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**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      D.C. 20549**

**FORM      10-Q**

**FOR      THE QUARTERLY PERIOD ENDED JUNE 30, 2006**

**_____________________**

**TXU      Energy Company LLC**

|  A                Delaware Limited Liability                Company  |   |  75-2967817                                                         |
|--------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------|
|  (State                of Organization)                                   |   |  (I.R.S.                Employer Identification                No.) |

|  1601                Bryan Street, Dallas TX,                75201-3411           |   |  (214)                812-4600                                       |
|----------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------|
|  (Address                of Principal Executive                Offices)(Zip Code) |   |  (Registrant’s                Telephone                Number) |

**_____________________**

**TXU      Energy Company LLC meets the conditions set forth in General Instructions (H)      (1) (a) and (b) of Form 10-Q and is therefore filing this report with the      reduced disclosure format.**

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| **TABLE                OF CONTENTS**                                                                                                                                                                                    |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                              | **Page** |
| **Glossary**                                                                                                                                                                                                            | ii  |
| **Part                I.    ****FINANCIAL                INFORMATION**                                                                                                                                   |   |
| **Item                1.   ****Financial                Statements** Condensed                Statements of Consolidated Income -Three                and Six Months Ended June 30, 2006 and 2005   | 1 |
| Condensed                Statements of Consolidated Comprehensive Income -Three                and Six Months Ended June 30, 2006 and 2005                                                                              | 2 |
| Condensed                Statements of Consolidated Cash Flows -Six                Months Ended June 30, 2006 and 2005                                                                                                  | 3 |
| Condensed                Consolidated Balance Sheets -June                30, 2006 and December 31, 2005                                                                                                                | 4 |
| Notes                to Condensed Consolidated Financial Statements                                                                                                                                                     | 5 |
| Report                of Independent Registered Public Accounting Firm                                                                                                                                                  | 23 |
| **Item                2.    ****Management’s                Discussion and Analysis of Financial Condition****and                Results of Operations**                                      | 24 |
| **Item                3.    ****Quantitative                and Qualitative Disclosures About Market Risk**                                                                                         | 46 |
| **Item                4.    ****Controls                and Procedures**                                                                                                                            | 51 |
| **Part                II.           ****OTHER                INFORMATION**                                                                                            |   |
| **Item                1.    ****Legal                Proceedings**                                                                                                                                  | 52 |
| **Item                1A.        ****Risk                Factors**                                                                                                              | 52 |
| **Item                6.    ****Exhibits**                                                                                                                                                               | 53 |
| **SIGNATURE**                                                                                                                                                                                                                | 54 |
|                                                                                                                                                                                                                              |   |

**TXU      Energy Company LLC files periodic reports on Form 10-K and Form 10-Q and current      reports on Form 8-K which are generally made available to the public, free      of      charge, on the TXU Corp. website at http://www.txucorp.com, shortly after they      have been filed with the Securities and Exchange Commission. To the extent      any      of those reports are not posted on the TXU Corp. website, TXU Energy Company      LLC      will provide copies of such reports upon request. The information on TXU Corp.’s      website shall not be deemed a part of, or incorporated by reference into, this      report on Form 10-Q.**

**GLOSSARY**

| **1999                Restructuring Legislation**  | legislation                that restructured the electric utility industry in Texas to provide                for                retail competition                                                                                                                                                                                                                                                                                            |
|---------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **2005                Form 10-K**                  | TXU                Energy Holdings’ Annual Report on Form 10-K for the year ended December                31, 2005                                                                                                                                                                                                                                                                                                                       |
| **Capgemini**                                      | Capgemini                Energy LP, a subsidiary of Cap Gemini North America Inc. that provides                business support services to TXU Energy Holdings and TXU Electric                Delivery                                                                                                                                                                                                                                       |
| **Commission**                                     | Public                Utility Commission of Texas                                                                                                                                                                                                                                                                                                                                                                                              |
| **EITF**                                           | Emerging                Issues Task Force                                                                                                                                                                                                                                                                                                                                                                                                      |
| **EITF                02-3**                       | EITF                Issue 02-3, “Issues Involved in Accounting for Derivative Contracts Held                for Trading Purposes and Contracts Involved in Energy Trading and                Risk                Management Activities”                                                                                                                                                                                            |
| **EPA**                                            | US                Environmental Protection Agency                                                                                                                                                                                                                                                                                                                                                                                              |
| **ERCOT**                                          | Electric                Reliability Council of Texas, the Independent System Operator and                the                regional reliability coordinator of the various electricity systems                within                Texas                                                                                                                                                                                                     |
| **FASB**                                           | Financial                Accounting Standards Board, the designated organization in the private                sector for establishing standards for financial accounting and                reporting                                                                                                                                                                                                                                         |
| **FERC**                                           | US                Federal Energy Regulatory Commission                                                                                                                                                                                                                                                                                                                                                                                         |
| **FIN**                                            | Financial                Accounting Standards Board Interpretation                                                                                                                                                                                                                                                                                                                                                                             |
| **FIN                47**                          | FIN                No. 47, “Accounting for Conditional Asset Retirement Obligations - An                Interpretation of FASB Statement No. 143”                                                                                                                                                                                                                                                                                  |
| **FIN                48**                          | FIN                48, “Accounting for Uncertainty in Income Taxes”                                                                                                                                                                                                                                                                                                                                                                |
| **Fitch**                                          | Fitch                Ratings, Ltd. (a credit rating agency)                                                                                                                                                                                                                                                                                                                                                                                    |
| **GW**                                             | gigawatts                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| **GWh**                                            | gigawatt-hours                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| **historical                service territory**    | the                territory, largely in north Texas, being served by TXU Corp.’s regulated                electric utility subsidiary at the time of entering retail competition                on                January 1, 2002                                                                                                                                                                                                       |
| **IRS**                                            | US                Internal Revenue Service                                                                                                                                                                                                                                                                                                                                                                                                     |
| **kWh**                                            | kilowatt-hours                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| **market                heat rate**                | Heat                rate is a measure of the efficiency of converting a fuel source to                electricity. The market heat rate is based on the price offer of                the                marginal supplier (generally gas plants) in generating electricity                and is                calculated by dividing the wholesale market price of power by the                market                price of natural gas.  |
| **MMBtu**                                          | million                British thermal units                                                                                                                                                                                                                                                                                                                                                                                                   |
| **Moody’s**                                  | Moody’s                Investors Services, Inc. (a credit rating agency)                                                                                                                                                                                                                                                                                                                                                                 |

| **MW**                                 | megawatts                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|---------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **MWh**                                | megawatt-hours                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| **NRC**                                | US                Nuclear Regulatory Commission                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| **price-to-beat                rate**  | residential                and small business customer electricity rates established by the                Commission that (i) were required to be charged in a REP’s historical                service territories until the earlier of January 1, 2005 or the date                when                40% of the electricity consumed by such customer classes is supplied                by                competing REPs, adjusted periodically for changes in fuel costs,                and (ii)                are required to be made available to those customers until January                1,                2007  |
| **PURA**                               | Texas                Public Utility Regulatory Act                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| **REP**                                | retail                electric provider                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| **S&P**                            | Standard                & Poor’s Ratings Services, a division of the McGraw Hill Inc.                Companies (a credit rating agency)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| **SEC**                                | US                Securities and Exchange Commission                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| **Settlement                Plan**     | regulatory                settlement plan that received final approval by the Commission in                January                2003                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| **SFAS**                               | Statement                of Financial Accounting Standards issued by the FASB                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| **SFAS                34**             | SFAS                No. 34, “Capitalization of Interest Cost”                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| **SFAS                109**            | SFAS                No. 109, “Accounting for Income Taxes”                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| **SFAS                133**            | SFAS                No. 133, “Accounting for Derivative Instruments and Hedging Activities” as                amended and interpreted                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| **SFAS                140**            | SFAS                No. 140, “Accounting for Transfers and Servicing of Financial Assets and                Extinguishments of Liabilities, a replacement of FASB Statement                125”                                                                                                                                                                                                                                                                                                                                                                                                                           |
| **SFAS                143**            | SFAS                No. 143, “Accounting for Asset Retirement Obligations”                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| **SFAS                144**            | SFAS                No. 144, “Accounting for the Impairment or Disposal of Long-Lived                Assets”                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| **SG&A**                           | selling,                general and administrative                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| **Short-cut                method**    | refers                to the short-cut method under SFAS 133 that allows entities to assume                no                hedge ineffectiveness in a hedging relationship of interest rate                risk if                certain conditions are met                                                                                                                                                                                                                                                                                                                                                                        |
| **TCEQ**                               | Texas                Commission on Environmental Quality                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| **TXU                Big Brown**       | TXU                Big Brown Company LP, a Texas limited partnership and subsidiary                of TXU                Energy Holdings, which owns two lignite/coal-fired generation units                in                Texas                                                                                                                                                                                                                                                                                                                                                                                                   |
| **TXU                Corp.**           | refers                to TXU Corp., a holding company, and/or its consolidated subsidiaries,                depending on context                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| **TXU                DevCo**           | refers                to TXU Generation Development Company LLC, a Delaware limited liability                company and holding company subsidiary of TXU Corp., which has been                established for the purpose of developing and constructing new                lignite/coal-fired generation units in Texas. While an affiliate                of TXU                Energy Holdings, TXU DevCo is not a subsidiary of, or a parent company                to,                TXU Energy Holdings.                                                                                                                     |

| **TXU                Electric Delivery**  | refers                to TXU Electric Delivery Company, a subsidiary of TXU Corp., and/or                its                consolidated bankruptcy-remote financing subsidiary, TXU Electric                Delivery                Transition Bond Company LLC, depending on context                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **TXU                Energy Holdings**    | refers                to TXU Energy Company LLC, a subsidiary of US Holdings, and/or its                consolidated subsidiaries, depending on context. This Form 10-Q and                other                SEC filings of TXU Energy Holdings occasionally make references to                TXU                Energy Holdings when describing actions, rights or obligations of                its                subsidiaries. These references reflect the fact that the subsidiaries                are                consolidated with TXU Energy Holdings for financial reporting purposes.                However, these references should not be interpreted to imply that                TXU                Energy Holdings is actually undertaking the action or has the rights                or                obligations of its subsidiaries.  |
| **US**                                    | United                States of America                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| **US                GAAP**                | accounting                principles generally accepted in the US                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| **US                Holdings**            | TXU                US Holdings Company, a subsidiary of TXU Corp. and parent of TXU                Energy                Holdings                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |

**PART      I. FINANCIAL INFORMATION**

**Item      1.  FINANCIAL      STATEMENTS**

**TXU      ENERGY COMPANY LLC**

**CONDENSED      STATEMENTS OF CONSOLIDATED INCOME**

**(Unaudited)**

|                                                                                |   | **Three                Months Ended****June                30,** |    | **Six                Months Ended****June                30,** |   |
|-------------------------------------------------------------------------------------|--------|------------------------------------------------------------------|---------|----------------------------------------------------------------|--------|
|                                                                                |   | **2006**                                                         |    | **2005**                                                       |   | **2006** |   | **2005** |   |
|                                                                                |   | **(millions                of dollars)**                         |    |
|                                                                                |   |                                                             |    |                                                           |   |   |   |   |   |
| **Operating                revenues**                                          |   | $                                                                | 2,468   |                                                           | $      | 2,276 |   | $ | 4,478 |   | $ | 4,097 |   |
|                                                                                |   |                                                             |    |                                                           |   |   |   |   |   |   |   |   |   |
| Costs                and expenses:                                                  |   |                                                             |    |                                                           |   |   |   |   |   |   |   |   |   |
| Fuel,                purchased power costs and delivery fees                        |   |                                                             | 943     |                                                           |   | 1,265 |   |   | 1,733 |   |   | 2,338 |   |
| Operating                costs                                                      |   |                                                             | 152     |                                                           |   | 177 |   |   | 307 |   |   | 331 |   |
| Depreciation                and amortization                                        |   |                                                             | 84      |                                                           |   | 77 |   |   | 169 |   |   | 156 |   |
| Selling,                general and administrative expenses                         |   |                                                             | 121     |                                                           |   | 113 |   |   | 242 |   |   | 227 |   |
| Franchise                and revenue-based taxes                                    |   |                                                             | 27      |                                                           |   | 24 |   |   | 54 |   |   | 50 |   |
| Other                income (Note 11)                                               |   |                                                             | (1      | )                                                              |   | (6 | ) |   | (1 | ) |   | (8 | ) |
| Other                deductions (Note 11)                                           |   |                                                             | 205     |                                                           |   | 12 |   |   | 195 |   |   | 13 |   |
| Interest                income                                                      |   |                                                             | (45     | )                                                              |   | (11 | ) |   | (76 | ) |   | (21 | ) |
| Interest                expense and related charges (Note 13)                       |   |                                                             | 102     |                                                           |   | 94 |   |   | 202 |   |   | 185 |   |
| Total                costs and expenses                                             |   |                                                             | 1,588   |                                                           |   | 1,745 |   |   | 2,825 |   |   | 3,271 |   |
|                                                                                |   |                                                             |    |                                                           |   |   |   |   |   |   |   |   |   |
| Income                from continuing operations before income taxes           |   |                                                             | 880     |                                                           |   | 531 |   |   | 1,653 |   |   | 826 |   |
|                                                                                |   |                                                             |    |                                                           |   |   |   |   |   |   |   |   |   |
| Income                tax expense                                              |   |                                                             | 337     |                                                           |   | 186 |   |   | 590 |   |   | 278 |   |
|                                                                                |   |                                                             |    |                                                           |   |   |   |   |   |   |   |   |   |
| **Income                from continuing operations**                           |   |                                                             | 543     |                                                           |   | 345 |   |   | 1,063 |   |   | 548 |   |
|                                                                                |   |                                                             |    |                                                           |   |   |   |   |   |   |   |   |   |
| Loss                from discontinued operations, net of tax benefit (Note 4)  |   |                                                             | ─ |                                                           |   | (1 | ) |   | ─ |   |   | (4 | ) |
|                                                                                |   |                                                             |    |                                                           |   |   |   |   |   |   |   |   |   |
| **Net                income**                                                  |   | $                                                                | 543     |                                                           | $      | 344 |   | $ | 1,063 |   | $ | 544 |   |

