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**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      D.C.  20549**

**FORM      10-Q**

**FOR      THE QUARTERLY PERIOD ENDED JUNE 30, 2007**

**_____________________**

**Texas      Competitive Electric Holdings 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) |

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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, 2007 and                2006                                                                                                                | 1 |
|        Condensed                Statements of                Consolidated Comprehensive Income –Three                and Six Months Ended June                30, 2007 and                2006                                                                                                                                                               | 1 |
|        Condensed                Statements of Consolidated Cash Flows –Six                Months Ended June 30, 2007                and                2006                                                                                                                                                                                                  | 2 |
|        Condensed                Consolidated Balance Sheets –June                30, 2007 and December 31,                2006                                                                                                                                                                                                                               | 3 |
|        Notes                to Condensed                Consolidated Financial                Statements                                                                                                                                                                                                                                                           | 4 |
|        Report                of                Independent Registered Public Accounting                Firm                                                                                                                                                                                                                                                        | 22 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |
| **Item                2.     Management’s Discussion and Analysis of                Financial Condition****and                Results of                Operations                                                                                                               **                                                                                    | 23 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |
| **Item                3.      Quantitative and Qualitative                Disclosures About Market Risk**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 48 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |
| **Item                4.       Controls and                Procedures                                                                                                     **                                                                                                                                                                                                                                         | 53 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |
| **Part                II.       Other                Information**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |
| **Item                1.        Legal                Proceedings                                                                                                     **                                                                                                                                                                                                                                         | 54 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |
| **Item                1A.     Risk                Factors                                                                                                     **                                                                                                                                                                                                                                                               | 54 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |
| **Item                6.        Exhibits**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | 56 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |
| **Signature                                                                                                                          **                                                                                                                                                                                                        | 57 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |

**Texas      Competitive Electric Holdings Company LLC’s annual reports on Form 10-K,      quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments      to those reports are made available to the public, free of charge, on the TXU      Corp. website at http://www.txucorp.com, as soon as reasonably practicable,      after they have been filed with or furnished to the Securities and Exchange      Commission.  Texas Competitive Electric Holdings Company LLC will      provide copies of current reports not posted on the TXU Corp. website 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.**

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**GLOSSARY**

| **1999                Restructuring Legislation** | legislation                that restructured the electric utility industry in Texas to provide                for                retail competition                                                                                                                                                                                                                                                                                                                             |
|---------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **2006                Form 10-K**                 | TXU                Energy Company’s Annual Report on Form 10-K for the year ended December                31, 2006 (now Texas Competitive Electric Holdings Company                LLC)                                                                                                                                                                                                                                                                                   |
| **Capgemini**                                     | Capgemini                Energy LP, a subsidiary of Cap Gemini North America Inc. that provides                business process support services to Texas Competitive                Holdings                                                                                                                                                                                                                                                                                   |
| **Commission**                                    | Public                Utility Commission of Texas                                                                                                                                                                                                                                                                                                                                                                                                                               |
| **EPA**                                           | US                Environmental Protection Agency                                                                                                                                                                                                                                                                                                                                                                                                                               |
| **EPC**                                           | engineering,                procurement and construction                                                                                                                                                                                                                                                                                                                                                                                                                        |
| **ERCOT**                                         | Electric                Reliability Council of Texas, the Independent System Operator and                the                regional coordinator of 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                45**                         | FIN                No. 45, “Guarantor’s Accounting and Disclosure Requirements for                Guarantees, Including Indirect Guarantees of Indebtedness of Others– An                Interpretation of FASB Statements No. 5, 57, and 107 and Rescission                of                FASB Interpretation No. 34”                                                                                                                               |
| **FIN                48**                         | FIN                No. 48, “Accounting for Uncertainty in Income Taxes”                                                                                                                                                                                                                                                                                                                                                                                             |
| **Fitch**                                         | Fitch                Ratings, Ltd. (a credit rating agency)                                                                                                                                                                                                                                                                                                                                                                                                                     |
| **FSP**                                           | FASB                Staff Position                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| **GAAP**                                          | generally                accepted accounting principles                                                                                                                                                                                                                                                                                                                                                                                                                         |
| **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 in Texas (generally natural gas plants)                in                generating electricity and is calculated by dividing the wholesale                market                price of electricity by the market price of natural                gas. |
| **Merger                Agreement**               | Agreement                and Plan of Merger, dated February 25, 2007, under which an investor                group                led by Kohlberg Kravis Roberts & Co. and Texas Pacific Group would                acquire TXU Corp.                                                                                                                                                                                                                                       |

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| **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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| **Oncor                Electric Delivery** | refers                to Oncor Electric Delivery Company (formerly TXU Electric Delivery                Company), a subsidiary of TXU Corp., and/or its consolidated                bankruptcy-remote financing subsidiary, Oncor Electric Delivery Transition                Bond Company LLC (formerly TXU Electric Delivery Transition Bond                Company                LLC), depending on context                                                                                                                                                                                                         |
| **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 was supplied                by                competing REPs, adjusted periodically for changes in fuel costs,                and (ii)                were required to be made available to those customers until January                1,                2007 |
| **PURA**                                   | Texas                Public Utility Regulatory Act                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| **REP**                                    | retail                electric provider                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| **RRC**                                    | Railroad                Commission of Texas, which has oversight of lignite mining                activity                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| **S&P**                                | Standard                & Poor’s Ratings Services, a division of the McGraw Hill Companies                Inc. (a credit rating agency)                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| **SEC**                                    | US                Securities and Exchange Commission                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| **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”                                                                                                                                                                                                                                                                                                                                                                                                             |
| **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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |

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| **Texas                Competitive Holdings** | Refers                to Texas Competitive Electric Holdings Company LLC (formerly TXU                Energy                Company LLC), a subsidiary of US Holdings, and/or its consolidated                subsidiaries, depending on context, engaged in electricity generation                and                wholesale and retail energy markets activities.  This Form 10-Q                and other SEC filings of Texas Competitive Holdings occasionally                make                references to Texas Competitive Holdings when describing actions,                rights                or obligations of its subsidiaries.  These references reflect                the fact that the subsidiaries are consolidated with Texas Competitive                Holdings for financial reporting purposes.  However, these                references should not be interpreted to imply that Texas Competitive                Holdings is actually undertaking the action or has the rights or                obligations of the relevant subsidiary company or that the subsidiary                company is undertaking an action or has the rights or obligations                of Texas                Competitive Holdings or of any other affiliate. |
|-----------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **TXU                Corp.**                  | refers                to TXU Corp. a holding company, and/or its consolidated subsidiaries,                depending on context                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| **TXU                DevCo**                  | Refers                to subsidiaries of TXU Corp. that have been established for the purpose                of                developing and constructing new generation facilities.  The TXU                DevCo subsidiaries are not currently subsidiaries of Texas Competitive                Holdings.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| **TXU                Energy Retail**          | refers                to TXU Energy Retail Company LLC (formerly TXU Energy Retail Company                LP),                a subsidiary of Texas Competitive Holdings engaged in the retail                sale of                power to residential and business customers                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| **TXU                Portfolio Management**   | TXU                Portfolio Management Company LP, a subsidiary of Texas Competitive                Holdings, currently doing business as Luminant Energy                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| **US**                                        | United                States of America                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| **US                Holdings**                | TXU                US Holdings Company, a subsidiary of TXU Corp. and parent of Texas                Competitive Holdings                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |

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**PART        I.  FINANCIAL INFORMATION**

**ITEM      1.  FINANCIAL STATEMENTS**

**TEXAS      COMPETITIVE ELECTRIC HOLDINGS COMPANY LLC**

**CONDENSED      STATEMENTS OF CONSOLIDATED INCOME**

**(Unaudited)**

|                                                                         |   | **Three                Months Ended****June                  30,** |   |   | **Six                Months Ended****June                  30,** |   |
|------------------------------------------------------------------------------|--------|--------------------------------------------------------------------|--------|--------|------------------------------------------------------------------|--------|
|                                                                         |   | **2007**                                                           |   |   | **2006**                                                         |   |   | **2007** |   |   | **2006** |   |
|                                                                         |   | **(millions                of dollars)**                           |   |
|                                                                         |   |                                                               |   |   |                                                             |   |   |   |   |   |   |   |
| **Operating                revenues**                                        |   | $                                                                  | 1,889  |   |                                                             | $      | 2,468 |   |   | $ | 3,411 |   |   | $ | 4,478 |   |
|                                                                         |   |                                                               |   |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |
| Costs                and expenses:                                           |   |                                                               |   |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |
| Fuel,                purchased power costs and                delivery fees  |   |                                                               | 970    |   |                                                             |   | 943 |   |   |   | 1,900 |   |   |   | 1,733 |   |
| Operating                costs                                               |   |                                                               | 168    |   |                                                             |   | 152 |   |   |   | 319 |   |   |   | 307 |   |
| Depreciation                and                amortization                  |   |                                                               | 81     |   |                                                             |   | 84 |   |   |   | 160 |   |   |   | 169 |   |
| Selling,                general and                administrative expenses   |   |                                                               | 147    |   |                                                             |   | 121 |   |   |   | 285 |   |   |   | 242 |   |
| Franchise                and revenue-based                taxes              |   |                                                               | 27     |   |                                                             |   | 27 |   |   |   | 53 |   |   |   | 54 |   |
| Other                income (Note                4)                          |   | ─                                                            |   |   |                                                             | (1     | ) |   |   | (9 | ) |   |   | (1 | ) |
| Other                deductions (Note                4)                      |   |                                                               | 10     |   |                                                             |   | 205 |   |   |   | 15 |   |   |   | 195 |   |
| Interest                income                                               |   |                                                               | (85    | )      |                                                             |   | (45 | ) |   |   | (162 | ) |   |   | (76 | ) |
| Interest                expense and related                charges (Note 12) |   |                                                               | 108    |   |                                                             |   | 102 |   |   |   | 190 |   |   |   | 202 |   |
| Total                costs and                expenses                       |   |                                                               | 1,426  |   |                                                             |   | 1,588 |   |   |   | 2,751 |   |   |   | 2,825 |   |
|                                                                         |   |                                                               |   |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |
| Income                before income taxes                                    |   |                                                               | 463    |   |                                                             |   | 880 |   |   |   | 660 |   |   |   | 1,653 |   |
|                                                                         |   |                                                               |   |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |
| Income                tax expense                                            |   |                                                               | 124    |   |                                                             |   | 337 |   |   |   | 180 |   |   |   | 590 |   |
|                                                                         |   |                                                               |   |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |
| **Net                income**                                                |   | $                                                                  | 339    |   |                                                             | $      | 543 |   |   | $ | 480 |   |   | $ | 1,063 |   |

**TEXAS      COMPETITIVE ELECTRIC HOLDINGS COMPANY LLC**

**CONDENSED      STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME**

**(Unaudited)**

|                                                                                                                                                                                                                                      |   | **Three                Months Ended****June                  30,** |   |   | **Six                Months Ended****June                  30,** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------|--------|--------|------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                      |   | **2007**                                                           |   |   | **2006**                                                         |   |   | **2007** |   |   | **2006** |   |
|                                                                                                                                                                                                                                      |   | **(millions                of dollars)**                           |   |
|                                                                                                                                                                                                                                      |   |                                                               |   |   |                                                             |   |   |   |   |   |   |   |
| Net                income                                                                                                                                                                                                                 |   | $                                                                  | 339    |   |                                                             | $      | 543 |   |   | $ | 480 |   |   | $ | 1,063 |   |
|                                                                                                                                                                                                                                      |   |                                                               |   |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |
| Other                comprehensive income (loss):                                                                                                                                                                                         |   |                                                               |   |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                      |   |                                                               |   |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |
| Cash                flow hedges:                                                                                                                                                                                                          |   |                                                               |   |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |
| Net                increase (decrease) in fair value of derivatives heldat                end of period (net of tax (expense) benefit of $(19),$39,                $95 and $(21))                                                         |   |                                                               | 35     |   |                                                             |   | (74 | ) |   |   | (177 | ) |   |   | 39 |   |
| Derivative                value net (gains) losses related to hedgedtransactions                settled during the period and reported innet                income (net of tax (expense) benefit of $(9), $6,$(49)                and $5) |   |                                                               | (18    | )      |                                                             |   | 12 |   |   |   | (92 | ) |   |   | 10 |   |
| Total                effect of cash flow                hedges                                                                                                                                                                            |   |                                                               | 17     |   |                                                             |   | (62 | ) |   |   | (269 | ) |   |   | 49 |   |
|                                                                                                                                                                                                                                      |   |                                                               |   |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive                income                                                                                                                                                                                                       |   | $                                                                  | 356    |   |                                                             | $      | 481 |   |   | $ | 211 |   |   | $ | 1,112 |   |

