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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q



|þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2008

 OR 



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

Commission File Number 1-12833

Energy Future Holdings Corp.

(Exact name of registrant as specified in its charter)



|                                                   |  |                                     
|-------------------------------------------------- |  | ------------------------------------
|Texas                                              |  | 75-2669310                          
|(State of incorporation)                           |  | (I.R.S. Employer Identification No.)
|                                                   | 
|1601 Bryan Street, Dallas, TX 75201-3411           |  | (214) 812-4600                      
|(Address of principal executive offices)(Zip Code) |  | (Registrants telephone number)     

Indicate by check mark whether the registrant (1) has 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 registrant was required to file such reports) and (2) has been subject to such filing requirements for the past
90 days.    Yes   ̈    No   þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of large accelerated filer, accelerated filer
and smaller reporting company in Rule 12b-2 of the Exchange Act.

Large accelerated filer   ̈            Accelerated filer   ̈            Non-Accelerated filer  þ            Smaller reporting company   ̈

Indicate by check mark if the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ̈    No   þ

As of August 13, 2008, there were
1,667,005,540 shares of common stock outstanding, without par value, of Energy Future Holdings Corp. (substantially all of which were owned by Texas Energy Future Holdings Limited Partnership, Energy Future Holdings Corp.s parent holding
company, and none of which is publicly traded).









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TABLE OF CONTENTS



|                              |  |                                                                                                                      |  |     
|----------------------------- |  | -------------------------------------------------------------------------------------------------------------------- |  | ----
|                              |  |                                                                                                                      |  | Page
|GLOSSARY                      |  | ii                                                                                                                  
|                              | 
|PART I. FINANCIAL INFORMATION |  |                                                                                                                     
|                              |  |                                                                                                                     
|Item 1.                       |  | Financial Statements                                                                                                 |  |     
|                              |  | Condensed Statements of Consolidated Income (Loss)  Three and Six Months Ended June 30, 2008 and 2007               |  | 1   
|                              |  |                                                                                                                     
|                              |  | Condensed Statements of Consolidated Comprehensive Income (Loss)  Three and Six Months Ended June 30, 2008 and 2007 |  | 2   
|                              |  |                                                                                                                     
|                              |  | Condensed Statements of Consolidated Cash Flows  Six Months Ended June 30, 2008 and 2007                            |  | 3   
|                              |  |                                                                                                                     
|                              |  | Condensed Consolidated Balance Sheets  June 30, 2008 and December 31, 2007                                          |  | 5   
|                              |  |                                                                                                                     
|                              |  | Notes to Condensed Consolidated Financial Statements                                                                 |  | 6   
|                              |  |                                                                                                                     
|                              |  | Report of Independent Registered Public Accounting Firm                                                              |  | 51  
|                              |  |                                                                                                                     
|Item 2.                       |  | Managements Discussion and Analysis of Financial Conditionand Results of Operations                                 |  | 52  
|                              |  |                                                                                                                     
|Item 3.                       |  | Quantitative and Qualitative Disclosures About Market Risk                                                           |  | 96  
|                              |  |                                                                                                                     
|Item 4T.                      |  | Controls and Procedures                                                                                              |  | 102 
|                              | 
|PART II. OTHER INFORMATION    |  |                                                                                                                     
|                              |  |                                                                                                                     
|Item 1.                       |  | Legal Proceedings                                                                                                    |  | 102 
|                              |  |                                                                                                                     
|Item 1A.                      |  | Risk Factors                                                                                                         |  | 102 
|                              |  |                                                                                                                     
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                          |  | 103 
|                              |  |                                                                                                                     
|Item 5.                       |  | Other Information                                                                                                    |  | 104 
|                              |  |                                                                                                                     
|Item 6.                       |  | Exhibits                                                                                                             |  | 106 
|                              | 
|SIGNATURE                     |  | 107                                                                                                                 

Energy Future Holdings Corp.s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports
on Form 8-K and any amendments to those reports are made available to the public, free of charge, on the Energy Future Holdings Corp. website at http://www.energyfutureholdings.com, as soon as reasonably practicable after they have been filed with
or furnished to the Securities and Exchange Commission. The information on Energy Future Holdings Corp.s website shall not be deemed a part of, or incorporated by reference into, this report on Form 10-Q.

This Form 10-Q and other Securities and Exchange Commission filings of Energy Future Holdings Corp. and its subsidiaries occasionally make references to EFH Corp., EFC
Holdings, Intermediate Holding, TCEH, TXU Energy, Luminant, Oncor Holdings or Oncor when describing actions, rights or obligations of their respective subsidiaries. These references reflect the fact that the subsidiaries are consolidated with their
respective parent companies for financial reporting purposes. However, these references should not be interpreted to imply that the parent company is actually undertaking the action or has the rights or obligations of the relevant subsidiary company
or that the subsidiary company is undertaking an action or has the rights or obligations of its parent company or any other affiliate.

.



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GLOSSARY

When the following terms and abbreviations appear in the text of this report, they have the meanings indicated below.



|                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|---------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2007 Form 10-K               |  | EFH Corp.s Annual Report on Form 10-K for the year ended December 31, 2007                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                             | 
|Adjusted EBITDA              |  | Adjusted EBITDA means EBITDA adjusted to exclude non-cash items, unusual items and other adjustments allowable under certain debt arrangements of EFH Corp. and its subsidiaries. See the
definition of EBITDA below. Adjusted EBITDA and EBITDA are not recognized terms under GAAP and, thus, are non-GAAP financial measures. EFH Corp. is providing Adjusted EBITDA in this Form 10-Q (see reconciliation in Exhibit 99(b)) solely because of
the important role that Adjusted EBITDA plays in respect of the certain covenants contained in EFH Corp.s debt arrangements. EFH Corp. does not intend for Adjusted EBITDA (or EBITDA) to be an alternative to net income as a measure of operating
performance or an alternative to cash flows from operating activities as a measure of liquidity or an alternative to any other measure of financial performance presented in accordance with GAAP. Additionally, EFH Corp. does not intend for Adjusted
EBITDA (or EBITDA) to be used as a measure of free cash flow available for managements discretionary use, as the measure excludes certain cash requirements such as interest payments, tax payments and other debt service requirements. Because
not all companies use identical calculations, EFH Corp.s presentation of Adjusted EBITDA (and EBITDA) may not be comparable to similarly titled measures of other companies.
|                             | 
|Capgemini                    |  | Capgemini Energy LP, a subsidiary of Cap Gemini North America Inc. that provides business support services to EFH Corp. and its subsidiaries                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                             | 
|Competitive Electric segment |  | Refers to the EFH Corp. business segment that includes TCEH and equipment salvage and resale activities related to eight canceled coal-fueled generation units.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                             | 
|EBITDA                       |  | Refers to earnings (net income) before interest expense, income taxes, depreciation and amortization. See the definition of Adjusted EBITDA above.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                             | 
|EFC Holdings                 |  | Refers to Energy Future Competitive Holdings Company, a direct-wholly-owned subsidiary of EFH Corp. and the direct parent of TCEH.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                             | 
|EFH Corp.                    |  | Refers to Energy Future Holdings Corp., a holding company, and/or its subsidiaries, depending on context. Its major subsidiaries include TCEH and Oncor.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                             | 
|EPA                          |  | US Environmental Protection Agency                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                             | 
|EPC                          |  | engineering, procurement and construction                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     



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|                             |  |                                                                                                                                                                                                                                                                                                                                             
|---------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                             | 
|ERCOT                        |  | Electric Reliability Council of Texas, the independent system operator and the regional coordinator of various electricity systems within Texas                                                                                                                                                                                             
|                             | 
|FASB                         |  | Financial Accounting Standards Board, the designated organization in the private sector for establishing standards for financial accounting and reporting                                                                                                                                                                                   
|                             | 
|FERC                         |  | US Federal Energy Regulatory Commission                                                                                                                                                                                                                                                                                                     
|                             | 
|FIN                          |  | Financial Accounting Standards Board Interpretation                                                                                                                                                                                                                                                                                         
|                             | 
|FIN 39-1                     |  | FASB Staff Position No. FIN 39-1, Amendment of FASB Interpretation No. 39, (Offsetting of Amounts Related to Certain Contracts  an Interpretation of APB Opinion No. 10 and FASB
Statement No. 105)                                                                                                                                      
|                             | 
|FIN 48                       |  | FASB Interpretation No. 48 (As Amended), Accounting for Uncertainty in Income Taxes                                                                                                                                                                                                                                                       
|                             | 
|Fitch                        |  | Fitch Ratings, Ltd. (a credit rating agency)                                                                                                                                                                                                                                                                                                
|                             | 
|FSP                          |  | FASB Staff Position                                                                                                                                                                                                                                                                                                                         
|                             | 
|GAAP                         |  | generally accepted accounting principles                                                                                                                                                                                                                                                                                                    
|                             | 
|GWh                          |  | gigawatt-hours                                                                                                                                                                                                                                                                                                                              
|                             | 
|historical service territory |  | the territory, largely in north Texas, being served by EFH Corp.s regulated electric utility subsidiary at the time of entering retail competition on January 1, 2002                                                                                                                                                                      
|                             | 
|Intermediate Holding         |  | Refers to Energy Future Intermediate Holding Company LLC, a direct wholly-owned subsidiary of EFH Corp. and the direct parent of Oncor Holdings.                                                                                                                                                                                            
|                             | 
|IRS                          |  | US Internal Revenue Service                                                                                                                                                                                                                                                                                                                 
|                             | 
|kWh                          |  | kilowatt-hours                                                                                                                                                                                                                                                                                                                              
|                             | 
|LIBOR                        |  | London Interbank Offered Rate. An interest rate at which banks can borrow funds, in marketable size, from other banks in the London interbank market.                                                                                                                                                                                       
|                             | 
|Luminant Construction        |  | Refers to the operations of TCEH established for the purpose of developing and constructing new generation facilities.                                                                                                                                                                                                                      
|                             | 
|Luminant Energy              |  | Luminant Energy Company LLC, an indirect wholly-owned subsidiary of TCEH that engages in certain wholesale markets activities                                                                                                                                                                                                               
|                             | 
|Luminant                     |  | Refers to wholly-owned subsidiaries of TCEH engaged in competitive market activities consisting of electricity generation, development and construction of new generation facilities, wholesale
energy sales and purchases as well as commodity risk management and trading activities, all largely in Texas.                               
|                             | 
|market heat rate             |  | Heat rate is a measure of the efficiency of converting a fuel source to electricity. The market heat rate is based on the price offer of the marginal supplier in Texas (generally natural gas
plants) in generating electricity and is calculated by dividing the wholesale market price of electricity by the market price of natural gas.



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|                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|-------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                           | 
|Merger                     |  | The transaction referred to in Merger Agreement (defined immediately below) that was completed on October 10, 2007.                                                                                                                                                                                                                                                                                                                                 
|                           | 
|Merger Agreement           |  | Agreement and Plan of Merger, dated February 25, 2007, under which Texas Holdings agreed to acquire EFH Corp.                                                                                                                                                                                                                                                                                                                                         
|                           | 
|Merger Sub                 |  | Texas Energy Future Merger Sub Corp, a Texas corporation and a wholly-owned subsidiary of Texas Holdings that EFH Corp. merged into on October 10, 2007                                                                                                                                                                                                                                                                                               
|                           | 
|MMBtu                      |  | million British thermal units                                                                                                                                                                                                                                                                                                                                                                                                                         
|                           | 
|Moodys                    |  | Moodys Investors Services, Inc. (a credit rating agency)                                                                                                                                                                                                                                                                                                                                                                                             
|                           | 
|MW                         |  | megawatts                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                           | 
|MWh                        |  | megawatt-hours                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                           | 
|NRC                        |  | US Nuclear Regulatory Commission                                                                                                                                                                                                                                                                                                                                                                                                                      
|                           | 
|Oncor                      |  | Refers to Oncor Electric Delivery Company LLC, a direct wholly-owned subsidiary of Oncor Holdings and an indirect wholly-owned subsidiary of EFH Corp., and/or its consolidated bankruptcy remote
financing subsidiary, Oncor Electric Delivery Transition Bond Company LLC, depending on context, that is engaged in regulated electricity transmission and distribution activities.                                                                 
|                           | 
|Oncor Holdings             |  | Refers to Oncor Electric Delivery Holdings Company LLC, a direct wholly-owned subsidiary of Intermediate Holding and the direct parent of Oncor.                                                                                                                                                                                                                                                                                                      
|                           | 
|Oncor Ring-Fenced Entities |  | Refers to Oncor Holdings and its direct and indirect subsidiaries.                                                                                                                                                                                                                                                                                                                                                                                    
|                           | 
|OPEB                       |  | other postretirement employee benefits                                                                                                                                                                                                                                                                                                                                                                                                                
|                           | 
|PUCT                       |  | Public Utility Commission of Texas                                                                                                                                                                                                                                                                                                                                                                                                                    
|                           | 
|PURA                       |  | Texas Public Utility Regulatory Act                                                                                                                                                                                                                                                                                                                                                                                                                   
|                           | 
|Purchase accounting        |  | The purchase method of accounting for a business combination as prescribed by SFAS 141 whereby the cost or purchase price of a business combination, including the amount paid for the
equity and direct transaction costs are allocated to identifiable assets and liabilities (including intangible assets) based upon their fair values. The excess of the purchase price over the fair values of assets and liabilities is recorded as
goodwill.
|                           | 
|Regulated Delivery segment |  | Refers to the EFH Corp. business segment, the substantial majority of which consists of the activities of Oncor.                                                                                                                                                                                                                                                                                                                                      
|                           | 
|REP                        |  | retail electric provider                                                                                                                                                                                                                                                                                                                                                                                                                              



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|                               |  |                                                                                                                                                                                                                                                                                                                                                                                                      
|------------------------------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                               | 
|RRC                            |  | Railroad Commission of Texas, which has oversight of lignite mining activity                                                                                                                                                                                                                                                                                                                         
|                               | 
|S&P                            |  | Standard & Poors Ratings Services, a division of the McGraw-Hill Companies Inc. (a credit rating agency)                                                                                                                                                                                                                                                                                            
|                               | 
|SEC                            |  | US Securities and Exchange Commission                                                                                                                                                                                                                                                                                                                                                                
|                               | 
|Securities Act                 |  | Securities Act of 1933, as amended                                                                                                                                                                                                                                                                                                                                                                   
|                               | 
|SFAS                           |  | Statement of Financial Accounting Standards issued by the FASB                                                                                                                                                                                                                                                                                                                                       
|                               | 
|SFAS 133                       |  | SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities as amended and interpreted                                                                                                                                                                                                                                                                                              
|                               | 
|SFAS 140                       |  | SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, a replacement of FASB Statement No. 125                                                                                                                                                                                                                                               
|                               | 
|SFAS 141                       |  | SFAS No. 141, Business Combinations                                                                                                                                                                                                                                                                                                                                                                
|                               | 
|SFAS 142                       |  | SFAS No. 142, Goodwill and Other Intangible Assets                                                                                                                                                                                                                                                                                                                                                 
|                               | 
|SFAS 144                       |  | SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets                                                                                                                                                                                                                                                                                                                       
|                               | 
|SFAS 146                       |  | SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities                                                                                                                                                                                                                                                                                                                     
|                               | 
|SFAS 157                       |  | SFAS No. 157, Fair Value Measurements                                                                                                                                                                                                                                                                                                                                                              
|                               | 
|SFAS 158                       |  | SFAS No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plans                                                                                                                                                                                                                                                                                                     
|                               | 
|SFAS 161                       |  | SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities  an Amendment of FASB Statement No. 133                                                                                                                                                                                                                                                                             
|                               | 
|SG&A                           |  | selling, general and administrative                                                                                                                                                                                                                                                                                                                                                                  
|                               | 
|Sponsor Group                  |  | Collectively, the investment funds affiliated with Kohlberg Kravis Roberts & Co. L.P., TPG Capital, L.P. and GS Capital Partners, an affiliate of Goldman Sachs & Co.                                                                                                                                                                                                                                
|                               | 
|TCEH                           |  | Refers to Texas Competitive Electric Holdings Company LLC, a direct wholly-owned subsidiary of EFC Holdings and an indirect wholly-owned subsidiary of EFH Corp., and/or its subsidiaries,
depending on context, that are engaged in electricity generation, wholesale and retail energy markets and development and construction activities. Its major subsidiaries include Luminant and TXU Energy.
|                               | 
|TCEH Finance                   |  | Refers to TCEH Finance, Inc., a direct wholly-owned subsidiary of TCEH, formed for the sole purpose of serving as co-issuer with TCEH of certain debt securities.                                                                                                                                                                                                                                    
|                               | 
|TCEH Senior Secured Facilities |  | Refers collectively to the TCEH Initial Term Loan Facility, TCEH Delayed Draw Term Loan Facility, TCEH Revolving Credit Facility, TCEH Letter of Credit Facility and TCEH Commodity Collateral
Posting Facility. See Note 7 to the Financial Statements for details of these facilities.                                                                                                             



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|               |  |                                                                                                                                                                                                                      
|-------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               | 
|TCEQ           |  | Texas Commission on Environmental Quality                                                                                                                                                                            
|               | 
|Texas Holdings |  | Refers to Texas Energy Future Holdings Limited Partnership, a Delaware limited partnership controlled by the Sponsor Group that is the direct parent of EFH Corp.                                                    
|               | 
|TXU Energy     |  | Refers to TXU Energy Retail Company LLC, a direct wholly-owned subsidiary of TCEH engaged in the retail sale of electricity to residential and business customers. TXU Energy is a REP in
competitive areas of ERCOT.
|               | 
|TXU Europe     |  | TXU Europe Limited, a subsidiary of EFH Corp. that is in administration (similar to bankruptcy) in the United Kingdom                                                                                                
|               | 
|TXU Fuel       |  | TXU Fuel Company, a former subsidiary of TCEH                                                                                                                                                                        
|               | 
|TXU Gas        |  | TXU Gas Company, a former subsidiary of EFH Corp.                                                                                                                                                                    
|               | 
|US             |  | United States of America                                                                                                                                                                                             



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PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

ENERGY FUTURE HOLDINGS CORP. AND
SUBSIDIARIES

CONDENSED STATEMENTS OF CONSOLIDATED INCOME (LOSS)

(Unaudited)

(millions of dollars)



|                                                         |  |                                |        |   |  |  |                                |   |       |                              |  |   |        |   |                              |  |  |   |        |  
|-------------------------------------------------------- |  | ------------------------------ | ------ | - |  |  | ------------------------------ | - | ----- | ---------------------------- |  | - | ------ | - | ---------------------------- |  |  | - | ------ | -
|                                                         |  | Successor                      |        |   |  |  | Predecessor                    |   |       | Successor                    |  |   |        |   | Predecessor                  | 
|                                                         |  | Three MonthsEndedJune 30, 2008 |        |   |  |  | Three MonthsEndedJune 30, 2007 |   |       | Six MonthsEndedJune 30, 2008 |  |   |        |   | Six MonthsEndedJune 30, 2007 | 
|Operating revenues                                       |  | $                              | 2,951  |   |  |  |                                | $ | 2,405 |                              |  | $ | 5,305  |   |                              |  |  | $ | 4,760  |  
|Fuel, purchased power costs and delivery fees            |  |                                | (1,416 | ) |  |  |                                |   | (739  | )                            |  |   | (2,237 | ) |                              |  |  |   | (1,404 | )
|Net losses from commodity hedging and trading activities |  |                                | (4,727 | ) |  |  |                                |   | (383  | )                            |  |   | (6,293 | ) |                              |  |  |   | (1,069 | )
|Operating costs                                          |  |                                | (390   | ) |  |  |                                |   | (368  | )                            |  |   | (748   | ) |                              |  |  |   | (714   | )
|Depreciation and amortization                            |  |                                | (390   | ) |  |  |                                |   | (200  | )                            |  |   | (785   | ) |                              |  |  |   | (403   | )
|Selling, general and administrative expenses             |  |                                | (247   | ) |  |  |                                |   | (227  | )                            |  |   | (464   | ) |                              |  |  |   | (447   | )
|Franchise and revenue-based taxes                        |  |                                | (81    | ) |  |  |                                |   | (89   | )                            |  |   | (167   | ) |                              |  |  |   | (176   | )
|Other income (Note 5)                                    |  |                                | 15     |   |  |  |                                |   | 16    |                              |  |   | 29     |   |                              |  |  |   | 45     |  
|Other deductions (Note 5)                                |  |                                | (26    | ) |  |  |                                |   | (122  | )                            |  |   | (42    | ) |                              |  |  |   | (891   | )
|Interest income                                          |  |                                | 8      |   |  |  |                                |   | 17    |                              |  |   | 13     |   |                              |  |  |   | 35     |  
|Interest expense and related charges (Note 15)           |  |                                | (831   | ) |  |  |                                |   | (221  | )                            |  |   | (1,674 | ) |                              |  |  |   | (418   | )
|                                                         |  |                                |        |   |  |  |                                |   |       |                              |  |   |        |   |                              |  |  |   |        |  
|Income (loss) before income taxes                        |  |                                | (5,134 | ) |  |  |                                |   | 89    |                              |  |   | (7,063 | ) |                              |  |  |   | (682   | )
|Income tax benefit                                       |  |                                | 1,803  |   |  |  |                                |   | 21    |                              |  |   | 2,463  |   |                              |  |  |   | 294    |  
|                                                         |  |                                |        |   |  |  |                                |   |       |                              |  |   |        |   |                              |  |  |   |        |  
|Income (loss) from continuing operations                 |  |                                | (3,331 | ) |  |  |                                |   | 110   |                              |  |   | (4,600 | ) |                              |  |  |   | (388   | )
|Income from discontinued operations, net of tax effect   |  |                                |       |   |  |  |                                |   | 11    |                              |  |   |       |   |                              |  |  |   | 11     |  
|                                                         |  |                                |        |   |  |  |                                |   |       |                              |  |   |        |   |                              |  |  |   |        |  
|Net income (loss)                                        |  | $                              | (3,331 | ) |  |  |                                | $ | 121   |                              |  | $ | (4,600 | ) |                              |  |  | $ | (377   | )
|                                                         |  |                                |        |   |  |  |                                |   |       |                              |  |   |        |   |                              |  |  |   |        |  

See Notes to Financial Statements.