**TXU      ENERGY COMPANY LLC**

**CONDENSED      STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME**

**(Unaudited)**

|                                                                                                                                                                                                                   |   | **Three                Months Ended****June                30,** |    | **Six                Months Ended****June                30,** |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------|---------|----------------------------------------------------------------|--------|
|                                                                                                                                                                                                                   |   | **2006**                                                         |    | **2005**                                                       |   | **2006** |   | **2005** |   |
|                                                                                                                                                                                                                   |   | **(millions                of dollars)**                         |    |
|                                                                                                                                                                                                                   |   |                                                             |    |                                                           |   |   |   |   |   |
| Components                related to continuing operations:                                                                                                                                                            |   |                                                             |    |                                                           |   |   |   |   |   |
|                                                                                                                                                                                                                   |   |                                                             |    |                                                           |   |   |   |   |   |
| Income                from continuing operations                                                                                                                                                                  |   | $                                                                | 543     |                                                           | $      | 345 |   | $ | 1,063 |   | $ | 548 |   |
|                                                                                                                                                                                                                   |   |                                                             |    |                                                           |   |   |   |   |   |   |   |   |   |
| Other                comprehensive income:                                                                                                                                                                             |   |                                                             |    |                                                           |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                   |   |                                                             |    |                                                           |   |   |   |   |   |   |   |   |   |
| Minimum                pension liability adjustment (net of tax expense of$-,                $4, $- and $4)                                                                                                       |   |                                                             | ─ |                                                           |   | 7 |   |   | ─ |   |   | 7 |   |
|                                                                                                                                                                                                                   |   |                                                             |    |                                                           |   |   |   |   |   |   |   |   |   |
| Cash                flow hedges:                                                                                                                                                                                       |   |                                                             |    |                                                           |   |   |   |   |   |   |   |   |   |
| Net                change in fair value of derivatives held at end of period (net                oftax                benefit (expense) of $39, $1, $(21) and $(7)) (See Note                10)                       |   |                                                             | (74     | )                                                              |   | (2 | ) |   | 39 |   |   | 13 |   |
| Derivative                value net losses related to hedged transactions settled during the                period                and reported in net income (net of tax benefit of $6, $9, $5 and                $19) |   |                                                             | 12      |                                                           |   | 18 |   |   | 10 |   |   | 35 |   |
| Total                effect of cash flow hedges                                                                                                                                                                        |   |                                                             | (62     | )                                                              |   | 16 |   |   | 49 |   |   | 48 |   |
|                                                                                                                                                                                                                   |   |                                                             |    |                                                           |   |   |   |   |   |   |   |   |   |
| Comprehensive                income from continuing operations                                                                                                                                                    |   |                                                             | 481     |                                                           |   | 368 |   |   | 1,112 |   |   | 603 |   |
|                                                                                                                                                                                                                   |   |                                                             |    |                                                           |   |   |   |   |   |   |   |   |   |
| Comprehensive                loss from discontinued operations                                                                                                                                                    |   |                                                             | ─ |                                                           |   | (1 | ) |   | ─ |   |   | (4 | ) |
|                                                                                                                                                                                                                   |   |                                                             |    |                                                           |   |   |   |   |   |   |   |   |   |
| Comprehensive                income                                                                                                                                                                               |   | $                                                                | 481     |                                                           | $      | 367 |   | $ | 1,112 |   | $ | 599 |   |

**TXU      ENERGY COMPANY LLC**

**CONDENSED      STATEMENTS OF CONSOLIDATED CASH FLOWS**

**(Unaudited)**

|                                                                                                                               |   | **Six                Months Ended**      |    |
|------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------|---------|
|                                                                                                                               |   | **June                30,**              |    |
|                                                                                                                               |   | **2006**                                 |    | **2005** |   |
|                                                                                                                               |   | **(millions                of dollars)** |    |
| Cash                flows - operating activities:                                                         |   |                                     |    |   |   |
| Income                from continuing operations                                                                              |   | $                                        | 1,063   |   | $ | 548 |   |
| Adjustments                to reconcile income from continuing operations to cash provided by                operating activities: |   |                                     |    |   |   |   |   |
| Depreciation                and amortization                                                                                  |   |                                     | 202     |   |   | 185 |   |
| Deferred                income taxes and investment tax credits - net                                                         |   |                                     | 74      |   |   | 54 |   |
| Impairment                of natural gas-fired generation plants                                                              |   |                                     | 198     |   |   | ─ |   |
| Inventory                write-off related to natural gas-fired generation plants                                             |   |                                     | 3       |   |   | ─ |   |
| Net                effect of unrealized mark-to-market valuations                                                             |   |                                     | (148    | ) |   | (18 | ) |
| Credit                related to impaired leases                                                                              |   |                                     | (4      | ) |   | (12 | ) |
| Change                in retail clawback liability                                                                            |   |                                     | ─ |   |   | (32 | ) |
| Charge                related to coal contract counterparty claim                                                             |   |                                     | ─ |   |   | 12 |   |
| Net                equity loss from unconsolidated affiliate                                                                  |   |                                     | 5       |   |   | 3 |   |
| Stock-based                compensation expense                                                                               |   |                                     | 4       |   |   | 6 |   |
| Bad                debt expense                                                                                               |   |                                     | 29      |   |   | 19 |   |
| Changes                in operating assets and liabilities                                                                    |   |                                     | 668     |   |   | (253 | ) |
| Cash                provided by operating activities from continuing                operations                                     |   |                                     | 2,094   |   |   | 512 |   |
|                                                                                                                               |   |                                     |    |   |   |   |   |
| Cash                flows - financing activities:                                                                                  |   |                                     |    |   |   |   |   |
| Issuances                of long-term debt                                                                                    |   |                                     | 100     |   |   | 71 |   |
| Retirements                of debt                                                                                            |   |                                     | (603    | ) |   | (40 | ) |
| Change                in notes payable:                                                                                            |   |                                     |    |   |   |   |   |
| Commercial                paper                                                                                               |   |                                     | 365     |   |   | ─ |   |
| Banks                                                                                                                         |   |                                     | 800     |   |   | 950 |   |
| Decrease                in income tax-related note payable to TXU Electric Delivery                                           |   |                                     | (22     | ) |   | (32 | ) |
| Distribution                paid to parent                                                                                    |   |                                     | (572    | ) |   | (350 | ) |
| Debt                premium, discount, financing and reacquisition expenses                                                   |   |                                     | (14     | ) |   | (12 | ) |
| Cash                provided by financing activities from continuing                operations                                     |   |                                     | 54      |   |   | 587 |   |
|                                                                                                                               |   |                                     |    |   |   |   |   |
| Cash                flows - investing activities:                                                                                  |   |                                     |    |   |   |   |   |
| Capital                expenditures                                                                                           |   |                                     | (218    | ) |   | (135 | ) |
| Nuclear                fuel                                                                                                   |   |                                     | (30     | ) |   | (26 | ) |
| Proceeds                from pollution control revenue bonds deposited with trustee                                           |   |                                     | (99     | ) |   | ─ |   |
| Proceeds                from sales of nuclear decommissioning trust fund securities                                           |   |                                     | 144     |   |   | 95 |   |
| Investments                in nuclear decommissioning trust fund securities                                                   |   |                                     | (151    | ) |   | (102 | ) |
| Advances                to affiliates                                                                                         |   |                                     | (1,803  | ) |   | (934 | ) |
| Other                                                                                                                         |   |                                     | 2       |   |   | ─ |   |
| Cash                used in investing activities from continuing operations                                                        |   |                                     | (2,155  | ) |   | (1,102 | ) |
|                                                                                                                               |   |                                     |    |   |   |   |   |
| Discontinued                operations:                                                                                            |   |                                     |    |   |   |   |   |
| Cash                used in operating activities                                                                              |   |                                     | ─ |   |   | (3 | ) |
| Cash                used in financing activities                                                                              |   |                                     | ─ |   |   | ─ |   |
| Cash                used in investing activities                                                                              |   |                                     | ─ |   |   | ─ |   |
| Cash                used in discontinued operations                                                                                |   |                                     | ─ |   |   | (3 | ) |
|                                                                                                                               |   |                                     |    |   |   |   |   |
| Net                change in cash and cash equivalents                                                                        |   |                                     | (7      | ) |   | (6 | ) |
|                                                                                                                               |   |                                     |    |   |   |   |   |
| Cash                and cash equivalents - beginning balance                                                                  |   |                                     | 12      |   |   | 70 |   |
|                                                                                                                               |   |                                     |    |   |   |   |   |
| Cash                and cash equivalents - ending balance                                                                     |   | $                                        | 5       |   | $ | 64 |   |

**TXU      ENERGY COMPANY LLC**

**CONDENSED      CONSOLIDATED BALANCE SHEETS**

**(Unaudited)**

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | **June                30,**              |    | **December                31,** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------|---------|---------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | **2006**                                 |    | **2005**                        |   |
| **ASSETS**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | **(millions                of dollars)** |    |
| Current                assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                     |    |                            |   |
| Cash                and cash equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | $                                        | 5       |                            | $      | 12 |   |
| Restricted                cash                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                     | 3       |                            |   | 8 |   |
| Trade                accounts receivable — net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                     | 843     |                            |   | 1,178 |   |
| Advances                to parent                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                     | 1,797   |                            |   | 694 |   |
| Note                receivable from parent                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                     | 1,500   |                            |   | 1,500 |   |
| Income                taxes receivable from parent                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                     | ─ |                            |   | 361 |   |
| Inventories                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                     | 322     |                            |   | 309 |   |
| Commodity                contract assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                     | 607     |                            |   | 1,603 |   |
| Cash                flow hedge and other derivative assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                     | 86      |                            |   | 63 |   |
| Margin                deposits related to commodity positions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                     | 70      |                            |   | 247 |   |
| Other                current assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                     | 332     |                            |   | 244 |   |
| Total                current assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                     | 5,565   |                            |   | 6,219 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                     |    |                            |   |   |   |
| Restricted                cash                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                     | 100     |                            |   | ─ |   |
| Investments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                     | 498     |                            |   | 501 |   |
| Advances                to parent                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                     | 700     |                            |   | ─ |   |
| Property,                plant and equipment — net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                     | 9,839   |                            |   | 9,958 |   |
| Goodwill                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                     | 517     |                            |   | 517 |   |
| Commodity                contract assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                     | 198     |                            |   | 338 |   |
| Cash                flow hedge and other derivative assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                     | 307     |                            |   | 68 |   |
| Other                noncurrent assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                     | 219     |                            |   | 205 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                     |    |                            |   |   |   |
| Total                assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | $                                        | 17,943  |                            | $      | 17,806 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                     |    |                            |   |   |   |
| **                                                                                                  LIABILITIES AND MEMBERSHIP INTERESTS** |
| Current                liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                     |    |                            |   |   |   |
| Notes                payable:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                     |    |                            |   |   |   |
| Commercial                paper                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | $                                        | 671     |                            | $      | 306 |   |
| Banks                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                     | 1,240   |                            |   | 440 |   |
| Long-term                debt due currently                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                     | 1       |                            |   | 401 |   |
| Trade                accounts payable - nonaffiliates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                     | 683     |                            |   | 879 |   |
| Trade                accounts and other payables to affiliates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                     | 369     |                            |   | 355 |   |
| Commodity                contract liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                     | 637     |                            |   | 1,481 |   |
| Cash                flow hedge and other derivative liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                     | 44      |                            |   | 260 |   |
| Margin                deposits related to commodity positions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                     | 54      |                            |   | 357 |   |
| Accrued                income taxes payable to parent                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                     | 293     |                            |   | ─ |   |
| Accrued                taxes other than income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                     | 55      |                            |   | 51 |   |
| Other                current liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                     | 323     |                            |   | 415 |   |
| Total                current liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                     | 4,370   |                            |   | 4,945 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                     |    |                            |   |   |   |
| Accumulated                deferred income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                     | 3,002   |                            |   | 2,800 |   |
| Investment                tax credits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                     | 319     |                            |   | 326 |   |
| Commodity                contract liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                     | 234     |                            |   | 516 |   |
| Cash                flow hedge and other derivative liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                     | 302     |                            |   | 44 |   |
| Notes                or other liabilities due affiliates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                     | 378     |                            |   | 406 |   |
| Other                noncurrent liabilities and deferred credits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                     | 942     |                            |   | 833 |   |
| Long-term                debt, less amounts due currently (Note 6)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                     | 2,949   |                            |   | 3,055 |   |
| Exchangeable                preferred membership interests, net of discount ($213 and                $222)                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                     | 537     |                            |   | 528 |   |
| Total                liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                     | 13,033  |                            |   | 13,453 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                     |    |                            |   |   |   |
| Commitments                and contingencies (Note 8)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                     |    |                            |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                     |    |                            |   |   |   |
| Membership                interests (Note 7):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                     |    |                            |   |   |   |
| Capital                account                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                     | 4,982   |                            |   | 4,474 |   |
| Accumulated                other comprehensive loss                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                     | (72     | )                               |   | (121 | ) |
| Total                membership interests                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                     | 4,910   |                            |   | 4,353 |   |
| Total                liabilities and membership interests                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | $                                        | 17,943  |                            | $      | 17,806 |   |

