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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10-Q

|/x/                                               | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|------------------------------------------------- | ----------------------------------------------------------------------------------------
|For The Quarterly Period Ended September 30, 1999
|OR                                             
|/ /                                               | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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Texas Utilities Company(doing business as TXU Corp)

|A Texas Corporation
Commission File Number 1-12833 |  | I.R.S. Employer Identification
No. 75-2669310
|-------------------------------------------------- |  | ---------------------------------------------

ENERGY
PLAZA, 1601 BRYAN STREET, DALLAS, TEXAS 75201-3411
(214) 812-4600

TXU Electric Company(formerly known as Texas Utilities Electric Company)

|A Texas Corporation
Commission File Number 1-11668 |  | I.R.S. Employer Identification
No. 75-1837355
|-------------------------------------------------- |  | ---------------------------------------------

ENERGY
PLAZA, 1601 BRYAN STREET, DALLAS, TEXAS 75201-3411
(214) 812-4600

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Indicate
by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90
days. Yes /x/  No / /

Common Stock outstanding at November 10, 1999:TXU Corp: 276,406,519 shares, without par value.
TXU Electric Company: 103,874,700 shares, without par value.

This combined Form 10-Q is filed separately by TXU Corp and TXU Electric Company. Information contained herein relating to an individual registrant is filed by that registrant
on its own behalf except that the information with respect to TXU Electric Company, other than the condensed consolidated financial statements of TXU Electric Company, is filed by each of TXU Corp and
TXU Electric Company. Each registrant makes no representation as to information filed by the other registrant.

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TABLE OF CONTENTS

|                                                                                                                           |  | Page
|-------------------------------------------------------------------------------------------------------------------------- |  | ----
|PART I. FINANCIAL INFORMATION                                                                                              |  |     
|Item 1. Financial Statements                                                                                               |  |     
|Texas Utilities Company (doing business as TXU Corp) and Subsidiaries                                                      |  |     
|Condensed Statements of Consolidated Income
Three, Nine and Twelve Months Ended September 30, 1999 and 1998               |  | 3   
|Condensed Statements of Consolidated Comprehensive Income
Three, Nine and Twelve Months Ended September 30, 1999 and 1998 |  | 4   
|Condensed Statements of Consolidated Cash Flows
Nine Months Ended September 30, 1999 and 1998                             |  | 5   
|Condensed Consolidated Balance Sheets
September 30, 1999 and December 31, 1998                                            |  | 6   
|TXU Electric Company and Subsidiaries                                                                                      |  |     
|Condensed Statements of Consolidated Income
Three, Nine and Twelve Months Ended September 30, 1999 and 1998               |  | 8   
|Condensed Statements of Consolidated Comprehensive Income
Three, Nine and Twelve Months Ended September 30, 1999 and 1998 |  | 8   
|Condensed Statements of Consolidated Cash Flows
Nine Months Ended September 30, 1999 and 1998                             |  | 9   
|Condensed Consolidated Balance Sheets
September 30, 1999 and December 31, 1998                                            |  | 10  
|Notes to Condensed Consolidated Financial Statements                                                                       |  | 12  
|Independent Accountants' Reports                                                                                           |  | 24  
|Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations                              |  | 26  
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                                                         |  | 41  
|PART II. OTHER INFORMATION                                                                                                 |  |     
|Item 6. Exhibits and Reports on Form 8-K                                                                                   |  | 42  
|SIGNATURES                                                                                                                 |  | 43  



## 

PART I.  FINANCIAL INFORMATION

Item 1.  FINANCIAL STATEMENTS

TEXAS UTILITIES COMPANY (doing business as TXU CORP) AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
(Unaudited)

|                                                                                                                                                                 |  | Three Months Ended
September 30, |       | Nine Months Ended
September 30, |   | Twelve Months Ended
September 30, |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------- | ----- | ------------------------------- | - | --------------------------------- | -
|
|
|OPERATING REVENUES                                                                                                                                               |  | $                                | 4,435 |                                 | $ | 4,380                             |  
|                                                                                                                                                                 |  |                                  |       |                                 |   |                                   |  
|OPERATING EXPENSES                                                                                                                                               |  |                                  |       |                                 |   |                                   |  
|Fuel and purchased power                                                                                                                                         |  |                                  | 1,228 |                                 |   | 1,157                             |  
|Gas and electricity purchased for resale                                                                                                                         |  |                                  | 1,140 |                                 |   | 1,135                             |  
|Operation and maintenance                                                                                                                                        |  |                                  | 725   |                                 |   | 751                               |  
|Depreciation and other amortization                                                                                                                              |  |                                  | 254   |                                 |   | 359                               |  
|Goodwill amortization                                                                                                                                            |  |                                  | 49    |                                 |   | 39                                |  
|Taxes other than income                                                                                                                                          |  |                                  | 154   |                                 |   | 156                               |  
|                                                                                                                                                                 |  |                                  |       |                                 |   |                                   |  
|Total operating expenses                                                                                                                                         |  |                                  | 3,550 |                                 |   | 3,597                             |  
|                                                                                                                                                                 |  |                                  |       |                                 |   |                                   |  
|OPERATING INCOME                                                                                                                                                 |  |                                  | 885   |                                 |   | 783                               |  
|OTHER INCOME (DEDUCTIONS)NET                                                                                                                                    |  |                                  | 35    |                                 |   | 49                                |  
|                                                                                                                                                                 |  |                                  |       |                                 |   |                                   |  
|INCOME BEFORE INTEREST, OTHER CHARGES AND INCOME TAXES                                                                                                           |  |                                  | 920   |                                 |   | 832                               |  
|                                                                                                                                                                 |  |                                  |       |                                 |   |                                   |  
|INTEREST INCOME                                                                                                                                                  |  |                                  | 36    |                                 |   | 66                                |  
|INTEREST EXPENSE AND OTHER CHARGES                                                                                                                               |  |                                  |       |                                 |   |                                   |  
|Interest                                                                                                                                                         |  |                                  | 373   |                                 |   | 399                               |  
|Distributions on mandatorily redeemable, preferred securities of subsidiary trusts, each holding solely junior subordinated debentures of the obligated company: |  |                                  |       |                                 |   |                                   |  
|TXU obligated                                                                                                                                                    |  |                                  | 5     |                                 |   |                                  |  
|Subsidiary obligated                                                                                                                                             |  |                                  | 20    |                                 |   | 20                                |  
|Preferred stock dividends of subsidiaries                                                                                                                        |  |                                  | 3     |                                 |   | 4                                 |  
|Allowance for borrowed funds used during construction                                                                                                            |  |                                  | (1    | )                               |   | (2                                | )
|                                                                                                                                                                 |  |                                  |       |                                 |   |                                   |  
|Total interest expense and other charges                                                                                                                         |  |                                  | 400   |                                 |   | 421                               |  
|                                                                                                                                                                 |  |                                  |       |                                 |   |                                   |  
|INCOME BEFORE INCOME TAXES                                                                                                                                       |  |                                  | 556   |                                 |   | 477                               |  
|INCOME TAX EXPENSE                                                                                                                                               |  |                                  | 195   |                                 |   | 184                               |  
|                                                                                                                                                                 |  |                                  |       |                                 |   |                                   |  
|NET INCOME                                                                                                                                                       |  | $                                | 361   |                                 | $ | 293                               |  
|                                                                                                                                                                 |  |                                  |       |                                 |   |                                   |  
|Average shares of common stock outstanding (millions)                                                                                                            |  |                                  | 276   |                                 |   | 281                               |  
|Per share of common stock:                                                                                                                                       |  |                                  |       |                                 |   |                                   |  
|Basic earnings                                                                                                                                                   |  | $                                | 1.31  |                                 | $ | 1.04                              |  
|Diluted earnings                                                                                                                                                 |  | $                                | 1.31  |                                 | $ | 1.04                              |  
|Dividends declared                                                                                                                                               |  | $                                | 0.575 |                                 | $ | 0.55                              |  

See
Notes to Condensed Consolidated Financial Statements.

TEXAS UTILITIES COMPANY (doing business as TXU CORP) AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME
(Unaudited)

|                                                 |  | Three Months Ended
September 30, |     | Nine Months Ended
September 30, |   | Twelve Months
Ended
September 30, | 
|------------------------------------------------ |  | -------------------------------- | --- | ------------------------------- | - | --------------------------------- | 
|
|
|NET INCOME                                       |  | $                                | 361 |                                 | $ | 293                               | 
|                                                 |  |                                  |     |                                 |   |                                   | 
|OTHER COMPREHENSIVE INCOME (LOSS)               |  |                                  |     |                                 |   |                                   | 
|Net change during period:                        |  |                                  |     |                                 |   |                                   | 
|Foreign currency translation adjustments         |  |                                  | 118 |                                 |   | 14                                | 
|Unrealized holding gains (losses) on investments |  |                                  | (1  | )                               |   |                                  | 
|Minimum pension liability adjustments            |  |                                  |    |                                 |   |                                  | 
|                                                 |  |                                  |     |                                 |   |                                   | 
|Total                                            |  |                                  | 117 |                                 |   | 14                                | 
|                                                 |  |                                  |     |                                 |   |                                   | 
|Deferred income tax effects                      |  |                                  |    |                                 |   |                                  | 
|                                                 |  |                                  |     |                                 |   |                                   | 
|COMPREHENSIVE INCOME                             |  | $                                | 478 |                                 | $ | 307                               | 
|                                                 |  |                                  |     |                                 |   |                                   | 

See
Notes to Condensed Consolidated Financial Statements.



TEXAS UTILITIES COMPANY (doing business as TXU CORP) AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Unaudited)

|                                                                                                                                                                        |  | Nine Months Ended
September 30, |       
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------- | ------
|
|
|CASH FLOWSOPERATING ACTIVITIES                                                                                                                                         |  |                                 |       
|Net income                                                                                                                                                              |  | $                               | 642   
|Adjustments to reconcile net income to cash provided by operating activities:                                                                                           |  |                                 |       
|Depreciation and amortization (including amounts charged to fuel)                                                                                                       |  |                                 | 1,085 
|Deferred income taxesnet                                                                                                                                               |  |                                 | 138   
|Investment tax creditsnet                                                                                                                                              |  |                                 | (17   
|Other                                                                                                                                                                   |  |                                 | 51    
|Changes in operating assets and liabilities:                                                                                                                            |  |                                 |       
|Accounts receivable                                                                                                                                                     |  |                                 | 460   
|Inventories                                                                                                                                                             |  |                                 | 9     
|Accounts payable                                                                                                                                                        |  |                                 | (252  
|Interest and taxes accrued                                                                                                                                              |  |                                 | 102   
|Other working capital                                                                                                                                                   |  |                                 | 167   
|Over/(under)-recovered fuel revenuenet of deferred taxes                                                                                                               |  |                                 | (71   
|Othernet                                                                                                                                                               |  |                                 | (244  
|                                                                                                                                                                        |  |                                 |       
|Cash provided by operating activities                                                                                                                                   |  |                                 | 2,070 
|                                                                                                                                                                        |  |                                 |       
|CASH FLOWSFINANCING ACTIVITIES                                                                                                                                         |  |                                 |       
|Issuances of securities:                                                                                                                                                |  |                                 |       
|Acquisition and interim facilities                                                                                                                                      |  |                                 | 926   
|Other long-term debt                                                                                                                                                    |  |                                 | 4,650 
|Subsidiary obligated, mandatorily redeemable, preferred securities of subsidiary trusts, each holding solely junior subordinated debentures of the obligated subsidiary |  |                                 |      
|Common stock                                                                                                                                                            |  |                                 | 1     
|Retirements/repurchases of securities:                                                                                                                                  |  |                                 |       
|Acquisition facilities                                                                                                                                                  |  |                                 | (1,225
|Other long-term debt/obligations                                                                                                                                        |  |                                 | (1,385
|Preferred stock of subsidiaries                                                                                                                                         |  |                                 |      
|Subsidiary obligated, mandatorily redeemable, preferred securities of subsidiary trusts, each holding solely junior subordinated debentures of the obligated subsidiary |  |                                 |      
|Common stock                                                                                                                                                            |  |                                 | (250  
|Change in notes payable:                                                                                                                                                |  |                                 |       
|Commercial paper                                                                                                                                                        |  |                                 | (1,154
|Banks                                                                                                                                                                   |  |                                 | (476  
|Common stock dividends paid                                                                                                                                             |  |                                 | (485  
|Debt premium, discount, financing and reacquisition expenses                                                                                                            |  |                                 | (60   
|                                                                                                                                                                        |  |                                 |       
|Cash provided by financing activities                                                                                                                                   |  |                                 | 542   
|                                                                                                                                                                        |  |                                 |       
|CASH FLOWSINVESTING ACTIVITIES                                                                                                                                         |  |                                 |       
|Acquisitions of businesses                                                                                                                                              |  |                                 | (1,051
|Construction expenditures                                                                                                                                               |  |                                 | (1,192
|Nuclear fuel                                                                                                                                                            |  |                                 | (55   
|Other                                                                                                                                                                   |  |                                 | (229  
|                                                                                                                                                                        |  |                                 |       
|Cash used in investing activities                                                                                                                                       |  |                                 | (2,527
|                                                                                                                                                                        |  |                                 |       
|EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS                                                                                                            |  |                                 | (32   
|                                                                                                                                                                        |  |                                 |       
|NET CHANGE IN CASH AND CASH EQUIVALENTS                                                                                                                                 |  |                                 | 53    
|CASH AND CASH EQUIVALENTSBEGINNING BALANCE                                                                                                                             |  |                                 | 796   
|                                                                                                                                                                        |  |                                 |       
|CASH AND CASH EQUIVALENTSENDING BALANCE                                                                                                                                |  | $                               | 849   
|                                                                                                                                                                        |  |                                 |       

See Notes to Condensed Consolidated Financial Statements.



TEXAS UTILITIES COMPANY (doing business as TXU CORP) AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS

|                                                                                      |  | September 30,
1999
(Unaudited) |        | December 31,
1998 |  
|------------------------------------------------------------------------------------- |  | ------------------------------ | ------ | ----------------- | -
|
|PROPERTY, PLANT AND EQUIPMENT                                                         |  |                                |        |                   |  
|United States (US):                                                                   |  |                                |        |                   |  
|Electric                                                                              |  | $                              | 23,450 |                   | $
|Gas distribution and pipeline                                                         |  |                                | 1,335  |                   |  
|Other                                                                                 |  |                                | 970    |                   |  
|                                                                                      |  |                                |        |                   |  
|Total                                                                                 |  |                                | 25,755 |                   |  
|Less accumulated depreciation                                                         |  |                                | 7,996  |                   |  
|                                                                                      |  |                                |        |                   |  
|Net of accumulated depreciation                                                       |  |                                | 17,759 |                   |  
|Construction work in progress                                                         |  |                                | 312    |                   |  
|Nuclear fuel (net of accumulated amortization: 1999$616; 1998$549)                  |  |                                | 190    |                   |  
|Held for future use                                                                   |  |                                | 24     |                   |  
|Reserve for regulatory disallowances                                                  |  |                                | (836   | )                 |  
|                                                                                      |  |                                |        |                   |  
|Net US property, plant and equipment                                                  |  |                                | 17,449 |                   |  
|UK/EuropeElectric and other (net of accumulated depreciation: 1999$342; 1998$147)  |  |                                | 4,407  |                   |  
|AustraliaElectric and gas distribution (net of accumulated depreciation: 1999$177;  |  |                                |        |                   |  
|Net property, plant and equipment                                                     |  |                                | 23,502 |                   |  
|                                                                                      |  |                                |        |                   |  
|INVESTMENTS                                                                           |  |                                |        |                   |  
|Goodwill (net of accumulated amortization: 1999$301; 1998$154)                      |  |                                | 7,678  |                   |  
|Other investments                                                                     |  |                                | 2,604  |                   |  
|                                                                                      |  |                                |        |                   |  
|Total investments                                                                     |  |                                | 10,282 |                   |  
|                                                                                      |  |                                |        |                   |  
|CURRENT ASSETS                                                                        |  |                                |        |                   |  
|Cash and cash equivalents                                                             |  |                                | 849    |                   |  
|Accounts receivable (net of allowance for uncollectible accounts: 1999$48; 1998$50) |  |                                | 1,480  |                   |  
|Inventoriesat average cost:                                                          |  |                                |        |                   |  
|Materials and supplies                                                                |  |                                | 284    |                   |  
|Fuel stock                                                                            |  |                                | 244    |                   |  
|Gas stored underground                                                                |  |                                | 134    |                   |  
|Energy marketing risk management assets                                               |  |                                | 1,163  |                   |  
|Deferred income taxes                                                                 |  |                                | 22     |                   |  
|Other current assets                                                                  |  |                                | 348    |                   |  
|                                                                                      |  |                                |        |                   |  
|Total current assets                                                                  |  |                                | 4,524  |                   |  
|                                                                                      |  |                                |        |                   |  
|OTHER ASSETS                                                                          |  |                                |        |                   |  
|Regulatory assets                                                                     |  |                                | 1,782  |                   |  
|Long-term prepayments                                                                 |  |                                | 627    |                   |  
|Deferred debits                                                                       |  |                                | 667    |                   |  
|                                                                                      |  |                                |        |                   |  
|Total other assets                                                                    |  |                                | 3,076  |                   |  
|                                                                                      |  |                                |        |                   |  
|Total                                                                                 |  | $                              | 41,384 |                   | $
|                                                                                      |  |                                |        |                   |  

See Notes to Condensed Consolidated Financial Statements.