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ENERGY FUTURE HOLDINGS CORP. AND SUBSIDIARIES

CONDENSED STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(millions of dollars)



|                                                                                                                                                                                      |  |                                |        |   |  |  |                                |   |     |                              |  |   |        |   |                              |  |  |   |      |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------ | ------ | - |  |  | ------------------------------ | - | --- | ---------------------------- |  | - | ------ | - | ---------------------------- |  |  | - | ---- | -
|                                                                                                                                                                                      |  | Successor                      |        |   |  |  | Predecessor                    |   |     | Successor                    |  |   |        |   | Predecessor                  | 
|                                                                                                                                                                                      |  | Three MonthsEndedJune 30, 2008 |        |   |  |  | Three MonthsEndedJune 30, 2007 |   |     | Six MonthsEndedJune 30, 2008 |  |   |        |   | Six MonthsEndedJune 30, 2007 | 
|Components related to continuing operations:                                                                                                                                          |  |                                |        |   |  |  |                                |   |     |                              |  |   |        |   |                              |  |  |   |      |  
|Income (loss) from continuing operations                                                                                                                                              |  | $                              | (3,331 | ) |  |  |                                | $ | 110 |                              |  | $ | (4,600 | ) |                              |  |  | $ | (388 | )
|Other comprehensive income (loss), net of tax effects:                                                                                                                                |  |                                |        |   |  |  |                                |   |     |                              |  |   |        |   |                              |  |  |   |      |  
|Reclassification of pension and other retirement benefit costs (net of tax expense of $,, and $3) (Note 11)                                                                        |  |                                | 1      |   |  |  |                                |   | 1   |                              |  |   | 1      |   |                              |  |  |   | 5    |  
|Cash flow hedges:                                                                                                                                                                     |  |                                |        |   |  |  |                                |   |     |                              |  |   |        |   |                              |  |  |   |      |  
|Net increase (decrease) in fair value of derivatives (net of tax (expense) benefit of $(208), $(16), $23 and $160)                                                                    |  |                                | 385    |   |  |  |                                |   | 30  |                              |  |   | (43    | ) |                              |  |  |   | (297 | )
|Derivative value net (gains) losses related to hedged transactions recognized during the period and reported in net income (net of tax
(expense) benefit of $13, $(6), $23 and $(40)) |  |                                | 24     |   |  |  |                                |   | (12 | )                            |  |   | 42     |   |                              |  |  |   | (75  | )
|                                                                                                                                                                                      |  |                                |        |   |  |  |                                |   |     |                              |  |   |        |   |                              |  |  |   |      |  
|Total effect of cash flow hedges                                                                                                                                                      |  |                                | 409    |   |  |  |                                |   | 18  |                              |  |   | (1     | ) |                              |  |  |   | (372 | )
|                                                                                                                                                                                      |  |                                |        |   |  |  |                                |   |     |                              |  |   |        |   |                              |  |  |   |      |  
|Total adjustments to net income (loss) from continuing operations                                                                                                                     |  |                                | 410    |   |  |  |                                |   | 19  |                              |  |   |       |   |                              |  |  |   | (367 | )
|                                                                                                                                                                                      |  |                                |        |   |  |  |                                |   |     |                              |  |   |        |   |                              |  |  |   |      |  
|Comprehensive income (loss) from continuing operations                                                                                                                                |  |                                | (2,921 | ) |  |  |                                |   | 129 |                              |  |   | (4,600 | ) |                              |  |  |   | (755 | )
|Comprehensive income from discontinued operations                                                                                                                                     |  |                                |       |   |  |  |                                |   | 11  |                              |  |   |       |   |                              |  |  |   | 11   |  
|                                                                                                                                                                                      |  |                                |        |   |  |  |                                |   |     |                              |  |   |        |   |                              |  |  |   |      |  
|Comprehensive income (loss)                                                                                                                                                           |  | $                              | (2,921 | ) |  |  |                                | $ | 140 |                              |  | $ | (4,600 | ) |                              |  |  | $ | (744 | )
|                                                                                                                                                                                      |  |                                |        |   |  |  |                                |   |     |                              |  |   |        |   |                              |  |  |   |      |  

See Notes to Financial Statements.



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ENERGY FUTURE HOLDINGS CORP. AND SUBSIDIARIES

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS

(Unaudited)

(millions of dollars)



|                                                                                               |  |                              |        |   |  |  |                              |   |        |  
|---------------------------------------------------------------------------------------------- |  | ---------------------------- | ------ | - |  |  | ---------------------------- | - | ------ | -
|                                                                                               |  | Successor                    |        |   |  |  | Predecessor                  |  
|                                                                                               |  | Six MonthsEndedJune 30, 2008 |        |   |  |  | Six MonthsEndedJune 30, 2007 |  
|Cash flows  operating activities:                                                             |  |                              |        |   |  |  |                              |   |        |  
|Net income (loss)                                                                              |  | $                            | (4,600 | ) |  |  |                              | $ | (377   | )
|Income from discontinued operations, net of tax effect                                         |  |                              |       |   |  |  |                              |   | (11    | )
|                                                                                               |  |                              |        |   |  |  |                              |   |        |  
|Income (loss) from continuing operations                                                       |  |                              | (4,600 | ) |  |  |                              |   | (388   | )
|Adjustments to reconcile loss from continuing operations to cash used in operating activities: |  |                              |        |   |  |  |                              |   |        |  
|Depreciation and amortization                                                                  |  |                              | 1,037  |   |  |  |                              |   | 433    |  
|Deferred income tax benefit  net                                                              |  |                              | (2,533 | ) |  |  |                              |   | (613   | )
|Charge related to canceled development of generation facilities (Note 4)                       |  |                              |       |   |  |  |                              |   | 716    |  
|Write-off of deferred transaction costs (Note 5)                                               |  |                              |       |   |  |  |                              |   | 38     |  
|Net gains on sale of assets                                                                    |  |                              |       |   |  |  |                              |   | (27    | )
|Unrealized net losses from mark-to-market valuations                                           |  |                              | 6,363  |   |  |  |                              |   | 1,182  |  
|Bad debt expense                                                                               |  |                              | 34     |   |  |  |                              |   | 25     |  
|Stock-based compensation expense                                                               |  |                              | 10     |   |  |  |                              |   | 15     |  
|Other                                                                                          |  |                              | 1      |   |  |  |                              |   | 19     |  
|Changes in operating assets and liabilities:                                                   |  |                              |        |   |  |  |                              |   |        |  
|Margin deposits  net                                                                          |  |                              | (2,003 | ) |  |  |                              |   | (1,087 | )
|Other                                                                                          |  |                              | (209   | ) |  |  |                              |   | (368   | )
|                                                                                               |  |                              |        |   |  |  |                              |   |        |  
|Cash used in operating activities from continuing operations                                   |  |                              | (1,900 | ) |  |  |                              |   | (55    | )
|                                                                                               |  |                              |        |   |  |  |                              |   |        |  
|Cash flows  financing activities:                                                             |  |                              |        |   |  |  |                              |   |        |  
|Issuances of securities:                                                                       |  |                              |        |   |  |  |                              |   |        |  
|Pollution control revenue bonds                                                                |  |                              | 242    |   |  |  |                              |   |       |  
|Other long-term debt                                                                           |  |                              | 762    |   |  |  |                              |   | 1,800  |  
|Common stock                                                                                   |  |                              | 34     |   |  |  |                              |   | 1      |  
|Retirements/repurchases of securities:                                                         |  |                              |        |   |  |  |                              |   |        |  
|Pollution control revenue bonds                                                                |  |                              | (242   | ) |  |  |                              |   | (143   | )
|Other long-term debt                                                                           |  |                              | (363   | ) |  |  |                              |   | (68    | )
|Common stock                                                                                   |  |                              | (1     | ) |  |  |                              |   | (10    | )
|Change in short-term borrowings:                                                               |  |                              |        |   |  |  |                              |   |        |  
|Commercial paper                                                                               |  |                              |       |   |  |  |                              |   | (1,296 | )
|Banks                                                                                          |  |                              | 3,015  |   |  |  |                              |   | 2,155  |  
|Common stock dividends paid                                                                    |  |                              |       |   |  |  |                              |   | (397   | )
|Settlements of minimum withholding tax liabilities under stock-based compensation plans        |  |                              |       |   |  |  |                              |   | (93    | )
|Debt premium, discount, financing and reacquisition expenses                                   |  |                              | (6     | ) |  |  |                              |   | (15    | )
|Other                                                                                          |  |                              | 22     |   |  |  |                              |   |       |  
|                                                                                               |  |                              |        |   |  |  |                              |   |        |  
|Cash provided by financing activities                                                          |  |                              | 3,463  |   |  |  |                              |   | 1,934  |  
|                                                                                               |  |                              |        |   |  |  |                              |   |        |  
|Cash flows  investing activities:                                                             |  |                              |        |   |  |  |                              |   |        |  
|Capital expenditures                                                                           |  |                              | (1,480 | ) |  |  |                              |   | (1,611 | )
|Nuclear fuel purchases                                                                         |  |                              | (84    | ) |  |  |                              |   | (30    | )
|Reduction of restricted cash related to pollution control revenue bonds                        |  |                              | 29     |   |  |  |                              |   | 143    |  
|Transfer of cash collateral to custodian account                                               |  |                              | (179   | ) |  |  |                              |   |       |  
|Proceeds from sale of assets                                                                   |  |                              | 46     |   |  |  |                              |   | 4      |  
|Proceeds from sale of environmental allowances and credits                                     |  |                              | 28     |   |  |  |                              |   |       |  
|Purchases of environmental allowances and credits                                              |  |                              | (17    | ) |  |  |                              |   |       |  
|Proceeds from sales of nuclear decommissioning trust fund securities                           |  |                              | 475    |   |  |  |                              |   | 104    |  
|Investments in nuclear decommissioning trust fund securities                                   |  |                              | (482   | ) |  |  |                              |   | (111   | )
|Cost to remove retired property                                                                |  |                              | (17    | ) |  |  |                              |   | (16    | )
|Other                                                                                          |  |                              | 27     |   |  |  |                              |   | 11     |  
|                                                                                               |  |                              |        |   |  |  |                              |   |        |  
|Cash used in investing activities                                                              |  |                              | (1,654 | ) |  |  |                              |   | (1,506 | )
|                                                                                               |  |                              |        |   |  |  |                              |   |        |  



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##### Table of Contents

ENERGY FUTURE HOLDINGS CORP. AND SUBSIDIARIES

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (cont.)

(Unaudited)

(millions of dollars)



|                                              |  |                              |     |   |  |  |                              |   |    
|--------------------------------------------- |  | ---------------------------- | --- | - |  |  | ---------------------------- | - | ---
|                                              |  | Successor                    |     |   |  |  | Predecessor                 
|                                              |  | Six MonthsEndedJune 30, 2008 |     |   |  |  | Six MonthsEndedJune 30, 2007
|Discontinued operations:                      |  |                              |     |   |  |  |                              |   |    
|Cash provided by operating activities         |  |                              |    |   |  |  |                              |   | 24 
|Cash provided by financing activities         |  |                              |    |   |  |  |                              |   |   
|Cash used in investing activities             |  |                              |    |   |  |  |                              |   |   
|                                              |  |                              |     |   |  |  |                              |   |    
|Cash provided by discontinued operations      |  |                              |    |   |  |  |                              |   | 24 
|                                              |  |                              |     |   |  |  |                              |   |    
|Net change in cash and cash equivalents       |  |                              | (91 | ) |  |  |                              |   | 397
|Cash and cash equivalents  beginning balance |  |                              | 281 |   |  |  |                              |   | 25 
|                                              |  |                              |     |   |  |  |                              |   |    
|Cash and cash equivalents  ending balance    |  | $                            | 190 |   |  |  |                              | $ | 422
|                                              |  |                              |     |   |  |  |                              |   |    

See Notes to Financial Statements.



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##### Table of Contents

ENERGY FUTURE HOLDINGS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(millions of dollars)



|                                                                                                                     |  |              |        |   |                  |   |        |  
|-------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------ | - | ---------------- | - | ------ | -
|                                                                                                                     |  | Successor    |       
|                                                                                                                     |  | June 30,2008 |        |   | December 31,2007 |  
|ASSETS                                                                                                               |  |              |        |   |                  |   |        |  
|Current assets:                                                                                                      |  |              |        |   |                  |   |        |  
|Cash and cash equivalents                                                                                            |  | $            | 190    |   |                  | $ | 281    |  
|Restricted cash                                                                                                      |  |              | 227    |   |                  |   | 56     |  
|Trade accounts receivable  net (Note 6)                                                                             |  |              | 1,702  |   |                  |   | 1,099  |  
|Income taxes receivable                                                                                              |  |              | 181    |   |                  |   | 101    |  
|Inventories                                                                                                          |  |              | 423    |   |                  |   | 405    |  
|Commodity and other derivative contractual assets (Note 10)                                                          |  |              | 5,943  |   |                  |   | 1,129  |  
|Accumulated deferred income taxes                                                                                    |  |              | 27     |   |                  |   | 9      |  
|Margin deposits related to commodity positions (Note 10)                                                             |  |              | 2,687  |   |                  |   | 513    |  
|Other current assets                                                                                                 |  |              | 212    |   |                  |   | 376    |  
|                                                                                                                     |  |              |        |   |                  |   |        |  
|Total current assets                                                                                                 |  |              | 11,592 |   |                  |   | 3,969  |  
|Restricted cash                                                                                                      |  |              | 1,267  |   |                  |   | 1,296  |  
|Investments                                                                                                          |  |              | 757    |   |                  |   | 868    |  
|Property, plant and equipment  net                                                                                  |  |              | 29,396 |   |                  |   | 28,650 |  
|Goodwill (Note 3)                                                                                                    |  |              | 22,918 |   |                  |   | 22,954 |  
|Intangible assets  net (Note 3)                                                                                     |  |              | 4,123  |   |                  |   | 4,365  |  
|Regulatory assets  net                                                                                              |  |              | 1,324  |   |                  |   | 1,305  |  
|Commodity and other derivative contractual assets (Note 10)                                                          |  |              | 898    |   |                  |   | 244    |  
|Unamortized debt issuance costs and other noncurrent assets                                                          |  |              | 1,092  |   |                  |   | 1,130  |  
|Assets held for sale                                                                                                 |  |              |       |   |                  |   | 23     |  
|                                                                                                                     |  |              |        |   |                  |   |        |  
|Total assets                                                                                                         |  | $            | 73,367 |   |                  | $ | 64,804 |  
|                                                                                                                     |  |              |        |   |                  |   |        |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                 |  |              |        |   |                  |   |        |  
|Current liabilities:                                                                                                 |  |              |        |   |                  |   |        |  
|Short-term borrowings (Note 7)                                                                                       |  | $            | 4,733  |   |                  | $ | 1,718  |  
|Long-term debt due currently (Note 7)                                                                                |  |              | 398    |   |                  |   | 513    |  
|Trade accounts payable                                                                                               |  |              | 1,513  |   |                  |   | 904    |  
|Commodity and other derivative contractual liabilities (Note 10)                                                     |  |              | 7,425  |   |                  |   | 1,146  |  
|Margin deposits related to commodity positions (Note 10)                                                             |  |              | 176    |   |                  |   | 5      |  
|Accrued interest                                                                                                     |  |              | 537    |   |                  |   | 537    |  
|Other current liabilities                                                                                            |  |              | 459    |   |                  |   | 879    |  
|                                                                                                                     |  |              |        |   |                  |   |        |  
|Total current liabilities                                                                                            |  |              | 15,241 |   |                  |   | 5,702  |  
|Accumulated deferred income taxes                                                                                    |  |              | 4,131  |   |                  |   | 6,664  |  
|Investment tax credits                                                                                               |  |              | 45     |   |                  |   | 47     |  
|Commodity and other derivative contractual liabilities (Note 10)                                                     |  |              | 7,985  |   |                  |   | 2,453  |  
|Long-term debt, less amounts due currently (Note 7)                                                                  |  |              | 39,162 |   |                  |   | 38,603 |  
|Other noncurrent liabilities and deferred credits                                                                    |  |              | 4,711  |   |                  |   | 4,650  |  
|                                                                                                                     |  |              |        |   |                  |   |        |  
|Total liabilities                                                                                                    |  |              | 71,275 |   |                  |   | 58,119 |  
|Commitments and Contingencies (Note 8)                                                                               |  |              |        |   |                  |   |        |  
|Shareholders equity (Note 9)                                                                                        |  |              |        |   |                  |   |        |  
|Common stock without par value: Authorized shares - 2,000,000,000 Outstanding shares 1,667,005,540 and 1,664,345,953 |  |              |       |   |                  |   |       |  
|Additional paid-in capital                                                                                           |  |              | 8,286  |   |                  |   | 8,279  |  
|Retained deficit                                                                                                     |  |              | (5,960 | ) |                  |   | (1,360 | )
|Accumulated other comprehensive loss                                                                                 |  |              | (234   | ) |                  |   | (234   | )
|                                                                                                                     |  |              |        |   |                  |   |        |  
|Total shareholders equity                                                                                           |  |              | 2,092  |   |                  |   | 6,685  |  
|                                                                                                                     |  |              |        |   |                  |   |        |  
|Total liabilities and shareholders equity                                                                           |  | $            | 73,367 |   |                  | $ | 64,804 |  
|                                                                                                                     |  |              |        |   |                  |   |        |  

See Notes to Financial Statements.



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ENERGY FUTURE HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



|1. | SIGNIFICANT ACCOUNTING POLICIES
|-- | -------------------------------

Description of Business

EFH Corp., a Texas corporation, is a Dallas-based holding company conducting its operations principally through its TCEH and Oncor
subsidiaries. TCEH is a holding company for subsidiaries engaged in competitive electricity market activities largely in Texas, including Luminant, which is engaged in electricity generation, development and construction of new generation
facilities, wholesale energy sales and purchases, and commodity risk management and trading activities, and TXU Energy, which is engaged in retail electricity sales. Oncor is engaged in regulated electricity transmission and distribution operations
in Texas. As described in the 2007 Form 10-K, various ring-fencing measures have been taken to further separate Oncor from the other EFH Corp. businesses. Under such provisions, the assets and liabilities of the Oncor Ring-Fenced
Entities are separate and distinct from those of Texas Holdings, EFH Corp. and EFH Corp.s other subsidiaries, including TXU Energy and Luminant, and none of the assets of the Oncor Ring-Fenced Entities are available to satisfy the debt or
other obligations of Texas Holdings, EFH Corp. or EFH Corp.s other subsidiaries. Moreover, the cash flows of the Oncor Ring-Fenced Entities and their results of operations are separate from those of Texas Holdings, EFH Corp. and EFH
Corp.s other subsidiaries.

EFH Corp. has two reportable segments: the Competitive Electric segment, which includes the activities of
TCEH as well as equipment salvage and resale activities related to the canceled development of new generation facilities, and the Regulated Delivery segment, which includes the activities of Oncor, its wholly-owned bankruptcy-remote financing
subsidiary and, in 2007, certain revenues and costs associated with installation of equipment that will facilitate Oncors technology initiatives. See Note 14 for further information concerning reportable business segments.