**TXU      ENERGY COMPANY LLC**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**(Unaudited)**

| **1.  ** | **                     SIGNIFICANT ACCOUNTING POLICIES AND                BUSINESS** |
|--------------------|---------------------------------------------------------------------------------------------------------------|

***Description      of Business***

***Basis      of Presentation***

***Discontinued      Businesses***

***Use      of Estimates***

***Changes      in Accounting Standards***
*—*
*** ***

**2.              **
**IMPAIRMENT      OF NATURAL GAS-FIRED GENERATION PLANTS**

**3.             **
**TEXAS      MARGIN TAX**

**4.             **
**DISCONTINUED      OPERATIONS**

|                                               |   | **Three                Months Ended** |    | **Six                Months Ended** |   |
|----------------------------------------------------|--------|---------------------------------------|---------|-------------------------------------|--------|
|                                               |   | **June                30, 2005**      |    | **June                30, 2005**    |   |
| Operating                revenues                  |   | $                                     | 6       |                                | $      | 12 |   |
| Operating                costs and expenses        |   |                                  | 7       |                                |   | 14 |   |
| Operating                loss before income taxes  |   |                                  | (1      | )                                   |   | (2 | ) |
| Income                tax benefit                  |   |                                  | ─ |                                |   | ─ |   |
| Charges                related to exit (after-tax) |   |                                  | ─ |                                |   | (2 | ) |
| Loss                from discontinued operations   |   | $                                     | (1      | )                                   | $      | (4 | ) |

**5.             **
**TRADE      ACCOUNTS RECEIVABLE AND SALE OF RECEIVABLES PROGRAM**

***Sale      of Receivables***

|                                                                                                                 |   | **Six                Months Ended June 30,** |   |
|----------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|--------|
|                                                                                                                 |   | **2006**                                     |   | **2005** |   |
|                                                                                                                 |   |                                         |   |   |   |
| Cash                collections on accounts receivable                                                          |   | $                                            | 3,138  |   | $ | 2,786 |   |
| Face                amount of new receivables purchased                                                         |   |                                         | (3,184 | ) |   | (2,718 | ) |
| Discount                from face amount of purchased receivables                                               |   |                                         | 17     |   |   | 9 |   |
| Program                fees paid                                                                                |   |                                         | (15    | ) |   | (7 | ) |
| Servicing                fees paid                                                                              |   |                                         | (2     | ) |   | (2 | ) |
| Increase                (decrease) in subordinated notes payable                                                |   |                                         | 20     |   |   | (63 | ) |
| Operating                cash flows (provided to) used by TXU Energy Holdings under the                program  |   | $                                            | (26    | ) | $ | 5 |   |

***Contingencies      Related to Sale of Receivables Program***
* *

|  1)    | all of the originators              cease to              maintain their required fixed charge coverage ratio and debt to capital              (leverage) ratio; or                                                                                                                                                                                                                                                                                                                                                                                                                                |
|----------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  2)         | the delinquency ratio              (delinquent for 31 days) for the sold receivables, the default ratio              (delinquent for 91 days or deemed uncollectible), the dilution ratio              (reductions for discounts, disputes and other allowances) or the days              collection outstanding ratio exceed stated thresholds and the financial              institutions do not waive such event of termination. The thresholds              apply              to the entire portfolio of sold receivables, not separately to the              receivables of each originator. |

***Trade      Accounts Receivable***

|                                                                                                                            |   | **June                30,** |   | **December                31,** |   |
|---------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|--------|---------------------------------|--------|
|                                                                                                                            |   | **2006**                    |   | **2005**                        |   |
| Gross                trade accounts receivable                                                                             |   | $                           | 1,467  |                            | $      | 1,791 |   |
| Undivided                interests in accounts receivable sold by TXU Receivables                Company                   |   |                        | (782   | )                               |   | (736 | ) |
| Subordinated                notes receivable from TXU Receivables Company                                                  |   |                        | 174    |                            |   | 154 |   |
| Allowance                for uncollectible accounts related to undivided interests in receivables                retained  |   |                        | (16    | )                               |   | (31 | ) |
| Trade                accounts receivable ― reported                in balance sheet                                       |   | $                           | 843    |                            | $      | 1,178 |   |

***Allowance      for Uncollectible Accounts***

|                                                                                                                                                                                |   | **2006** |   | **2005** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|--------|----------|--------|
|                                                                                                                                                                                |   |     |   |     |   |
| Allowance                for uncollectible accounts receivable as of January 1                                                                                                 |   | $        | 31     |     | $      | 15 |   |
| Increase                for bad debt expense                                                                                                                                        |   |     | 29     |     |   | 19 |   |
| Decrease                for account write-offs                                                                                                                                      |   |     | (41    | )        |   | (31 | ) |
| Changes                related to receivables sold                                                                                                                                  |   |     | 13     |     |   | 18 |   |
| Other                (a)                                                                                                                                                            |   |     | (16    | )        |   | 15 |   |
| Allowance                for uncollectible accounts receivable as of June 30                                                                                                   |   | $        | 16     |     | $      | 36 |   |
| ____________                                                                                                                                                                        |   |     |   |     |   |   |   |
|    (a)  Reflects              an allowance established in 2005 for a coal contract dispute that was              reversed upon settlement in 2006. See Note 11. |   |     |   |     |   |   |   |

|   |   |
|--------|--------|

**6.              **
**SHORT-TERM      AND LONG-TERM DEBT**

***Short-term      Borrowings***
*** ***
** **

***Credit      Facilities***
** **

|                                                           |                         | **At                June 30, 2006** |
|-----------------------------------------------------------|------------------------------|-------------------------------------|
| **Authorized**                                            | **Maturity**                 | **Facility**                        | **Letters                of** | **Cash** |   |
| **Borrowers**                                             | **Date**                     | **Limit**                           | **Credit** | **Borrowings** | **Availability** |
| TXU                Energy Holdings                        | May                2007      | $1,500                              | $                  ―  | $                  ―  | $1,500 |
| TXU                Energy Holdings, TXU Electric Delivery | June                2008     | 1,400                               | 505 | 180  | 715 |
| TXU                Energy Holdings, TXU Electric Delivery | August                2008   | 1,000                               | ― | 495 | 505 |
| TXU                Energy Holdings, TXU Electric Delivery | March                2010    | 1,600                               | 500 | 280 | 820 |
| TXU                Energy Holdings, TXU Electric Delivery | June                2010     | 500                                 | ― | 240 | 260 |
| TXU                Energy Holdings                        | December                2009 | 500                                 | 455 | 45 | ― |
|     Total                             |                         | $6,500                              | $1,460 | $1,240 | $3,800 |

***Long-term      debt***

|                                                                                                                                                             |   | **June                30,** |    | **December                31,** |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|---------|---------------------------------|--------|
|                                                                                                                                                             |   | **2006**                    |    | **2005**                        |   |
|                                                                                                                                                             |   |                        |    |                            |   |
| Pollution                Control Revenue Bonds:                                                                                                                  |   |                        |    |                            |   |
| Brazos              River Authority:                                                                                                                             |   |                        |    |                            |   |
| 5.400%                Fixed Series 1994A due May 1, 2029                                                                                                         |   | $                           | 39      |                            | $      | 39 |   |
| 5.400%                Fixed Series 1994B due May 1, 2029, remarketing date May 1, 2006(a)                (b)                                                     |   |                        | ― |                            |   | 39 |   |
| 5.400%                Fixed Series 1995A due April 1, 2030, remarketing date May 1, 2006(a)                (b)                                                   |   |                        | ― |                            |   | 50 |   |
| 5.050%                Fixed Series 1995B due June 1, 2030, remarketing date June 19, 2006(a)                (c)                                                  |   |                        | ― |                            |   | 114 |   |
| 7.700%                Fixed Series 1999A due April 1, 2033                                                                                                       |   |                        | 111     |                            |   | 111 |   |
| 6.750%                Fixed Series 1999B due September 1, 2034, remarketing date April                1,                2013(a)                                  |   |                        | 16      |                            |   | 16 |   |
| 7.700%                Fixed Series 1999C due March 1, 2032                                                                                                       |   |                        | 50      |                            |   | 50 |   |
| 3.980%                Floating Series 2001A due October 1, 2030(d)                                                                                               |   |                        | 71      |                            |   | 71 |   |
| 4.750%                Fixed Series 2001B due May 1, 2029, remarketing date November 1,                2006(a)                                                    |   |                        | 19      |                            |   | 19 |   |
| 5.750%                Fixed Series 2001C due May 1, 2036, remarketing date November 1,                2011(a)                                                    |   |                        | 217     |                            |   | 217 |   |
| 4.020%                Floating Series 2001D due May 1, 2033(d)                                                                                                   |   |                        | 268     |                            |   | 268 |   |
| 5.350%                Floating Taxable Series 2001I due December 1, 2036(d)                                                                                      |   |                        | 62      |                            |   | 62 |   |
| 3.980%                Floating Series 2002A due May 1, 2037(d)                                                                                                   |   |                        | 45      |                            |   | 45 |   |
| 6.750%                Fixed Series 2003A due April 1, 2038, remarketing date April 1,                2013(a)                                                     |   |                        | 44      |                            |   | 44 |   |
| 6.300%                Fixed Series 2003B due July 1, 2032                                                                                                        |   |                        | 39      |                            |   | 39 |   |
| 6.750%                Fixed Series 2003C due October 1, 2038                                                                                                     |   |                        | 52      |                            |   | 52 |   |
| 5.400%                Fixed Series 2003D due October 1, 2029, remarketing date October                1,                2014(a)                                  |   |                        | 31      |                            |   | 31 |   |
| 5.000%                Fixed Series 2006 due March 1, 2041                                                                                                        |   |                        | 100     |                            |   | ― |   |
|                                                                                                                                                             |   |                        |    |                            |   |   |   |
| Sabine              River Authority of Texas:                                                                                                                    |   |                        |    |                            |   |   |   |
| 6.450%                Fixed Series 2000A due June 1, 2021                                                                                                        |   |                        | 51      |                            |   | 51 |   |
| 5.500%                Fixed Series 2001A due May 1, 2022, remarketing date November 1,                2011(a)                                                    |   |                        | 91      |                            |   | 91 |   |
| 5.750%                Fixed Series 2001B due May 1, 2030, remarketing date November 1,                2011(a)                                                    |   |                        | 107     |                            |   | 107 |   |
| 5.200%                Fixed Series 2001C due May 1, 2028                                                                                                         |   |                        | 70      |                            |   | 70 |   |
| 5.800%                Fixed Series 2003A due July 1, 2022                                                                                                        |   |                        | 12      |                            |   | 12 |   |
| 6.150%                Fixed Series 2003B due August 1, 2022                                                                                                      |   |                        | 45      |                            |   | 45 |   |
|                                                                                                                                                             |   |                        |    |                            |   |   |   |
| Trinity              River Authority of Texas:                                                                                                                   |   |                        |    |                            |   |   |   |
| 6.250%                Fixed Series 2000A due May 1, 2028                                                                                                         |   |                        | 14      |                            |   | 14 |   |
| 5.000%                Fixed Series 2001A due May 1, 2027, remarketing date November 1,                2006(a)                                                    |   |                        | 37      |                            |   | 37 |   |
|                                                                                                                                                             |   |                        |    |                            |   |   |   |
| Other:                                                                                                                                                           |   |                        |    |                            |   |   |   |
| 6.125%                Fixed Senior Notes due March 15, 2008(e)                                                                                                   |   |                        | 250     |                            |   | 250 |   |
| 7.000%                Fixed Senior Notes due March 15, 2013                                                                                                      |   |                        | 1,000   |                            |   | 1,000 |   |
| 4.920%                Floating Rate Senior Notes due January 17, 2006 (Interest rate in                effect                atDecember                31, 2005) |   |                        | ― |                            |   | 400 |   |
| Capital                lease obligations                                                                                                                         |   |                        | 101     |                            |   | 103 |   |
| Fair                value adjustments related to interest rate swaps                                                                                             |   |                        | 8       |                            |   | 9 |   |
| Total                TXU Energy Holdings                                                                                                                         |   |                        | 2,950   |                            |   | 3,456 |   |
|                                                                                                                                                             |   |                        |    |                            |   |   |   |
| Less                amount due currently                                                                                                                         |   |                        | (1      | )                               |   | (401 | ) |
|                                                                                                                                                             |   |                        |    |                            |   |   |   |
| Total                long-term debt                                                                                                                              |   | $                           | 2,949   |                            | $      | 3,055 |   |

|  (a)             | These series are in the multiannual              mode and              are subject to mandatory tender prior to maturity on the mandatory              remarketing date. On such date, the interest rate and interest rate              period              will be reset for the bonds. |
|-----------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   (b)       | Repurchased on May 1, 2006 for remarketing              at              a later date.                                                                                                                                                                                                    |
|   (c)  | Repurchased              on June 19, 2006 for remarketing at a later date.                                                                                                                                                                                                               |
|  (d)             | Interest rates in effect at June 30,              2006.              These series are in a weekly rate mode and are classified as long-term              as              they are  supported              by long-term irrevocable letters of credit.                               |
|   (e)  | Interest rate swapped to variable on              entire              principal amount.                                                                                                                                                                                                  |

