<PAGE>
                                                                    EXHIBIT 10.2

                     TRANSITION PROPERTY SERVICING AGREEMENT

                                     BETWEEN

                           CPL TRANSITION FUNDING LLC

                                   NOTE ISSUER

                                       AND

                         CENTRAL POWER AND LIGHT COMPANY

                                    SERVICER

                          DATED AS OF FEBRUARY 7, 2002

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                                TABLE OF CONTENTS

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<Caption>
                                                                                                               Page

<S>                                                                                                            <C>
ARTICLE I                  DEFINITIONS............................................................................1
     SECTION 1.01.         Definitions............................................................................1

ARTICLE II                 APPOINTMENT AND AUTHORIZATION..........................................................2
     SECTION 2.01.         Appointment of Servicer; Acceptance of Appointment.....................................2
     SECTION 2.02.         Authorization..........................................................................2
     SECTION 2.03.         Dominion and Control Over the Transition Property......................................2

ARTICLE III                ROLE OF SERVICER.......................................................................3
     SECTION 3.01.         Duties of Servicer.....................................................................3
     SECTION 3.02.         Servicing and Maintenance Standards....................................................5
     SECTION 3.03.         Certificate of Compliance..............................................................5
     SECTION 3.04.         Annual Report by Independent Public Accountants........................................6
     SECTION 3.05.         Monitoring of Third-Party Collectors...................................................6

ARTICLE IV                 SERVICES RELATED TO TRUE-UP ADJUSTMENTS................................................9
     SECTION 4.01.         True-Up Adjustments....................................................................9
     SECTION 4.02.         Limitation of Liability...............................................................13

ARTICLE V                  THE TRANSITION PROPERTY...............................................................14
     SECTION 5.01.         Custody of Transition Property Records................................................14
     SECTION 5.02.         Duties of Servicer as Custodian.......................................................14
     SECTION 5.03.         Instructions; Authority to Act........................................................15
     SECTION 5.04.         Custodian's Indemnification...........................................................15
     SECTION 5.05.         Effective Period and Termination......................................................16

ARTICLE VI                 THE SERVICER..........................................................................16
     SECTION 6.01.         Representations and Warranties of Servicer............................................16
     SECTION 6.02.         Indemnities of Servicer; Release of Claims............................................18
     SECTION 6.03.         Binding Effect of Servicing Obligations...............................................20
     SECTION 6.04.         Limitation on Liability of Servicer and Others........................................21
     SECTION 6.05.         CPL Not to Resign as Servicer.........................................................21
     SECTION 6.06.         Servicing Compensation................................................................21
     SECTION 6.07.         Compliance with Applicable Law........................................................22
     SECTION 6.08.         Access to Certain Records and Information Regarding Transition Property...............22
     SECTION 6.09.         Appointments..........................................................................23
     SECTION 6.10.         No Servicer Advances..................................................................23
     SECTION 6.11.         Remittances...........................................................................23
     SECTION 6.12.         Maintenance of Operations.............................................................24

ARTICLE VII                DEFAULT...............................................................................24
</Table>

                                       i
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<Table>
<S>                                                                                                              <C>
     SECTION 7.01.         Servicer Default......................................................................24
     SECTION 7.02.         Appointment of Successor..............................................................26
     SECTION 7.03.         Waiver of Past Defaults...............................................................26
     SECTION 7.04.         Notice of Servicer Default............................................................27
     SECTION 7.05.         Cooperation with Successor............................................................27

ARTICLE VIII               MISCELLANEOUS PROVISIONS..............................................................27
     SECTION 8.01.         Amendment.............................................................................27
     SECTION 8.02.         PUCT Condition........................................................................28
     SECTION 8.03.         Maintenance of Accounts and Records...................................................29
     SECTION 8.04.         Notices...............................................................................29
     SECTION 8.05.         Assignment............................................................................29
     SECTION 8.06.         Limitations on Rights of Others.......................................................30
     SECTION 8.07.         Severability..........................................................................30
     SECTION 8.08.         Separate Counterparts.................................................................30
     SECTION 8.09.         Headings..............................................................................30
     SECTION 8.10.         GOVERNING LAW.........................................................................30
     SECTION 8.11.         Assignment to Indenture Trustee.......................................................30
     SECTION 8.12.         Nonpetition Covenants.................................................................30
     SECTION 8.13.         Limitation of Liability...............................................................31

EXHIBITS AND SCHEDULES
     Exhibit A             Form of Monthly Servicer's Certificate
     Exhibit B             Form of Certificate of Compliance
     Exhibit C             Form of Servicer Certificate
     Schedule 4.01(a)      Expected Amortization Schedule
</Table>

                                       ii
<PAGE>

                                     ANNEXES

Annex I           Servicing Procedures

                                      iii
<PAGE>

         This TRANSITION PROPERTY SERVICING AGREEMENT (this "Agreement"), dated
as of February 7, 2002, is between CPL Transition Funding LLC, a Delaware
limited liability company (the "Note Issuer"), and Central Power and Light
Company, a Texas corporation, as Servicer (the "Servicer").

                                    RECITALS

         WHEREAS, pursuant to the Securitization Law and the Initial Financing
Order, the Seller and the Note Issuer are concurrently entering into the Sale
Agreement pursuant to which the Seller is selling and the Note Issuer is
purchasing certain Transition Property created pursuant to the Securitization
Law and the Initial Financing Order described therein, and the Seller may sell
other Transition Property to the Note Issuer pursuant to the Sale Agreement.

         WHEREAS, in connection with its ownership of the Transition Property
and in order to collect the associated Transition Charges, the Note Issuer
desires to engage the Servicer to carry out the functions described herein. The
Servicer currently performs similar functions for itself with respect to its own
charges to its customers. In addition, the Note Issuer desires to engage the
Servicer to act on its behalf in obtaining Annual True-Up Adjustments,
Non-Standard True-Up Adjustments and Interim True-Up Adjustments from the PUCT.
The Servicer desires to perform all of these activities on behalf of the Note
Issuer.

         NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:

                                   ARTICLE I
                                   DEFINITIONS

         SECTION 1.01. Definitions.

         (a) Unless otherwise defined herein, capitalized terms used herein
shall have the meanings assigned to them in that certain Indenture (including
Appendix A thereto) dated as of the date hereof between the Note Issuer and U.S.
Bank National Association, as the Indenture Trustee, as the same may be amended,
supplemented or otherwise modified from time to time.

         (b) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.

         (c) The words "hereof," "herein," "hereunder" and words of similar
import, when used in this Agreement, shall refer to this Agreement as a whole
and not to any particular provision of this Agreement; Section, Schedule,
Exhibit, Annex and Attachment references contained in this Agreement are
references to Sections, Schedules, Exhibits, Annexes and Attachments in or to
this Agreement unless otherwise specified; and the term "including" shall mean
"including without limitation."

<PAGE>

         (d) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms.

         (e) Non-capitalized terms used herein which are defined in the
Utilities Code shall, as the context requires, have the meanings assigned to
such terms in the Utilities Code, but without giving effect to amendments to the
Utilities Code after the date hereof which have a material adverse effect on the
Note Issuer or the Holders.

                                   ARTICLE II
                          APPOINTMENT AND AUTHORIZATION

         SECTION 2.01. Appointment of Servicer; Acceptance of Appointment.
Subject to Section 6.05 and Article VII, the Note Issuer hereby appoints the
Servicer, and the Servicer hereby accepts such appointment, to perform the
Servicer's obligations pursuant to this Agreement on behalf of and for the
benefit of the Note Issuer or any assignee thereof in accordance with the terms
of this Agreement and applicable law. This appointment and the Servicer's
acceptance thereof may not be revoked except in accordance with the express
terms of this Agreement.

         SECTION 2.02. Authorization. With respect to all or any portion of the
Transition Property, the Servicer shall be, and hereby is, authorized and
empowered by the Note Issuer to (a) execute and deliver, on behalf of itself
and/or the Note Issuer, as the case may be, any and all instruments, documents
or notices, and (b) on behalf of itself and/or the Note Issuer, as the case may
be, make any filing and participate in proceedings of any kind with any
Governmental Authority, including with the PUCT. The Note Issuer shall execute
and deliver to the Servicer such documents as have been prepared by the Servicer
for execution by the Note Issuer and shall furnish the Servicer with such other
documents as may be in the Note Issuer's possession, in each case as the
Servicer may determine to be necessary or appropriate to enable it to carry out
its servicing and administrative duties hereunder. Upon the Servicer's written
request, the Note Issuer shall furnish the Servicer with any powers of attorney
or other documents necessary or appropriate to enable the Servicer to carry out
its duties hereunder.

         SECTION 2.03. Dominion and Control Over the Transition Property.
Notwithstanding any other provision herein, the Note Issuer shall have dominion
and control over the Transition Property, and the Servicer, in accordance with
the terms hereof, is acting solely as the servicing agent and custodian for the
Note Issuer with respect to the Transition Property and the Transition Property
Records. The Servicer shall not take any action that is not authorized by this
Agreement, that is not consistent with its customary procedures and practices,
or that shall impair the rights of the Note Issuer in the Transition Property,
in each case unless such action is required by applicable law or court or
regulatory order.

                                       2
<PAGE>

                                  ARTICLE III
                                ROLE OF SERVICER

         SECTION 3.01. Duties of Servicer. The Servicer, as agent for the Note
Issuer, shall have the following duties:

         (a) Duties of Servicer Generally. The Servicer's duties in general
shall include management, servicing and administration of the Transition
Property; obtaining meter reads, calculating usage (including demand and
including any such usage by Customers served by a REP), billing, collections and
posting of all payments in respect of the Transition Property; responding to
inquiries by Customers, REPs, the PUCT, or any other Governmental Authority with
respect to the Transition Property; delivering Bills to Customers and REPs,
investigating and handling delinquencies, processing and depositing collections
and making periodic remittances; furnishing periodic reports to the Note Issuer,
the Indenture Trustee and the Rating Agencies; making all filings with the PUCT
and taking such other action as may be necessary to perfect the Note Issuer's
ownership interests in and the Indenture Trustee's lien on the Transition
Property; making all filings and taking such other action as may be necessary to
perfect the Indenture Trustee's lien on and security interest in all Note
Collateral not constituting Transition Property; selling as the agent for the
Note Issuer as its interests may appear defaulted or written off accounts in
accordance with the Servicer's usual and customary practices; and taking all
necessary action in connection with True-Up Adjustments as set forth herein.
Certain of the duties set forth above may be performed by REPs pursuant to PUCT
Regulations and, if any, REP Service Agreements. Anything to the contrary
notwithstanding, the duties of the Servicer set forth in this Agreement shall be
qualified in their entirety by any PUCT Regulations as in effect at the time
such duties are to be performed. Without limiting the generality of this Section
3.01(a), in furtherance of the foregoing, the Servicer hereby agrees that it
shall also have, and shall comply with, the duties and responsibilities relating
to data acquisition, usage and bill calculation, billing, customer service
functions, collections, payment processing and remittance set forth in Annex I
hereto, as it may be amended from time to time. For the avoidance of doubt, the
term "usage" when used herein refers to both kilowatt hour consumption and
kilowatt demand.

         (b) Reporting Functions.

                  (i) Monthly Servicer's Certificate. On or before the
         twenty-fifth calendar day of each month (or if such day is not a
         Servicer Business Day, on the immediately preceding Servicer Business
         Day), the Servicer shall prepare and deliver to the Note Issuer, the
         Indenture Trustee and the Rating Agencies a written report
         substantially in the form of Exhibit A hereto (a "Monthly Servicer's
         Certificate") setting forth certain information relating to TC Payments
         received by the Servicer during the Collection Period immediately
         preceding such date; provided, however, that for any month in which the
         Servicer is required to deliver a Servicer's Certificate pursuant to
         Section 4.01(c)(ii) hereof, the Servicer shall

                                       3
<PAGE>

         prepare and deliver the Monthly Servicer's Certificate no later than
         the date of delivery of such Servicer's Certificate.

                  (ii) Notification of Laws and Regulations. The Servicer shall
         immediately notify the Note Issuer, the Indenture Trustee and the
         Rating Agencies in writing of any Requirements of Law or PUCT
         Regulations hereafter promulgated that have a material adverse effect
         on the Servicer's ability to perform its duties under this Agreement.

                  (iii) Other Information. Upon the reasonable request of the
         Note Issuer, the Indenture Trustee or any Rating Agency, the Servicer
         shall provide to the Note Issuer, the Indenture Trustee or such Rating
         Agency, as the case may be, any public financial information in respect
         of the Servicer, or any material information regarding the Transition
         Property to the extent it is reasonably available to the Servicer, as
         may be reasonably necessary and permitted by law to enable the Note
         Issuer, the Indenture Trustee or the Rating Agencies to monitor the
         performance by the Servicer hereunder. In addition, so long as any of
         the Notes of any Series are outstanding, the Servicer shall provide the
         Note Issuer and the Indenture Trustee, within a reasonable time after
         written request therefor, any information available to the Servicer or
         reasonably obtainable by it that is necessary to calculate the
         Transition Charges applicable to each TC Customer Class.

                  (iv) Preparation of Reports to be Filed with the SEC. The
         Servicer shall prepare any reports required to be filed by the Note
         Issuer under the securities laws, including a copy of each Servicer's
         Certificate described in Section 4.01(c)(ii), the annual Certificate of
         Compliance described in Section 3.03, and the Annual Accountant's
         Report described in Section 3.04.

         (c) Opinions of Counsel. The Servicer shall deliver to the Note Issuer
and the Indenture Trustee:

                  (i) promptly after the execution and delivery of this
         Agreement and of each amendment hereto, promptly after the execution of
         each Sale Agreement and of each amendment thereto and on each
         Subsequent Transfer Date, an Opinion of Counsel from external counsel
         either (A) to the effect that, in the opinion of such counsel, all
         filings, including filings with the PUCT and the Texas Secretary of
         State and all filings pursuant to the UCC, that are necessary to fully
         preserve and protect the interests of the Indenture Trustee in the
         Transition Property have been executed and filed, and reciting the
         details of such filings or referring to prior Opinions of Counsel in
         which such details are given, or (B) to the effect that, in the opinion
         of such counsel, no such action shall be necessary to preserve and
         protect such interest; and

                                       4
<PAGE>

                  (ii) within 90 days after the beginning of each calendar year
         beginning with the first calendar year beginning more than three months
         after the date hereof, an Opinion of Counsel from external counsel,
         dated as of a date during such 90-day period, either (A) to the effect
         that, in the opinion of such counsel, all filings, including filings
         with the PUCT and the Texas Secretary of State and all filings pursuant
         to the UCC, have been executed and filed that are necessary to preserve
         fully and protect fully the interest of the Indenture Trustee in the
         Transition Property, and reciting the details of such filings or
         referring to prior Opinions of Counsel in which such details are given,
         or (B) to the effect that, in the opinion of such counsel, no such
         action shall be necessary to preserve and protect such interest.

         Each Opinion of Counsel referred to in clause (i) or (ii) above shall
specify any action necessary (as of the date of such opinion) to be taken in the
following year to preserve and protect such interest.