On October 10, 2007, EFH Corp. completed its Merger with Merger Sub. As a result of the Merger, EFH Corp. became a subsidiary of Texas Holdings,
which is controlled by the Sponsor Group.

Basis of Presentation

The condensed consolidated financial statements of EFH Corp. have been prepared in accordance with US GAAP and on the same basis as the audited
financial statements included in its 2007 Form 10-K, with the exception of a change to discontinue the netting of derivative assets and liabilities under master netting agreements as allowed under FIN 39-1, a change in classification to report the
results of commodity hedging and trading activities on a separate line item in the income statement instead of within operating revenues, as discussed below, and certain reclassifications in the condensed statements of comprehensive income (loss) to
conform to current period presentation. All adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the results of operations and financial position have been included therein. All intercompany items and
transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with US GAAP have been omitted pursuant to the rules and
regulations of the SEC. Because the condensed consolidated interim financial statements do not include all of the information and footnotes required by US GAAP, they should be read in conjunction with the audited financial statements and
related notes included in the 2007 Form 10-K. The results of operations for an interim period may not give a true indication of results for a full year. All dollar amounts in the financial statements and tables in the notes are stated in millions of
US dollars unless otherwise indicated.

The accompanying condensed statements of consolidated income (loss) for the three and six months
ended June 30, 2008 and June 30, 2007 and cash flows for the six months ended June 30, 2008 and June 30, 2007 are presented as the Successor and the Predecessor, respectively, and relate to periods
succeeding and preceding the Merger, respectively. The consolidated financial statements of the Successor reflect the application of purchase accounting in accordance with the provisions of SFAS 141.



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##### Table of Contents

Change in Classification of Results from Commodity Hedging and Trading Activities
Effective April 1, 2008, EFH Corp. changed its classification of realized and unrealized net gains and losses from commodity hedging and trading activities such that the results from these activities are reported as a separate line on the
income statement. Prior to April 2008, such amounts were included within operating revenues. EFH Corp. believes this change in classification provides users of the financial statements better transparency of underlying revenue trends. Results from
commodity hedging and trading activities are volatile as a substantial majority of the activity involves natural gas financial instruments, which are used to economically hedge future cash flows from electricity sales and are marked-to-market in net
income. Comparative financial statements of prior periods reflect this reclassification. The following table presents EFH Corp.s operating revenues as previously reported and reflects the change in classification. There is no effect on
reported earnings, the balance sheet or the statement of cash flows as a result of this change in presentation.



|                                                         |  |                               |       |                               |   |       |                             |  |   |                             |   |  |   |        |  
|-------------------------------------------------------- |  | ----------------------------- | ----- | ----------------------------- | - | ----- | --------------------------- |  | - | --------------------------- | - |  | - | ------ | -
|                                                         |  | Predecessor                   |      
|                                                         |  | As OriginallyReported         |       | As Reclassified               |   |       | As OriginallyReported       |  |   | As Reclassified             |  
|                                                         |  | ThreeMonthsEnded June 30,2007 |       | ThreeMonthsEnded June 30,2007 |   |       | SixMonthsEnded June 30,2007 |  |   | SixMonthsEnded June 30,2007 |  
|Operating revenues                                       |  | $                             | 2,022 |                               | $ | 2,405 |                             |  | $ | 3,691                       |   |  | $ | 4,760  |  
|Net losses from commodity hedging and trading activities |  |                               | n/a   |                               |   | (383  | )                           |  |   | n/a                         |   |  |   | (1,069 | )
|Income (loss) from continuing operations                 |  |                               | 110   |                               |   | 110   |                             |  |   | (388                        | ) |  |   | (388   | )

Discontinued Businesses

Income from discontinued operations in the six months ended June 30, 2007 consisted primarily of insurance proceeds related to the 2005 TXU Europe
litigation settlement agreement.

Use of Estimates

Preparation of EFH Corp.s financial statements requires management to make estimates and assumptions about future events that affect the reporting of assets and liabilities at the balance sheet dates and the
reported amounts of revenue and expense, including fair value measurements. In the event estimates and/or assumptions prove to be different from actual amounts, adjustments are made in subsequent periods to reflect more current information. No
material adjustments, other than those disclosed elsewhere herein, were made to previous estimates or assumptions during the current year.

Purchase
Accounting

The Merger has been accounted for under purchase accounting, whereby the total purchase price of the transaction was
allocated to EFH Corp.s identifiable tangible and intangible assets acquired and liabilities assumed based on their fair values, and the excess of the purchase price over the fair value of net assets acquired was recorded as goodwill. The
allocation resulted in a significant amount of goodwill, an increase in the carrying value of property, plant and equipment and deferred income tax liabilities as well as new identifiable intangible assets and liabilities. Reported earnings in
periods subsequent to the Merger reflect increases in interest, depreciation and amortization expense. See Note 2 for details regarding the effect of purchase accounting.



7



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##### Table of Contents

Changes in Accounting Standards

Effective January 1, 2008, EFH Corp. adopted FSP FIN 39-1, Amendment of FASB Interpretation No. 39. This FSP provides additional
guidance regarding the offsetting in the balance sheet of cash collateral and derivative fair value asset and liability amounts. As provided for by this new rule, for balance sheet presentation, EFH Corp. elected to not adopt netting of cash
collateral, and further to discontinue netting of derivative assets and liabilities under master netting agreements. Accordingly, as required by the rule, prior period amounts in the financial statements reflect the change in presentation, resulting
in an increase of $849 million and $171 million in both commodity and other derivative contractual current and noncurrent assets and liabilities, respectively, at December 31, 2007 compared to previously reported amounts, including the effect
of the adjustment in the second quarter of 2008 as discussed in Note 10.

In March 2008, the FASB issued SFAS 161, Disclosures about
Derivative Instruments and Hedging Activities  an Amendment of FASB Statement 133. SFAS 161 enhances required disclosures regarding derivatives and hedging activities to enable investors to better understand their effects on an
entitys financial position, financial performance and cash flows. This statement is effective for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. EFH Corp. is evaluating the impact of
this statement on its financial statement disclosures.



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##### Table of Contents

|2. | FINANCIAL STATEMENT EFFECTS OF THE MERGER
|-- | -----------------------------------------

EFH
Corp. accounted for the Merger under purchase accounting in accordance with the provisions of SFAS 141, whereby the total purchase price of the transaction was allocated to EFH Corp.s identifiable tangible and intangible assets acquired and
liabilities assumed based on their fair values as of October 10, 2007 as summarized in the table below. The fair values were determined based upon assumptions related to future cash flows, discount rates, and asset lives as well as factors more
unique to EFH Corp., its industry and the competitive wholesale power market that include forward natural gas price curves and market heat rates, retail customer attrition rates, generation plant operating and construction costs, and the effect on
generation facility values of lignite fuel reserves and mining capabilities using currently available information. As a result of cost-based regulatory rate-setting processes, the book value of the majority of Oncors assets and liabilities
effectively represent fair value, and no adjustments to those regulated assets or liabilities were recorded. The excess of the purchase price over the fair value of net assets acquired was recorded as goodwill.

The goodwill amount recorded totaled $23.0 billion. Management believes the drivers of the goodwill amount include the incremental value of the future
cash flow potential of the baseload generation facilities, including facilities under construction, over the values assigned to those assets under purchase accounting rules, considering the market-pricing mechanisms and growth potential in the ERCOT
market, as well as the value derived from the scale of the retail business. Management also believes that the goodwill reflects the value of the relatively stable, long-lived cash flows of the regulated business, considering the constructive
regulatory environment and market growth potential. See Note 3 for disclosures related to goodwill.

The purchase price allocation at
June 30, 2008 is substantially complete; however, additional analysis with respect to the value of certain assets, contractual arrangements and contingent liabilities could result in a change in the total amount of goodwill and amounts assigned
to EFH Corp.s reporting units. SFAS 141 requires that the purchase price allocation be completed no later than one year from the date of the Merger.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed:



|                                         |  |   |        |  |   |       
|---------------------------------------- |  | - | ------ |  | - | ------
|Equity purchase price                    |  |   |        |  | $ | 31,935
|Transaction costs                        |  |   |        |  |   | 759   
|                                         |  |   |        |  |   |       
|Total purchase price                     |  |   |        |  |   | 32,694
|Property, plant and equipment            |  | $ | 28,402 |  |   |       
|Intangible assets                        |  |   | 4,462  |  |   |       
|Regulatory assets and deferred debits    |  |   | 1,447  |  |   |       
|Other assets                             |  |   | 5,353  |  |   |       
|                                         |  |   |        |  |   |       
|Total assets acquired                    |  |   | 39,664 |  |   |       
|                                         |  |   |        |  |   |       
|Short-term borrowings and long-term debt |  |   | 14,183 |  |   |       
|Deferred income tax liabilities          |  |   | 7,956  |  |   |       
|Other liabilities                        |  |   | 7,749  |  |   |       
|                                         |  |   |        |  |   |       
|Total liabilities assumed                |  |   | 29,888 |  |   |       
|                                         |  |   |        |  |   |       
|Net identifiable assets acquired.        |  |   |        |  |   | 9,776 
|                                         |  |   |        |  |   |       
|Goodwill                                 |  |   |        |  | $ | 22,918
|                                         |  |   |        |  |   |       

Exit liabilities originally recorded as part of the purchase price allocation totaled
approximately $60 million, which consisted primarily of estimated amounts related to the cancellation of the development of coal-fueled generation facilities discussed in Note 4 and the exit of certain administrative activities. Such cancelation
liabilities have been negotiated to a lesser amount and taking into consideration payments made, the exit liabilities have all been extinguished as of June 30, 2008.

The decrease in exit liabilities discussed immediately above was the principal cause of a $36 million decrease in goodwill between December 31, 2007 and June 30, 2008.



9



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Unaudited Pro Forma Financial Information

The following unaudited pro forma results of operations assume that the Merger-related transactions occurred on January 1, 2007. The unaudited pro
forma information is provided for informational purposes only and is not necessarily indicative of what EFH Corp.s results of operations would have been if the transactions had occurred on that date, or what EFH Corp.s results of
operations will be for any future periods.

For the three months ended June 30, 2007, unaudited pro forma revenues and net loss were
$2.407 billion and $418 million, respectively. Pro forma adjustments for the three months ended June 30, 2007 consist of incremental depreciation and amortization expense (including amounts recognized in revenues or fuel and purchased power
costs) of $151 million, interest expense of $678 million and income tax benefits of $290 million. For the six months ended June 30, 2007, unaudited pro forma revenues and net loss were $4.765 billion and $1.455 billion, respectively. Pro forma
adjustments for the six months ended June 30, 2007 consist of incremental depreciation and amortization expense (including amounts recognized in revenues or fuel and purchased power costs) of $302 million, interest expense of $1.356 billion and
income tax benefits of $580 million.



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|3. | GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS
|-- | -------------------------------------------

Goodwill

Goodwill as of June 30, 2008 totaled $22.918 billion with $18.018 billion assigned to the Competitive Electric segment and
$4.900 billion to the Regulated Delivery segment. Goodwill as of December 31, 2007 totaled $22.954 billion with $18.060 billion assigned to the Competitive Electric segment and $4.894 billion to the Regulated Delivery segment.

Identifiable Intangible Assets

Identifiable
intangible assets are comprised of the following:



|                                                          |  |                     |       |                         |   |     |  |          |       |              |   |       |  |   |     |  |   |      
|--------------------------------------------------------- |  | ------------------- | ----- | ----------------------- | - | --- |  | -------- | ----- | ------------ | - | ----- |  | - | --- |  | - | -----
|                                                          |  | Successor          
|                                                          |  | As of June 30, 2008 |       | As of December 31, 2007
|                                                          |  | Gross               |       |                         |   |     |  | Gross    |       |              |   |      
|                                                          |  | Carrying            |       | Accumulated             |   |     |  | Carrying |       | Accumulated  |   |      
|                                                          |  | Amount              |       | Amortization            |   | Net |  | Amount   |       | Amortization |   | Net  
|Retail customer relationship                              |  | $                   | 463   |                         | $ | 105 |  | $        | 358   |              | $ | 463   |  | $ | 79  |  | $ | 384  
|Favorable purchase and sales contracts                    |  |                     | 715   |                         |   | 188 |  |          | 527   |              |   | 702   |  |   | 68  |  |   | 634  
|Capitalized in-service software                           |  |                     | 245   |                         |   | 93  |  |          | 152   |              |   | 225   |  |   | 71  |  |   | 154  
|Environmental allowances and credits                      |  |                     | 1,486 |                         |   | 68  |  |          | 1,418 |              |   | 1,525 |  |   | 19  |  |   | 1,506
|Land easements                                            |  |                     | 179   |                         |   | 68  |  |          | 111   |              |   | 179   |  |   | 67  |  |   | 112  
|                                                          |  |                     |       |                         |   |     |  |          |       |              |   |       |  |   |     |  |   |      
|Total intangible assets subject to amortization           |  | $                   | 3,088 |                         | $ | 522 |  |          | 2,566 |              | $ | 3,094 |  | $ | 304 |  |   | 2,790
|                                                          |  |                     |       |                         |   |     |  |          |       |              |   |       |  |   |     |  |   |      
|Trade name (not subject to amortization)                  |  |                     |       |                         |   |     |  |          | 1,436 |              |   |       |  |   |     |  |   | 1,436
|Mineral interests (not currently subject to amortization) |  |                     |       |                         |   |     |  |          | 121   |              |   |       |  |   |     |  |   | 139  
|                                                          |  |                     |       |                         |   |     |  |          |       |              |   |       |  |   |     |  |   |      
|Total intangible assets                                   |  |                     |       |                         |   |     |  | $        | 4,123 |              |   |       |  |   |     |  | $ | 4,365
|                                                          |  |                     |       |                         |   |     |  |          |       |              |   |       |  |   |     |  |   |      

Amortization expense related to intangible assets consisted of:



|                                       |  |                                |    |  |  |                                |   |                              |  |   |     |                              |  |  |   |   
|-------------------------------------- |  | ------------------------------ | -- |  |  | ------------------------------ | - | ---------------------------- |  | - | --- | ---------------------------- |  |  | - | --
|                                       |  | Successor                      |    |  |  | Predecessor                    |   | Successor                    |  |   |     | Predecessor                 
|                                       |  | Three MonthsEndedJune 30,
2008 |    |  |  | Three MonthsEndedJune 30,
2007 |   | Six MonthsEndedJune 30, 2008 |  |   |     | Six MonthsEndedJune 30, 2007
|Retail customer relationship           |  | $                              | 13 |  |  |                                | $ |                             |  | $ | 26  |                              |  |  | $ |  
|Favorable purchase and sales contracts |  |                                | 44 |  |  |                                |   |                             |  |   | 103 |                              |  |  |   |  
|Capitalized in-service software        |  |                                | 11 |  |  |                                |   | 7                            |  |   | 22  |                              |  |  |   | 13
|Environmental allowances and credits   |  |                                | 24 |  |  |                                |   |                             |  |   | 50  |                              |  |  |   |  
|Land easements                         |  |                                |   |  |  |                                |   | 1                            |  |   | 1   |                              |  |  |   | 2 
|                                       |  |                                |    |  |  |                                |   |                              |  |   |     |                              |  |  |   |   
|Total amortization expense             |  | $                              | 92 |  |  |                                | $ | 8                            |  | $ | 202 |                              |  |  | $ | 15
|                                       |  |                                |    |  |  |                                |   |                              |  |   |     |                              |  |  |   |   

Separately identifiable and previously unrecognized intangible assets acquired and recorded as
part of purchase accounting for the Merger are described as follows:



| |  |  | Retail Customer Relationship Retail customer relationship intangible asset represents the value of TXU Energys non-contracted customer base and
is being amortized using an accelerated method based on customer attrition rates and reflecting the pattern in which economic benefits are realized over their estimated useful life. Amortization expense related to the retail customer relationship
intangible asset is reported as part of depreciation and amortization expense in the income statement (reported in the Competitive Electric segment).
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Favorable Purchase and Sales Contracts Favorable purchase and sales contracts intangible asset primarily represents the in-the-money value of
commodity contracts for which: 1) EFH Corp. has made the normal purchase or sale election allowed by SFAS 133 or 2) the contracts did not meet the definition of a derivative. The amortization periods of these intangible assets are based
on the terms of the contracts, and the expense is reported as part of revenues or fuel and purchased power costs in the income statement as appropriate (reported in the Competitive Electric segment). Unfavorable purchase and sales contracts are
recorded as other noncurrent liabilities and deferred credits (see Note 15).
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Trade name The trade name intangible asset represents the value of the TXU Energy trade name, and as an indefinite-lived asset is not subject to
amortization. This intangible asset will be evaluated for impairment at least annually (as of October 1) in accordance with SFAS No. 142, Goodwill and Other Intangible Assets.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Environmental Allowances and Credits This intangible asset represents the fair value of environmental allowances and credits held by EFH Corp.,
substantially all of which were expected to be used in its power generation activity. These credits will be amortized to fuel and purchased power costs utilizing a units-of-production method (reported in the Competitive Electric segment).
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In the three months ended June 30, 2008, EFH Corp. determined that certain of its sulfur dioxide allowances had
decreased materially in value, likely driven by litigation that resulted in the July 2008 decision from the US Court of Appeals for the D.C. Circuit invalidating the EPAs Clean Air Interstate Rule (CAIR). Accordingly, EFH Corp. recorded a $2
million (before deferred income tax benefit) impairment of certain sulfur dioxide allowances. The impairment was reported in other deductions and is reflected in the results of the Competitive Electric segment. See Note 16 for discussion of
additional impairment charges anticipated as a result of the court decision.

Estimated Amortization of Intangible Assets The estimated aggregate amortization expense of intangible assets for each of the five succeeding fiscal years from December 31, 2007 is as follows:



|     |  |           |    
|---- |  | --------- | ---
|Year |  | Successor
|2008 |  | $         | 384
|2009 |  |           | 478
|2010 |  |           | 285
|2011 |  |           | 251
|2012 |  |           | 183



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|4. | CHARGES RELATED TO CANCELED DEVELOPMENT OF COAL-FUELED GENERATION FACILITIES
|-- | ----------------------------------------------------------------------------

In the first quarter of 2007, EFH Corp. recorded a charge totaling $713 million ($463 million after-tax) in connection with the suspension in February 2007 of the development of eight coal-fueled generation units.
This decision and subsequent terminations of equipment orders required an evaluation of the recoverability of recorded assets associated with the development program. The charge included $673 million for the impairment of construction
work-in-process asset balances (primarily pre-construction development costs), $11 million for costs arising from terminations of equipment orders and $29 million for the write-off of deferred financing costs. In determining the charge to be
recorded, EFH Corp. applied accounting rules for impairment of long-lived assets under SFAS 144 and for exit activities under SFAS 146. As disclosed in the 2007 Form 10-K, $44 million ($29 million after-tax) in net charges related to these units
were recorded in subsequent periods of 2007, including net charges of $82 million ($54 million after-tax) recorded in the second quarter of 2007. Additional charges totaling $2 million and $7 million ($1 million and $5 million after-tax,
respectively) were recorded in the three and six months ended June 30, 2008, respectively, which primarily represented costs for transportation and storage of materials.

The construction work-in-process asset balances totaled $871 million at March 31, 2007 prior to the writedown and included progress payments made
and accruals for amounts due to equipment suppliers, based on percentage of completion estimates, engineering and design services costs, site preparation expenditures, internal salary and related overhead costs for personnel engaged directly in
construction management activities and capitalized interest. The construction work-in-process balance at June 30, 2008 totaled $104 million and consisted of estimated recovery amounts, using a probability-weighted methodology, from equipment
salvage and potential resale activities. Cumulative net cash proceeds through June 30, 2008 from the sale of the impaired assets total $168 million.

Subsidiaries of EFH Corp. have terminated all of the equipment orders, with the exception of one purchase order for a boiler that is expected to be resold, and the air permit applications related to the eight units
were formally withdrawn from the TCEQ in October 2007 after the close of the Merger. The net charges arising from cancellation of this development program have been classified in other deductions and are reported in the results of the Competitive
Electric segment.