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**TEXAS      COMPETITIVE ELECTRIC HOLDINGS COMPANY LLC**

**CONDENSED      STATEMENTS OF CONSOLIDATED CASH FLOWS**

**(Unaudited)**

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | **Six                Months Ended**      |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | **June                  30,**            |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | **2007**                                 |   |   | **2006** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | **(millions                of dollars)** |   |
| Cash                flows – operating activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                     |   |   |   |   |
| Net                income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | $                                        | 480    |   |   | $ | 1,063 |   |
| Adjustments                to reconcile net                income to cash provided by operating activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                     |   |   |   |   |   |   |
| Depreciation                and                amortization                                                                                                                                                                         |   |                                     | 191    |   |   |   | 202 |   |
| Deferred                income tax expense                (benefit) –                net                                                                                                                                      |   |                                     | (219   | ) |   |   | 74 |   |
| Net                effect of unrealized                mark-to-market valuations – losses                (gains)                                                                                                              |   |                                     | 750    |   |   |   | (148 | ) |
| Bad                debt                expense                                                                                                                                                                                      |   |                                     | 24     |   |   |   | 29 |   |
| Net                equity loss from                unconsolidated                affiliate                                                                                                                                          |   |                                     | 3      |   |   |   | 5 |   |
| Impairment                of natural                gas-fueled generation                plants                                                                                                                                     |   | ─                                  |   |   |   | 198 |   |
| Inventory                write-off related to                natural gas-fueled generation                plants                                                                                                                    |   | ─                                  |   |   |   | 3 |   |
| Credit                related to impaired                leases                                                                                                                                                                     |   | ─                                  |   |   |   | (4 | ) |
| Other,                net                                                                                                                                                                                                           |   |                                     | 16     |   |   |   | 13 |   |
| Changes                in operating assets and                liabilities                                                                                                                                       |   |                                     | (1,923 | ) |   |   | 659 |   |
| Cash                (used in) provided by                operating                activities                                                                                                                                                                 |   |                                     | (678   | ) |   |   | 2,094 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                     |   |   |   |   |   |   |
| Cash                flows – financing activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                     |   |   |   |   |   |   |
| Issuances                of long-term                debt                                                                                                                                                       |   |                                     | 1,000  |   |   |   | 100 |   |
| Retirements                of                debt:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                     |   |   |   |   |   |   |
| Pollution                control revenue                bonds                                                                                                                                                                       |   |                                     | (143   | ) |   |   | (203 | ) |
| Other                long-term                debt                                                                                                                                                                                  |   |                                     | (5     | ) |   |   | (400 | ) |
| Change                in short-term                borrowings:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                     |   |   |   |   |   |   |
| Commercial                paper                                                                                                                                                                                                     |   |                                     | (623   | ) |   |   | 365 |   |
| Bank                borrowings                                                                                                                                                                                                      |   |                                     | 2,000  |   |   |   | 800 |   |
| Decrease                in income tax-related                note payable to Oncor Electric Delivery                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                     | (15    | ) |   |   | (22 | ) |
| Distributions                paid to                parent                                                                                                                                                      |   |                                     | (567   | ) |   |   | (572 | ) |
| Debt                premium, discount,                financing and reacquisition expenses -                net                                                                                                 |   |                                     | (9     | ) |   |   | (14 | ) |
| Cash                provided by financing                activities                                                                                                                                                                                          |   |                                     | 1,638  |   |   |   | 54 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                     |   |   |   |   |   |   |
| Cash                flows – investing activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                     |   |   |   |   |   |   |
| Net                advances to                affiliates                                                                                                                                                        |   |                                     | (288   | ) |   |   | (1,803 | ) |
| Capital                expenditures                                                                                                                                                                             |   |                                     | (381   | ) |   |   | (218 | ) |
| Nuclear                fuel                                                                                                                                                                                     |   |                                     | (30    | ) |   |   | (30 | ) |
| Reduction                of restricted cash                related to the redemption of pollution control revenue                bonds                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                     | 143    |   |   | ─ |   |
| Proceeds                from sales of nuclear                decommissioning trust fund                securities                                                                                               |   |                                     | 104    |   |   |   | 144 |   |
| Investments                in nuclear                decommissioning trust fund                securities                                                                                                       |   |                                     | (111   | ) |   |   | (151 | ) |
| Proceeds                from pollution control                revenue bonds deposited with                trustee                                                                                               |   | ─                                  |   |   |   | (99 | ) |
| Other                                                                                                                                                                                                           |   | ─                                  |   |   |   | 2 |   |
| Cash                used in investing                activities                                                                                                                                                                                              |   |                                     | (563   | ) |   |   | (2,155 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                     |   |   |   |   |   |   |
| Net                change in cash and cash                equivalents                                                                                                                                 |   |                                     | 397    |   |   |   | (7 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                     |   |   |   |   |   |   |
| Cash                and cash equivalents – beginning                balance                                                                                                                     |   |                                     | 7      |   |   |   | 12 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                     |   |   |   |   |   |   |
| Cash                and cash equivalents – ending                balance                                                                                                                        |   | $                                        | 404    |   |   | $ | 5 |   |

----

**TEXAS      COMPETITIVE ELECTRIC HOLDINGS COMPANY LLC**

**CONDENSED      CONSOLIDATED BALANCE SHEETS**

**(Unaudited)**

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | **                 June 30,**       |   |   | **December                31,** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------|--------|--------|---------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | **2007**                                 |   |   | **2006**                        |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | **(millions                of dollars)** |   |
| **ASSETS**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |
| Current                assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                     |   |   |                            |   |
| Cash                and cash                equivalents                                                                                                                                               |   | $                                        | 404    |   |                            | $      | 7 |   |
| Restricted                cash                                                                                                                                                                   |   |                                     | 1      |   |                            |   | 3 |   |
| Trade                accounts receivable — net                (Note                5)                                                                                                      |   |                                     | 831    |   |                            |   | 804 |   |
| Advances                to                parent                                                                                                                                                 |   |                                     | 3,406  |   |                            |   | 2,418 |   |
| Note                receivable from                parent                                                                                                                                        |   |                                     | 1,500  |   |                            |   | 1,500 |   |
| Inventories                                                                                                                                                                                           |   |                                     | 357    |   |                            |   | 306 |   |
| Commodity                and other derivative                contractual assets (Note                10)                                                                                              |   |                                     | 287    |   |                            |   | 948 |   |
| Accumulated                deferred income                taxes (Note                2)                                                                                                               |   |                                     | 599    |   |                            |   | 189 |   |
| Margin                deposits related to                commodity                positions                                                                                                           |   |                                     | 448    |   |                            |   | 7 |   |
| Other                current                assets                                                                                                                                                    |   |                                     | 83     |   |                            |   | 84 |   |
| Total                current                assets                                                                                                                                                                                            |   |                                     | 7,916  |   |                            |   | 6,266 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                     |   |   |                            |   |   |   |
| Restricted                cash                                                                                                                                                              |   |                                     | 102    |   |                            |   | 241 |   |
| Investments                                                                                                                                                                                 |   |                                     | 519    |   |                            |   | 496 |   |
| Advances                to                parent                                                                                                                                            |   | ─                                  |   |   |                            | 700    |   |
| Property,                plant and equipment —                net                                                                                                                     |   |                                     | 10,133 |   |                            |   | 9,888 |   |
| Goodwill                                                                                                                                                                                    |   |                                     | 517    |   |                            |   | 517 |   |
| Commodity                and other derivative contractual assets (Note                10)                                                                                                   |   |                                     | 151    |   |                            |   | 251 |   |
| Other                noncurrent                assets                                                                                                                                       |   |                                     | 159    |   |                            |   | 157 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                     |   |   |                            |   |   |   |
| Total                assets                                                                                                                                                                                                                   |   | $                                        | 19,497 |   |                            | $      | 18,516 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                     |   |   |                            |   |   |   |
| **LIABILITIES                AND MEMBERSHIP INTERESTS**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |
| Current                liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                     |   |   |                            |   |   |   |
| Short-term                borrowings (Note                6)                                                                                                                                               |   | $                                        | 2,195  |   |                            | $      | 818 |   |
| Long-term                debt due currently                (Note                7)                                                                                                                         |   |                                     | 257    |   |                            |   | 154 |   |
| Trade                accounts payable –                nonaffiliates                                                                                                                                 |   |                                     | 732    |   |                            |   | 802 |   |
| Trade                accounts and other                payables to                affiliates                                                                                                               |   |                                     | 374    |   |                            |   | 379 |   |
| Commodity                and other derivative                contractual liabilities (Note                10)                                                                                              |   |                                     | 405    |   |                            |   | 272 |   |
| Margin                deposits related to                commodity                positions                                                                                                                |   |                                     | 35     |   |                            |   | 681 |   |
| Accrued                income taxes payable to                parent                                                                                                                                       |   |                                     | 48     |   |                            |   | 533 |   |
| Accrued                taxes other than                income                                                                                                                                              |   |                                     | 52     |   |                            |   | 51 |   |
| Other                current                liabilities                                                                                                                                                    |   |                                     | 254    |   |                            |   | 255 |   |
| Total                current                liabilities                                                                                                                                                                                            |   |                                     | 4,352  |   |                            |   | 3,945 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                     |   |   |                            |   |   |   |
| Accumulated                deferred income taxes (Note                2)                                                                                                                         |   |                                     | 2,932  |   |                            |   | 3,237 |   |
| Investment                tax                credits                                                                                                                                             |   |                                     | 304    |   |                            |   | 311 |   |
| Commodity                and other derivative contractual liabilities (Note                10)                                                                                                   |   |                                     | 258    |   |                            |   | 127 |   |
| Notes                or other liabilities due                affiliates                                                                                                                          |   |                                     | 345    |   |                            |   | 359 |   |
| Long-term                debt, less amounts due currently (Note                7)                                                                                                                |   |                                     | 3,631  |   |                            |   | 2,882 |   |
| Other                noncurrent liabilities and deferred                credits                                                                                                                  |   |                                     | 1,414  |   |                            |   | 1,002 |   |
| Total                liabilities                                                                                                                                                                                                                   |   |                                     | 13,236 |   |                            |   | 11,863 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                     |   |   |                            |   |   |   |
| Commitments                and contingencies (Note 8)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                     |   |   |                            |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                     |   |   |                            |   |   |   |
| Membership                interests (Note 9):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                     |   |   |                            |   |   |   |
| Capital                account                                                                                                                                                                             |   |                                     | 6,191  |   |                            |   | 6,314 |   |
| Accumulated                other comprehensive                income                                                                                                                                       |   |                                     | 70     |   |                            |   | 339 |   |
| Total                membership                interests                                                                                                                                                                                           |   |                                     | 6,261  |   |                            |   | 6,653 |   |
| Total                liabilities and                membership                interests                                                                                                                                                            |   | $                                        | 19,497 |   |                            | $      | 18,516 |   |

----

**TEXAS      COMPETITIVE ELECTRIC HOLDINGS COMPANY LLC**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**(Unaudited)**

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

***Description      of Business***

***Basis      of Presentation***

***Use      of Estimates***

***Changes      in Accounting Standards***

----

**2.       ADOPTION      OF NEW INCOME TAX ACCOUNTING RULES (FIN 48)**

**3.       TEXAS      MARGIN TAX**

----

**4.       OTHER      INCOME AND DEDUCTIONS**

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | **Three                Months Ended**                                                                                                                                                 |   |   | **Six                Months Ended**                                                                                                                                                        |    |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | **June                  30,**                                                                                                                                                         |   |   | **June                  30,**                                                                                                                                                              |    |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | **2007**                                                                                                                                                                              |   |   | **2006**                                                                                                                                                                                   |    |   | **2007** |   |   | **2006** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                                                                                                                                                                  |   |   |                                                                                                                                                                                       |    |   |   |   |   |   |   |
| Other                income:                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                                                                                                                                                  |   |   |                                                                                                                                                                                       |    |   |   |   |   |   |   |
| Settlement                penalty for coal tonnage delivery deficiency                                                                                                                                                                                                                                                                                                                                                                                                  |   | $                                          ─  |   |   | $                                           ─ |    |   | $ | 3 |   |   | $                                           ─ |   |
| Royalty                income from lignite leases                                                                                                                                                                                                                                                                                                                                                                                                                       |   | ─                                                                                                                                                                               |   |   | ─                                                                                                                                                                                    |    |   |   | 3 |   |   | ─ |   |
| Other                                                                            |   | ─                                                                                                                                                                               |   |   |                                                                                                                                                                                       | 1       |   |   |   | 3 |   |   |   | 1 |   |
| Total                other                income                                                                                                                                                                                                                                                                                                                                                                                                                        |   | $                                          ─  |   |   | $                                                                                                                                                                                          | 1       |   |   | $ | 9 |   |   | $ | 1 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                                                                                                                                                                  |   |   |                                                                                                                                                                                       |    |   |   |   |   |   |   |   |   |   |
| Other                deductions:                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                                                                                                                                                                  |   |   |                                                                                                                                                                                       |    |   |   |   |   |   |   |   |   |   |
| Charge                for impairment of natural gas-fueled generation plants                                                                                                                                                                                                                                                                                                                                                                                            |   | $                                           ─ |   |   | $                                                                                                                                                                                          | 198     |   |   | $                                           ─ |   |   | $ | 198 |   |
| Inventory                write-off related to natural gas-fueled generation plants                                                                                                                                                                                                                                                                                                                                                                                      |   | ─                                                                                                                                                                               |   |   |                                                                                                                                                                                       | 3       |   |   | ─ |   |   |   | 3 |   |
| Credit                related to coal contract counterparty claim (a)                                                                                                                                                                                                                                                                                                                                                                                                   |   | ─                                                                                                                                                                               |   |   | ─                                                                                                                                                                                    |    |   | ─ |   |   |   | (12 | ) |
| Charge                for settlement of retail matter with the Commission                                                                                                                                                                                                                                                                                                                                                                                               |   |                                                                                                                                                                                  | 5      |   |                                                                                                                                                                                       | ─ |   |   |   | 5 |   |   | ─ |   |
| Equity                losses of entity holding investment in Capgemini                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                                                                                                                                                                  | 2      |   |                                                                                                                                                                                       |    | 2 |   |   |   | 3 |   |   |   | 5 |   |
| Accretion                expense                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                                                                                                                                                                  | 1      |   |                                                                                                                                                                                       |    | 1 |   |   |   | 2 |   |   |   | 2 |   |
| Other                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                                                                                                                                                                  | 2      |   |                                                                                                                                                                                       |    | 1 |   |   |   | 5 |   |   |   | (1 | ) |
| Total                other                deductions                                                                                                                                                                                                                                                                                                                                                                                                                    |   | $                                                                                                                                                                                     | 10     |   |                                                                                                                                                                                       | $       | 205 |   |   | $ | 15 |   |   | $ | 195 |   |
| ________________                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                                                                                                                                                                  |   |   |                                                                                                                                                                                       |    |   |   |   |   |   |   |   |   |   |   |

| (a) | In                  the first quarter of 2006, Texas Competitive Holdings recorded                  income of                  $12 million upon the settlement of a claim against a counterparty                  for                  nonperformance under a coal contract.  A charge in the same                  amount was recorded in the first quarter of 2005 for losses due                  to the                  nonperformance. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

