costs of TXU Corp. or its subsidiaries related to
the Transaction will be borne by Oncor’s customers. This commitment is
supplemented in paragraph (40).

 

  (19) Exclusion of Goodwill Commitment. The calculations for the debt-to-equity
ratio commitment will not include goodwill resulting from the Transaction. This
commitment is supplemented by paragraph (39).

 

  (20) No Inter-Company Debt Commitment. Oncor will not enter into any
inter-company debt transactions with TXU Corp. affiliates following consummation
of the Transaction. This commitment is supplemented by paragraph (26).

 

  (21) No Shared Credit Facilities Commitment. Oncor will not share any credit
facility with any unregulated affiliate. This commitment is supplemented by
paragraph (27).

 

  (22) No Recovery of TXU Energy Retail Bad Debt Commitment. So long as TXU
Energy Retail is affiliated with Oncor, Oncor will not seek to recover from its
customers any costs incurred as a result of a bankruptcy of TXU Energy Retail.
This commitment is supplemented by paragraph (30).

In addition to the commitments made in testimony, the Signatories hereby
stipulate and agree as follows and request the Commission to find and enter an
order that reflects the following:

 

  (23) The Oncor LLC agreement shall, and TEF and Oncor will support a
Commission finding to, limit the payment of dividends by Oncor through
December 31, 2012, to an amount not to exceed Oncor’s net income (determined in
accordance with GAAP) for the period beginning on the date following the closing
of the Transaction and ending on December 31, 2012.

 

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  (24) Oncor will implement a one-time $35 million write-off in 2007 or 2008, at
its discretion either prior to or after the closing of the Transaction, to its
storm reserve and a one-time write-off in 2007 or 2008, at its discretion either
prior to or after the closing of the Transaction, to the 2002 restructuring
expenses held as regulatory assets ($20,927,391.50). These write-off amounts
will not be included as a cost item in the 2008 rate case or any other
Commission proceeding. Parties reserve the right to challenge claimed expenses
included in storm reserve and regulatory assets accounts. These write-offs shall
not be included in the calculation of net income for dividend payment purposes,
as described in paragraph (23).

 

  (25) Oncor will file quarterly earnings monitoring reports with the
Commission, including information on dividends paid, for a period of five years
beginning in January 2008.

 

  (26) Oncor will not lend money to or borrow money from TXU Corp. or TXU Corp.
affiliates. This provision supplements the commitment reflected in paragraph
(20).

 

  (27) Oncor will not share credit facilities with TXU Corp. or TXU Corp.
affiliates. This provision supplements the commitment reflected in paragraph
(21).

 

  (28) Oncor’s assets shall not be pledged for any entity other than Oncor. This
provision supplements the commitment reflected in paragraph (4).

 

  (29) Oncor, TXU Corp., and TXU Corp. affiliates will provide advance notice of
their corporate separateness to lenders on all new debt and will use
commercially reasonable efforts to seek an acknowledgment representation of that
separateness and non-petition covenants in all new debt instruments, including
the debt instruments used in connection with financing the Transaction. This
commitment will terminate at such time that Oncor ceases to be affiliated with
TXU Corp.

 

  (30) Oncor will not seek recovery in rates of any expenses related to a
bankruptcy or default of TXU Corp. or TXU Corp. affiliates, including bad debt
expense, or expenses associated with the expiration or cancellation of tax and
interest reimbursement agreements presently in effect. This provision
supplements the commitment reflected in paragraph (22).

 

 

(31)

During any period that any two of the Standard & Poor’s, Moody’s, or Fitch
rating agencies rate Oncor as an entity at below investment grade,2 TEF will
cause TXU Energy Retail within 15 days to post a letter of credit in favor of
Oncor in the amount of $170 million to secure TXU Energy Retail’s payment
obligations to Oncor. The parties agree that TXU Energy Retail may withdraw the
letter of credit at such time as two of the three ratings agencies rate Oncor as
investment grade or at such time as TXU Energy Retail and Oncor cease to be
affiliated with one another. The cost of any letter of credit required under
this provision will not be reflected in Oncor’s rates.

 

2

Ratings are below investment grade if they fall below the following ratings:
Fitch’s BBB- rating, Standard and Poor’s BBB- rating, or Moody’s Baa3 rating.

 

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  (32) For an individual to qualify as an independent director of Oncor, such
individual must be independent of each of Oncor, TEF, TXU Corp. and TXU Corp.
affiliates, KKR, TPG, Goldman Sachs, Lehman Brothers, Morgan Stanley, Citigroup,
J.P. Morgan, and CSFB in accordance with the applicable criteria set forth in
the NYSE Manual for independent directors of NYSE listed companies. This
provision supplements the commitment reflected in paragraph (12). After such
time as any of Lehman Brothers, Morgan Stanley, Citigroup, J.P. Morgan, or CSFB
has sold all of the debt it underwrote to finance the Transaction, then any such
entity that has sold all of the debt it underwrote to finance the Transaction
shall be deemed removed from the list of entities from which an individual must
be independent in order to qualify as an independent director of Oncor in this
paragraph (32).

 

  (33) The currently contemplated sale of a minority interest in Oncor, to the
extent that such sale occurs, will be made to a party that is not otherwise
affiliated with, and is independent from, TXU Corp., KKR, TPG, and Goldman
Sachs. Oncor may dividend the net proceeds from the sales of minority interests
in Oncor to its member without regard to the provisions of paragraph (23).

 

  (34) Oncor’s Board cannot be overruled by the Board of TXU Corp. or any of its
subsidiaries on dividend policy, debt issuance, capital expenditures, management
and service fees, and appointment or removal of Board members, provided that
such actions may also require the additional approval of Oncor Electric Delivery
Holdings’ Board. This provision supplements the commitment reflected in
paragraph (16).

 

  (35)

Within 45 days after the Commission dismisses P.U.C. Docket No. 34040, Oncor
will provide a one-time credit of $72 million to REPs to be paid or directly
credited to its retail customers. The one-time credit shall be allocated and
refunded as reflected on Exhibit B to this Stipulation. Oncor will notify all
Retail Electric Providers (REPs) in its service area that the credit will be
available only to those REPs that within 15 days of receiving the notice agree
in writing to: (1) pay or otherwise directly credit the one-time credit in full
to retail customers by customer class within 35 days of receipt of the credit
from Oncor, and (2) file a report with the Commission within 60 days of receipt
of the credit from Oncor listing the amounts the REP credited to customers by
customer class. To the extent that certain REPs do not participate in the rate
credit, Oncor will reallocate in the same proportions the remaining portion of
the $72 million rate credit to the REPs participating in the rate credit so that
the full $72 million rate credit is received by participating REPs and paid or
directly credited to retail customers. Credit amounts that are unclaimed by
non-industrial customers after the initial REP allocation and reallocation, such
as credits related to retail customers who cannot be readily located, will be
directed to that REP’s bill payment assistance programs and accounted for in the
report required to be filed by the REP with the Commission. This $72 million
one-time credit to retail customers shall count as a reduction to net income in
the calculation of net income for dividend payment purposes described in
paragraph (23). TEF will ensure that TXU Energy Retail passes the entire rate
credit that it receives directly through to its retail customers. The parties
agree that the one-time rate credit will not be recovered by Oncor in any future
proceedings, and further agree that they will not argue that the rate credit is
any

 

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precedent or support for a rate reduction in the 2008 rate case or any future
rate proceeding. The Signatories will request the Commission to dismiss P.U.C.
Docket No. 34040, Commission Staff’s Petition for Review of the Rates of TXU
Electric Delivery Company, and Oncor will agree to file a system-wide rate case
no later than July 1, 2008 based on a test-year ended December 31, 2007.

 

  (36) Oncor’s debt will be limited so that its debt-to-equity ratio is at or
below the assumed debt-to-equity ratio established from time to time by the
Commission for ratemaking purposes, which is currently set at 60% debt to 40%
equity. The Commission has authority to determine what types of debt and equity
are included in a utility’s debt-to-equity ratio. The purposes to be conducted
or promoted by Oncor are those of an electric transmission and distribution
company, including owning and operating equipment or facilities to transmit and
distribute electricity, and to engage in any other activities related or
incidental thereto or in anticipation thereof. Oncor will agree to cap its cost
of debt for the 2008 rate case at pre-Transaction levels. In addition, Oncor
will agree that its cost of debt in future rate proceedings initiated prior to
December 31, 2012 will be based on the then-current cost of debt for electric
utilities which have the same investment grade ratings, as established by the
Standard & Poor’s, Moody’s and Fitch rating agencies, at the time of such
proceedings as Oncor’s ratings as of October 1, 2007. This provision supplements
the commitment reflected in paragraph (5).

 

  (37) If, at any time from the date of closing of the Transaction through
December 31, 2012, Oncor’s entity rating is not maintained as investment grade
by Standard & Poor’s, Moody’s, or Fitch credit rating agencies, Oncor will not
use its below investment grade ratings to justify an argument in favor of a
higher regulatory ROE. This provision supplements the commitment reflected in
paragraph (5).

 

  (38) TEF and Oncor will not include goodwill from the acquisition in the
calculation of the Debt-to-Equity Ratio commitment to justify increased debt at
Oncor. Write-downs or write-offs of goodwill will not be included in the
calculation of net income for dividend payment purposes. This provision
supplements the commitment reflected in paragraph (5).

 

  (39) Oncor will not seek to recover Transaction goodwill or any expense
associated with the impairment of goodwill in its rates. This provision
supplements the commitment reflected in paragraph (19).

 

  (40) Oncor will not seek to include costs related to the Transaction in its
rates. This provision supplements the commitment reflected in paragraph (18).

 

  (41) Oncor will not seek recovery in rates of any portion of the $200 million
TEF DSM/Energy Efficiency commitment. This provision supplements the commitment
reflected in paragraph (7).

 

  (42) TEF will spend $100 million of the additional $200 million DSM/Energy
Efficiency commitment reflected in paragraph (7) at Oncor.

 

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  (a) From January 1, 2008 through December 31, 2012, Oncor shall spend $100
million of DSM/Energy Efficiency commitment as follows:

 

  i. Oncor shall spend $16 million for low income customer programs which will
be conducted in a manner consistent with P.U.C. energy efficiency rules. To do
so, Oncor will negotiate and execute a contract with the Texas Association of
Community Action Agencies (TACAA) to administer $3.2 million annually (for
calendar years 2008 through 2012) for weatherization assistance services through
local contracts with governmental and nonprofit agencies that will augment
resources from the federal weatherization assistance program. Oncor will use its
best efforts to have this agreement in place within 30 days of the final Order
in Docket No. 34077. The contract with TACAA must contain reporting provisions
to ensure that the funds are spent efficiently on effective weatherization
programs, and provisions that ensure that TACAA makes reasonable progress toward
spending the total $16 million over five years. TACAA must also agree that these
additional weatherization funds will be spread equitably across the entire Oncor
service area, including through community action agencies that are not members
of TACAA. For this $16 million for low income customer programs, Oncor shall
provide the Commission accurate annual reporting of revenues spent, the
reduction in demand, and energy savings by customer class.