         SECTION 3.02. Servicing and Maintenance Standards. On behalf of the
Note Issuer, the Servicer shall (a) manage, service, administer and make
collections in respect of the Transition Property with reasonable care and in
material compliance with applicable Requirements of Law, including all
applicable PUCT Regulations and guidelines, using the same degree of care and
diligence that the Servicer exercises with respect to similar assets for its own
account and, if applicable, for others; (b) follow customary standards, policies
and procedures for the industry in Texas in performing its duties as Servicer;
(c) use all reasonable efforts, consistent with its customary servicing
procedures, to enforce, and maintain rights in respect of, the Transition
Property and to bill and collect the Transition Charges; (d) comply with all
Requirements of Law including all applicable PUCT Regulations and guidelines,
applicable to and binding on it relating to the Transition Property; (e) file
all PUCT notices described in the Securitization Law and file and maintain the
effectiveness of UCC financing statements with respect to the property
transferred from time to time under the Sale Agreement, and (f) take such other
action on behalf of the Note Issuer to ensure that the Lien of the Indenture
Trustee on the Note Collateral remains perfected and of first priority. The
Servicer shall follow such customary and usual practices and procedures as it
shall deem necessary or advisable in its servicing of all or any portion of the
Transition Property, which, in the Servicer's judgment, may include the taking
of legal action, at the Note Issuer's expense but subject to the priority of
payment set forth in Section 8.02(e) of the Indenture.

         SECTION 3.03. Certificate of Compliance. The Servicer shall deliver to
the Note Issuer, the Indenture Trustee and the Rating Agencies on or before
March 30 of each year, commencing March 30, 2003 to and including the March 30
succeeding the Retirement of the Notes, an Officer's Certificate substantially
in the form of Exhibit B hereto (a "Certificate of Compliance"), stating that:
(i) a review of the activities of the Servicer during the twelve months ended
the preceding December 31 (or, in the case of the first Certificate of
Compliance to be delivered on or before March 30, 2003, the period of time from
the date of this Agreement until December 31, 2002) and of its performance under
this Agreement has been made under such

                                       5
<PAGE>

officer's supervision, and (ii) to the best of such officer's knowledge, based
on such review, the Servicer has fulfilled all of its obligations in all
material respects under this Agreement throughout such twelve months (or, in the
case of the Certificate of Compliance to be delivered on or before March 30,
2003, the period of time from the date of this Agreement until December 31,
2002), or, if there has been a Servicer Default or an event which with the
giving of notice, the lapse of time, or both, would become a Servicer Default,
specifying each such default or event known to such officer and the nature and
status thereof.

         SECTION 3.04. Annual Report by Independent Public Accountants. (a) The
Servicer, at its own expense in partial consideration of the Servicing Fee paid
to it, shall cause a firm of independent certified public accountants (which may
provide other services to the Servicer or the Seller) to prepare, and the
Servicer shall deliver to the Note Issuer, the Indenture Trustee and the Rating
Agencies, a report addressed to the Servicer (the "Annual Accountant's Report"),
which may be included as part of the Servicer's customary auditing activities,
for the information and use of the Note Issuer, the Indenture Trustee and the
Rating Agencies on or before March 30 of each year, beginning March 30, 2003 to
and including the March 30 succeeding the Retirement of the Notes, to the effect
that such firm has performed certain procedures, agreed between the Servicer and
such accountants, in connection with the Servicer's compliance with its
obligations under this Agreement during the preceding twelve months ended
December 31 (or, in the case of the first Annual Accountant's Report to be
delivered on or before March 30, 2003, the period of time from the date of this
Agreement until December 31, 2002), identifying the results of such procedures
and including any exceptions noted. In the event such accounting firm requires
the Indenture Trustee to agree or consent to the procedures performed by such
firm, the Note Issuer shall direct the Indenture Trustee in writing to so agree;
it being understood and agreed that the Indenture Trustee will deliver such
letter of agreement or consent in conclusive reliance upon the direction of the
Note Issuer, and the Indenture Trustee will not make any independent inquiry or
investigation as to, and shall have no obligation or liability in respect of the
sufficiency, validity or correctness of such procedures.

         (b) The Annual Accountant's Report shall also indicate that the
accounting firm providing such report is independent of the Servicer within the
meaning of the Code of Professional Ethics of the American Institute of
Certified Public Accountants.

         SECTION 3.05. Monitoring of Third-Party Collectors. From time to time,
until the Retirement of the Notes, the Servicer shall, in accordance with the
Servicing Standard, take all actions with respect to Third-Party Collectors
required to be taken by the Servicer as set forth in the Tariffs and any other
applicable PUCT Regulations in effect from time to time and implement such
additional procedures and policies as are necessary to ensure that the
obligations of all Third-Party Collectors (including Applicable REPs) in
connection with Transition Charges are properly enforced in accordance with the
terms and provisions of the Tariffs and any other applicable PUCT Regulations in
effect from time to time. Such procedures and policies shall include the
following:

                                       6
<PAGE>

         (a) Maintenance of Records and Information. In addition to any actions
required by the Tariffs, PUCT Regulations or other applicable law, the Servicer
shall:

                  (i) maintain adequate records for promptly identifying and
         contacting each such Third-Party Collector (including any Applicable
         REP);

                  (ii) maintain records of end-user Customers which are billed
         by Third-Party Collectors (including Applicable REPs) to permit prompt
         transfer of billing responsibilities in the event of default by such
         Third-Party Collectors (including Applicable REPs);

                  (iii) maintain adequate records for enforcing compliance by
         all Third-Party Collectors with their obligations with respect to
         Transition Charges, including compliance by all Applicable REPs with
         all REP Credit Requirements, REP Deposit Requirements and REP
         Remittance Requirements; and

                  (iv) provide to Third-Party Collectors such information
         necessary for such Third-Party Collectors to confirm the Servicer's
         calculation of Transition Charges and remittances, including, if
         applicable, charge-off amounts.

     The Servicer shall update the records described above no less frequently
than quarterly.

         (b) Credit and Collection Policies. The Servicer shall, to the fullest
extent permitted under the Initial Financing Order or any Subsequent Financing
Order, as applicable, impose such terms with respect to credit and collection
policies applicable to Third-Party Collectors as may be reasonably necessary to
prevent the then-current rating of the Notes of any Series from being
downgraded, withdrawn or suspended. The Servicer shall, in accordance with and
to the extent permitted by the Utilities Code, applicable PUCT Regulations and
the terms of the Initial Financing Order and any Subsequent Financing Order,
include and impose the above-described terms in all tariffs filed under the
Utilities Code which would allow REPs or other utilities to issue single bills
which include Transition Charges to CPL's Customers . The Servicer shall
periodically review the need for modified or additional terms based upon, among
other things, (i) the relative amount of TC Payments received through REPs
relative to the Periodic Billing Requirement, (ii) the historical payment and
default experience of each REP and (iii) such other credit and collection
policies to which the REPs are subject, and if permitted by applicable law, will
set out any such modified or additional terms in a supplemental tariff filed
with the PUCT.

         (c) Monitoring of Performance and Payment by REPs. In addition to any
actions required by the Tariffs, PUCT Regulations or other applicable law, the
Servicer shall undertake to do the following:

                  (i) The Servicer shall require each REP to pay all Transition
         Charges (less any applicable charge-off allowances) billed to such REP
         in accordance with the provisions of the Initial Tariff, each
         Subsequent Tariff and PUCT Regulations

                                       7
<PAGE>

         (whether or not disputed). The Servicer shall monitor compliance by
         each REP with all REP Credit Requirements, REP Deposit Requirements and
         REP Remittance Requirements and take prompt action to enforce such
         requirements.

                  (ii) The Servicer shall, consistent with its customary billing
         practices, bill each REP who provides consolidated billing to end-user
         Customers for all Transition Charges owed by such end-user Customers no
         less frequently than the billing cycle otherwise applicable to such
         end-user Customers.

                  (iii) The Servicer shall work with REPs to resolve any
         disputes using the dispute resolution procedures established in the
         Initial Tariff, each Subsequent Tariff and any PUCT Regulations, in
         accordance with the Servicing Standard.

         (d) Enforcement of REP Obligations. The Servicer shall, in accordance
with the terms of the Initial Tariff and each Subsequent Tariff, ensure that
each REP remits all TC Payments which it is obligated to remit to the Servicer.
In the event of any default by any REP, the Servicer shall enforce all rights
set forth in, and take all other steps permitted by, the Initial Tariff or any
Subsequent Tariff or other PUCT Regulations as it determines, in accordance with
the Servicing Standard, are reasonably necessary to ensure the prompt payment of
TC Payments by such REP and to preserve the rights of the Holders with respect
thereto, including, where appropriate, terminating the right of any REP to bill
and collect Transition Charges or petitioning the PUCT to impose such other
remedies or penalties as may be available under the circumstances. Any agreement
entered into between the Servicer and a defaulted REP will be limited to the
terms of this agreement and will satisfy the Rating Agency Condition. In the
event the Servicer has actual knowledge that an REP is in default, including due
to the downgrade by the Rating Agencies of any party providing credit support
for such REP, the Servicer shall promptly notify the Indenture Trustee of the
same and, shall, if applicable, instruct the Indenture Trustee either:

                  (i) to withdraw from such REP's REP Deposit Account and
         deposit into the Collection Account the lesser of (x) the amount of
         cash collateral on deposit in such REP Deposit Account at such time and
         (y) the amount of any Transition Charges then due and payable by such
         REP; or

                  (ii) make demand under any letter of credit, guarantee or
         other credit support which may be drawn on at such time and deposit
         such proceeds into the REP Deposit Account for forwarding to the
         Collection Account as described in clause (i) above.

The Indenture Trustee shall, within two Business Days of receipt of such notice,
withdraw such funds from the REP Deposit Account or make demand under such
credit support, as applicable.

         (e) Maintenance of REP Deposit Accounts. The Servicer shall cause the
entity acting as Indenture Trustee to maintain one or more REP Deposit Accounts
as described in

                                       8
<PAGE>

Section 8.02(g) of the Indenture. The Servicer shall provide written direction
to the Indenture Trustee regarding the allocation and release of funds on
deposit in the REP Deposit Accounts, as permitted or required by the Indenture
or any applicable Financing Order, Tariff or PUCT Regulations. The Indenture
Trustee shall be entitled to rely on written directions from the Servicer
pursuant to this Section 3.05. The Servicer will seek and use reasonable best
efforts to obtain, from any REP which wishes to satisfy its credit support
requirements by making a deposit to a REP Deposit Account, a written security
agreement stating that (i) by making such deposit the REP has granted a security
interest in such deposit in favor of the Indenture Trustee, and (ii) the
Indenture Trustee, in holding such deposit as collateral, will have the rights
and remedies of a secured party under Article 9 of the UCC with respect to such
collateral, and the Servicer will promptly forward any such agreement to the
Indenture Trustee.

         (f) Affiliated Third-Party Collectors and REPs. In performing its
obligations under this Section 3.05, the Servicer shall deal with Third-Party
Collectors and REPs which are Affiliates of the Servicer on terms which are no
more favorable in the aggregate to such affiliated Third-Party Collector or REP
than those used by the Servicer in its dealings with Third-Party Collectors and
REPs that are not affiliates of the Servicer.

                                   ARTICLE IV
                     SERVICES RELATED TO TRUE-UP ADJUSTMENTS

         SECTION 4.01. True-Up Adjustments. From time to time, until the
Retirement of the Notes, the Servicer shall identify the need for Annual True-Up
Adjustments, Interim True-Up Adjustments and Non-Standard True-Up Adjustments
and shall take all reasonable action to obtain and implement such True-Up
Adjustments, all in accordance with the following:

         (a) Expected Amortization Schedule. The initial Expected Amortization
Schedule is attached hereto as Schedule 4.01(a). In connection with the Note
Issuer's issuance of any additional Series of Notes after the Closing Date, the
Servicer, on or prior to the Series Issuance Date therefor, shall revise the
Expected Amortization Schedule to add the requisite information for each new
Series of Notes and set forth, as of each Payment Date through the scheduled
Retirement of the Notes, the aggregate principal amounts of the Notes of all
Series, including such additional Series, expected to be outstanding on such
Payment Date. If the Expected Amortization Schedule is revised as set forth
above, the Servicer shall send a copy of such revised Expected Amortization
Schedule to the Note Issuer, the Indenture Trustee and the Rating Agencies
promptly thereafter.

         (b) True-Up Adjustments.

                  (i) Annual True-Up Adjustments and Filings. Each year no later
         than the last billing cycle of January, the Servicer shall: (A) update
         the data and assumptions underlying the calculation of the Transition
         Charges, including projected electricity usage during the next
         Calculation Period for each TC

                                       9
<PAGE>

         Customer Class and including interest and estimated expenses and fees
         of the Note Issuer to be paid during such period, the Weighted Average
         Days Outstanding and write-offs; (B) determine the Periodic Payment
         Requirements and Periodic Billing Requirement for the next Calculation
         Period based on such updated data and assumptions; (C) determine the
         Transition Charges to be allocated to each TC Customer Class during the
         next Calculation Period based on such Periodic Billing Requirement and
         the terms of the applicable Financing Orders and the Tariffs filed
         pursuant thereto and in doing so the Servicer shall use the method of
         allocating Transition Charges then in effect as a result of the
         implementation of a Non-Standard True-Up Adjustment; (D) make all
         required notice and other filings with the PUCT to reflect the revised
         Transition Charges, including any Amendatory Tariffs, and (E) take all
         reasonable actions and make all reasonable efforts to effect such
         Annual True-Up Adjustment and to enforce the provisions of the
         Securitization Law and the applicable Financing Orders which relate
         thereto; provided, however, that if the Servicer determines that the
         forecasted billing units for one or more of the TC Customer Classes for
         an upcoming period decreases by more than 10% compared to the billing
         units for the threshold period set forth in the applicable Financing
         Order, the Servicer shall implement a Non-Standard True-Up Adjustment
         and, if such Non-Standard True-Up Adjustment shall be made in the time
         period provided for Annual True-Up Adjustments pursuant to this Section
         4.01(b)(i), such Non-Standard True-Up Adjustment shall also qualify as
         an Annual True-Up Adjustment for purposes of this Agreement. The
         Servicer shall implement the revised Transition Charges, if any,
         resulting from such Annual True-Up Adjustment as of the Annual True-Up
         Adjustment Date.

                  (ii) Non-Standard True-Up Adjustments and Filings. In the
         event that the Servicer determines that a Non-Standard True-Up
         Adjustment is required, the Servicer shall, no later than the ninety
         days prior to the first billing cycle of February, (A) recalculate the
         Transition Charges to reallocate such Transition Charges among TC
         Customer Classes in accordance with the procedures for Non-Standard
         True-Up Adjustments set forth in the applicable Financing Order and TC
         Tariff; (B) make all required notice and other filings with the PUCT to
         reflect the revised Transition Charges, including any Amendatory
         Tariffs; and (C) take all reasonable actions and make all reasonable
         efforts to effect such Non-Standard True-Up Adjustment and to enforce
         the provisions of the Securitization Law and the applicable Financing
         Orders which relate thereto. The Servicer shall implement the revised
         Transition Charges, if any, resulting from such Non-Standard True-Up
         Adjustment on the Non-Standard True-Up Adjustment Date. For the
         avoidance of doubt, no Annual True-Up Adjustment or Interim True-Up
         Adjustment shall be considered a Non-Standard True-Up Adjustment solely
         because Transition Charges are allocated under such Annual True-Up
         Adjustment or Interim True-Up Adjustment in the same manner as in a
         Non-Standard True-Up Adjustment.