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##### Table of Contents

|5. | OTHER INCOME AND DEDUCTIONS
|-- | ---------------------------



|                                                                                                         |  |                                |    |  |  |                                |   |                              |  |   |    |                              |  |  |   |    
|-------------------------------------------------------------------------------------------------------- |  | ------------------------------ | -- |  |  | ------------------------------ | - | ---------------------------- |  | - | -- | ---------------------------- |  |  | - | ---
|                                                                                                         |  | Successor                      |    |  |  | Predecessor                    |   | Successor                    |  |   |    | Predecessor                 
|                                                                                                         |  | Three MonthsEndedJune 30,
2008 |    |  |  | Three MonthsEndedJune 30,
2007 |   | Six MonthsEndedJune 30, 2008 |  |   |    | Six MonthsEndedJune 30, 2007
|Other income:                                                                                            |  |                                |    |  |  |                                |   |                              |  |   |    |                              |  |  |   |    
|Amortization of gain on sale of TXU Fuel business                                                        |  | $                              |   |  |  |                                | $ | 11                           |  | $ |   |                              |  |  | $ | 23 
|Accretion of adjustment (discount) of regulatory assets resulting from purchase accounting (see Note 15) |  |                                | 11 |  |  |                                |   |                             |  |   | 22 |                              |  |  |   |   
|Net gain on sale of assets                                                                               |  |                                |   |  |  |                                |   |                             |  |   |   |                              |  |  |   | 4  
|Adjustments to insurance reserves related to discontinued operations                                     |  |                                |   |  |  |                                |   | 2                            |  |   |   |                              |  |  |   | 7  
|Penalty received for nonperformance under a coal transportation agreement                                |  |                                |   |  |  |                                |   |                             |  |   |   |                              |  |  |   | 3  
|Mineral rights royalty income                                                                            |  |                                | 1  |  |  |                                |   | 2                            |  |   | 2  |                              |  |  |   | 5  
|Other                                                                                                    |  |                                | 3  |  |  |                                |   | 1                            |  |   | 5  |                              |  |  |   | 3  
|                                                                                                         |  |                                |    |  |  |                                |   |                              |  |   |    |                              |  |  |   |    
|Total other income                                                                                       |  | $                              | 15 |  |  |                                | $ | 16                           |  | $ | 29 |                              |  |  | $ | 45 
|                                                                                                         |  |                                |    |  |  |                                |   |                              |  |   |    |                              |  |  |   |    
|Other deductions:                                                                                        |  |                                |    |  |  |                                |   |                              |  |   |    |                              |  |  |   |    
|Net charges related to canceled development of generation facilities (Note 4)                            |  |                                | 2  |  |  |                                |   | 82                           |  |   | 7  |                              |  |  |   | 795
|Asset writeoffs (a)                                                                                      |  |                                | 2  |  |  |                                |   |                             |  |   | 2  |                              |  |  |   | 30 
|Professional fees incurred related to the Merger                                                         |  |                                | 2  |  |  |                                |   | 6                            |  |   | 3  |                              |  |  |   | 20 
|Expenses related to InfrastruX Energy Services joint venture (b)                                         |  |                                |   |  |  |                                |   | 11                           |  |   |   |                              |  |  |   | 12 
|Costs related to 2006 cities rate settlement                                                             |  |                                | 7  |  |  |                                |   | 7                            |  |   | 13 |                              |  |  |   | 13 
|Litigation/regulatory settlements                                                                        |  |                                | 7  |  |  |                                |   | 5                            |  |   | 6  |                              |  |  |   | 5  
|Ongoing pension and other postretirement benefit expense (credit) related to discontinued businesses     |  |                                | 3  |  |  |                                |   | 6                            |  |   | 1  |                              |  |  |   | 9  
|Other                                                                                                    |  |                                | 3  |  |  |                                |   | 5                            |  |   | 10 |                              |  |  |   | 7  
|                                                                                                         |  |                                |    |  |  |                                |   |                              |  |   |    |                              |  |  |   |    
|Total other deductions                                                                                   |  | $                              | 26 |  |  |                                | $ | 122                          |  | $ | 42 |                              |  |  | $ | 891
|                                                                                                         |  |                                |    |  |  |                                |   |                              |  |   |    |                              |  |  |   |    



|(a) | Six months ended June 30, 2007 amount represents previously deferred costs, consisting primarily of professional fees for tax, legal and other advisory services, in connection
with certain previously anticipated strategic transactions (including expected financings) that are no longer expected to be consummated as a result of the Merger. (Reported in Corporate and Other activities.)
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | Consists of previously deferred costs, consisting primarily of professional fees that were written off due to suspension of the joint venture arrangement, which was canceled in
connection with the Merger. Of these amounts, $8 million was reported in the Corporate and Other activities and the balance was reported in the Regulated Delivery segment results.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|6. | TRADE ACCOUNTS RECEIVABLE AND SALE OF RECEIVABLES PROGRAM
|-- | ---------------------------------------------------------

Sale of Receivables

Subsidiaries of EFH Corp. engaged in retail sales of electricity participate in an accounts
receivable securitization program, the activity under which is accounted for as a sale of accounts receivable in accordance with SFAS 140. Under the program, such subsidiaries (originators) sell trade accounts receivable to TXU Receivables Company,
a consolidated wholly-owned bankruptcy-remote direct subsidiary of EFH Corp., which sells undivided interests in the purchased accounts receivable for cash to special purpose entities established by financial institutions (the funding entities).

The maximum amount currently available under the accounts receivable securitization program is $700 million, and the program funding was
$482 million as of June 30, 2008. The amount of customer deposits held by the originators can reduce the amount of undivided interests that can be sold, thus reducing funding available under the program, so long as TCEHs long-term senior
unsecured debt rating is lower than investment grade. Funding availability for all originators is reduced by 100% of the originators customer deposits if TCEHs credit rating is lower than Ba3/BB-; 50% if TCEHs credit rating is
between Ba3/BB- and Ba1/BB+; and zero % if TCEHs credit rating is at least Baa3/BBB-. The originators customer deposits, which totaled $114 million, reduced funding availability as of June 30, 2008 as TCEHs credit ratings were
lower than Ba3/BB-.

All new trade receivables under the program generated by the originators are continuously purchased by TXU Receivables
Company with the proceeds from collections of receivables previously purchased. Changes in the amount of funding under the program, through changes in the amount of undivided interests sold by TXU Receivables Company, reflect seasonal variations in
the level of accounts receivable, changes in collection trends as well as other factors such as changes in sales prices and volumes. TXU Receivables Company has issued subordinated notes payable to the originators for the difference between the face
amount of the uncollected accounts receivable purchased, less a discount, and cash paid to the originators that was funded by the sale of the undivided interests. The balance of the subordinated notes payable, which is eliminated in consolidation,
totaled $320 million and $296 million at June 30, 2008 and December 31, 2007, respectively.

The discount from face amount on the
purchase of receivables principally funds program fees paid by TXU Receivables Company to the funding entities. The discount also funds a servicing fee paid by TXU Receivables Company to EFH Corporate Services Company, a direct wholly-owned
subsidiary of EFH Corp. The program fees, also referred to as losses on sale of the receivables under SFAS 140, consist primarily of interest costs on the underlying financing. The servicing fee compensates EFH Corporate Services Company for the
collection agent services being performed, including the maintenance of detailed accounts receivable collection records. The program fees represent essentially all the net incremental costs of the program on a consolidated basis and are reported in
SG&A expenses. Fee amounts were as follows:



|                                                             |  |                                |     |   |  |  |                                |   |     |                              |  |   |     |   |                              |  |  |   |     |  
|------------------------------------------------------------ |  | ------------------------------ | --- | - |  |  | ------------------------------ | - | --- | ---------------------------- |  | - | --- | - | ---------------------------- |  |  | - | --- | -
|                                                             |  | Successor                      |     |   |  |  | Predecessor                    |   |     | Successor                    |  |   |     |   | Predecessor                  | 
|                                                             |  | Three MonthsEndedJune 30,
2008 |     |   |  |  | Three MonthsEndedJune 30,
2007 |   |     | Six MonthsEndedJune 30, 2008 |  |   |     |   | Six MonthsEndedJune 30, 2007 | 
|Program fees                                                 |  | $                              | 4   |   |  |  |                                | $ | 10  |                              |  | $ | 11  |   |                              |  |  | $ | 20  |  
|Program fees as a percentage of average funding (annualized) |  |                                | 4.9 | % |  |  |                                |   | 7.4 | %                            |  |   | 6.0 | % |                              |  |  |   | 6.4 | %
|Servicing fees                                               |  |                                | 1   |   |  |  |                                |   | 1   |                              |  |   | 2   |   |                              |  |  |   | 2   |  



15



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##### Table of Contents

The accounts receivable balance reported in the June 30, 2008 consolidated balance sheet includes
$802 million face amount of trade accounts receivable of TCEH subsidiaries sold to TXU Receivables Company, such amount having been reduced by $482 million of undivided interests sold by TXU Receivables Company. Funding under the program increased
$119 million for the six month period ending June 30, 2008 and decreased $100 million for the six month period ending June 30, 2007. Funding increases or decreases under the program are reflected as operating cash flow activity in the
statement of cash flows. The carrying amount of the retained interests in the accounts receivable balance approximated fair value due to the short-term nature of the collection period.

Activities of TXU Receivables Company were as follows:



|                                                                       |  |                              |        |   |  |  |                              |   |        |  
|---------------------------------------------------------------------- |  | ---------------------------- | ------ | - |  |  | ---------------------------- | - | ------ | -
|                                                                       |  | Successor                    |        |   |  |  | Predecessor                  |  
|                                                                       |  | Six MonthsEndedJune 30, 2008 |        |   |  |  | Six MonthsEndedJune 30, 2007 |  
|Cash collections on accounts receivable                                |  | $                            | 2,844  |   |  |  |                              | $ | 3,964  |  
|Face amount of new receivables purchased                               |  |                              | (2,987 | ) |  |  |                              |   | (4,003 | )
|Discount from face amount of purchased receivables                     |  |                              | 13     |   |  |  |                              |   | 22     |  
|Program fees paid                                                      |  |                              | (11    | ) |  |  |                              |   | (20    | )
|Servicing fees paid                                                    |  |                              | (2     | ) |  |  |                              |   | (2     | )
|Increase in subordinated notes payable                                 |  |                              | 24     |   |  |  |                              |   | 139    |  
|                                                                       |  |                              |        |   |  |  |                              |   |        |  
|Operating cash flows used by (provided to) EFH Corp. under the program |  | $                            | (119   | ) |  |  |                              | $ | 100    |  
|                                                                       |  |                              |        |   |  |  |                              |   |        |  

Effective with the completion of the Merger, Oncor no longer participates in the accounts
receivable securitization program. Amounts funded under the program related to Oncors trade accounts receivable totaled $86 million at June 30, 2007. Amounts related to Oncors trade accounts receivable for the six months ended
June 30, 2007 totaled $4 million in program fees and there was no change in funding to Oncor during the period.

The program may be
terminated upon the occurrence of a number of specified events, including if the delinquency ratio (delinquent for 31 days) for the sold receivables, the default ratio (delinquent for 91 days or deemed uncollectible), the dilution ratio (reductions
for discounts, disputes and other allowances) or the days collection outstanding ratio exceed stated thresholds, and the financial institutions do not waive such event of termination. The thresholds apply to the entire portfolio of sold receivables,
not separately to the receivables of each originator. In addition, the program may be terminated if TXU Receivables Company or EFH Corporate Services Company, as collection agent, shall default in any payment with respect to debt in excess of
$50,000 in the aggregate for TXU Receivables Company and EFH Corporate Services Company, or if TCEH, any affiliate of TCEH acting as collection agent under the program other than EFH Corporate Services Company, any parent guarantor of an originator
or any originator shall default in any payment with respect to debt (other than hedging obligations) in excess of $200 million in the aggregate for such entities.

Upon termination of the program, cash flows would be delayed as collections of sold receivables would be used by TXU Receivables Company to repurchase the undivided interests from the funding entities instead of
purchasing new receivables. The level of cash flows would normalize in approximately 16 to 30 days.

The subordinated notes issued by TXU
Receivables Company are subordinated to the undivided interests of the financial institutions in the purchased receivables.



16



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##### Table of Contents

Trade Accounts Receivable



|                                                                           |  |               |       |   |                   |   |       |  
|-------------------------------------------------------------------------- |  | ------------- | ----- | - | ----------------- | - | ----- | -
|                                                                           |  | Successor     |      
|                                                                           |  | June 30, 2008 |       |   | December 31, 2007 |  
|Gross trade accounts receivable                                            |  | $             | 2,216 |   |                   | $ | 1,494 |  
|Undivided interests in accounts receivable sold by TXU Receivables Company |  |               | (482  | ) |                   |   | (363  | )
|Allowance for uncollectible accounts                                       |  |               | (32   | ) |                   |   | (32   | )
|                                                                           |  |               |       |   |                   |   |       |  
|Trade accounts receivable  reported in balance sheet                      |  | $             | 1,702 |   |                   | $ | 1,099 |  
|                                                                           |  |               |       |   |                   |   |       |  

Gross trade accounts receivable at June 30, 2008 and December 31, 2007 included unbilled
revenues of $603 million and $477 million, respectively.

Allowance for Uncollectible Accounts Receivable



|                                                                          |  |                               |     |   |  |  |                               |   |     |  
|------------------------------------------------------------------------- |  | ----------------------------- | --- | - |  |  | ----------------------------- | - | --- | -
|                                                                          |  | Successor                     |     |   |  |  | Predecessor                   |  
|                                                                          |  | Six Months EndedJune 30, 2008 |     |   |  |  | Six Months EndedJune 30, 2007 |  
|Allowance for uncollectible accounts receivable as of beginning of period |  | $                             | 32  |   |  |  |                               | $ | 13  |  
|Increase for bad debt expense                                             |  |                               | 34  |   |  |  |                               |   | 25  |  
|Decrease for account writeoffs                                            |  |                               | (34 | ) |  |  |                               |   | (33 | )
|Changes related to receivables sold                                       |  |                               |    |   |  |  |                               |   | 9   |  
|                                                                          |  |                               |     |   |  |  |                               |   |     |  
|Allowance for uncollectible accounts receivable as of end of period       |  | $                             | 32  |   |  |  |                               | $ | 14  |  
|                                                                          |  |                               |     |   |  |  |                               |   |     |  

Allowances related to undivided interests in receivables sold totaled $17 million at June 30,
2007, and this amount was reported in current liabilities.



17



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##### Table of Contents

|7. | SHORT-TERM BORROWINGS AND LONG-TERM DEBT
|-- | ----------------------------------------

Short-Term
Borrowings

At June 30, 2008, EFH Corp. and its subsidiaries had outstanding short-term borrowings of $4.733 billion at a
weighted average interest rate of 3.04%, excluding certain customary fees, at the end of the period. Short-term borrowings under credit facilities totaled $1.655 billion for Oncor and $3.078 billion for TCEH.

At December 31, 2007, EFH Corp. and its subsidiaries had outstanding short-term borrowings of $1.718 billion at a weighted average interest rate of
5.39%, excluding certain customary fees, at the end of the period. Borrowings under credit facilities totaled $1.280 billion for Oncor and $438 million for TCEH.

Credit Facilities

EFH Corp.s credit facilities with cash borrowing and/or letter of credit availability at
June 30, 2008 are presented below. The facilities are all senior secured facilities of the authorized borrower.



|                                               |  |               |  |                  |           |                  |   |                |  |              |       |  |   |          
|---------------------------------------------- |  | ------------- |  | ---------------- | --------- | ---------------- | - | -------------- |  | ------------ | ----- |  | - | ---------
|                                               |  |               |  | At June 30, 2008
|Authorized Borrowers and Facility              |  | MaturityDate  |  | FacilityLimit    |           | Letters ofCredit |   | CashBorrowings |  | Availability
|TCEH Delayed Draw Term Loan Facility (a)       |  | October 2014  |  | $                | 4,100     |                  | $ |               |  | $            | 2,881 |  | $ | 1,219    
|TCEH Revolving Credit Facility (b)             |  | October 2013  |  |                  | 2,700     |                  |   | 383            |  |              | 296   |  |   | 2,021    
|TCEH Letter of Credit Facility (c)             |  | October 2014  |  |                  | 1,250     |                  |   |               |  |              | 1,250 |  |   |         
|                                               |  |               |  |                  |           |                  |   |                |  |              |       |  |   |          
|Subtotal TCEH                                  |  |               |  | $                | 8,050     |                  | $ | 383            |  | $            | 4,427 |  | $ | 3,240    
|                                               |  |               |  |                  |           |                  |   |                |  |              |       |  |   |          
|TCEH Commodity Collateral Posting Facility (d) |  | December 2012 |  |                  | Unlimited |                  | $ |               |  | $            | 3,193 |  |   | Unlimited
|Oncor Revolving Credit Facility (e)            |  | October 2013  |  | $                | 2,000     |                  | $ |               |  | $            | 1,655 |  | $ | 345      



|(a) | Facility to be used during the two-year period commencing on October 10, 2007 to fund expenditures for constructing certain new generation facilities and environmental upgrades
of existing generation facilities, including previously incurred expenditures not yet funded under this facility. Borrowings are classified as long-term debt.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | Facility to be used for letters of credit and borrowings for general corporate purposes. Borrowings are classified as short-term borrowings.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------



|(c) | Facility to be used for issuing letters of credit for general corporate purposes, including, but not limited to, providing collateral support under hedging arrangements and other
commodity transactions that are not eligible for funding under the TCEH Commodity Collateral Posting Facility. The borrowings, all of which were drawn at the closing of the Merger and are classified as long-term debt, have been retained as
restricted cash. Letters of credit totaling $1.246 billion issued as of June 30, 2008 are supported by the restricted cash, and the remaining letter of credit availability totals $4 million.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(d) | Revolving facility to be used to fund cash collateral posting requirements for specified volumes of natural gas hedges. At June 30, 2008, cash borrowings of $411 million are
classified as long-term debt and $2.782 billion are classified as short-term borrowings.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(e) | Facility to be used by Oncor for its general corporate purposes. Borrowings are classified as short-term borrowings.
|--- | --------------------------------------------------------------------------------------------------------------------

Pursuant to PUCT rules, TCEH is required to maintain available capacity under its credit facilities in order to permit TXU Energy to return retail
customer deposits, if necessary. As a result, at June 30, 2008, the total availability under the TCEH credit facilities should be further reduced by $121 million.