 

  ii. After accounting for the low income customers’ share of the $100 million
to be spent by Oncor, Oncor shall spend the remaining $84 million for the
benefit of industrial, commercial, residential and municipal, state, and other
governmental customers. Oncor will spend the remaining $84 million for
DSM/Energy Efficiency in a manner consistent with P.U.C. energy efficiency
rules, except that (A) up to $8.4 million of the remaining $84 million need not
meet the cost effectiveness standards set out in such rules; and (B) program
cost effectiveness will be measured over the life of the energy efficiency
measure, provided that there will be realized savings in a three year period.
For purposes of this Stipulation only, all end-use customers, including
industrial, municipal, state and other governmental customers, will be
considered “eligible customers.” Oncor shall provide the Commission accurate
annual reporting of revenues spent, the reduction in demand, and energy savings
by customer class.

 

  iii. The $100 million DSM/Energy Efficiency spending described here shall be
in addition to amounts Oncor is required to spend under PURA § 39.905, other
legislation, or its preexisting obligations, including those related to Docket
Nos. 32103 and 34630. Energy savings achieved through the expenditure of this
$100 million shall not count toward meeting or exceeding requirements of PURA §
39.905, related substantive rules, or for purposes of calculating bonuses.

 

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  iv. If the $100 million to be expended by Oncor for DSM/Energy Efficiency is
funded by Oncor, including through the sale or transfer of Oncor’s assets, the
portion of the $100 million spent in any calendar year shall be included in the
calculation of net income for dividend payment purposes, as described in
paragraph (23), but shall not be recognized as an expense for purposes of
calculating Oncor’s rate of return as reported on any Commission-required filing
or in support of any future Oncor rate increase.

 

  (b) The other $100 million that TEF has committed to spend on DSM/Energy
Efficiency will be funded and spent by TEF affiliates other than Oncor for the
benefit of industrial, commercial, residential and municipal, state, and other
governmental customers from January 1, 2008 through December 31, 2012.

 

  (c) These provisions supplement the commitment reflected in paragraph (7).

 

  (43) Any corporate support services provided by an affiliate shall be acquired
by Oncor at cost, but this provision shall not serve as a precedent or factor
for determining the validity of any affiliate expense in future rate cases.
Parties in future rate cases may challenge requested affiliate expenses for
compliance with PURA § 36.058. The Commission can audit compliance with this
provision consistent with existing substantive rules. Further, in the 2008 rate
case, Oncor will not request affiliate expenses relating to corporate support
services in an amount that exceeds the amount included in its Docket No. 34040
request. Nothing in this Stipulation shall be considered precedent as to whether
CGE expenses are to be considered affiliate expenses. By agreeing to this
provision, parties do not waive their rights to take the position that CGE is an
affiliate of Oncor in the 2008 rate case and any future rate proceedings.

 

  (44) Oncor shall make minimum capital expenditures equal to a budget of $3.6
billion over the five-year period beginning January 1, 2008, and ending
December 31, 2012, subject to the following adjustments to the extent reported
to the Commission in Oncor’s quarterly earnings monitor report: Oncor may reduce
capital spending due to conditions not under Oncor’s control, including, without
limitation, siting delays, cancellations of projects by third-parties, or weaker
than expected economic conditions. The $3.6 billion budget does not include
transmission projects to be constructed by Oncor as a result of the Commission’s
decision in its Docket No. 33672, Commission Staff’s Petition for Designation of
Competitive Renewable Energy Zones. This paragraph modifies the commitment
reflected in paragraphs (6) and (17).

 

  (45) The capital expenditures contained in paragraph (44) shall be made solely
to support the traditional Oncor system.

 

  (46)

From January 1, 2008 until December 31, 2012, Oncor will agree to the following
system SAIDI and SAIFI Performance Standards, and Worst Performing Feeder
Standards, including a total annual rebate payment ceiling of $2 million. The
metrics

 

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for these standards were the subject of proposed legislation in the most recent
legislative session; therefore in the event the metrics are changed in
subsequent legislative sessions, the Signatories agree that Oncor shall have the
right to file an application to conform the metrics referenced herein to the new
metrics established in subsequent legislation.

 

  (a) General Provisions

 

  i. The reliability standards contained herein are intended to be consistent
with P.U.C. Subst. R. 25.52 - Reliability and Continuity of Service.

 

  ii. Reporting periods for these reliability standards are intended to be
consistent with P.U.C. Subst. R. 25.81 - Service Quality Reports, and will
coincide with the reporting periods in the Oncor Electric System Service Quality
Reports to the Commission. Annual evaluations will be for calendar years.

 

  iii. The initial reporting period for purposes of the rebates provided herein
will be the year 2008.

 

  iv. Reliability indices are calculated for “forced interruptions” as defined
by P.U.C. Subst. R. 25.52.

 

  (b) Reliability Indices

The following reliability standards use the System Average Interruption
Frequency Index (“SAIFI”) and System Average Interruption Duration Index
(“SAIDI”). The distribution feeder standards will be established for
distribution feeders with 10 or more customers.

 

  i. 10 Percent Worst Distribution Feeder Performance Standards

No distribution feeder will sustain a SAIFI or SAIDI value for a reporting
period that is among the highest (worst) 10 percent of the feeders for any two
consecutive reporting periods.

 

  ii. 300 Percent Greater than System Average Distribution Feeder Performance
Standards

No distribution feeder will sustain a SAIFI or SAIDI value for a reporting
period that is more than 300 percent greater than the system average of all
feeders for any two consecutive reporting periods.

 

  iii. System-Wide Standards

Oncor will not exceed the system-wide SAIFI or SAIDI standard by more than 5.0
percent beginning in 2008. The system-wide standards are the average SAIFI and
the average SAIDI for 1998, 1999, and 2000.

 

  (c) Maximum Amount of Rebates and Rebate Priorities

 

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  i. The rebates for violations of the reliability standards will not exceed a
total of $2 million in a calendar year.

 

  ii. The rebates will be credited to customers based upon the following
priorities:

 

  1. 10 Percent Worst Distribution Feeder Performance Standards

 

  2. 300 Percent Greater than System Average Distribution Feeder Performance
Standards

 

  3. System-Wide Standards

To the extent that the $2 million rebate cap is reached, the rebate money will
be prorated to customers in the last group, under subsections (c)(ii)(1),
(c)(ii)(2) and (c)(ii)(3) above, eligible for rebates. Customers in higher
priority groups will receive full rebates.

 

  (d) Determination of Rebates

 

  i. 10 Percent Worst Distribution Feeder Performance Standards

 

  1. A rebate of $20 will be made to each customer on all feeders violating one
of the 10 Percent Worst Distribution Feeder Performance Standards. A separate
rebate will be made for each violated standard (SAIFI or SAIDI) such that a
customer on a feeder violating both standards would be credited $40.

 

  2. If Oncor has no distribution feeder that violates one of the 10 Percent
Worst Distribution Feeder Performance Standards for a reporting period, the
total amount of money for rebates will be reduced 10 percent ($200,000) for the
standard achieved. This reduction of money for rebates will decrease the total
amount of rebates available for a calendar year for violations of any of the
remaining standards. The amount of reduction will be 20 percent ($400,000) if
both standards are achieved.

 

  ii. 300 Percent Greater than System Average Distribution Feeder Performance
Standards

 

  1. A service reliability credit of $50 will be made to each customer on all
feeders violating either standard. A separate credit will be made for each
standard violated (SAIFI or SAIDI) such that a customer on a feeder violating
both standards would be credited $100.

 

  2.

If Oncor has no distribution feeder that violates a 300 Percent Greater than
System Average Distribution Feeder Performance

 

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Standard for a reporting period, the total amount of money for rebates will be
reduced 10 percent ($200,000) for the standard achieved. The amount of reduction
will be 20 percent ($400,000) if both standards are achieved. This reduction of
money for rebates will decrease the total amount of rebates available for a
calendar year for violations of any remaining 300 Percent Greater than Average
Distribution Feeder Performance Standard, or the System-Wide Standards, but not
the 10 Percent Worst Distribution Feeder Performance Standards.

 

  iii. System-Wide Standards

 

  1. If the SAIFI or SAIDI System-Wide Standard is violated, Oncor will
distribute the total rebate on a per capita basis among all distribution
customers.

 

  2. SAIFI: The total rebate will be the numerical difference between the actual
and the allowable SAIFI values multiplied by $1 million, up to a maximum of
one-half of the total amount of money available for rebates for violations of
the System-Wide Standards.

 

  3. SAIDI: The total rebate will be the numerical difference between the actual
and the allowable SAIDI values multiplied by $10,000, up to a maximum of
one-half of the total amount of money available for rebates for violations of
the System-Wide Standards.

 

  iv. Payment

Oncor will make rebates to the current customer at the affected consuming
facility by June 1 of the year following the reporting period.

 

  v. Term of Standards

 

  1. The electric reliability standards established under this Stipulation will
remain in effect from January 1, 2008 through December 31, 2012.

 

  (e) Any interested person will have the right to petition the Commission to
revise the commitments in this paragraph (46). In the event the Commission’s
service reliability rule, P.U.C. SUBST. R. 25.52, is amended, such amendments
will automatically be incorporated in these reliability commitments.
Additionally, the signatories agree that they will revisit these standards and
penalties in the future in the context of any performance-based ratemaking plans
or rules for Oncor and/or the electric industry.

 

  (f) Within 45 days of the date of the Order in Docket No. 34077, Oncor shall
file with the Commission a compliance plan with an agreement to pass through
service quality credits similar in form to Phase Two of the plan and the
agreement adopted in Project No. 30848, Compliance Filings by Texas-New Mexico
Power Company from the Order in Docket No. 30172.

 

12

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  (47) From January 1, 2008 until December 31, 2012, to the extent not
inconsistent with existing agreements with Cities, Oncor agrees to annual street
light performance standards as follows:

 

  (a) Routine repairs (bulbs, photocells, ballasts) - 90% complete in 5 calendar
days;

 

  (b) Circuit repairs (overhead/underground cable repairs) - 80% complete in 15
calendar days;

 

  (c) Knockdowns (not repairs, require the replacement of the entire light) -
80% complete in 30 calendar days

These metrics will be exempt from force majeure events, including, but not
limited to, major storms, cities whose ordinances or approvals impact Oncor's
ability to meet these metrics, and mutual assistance to other utilities.
Examples of qualifying City ordinances include - lane closures, pre-determined
work schedules, and noise ordinances. All non-standard lights, such as antique
or historical lights are exempt from this requirement since they are not readily
available in Oncor’s stock or from the manufacturer. Oncor agrees to a maximum
payment of $1 million per year if the standards are not achieved, to be paid to
the customers affected as contained in a plan filed by Oncor with the Commission
for approval. Oncor shall file such a plan within 60 days of the date of the
final order in Docket No. 34077. Notwithstanding this agreement, this issue may
be addressed in subsequent rate proceedings.