                                       10
<PAGE>

                  (iii) Interim True-Up Adjustments and Filings. In the month
         prior to each Payment Date, the Servicer shall compare the anticipated
         Unrecovered Balance, as of such Payment Date and after giving effect to
         payments to be made on such Payment Date, to the Projected Unrecovered
         Balance as of such Payment Date. If the Servicer determines that such
         Unrecovered Balance will exceed 105% of such Projected Unrecovered
         Balance or will be less than 95% of such Projected Unrecovered Balance
         and if any Outstanding Series of Notes which matures after January 15,
         2015, will not have been paid in full by its Expected Final Payment
         Date, then the Servicer shall: (A) update the data and assumptions
         underlying the calculation of the Transition Charges, including
         projected electricity usage during the next Calculation Period for each
         TC Customer Class and including interest and estimated expenses and
         fees of the Note Issuer to be paid during such period, the rate of
         delinquencies and write-offs; (B) determine the Periodic Payment
         Requirement and Periodic Billing Requirement for the next Calculation
         Period based on such updated data and assumptions; (C) determine the
         Transition Charges to be allocated to each TC Customer Class during the
         next Calculation Period based on such Periodic Billing Requirement and
         the terms of the applicable Financing Orders and the Tariffs filed
         pursuant thereto, and in doing so the Servicer shall use the method of
         allocating Transition Charges then in effect as a result of the
         implementation of a Non-Standard True-Up Adjustment; (D) make all
         required notice and other filings with the PUCT to reflect the revised
         Transition Charges, including any Amendatory Tariffs, and (E) take all
         reasonable actions and make all reasonable efforts to effect such
         Interim True-Up Adjustment and to enforce the provisions of the
         Securitization Law and the applicable Financing Orders which relate
         thereto. The Servicer shall implement the revised Transition Charges,
         if any, resulting from such Interim True-Up Adjustment on the Interim
         True-Up Adjustment Date.

         (c) Reports.

                  (i) Notification of Amendatory Tariff Filings and True-Up
         Adjustments. Whenever the Servicer files an Amendatory Tariff with the
         PUCT or implements revised Transition Charges with notice to the PUCT
         without filing an Amendatory Tariff if permitted by any applicable
         Financing Order, the Servicer shall send a copy of such filing or
         notice (together with a copy of all notices and documents which, in the
         Servicer's reasonable judgment, are material to the adjustments
         effected by such Amendatory Tariff or notice) to the Note Issuer, the
         Indenture Trustee and the Rating Agencies concurrently therewith. If,
         for any reason any revised Transition Charges are not implemented and
         effective on the applicable date set forth herein, the Servicer shall
         notify the Note Issuer, the Indenture Trustee and each Rating Agency by
         the end of the second Servicer Business Day after such applicable date.

                                       11
<PAGE>

                  (ii) Servicer's Certificate. Not later than five Servicer
         Business Days prior to each Payment Date, the Servicer shall deliver a
         written report substantially in the form of Exhibit C hereto (the
         "Servicer's Certificate") to the Note Issuer, the Indenture Trustee and
         the Rating Agencies.

                  (iii) Reports to Customers.

                  (A) After each revised Transition Charge has gone into effect
         pursuant to a True-Up Adjustment, the Servicer shall, to the extent and
         in the manner and time frame required by applicable PUCT Regulations,
         if any, cause to be prepared and delivered to Customers any required
         notices announcing such revised Transition Charges.

                  (B) The Servicer shall comply with the requirements of each
         Financing Order and Tariff with respect to the identification of
         Transition Charges on Bills. In addition, at least once each year, the
         Servicer shall (to the extent that it does not separately identify the
         Transition Charges as being owned by the Note Issuer in the Bills
         regularly sent to Applicable REPs or Customers) cause to be prepared
         and delivered to REPs and such Customers a notice stating, in effect,
         that the Transition Property and the Transition Charges are owned by
         the Note Issuer and not the Seller. Unless prohibited by applicable
         PUCT Regulations, the Servicer shall cause each Applicable REP, at
         least once each year, to include similar notices in the bills sent by
         Applicable REPs to Customers indicating additionally that the
         Transition Charges are not owned by the REP (to the extent that such
         REP does not include such information in the Bills regularly sent to
         Customers). Such notice shall be included either as an insert to or in
         the text of the Bills delivered to such Customers or shall be delivered
         to Customers by electronic means or such other means as the Servicer or
         the Applicable REP may from time to time use to communicate with its
         respective customers.

                  (C) Except to the extent that applicable PUCT Regulations make
         the Applicable REP responsible for such costs, or the Applicable REP
         has otherwise agreed to pay such costs, the Servicer shall pay from its
         own funds all costs of preparation and delivery incurred in connection
         with clauses (A) and (B) above, including printing and postage costs as
         the same may increase or decrease from time to time.

                  (iv) REP Reports. The Servicer shall provide to the Rating
         Agencies, upon request, any publicly available reports filed by the
         Servicer with the PUCT (or otherwise made publicly available by the
         Servicer) relating to REPs and any other non-confidential and
         non-proprietary information relating to REPs reasonably requested by
         the Rating Agencies.

                                       12
<PAGE>

         SECTION 4.02. Limitation of Liability. (a) The Note Issuer and the
Servicer expressly agree and acknowledge that:

                  (i) In connection with any True-Up Adjustment, the Servicer is
         acting solely in its capacity as the servicing agent hereunder.

                  (ii) Neither the Servicer nor the Note Issuer is responsible
         in any manner for, and shall have no liability whatsoever as a result
         of, any action, decision, ruling or other determination made or not
         made, or any delay (other than any delay resulting from the Servicer's
         failure to make any filings required by Section 4.01 in a timely and
         correct manner or any breach by the Servicer of its duties under this
         Agreement that adversely affects the Transition Property or the True-Up
         Adjustments), by the PUCT in any way related to the Transition Property
         or in connection with any True-Up Adjustment, the subject of any
         filings under Section 4.01, any proposed True-Up Adjustment, or the
         approval of any revised Transition Charges and the scheduled
         adjustments thereto.

                  (iii) Except to the extent that the Servicer is liable under
         Section 6.02, the Servicer shall have no liability whatsoever relating
         to the calculation of any revised Transition Charges and the scheduled
         adjustments thereto, including as a result of any inaccuracy of any of
         the assumptions made in such calculation regarding expected energy
         usage volume and the Weighted Average Days Outstanding, write-offs and
         estimated expenses and fees of the Note Issuer, so long as the Servicer
         has acted in good faith and has not acted in a negligent manner in
         connection therewith, nor shall the Servicer have any liability
         whatsoever as a result of any Person, including the Holders, not
         receiving any payment, amount or return anticipated or expected or in
         respect of any Note generally.

         (b) Notwithstanding the foregoing, this Section 4.02 shall not relieve
the Servicer of liability for any misrepresentation by the Servicer under
Section 6.01 or for any breach by the Servicer of its other obligations under
this Agreement.

                                       13
<PAGE>

                                    ARTICLE V
                             THE TRANSITION PROPERTY

         SECTION 5.01. Custody of Transition Property Records. To assure uniform
quality in servicing the Transition Property and to reduce administrative costs,
the Note Issuer hereby revocably appoints the Servicer, and the Servicer hereby
accepts such appointment, to act as the agent of the Note Issuer and the
Indenture Trustee as custodian of any and all documents and records that the
Seller shall keep on file, in accordance with its customary procedures, relating
to the Transition Property, including copies of any Financing Orders, Issuance
Advice Letters, Tariffs and Amendatory Tariffs relating thereto and all
documents filed with the PUCT in connection with any True-Up Adjustment and
computational records relating thereto (collectively, the "Transition Property
Records"), which are hereby constructively delivered to the Indenture Trustee,
as pledgee of the Note Issuer (or, in the case of the Subsequent Transition
Property, will as of the applicable Subsequent Transfer Date be constructively
delivered to the Indenture Trustee, as pledgee of the Note Issuer) with respect
to all Transition Property.

         SECTION 5.02. Duties of Servicer as Custodian. (a) Safekeeping. The
Servicer shall hold the Transition Property Records on behalf of the Note Issuer
and maintain such accurate and complete accounts, records and computer systems
pertaining to the Transition Property Records as shall enable the Note Issuer
and the Indenture Trustee, as applicable, to comply with this Agreement, the
Sale Agreement and the Indenture. In performing its duties as custodian, the
Servicer shall act with reasonable care, using that degree of care and diligence
that the Servicer exercises with respect to comparable assets that the Servicer
services for itself or, if applicable, for others. The Servicer shall promptly
report to the Note Issuer, the Indenture Trustee and the Rating Agencies any
failure on its part to hold the Transition Property Records and maintain its
accounts, records and computer systems as herein provided and promptly take
appropriate action to remedy any such failure. Nothing herein shall be deemed to
require an initial review or any periodic review by the Note Issuer or the
Indenture Trustee of the Transition Property Records. The Servicer's duties to
hold the Transition Property Records on behalf of the Note Issuer and the
Indenture Trustee set forth in this Section 5.02, to the extent such Transition
Property Records have not been previously transferred to a successor Servicer
pursuant to Article VII, shall terminate one year and one day after the earlier
of the date on which (i) the Servicer is succeeded by a successor Servicer in
accordance with Article VII and (ii) no Notes of any Series are Outstanding.

         (b) Maintenance of and Access to Records. The Servicer shall maintain
the Transition Property Records at 2 West Second Street, Tulsa, Oklahoma
74103-3132 or at such other office as shall be specified to the Note Issuer and
the Indenture Trustee by written notice at least 30 days prior to any change in
location. The Servicer shall make available for inspection, audit and copying to
the Note Issuer and the Indenture Trustee or their respective duly authorized
representatives, attorneys or auditors the Transition Property Records at such
times during normal business hours as the Note Issuer or the Indenture Trustee
shall reasonably request and which do not unreasonably interfere with the
Servicer's normal operations. Nothing in this

                                       14
<PAGE>

Section 5.02(b) shall affect the obligation of the Servicer to observe any
applicable law (including any PUCT Regulation) prohibiting disclosure of
information regarding the Customers, and the failure of the Servicer to provide
access to such information as a result of such obligation shall not constitute a
breach of this Section 5.02(b).

         (c) Release of Documents. Upon instruction from the Indenture Trustee
in accordance with the Indenture, the Servicer shall release any Transition
Property Records to the Indenture Trustee, the Indenture Trustee's agent or the
Indenture Trustee's designee, as the case may be, at such place or places as the
Indenture Trustee may designate, as soon as practicable.

         (d) Defending Transition Property Against Claims. The Servicer, on
behalf of the Holders, shall institute any action or proceeding necessary to
compel performance by the PUCT, the State of Texas, each REP and each party to
any Intercreditor Agreement (and in the case of each REP at the earliest
possible time) of any of their respective obligations or duties under the
Securitization Law, any Financing Order, any Issuance Advice Letter, True-Up
Adjustment, any Tariff, any Amendatory Tariff or any Intercreditor Agreement,
and the Servicer agrees to take such legal or administrative actions, including
defending against or instituting and pursuing legal actions and appearing or
testifying at hearings or similar proceedings, as may be reasonably necessary to
block or overturn any attempts to cause a repeal of, modification of or
supplement to or judicial invalidation of the Securitization Law or any
Financing Order or the rights of holders of Transition Property by legislative
enactment, voter initiative or constitutional amendment that would be materially
adverse to Holders or which would cause an impairment of the rights of the Note
Issuer or the Holders. In any proceedings related to the exercise of the power
of eminent domain by any municipality to acquire a portion of CPL's electric
distribution facilities, the Servicer shall assert that the court ordering such
condemnation must treat such municipality as a successor to CPL under the
Securitization Law and Financing Order. The costs of any such action shall be
payable by the Seller pursuant to Section 5.01(h) of the Sale Agreement.

         SECTION 5.03. Instructions; Authority to Act. For so long as any Notes
remain Outstanding, the Servicer shall be deemed to have received proper
instructions with respect to the Transition Property Records upon its receipt of
written instructions signed by a Responsible Officer of the Indenture Trustee.

         SECTION 5.04. Custodian's Indemnification. The Servicer as custodian
shall indemnify the Note Issuer, the Independent Managers and the Indenture
Trustee (for itself and for the benefit of the Noteholders) and each of their
respective officers, directors, employees and agents for, and defend and hold
harmless each such Person from and against, any and all liabilities,
obligations, losses, damages, payments and claims, and reasonable costs or
expenses, of any kind whatsoever (collectively, "Losses") that may be imposed
on, incurred by or asserted against each such Person as the result of any
negligent act or omission in any way relating to the maintenance and custody by
the Servicer, as custodian, of the Transition Property Records; provided,
however, that the Servicer shall not be liable for any portion of any such
amount

                                       15
<PAGE>

resulting from the willful misconduct, bad faith or gross negligence of the Note
Issuer, the Independent Managers or the Indenture Trustee, as the case may be.

         Indemnification under this Section shall survive resignation or removal
of the Indenture Trustee or any Independent Manager and shall include reasonable
out-of-pocket fees and expenses of investigation and litigation (including
reasonable attorney's fees and expenses).

         SECTION 5.05. Effective Period and Termination. The Servicer's
appointment as custodian shall become effective as of the Closing Date and shall
continue in full force and effect until terminated pursuant to this Section
5.05. If the Servicer shall resign as Servicer in accordance with the provisions
of this Agreement or if all of the rights and obligations of the Servicer shall
have been terminated under Section 7.01, the appointment of the Servicer as
custodian shall be terminated effective as of the date on which the termination
or resignation of the Servicer is effective. Additionally, if not sooner
terminated as provided above, the Servicer's obligations as Custodian shall
terminate one year and one day after the date on which no Notes of any Series
are Outstanding.

                                   ARTICLE VI
                                  THE SERVICER

         SECTION 6.01. Representations and Warranties of Servicer. The Servicer
makes the following representations and warranties, as of the Closing Date, as
of each Subsequent Transfer Date relating to the sale of Subsequent Transition
Property, and as of such other dates as expressly provided in this Section 6.01,
on which the Note Issuer and the Indenture Trustee are deemed to have relied in
entering into this Agreement relating to the servicing of the Transition
Property. The representations and warranties shall survive the execution and
delivery of this Agreement, the sale of any Transition Property and the pledge
thereof to the Indenture Trustee pursuant to the Indenture.

         (a) Organization and Good Standing. The Servicer is duly organized and
validly existing and is in good standing under the laws of the state of its
organization, with the requisite corporate or other power and authority to own
its properties and to conduct its business as such properties are currently
owned and such business is presently conducted and to execute, deliver and carry
out the terms of this Agreement, and had at all relevant times, and has, the
requisite power, authority and legal right to service the Transition Property
and to hold the Transition Property Records as custodian.

         (b) Due Qualification. The Servicer is duly qualified to do business
and is in good standing, and has obtained all necessary licenses and approvals,
in all jurisdictions in which the ownership or lease of property or the conduct
of its business (including the servicing of the Transition Property as required
by this Agreement) shall require such qualifications, licenses or approvals
(except where the failure to so qualify would not be reasonably likely to have a
material adverse effect on the Servicer's business, operations, assets, revenues
or properties or to its servicing of the Transition Property).