***Sale      of Receivables***

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | **Six                  Months Ended June 30,** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | **2007**                                       |   |   | **2006** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                           |   |   |   |   |
| Cash                collections on accounts                receivable                                                                                                                         |   | $                                              | 3,262  |   |   | $ | 3,138 |   |
| Face                amount of new receivables                purchased                                                                                                                        |   |                                           | (3,258 | ) |   |   | (3,184 | ) |
| Discount                from face amount of purchased                receivables                                                                                                              |   |                                           | 18     |   |   |   | 17 |   |
| Program                fees                paid                                                                                                                                               |   |                                           | (16    | ) |   |   | (15 | ) |
| Servicing                fees                paid                                                                                                                                             |   |                                           | (2     | ) |   |   | (2 | ) |
| Increase                in subordinated notes                payable                                                                                                                          |   |                                           | 96     |   |   |   | 20 |   |
| Operating                cash flows used by (provided to) Texas CompetitiveHoldings                under the                program                                                                     |   | $                                              | 100    |   |   | $ | (26 | ) |

***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,** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|--------|--------|---------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | **2007**                           |   |   | **2006**                        |   |
| Gross                trade accounts                receivable                                                                       |   | $                                  | 1,280  |   |                            | $      | 1,353 |   |
| Undivided                interests in accounts receivable sold by TXU                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                               |   |   |                            |   |   |   |
| Receivables                Company                                                                                                                           |   |                               | (696   | )      |                            |   | (700 | ) |
| Subordinated                notes receivable from TXU Receivables Company                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                               | 255    |   |                            |   | 159 |   |
| Allowance                for uncollectible accounts related to undivided interests                in                                                                                                                                                                                                                                                                                                                                                                                              |   |                               |   |   |                            |   |   |   |
| receivables                retained                                                                                                                          |   |                               | (8     | )      |                            |   | (8 | ) |
| Trade                accounts receivable ― reported in balance sheet                                                                                                                                                                                                                                                                                                                                                                                                                        |   | $                                  | 831    |   |                            | $      | 804 |   |

***Allowance      for Uncollectible Accounts Receivable***

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | **2007** |   |   | **2006** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|--------|--------|----------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |     |   |   |     |   |
| Allowance                for uncollectible accounts receivable as of January 1                                                                                                                                                                                                                                                                                                                                                                                                      |   | $        | 8      |   |     | $      | 31 |   |
| Increase                for bad debt                expense                                                                          |   |     | 24     |   |     |   | 29 |   |
| Decrease                for account                write-offs                                                                        |   |     | (33    | )      |     |   | (41 | ) |
| Changes                related to receivables                sold                                                                    |   |     | 9      |   |     |   | 13 |   |
| Other                (a)                                                                                                             |   | ─  |   |   |     | (16    | ) |
| Allowance                for uncollectible accounts receivable as of June 30                                                                                                                                                                                                                                                                                                                                                                                                        |   | $        | 8      |   |     | $      | 16 |   |
| ________________                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |     |   |   |     |   |   |   |

| (a) |   | Represents                an allowance established in 2005 for a coal contract dispute that                was                reversed upon settlement in 2006. See Note 4. |   |
|-----|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|

----

**6.       SHORT-TERM      FINANCING**

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

|                                                                                                                                                                                                                                                   |   | **At                  June 30, 2007**   |    |   | **At                  December 31, 2006** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|---------|--------|-------------------------------------------|--------|
|                                                                                                                                                                                                                                                   |   | **Outstanding                  Amount** |    |   | **Interest****Rate                  (a)** |   |   | **Outstanding                  Amount** |   |   | **Interest****Rate                  (a)** |   |
|                                                                                                                                                                                                                                                   |   |                                    |    |   |                                      |   |   |   |   |   |   |   |
| Bank                borrowings                                     |   | $                                       | 2,195   |   |                                      |   | 6.22 | % |   | $ | 195 |   |   |   | 5.97 | % |
| Commercial                paper                                                                                                                                                                                                                        |   |                                    | ― |   |                                      |   | ― |   |   |   | 623 |   |   |   | 5.52 | % |
| Total                                                                                                                                                                                                                                                  |   | $                                       | 2,195   |   |                                      |   |   |   |   | $ | 818 |   |   |   |   |   |
|                                                                                                                                                                                                                                                   |   |
| _________________                                                                                                                                                                                                                                      |   |

| (a) |   | Weighted                average interest rate at the end of the period. |   |
|-----|--------|-------------------------------------------------------------------------|--------|

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

|                                                                          |                         |   | **At                June 30, 2007** |   |
|-------------------------------------------------------------------------------|------------------------------|--------|-------------------------------------|--------|
| **Authorized**                                                                | **Maturity**                 |   | **Facility**                        |   |   | **Letters                  of** |   |   | **Cash** |   |   |   |   |
| **Borrowers**                                                                 | **Date**                     |   | **Limit**                           |   |   | **Credit** |   |   | **Borrowings** |   |   | **Availability** |   |
| Texas                Competitive Holdings                                     | February                2008 |   | $                                   | 1,500  |   |   | $ | ― |   |   | $ | ― |   |   | $ | 1,500 |   |
| Texas                Competitive Holdings, Oncor  Electric Delivery | June                2008     |   |                                | 1,400  |   |   |   | 512 |   |   |   | 765 |   |   |   | 123 |   |
| Texas                Competitive Holdings, Oncor Electric Delivery            | August                2008   |   |                                | 1,000  |   |   |   | ― |   |   |   | 495 |   |   |   | 505 |   |
| Texas                Competitive Holdings, Oncor Electric Delivery            | March                2010    |   |                                | 1,600  |   |   |   | 248 |   |   |   | 815 |   |   |   | 537 |   |
| Texas                Competitive Holdings, Oncor Electric Delivery            | June                2010     |   |                                | 500    |   |   |   | 5 |   |   |   | 230 |   |   |   | 265 |   |
| Texas                Competitive Holdings                                     | December                2009 |   |                                | 500    |   |   |   | 455 |   |   |   | 45 |   |   |   | ― |   |
| Total                                                                         |                         |   | $                                   | 6,500  |   |   | $ | 1,220 |   |   | $ | 2,350 |   |   | $ | 2,930 |   |

----

**7.       LONG-TERM      DEBT**

***Long-term      debt***

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | **June                  30,** |   |   | **December                  31,** |    |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------|--------|--------|-----------------------------------|---------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | **2007**                      |   |   | **2006**                          |    |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                          |   |   |                              |    |
| Pollution                  Control Revenue Bonds:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                          |   |   |                              |    |
| Brazos                  River Authority:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                          |   |   |                              |    |
| 5.400%                  Fixed Series 1994A due May 1, 2029                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | $                             | 39     |   |                              | $       | 39 |   |
| 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 |   |
| 3.830%                  Floating Series 2001A due October 1, 2030 (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                          | 71     |   |                              |    | 71 |   |
| 5.750%                  Fixed Series 2001C due May 1, 2036, remarketing date November 1,                  2011                  (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                          | 217    |   |                              |    | 217 |   |
| 3.780%                  Floating Series 2001D due May 1, 2033 (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                          | 268    |   |                              |    | 268 |   |
| 5.380%                  Floating Taxable Series 2001I due December 1, 2036 (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                          | 62     |   |                              |    | 62 |   |
| 3.830%                  Floating Series 2002A due May 1, 2037 (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                          | 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    |   |                              |    | 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 |   |
| 3.850%                  Floating Series 2006A due November 1, 2041, (interest rate in effect                  at                  March 31, 2007) (c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | ─                       |   |   |                              | 47      |   |
| 3.850%                  Floating Series 2006B due November 1, 2041, (interest rate in effect                  at                  March 31, 2007) (c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | ─                       |   |   |                              | 46      |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                          |   |   |                              |    |   |   |
| Trinity                  River Authority of Texas:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                          |   |   |                              |    |   |   |
| 6.250%                  Fixed Series 2000A due May 1, 2028                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                          | 14     |   |                              |    | 14 |   |
| 3.850%                  Floating Series 2006 due November 1, 2041, (interest rate in effect                  at                  March 31, 2007) (c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | ─                       |   |   |                              | 50      |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                          |   |   |                              |    |   |   |
| Other:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                          |   |   |                              |    |   |   |
| 6.125%                  Fixed Senior Notes due March 15, 2008 (d)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                          | 250    |   |                              |    | 250 |   |
| 7.000%                  Fixed Senior Notes due March 15, 2013                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                          | 1,000  |   |                              |    | 1,000 |   |
| 5.860%                  Floating Senior Notes due September 16, 2008 (e)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                          | 1,000  |   |                              | ─ |   |
| Capital                  lease obligations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                          | 92     |   |                              |    | 98 |   |
| Fair                  value adjustments related to interest rate swaps                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                          | 11     |   |                              |    | 10 |   |
| Total                  Texas Competitive Holdings                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                          | 3,888  |   |                              |    | 3,036 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                          |   |   |                              |    |   |   |
| Less                  amount due                  currently                                                                                                       |   |                          | (257   | )      |                              |    | (154 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                          |   |   |                              |    |   |   |
| Total                  long-term                  debt                                                                                                            |   | $                             | 3,631  |   |                              | $       | 2,882 |   |

|   | (a) | These                  series are in the multiannual interest rate 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) | Interest                  rates in effect at June 30, 2007.  These series are in a weekly                  interest rate mode and are classified as long-term as they are                  supported                  by long-term irrevocable letters of credit.                                                           |
|   | (c) | These                  series were redeemed on May 8, 2007 as a result of the suspension                  of                  development of eight coal-fueled generation facilities.                                                                                                                                                 |
|   | (d) | Interest                  rate swapped to variable on entire principal amount at June 30,                  2007.                                                                                                                                                                                                                      |
|   | (e) | Interest                  rates in effect at June 30,                  2007.                                                                                                                                                                                                                                                |

----

***Debt-related      Activity in 2007***

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

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

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | **Six                  Months Ended****June                  30, 2007** |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------|--------|
| Long-term                debt fair value adjustments related to interest rate swap atbeginning                of period ― increase                in debt carrying value                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | $                                                                       | 10     |   |
| Fair                value adjustments during the                period                                                                                          |   |                                                                    | 2      |   |
| Recognition                of net gains on settled fair value hedges (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                                                    | (1     | ) |
| Long-term                debt fair value adjustments at end of period ― increase in                debtcarrying                value (net                in-the-money value of swap)                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | $                                                                       | 11     |   |

|   | (a) | Net                value of settled in-the-money fixed-to-variable swaps recognized                in net                income when the hedged transactions are recognized.  Amount is                pretax. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**8.       COMMITMENTS      AND CONTINGENCIES**

***Generation        Development***

***Litigation***

----

***Regulatory      Investigations***

***Other      Proceedings***

***Guarantees***

***Overview      —***

***Residual      value guarantees in operating leases***
* *

----

***Letters      of Credit***

***Security      Interest***

**9.       MEMBERSHIP      INTERESTS**

|                                                                                                                                                                                                                                                                                                                                                                                                       |   | **Capital                  Accounts** |   |   | **Accumulated                  Other Comprehensive Income (Loss)** |    |   | **Total                  Membership Interests** |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|--------|--------|--------------------------------------------------------------------|---------|--------|-------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                  |   |   |                                                               |    |   |                                            |   |
| Balance                at December 31,                2006                                                         |   | $                                     | 6,314  |   |                                                               | $       | 339    |                                            |   | $ | 6,653 |   |
| Net                income                                                                                                                                                                                                                                                                                                                                                                                  |   |                                  | 480    |   |                                                               | ─ |   |                                            |   | 480 |   |
| Effect                of adoption of FIN                48                                                                                                                                                                                                                                                                                                                                                 |   |                                  | (36    | )      |                                                               | ─ |   |                                            |   | (36 | ) |
| Distributions                paid to                parent                                                                                                                                                                                                                                                                                                                                                 |   |                                  | (567   | )      |                                                               | ─ |   |                                            |   | (567 | ) |
| Net                effects of cash flow hedges                (net of tax)                                                                                                                                                                                                                                                                                                                                 |   | ─                               |   |   |                                                               | (269    | )      |                                            |   | (269 | ) |
| Balance                at June 30, 2007                                                                                                                                                                                                                                                                                                                                                                    |   | $                                     | 6,191  |   |                                                               | $       | 70     |                                            |   | $ | 6,261 |   |

----

**10.       COMMODITY      AND OTHER DERIVATIVE CONTRACTUAL ASSETS AND LIABILITIES**

|                                                   |   | **June                  30, 2007**     |   |
|--------------------------------------------------------|--------|----------------------------------------|--------|
|                                                   |   | **Commodity****contracts**             |   |   | **Cash                  flow hedges****and                  other derivatives** |   |   | **Netting****adjustments                  (a)** |   |   | **Total** |   |
|                                                   |   |                                   |   |   |   |   |   |   |   |   |   |   |
| Assets:                                                |   |                                   |   |   |   |   |   |   |   |   |   |   |
| Current                assets                          |   | $                                      | 243    |   |   | $ | 347 |   |   | $ | (303 | ) |   | $ | 287 |   |
| Noncurrent                assets                       |   |                                   | 121    |   |   |   | 58 |   |   |   | (28 | ) |   |   | 151 |   |
| Total                                                  |   | $                                      | 364    |   |   | $ | 405 |   |   | $ | (331 | ) |   | $ | 438 |   |
|                                                   |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities:                                           |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current                liabilities                     |   | $                                      | 694    |   |   | $ | 14 |   |   | $ | (303 | ) |   | $ | 405 |   |
| Noncurrent                liabilities                  |   |                                   | 277    |   |   |   | 9 |   |   |   | (28 | ) |   |   | 258 |   |
| Total                                                  |   | $                                      | 971    |   |   | $ | 23 |   |   | $ | (331 | ) |   | $ | 663 |   |
|                                                   |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                assets                (liabilities) |   | $                                      | (607   | ) |   | $ | 382 |   |   | $                                          ─ |   |   | $ | (225 | ) |
|                                                   |   |                                   |   |
|                                                   |   |                                   |   |
|                                                   |   | **December                  31, 2006** |   |
|                                                   |   | **Commodity****contracts**             |   |   | **Cash                  flow hedges****and                  other derivatives** |   |   | **Netting****adjustments                  (a)** |   |   | **Total** |   |
|                                                   |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Assets:                                                |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current                assets                          |   | $                                      | 276    |   |   | $ | 696 |   |   | $ | (24 | ) |   | $ | 948 |   |
| Noncurrent                assets                       |   |                                   | 163    |   |   |   | 94 |   |   |   | (6 | ) |   |   | 251 |   |
| Total                                                  |   | $                                      | 439    |   |   | $ | 790 |   |   | $ | (30 | ) |   | $ | 1,199 |   |
|                                                   |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities:                                           |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current                liabilities                     |   | $                                      | 278    |   |   | $ | 18 |   |   | $ | (24 | ) |   | $ | 272 |   |
| Noncurrent                liabilities                  |   |                                   | 124    |   |   |   | 9 |   |   |   | (6 | ) |   |   | 127 |   |
| Total                                                  |   | $                                      | 402    |   |   | $ | 27 |   |   | $ | (30 | ) |   | $ | 399 |   |
|                                                   |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                assets                (liabilities) |   | $                                      | 37     |   |   | $ | 763 |   |   | $                                           ─ |   |   | $ | 800 |   |

|   | (a) | Represents                the effects of netting assets and liabilities at the counterparty                agreement level. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------|