 

  (48) From January 1, 2008 until December 31, 2012, Oncor will agree to the
Customer Service metric proposed by Cities Witness Norwood (annual average
response time for customer calls to Oncor’s telephone call center shall not
exceed 60 seconds), with a total payment not to exceed $2 million per calendar
year, to be paid in accordance with a plan filed by Oncor with the Commission
for approval. Oncor shall file such a plan within 60 days of the date of the
final order in Docket No. 34077.

 

  (49) Oncor will file its advanced metering deployment plan with the Commission
before July 1, 2008; provided, however, that should the Commission take action
to materially alter the existing requirements for advanced metering deployment,
Oncor reserves its rights to delay the filing for a reasonable time as may be
necessary to address any such requirements. The advanced meters deployed will
support DSM programs to the extent required by the Commission’s rules.

 

  (50) TEF, Oncor, TXU Corp. and its subsidiaries, and any legislative advocacy
group to which any of the parties are members, and the other Signatories will
agree not to pursue, support or propose legislation that would change or
abrogate any of the terms of this Stipulation except that this Stipulation is
not intended to impair the ability of the Staff, OPC or the State to communicate
with or respond to a request of a member of the Texas Legislature; provided that
if legislation discussed in paragraph (46) is considered in future sessions,
Oncor reserves the right to participate in that legislative process.

 

13

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  (51) Oncor will comply with the commitments identified in the direct and
rebuttal testimonies of Frederick M. Goltz and Robert S. Shapard (“the “Oncor
Commitments”), which are reflected in paragraphs (1) through (22) and as
replaced or supplemented as described herein. Oncor will make annual reports to
the Commission regarding its compliance with the Oncor Commitments.

 

  (52) Oncor will agree to make an exception to the standard transformer loss
adjustment of 0.8% for high-voltage customers that are metered on the low side
of the transformer, provided that the customer can provide third-party
verification of the actual loss level.

 

  (53) Oncor will propose and support a cost-based retail transformation tariff
applicable to industrial customers in its 2008 rate filing. Parties are free to
take any position with respect to the proposed tariff.

II.

The Signatories agree that consideration of the following issues identified in
the Preliminary Order in this proceeding is not necessary to a public interest
definition given the type of transaction involved in this docket, which does not
involve the sale of the utility’s assets or a merger of operating utilities:

 

  a. The reasonable value of the property, facilities, or securities to be
acquired, disposed of, merged, transferred, or consolidated (Preliminary Order
Issue No. 1, at 3).

 

  b. Will the public utility receive consideration equal to the reasonable value
of the assets when it sells, leases, or transfers assets? (Preliminary Order
Issue No. 1, at 5).

III.

The Signatories stipulate to the facts contained in the attached Proposed Order.
Signatories agree to participate in this proceeding and actively urge the
Commission to approve the Stipulation and an order consistent with the attached
Proposed Order. Furthermore, if the Stipulation is approved, the Signatories
will seek the dismissal of Docket No. 34040, Commission Staff’s Petition for
Review of the Rates of TXU Electric Delivery Company.

 

14

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IV.

This Stipulation has been drafted by all Signatories and is the result of
negotiation, compromise, settlement and accommodation. The Signatories agree
that this settlement is in the public interest. The Signatories agree that the
terms and conditions herein are independent. The various provisions of this
Stipulation are not severable. None of the provisions of this Stipulation shall
become fully operative unless the Commission shall have entered a final order
approving this Stipulation. If the Commission issues a final order inconsistent
with the terms of this Stipulation, the Signatories agree that any Signatory
adversely affected by that material alteration has the right to withdraw from
this Stipulation thereby becoming released from its obligations arising
hereunder, and to proceed as otherwise permitted by law to exercise all rights
available under the law. The right to withdraw must be exercised by providing
the other Signatories written notice within twenty (20) calendar days of the
date the Commission files the order acting on this Agreement. Failure to provide
such notice within the specified time-period shall constitute a waiver of the
right to withdraw and acceptance of the changes to this Stipulation made by the
Commission.

V.

This Stipulation is binding on each of the Signatories only for the purpose of
settling the issues as set forth herein in this jurisdiction and for no other
purposes. The matters resolved herein are resolved on the basis of a compromise
and settlement. Except to the extent that this Stipulation expressly governs a
Signatory’s rights and obligations for future periods, this Stipulation shall
not be binding or precedential on a Signatory outside of this proceeding except
for a proceeding to enforce the terms of this Stipulation. The Signatories agree
that a Signatory’s support of the resolution of this docket in accordance with
this Stipulation may differ from its position or testimony regarding contested
issues of law, policy, or fact in other proceedings before the Commission or
other forum. Because this is a Stipulation, a Signatory is under no obligation
to take the same position as set out in this Stipulation in other proceedings
not referenced in this Stipulation whether those dockets present the same or a
different set of circumstances. A Signatory’s agreement to entry of a final
order of the Commission consistent with this Stipulation should not be regarded
as an agreement to the appropriateness or correctness of any assumptions,
methodology, or legal or regulatory principle that may have been employed in
reaching this Stipulation.

 

15

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VI.

This Agreement contains the entire agreement between the Signatories. Moreover,
this Agreement supersedes all other written and oral exchanges or negotiations
among the Signatories or their representatives with regard to the subjects
contained herein.

VII.

Each person executing this Stipulation represents that he or she is authorized
to sign this Stipulation on behalf of the party represented. Facsimile copies of
signatures are valid for purposes of evidencing this Stipulation, and this
Stipulation may be executed in multiple counterparts.

VIII.

Oncor will provide notice of this Stipulation and this proceeding to all parties
in Docket Nos. 34077 and 34040.

WHEREFORE, PREMISES CONSIDERED, the Signatories respectfully pray this Honorable
Commission to enter an order as set forth in Exhibit A granting the relief
requested in this Stipulation and to grant them such additional relief not
inconsistent therewith to which they are entitled.

STIPULATED AND AGREED TO AS OF OCTOBER 24, 2007, AND RESPECTFULLY SUBMITTED:

 

16

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By:  

/s/ Michael J. Tomsu

    VINSON & ELKINS L.L.P.     Michael J. Tomsu     Texas Bar No. 20125875    
Michael D. Marin     Texas Bar No. 00791174     The Terrace 7     2801 Via
Fortuna, Suite 100     Austin, TX 78746     Tel: (512) 542-8400     Fax: (512)
542-8612     John C. Wander     Texas Bar No. 00791877     Elizabeth C. Brandon
    Texas Bar No. 24049580     3700 Trammell Crow Center     2001 Ross Avenue  
  Dallas, TX 75201-2975     Tel: (214) 220-7770     Fax: (214) 999-7770    
HUNTON & WILLIAMS     Richard L. Adams     Texas Bar No. 00874950     Jo Ann
Biggs     State Bar No. 02312400     1445 Ross Avenue, Suite 3700     Dallas,
Texas 75202     Tel. (214) 979-3000     Fax. (214) 979-3901 ATTORNEYS FOR TEXAS
ENERGY FUTURE HOLDINGS LIMITED PARTNERSHIP

 

17

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By:  

/s/ Matthew C. Henry

    HUNTON & WILLIAMS     Matthew C. Henry     Texas Bar No. 00790870     1445
Ross Avenue, Suite 3700     Dallas, Texas 75202     Tel. (214) 979-3000     Fax.
(214) 979-3901     Howard V. Fisher     State Bar No. 07051500     Oncor
Electric Delivery Company     1601 Bryan Street, 23rd Floor     Dallas, Texas
75201     214.486.3026 Office     214.486.3221 Fax

ATTORNEYS FOR ONCOR ELECTRIC

DELIVERY COMPANY

TEXAS INDUSTRIAL ELECTRIC CONSUMERS By:  

 

    ANDREWS KURTH LLP     Jonathan Day     State Bar No. 05610000     Lino
Mendiola     State Bar No. 00791248     Tammy Cooper     State Bar No. 00796401
    111 Congress Avenue, Suite 1700     Austin, Texas 78701     Telephone: (512)
320-9200     Fax: (512) 320-9292

 

18

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By:  

 

    HUNTON & WILLIAMS     Matthew C. Henry     Texas Bar No. 00790870     1445
Ross Avenue, Suite 3700     Dallas, Texas 75202     Tel. (214) 979-3000     Fax.
(214) 979-3901     Howard V. Fisher     State Bar No. 07051500     Oncor
Electric Delivery Company     1601 Bryan Street, 23rd Floor     Dallas, Texas
75201     214.486.3026 Office     214.486.3221 Fax

ATTORNEYS FOR ONCOR ELECTRIC

DELIVERY COMPANY

TEXAS INDUSTRIAL ELECTRIC CONSUMERS By:  

/s/ Lino Mendiola

    ANDREWS KURTH LLP     Jonathan Day     State Bar No. 05610000     Lino
Mendiola     State Bar No. 00791248     Tammy Cooper     State Bar No. 00796401
    111 Congress Avenue, Suite 1700     Austin, Texas 78701     Telephone: (512)
320-9200     Fax: (512) 320-9292

 

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STEERING COMMITTEE OF CITIES

SERVED BY ONCOR

By:  

/s/ Thomas L. Brocato

    LLOYD GOSSELINK BLEVINS     ROCHELLE & TOWNSEND, P.C.     Geoffrey Gay    
State Bar No. 07774300     Thomas L. Brocato     State Bar No. 03039030    
Kristen Pauling Doyle     State Bar No. 00797225     816 Congress Avenue, Suite
1900     Austin, Texas 78701     Telephone: (512) 322-5800     Fax: (512)
472-0532

The Office of Public Utility Counsel does not agree to Paragraph (53) regarding
a proposal for a transformation tariff, but otherwise agrees to the terms of the
Stipulation.

 

OFFICE OF PUBLIC UTILITY COUNSEL By:  

 

    Suzi Ray McClellan     Public Counsel     State Bar No. 16607620     James
K. Rourke, Jr.     Assistant Public Counsel     State Bar No. 17323700     1701
N. Congress Avenue, Suite 9-180     P.O. Box 12397     Austin, Texas 78711-2397
    Telephone: (512) 936-7500     Fax: (512) 936-7525

 

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STEERING COMMITTEE OF CITIES

SERVED BY ONCOR

By:  

 

    LLOYD GOSSELINK BLEVINS     ROCHELLE & TOWNSEND, P.C.     Geoffrey Gay    
State Bar No. 07774300     Thomas L. Brocato     State Bar No. 03039030    
Kristen Pauling Doyle     State Bar No. 00797225     816 Congress Avenue, Suite
1900     Austin, Texas 78701     Telephone: (512) 322-5800     Fax: (512)
472-0532

The Office of Public Utility Counsel does not agree to Paragraph (53) regarding
a proposal for a transformation tariff, but otherwise agrees to the terms of the
Stipulation.