                                       16
<PAGE>

         (c) Power and Authority. The Servicer has the requisite corporate or
other power and authority to execute and deliver this Agreement and to carry out
its terms; and the execution, delivery and performance of this Agreement have
been duly authorized by all necessary action on the part of the Servicer under
its organizational or governing documents and laws.

         (d) Binding Obligation. This Agreement constitutes a legal, valid and
binding obligation of the Servicer enforceable against the Servicer in
accordance with its terms, subject to applicable insolvency, reorganization,
moratorium, fraudulent transfer and other laws relating to or affecting
creditors' rights generally from time to time in effect and to general
principles of equity (including concepts of materiality, reasonableness, good
faith and fair dealing), regardless of whether considered in a proceeding in
equity or at law.

         (e) No Violation. The consummation of the transactions contemplated by
this Agreement and the fulfillment of the terms hereof do not conflict with,
result in any breach of any of the terms and provisions of, nor constitute (with
or without notice or lapse of time) a default under, the organizational
documents of the Servicer, or any indenture or other agreement or instrument to
which the Servicer is a party or by which it or any of its property is bound;
nor result in the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, agreement or other instrument
(other than any Lien that may be granted under the Basic Documents or any Lien
created pursuant to Section 39.309 of the Securitization Law); nor violate any
existing law or any existing order, rule or regulation applicable to the
Servicer of any Governmental Authority having jurisdiction over the Servicer or
its properties.

         (f) No Proceedings. There are no proceedings or investigations pending
or, to the Servicer's knowledge, threatened, before any Governmental Authority
having jurisdiction over the Servicer or its properties involving or relating to
the Servicer or the Note Issuer or, to the Servicer's knowledge, any other
Person: (i) asserting the invalidity of this Agreement or any of the other Basic
Documents, (ii) seeking to prevent the issuance of the Notes or the consummation
of any of the transactions contemplated by this Agreement or any of the other
Basic Documents, (iii) seeking any determination or ruling that could reasonably
be expected to materially and adversely affect the performance by the Servicer
of its obligations under, or the validity or enforceability of, this Agreement,
any of the other Basic Documents or the Notes or (iv) seeking to adversely
affect the federal income tax or state income or franchise tax classification of
the Notes of any Series as debt.

         (g) Approvals. No approval, authorization, consent, order or other
action of, or filing with, any Governmental Authority is required in connection
with the execution and delivery by the Servicer of this Agreement, the
performance by the Servicer of the transactions contemplated hereby or the
fulfillment by the Servicer of the terms hereof, except those that have been
obtained or made, those that the Servicer is required to make in the future
pursuant to Article IV and those that the Servicer may need to file in the
future to continue the effectiveness of any financing statement filed under the
UCC.

                                       17
<PAGE>

         (h) Reports and Certificates. Each report and certificate delivered in
connection with an Issuance Advice Letter or delivered in connection with any
filing made to the PUCT by the Note Issuer with respect to the Transition
Charges or True-Up Adjustments will constitute a representation and warranty by
the Servicer that each such report or certificate, as the case may be, is true
and correct in all material respects; provided, however, that to the extent any
such report or certificate is based in part upon or contains assumptions,
forecasts or other predictions of future events, the representation and warranty
of the Servicer with respect thereto will be limited to the representation and
warranty that such assumptions, forecasts or other predictions of future events
are reasonable based upon historical performance (and facts known to the
Servicer on the date such report or certificate is delivered).

         (i) Conversion. In the event CPL converts into a Texas limited
liability company, such conversion will not:

                  (i) interrupt CPL's existence;

                  (ii) affect CPL's rights, title and interests in its real
         estate and other property or its power, authority or ability to perform
         its obligations under the Sale Agreement, this Agreement or the Basic
         Documents; or

                  (iii) impair or diminish the liabilities and obligations of
         CPL, including, without limitation, its obligations under this
         Agreement or any other Basic Document.

         SECTION 6.02. Indemnities of Servicer; Release of Claims. (a) The
Servicer shall be liable in accordance herewith only to the extent of the
obligations specifically undertaken by the Servicer under this Agreement and any
Intercreditor Agreement.

         (b) The Servicer shall indemnify the Note Issuer, the Indenture Trustee
(for itself and for the benefit of the Noteholders) and the Independent Managers
and each of their respective trustees, officers, directors, employees and agents
for, and defend and hold harmless each such Person from and against, any and all
Losses imposed on, incurred by or asserted against any such Person as a result
of (i) the Servicer's willful misconduct, bad faith or negligence in the
performance of its duties or observance of its covenants under this Agreement or
its reckless disregard of its obligations and duties under this Agreement, (ii)
the Servicer's breach of any of its representations and warranties contained in
this Agreement or (iii) any finding that interest payable to a REP with respect
to disputed funds must be paid by the Note Issuer or from the Transition
Property, except to the extent of Losses either resulting from the willful
misconduct or gross negligence of such Person seeking indemnification hereunder
or resulting from a breach of a representation or warranty made by such Person
seeking indemnification hereunder in any of the Basic Documents that gives rise
to the Servicer's breach.

         (c) For purposes of Section 6.02(b), in the event of the termination of
the rights and obligations of CPL (or any successor thereto pursuant to Section
6.03) as Servicer

                                       18
<PAGE>

pursuant to Section 7.01, or a resignation by such Servicer pursuant to this
Agreement, such Servicer shall be deemed to be the Servicer pending appointment
of a successor Servicer pursuant to Section 7.02.

         (d) Indemnification under this Section 6.02 shall survive any repeal
of, modification of, or supplement to, or judicial invalidation of, the
Securitization Law or any Financing Order and shall survive the resignation or
removal of the Indenture Trustee or any Independent Manager or the termination
of this Agreement and shall include reasonable out-of-pocket fees and expenses
of investigation and litigation (including reasonable attorney's fees and
expenses).

         (e) Except to the extent expressly provided in this Agreement or the
other Basic Documents (including the Servicer's claims with respect to the
Servicing Fee, reimbursement for any Excess Remittance, reimbursement for costs
incurred pursuant to Section 5.02 (d) and the payment of the purchase price of
Transition Property), the Servicer hereby releases and discharges the Note
Issuer, the Independent Managers, and the Indenture Trustee and each of their
respective officers, directors and agents (collectively, the "Released Parties")
from any and all actions, claims and demands whatsoever, whenever arising, which
the Servicer, in its capacity as Servicer or otherwise, shall or may have
against any such Person relating to the Transition Property or the Servicer's
activities with respect thereto other than any actions, claims and demands
arising out of the willful misconduct, bad faith or gross negligence of the
Released Parties.

         (f) Promptly after receipt by an Indemnified Person of notice of the
commencement of any action, proceeding or investigation, such Indemnified Person
shall, if a claim in respect thereof is to be made against the Servicer under
this Section 6.02(f), notify the Servicer in writing of the commencement
thereof. Failure by an Indemnified Person to so notify the Servicer shall
relieve the Servicer from the obligation to indemnify and hold harmless such
Indemnified Person under this Section 6.02(f) only to the extent that the
Servicer suffers actual prejudice as a result of such failure. With respect to
any action, proceeding or investigation brought by a third party for which
indemnification may be sought under this Section 6.02(f), the Servicer shall be
entitled to conduct and control, at its expense and with counsel of its choosing
that is reasonably satisfactory to such Indemnified Person, the defense of any
such action, proceeding or investigation (in which case the Servicer shall not
thereafter be responsible for the fees and expenses of any separate counsel
retained by the Indemnified Person except as set forth below); provided that the
Indemnified Person shall have the right to participate in such action,
proceeding or investigation through counsel chosen by it and at its own expense.
Notwithstanding the Servicer's election to assume the defense of any action,
proceeding or investigation, the Indemnified Person shall have the right to
employ separate counsel (including local counsel), and the Servicer shall bear
the reasonable fees, costs and expenses of such separate counsel if (i) the
defendants in any such action include both the Indemnified Person and the
Servicer and the Indemnified Person shall have reasonably concluded that there
may be legal defenses available to it that are different from or additional to
those available to the Servicer, (ii) the Servicer shall not have employed
counsel reasonably satisfactory to the Indemnified Person

                                       19
<PAGE>

to represent the Indemnified Person within a reasonable time after notice of the
institution of such action or (iii) the Servicer shall authorize the Indemnified
Person to employ separate counsel at the expense of the Servicer.
Notwithstanding the foregoing, the Servicer shall not be obligated to pay for
the fees, costs and expenses of more than one separate counsel for the
Indemnified Persons other than one local counsel, if appropriate.

         SECTION 6.03. Binding Effect of Servicing Obligations. The obligations
to continue to provide service and to collect and account for Transition Charges
will be binding upon the Servicer and any other entity that provides
transmission and distribution services or direct wire services to a Person that
was a retail customer of CPL located within CPL's certificated service area on
May 1, 1999 (except for former customers not taking service from CPL by reason
of taking service from Sharyland Utilities, L.P. pursuant to Commission Action
in Docket No. 20292) or that became a retail customer for electric services
within such area after May 1, 1999 and is still located within such area. Any
Person (a) into which the Servicer may be merged, converted or consolidated and
which is a Permitted Successor, (b) that may result from any merger, conversion
or consolidation to which the Servicer shall be a party and which is a Permitted
Successor, (c) that may succeed to the properties and assets of the Servicer
substantially as a whole and which is a Permitted Successor, (d) which results
from the division of the Servicer into two or more Persons and which is a
Permitted Successor, or (e) which otherwise is a Permitted Successor, which
Person in any of the foregoing cases executes an agreement of assumption to
perform all of the obligations of the Servicer hereunder, shall be the successor
to the Servicer under this Agreement without further act on the part of any of
the parties to this Agreement; provided, however, that (i) immediately after
giving effect to such transaction, no representation or warranty made pursuant
to Section 6.01 shall have been breached and no Servicer Default and no event
which, after notice or lapse of time, or both, would become a Servicer Default
shall have occurred and be continuing, (ii) the Servicer shall have delivered to
the Note Issuer and the Indenture Trustee an Officer's Certificate and an
Opinion of Counsel from external counsel stating that such consolidation,
conversion, merger, division or succession and such agreement of assumption
complies with this Section 6.03 and that all conditions precedent, if any,
provided for in this Agreement relating to such transaction have been complied
with, (iii) the Servicer shall have delivered to the Note Issuer, the Indenture
Trustee and the Rating Agencies an Opinion of Counsel from external counsel
either (A) stating that, in the opinion of such counsel, all filings to be made
by the Servicer, including filings with the PUCT pursuant to the Securitization
Law and the UCC, have been executed and filed and are in full force and effect
that are necessary to fully preserve and protect the interests of the Note
Issuer and the Indenture Trustee in the Transition Property and reciting the
details of such filings or (B) stating that, in the opinion of such counsel, no
such action shall be necessary to preserve and protect such interests and (iv)
the Servicer shall have given the Rating Agencies prior written notice of such
transaction. When any Person (or more than one Person) acquires the properties
and assets of the Servicer substantially as a whole or otherwise becomes the
successor, by merger, conversion, consolidation, sale, transfer, lease or
otherwise, to all or substantially all the electric transmission and
distribution business of the Servicer (or, if transmission and distribution are
not provided by a single entity, provides wire service directly to customers
taking services at facilities, premises or loads located in CPL's Certificated
Service area as it existed on May 1,

                                       20
<PAGE>

1999 (except for former customers not taking service from CPL by reason of
taking service from Sharyland Utilities, L.P. pursuant to PUCT action in Docket
No. 20292)) in accordance with the terms of this Section 6.03, then upon
satisfaction of all of the other conditions of this Section, the preceding
Servicer shall automatically and without further notice be released from all its
obligations hereunder. Notwithstanding anything to the contrary contained in
this Section 6.03, the Servicer may convert into a Texas limited liability
company that shall be the successor to the Servicer under this Agreement without
the execution or filing of any document or any further act by any of the parties
to this Agreement, without execution of the above-described agreement and
without compliance with clauses (i), (ii), (iii) or (iv) above, provided that
such conversion does not result in a breach of the Servicer's representation and
warranty in Section 6.01(i) hereof.

         SECTION 6.04. Limitation on Liability of Servicer and Others. Except as
otherwise provided under this Agreement, neither the Servicer nor any of the
directors, officers, employees or agents of the Servicer shall be liable to the
Note Issuer or any other Person for any action taken or for refraining from the
taking of any action pursuant to this Agreement or for errors in judgment;
provided, however, that this provision shall not protect the Servicer or any
such person against any liability that would otherwise be imposed by reason of
willful misconduct, bad faith or negligence in the performance of duties or by
reason of reckless disregard of obligations and duties under this Agreement. The
Servicer and any director, officer, employee or agent of the Servicer may rely
in good faith on the advice of counsel reasonably acceptable to the Indenture
Trustee or on any document of any kind, prima facie properly executed and
submitted by any Person, respecting any matters arising under this Agreement.

         Except as provided in this Agreement, the Servicer shall not be under
any obligation to appear in, prosecute or defend any legal action relating to
the Transition Property.

         SECTION 6.05. CPL Not to Resign as Servicer. Subject to the provisions
of Section 6.03, CPL shall not resign from the obligations and duties hereby
imposed on it as Servicer under this Agreement unless the Servicer delivers to
the Indenture Trustee and the PUCT an opinion of independent legal counsel to
the effect that the Servicer's performance of its duties under this Agreement
shall no longer be permissible under applicable law. No such resignation shall
become effective until a successor Servicer shall have assumed the
responsibilities and obligations of CPL in accordance with Section 7.02.

         SECTION 6.06. Servicing Compensation. (a) In consideration for its
services hereunder, until the Retirement of the Notes, the Servicer shall
receive an annual fee (the "Servicing Fee") in an amount equal to (i) 0.05% of
the aggregate initial principal amount of all Outstanding Series of Notes for so
long as CPL or any of its Permitted Successors or assigns or an Affiliate of CPL
is the Servicer or (ii) an amount agreed upon by the Successor Servicer and the
Indenture Trustee, but not more than 0.60% of the aggregate initial principal
amount of all Outstanding Series of Notes if CPL, any Permitted Successor or
assign or an Affiliate is not the Servicer. The Servicing Fee shall be paid
semi-annually with half of the Servicing Fee being paid on each Payment Date.
The Servicer also shall be entitled to retain as additional compensation (i) any
interest earnings on TC Payments received by the Servicer and invested by

                                       21
<PAGE>

the Servicer during each Collection Period prior to remittance to the Collection
Account and (ii) all late payment charges, if any, collected from Customers or
REPs; provided, however, that if the Servicer has failed to remit the Daily
Remittance to the General Subaccount of the Collection Account on the Servicer
Business Day that such payment is to be made pursuant to Section 6.11 on more
than three occasions during the period that the Notes are outstanding, then
thereafter the Servicer will be required to pay to the Indenture Trustee
interest on each Daily Remittance accrued at the Federal Funds Rate from the
Servicer Business Day on which such Daily Remittance was required to be made to
the date that such Daily Remittance is actually made.