***Commodity      Contract Assets and Liabilities***
* *

----

***Cash      Flow Hedge and Other Derivative Assets and      Liabilities***
* *

|                                                                                                                                                                                                                                                                                                                                                                |   | **                 June 30,** |   |   | **                   December 31,** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|--------|--------|----------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                |   | **2007**                           |   |   | **2006**                                           |   |
|                                                                                                                                                                                                                                                                                                                                                                |   |                               |   |   |                                               |   |
| Current                and noncurrent assets:                                                                                                                                                                                                                                                                                                                       |   |                               |   |   |                                               |   |
| Commodity-related                cash flow                hedges                                                                                                                                                                                                                                                                                                    |   | $                                  | 405    |   |                                               | $      | 790 |   |
|                                                                                                                                                                                                                                                                                                                                                                |   |                               |   |   |                                               |   |   |   |
| Current                and noncurrent liabilities:                                                                                                                                                                                                                                                                                                                  |   |                               |   |   |                                               |   |   |   |
| Commodity-related                cash flow                hedges                                                                                                                                                                                                                                                                                                    |   | $                                  | 20     |   |                                               | $      | 22 |   |
| Debt-related                interest rate                swap                                                  |   |                               | 3      |   |                                               |   | 5 |   |
| Total                                                                                                                    |   | $                                  | 23     |   |                                               | $      | 27 |   |

***Other      Cash Flow Hedge Information***
* *

----

**11.           RELATED–PARTY      TRANSACTIONS**

|   | · | In                December 2006, Texas Competitive Holdings transferred all of its                employees                and its employee-related assets and liabilities, including pension                and                other postretirement employee benefit obligations, to new employee                services subsidiaries of TXU Corp.  Employees of these services                subsidiaries are engaged in the business activities of Texas Competitive                Holdings, and their services are billed to Texas Competitive Holdings                at                cost.  The costs totaled $117 million and $262 million for the                three and six month periods ended June 30, 2007,                respectively.  Classifications of the billed costs in Texas                Competitive Holdings’ income statement are consistent with prior                reporting. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Texas                Competitive Holdings incurs electricity delivery fees charged by                Oncor                Electric Delivery.  These fees totaled $232 million and $285                million for the three months ended June 30, 2007 and 2006, respectively,                and $498 million and $554 million for the six months ended June 30,                2007                and 2006, respectively. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Oncor                Electric Delivery’s bankruptcy-remote financing subsidiary has issued                securitization bonds to recover generation-related regulatory assets                through a transition surcharge to its customers.  Oncor Electric                Delivery’s incremental income taxes related to the transition surcharges                it collects are being reimbursed by Texas Competitive                Holdings.  Therefore, Texas Competitive Holdings’ financial                statements reflect a noninterest bearing note payable to Oncor Electric                Delivery of $340 million ($33 million reported as current liabilities)                at                June 30, 2007 and $356 million ($33 million reported as current                liabilities) at December 31, 2006. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Texas                Competitive Holdings reimburses Oncor Electric Delivery for interest                expense on Oncor Electric Delivery’s bankruptcy-remote financing                subsidiary’s securitization bonds.  This interest expense                totaled $12 million and $13 million for the three months ended June                30,                2007 and 2006, respectively, and $25 million and $27 million for                the six                months ended June 30, 2007 and 2006,                respectively. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Current                and noncurrent advances to parent totaled $3.4 billion at June 30,                2007                (all reported as current) and $3.1 billion at December 31, 2006 ($700                million reported as noncurrent).  The average daily balances of                the advances to parent totaled $3.2 billion and $1.6 billion during                the                three months ended June 30, 2007 and 2006,                respectively.  Interest income earned on the advances totaled                $51 million and $22 million for the three months ended June 30, 2007                and                2006, respectively.  The weighted average annual interest rates                were 6.4% and 5.3% for the three months ended June 30, 2007 and 2006,                respectively.  The average daily balances of the advances to                parent totaled $3.1 billion and $1.2 billion during the six months                ended                June 30, 2007 and 2006, respectively.  Interest income earned on                the advances totaled $95 million and $32 million for the six months                ended                June 30, 2007 and 2006, respectively.  The weighted average                annual interest rates were 6.1% and 5.2% for the six months ended                June 30,                2007 and 2006, respectively. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In                December 2005, Texas Competitive Holdings received a $1.5 billion                note                receivable from TXU Corp. in partial settlement of outstanding advances                to                parent.  The note carries interest at a rate based on the                weighted average cost of Texas Competitive Holdings' short-term                borrowings.  Interest income related to this note totaled $24 million                and $19 million for the three months ended June 30, 2007 and 2006,                respectively, and $46 million and $39 million for the six months                ended                June 30, 2007 and 2006,                respectively. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | A                TXU Corp. subsidiary charges Texas Competitive Holdings for financial,                accounting, environmental and other administrative services at                cost.  These costs, which are primarily reported in SG&A                expenses, totaled $16 million and $15 million for the three months                ended                June 30, 2007 and 2006, respectively, and $29 million and $35 million                for                the six months ended June 30, 2007 and 2006,                respectively. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | Under                Texas regulatory provisions, the trust fund for decommissioning the                Comanche Peak nuclear generation facility, reported in investments                on                Texas Competitive Holdings’ balance sheet, is funded by a delivery fee                surcharge billed to REPs by Oncor Electric Delivery and remitted                to Texas                Competitive Holdings, with the intent that the trust fund assets                will be                sufficient to fund the decommissioning liability, reported in noncurrent                liabilities on Texas Competitive Holdings’ balance                sheet.  Income and expenses associated with the trust fund and                the decommissioning liability incurred by Texas Competitive Holdings                are                offset by a net change in the intercompany receivable/payable with                Oncor                Electric Delivery, which in turn results in a change in the net regulatory                asset/liability.  The regulatory liability, which totaled $26                million and $17 million at June 30, 2007 and December 31, 2006,                respectively, is reported on Oncor Electric Delivery’s balance sheet,                represents the excess of the trust fund balance over the decommissioning                liability. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Distributions                and discount amortization (both reported as interest expense) related                to                Texas Competitive Holdings’ exchangeable preferred membership interests                held entirely by subsidiaries of TXU Corp. totaled $22 million for                the                three months ended June 30, 2006 and $45 million for the six months                ended                June 30, 2006.  Effective September 30, 2006, these securities                were recapitalized into common equity membership                interests. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In                March 2006, US Holdings completed the purchase of the owner participant                interest in a trust that leases combustion turbines to Texas Competitive                Holdings.  The trust was consolidated by US Holdings at December                31, 2005.  In 2004, Texas Competitive Holdings impaired the                lease because Texas Competitive Holdings had ceased using certain                of the                combustion turbines for its own benefit and recorded the related                liability                representing the discounted amount of future lease payments less                estimated                sublease proceeds.  The liability totaled $44 million ($6                million reported as due currently) at June 30, 2007 and $50 million                ($14                million reported as due currently) at December 31, 2006.  Texas                Competitive Holdings’ lease expense for the trust’s other combustion                turbines that it continues to operate for its own benefit totaled                $3                million for both the three months ended June 30, 2007 and 2006 and                $5                million for both the six months ended June 30, 2007 and                2006.  These expenses are reported as operating                costs. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Texas                Competitive Holdings has a 53.1% limited partnership interest, with                a                carrying value of $11 million and $14 million at June 30, 2007 and                December 31, 2006, 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, 2007                and 2006 and $3 million and $5 million for the six months ended June                30,                2007 and 2006, respectively.  These losses primarily represent                amortization of software assets held by the subsidiary.  The                equity losses are reported as other                deductions. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | 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.  As a result, Texas Competitive Holdings had an                income tax payable to TXU Corp. of $48 million and $533 million as                of June                30, 2007 and December 31, 2006,                respectively. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In                the second quarter of 2006, Texas Competitive Holdings began charging                TXU                DevCo for employee services related to the development of generation                facilities in Texas.  These charges totaled $0.6 million and                $0.7 million for the three months ended June 30, 2007 and 2006,                respectively, and $1.4 million and $0.7 million for the six months                ended                June 30, 2007 and 2006, respectively.  These charges are largely                reflected as a reduction in Texas Competitive Holdings’ SG&A                expenses. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**12.           SUPPLEMENTARY      FINANCIAL INFORMATION**

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

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | **Three                Months Ended****June 30,** |    |   | **Six                Months Ended****June 30,** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------|---------|--------|------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | **2007**                                               |    |   | **2006**                                             |   |   | **2007** |   |   | **2006** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                                   |    |   |                                                 |   |   |   |   |   |   |   |
| Interest                                                                                                                                       |   | $                                                      | 111     |   |                                                 | $      | 86 |   |   | $ | 200 |   |   | $ | 166 |   |
| Distributions                on exchangeable preferred membership interests (a)                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                                   | ― |   |                                                 |   | 17 |   |   |   | ― |   |   |   | 34 |   |
| Amortization                of discount and debt issuance costs                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                                   | 4       |   |                                                 |   | 7 |   |   |   | 6 |   |   |   | 14 |   |
| Interest                capitalized in accordance with SFAS                34                                                                  |   |                                                   | (7      | )      |                                                 |   | (8 | ) |   |   | (16 | ) |   |   | (12 | ) |
| Total                interest expense and                related                charges                                                                                      |   | $                                                      | 108     |   |                                                 | $      | 102 |   |   | $ | 190 |   |   | $ | 202 |   |
| ________________                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                                   |    |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |

| (a) |   | Effective                September 30, 2006, Texas Competitive Holdings’ exchangeable preferred                membership interests, which were held entirely by subsidiaries of                TXU                Corp., were recapitalized into common equity membership interest                of Texas                Competitive Holdings. |   |   |   |   |   |
|-----|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|

***Restricted      Cash***

|                                                                                                                                                                                                                                                                                                                                                                                                                           |   | **Balance                  Sheet Classification** |    |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------|---------|
|                                                                                                                                                                                                                                                                                                                                                                                                                           |   | **At                  June 30, 2007**        |    |   | **At                  December 31, 2006** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                           |   | **Current****Assets**                             |    |   | **Noncurrent                  Assets** |   |   | **Current                  Assets** |   |   | **Noncurrent                  Assets** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                              |    |   |   |   |   |   |   |   |   |   |
| Pollution                control revenue bond funds held by trustee                                                                                                                                                                                                                                                                                                                                                            |   | $                                                 | 1       |   |   | $ | 102 |   |   | $ | ― |   |   | $ | 241 |   |
| All                other                                                                  |   |                                              | ― |   |   |   | ― |   |   |   | 3 |   |   |   | ― |   |
| Total                restricted                cash                                                                     |   | $                                                 | 1       |   |   | $ | 102 |   |   | $ | 3 |   |   | $ | 241 |   |

***Inventories      by Major Category***

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | **June                30,**            |   |   | **December                31,**        |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------|--------|--------|----------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | **                    2007** |   |   | **                    2006** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                   |   |   |                                   |   |
| Materials                and                supplies                                                                       |   | $                                      | 115    |   |                                   | $      | 112 |   |
| Fuel                stock                                                                                                  |   |                                   | 97     |   |                                   |   | 94 |   |
| Natural                gas in                storage                                                                       |   |                                   | 110    |   |                                   |   | 75 |   |
| Environmental                energy credits and emission allowances                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                   | 35     |   |                                   |   | 25 |   |
| Total                inventories                                                                                                                    |   | $                                      | 357    |   |                                   | $      | 306 |   |

***Investments***

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | **June 30,**                      |   |   | **December                31,**              |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------|--------|--------|----------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | **                    2007** |   |   | **                     2006** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                   |   |   |                                         |   |
| Nuclear                decommissioning                trust                                                                       |   | $                                      | 474    |   |                                         | $      | 447 |   |
| Land                                                                                                                              |   |                                   | 33     |   |                                         |   | 33 |   |
| Investment                in affiliate holding Capgemini-related assets                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                   | 11     |   |                                         |   | 14 |   |
| Miscellaneous                other                                                                                                |   |                                   | 1      |   |                                         |   | 2 |   |
| Total                investments                                                                                                                           |   | $                                      | 519    |   |                                         | $      | 496 |   |

***Property,      Plant and Equipment***

----

***Asset      Retirement Obligations***

| Asset                retirement liability at December 31,                2006                                                                     |   | $      | 585    |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|
| Additions:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |   |   |   |
| Accretion                                                                                                                                                        |   |   | 19     |   |
| Reductions:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |   |   |   |
| Mining                reclamation cost                adjustments                                                                                                |   |   | (2     | )      |
| Mining                reclamation                payments                                                                                                        |   |   | (13    | )      |
| Asset                retirement liability at June 30,                2007                                                                         |   | $      | 589    |   |