 

OFFICE OF PUBLIC UTILITY COUNSEL By:  

/s/ James K. Rourke, Jr.

    Suzi Ray McClellan     Public Counsel     State Bar No. 16607620     James
K. Rourke, Jr.     Assistant Public Counsel     State Bar No. 17323700     1701
N. Congress Avenue, Suite 9-180     P.O. Box 12397     Austin, Texas 78711-2397
    Telephone: (512) 936-7500     Fax: (512) 936-7525

 

21

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STAFF OF THE PUBLIC UTILITY COMMISSION OF TEXAS Thomas S. Hunter Division
Director Legal Division Keith Rogas Deputy Division Director Legal Division

/s/ Paul A. Curtis

Paul A. Curtis Senior Attorney – Legal Division State Bar No. 24047627 Public
Utility Commission of Texas 1701 N. Congress Avenue P.O. Box 13326 Austin, Texas
78711-3326 Telephone: (512) 936-7297 Facsimile: (512) 936-7268

 

22

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STATE OF TEXAS GREG ABBOTT Attorney General of Texas KENT C. SULLIVAN First
Assistant Attorney General DAVID S. MORALES Deputy Attorney General for Civil
Litigation PAUL D. CARMONA Chief, Consumer Protection and Public Health
Division MARION TAYLOR DREW Public Agency Representation Section Chief By:  

/s/ Susan M. Kelley

    Bryan L. Baker     State Bar No. 00790256     Susan Kelley     State Bar No.
11205700     Assistant Attorneys General     Office of the Attorney General    
P.O. Box 12548     Austin, Texas 78711     Voice: (512) 475-4171     Fax: (512)
322-9114     E-mail: bryan.baker@oag.state.tx.us    
             susan.kelley@oag.state.tx.us

 

23

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TEXAS STATE ASSOCIATION OF ELECTRICAL WORKERS By:  

/s/ Richard Levy

    DEATS, DURST, OWEN & LEVY, P.L.L.C.     Richard Levy     State Bar No.
12268650     Philip Durst     State Bar No. 06287850     Elaine F. Edwards    
State Bar No. 34049829     1204 San Antonio Street, Suite 203     Austin, Texas
78701     Telephone: (512) 474-6200     Fax: (512) 474-7896

 

24

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TEXAS LEGAL SERVICES CENTER By:  

/s/ Neish A. Carroll

    Randall Chapman, Bar No. 04129800     Neish A. Carroll, Bar No. 00795282    
Texas Legal Services Center     815 Brazos, Suite 1100     Austin, Texas 78701  
  Telephone: (512) 477-6000     Facsimile: (512) 477-6576

 

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TEXAS RATEPAYERS’ ORGANIZATION

TO SAVE ENERGY

By:  

/s/ Carol J. Biedrzycki

    Carol J. Biedrzycki, Executive Director     Texas Ratepayers’ Organization
to Save Energy     815 Brazos, Ste. 1100     Austin, Texas 78701     Telephone:
(512) 472-52330     Facsimile: (512) 472-5310

 

26

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PUC DOCKET NO. 34077

 

JOINT REPORT AND APPLICATION    §   BEFORE THE     OF ONCOR ELECTRIC DELIVERY   
§         COMPANY AND TEXAS ENERGY    §   PUBLIC UTILITY COMMISSION     FUTURE
HOLDINGS LIMITED    §         PARTNERSHIP PURSUANT TO    §   OF TEXAS     PURA §
14.101    §        

ORDER

This Order approves the Joint Report and Application filed by Texas Energy
Future Holdings Limited Partnership (“TEF”) and Oncor Electric Delivery Company
(“Oncor”) pursuant to PURA § 14.101 requesting a public interest finding on the
merger of TEF with Oncor’s parent, TXU Corp. (“Transaction”). The docket was
processed in accordance with the applicable statutes and Commission rules by an
Administrative Law Judge (ALJ). Several parties entered into a non-unanimous
Stipulation (“Stipulation”).3 The remaining parties [requested a hearing on the
Stipulation]. This Order is consistent with the Stipulation. The Commission
concludes that adoption of the Stipulation is reasonable and that the
Transaction is in the public interest. The Stipulation ensures that the matters
addressed therein are resolved without the need for lengthy and costly
litigation.

I. Findings of Fact

Procedural History

 

1. On April 25, 2007, TEF and Oncor filed their Joint Report and Application of
Oncor Electric Delivery Company and Texas Energy Future Holdings Limited
Partnership Pursuant to Public Utility Regulatory Act Section 14.101 in this
proceeding requesting a determination that the Transaction as it relates to
Oncor is consistent with the standards set out in PURA § 14.101(b).

 

2. The following parties intervened in this proceeding: AARP, Alliance for
Retail Markets, Alliance of TXU/Oncor Customers, Chaparral Steel Company, Cities
Served by Oncor

 

3 Signatories to the Stipulation include: TEF; Oncor; Commission Staff; the
Office of Public Utility Counsel (“OPC”); Texas Industrial Energy Consumers
(“TIEC”); the Cities Served by Oncor Electric Delivery (“Cities”); the Texas
State Association of Electrical Workers (“IBEW”); the State of Texas; Texas
Ratepayers Organization to Save Energy (“Texas ROSE”); and Texas Legal Services
Center (“TLSC”).

 

27

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Electric Delivery Company, Nucor Steel, Office of Public Utility Counsel, Office
of the Attorney General, Reliant Energy Retail Services LLC, Sharyland Utilities
LP, TEX-LA Electric Cooperative of Texas Inc., Texas Industrial Energy
Consumers, Texas Legal Services Center & Texas Ratepayers’ Organization to Save
Energy, and Texas State Association of Electrical Workers.

 

3. On October 5, 2007 Signatories (Oncor, Staff, OPC, Cities, TIEC, IBEW, and
the State of Texas) filed a Notice of Settlement. Oncor provided notice of the
settlement to all parties in this docket. On October 10, 2007, the Transaction
closed. On October 24, 2007, the Stipulation was executed.

 

4. The hearing on the merits was convened on             . At that time, the
following items were admitted into evidence:

 

  a. Direct Testimony of Robert S. Shapard (Oncor Ex.     )

 

  b. Direct Testimony of Brenda Pulis (Oncor Ex.     )

 

  c. Direct Testimony of John M. Casey (Oncor Ex.     )

 

  d. Direct Testimony of Richard C. Hays (Oncor Ex.     )

 

  e. Direct Testimony of Frederick M. Goltz (TEF Ex.     )

 

  f. Direct Testimony of Steve M. Fetter (TEF Ex.     )

 

  g. Direct Testimony of William E. Avera (TEF Ex.     )

 

  h. Rebuttal Testimony of Frederick M. Goltz (TEF Ex.     )

 

  i. Rebuttal Testimony of William E. Avera, PH.D., (TEF Ex.     )

 

  j. Rebuttal Testimony of Steven L. Schwarcz, (TEF Ex.     )

 

  k. Rebuttal Testimony of Steven M. Fetter (TEF Ex.     )

 

  l. Rebuttal Testimony of Robert S. Shapard (Oncor Ex.     )

 

  m. Rebuttal Testimony of Brenda J. Pulis (Oncor Ex.     )

 

  n. Direct Testimony of Carol Szerszen (OPC Ex.     )

 

  o. Direct Testimony of Scott Norwood (Cities Ex.    )

 

  p. Direct Testimony of Mark T. Williams (Cities and TIEC Ex.    )

 

  q. Direct Testimony of Clarence Johnson (OPC Ex.     )

 

  r. Direct Testimony of Dr. Dennis W. Goins (Nucor Ex.     ) (except for
certain portions that were stricken by the Administrative Law Judge)

 

28

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  s. Direct Testimony of Jeffrey Pollock (TIEC Ex.     ) (except for certain
portions that were stricken by the Administrative Law Judge)

 

  t. Direct Testimony in Support of Stipulation of T. Brian Almon, P.E. (P.U.C
Legal Ex.     )

 

  u. Workpapers of T. Brian Almon, P.E. (P.U.C Legal Ex.     )

 

  v. Direct Testimony in Support of Stipulation of Darryl Tietjen (P.U.C Legal
Ex.     )

 

  w. Direct Testimony in Support of Stipulation of Frederick M. Goltz (TEF
Ex.    )

 

  x. Direct Testimony in Support of Stipulation of William E. Avera (TEF
Ex.    )

 

  y. Direct Testimony in Support of Stipulation of Robert S. Shapard (Oncor Ex.
    )

No other parties offered testimony or other evidence.

 

5. All parties [except             ] waived cross-examination at the hearing.

Notice

 

6. Notice of the Transaction and the proceedings in this docket was provided by
first class mail to: (1) all municipalities in Oncor’s service area; (2) all
entities listed in the Commission’s transmission matrix in Docket No. 33550,
Commission Staff’s Application to Set 2007 Wholesale Transmission Service Rates
for the Electric Reliability Council of Texas; (3) all electric cooperatives and
municipally-owned utilities with dually certified areas with Oncor; (4) all REPs
currently certificated by this Commission; and (5) all authorized
representatives for parties in Docket No. 22350, Application of TXU Electric
Company for Approval of Unbundled Cost of Service Rate pursuant to PURA § 39.201
and Commission Substantive Rule 25.344. Further notice of this docket was
provided by publication of an approved notice in local newspapers of general
circulation in Oncor’s service territory once a week for two consecutive weeks
in accordance with P.U.C. PROC. R. 22.55.

 

7. Notice of the Stipulation was provided to all parties in this proceeding and
in Docket No. 34040, Commission Staff’s Petition for Review of the Rates of TXU
Electric Delivery Company.

Description of the Parties to the Transaction

 

8.

Oncor is a Delaware limited liability company and is a direct wholly-owned
subsidiary of TXU Corp. Oncor is an electric distribution and transmission
utility that delivers power pursuant to rates approved by municipalities in
which it provides service that have retained original jurisdiction and by the
Commission. Oncor operates more than 115,000 miles of

 

29

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distribution and transmission lines within the Electric Reliability Council of
Texas (“ERCOT”) region of Texas. Oncor also provides limited open access
wholesale transmission service under tariffs on file with the Federal Energy
Regulatory Commission (“FERC”) for certain transactions that are subject to the
jurisdiction of the FERC under Sections 210, 211, and 212 of the Federal Power
Act.

 

9. TEF is a Delaware limited partnership formed for the purpose of effectuating
the Transaction. TEF is not a public utility. TEF is controlled by its sole
general partner, Texas Energy Future Capital Holdings LLC, and is owned by its
sole general partner and its limited partners. Upon consummation of the
Transaction, which became effective on October 10, 2007, TEF became the owner of
all or substantially all of the outstanding common shares of TXU Corp.

 

10.