         (b) The Servicing Fee set forth in Section 6.06(a) shall be paid to the
Servicer by the Indenture Trustee, on each Payment Date in accordance with the
priorities set forth in Section 8.02(e) of the Indenture, by wire transfer of
immediately available funds from the Collection Account to an account designated
by the Servicer. Any portion of the Servicing Fee not paid on any such date
should be added to the Servicing Fee payable on the subsequent Payment Date.

         (c) Except as expressly provided elsewhere in this Agreement, the
Servicer shall be required to pay from its own account expenses incurred by the
Servicer in connection with its activities hereunder (including any fees to and
disbursements by accountants, counsel, or any other Person, any taxes imposed on
the Servicer and any expenses incurred in connection with reports to Holders)
out of the compensation retained by or paid to it pursuant to this Section 6.06,
and shall not be entitled to any extra payment or reimbursement therefor.

         (d) The foregoing Servicing Fees constitute a fair and reasonable price
for the obligations to be performed by the Servicer. Such Servicing Fee shall be
determined without regard to the income of the Note Issuer, shall not be deemed
to constitute distributions to the recipient of any profit, loss or capital of
the Note Issuer and shall be considered a fixed Operating Expense of the Note
Issuer subject to the limitations on such expenses set forth in the Financing
Order.

         SECTION 6.07. Compliance with Applicable Law. The Servicer covenants
and agrees, in servicing the Transition Property, to comply in all material
respects with all laws applicable to, and binding upon, the Servicer and
relating to such Transition Property the noncompliance with which would have a
material adverse effect on the value of the Transition Property; provided,
however, that the foregoing is not intended to, and shall not, impose any
liability on the Servicer for noncompliance with any law that the Servicer is
contesting in good faith in accordance with its customary standards and
procedures.

         SECTION 6.08. Access to Certain Records and Information Regarding
Transition Property. The Servicer shall provide to the Holders and the Indenture
Trustee access to the Transition Property Records in such cases where the
Holders and the Indenture Trustee shall be required by applicable law to be
provided access to such records. Access shall be afforded without charge, but
only upon reasonable request and during normal business hours at the respective
offices of the Servicer. Nothing in this Section shall affect the obligation of
the

                                       22
<PAGE>

Servicer to observe any applicable law (including any PUCT Regulation)
prohibiting disclosure of information regarding the Customers, and the failure
of the Servicer to provide access to such information as a result of such
obligation shall not constitute a breach of this Section.

         SECTION 6.09. Appointments. The Servicer may at any time appoint any
Person to perform all or any portion of its obligations as Servicer hereunder
including a collection agent acting pursuant to any Intercreditor Agreement;
provided, however, that, unless such Person is an Affiliate of CPL, the Rating
Agency Condition shall have been satisfied in connection therewith; provided
further that the Servicer shall remain obligated and be liable under this
Agreement for the servicing and administering of the Transition Property in
accordance with the provisions hereof without diminution of such obligation and
liability by virtue of the appointment of such Person and to the same extent and
under the same terms and conditions as if the Servicer alone were servicing and
administering the Transition Property; and provided further, however, that
nothing herein (including the Rating Agency Condition) shall preclude the
execution by the Servicer of an REP Service Agreement with any REP pursuant to
applicable PUCT Regulations. The fees and expenses of any such Person shall be
as agreed between the Servicer and such Person from time to time and none of the
Note Issuer, the Indenture Trustee, the Holders or any other Person shall have
any responsibility therefor or right or claim thereto. Any such appointment
shall not constitute a Servicer resignation under Section 6.05.

         SECTION 6.10. No Servicer Advances. The Servicer shall not make any
advances of interest or principal on the Notes.

         SECTION 6.11. Remittances. (a) On each Servicer Business Day,
commencing 35 days after the Closing Date, the Servicer shall remit to the
General Subaccount of the Collection Account the total TC Payments estimated to
have been received by the Servicer from or on behalf of Customers on such
Servicer Business Day in respect of all previously billed Transition Charges
(the "Daily Remittance"), which Daily Remittance shall be calculated according
to the procedures set forth in Annex I and shall be remitted as soon as
reasonably practicable but in no event later than the second Servicer Business
Day after such payments are estimated to have been received. Prior to each
remittance to the General Subaccount of the Collection Account pursuant to this
Section, the Servicer shall provide written notice to the Indenture Trustee of
each such remittance (including the exact dollar amount to be remitted).

         (b) The Servicer agrees and acknowledges that it holds all TC Payments
collected by it for the benefit of the Indenture Trustee and the Holders and
that all such amounts will be remitted by the Servicer in accordance with this
Section without any surcharge, fee, offset, charge or other deduction except (i)
as set forth in clause (c) below and (ii) for late fees permitted by Section
6.06. The Servicer further agrees not to make any claim to reduce its obligation
to remit all TC Payments collected by it in accordance with this Agreement
except (i) as set forth in clause (c) below and (ii) for late fees permitted by
Section 6.06.

                                       23
<PAGE>

         (c) On or before the twenty-fifth calendar day of each calendar month
(or, if such day is not a Servicer Business Day, the immediately preceding
Servicer Business Day) commencing with January 25, 2003, the Servicer shall
calculate the amount of any Remittance Shortfall or Excess Remittance for the
first Collection Period of the immediately preceding Reconciliation Period and
(A) if a Remittance Shortfall exists, the Servicer shall make a supplemental
remittance to the General Subaccount of the Collection Account within two
Servicer Business Days, or (B) if an Excess Remittance exists, the Servicer
shall be entitled either (i) to reduce the amount of each Daily Remittance which
the Servicer subsequently remits to the General Subaccount of the Collection
Account for application to the amount of such Excess Remittance until the
balance of such Excess Remittance has been reduced to zero, the amount of such
reduction becoming the property of the Servicer or (ii) so long as such
withdrawal would not cause the amounts on deposit in the General Subaccount or
the Reserve Subaccount to be insufficient for the payment of the next
installment of interest on the Notes or principal due at maturity on the next
Payment Date or upon acceleration on or before the next Payment Date, to be paid
immediately from the General Subaccount or the Reserve Subaccount the amount of
such Excess Remittance, such payment becoming the property of the Servicer. If
there is a Remittance Shortfall, the amount which the Servicer remits to the
General Subaccount of the Collection Account on the relevant date set forth
above shall be increased by the amount of such Remittance Shortfall, such
increase coming from the Servicer's own funds.

         (d) Unless otherwise directed to do so by the Note Issuer, the Servicer
shall be responsible for selecting Eligible Investments in which the funds in
the Collection Account shall be invested pursuant to Section 8.03 of the
Indenture.

         SECTION 6.12. Maintenance of Operations. Subject to Section 6.03, CPL
agrees to continue to operate its electric transmission and distribution system
to provide service (or, if transmission and distribution are split, to provide
wire service directly to its customers) so long as it is acting as the Servicer
under this Agreement.

                                  ARTICLE VII
                                     DEFAULT

         SECTION 7.01. Servicer Default. If any one of the following events (a
"Servicer Default") shall occur and be continuing:

         (a) any failure by the Servicer to remit to the Collection Account on
behalf of the Note Issuer any required remittance that shall continue unremedied
for a period of five Business Days after written notice of such failure is
received by the Servicer from the Note Issuer or the Indenture Trustee or after
discovery of such failure by an officer of the Servicer; or

         (b) any failure on the part of the Servicer or, so long as the Servicer
is CPL or an affiliate thereof, any failure on the part of CPL, as the case may
be, duly to observe or to perform in any material respect any covenants or
agreements of the Servicer or CPL, as the case may be, set forth in this
Agreement (other than as provided in clause (a) of this Section 7.01) or

                                       24
<PAGE>

any other Basic Document to which it is a party in such capacity, which failure
shall (i) materially and adversely affect the rights of the Holders and (ii)
continue unremedied for a period of 60 days after the date on which (A) written
notice of such failure, requiring the same to be remedied, shall have been given
to the Servicer or CPL, as the case may be, by the Note Issuer (with a copy to
the Indenture Trustee) or to the Servicer or CPL, as the case may be, by the
Indenture Trustee or (B) such failure is discovered by an officer of the
Servicer; or

         (c) any failure by the Servicer duly to perform its obligations under
Section 4.01(b) of this Agreement in the time and manner set forth therein,
which failure continues unremedied for a period of five days; or

         (d) any representation or warranty made by the Servicer in this
Agreement or any Basic Document shall prove to have been incorrect when made,
which has a material adverse effect on the Holders and which material adverse
effect continues unremedied for a period of 60 days after the date on which (A)
written notice thereof, requiring the same to be remedied, shall have been
delivered to the Servicer (with a copy to the Indenture Trustee) by the Note
Issuer or the Indenture Trustee or (B) such failure is discovered by an officer
of the Servicer; or

         (e) an Insolvency Event occurs with respect to the Servicer or CPL;

then, and in each and every case, so long as the Servicer Default shall not have
been remedied, either the Indenture Trustee may, or shall upon the instruction
of the Holders of Notes evidencing not less than a majority of the Outstanding
Amount of the Notes of all Series, by notice then given in writing to the
Servicer (and to the Indenture Trustee if given by the Holders) (a "Termination
Notice") terminate all the rights and obligations (other than the obligations
set forth in Section 6.02 and the obligation under Section 7.02 to continue
performing its functions as Servicer until a successor Servicer is appointed) of
the Servicer under this Agreement, subject to the terms of any Intercreditor
Agreement. In addition, upon a Servicer Default described in Section 7.01(a),
the Holders and the Indenture Trustee as financing parties under the
Securitization Law (or any of their representatives) shall be entitled to (i)
apply to the district court of Travis County for sequestration and payment of
revenues arising with respect to the Transition Property, (ii) foreclose on or
otherwise enforce the lien and security interests in any Transition Property and
(iii) apply to the Texas Commission for an order that amounts arising from the
Transition Charges be transferred to a separate account for the benefit of the
Holders, in accordance with the Securitization Law. On or after the receipt by
the Servicer of a Termination Notice, all authority and power of the Servicer
under this Agreement, whether with respect to the Notes, the Transition
Property, the Transition Charges or otherwise, shall, without further action,
pass to and be vested in such successor Servicer as may be appointed under
Section 7.02; and, without limitation, the Indenture Trustee is hereby
authorized and empowered to execute and deliver, on behalf of the predecessor
Servicer, as attorney-in-fact or otherwise, any and all documents and other
instruments, and to do or accomplish all other acts or things necessary or
appropriate to effect the purposes of such Termination Notice, whether to
complete the transfer of the Transition Property Records and related documents,
or otherwise. The predecessor Servicer shall cooperate with the successor
Servicer, the Note Issuer and the Indenture Trustee in

                                       25
<PAGE>

effecting the termination of the responsibilities and rights of the predecessor
Servicer under this Agreement, including the transfer to the successor Servicer
for administration by it of all Transition Property Records and all cash amounts
that shall at the time be held by the predecessor Servicer for remittance, or
shall thereafter be received by it with respect to the Transition Property or
the Transition Charges. As soon as practicable after receipt by the Servicer of
such Termination Notice, the Servicer shall deliver the Transition Property
Records to the successor Servicer. In case a successor Servicer is appointed as
a result of a Servicer Default, all reasonable costs and expenses (including
reasonable attorney's fees and expenses) incurred in connection with
transferring the Transition Property Records to the successor Servicer and
amending this Agreement or any Intercreditor Agreement to reflect such
succession as Servicer pursuant to this Section shall be paid by the predecessor
Servicer upon presentation of reasonable documentation of such costs and
expenses. Termination of CPL as Servicer shall not terminate CPL's rights or
obligations under the Sale Agreement or any Intercreditor Agreement (except
rights thereunder deriving from its rights as the Servicer hereunder).

         SECTION 7.02. Appointment of Successor. (a) Upon the Servicer's receipt
of a Termination Notice pursuant to Section 7.01 or the Servicer's resignation
or removal in accordance with the terms of this Agreement, the predecessor
Servicer shall continue to perform its functions as Servicer under this
Agreement, and shall be entitled to receive the requisite portion of the
Servicing Fee, until a successor Servicer shall have assumed in writing the
obligations of the Servicer hereunder as described below. In the event of the
Servicer's removal or resignation hereunder, the Indenture Trustee may at the
written direction and with the consent of the Holders of at least a majority of
the Outstanding Amount of the Notes shall appoint a successor Servicer with the
Note Issuer's prior written consent thereto (which consent shall not be
unreasonably withheld), and the successor Servicer shall accept its appointment
by a written assumption in form reasonably acceptable to the Note Issuer and the
Indenture Trustee and provide prompt written notice of such assumption to the
Note Issuer and the Rating Agencies. If within 30 days after the delivery of the
Termination Notice, a new Servicer shall not have been appointed, the Indenture
Trustee may petition the PUCT or a court of competent jurisdiction to appoint a
successor Servicer under this Agreement. A Person shall qualify as a successor
Servicer only if (i) such Person is permitted under PUCT Regulations to perform
the duties of the Servicer, (ii) the Rating Agency Condition shall have been
satisfied and (iii) such Person enters into a servicing agreement with the Note
Issuer having substantially the same provisions as this Agreement and, if
applicable, into an Intercreditor Agreement (as the Transition Bond Servicer).

         (b) Upon appointment, the successor Servicer shall be the successor in
all respects to the predecessor Servicer and shall be subject to all the
responsibilities, duties and liabilities arising thereafter relating thereto
placed on the predecessor Servicer and shall be entitled to the Servicing Fee
and all the rights granted to the predecessor Servicer by the terms and
provisions of this Agreement.

         SECTION 7.03. Waiver of Past Defaults. The Holders of Notes evidencing
not less than a majority of the Outstanding Amount of the Notes of all Series
may, on behalf of

                                       26
<PAGE>

all Holders, waive in writing any default by the Servicer in the performance of
its obligations hereunder and its consequences, except a default in making any
required deposits to the Collection Account in accordance with this Agreement.
Upon any such waiver of a past default, such default shall cease to exist, and
any Servicer Default arising therefrom shall be deemed to have been remedied for
every purpose of this Agreement. No such waiver shall extend to any subsequent
or other default or impair any right consequent thereto.

         SECTION 7.04. Notice of Servicer Default. The Servicer shall deliver to
the Note Issuer, the Indenture Trustee, the PUCT and the Rating Agencies,
promptly after having obtained knowledge thereof, but in no event later than
five Business Days thereafter, written notice in an Officer's Certificate of any
event which with the giving of notice or lapse of time, or both, would become a
Servicer Default under Section 7.01(a), (b), (c) or (d).

         SECTION 7.05 Cooperation with Successor. The Servicer covenants and
agrees with each Issuer that it will, on an ongoing basis, cooperate with the
successor Servicer and provide whatever information is, and take whatever
actions are, reasonably necessary to assist the successor Servicer in performing
its obligations hereunder.

                                  ARTICLE VIII
                            MISCELLANEOUS PROVISIONS

         SECTION 8.01. Amendment. (a) This Agreement may be amended in writing
by the Servicer and the Note Issuer, with the prior written consent of the
Indenture Trustee, the satisfaction of the Rating Agency Condition and the
satisfaction of the condition set forth below in Section 8.02. Promptly after
the execution of any such amendment or consent, the Note Issuer shall furnish
written notification of the substance of such amendment or consent to each of
the Rating Agencies.