18



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##### Table of Contents

Long-Term Debt

At June 30, 2008 and December 31, 2007, the long-term debt of EFH Corp. consisted of the following:



|                                                                                    |  |              |        |   |                  |   |        |  
|----------------------------------------------------------------------------------- |  | ------------ | ------ | - | ---------------- | - | ------ | -
|                                                                                    |  | Successor    |       
|                                                                                    |  | June 30,2008 |        |   | December 31,2007 |  
|TCEH                                                                                |  |              |        |   |                  |   |        |  
|Pollution Control Revenue Bonds:                                                    |  |              |        |   |                  |   |        |  
|Brazos River Authority:                                                             |  |              |        |   |                  |   |        |  
|5.400% Fixed Series 1994A due May 1, 2029                                           |  | $            | 39     |   |                  | $ | 39     |  
|7.700% Fixed Series 1999A due April 1, 2033                                         |  |              | 111    |   |                  |   | 111    |  
|6.750% Fixed Series 1999B due September 1, 2034, remarketing date April 1, 2013 (a) |  |              | 16     |   |                  |   | 16     |  
|7.700% Fixed Series 1999C due March 1, 2032                                         |  |              | 50     |   |                  |   | 50     |  
|8.250% Fixed Series 2001A due October 1, 2030                                       |  |              | 71     |   |                  |   |       |  
|2.300% Floating Series 2001A due October 1, 2030 (b)                                |  |              |       |   |                  |   | 71     |  
|5.750% Fixed Series 2001C due May 1, 2036, remarketing date November 1, 2011 (a)    |  |              | 217    |   |                  |   | 217    |  
|8.250% Fixed Series 2001D-1 due May 1, 2033                                         |  |              | 171    |   |                  |   |       |  
|2.300% Floating Series 2001D-1 due May 1, 2033 (b)                                  |  |              |       |   |                  |   | 171    |  
|1.780% Floating Series 2001D-2 due May 1, 2033 (c)                                  |  |              | 97     |   |                  |   | 97     |  
|2.580% Floating Taxable Series 2001I due December 1, 2036 (c)                       |  |              | 62     |   |                  |   | 62     |  
|1.780% Floating Series 2002A due May 1, 2037 (c)                                    |  |              | 45     |   |                  |   | 45     |  
|6.750% Fixed Series 2003A due April 1, 2038, remarketing date April 1, 2013 (a)     |  |              | 44     |   |                  |   | 44     |  
|6.300% Fixed Series 2003B due July 1, 2032                                          |  |              | 39     |   |                  |   | 39     |  
|6.750% Fixed Series 2003C due October 1, 2038                                       |  |              | 52     |   |                  |   | 52     |  
|5.400% Fixed Series 2003D due October 1, 2029, remarketing date October 1, 2014 (a) |  |              | 31     |   |                  |   | 31     |  
|5.000% Fixed Series 2006 due March 1, 2041                                          |  |              | 100    |   |                  |   | 100    |  
|                                                                                    |  |             
|Sabine River Authority of Texas:                                                    |  |              |        |   |                  |   |        |  
|6.450% Fixed Series 2000A due June 1, 2021                                          |  |              | 51     |   |                  |   | 51     |  
|5.500% Fixed Series 2001A due May 1, 2022, remarketing date November 1, 2011 (a)    |  |              | 91     |   |                  |   | 91     |  
|5.750% Fixed Series 2001B due May 1, 2030, remarketing date November 1, 2011 (a)    |  |              | 107    |   |                  |   | 107    |  
|5.200% Fixed Series 2001C due May 1, 2028                                           |  |              | 70     |   |                  |   | 70     |  
|5.800% Fixed Series 2003A due July 1, 2022                                          |  |              | 12     |   |                  |   | 12     |  
|6.150% Fixed Series 2003B due August 1, 2022                                        |  |              | 45     |   |                  |   | 45     |  
|                                                                                    |  |             
|Trinity River Authority of Texas:                                                   |  |              |        |   |                  |   |        |  
|6.250% Fixed Series 2000A due May 1, 2028                                           |  |              | 14     |   |                  |   | 14     |  
|                                                                                    |  |             
|Unamortized fair value discount related to pollution control revenue bonds (d)      |  |              | (168   | ) |                  |   | (175   | )
|                                                                                    |  |             
|Senior Secured Facilities:                                                          |  |              |        |   |                  |   |        |  
|6.229% TCEH Initial Term Loan Facility maturing October 10, 2014 (e)(f)             |  |              | 16,327 |   |                  |   | 16,409 |  
|6.164% TCEH Delayed Draw Term Loan Facility maturing October 10, 2014 (e)(f)        |  |              | 2,881  |   |                  |   | 2,150  |  
|5.948% TCEH Letter of Credit Facility maturing October 10, 2014 (f)                 |  |              | 1,250  |   |                  |   | 1,250  |  
|2.699% TCEH Commodity Collateral Posting Facility maturing December 31, 2012 (g)    |  |              | 411    |   |                  |   | 382    |  
|                                                                                    |  |             
|Other:                                                                              |  |              |        |   |                  |   |        |  
|10.25% Fixed Senior Notes due November 1, 2015                                      |  |              | 3,000  |   |                  |   | 3,000  |  
|10.25% Fixed Senior Notes Series B due November 1, 2015                             |  |              | 2,000  |   |                  |   | 2,000  |  
|10.50 / 11.25% Senior Toggle Notes due November 1, 2016                             |  |              | 1,750  |   |                  |   | 1,750  |  
|6.125% Fixed Senior Notes due March 15, 2008                                        |  |              |       |   |                  |   | 3      |  
|7.000% Fixed Senior Notes due March 15, 2013                                        |  |              | 5      |   |                  |   | 5      |  
|7.100% Promissory Note due January 5, 2009                                          |  |              | 65     |   |                  |   | 65     |  
|7.460% Fixed Secured Facility Bonds with amortizing payments through January 2015   |  |              | 67     |   |                  |   | 78     |  
|Capital lease obligations                                                           |  |              | 162    |   |                  |   | 161    |  
|Unamortized fair value discount (d)                                                 |  |              | (9     | ) |                  |   | (9     | )
|                                                                                    |  |              |        |   |                  |   |        |  
|Total TCEH                                                                          |  | $            | 29,276 |   |                  | $ | 28,604 |  
|                                                                                    |  |              |        |   |                  |   |        |  



19



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##### Table of Contents

|                                                                                        |  |              |        |   |                  |   |        |  
|--------------------------------------------------------------------------------------- |  | ------------ | ------ | - | ---------------- | - | ------ | -
|                                                                                        |  | Successor    |       
|                                                                                        |  | June 30,2008 |        |   | December 31,2007 |  
|EFC Holdings                                                                            |  |              |        |   |                  |   |        |  
|9.580% Fixed Notes due in semiannual installments through December 4, 2019              |  | $            | 58     |   |                  | $ | 59     |  
|8.254% Fixed Notes due in quarterly installments through December 31, 2021              |  |              | 55     |   |                  |   | 56     |  
|3.673% Floating Rate Junior Subordinated Debentures, Series D due January 30, 2037 (f)  |  |              | 1      |   |                  |   | 1      |  
|8.175% Fixed Junior Subordinated Debentures, Series E due January 30, 2037              |  |              | 8      |   |                  |   | 8      |  
|Unamortized fair value discount (d)                                                     |  |              | (13    | ) |                  |   | (14    | )
|                                                                                        |  |              |        |   |                  |   |        |  
|Total EFC Holdings                                                                      |  |              | 109    |   |                  |   | 110    |  
|                                                                                        |  |              |        |   |                  |   |        |  
|EFH Corp.                                                                               |  |              |        |   |                  |   |        |  
|10.875% Fixed Senior Notes due November 1, 2017                                         |  |              | 2,000  |   |                  |   | 2,000  |  
|11.25 / 12.00% Senior Toggle Notes due November 1, 2017                                 |  |              | 2,500  |   |                  |   | 2,500  |  
|6.375% Fixed Senior Notes Series C due January 1, 2008                                  |  |              |       |   |                  |   | 200    |  
|4.800% Fixed Senior Notes Series O due November 15, 2009                                |  |              | 3      |   |                  |   | 3      |  
|5.550% Fixed Senior Notes Series P due November 15, 2014                                |  |              | 1,000  |   |                  |   | 1,000  |  
|6.500% Fixed Senior Notes Series Q due November 15, 2024                                |  |              | 750    |   |                  |   | 750    |  
|6.550% Fixed Senior Notes Series R due November 15, 2034                                |  |              | 750    |   |                  |   | 750    |  
|8.820% Building Financing due semiannually through February 11, 2022 (h)                |  |              | 83     |   |                  |   | 88     |  
|Unamortized fair value premium related to Building Financing (d)                        |  |              | 24     |   |                  |   | 24     |  
|Unamortized fair value discount (d)                                                     |  |              | (688   | ) |                  |   | (714   | )
|                                                                                        |  |              |        |   |                  |   |        |  
|Total EFH Corp.                                                                         |  |              | 6,422  |   |                  |   | 6,601  |  
|                                                                                        |  |              |        |   |                  |   |        |  
|Oncor                                                                                   |  |              |        |   |                  |   |        |  
|6.375% Fixed Senior Notes due May 1, 2012 (i)                                           |  |              | 700    |   |                  |   | 700    |  
|7.000% Fixed Senior Notes due May 1, 2032 (i)                                           |  |              | 500    |   |                  |   | 500    |  
|6.375% Fixed Senior Notes due January 15, 2015 (i)                                      |  |              | 500    |   |                  |   | 500    |  
|7.250% Fixed Senior Notes due January 15, 2033 (i)                                      |  |              | 350    |   |                  |   | 350    |  
|7.000% Fixed Debentures due September 1, 2022 (i)                                       |  |              | 800    |   |                  |   | 800    |  
|Unamortized discount                                                                    |  |              | (15    | ) |                  |   | (15    | )
|                                                                                        |  |              |        |   |                  |   |        |  
|Total Oncor                                                                             |  |              | 2,835  |   |                  |   | 2,835  |  
|Oncor Electric Delivery Transition Bond Company LLC (j)                                 |  |              |        |   |                  |   |        |  
|4.030% Fixed Series 2003 Bonds due in semiannual installments through February 15, 2010 |  |              | 71     |   |                  |   | 93     |  
|4.950% Fixed Series 2003 Bonds due in semiannual installments through February 15, 2013 |  |              | 130    |   |                  |   | 130    |  
|5.420% Fixed Series 2003 Bonds due in semiannual installments through August 15, 2015   |  |              | 145    |   |                  |   | 145    |  
|3.520% Fixed Series 2004 Bonds due in semiannual installments through November 15, 2009 |  |              | 71     |   |                  |   | 99     |  
|4.810% Fixed Series 2004 Bonds due in semiannual installments through November 15, 2012 |  |              | 221    |   |                  |   | 221    |  
|5.290% Fixed Series 2004 Bonds due in semiannual installments through May 15, 2016      |  |              | 290    |   |                  |   | 290    |  
|                                                                                        |  |              |        |   |                  |   |        |  
|Total Oncor Electric Delivery Transition Bond Company LLC                               |  |              | 928    |   |                  |   | 978    |  
|Unamortized fair value discount related to transition bonds (d)                         |  |              | (10    | ) |                  |   | (12    | )
|                                                                                        |  |              |        |   |                  |   |        |  
|Total Oncor consolidated                                                                |  |              | 3,753  |   |                  |   | 3,801  |  
|                                                                                        |  |              |        |   |                  |   |        |  
|Total EFH Corp. consolidated                                                            |  |              | 39,560 |   |                  |   | 39,116 |  
|Less amount due currently                                                               |  |              | (398   | ) |                  |   | (513   | )
|                                                                                        |  |              |        |   |                  |   |        |  
|Total long-term debt                                                                    |  | $            | 39,162 |   |                  | $ | 38,603 |  
|                                                                                        |  |              |        |   |                  |   |        |  



|(a) | These series are in the multiannual interest rate mode and are subject to mandatory tender prior to maturity on the mandatory remarketing date. On such date, the interest rate and
interest rate period will be reset for the bonds.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | Interest rates in effect at March 31, 2008. These series were remarketed in June 2008, resulting in a fixed rate to maturity.
|--- | -----------------------------------------------------------------------------------------------------------------------------



|(c) | Interest rates in effect at June 30, 2008. These series are in a weekly interest rate mode and are classified as long-term as they are supported by long-term irrevocable
letters of credit.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(d) | Amount represents unamortized fair value adjustments recorded under purchase accounting.
|--- | ----------------------------------------------------------------------------------------



|(e) | Interest rate swapped to fixed on $15.05 billion principal amount.
|--- | ------------------------------------------------------------------



|(f) | Interest rates in effect at June 30, 2008.
|--- | ------------------------------------------



|(g) | Interest rates in effect at June 30, 2008, excluding quarterly maintenance fee discussed below. See Credit Facilities above for more information.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------



|(h) | This financing is secured with a $127 million letter of credit.
|--- | ---------------------------------------------------------------



|(i) | Secured with first priority lien as discussed under Oncor Revolving Credit Facility below.
|--- | --------------------------------------------------------------------------------------------



|(j) | These bonds are nonrecourse to Oncor and were issued to securitize a regulatory asset.
|--- | --------------------------------------------------------------------------------------



20



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##### Table of Contents

Debt-Related Activity in 2008 Retirements of long-term debt in 2008 totaling $605
million represented principal payments at scheduled maturity dates as well as the remarketing of $242 million principal amount of pollution control revenue bonds discussed below and included $200 million of EFH Corp. senior notes, $82 million repaid
under the TCEH Initial Term Loan Facility, and $50 million of Oncor transition bond principal payments.

Issuances of long-term debt in
2008 totaling $1.004 billion represented borrowings under the TCEH Delayed Draw Term Loan Facility of $731 million to fund expenditures related to the development of new generation facilities and the environmental retrofit program for existing
lignite/coal-fueled generation facilities, the remarketing of $242 million principal amount of pollution control revenue bonds discussed immediately below and $31 million of additional borrowings under the TCEH Commodity Collateral Posting Facility.
Additional borrowings of $2.344 billion in 2008 under the TCEH Commodity Collateral Posting Facility were driven by the effects of higher forward natural gas prices on hedging positions and are classified as short-term borrowings.

In June 2008, TCEH remarketed the Brazos River Authority Pollution Control Revenue Bonds Series 2001A due in October 2030 and Series 2001D-1 due in May
2033 with aggregate principal amounts of $71 million and $171 million, respectively. The bonds were previously in a floating rate mode that reset weekly and were backed by two letters of credit in an aggregate amount of $247 million. As a result of
the remarketing, the bonds were fixed to maturity at an interest rate of 8.25%, and the two letters of credit were cancelled. The bonds are redeemable at par beginning July 1, 2018 and are redeemable with a make-whole premium prior to
July 1, 2018. These bonds were remarketed with a covenant package similar to the notes discussed below under TCEH Notes Issued Subsequent to the Merger.

TCEH Senior Secured Facilities Borrowings under the TCEH Initial Term Loan Facility, the TCEH Delayed Draw Term Loan Facility, the TCEH Revolving Credit Facility and the TCEH Letter
of Credit Facility, which totaled $20.754 billion at June 30, 2008, bear interest at per annum rates equal to, at TCEHs option, (i) adjusted LIBOR plus 3.50% or (ii) a base rate (the higher of (1) the prime rate as
announced from time to time by the administrative agent of the facilities and (2) the federal funds effective rate plus 0.50%) plus 2.50%. There is a margin adjustment mechanism in relation to term loans, revolving loans and letter of credit
fees under which the applicable margins may be reduced based on the achievement of certain leverage ratio levels. There was no change based upon June 30, 2008 levels. The applicable rate on each facility as of June 30, 2008 is provided in
the table above and reflects LIBOR-based borrowings.

A commitment fee is payable quarterly in arrears and upon termination of the TCEH
Revolving Credit Facility at a rate per annum equal to 0.50% of the average daily unused portion of such facility. The commitment fee is subject to reduction, based on the achievement of certain leverage ratio levels. There was no change based upon
June 30, 2008 levels.

With respect to the TCEH Delayed Draw Term Loan Facility, a commitment fee is payable quarterly in arrears and
upon termination of the undrawn portion of the commitments of such facility at a rate per annum equal to, prior to October 10, 2008, 1.25% per annum, and thereafter, 1.50% per annum.

Letter of credit fees under the TCEH Revolving Facility are payable quarterly in arrears and upon termination at a rate per annum equal to the spread
over adjusted LIBOR under the TCEH Revolving Facility, less the issuing banks fronting fee. Letter of credit fees under the TCEH Letter of Credit Facility are equal to the difference between interest paid on each outstanding letter of credit
at a rate of LIBOR plus 3.50% per annum and the interest earned on the total $1.25 billion TCEH Letter of Credit Facility restricted cash at a rate of LIBOR minus 0.12% per annum yielding a currently effective rate of 3.62% per annum
on each outstanding letter of credit under that facility.

TCEH will pay a fixed quarterly maintenance fee of approximately $11 million
through maturity for having procured the TCEH Commodity Collateral Posting Facility regardless of actual borrowings under the facility. In addition, TCEH will pay interest at LIBOR on actual borrowed amounts under the TCEH Commodity Collateral
Posting Facility partially offset by interest earned on collateral deposits to counterparties.



21



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##### Table of Contents

The TCEH Senior Secured Facilities are unconditionally guaranteed jointly and severally on a senior
secured basis, by EFC Holdings, and each existing and subsequently acquired or organized direct or indirect wholly-owned US restricted subsidiary of TCEH (other than certain subsidiaries as provided in the TCEH Senior Secured Facilities), subject to
certain other exceptions.

The TCEH Senior Secured Facilities, including the guarantees thereof, certain commodity hedging transactions and
the interest rate swaps described under TCEH Interest Rate Hedges below are secured by (a) substantially all of the current and future assets of TCEH and TCEHs subsidiaries who are guarantors of such facilities as described
above, and (b) pledges of the capital stock of TCEH and each current and future material wholly-owned restricted subsidiary of TCEH directly owned by TCEH or any guarantor.

The TCEH Senior Secured Facilities contain customary negative covenants, restricting, subject to certain exceptions, TCEH and TCEHs restricted
subsidiaries from, among other things:



| |  |  | incurring additional debt;
| | - |  | --------------------------



| |  |  | incurring additional liens;
| | - |  | ---------------------------



| |  |  | entering into mergers and consolidations;
| | - |  | -----------------------------------------



| |  |  | selling or otherwise disposing of assets;
| | - |  | -----------------------------------------



| |  |  | making dividends, redemptions or other distributions in respect of capital stock;
| | - |  | ---------------------------------------------------------------------------------



| |  |  | making acquisitions, investments, loans and advances, and
| | - |  | ---------------------------------------------------------



| |  |  | paying or modifying certain subordinated and other material debt.
| | - |  | -----------------------------------------------------------------

In addition, the TCEH Senior Secured Facilities contain a maintenance covenant that prohibits TCEH and its restricted subsidiaries from exceeding a maximum consolidated secured leverage ratio and to observe certain
customary reporting requirements and other affirmative covenants.

The TCEH Initial Term Loan Facility is required to be repaid in equal
quarterly installments in an aggregate annual amount equal to 1% of the original principal amount of such facility ($41 million quarterly), with the balance payable on October 10, 2014. The TCEH Delayed Draw Term Loan Facility is required to be
repaid in equal quarterly installments beginning on December 31, 2009 in an aggregate annual amount equal to 1% of the actual principal outstanding under the TCEH Delayed Draw Term Loan Facility as of such date, with the balance payable on
October 10, 2014. Amounts borrowed under the TCEH Revolving Facility may be reborrowed from time to time from and after the closing date until October 10, 2013. The TCEH Letter of Credit Facility will mature on October 10, 2014. The
TCEH Commodity Collateral Posting Facility will mature on December 31, 2012.

The TCEH Senior Secured Facilities contain certain
customary events of default for senior leveraged acquisition financings, the occurrence of which would allow the lenders to accelerate all outstanding loans and terminate their commitments.

TCEH Notes Issued Subsequent to the Merger Pursuant to an indenture entered into in October 2007 (the TCEH Indenture), TCEH and TCEH
Finance (the Co-Issuers) issued and sold $3.0 billion aggregate principal amount of 10.25% Senior Notes due November 1, 2015. In December 2007 under a supplemental indenture, the Co-Issuers issued and sold $2.0 billion aggregate principal
amount of 10.25% Series B Senior Notes due November 1, 2015. Interest on these notes (referred to as the TCEH Cash-Pay Notes) is payable in cash semiannually in arrears on May 1 and November 1 of each year at a fixed rate of
10.25% per annum, and the first interest payment was made on May 1, 2008.

Pursuant to the supplemental indenture, the Co-Issuers
also issued and sold $1.75 billion aggregate principal amount of 10.50%/11.25% Senior Toggle Notes due November 1, 2016. The initial interest payment on these notes (referred to as the TCEH Toggle Notes) was paid in cash. For any interest
period thereafter until November 1, 2012, the Issuer may elect to pay interest on the notes, at the Issuers option (i) entirely in cash; (ii) by increasing the principal amount of the notes or by issuing new TCEH Toggle Notes
(Payment-in-Kind or PIK Interest); or (iii) 50% in cash 50% in PIK Interest. Interest on the notes is payable semi-annually in arrears on May 1 and November 1 of each year at a fixed rate of 10.50% per annum for cash interest and
at a fixed rate of 11.25% per annum for PIK Interest, and the first interest payment was made on May 1, 2008.



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The $6.75 billion principal amount of notes issued under the TCEH Indenture and its supplement (the TCEH
Cash-Pay Notes and the TCEH Toggle Notes) are collectively referred to as the TCEH Notes.

The TCEH Notes are fully and unconditionally
guaranteed by TCEHs direct parent, EFC Holdings (which owns 100% of TCEH and its subsidiary guarantors), and by each subsidiary that guarantees the TCEH Senior Secured Facilities (the TCEH Guarantors). The TCEH Notes are the Co-Issuers
senior unsecured debt and rank senior in right of payment to any future subordinated indebtedness of the Co-Issuers, equally in right of payment with all of the Co-Issuers existing and future senior unsecured indebtedness, and structurally
subordinated in right of payment to all existing and future indebtedness and other liabilities of the Co-Issuers non-guarantor subsidiaries, including trade payables (other than indebtedness and liabilities owed to the Co-Issuers or the TCEH
Guarantors). The TCEH Notes rank effectively junior in right of payment to all existing and future senior secured indebtedness of the Co-Issuers, including the TCEH Senior Secured Facilities to the extent of the value of the collateral securing such
indebtedness.

The guarantees are joint and several guarantees of the TCEH Notes, are the TCEH Guarantors senior unsecured
obligations and rank equal in right of payment with all existing and future senior unsecured indebtedness of the relevant TCEH Guarantor and senior in right of payment to any existing or future subordinated indebtedness of the relevant TCEH
Guarantor. The guarantees rank effectively junior to all secured indebtedness of the TCEH Guarantors to the extent of the assets securing that indebtedness. EFC Holdings guarantee of the TCEH Notes ranks equally with its guarantee of the EFH
Corp. Cash-Pay Notes and the EFH Corp. Toggle Notes (discussed below). The guarantees of the TCEH Notes are structurally junior to all indebtedness and other liabilities of the Co-Issuers subsidiaries that do not guarantee the notes.