***Intangible      Assets***
* *

|                                                                                                                                                                                                                                                                                            |   | **As                  of June 30, 2007** |   |   | **As                  of December 31, 2006** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------|--------|--------|----------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                            |   | **Gross**                                |   |   |                                         |   |   |   |   |   | **Gross** |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                            |   | **Carrying**                             |   |   | **Accumulated**                              |   |   |   |   |   | **Carrying** |   |   | **Accumulated** |   |   |   |   |
|                                                                                                                                                                                                                                                                                            |   | **Amount**                               |   |   | **Amortization**                             |   |   | **Net** |   |   | **Amount** |   |   | **Amortization** |   |   | **Net** |   |
| Intangible                assets subject to amortization includedin                property, plant and equipment:                                                                                                                                                                               |   |                                     |   |   |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Capitalized                software placed in                service                                                                                                                                                                                                                            |   | $                                        | 25     |   |                                         | $      | 7 |   |   | $ | 18 |   |   | $ | 14 |   |   | $ | 5 |   |   | $ | 9 |   |
| Land                easements                                            |   |                                     | 2      |   |                                         |   | 1 |   |   |   | 1 |   |   |   | 2 |   |   |   | 1 |   |   |   | 1 |   |
| Total                                                                                        |   | $                                        | 27     |   |                                         | $      | 8 |   |   | $ | 19 |   |   | $ | 16 |   |   | $ | 6 |   |   | $ | 10 |   |

| **Year**                                                                                                                                                                     |   | **Amortization                  Expense** |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------|--------|
|                                                                                                                                                                         |   |                                      |   |
| 2007                             |   | $                                         | 6      |   |
| 2008                             |   |                                      | 4      |   |
| 2009                             |   |                                      | 2      |   |
| 2010                             |   |                                      | 1      |   |
| 2011                             |   |                                      | 1      |   |

----

***Pension      and OPEBs***
* *

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

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | **Six                  Months Ended****June                  30,** |    |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------|---------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | **2007**                                                           |    |   | **2006** |   |
| Cash                payments (receipts) related to continuing operations:                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                                               |    |   |   |   |
| Interest                (net of amounts                capitalized)                                                                                                 |   | $                                                                  | 174     |   |   | $ | 195 |   |
| Income                taxes                                                                                                                                         |   | $                                                                  | 880     |   |   | $ | (246 | ) |
| Noncash                investing and financing activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                                               |    |   |   |   |   |   |
| Noncash                construction expenditures                (a)                                                                                                 |   | $                                                                  | 28      |   |   | $ | 26 |   |
| Net                transfer of property from TXU                DevCo                                                                                               |   | $                                                                  | 7       |   |   | $ | ― |   |
| Noncash                contribution of                pension-related                assets                                                                         |   | $                                                                  | ― |   |   | $ | (8 | ) |

----

**REPORT      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

----

| **ITEM                2.** | **MANAGEMENT’S                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF                OPERATIONS** |
|----------------------------|-------------------------------------------------------------------------------------------------------------------------------|

**Business**

**Recent      Developments**

***Proposed      Merger***

----

***Texas      Generation Facilities Development Program***
*─*
** **

***Nuclear      Generation Development***
*─*
** **

***Integrated      Gasification Combined Cycle (IGCC) Demonstration Plants***

----

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

***Retail      Pricing***

|   | · | a                six percent price discount effective with March 27, 2007 meter reads                to                those existing residential customers in the historical service territory                with month-to-month service plans and a rate equivalent to the former                price-to-beat rate; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | an                additional four percent price discount to the same class of customers                as                above effective with June 8, 2007 meter                reads; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | an                additional five percent price discount to such customers upon closing                of                the Proposed Merger; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | protection                against price increases above the rates in effect prior to the four                percent discount described above for bills based on meter readings                through                September 30, 2008 (excluding increases in response to a change in                law or                regulatory charges); |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | protection                against price increases above the rates prior to the six percent                discount                described above for bills based on meter readings ending between                October                1, 2008 and December 31, 2009 (excluding increases in response to                a change                in law or regulatory charges); |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | upon                closing of the Proposed Merger, protection against price increases                at the                full fifteen percent discounted level through December 2008 (excluding                increases in response to a change in law or regulatory charges);                and |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the                remaining customer appreciation bonus of $25 to be applied to residential                customers' bills in August 2007 under the previously announced customer                appreciation bonus program, in addition to the $25 bonuses provided                in                each of the November 2006, February 2007 and May 2007 bill cycles                (for                residential customers who were receiving service as of October 29,                2006                and living in areas where TXU Energy Retail offered its price-to-beat                rate). |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**RESULTS      OF OPERATIONS**

***Sales      Volume Data***

|                                                                                                                                                                                                                                                                                                                                                                                            |   | **Three                Months Ended** |    |   | **Six                Months Ended** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|---------|--------|-------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                            |   | **June                  30,**         |    |   | **June                  30,**       |   |
|                                                                                                                                                                                                                                                                                                                                                                                            |   | **2007**                              |    |   | **2006**                            |   |   | **Change                  %** |   |   | **2007** |   |   | **2006** |   |   | **Change                  %** |   |
|                                                                                                                                                                                                                                                                                                                                                                                            |   |                                  |    |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Sales                volumes:**                                                                                                                                                                                                                                                                                                                                                               |   |                                  |    |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                            |   |                                  |    |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Retail                electricity sales volumes (GWh):                                                                                                                                                                                                                                                                                                                                          |   |                                  |    |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Historical                service                territory:                                                                                                                                                                                                                                                                                                                                     |   |                                  |    |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential                                                                                                                           |   |                                  | 5,072   |   |                                |   | 6,825 |   |   |   | (25.7 | ) |   |   | 10,719 |   |   |   | 12,057 |   |   |   | (11.1 | ) |
| Small                business                (a)                                                                                      |   |                                  | 1,537   |   |                                |   | 2,068 |   |   |   | (25.7 | ) |   |   | 3,180 |   |   |   | 3,795 |   |   |   | (16.2 | ) |
| Total                historical service                territory                                                                                |   |                                  | 6,609   |   |                                |   | 8,893 |   |   |   | (25.7 | ) |   |   | 13,899 |   |   |   | 15,852 |   |   |   | (12.3 | ) |
| Other                territories:                                                                                                                                                                                                                                                                                                                                                               |   |                                  |    |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential                                                                                                                           |   |                                  | 1,010   |   |                                |   | 1,018 |   |   |   | (0.8 | ) |   |   | 1,748 |   |   |   | 1,629 |   |   |   | 7.3 |   |
| Small                business                (a)                                                                                      |   |                                  | 204     |   |                                |   | 169 |   |   |   | 20.7 |   |   |   | 368 |   |   |   | 301 |   |   |   | 22.3 |   |
| Total                other                territories                                                                                           |   |                                  | 1,214   |   |                                |   | 1,187 |   |   |   | 2.3 |   |   |   | 2,116 |   |   |   | 1,930 |   |   |   | 9.6 |   |
| Large                business and other                customers                                                                      |   |                                  | 3,653   |   |                                |   | 3,552 |   |   |   | 2.8 |   |   |   | 7,043 |   |   |   | 6,785 |   |   |   | 3.8 |   |
| Total                retail                electricity                                                                                          |   |                                  | 11,476  |   |                                |   | 13,632 |   |   |   | (15.8 | ) |   |   | 23,058 |   |   |   | 24,567 |   |   |   | (6.1 | ) |
| Wholesale                electricity sales                volumes                                                      |   |                                  | 9,290   |   |                                |   | 7,852 |   |   |   | 18.3 |   |   |   | 17,977 |   |   |   | 15,705 |   |   |   | 14.5 |   |
| Net                sales (purchases) of balancing electricity                                                                                                                                                                                                                                                                                                                                   |   |                                  |    |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| to/from                ERCOT                                                                                                          |   |                                  | 302     |   |                                |   | (267 | ) |   | ─ |   |   |   | 626 |   |   |   | 1,165 |   |   |   | (46.3 | ) |
| Total                sales                volumes                                                                                               |   |                                  | 21,068  |   |                                |   | 21,217 |   |   |   | (0.7 | ) |   |   | 41,661 |   |   |   | 41,437 |   |   |   | 0.5 |   |
|                                                                                                                                                                                                                                                                                                                                                                                            |   |                                  |    |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Average                volume (kWh) per retail customer (b):**                                                                                                                                                                                                                                                                                                                                |   |                                  |    |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                            |   |                                  |    |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential                                                                                                                           |   |                                  | 3,299   |   |                                |   | 4,012 |   |   |   | (17.8 | ) |   |   | 6,731 |   |   |   | 6,975 |   |   |   | (3.5 | ) |
| Small                business                                                                                                         |   |                                  | 6,676   |   |                                |   | 7,990 |   |   |   | (16.4 | ) |   |   | 13,476 |   |   |   | 14,460 |   |   |   | (6.8 | ) |
| Large                business and other                customers                                                                      |   |                                  | 100,336 |   |                                |   | 70,256 |   |   |   | 42.8 |   |   |   | 175,727 |   |   |   | 130,966 |   |   |   | 34.2 |   |
|                                                                                                                                                                                                                                                                                                                                                                                            |   |                                  |    |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Weather                (service territory average) – percent of normal                (c):**                                                                                                                                                                                                                                                                                            |   |                                  |    |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                            |   |                                  |    |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Percent                of normal:                                                                                                                                                                                                                                                                                                                                                               |   |                                  |    |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cooling                degree                days                                                                                               |   |                                  | 85.3    | %      |                                |   | 131.0 | % |   |   |   |   |   |   | 88.8 | % |   |   | 135.9 | % |   |   |   |   |

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

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

|   | (c) | 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***

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | **June                  30,** |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | **2007**                      |   |   | **2006** |   |   | **Change                  %** |   |
| **Customer                counts:**                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                          |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                          |   |   |   |   |   |   |   |
| Retail                electricity customers (end of period and in thousands)                (a):                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                          |   |   |   |   |   |   |   |
| Historical                service territory:                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                          |   |   |   |   |   |   |   |
| Residential                                                                                                                                        |   |                          | 1,560  |   |   |   | 1,716 |   |   |   | (9.1 | ) |
| Small                business                (b)                                                                                                   |   |                          | 248    |   |   |   | 271 |   |   |   | (8.5 | ) |
| Total                historical service                territory                                                                                                  |   |                          | 1,808  |   |   |   | 1,987 |   |   |   | (9.0 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                          |   |   |   |   |   |   |   |   |   |   |
| Other                territories:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                          |   |   |   |   |   |   |   |   |   |   |
| Residential                                                                                                                                        |   |                          | 273    |   |   |   | 227 |   |   |   | 20.3 |   |
| Small                business                (b)                                                                                                   |   |                          | 11     |   |   |   | 7 |   |   |   | 57.1 |   |
| Total                other                territories                                                                                                             |   |                          | 284    |   |   |   | 234 |   |   |   | 21.4 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                          |   |   |   |   |   |   |   |   |   |   |
| All                territories:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                          |   |   |   |   |   |   |   |   |   |   |
| Residential                                                                                                                                        |   |                          | 1,833  |   |   |   | 1,943 |   |   |   | (5.7 | ) |
| Small                business                (b)                                                                                                   |   |                          | 259    |   |   |   | 278 |   |   |   | (6.8 | ) |
| Total                all                territories                                                                                                               |   |                          | 2,092  |   |   |   | 2,221 |   |   |   | (5.8 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                          |   |   |   |   |   |   |   |   |   |   |
| Large                business and other                customers                                                                         |   |                          | 36     |   |   |   | 49 |   |   |   | (26.5 | ) |
| Total                retail electricity                customers                                                                                                  |   |                          | 2,128  |   |   |   | 2,270 |   |   |   | (6.3 | ) |