TEXAS UTILITIES COMPANY (doing business as TXU CORP) AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
CAPITALIZATION AND LIABILITIES

|                                                                                                                                                |  | September 30,
1999
(Unaudited) |        | December 31,
1998 |  
|----------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------ | ------ | ----------------- | -
|
|CAPITALIZATION                                                                                                                                  |  |                                |        |                   |  
|Common stock without par value:                                                                                                                 |  |                                |        |                   |  
|Authorized shares1,000,000,000                                                                                                                 |  |                                |        |                   |  
|Outstanding shares1999276,406,519 and 1998282,332,819                                                                                        |  | $                              | 6,793  |                   | $
|Retained earnings                                                                                                                               |  |                                | 1,512  |                   |  
|Accumulated other comprehensive loss:                                                                                                           |  |                                |        |                   |  
|Foreign currency translation adjustments                                                                                                        |  |                                | (122   | )                 |  
|Unrealized holding losses on investments                                                                                                        |  |                                | (11    | )                 |  
|Minimum pension liability adjustments                                                                                                           |  |                                | (5     | )                 |  
|                                                                                                                                                |  |                                |        |                   |  
|Total common stock equity                                                                                                                       |  |                                | 8,167  |                   |  
|Preferred stock of subsidiaries:                                                                                                                |  |                                |        |                   |  
|Not subject to mandatory redemption                                                                                                             |  |                                | 190    |                   |  
|Subject to mandatory redemption                                                                                                                 |  |                                | 21     |                   |  
|Mandatorily redeemable, preferred securities of subsidiary trusts, each holding solely junior subordinated debentures of the obligated company: |  |                                |        |                   |  
|TXU obligated                                                                                                                                   |  |                                | 223    |                   |  
|Subsidiary obligated                                                                                                                            |  |                                | 970    |                   |  
|Long-term debt, less amounts due currently                                                                                                      |  |                                | 17,562 |                   |  
|                                                                                                                                                |  |                                |        |                   |  
|Total capitalization                                                                                                                            |  |                                | 27,133 |                   |  
|                                                                                                                                                |  |                                |        |                   |  
|CURRENT LIABILITIES                                                                                                                             |  |                                |        |                   |  
|Notes payable:                                                                                                                                  |  |                                |        |                   |  
|Commercial paper                                                                                                                                |  |                                | 1,717  |                   |  
|Banks                                                                                                                                           |  |                                | 411    |                   |  
|Long-term debt due currently                                                                                                                    |  |                                | 1,056  |                   |  
|Accounts payable                                                                                                                                |  |                                | 1,522  |                   |  
|Energy marketing risk management liabilities                                                                                                    |  |                                | 1,080  |                   |  
|Dividends declared                                                                                                                              |  |                                | 160    |                   |  
|Taxes accrued                                                                                                                                   |  |                                | 628    |                   |  
|Interest accrued                                                                                                                                |  |                                | 317    |                   |  
|Other current liabilities                                                                                                                       |  |                                | 946    |                   |  
|                                                                                                                                                |  |                                |        |                   |  
|Total current liabilities                                                                                                                       |  |                                | 7,837  |                   |  
|                                                                                                                                                |  |                                |        |                   |  
|DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES                                                                                               |  |                                |        |                   |  
|Accumulated deferred income taxes                                                                                                               |  |                                | 3,821  |                   |  
|Investment tax credits                                                                                                                          |  |                                | 530    |                   |  
|Other deferred credits and noncurrent liabilities                                                                                               |  |                                | 2,063  |                   |  
|                                                                                                                                                |  |                                |        |                   |  
|Total deferred credits and other noncurrent liabilities                                                                                         |  |                                | 6,414  |                   |  
|                                                                                                                                                |  |                                |        |                   |  
|COMMITMENTS AND CONTINGENCIES (Note 8)                                                                                                          |  |                                |        |                   |  
|                                                                                                                                                |  |                                |        |                   |  
|Total                                                                                                                                           |  | $                              | 41,384 |                   | $
|                                                                                                                                                |  |                                |        |                   |  

See Notes to Condensed Consolidated Financial Statements.



TXU ELECTRIC COMPANY AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
(Unaudited)

|                                                                                                                                                                                         |  | Three Months Ended
September 30, |       | Nine Months Ended
September 30, |   | Twelve Months Ended
September 30, |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------- | ----- | ------------------------------- | - | --------------------------------- | -
|
|
|OPERATING REVENUES                                                                                                                                                                       |  | $                                | 2,059 |                                 | $ | 2,124                             |  
|                                                                                                                                                                                         |  |                                  |       |                                 |   |                                   |  
|OPERATING EXPENSES                                                                                                                                                                       |  |                                  |       |                                 |   |                                   |  
|Fuel and purchased power                                                                                                                                                                 |  |                                  | 709   |                                 |   | 674                               |  
|Operation and maintenance                                                                                                                                                                |  |                                  | 313   |                                 |   | 302                               |  
|Depreciation and amortization                                                                                                                                                            |  |                                  | 138   |                                 |   | 286                               |  
|Income taxes                                                                                                                                                                             |  |                                  | 225   |                                 |   | 231                               |  
|Taxes other than income                                                                                                                                                                  |  |                                  | 131   |                                 |   | 132                               |  
|                                                                                                                                                                                         |  |                                  |       |                                 |   |                                   |  
|Total operating expenses                                                                                                                                                                 |  |                                  | 1,516 |                                 |   | 1,625                             |  
|                                                                                                                                                                                         |  |                                  |       |                                 |   |                                   |  
|OPERATING INCOME                                                                                                                                                                         |  |                                  | 543   |                                 |   | 499                               |  
|                                                                                                                                                                                         |  |                                  |       |                                 |   |                                   |  
|OTHER INCOME (DEDUCTIONS)                                                                                                                                                                |  |                                  |       |                                 |   |                                   |  
|Allowance for equity funds used during construction                                                                                                                                      |  |                                  | 5     |                                 |   | 2                                 |  
|Other income (deductions)net                                                                                                                                                            |  |                                  | (3    | )                               |   | (6                                | )
|Income tax benefit (expense)                                                                                                                                                             |  |                                  |      |                                 |   | 1                                 |  
|                                                                                                                                                                                         |  |                                  |       |                                 |   |                                   |  
|Total other income (deductions)                                                                                                                                                          |  |                                  | 2     |                                 |   | (3                                | )
|                                                                                                                                                                                         |  |                                  |       |                                 |   |                                   |  
|INCOME BEFORE INTEREST AND OTHER CHARGES                                                                                                                                                 |  |                                  | 545   |                                 |   | 496                               |  
|                                                                                                                                                                                         |  |                                  |       |                                 |   |                                   |  
|INTEREST INCOME                                                                                                                                                                          |  |                                  |      |                                 |   |                                  |  
|INTEREST EXPENSE AND OTHER CHARGES                                                                                                                                                       |  |                                  |       |                                 |   |                                   |  
|Interest                                                                                                                                                                                 |  |                                  | 95    |                                 |   | 115                               |  
|Distributions on TXU Electric Company obligated, mandatorily redeemable, preferred securities of subsidiary trusts holding solely junior subordinated debentures of TXU Electric Company |  |                                  | 17    |                                 |   | 18                                |  
|Allowance for borrowed funds used during construction                                                                                                                                    |  |                                  | (1    | )                               |   | (2                                | )
|                                                                                                                                                                                         |  |                                  |       |                                 |   |                                   |  
|Total interest expense and other charges                                                                                                                                                 |  |                                  | 111   |                                 |   | 131                               |  
|                                                                                                                                                                                         |  |                                  |       |                                 |   |                                   |  
|NET INCOME                                                                                                                                                                               |  |                                  | 434   |                                 |   | 365                               |  
|PREFERRED STOCK DIVIDENDS                                                                                                                                                                |  |                                  | 2     |                                 |   | 3                                 |  
|                                                                                                                                                                                         |  |                                  |       |                                 |   |                                   |  
|NET INCOME AVAILABLE FOR COMMON STOCK                                                                                                                                                    |  | $                                | 432   |                                 | $ | 362                               |  
|                                                                                                                                                                                         |  |                                  |       |                                 |   |                                   |  

CONDENSED STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME
(Unaudited)

|                                                                 |  | Three Months Ended
September 30, |     | Nine Months Ended
September 30, |   | Twelve Months Ended
September 30,
|---------------------------------------------------------------- |  | -------------------------------- | --- | ------------------------------- | - | ---------------------------------
|
|
|NET INCOME                                                       |  | $                                | 434 |                                 | $ | 365                              
|                                                                 |  |                                  |     |                                 |   |                                  
|OTHER COMPREHENSIVE LOSS                                        |  |                                  |     |                                 |   |                                  
|Net change during period in minimum pension liability adjustment |  |                                  |    |                                 |   |                                 
|                                                                 |  |                                  |     |                                 |   |                                  
|Total                                                            |  |                                  |    |                                 |   |                                 
|                                                                 |  |                                  |     |                                 |   |                                  
|COMPREHENSIVE INCOME                                             |  | $                                | 434 |                                 | $ | 365                              
|                                                                 |  |                                  |     |                                 |   |                                  

See
Notes to Condensed Consolidated Financial Statements.

TXU ELECTRIC COMPANY AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Unaudited)

|                                                                                                                                                                        |  | Nine Months Ended
September 30, |      
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------- | -----
|
|
|CASH FLOWSOPERATING ACTIVITIES                                                                                                                                         |  |                                 |      
|Net income                                                                                                                                                              |  | $                               | 702  
|Adjustments to reconcile net income to cash provided by operating activities:                                                                                           |  |                                 |      
|Depreciation and amortization (including amounts charged to fuel)                                                                                                       |  |                                 | 600  
|Deferred income taxesnet                                                                                                                                               |  |                                 | 69   
|Investment tax creditsnet                                                                                                                                              |  |                                 | (16  
|Allowance for equity funds used during construction                                                                                                                     |  |                                 | (7   
|Other                                                                                                                                                                   |  |                                 | 59   
|Changes in operating assets and liabilities:                                                                                                                            |  |                                 |      
|Accounts receivable                                                                                                                                                     |  |                                 | (95  
|Inventories                                                                                                                                                             |  |                                 | 8    
|Accounts payable                                                                                                                                                        |  |                                 | 10   
|Interest and taxes accrued                                                                                                                                              |  |                                 | 135  
|Other working capital                                                                                                                                                   |  |                                 | 44   
|Over/(under)recovered fuel revenuenet of deferred taxes                                                                                                               |  |                                 | (71  
|Othernet                                                                                                                                                               |  |                                 | 7    
|                                                                                                                                                                        |  |                                 |      
|Cash provided by operating activities                                                                                                                                   |  |                                 | 1,445
|                                                                                                                                                                        |  |                                 |      
|CASH FLOWSFINANCING ACTIVITIES                                                                                                                                         |  |                                 |      
|Issuances of long-term debt                                                                                                                                             |  |                                 | 127  
|Retirements/repurchase of securities:                                                                                                                                   |  |                                 |      
|Long-term debt                                                                                                                                                          |  |                                 | (557 
|Preferred stock                                                                                                                                                         |  |                                 |     
|TXU Electric Company obligated, mandatorily redeemable, preferred securities of subsidiary trusts holding solely junior subordinated debentures of TXU Electric Company |  |                                 |     
|Common stock                                                                                                                                                            |  |                                 | (445 
|Change in notes payableaffiliates                                                                                                                                      |  |                                 | (21  
|Preferred stock dividends paid                                                                                                                                          |  |                                 | (8   
|Debt premium, discount, financing and reacquisition expenses                                                                                                            |  |                                 | (26  
|                                                                                                                                                                        |  |                                 |      
|Cash used in financing activities                                                                                                                                       |  |                                 | (930 
|                                                                                                                                                                        |  |                                 |      
|CASH FLOWSINVESTING ACTIVITIES                                                                                                                                         |  |                                 |      
|Construction expenditures                                                                                                                                               |  |                                 | (401 
|Nuclear fuel                                                                                                                                                            |  |                                 | (55  
|Other investments                                                                                                                                                       |  |                                 | (17  
|                                                                                                                                                                        |  |                                 |      
|Cash used in investing activities                                                                                                                                       |  |                                 | (473 
|                                                                                                                                                                        |  |                                 |      
|NET CHANGE IN CASH AND CASH EQUIVALENTS                                                                                                                                 |  |                                 | 42   
|CASH AND CASH EQUIVALENTSBEGINNING BALANCE                                                                                                                             |  |                                 | 5    
|                                                                                                                                                                        |  |                                 |      
|CASH AND CASH EQUIVALENTSENDING BALANCE                                                                                                                                |  | $                               | 47   
|                                                                                                                                                                        |  |                                 |      

See
Notes to Condensed Consolidated Financial Statements.