Pursuant to the Merger Agreement governing the Transaction, Texas Energy Future
Merger Sub Corp., a Texas corporation and wholly owned subsidiary of TEF, was
merged with and into TXU Corp., with TXU Corp. 4 continuing as the surviving
corporation. Upon the closing of the Transaction, each outstanding share of
common stock of TXU Corp. was converted into the right to receive $69.25 in
cash, without interest and less any applicable withholding taxes. After the
closing of the Transaction, TEF now owns all or substantially all of the
outstanding shares of TXU Corp., and Oncor remains a direct or indirect
wholly-owned subsidiary of TXU Corp.

 

11. Because this is a change in ownership of TXU Corp.’s stock, none of Oncor’s
assets, franchises, or certificates of convenience and necessity were
transferred as a result of the Transaction.

 

12. No utility operations were combined or modified as a result of the
Transaction.

The Stipulation

 

13. TEF and Oncor made numerous commitments in their direct and rebuttal
testimonies. Those commitments are included as part of the Stipulation and are
listed below:

 

  a. Name Change Commitment. On or before closing of the Transaction, the name
of TXU Electric Delivery Company will be changed to Oncor Electric Delivery
Company. Oncor’s logo will be separate and distinct from the logos of the
parent,

 

4

As a result of the closing of the Transaction on October 10, TXU Corp. is now
named Energy Future Holdings Corp. (“EFH Corp.”). Any current references to TXU
Corp. in this Order are to EFH Corp.

 

30

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TXU Corp., the retail electric provider, which will retain the TXU Energy name
(“TXU Energy Retail”), and the power generation company, which we expect to
rename with the Luminant Energy brand (“Luminant”). In fact, the name of TXU
Electric Delivery Company was changed to Oncor Electric Delivery Company on
April 24, 2007. TXU Corp. commits to maintaining a name and logo for Oncor that
is separate and distinct from the names of TXU Corp.’s retail electric provider
and wholesale generation companies.

 

  b. Separate Board Commitment. At closing and thereafter, Oncor will have a
separate board of directors that will not include any members from the boards of
directors of TXU Energy Retail or Luminant. This Finding of Fact is supplemented
by Finding of Fact Nos. 14.j and 14.k.

 

  c. Separate Headquarters Commitment. Within a reasonable transition period
after closing of the Transaction, not to exceed six months, Oncor’s headquarters
will be located in a separate building from the headquarters and operations of
TXU Energy Retail and Luminant.

 

  d. No Transaction Related Debt at Oncor Commitment. Oncor will not incur,
guaranty, or pledge assets in respect of any incremental new debt related to
financing the Transaction at the closing or thereafter. Oncor’s financial
integrity will be protected from the separate operations of TXU Energy Retail
and Luminant. This provision is supplemented by Finding of Fact No. 14.r.

 

  e. Debt-to-Equity Ratio Commitment. Oncor’s debt will be limited so that its
regulatory debt-to-equity ratio (as determined by the Commission) is at or below
the assumed debt-to-equity ratio established from time to time by the Commission
for ratemaking purposes, which is currently set at 60% debt to 40% equity. For
ratemaking purposes, in its scheduled rate cases in 2007 and 2008, Oncor will
support a cost of debt that does not exceed Oncor’s actual cost of debt
immediately prior to the announcement of the Transaction. This Finding of Fact
is supplemented by Finding of Fact Nos. 14.n, 14.o and 14.p.

 

  f.

Capital Expenditure Commitment. Following the closing of the Transaction, Oncor
will continue to make capital expenditures consistent with the capital
expenditures in Oncor’s business plan. Total capital spending will depend in
part on

 

31

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economic and population growth in Texas, as well as permitting and siting
outcomes. However, in any event, over the five years following the year in which
closing of the Transaction occurs, Oncor will make capital expenditures in
connection with its transmission and distribution business in an aggregate
amount of more than $3.0 billion. This commitment has been replaced by the
provisions of Finding of Fact No. 14.v.

 

  g. DSM/Energy Efficiency Commitment. Over the five years following the year in
which closing occurs, subsidiaries of TXU Corp. will expend an aggregate of at
least $200 million on DSM over the amount included by the Commission in Oncor’s
rates. This commitment will approximately double the level of spending on DSM
currently included in Oncor’s rates. Oncor will not seek to recover in rates any
of the $200 million in incremental DSM expenditures. This provision is
supplemented by Finding of Fact Nos. 14.s and 14.t.

 

  h. Service and Safety Commitment. Oncor will support the inclusion of
negotiated commitments with appropriate stakeholders regarding reliability,
customer service and employee safety in any final order regarding the
Transaction issued pursuant to PURA § 14.101. Those negotiated commitments are
reflected in Finding of Fact Nos. 14.x, 14.y, and 14.z.

 

  i. Rate Case Commitment. If, for any reason, the Commission has not initiated
a general rate proceeding for Oncor or its predecessor prior to July 1, 2008,
Oncor will not later than that date file a general rate case consistent with its
currently effective settlement agreement with certain municipalities.

 

  j. Continued Ownership Commitment. TEF will hold a majority of its ownership
interest in Oncor, in the current regulatory system, for a period of more than
five years after the closing date of the Transaction.

 

  k. Holding Company Commitment. A new holding company, Oncor Electric Delivery
Holdings, will be formed between TXU Corp. and Oncor.

 

  l.

Independent Board Commitment. Each of Oncor Electric Delivery Holdings and Oncor
will have a board of directors comprised of at least nine persons. A majority of
the board members of each of Oncor Electric Delivery Holdings and Oncor will
qualify as “independent” in all material respects in accordance with the rules
and

 

32

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regulations of the New York Stock Exchange (“NYSE”) (which are set forth in
Section 303A of the NYSE Listed Company Manual and in Exhibit FMG-2), from TXU
Corp. and its subsidiaries (including TXU Energy Retail and Luminant), TPG, and
KKR. Consistent with TEF’s commitments, the directors of Oncor and Oncor
Electric Delivery Holdings will also not include any members from the boards of
directors of TXU Energy Retail or Luminant. This provision is supplemented by
Finding of Fact No. 14.j.

 

  m. Affiliate Asset Transfer Commitment. Neither Oncor Electric Delivery
Holdings nor Oncor will transfer any material assets or facilities to any
affiliates (other than Oncor Electric Delivery Holdings, Oncor, and their
subsidiaries, which are hereinafter referred to as the “Ring-Fenced Entities”),
other than such transfer that is on an arm’s length basis consistent with the
Commission’s affiliate standards applicable to Oncor, regardless of whether such
affiliate standards would apply to the particular transaction.

 

  n. Arm’s Length Relationship Commitment. Each of the Ring-Fenced Entities will
maintain an arm’s length relationship with the TXU Group consistent with the
Commission’s affiliate standards applicable to Oncor. This provision is
supplemented by Finding of Fact No. 14.u.

 

  o. Separate Books and Records Commitment. Each of the Ring-Fenced Entities
will maintain accurate and appropriate detailed books, financial records and
accounts, including checking and other bank accounts, and custodial and other
securities safekeeping accounts that are separate and distinct from those of any
other entity.

 

  p. Oncor Board’s Right to Determine Dividends Commitment. The Oncor Board,
comprised of a majority of independent directors, will have the sole right to
determine dividends. This provision is supplemented by Finding of Fact Nos. 14.a
and 14.j.

 

  q. Capital Expenditures Within Oncor Service Territory Commitment. The $3
billion minimum commitment for Oncor capital expenditures over the five years
following the Transaction will be spent within the traditional Oncor system, and
that amount does not include any transmission projects to be constructed by
Oncor as a result of the Commission’s decision in its Docket No. 33672,
Commission Staff’s Petition for Designation of Competitive Renewable Energy
Zones. This commitment is replaced by Finding of Fact Nos. 14.v and 14.w.

 

33

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  r. No Transaction Costs to Oncor Commitment. None of the fees and expenses nor
any incremental borrowing costs of TXU Corp. or its subsidiaries related to the
Transaction will be borne by Oncor’s customers. This commitment is supplemented
in Finding of Fact No. 14.r.

 

  s. Exclusion of Goodwill Commitment. The calculations for the debt-to-equity
ratio commitment will not include goodwill resulting from the Transaction. This
commitment is supplemented by Finding of Fact No. 14.q.

 

  t. No Intercompany Debt Commitment. Oncor will not enter into any
inter-company debt transactions with TXU Corp. affiliates following consummation
of the Transaction. This commitment is supplemented by Finding of Fact No. 14.d.

 

  u. No Shared Credit Facilities Commitment. Oncor will not share any credit
facility with any unregulated affiliate. This commitment is supplemented by
Finding of Fact No. 14.e.

 

  v. No Recovery of TXU Energy Retail Bad Debt Commitment. So long as TXU Energy
Retail is affiliated with Oncor, Oncor will not seek to recover from its
customers any costs incurred as a result of a bankruptcy of TXU Energy Retail.
This commitment is supplemented by Finding of Fact No. 14.h.

 

14. In addition to the commitments made in testimony, the Signatories have also
stipulated and agreed to the following:

 

  a. The Oncor LLC agreement shall, and TEF and Oncor will support a Commission
finding to, limit the payment of dividends by Oncor through December 31, 2012,
to an amount not to exceed Oncor’s net income (determined in accordance with
GAAP) for the period beginning on the date following the closing of the
Transaction and ending on December 31, 2012.

 

  b.

Oncor will implement a one-time $35 million write-off in 2007 or 2008, at its
discretion either prior to or after the closing of the Transaction, to its storm
reserve and a one-time write-off in 2007 or 2008, at its discretion either prior
to or after the closing of the Transaction, to the 2002 restructuring expenses
held as regulatory assets ($20,927,391.50). These write-off amounts will not be
included as a cost item

 

34

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in the 2008 rate case or any other Commission proceeding. Parties reserve the
right to challenge claimed expenses included in storm reserve and regulatory
assets accounts. These write-offs shall not be included in the calculation of
net income for dividend payment purposes, as described in Finding of Fact
No. 14.a.

 

  c. Oncor will file quarterly earnings monitoring reports with the Commission,
including information on dividends paid, for a period of five years beginning in
January 2008.

 

  d. Oncor will not lend money to or borrow money from TXU Corp. and TXU Corp.
affiliates.

 

  e. Oncor will not share credit facilities with TXU Corp. and TXU Corp.
affiliates.

 

  f. Oncor’s assets shall not be pledged for any entity other than Oncor.

 

  g. Oncor, TXU Corp. and TXU Corp. affiliates will provide advance notice of
their corporate separateness to lenders on all new debt and will use
commercially reasonable efforts to seek an acknowledgment representation of that
separateness and non-petition covenants in all new debt instruments, including
the debt instruments used in connection with financing the Transaction.

 

  h. Oncor will not seek recovery in rates of any expenses related to a
bankruptcy or default of TXU Corp. or TXU Corp. affiliates, including bad debt
expense, or expenses associated with the expiration or cancellation of tax and
interest reimbursement agreements presently in effect.

 

 

i.