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

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

----

***Revenue      and Market Share Data***

|                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | **Three                Months Ended** |   |   | **Six                Months Ended** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|--------|--------|-------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | **June                  30,**         |   |   | **June                  30,**       |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | **2007**                              |   |   | **2006**                            |   |   | **Change                  %** |   |   | **2007** |   |   | **2006** |   |   | **Change                  %** |   |
| **Operating                revenues:**                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                  |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Retail                electricity revenues:                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                  |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Historical                service                territory:                                                                                                                                                                                                                                                                                                                                                                                   |   |                                  |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential                                                                                                                                           |   | $                                     | 700    |   |                                | $      | 1,008 |   |   |   | (30.6 | ) |   | $ | 1,484 |   |   | $ | 1,753 |   |   |   | (15.3 | ) |
| Small                business                (a)                                                                                                      |   |                                  | 230    |   |                                |   | 309 |   |   |   | (25.6 | ) |   |   | 468 |   |   |   | 566 |   |   |   | (17.3 | ) |
| Total                historical service                territory                                                                                                     |   |                                  | 930    |   |                                |   | 1,317 |   |   |   | (29.4 | ) |   |   | 1,952 |   |   |   | 2,319 |   |   |   | (15.8 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                  |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                territories:                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                  |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential                                                                                                                                           |   |                                  | 141    |   |                                |   | 160 |   |   |   | (11.9 | ) |   |   | 249 |   |   |   | 248 |   |   |   | 0.4 |   |
| Small                business                (a)                                                                                                      |   |                                  | 26     |   |                                |   | 20 |   |   |   | 30.0 |   |   |   | 46 |   |   |   | 36 |   |   |   | 27.8 |   |
| Total                other                territories                                                                                                                |   |                                  | 167    |   |                                |   | 180 |   |   |   | (7.2 | ) |   |   | 295 |   |   |   | 284 |   |   |   | 3.9 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                  |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Large                business and other                customers                                                                                      |   |                                  | 343    |   |                                |   | 339 |   |   |   | 1.2 |   |   |   | 657 |   |   |   | 655 |   |   |   | 0.3 |   |
| Total                retail electricity                revenues                                                                             |   |                                  | 1,440  |   |                                |   | 1,836 |   |   |   | (21.6 | ) |   |   | 2,904 |   |   |   | 3,258 |   |   |   | (10.9 | ) |
| Wholesale                electricity                revenues                                                                                |   |                                  | 535    |   |                                |   | 479 |   |   |   | 11.7 |   |   |   | 982 |   |   |   | 956 |   |   |   | 2.7 |   |
| Net                sales (purchaes) of balancing electricityto/from                ERCOT                                                              |   | ─                               |   |   |                                | (32    | ) |   | ─ |   |   |   | 9 |   |   |   | 26 |   |   |   | (65.4 | ) |
| Net                gains (losses) from risk management and trading activities                                                                                                                                                                                                                                                                                                                                                                 |   |                                  | (159   | )      |                                |   | 106 |   |   | ─ |   |   |   | (638 | ) |   |   | 62 |   |   | ─ |   |
| Other                operating                revenues                                                                                      |   |                                  | 73     |   |                                |   | 79 |   |   |   | (7.6 | ) |   |   | 154 |   |   |   | 176 |   |   |   | (12.5 | ) |
| Total                operating                revenues                                                                                                               |   | $                                     | 1,889  |   |                                | $      | 2,468 |   |   |   | (23.5 | ) |   | $ | 3,411 |   |   | $ | 4,478 |   |   |   | (23.8 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                  |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Risk                management and trading activities:**                                                                                                                                                                                                                                                                                                                                                                                    |   |                                  |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Realized                net gains (losses) on                settled positions (b)                                                                                                                                                                                                                                                                                                                                                            |   | $                                     | 35     |   |                                | $      | (38 | ) |   |   |   |   |   | $ | 112 |   |   | $ | (86 | ) |   |   |   |   |
| Reversal                of prior periods' unrealiazed net(gains)                losses on positions settled in current period                                                                                                                                                                                                                                                                                                                 |   |                                  | (21    | )      |                                |   | 2 |   |   |   |   |   |   |   | (13 | ) |   |   | 38 |   |   |   |   |   |
| Other                  unrealized net gains (losses), including cash flowhedge                  ineffectiveness                                                      |   |                                  | (173   | )      |                                |   | 142 |   |   |   |   |   |   |   | (737 | ) |   |   | 110 |   |   |   |   |   |
| Total                net gains                (losses)                                                                                                               |   | $                                     | (159   | )      |                                | $      | 106 |   |   |   |   |   |   | $ | (638 | ) |   | $ | 62 |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                  |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Average                revenues per MWh:**                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                  |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential                                                                                                                                           |   | $                                     | 138.36 |   |                                | $      | 148.85 |   |   |   | (7.0 | ) |   | $ | 139.01 |   |   | $ | 146.23 |   |   |   | (4.9 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                  |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Estimated                share of ERCOT retail markets (c):**                                                                                                                                                                                                                                                                                                                                                                               |   |                                  |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Historical                service territory:                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                  |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                  |   | 62     | %                                   |   |   | 69 | % |   |   |   |   |
| Small                business                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                  |   | 61     | %                                   |   |   | 68 | % |   |   |   |   |
| Total                ERCOT:                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                  |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                  |   | 35     | %                                   |   |   | 38 | % |   |   |   |   |
| Small                business                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                  |   | 25     | %                                   |   |   | 28 | % |   |   |   |   |
| Large                business and other                customers                                                                                                                                                                                                                                                                                                                                                                              |   |                                  |   | 11     | %                                   |   |   | 17 | % |   |   |   |   |

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

|   | (b) | Includes                physical commodity trading activity not subject to mark-to-market                accounting of $5 million in net losses in the second quarter of both                2007                and 2006, and $6 million and $15 million in net losses in the six                months                ended June 30, 2007 and 2006,                respectively. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c) | Based                on number of meters.  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,**       |   |
|                                                                                             |   | **2007**                              |   |   | **2006**                            |   |   | **Change                  %** |   |   | **2007** |   |   | **2006** |   |   | **Change                  %** |   |
|                                                                                             |   |                                  |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Fuel,                purchased power costs and delivery fees****($                millions):** |   |                                  |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                             |   |                                  |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Nuclear                fuel                                                                      |   | $                                     | 21     |   |                                | $      | 22 |   |   |   | (4.5 | ) |   | $ | 39 |   |   | $ | 43 |   |   |   | (9.3 | ) |
| Lignite/coal                                                                                     |   |                                  | 152    |   |                                |   | 113 |   |   |   | 34.5 |   |   |   | 290 |   |   |   | 229 |   |   |   | 26.6 |   |
| Total                baseload                fuel                                                |   |                                  | 173    |   |                                |   | 135 |   |   |   | 28.1 |   |   |   | 329 |   |   |   | 272 |   |   |   | 21.0 |   |
| Natural                gas fuel and purchased                power                               |   |                                  | 435    |   |                                |   | 421 |   |   |   | 3.3 |   |   |   | 818 |   |   |   | 689 |   |   |   | 18.7 |   |
| Other                costs                                                                       |   |                                  | 71     |   |                                |   | 50 |   |   |   | 42.0 |   |   |   | 144 |   |   |   | 122 |   |   |   | 18.0 |   |
| Fuel                and purchased power                costs                                     |   |                                  | 679    |   |                                |   | 606 |   |   |   | 12.0 |   |   |   | 1,291 |   |   |   | 1,083 |   |   |   | 19.2 |   |
| Delivery                fees                                                                     |   |                                  | 291    |   |                                |   | 337 |   |   |   | (13.6 | ) |   |   | 609 |   |   |   | 650 |   |   |   | (6.3 | ) |
| Total                                                                                            |   | $                                     | 970    |   |                                | $      | 943 |   |   |   | 2.9 |   |   | $ | 1,900 |   |   | $ | 1,733 |   |   |   | 9.6 |   |
|                                                                                             |   |                                  |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Fuel                and purchased power costs (which excludes**                                |   |                                  |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **generation                plant operating costs) per MWh:**                                    |   |                                  |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Nuclear                fuel                                                                      |   | $                                     | 4.64   |   |                                | $      | 4.25 |   |   |   | 9.2 |   |   | $ | 4.55 |   |   | $ | 4.24 |   |   |   | 7.3 |   |
| Lignite/coal                (a)                                                                  |   | $                                     | 16.14  |   |                                | $      | 12.67 |   |   |   | 27.4 |   |   | $ | 15.62 |   |   | $ | 12.33 |   |   |   | 26.7 |   |
| Natural                gas fuel and purchased                power                               |   | $                                     | 62.86  |   |                                | $      | 63.40 |   |   |   | (0.9 | ) |   | $ | 61.37 |   |   | $ | 61.76 |   |   |   | (0.6 | ) |
|                                                                                             |   |                                  |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Delivery                fees per MWh**                                                         |   | $                                     | 24.90  |   |                                | $      | 24.51 |   |   |   | 1.6 |   |   | $ | 25.94 |   |   | $ | 26.18 |   |   |   | (0.9 | ) |
|                                                                                             |   |                                  |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Production                and purchased power volumes (GWh):**                                 |   |                                  |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                             |   |                                  |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Nuclear                                                                                          |   |                                  | 4,492  |   |                                |   | 5,098 |   |   |   | (11.9 | ) |   |   | 8,555 |   |   |   | 10,178 |   |   |   | (15.9 | ) |
| Lignite/coal                                                                                     |   |                                  | 10,211 |   |                                |   | 10,044 |   |   |   | 1.7 |   |   |   | 20,197 |   |   |   | 20,918 |   |   |   | (3.4 | ) |
| Total                baseload                generation                                          |   |                                  | 14,703 |   |                                |   | 15,142 |   |   |   | (2.9 | ) |   |   | 28,752 |   |   |   | 31,096 |   |   |   | (7.5 | ) |
| Natural                gas-fueled                generation                                      |   |                                  | 633    |   |                                |   | 1,350 |   |   |   | (53.1 | ) |   |   | 1,382 |   |   |   | 1,539 |   |   |   | (10.2 | ) |
| Purchased                power                                                                   |   |                                  | 6,287  |   |                                |   | 5,291 |   |   |   | 18.8 |   |   |   | 11,957 |   |   |   | 9,616 |   |   |   | 24.3 |   |
| Total                energy                supply                                                |   |                                  | 21,623 |   |                                |   | 21,783 |   |   |   | (0.7 | ) |   |   | 42,091 |   |   |   | 42,251 |   |   |   | (0.4 | ) |
| Less                line loss and power                imbalances                                |   |                                  | 555    |   |                                |   | 566 |   |   |   | (1.9 | ) |   |   | 430 |   |   |   | 814 |   |   |   | (47.2 | ) |
| Net                energy supply                volumes                                          |   |                                  | 21,068 |   |                                |   | 21,217 |   |   |   | (0.7 | ) |   |   | 41,661 |   |   |   | 41,437 |   |   |   | 0.5 |   |
|                                                                                             |   |                                  |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Baseload                capacity factors (%):**                                                |   |                                  |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                             |   |                                  |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Nuclear                                                                                          |   |                                  | 89.6   | %      |                                |   | 102.0 | % |   |   | (12.2 | ) |   |   | 85.8 | % |   |   | 102.3 | % |   |   | (16.1 | ) |
| Lignite/coal                                                                                     |   |                                  | 85.9   | %      |                                |   | 82.4 | % |   |   | 4.2 |   |   |   | 86.6 | % |   |   | 86.4 | % |   |   | 0.2 |   |
| Total                baseload                                                                    |   |                                  | 87.0   | %      |                                |   | 88.0 | % |   |   | (1.1 | ) |   |   | 86.3 | % |   |   | 90.9 | % |   |   | (5.1 | ) |

|   | (a) | 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, 2007 Compared to Three Months Ended June 30,      2006***

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | **Three                  Months Ended June 30,** |   |   |     |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------|--------|--------|----------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | **2007**                                         |   |   | **2006** |   |   | **Increase****(Decrease)** |   |
| Retail                electricity                revenues                                                                       |   | $                                                | 1,440  |   |     | $      | 1,836 |   |   | $ | (396 | ) |
| Wholesale                electricity                revenues                                                                    |   |                                             | 535    |   |     |   | 479 |   |   |   | 56 |   |
| Wholesale                balancing                activities                                                                    |   | ─                                          |   |   |     | (32    | ) |   |   | 32 |   |
| Net                gains (losses) from risk                management and trading activities                                                                                                                                                                                                                                                                                                                                                                                   |   |                                             | (159   | )      |     |   | 106 |   |   |   | (265 | ) |
| Other                operating                revenues                                                                          |   |                                             | 73     |   |     |   | 79 |   |   |   | (6 | ) |
| Total                operating                revenues                                                                                         |   | $                                                | 1,889  |   |     | $      | 2,468 |   |   | $ | (579 | ) |

|   | · | Lower                retail volumes contributed $290 million to the revenue                decrease.  Residential and small business volumes in the                historical service territory decreased 26% reflecting cooler, below                normal                weather that drove an 18% decrease in average consumption per customer                and                the effects of a net loss of customers due to competitive                activity. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Lower                average pricing (including customer mix effects) contributed $106                million                to the revenue decrease.  Lower average retail pricing reflected                new competitive product offerings, the effect of a six percent price                discount, effective with meter reads on March 27, 2007, and an additional                four percent price discount, effective with meter reads on June 8,                2007,                to those residential customers in the historical service territory                with                month-to-month service plans and a rate equivalent to the former                price-to-beat rate.  Average prices in the large business market                decreased 2% primarily reflecting a change in customer                mix. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Total                retail electricity customer counts at June 30, 2007 declined 6% from                June                30, 2006.  Total residential and small business customer counts                in the historical service territory declined 9% and in all combined                territories declined 6%. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | $239                million in unrealized mark-to-market net losses, which includes $225                million in net losses on unsettled positions and $14 million in net                losses                that represent reversals of previously recorded unrealized net gains                on                positions settled in the current                period; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | $3                million in unrealized cash flow hedge ineffectiveness net losses                that                represent reversals of previously recorded unrealized net gains on                positions settled in the current period;                and |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | $34                million in realized net gains, which offset hedged electricity revenues                recognized in the current period. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | $33                million in unrealized net gains on economic hedge positions, which                includes $40 million in net gains on unsettled positions and $7 million                in                net losses that represent reversals of previously recorded unrealized                net                gains on positions settled in the current                period; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | $30                million "day one" gain on a long-term power purchase agreement;                and |
|--------|--------|-------------------------------------------------------------------------------------------------------|

|   | · | $14                million in other net losses, including unrealized losses on commodity                trading positions. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------|

----

*Gross      Margin*

|                                                                                                                                                                                                                                                                                                                                                      |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                      |   | **Three                  Months Ended June 30,** |   |
|                                                                                                                                                                                                                                                                                                                                                      |   | **2007** |   |   | **%                  of Revenue** |   |   | **2006** |   |   | **%                  of Revenue** |   |
|                                                                                                                                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating                revenues                                                     |   | $ | 1,889 |   |   |   | 100 | % |   | $ | 2,468 |   |   |   | 100 | % |
| Costs                and expenses:                                                                                                                                                                                                                                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Fuel,                purchased power costs and                delivery fees                                                                                                                                                                                                                                                                               |   |   | 970 |   |   |   | 51 |   |   |   | 943 |   |   |   | 38 |   |
| Generation                plant operating                costs                                                 |   |   | 168 |   |   |   | 9 |   |   |   | 152 |   |   |   | 6 |   |
| Depreciation                and                amortization                                                    |   |   | 79 |   |   |   | 4 |   |   |   | 83 |   |   |   | 4 |   |
| Gross                margin                                                           |   | $ | 672 |   |   |   | 36 | % |   | $ | 1,290 |   |   |   | 52 | % |

|   | · | the                effect of results from risk management and trading activities, including                unrealized mark-to-market losses on positions in the long-term hedging                program (seven percentage point margin                decrease); |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the                effect of a decrease in residential and small business sales volumes                and                an increase in wholesale sales volumes (four percentage point margin                decrease); |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the                effect of lower average retail electricity pricing (two percentage                point                margin decrease); and |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the                effect of lower generation volumes and higher purchased power volumes                (one                percentage point margin decrease). |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | $6                million in higher generation maintenance costs largely due to the                scheduled outage of one of the nuclear generation                units; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | $6                million in higher insurance costs, principally property-related;                and |
|--------|--------|-------------------------------------------------------------------------------------------------------|

|   | · | $5                million in higher property taxes reflecting higher valuations for                2007, |
|--------|--------|----------------------------------------------------------------------------------------------------------|