TXU ELECTRIC COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS

|                                                                                    |  | September 30,
1999
(Unaudited) |        | December 31,
1998 |  
|----------------------------------------------------------------------------------- |  | ------------------------------ | ------ | ----------------- | -
|
|ELECTRIC PLANT                                                                      |  |                                |        |                   |  
|In service:                                                                         |  |                                |        |                   |  
|Production                                                                          |  | $                              | 15,517 |                   | $
|Transmission                                                                        |  |                                | 1,655  |                   |  
|Distribution                                                                        |  |                                | 5,284  |                   |  
|General                                                                             |  |                                | 489    |                   |  
|                                                                                    |  |                                |        |                   |  
|Total                                                                               |  |                                | 22,945 |                   |  
|Less accumulated depreciation                                                       |  |                                | 7,272  |                   |  
|                                                                                    |  |                                |        |                   |  
|Electric plant in service, less accumulated depreciation                            |  |                                | 15,673 |                   |  
|Construction work in progress                                                       |  |                                | 201    |                   |  
|Nuclear fuel (net of accumulated amortization: 1999$616; 1998$549)                |  |                                | 190    |                   |  
|Held for future use                                                                 |  |                                | 24     |                   |  
|                                                                                    |  |                                |        |                   |  
|Electric plant, less accumulated depreciation and amortization                      |  |                                | 16,088 |                   |  
|Reserve for regulatory disallowances                                                |  |                                | (836   | )                 |  
|                                                                                    |  |                                |        |                   |  
|Net electric plant                                                                  |  |                                | 15,252 |                   |  
|                                                                                    |  |                                |        |                   |  
|INVESTMENTS                                                                         |  |                                | 619    |                   |  
|                                                                                    |  |                                |        |                   |  
|CURRENT ASSETS                                                                      |  |                                |        |                   |  
|Cash and cash equivalents                                                           |  |                                | 47     |                   |  
|Accounts receivable (net of allowance for uncollectible accounts: 1999$5; 1998$7) |  |                                | 300    |                   |  
|Inventoriesat average cost:                                                        |  |                                |        |                   |  
|Materials and supplies                                                              |  |                                | 178    |                   |  
|Fuel stock                                                                          |  |                                | 79     |                   |  
|Deferred income taxes                                                               |  |                                | 8      |                   |  
|Prepayments and other current assets                                                |  |                                | 55     |                   |  
|                                                                                    |  |                                |        |                   |  
|Total current assets                                                                |  |                                | 667    |                   |  
|                                                                                    |  |                                |        |                   |  
|OTHER ASSETS                                                                        |  |                                |        |                   |  
|Regulatory assets                                                                   |  |                                | 1,709  |                   |  
|Under-recovered fuel revenue                                                        |  |                                | 57     |                   |  
|Deferred debits                                                                     |  |                                | 64     |                   |  
|                                                                                    |  |                                |        |                   |  
|Total other assets                                                                  |  |                                | 1,830  |                   |  
|                                                                                    |  |                                |        |                   |  
|Total                                                                               |  | $                              | 18,368 |                   | $
|                                                                                    |  |                                |        |                   |  

See
Notes to Condensed Consolidated Financial Statements.

TXU ELECTRIC COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
CAPITALIZATION AND LIABILITIES

|                                                                                                                                                                        |  | September 30,
1999
(Unaudited) |        | December 31,
1998 |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------ | ------ | ----------------- | -
|
|CAPITALIZATION                                                                                                                                                          |  |                                |        |                   |  
|Common stock without par value:                                                                                                                                         |  |                                |        |                   |  
|Authorized shares180,000,000                                                                                                                                           |  |                                |        |                   |  
|Outstanding shares1999108,821,200 and 1998123,660,700                                                                                                                |  | $                              | 3,293  |                   | $
|Stock of parent held for long-term incentive plan trust                                                                                                                 |  |                                | (10    | )                 |  
|Retained earnings                                                                                                                                                       |  |                                | 3,462  |                   |  
|Accumulated other comprehensive loss                                                                                                                                   |  |                                |        |                   |  
|Minimum pension liability adjustment                                                                                                                                    |  |                                | (1     | )                 |  
|                                                                                                                                                                        |  |                                |        |                   |  
|Total common stock equity                                                                                                                                               |  |                                | 6,744  |                   |  
|Preferred stock:                                                                                                                                                        |  |                                |        |                   |  
|Not subject to mandatory redemption                                                                                                                                     |  |                                | 115    |                   |  
|Subject to mandatory redemption                                                                                                                                         |  |                                | 21     |                   |  
|TXU Electric Company obligated, mandatorily redeemable, preferred securities of subsidiary trusts holding solely junior subordinated debentures of TXU Electric Company |  |                                | 824    |                   |  
|Long-term debt, less amounts due currently                                                                                                                              |  |                                | 4,780  |                   |  
|                                                                                                                                                                        |  |                                |        |                   |  
|Total capitalization                                                                                                                                                    |  |                                | 12,484 |                   |  
|                                                                                                                                                                        |  |                                |        |                   |  
|CURRENT LIABILITIES                                                                                                                                                     |  |                                |        |                   |  
|Notes payableaffiliates                                                                                                                                                |  |                                | 142    |                   |  
|Long-term debt due currently                                                                                                                                            |  |                                | 535    |                   |  
|Accounts payable:                                                                                                                                                       |  |                                |        |                   |  
|Affiliates                                                                                                                                                              |  |                                | 130    |                   |  
|Other                                                                                                                                                                   |  |                                | 152    |                   |  
|Customers' deposits                                                                                                                                                     |  |                                | 79     |                   |  
|Taxes accrued                                                                                                                                                           |  |                                | 330    |                   |  
|Interest accrued                                                                                                                                                        |  |                                | 107    |                   |  
|Over-recovered fuel revenue                                                                                                                                             |  |                                |       |                   |  
|Other current liabilities                                                                                                                                               |  |                                | 177    |                   |  
|                                                                                                                                                                        |  |                                |        |                   |  
|Total current liabilities                                                                                                                                               |  |                                | 1,652  |                   |  
|                                                                                                                                                                        |  |                                |        |                   |  
|DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES                                                                                                                       |  |                                |        |                   |  
|Accumulated deferred income taxes                                                                                                                                       |  |                                | 3,297  |                   |  
|Investment tax credits                                                                                                                                                  |  |                                | 520    |                   |  
|Other deferred credits and noncurrent liabilities                                                                                                                       |  |                                | 415    |                   |  
|                                                                                                                                                                        |  |                                |        |                   |  
|Total deferred credits and other noncurrent liabilities                                                                                                                 |  |                                | 4,232  |                   |  
|                                                                                                                                                                        |  |                                |        |                   |  
|COMMITMENTS AND CONTINGENCIES (Note 8)                                                                                                                                  |  |                                |        |                   |  
|Total                                                                                                                                                                   |  | $                              | 18,368 |                   | $
|                                                                                                                                                                        |  |                                |        |                   |  

See
Notes to Condensed Consolidated Financial Statements.



TEXAS UTILITIES COMPANY (doing business as TXU CORP) AND SUBSIDIARIES
TXU ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.  BUSINESS, MERGERS AND ACQUISITIONS

TXU

In May 1999, Texas Utilities Company (TXU) adopted TXU Corp as its assumed name and began conducting business as TXU Corp. During 1999, several of TXU's
subsidiaries changed their corporate names in connection with the new TXU corporate identity program. TXU, a Texas corporation, is a holding company whose principal United States (US) operations are
conducted through TXU Electric Company, formerly Texas Utilities Electric Company (TXU Electric), TXU Gas Company, formerly ENSERCH Corporation (TXU Gas), and TXU Energy Industries Company, formerly
Texas Energy Industries, Inc. TXU's principal international operations are conducted through TXU International Holdings Limited, which in turn indirectly owns TXU Europe Limited, formerly TXU
Eastern Holdings Limited (TXU Europe), and TXU Australia Holdings (Partnership) Limited Partnership (TXU Australia Holdings). TXU Europe's operations in the United Kingdom (UK) and other parts of
Europe are conducted through subsidiaries of TXU Europe Group plc, formerly Eastern Group plc (Eastern Group), primarily Eastern Electricity plc (Eastern Electricity). TXU Australia Holdings'
principal operating subsidiaries include Eastern Energy Limited (Eastern Energy) and the gas operations of Westar/ Kinetik Energy described below.

In
May 1998, TXU acquired The Energy Group PLC (TEG), the former holding company of Eastern Group. TXU recorded its approximate 22% equity interest in the net income of TEG for
the period from March 1998 to May 19, 1998 and has accounted for TEG and Eastern Group as consolidated subsidiaries since May 19, 1998. The excess of the purchase consideration
plus acquisition costs over the net fair value of tangible and identifiable intangible assets acquired and liabilities assumed resulted in goodwill of £3.5 billion ($5.8 billion), which is
being amortized over 40 years.

In
February 1999, TXU Australia Holdings acquired from the Government of Victoria, Australia, the gas retail business of Kinetik Energy Pty Ltd and the gas distribution
operations of Westar Pty Ltd (together, Westar/Kinetik Energy). The purchase price was A$1.6 billion ($1.0 billion) which has been financed principally through bank borrowings by TXU Australia
Holdings. The excess of the purchase consideration plus acquisition costs over a preliminary estimate of net fair value of tangible and identifiable intangible assets acquired and liabilities assumed
resulted in goodwill of A$873 million ($569 million), which is being amortized over 40 years. The process of determining the fair value of assets and liabilities at the acquisition date is continuing,
and the final result awaits the resolution of pensions, employee benefits and other contingencies and finalization of certain estimates.

Since
the acquisition of Westar/Kinetik Energy was treated for accounting purposes as a purchase business combination, no financial or other information is presented for periods prior
to the date of acquisition. Consolidated pro forma income and earnings per share for the periods ended September 30, 1999 and 1998, assuming the acquisition of Westar/Kinetik Energy had
occurred at the beginning of the periods, would not have differed significantly from reported results.

In
September 1999, TXU Europe announced it was forming a joint venture with certain shareholders of Pohjolan Voima Oy (PVO), Finland's second largest electricity generator. As
part of the transaction
TXU Europe contributed approximately £200 million ($329 million) for an 81% ownership interest in the joint venture company on November 1, 1999. The joint venture will acquire
rights to the output from approximately 600 megawatts (MW) of PVO's thermal generating capacity.

Throughout
this document, references to TEG shall mean the consolidated UK entity acquired in May 1998, and references to Eastern Group or TXU Europe shall mean TXU's primary
operations in the

UK and other parts of Europe. References to TXU Australia Holdings shall mean TXU's primary operations in Australia, including Eastern Energy and results for Westar/Kinetik Energy from date of
acquisition.

The
following exchange rates have been used to convert foreign currency denominated amounts into US dollars:

|                        |  |   |       |  |   | Income Statement
(Average Rates)
|----------------------- |  | - | ----- |  | - | --------------------------------
|
|
|
|
|UK pounds sterling (£)  |  | $ | 1.646 |  | $ | 1.654                           
|Australian dollars (A$) |  | $ | 0.652 |  | $ | 0.612                           

TXU and TXU Electric

On October 1, 1999, TXU Electric announced plans to sell six of its eighteen natural gas-fired electricity generating plants in Texas with an aggregate
generating capacity of 3,116 megawatts, or approximately 15% of TXU Electric's generating capacity. Any gain on the sale of these plants will be recorded as a regulatory liability and applied against
TXU Electric's generation assets that may become stranded costs under provisions of the 1999 Texas electric utility industry restructuring legislation discussed in Note 3 to the Condensed Consolidated
Financial Statements. TXU Electric plans to sell the plants, together with all associated assets, including land, lakes, water rights, air permits, emission allowances and fuel transportation
contracts. TXU Electric anticipates completion of the plant sales by the end of 2000.

2.  SIGNIFICANT ACCOUNTING POLICIES

TXU and TXU Electric

Basis of PresentationThe condensed consolidated financial statements of TXU and its subsidiaries
and TXU Electric and its subsidiaries have been prepared on the same basis as those in their respective 1998 Annual Reports on Form 10-K (1998 Form 10-K) and, in the opinion of management, all
adjustments (constituting only normal recurring accruals) necessary for a fair presentation of the results of operations and financial position have been included therein. Certain information and
footnote disclosures normally included in annual consolidated financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain previously reported amounts have been reclassified to conform to current classifications.

All
dollar amounts in the condensed consolidated financial statements and tables in the notes, except per share amounts, are stated in millions of US dollars unless otherwise
indicated.

TXU

Earnings Per ShareBasic earnings per share applicable to common stock are based on the weighted
average number of common shares outstanding during the period reported. The following table details the

adjustments to calculate diluted earnings per share. After-tax interest expense for the convertible subordinated debentures prior to their conversion in 1998 are added to earnings applicable to common
stock, and the number of shares from the assumed conversion of the convertible subordinated debentures and the assumed exercise of all outstanding stock options are added to average shares
outstanding.

|                                      |  | Three Months Ended
September 30, |    | Nine Months Ended
September 30, |   | Twelve Months Ended
September 30,
|------------------------------------- |  | -------------------------------- | -- | ------------------------------- | - | ---------------------------------
|
|After-tax interest expense            |  | $                                |   |                                 | $ |                                 
|Shares of common stock (in thousands) |  |                                  | 87 |                                 |   | 122                              

3.  ACCOUNTING IMPACT OF THE RESTRUCTURING OF THE ELECTRIC UTILITY INDUSTRY IN TEXAS

TXU and TXU Electric

Electric Industry RestructuringLegislation was passed during the 1999 session of the Texas
legislature that will restructure the electric utility industry in Texas. Among other matters, the legislation authorizes competition in the retail and generation markets for electricity beginning
January 1, 2002; provides for the recovery of stranded costs and generation-related regulatory assets; requires reductions in nitrogen oxide and sulfur dioxide emissions; requires a rate freeze
for all customers until January 1, 2002 and certain rate reductions for residential and small commercial customers for up to five years thereafter; and sets certain limits on capacity owned and
controlled by power generation companies.

Accounting Impact of the RestructuringRegulatory Assets and LiabilitiesAs discussed
in TXU's and TXU Electric's 1998 Form 10-K, the financial statements of TXU and TXU Electric reflect regulatory assets and liabilities under cost-based rate regulation in accordance with Statement of
Financial Accounting Standards (SFAS) No. 71, "Accounting for the Effect of Certain Types of Regulation." As a result of the 1999 Texas legislation, the electricity generation portion of TXU
Electric's business no longer meets the criteria to apply SFAS No. 71. Accordingly, application of SFAS No. 71 to the generation portion of TXU Electric's business was discontinued as of
June 30, 1999, and the principles of SFAS No. 101, "Regulated EnterprisesAccounting for the Discontinuation of Application of FASB Statement No. 71,"
as interpreted by Emerging Issues Task Force Issue (EITF) No. 97-4, "Deregulation of the Pricing of ElectricityIssues Related to the Application of FASB Statement Nos. 71
and 101," have been applied. TXU Electric's transmission and distribution (T&D) operations continue to meet the criteria for recognition of regulatory assets and liabilities as defined by SFAS
No. 71. In addition, fuel costs will be fully recoverable, subject to regulatory review, during the transition period that extends to January 1, 2002. The 1999 Texas legislation provides
for the recovery of net generation-related regulatory assets existing at December 31, 1998. Under the provisions of EITF No. 97-4, such generation-related regulatory assets will be
amortized as recovered through the T&D portion of the business. As a result, management believes the economic benefit of all net regulatory assets related to the generation business will be recovered.

On
October 18, 1999, TXU Electric filed with the Public Utility Commission of Texas (PUC) a petition for a financing order (Docket No. 21527) to securitize $1.65 billion
of its generation-related regulatory assets and other qualified costs. Pursuant to the provisions of the 1999 Texas legislation, the PUC will issue a financing order on Docket No. 21527 no
later than 90 days after the petition was filed. If


approved by the PUC, TXU Electric would sell its rights under the financing order to recover such qualified costs to a special purpose subsidiary of TXU Electric. The special purpose subsidiary would
issue transition bonds and would use the net proceeds thereof to purchase such rights from TXU Electric. The proceeds received by TXU Electric are to be used solely for the purposes of reducing the
amount of TXU Electric's recoverable regulatory assets and retiring utility debt and equity. TXU Electric is unable to predict the extent, if any, to which this petition will be granted.

Generation Production AssetsTXU Electric anticipates that a portion of the cost of its generation production assets and
power purchase contracts may be identified as stranded costs under the legislation and become subject to a future quantification of the economic value of such assets. The 1999 Texas legislation
provides that 100% of such stranded costs will be recovered from regulated operations. TXU Electric has performed an impairment analysis of generation assets under the provisions of SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." SFAS No. 121 requires a company to forecast future net cash flows from
operating the asset, on an undiscounted basis excluding carrying costs, and to compare the sum of those cash flows with the net carrying value of the asset. Under this test, if the undiscounted net
cash flows exceed the net carrying value, no impairment exists for accounting purposes. TXU Electric has forecasted the net cash flows of its generating assets, including anticipated proceeds on sale,
and determined that the undiscounted net cash flows exceed the net carrying value of those plants; accordingly, for accounting purposes, there is no impairment. Generation-related plant assets at
September 30, 1999 were approximately $9.8 billion, net of accumulated depreciation.