***Debt      Issuances and Retirements in 2006***

***Fair      Value Hedge***
*** ***

***Long-term      debt fair value adjustments***

|   |                                                                                                                                                                                              |    | **June                30, 2006** |   |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------|----------------------------------|--------|
|   | Long-term                debt fair value adjustments related to an interest rate swap at                beginning                of period                ― increase in debt carrying value |  $ |  9                     |   |
|   | Amortization                of net gains on settled fair value hedge (a)                                                                                                                          |    | (1)                              |   |
|   | Long-term                debt fair value adjustments at end of period ― increase in                debtcarrying                value (net in-the-money value of swap)                  |  $ |  8                     |   |

| (a)   | Net                value of settled in-the-money fixed-to-variable swap that is being                amortized as a reduction to interest expense over the remaining life                of                the associated debt. Amount is                pretax. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**7.             **
**MEMBERSHIP      INTERESTS**

|                                                        |   | **Capital****Accounts** |    | **Accumulated**** Other****Comprehensive****Gain                (Loss)** |   | **Total****Membership****Interests** |   |
|-------------------------------------------------------------|--------|-------------------------|---------|-------------------------------------------------------------------------------|--------|--------------------------------------|--------|
|                                                        |   |                    |    |                                                                          |   |                                 |   |
| Balance                at December 31, 2005            |   | $                       | 4,474   |                                                                          | $      | (121                                 | )      | $ | 4,353 |   |
| Net                income                                   |   |                    | 1,063   |                                                                          |   | ─                              |   |   | 1,063 |   |
| Distributions                paid to parent                 |   |                    | (572    | )                                                                             |   | ─                              |   |   | (572 | ) |
| Net                effects of cash flow hedges (net of tax) |   |                    | ─ |                                                                          |   | 49                                   |   |   | 49 |   |
| Effects                of incentive compensation plans      |   |                    | 15      |                                                                          |   | ─                              |   |   | 15 |   |
| Other                                                       |   |                    | 2       |                                                                          |   | ─                              |   |   | 2 |   |
| Balance                at June 30, 2006                |   | $                       | 4,982   |                                                                          | $      | (72                                  | )      | $ | 4,910 |   |

**8.              **
**COMMITMENTS      AND CONTINGENCIES**

***Guarantees      —***

*Letters      of credit*

*Debt      obligation of TXU Corp. *
* *

*Residual      value guarantees in operating leases *

***Contractual      Obligations***

***Legal      Proceedings***
* *
** **

***Environmental      Contingencies***

| ·   | changes                to** **existing                state or federal regulation by governmental authorities having                jurisdiction over air quality, water quality, control of toxic substances                and hazardous and solid wastes, and other environmental                matters; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the                identification of sites requiring clean-up or the filing of other                complaints in which TXU Energy Holdings or its subsidiaries may be                asserted to be potential responsible                parties. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**9**
**.             **
**COMMODITY      CONTRACT ASSETS AND LIABILITIES**

**10.           **
**CASH      FLOW HEDGES UNDER SFAS 133**

**11.          **
**OTHER      INCOME AND DEDUCTIONS**

|                                                                                    |   | **Three                Months Ended****June                30,** |    | **Six                Months Ended****June                30,** |   |
|-----------------------------------------------------------------------------------------|--------|------------------------------------------------------------------|---------|----------------------------------------------------------------|--------|
|                                                                                    |   |
|                                                                                    |   | **2006**                                                         |    | **2005**                                                       |   | **2006** |   | **2005** |   |
|                                                                                    |   |                                                             |    |                                                           |   |   |   |   |   |
| Other                income:                                                            |   |                                                             |    |                                                           |   |   |   |   |   |
| Net                gain on sales of assets                                         |   | $                                                                | ─ |                                                           | $      | 2 |   | $ | ─ |   | $ | 1 |   |
| Power                services agreement termination fee                            |   |                                                             | ─ |                                                           |   | 4 |   |   | ─ |   |   | 4 |   |
| Other                                                                              |   |                                                             | 1       |                                                           |   | ─ |   |   | 1 |   |   | 3 |   |
| Total                other income                                                       |   | $                                                                | 1       |                                                           | $      | 6 |   | $ | 1 |   | $ | 8 |   |
|                                                                                    |   |                                                             |    |                                                           |   |   |   |   |   |   |   |   |   |
| Other                deductions:                                                        |   |                                                             |    |                                                           |   |   |   |   |   |   |   |   |   |
| Charge                for impairment of natural gas-fired generation plants        |   | $                                                                | 198     |                                                           | $      | ─ |   | $ | 198 |   | $ | ─ |   |
| Charge                (credit) related to coal contract counterparty claim         |   |                                                             | ─ |                                                           |   | ─ |   |   | (12 | ) |   | 12 |   |
| Inventory                write-off related to natural gas-fired generation plants  |   |                                                             | 3       |                                                           |   | ─ |   |   | 3 |   |   | ─ |   |
| Capgemini                outsourcing transition costs                              |   |                                                             | ─ |                                                           |   | 2 |   |   | ─ |   |   | 6 |   |
| Equity                losses of affiliate holding investment in Capgemini          |   |                                                             | 2       |                                                           |   | 2 |   |   | 5 |   |   | 3 |   |
| Employee                severance                                                  |   |                                                             | ─ |                                                           |   | 3 |   |   | ─ |   |   | (1 | ) |
| Charge                (credit) related to impaired leases                          |   |                                                             | 1       |                                                           |   | 3 |   |   | (1 | ) |   | (12 | ) |
| Other                                                                              |   |                                                             | 1       |                                                           |   | 2 |   |   | 2 |   |   | 5 |   |
| Total                other deductions                                                   |   | $                                                                | 205     |                                                           | $      | 12 |   | $ | 195 |   | $ | 13 |   |

**12.           **
**RELATED-PARTY      TRANSACTIONS**

| ·   | TXU                Energy Holdings incurs electricity delivery fees charged by TXU Electric                Delivery. These fees totaled $285 million and $305 million for the                three                months ended June 30, 2006 and 2005, respectively, and $554 million                and                $618 million for the six months ended June 30, 2006 and 2005,                respectively. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Under                the terms of the Settlement Plan, TXU Electric Delivery issued an                initial                $500 million of securitization bonds in 2003 and issued $790 million                in                2004 to recover generation-related regulatory assets. The incremental                income taxes TXU Electric Delivery will pay on the increased delivery                fees                to be charged to TXU Electric Delivery’s customers related to the bonds                will be reimbursed by TXU Energy Holdings. Therefore, TXU Energy                Holdings’                financial statements reflect a noninterest bearing note payable to                TXU                Electric Delivery of $373 million at June 30, 2006 ($33 million reported                as current liabilities) and $395 million at December 31, 2005 ($33                million                reported as current liabilities). |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | TXU                Energy Holdings records interest expense to reimburse TXU Electric                Delivery for interest on TXU Electric Delivery’s securitization bonds.                This interest expense totaled $13 million and $14 million for the                three                months ended June 30, 2006 and 2005, respectively, and $27 million                and $28                million for the six months ended June 30, 2006 and 2005,                respectively. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Current                and noncurrent advances to parent totaled $2.5 billion at June 30,                2006                and $694 million at December 31, 2005. The average daily balances                of the                advances to parent totaled $1.6 billion and $1.0 billion during the                three                months ended June 30, 2006 and 2005, respectively. Interest income                earned                on the advances totaled $22 million and $10 million for the three                months                ended June 30, 2006 and 2005, respectively. The weighted average                annual                interest rates were 5.3% and 3.7% for the three months ended June                30, 2006                and 2005, respectively. The average daily balance of the advances                to                parent were $1.2 billion and $853 million during the six months ended                June                30, 2006 and 2005, respectively. Interest income earned on the advances                totaled $32 million and $16 million for the six months ended June                30, 2006                and 2005, respectively. The weighted average annual interest rates                were                5.2% and 3.7% for the six months ended June 30, 2006 and 2005,                respectively. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | In                December 2005, TXU Energy Holdings received a $1.5 billion note receivable                from TXU Corp. in partial settlement of outstanding advances to parent.                The note carries interest at the same rate that is applicable to                other                affiliate receivable balances. Interest                income related to this note totaled $19 million and $39 million for                the                three and six months ended June 30, 2006,                respectively. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | TXU                Corp. charges TXU Energy Holdings for financial, accounting, environmental                and other administrative services at cost. These costs, which are                primarily reported in SG&A expenses, totaled $15 million and $14                million for the three months ended June 30, 2006 and 2005, respectively,                and $35 million and $28 million for the six months ended June 30,                2006 and                2005, respectively. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Under                Texas regulatory provisions, the trust fund for decommissioning the                Comanche Peak nuclear generation facility, reported in investments                on TXU                Energy Holdings’ balance sheet, is funded by a delivery fee surcharge                billed to REPs by TXU Electric Delivery and remitted to TXU Energy                Holdings, with the intent that the trust fund assets will be sufficient                to                fund the decommissioning liability, reported in noncurrent liabilities                on                TXU Energy Holdings’ balance sheet. Income and expenses associated with                the trust fund and the decommissioning liability incurred by TXU                Energy                Holdings are offset by a net change in the intercompany receivable/payable                with TXU Electric Delivery, which in turn results in a change in                a net                regulatory asset/liability. The regulatory asset, which totaled $12                million and $8 million at June 30, 2006 and December 31, 2005,                respectively, and is reported on TXU Electric Delivery’s balance sheet,                represents the excess of the decommissioning liability over the trust                fund                balance. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | In                April 2004, TXU Corp. purchased TXU Energy Holdings’ exchangeable                preferred membership interests from unaffiliated holders. Distributions                and discount amortization (both reported as interest expense) related                to                the securities totaled $22 million for both the three months ended                June                30, 2006 and 2005 and totaled $45 million and $43 million for the                six                months ended June 30, 2006 and 2005, respectively, and are reported                in                interest expense and related                charges. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | In                December 2005, US Holdings entered into an agreement to purchase                the owner                participant interest in a trust that leases combustion turbines to                TXU                Energy Holdings. Therefore, TXU Energy Holdings’ financial statements                reflect a $49 million liability payable to US Holdings ($11 million                reported as due currently) at June 30, 2006 and $59 million ($15                million                reported as due currently) at December 31, 2005. The liability relates                to                lease payments for combustion turbines that TXU Energy Holdings has                ceased                operating for its own benefit. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | TXU                Energy Holdings has a 53.1% limited partnership interest, with a                carrying                value of $19 million and $24 million at June 30, 2006 and December                31,                2005, respectively, in a TXU Corp. subsidiary holding Capgemini-related                assets. Equity losses related to this interest totaled $2 million                for both                the three months ended June 30, 2006 and 2005 and totaled $5 million                and                $3 million for the six months ended June 30, 2006 and 2005, respectively.                These losses primarily represent amortization of software assets                held by                the subsidiary. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | TXU                Corp. files a consolidated federal income tax return, and federal                income                taxes are allocated to subsidiaries based on their respective taxable                income or loss. TXU Energy Holdings had an income tax payable to                TXU Corp.                of $293 million at June 30, 2006 and an income tax receivable from                TXU                Corp. of $361 million at December 31,                2005. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | In                the second quarter of 2006, TXU Energy Holdings transferred its mineral                interests in natural gas and oil to TXU Corp. at book value, which                was                zero. These mineral interests were acquired as part of land purchases                over                the years to support generation activities and not for the mineral                development, and no value was attributed to the mineral interests                at the                time of acquisition. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**13.          **
**SUPPLEMENTARY      FINANCIAL INFORMATION**

***Interest      Expense and***
***Related***
***Charges***
* *

|                                                                  |   | **Three                Months Ended****June                30,** |   | **Six                Months Ended****June                30,** |   |
|-----------------------------------------------------------------------|--------|------------------------------------------------------------------|--------|----------------------------------------------------------------|--------|
|                                                                  |   |
|                                                                  |   | **2006**                                                         |   | **2005**                                                       |   | **2006** |   | **2005** |   |
|                                                                  |   |                                                             |   |                                                           |   |   |   |   |   |
| Interest                                                         |   | $                                                                | 86     |                                                           | $      | 72 |   | $ | 166 |   | $ | 139 |   |
| Distributions                on preferred membership interests   |   |                                                             | 17     |                                                           |   | 17 |   |   | 34 |   |   | 34 |   |
| Amortization                of discount and debt issuance costs  |   |                                                             | 7      |                                                           |   | 8 |   |   | 14 |   |   | 17 |   |
| Interest                capitalized in accordance with SFAS 34   |   |                                                             | (8     | )                                                              |   | (3 | ) |   | (12 | ) |   | (5 | ) |
| Total                interest expense and related charges        |   | $                                                                | 102    |                                                           | $      | 94 |   | $ | 202 |   | $ | 185 |   |