----

|   | · | $12                million in increased retail marketing                expenses; |
|--------|--------|-----------------------------------------------------------------------------------|

|   | · | $8                million in higher salary and benefit costs primarily driven by an                increase                in staffing in retail operations; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | $6                million in higher professional fees primarily for marketing/strategic                projects and retail billing and customer care systems                enhancements; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | $2                million in higher incentive compensation expense;                and |
|--------|--------|----------------------------------------------------------------------------------------|

|   | · | $2                million in increased contributions primarily for the Energy Aid                (low-income customer assistance)                program, |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

----

***Six      Months Ended June 30, 2007 Compared to Six Months Ended June 30,      2006***

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | **Six                  Months Ended June 30,** |   |   |     |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------|--------|--------|----------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | **2007**                                       |   |   | **2006** |   |   | **Increase****(Decrease)** |   |
| Retail                electricity                revenues                                                                       |   | $                                              | 2,904  |   |     | $      | 3,258 |   |   | $ | (354 | ) |
| Wholesale                electricity                revenues                                                                    |   |                                           | 982    |   |     |   | 956 |   |   |   | 26 |   |
| Wholesale                balancing                activities                                                                    |   |                                           | 9      |   |     |   | 26 |   |   |   | (17 | ) |
| Net                gains (losses) from risk                management and trading activities                                                                                                                                                                                                                                                                                                                                                                                   |   |                                           | (638   | )      |     |   | 62 |   |   |   | (700 | ) |
| Other                operating                revenues                                                                          |   |                                           | 154    |   |     |   | 176 |   |   |   | (22 | ) |
| Total                operating                revenues                                                                                         |   | $                                              | 3,411  |   |     | $      | 4,478 |   |   | $ | (1,067 | ) |

|   | · | Lower                retail volumes contributed $200 million to the revenue                decrease.  Residential and small business volumes in the                historical service territory decreased 12% reflecting the effects                of a net                loss of customers due to competitive activity and lower average                consumption per customer of 4% reflecting the cooler, below normal                weather                in the second quarter of 2007.  Large business market volumes                increased 4% reflecting a change in customer                mix. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Lower                average pricing (including customer mix effects) contributed $154                million                to the revenue decrease.  Lower average retail pricing reflected                new competitive product offerings, the effect of a six percent price                discount, effective with meter reads on March 27, 2007, and an additional                four percent price discount, effective with meter reads on June 8,                2007,                to those residential customers in the historical service territory                with                month-to-month service plans and a rate equivalent to the former                price-to-beat rate.  Average prices in the large business market                decreased 3% primarily reflecting a change in customer                mix. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Total                retail electricity customer counts at June 30, 2007 declined 6% from                June                30, 2006.  Total residential and small business customer counts                in the historical service territory declined 9% and in all combined                territories declined 6%. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | $744                million in unrealized mark-to-market net losses, which includes $775                million in net losses on unsettled positions and $31 million in net                gains                that represent reversals of previously recorded unrealized net losses                on                positions settled in the current                period; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | $38                million in unrealized cash flow hedge ineffectiveness net gains,                which                includes $56 million in net gains on unsettled positions and $18                million                in net losses that represent reversals of previously recorded unrealized                net gains on positions settled in the current                period; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | $26                million in an unrealized "day one" loss on a large position entered                into                at below-market prices; and |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | $93                million in realized net gains, which offset hedged electricity revenues                recognized in the current period. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | $50                million in unrealized net losses on commodity trading positions,                which                includes $22 million in net losses on unsettled positions and $28                million                in net losses that represent reversals of previously recorded unrealized                net gains on positions settled in the current                period; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | $30                million "day one" gain on a long-term power purchase agreement;                and |
|--------|--------|-------------------------------------------------------------------------------------------------------|

|   | · | $18                million in other gains, driven by realized net gains on settlement                of                trading positions. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------|

----

*Gross      Margin*

|                                                                                                                                                                                                                                                                                                                                                      |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                      |   | **Six                  Months Ended June 30,** |   |
|                                                                                                                                                                                                                                                                                                                                                      |   | **2007** |   |   | **%                  of Revenue** |   |   | **2006** |   |   | **%                  of Revenue** |   |
|                                                                                                                                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating                revenues                                                     |   | $ | 3,411 |   |   |   | 100 | % |   | $ | 4,478 |   |   |   | 100 | % |
| Costs                and expenses:                                                                                                                                                                                                                                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Fuel,                purchased power costs and                delivery fees                                                                                                                                                                                                                                                                               |   |   | 1,900 |   |   |   | 56 |   |   |   | 1,733 |   |   |   | 38 |   |
| Generation                plant operating                costs                                                 |   |   | 319 |   |   |   | 9 |   |   |   | 307 |   |   |   | 7 |   |
| Depreciation                and                amortization                                                    |   |   | 157 |   |   |   | 5 |   |   |   | 166 |   |   |   | 4 |   |
| Gross                margin                                                           |   | $ | 1,035 |   |   |   | 30 | % |   | $ | 2,272 |   |   |   | 51 | % |

|   | · | the                effect of results from risk management and trading activities, including                net unrealized mark-to-market losses on positions in the long-term                hedging                program (12 percentage point margin                decrease); |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the                effect of a decrease in residential and small business sales volumes                and                an increase in wholesale sales volumes (two percentage point margin                decrease); |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the                effect of lower average retail electricity pricing (two percentage                point                margin decrease); |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the                effect of lower generation volumes and higher purchased power volumes                (two                percentage point margin decrease);                and |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the                effect of higher average fuel costs (one percentage point margin                decrease). |
|--------|--------|---------------------------------------------------------------------------------------------------------------|

----

|   | · | $18                million in increased retail marketing                expenses; |
|--------|--------|-----------------------------------------------------------------------------------|

|   | · | $12                million in higher professional fees primarily for retail billing                and                customer care systems enhancements and marketing/strategic                projects; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | $10                million in higher salary and benefit costs primarily driven by an                increase                in staffing in retail operations; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | $7                million in higher costs due to reallocation of Capgemini outsourcing                fees;                and |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------|

|   | · | $3                million in increased contributions primarily for the Energy Aid                (low-income customer assistance)                program, |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

----

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

* *

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | **Six                Months**      |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | **Ended**                          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | **June                  30, 2007** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                               |   |
| Net                commodity contract asset at beginning of                period                                                                             |   | $                                  | 37     |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                               |   |   |
| Settlements                of positions included in the opening balance (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                               | 7      |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                               |   |   |
| Unrealized                mark-to-market valuations of positions held at end of period                (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                               | (794   | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                               |   |   |
| Other                activity                (3)                                                                                                              |   |                               | 143    |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                               |   |   |
| Net                commodity contract liability at end of                period                                                                               |   | $                                  | (607   | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                               |   |   |

**__________________________**

| (1) | Represents                  reversals of unrealized mark-to-market valuations of these positions                  recognized in net income prior to the beginning of the period,                  to offset                  gains and losses realized upon settlement of the positions in the                  current                  period.                                                                                                                                                                                                                                                                                                                           |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Includes                  mark-to-market effects of positions dedesignated as cash flow hedges                  (see                  discussion above under "Long-term Hedging Program").  Also                  includes $30 million in losses and a $30 million gain recorded                  at contract                  inception dates (see Note 10 to Financial Statements).                                                                                                                                                                                                                                                                            |
| (3) | These                  amounts have not been recognized in prior and current year mark-to-market                  earnings.  Includes initial values of positions involving the                  receipt or payment of cash or other consideration such as option                  premiums                  paid and received.  Activity in 2007 included payments of $39                  million related to natural gas physical swap transactions and a                  $102                  million premium paid in 2007 related to a structured economic hedge                  transaction in the long-term hedging                  program. |

|                                                                           |   | **Three                Months Ended** |   |   | **Six                Months Ended** |   |
|--------------------------------------------------------------------------------|--------|---------------------------------------|--------|--------|-------------------------------------|--------|
|                                                                           |   | **June                  30,**         |   |   | **June                  30,**       |   |
|                                                                           |   | **2007**                              |   |   | **2006**                            |   |   | **2007** |   |   | **2006** |   |
|                                                                           |   |                                  |   |   |                                |   |   |   |   |   |   |   |
| Unrealized                gains (losses) related to contracts marked-to-market |   | $                                     | (189   | )      |                                | $      | (8 | ) |   | $ | (787 | ) |   | $ | (2 | ) |
|                                                                           |   |                                  |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |
| Ineffectiveness                gains related to cash flow hedges (a)           |   |                                  | (5     | )      |                                |   | 151 |   |   |   | 37 |   |   |   | 150 |   |
|                                                                           |   |                                  |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |
| Total                unrealized gains (losses) related to commodity contracts  |   | $                                     | (194   | )      |                                | $      | 143 |   |   | $ | (750 | ) |   | $ | 148 |   |

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

----

***Maturity      Table***

|                                                                                                                                                                                                                                                                                                     |   | **Maturity                  dates of unrealized commodity contract net liabilities at June                  30,                  2007** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|--------|
| **Source                of fair                value                                **                                                   |   | **Less                than****1                  year**                                                                                 |   |   | **1-3                  years** |   |   | **4-5                  years** |   |   | **Excess                of****5                  years** |   |   | **Total** |   |
| Prices                actively                quoted                                             |   | $                                                                                                                                       | 16     |   |   | $ | (200 | ) |   | $ | (248 | ) |   | $ | (23 | ) |   | $ | (455 | ) |
| Prices                provided by other                                                                                                                                                                                                                                                                  |   |                                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| external                sources                (a)                                                         |   |                                                                                                                                    | 13     |   |   |   | (47 | ) |   |   | (86 | ) |   |   | (20 | ) |   |   | (140 | ) |
| Prices                based on models                (b)                                         |   |                                                                                                                                    | (45    | ) |   |   | (18 | ) |   | ─ |   |   | ─ |   |   |   | (63 | ) |
| Total                                                                                            |   | $                                                                                                                                       | (16    | ) |   | $ | (265 | ) |   | $ | (334 | ) |   | $ | (43 | ) |   | $ | (658 | ) |
| Percentage                of total fair value                                                                                                                                                                                                                                                            |   |                                                                                                                                    | 2      | % |   |   | 40 | % |   |   | 51 | % |   |   | 7 | % |   |   | 100 | % |

|   | (a) | Includes                “day one” gain of $30 million associated with a long-term power purchase                agreement and a $4 million “day one”loss. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | Includes                "day one" loss of $26 million associated with a hedge                transaction. |
|--------|-----|-----------------------------------------------------------------------------------------------------------|

----

**COMPREHENSIVE      INCOME – Continuing Operations**

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | **Three                Months Ended** |   |   | **Six                Months Ended** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|--------|--------|-------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | **June                  30,**         |   |   | **June                  30,**       |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | **2007**                              |   |   | **2006**                            |   |   | **2007** |   |   | **2006** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                  |   |   |                                |   |   |   |   |   |   |   |
| Net                increase (decrease) in fair value of cash flow hedges allcommodity-related)                held at end of                period                                                                        |   | $                                     | 35     |   |                                | $      | (74 | ) |   | $ | (177 | ) |   | $ | 39 |   |
| Derivative                value net losses (gains reported in net income that relate tohedged                transactions recognized in the period:                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                  |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |
| Commodities                                                                                                                                                                                                                              |   |                                  | (19    | )      |                                |   | 10 |   |   |   | (95 | ) |   |   | 7 |   |
| Financing–interest                rate                swaps                (a)                                                                                                                                                     |   |                                  | 1      |   |                                |   | 2 |   |   |   | 3 |   |   |   | 3 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                  | (18    | )      |                                |   | 12 |   |   |   | (92 | ) |   |   | 10 |   |
|  Total                income (loss) effect of cash flow hedges reported inother                comprehensive income from continuing operations                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | $                                     | 17     |   |                                | $      | (62 | ) |   | $ | (269 | ) |   | $ | 49 |   |

| (a) | Represents                recognition of net losses on settled                swaps. |
|-----|--------------------------------------------------------------------------------------|

----

**FINANCIAL      CONDITION**

***LIQUIDITY      AND CAPITAL RESOURCES***

***Cash      Flows***
* *
***—***

|   | · | lower                operating earnings after taking into account noncash items such as                deferred federal income taxes, unrealized mark-to-market valuations                and                charges related to impairment of gas-fueled generation plants in                2006; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | an                unfavorable change in federal income taxes payable to TXU Corp. of                $1.2                billion reflecting an $880 million tax payment in 2007 and a $246                million net tax refund in 2006; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | an                unfavorable change of $959 million in net margin deposits due to                the                effect of higher forward natural gas prices on hedge                positions; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | an                unfavorable change in working capital (accounts receivable, accounts                payable and inventories) balances of $269 million primarily due to                the                effects of lower natural gas prices, as cash flows in 2006 included                the                collection of higher wholesale natural gas and electricity receivables                that resulted from higher prices in late 2005;                and |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | $102                million premium paid in 2007 related to a structured natural gas-related                option transaction entered into as part of the long-term hedging                program. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | **Six                  Months Ended June 30,** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | **2007**                                       |   |   | **2006** |   |
| Net                issuances, repayments and                repurchases of borrowings                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | $                                              | 2,363  |   |   | $ | 851 |   |
| Repayment                of pollution control                revenue                bonds                                                                        |   |                                           | (143   | ) |   |   | (203 | ) |
| Payments                on income tax-related                note payable to Oncor Electric Delivery                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                           | (15    | ) |   |   | (22 | ) |
| Distributions                paid to                parent                                                                                                       |   |                                           | (567   | ) |   |   | (572 | ) |
| Total                                                                                                                                                                                               |   | $                                              | 1,638  |   |   | $ | 54 |   |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | **Six                  Months Ended June 30,** |    |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------|---------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | **2007**                                       |    |   | **2006** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                           |    |   |   |   |
| Increase                in advances to                affiliates                                                                                                                           |   | $                                              | (288    | ) |   | $ | (1,803 | ) |
| Capital                expenditures, including                nuclear                fuel                                                                                                  |   |                                           | (411    | ) |   |   | (248 | ) |
| Reduction                of restricted cash related to the redemption of pollutioncontrol                revenue                bonds                                                                     |   |                                           | 143     |   |   |   | ― |   |
| Proceeds                from pollution control                revenue bonds deposited with trustee                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                           | ― |   |   |   | (99 | ) |
| Net                investments in nuclear                decommissioning trust fund securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                           | (7      | ) |   |   | (7 | ) |
| Other                                                                                                                                                                                      |   |                                           | ― |   |   |   | 2 |   |
| Total                                                                                                                                                                                                                         |   | $                                              | (563    | ) |   | $ | (2,155 | ) |