Investment Tax CreditsTXU Electric has unamortized deferred investment tax credits (ITCs) of approximately $428 million
applicable to its generation business. The unamortized ITCs are temporary differences under generally accepted accounting principles for which a deferred income tax asset has been recorded. Under
regulatory accounting, a regulatory liability also has been recorded. Under the requirements of SFAS No. 101, the ITC-related regulatory liability would be written off as an extraordinary item
when the criteria of SFAS No. 71 are no longer met. However, it is uncertain under applicable regulations whether, and to what extent, the customers will ultimately benefit from the unamortized
ITCs and/or the related regulatory liability. Upon final determination by the PUC, TXU Electric expects that the amount of unamortized ITCs not applicable to customers will be amortized over the
remaining life of the generation plants. Also, upon final determination by the PUC, TXU Electric expects that the regulatory liability related to the ITCs that is not applicable to customers will be
written off as an extraordinary credit to income.

4.  SHORT-TERM FINANCING

TXU and TXU Electric

Lines of CreditAt September 30, 1999, TXU, TXU Electric and TXU Gas had amended joint US
dollar-denominated lines of credit under revolving credit facility agreements (US Credit Agreements) with a group of banking institutions amounting to $2.5 billion. The US Credit Agreements have two
facilities. Facility A provides for short-term borrowings aggregating up to $1.1 billion outstanding at any one time at variable interest rates and terminates February 25, 2000. Of this, $800 million
can be used for working capital and other general corporate purposes. Facility B provides for borrowings aggregating up to $1.4 billion outstanding at any one time at variable interest rates and
terminates March 2, 2003. Borrowings

under this facility can be used for working capital and other general corporate purposes. The combined borrowings of TXU, TXU Electric and TXU Gas under both facilities, excluding borrowings that were
permitted only to finance the acquisition of TEG, are limited to an aggregate of $2.2 billion outstanding at any one time. TXU Electric's and TXU Gas' borrowings under both facilities are limited to
an aggregate of $1.25 billion and $650 million outstanding at any one time, respectively. At September 30, 1999, there were no borrowings outstanding under these lines. The facilities primarily
support commercial paper borrowings. At September 30, 1999, outstanding commercial paper borrowings supported by both facilities totaled $1.7 billion.

TXU

Lines of CreditThe Eastern Electricity Revolving Credit Facility provides for short-term
borrowings for general corporate purposes of up to £250 million outstanding at any one time and terminates March 2, 2003. No borrowings were outstanding at September 30, 1999
under this facility.

In
addition, certain other non-US subsidiaries have revolving credit agreements (denominated in both foreign currencies and US dollars) aggregating approximately $105 million, of
which $86 million was outstanding at September 30, 1999. These revolving credit agreements expire at various dates through 2001.

ReceivablesEastern Electricity has facilities with a third party whereby Eastern Electricity may sell up to
£300 million of its electricity receivables and TXU Finance (No. 2) Limited may borrow up to an aggregate of £275 million, collateralized by additional receivables of
Eastern Electricity, through a short-term note issue arrangement. The program has an overall limit of £550 million. Through March 31, 1999, the electricity receivable financings
were in the form of short-term loans collateralized by Eastern Electricity's trade accounts receivable. Subsequent to March 31, 1999, the program was restructured so that a portion of the
receivables are sold outright rather than being used to collateralize short-term borrowings. Eastern Electricity continually sells additional receivables to replace those collected. At
September 30, 1999, accounts receivable of Eastern Electricity of £207 million had been sold under the
new program. An additional £93 million of receivables remain as collateral for short-term loans. At September 30, 1999, TXU Finance (No. 2) Limited had no outstanding
borrowings made through the note issue arrangement. The borrowings by Eastern Electricity bear interest at an annual rate based on commercial paper rates plus a margin, which was 5.3% at
September 30, 1999.

5.  CAPITALIZATION

TXU

Common StockIn April 1999, TXU repurchased approximately 1.7 million shares of its
outstanding common stock at a total cost of $64 million, and in July 1999, TXU repurchased an additional 4.4 million shares of its outstanding common stock for a total cost of $186 million. In
August 1999, the Board of Directors approved an increase in the stock repurchase program to $800 million, leaving $325 million authorized for future repurchases.

TXU Electric

Common StockDuring the nine months ended September 30, 1999, TXU Electric purchased and
retired a total of 14.8 million shares of its common stock from TXU at a cost of approximately $445 million.

TXU and TXU Electric

TXU or Subsidiary Obligated, Mandatorily Redeemable, Preferred Securities of Subsidiary Trusts, Each Holding Solely Junior Subordinated
Debentures of TXU or Related Subsidiary (Trust Securities)At September 30, 1999 and December 31, 1998, the statutory business trust subsidiaries had
trust securities outstanding, as follows:

|                                                            |  | Trust Securities |  | Trust Assets(a) |  | Maturity
|----------------------------------------------------------- |  | ---------------- |  | --------------- |  | --------
|
|
|TXU                                                         |  |                  |  |                 |  |         
|TXU Capital I
(7.25% Series)                                |  | 9,200            |  | 9,200           |  | $       
|                                                            |  |                  |  |                 |  |         
|TXU Electric                                                |  |                  |  |                 |  |         
|TXU Electric Capital I
(8.25% Series)                       |  | 5,871            |  | 5,871           |  |         
|TXU Electric Capital III
(8.00% Series)                     |  | 8,000            |  | 8,000           |  |         
|TXU Electric Capital IV
(Floating Rate Trust
Securities)(b) |  | 100              |  | 100             |  |         
|TXU Electric Capital V
(8.175% Trust
Securities)            |  | 400              |  | 400             |  |         
|                                                            |  |                  |  |                 |  |         
|Total TXU Electric                                          |  | 14,371           |  | 14,371          |  |         
|                                                            |  |                  |  |                 |  |         
|TXU Gas                                                     |  |                  |  |                 |  |         
|TXU Gas Capital I (Floating
Rate Trust Securities)(c)       |  | 150              |  | 150             |  |         
|                                                            |  |                  |  |                 |  |         
|Total                                                       |  | 23,721           |  | 23,721          |  | $       
|                                                            |  |                  |  |                 |  |         

---



Each parent company owns common securities issued by its subsidiary trust and has effectively issued a full and unconditional guarantee of such
trust's securities.

TXU Electric

Long-Term DebtIn March 1999, the Brazos River Authority issued $111 million aggregate
principal amount of Collateralized Pollution Control Revenue Refunding Bonds, Series 1999A, due April 1, 2033. The 1999A Bonds bear interest at a rate of 3.70% per annum until the
mandatory tender date of April 1, 2000. Upon mandatory tender, the 1999A Bonds will be remarketed by a remarketing agent appointed by TXU Electric. Proceeds were used to refund the 8.25% Brazos
River Authority Series 1989A Bonds and a portion of the Brazos River Authority Taxable Series 1991D Bonds. TXU Electric is obligated to make payments of principal and interest on the
1999A Bonds. This obligation is secured by TXU Electric First Mortgage Bonds. Because TXU Electric believes this obligation will be remarketed, and has the ability to refinance if necessary, it has
been classified as long-term debt.

On
June 19, 1999, the $118 million of Brazos River Authority Pollution Control Revenue Refunding Bonds, Series 1995B, due June 1, 2030, were remarketed, resulting
in an interest rate of 4.15% per annum to the mandatory tender date of June 19, 2000. TXU Electric is obligated to make payments of principal and interest on the 1995B Bonds. Because TXU
Electric believes this obligation will be remarketed, and has the ability to refinance if necessary, it has been classified as long-term debt.

TXU

On June 23, 1999, TXU issued $500 million principal amount of floating rate Senior Notes due June 25, 2001. The interest rate, based on
three-month LIBOR plus a margin, was 6.06% at September 30, 1999. The interest rate will be reset quarterly. Net proceeds were used to repay commercial paper.

On
September 24, 1999, TXU issued $425 million principal amount of floating rate Senior Notes due September 24, 2001. The Senior Notes bear interest at a rate determined
quarterly based on three-month LIBOR plus a margin. The initial interest rate is 6.44%. Net proceeds were used to repay commercial paper.

United KingdomAt September 30, 1999, TXU Europe and TXU Finance (No. 2) Limited had a joint sterling-denominated
line of credit with a group of banking institutions under a credit facilities agreement (Sterling Credit Agreement). The Sterling Credit Agreement, as amended in March 1999, provides for
borrowings of up to £1.275 billion and has two facilities: a £750 million term facility which will terminate on March 2, 2003 and a
£525 million revolving credit facility which has a £200 million 364-day tranche (Tranche A) and a £325 million tranche which terminates
March 2, 2003 (Tranche B). The amended Sterling Credit Agreement allows for borrowings in various currencies with interest rates based on the prevailing rates in effect in the countries in
which the borrowings originate. At September 30, 1999, £750 million ($1.235 billion) of borrowings were outstanding under the term facility with an average interest
rate of 5.98%, and approximately £182 million ($300 million) of non-UK borrowings were outstanding under Tranche B, at a weighted average interest rate of 5.59%.

In
May 1999, a subsidiary of TXU Europe issued $1.5 billion of Senior Notes in three series: $350 million at 6.15% due May 15, 2002, $650 million at
6.45% due May 15, 2005, and $500 million at 6.75% due May 15, 2009. The proceeds of this issuance were used to reduce indebtedness incurred in connection with the acquisition of
TEG, to reduce borrowings under the Sterling Credit Agreement and

for other corporate purposes. Shortly thereafter, TXU Europe entered into various interest rate and
currency swaps that in effect changed the interest rate on the borrowings from fixed to variable based on LIBOR and fixed the principal amount to be repaid in sterling.

On
October 5, 1999, a subsidiary of TXU Europe issued £77 million ($127 million) in Norwegian bonds due October 5, 2029, at a fixed rate of
7.25%. The net proceeds were used to pay down a portion of the Tranche B borrowings. On November 1, 1999, approximately £200 million ($329 million) was borrowed on the
Tranche B facility. The net proceeds were used to finance the acquisition of the interest in the PVO joint venture.

AustraliaAt September 30, 1999, TXU Australia Holdings had a A$1.1 billion Senior Acquisition Facility with
a group of banking institutions, and TXU Australia Holdings and Eastern Energy had a A$413 million Subordinated Acquisition Facility with a banking institution to fund the acquisition of the
assets of Westar/Kinetik Energy. The Senior Acquisition Facility is composed of: a A$275 million term facility due February 24, 2000 (Tranche A); a A$220 million revolving cash advance
facility due February 24, 2002 (Tranche B); and a A$605 million term facility due February 24, 2002 (Tranche C). The Subordinated Acquisition Facility expires December 24,
1999. As of September 30, 1999, there was A$1.5 billion ($978 million) outstanding under these facilities. The Subordinated Acquisition Facility and Tranche A have been
reclassified as a long-term liability since TXU intends to refinance these on a long-term basis.

6.  DERIVATIVE INSTRUMENTS

TXU

TXU enters into derivative instruments, including options, swaps, futures and other contractual commitments, to manage market risks related to changes in
interest rates, foreign currency exchange rates and commodity prices. TXU's participation in derivative transactions, except for the energy marketing activities of TXU Energy Trading Company, formerly
Enserch Energy Services, Inc., and Eastern Energy's agreement with AES Ecogen, as discussed below, has been designated primarily for hedging purposes and instruments are not held or issued for trading
purposes.

In
May 1999, Eastern Energy entered into a twenty-year agreement with AES Ecogen, which owns 966MW of gas-fired generation that is typically used during peak periods of demand
for electricity in Victoria. The agreement provides Eastern Energy with the ability to enter into contracts with AES Ecogen that require AES Ecogen to pay to Eastern Energy the difference between the
price for electricity specified in the agreement and the then current spot prices of electricity. In addition to providing a hedge against Eastern Energy's cost of electricity during peak periods, the
agreement enables Eastern Energy to offer price protection services to other electricity retailers. The portion of the agreement that relates to trading activities will be accounted for on a
mark-to-market basis. Eastern Energy made an initial payment of A$200 million and is required to make further future payments. The initial and future cash flows are included in the determination of
fair value. The fair value at September 30, 1999 approximates cost. Eastern Energy also has an agreement to supply gas to the AES Ecogen gas-fired generator for twenty years.

Interest Rate Risk ManagementAt September 30, 1999, TXU, TXU Electric and their subsidiaries had various interest
rate swaps in effect, the terms and notional amounts of which had not significantly
changed

from December 31, 1998. In addition, TXU entered into a $425 million extendable swap in September 1999 to convert variable rate commercial paper to an initial nine-month rate of
5.11%. If the swap is not cancelled at the end of the initial period, it continues until June 28, 2005 at a fixed rate of 5.84%.

United KingdomAt September 30, 1999, TXU Europe had various interest rate swaps with an aggregate notional amount
of $1.5 billion that convert the fixed rate Senior Notes to a floating rate based on LIBOR. These swaps mature on the dates of the underlying notes. In addition, TXU Europe had other interest rate
swaps and forward rate agreements outstanding, with aggregate notional amounts of approximately £1.14 billion ($1.9 billion), that establish a mix of fixed and variable
interest rates on outstanding debt. In October 1999, TXU Europe entered into interest rate swaps maturing December 15, 2000 to convert a £250 million notional amount
of variable rate debt to a weighted average fixed rate of 6.39%.

AustraliaAt September 30, 1999, Eastern Energy and Westar/Kinetik Energy had interest rate swaps and forward rate
agreements outstanding, denominated in Australian dollars and/or US dollars, with aggregate notional amounts of approximately $1.5 billion. These agreements establish a mix of fixed and
variable interest rates on outstanding debt and have remaining terms up to 17.5 years.

Foreign Currency Risk ManagementAt September 30, 1999, TXU and Eastern Energy had various foreign currency swaps,
options and exchange contracts in effect, the terms and amounts of which had not significantly changed from December 31, 1998. In connection with the May 1999 issuance of $1.5 billion of
Senior Notes, TXU Europe entered into currency swaps which effectively fixed the principal amount to be repaid in sterling. In August 1999, TXU Europe entered into a forward foreign currency
contract to acquire $200 million and $300 million in October 2017 and October 2018, respectively, for approximately £218 million to fix the cost (in
pounds sterling) to settle the original US dollar-denominated debt of TEG. The difference between the forward rate and the spot rate at the inception of the contract, a foreign currency gain of
approximately £92 million ($151 million), will be amortized to income over the life of the contract.

7.  REGULATION AND RATES

TXU and TXU Electric

Docket 18490The PUC approved the non-unanimous stipulation filed on December 17, 1997 by
TXU Electric, together with the General Counsel of the PUC, the Office of Public Utility Counsel (OPC) and various other parties interested in TXU Electric's rates and services. The stipulation,
modified to incorporate changes made by the PUC, resulted in base rate credits beginning January 1, 1998, of 4% for residential customers, 2% for general service secondary customers and 1% for
all other retail customers, and additional base rate credits for residential customers of 1.4% beginning January 1, 1999. Certain parties that did not sign the stipulation have appealed the
PUC's approval by filing suit in state district court. TXU and TXU Electric cannot predict the outcome of these appeals.

In
accordance with the stipulation, from January 1, 1998 through June 30, 1999, earnings in excess of the earnings cap were recorded as additional depreciation of
nuclear production assets, and a reclassification of depreciation expense was made from T&D to nuclear production assets. As discussed in Note 3, application of SFAS No. 71 to the generation
portion of TXU Electric's business was discontinued as of June 30, 1999. Effective July 1, 1999, earnings in excess of the earnings cap were recorded as a reduction of revenues, and a
corresponding regulatory liability recorded. Upon final PUC approval, the regulatory liability associated with earnings in excess of the earnings cap will either be applied against TXU Electric's

stranded generation assets as determined under the 1999 Texas legislation's market valuation criteria or refunded to customers upon a final determination by the PUC.