The TCEH Indenture contains a number of covenants that, among other things, restrict, subject to certain exceptions, the Co-Issuers
and their restricted subsidiaries ability to:



| |  |  | make restricted payments;
| | - |  | -------------------------



| |  |  | incur debt and issue preferred stock;
| | - |  | -------------------------------------



| |  |  | create liens;
| | - |  | -------------



| |  |  | engage in mergers or consolidations;
| | - |  | ------------------------------------



| |  |  | sell or otherwise dispose of certain assets;
| | - |  | --------------------------------------------



| |  |  | permit dividend and other payment restrictions on restricted subsidiaries, and
| | - |  | ------------------------------------------------------------------------------



| |  |  | engage in certain transactions with affiliates.
| | - |  | -----------------------------------------------

The TCEH Indenture also contains customary events of default, including failure to pay principal or interest on the TCEH Notes or the guarantees when due, among others. If an event of default occurs under the TCEH
Indenture, the trustee or the holders of at least 30% in principal amount of the Required Debt (as such term is defined in the TCEH Indenture) may declare the principal amount on the TCEH Notes to be due and payable immediately.

The Co-Issuers may redeem the TCEH Cash-Pay Notes, in whole or in part, at any time on or after November 1, 2011, or the TCEH Toggle Notes, in whole
or in part, at any time on or after November 1, 2012, at specified redemption prices, plus accrued and unpaid interest, if any. In addition, before November 1, 2010, the Co-Issuers may redeem with the cash proceeds of certain equity
offerings up to 35% of the aggregate principal amount of TCEH Cash-Pay Notes from time to time at a redemption price of 110.250% of the aggregate principal amount of the TCEH Cash-Pay Notes, plus accrued and unpaid interest, if any, or 110.500% of
the aggregate principal amount of the TCEH Toggle Notes, plus accrued and unpaid interest, if any. The Co-Issuers may also redeem the TCEH Cash-Pay Notes at any time prior to November 1, 2011 or the TCEH Toggle Notes at any time prior to
November 1, 2012 at a price equal to 100% of their principal amount, plus accrued and unpaid interest and a make-whole premium. Upon the occurrence of a change in control of TCEH, the Co-Issuers must offer to repurchase the TCEH
Notes at 101% of their principal amount, plus accrued and unpaid interest, if any.



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The TCEH Notes were issued in a private placement and have not been registered under the Securities Act.
The Co-Issuers have agreed to use their commercially reasonable efforts to register with the SEC notes having substantially identical terms as the TCEH Notes as part of an offer to exchange freely tradable exchange notes for the TCEH Notes. The
Co-Issuers have agreed to use commercially reasonable efforts to cause the exchange offer to be completed or, if required, to have one or more shelf registration statements declared effective, within 360 days after the issue date of the TCEH Notes.
If this obligation is not satisfied (a TCEH Registration Default), the annual interest rate on the TCEH Notes will increase by 0.25% per annum for the first 90-day period during which a TCEH Registration Default continues, and thereafter the
annual interest rate on the TCEH Notes will increase by 0.50% per annum over the original interest rate for the remaining period during which the TCEH Registration Default continues. If the TCEH Registration Default is cured, the applicable
interest rate on such TCEH Notes will revert to the original level.

EFH Corp. Notes Issued Subsequent to the Merger 
Pursuant to an indenture entered into in October 2007 (the EFH Corp. Indenture), EFH Corp. issued and sold $2.0 billion aggregate principal amount of 10.875% Senior Notes due November 1, 2017. Interest on the notes (referred to as the EFH Corp.
Cash-Pay Notes) is payable in cash semi-annually in arrears on May 1 and November 1 of each year at a fixed rate of 10.875% per annum, and the first interest payment was made on May 1, 2008.

Pursuant to the EFH Corp. Indenture, EFH Corp. also issued and sold $2.5 billion aggregate principal amount of 11.250%/12.000% Senior Toggle Notes due
November 1, 2017. The initial interest payment on the notes (referred to as the EFH Corp. Toggle Notes) was paid in cash. For any interest period thereafter until November 1, 2012, EFH Corp. may elect to pay interest on the notes, at EFH
Corp.s option (i) entirely in cash; (ii) by increasing the principal amount of the notes or by issuing new EFH Corp. Toggle Notes (PIK Interest); or (iii) 50% in cash 50% in PIK Interest. Interest on the notes is payable
semi-annually in arrears on May 1 and November 1 of each year at a fixed rate of 11.250% per annum for cash interest and at a fixed rate of 12.000% per annum for PIK Interest, and the first interest payment was made on
May 1, 2008.

The $4.5 billion principal amount of notes issued under the EFH Corp. Indenture (the EFH Corp. Cash-Pay Notes and the
EFH Corp. Toggle Notes) are collectively referred to herein as the EFH Corp. Notes.

The EFH Corp. Notes are fully and unconditionally
guaranteed by EFC Holdings and Intermediate Holding, 100% owned subsidiaries of EFH Corp. (the EFH Corp. Guarantors). The EFH Corp. Notes are EFH Corp.s senior unsecured debt and rank senior in right of payment to any existing and future
subordinated indebtedness of EFH Corp., equally in right of payment with all of EFH Corp.s existing and future senior unsecured indebtedness and structurally subordinated in right of payment to all existing and future indebtedness, preferred
stock and other liabilities of EFH Corp.s non-guarantor subsidiaries, including trade payables (other than indebtedness and liabilities owed to EFH Corp. or the EFH Corp. Guarantors). The EFH Corp. Notes will rank effectively junior in right
of payment to all future secured indebtedness of EFH Corp. to the extent of the assets securing that indebtedness.

The guarantees are
joint and several guarantees of the EFH Corp. Notes, are the EFH Corp. Guarantors unsecured senior obligations and rank equal in right of payment with all existing and future senior unsecured indebtedness of the relevant EFH Corp. Guarantor
and senior in right of payment to any existing or future subordinated indebtedness of the relevant EFH Corp. Guarantor. The guarantees of the EFH Corp. Notes will be structurally junior to all indebtedness and other liabilities of the relevant EFH
Corp. Guarantors subsidiaries that are not guarantors.



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The EFH Corp. Indenture contains a number of covenants that, among other things, restrict, subject to
certain exceptions, EFH Corp.s and its restricted subsidiaries ability to:



| |  |  | make restricted payments;
| | - |  | -------------------------



| |  |  | incur debt and issue preferred stock;
| | - |  | -------------------------------------



| |  |  | create liens;
| | - |  | -------------



| |  |  | engage in mergers or consolidations;
| | - |  | ------------------------------------



| |  |  | sell or otherwise dispose of certain assets;
| | - |  | --------------------------------------------



| |  |  | permit dividend and other payment restrictions on restricted subsidiaries, and
| | - |  | ------------------------------------------------------------------------------



| |  |  | engage in certain transactions with affiliates.
| | - |  | -----------------------------------------------

The EFH Corp. Indenture also contains customary events of default, including failure to pay principal or interest on the EFH Corp. Notes or the guarantees when due, among others. If an event of default occurs under
the EFH Corp. Indenture, the trustee or the holders of at least 30% in principal amount outstanding of the EFH Corp. Notes may declare the principal amount on the EFH Corp. Notes to be due and payable immediately.

EFH Corp. may redeem the EFH Corp. Notes, in whole or in part, at any time on or after November 1, 2012, at specified redemption prices, plus
accrued and unpaid interest, if any. In addition, before November 1, 2010, EFH Corp. may redeem, with the net cash proceeds of certain equity offerings, up to 35% of the aggregate principal amount of the EFH Corp. Notes from time to time at a
redemption price of 110.875% of the aggregate principal amount of the EFH Corp. Cash Pay Notes, plus accrued and unpaid interest, if any, or 111.250% of the aggregate principal amount of the EFH Corp. Toggle Notes, plus accrued and unpaid interest,
if any. EFH Corp. may also redeem the EFH Corp. Notes at any time prior to November 1, 2012 at a price equal to 100% of their principal amount, plus accrued and unpaid interest and a make-whole premium. Upon the occurrence of a
change in control, EFH Corp. must offer to repurchase the EFH Corp. Notes at 101% of their principal amount, plus accrued and unpaid interest, if any.

The EFH Corp. Notes were issued in a private placement and have not been registered under the Securities Act. EFH Corp. has agreed to use its commercially reasonable efforts to register with the SEC notes having
substantially identical terms as the EFH Corp. Notes as part of an offer to exchange freely tradable exchange notes for the EFH Corp. Notes. EFH Corp. has agreed to use commercially reasonable efforts to cause the exchange offer to be completed or,
if required, to have one or more shelf registration statements declared effective, within 360 days after the issue date of the EFH Corp. Notes. If this obligation is not satisfied (an EFH Corp. Registration Default), the annual interest rate on the
EFH Corp. Notes will increase by 0.25% per annum for the first 90-day period during which an EFH Corp. Registration Default continues, and thereafter the annual interest rate on the EFH Corp. Notes will increase by 0.50% per annum over the
applicable original interest rate for the remaining period during which the EFH Corp. Registration Default continues. If the EFH Corp. Registration Default is cured, the applicable interest rate on such EFH Corp. Notes will revert to the original
level.



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Intercreditor Agreement  In October 2007, in connection with the Merger, TCEH entered
into an Intercreditor Agreement (the Intercreditor Agreement) with Citibank, N.A. and five secured commodity hedge counterparties (the Secured Commodity Hedge Counterparties). The Intercreditor Agreement provides that the lien granted to the Secured
Commodity Hedge Counterparties will rank pari passu with the lien granted with respect to the collateral of the secured parties under the TCEH Senior Secured Facilities. The Intercreditor Agreement also provides that the Secured Commodity Hedge
Counterparties will be entitled to share, on a pro rata basis, in the proceeds of any liquidation of such collateral in connection with a foreclosure on such collateral in an amount provided in the TCEH Senior Secured Facilities. The Intercreditor
Agreement also provides that the Secured Commodity Hedge Counterparties will have voting rights with respect to any amendment or waiver of any provision of the Intercreditor Agreement that changes the priority of the Secured Commodity Hedge
Counterparties lien on such collateral relative to the priority of lien granted to the secured parties under the TCEH Senior Secured Facilities or the priority of payments to the Secured Commodity Hedge Counterparties upon a foreclosure and
liquidation of such collateral relative to the priority of the lien granted to the secured parties under the TCEH Senior Secured Facilities.

TCEH Interest Rate Hedges In 2007, subsequent to the Merger, TCEH entered into interest rate swap transactions pursuant to which payment of the floating interest rates on an aggregate of $15.05 billion of senior
secured term loans of TCEH were exchanged for interest payments at fixed rates of between 7.3% and 8.3% on debt maturing from 2009 to 2014. The interest rate swap counterparties are secured proportionally with the lenders under the TCEH Senior
Secured Facilities. The interest rate swaps are being accounted for as cash flow hedges related to variable interest rate cash flows. Based on the fair value of the positions, the cumulative unrealized mark-to-market net losses related to these
interest rate swaps totaled $278 million at June 30, 2008. This amount is reflected in the balance sheet as a derivative contract liability with the offset to accumulated other comprehensive income. No ineffectiveness gains or losses have been
recorded.

In May 2008, TCEH entered into an interest rate swap transaction pursuant to which semiannual payment (settled quarterly) of the
floating interest rates at LIBOR on an aggregate of $2.095 billion of senior secured term loans of TCEH were exchanged for floating interest rates of LIBOR plus 0.21% receivable monthly. At June 30, 2008, the cumulative unrealized
mark-to-market net losses related to these swaps, recorded in interest expense and related charges, totaled approximately $1 million. The interest rate swap counterparties are secured proportionally with the lenders under the TCEH Senior Secured
Facilities.

Oncor Revolving Credit Facility At June 30, 2008, Oncor had a $2.0 billion credit facility to be
used for working capital and general corporate purposes, including issuances of commercial paper and letters of credit. Oncor may request increases in the commitments under the facility in any amount up to $500 million, subject to the satisfaction
of certain conditions. This facility is a revolving credit facility, which means that amounts borrowed under the facility, once repaid, can be reborrowed by Oncor from time to time until October 10, 2013. In May 2008, Oncor secured this credit
facility with a first priority lien on certain of its transmission and distribution assets. Oncor also secured all of its existing long-term debt securities (excluding the transition bonds) with the same lien in accordance with the terms of those
securities. The lien contains customary provisions allowing Oncor to use the assets in its business, as well as to replace and/or release collateral as long as the market value of the aggregate collateral is at least 115% of the aggregate secured
debt. The lien may be terminated at Oncors option upon the termination of Oncors current credit facility.

Borrowings under
this facility totaled $1.655 billion and $1.280 billion at June 30, 2008 and December 31, 2007, respectively. The increased borrowings were driven by funding of ongoing capital investments, including the acquisition of CURRENT
Communications of Texas, LPs existing broadband over powerline based Smart Grid network assets in Oncors service territory.

Borrowings bear interest at per annum rates equal to, at Oncors option, (i) adjusted LIBOR plus a spread of 0.275% to 0.800% (depending on the rating assigned to Oncors senior secured debt) or (ii) a base rate (the
higher of (1) the prime rate of JPMorgan Chase Bank, N.A. and (2) the federal funds effective rate plus 0.50%). Under option (i) and based on Oncors current ratings, its LIBOR-based borrowings, which apply to all outstanding
borrowings at June 30, 2008, bear interest at LIBOR plus 0.575%.



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A facility fee is payable at a rate per annum equal to 0.100% to 0.200% (depending on the rating assigned
to Oncors senior secured debt) of the commitments under the facility. Based on Oncors current ratings, its facility fee is 0.175%. A utilization fee is payable on the average daily amount of borrowings in excess of 50% of the commitments
under the facility at a rate per annum equal to 0.125% per annum.

The facility contains customary covenants for facilities of this
type, restricting, subject to certain exceptions, Oncor and its subsidiary from, among other things:



| |  |  | incurring additional liens;
| | - |  | ---------------------------



| |  |  | entering into mergers and consolidations;
| | - |  | -----------------------------------------



| |  |  | selling assets, and
| | - |  | -------------------



| |  |  | making acquisitions and investments in subsidiaries.
| | - |  | ----------------------------------------------------

In addition, the facility requires that Oncor maintain a consolidated senior debt to capitalization ratio of no greater than 0.65 to 1.00 and observe certain customary reporting requirements and other affirmative
covenants.

The facility contains certain customary events of default for facilities of this type, the occurrence of which would allow the
lenders to accelerate all outstanding loans and terminate their commitments under the facility.



|8. | COMMITMENTS AND CONTINGENCIES
|-- | -----------------------------

Generation Development

Subsidiaries of EFH Corp. have executed EPC agreements for the development of three lignite coal-fueled generation units in Texas.
Such subsidiaries or the EPC contractors have placed orders for critical long lead-time equipment, including boilers, turbine generators and air quality control systems for the two units at Oak Grove and one unit at Sandow, and construction of the
three units is underway.

In September 2007, a subsidiary of EFH Corp. acquired from Alcoa Inc. the air permit related to the Sandow
facility that had been previously issued by the TCEQ. However, the air permit is the subject of an appeal as discussed below under Litigation Related to Generation Development.

A subsidiary of EFH Corp. has received the air permit for the Oak Grove units, which was approved by the TCEQ in June 2007. However, the air permit is
the subject of an appeal and litigation as discussed below under Litigation Related to Generation Development.

Construction
work-in-process asset balances for the three generation units totaled approximately $3.5 billion as of June 30, 2008, which includes the effects of the fair value adjustments related to purchase accounting and capitalized interest. If
construction-related agreements for the three generation units had been canceled as of that date, subsidiaries of EFH Corp. would have incurred an estimated termination obligation of up to approximately $400 million. This estimated gross
cancellation exposure of approximately $3.9 billion at June 30, 2008 excludes any potential recovery values for assets acquired to date and for assets already owned prior to executing such agreements that are intended to be utilized for these
projects.



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Litigation Related to the Merger

Two putative class and derivative lawsuits and one derivative lawsuit were filed in the US District Court, Northern District of Texas, Dallas Division in
March 2007 against the former directors of EFH Corp., EFH Corp. (then known as TXU Corp.), as a nominal defendant, and the Sponsor Group arising out of the Merger Agreement. In April 2007, the Plaintiffs filed Amended Complaints asserting only
derivative claims against the same defendants. The lawsuits sought to enjoin the Merger Agreement. The cases alleged that the former directors violated various fiduciary duties by approving the Merger Agreement and the Sponsor Group aided and
abetted that alleged conduct. The Plaintiffs contended that the former directors violated fiduciary duties owed to shareholders by failing to maximize the value of EFH Corp. and by breaching duties of loyalty and due care by not taking adequate
measures to ensure that the interests of shareholders were properly protected. EFH Corp. and its former directors filed Motions to Dismiss based on the Plaintiffs failure to comply with the provisions of the Texas Business Organizations Code
(TBOC) applicable to filing and pursuing derivative proceedings. As described below, these lawsuits were dismissed in May 2008.

In February and March 2007, three derivative lawsuits were filed in Dallas County state district
courts arising out of the Merger Agreement. The suits, filed by putative shareholders, alleged that EFH Corp.s former directors, named as defendants, breached fiduciary duties owed EFH Corp. by approving the Merger Agreement. The petitions
were consolidated into one action in the 44thDistrict Court, Dallas County, Texas, and included claims that the defendants failed to ensure that
the Merger was in the best interest of EFH Corp.; that the former directors participated in the Merger where their loyalties were divided and where they were to receive a personal financial benefit; that such alleged conduct constituted a breach of
their duties of care, loyalty, good faith, candor and independence owed to EFH Corp.; and that the Sponsor Group aided and abetted the alleged breaches of fiduciary duties by the directors. As described below, these lawsuits were dismissed in April
2008.

In February and March 2007, eight lawsuits were filed in state district court
in Dallas County, Texas by putative shareholders against the former directors of EFH Corp., EFH Corp. (then known as TXU Corp.), the Sponsor Group, and certain financial entities, asserting claims on behalf of former owners of shares of EFH Corp.
common stock as well as seeking to certify a class action on behalf of allegedly similarly situated shareholders. The lawsuits, which were consolidated into one action in the 44thDistrict Court, Dallas County, Texas, contended that the former directors of EFH Corp. violated various fiduciary duties owed plaintiffs and other shareholders in connection with the execution of the Merger Agreement
and that the Sponsor Group and certain financial entities aided and abetted the alleged breaches of fiduciary duties by the former directors. Plaintiffs sought to enjoin defendants from consummating the Merger Agreement until such time as a
procedure or process was adopted to obtain the highest possible price for shareholders, and requested that the Court direct the preclosing officers and directors of EFH Corp. to exercise their fiduciary duties in order to obtain a transaction in the
best interest of EFH Corp. shareholders. The consolidated suit included claims that the former directors failed to take steps to properly value or maximize the value of EFH Corp. and breached their duties of loyalty, good faith, candor and
independence owed to former EFH Corp. shareholders. EFH Corp. and its former directors filed a Motion to Dismiss and in May 2007, the Court granted the Motion and dismissed the consolidated putative class action suit with prejudice. In May 2007,
Plaintiffs moved for reconsideration of the order dismissing the action; however, Plaintiffs subsequently withdrew this motion. As described below, these lawsuits were dismissed in April 2008.

In July 2007, a putative class action lawsuit was filed in the US District Court, Northern District of Texas, Dallas Division by a putative shareholder
against EFH Corp. (then known as TXU Corp.) and its former directors asserting a claim under Section 14(a) of the Securities Exchange Act of 1934 and the rules and regulations thereunder, asserting that the preliminary proxy statement of EFH
Corp. filed in June 2007 failed to adequately describe the relevant facts and circumstances regarding the Merger as well as seeking to certify the litigation as a class action on behalf of allegedly similarly situated shareholders. In July 2007, the
Sponsor Group, joined by EFH Corp. entered into a memorandum of understanding with plaintiffs that resulted in the dismissal of this litigation as described below.