During any period that any two of the Standard & Poor’s, Moody’s, or Fitch
rating agencies rate Oncor as an entity at below investment grade,5 TEF will
cause TXU Energy Retail within 15 days to post a letter of credit in favor of
Oncor in the amount of $170 million to secure TXU Energy Retail’s payment
obligations to Oncor. The parties agree that TXU Energy Retail may withdraw the
letter of credit at such time as two of the three ratings agencies rate Oncor as
investment grade or at such time as TXU Energy Retail and Oncor cease to be
affiliated with one another. The cost of any letter of credit required under
this provision will not be reflected in Oncor’s rates.

 

  j. For an individual to qualify as an independent director of Oncor, such
individual must be independent of each of Oncor, TEF, TXU Corp. and TXU Corp.
affiliates, KKR,

 

5

Ratings are below investment grade if they fall below the following ratings:
Fitch’s BBB- rating, Standard and Poor’s BBB- rating, or Moody’s Baa3 rating.

 

35

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TPG, Goldman Sachs, Lehman Brothers, Morgan Stanley, Citigroup, J.P. Morgan, and
CSFB in accordance with the applicable criteria set forth in the NYSE Manual for
independent directors of NYSE listed companies. After such time as any of Lehman
Brothers, Morgan Stanley, Citigroup, J.P. Morgan, or CSFB has sold all of the
debt it underwrote to finance the Transaction, then any such entity that has
sold all of the debt it underwrote to finance the Transaction shall be deemed
removed from the list of entities from which an individual must be independent
in order to qualify as an independent director of Oncor in this Finding of Fact
No. 14.j.

 

  k. The currently contemplated sale of a minority interest in Oncor, to the
extent that such sale occurs, will be made to a party that is not otherwise
affiliated with, and is independent from, TXU Corp., KKR, TPG, and Goldman
Sachs. Oncor may dividend the net proceeds from the sale of minority interests
in Oncor to its member without regard to the provisions of Finding of Fact
No. 14.a.

 

  l. Oncor’s Board cannot be overruled by the Board of TXU Corp. or any of its
subsidiaries on dividend policy, debt issuance, capital expenditures, management
and service fees, and appointment or removal of Board members, provided that
such actions may also require the additional approval of Oncor Electric Delivery
Holdings’ Board.

 

  m.

Within 45 days after the Commission dismisses P.U.C. Docket No. 34040, Oncor
will provide a one-time credit of $72 million to REPs to be paid or directly
credited to its retail customers. Oncor will notify all Retail Electric
Providers (REPs) in its service area that the credit will be available only to
those REPs that within 15 days of receiving the notice agree in writing to:
(1) pay or otherwise directly credit the one-time credit in full to retail
customers by customer class within 35 days of receipt of the credit from Oncor,
and (2) file a report with the Commission within 60 days of receipt of the
credit from Oncor listing the amounts the REP credited to customers by customer
class. To the extent that certain REPs do not participate in the rate credit,
Oncor will reallocate in the same proportions the remaining portion of the $72
million rate credit to the REPs participating in the rate credit so that the
full $72 million rate credit is received by participating REPs and paid or
directly credited to retail customers. Credit amounts that are unclaimed by
non-industrial customers after the

 

36

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initial REP allocation and reallocation, such as credits related to retail
customers who cannot be readily located, will be directed to that REP’s bill
payment assistance programs and accounted for in the report required to be filed
by the REP with the Commission. This $72 million one-time credit to retail
customers shall count as a reduction to net income in the calculation of net
income for dividend payment purposes described in Finding of Fact No. 14.a. TEF
will ensure that TXU Energy Retail passes the entire rate credit that it
receives directly through to its customers. The parties agree that the one-time
rate credit will not be recovered by Oncor in any future proceedings, and
further agree that they will not argue that the rate credit is any precedent or
support for a rate reduction in the 2008 rate case or any future rate
proceeding. The Signatories will request the Commission to dismiss P.U.C Docket
No. 34040, Commission Staff’s Petition for Review of the Rates of TXU Electric
Delivery Company, and Oncor will agree to file a system-wide rate case no later
than July 1, 2008 based on a test-year ended December 31, 2007. The one-time
credit shall be allocated and refunded as follows:

 

Customer Class

   Amount Allocated to Class

Residential

   $ 32,983,398.59

Sec<=10 kW

   $ 790,769.48

Sec>10kW

   $ 26,427,614.56

Pri<=10kW

   $ 11,163.78

Pri>10kW

   $ 5,279,308.63

Transmission

   $ 5,401,089.92

Lighting

   $ 1,106,655.05

 

37

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Credit Methodology

General

The credit will be calculated on a spreadsheet basis based on a combination of
2006 Test Year information and December 31, 2007 information. The credit amount
will be sent to the participating REP with supporting documentation. The credit
will be calculated and credited outside of the normal Oncor billing process and
will not be part of the standard 810 transaction.

Residential Service ($32,983,398.59)

The Residential Rate Class credit will be based on a fixed $ amount per
Residential Customer that will be calculated as follows: $32,983,398.59/ Total
Number of participating REP Residential Customers as of December 31, 2007.

The fixed $ amount per Residential Customer will be applied to the number of
Residential Customers for each participating REP as of December 31, 2007. The
amount calculated will be the Residential Rate Class credit for that
participating REP.

Secondary Service Less Than or Equal to 10 kW ($790,769.48)

Same process used for Residential Service.

Secondary Service Greater Than 10 kW ($26,427,614.56)

The Secondary Service Greater Than 10 kW credit will be determined based on each
customer’s 2007 annual kWh consumption as a percentage of the total 2007
participating REP’s annual Secondary Service Greater Than 10 kW class kWh.

Each individual customer’s percentage will be multiplied by the total class
credit of $26,427,614.56. The credit for each customer will be totaled for each
participating REP based on the participating REP’s customers as of December 31,
2007.

Primary Service Less Than or Equal to 10 kW ($11,163.78)

Same process used for Residential Service.

 

38

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Primary Service Greater Than 10 kW ($5,279,308.63)

Same process used for Secondary Service Greater Than 10 kW.

Transmission Service ($5,401,089.92)

Same process used for Secondary Service Greater Than 10 kW.

Lighting Service ($1,106,655.05)

The Lighting Service Refund of $1,106,655.05 will be allocated to the various
types of lights based on the light type’s percentage of the total revenue for
the 2006 test year.

 

Light Type

   % of 2006 Test Year
Lighting Revenue     Refund

Schedule A

   58.88 %   $ 651,750.58

Schedule B

   8.66 %   $ 95,811.58

Schedule C

   0.03 %   $ 386.34

Schedule D

   2.23 %   $ 24,725.58

Metered (Non-Company)

   1.7 %     18,622.17

Metered (Company)

   0.4 %     4,420.61

Outdoor Lights

   28.1 %     310,938.20             

Total

   100.0 %   $ 1,106,655.06

For Street Light Schedules A, B, C, D, and Outdoor Lights, the credit will be
based on a fixed $ amount per light type calculated by dividing the allocated
amount for each light type by each participating REP’s number of lights in that
type as of December 31, 2007.

For metered streetlight service, the refund will be calculated for each metered
premise based on each participating REP’s metered premises’ 2007 annual revenue
as a percentage of the total 2007 revenue for metered Street Light Service.

 

  n.

Oncor’s debt will be limited so that its debt-to-equity ratio is at or below the
assumed debt-to-equity ratio established from time to time by the Commission for
ratemaking purposes, which is currently set at 60% debt to 40% equity. The
Commission has authority to determine what types of debt and equity are included
in a utility’s debt-

 

39

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to-equity ratio. The purposes to be conducted or promoted by Oncor are those of
an electric transmission and distribution company, including owning and
operating equipment or facilities to transmit and distribute electricity, and to
engage in any other activities related or incidental thereto or in anticipation
thereof. Oncor will cap its cost of debt for the 2008 rate case at
pre-Transaction levels. In addition, Oncor will agree that its cost of debt in
future rate proceedings initiated prior to December 31, 2012 will be based on
the then-current cost of debt for electric utilities which have the same
investment grade ratings, as established by the Standard & Poor’s. Moody’s and
Fitch rating agencies, at the time of such proceedings as Oncor’s ratings as of
October 1, 2007.

 

  o. If, at any time from the date of closing of the Transaction through
December 31, 2012, Oncor’s entity rating is not maintained as investment grade
by Standard and Poor’s, Moody’s or Fitch credit rating agencies, Oncor will not
use its below investment grade ratings to justify an argument in favor of a
higher regulatory ROE.

 

  p. TEF and Oncor will not include goodwill from the acquisition in the
calculation of the Debt-to-Equity Ratio commitment to justify increased debt at
Oncor. Write-downs or write-offs of goodwill will not be included in the
calculation of net income for dividend payment purposes, as described in Finding
of Fact No. 14.a.

 

  q. Oncor will not seek to recover Transaction goodwill or any expense
associated with the impairment of goodwill in its rates.

 

  r. Oncor will not seek to include costs related to the Transaction in its
rates.

 

  s. Oncor will not seek recovery in rates of any portion of the $200 million
TEF DSM/Energy Efficiency commitment.

 

  t. TEF will spend $100 million of the additional $200 million DSM/Energy
Efficiency commitment reflected in Finding of Fact No. 13.g at Oncor.

 

  i. From January 1, 2008 through December 31, 2012, Oncor shall spend $100
million of DSM/Energy Efficiency commitment as follows:

 

  1.

Oncor shall spend $16 million for low income customer programs which will be
conducted in a manner consistent with P.U.C. energy efficiency rules. To do so,
Oncor will negotiate and execute a contract with the Texas Association of
Community Action Agencies (TACAA) to administer $3.2 million annually (for
calendar years 2008 through 2012) for weatherization assistance services through
local contracts

 

40

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with governmental and nonprofit agencies that will augment resources from the
federal weatherization assistance program. Oncor will use its best efforts to
have this agreement in place within 30 days of the final Order in Docket
No. 34077. The contract with TACAA must contain reporting provisions to ensure
that the funds are spent efficiently on effective weatherization programs, and
provisions that ensure that TACAA makes reasonable progress toward spending the
total $16 million over five years. TACAA must also agree that these additional
weatherization funds will be spread equitably across the entire Oncor service
area, including through community action agencies that are not members of TACAA.
For this $16 million for low income customer programs, Oncor shall provide the
Commission accurate annual reporting of revenues spent, the reduction in demand,
and energy savings by customer class.

 

  2. After accounting for the low income customers’ share of the $100 million to
be spent by Oncor, Oncor shall spend the remaining $84 million for the benefit
of industrial, commercial, residential and municipal, state, and other
governmental customers. Oncor will spend the remaining $84 million for
DSM/Energy Efficiency in a manner consistent with P.U.C. energy efficiency
rules, except that (A) up to $8.4 million of the remaining $84 million need not
meet the cost effectiveness standards set out in such rules; and (B) program
cost effectiveness will be measured over the life of the energy efficiency
measure, provided that there will be realized savings in a three year period.
For purposes of the remaining $84 million to be spent by Oncor, all end-use
customers, including industrial, municipal, state and other governmental
customers, will be considered “eligible customers.” Oncor shall provide the
Commission accurate annual reporting of revenues spent, the reduction in demand,
and energy savings by customer class.