Additionally,
effective July 1, 1999, TXU Electric ceased the reclassification of T&D depreciation expense to nuclear production assets. Instead, an amount equal to T&D
depreciation expense for the period was recorded as a regulatory asset, which will be amortized as it is recovered through the T&D portion of the business. An equivalent amount was recorded as a
regulatory liability which will be applied against TXU Electric's stranded generation assets as determined under the legislation's market valuation criteria.

In
accordance with the 1999 Texas legislation, for the nine months ended September 30, 1999 TXU Electric recorded $52 million as additional depreciation of nuclear
production assets and $59 million as a reduction of revenues as a result of earnings in excess of the earnings cap, compared with $180 million of additional depreciation of nuclear
production assets for the same period in 1998. In addition, for the nine months ended September 30, 1999 and 1998, TXU Electric recorded $95 million and $136 million,
respectively, of depreciation expense reclassified from T&D to nuclear production assets. For the nine months ended September 30, 1999, an amount of $48 million was recorded as a regulatory
asset as a result of depreciation expense reclassified from T&D to nuclear production assets. For the twelve months ended September 30, 1999, TXU Electric recorded additional depreciation of
$183 million on its nuclear production assets representing $141 million of depreciation expense reclassified from T&D and $42 million of additional depreciation due to earnings in
excess of the earnings cap. In addition, TXU Electric recorded a $59 million reduction of revenues representing earnings in excess of the earnings cap subsequent to June 30, 1999.
Including deferred income tax effects, the net effect was a $65 million reduction in net income for the twelve months ended September 30, 1999 compared with a reduction of $147 million
for the same period of 1998.

Docket 20896In March 1999, TXU Electric filed with the PUC its first report, as required in Docket 18490,
concerning the earnings cap calculation for 1998. The General Counsel of the PUC filed a notice of contest in June 1999, which challenged the inclusion of $19 million of affiliate expenses in
the return cap calculation. In July 1999, the General Counsel withdrew this challenge. By PUC order dated September 7, 1999, Docket No. 20896 was closed.

Docket 20666Fuel RefundTXU Electric filed a petition with the PUC in March 1999 to refund to customers
approximately $115 million, including interest, in over-collected fuel costs for the period June 1997 through February 1999. In April 1999, parties to this docket: TXU
Electric, the General Counsel of the PUC, Texas Industrial Energy Consumers (TIEC) and OPC, filed a unanimous stipulation
resolving all issues in this docket. The PUC approved the stipulation at the May 20, 1999 Open Meeting, and the refund was made to customers through a one-time credit in June 1999. This
over-collection was the result of milder than expected weather and declining natural gas prices.

Docket 20285Fuel ReconciliationIn December 1998, in accordance with PUC rules, TXU Electric filed a
petition with the PUC seeking final reconciliation of all eligible fuel and purchased power expenses incurred during the reconciliation period of July 1, 1995 through June 30, 1998,
amounting to a total of $5.04 billion. In addition, and as permitted by the PUC rules, TXU Electric also requested an accounting order that would allow certain costs incurred to facilitate the
use of coal as a supplemental fuel at its Monticello plant to be treated as eligible fuel costs and billed pursuant to TXU Electric's fuel costs factor. By incurring these expenses, TXU and TXU
Electric believe they have significantly improved the reliability

of the supply of fuel to Monticello and have, at the same time, lowered the fuel expense that would otherwise be incurred in the absence of these investments. Parties to this docket (Cities of
Arlington,et al., OPC, TIEC, NUCOR Steel, Texas-New Mexico Power Company, and the General Counsel of the PUC) filed a unanimous stipulation, which
represents a compromise among the signatories, providing for, among other things, a disallowance and refund to consumers in the amount of $52 million, which was recorded in June 1999. On
August 5, 1999, the PUC voted to approve the stipulation. The refund, which was made as a one-time credit on customer bills during the September billing cycle, was approximately 1% of
the $5.04 billion spent by TXU Electric during the reconciliation period.

TXU
Electric and certain other regulated subsidiaries of TXU have several rate requests or refunds pending or on appeal. With regard to Eastern Group, the regulation of distribution
and supply charges is currently subject to review by the Office of Gas and Electricity Markets covering England, Wales and Scotland (OFGEM). On August 12, 1999, OFGEM issued a draft report,
adjusted on October 8, 1999, proposing a range of substantial revenue reductions for the distribution businesses of all Regional Electric Companies in the UK. OFGEM issued its proposed price
adjustments for the electricity supply businesses on October 8, 1999. The final OFGEM report is expected at the end of November 1999 and both distribution and supply price adjustments
are expected to become effective April 1, 2000. TXU is analyzing the draft proposals and cannot predict at this time either the final price adjustments that will be applicable to Eastern Group
or the ultimate impact of such adjustments on TXU's financial position, results of operations or cash flows.

8.  COMMITMENTS AND CONTINGENCIES

TXU

Legal ProceedingsIn February 1997, the official government representative of pensioners in
the UK (Pensions Ombudsman) made final determinations against The National Grid Company plc (National Grid) and its group trustees with respect to complaints by two pensioners in National Grid's
section of the Electricity Supply Pension Scheme (ESPS) relating to the use of the pension fund surplus resulting from the March 1992 actuarial valuation of the National Grid section to meet
certain costs arising from the payment of pensions on early retirement upon reorganization or downsizing. These determinations were set aside by the High Court in June 1997, and the
arrangements made by National Grid and its
group trustees in dealing with the surplus were confirmed. The two pensioners appealed this decision, and judgment on the appeal has now been received although a final order is awaited. The judgment
endorsed the Pensions Ombudsman's determination that National Grid was not entitled to deal unilaterally with any surplus. If a similar action were to be made against Eastern Group in relation to its
use of actuarial surplus in its section of the ESPS, it would vigorously defend the action, ultimately through the courts. However, if a determination were finally to be made against it and upheld in
the courts, Eastern Group could have a potential liability to repay to its section of the ESPS an amount estimated by TXU to be up to $74 million (exclusive of any applicable interest charges).

In
August 1998, the Gracy Fund, L.P. (Gracy Fund) filed suit in the United States District Court for the Northern District of Texas against EEX Corporation, formerly Enserch
Exploration, Inc. (EEX), TXU, David W. Biegler, Gary J. Junco, Erle Nye, Thomas Hamilton and J. Phillip McCormick. The Gracy Fund sought to represent a class of certain purchasers of the common
stock of ENSERCH Corporation (now TXU Gas) and EEX based upon claims of various violations of the Securities Act of 1933 (Securities Act) and the Securities Exchange Act of 1934 (Exchange Act). Also
in August 1998, Stan C. Thorne (Thorne)

filed suit in the United States District Court for the Southern District of Texas against EEX, TXU Gas, DeGolyer & Naughton, David W. Biegler, Gary J. Junco, Fredrick S. Addy and B.K. Irani and
sought to represent a certain class of purchasers of common stock of EEX. In December 1998, the United States District Court for the Northern District of Texas issued an Order in Cause No.
3-98-CV-1808-G consolidating the Gracy Fund and the Thorne suits (the Consolidated Action). In January 1999, the Gracy Fund et al. filed an amended class action complaint in the Consolidated
Action against EEX, TXU Gas, David W. Biegler, Gary J. Junco, Thomas Hamilton, J. Philip McCormick, Fredrick S. Addy and B.K. Irani. TXU and Erle Nye were omitted as defendants pursuant to a tolling
agreement. The individual named defendants are current or former officers and/or directors of EEX, and Mr. Biegler has been an officer and director of TXU Gas. The amended complaint alleges
violations of provisions of the Securities Act and the Exchange Act. The plaintiff in the Consolidated Action represents a class of persons acquiring stock of ENSERCH Corporation and/or EEX between
August 3, 1995 and August 5, 1997, inclusive. No amount of damages has been specified in the Consolidated Action. Defendants filed a joint motion to dismiss in March 1999, and
discovery has been stayed pending a ruling on the motion to dismiss. TXU Gas is continuing to evaluate the claims and is unable at this time to predict the outcome of this proceeding, but intends to
vigorously defend this suit.

TXU and TXU Electric

GeneralTXU and TXU Electric are each involved in various legal and administrative proceedings and
have other contingencies, that, in the opinion of the management of each, should not have a material effect upon their financial positions, results of operations or cash flows.

9.  SEGMENT INFORMATION

TXU

|                     |  | Three Months Ended
September 30, |       | Nine Months Ended
September 30, |   | Twelve Months Ended
September 30, |  
|-------------------- |  | -------------------------------- | ----- | ------------------------------- | - | --------------------------------- | -
|
|Trade Revenues      |  |                                  |       |                                 |   |                                   |  
|US Electric          |  | $                                | 2,077 |                                 | $ | 2,138                             |  
|US Gas               |  |                                  | 143   |                                 |   | 137                               |  
|US Energy Marketing  |  |                                  | 801   |                                 |   | 946                               |  
|UK/Europe            |  |                                  | 1,132 |                                 |   | 1,004                             |  
|Australia            |  |                                  | 210   |                                 |   | 123                               |  
|All Other            |  |                                  | 72    |                                 |   | 32                                |  
|                     |  |                                  |       |                                 |   |                                   |  
|Consolidated         |  | $                                | 4,435 |                                 | $ | 4,380                             |  
|                     |  |                                  |       |                                 |   |                                   |  
|Affiliated Revenues |  |                                  |       |                                 |   |                                   |  
|US Gas               |  | $                                | 14    |                                 | $ | 14                                |  
|US Energy Marketing  |  |                                  | 1     |                                 |   | C                                 |  
|All Other            |  |                                  | 85    |                                 |   | 76                                |  
|Eliminations         |  |                                  | (100  | )                               |   | (90                               | )
|                     |  |                                  |       |                                 |   |                                   |  
|Consolidated         |  | $                                |      |                                 | $ |                                  |  
|                     |  |                                  |       |                                 |   |                                   |  
|Net Income (Loss)   |  |                                  |       |                                 |   |                                   |  
|US Electric          |  | $                                | 435   |                                 | $ | 364                               |  
|US Gas               |  |                                  | (14   | )                               |   | (21                               | )
|US Energy Marketing  |  |                                  | (13   | )                               |   | 4                                 |  
|UK/Europe            |  |                                  | (3    | )                               |   | (31                               | )
|Australia            |  |                                  | 5     |                                 |   | 13                                |  
|All Other            |  |                                  | (49   | )                               |   | (36                               | )
|                     |  |                                  |       |                                 |   |                                   |  
|Consolidated         |  | $                                | 361   |                                 | $ | 293                               |  
|                     |  |                                  |       |                                 |   |                                   |  



INDEPENDENT ACCOUNTANTS' REPORT

Texas Utilities Company (doing business as TXU Corp):

We
have reviewed the accompanying condensed consolidated balance sheet of Texas Utilities Company (doing business as TXU Corp) and subsidiaries (TXU) as of September 30, 1999,
and the related condensed statements of consolidated income and of comprehensive income for the three-month, nine-month and twelve-month periods ended September 30, 1999 and 1998, and of
consolidated cash flows for the nine-month periods ended September 30, 1999 and 1998. These financial statements are the responsibility of TXU's management.

We
conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists
principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit in
accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such
an opinion.

Based
on our review, we are not aware of any material modifications that should be made to such condensed consolidated financial statements for them to be in conformity with generally
accepted accounting principles.

We
have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of TXU as of December 31, 1998, and the related statements
of consolidated income, comprehensive income, cash flows and common stock equity for the year then ended (not presented herein); and in our report, based on our audit and the report of other auditors,
dated March 5, 1999, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance
sheet as of December 31, 1998, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived.

DELOITTE &
TOUCHE LLP

Dallas,
Texas
November 11, 1999

INDEPENDENT ACCOUNTANTS' REPORT

TXU Electric Company:

We
have reviewed the accompanying condensed consolidated balance sheet of TXU Electric Company (formerly Texas Utilities Electric Company) and subsidiaries (TXU Electric) as of
September 30, 1999, and the related condensed statements of consolidated income and of comprehensive income for the three-month, nine-month and twelve-month periods ended September 30,
1999 and 1998, and of consolidated cash flows for the nine-month periods ended September 30, 1999 and 1998. These financial statements are the responsibility of TXU Electric's management.

We
conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists
principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit in
accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such
an opinion.

Based
on our review, we are not aware of any material modifications that should be made to such condensed consolidated financial statements for them to be in conformity with generally
accepted accounting principles.

We
have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of TXU Electric as of December 31, 1998, and the related
statements of consolidated income, comprehensive income, cash flows and common stock equity for the year then ended (not presented herein); and in our report dated March 5, 1999, we expressed
an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 1998, is
fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived.

DELOITTE &
TOUCHE LLP

Dallas,
Texas
November 11, 1999



## 

Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

BUSINESS, MERGERS AND ACQUISITIONS



In May 1999, Texas Utilities Company (TXU) adopted TXU Corp as its assumed name and began conducting business as TXU Corp. During 1999, several of TXU's
subsidiaries changed their corporate names in connection with the new TXU corporate identity program. Certain comparisons in this report have been affected by acquisitions by TXU or its subsidiaries
of Westar and Kinetik Energy in Australia (as described below) in February 1999, The Energy Group PLC (TEG) in May 1998, and TXU Communications Company, formerly Lufkin-Conroe
Communications Co., in November 1997. These acquisitions have been accounted for as purchase business combinations. Results of operations of these companies have been included only from their
dates of acquisition. TXU's principal international operations are conducted through TXU International Holdings Limited, which in turn indirectly owns TXU Europe Limited, formerly TXU Eastern Holdings
Limited (TXU Europe), and TXU Australia Holdings (Partnership) Limited Partnership (TXU Australia Holdings). TXU Europe's operations in the United Kingdom (UK) and other parts of Europe are conducted
through subsidiaries of TXU Europe Group plc, formerly Eastern Group plc (Eastern Group), primarily Eastern Electricity plc (Eastern Electricity). TXU Australia Holdings' principal operating
subsidiaries include Eastern Energy Limited (Eastern Energy) and the gas operations in Australia described below.

In
February 1999, TXU Australia Holdings acquired from the Government of Victoria, Australia, the gas retail business of Kinetik Energy Pty Ltd and the gas distribution
operations of Westar Pty Ltd (together, Westar/Kinetik Energy). The purchase price was A$1.6 billion ($1.0 billion) which has been financed principally through bank borrowings by TXU Australia
Holdings. The excess of the purchase consideration plus acquisition costs over a preliminary estimate of net fair value of tangible and identifiable intangible assets acquired and liabilities assumed
resulted in goodwill of A$873 million ($569 million), which is being amortized over 40 years. The process of determining the fair value of assets and liabilities at the acquisition date is continuing,
and the final result awaits the resolution of pensions, employee benefits and other contingencies and finalization of certain estimates.

In
September 1999, TXU Europe announced it was forming a joint venture with certain shareholders of Pohjolan Voima Oy (PVO), Finland's second largest electricity generator. As
part of the transaction TXU Europe contributed approximately £200 million ($329 million) for an 81% ownership interest in the joint venture company on November 1, 1999. The joint
venture will acquire rights to the output from approximately 600 megawatts of PVO's thermal generating capacity.

TXU
will pursue potential investment opportunities from time to time when it concludes that such investments are consistent with its business strategies and are likely to enhance the
long-term return to its shareholders.



On October 1, 1999, TXU Electric Company, formerly Texas Utilities Electric Company (TXU Electric) announced plans to sell six of its eighteen natural
gas-fired electricity generating plants in Texas. These plants have an aggregate generating capacity of 3,116 megawatts, or approximately 15% of TXU Electric's generating capacity. Any gain on the
sale of these plants will be recorded as a regulatory liability and applied against TXU Electric's generation assets that may become stranded costs under provisions of the Texas electric utility
industry restructuring legislation discussed in Note 3 to the Condensed Consolidated Financial Statements. TXU Electric plans to sell the plants, together with all associated assets, including land,
lakes, water rights, air permits, emission allowances and fuel transportation contracts. TXU Electric anticipates completion of the plant sales by the end of 2000.