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In July 2007, the Sponsor Group, joined by EFH Corp. for the limited purpose described below, executed a
memorandum of understanding with the plaintiffs in certain of the lawsuits described above pursuant to which, when approved by the court in which the litigation was pending, to the extent required, all of the litigation related to the Merger
described above would be dismissed with prejudice. None of EFH Corp.s former directors agreed to fund any payment or pay any other consideration under the settlement. EFH Corp. did agree to make certain revisions to the final proxy statement
related to the approval of the Merger as part of the agreement between the Sponsor Group and the plaintiffs to settle the litigation and agreed that under certain circumstances the termination fee payable by EFH Corp. under the Merger Agreement
would be $925 million rather than $1 billion. In addition, by reasons of the closing of the Merger on October 10, 2007, EFH Corp. merged with the entity obligated to fund any court approved attorneys fees. Accordingly, EFH Corp. was
legally obligated for such payment. In January 2008, a final settlement agreement was executed by the Plaintiffs in the above described litigation matters. The defendants and the courts with jurisdiction over the litigation considered the settlement
for approval in April 2008. The settlement was approved and a Final Order and Judgment was entered dismissing with prejudice all litigation pending in the State District Court, Dallas County, Texas. The settlement was approved and a Final Order and
Judgment was entered into by the US District Court, Northern District of Texas, in May 2008, dismissing with prejudice all claims related to the Merger against EFH Corp. and its preclosing officers and directors. In June 2008, an objector appealed
the Final Order and Judgment of the US District Court, Northern District of Texas, to the US Court of Appeals for the Fifth Circuit. EFH Corp. believes the claims made in the appeal are without merit; therefore, if necessary, EFH Corp. intends to
vigorously defend this appeal.

Litigation Related to Generation Development

An administrative appeal challenging the order of the TCEQ issuing the air permit for construction and operation of the Oak Grove generation facility in
Robertson County, Texas to a subsidiary of EFH Corp. was filed in September 2007 in the State District Court of Travis County, Texas. Plaintiffs asked that the District Court reverse TCEQs approval of the Oak Grove air permit and TCEQs
adoption and approval of the TCEQ Executive Directors Response to Comments; and remand the matter back to TCEQ for further proceedings. The TCEQ has filed the administrative record with the District Court. No further activity has occurred in
the appeal. In addition to this administrative appeal, two other petitions were filed in Travis County District Court by non-parties to the administrative hearing before TCEQ and the State Office of Administrative Hearings (SOAH) seeking to
challenge the TCEQs issuance of the Oak Grove air permit and asking the District Court to remand the matter to the SOAH for further proceedings. Finally, the plaintiffs in these two additional lawsuits filed a third, joint petition claiming
insufficiencies in the Oak Grove application, permit, and process and seeking party status and remand to the SOAH for further proceedings. EFH Corp. believes the Oak Grove air permit granted by the TCEQ is protective of the environment and that the
application for and the processing of the air permit by the TCEQ was in accordance with law. There can be no assurance that the outcome of these matters would not result in an adverse impact on the Oak Grove project.



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In December 2006, a lawsuit was filed in the US District Court for the Western District of Texas against
Luminant Generation Company LLC (then known as TXU Generation Company LP), Oak Grove Management Company LLC and EFH Corp. (then known as TXU Corp.). The complaint sought declaratory and injunctive relief, as well as the assessment of civil
penalties, with respect to the permit application for the construction and operation of the Oak Grove generation facility in Robertson County, Texas. The plaintiffs alleged violations of the Federal Clean Air Act, Texas Health and Safety Code and
Texas Administrative Code and sought to temporarily and permanently enjoin the construction and operation of the Oak Grove generation plant. The complaint also asserted that the permit application was deficient in failing to comply with various
modeling and analyses requirements relative to the impact of emissions from the Oak Grove plant. Plaintiffs further requested that the District Court enter an order requiring the defendants to take other appropriate actions to remedy, mitigate and
offset alleged harm to the public health and environment. EFH Corp. believes the Oak Grove air permit granted by the TCEQ in June 2007 is protective of the environment and that the application for and the processing of the air permit by Oak Grove
Management Company LLC with the TCEQ has been in accordance with applicable law. EFH Corp. and the other defendants filed a Motion to Dismiss the litigation, which was granted by the District Court in May 2007. The plaintiffs appealed the District
Courts dismissal of the case to the US Fifth Circuit Court of Appeals, and in July 2008, the US Fifth Circuit Court of Appeals upheld the District Courts dismissal of the case. EFH Corp. believes that the US Fifth Circuit Court of
Appeals properly upheld the District Courts decision, and while EFH Corp. is unable to estimate any possible loss or predict the outcome of this litigation in the event the plaintiffs appeal the US Fifth Circuit Court of Appeals decision
to the US Supreme Court, EFH Corp. maintains that the claims made in the complaint are without merit. Accordingly, EFH Corp. intends to continue to vigorously defend any further appeal. There can be no assurance that the outcome of this matter would
not result in an adverse impact on the Oak Grove project.

In May 2008, the Sierra Club announced that it may sue Oak Grove Management
Company LLC for violating federal Clean Air Act provisions regarding hazardous air pollutants. Similarly, in July 2008, the Sierra Club announced that it may sue Luminant, after the expiration of a 60-day waiting period, for violating federal Clean
Air Act provisions in connection with its Martin Lake generation facility. EFH Corp. believes that, contrary to Sierra Clubs allegations, it obtained lawful permits for constructing the Oak Grove generation facility and that it is in
compliance with emissions requirements applicable to the Martin Lake generation facility. EFH Corp. cannot predict whether the Sierra Club will actually file suit or the outcome of any such proceedings.

In September 2007, a subsidiary of EFH Corp. acquired from Alcoa Inc. the air permit related to the Sandow 5 facility that had been previously issued by
the TCEQ. Although a federal district court approved a settlement pursuant to which EFH Corp. acquired the permit, environmental groups opposed to the settlement appealed the district courts decision to the US Fifth Circuit Court of Appeals.
In June 2008, the US Fifth Circuit Court of Appeals upheld the district courts decision. EFH Corp. believes the claims are without merit and will vigorously defend any further appeal. There can be no assurance that the outcome of this matter
would not result in an adverse impact on the Sandow 5 project.



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Litigation-Other

In September 2005, a lawsuit was filed in the US District Court for the Northern District of Texas, Dallas Division against EFH Corp. (then known as TXU Corp.) and C. John Wilder, EFH Corp.s former Chief
Executive Officer. The plaintiffs Amended Complaint asserts claims on behalf of the plaintiffs and a putative class of owners of certain EFH Corp. securities who tendered such securities in connection with a tender offer conducted by EFH Corp.
in 2004. The Amended Complaint alleges violations of the provisions of Sections 14(e), 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 thereunder. The allegations relate to a tender offer conducted in September and
October 2004 for certain equity-linked securities in which it was expressly disclosed that EFH Corp. management was evaluating whether it should recommend to the board of directors that the board reevaluate EFH Corp.s dividend policy. After
the tender offer was closed, and consistent with the disclosure, management did make a recommendation to the board to reevaluate the dividend policy and the board elected to increase the quarterly dividend. The plaintiffs contend that such
disclosure in connection with the tender offer was inadequate. EFH Corp. maintains that the disclosure provided in connection with the tender offer regarding the evaluation of the dividend policy was complete and accurate at the time the tender
offer was initiated as well as when it was closed. A Motion to Dismiss was filed by the defendants, and the District Court entered an order granting the Motion to Dismiss and dismissing this litigation with prejudice in August 2006. The plaintiffs
filed a timely notice of appeal, and on appeal, the US Court of Appeals for the Fifth Circuit remanded the dismissal to the District Court in light of the decisions in Tellabs, Inc. v. Makor Issues & Rights, Ltd. On remand, plaintiffs filed
a Second Amended Complaint, and defendants filed a Motion to Dismiss. The District Court entered an order granting the Motion to Dismiss and dismissing this litigation with prejudice in April 2008. The plaintiffs filed a timely notice of appeal in
May 2008 and the appeal is currently pending before the US Court of Appeals for the Fifth Circuit. Briefing on the appeal has not yet concluded. While EFH Corp. is unable to estimate any possible loss or predict the outcome of this litigation, EFH
Corp. believes the claims made in this litigation are without merit and, accordingly, intends to vigorously defend this litigation.

In
July 2008, Alcoa Inc. filed a lawsuit in Milam County, Texas district court against Luminant Generation Company LLC and Luminant Mining Company LLC (both wholly-owned subsidiaries of EFH Corp.). The lawsuit alleges breach of various contractual
arrangements related to operation of the Sandow Unit 4 generation facility and the Three Oaks lignite mine. While EFH Corp. is unable to estimate any possible loss or predict the outcome of this litigation, EFH Corp. believes the claims made in this
litigation are without merit and, accordingly, intends to vigorously defend this litigation.



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Regulatory Investigations and Reviews

In March 2007, the PUCT issued a Notice of Violation (NOV) stating that the PUCT Staff was recommending an enforcement action, including the assessment of
administrative penalties, against EFH Corp. and certain affiliates for alleged market power abuse by its power generation affiliates and Luminant Energy in ERCOT-administered balancing energy auctions during certain periods of the summer of 2005. In
September 2007, the PUCT issued a revised NOV in which the proposed administrative penalty amount was reduced from $210 million to $171 million. The revised NOV was necessary, according to the PUCT Staff, to correct calculation errors in the initial
NOV. As revised, the NOV is premised upon the PUCT Staffs allegation that Luminant Energys bidding behavior was not competitive and increased market participants costs of balancing energy by approximately $57 million, including
approximately $19 million in incremental revenues to EFH Corp. A hearing requested by Luminant Energy to contest the alleged occurrence of a violation and the amount of the penalty in the NOV was scheduled to start in April 2008 but was stayed
pending resolution of discovery disputes and Luminant Energys motion to dismiss, which was filed in November 2007. That motion was denied by the state administrative law judges, and in February 2008 the PUCT declined to hear Luminant
Energys appeal of that denial. In March 2008, Luminant Energy submitted to the administrative law judges its motion for summary decision on the discrete legal issue of what the maximum lawful penalty calculation could be in this proceeding. In
April 2008, PUCT Staff submitted its cross-motion on the same issue. In July 2008, the administrative law judges issued their order on the cross-motions for summary decision. The order held that the PUCT Staffs proposed penalty calculation is
unlawful and ruled partially in Luminant Energys favor, holding that the proper maximum penalty calculation should be based on the number of allegedly improper bid curves submitted to ERCOT during the relevant time period. The order also holds
that a fact issue exists with respect to the number of bid curves submitted during the relevant period. Based upon this order and the PUCT Staffs alleged number of bid curves, EFH Corp. believes that the maximum penalty would be less than $16
million. The PUCT Staff appealed the administrative law judgesruling on this maximum penalty issue to the PUCT, and at the August 14, 2008 PUCT open meeting, the PUCT Commissioners determined that it was inappropriate to decide the issue
of how to calculate the potential maximum penalty at this point in the case. Instead, the PUCT indicated that the maximum penalty issue should be determined as part of the final resolution of the entire proceeding, after a full hearing on the
merits. EFH Corp. believes Luminant Energys conduct during the period in question was consistent with the PUCTs rules and policies, and no market power abuse was committed. EFH Corp. is vigorously contesting the NOV. EFH Corp. is unable
to predict the outcome of this matter.

In June 2008, the EPA issued a request for information to Luminant Energy under EPAs
authority under Section 114 of the Clean Air Act. The stated purpose of the request is to obtain information necessary to determine compliance with the Clean Air Act, including New Source Review Standards and air permits issued by the TCEQ for
the Big Brown, Monticello and Martin Lake generation facilities. Luminant Energy is cooperating with the EPA and is responding in good faith to the EPAs request. EFH Corp. is unable to predict the outcome of this matter.

Other Proceedings

In addition to the above,
EFH Corp. and its subsidiaries are involved in various other legal and administrative proceedings in the normal course of business, the ultimate resolution of which, in the opinion of management, should not have a material effect on its financial
position, results of operations or cash flows.

Guarantees

As discussed below, EFH Corp. and its subsidiaries have entered into contracts that contain guarantees to outside parties that could require performance or payment under certain conditions.

Disposed TXU Gas operationsIn connection with the TXU Gas transaction in October 2004, EFH Corp. agreed to indemnify Atmos
Energy Corporation (Atmos), until October 1, 2014, for up to $500 million for any liability related to assets retained by TXU Gas, including certain inactive gas plant sites not acquired by Atmos Energy Corporation, and up to $1.4 billion for
contingent liabilities associated with preclosing tax and employee related matters. The maximum aggregate amount that EFH Corp. may be required to pay is $1.9 billion. To date, EFH Corp. has not been required to make any payments to Atmos under any
of these indemnity obligations, and no such payments are currently anticipated.



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Residual value guarantees in operating leases  EFH Corp. or a subsidiary is the
lessee under various operating leases that guarantee the residual values of the leased assets. At June 30, 2008, the aggregate maximum amount of residual values guaranteed was approximately $73 million with an estimated residual recovery of
approximately $80 million. These leased assets consist primarily of mining equipment, rail cars and vehicles. The average life of the lease portfolio is approximately four years.

Indebtedness guaranteeIn 1990, EFC Holdings repurchased an electric co-ops minority ownership interest in the Comanche
Peak nuclear generation plant and assumed the co-ops indebtedness to the US government for the facilities. The indebtedness is included in long-term debt reported in the consolidated balance sheet. EFC Holdings is making principal and interest
payments to the co-op in an amount sufficient for the co-op to make payments on its indebtedness. EFC Holdings guaranteed the co-ops payments, and in the event that the co-op fails to make its payments on the indebtedness, the US government
would assume the co-ops rights under the agreement, and such payments would then be owed directly by EFC Holdings. At June 30, 2008, the balance of the indebtedness was $113 million with maturities of principal and interest extending to
December 2021. The indebtedness is secured by a lien on the purchased facilities.

See Note 7 for discussion of guarantees and security for
certain EFH Corp. indebtedness.

Letters of Credit

At June 30, 2008, TCEH had outstanding letters of credit under its credit facilities totaling $1.629 billion as follows:



| |  |  | $1.221 billion to support risk management and trading margin requirements in the normal course of business, including over-the-counter hedging transactions;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | $208 million to support (and available to fund payment of) floating rate pollution control revenue bond debt of $204 million principal amount. The letters of credit
are available to fund the payment of such debt obligations and expire in 2014;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | $127 million to support obligations under the lease agreement for an EFH Corp. office building, and
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | $73 million for miscellaneous credit support requirements.
| | - |  | ----------------------------------------------------------

Nuclear Insurance

As a result of the US Terrorism Risk Insurance Program Reauthorization Act of 2007 that was
effective January 1, 2008, under the American Nuclear Insurers liability policy, the liability arising out of terrorist acts that was previously subject to one industry aggregate limit of $300 million is no longer subject to an aggregate limit.



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|9. | SHAREHOLDERS EQUITY
|-- | --------------------

Equity Contributions

In the six months ended June 30, 2008, certain members of management and the board of directors of EFH Corp. and its
subsidiaries committed to net equity contributions aggregating approximately $6.8 million in exchange for approximately 1.36 million shares of common stock in EFH Corp.

Dividend Restrictions

The indenture governing the EFH Corp. Senior Cash-Pay and Toggle Notes
includes covenants that, among other things and subject to certain exceptions, restrict EFH Corp.s ability to pay dividends or make other distributions in respect of its capital stock.

Shareholders Equity

The following table
presents the changes to shareholders equity during the six months ended June 30, 2008.



|                                             |  |             |   |                          |   |                           |  |   |                                            |   |  |                          |      |   |  |   |        |  
|-------------------------------------------- |  | ----------- | - | ------------------------ | - | ------------------------- |  | - | ------------------------------------------ | - |  | ------------------------ | ---- | - |  | - | ------ | -
|                                             |  | CommonStock |   | AdditionalPaid-inCapital |   | RetainedEarnings(Deficit) |  |   | AccumulatedOtherComprehensiveIncome (Loss) |   |  | TotalShareholdersEquity |     
|Balance at December 31, 2007                 |  | $           |  |                          | $ | 8,279                     |  | $ | (1,360                                     | ) |  | $                        | (234 | ) |  | $ | 6,685  |  
|Net loss                                     |  |             |  |                          |   |                          |  |   | (4,600                                     | ) |  |                          |     |   |  |   | (4,600 | )
|Effects of employee stock-related activities |  |             |  |                          |   | 6                         |  |   |                                           |   |  |                          |     |   |  |   | 6      |  
|Other                                        |  |             |  |                          |   | 1                         |  |   |                                           |   |  |                          |     |   |  |   | 1      |  
|                                             |  |             |   |                          |   |                           |  |   |                                            |   |  |                          |      |   |  |   |        |  
|Balance at June 30, 2008                     |  | $           |  |                          | $ | 8,286                     |  | $ | (5,960                                     | ) |  | $                        | (234 | ) |  | $ | 2,092  |  
|                                             |  |             |   |                          |   |                           |  |   |                                            |   |  |                          |      |   |  |   |        |  



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|10. | COMMODITY AND OTHER DERIVATIVE CONTRACTUAL ASSETS AND LIABILITIES
|--- | -----------------------------------------------------------------

The following table provides detail of commodity and other derivative contractual assets and liabilities as presented in the balance sheet:



|                         |  |                            |        |   |                                       |   |      |                             |  |   |        |  
|------------------------ |  | -------------------------- | ------ | - | ------------------------------------- | - | ---- | --------------------------- |  | - | ------ | -
|                         |  | SuccessorJune 30, 2008     |       
|                         |  | Commoditycontracts         |        |   | Cash flow hedgesand other derivatives |   |      | Total  BalanceSheet amount | 
|Assets:                  |  |                            |        |   |                                       |   |      |                             |  |   |        |  
|Current assets           |  | $                          | 5,929  |   |                                       | $ | 14   |                             |  | $ | 5,943  |  
|Noncurrent assets        |  |                            | 869    |   |                                       |   | 29   |                             |  |   | 898    |  
|                         |  |                            |        |   |                                       |   |      |                             |  |   |        |  
|Total                    |  | $                          | 6,798  |   |                                       | $ | 43   |                             |  | $ | 6,841  |  
|                         |  |                            |        |   |                                       |   |      |                             |  |   |        |  
|Liabilities:             |  |                            |        |   |                                       |   |      |                             |  |   |        |  
|Current liabilities      |  | $                          | 7,175  |   |                                       | $ | 250  |                             |  | $ | 7,425  |  
|Noncurrent liabilities   |  |                            | 7,886  |   |                                       |   | 99   |                             |  |   | 7,985  |  
|                         |  |                            |        |   |                                       |   |      |                             |  |   |        |  
|Total                    |  | $                          | 15,061 |   |                                       | $ | 349  |                             |  | $ | 15,410 |  
|                         |  |                            |        |   |                                       |   |      |                             |  |   |        |  
|Net assets (liabilities) |  | $                          | (8,263 | ) |                                       | $ | (306 | )                           |  | $ | (8,569 | )
|                         |  |                            |        |   |                                       |   |      |                             |  |   |        |  
|                         | 
|                         |  | SuccessorDecember 31, 2007 |       
|                         |  | Commoditycontracts         |        |   | Cash flow hedgesand other derivatives |   |      | Total  BalanceSheet amount | 
|Assets:                  |  |                            |        |   |                                       |   |      |                             |  |   |        |  
|Current assets           |  | $                          | 1,118  |   |                                       | $ | 11   |                             |  | $ | 1,129  |  
|Noncurrent assets        |  |                            | 239    |   |                                       |   | 5    |                             |  |   | 244    |  
|                         |  |                            |        |   |                                       |   |      |                             |  |   |        |  
|Total                    |  | $                          | 1,357  |   |                                       | $ | 16   |                             |  | $ | 1,373  |  
|                         |  |                            |        |   |                                       |   |      |                             |  |   |        |  
|Liabilities:             |  |                            |        |   |                                       |   |      |                             |  |   |        |  
|Current liabilities      |  | $                          | 1,042  |   |                                       | $ | 104  |                             |  | $ | 1,146  |  
|Noncurrent liabilities   |  |                            | 2,232  |   |                                       |   | 221  |                             |  |   | 2,453  |  
|                         |  |                            |        |   |                                       |   |      |                             |  |   |        |  
|Total                    |  | $                          | 3,274  |   |                                       | $ | 325  |                             |  | $ | 3,599  |  
|                         |  |                            |        |   |                                       |   |      |                             |  |   |        |  
|Net assets (liabilities) |  | $                          | (1,917 | ) |                                       | $ | (309 | )                           |  | $ | (2,226 | )
|                         |  |                            |        |   |                                       |   |      |                             |  |   |        |  

In connection with the adoption of FIN 39-1 in the first quarter of 2008 (see Note 1), EFH Corp.
changed the presentation of its mark-to-market positions to report the assets and liabilities on a gross basis instead of on a net basis. This presentation can result in significant volatility in commodity contract assets and liabilities because EFH
Corp. enters into positions with the same counterparties that result in both assets and liabilities, and the underlying commodity prices can change significantly from period to period. The December 31, 2007 amounts shown in the table above for
commodity contract current assets and current liabilities, as well as the amounts shown for total current assets and total current liabilities, reflect a correcting adjustment to decrease such amounts by $256 million as compared to amounts reported
in the first quarter of 2008. The net liability position as shown in the table is unchanged, and the adjustment made in the current disclosure has no impact on reported earnings, shareholders equity or cash flows. Management believes the
effect of this adjustment to prior period amounts is immaterial to previously issued financial statements.