***Restricted      Cash***

|                                                                                   |   | **Balance                Sheet Classification** |    |
|----------------------------------------------------------------------------------------|--------|-------------------------------------------------|---------|
|                                                                                   |   | **At                June 30, 2006**             |    | **At                December 31, 2005** |   |
|                                                                                   |   | **Current****Assets**                           |    | **Noncurrent                Assets** |   | **Current                Assets** |   | **Noncurrent                Assets** |   |
|                                                                                   |   |                                            |    |   |   |   |   |   |   |
| Pollution                control revenue bond funds held by trustee (See Note 6)  |   | $                                               | ― |   | $ | 100 |   | $ | ― |   | $ | ― |   |
| All                other                                                          |   |                                            | 3       |   |   | ― |   |   | 8 |   |   | ― |   |
| Total                restricted cash                                                   |   | $                                               | 3       |   | $ | 100 |   | $ | 8 |   | $ | ― |   |

***Inventories      by Major Category***

|                                                                      |   | **June                30,** |   | **December                31,** |   |
|---------------------------------------------------------------------------|--------|-----------------------------|--------|---------------------------------|--------|
|                                                                      |   | **2006**                    |   | **2005**                        |   |
| Materials                and supplies                                |   | $                           | 111    |                            | $      | 108 |   |
| Gas                stored underground                                |   |                        | 104    |                            |   | 99 |   |
| Fuel                stock                                            |   |                        | 95     |                            |   | 81 |   |
| Environmental                energy credits and emission allowances  |   |                        | 12     |                            |   | 21 |   |
| Total                inventories                                          |   | $                           | 322    |                            | $      | 309 |   |

***Investments***

|                                                                          |   | **June                30,** |   | **December                31,** |   |
|-------------------------------------------------------------------------------|--------|-----------------------------|--------|---------------------------------|--------|
|                                                                          |   | **2006**                    |   | **2005**                        |   |
| Nuclear                decommissioning trust                             |   | $                           | 402    |                            | $      | 389 |   |
| Assets                related to employee benefit plans                  |   |                        | 45     |                            |   | 54 |   |
| Land                                                                     |   |                        | 31     |                            |   | 32 |   |
| Investment                in affiliate holding Capgemini-related assets  |   |                        | 19     |                            |   | 24 |   |
| Miscellaneous                other                                       |   |                        | 1      |                            |   | 2 |   |
| Total                investments                                              |   | $                           | 498    |                            | $      | 501 |   |

***Property,      Plant and Equipment***

***Asset      Retirement Obligations***

|   | Asset                retirement liability at December 31, 2005            |  $ | 558    |   |
|--------|--------------------------------------------------------------------------------|---------|--------|--------|
|   | Additions:                                                                     |    |   |   |
|   | Accretion                                                                 |    | 18     |   |
|   | Reductions:                                                                    |    |   |   |
|   | Net                change in mining land reclamation estimated liability  |    | (4)    |   |
|   | Reclamation                payments                                       |    | (14)   |   |
|   | Asset                retirement liability at June 30, 2006                |  $ | 558    |   |

***Intangible      Assets***

|                                                              |   | **As                of June 30, 2006** |   | **As                of December 31, 2005** |   |
|-------------------------------------------------------------------|--------|----------------------------------------|--------|--------------------------------------------|--------|
|                                                              |   | **Gross**                              |   |                                       |   |   |   | **Gross** |   |   |   |   |   |
|                                                              |   | **Carrying**                           |   | **Accumulated**                            |   |   |   | **Carrying** |   | **Accumulated** |   |   |   |
|                                                              |   | **Amount**                             |   | **Amortization**                           |   | **Net** |   | **Amount** |   | **Amortization** |   | **Net** |   |
| Intangible                assets subject to amortization included |   |                                   |   |                                       |   |   |   |   |   |   |   |   |   |
| in                property, plant and equipment:                  |   |                                   |   |                                       |   |   |   |   |   |   |   |   |   |
| Mineral                rights and other                           |   | $                                      | 30     |                                       | $      | 23 |   | $ | 7 |   | $ | 31 |   | $ | 24 |   | $ | 7 |   |
| Capitalized                software placed in service             |   |                                   | 11     |                                       |   | 4 |   |   | 7 |   |   | 7 |   |   | 3 |   |   | 4 |   |
| Land                easements                                     |   |                                   | 2      |                                       |   | 1 |   |   | 1 |   |   | 2 |   |   | 1 |   |   | 1 |   |
| Total                                                             |   | $                                      | 43     |                                       | $      | 28 |   | $ | 15 |   | $ | 40 |   | $ | 28 |   | $ | 12 |   |

***Pension      and Other Postretirement Benefits***

***Severance      Liabilities Related to Strategic Initiatives***

|   | Liability                for severance costs as of December 31, 2005                                                         |  $ | 18     |   |
|--------|-----------------------------------------------------------------------------------------------------------------------------------|---------|--------|--------|
|   | Additions                to liability (a)                                                                                         |    | 8      |   |
|   | Payments                charged against liability                                                                                 |    | (19)   |   |
|   | Liability                for severance costs as of June 30, 2006                                                             |  $ | 7      |   |
|   | ___________                                                                                                                       |    |   |   |
|   |                                                                                                                              |    |   |   |
|   | (a)  Additions                to the liability relate to an outsourcing of certain engineering                services. |    |

***Commodity      Contract Positions and Margin Deposits***

***    Supplemental      Cash Flow Information***
* *

|                                                                      |   | **Six                Months Ended****June                30,** |   |
|---------------------------------------------------------------------------|--------|----------------------------------------------------------------|--------|
|                                                                      |   | **2006**                                                       |   | **2005** |   |
| Cash                payments (receipts) related to continuing operations: |   |                                                           |   |   |   |
| Interest                (net of amounts capitalized)                 |   | $                                                              | 195    |   | $ | 166 |   |
| Income                taxes                                     |   | $                                                              | (246   | ) | $ | 239 |   |
| Noncash                investing and financing activities:                |   |                                                           |   |   |   |   |   |
| Noncash                contribution of pension-related assets        |   | $                                                              | (8     | ) | $ | 157 |   |

**REPORT      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

**ITEM      2.      MANAGEMENT’S DISCUSSION AND ANALYSIS OF      FINANCIAL CONDITION**

**AND      RESULTS OF OPERATIONS**

**BUSINESS**

**RECENT      DEVELOPMENTS**

***New      Generation Development Program***

***Impairment      of Natural Gas-fired Generation Plants***

***Update      of Hedging Program, Including New Collateral      Arrangements***

**RESULTS      OF OPERATIONS**

***Sales      Volume Data***

|                                                                                           |   | **Three                Months Ended** |   | **Six                Months Ended** |   |
|------------------------------------------------------------------------------------------------|--------|---------------------------------------|--------|-------------------------------------|--------|
|                                                                                           |   | **June                30,**           |   | **June                30,**         |   |
|                                                                                           |   | **2006**                              |   | **2005**                            |   | **Change                %** |   | **2006** |   | **2005** |   | **Change                %** |   |
|                                                                                           |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |
| **Sales                volumes:**                                                              |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |
|                                                                                           |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |
| Retail                electricity sales volumes (GWh):                                         |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |
| Historical                service territory:                                                   |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |
| Residential                                                                               |   |                                  | 6,825  |                                |   | 7,100 |   |   | (3.9 | ) |   | 12,057 |   |   | 13,417 |   |   | (10.1 | ) |
| Small                business (a)                                                         |   |                                  | 2,068  |                                |   | 2,289 |   |   | (9.7 | ) |   | 3,795 |   |   | 4,323 |   |   | (12.2 | ) |
| Total                historical service territory                                              |   |                                  | 8,893  |                                |   | 9,389 |   |   | (5.3 | ) |   | 15,852 |   |   | 17,740 |   |   | (10.6 | ) |
| Other                territories:                                                              |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential                                                                               |   |                                  | 1,018  |                                |   | 858 |   |   | 18.6 |   |   | 1,629 |   |   | 1,486 |   |   | 9.6 |   |
| Small                business (a)                                                         |   |                                  | 169    |                                |   | 165 |   |   | 2.4 |   |   | 301 |   |   | 304 |   |   | (1.0 | ) |
| Total                other territories                                                         |   |                                  | 1,187  |                                |   | 1,023 |   |   | 16.0 |   |   | 1,930 |   |   | 1,790 |   |   | 7.8 |   |
| Large                business and other customers                                         |   |                                  | 3,552  |                                |   | 4,172 |   |   | (14.9 | ) |   | 6,785 |   |   | 8,534 |   |   | (20.5 | ) |
| Total                retail electricity                                                        |   |                                  | 13,632 |                                |   | 14,584 |   |   | (6.5 | ) |   | 24,567 |   |   | 28,064 |   |   | (12.5 | ) |
| Wholesale                electricity sales volumes (b)                                    |   |                                  | 7,585  |                                |   | 12,585 |   |   | (39.7 | ) |   | 16,870 |   |   | 24,824 |   |   | (32.0 | ) |
| Total                sales volumes                                                             |   |                                  | 21,217 |                                |   | 27,169 |   |   | (21.9 | ) |   | 41,437 |   |   | 52,888 |   |   | (21.7 | ) |
|                                                                                           |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Average                volume (kWh) per retail customer (c):**                               |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                           |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential                                                                               |   |                                  | 4,012  |                                |   | 3,809 |   |   | 5.3 |   |   | 6,975 |   |   | 7,091 |   |   | (1.6 | ) |
| Small                business                                                             |   |                                  | 7,990  |                                |   | 8,096 |   |   | (1.3 | ) |   | 14,460 |   |   | 15,028 |   |   | (3.8 | ) |
| Large                business and other customers                                         |   |                                  | 70,256 |                                |   | 71,155 |   |   | (1.3 | ) |   | 130,966 |   |   | 129,342 |   |   | 1.3 |   |
|                                                                                           |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Weather                (service territory average) - percent of normal                (d):** |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                           |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Percent                of normal:                                                              |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cooling                degree days                                                             |   |                                  | 131.0  | %                                   |   | 102.2 | % |   |   |   |   | 135.9 | % |   | 101.3 | % |   |   |   |

| (a)   | Customers                with demand of less than 1 MW                annually. |
|-----------------|---------------------------------------------------------------------------------|

| (b)   | See                Note 1 to Financial Statements for discussion of reporting of trading                and                ERCOT balancing activity in 2006. Includes net purchase volumes related                to                ERCOT balancing of 266 GWh in the second quarter of 2006 and 1,253                GWh of                net sales volumes in the second quarter of 2005, and net sales volumes                of                1,166 GWh and 2,012 GWh in the six months ended June 30, 2006 and                2005,                respectively. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (c)   | Calculated                using average number of customers for                period. |
|-----------------|----------------------------------------------------------------------------------------|

| (d)   | Weather                data is obtained from Weatherbank, Inc., an independent company that                collects and archives weather data from reporting stations of the                National                Oceanic and Atmospheric Administration (a federal agency under the                US                Department of Commerce). |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Customer      Count Data***

|                                                                                             |   | **Six                Months Ended** |   |
|--------------------------------------------------------------------------------------------------|--------|-------------------------------------|--------|
|                                                                                             |   | **June                30,**         |   |
|                                                                                             |   | **2006**                            |   | **2005** |   | **Change                %** |   |
| **Customer                counts:**                                                              |   |                                |   |   |   |   |   |
|                                                                                             |   |                                |   |   |   |   |   |
| Retail                electricity customers (end of period and in thousands)                (a): |   |                                |   |   |   |   |   |
| Historical                service territory:                                                     |   |                                |   |   |   |   |   |
| Residential                                                                                 |   |                                | 1,716  |   |   | 1,865 |   |   | (8.0 | ) |
| Small                business (b)                                                           |   |                                | 271    |   |   | 294 |   |   | (7.8 | ) |
| Total                historical service territory                                                |   |                                | 1,987  |   |   | 2,159 |   |   | (8.0 | ) |
|                                                                                             |   |                                |   |   |   |   |   |   |   |   |
| Other                territories:                                                                |   |                                |   |   |   |   |   |   |   |   |
| Residential                                                                                 |   |                                | 227    |   |   | 193 |   |   | 17.6 |   |
| Small                business (b)                                                           |   |                                | 7      |   |   | 7 |   |   | ─ |   |
| Total                other territories                                                           |   |                                | 234    |   |   | 200 |   |   | 17.0 |   |
|                                                                                             |   |                                |   |   |   |   |   |   |   |   |
| Large                business and other customers                                           |   |                                | 49     |   |   | 56 |   |   | (12.5 | ) |
| Total                retail electricity customers                                                |   |                                | 2,270  |   |   | 2,415 |   |   | (6.0 | ) |

| (a)   | Based                on number of meters. |
|-----------------|-------------------------------------------|

| (b)   | Customers                with demand of less than 1MW                annually. |
|-----------------|--------------------------------------------------------------------------------|