RESULTS OF OPERATIONS



Net income for TXU Electric for the three months ended September 30, 1999 was higher than the same period of 1998, while net income for the nine- and
twelve-month periods of 1999 was slightly lower than the like periods in 1998. Period-to-period comparisons of net income were impacted by both a fuel reconciliation settlement recorded in the second
quarter of 1999 and a rate settlement agreement that became effective in January 1998, which reduced customer rates and introduced an earnings cap.

As
discussed in Note 7 to the Condensed Consolidated Financial Statements, from January 1, 1998 through June 30, 1999, earnings in excess of the earnings cap were
recorded as additional depreciation of nuclear production assets, and depreciation expense was reclassified from transmission and distribution (T&D) to nuclear production assets. Effective
July 1, 1999, earnings in excess of the earnings cap were recorded as a reduction of revenues. The net effect of the above earnings mitigation reduced net income by $32 million, $69 million and
$65 million, respectively, for the three, nine and twelve months ended September 30, 1999, versus reductions of $109 million, $147 million and $147 million in the comparable 1998 periods
respectively.

In
June 1999, TXU Electric reached an agreement with all intervening parties to refund $52 million ($31 million after tax) to consumers as part of a fuel reconciliation
proceeding with the Public Utility Commission of Texas (PUC). The refund, which was recorded as a reduction in revenues, is approximately 1% of the $5.04 billion spent by TXU Electric during the
period from July 1, 1995 through June 30, 1998 for fuel to generate electricity and appeared as a one-time credit on customer bills during the September 1999 billing cycle.

Excluding
a $59 million reduction of revenues in the 1999 periods as a result of earnings in excess of the earnings cap and the $52 million fuel reconciliation recorded in the second
quarter of 1999, total revenues for the three-, nine- and twelve-month periods of 1999 were 0.3%, 3.2% and 4.0% lower, respectively, than the comparable 1998 periods, primarily due to more normal
weather conditions in the 1999 periods and an additional reduction in rates effective January 1, 1999 due to the 1998 rate settlement agreement, somewhat offset by continued strong core retail
sales and revenue growth. Electric energy sales volumes for the three-, nine- and twelve-month periods of 1999 were 3.4%, 3.5% and 3.0% lower, respectively, than the same periods of 1998. Fuel
revenues for the third quarter of 1999 were slightly higher than the same period of 1998, but decreased for the nine- and twelve-month periods of 1999, primarily as a result of lower energy sales.

Fuel
and purchased power expenses for the three months ended September 30, 1999 were higher than the same period of 1998 primarily due to higher natural gas prices, partially
offset by lower natural gas usage. The decrease in fuel and purchased power expenses for the 1999 nine-month period compared to the 1998 nine-month period resulted primarily from lower usage of
natural gas, partially offset by higher natural gas prices, while the lower expense for the 1999 twelve-month period compared to the 1998 twelve-month period was principally due to lower natural gas
usage.

Depreciation
and amortization expense was lower for all periods of 1999 compared with the same periods of 1998 due to less mitigation depreciation recorded in 1999 than in the 1998
periods. For the twelve months ended September 30, 1999, depreciation and amortization expense was 17% lower than the same period in 1998. During that period, TXU Electric's rate settlement
agreement resulted in additional depreciation of $183 million on its nuclear production assets versus $317 million in the comparable 1998 period. Of the additional depreciation for the twelve months
ended September 30, 1999, $141 million represents depreciation expense reclassified from T&D, and $42 million represents additional depreciation due to earnings in excess of the earnings cap.
Since January 1998, total nuclear mitigation is approximately $1.1 billion.

Net
decreases in interest expense for the three, nine and twelve months ended September 30, 1999, compared to the same periods in 1998 are primarily due to the reacquisition of
long-term debt and remarketing of certain debt to lower interest rates.

The
1999 effective income tax rate for TXU Electric was lower for all periods as compared to 1998 due primarily to the discontinuation of amortization of prior period flow-through
amounts and other tax-related regulatory assets and liabilities resulting from the impact of the Texas electric utility industry restructuring legislation. The lower effective tax rate for the nine
and twelve months ended September 30, 1999 also reflects a favorable adjustment to prior years' tax accruals.



Earnings for the three months ended September 30, 1999 were $361 million ($1.31 per share, basic and diluted) compared with $293 million ($1.04 per
share, basic and diluted) for the third quarter of 1998, a 23% earnings improvement. Earnings for the nine months ended September 30, 1999 were $642 million ($2.30 per share, basic and diluted)
compared with $503 million ($1.94 per share, basic and diluted) for the nine months ended September 30, 1998, a 28% earnings improvement. Earnings for the twelve months ended
September 30, 1999 were $879 million ($3.14 per share, basic and diluted) compared with $599 million ($2.35 per share basic, $2.34 per share diluted) for the prior twelve-month period, a 47%
earnings improvement. For all periods presented, the factors affecting the results of TXU Electric, as discussed above, are also major factors affecting the results of TXU. Results for the 1999 nine-
and twelve-month periods also reflect a full period of operations of the Eastern Group, while the same periods in 1998 include results from the date of acquisition of TEG (including certain one-time
acquisition transaction-related costs, which totaled $31 million after-tax). Earnings per share comparisons for all periods presented were affected by the issuance in 1998 of shares of common stock
for the acquisition of TEG and the repurchase of TXU common shares in both 1998 and 1999.

Operating
revenues for the third quarter of 1999 of $4.4 billion were slightly higher than the third quarter of 1998 due to increased revenues for the UK/Europe segment, primarily
resulting from increased wholesale electric energy sales volumes and related merchant trading operations, and the inclusion of revenues from Westar/Kinetic Energy in the 1999 period. Partially
offsetting the increase was the $59 million reduction of TXU Electric's revenues as a result of earnings in excess of the earnings cap and decreased revenues for the US Energy Marketing segment.

Results
for the nine months ended September 30, 1999 reflect operating revenues of $13 billion, a 25% increase over the first nine months of 1998. Operating revenues for the
twelve months ended September 30, 1999 of $17 billion were 36% higher than the same period of 1998. The increases for both periods were primarily due to the inclusion of the Eastern Group for a
full period in 1999 versus from the acquisition date in the 1998 periods, and the inclusion of revenues from Westar/Kinetic Energy in the 1999 periods. Partially offsetting were lower revenues from
TXU Electric for reasons discussed above and lower revenues for the US Gas and US Energy Marketing segments, which were both impacted by mild weather in the fourth quarter of 1998 and the first
quarter of 1999.

Total
operating expenses for the three months ended September 30, 1999 were slightly less than in the same period of 1998. Lower depreciation and amortization due to less
mitigation depreciation recorded in 1999 than in the 1998 period more than offset higher fuel and purchased power costs. Total operating expenses for the nine- and twelve-month periods of 1999 were
26% and 36% higher, respectively, than the same periods in 1998. Substantially all of the increase was due to the inclusion of the Eastern Group for a full period in 1999 versus from the date of
acquisition in the 1998 periods and the inclusion of Westar/Kinetic Energy from the date of acquisition in 1999, partially offset by less mitigation depreciation recorded by TXU Electric in the 1999
periods versus the 1998 periods.

Total
interest expense and other charges, including distributions on trust securities and preferred stock dividends of subsidiaries, for the three months ended September 30,
1999 were 5% less than in the same

period of 1998, but for the nine- and twelve-months periods of 1999 were 21% and 34% higher, respectively, than in the same periods of 1998. The increases for the nine- and twelve-month periods were
principally due to debt assumed and incurred in connection with the acquisitions of TEG and Westar/Kinetic Energy, partially offset by the favorable impact of TXU's capital restructuring and debt
reduction programs.

The
overall effective income tax rate was lower for all periods of 1999 versus the same periods of 1998. The 1999 periods benefited from the discontinuation of amortization of prior
period flow-through amounts and other tax-related regulatory assets and liabilities of TXU Electric as a result of the 1999 Texas electric utility industry restructuring legislation. Partially
offsetting the lower tax rate was greater non-deductible goodwill amortization in the 1999 periods as a result of acquisitions versus the 1998 periods.

For
certain financial data by segment, see Note 9 to the Condensed Consolidated Financial Statements.

US ElectricResults for this segment primarily reflect the results of TXU Electric, see discussion above.

US GasFor the three- and nine-month periods of 1999, the US Gas segment had losses of $14 million and $22 million,
respectively, versus losses of $21 million and $27 million, respectively, for the same periods of 1998. For the twelve months ended September 30, 1999, the segment had a net loss of $27 million
compared with a net loss of $17 million in the same period of 1998. Results for the 1999 periods included third-quarter pre-tax gains totaling $10 million ($6 million after-tax) in other income
(deductions)net from the sale of assets. Operating revenues for the three months ended September 30, 1999 were 4% higher than in the same period of 1998. For the nine and twelve
months ended September 30, 1999, operating revenues were 7% and 17% lower, respectively, than the same periods of 1998 due to lower gas prices and the abnormally mild winter weather in the
fourth quarter of 1998 and the first quarter of 1999.

US Energy MarketingNet results for the US Energy Marketing segment were down by $17 million, $31 million and $18 million
for the three, nine and twelve months ended September 30, 1999 compared to the same periods in 1998. Third-quarter 1999 results were negatively impacted by lower trading volumes and margins and
unusually high natural gas prices which affected the results from retail marketing originations. Management limited trading volumes in the third quarter of 1999 because of the market conditions
present during the period. Results were also impacted by higher operating expenses, which increased by $4 million, $12 million and $14 million in the 1999 periods versus the 1998 periods primarily due
to costs related to developing middle and back office infrastructure capabilities to prepare for the opening of the Texas electricity market to competition in 2002.

UK/EuropeThe UK/Europe operations had a net loss of $3 million in the third quarter this year versus a loss of $31 million
in the third quarter last year. For the year-to-date period, the UK/Europe segment contributed net income of $137 million compared with a loss of $66 million in the same period of 1998. For the
twelve-month period ended September 30, 1999, net income was $343 million compared to a loss of $66 million. The nine- and twelve-month periods of 1998 included operations from the date of
acquisition of TEG on May 19, 1998 and 22% equity in the net income of TEG for the period March to May 19, 1998. The improved results for the three months ended
September 30, 1999 reflected a 13% increase in operating revenues, primarily due to higher wholesale energy sales.

AustraliaNet income for the three, nine, and twelve months ended September 30, 1999 was $5 million, $0.3 million and $3
million, respectively, compared with net income of $13 million, $28 million and $28 million for the same periods of 1998. Results for this segment include Westar/Kinetik Energy since acquisition on
February 24, 1999. Operating revenues increased for all periods primarily as a result of the addition of gas revenues from Westar/Kinetik Energy and increased electric revenues and sales as a
result of the gas crisis in Australia in 1998 causing customers to shift to electricity. The increase in revenues was more than offset by higher operating expenses, including gas purchase costs, along
with increased interest

costs, principally related to the acquisition of Westar/Kinetik Energy. Results for the 1999 periods were also affected by very mild winter weather in the third quarter. Results for the nine and
twelve months ended September 30, 1999 were also impacted by the write-off of uncollectible revenues and costs incurred as a result of the acquisition of Westar/Kinetik Energy.

Comprehensive IncomeThe gains and losses from currency translation adjustments in all periods principally reflect
movements in exchange rates between the US dollar and the British pound sterling.

FINANCIAL CONDITION

Liquidity and Capital Resources



For information concerning liquidity and capital resources, see Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
in TXU's and TXU Electric's Annual Reports on Form 10-K for the year 1998 (1998 Form 10-K). Results for the three- and nine-month periods presented herein are not necessarily indicative of
expectations for a full year's operations because of seasonal and other factors, including variations in maintenance and other operating expense patterns. No significant changes or events which might
affect the financial condition of TXU or TXU Electric have occurred subsequent to year-end other than as disclosed in other reports of TXU or TXU Electric or included herein.

Cash
flows provided from operating activities for TXU before changes in operating assets and liabilities for the nine months ended September 30, 1999 were $1.9 billion versus
$1.6 billion for the comparable period in 1998 ($1.4 billion versus $1.5 billion for TXU Electric). Changes in operating assets and liabilities for TXU for the nine months ended September 30,
1999 provided cash flows of $171 million versus cash used of $83 million in the comparable nine-month period of 1998. The year-to-year comparison reflects cash provided of $335 million from the sale
of receivables by Eastern Group, which was partially offset by working capital requirements for Eastern Group operations. Additionally, federal income tax payments were greater in the 1998 period than
in the 1999 period. Changes in operating assets and liabilities for TXU Electric provided cash flows of $38 million for the first nine months of 1999 compared with $56 million for the same 1998
period.

Cash
flows used for investing activities for the nine months ended September 30, 1999 were $2.5 billion compared with $3.5 billion for the same period of 1998 ($473 million
versus $413 million for TXU Electric). The February 1999 acquisition of Westar/Kinetik Energy in Australia used approximately $1.0 billion, while the purchase of the shares of TEG during the
nine months ended September 30, 1998 required $2.5 billion. Construction expenditures used $1.2 billion for the current nine-month period compared with $751 million for the same period in 1998
($401 million versus $365 million for TXU Electric), primarily resulting from the inclusion of a full nine months expenditures by Eastern Group in the 1999 period.

External
funds of a permanent or long-term nature are obtained through the issuance of common stock, preferred stock, trust securities and long-term debt by TXU and subsidiaries. The
capitalization ratios of TXU at September 30, 1999 consisted of approximately 65% long-term debt, 4% TXU or subsidiary obligated, mandatorily redeemable, preferred securities of subsidiary
trusts, each holding solely junior subordinated debentures of TXU or related subsidiary (trust securities), 1% preferred stock and 30% common stock equity. Restricted cash of $1.2 billion included in
other investments collateralizes certain Eastern Group capital lease obligations. Applying the cash collateral against related capital lease obligations, the capitalization ratios would consist of 63%
long term debt, 5% trust securities, 1% preferred stock and 31% common stock equity. The capitalization ratios of TXU Electric at September 30, 1999 consisted of approximately 38% long-term
debt, 7% trust securities, 1% preferred stock and 54% common stock equity.

During
the nine-month period ended September 30, 1999, TXU (including TXU Electric) issued, redeemed, reacquired or made scheduled principal payments on long-term debt, as
follows (in millions of dollars):

|                                               |  | Issuances |       | Retirement
|---------------------------------------------- |  | --------- | ----- | ----------
|TXU Electric:                                  |  |           |       |           
|Brazos River Authority Pollution Control Bonds |  | $         | 127   |           
|First Mortgage Bonds                           |  |           |      |           
|                                               |  |           |       |           
|Total TXU Electric                             |  |           | 127   |           
|TXU Europe:                                    |  |           |       |           
|Senior Notes                                   |  |           | 1,500 |           
|Term Facility                                  |  |           | 1,225 |           
|Acquisition Facilities                         |  |           |      |           
|Revolving Credit Facility (Tranche B)          |  |           | 391   |           
|Other                                          |  |           | 178   |           
|TXU Australia Holdings:                        |  |           |       |           
|Acquisition Facilities                         |  |           | 926   |           
|Other                                          |  |           | 301   |           
|TXU Corp:                                      |  |           |       |           
|Senior Notes                                   |  |           | 925   |           
|All Other Subsidiaries                         |  |           | 3     |           
|                                               |  |           |       |           
|Total                                          |  | $         | 5,576 |           
|                                               |  |           |       |           

See
Note 5 to the Condensed Consolidated Financial Statements for additional information on new issuances of long-term debt.