         Prior to the execution of any amendment to this Agreement, the Note
Issuer and the Indenture Trustee shall be entitled to receive and conclusively
rely upon an Opinion of Counsel stating that such amendment is authorized or
permitted by this Agreement and upon the Opinion of Counsel from external
counsel referred to in Section 3.01(c)(i). The Note Issuer and the Indenture
Trustee may, but shall not be obligated to, enter into any such amendment which
affects their own rights, duties, indemnities or immunities under this Agreement
or otherwise.

         (b) Notwithstanding Section 8.01(a) or anything to the contrary in this
Agreement, the Servicer and the Note Issuer may amend Annex I to this Agreement
in writing with prior written notice given to the Indenture Trustee and the
Rating Agencies, but without the consent of the Indenture Trustee, any Rating
Agency or any Holder, solely to address changes to the Servicer's method of
calculating TC Payments as a result of changes to the Servicer's current
computerized customer information system, including changes which would replace
the remittances contemplated by the estimation procedures set forth in Annex I
with remittances of TC Collections determined to have been actually received;
provided that any such amendment shall not have a material adverse effect on the
Holders of then Outstanding Notes.

                                       27
<PAGE>

         SECTION 8.02. PUCT Condition. Notwithstanding anything to the contrary
in Section 8.01(a), no amendment or modification of this Agreement shall be
effective except upon satisfaction of the conditions precedent in this Section
8.02.

         (a) At least fifteen days prior to the effectiveness of any such
amendment or modification and after obtaining the other necessary approvals set
forth in Section 8.01(a) above (except that the consent of the Indenture Trustee
may be subject to the consent of Holders if such consent is required or sought
by the Indenture Trustee in connection with such amendment or modification), the
Servicer shall have delivered to the PUCT's executive director and general
counsel written notification of any proposed amendment, which notification shall
contain:

                  (i) a reference to Docket No. 21528;

                  (ii) an Officer's Certificate stating that the proposed
         amendment or modification has been approved by all parties to this
         Agreement; and

                  (iii) a statement identifying the person to whom the PUCT or
         its staff is to address any response to the proposed amendment or to
         request additional time;

         (b) If the PUCT or its staff shall have, within fifteen days (subject
to extension as provided in Section 8.02(c) below) of receiving a notification
complying with Section 8.02(a) above, delivered to the office of the person
specified in Section 8.02(a)(iii) above a written statement that the PUCT might
object to the proposed amendment or modification, then such proposed amendment
or modification shall not be effective unless and until the PUCT subsequently
delivers a written statement in writing that it does not object to such proposed
amendment or modification.

         (c) If the PUCT or its staff shall have, within fifteen days of
receiving a notification complying with Section 8.02(a) above, delivered to the
office of the person specified in Section 8.02(a)(iii) above a written statement
requesting an additional amount of time not to exceed thirty days in which to
consider such proposed amendment or modification, then such proposed amendment
or modification shall not be effective if, within such extended period, the PUCT
shall have delivered to the office of the person specified in Section
8.02(a)(iii) above a written statement as described in Section 8.02(b) above,
unless and until the PUCT subsequently delivers a written statement in writing
that it does not object to such proposed amendment or modification.

         (d) If the PUCT or its staff shall have not delivered written notice
that the PUCT might object to such proposed amendment or modification within the
time periods described in Section 8.02(b) or Section 8.02(c) above, whichever is
applicable, then the PUCT shall be conclusively deemed not to have any objection
to the proposed amendment or modification and such amendment or modification may
subsequently become effective upon satisfaction of the other conditions
specified in Section 8.01.

                                       28
<PAGE>

         (e) Following the delivery of a notice to the PUCT by the Servicer
under Section 8.02(a) above, the Servicer and the Note Issuer shall have the
right at any time to withdraw from the PUCT further consideration of any
notification of a proposed amendment.

         SECTION 8.03. Maintenance of Accounts and Records. (a) The Servicer
shall maintain accounts and records as to the Transition Property accurately and
in accordance with its standard accounting procedures and in sufficient detail
to permit reconciliation between TC Payments received by the Servicer and TC
Collections from time to time deposited in the Collection Account.

         (a) The Servicer shall permit the Indenture Trustee and its agents at
any time during normal business hours, upon reasonable notice to the Servicer
and to the extent it does not unreasonably interfere with the Servicer's normal
operations, to inspect, audit and make copies of and abstracts from the
Servicer's records regarding the Transition Property and the Transition Charges.
Nothing in this Section 8.03(b) shall affect the obligation of the Servicer to
observe any applicable law (including any PUCT Regulation) prohibiting
disclosure of information regarding the Customers, and the failure of the
Servicer to provide access to such information as a result of such obligation
shall not constitute a breach of this Section 8.03(b).

         SECTION 8.04. Notices. Unless otherwise specifically provided herein,
all demands, notices and communications upon or to the Servicer, the Note
Issuer, the Indenture Trustee or the Rating Agencies under this Agreement shall
be sufficiently given for all purposes hereunder if in writing and delivered
personally, sent by documented delivery service or, to the extent receipt is
confirmed telephonically, sent by telecopy or other form of electronic
transmission, (a) in the case of the Servicer, to Central Power and Light
Company, at 1 Riverside Plaza, Columbus, Ohio 43215, Attention of Treasurer,
telephone: (614) 223-1000, facsimile: (614) 223-2807 (b) in the case of the Note
Issuer to CPL Transition Funding LLC at 1616 Woodall Rodgers Freeway, Dallas,
Texas 75202, Attention of Wendy G. Hargus, Manager, telephone: (214) 777-1338,
facsimile: (214) 777-1223, (c) in the case of the Indenture Trustee, to it at
the Corporate Trust Office, telephone: (312) 836-6716, facsimile: (312)
836-6701, (d) in the case of the PUCT, to 1701 N. Congress Avenue, Austin, Texas
78711-3326, Attention of Executive Director and General Counsel, telephone:
(512) 936-7040, facsimile: (512) 936-7036, (e) in the case of Moody's, to
Moody's Investors Service, Inc., ABS Monitoring Department, 99 Church Street,
New York, New York 10007, telephone: (212) 553-3686, facsimile: (212) 553-0573,
(f) in the case of S&P, to Standard & Poor's, 55 Water Street, 41st Floor, New
York, New York 10041, Attention of Asset Backed Surveillance Department,
telephone: (212) 438-2000, facsimile: (212) 438-2665, (g) in the case of Fitch,
to Fitch Ratings, One State Street Plaza, New York, NY 10004, Attention of ABS
Surveillance, telephone: (212) 908-0500, facsimile: (212) 908-0355, or (h) as to
each of the foregoing, at such other address as shall be designated by written
notice to the other parties.

         SECTION 8.05. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Section 6.03 and as provided in the
provisions of this

                                       29
<PAGE>

Agreement concerning the resignation of the Servicer, this Agreement may not be
assigned by the Servicer.

         SECTION 8.06. Limitations on Rights of Others. The provisions of this
Agreement are solely for the benefit of the Servicer and the Note Issuer and, to
the extent provided herein or in the Basic Documents, the Indenture Trustee and
the Holders, and the other Persons expressly referred to herein, and such
Persons shall have the right to enforce the relevant provisions of this
Agreement. Nothing in this Agreement, whether express or implied, shall be
construed to give to any other Person any legal or equitable right, remedy or
claim in the Transition Property or under or in respect of this Agreement or any
covenants, conditions or provisions contained herein.

         SECTION 8.07. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remainder of such provision (if any) or the remaining
provisions hereof (unless such a construction shall be unreasonable), and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.

         SECTION 8.08. Separate Counterparts. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.

         SECTION 8.09. Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.

         SECTION 8.10. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, (OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW
YORK GENERAL OBLIGATIONS LAW), AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

         SECTION 8.11. Assignment to Indenture Trustee. The Servicer hereby
acknowledges and consents to any mortgage, pledge, assignment and grant of a
security interest by the Note Issuer to the Indenture Trustee for the benefit of
the Holders pursuant to the Indenture of any or all of the Note Issuer's rights
hereunder.

         SECTION 8.12. Nonpetition Covenants. Notwithstanding any prior
termination of this Agreement or the Indenture, the Servicer shall not, prior to
the date which is one year and one day after the termination of the Indenture,
with respect to the Note Issuer, acquiesce, petition or otherwise invoke or
cause the Note Issuer to invoke or join with any

                                       30
<PAGE>

Person in provoking the process of any Governmental Authority for the purpose of
commencing or sustaining a case against the Note Issuer under any federal or
state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Note Issuer or any substantial part of the property of the Note Issuer or
ordering the dissolution, winding up or liquidation of the affairs of the Note
Issuer.

         SECTION 8.13. Limitation of Liability. It is expressly understood and
agreed by the parties hereto that this Agreement is executed and delivered by
the Indenture Trustee, not individually or personally but solely as Indenture
Trustee on behalf of the Holders, in the exercise of the powers and authority
conferred and vested in it.

                                       31
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers as of the day and year first above
written.

                                       CPL TRANSITION FUNDING LLC

                                       By: /s/ Wendy G. Hargus
                                           ---------------------------
                                           as Manager
                                           Name: Wendy G. Hargus

                                       CENTRAL POWER AND LIGHT COMPANY

                                       By: /s/ Wendy G. Hargus
                                           ---------------------------
                                           Name:  Wendy G. Hargus
                                           Title: Assistant Treasurer

Acknowledged and Accepted:

U.S. BANK NATIONAL ASSOCIATION,
as Indenture Trustee

By: /s/ Melissa A. Rosal
    ---------------------------
    Name:  Melissa A. Rosal
    Title: Vice President


            Signature Page to Transition Property Servicing Agreement


<PAGE>

                                    EXHIBIT A

                             TO TRANSITION PROPERTY

                               SERVICING AGREEMENT

                         MONTHLY SERVICER'S CERTIFICATE
<PAGE>


                     FORM OF MONTHLY SERVICER'S CERTIFICATE
           (TO BE DELIVERED EACH MONTH PURSUANT TO SECTION 3.01(b)(i)
                OF THE TRANSITION PROPERTY SERVICING AGREEMENT)

                CPL TRANSITION FUNDING LLC, Series 2002-1 Notes
                  Central Power and Light Company, as Servicer

         Pursuant to the Transition Property Servicing Agreement dated
          as of [February 7, 2002] the "Transition Property Servicing
              Agreement") between Central Power and Light Company,
          as Servicer, and CPL Transition Funding LLC, as Note Issuer,
                  the Servicer does hereby certify as follows:

               COLLECTION PERIOD:      Mar-2002

<Table>
<Caption>
<S>                                         <C>                <C>                 <C>
TC Class                                    a. TCs in Effect   b. TCs Billed       c. Estimated TC
                                                                                      Payments Received

Residential                                    __ cents/kWh

Commercial & Small Industrial - Energy         __ cents/kWh

Commercial & Small Industrial - Demand              __ $/kW

Large Industrial - Firm                             __ $/kW

Large Industrial - Non-firm                         __ $/kW

Standby - Firm                                      __ $/kW

Standby - Non-Firm                                  __ $/kW

Municipal & Cotton Gin                         __ cents/kWh

                                    Total                                  $0                          $0
</Table>

               COLLECTION PERIOD:      Mar-2001

<Table>
<Caption>
<S>                                         <C>                <C>                 <C>                        <C>
TC Class                                    d. Estimated TC    e. Actual TC        f. Remittance Shortfall    g. Excess Remittance
                                               Payments           Payments            for this Collection        for this Collection
                                               Received           Received            Period                     Period

Residential                                                                                            $0                       $0

Commercial & Small Industrial - Energy                                                                  0                        0

Commercial & Small Industrial - Demand                                                                  0                        0

Large Industrial - Firm                                                                                 0                        0

Large Industrial - Non-firm                                                                             0                        0

Standby - Firm                                                                                          0                        0

Standby - Non-Firm                                                                                      0                        0

Municipal & Cotton Gin                                                                                  0                        0

                                                                                                       --                       --
                                    Total             $0                   $0                          $0                       $0

h.   Daily remittances previously made by the Servicer to the Collection Account in respect of this Collection Period (c)       $0

i.   The amount to be remitted by the Servicer to the Collection Account for this Collection Period is (c + f - g):             $0

j.   if (i is greater than h), (i-h) equals net amount due from the Servicer to the Collection Account;                         $0

k.   if (h is greater than i), (h-i) equals net amount due to the Servicer from the Collection Account;                         $0
</Table>

Capitalized terms used herein have their respective meanings set forth in the
Transition Property Servicing Agreement.

In WITNESS HEREOF, the undersigned has duly executed and delivered this Monthly
Servicer's Certificate this ( )th day of April, 2002.

CENTRAL POWER AND LIGHT COMPANY, as Servicer

By ________________________
Title: Assistant Treasurer

<PAGE>

                                    EXHIBIT B

                             TO TRANSITION PROPERTY

                               SERVICING AGREEMENT

                            CERTIFICATE OF COMPLIANCE

         The undersigned hereby certifies that he/she is the duly elected and
acting _________________ of [NAME OF SERVICER], as servicer (the "Servicer")
under the Transition Property Servicing Agreement dated as of [__________], 2002
(the "Servicing Agreement") between the Servicer and CPL Transition Funding LLC
(the "Note Issuer") and further that:

         1. A review of the activities of the Servicer and of its performance
under the Servicing Agreement during the twelve months ended [________], [____]
has been made under the supervision of the undersigned pursuant to Section 3.03
of the Servicing Agreement; and

         2. To the best of the undersigned's knowledge, based on such review,
the Servicer has fulfilled all of its obligations in all material respects under
the Servicing Agreement throughout the twelve months ended [________],[_____],
except as set forth on Annex A hereto.

         Executed as of this ______________ day of _________________, ____.

                                       [NAME OF SERVICER]


                                       By:
                                           --------------------------------
                                           Name:
                                           Title:

<PAGE>

                                     ANNEX A

                          TO CERTIFICATE OF COMPLIANCE

                            LIST OF SERVICER DEFAULTS

The following Servicer Defaults, or events which with the giving of notice, the
lapse of time, or both, would become Servicer Defaults known to the undersigned
occurred during the year ended

[           ], [          ]:
 -----------    ----------

          Nature of Default            Status

<PAGE>

                                    EXHIBIT C

                             TO TRANSITION PROPERTY

                               SERVICING AGREEMENT

                             SERVICER'S CERTIFICATE

<PAGE>

                                                Exhibit C of Servicing Agreement


                   FORM OF SEMI-ANNUAL SERVICER'S CERTIFICATE
-------------------------------------------------------------------------------
                  CENTRAL POWER AND LIGHT COMPANY, AS SERVICER
                           CPL TRANSITION FUNDING LLC


     Pursuant to Section [4.01(c)(ii)] of the Transition Property Servicing
   Agreement dated as of [February 7, 2002] (the "Agreement") between Central
  Power and Light Company, as Servicer and CPL Transition Funding LLC, as Note
              Issuer, the Servicer does hereby certify as follows:


   Capitalized terms used herein have their respective meanings as set forth
  in the Agreement. References herein to certain sections and subsections are
            references to the respective sections of the Agreement.