***Revenue      and Market Share Data***

|                                                                                |   | **Three                Months Ended** |   | **Six                Months Ended** |   |
|-------------------------------------------------------------------------------------|--------|---------------------------------------|--------|-------------------------------------|--------|
|                                                                                |   | **June                30,**           |   | **June                30,**         |   |
|                                                                                |   | **2006**                              |   | **2005**                            |   | **Change                %** |   | **2006** |   | **2005** |   | **Change                %** |   |
| **Operating                revenues:**                                              |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |
|                                                                                |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |
| Retail                electricity revenues:                                         |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |
| Historical                service territory:                                        |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |
| Residential                                                                    |   | $                                     | 1,008  |                                | $      | 838 |   |   | 20.3 |   | $ | 1,753 |   | $ | 1,474 |   |   | 18.9 |   |
| Small                business (a)                                              |   |                                  | 309    |                                |   | 270 |   |   | 14.4 |   |   | 566 |   |   | 498 |   |   | 13.7 |   |
| Total                historical service territory                                   |   |                                  | 1,317  |                                |   | 1,108 |   |   | 18.9 |   |   | 2,319 |   |   | 1,972 |   |   | 17.6 |   |
|                                                                                |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                territories:                                                   |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential                                                                    |   |                                  | 160    |                                |   | 99 |   |   | 61.6 |   |   | 248 |   |   | 156 |   |   | 59.0 |   |
| Small                business (a)                                              |   |                                  | 20     |                                |   | 15 |   |   | 33.3 |   |   | 36 |   |   | 27 |   |   | 33.3 |   |
| Total                other territories                                              |   |                                  | 180    |                                |   | 114 |   |   | 57.9 |   |   | 284 |   |   | 183 |   |   | 55.2 |   |
|                                                                                |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Large                business and other customers                              |   |                                  | 339    |                                |   | 332 |   |   | 2.1 |   |   | 655 |   |   | 659 |   |   | (0.6 | ) |
| Total                retail electricity revenues                               |   |                                  | 1,836  |                                |   | 1,554 |   |   | 18.1 |   |   | 3,258 |   |   | 2,814 |   |   | 15.8 |   |
| Wholesale                electricity revenues (b)                              |   |                                  | 447    |                                |   | 598 |   |   | (25.3 | ) |   | 982 |   |   | 1,132 |   |   | (13.3 | ) |
| Net                gains (losses) from risk management and trading activities  |   |                                  | 106    |                                |   | 47 |   |   | ─ |   |   | 62 |   |   | (6 | ) |   | ─ |   |
| Other                revenues                                                  |   |                                  | 79     |                                |   | 77 |   |   | 2.6 |   |   | 176 |   |   | 157 |   |   | 12.1 |   |
| Total                operating revenues                                             |   | $                                     | 2,468  |                                | $      | 2,276 |   |   | 8.4 |   | $ | 4,478 |   | $ | 4,097 |   |   | 9.3 |   |
|                                                                                |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Risk                management and trading activities:**                          |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                realized gains (losses) on settled positions                |   | $                                     | (38    | )                                   | $      | 5 |   |   |   |   | $ | (86 | ) | $ | (24 | ) |   |   |   |
| Reversal                of prior years’ net unrealized                        |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (gains)/losses                on positions settled in current period                |   |                                  | (2     | )                                   |   | (14 | ) |   |   |   |   | 22 |   |   | (23 | ) |   |   |   |
| Other                net unrealized gains, including ineffectiveness           |   |                                  | 146    |                                |   | 56 |   |   |   |   |   | 126 |   |   | 41 |   |   |   |   |
| Total                net gains (losses)                                             |   | $                                     | 106    |                                | $      | 47 |   |   |   |   | $ | 62 |   | $ | (6 | ) |   |   |   |
|                                                                                |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Average                revenues per MWh:**                                        |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential                                                                    |   | $                                     | 148.85 |                                | $      | 117.80 |   |   | 26.4 |   | $ | 146.23 |   | $ | 109.39 |   |   | 33.7 |   |
| Small                business                                                  |   | $                                     | 147.32 |                                | $      | 116.38 |   |   | 26.6 |   | $ | 146.95 |   | $ | 113.59 |   |   | 29.4 |   |
| Large                business and other customers                              |   | $                                     | 95.34  |                                | $      | 79.43 |   |   | 20.0 |   | $ | 96.55 |   | $ | 77.19 |   |   | 25.1 |   |
|                                                                                |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Estimated                share of ERCOT retail markets (c)(d):**                  |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Historical                service territory:                                        |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential                                                                    |   |                                  |   |                                |   |   |   |   |   |   |   | 70 | % |   | 77 | % |   |   |   |
| Small                business                                                  |   |                                  |   |                                |   |   |   |   |   |   |   | 68 | % |   | 74 | % |   |   |   |
| Total                ERCOT:                                                         |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential                                                                    |   |                                  |   |                                |   |   |   |   |   |   |   | 38 | % |   | 42 | % |   |   |   |
| Small                business                                                  |   |                                  |   |                                |   |   |   |   |   |   |   | 28 | % |   | 30 | % |   |   |   |
| Large                business and other customers                              |   |                                  |   |                                |   |   |   |   |   |   |   | 17 | % |   | 20 | % |   |   |   |

**__________________________**

|  (a) | Customers with demand                of less                than 1 MW annually.                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|-----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  (b) | See Note 1 to Financial Statements                for                discussion of reporting of trading and ERCOT balancing activity in                2006.                Includes net purchases related to ERCOT balancing of $32 million                in the                second quarter of 2006 and $49 million of net sales in the second                quarter                of 2005, and net sales of $26 million and $66 million in the six                months                ended June 30, 2006 and 2005, respectively. |
|  (c) | Based on number of                meters.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|  (d) | Estimated market share                is based                on the number of customers that have                choice.                                                                                                                                                                                                                                                                                                                                                                                                                   |

***Production,      Purchased Power and Delivery Cost Data***

|                                                              |   | **Three                Months Ended** |   | **Six                Months Ended** |   |
|-------------------------------------------------------------------|--------|---------------------------------------|--------|-------------------------------------|--------|
|                                                              |   | **June                30,**           |   | **June                30,**         |   |
|                                                              |   | **2006**                              |   | **2005**                            |   | **Change                %** |   | **2006** |   | **2005** |   | **Change                %** |   |
|                                                              |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |
| **Fuel,                purchased power costs and delivery fees**  |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |
| **($                millions):**                                  |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |
|                                                              |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |
| Nuclear                fuel                                  |   | $                                     | 22     |                                | $      | 18 |   |   | 22.2 |   | $ | 43 |   | $ | 38 |   |   | 13.2 |   |
| Lignite/coal                                                 |   |                                  | 113    |                                |   | 119 |   |   | (5.0 | ) |   | 229 |   |   | 234 |   |   | (2.1 | ) |
| Total                baseload fuel                                |   |                                  | 135    |                                |   | 137 |   |   | (1.5 | ) |   | 272 |   |   | 272 |   |   | ─ |   |
| Gas/oil                fuel and purchased power              |   |                                  | 421    |                                |   | 720 |   |   | (41.5 | ) |   | 689 |   |   | 1,252 |   |   | (45.0 | ) |
| Other                costs                                   |   |                                  | 50     |                                |   | 70 |   |   | (28.6 | ) |   | 122 |   |   | 133 |   |   | (8.3 | ) |
| Fuel                and purchased power costs (a)                 |   |                                  | 606    |                                |   | 927 |   |   | (34.6 | ) |   | 1,083 |   |   | 1,657 |   |   | (34.6 | ) |
| Delivery                fees                                 |   |                                  | 337    |                                |   | 338 |   |   | (0.3 | ) |   | 650 |   |   | 681 |   |   | (4.6 | ) |
| Total                                                             |   | $                                     | 943    |                                | $      | 1,265 |   |   | (25.5 | ) | $ | 1,733 |   | $ | 2,338 |   |   | (25.9 | ) |
|                                                              |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Fuel                and purchased power costs (which excludes** |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **generation                plant operating costs) per MWh:**     |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Nuclear                generation                            |   | $                                     | 4.25   |                                | $      | 4.20 |   |   | 1.2 |   | $ | 4.24 |   | $ | 4.19 |   |   | 1.2 |   |
| Lignite/coal                generation (b)                   |   | $                                     | 12.67  |                                | $      | 12.02 |   |   | 5.4 |   | $ | 12.33 |   | $ | 11.98 |   |   | 2.9 |   |
| Gas/oil                generation and purchased power        |   | $                                     | 63.40  |                                | $      | 54.92 |   |   | 15.4 |   | $ | 61.76 |   | $ | 52.47 |   |   | 17.7 |   |
|                                                              |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Delivery                fee per MWh**                      |   | $                                     | 24.51  |                                | $      | 22.84 |   |   | 7.3 |   | $ | 26.18 |   | $ | 23.95 |   |   | 9.3 |   |
|                                                              |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Production                and purchased power volumes (GWh):**  |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                              |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Nuclear                                                      |   |                                  | 5,098  |                                |   | 4,250 |   |   | 20.0 |   |   | 10,178 |   |   | 9,047 |   |   | 12.5 |   |
| Lignite/coal                                                 |   |                                  | 10,044 |                                |   | 10,605 |   |   | (5.3 | ) |   | 20,918 |   |   | 21,125 |   |   | (1.0 | ) |
| Total                baseload generation                          |   |                                  | 15,142 |                                |   | 14,855 |   |   | 1.9 |   |   | 31,096 |   |   | 30,172 |   |   | 3.1 |   |
| Gas/oil                generation                            |   |                                  | 1,350  |                                |   | 1,005 |   |   | 34.3 |   |   | 1,539 |   |   | 1,265 |   |   | 21.7 |   |
| Purchased                power (a)                           |   |                                  | 5,291  |                                |   | 12,034 |   |   | (56.0 | ) |   | 9,616 |   |   | 22,599 |   |   | (57.4 | ) |
| Total                energy supply                                |   |                                  | 21,783 |                                |   | 27,894 |   |   | (21.9 | ) |   | 42,251 |   |   | 54,036 |   |   | (21.8 | ) |
| Less                line loss and power imbalances           |   |                                  | 566    |                                |   | 725 |   |   | (21.9 | ) |   | 814 |   |   | 1,148 |   |   | (29.1 | ) |
| Net                energy supply volumes                          |   |                                  | 21,217 |                                |   | 27,169 |   |   | (21.9 | ) |   | 41,437 |   |   | 52,888 |   |   | (21.7 | ) |
|                                                              |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Baseload                capacity factors (%):**                 |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                              |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Nuclear                                                      |   |                                  | 102.0  | %                                   |   | 84.9 | % |   | 20.1 |   |   | 102.3 | % |   | 90.8 | % |   | 12.7 |   |
| Lignite/coal                                                 |   |                                  | 82.4   | %                                   |   | 86.9 | % |   | (5.2 | ) |   | 86.4 | % |   | 87.3 | % |   | (1.0 | ) |
| Total                baseload                                     |   |                                  | 88.0   | %                                   |   | 86.3 | % |   | 2.0 |   |   | 90.9 | % |   | 88.3 | % |   | 2.9 |   |

| (a)   | See                Note 1 to Financial Statements for discussion of reporting of trading                and                ERCOT balancing activity in 2006. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b)   | Includes                depreciation and amortization of lignite mining assets, which is                reported                in the depreciation and amortization expense line item, but is part                of                overall fuel costs. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Three      Months Ended June 30, 2006 Compared to Three Months Ended June 30,      2005***

| ·   | The                retail revenue increase reflected $383 million in higher pricing                due to                increased price-to-beat rates, reflecting regulatory-approved fuel                factor                increases in May and October 2005, and higher pricing in the competitive                business market, both resulting from the effects of higher natural                gas                prices. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                effect of higher pricing due to increased price-to-beat rates was                partially offset by a $101 million effect of lower retail volumes.                Total                retail sales volumes declined 7% primarily reflecting a net loss                of                customers due to competitive activity partially offset by the effect                of                warmer weather. Excluding the estimated effect of warmer weather,                average                consumption per customer declined somewhat. Large business market                volumes                declined 15%, while residential and small business volumes fell 3%.                The                large business market decline reflected a continuing strategy to                improve                margins. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Retail                electricity customer counts at June 30, 2006 declined 6% from June                30,                2005. Total residential and small business customer counts in the                historical service territory declined 8% and in all combined territories                declined 6%. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | $151                million in net unrealized cash flow hedge ineffectiveness gains largely                associated with positions in the long-term hedging                program; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | $15                million in net realized gains primarily associated with positions                in the                long-term hedging program accounted for as cash flow hedges, the                offsetting effects of which are reflected in electricity                revenues; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | $16                million in net realized losses associated with hedges entered into                in                prior years (largely 2003), the offsetting effects of which are reflected                in electricity revenues and fuel and purchased power. This amount                includes                $11 million in losses related to positions that had been accounted                for as                cash flow hedges; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | $20                million in reversals of previously recorded net unrealized gains                on hedge                positions (marked-to-market) that were settled in the current period,                the                offsetting effects of which are reflected in electricity revenues                and fuel                and purchased power costs; and |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | $28                million in net unrealized losses primarily relating to hedge positions                that are marked-to-market. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------|

|                                                         |   |
|--------------------------------------------------------------|--------|
|                                                         |   | **Three                Months Ended June 30,** |   |
|                                                         |   | **2006** |   | **%                of Revenue** |   | **2005** |   | **%                of Revenue** |   |
|                                                         |   |   |   |   |   |   |   |   |   |
| Operating                revenues                       |   | $ | 2,468 |   |   | 100 | % | $ | 2,276 |   |   | 100 | % |
| Costs                and expenses:                           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Fuel,                purchased power costs and delivery fees |   |   | 943 |   |   | 38 |   |   | 1,265 |   |   | 56 |   |
| Generation                plant operating costs              |   |   | 152 |   |   | 6 |   |   | 177 |   |   | 8 |   |
| Depreciation                and amortization                 |   |   | 83 |   |   | 4 |   |   | 76 |   |   | 3 |   |
| Gross                margin                             |   | $ | 1,290 |   |   | 52 | % | $ | 758 |   |   | 33 | % |

| ·   | higher                pricing, as the average wholesale sales price per MWh rose 24%, and                the                average retail sales price per MWh rose 26% (11 percentage point                margin                increase); |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the                effect of reporting wholesale power trading activity on a net basis                (five                percentage point margin increase);                and |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | lower                operating costs and higher gains from risk management and trading                activities (two percentage point margin                increase), |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | $20                million in lower maintenance costs due largely to the absence in                2006 of                costs incurred in 2005 for the nuclear generation plant refueling                outage;                and |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | $3                million in lower property taxes due to lower overall property valuation                estimates, |
|--------------------|---------------------------------------------------------------------------------------------------------------------|

| ·   | $9                million in higher bad debt expense reflecting higher retail accounts                receivable balances; and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------|

| ·   | $4                million in higher fees related to the sale of accounts receivable                program                due to higher interest rates, |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|