In
May 1999, a subsidiary of TXU Europe issued $1.5 billion of Senior Notes in three series: $350 million at 6.15% due May 15, 2002, $650 million at 6.45% due
May 15, 2005, and $500 million at 6.75% due May 15, 2009. The proceeds of this issuance were used to reduce indebtedness incurred in connection with the acquisition of TEG, to reduce
borrowings under a joint sterling denominated line of credit with a group of banking institutions under a credit facilities agreement (Sterling Credit Agreement) and for other corporate purposes.
Shortly thereafter, TXU Europe entered into various interest
rate and currency swaps that in effect changed the interest rate on the borrowings from fixed to variable based on LIBOR and fixed the principal amount to be repaid in pounds sterling.

On
June 23, 1999, TXU issued $500 million principal amount of floating rate Senior Notes due June 25, 2001. The interest rate, based on three-month LIBOR plus a margin,
was 6.06% at September 30, 1999. The interest rate will be reset quarterly. Net proceeds were used to repay commercial paper issued by TXU.

On
September 24, 1999, TXU issued $425 million principal amount of floating rate Senior Notes due September 24, 2001. The Senior Notes bear interest at a rate determined
quarterly based on three-month LIBOR plus a margin. The initial interest rate is 6.44%. Net proceeds were used to repay commercial paper issued by TXU.

Eastern
Electricity has facilities with a third party whereby Eastern Electricity may sell up to £300 million of its electricity receivables and TXU Finance (No. 2)
Limited may borrow up to an aggregate of £275 million, collateralized by additional receivables of Eastern Electricity, through a short-term note issue arrangement. The program has an
overall limit of £550 million. Through March 31, 1999, the electricity receivable financings were in the form of short-term loans collateralized by Eastern Electricity's trade


accounts receivable. Subsequent to March 31, 1999, the program was restructured so that a portion of the receivables are sold outright rather than being used to collateralize short-term
borrowings. Eastern Electricity continually sells additional receivables to replace those collected. At September 30, 1999, accounts receivable of Eastern Electricity of £207
million had been sold under the new program. An additional £93 million of receivables remain as collateral for short-term loans. At September 30, 1999, TXU Finance (No. 2)
Limited no outstanding borrowings made under the note issue arrangement. The borrowings by Eastern Electricity bear interest at an annual rate based on commercial paper rates plus a margin, which was
5.3% at September 30, 1999.

At
September 30, 1999, TXU, TXU Electric and TXU Gas Company, formerly Enserch Corporation (TXU Gas) had amended joint US dollar-denominated lines of credit under revolving
credit facility agreements (US Credit Agreements) with a group of banking institutions amounting to $2.5 billion. The US Credit Agreements have two facilities. Facility A provides for
short-term borrowings aggregating up to $1.1 billion outstanding at any one time at variable interest rates and terminates February 25, 2000. Of this, $800 million can be used for
working capital and other general corporate purposes. Facility B provides for borrowings aggregating up to $1.4 billion outstanding at any one time at variable interest rates and terminates
March 2, 2003. Borrowings under this facility can be used for working capital and other general corporate purposes. The combined borrowings of TXU, TXU Electric and TXU Gas under both
facilities, excluding borrowings that were permitted only to finance the acquisition of TEG, are limited to an aggregate of $2.2 billion outstanding at any one time. TXU Electric's and TXU Gas'
borrowings under both facilities are limited to an aggregate of $1.25 billion and $650 million outstanding at any one time, respectively. At September 30, 1999, there were no borrowings
outstanding under these lines. The facilities primarily support commercial paper borrowings. At September 30, 1999, outstanding commercial paper borrowings supported by both facilities totaled
$1.7 billion.

An
Eastern Electricity Revolving Credit Facility provides for short-term borrowings for general corporate purposes of up to £250 million outstanding at any one time and
terminates March 2, 2003. No borrowings were outstanding at September 30, 1999 under this facility.

In
addition, certain other non-US subsidiaries have revolving credit agreements (denominated in both foreign currencies and US dollars) aggregating approximately $105 million, of
which $86 million was
outstanding at September 30, 1999. These revolving credit agreements expire at various dates through 2001.

United Kingdom--At September 30, 1999, TXU Europe's and TXU Finance (No. 2) Limited's Sterling Credit Agreement, as
amended in March 1999, provides for borrowings of up to £1.275 billion and has two facilities: a £750 million term facility which will terminate on March 2, 2003
and a £525 million revolving credit facility which has a £200 million 364-day tranche (Tranche A) and a £325 million tranche which terminates March 2, 2003
(Tranche B). TXU Europe and TXU Finance (No. 2) Limited currently are the only permitted borrowers under the amended Sterling Credit Agreement. The amended Sterling Credit Agreement
allows for borrowings in various currencies with interest rates based on the prevailing rates in effect in the countries in which the borrowings originate. At September 30, 1999,
£750 million ($1.235 billion) of borrowings were outstanding under the term facility with an average interest rate of 5.98%, and approximately £182 million ($300 million) of
non-UK borrowings were outstanding under Tranche B, at a weighted average interest rate of 5.59%.

On
October 5, 1999, a subsidiary of TXU Europe issued £77 million ($127 million) in Norwegian bonds due October 5, 2029, at a fixed rate of 7.25%. The net
proceeds were used to pay down a portion of the Tranche B borrowings. On November 1, 1999, approximately £200 million ($329 million) was borrowed on the Tranche B facility.
The net proceeds were used to finance the acquisition of the interest in the PVO joint venture.

Australia--At September 30, 1999, TXU Australia Holdings had a A$1.1 billion Senior Acquisition Facility with a group of banking
institutions, and TXU Australia Holdings and Eastern Energy had a

A$413 million Subordinated Acquisition Facility with a banking institution to fund the acquisition of the assets of Westar/Kinetik Energy. The Senior Acquisition Facility is composed of: a A$275
million term facility due February 24, 2000 (Tranche A); a A$220 million revolving cash advance facility due February 24, 2002 (Tranche B); and a A$605 million term facility due
February 24, 2002 (Tranche C). The Subordinated Acquisition Facility expires December 24, 1999. As of September 30, 1999, there was A$1.5 billion ($978 million) outstanding under these
facilities.

In
May 1999, Eastern Energy entered into a twenty year agreement with AES Ecogen, which owns 966MW of gas-fired generation that is typically used during peak periods of demand
for electricity in Victoria. The agreement provides Eastern Energy with the ability to enter into contracts with AES Ecogen that require the exchange of cash for the difference between the amounts
specified in the agreement and the then current spot prices of electricity. In addition to providing a hedge against Eastern Energy's cost of electricity during peak periods, the agreement enables
Eastern Energy to offer price protection services to other electricity retailers. The portion of the agreement that relates to trading activities will be accounted for on a mark-to-market basis.
Eastern Energy made an initial payment of A$200 million and is required to make further future payments. The initial and future cash flows are included in the determination of fair value. The fair
value at September 30, 1999 approximates cost. Eastern Energy also has an agreement to supply gas to the AES Ecogen gas-fired generator for twenty years.

In
April 1999, TXU repurchased approximately 1.7 million shares of its outstanding common stock at a total cost of approximately $64 million, and in July 1999, TXU
repurchased an additional 4.4 million shares of its outstanding common stock for a total cost of approximately $186 million. In August 1999, the Board of Directors approved an increase in the
stock repurchase program to $800 million, leaving approximately $325 million authorized for future repurchases.

During
the nine months ended September 30, 1999, TXU Electric purchased and retired a total of 14.8 million shares of its common stock from TXU at a cost of approximately $445
million.

TXU,
TXU Electric, TXU Gas and other subsidiaries of TXU may issue additional debt and equity securities as needed, including the possible future sale: (i) by TXU Electric of
up to $499 million principal amount of debt securities and up to $25 million of Cumulative Preferred Stock, and (ii) by TXU Gas of up to $600 million aggregate principal amount of debt
securities and/or preferred securities of subsidiary trusts, all of which are currently registered with the Securities and Exchange Commission (SEC) for offering pursuant to Rule 415 under the
Securities Act of 1933. In addition, TXU may issue up to $340 million of debt securities and up to an aggregate of $510 million of (i) debt securities, (ii) shares of its preference
stock, or (iii) preferred securities of subsidiary trusts.

Risk Management

TXU's and TXU Electric's operations involve managing market risks related to changes in interest rates and, for TXU, foreign exchange and commodity price
exposures. Derivative instruments including swaps, options, futures and forward contracts are used to reduce exposure and manage those risks. With the exception of the energy marketing activities of
TXU Energy Trading Company and Eastern Energy's agreement with AES Ecogen, which use the mark-to-market method of accounting, TXU's and TXU Electric's participation in derivative transactions are
designated for hedging purposes and are not held or issued for trading purposes.

No
material substantive changes in the exposure to, or management of, interest rate, foreign currency and electricity or gas price risk have occurred subsequent to December 31,
1998 for TXU's US operations. For information regarding certain changes in non-US derivative instruments, see Note 6 to Condensed Consolidated Financial Statements.

Regulation, Rates and Competition



Electric Industry RestructuringLegislation was passed during the 1999 session of the Texas legislature that will
restructure the electric utility industry in Texas. Among other matters, the legislation authorizes competition in the retail and generation markets for electricity beginning January 1, 2002;
provides for the recovery of stranded costs and generation-related regulatory assets; requires reductions in nitrogen oxide and sulfur dioxide emissions; requires a rate freeze for all customers until
January 1, 2002 and certain rate reductions for residential and small commercial customers for up to five years thereafter; and sets certain limits on capacity owned and controlled by power
generation companies.

TXU
and TXU Electric are analyzing how the long-range implications of the 1999 Texas deregulation legislation will affect their respective financial positions, results of operations
and cash flows. For further discussion of the accounting impact of the restructuring of the electric utility industry in Texas, see Notes 3 and 7 to the Condensed Consolidated Financial Statements.

OtherIn June 1999, TXU Electric reached an agreement in principle with all intervening parties to refund $52
million to consumers as part of a PUC fuel reconciliation proceeding. The refund, which appeared as a one-time credit on customer bills during the September billing cycle, was approximately
1% of the $5.04 billion spent by TXU Electric for fuel to generate electricity from July 1, 1995 to June 30, 1998.

TXU
Electric and certain other regulated subsidiaries of TXU have several rate requests or refunds pending or on appeal. (See Note 7 to Condensed Consolidated Financial Statements for
a discussion of the impact of these various issues.) With regard to Eastern Group, the regulation of distribution and supply charges is currently subject to review by the Office of Gas and Electricity
Markets covering England, Wales and Scotland (OFGEM). On August 12, 1999, OFGEM issued a draft report, adjusted on October 8, 1999, proposing a range of substantial revenue reductions
for the distribution businesses of all Regional Electric Companies in the UK. OFGEM issued its proposed price adjustments for the electricity supply business on October 8, 1999. The final OFGEM
report is expected at the end of November 1999 and both distribution and supply price adjustments are expected to become effective April 1, 2000. TXU is analyzing the draft proposals and
cannot predict at this time either the final price adjustments that will be applicable to Eastern Group or the ultimate impact of such adjustments on TXU's financial position, results of operations or
cash flows.

CHANGE IN ACCOUNTING STANDARDS

In June 1999, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 137, "Accounting for
Derivative Instruments and Hedging ActivitiesDeferral of the Effective Date of FASB Statement No. 133", which defers the implementation of SFAS No. 133 to fiscal years
beginning after June 15, 2000. SFAS No. 133 establishes accounting and reporting standards for derivative financial instruments, including derivative instruments embedded in other
contracts, and hedging activities. It requires the recognition of derivatives as either assets or liabilities in the statement of financial position and the measurement of those instruments at fair
value. TXU and TXU Electric are currently evaluating the impact the adoption of this standard will have on their respective statements of financial position and results of operations.

YEAR 2000 ISSUES

TXU and TXU Electric



Many existing computer programs use only the last two digits to identify a year in the date field. Thus, they would not recognize a year that begins with 20
instead of 19. If not corrected, many computer applications could fail or produce erroneous data on or about the year 2000.

US

TXU began its US efforts to address Year 2000 (Y2K) issues in 1996 by focusing on information technology mainframe-based application systems (IT Corporate
Applications). In early 1997, an infrastructure project to address TXU's information technology (IT) related hardware, operating systems and desktop software was begun (IT Infrastructure). In late
1997, a project was begun to address Y2K issues throughout TXU related to embedded systems, such as process controls for energy production and delivery, and business-unit-owned applications (Non-IT
Equipment and Applications).

Applications
and equipment in each of these three major initiatives have been inventoried and categorized based on their criticality to TXU's business operations. Assessments of the
potential impact due to Y2K issues are essentially complete. This process includes the solicitation of vendor feedback, comparing information with other energy companies, and in many cases internal
verification by testing. The remediation and testing work on IT Corporate Applications is 100% complete. As of September 30, 1999, the IT Infrastructure project was over 95% complete and
remediation work on embedded systems was 99.6% complete.



TXU reported its readiness to the North American Electric Reliability Council (NERC) and the Nuclear Regulatory Commission (NRC) on October 7 and
October 1, 1999, respectively. In both reports, all mission critical work was confirmed as complete.

The
IT Corporate Applications remediation and testing activities are complete. Certification for the Y2K compliance on all mission critical business applications was completed as
scheduled. Certification of remaining applications was completed in the third quarter of 1999.

The
IT Infrastructure project involves assessing the compliance of standard computer hardware, network systems including gateways, hubs and routers, telecommunications equipment,
operating systems and IT standard software products. Equipment is brought to the appropriate model, version or release level specified by the product vendor as Y2K ready and tested in the TXU
environment using test tools and appropriate procedures specified by documented test standards. All mission critical IT Infrastructure systems are Y2K ready. The total IT Infrastructure project is
over 95% complete. The remaining work, which primarily involves the planned replacement or retirement of 850 business PCs, is scheduled for completion by November 30, 1999.

Non-IT
Equipment and Applications involve the hardware and software products that reside in individual business units. These items include the embedded systems that are used in the
production, energy delivery, and other processes of TXU. Mission critical work for this project is complete.

TXU
has analyzed the potential impact of Y2K compliance efforts of third parties. Over 2,000 suppliers and service providers have been contacted to determine the status of their Y2K
efforts. All of the top 500 key suppliers have responded. Fifty-six of the key suppliers have been audited by TXU's procurement services organization. Each supplier has reported it will be ready for
Y2K. The more significant interdependencies relate to telecommunications and gas suppliers. On-site audits of a limited number of these significant third parties have been performed and readiness
verified.



The total costs associated with TXU's Y2K efforts for its US energy businesses are currently estimated to be approximately $40 million. These costs reflect
new, incremental costs and the reallocation of resources in pre-existing maintenance budgets. The costs related to the three major initiatives are estimated to be as follows: IT Corporate Applications
-$15 million; IT Infrastructure - $10 million; and Non IT-Equipment and Applications - $15 million. These costs are being expensed as incurred over the period 1996 through 2000 and a total of
approximately $34 million has been expended through September 30, 1999. There can be no assurance that these estimated costs will not change as TXU's Y2K program continues.

Strategic
initiatives were begun in two areas prior to beginning work on the Y2K issue, and the costs for these initiatives are not included in the estimate above. The energy
management system for TXU's transmission grid is being replaced. TXU's principal financial and accounting system has been replaced. Each of these projects will eliminate potential Y2K deficiencies;
however, that was not a significant consideration at the time replacement decisions were made.

TXU
Communications Company (TXU Communications) is nearing completion on all phases of work on its Y2K project. Remediation of embedded systems and of IT applications was completed in
the third quarter of 1999 except for two support/auxiliary systems. Both remaining items are scheduled for completion by mid-November 1999. Testing on all other IT applications and embedded
systems has been completed. The total cost of the TXU Communications Y2K effort is estimated to be $3.9 million, which is being expended through 1999. As of September 30, 1999, estimated costs
expended were approximately $3.7 million. Due to a strategic decision involving software for the regulated business unit, these costs are lower than previously projected. Although TXU Communications
filed its Y2K Contingency Plan with the PUC on June 30, 1999, additional planning and drills will be taking place throughout the remainder of the year.