COLLECTION PERIODS:    Feb-2002 to Dec-2002
  PAYMENT DATE:            01/15/2003

1.   COLLECTIONS ALLOCABLE AND AGGREGATE AMOUNTS AVAILABLE FOR THE CURRENT
     PAYMENT DATE:

        i.  Remittances for the 02/02 Collection Period
       ii.  Remittances for the 03/02 Collection Period
      iii.  Remittances for the 04/02 Collection Period
       iv.  Remittances for the 05/02 Collection Period
        v.  Remittances for the 06/02 Collection Period
       vi.  Remittances for the 07/02 Collection Period
      vii.  Remittances for the 08/02 Collection Period (after 01/03,
            use 6 prior periods only)*
     viii.  Remittances for the 09/02 Collection Period (after 01/03,
            use 6 prior periods only)*
       ix.  Remittances for the 10/02 Collection Period (after 01/03,
            use 6 prior periods only)*
        x.  Remittances for the 11/02 Collection Period (after 01/03,
            use 6 prior periods only)*
       xi.  Remittances for the 12/02 Collection Period (after 01/03,
            use 6 prior periods only)*
      xii.  Investment Earnings on Collection Account
              xiii.  Investment Earnings on Capital Subaccount
               xiv.  Investment Earnings on Overcollateralization
                     Subaccount
                xv.  Investment Earnings on Reserve Subaccount
               xvi.  Investment Earnings on General Subaccount
                                                                       ---------
     xvii.  GENERAL SUBACCOUNT BALANCE (SUM OF i THROUGH xvi ABOVE)         0.00
                                                                       =========


    xviii.  Reserve Subaccount Balance as of Prior Payment Date
      xix.  Overcollateralization Subaccount Balance as of Prior
            Payment Date
       xx.  Capital Subaccount Balance as of Prior Payment Date
                                                                       ---------
      xxi.  COLLECTION ACCOUNT BALANCE (SUM OF xvii THROUGH xx ABOVE)       0.00
                                                                       =========


                                                                          Page 1
<PAGE>


                                                Exhibit C of Servicing Agreement

2.   OUTSTANDING AMOUNTS AS OF PRIOR PAYMENT DATE:


        SERIES 2002-1
        -------------
        i.  Class A-1 Outstanding Amount
       ii.  Class A-2 Outstanding Amount
      iii.  Class A-3 Outstanding Amount
       iv.  Class A-4 Outstanding Amount
        v.  Class A-5 Outstanding Amount
                                                                       ---------
       vi.  AGGREGATE OUTSTANDING AMOUNT OF ALL SERIES 2002-1 NOTES         0.00
                                                                       =========
            [Add Other Series as applicable)

                                                                       ---------
      vii. AGGREGATE OUTSTANDING AMOUNT OF ALL NOTES                        0.00
                                                                       =========

3.   REQUIRED FUNDING/PAYMENTS AS OF CURRENT PAYMENT DATE:

<Table>
<Caption>
                                                                       PRINCIPAL
SERIES 2002-1 PRINCIPAL                                                   DUE
-----------------------                                                ---------
<S>                                                                    <C>
        i.  Class A-1
       ii.  Class A-2
      iii.  Class A-3
       iv.  Class A-4
        v.  Class A-5
                                                                       ---------
       vi.  FOR ALL SERIES 2002-1 NOTES                                     0.00
                                                                       =========
</Table>
            [Add Other Series as applicable)

<Table>
<Caption>
                                        NOTE INTEREST     DAYS IN INTEREST     PRINCIPAL
SERIES 2002-1 INTEREST                      RATE             PERIOD (1)         BALANCE           INTEREST DUE
----------------------                      ----             ----------        -------            ------------
<S>                                     <C>               <C>                  <C>                <C>
      vii.  Class A-1                       3.75%               340                 0.00                    0.00
     viii.  Class A-2                       5.45%               340                 0.00                    0.00
       ix.  Class A-3                       5.94%               340                 0.00                    0.00
        x.  Class A-4                       6.37%               340                 0.00                    0.00
       xi.  Class A-5                       6.66%               340                 0.00                    0.00
                                                                                                       ---------
      xii.  FOR ALL SERIES 2002-1 NOTES                                                                     0.00
                                                                                                       =========
</Table>
            [Add Other Series as applicable)

<Table>
<Caption>
                                             REQUIRED LEVEL     FUNDING REQUIRED
                                             --------------     ----------------
<S>                                             <C>                <C>
     xiii.  Overcollateralization Subaccount
      xiv.  Capital Subaccount
                                                ---------          ---------
                                                     0.00               0.00
                                                =========          =========
</Table>

NOTES:

1.   On 30/360 day basis for initial payment date; otherwise use one-half of
     annual rate.


                                                                          Page 2
<PAGE>



                                                Exhibit C of Servicing Agreement


4.   ALLOCATION OF REMITTANCES AS OF CURRENT PAYMENT DATE PURSUANT TO 8.02(d)
     OF INDENTURE:


        i.  Trustee Fees and Expenses (subject to cap - see 8.02(e)(i) of the
            Indenture)

       ii.  Servicing Fee

      iii.  Operating Expenses (subject to cap - see 8.02(e)(iii) of the
            Indenture)

       iv.  Semi-Annual Interest (including any past-due for prior
            period(s)                                                       0.00


<Table>
<Caption>
                                                           PER $1000 OF ORIGINAL
SERIES 2002-1                         AGGREGATE               PRINCIPAL AMOUNT
-------------                         ---------            ---------------------
<S>                                   <C>                  <C>
1.  Class A-1 Interest Payment             0.00            #DIV/01
2.  Class A-2 Interest Payment             0.00            #DIV/01
3.  Class A-3 Interest Payment             0.00            #DIV/01
4.  Class A-4 Interest Payment             0.00            #DIV/01
5.  Class A-5 Interest Payment             0.00            #DIV/01
                                      ---------
                                           0.00
                                      =========
</Table>
            (Add Other Series as Applicable)



        v.  Principal Due and Payable as a Result of Event of Default or
            on Final Maturity Date                                          0.00


<Table>
<Caption>
                                                           PER $1000 OF ORIGINAL
SERIES 2002-1                         AGGREGATE               PRINCIPAL AMOUNT
-------------                         ---------            ---------------------
<S>                                   <C>                  <C>
1.  Class A-1 Principal Payment                             #DIV/01
2.  Class A-2 Principal Payment                             #DIV/01
3.  Class A-3 Principal Payment                             #DIV/01
4.  Class A-4 Principal Payment                             #DIV/01
5.  Class A-5 Principal Payment                             #DIV/01
                                      ---------
                                           0.00
                                      =========
</Table>
            (Add Other Series as Applicable)


         vi.  Semi-Annual Principal

<Table>
<Caption>
                                                           PER $1000 OF ORIGINAL
SERIES 2002-1                         AGGREGATE               PRINCIPAL AMOUNT
-------------                         ---------            ---------------------
<S>                                   <C>                  <C>
1.  Class A-1 Principal Payment                             #DIV/01
2.  Class A-2 Principal Payment                             #DIV/01
3.  Class A-3 Principal Payment                             #DIV/01
4.  Class A-4 Principal Payment                             #DIV/01
5.  Class A-5 Principal Payment                             #DIV/01
                                      ---------
                                           0.00
                                      =========
</Table>
            (Add Other Series as Applicable)



                                                                          Page 3
<PAGE>



                                                Exhibit C of Servicing Agreement


4.   ALLOCATION OF REMITTANCES AS OF CURRENT PAYMENT DATE PURSUANT TO 8.02(d) OF
     INDENTURE (CONTINUED):

      vii.  Funding of Capital Subaccount (to required level)               0.00
     viii.  Funding of Overcollateralization Subaccount (to required
            level)                                                          0.00
       ix.  Investment Earnings on Capital Subaccount Released to Note
            Issuer                                                          0.00
        x.  Deposit to Reserve Subaccount                                   0.00
       xi.  Released to Note Issuer upon Retirement of all Notes            0.00
                                                                       ---------
      xii.  AGGREGATE REMITTANCES AS OF CURRENT PAYMENT DATE                0.00
                                                                       =========

5.   OUTSTANDING AMOUNT AND COLLECTION ACCOUNT BALANCE AS OF CURRENT PAYMENT
     DATE (AFTER GIVING EFFECT TO PAYMENTS TO BE MADE ON SUCH PAYMENT DATE):

        SERIES 2002-1
        -------------
        i.  Class A-1 Outstanding Amount                                    0.00
       ii.  Class A-2 Outstanding Amount                                    0.00
      iii.  Class A-3 Outstanding Amount                                    0.00
       iv.  Class A-4 Outstanding Amount                                    0.00
        v.  Class A-5 Outstanding Amount                                    0.00
                                                                       ---------
       vi.  AGGREGATE OUTSTANDING AMOUNT OF ALL SERIES 2002-1 NOTES         0.00
                                                                       =========
       {Add Other Series as applicable}
                                                                       ---------
      vii.  AGGREGATE OUTSTANDING AMOUNT OF ALL NOTES                       0.00
                                                                       =========

     viii.  Reserve Subaccount Balance                                      0.00
       ix.  Overcollateralization Subaccount Balance                        0.00
        x.  Capital Subaccount Balance                                      0.00
                                                                       ---------
       xi.  AGGREGATE COLLECTION ACCOUNT BALANCE                            0.00
                                                                       =========

6.   SUBACCOUNT WITHDRAWALS AS OF CURRENT PAYMENT DATE
     (IF APPLICABLE, PURSUANT TO SECTION 8.02(e) OF INDENTURE):

        i.  Reserve Subaccount
       ii.  Overcollateralization Subaccount
      iii.  Capital Subaccount
                                                                       ---------
       iv.  TOTAL WITHDRAWALS                                               0.00
                                                                       =========


                                                                          Page 4
<PAGE>



                                                Exhibit C of Servicing Agreement

7.   SHORTFALLS IN INTEREST AND PRINCIPAL PAYMENTS AS OF CURRENT
     PAYMENT DATE:                                                     ---------

                                                                       =========
        i.  Semi-annual Interest

        SERIES 2002-1
        -------------
        1.  Class A-1 Interest Payment
        2.  Class A-2 Interest Payment
        3.  Class A-3 Interest Payment
        4.  Class A-4 Interest Payment
        5.  Class A-5 Interest Payment                                 ---------
                                                                            0.00
                                                                       =========
         (Add Other Series as Applicable)

       ii.  Semi-annual Principal                                      ---------

                                                                       =========

        SERIES 2002-1
        -------------
        1.  Class A-1 Principal Payment
        2.  Class A-2 Principal Payment
        3.  Class A-3 Principal Payment
        4.  Class A-4 Principal Payment
        5.  Class A-5 Principal Payment                                ---------
                                                                            0.00
                                                                       =========

         (Add Other Series as Applicable)

8.   SHORTFALLS IN REQUIRED SUBACCOUNT LEVELS AS OF CURRENT PAYMENT DATE:

        i.  Overcollateralization Subaccount
       ii.  Capital Subaccount                                         ---------
                                                                            0.00
                                                                       =========


IN WITNESS HEREOF, the undersigned has duly executed and delivered this
Semi-Annual Servicer's Certificate this ---- day of ----------------, ----.




CENTRAL POWER AND LIGHT COMPANY, as Servicer


by: --------------------------

title: -----------------------



                                                                          Page 5
<PAGE>
                                SCHEDULE 4.01(a)

                             TO TRANSITION PROPERTY

                               SERVICING AGREEMENT

                         EXPECTED AMORTIZATION SCHEDULE

<PAGE>
                                                               SCHEDULE 4.01(a)

                         EXPECTED AMORTIZATION SCHEDULE

                         OUTSTANDING PRINCIPAL BALANCE

<Table>
DATE                           CLASS A-1      CLASS A-2      CLASS A-3      CLASS A-4      CLASS A-5
----                          ------------   ------------   ------------   ------------   ------------
<S>                          <C>            <C>            <C>            <C>            <C>
Series Issuance Date ......   $128,950,233   $154,506,810   $107,094,258   $214,926,738   $191,856,858
January 15, 2003 ..........     97,133,531    154,506,810    107,094,258    214,926,738    191,856,858
July 15, 2003 .............     77,937,455    154,506,810    107,094,258    214,926,738    191,856,858
January 15, 2004 ..........     49,128,416    154,506,810    107,094,258    214,926,738    191,856,858
July 15, 2004 .............     29,386,451    154,506,810    107,094,258    214,926,738    191,856,858
January 15, 2005 ..........              0    154,506,810    107,094,258    214,926,738    191,856,858
July 15, 2005 .............              0    133,913,828    107,094,258    214,926,738    191,856,858
January 15, 2006 ..........              0    103,272,491    107,094,258    214,926,738    191,856,858
July 15, 2006 .............              0     81,649,042    107,094,258    214,926,738    191,856,858
January 15, 2007 ..........              0     49,523,804    107,094,258    214,926,738    191,856,858
July 15, 2007 .............              0     28,919,685    107,094,258    214,926,738    191,856,858
January 15, 2008 ..........              0              0    107,094,258    214,926,738    191,856,858
July 15, 2008 .............              0              0     85,906,616    214,926,738    191,856,858
January 15, 2009...........              0              0     55,016,428    214,926,738    191,856,858
July 15, 2009 .............              0              0     32,279,500    214,926,738    191,856,858
January 15, 2010 ..........              0              0              0    214,926,738    191,856,858
July 15, 2010 .............              0              0              0    190,631,083    191,856,858
January 15, 2011 ..........              0              0              0    156,759,473    191,856,858
July 15, 2011 .............              0              0              0    130,670,070    191,856,858
January 15, 2012 ..........              0              0              0     95,071,985    191,856,858
July 15, 2012 .............              0              0              0     67,236,582    191,856,858
January 15, 2013 ..........              0              0              0     29,655,892    191,856,858
July 15, 2013 .............              0              0              0              0    191,856,858
January 15, 2014 ..........              0              0              0              0    152,143,608
July 15, 2014 .............              0              0              0              0    120,262,573
January 15, 2015 ..........              0              0              0              0     78,412,359
July 15, 2015 .............              0              0              0              0     44,198,278
January 15, 2016 ..........              0              0              0              0              0
</Table>

<PAGE>

                                     ANNEX I

                             TO TRANSITION PROPERTY

                               SERVICING AGREEMENT

The Servicer agrees to comply with the following servicing procedures:

         SECTION 1. DEFINITIONS.

         (a) Capitalized terms used herein and not otherwise defined shall have
the meanings set forth in the Agreement.

         (b) Whenever used in this Annex I, the following words and phrases
shall have the following meanings:

               "Applicable MDMA" means with respect to each Customer, the meter
data management agent providing meter reading services for that Customer's
account.

               "Billed TCs" means the amounts of Transition Charges billed to
Customers, whether billed directly to such Customers by the Servicer or
indirectly through an Applicable REP pursuant to Consolidated REP Billing.

               "Budget Billing Plan" means the alternative payment plan offered
by the Servicer that allows residential and commercial customers who have
satisfactory credit the opportunity for a monthly budget payment which allows
the customer to pay roughly equal amounts each month based on its expected
average consumption for the year.

               "Closing Bill" means the final bill issued to a Customer at the
time service is terminated.

               "Price to Beat" has the meaning assigned to such term in Section
39.202 of the Utilities Code.