***Six      Months Ended June 30, 2006 Compared to Six Months Ended June 30,      2005***

| ·   | The                retail revenue increase reflected $795 million in higher pricing                due to                increased price-to-beat rates, reflecting regulatory-approved fuel                factor                increases in May and October 2005, and higher pricing in the competitive                business market, both resulting from the effects of higher natural                gas                prices. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                effect of higher pricing due to increased price-to-beat rates was                partially offset by a $351 million effect of lower retail volumes.                Total                retail sales volumes declined 12% reflecting a net loss of customers                due                to competitive activity and lower average consumption per customer                in                residential and small business markets. Large business market volumes                declined 20% and residential and small business volumes fell by 9%.                The                large business market decline reflected a continuing strategy to                improve                margins. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Retail                electricity customer counts at June 30, 2006 declined 6% from June                30,                2005. Total residential and small business customer counts in the                historical service territory declined 8% and in all combined territories                declined 6%. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | $150                million in net unrealized cash flow hedge ineffectiveness gains largely                associated with positions in the long-term hedging                program; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | $22                million in net realized gains primarily associated with positions                in the                long-term hedging program accounted for as cash flow hedges, the                offsetting effects of which are reflected in electricity                revenues; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | $30                million in net realized losses associated with hedges entered into                in                prior years (largely 2003), the offsetting effects of which are reflected                in electricity revenues and fuel and purchased power. This amount                includes                $19 million in losses related to positions that had been accounted                for as                cash flow hedges; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | $31                million in reversals of previously recorded net unrealized gains                on hedge                positions (marked-to-market) that were settled in the current period,                the                offsetting effects of which are reflected in electricity revenues                and fuel                and purchased power costs; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | $27                million in net unrealized losses primarily relating to hedge positions                that are marked-to-market; and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------|

| ·   | $20                million in net realized losses on settlement of various commodity                trading                positions. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------|

|                                                         |   |
|--------------------------------------------------------------|--------|
|                                                         |   | **Six                Months Ended June 30,** |   |
|                                                         |   |   |   |
|                                                         |   | **2006** |   | **%                of Revenue** |   | **2005** |   | **%                of Revenue** |   |
|                                                         |   |   |   |   |   |   |   |   |   |
| Operating                revenues                       |   | $ | 4,478 |   |   | 100 | % | $ | 4,097 |   |   | 100 | % |
| Costs                and expenses:                           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Fuel,                purchased power costs and delivery fees |   |   | 1,733 |   |   | 38 |   |   | 2,338 |   |   | 57 |   |
| Generation                plant operating costs              |   |   | 307 |   |   | 7 |   |   | 331 |   |   | 8 |   |
| Depreciation                and amortization                 |   |   | 166 |   |   | 4 |   |   | 154 |   |   | 4 |   |
| Gross                margin                             |   | $ | 2,272 |   |   | 51 | % | $ | 1,274 |   |   | 31 | % |

| ·   | higher                pricing, as the average wholesale sales price per MWh rose 28%, and                the                average retail sales price per MWh rose 32% (15 percentage point                margin                increase); and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the                effect of reporting wholesale power trading activity on a net basis                (six                percentage point margin increase), |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | $10                million in higher bad debt expense reflecting higher retail accounts                receivable balances; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------|

| ·   | $8                million in higher fees related to the sale of accounts receivable                program                due to higher interest rates; and |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | $6                million in executive severance expense (including amounts allocated                from                parent), |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------|

**Energy-Related      Commodity Contracts and Mark-to-Market Activities**

* *

|   |                                                                                                  |   | **Six                Months**    |   |
|--------|-------------------------------------------------------------------------------------------------------|--------|----------------------------------|--------|
|   |                                                                                                  |   | **Ended**                        |   |
|   |                                                                                                  |   | **June                30, 2006** |   |
|   |                                                                                                  |   |                             |   |
|   | Net                commodity contract liability at beginning of period                                | $      | (56)                             |   |
|   |                                                                                                  |   |                             |   |
|   | Settlements                of positions included in the opening balance (1)                           |   | 22                               |   |
|   |                                                                                                  |   |                             |   |
|   | Unrealized                mark-to-market valuations of positions held at end of                period |   | (24)                             |   |
|   |                                                                                                  |   |                             |   |
|   | Other                activity (2)                                                                     |   | (8)                              |   |
|   |                                                                                                  |   |                             |   |
|   | Net                commodity contract liability at end of period                                      | $      | (66)                             |   |
|   |                                                                                                  |   |                             |   |

**__________________________**

|   | (1) | Represents                reversals of unrealized mark-to-market valuations of these positions                recognized in earnings prior to the beginning of the period, to offset                realized gains and losses upon                settlement. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | These                amounts do not arise from mark-to-market activities. Includes initial                values of positions involving the receipt or payment of cash or other                consideration such as option premiums paid and received and related                amortization. Activity for the period includes $20 million of natural                gas                received related to physical swap transactions as well as $12 million                of                option premium payments. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                 |   | **Three                Months Ended** |   | **Six                Months Ended** |   |
|--------------------------------------------------------------------------------------|--------|---------------------------------------|--------|-------------------------------------|--------|
|                                                                                 |   | **June                30,**           |   | **June                30,**         |   |
|                                                                                 |   | **2006**                              |   | **2005**                            |   | **2006** |   | **2005** |   |
|                                                                                 |   |                                  |   |                                |   |   |   |   |   |
| Unrealized                gains/(losses) related to contracts marked-to-market  |   | $                                     | (8     | )                                   | $      | 39 |   | $ | (2 | ) | $ | 12 |   |
|                                                                                 |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |
| Ineffectiveness                gains related to cash flow hedges (a)            |   |                                  | 151    |                                |   | 3 |   |   | 150 |   |   | 6 |   |
|                                                                                 |   |                                  |   |                                |   |   |   |   |   |   |   |   |   |
| Total                unrealized gains related to commodity contracts            |   | $                                     | 143    |                                | $      | 42 |   | $ | 148 |   | $ | 18 |   |

**__________________________**

|   | (a) | See                Note 10 to Financial Statements. |
|--------|-----|-----------------------------------------------------|

***Maturity      Table***

|                                                |   | **Maturity                dates of unrealized net commodity contract assets (liabilities) at                June                30, 2006** |   |
|-----------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------|--------|
| **Source                of fair value**        |   | **Less                than****1                year**                                                                                      |   |  **1-3                years** |   |  **4-5                years** |   | **Excess                of****5                years** |   |  **Total** |   |
| Prices                actively quoted          |   | $                                                                                                                                          | 103    |   | $ | 30 |   | $ | 9 |   | $ | ─ |   | $ | 142 |   |
| Prices                provided by other             |   |                                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| external                sources                     |   |                                                                                                                                       | (127   | ) |   | 20 |   |   | (18 | ) |   | ─ |   |   | (125 | ) |
| Prices                based on models          |   |                                                                                                                                       | 17     |   |   | ─ |   |   | ─ |   |   | ─ |   |   | 17 |   |
| Total                                               |   | $                                                                                                                                          | (7     | ) | $ | 50 |   | $ | (9 | ) | $ | ─ |   | $ | 34 |   |
| Percentage                of total fair value  |   |                                                                                                                                       | (21    | )% |   | 147 | % |   | (26 | )% |   | ─ | % |   | 100 | % |

**COMPREHENSIVE      INCOME**

|                                                                                                                                                         |   | **Three                Months Ended****June                30,** |   | **Six                Months Ended****June                30,** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------|--------|----------------------------------------------------------------|--------|
|                                                                                                                                                         |   | **2006**                                                         |   | **2005**                                                       |   | **2006** |   | **2005** |   |
|                                                                                                                                                         |   |                                                             |   |                                                           |   |   |   |   |   |
| Net                increase (decrease) in fair value of cash flow hedges (all commodity)                held                                                 |   |                                                             |   |                                                           |   |   |   |   |   |
| at                end of period                                                                                                                         |   | $                                                                | (74    | )                                                              | $      | (2 | ) | $ | 39 |   | $ | 13 |   |
| Derivative                value net losses related to hedged transactions settled during                theperiod                and reported in net income: |   |                                                             |   |                                                           |   |   |   |   |   |   |   |   |   |
| Commodities                                                                                                                                             |   |                                                             | 10     |                                                           |   | 17 |   |   | 7 |   |   | 33 |   |
| Financing                - interest rate swaps                                                                                                          |   |                                                             | 2      |                                                           |   | 1 |   |   | 3 |   |   | 2 |   |
|                                                                                                                                                         |   |                                                             | 12     |                                                           |   | 18 |   |   | 10 |   |   | 35 |   |
| Total                income (loss) effect of cash flow hedges reported in other                comprehensive                                                 |   |                                                             |   |                                                           |   |   |   |   |   |   |   |   |   |
| income                related to continuing operations                                                                                                  |   | $                                                                | (62    | )                                                              | $      | 16 |   | $ | 49 |   | $ | 48 |   |

**FINANCIAL      CONDITION**

***LIQUIDITY      AND CAPITAL RESOURCES***

***Cash      Flows —***

| ·   | a                favorable change in income taxes payable of approximately $770 million                primarily driven by net operating losses arising from the expected                reporting on the 2005 federal income tax return of a market value                loss                related to a power sales agreement;                and |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | a                favorable change of $176 million in working capital (accounts receivable,                accounts payable and inventories) principally reflecting higher wholesale                gas receivables in 2005, due to higher natural gas prices and sales                volumes, as well as increased proceeds from the accounts receivable                sales                program in 2006. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                     |   | **Six                Months Ended June 30,** |   |
|------------------------------------------------------------------------------------------|--------|----------------------------------------------|--------|
|                                                                                     |   | **2006**                                     |   | **2005** |   |
| Inflow                from net issuances, repurchases and repayments of borrowings  |   | $                                            | 648    |   | $ | 969 |   |
| Decrease                in note payable to TXU Electric Delivery                    |   |                                         | (22    | ) |   | (32 | ) |
| Distributions                paid to parent                                         |   |                                         | (572   | ) |   | (350 | ) |
| Total                                                                                    |   | $                                            | 54     |   | $ | 587 |   |

|                                                                                       |   | **Six                Months Ended June 30,** |   |
|--------------------------------------------------------------------------------------------|--------|----------------------------------------------|--------|
|                                                                                       |   | **2006**                                     |   | **2005** |   |
|                                                                                       |   |                                         |   |   |   |
| Capital                expenditures, including nuclear fuel                      |   | $                                            | (248   | ) | $ | (161 | ) |
| Deposit                of proceeds from pollution control revenue bonds with trustee  |   |                                         | (99    | ) |   | ― |   |
| Net                investments in nuclear decommissioning trust fund securities       |   |                                         | (7     | ) |   | (7 | ) |
| Advances                to affiliates                                                 |   |                                         | (1,803 | ) |   | (934 | ) |
| Other                                                                                 |   |                                         | 2      |   |   | ― |   |
| Total                                                                                      |   | $                                            | (2,155 | ) | $ | (1,102 | ) |

***Long-term      Debt Activity***
*—*
*** ***

|                                           |   | **Issuances** |    | **Retirements** |   |
|------------------------------------------------|--------|---------------|---------|-----------------|--------|
|                                           |   |          |    |            |   |
| Pollution                control revenue bonds |   | $             | 100     |            | $      | 203 |   |
| Senior                notes                    |   |          | ― |            |   | 400 |   |
|                                           |   |          |    |            |   |   |   |
| Total                                          |   | $             | 100     |            | $      | 603 |   |

***Credit      Facilities***
*—*

***Capital      Expenditures —***

***Short-term      Borrowings***

***Sale      of Accounts Receivable***

***Liquidity      Effects of Risk Management and Trading Activities***
** **

| ·   | $54                million in cash has been received from counterparties as                collateral; |
|--------------------|--------------------------------------------------------------------------------------------------------|

| ·   | $70                million in cash has been posted with counterparties as collateral;                and |
|--------------------|----------------------------------------------------------------------------------------------------------|

| ·   | $971                million in letters of credit have been posted as collateral by TXU                Energy                Holdings including $500 million to support a related series of hedge                transactions entered into by TXU DevCo in June 2006. (See discussion                above                under “Recent Developments”.) |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Asset      Transfer***