 

  3. The $100 million DSM/Energy Efficiency spending described here shall be in
addition to amounts Oncor is required to spend under PURA § 39.905, other
legislation, or its preexisting obligations, including those related to Docket
Nos. 32103 and 34630. Energy savings achieved through the expenditure of this
$100 million shall not count toward meeting or exceeding requirements of PURA §
39.905, related substantive rules, or for purposes of calculating bonuses.

 

  4. If the $100 million to be expended by Oncor for DSM/Energy Efficiency is
funded by Oncor, including through the sale or transfer of Oncor’s assets, the
portion of the $100 million spent in any calendar year shall be included in the
calculation of net income for dividend payment purposes, as described in Finding
of Fact No. 14.a, but shall not be recognized as an expense for purposes of
calculating Oncor’s rate of return as reported on any Commission-required filing
or in support of any future Oncor rate increase.

 

41

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  ii. The other $100 million that TEF has committed to spend on DSM/Energy
Efficiency will be funded and spent by TEF affiliates other than Oncor for the
benefit of industrial, commercial, residential and municipal, state, and other
governmental customers from January 1, 2008 through December 31, 2012.

 

  u. Any corporate support services provided by an affiliate shall be acquired
by Oncor at cost, but this provision shall not serve as a precedent or factor
for determining the validity of any affiliate expense in future rate cases.
Parties in future rate cases may challenge requested affiliate expenses for
compliance with PURA § 36.058. The Commission can audit compliance with this
provision consistent with existing substantive rules. Further, in the 2008 rate
case, Oncor will not request affiliate expenses relating to corporate support
services in an amount that exceeds the amount included in its Docket No. 34040
request. Nothing in the Stipulation shall be considered precedent as to whether
CGE expenses are to be considered affiliate expenses. By agreeing to this
provision, parties do not waive their rights to take the position that CGE is an
affiliate of Oncor in the 2008 rate case and any future rate proceedings.

 

  v. Oncor shall make minimum capital expenditures equal to a budget of $3.6
billion over the five-year period beginning January 1, 2008, and ending
December 31, 2012, subject to the following adjustments to the extent reported
to the Commission in Oncor’s quarterly earnings monitor report: Oncor may reduce
capital spending due to conditions not under Oncor’s control, including, without
limitation, siting delays, cancellations of projects by third-parties, or weaker
than expected economic conditions. The $3.6 billion budget does not include
transmission projects to be constructed by Oncor as a result of the Commission’s
decision in its Docket No. 33672, Commission Staff’s Petition for Designation of
Competitive Renewable Energy Zones. This Finding of Fact modifies the commitment
reflected in Finding of Fact No. 13.q.

 

  w. The capital expenditures contained in Finding of Fact No. 14.v shall be
made solely to support the traditional Oncor system.

 

42

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  x. From January 1, 2008 until December 31, 2012, Oncor will agree to the
following system SAIDI and SAIFI Performance Standards, and Worst Performing
Feeder Standards, including a total annual rebate payment ceiling of $2 million.
The metrics for these standards were the subject of proposed legislation in the
most recent legislative session; therefore in the event the metrics are changed
in subsequent legislative sessions, the Signatories agree that Oncor shall have
the right to file an application to conform the metrics referenced herein to the
new metrics established in subsequent legislation.

 

  i. General Provisions

 

  1. The reliability standards contained herein are intended to be consistent
with P.U.C. Subst. R. 25.52 - Reliability and Continuity of Service.

 

  2. Reporting periods for these reliability standards are intended to be
consistent with P.U.C. Subst. R. 25.81 - Service Quality Reports, and will
coincide with the reporting periods in the Oncor Electric System Service Quality
Reports to the Commission. Annual evaluations will be for calendar years.

 

  3. The initial reporting period for purposes of the rebates provided herein
will be the year 2008.

 

  4. Reliability indices are calculated for “forced interruptions” as defined by
P.U.C. Subst. R. 25.52.

 

  ii. Reliability Indices

The following reliability standards use the System Average Interruption
Frequency Index (“SAIFI”) and System Average Interruption Duration Index
(“SAIDI”). The distribution feeder standards will be established for
distribution feeders with 10 or more customers.

 

  1. 10 Percent Worst Distribution Feeder Performance Standards

No distribution feeder will sustain a SAIFI or SAIDI value for a reporting
period that is among the highest (worst) 10 percent of the feeders for any two
consecutive reporting periods.

 

  2. 300 Percent Greater than System Average Distribution Feeder Performance
Standards

No distribution feeder will sustain a SAIFI or SAIDI value for a reporting
period that is more than 300 percent greater than the system average of all
feeders for any two consecutive reporting periods.

 

43

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  3. System-Wide Standards

Oncor will not exceed the system-wide SAIFI or SAIDI standard by more than 5.0
percent beginning in 2008. The system-wide standards are the average SAIFI and
the average SAIDI for 1998, 1999, and 2000.

 

  iii. Maximum Amount of Rebates and Rebate Priorities

 

  1. The rebates for violations of the reliability standards will not exceed a
total of $2 million in a calendar year.

 

  2. The rebates will be credited to customers based upon the following
priorities:

 

  a. 10 Percent Worst Distribution Feeder Performance Standards

 

  b. 300 Percent Greater than System Average Distribution Feeder Performance
Standards

 

  c. System-Wide Standards

To the extent that the $2 million rebate cap is reached, the rebate money will
be prorated to customers in the last group, under subsections (iii)(2)(a),
(iii)(2)(b), or (iii)(2)(c) above, eligible for rebates. Customers in higher
priority groups will receive full rebates.

 

  iv. Determination of Rebates

 

  1. 10 Percent Worst Distribution Feeder Performance Standards

 

  a. A rebate of $20 will be made to each customer on all feeders violating one
of the 10 Percent Worst Distribution Feeder Performance Standards. A separate
rebate will be made for each violated standard (SAIFI or SAIDI) such that a
customer on a feeder violating both standards would be credited $40.

 

  b. If Oncor has no distribution feeder that violates one of the 10 Percent
Worst Distribution Feeder Performance Standards for a reporting period, the
total amount of money for rebates will be reduced 10 percent ($200,000) for the
standard achieved. This reduction of money for rebates will decrease the total
amount of rebates available for a calendar year for violations of any of the
remaining standards. The amount of reduction will be 20 percent ($400,000) if
both standards are achieved.

 

  2. 300 Percent Greater than System Average Distribution Feeder Performance
Standards

 

44

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  a. A service reliability credit of $50 will be made to each customer on all
feeders violating either standard. A separate credit will be made for each
standard violated (SAIFI or SAIDI) such that a customer on a feeder violating
both standards would be credited $100.

 

  b. If Oncor has no distribution feeder that violates a 300 Percent Greater
than System Average Distribution Feeder Performance Standard for a reporting
period, the total amount of money for rebates will be reduced 10 percent
($200,000) for the standard achieved. The amount of reduction will be 20 percent
($400,000) if both standards are achieved. This reduction of money for rebates
will decrease the total amount of rebates available for a calendar year for
violations of any remaining 300 Percent Greater than Average Distribution Feeder
Performance Standard, or the System-Wide Standards, but not the 10 Percent Worst
Distribution Feeder Performance Standards.

 

  3. System-Wide Standards

 

  a. If the SAIFI or SAIDI System-Wide Standard is violated, Oncor will
distribute the total rebate on a per capita basis among all distribution
customers.

 

  b. SAIFI: The total rebate will be the numerical difference between the actual
and the allowable SAIFI values multiplied by $1 million, up to a maximum of
one-half of the total amount of money available for rebates for violations of
the System-Wide Standards.

 

  c. SAIDI: The total rebate will be the numerical difference between the actual
and the allowable SAIDI values multiplied by $10,000, up to a maximum of
one-half of the total amount of money available for rebates for violations of
the System-Wide Standards.

 

  4. Payment

Oncor will make rebates to the current customer at the affected consuming
facility by June 1 of the year following the reporting period.

 

  5. Term of Standards

 

  a. The electric reliability standards established under this Stipulation will
remain in effect from January 1, 2008 through December 31, 2012.

 

45

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  v. Any interested person will have the right to petition the Commission to
revise the commitments in this Finding of Fact No. 14.x. In the event the
Commission’s service reliability rule, P.U.C. SUBST. R. 25.52, is amended, such
amendments will automatically be incorporated in these reliability commitments.
Additionally, the signatories agree that they will revisit these standards and
penalties in the future in the context of any performance-based ratemaking plans
or rules for Oncor and/or the electric industry.

 

  vi. Within 45 days of the date of the Order in Docket No. 34077, Oncor shall
file with the Commission a compliance plan with an agreement to pass through
service quality credits similar in form to Phase Two of the plan and the
agreement adopted in Project No. 30848, Compliance Filings by Texas-New Mexico
Power Company from the Order in Docket No. 30172.

 

  y. From January 1, 2008 until December 31, 2012, to the extent not
inconsistent with existing agreements with Cities, Oncor agrees to annual street
light performance standards as follows:

(i) Routine repairs (bulbs, photocells, ballasts) - 90% complete in 5 calendar
days;

(ii) Circuit repairs (overhead/underground cable repairs) - 80% complete in 15
calendar days;

(iii) Knockdowns (not repairs, require the replacement of the entire light) -
80% complete in 30 calendar days

These metrics will be exempt from force majeure events, including, but not
limited to, major storms, cities whose ordinances or approvals impact Oncor's
ability to meet these metrics, and mutual assistance to other utilities.
Examples of qualifying City ordinances include - lane closures, pre-determined
work schedules, and noise ordinances. All non-standard lights, such as antique
or historical lights are exempt from this requirement since they are not readily
available in Oncor’s stock or from the manufacturer. Oncor agrees to a maximum
payment of $1 million per year if the standards are not achieved, to be paid to
the customers affected as contained in a plan filed by Oncor with the Commission
for approval. Oncor shall file such a plan within 60 days of the date of the
final order in Docket No. 34077. Notwithstanding this agreement, this issue may
be addressed in subsequent rate proceedings.

 

  z.

From January 1, 2008 until December 31, 2012, Oncor will agree to the Customer
Service metric proposed by Cities Witness Norwood (annual average response time
for customer calls to Oncor’s telephone call center shall not exceed 60
seconds), with

 

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a total payment not to exceed $2 million on an annual basis, to be paid in
accordance with a plan filed by Oncor with the Commission for approval. Oncor
shall file such a plan within 60 days of the date of the final order in Docket
No. 34077.

 

  aa. Oncor will file its advanced metering deployment plan with the Commission
before July 1, 2008; provided, however, that should the Commission take action
to materially alter the existing requirements for advanced metering deployment,
Oncor reserves its rights to delay the filing for a reasonable time as may be
necessary to address any such requirements. The advanced meters deployed will
support DSM programs to the extent required by the Commission’s rules.