               "Price to Beat Period" means the period during which CPL and its
affiliated REP must, under Section 39.202 of the Utilities Code, offer rates to
residential and small commercial Customers which, on a bundled basis, equal the
Price to Beat.

               "Servicer Policies and Practices" means, with respect to the
Servicer's duties under this Annex I, the policies and practices of the Servicer
applicable to such duties that the Servicer follows with respect to comparable
assets that it services for itself and, if applicable, others.

<PAGE>

         SECTION 2. DATA ACQUISITION.

         (a) Installation and Maintenance of Meters. Except to the extent that
an REP is responsible for such services, the Servicer shall cause to be
installed, replaced and maintained meters in such places and in such condition
as will enable the Servicer to obtain usage measurements for each Customer at
least once every Billing Period. To the extent the REP is responsible for such
services, but not performing such services, the Servicer shall take all
reasonably necessary actions to obtain usage measurements for each Customer at
least once every Billing Period.

         (b) Meter Reading. At least once each Billing Period, the Servicer
shall obtain usage measurements from the Applicable MDMA for each Customer;
provided, however, that the Servicer may determine any Customer's usage on the
basis of estimates in accordance with applicable PUCT Regulations.

         (c) Cost of Metering. The Note Issuer shall not be obligated to pay any
costs associated with the metering duties set forth in this Section 2, including
the costs of installing, replacing and maintaining meters, nor shall the Note
Issuer be entitled to any credit against the Servicing Fee for any cost savings
realized by the Servicer or any REP as a result of new metering and/or billing
technologies.

         (d) ERCOT. The Servicer shall take all reasonable actions available
under PUCT Regulations to obtain timely information from ERCOT (or, if such
information is not available from ERCOT, directly from the Applicable MDMA)
which is necessary for the Servicer to fulfill its obligations under the
Servicing Agreement.

         SECTION 3. USAGE AND BILL CALCULATION.

         The Servicer shall obtain a calculation of each Customer's usage (which
may be based on data obtained from such Customer's meter read or on usage
estimates determined in accordance with applicable PUCT Regulations) at least
once each Billing Period and shall determine therefrom each Customer's
individual Transition Charges to be included on such Customer's Bill; provided,
however, that in the case of Customers taking service under Consolidated REP
Billing, the Applicable REP, rather than the Servicer, may determine such
Customers' individual Transition Charges to be included on such Customer's Bills
based on billing factors provided by the Servicer, and, in such case, the
Servicer shall deliver to the Applicable REP such billing factors as are
necessary for the Applicable REP to calculate such Customers' respective
Transition Charges as such charges may change from time to time pursuant to the
True-Up Adjustments.

         SECTION 4. BILLING.

         The Servicer shall implement the Transition Charges as of the Closing
Date and shall thereafter bill each Customer or, with respect to Customer's
billed by a REP, the Applicable REP for the respective Customer's outstanding
current and past due Transition Charges accruing

                                       2
<PAGE>

through the date on which such Transition Charges may no longer be billed under
the Tariff, all in accordance with the following:

         (a) Frequency of Bills; Billing Practices. In accordance with the
Servicer's then-existing Servicer Policies and Practices for its own charges, as
such Servicer Policies and Practices may be modified from time to time, the
Servicer shall generate and issue a Bill to each Customer, or, beginning on the
date of customer choice for any retail Customer, in the case of a Customer
taking service under Consolidated REP Billing, to the Applicable REP, for such
Customer's or REP's Customer's respective Transition Charges once every
applicable Billing Period, at the same time, with the same frequency and on the
same Bill as that containing the Servicer's own charges to such Customer or REP,
as the case may be. In the event that the Servicer makes any material
modification to these practices, it shall notify the Note Issuer, the Indenture
Trustee, and the Rating Agencies prior to the effectiveness of any such
modification; provided, however, that the Servicer may not make any modification
that will materially adversely affect the Holders.

         (b) Format.

               (i) Each Bill to a Customer shall contain the charge
corresponding to the respective Transition Charges owed by such Customer for the
applicable Billing Period. The Transition Charges shall be separately identified
if required by and in accordance with the terms of the related Financing Orders
and Tariffs. If such charges are not separately identified, the Servicer shall
provide, and unless prohibited by applicable PUCT Regulations, shall cause each
Applicable REP to provide, Customers with the annual notice required by Section
4.01(c)(iii)(B) of the Servicing Agreement.

               (ii) In the case of each Customer served by an REP under
Consolidated REP Billing, the Servicer shall deliver to the Applicable REP
itemized charges for such Customer setting forth such Customer's Transition
Charges.

               (iii) The Servicer shall conform to such requirements in respect
of the format, structure and text of Bills delivered to Customers and REPs as
applicable PUCT Regulations shall from time to time prescribe. To the extent
that Bill format, structure and text are not prescribed by the Utilities Code or
by applicable PUCT Regulations, the Servicer shall, subject to clauses (i) and
(ii) above, determine the format, structure and text of all Bills in accordance
with its reasonable business judgment, its Servicer Policies and Practices with
respect to its own charges and prevailing industry standards.

         (c) Delivery. The Servicer shall deliver all Bills to Customers (i) by
United States Mail in such class or classes as are consistent with the Servicer
Policies and Practices followed by the Servicer with respect to its own charges
to its customers or (ii) by any other means, whether electronic or otherwise,
that the Servicer may from time to time use to present its own charges to its
customers. In the case of Customers taking service under Consolidated REP
Billing, the Servicer shall deliver all Bills to the Applicable REP by such
means as are prescribed by applicable PUCT Regulations, or if not prescribed

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by applicable PUCT Regulations, by such means as are mutually agreed upon by the
Servicer and the Applicable REP and are consistent with PUCT Regulations. The
Servicer or an REP, as applicable, shall pay from its own funds all costs of
issuance and delivery of all Bills, including but not limited to printing and
postage costs as the same may increase or decrease from time to time.

         (d) Allocations of Transition Charges. During the Price to Beat Period,
for those Customers that are being charged the Price to Beat, Transition Charges
shall be deducted from other charges to such Customers in order to ensure that
the total rates paid by such Customers equal the Price to Beat. For (i)
Customers not being charged the Price to Beat during the Price to Beat Period or
(ii) all Customers after the Price to Beat Period, Transition Charges will be
added to charges otherwise owed by such Customers.

         SECTION 5. CUSTOMER SERVICE FUNCTIONS.

         The Servicer shall handle all Customer inquiries and other Customer
service matters according to the same procedures it uses to service Customers
with respect to its own charges.

         SECTION 6. COLLECTIONS; PAYMENT PROCESSING; REMITTANCE.

         (a) Collection Efforts, Policies, Procedures.

               (i) The Servicer shall use reasonable efforts to collect all
Billed TCs from Customers and Third-Party Collectors (including REPs) as and
when the same become due and shall follow such collection procedures as it
follows with respect to comparable assets that it services for itself or others,
including with respect to the following:

               (A)  The Servicer shall prepare and deliver overdue notices to
                    Customers and REPs in accordance with applicable PUCT
                    Regulations and Servicer Policies and Practices.

               (B)  The Servicer shall apply late payment charges to outstanding
                    Customer and REP balances in accordance with applicable PUCT
                    Regulations and as required by the Financing Order.

               (C)  The Servicer shall deliver verbal and written final notices
                    of delinquency and possible disconnection in accordance with
                    applicable PUCT Regulations and Servicer Policies and
                    Practices.

               (D)  The Servicer shall adhere to and carry out disconnection
                    policies and termination of REP billing in accordance with
                    the Utilities Code, the Financing Order, applicable PUCT
                    Regulations and the Servicer Policies and Practices.

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<PAGE>

               (E)  The Servicer may employ the assistance of collection agents
                    to collect any past-due Transition Charges in accordance
                    with applicable PUCT Regulations and Servicer Policies and
                    Practices and the Tariffs.

               (F)  The Servicer shall apply Customer and REP deposits to the
                    payment of delinquent accounts in accordance with applicable
                    PUCT Regulations and Servicer Policies and Practices and
                    according to the priorities set forth in Section 6(b)(ii),
                    (iii), (iv) and (v) of this Annex I.

               (ii) The Servicer shall not waive any late payment charge or any
other fee or charge relating to delinquent payments, if any, or waive, vary or
modify any terms of payment of any amounts payable by a Customer, in each case
unless such waiver or action: (A) would be in accordance with the Servicer's
customary practices or those of any successor Servicer with respect to
comparable assets that it services for itself and for others; (B) would not
materially adversely affect the rights of the Holders; and (C) would comply with
applicable law; provided, however, that notwithstanding anything in the
Agreement or this Annex I to the contrary, the Servicer is authorized to write
off any Billed TCs, in accordance with its Servicer Policies and Practices, that
have remained outstanding for 180 days or more.

               (iii) The Servicer shall accept payment from Customers and
Third-Party Collectors (other than REPs) in respect of Billed TCs in such forms
and methods and at such times and places as it accepts for payment of its own
charges. The Servicer shall accept payment from REPs in respect of Billed TCs in
such forms and methods and at such times and places as the Servicer and each REP
shall mutually agree in accordance with applicable PUCT Regulations and the
Servicer shall give prompt written notice to the Rating Agencies of any such
agreements.

         (b) Payment Processing; Allocation; Priority of Payments.

               (i) The Servicer shall post all payments received to Customer
accounts as promptly as practicable, and, in any event, substantially all
payments shall be posted no later than 3 Business Days after receipt.

               (ii) Subject to clause (iii) below, the Servicer shall apply
payments received to each Customer's or Applicable REP's account in proportion
to the charges contained on the outstanding Bill to such Customer or Applicable
REP.

               (iii) Any amounts collected by the Servicer that represent
partial payments of the total Bill to a Customer or REP shall be allocated as
follows: (A) first to amounts owed to the Note Issuer and CPL (excluding any
late fees and interest charges), regardless of age, pro rata in proportion to
their respective percentages of the total amount of their combined outstanding
charges on such Bill; then (B) all late charges shall be allocated to the
Servicer.

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<PAGE>

               (iv) The Servicer shall hold all over-payments for the benefit of
the Note Issuer and CPL and shall apply such funds to future Bill charges in
accordance with clauses (ii) and (iii) above as such charges become due.

               (v) For Customers on a Budget Billing Plan, the Servicer shall
treat TC Payments received from such Customers as if such Customers had been
billed for their respective Transition Charges in the absence of the Budget
Billing Plan; partial payment of a Budget Billing Plan payment shall be
allocated according to clause (iii) above and overpayment of a Budget Billing
Plan payment shall be allocated according to clause (iv) above.

         (c) Accounts; Records.

               The Servicer shall maintain accounts and records as to the
Transition Property accurately and in accordance with its standard accounting
procedures and in sufficient detail (i) to permit reconciliation between
payments or recoveries with respect to the Transition Property and the amounts
from time to time remitted to the Collection Account in respect of the
Transition Property and (ii) to permit the TC Collections held by the Servicer
to be accounted for separately from the funds with which they may be commingled,
so that the dollar amounts of TC Collections commingled with the Servicer's
funds may be properly identified and traced.

         (d) Investment of TC Payments Received.

               Prior to each Daily Remittance, the Servicer may invest TC
Payments received at its own risk and (except as required by applicable PUCT
Regulations) for its own benefit. So long as the Servicer complies with its
obligations under the immediately preceding section (c), neither such
investments nor such funds shall be required to be segregated from the other
investment and funds of the Servicer.

         (e) Calculation of Daily Remittance.

               (i) For purposes of calculating the Daily Remittance, (i) all
Billed TCs shall be deemed to be collected the same number of days after billing
as is equal to the Weighted Average Days Outstanding then in effect and (ii) the
Servicer will, on each Servicer Business Day, remit to the Indenture Trustee for
deposit in the Collection Account an amount equal to the product of the
applicable Billed TCs multiplied by one hundred percent less the system wide
charge-off percentage used by the Servicer to calculate the most recent Periodic
Billing Requirement. Such product shall constitute the amount of Estimated TC
Collections for such Servicer Business Day. Pursuant to Section 6.11(c) of the
Agreement, commencing no later than January 25, 2003, the Servicer shall
calculate in each Monthly Servicer's Certificate Net TC Write-Offs for the
preceding Reconciliation Period and shall subtract such Net TC Write-Offs from
the Billed TCs billed during the preceding Reconciliation Period in order to
determine the amount of Actual TC Collections for the first Collection Period of
such Reconciliation Period. No Excess Remittance shall be withdrawn from the
Collection Account if such withdrawal would cause the amounts on deposit in the
General Subaccount or the Reserve Subaccount to be

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<PAGE>

insufficient for the payment of the next installment of interest or principal
due at maturity on the next Payment Date or upon acceleration on or before the
next Payment Date on the Notes. The Servicer shall be allowed to use the
proceeds from any Excess Remittance to reimburse any Applicable REPs for the
excess of their remittances over actual TC Payments received by such REPs in
accordance with the terms of PUCT Regulations or any applicable REP Service
Agreements.

               (ii) On or before the last billing cycle of January of each year,
in accordance with Section 4.01(b) of the Agreement, the Servicer shall, in a
timely manner so as to perform all required calculations under such Section
4.01(b), update the Weighted Average Days Outstanding and the system-wide
charge-off percentage in order to be able to calculate the Periodic Billing
Requirement for the next True-Up Adjustment and to calculate any change in the
Daily Remittances for the next Calculation Period.

               (iii) The Servicer and the Note Issuer acknowledge that, as
contemplated in Section 8.01(b) of the Agreement, the Servicer may make certain
changes to its current computerized customer information system, which changes,
when functional, would affect the Servicer's method of calculating the TC
Payments estimated to have been received by the Servicer during each Collection
Period as set forth in this Annex. Should these changes to the computerized
customer information system become functional during the term of the Agreement,
the Servicer and the Note Issuer agree that they shall review the procedures
used to calculate the TC Payments estimated to have been received in light of
the capabilities of such new system and shall amend this Annex I in writing to
make such modifications and/or substitutions to such procedures as may be
appropriate in the interests of efficiency, accuracy, cost and/or system
capabilities; provided, however, that the Servicer may not make any modification
or substitution that will materially adversely affect the Noteholders. As soon
as practicable, and in no event later than 60 Business Days after the date on
which all Customer accounts are being billed under such new system, the Servicer
shall notify the Note Issuer, the Indenture Trustee and the Rating Agencies of
the same.

               (iv) All calculations of collections, each update of the Weighted
Average Days Outstanding or system-wide charge off percentage and any changes in
procedures used to calculate the Estimated TC Payments pursuant to this Section
6(e) shall be made in good faith, and in the case of any update pursuant to
clause (ii) or any change in procedures pursuant to clause (iii), in a manner
reasonably intended to provide estimates and calculations that are at least as
accurate as those that would be provided on the Closing Date utilizing the
initial procedures.

         (f) Remittances.

               (i) The Note Issuer shall cause to be established the Collection
Account in the name of the Indenture Trustee in accordance with the Indenture.

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<PAGE>

               (ii) The Servicer shall make remittances to the Collection
Account in accordance with Section 6.11 of the Agreement.

               (iii) In the event of any change of account or change of
institution affecting the Collection Account, the Note Issuer shall provide
written notice thereof to the Servicer not later than five Business Days from
the effective date of such change.

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