***Financial      Covenants, Credit Rating Provisions and Cross Default      Provisions***

*Credit      Ratings*

|          | TXU                Corp.          |   | US                Holdings        |   | TXU                Electric Delivery |   | TXU                Energy Holdings |   |
|---------------|-----------------------------------|--------|-----------------------------------|--------|--------------------------------------|--------|------------------------------------|--------|
|          | (Senior                Unsecured) |   | (Senior                Unsecured) |   | (Senior                Unsecured)    |   | (Senior                Unsecured)  |   |
| S&P       | BB+                               |   | BB+                               |   | BBB-                                 |   | BBB-                               |   |
| Moody’s | Ba1                               |   | Baa3                              |   | Baa2                                 |   | Baa2                               |   |
| Fitch         | BBB-                              |   | BBB-                              |   | BBB+                                 |   | BBB                                |   |

*Material      Credit Rating Covenants*

*Material      Cross Default Provisions *

***Long-term***
** **
***Contractual      Obligations and Commitments***

**OFF      BALANCE SHEET ARRANGEMENTS**

** **

**COMMITMENTS      AND CONTINGENCIES**

**REGULATION      AND RATES**

| ·   | For                customers who have been designated as “critical care” because interruption                or suspension of electric service will create a dangerous or                life-threatening condition, there shall be no disconnection through                September 30, 2006, regardless of whether the customer makes payments                for                electricity use this summer; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Elderly                low-income customers who contact their electric provider will also                not be                disconnected through September 30, 2006, regardless of whether the                customer makes payments for electricity use, though the Commissioners                encouraged customers to pay as much as they can to avoid building                up                significant unpaid balances. These customers will be entitled to                enter                into a deferred payment arrangement with 25% of their balance due                in                October and the balance of the deferred bills paid over the next                five                months; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | All                other low-income customers can avoid disconnection through September                30,                2006 by paying 25% of their current month’s bill and entering into a                deferred payment arrangement that spreads remaining amounts over                the next                five months. In July, August and September 2006, the customer can                avoid                disconnection by paying 25% of that month’s bill and also paying the                deferral installment that is due for that                month. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Texas      Legislative Special Session***

***Wholesale      Market Design***
*** ***

| ·   | to                use a stakeholder process to develop a new wholesale market                model; |
|--------------------|-----------------------------------------------------------------------------------------------------|

| ·   | to                operate a voluntary day-ahead energy                market; |
|--------------------|-------------------------------------------------------------------------------|

| ·   | to                directly assign all congestion rents to the resources that caused                the                congestion; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------|

| ·   | to                use nodal energy prices for                resources; |
|--------------------|-------------------------------------------------------------------------|

| ·   | to                provide information for energy trading hubs by aggregating                nodes; |
|--------------------|----------------------------------------------------------------------------------------------------|

| ·   | to                use zonal prices for loads; and |
|--------------------|---------------------------------------------------|

| ·   | to                provide congestion revenue rights (but not physical                rights). |
|--------------------|-----------------------------------------------------------------------------------------------|

***Summary***

**CHANGES      IN ACCOUNTING STANDARDS**

**ITEM      3.    QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK**

***RISK      OVERSIGHT***

***COMMODITY      PRICE RISK***

***Long-term      Hedging Program***
** **

***VaR      Methodology***

***VaR      for Energy Contracts Subject to Mark-to-Market      Accounting***

|   |                                     |   |   | **June                30,** |   |   | **December                31,** |   |
|--------|------------------------------------------|--------|--------|-----------------------------|--------|--------|---------------------------------|--------|
|   |                                     |   |   | **2006**                    |   |   | **2005**                        |   |
|   | Period-end                MtM VaR        |   | $      | 13                          |   | $      | 19                              |   |
|   | Average                Month-end MtM VaR |   | $      | 11                          |   | $      | 20                              |   |

***Earnings      at Risk (EaR)***

|   |   |   |   | **June                30,** |   |   | **December                31,** |   |
|--------|--------|--------|--------|-----------------------------|--------|--------|---------------------------------|--------|
|   |   |   |   | **2006**                    |   |   | **2005**                        |   |
|   | EaR    |   | $      | 22                          |   | $      | 32                              |   |

***INTEREST      RATE RISK***

***CREDIT      RISK***

***Credit      Risk***
** **

***Credit      Exposure***

|                                     |   |                                           |   |                                             |   |                                        |   | **Net                Exposure by**** ****Maturity** |   |
|------------------------------------------|--------|------------------------------------------------|--------|--------------------------------------------------|--------|---------------------------------------------|--------|----------------------------------------------------------|--------|
|                                     |   | **Exposure****before****Credit****Collateral** |   |   **Credit                Collateral** |   |   **Net                Exposure** |   | **2                years or less**                       |   | **Between****2-5                years** |   | **Greater****than                5****years** |   | **Total** |   |
|                                     |   |                                           |   |                                             |   |                                        |   |                                                     |   |   |   |   |   |   |   |
|                                     |   |                                           |   |                                             |   |                                        |   |                                                     |   |   |   |   |   |   |   |
| Investment                grade     |   | $                                              | 946    |                                             | $      | 154                                         |   | $                                                        | 792    |   | $ | 521 |   | $ | 125 |   | $ | 146 |   | $ | 792 |   |
| Noninvestment                grade  |   |                                           | 246    |                                             |   | 55                                          |   |                                                     | 191    |   |   | 159 |   |   | 22 |   |   | 10 |   |   | 191 |   |
| Totals                                   |   | $                                              | 1,192  |                                             | $      | 209                                         |   | $                                                        | 983    |   | $ | 680 |   | $ | 147 |   | $ | 156 |   | $ | 983 |   |
|                                     |   |                                           |   |                                             |   |                                        |   |                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Investment                grade     |   |                                           | 79     | %                                                |   | 74                                          | %      |                                                     | 81     | % |   |   |   |   |   |   |   |   |   |   |   |   |
| Noninvestment                grade  |   |                                           | 21     | %                                                |   | 26                                          | %      |                                                     | 19     | % |   |   |   |   |   |   |   |   |   |   |   |   |

**FORWARD-LOOKING      STATEMENTS**

| ·   | prevailing                governmental policies and regulatory actions, including those of                the Texas                Legislature, the Governor of Texas, FERC, the Commission, the RRC,                the                NRC, the EPA and the TCEQ, with respect                to: |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | allowed                prices; |
|--------------------|--------------------------------|

| ·   | industry,                market and rate structure; |
|--------------------|-----------------------------------------------------|

| ·   | purchased                power and recovery of investments; |
|--------------------|-------------------------------------------------------------|

| ·   | operations                of nuclear generating facilities; |
|--------------------|-------------------------------------------------------------|

| ·   | acquisitions                and disposal of assets and                facilities; |
|--------------------|-----------------------------------------------------------------------------------|

| ·   | development,                construction and operation of                facilities; |
|--------------------|--------------------------------------------------------------------------------------|

| ·   | decommissioning                costs; |
|--------------------|---------------------------------------|

| ·   | present                or prospective wholesale and retail                competition; |
|--------------------|----------------------------------------------------------------------------------------|

| ·   | changes                in tax laws and policies; and |
|--------------------|------------------------------------------------------|

| ·   | changes                in and compliance with environmental and safety laws and                policies; |
|--------------------|----------------------------------------------------------------------------------------------------------|

| ·   | continued                implementation of the 1999 Restructuring                Legislation; |
|--------------------|-----------------------------------------------------------------------------------------------|

| ·   | legal                and administrative proceedings and                settlements; |
|--------------------|-------------------------------------------------------------------------------------|

| ·   | general                industry trends; |
|--------------------|-----------------------------------------|

| ·   | TXU                Energy Holdings’ ability to attract and retain profitable                customers; |
|--------------------|--------------------------------------------------------------------------------------------------------------|

| ·   | delays                in implementing any future price-to-beat fuel factor                adjustments; |
|--------------------|--------------------------------------------------------------------------------------------------------|

| ·   | changes                in wholesale electricity prices or energy commodity                prices; |
|--------------------|---------------------------------------------------------------------------------------------------|

| ·   | unanticipated                changes in market heat rates in the Texas electricity                market; |
|--------------------|-----------------------------------------------------------------------------------------------------------|

| ·   | TXU                Energy Holdings’ ability to effectively hedge against changes in commodity                prices and market heat rates; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | weather                conditions and other natural phenomena, and acts of sabotage, wars                or                terrorist activities; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | unanticipated                population growth or decline, and changes in market demand and demographic                patterns; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------|

| ·   | changes                in business strategy, development plans or vendor                relationships; |
|--------------------|--------------------------------------------------------------------------------------------------------|

| ·   | access                to adequate transmission facilities to meet changing                demands; |
|--------------------|----------------------------------------------------------------------------------------------------|

| ·   | unanticipated                changes in interest rates, commodity prices or rates of                inflation; |
|--------------------|----------------------------------------------------------------------------------------------------------------|

| ·   | unanticipated                changes in operating expenses, liquidity needs and capital                expenditures; |
|--------------------|----------------------------------------------------------------------------------------------------------------------|

| ·   | commercial                bank market and capital market                conditions; |
|--------------------|-------------------------------------------------------------------------------------|

| ·   | competition                for new energy development and other business                opportunities; |
|--------------------|--------------------------------------------------------------------------------------------------------|

| ·   | inability                of various counterparties to meet their obligations with respect                to TXU                Energy Holdings’ financial                instruments; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | changes                in technology used by and services offered by TXU Energy                Holdings; |
|--------------------|----------------------------------------------------------------------------------------------------------|

| ·   | significant                changes in TXU Energy Holdings’ relationship with its employees, including                the availability of qualified personnel, and the potential adverse                effects                if labor disputes or grievances were to                occur; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | significant                changes in critical accounting policies material to TXU Energy                Holdings; |
|--------------------|--------------------------------------------------------------------------------------------------------------------|

| ·   | actions                by credit rating agencies; and |
|--------------------|-------------------------------------------------------|

| ·   | the                ability of TXU Energy Holdings to implement cost reduction initiatives                and                effectively execute its growth                strategy. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**ITEM      4.    CONTROLS AND PROCEDURES**

**PART      II. OTHER INFORMATION**

**ITEM      1.     LEGAL PROCEEDINGS**

**ITEM      1A.   RISK FACTORS**

**TXU      Energy Holdings’ retail business is subject to the risk that sensitive customer      data may be compromised, which could result in an adverse impact to its      reputation and/or results of operations of the retail      business.**

**ITEM      6.    **
**EXHIBITS**

| **(a)    ****Exhibits                provided as part of Part II are:**  |
|---------------------------------------------------------------------------------------------------|
| **Exhibits**                                                                                      | **Previously                Filed****With                File****Number******* | **As****Exhibit** |   |   |
|                                                                                              | **Material                Contracts.**  |
|                                                                                              | **Credit                Agreements.**  |
| 10(a)                                                                                        | 333-108876Form                8-K (filed June                2, 2006) | 10.1  |   | $1.5                Billion Revolving Credit Agreement, dated May 26, 2006, by and among                TXU                Energy Company LLC, certain lenders parties thereto, Credit Suisse,                Cayman                Islands Branch, as administrative agent, and as fronting bank, and                Lehman                Brothers Bank, as fronting bank.  |
|                                                                                              | **Other                Material Contracts.**  |
| 10(b)                                                                                        | 1-12833Form                10-Q(filed                August 7, 2006) | 10(k)  |   | Confirmation                Agreement by TXU Generation Development Company LLC, dated June 6,                2006                (confidential treatment has been requested for portions of this                exhibit).  |
| **(31)**                                                                                     | **Rule                13a - 14(a)/15d - 14(a) Certifications.**  |
| 31(a)                                                                                        |   |   | —  | Certification                of M. S. Greene, Chairman of the Board, President and Chief Executive                of                TXU Energy Company LLC, pursuant to Rule 13a-14(a)/15d-14(a) of the                Securities Act of 1934, as adopted pursuant to Section 302 of the                Sarbanes-Oxley Act of 2002.  |
| 31(b)                                                                                        |   |   | —  | Certification                of David A. Campbell, Manager and Acting Chief Financial Officer                of TXU                Energy Company LLC, pursuant to Rule 13a-14(a)/15d-14(a) of the Securities                Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley                Act                of 2002.  |
| **(32)**                                                                                     | **Section                1350 Certifications.**  |
| 32(a)                                                                                        |   |   | —  | Certification                of M. S. Greene, Chairman of the Board, President and Chief Executive                of                TXU Energy Company LLC, pursuant to 18 U.S.C. Section 1350, as adopted                pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.  |
| 32(b)                                                                                        |   |   | —  | Certification                of David A. Campbell, Manager and Acting Chief Financial Officer                of TXU                Energy Company LLC, pursuant to 18 U.S.C. Section 1350, as adopted                pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.  |
| **(99)**                                                                                     | **Additional                Exhibits**  |   |   |   |
| 99                                                                                           |   |   | —  | Condensed                Statements of Consolidated Income -Twelve                Months Ended June 30, 2006.  |
|                                                                                              |

| * | Incorporated                herein by reference. |
|---|--------------------------------------------------|

**SIGNATURE**

|         |                                                                                                                                  |                                                                                                                                |
|--------------|---------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------|
|         | **TXU              ENERGY COMPANY LLC**                                                                                               |
|    |                                                                                                                             |                                                                                                                           |
|         | By:                                                                                                                         |                             /s/   Stan Szlauderbach |
|         |               Senior              Vice President and Controller |