 

  bb. TEF, Oncor, TXU Corp. and its subsidiaries, and any legislative advocacy
group to which any of the parties are members, and the other Signatories will
agree not to pursue, support or propose legislation that would change or
abrogate any of the terms of this Stipulation except that this Stipulation is
not intended to impair the ability of the Staff, OPC or the State to communicate
with or respond to a request of a member of the Texas Legislature; provided that
if legislation discussed in Finding of Fact No. 14.x is considered in future
sessions, Oncor reserves the right to participate in that legislative process.

 

  cc. Oncor will comply with the commitments identified in the direct and
rebuttal testimonies of Frederick M. Goltz and Robert S. Shapard (“the “Oncor
Commitments”), which are reflected in Finding of Fact Nos. 13.a through 13.v and
as replaced or supplemented as described herein. Oncor will make annual reports
to the Commission regarding its compliance with the Oncor Commitments.

 

  dd. Oncor will agree to make an exception to the standard transformer loss
adjustment of 0.8% for high-voltage customers that are metered on the low side
of the transformer, provided that the customer can provide third-party
verification of the actual loss level.

 

  ee. Oncor will propose and support a cost-based retail transformation tariff
applicable to industrial customers in its 2008 rate filing. Parties are free to
take any position with respect to the proposed tariff.

 

15. The Stipulation is reasonable, supported by the evidence, and in the public
interest.

 

16. The Transaction is in the public interest.

 

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Findings in Accordance with Preliminary Order

 

17. On August 23, 2007, the Commission issued its Preliminary Order in this
docket, identifying the issues to be considered in determining whether the
Transaction is consistent with the public interest. The Commission also
identified the criteria it will evaluate in making the public interest
determination.

 

18. Given the issues identified in the Preliminary Order, the following facts
favor a finding that the Transaction is consistent with the public interest:

 

  a. The Transaction will not adversely affect the health or safety of Oncor’s
customers or employees. (Preliminary Order, Issue No. 2, at 3). Oncor’s quality
of service and customer service commitments, as contained in the Stipulation,
support this finding. (Stipulation, paragraphs I.(46), (47), and (48)).

 

  b. The Transaction will not result in the transfer of jobs of citizens of this
state to workers domiciled outside this state. (Preliminary Order, Issue No. 3,
at 3). TEF witness Goltz testified that the Transaction would not result in the
transfer of jobs to workers located outside Texas. (TEF Ex.     , p. 21).

 

  c. The Transaction will not result in a decline in service. (Preliminary
Order, Issue No. 4, at 3). Oncor’s and TEF’s commitments to specific system
SAIDI and SAIFI Performance Standards, a Worst Performance Feeder Standard,
Street Lighting Performance Standard, and a Customer Service metric support this
finding. (Stipulation, paragraphs I.(46), (47), and (48)).

 

  d. The Transaction will not result in Texas ratepayers bearing any
Transaction-related costs unrelated to the corresponding benefits to Texas
ratepayers. (Preliminary Order, Criterion No. 1, at 3). The commitment by TEF
and Oncor in the Stipulation that Oncor will not seek to include Transaction
costs in its rates supports this finding. (Stipulation, paragraph I.(18) and
(40)).

 

  e. No additional guarantees should be required to ensure that the service
quality and customer relations are commensurate with the requirements of PURA.
(Preliminary Order, Criterion No. 2, at 3). The Stipulation imposes specific
system SAIDI and SAIFI Performance Standards, a Worst Performance Feeder
Standard, Street Lighting Performance Standards, and a Customer Service metric
that make additional guarantees unnecessary. (Stipulation, paragraphs I.(46),
(47), and (48)).

 

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  f. No additional guarantees or commitments are required to ensure that no
cost-shifting, cross subsidies, or discriminatory behavior occurs among Oncor’s
affiliates. (Preliminary Order, Criterion No. 3, at 3). TEF witness Goltz
described ring-fencing provisions to be implemented that, in conjunction with
the Commission’s Substantive Rules, provide adequate protection against
cost-shifting, cross-subsidies, or discriminatory behavior among Oncor’s
affiliates. (TEF Ex.     , pp. 14-16; Stipulation, paragraphs I.13-15).

 

  g. The ring-fencing proposed by TEF and Oncor will separate and help protect
Oncor from bankruptcy or financial distress of an unregulated affiliate.
(Preliminary Order, Criterion No. 4, at 4). TEF’s and Oncor’s commitments to
implement the proposed ring-fencing mechanisms in conjunction with their
agreements in the Stipulation support this finding. (TEF Ex.     , pp. 8-15;
Stipulation, paragraphs I.1-5, 11-16, 20-22, 26-30, 32, 34-37).

 

  h. Additional guarantees or commitments are not required to ensure that
Oncor’s debt ratings as a result of this Transaction have no negative effect on
ratepayers. (Preliminary Order, Criterion No. 5, at 4). Commitments made by TEF
and Oncor in the Stipulation ensure that Oncor’s cost of debt shall not increase
for five years as a result of the Transaction. (Stipulation, paragraphs I.5, 19,
36-38).

 

  i. Oncor will make annual reports to the Commission regarding its compliance
with the Oncor commitments. (Preliminary Order, Criterion 6, at 4).

 

  j. Given the Stipulation, the commitments made by the Oncor and TEF are
consistent with the public interest. (Preliminary Order, Criterion No. 7, at 4).

II. Conclusions of Law

 

1. Oncor is an electric utility as that term is defined in Section 31.002(6) of
the Public Utility Regulatory Act, Title II, Texas Utilities Code (“PURA”) and
is a wholly owned subsidiary of TXU Corp.

 

2. The Commission asserts jurisdiction over the parties and the subject matter
of the Stipulation by virtue of § 14.101 of PURA.

 

3. Notice has been given to all affected persons as required by P.U.C. Proc. R.
22.55.

 

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4. Consideration of the following issues identified in the Preliminary order is
not necessary to a public interest definition given the type of transaction
involved in this docket, which does not involve the sale of the utility’s assets
or a merger of operating utilities:

a. The reasonable value of the property, facilities, or securities to be
acquired, disposed of, merged, transferred, or consolidated (Preliminary Order
Issue No. 1, at 3).

b. Will the public utility receive consideration equal to the reasonable value
of the assets when it sells, leases, or transfers assets? (Preliminary Order
Issue No. 1, at 5).

 

5. The Signatories’ application was processed in accordance with the
requirements of PURA and the Texas Administrative Procedure Act, Tex. Gov’t Code
Ann. §§ 2001.001-.902.

 

6. The Commission’s consideration of the Stipulation complies with PURA § 14.054
and P.U.C. Proc. R. 22.206.

 

7. The terms of the Stipulation are supported by a preponderance of the
evidence.

 

8. The Transaction, in light of the provisions of the Stipulation, is consistent
with the public interest within the meaning of PURA § 14.101.

III. ORDERING PARAGRAPHS

Based on the foregoing Findings of Fact and Conclusions of Law, the Commission
issues the following orders:

 

1. The Transaction is consistent with the public interest within the meaning of
PURA § 14.101.

 

2. TEF and Oncor are hereby ordered to comply with the terms of the Stipulation,
as set forth in this Order.

 

3. All motions, applications, and requests for entry of specific findings of
fact and conclusions of law, and other requests for relief, general and
specific, if not expressly granted herein are denied for lack of merit.

SIGNED AT AUSTIN, Texas on the      day of                 , 2007.

 

50

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PUBLIC UTILITY COMMISSION OF TEXAS

 

PAUL HUDSON, CHAIRMAN

 

JULIE C. PARSLEY, COMMISSIONER

 

BARRY T. SMITHERMAN, COMMISSIONER

 

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Exhibit B

Allocation of One-Time Credit Provided in Paragraph IV(35) of Stipulation

 

Customer Class

   Amount Allocated to Class

Residential

   $ 32,983,398.59

Sec<=10 kW

   $ 790,769.48

Sec>10kW

   $ 26,427,614.56

Pri<=10kW

   $ 11,163.78

Pri>10kW

   $ 5,279,308.63

Transmission

   $ 5,401,089.92

Lighting

   $ 1,106,655.05

Credit Methodology

General

The credit will be calculated on a spreadsheet basis based on a combination of
2006 Test Year information and December 31, 2007 information. The credit amount
will be sent to the participating REP with supporting documentation. The credit
will be calculated and credited outside of the normal Oncor billing process and
will not be part of the standard 810 transaction.

Residential Service ($32,983,398.59)

The Residential Rate Class credit will be based on a fixed $ amount per
Residential Customer that will be calculated as follows: $32,983,398.59/ Total
Number of participating REP Residential Customers as of December 31, 2007.

The fixed $ amount per Residential Customer will be applied to the number of
Residential Customers for each participating REP as of December 31, 2007. The
amount calculated will be the Residential Rate Class credit for that
participating REP.

Secondary Service Less Than or Equal to 10 kW ($790,769.48)

Same process used for Residential Service.

--------------------------------------------------------------------------------

Secondary Service Greater Than 10 kW ($26,427,614.56)

The Secondary Service Greater Than 10 kW credit will be determined based on each
customer’s 2007 annual kWh consumption as a percentage of the total 2007
participating REP’s annual Secondary Service Greater Than 10 kW class kWh.

Each individual customer’s percentage will be multiplied by the total class
credit of $26,427,614.56. The credit for each customer will be totaled for each
participating REP based on the participating REP’s customers as of December 31,
2007.

Primary Service Less Than or Equal to 10 kW ($11,163.78)

Same process used for Residential Service.

Primary Service Greater Than 10 kW ($5,279,308.63)

Same process used for Secondary Service Greater Than 10 kW.

Transmission Service ($5,401,089.92)

Same process used for Secondary Service Greater Than 10 kW.

Lighting Service ($1,106,655.05)

The Lighting Service credit of $1,106,655.05 will be allocated to the various
types of lights based on the light type’s percentage of the total revenue for
the 2006 test year.

 

Light Type

   % of 2006 Test Year
Lighting Revenue     Refund

Schedule A

   58.88 %   $ 651,750.58

Schedule B

   8.66 %   $ 95,811.58

Schedule C

   0.03 %   $ 386.34

Schedule D

   2.23 %   $ 24,725.58

Metered (Non-Company)

   1.7 %     18,622.17

Metered (Company)

   0.4 %     4,420.61

Outdoor Lights

   28.1 %     310,938.20             

Total

   100.0 %   $ 1,106,655.06

For Street Light Schedules A, B, C, D, and Outdoor Lights, the credit will be
based on a fixed $ amount per light type calculated by dividing the allocated
amount for each light type by each participating REP’s number of lights in that
type as of December 31, 2007.

For metered streetlight service, the credit will be calculated for each metered
premise based on each participating REP’s metered premises’ 2007 annual revenue
as a percentage of the total 2007 revenue for metered Street Light Service.

 

2