----

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

***Credit      Facilities/Commercial Paper***
*—*

***Short-term      Borrowings***

***Cash      Distributions to Parent***

***Sale      of Accounts Receivable***

----

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

|   | · | $459                million in cash has been posted with counterparties for exchange                cleared                transactions (including initial margin), as compared to $672 million                received as of December 31, 2006; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | $102                million in cash has been posted with counterparties for over-the-counter                and other non-exchanged cleared transactions, as compared to $2 million                received as of December 31, 2006;                and |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | $499                million in letters of credit have been posted with counterparties,                as                compared to $455 million posted as of December 31,                2006. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

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

*Financial      Covenants*

*Credit      Ratings*

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

*Material      Credit Rating Covenants*

----

----

*Material      Cross Default Provisions*

** **

----

**OFF      BALANCE SHEET ARRANGEMENTS**

*.*

**COMMITMENTS      AND CONTINGENCIES**

**CHANGES      IN ACCOUNTING STANDARDS**

**REGULATION      AND RATES**

***Regulatory      Investigations***

***2007      Texas Legislative Session***

***Summary***

----

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

***RISK      OVERSIGHT***

***COMMODITY      PRICE RISK***

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

----

***VaR      Methodology***

***Trading      VaR***

|                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                                                    |   |   | **Year                Ended**          |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------|--------|--------|----------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                   |   | **Six                  Months Ended****June                  30, 2007** |   |   | **December                  31, 2006** |   |
| Month-end                average Trading                VaR:                                                        |   | $                                                                       | 9      |   |                                   | $      | 12 |   |
| Month-end                high Trading                VaR:                                                           |   | $                                                                       | 11     |   |                                   | $      | 30 |   |
| Month-end                low Trading                VaR:                                                            |   | $                                                                       | 6      |   |                                   | $      | 5 |   |

***VaR      for Energy-Related Contracts Subject to Mark-to-Market (MtM) Accounting***

|                                                                                                                                                                                                                                                                                                                                                                                               |   |                                                                      |   |   | **Year                Ended**          |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------|--------|--------|----------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                               |   | **Six                    Months Ended****June                  30, 2007** |   |   | **December                  31, 2006** |   |
| Month-end                average MtM                VaR:                                                        |   | $                                                                         | 417    |   |                                   | $      | 89 |   |
| Month-end                high MtM                VaR:                                                           |   | $                                                                         | 566    |   |                                   | $      | 246 |   |
| Month-end                low MtM                VaR:                                                            |   | $                                                                         | 253    |   |                                   | $      | 5 |   |

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

|                                                                                                                                                                                                                                                                                                                                                                                           |   |                                                                      |   |   | **Year                Ended**          |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------|--------|--------|----------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                           |   | **Six                    Months Ended****June                  30, 2007** |   |   | **December                  31, 2006** |   |
| Month-end                average                EaR:                                                        |   | $                                                                         | 405    |   |                                   | $      | 99 |   |
| Month-end                high                EaR:                                                           |   | $                                                                         | 546    |   |                                   | $      | 241 |   |
| Month-end                low                EaR:                                                            |   | $                                                                         | 249    |   |                                   | $      | 21 |   |

----

***CREDIT      RISK***

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

***Credit      Exposure***

----

|                                                                                                                                                                                              |   |                                                   |   |   |                                   |   |   |                              |   |   | **Net                  Exposure byMaturity** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------|--------|--------|----------------------------------------|--------|--------|-----------------------------------|--------|--------|----------------------------------------------|--------|
|                                                                                                                                                                                              |   | **Exposure                  before Credit Collateral** |   |   | **Credit                  Collateral** |   |   | **Net                  Exposure** |   |   | **2                  years or less**         |   |   | **Between****2-5                  years** |   |   | **Greater                  than 5 years** |   |   | **Total** |   |
|                                                                                                                                                                                              |   |                                                   |   |   |                                   |   |   |                              |   |   |                                         |   |   |   |   |   |   |   |   |   |   |
| Investment                grade                            |   | $                                                      | 1,004  |   |                                   | $      | 16     |                              |   | $      | 988                                          |   |   | $ | 596 |   |   | $ | 140 |   |   | $ | 252 |   |   | $ | 988 |   |
| Noninvestment                grade                                                                                                                                                                |   |                                                   | 301    |   |                                   |   | 7      |                              |   |   | 294                                          |   |   |   | 168 |   |   |   | 72 |   |   |   | 54 |   |   |   | 294 |   |
| Totals                                                                              |   | $                                                      | 1,305  |   |                                   | $      | 23     |                              |   | $      | 1,282                                        |   |   | $ | 764 |   |   | $ | 212 |   |   | $ | 306 |   |   | $ | 1,282 |   |
|                                                                                                                                                                                              |   |                                                   |   |   |                                   |   |   |                              |   |   |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Investment                grade                            |   |                                                   | 77     | %      |                                   |   | 70     | %                                 |   |   | 77                                           | %      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Noninvestment                grade                                                                                                                                                                |   |                                                   | 23     | %      |                                   |   | 30     | %                                 |   |   | 23                                           | %      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

**FORWARD-LOOKING      STATEMENTS**

|   | · | prevailing                governmental policies and regulatory actions, including those of                the Texas                Legislature, the Governor of Texas, the US Congress, 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 generation facilities; |
|--------|--------|-------------------------------------------------------------|

|   | · | operations                of mines; |
|--------|--------|-------------------------------------|

|   | · | 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                including climate change                initiatives; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

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

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

|   | · | Texas                Competitive Holdings’ ability to attract and retain profitable                customers; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------|

|   | · | Texas                Competitive Holdings’ ability to profitably serve its customers given the                announced price protection and price                cuts; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | restrictions                on competitive retail pricing; |
|--------|--------|------------------------------------------------------------|

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

|   | · | changes                in prices of transportation of natural gas, lignite, coal, crude                oil and                refined products; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------|

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

|   | · | Texas                Competitive 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 Texas                Competitive Holdings’ financial                instruments; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | changes                in technology used by and services offered by Texas Competitive                Holdings; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------|

|   | · | significant                changes in Texas Competitive 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 Texas Competitive                Holdings; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------|

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

|   | · | with                respect to the proposed development of three new lignite/coal-fueled                generation units, more specifically, Texas Competitive Holdings’ ability                to fund such developments, delays in the approval of, or failure                to                obtain, air and other environmental permits for the program and the                ability to satisfactorily resolve issues relating to any appeal to                the                final judgment issued with respect to the Sandow consent decree,                changes                in competitive market rules, changes in environmental laws or regulations,                changes in electric generation and emissions control technologies,                changes                in projected demand for electricity, the ability of Texas Competitive                Holdings and its contractors to attract and retain, at projected                rates,                skilled labor for constructing the new generating units, changes                in                wholesale electricity prices or energy commodity prices, transmission                capacity and constraints, supplier performance risk, changes in the                cost                and availability of materials necessary for the construction program                and                the ability of Texas Competitive Holdings to manage the significant                construction program to a timely conclusion with limited cost                overruns; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | with                respect to the Proposed Merger: the occurrence of any event, change                or                other circumstances, including the enactment of any new applicable                legislation, that could give rise to the termination of the Merger                Agreement or the Proposed Merger; the outcome of any legal proceedings                that may be instituted against TXU Corp. and others related to the                Merger                Agreement; failure to obtain shareholder approval or any other failure                to                satisfy other conditions required to complete the Proposed Merger,                including required regulatory approvals; risks that the proposed                transaction disrupts current plans and operations and the potential                difficulties in employee retention as a result of the Proposed Merger;                the                amount of the costs, fees, expenses and charges related to the Proposed                Merger and the execution of certain financings that will be obtained                to                consummate the Proposed Merger; and the impact of the substantial                indebtedness incurred to finance the consummation of the Proposed                Merger;                and |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the                ability of Texas Competitive Holdings to implement cost reduction                initiatives. |
|--------|--------|------------------------------------------------------------------------------------------------------------------|

**ITEM      4.  CONTROLS AND PROCEDURES**

----

**PART      II.  OTHER INFORMATION**

**Item      1.  LEGAL PROCEEDINGS.**

**Item      1A.  RISK FACTORS.**

***Risks      Relating to Texas Competitive Holdings’ Businesses***

**The      liquidity needs of Texas Competitive Holdings could be difficult to satisfy      under some circumstances, particularly during times of uncertainty in the      financial markets and/or during times when there are significant increases      in      natural gas prices.  The inability to access liquidity, particularly      on favorable terms, could materially adversely affect Texas Competitive      Holdings’ results of operations and/or financial      condition.**

| ·   | the                  announcement of the Proposed                  Merger; |
|--------------------|----------------------------------------------------------------------------|

| ·   | changes                  in financial markets that reduce available credit or the ability                  to obtain                  or renew liquidity facilities on acceptable                  terms; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | changes                  in interest rates; |
|--------------------|---------------------------------------------|

| ·   | a                  deterioration of Texas Competitive Holdings’ credit or an affiliate’s                  credit or a reduction in Texas Competitive Holdings’ credit ratings or the                  credit ratings of an affiliate; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | volatility                  in commodity prices that increases margin or credit                  requirements; |
|--------------------|----------------------------------------------------------------------------------------------------------------|

| ·   | a                  material breakdown in risk management procedures;                  and |
|--------------------|-------------------------------------------------------------------------------------------|

| ·   | a                  material adverse change in Texas Competitive Holdings’ businesses that                  restricts access to liquidity                  facilities. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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***Risks      Relating to the Proposed Merger***

**Texas      Competitive Holdings cannot guarantee that the Proposed Merger will be      consummated. Any failure to consummate the Proposed Merger could have a material      adverse impact on Texas Competitive Holdings’ results of operations      and/or financial condition.**

|   | · | management’s                attention from Texas Competitive Holdings’ day-to-day business may be                diverted; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Texas                Competitive Holdings may lose key                employees; |
|--------|--------|----------------------------------------------------------------------------------|

|   | · | Texas                Competitive Holdings’ relationships with customers and vendors may be                disrupted as a result of uncertainties with regard to its business                and                prospects; and |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | TXU                Corp. may be required to pay significant transaction costs related                to the                Proposed Merger, such as a transaction termination (break-up) fee                of up to                $1.0 billion. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**ITEM      6.                      EXHIBITS**

| **(a)       Exhibits                  provided as part of Part II are:** |
|-------------------------------------------------------------------------------------------------------------|
| **Exhibits**                                                                                                |  **Previously                  Filed With File****Number*** | **As****Exhibit** |   |   |
| **(3(i))**                                                                                                  | **Articles                  of Incorporation.** |
| 3(a)                                                                                                        | 333-108876Form                  S-4 (filed September 17, 2003) | 3(a) | ― | Certificate                  of Formation dated November 5, 2001. |
| 3(b)                                                                                                        |   |   | ― | Certificate                  of Amendment, effective June 29, 2007, to the Certificate of Formation                  dated November 5, 2001. |
| **(10)**                                                                                                    | **Material                  Contracts.** |
| 10(a)                                                                                                       | 1-12833Form                  10-Q (filed August 9, 2007) | 10.1 | ― | First                  Amendment to Lease Agreement, dated as of June 1, 2007, between                  U.S. Bank,                  N.A. (as successor-in-interest to State Street Bank and Trust Company                  of                  Connecticut, National Association), as owner trustee of ZSF/Dallas                  Tower                  Trust, a Delaware grantor trust, as Lessor, and TXU Properties                  Company, a                  Texas corporation, as Lessee (Energy Plaza Property) |
| 10(b)                                                                                                       | 1-12833Form                  10-Q (filed August 9, 2007) | 10.2 |   | Amended                  and Restated Engineering, Procurement and Construction Agreement,                  dated as                  of June 8, 2007, between Oak Grove Management Company LLC, a Delaware                  limited liability company and a wholly-owned, direct subsidiary                  of Texas                  Competitive Holdings Company LLC, and Fluor Enterprises, Inc.,                  a                  California corporation (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                  Texas Competitive Electric Holdings 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 Chief Financial Officer of Texas                  Competitive Electric Holdings 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                  Texas Competitive Electric Holdings 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 Chief Financial Officer of Texas                  Competitive Electric Holdings 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, 2007. |

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

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

**SIGNATURE**

|   |   | **TEXAS                  COMPETITIVE ELECTRIC HOLDINGS COMPANY LLC**     |   |
|--------|--------|---------------------------------------------------------------------------------------------------|--------|
|   | By     | /s/                  Stan                  Szlauderbach                                           |   |
|   |   | Stan                  Szlauderbach                                                                |   |
|   |   | Senior                  Vice President and                  Controller                            |   |
|   |   |                                                                                              |   |
|   |   |                                                                                              |   |
|   |   |                                                                                              |   |

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