With respect to internal risks, TXU's current assessment of the most reasonably likely worst case scenario is that impacts on either service or financial
performance will not be materially adverse. TXU believes, based on the results of testing that has already occurred on a large portion of its production equipment with embedded systems, that if any
disruption to service occurs, it will be isolated and of short-term duration. TXU continues to collaborate with other major energy suppliers through the joint Electric Power Research Institute's
embedded systems project.

NERC
is continuing to evaluate the status of the electric infrastructure throughout North America. TXU is a participant in this process. The fourth NERC status report, issued on
August 3, 1999, indicated that the transition through critical Y2K dates was expected to have minimal impact on electrical systems in North America. With continued work and coordinated
contingency planning, operating risks can be effectively mitigated. Results from TXU's testing program compare favorably with the results on which the NERC conclusions have been based. At the request
of the US Department of Energy, NERC authorized an independent study of system stability throughout North America. The results of that study, published in late October, indicate that the
interconnected power systems are very robust and remain secure for all but a few of the extremely severe and low probability events. Joint industry testing between the electric industry and the
telecommunications industry was performed during the second quarter of 1999. The results of those tests indicate that the telecommunications and electric systems tested would interface correctly in
the year 2000.

As
TXU's Y2K program proceeds, TXU will continue to assess its internal and external risks, not all of which are within its control; and it will continue to consider the most
reasonably likely worst case scenario. There can be no assurance that all material Y2K risks within TXU's control will have been adequately identified and corrected before the end of 1999. In
addition, TXU can make no assurances

regarding the Y2K readiness of systems and parties outside its control or the effect on TXU if those parties are not Y2K compliant.



TXU has in place detailed emergency response and disaster recovery plans designed to ensure high reliability of service to customers. These plans are utilized
routinely for abnormal service conditions. These plans have been reviewed to identify required actions specific to the Y2K issue. Y2K contingency plans were developed and filed with the PUC on
June 30, 1999. These Y2K contingency plans address both TXU activities and actions necessary to mitigate the impact of third party disruptions. These contingency plans have been coordinated
with those of the Electric Reliability Council of Texas and NERC. TXU will continue to refine and test these plans throughout the remainder of 1999.

International OperationsY2K Programs

TXU

UK/Europe



In the UK, Eastern Group established a program of projects in August 1996 designed to ensure that all its systems are Y2K compliant. In testing for
conformity, Eastern Group uses the revised version of the British Standards Institute's definition of Y2K conformity. Eastern Group's Y2K Program is sponsored by the Chief Executive and managed by a
board consisting of Eastern Directors and Senior Managers. Each project has six phases: inventory, risk assessment, analysis, remediation, testing and contingency planning.



During the third quarter of 1999, the formal certification of systems, both IT and embedded, was completed. The current assessment of remediation made by the
industry regulator, OFGEM, for the electricity industry is 100% complete for essential remedial work, including assessment of 100% of Eastern Group.

Eastern ElectricityThe inventory, risk assessment and analysis of the mainframe billing systems were completed in
June 1997. All the COBOL code was fixed by November 1998 and the remediation work for the mainframe operating system was completed in March 1999. Eastern's internal Y2K testing of
the remediated billing system application was completed in September 1999 and the system is ready for operation through the millennium transition. A further upgrade to the system is scheduled
for January 14, 2000 to ensure that all of the mainframe billing systems function correctly for February 29, 2000. The other Eastern Electricity IT systems have all been through the Y2K
compliance certification process.

TXU Europe Energy Trading Limited, formerly Eastern Power and Energy Trading Limited (EPET)All of the existing IT systems
have been through the Y2K compliance certification process. EPET is confident of business as usual into the millennium for the vast majority of EPET's UK and European trading operations that are
reliant on these systems, accounting for approximately 99% of the business revenue. A number of subsidiaries which come under the responsibility of the EPET Y2K project (e.g, joint ventures in Europe
and gas alliances in the North Sea) are being risk assessed in terms of potential impact to the EPET business as a whole, and satisfactory statements and evidence of Y2K readiness have been obtained
from the gas alliances in the North Sea. European joint venture assessments have been completed, with the exception of those in Spain, Sweden and Finland, which are scheduled to be finished in
November 1999.

MeteringAll of the existing IT and embedded systems have been through the Y2K compliance certification process. The one
remaining piece of work is to complete a fix to the customer key prepayment meters to enable tariff changes in the year 2000 to be implemented. The supply of electricity is unaffected

by this upgrade. This process began in October 1999 and is on target to address over 90% of customers by December 31, 1999. This project requires customers to visit vending stations to
collect special meter keys when they wish to apply credit next. Not all customers will come into the vending stations before December 31, 1999 to collect these special meter keys.

GenerationAll of the existing IT and embedded systems have been through the Y2K compliance certification process. Rollover
tests of main power station process control systems are complete. There are a number of subsidiaries in the generation business. These have been risk assessed in terms of potential impact to the
Eastern generation business as a whole, and satisfactory statements and evidence of Y2K readiness has been obtained from each subsidiary.

Networks DistributionAll the existing IT and embedded systems have been through the Y2K compliance certification process.
All non-compliant remote telemetry embedded systems on the distribution network have been upgraded to Y2K compliant version.

IT InfrastructureThis project covers the local and wide area networks, voice network, and the file and print server
network. All of the systems have been through the Y2K compliance certification process and the operational infrastructure platforms are running Y2K compliant versions. Upgrades are scheduled to be
installed where necessary in November 1999.

Overall Eastern Group ProgramSince October 1996, a Y2K compliance requirement has been included in Eastern Group's
standard terms and conditions for its purchasing contracts. New projects and systems during 1999 should not affect the scope and objectives of the above projects and the Y2K Program. Eastern Group's
operations are also exposed to the failure of third parties to deal with their Y2K exposure. Assurances about Y2K compliance have been received from most suppliers with whom Eastern Group does not
have contracts for existing IT and embedded systems that must be Y2K compliant.



As a result of lower than anticipated remediation efforts, the estimated costs associated with Eastern Group's Y2K program have been lowered to approximately
$22 million from $33 million. These costs include all Y2K related activities. They do not include the cost of achieving Y2K compliance for new IT systems installed in connection with the opening up of
the domestic UK electricity retail market to competition, new systems installed to meet other business needs or the cost of developing contingency plans for the energy management business.

Costs
of addressing the Y2K issue are being expensed as incurred. Amounts expended through September 30, 1999 totaled $13 million. Cost expenditures for the remainder of 1999
are estimated at $5 million and an additional $4 million for 2000.



With respect to internal risks, Eastern Group's current assessment of the most reasonably likely worst case scenario is that impacts on either service or
financial performance will not be materially adverse. Eastern Group believes, based on the results of testing that has already been carried out, that if any disruption to service occurs, it will be
isolated and of short-term duration.

Eastern
Group is working with its equipment and service suppliers to ensure its products and services are Y2K compliant. Reviews were completed by December 1998. Eastern Group
believes that any failure of such suppliers to be compliant is unlikely to have a material effect on Eastern Group or its operations. Eastern Group's operations are heavily dependent upon the
reliability of the high voltage transmission system in England and Wales and on the operations of the wholesale trading market for electricity in England and Wales. The owners and operators of those
systems have taken the position that they anticipate no material disruptions of service.

Two
internal audits of the Y2K Program were completed in April 1998 and August 1998. The Office of Electric Regulation covering England, Wales and Scotland audited the Y2K
Program in January 1999, and the Office of Gas Supply audited the Y2K Program in May 1999. OFGEM has carried out further questionnaire audits during June, July and
August 1999. These have focused on updates to the compliance testing program, contingency planning and communications.

There
are existing contingency plans in place which cover realistic failure scenarios and these are regularly tested. All plans have been reviewed against specific Y2K risks and all
of Eastern Group's businesses have produced Y2K contingency plans. These plans have been through three reviews. On October 1, 1999, the interdependencies between plans were tested. The results
of the test enabled the businesses to further refine and issue updated Y2K contingency plans that are scheduled for testing in late November 1999. Additional simulation exercises may be
conducted during November 1999 to test the interfaces between the central contingency control and communications center and business control rooms.

As
part of the contingency planning process, a Millennium Operating Regime has been developed to ensure business as usual during the millennium period. Key components include: an
escalation and communications structure including a contingency control and communications center supported by appropriate Eastern directors, increased manpower levels for business critical
operations, an agreed remuneration package for staff working during the millennium period, and a check of business critical systems at the rollover date.

Australia



TXU Australia Holdings initiated a Y2K Program in the third quarter of 1997 with the compilation of a Y2K inventory of supported IT assets and systems. An IT
Project Manager was appointed and a consultant was engaged to develop a Y2K remediation plan for items in the inventory assessed as having Y2K risk. A consulting firm was engaged in early 1998 to
provide a methodology for addressing the Y2K risks of all other assets and systems. The consulting firm was subsequently retained to establish a Y2K Program Office and complete a non-IT inventory. A
Y2K structure was also established in 1998 and a full time Program Director appointed to bring all activities together into a single TXU Australia Holdings Y2K Program. A gas distribution business and
a gas retail business were purchased in early 1999, and the Y2K Programs of these businesses were amalgamated within the TXU Australia Holdings Y2K Program from April 1999. This increased the
number of individual Y2K projects within TXU Australia Holdings to 80.



Y2K testing has been completed for all of the projects and remediation activities have been completed for 77 of the 80 projects. The outstanding Y2K
remediation activities are associated with TXU Australia Holdings' System Control and Data Acquisitions (SCADA) system, the Trunk Mobile Radio (TMR) system and replacement of the Outage Analysis
System. As the SCADA and TMR systems are considered to be mission critical systems, contingency plans have been established with workarounds for the non-compliant systems to enable both projects to be
declared Y2K Ready. All outstanding remediation activities are considered to be minor and are scheduled for completion by the end of 1999.



As a result of lower than anticipated remediation efforts, the estimated costs associated with the TXU Australia Holdings Y2K Program have been lowered to
approximately $1.6 million. Some additional costs included in capital budgets for new IT systems are not reflected in these Y2K costs. Approximately $1.2 million was spent through the end of
September 1999, with an additional $0.4 million expected to be spent throughout the remainder of 1999. There can be no assurance that these estimates will not change as a result of the
discovery of unexpected additional remediation work identified during Y2K testing.



With respect to internal risks, TXU Australia Holdings' current assessment of the most reasonably likely worst case scenario is that impacts on either service
or financial performance will not be materially adverse. TXU Australia Holdings believes, based on the results of testing that has already occurred
on a large portion of operating equipment, that if any disruption to service occurs, it will be isolated and of short-term duration.

The
completion of Y2K testing has not revealed any significant Y2K-related failures. Any discovered Y2K-related failures have been remediated to mitigate the impact of failure on TXU
Australia Holdings. No Y2K-related failures that have the potential to interrupt energy delivery to customers have been identified. Though some residual energy supply risk will always remain, joint
activities undertaken with upstream energy suppliers have given TXU Australia Holdings no reason to believe that significant disruption of energy delivery will occur.

Internal
audits have been conducted on TXU Australia Holdings' Y2K Program by consulting firms on four separate occasions. The most recent of these was conducted by
PricewaterhouseCoopers with the last report due in November 1999. The Victorian Office of the Regulator General (ORG) has also completed an extensive audit of Y2K preparations for the entire
Victorian Electricity Supply Industry (VESI). The report of this audit was released publicly August 3, 1999 and concluded that there is little likelihood of a disruption to the supply of
electricity in Victoria over the millennium period due to a Y2K computer failure. This report assessed the quality of TXU Australia Holdings' Y2K Program to be 88%. This report also made the following
assessment of TXU Australia Holdings' Y2K preparedness for critical electricity supply assets at the end of June: Readiness = 90%; Contingency Planning = 73%. Based on updated data
submitted monthly to ORG, TXU Australia Holdings' Y2K Readiness and Contingency Planning is now expected to be reported as 100% complete. ORG has recently commenced a second VESI Y2K audit focusing on
Contingency Planning with results expected to be published in November 1999.



Y2K contingency plans have been completed at both the asset level and at the project level. Testing and refinement of Y2K contingency plans will continue for
the remainder of 1999. Y2K contingency planning will also be conducted on a state level with the rest of the VESI and on a national level through the National Electricity Market Management Company.

As
TXU Australia Holdings' Y2K Program proceeds, it will continue to assess its internal and external risks, not all of which are within its control. There can be no assurance that
all material Y2K risks within TXU Australia Holdings' control will have been adequately identified and corrected before the end of 1999. In addition, Eastern Energy's operations are connected with the
Victorian electricity pool, along with those of all Victorian energy companies that use the pool, and depend on the reliability of the high voltage transmission grid and the operations of the pool.
TXU Australia Holdings can make no assurance regarding the Y2K readiness of systems and parties outside its control, nor can it currently assess the effect of any non-readiness by those systems or
parties.

FORWARD-LOOKING STATEMENTS



This report and other presentations made by TXU or TXU Electric contain forward-looking statements within the meaning of Section 21E of the Securities Exchange
Act of 1934, as amended. Although TXU and TXU Electric each believe that in making any such statement its expectations are based on reasonable assumptions, any such statement involves uncertainties
and is qualified in its entirety by reference to factors contained in the Forward-Looking Statements section of Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations in TXU's and TXU Electric's

Annual Reports on 1998 Form 10-K, as well as general industry trends; implementation of the Texas electricity deregulation legislation; power costs and availability; changes in business
strategy, development plans or vendor relationships; availability of qualified personnel; changes in, or the failure or inability to comply with, governmental regulations, including, without
limitation, environmental regulations; changes in tax laws; and access to adequate transmission facilities to meet changing demands, among others, that could cause the actual results of TXU or TXU
Electric to differ materially from those projected in such forward-looking statements.

Any
forward-looking statement speaks only as of the date on which such statement is made, and neither TXU nor TXU Electric undertakes any obligation to update any forward-looking
statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time and it is not
possible for TXU or TXU Electric to predict all of such factors, nor can they assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to
differ materially from those contained in any forward-looking statement.

Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information required hereunder for TXU and TXU Electric is not significantly different from the information set forth in Item 7A. Quantitative and
Qualitative Disclosures About Market Risk included in the 1998 Form 10-K and is therefore not presented herein, except for certain changes in non-US derivatives as discussed in Note 6 to the
Condensed Consolidated Financial Statements.



## 

PART II.  OTHER INFORMATION

Item 6.  EXHIBITS AND REPORTS ON FORM 8-K

TXU and TXU Electric



TXU

|Date of Report   |  | Item Reported                                                          
|---------------- |  | -----------------------------------------------------------------------
|August 6, 1999   |  | Item 4. Change in Certifying Accountant of TXU Eastern Holdings Limited
|October 1, 1999  |  | Item 5. Other Events                                                   
|October 18, 1999 |  | Item 5. Other Events                                                   

TXU Electric

|Date of Report   |  | Item Reported       
|---------------- |  | --------------------
|October 1, 1999  |  | Item 5. Other Events
|October 18, 1999 |  | Item 5. Other Events



SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.

|                        |  | TEXAS UTILITIES COMPANY(doing business as TXU Corp)
|----------------------- |  | ---------------------------------------------------
|                        |  | By                                                 
|Date: November 11, 1999 |  |                                                    

---

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.

|                        |  | TXU ELECTRIC COMPANY(formerly Texas Utilities Electric Company)
|----------------------- |  | ---------------------------------------------------------------
|                        |  | By                                                             
|Date: November 11, 1999 |  |                                                                



## QuickLinks

PART I. FINANCIAL INFORMATIONItem 1. FINANCIAL STATEMENTS

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

PART II. OTHER INFORMATIONItem 6. EXHIBITS AND REPORTS ON FORM 8-K