Margin deposits net assets of
$2.559 billion and $445 million under master netting arrangements at June 30, 2008 and December 31, 2007, respectively, were not netted with derivative assets and liabilities since EFH Corp. has elected to present the amounts of derivative
assets and liabilities on a gross basis in the balance sheet as provided in FIN 39-1. See discussion in Note 1 under Changes in Accounting Standards.



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Commodity Contract Assets and Liabilities

Commodity contract assets and liabilities primarily represent fair values of natural gas and electricity derivative instruments that have not been
designated as cash flow hedges or normal purchases or sales under SFAS 133. These instruments are marked-to-market in net income and reported in the income statement in net losses from commodity hedging and trading activities.

Results for the three months ended June 30, 2008 and 2007 include net day one losses of $39 million and $37 million,
respectively. Results for the six months ended June 30, 2008 and 2007 include net day one losses of $58 million and $134 million, respectively, primarily associated with commodity contracts entered into at below market prices.
Substantially all of these amounts represent losses associated with related series of transactions involving natural gas financial instruments intended to hedge exposure to future changes in electricity prices. The losses are reported in the income
statement in net losses from commodity hedging and trading activities, consistent with other mark-to-market hedging and trading gains and losses, and are included in the results of the Competitive Electric segment.

Cash Flow Hedge and Other Derivative Assets and Liabilities

Cash flow hedge and other derivative assets and liabilities primarily represent fair values of commodity contracts and interest rate swaps that have been designated as cash flow hedges. The change in fair value of
derivative assets and liabilities designated as cash flow hedges are recorded as other comprehensive income or loss to the extent the hedges are effective; the ineffective portion of the change in fair value is included in net income. See Note 7 for
details of interest rate swaps designated as cash flow hedges.

A significant portion of natural gas derivatives entered into to hedge
future changes in electricity prices had been designated and accounted for as cash flow hedges. In March 2007, these instruments were dedesignated as cash flow hedges as allowed under SFAS 133, thus becoming subject to mark-to-market accounting in
net income as the fair values change.

A summary of transactions comprising cash flow hedge and other derivative assets and liabilities
follows:



|                                    |  |              |     |                  |   |    
|----------------------------------- |  | ------------ | --- | ---------------- | - | ---
|                                    |  | Successor   
|                                    |  | June 30,2008 |     | December 31,2007
|Current and noncurrent assets:      |  |              |     |                  |   |    
|Interest rate swaps (a)             |  | $            | 21  |                  | $ | 8  
|Commodity-related cash flow hedges  |  |              | 22  |                  |   | 8  
|                                    |  |              |     |                  |   |    
|Total                               |  | $            | 43  |                  | $ | 16 
|                                    |  |              |     |                  |   |    
|Current and noncurrent liabilities: |  |              |     |                  |   |    
|Interest rate swaps (a)             |  | $            | 334 |                  | $ | 324
|Commodity-related cash flow hedges  |  |              | 15  |                  |   | 1  
|                                    |  |              |     |                  |   |    
|Total                               |  | $            | 349 |                  | $ | 325
|                                    |  |              |     |                  |   |    



|(a) | June 30, 2008 amount includes $278 million in net liabilities related to interest rate hedges on $15.05 billion principal amount of debt and $1 million in net liabilities
related to interest rate basis swaps on $2.1 billion principal amount of debt, both entered into after the Merger, and $34 million in net liabilities related to swaps existing at the time of the Merger.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Other Cash Flow Hedge Information EFH Corp. experienced cash flow hedge ineffectiveness of $2 million and $4 million in net losses
for the three and six month periods ended June 30, 2008, respectively. For the corresponding periods of 2007, the amounts were $1 million and $113 million in net gains, respectively. These amounts are pretax and are reported in the income
statement in net losses from commodity hedging and trading activities.



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The net effect of recording unrealized mark-to-market gains and losses arising from hedge ineffectiveness
(versus recording gains and losses upon settlement) includes the above amounts as well as the effect of reversing unrealized ineffectiveness gains and losses recorded in previous periods to offset realized gains and losses in the current period.
Such net unrealized effect totaled $2 million and $4 million in net losses for the three and six month periods ended June 30, 2008, respectively, and $5 million in net losses and $94 million in net gains for the three and six month periods
ended June 30, 2007, respectively.

Accumulated other comprehensive income related to cash flow hedges at June 30, 2008 totaled
$178 million in net losses (after-tax), substantially all of which relates to interest rate swaps. EFH Corp. expects that $111 million of net losses related to cash flow hedges included in accumulated other comprehensive income as of June 30,
2008 will be reclassified into net income during the next twelve months as the related hedged transactions affect net income.



|11. | PENSION AND OTHER POSTRETIREMENT EMPLOYEE BENEFITS (OPEB) COSTS
|--- | ---------------------------------------------------------------

Net pension and OPEB costs for the three and six months ended June 30, 2008 and 2007 are comprised of the following:



|                                                                    |  |                                |     |   |  |  |                                |   |     |                              |  |   |     |   |                              |  |  |   |     |  
|------------------------------------------------------------------- |  | ------------------------------ | --- | - |  |  | ------------------------------ | - | --- | ---------------------------- |  | - | --- | - | ---------------------------- |  |  | - | --- | -
|                                                                    |  | Successor                      |     |   |  |  | Predecessor                    |   |     | Successor                    |  |   |     |   | Predecessor                  | 
|                                                                    |  | Three MonthsEndedJune 30, 2008 |     |   |  |  | Three MonthsEndedJune 30, 2007 |   |     | Six MonthsEndedJune 30, 2008 |  |   |     |   | Six MonthsEndedJune 30, 2007 | 
|Components of net pension costs:                                    |  |                                |     |   |  |  |                                |   |     |                              |  |   |     |   |                              |  |  |   |     |  
|Service cost                                                        |  | $                              | 7   |   |  |  |                                | $ | 9   |                              |  | $ | 16  |   |                              |  |  | $ | 20  |  
|Interest cost                                                       |  |                                | 29  |   |  |  |                                |   | 36  |                              |  |   | 66  |   |                              |  |  |   | 71  |  
|Expected return on assets                                           |  |                                | (32 | ) |  |  |                                |   | (38 | )                            |  |   | (76 | ) |                              |  |  |   | (79 | )
|Prior service cost                                                  |  |                                |    |   |  |  |                                |   |    |                              |  |   |    |   |                              |  |  |   | 1   |  
|Net loss                                                            |  |                                |    |   |  |  |                                |   | 6   |                              |  |   |    |   |                              |  |  |   | 10  |  
|                                                                    |  |                                |     |   |  |  |                                |   |     |                              |  |   |     |   |                              |  |  |   |     |  
|Net pension cost                                                    |  |                                | 4   |   |  |  |                                |   | 13  |                              |  |   | 6   |   |                              |  |  |   | 23  |  
|                                                                    |  |                                |     |   |  |  |                                |   |     |                              |  |   |     |   |                              |  |  |   |     |  
|Components of net OPEB costs:                                       |  |                                |     |   |  |  |                                |   |     |                              |  |   |     |   |                              |  |  |   |     |  
|Service cost                                                        |  |                                | 3   |   |  |  |                                |   | 4   |                              |  |   | 5   |   |                              |  |  |   | 6   |  
|Interest cost                                                       |  |                                | 15  |   |  |  |                                |   | 14  |                              |  |   | 30  |   |                              |  |  |   | 27  |  
|Expected return on assets                                           |  |                                | (5  | ) |  |  |                                |   | (5  | )                            |  |   | (10 | ) |                              |  |  |   | (10 | )
|Net transition obligation                                           |  |                                |    |   |  |  |                                |   | 1   |                              |  |   |    |   |                              |  |  |   | 1   |  
|Prior service cost                                                  |  |                                |    |   |  |  |                                |   | (1  | )                            |  |   |    |   |                              |  |  |   | (2  | )
|Net loss                                                            |  |                                | 2   |   |  |  |                                |   | 3   |                              |  |   | 6   |   |                              |  |  |   | 13  |  
|                                                                    |  |                                |     |   |  |  |                                |   |     |                              |  |   |     |   |                              |  |  |   |     |  
|Net OPEB cost                                                       |  |                                | 15  |   |  |  |                                |   | 16  |                              |  |   | 31  |   |                              |  |  |   | 35  |  
|                                                                    |  |                                |     |   |  |  |                                |   |     |                              |  |   |     |   |                              |  |  |   |     |  
|Net pension and OPEB costs                                          |  |                                | 19  |   |  |  |                                |   | 29  |                              |  |   | 37  |   |                              |  |  |   | 58  |  
|Less amounts deferred principally as a regulatory asset or property |  |                                | (11 | ) |  |  |                                |   | (17 | )                            |  |   | (22 | ) |                              |  |  |   | (29 | )
|                                                                    |  |                                |     |   |  |  |                                |   |     |                              |  |   |     |   |                              |  |  |   |     |  
|Net amounts recognized as expense                                   |  | $                              | 8   |   |  |  |                                | $ | 12  |                              |  | $ | 15  |   |                              |  |  | $ | 29  |  
|                                                                    |  |                                |     |   |  |  |                                |   |     |                              |  |   |     |   |                              |  |  |   |     |  

The discount rate reflected in net pension and OPEB costs in 2008 is 6.55%. The expected rate of
return on plan assets reflected in the 2008 cost amounts is 8.25% for the pension plan and 7.90% for the OPEB plan.



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In 2008, EFH Corp. will not record any amortization of the estimated net loss and prior service cost for
the defined benefit pension plans as well as amortization of the estimated net loss, prior service credit and net transition obligation for the OPEB plans from accumulated other comprehensive income into net periodic benefit cost. This accounting is
the result of EFH Corp. eliminating accumulated other comprehensive income as a result of purchase accounting for the Merger, and as a result, being within the SFAS 158 guidelines under which amortization of accumulated other comprehensive income is
not required until the accumulated other comprehensive income balance exceeds 10% of the benefit obligation.

EFH Corp. made required
pension contributions of $7 million and $18 million in January and April of 2008, respectively. EFH Corp. expects to make required contributions of $113 million and $22 million to its pension plan in the third and fourth quarters of 2008,
respectively.



|12. | FAIR VALUE MEASUREMENTS
|--- | -----------------------

In September 2006, the
FASB issued SFAS 157, which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS 157 applies in situations where other accounting pronouncements either permit or require
fair value measurements, including purchase accounting. SFAS 157 does not require any new fair value measurements. However, SFAS 157 supersedes a previous accounting rule that prohibited the recognition of day one gains or losses on derivative
instruments unless the fair value of those instruments were derived from an observable market price. Additionally, SFAS 157 requires an entity to take its own credit risk (nonperformance risk) into consideration when measuring the fair value of
liabilities. EFH Corp. adopted SFAS 157 effective with the closing of the Merger. The adoption of SFAS 157 reflects the application of FSP 157-2, Effective Date of FASB Statement No. 157, which was issued by the FASB in February
2008 and delays until financial statements issued after December 15, 2008 the effective date of SFAS 157 for all nonfinancial assets and liabilities, except for those recognized or disclosed at fair value in the financial statements on a
recurring basis (at least annually).

SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer
a liability in an orderly transaction between market participants at the measurement date. With the adoption of SFAS 157, EFH Corp. uses a mid-market valuation convention (the mid-point price between bid and ask prices) as a practical
expedient to measure fair value for the majority of its assets and liabilities subject to fair value measurement under SFAS 133 and other accounting rules that require such measurement on a recurring basis. EFH Corp. primarily uses the market
approach for recurring fair value measurements and uses valuation techniques to maximize the use of observable inputs and minimize the use of unobservable inputs.

EFH Corp. categorizes its assets and liabilities recorded at fair value based upon the following fair value hierarchy established by SFAS 157:



| |  |  | Level 1 valuations use quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date. An active market is a market
in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. EFH Corp.s Level 1 assets and liabilities normally include exchange traded commodity contracts. For
example, EFH Corp. has a significant number of derivatives that are NYMEX futures and swaps transacted through clearing brokers for which the pricing is actively quoted.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Level 2 valuations use inputs other than actively quoted market prices included within Level 1 that are observable for the asset or liability, either directly or
indirectly. Level 2 inputs include: (a) quoted prices for similar assets or liabilities in active markets, (b) quoted prices for identical or similar assets or liabilities in markets that are not active, (c) inputs other than quoted
prices that are observable for the asset or liability such as interest rates and yield curves observable at commonly quoted intervals and (d) inputs that are derived principally from or corroborated by observable market data by correlation or
other means. EFH Corp.s Level 2 assets and liabilities utilize over the counter broker quotes, quoted prices for similar assets or liabilities that are corroborated by correlations or other mathematical means and other valuation inputs. For
example, EFH Corp.s Level 2 assets and liabilities include forward commodity positions at locations for which over-the-counter broker quotes are available.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 3 valuations use unobservable inputs for the asset or liability. Unobservable inputs are used to the extent observable inputs are not available, thereby
allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date. EFH Corp. uses the most meaningful information available from the market combined with its own internally developed
valuation methodologies to develop its best estimate of fair value. For example, certain derivative assets or liabilities are derived from pricing models that utilize multiple inputs to the valuations, including inputs that are not observable or
easily corroborated through other means.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

EFH Corp. utilizes several different valuation techniques to measure the fair
value of assets and liabilities, relying primarily on the market approach of using prices and other market information for identical and/or comparable assets and liabilities for those items that are measured on a recurring basis. Certain derivatives
and financial instruments are valued utilizing option pricing models that take into consideration multiple inputs including commodity prices, volatility factors, discount rates and other inputs. Additionally, when there is not a sufficient amount of
observable market data, valuation models are developed that incorporate proprietary views of market factors. Those valuation models are generally used in developing long-term forward price curves for certain commodities. EFH Corp. believes that
development of such curves is consistent with industry practice; however, the fair value measurements resulting from such curves are classified as Level 3.

With respect to amounts presented in the following fair value hierarchy table, the fair value measurement of an asset or liability (e.g. a contract) is required under SFAS 157 to fall in its entirety in one level,
based on the lowest level input that is significant to the fair value measurement. Certain assets and liabilities would be classified in Level 2 instead of Level 3 of the hierarchy except for the effects of credit reserves and non-performance risk
adjustments, respectively. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgment, considering factors specific to the asset or liability being measured.



39



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##### Table of Contents

At June 30, 2008, assets and liabilities measured at fair value on a recurring basis consisted of
the following:



|                                     |  |           |       |         |   |         |  |                      |     |       |   |    |  |   |       
|------------------------------------ |  | --------- | ----- | ------- | - | ------- |  | -------------------- | --- | ----- | - | -- |  | - | ------
|                                     |  | Successor
|                                     |  | Level 1   |       | Level 2 |   | Level 3 |  | Reclassification (a) |     | Total
|Assets:                              |  |           |       |         |   |         |  |                      |     |       |   |    |  |   |       
|Commodity-related contracts          |  | $         | 3,027 |         | $ | 3,474   |  | $                    | 282 |       | $ | 37 |  | $ | 6,820 
|Interest rate swaps                  |  |           |      |         |   | 21      |  |                      |    |       |   |   |  |   | 21    
|Nuclear decommissioning trust (b)    |  |           | 143   |         |   | 313     |  |                      |    |       |   |   |  |   | 456   
|Salary deferral plan investments (b) |  |           | 12    |         |   | 63      |  |                      |    |       |   |   |  |   | 75    
|                                     |  |           |       |         |   |         |  |                      |     |       |   |    |  |   |       
|Total assets                         |  | $         | 3,182 |         | $ | 3,871   |  | $                    | 282 |       | $ | 37 |  | $ | 7,372 
|                                     |  |           |       |         |   |         |  |                      |     |       |   |    |  |   |       
|Liabilities:                         |  |           |       |         |   |         |  |                      |     |       |   |    |  |   |       
|Commodity-related contracts          |  | $         | 3,351 |         | $ | 10,867  |  | $                    | 821 |       | $ | 37 |  | $ | 15,076
|Interest rate swaps                  |  |           |      |         |   | 334     |  |                      |    |       |   |   |  |   | 334   
|                                     |  |           |       |         |   |         |  |                      |     |       |   |    |  |   |       
|Total liabilities                    |  | $         | 3,351 |         | $ | 11,201  |  | $                    | 821 |       | $ | 37 |  | $ | 15,410
|                                     |  |           |       |         |   |         |  |                      |     |       |   |    |  |   |       



|(a) | Represents the effects of reclassification of the assets and liabilities to conform to the balance sheet presentation of current and long-term assets and liabilities.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | EFH Corp.s nuclear decommissioning trust and salary deferral plan investments are included in the Investments line on the balance sheet.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------

Commodity-related contracts consist primarily of natural gas and electricity derivative instruments entered into for hedging purposes and include
physical contracts that have not been designated normal purchases or sales under SFAS 133.

Interest rate swaps consist largely
of variable-to-fixed rate swap instruments that have been designated as cash flow hedges.

Nuclear decommissioning trust assets represent
securities held for the purpose of funding the future retirement and decommissioning of EFH Corp.s nuclear generation units. These investments include equity, debt and other fixed-income securities consistent with investment rules established
by the NRC and the PUCT.

Salary deferral plan assets represent securities held for the purpose of funding the liabilities of EFH
Corp.s Salary Deferral Program. These investments include life insurance contracts, equity, debt and other fixed-income securities.



40



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##### Table of Contents

The following table presents the changes in fair value of EFH Corp.s Level 3 assets and liabilities
(all related to commodity contracts) for the three and six months ended June 30, 2008:



|                                                                                                                 |  |                                |      |   |                              |   |      |  
|---------------------------------------------------------------------------------------------------------------- |  | ------------------------------ | ---- | - | ---------------------------- | - | ---- | -
|                                                                                                                 |  | Three MonthsEndedJune 30, 2008 |      |   | Six MonthsEndedJune 30, 2008 |  
|Balance at beginning of period (net liability)                                                                   |  | $                              | (272 | ) |                              | $ | (173 | )
|Total realized and unrealized gains (losses) (a):                                                                |  |                                |      |   |                              |   |      |  
|Included in net income (loss)                                                                                    |  |                                | (83  | ) |                              |   | (128 | )
|Included in other comprehensive income                                                                           |  |                                | 14   |   |                              |   | 15   |  
|Purchases, sales, issuances and settlements (net) (b)                                                            |  |                                | (154 | ) |                              |   | (137 | )
|Net transfers in and/or out of Level 3 (c)                                                                       |  |                                | (44  | ) |                              |   | (116 | )
|                                                                                                                 |  |                                |      |   |                              |   |      |  
|Balance at June 30, 2008 (net liability)                                                                         |  | $                              | (539 | ) |                              | $ | (539 | )
|                                                                                                                 |  |                                |      |   |                              |   |      |  
|Net change in unrealized gains (losses) included in net income relating to instruments held at June 30, 2008 (a) |  | $                              | (228 | ) |                              | $ | (276 | )



|(a) | Substantially all changes in values of commodity-related contracts are reported in the income statement in net losses from commodity hedging and trading activities.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | Settlements represent amounts included in the beginning balance for the period.
|--- | -------------------------------------------------------------------------------



|(c) | Includes transfers due to changes in the observability of significant inputs. Amounts transferred in and/or out represent June 30, 2008 values.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------



|13. | RELATED PARTY TRANSACTIONS
|--- | --------------------------

In the three and six
months ended June 30, 2008, EFH Corp. accrued $9 million and $18 million, respectively, of an annual management fee of $35 million under terms of a Management Agreement with the Sponsor Group. The fee is reported as SG&A expense in
Corporate and Other activities.

At the closing of the Merger, TCEH entered into the TCEH Senior Secured Facilities and Oncor entered into
a revolving credit facility, each with syndicates of financial institutions and other lenders. These syndicates included affiliates of GS Capital Partners, which is a member of the Sponsor Group. Affiliates of GS Capital Partners have from time to
time engaged in commercial banking and financial advisory transactions with EFH Corp. in the normal course of business.

Affiliates of
Goldman Sachs & Co. are party to certain commodity and interest rate hedging transactions with EFH Corp. in the normal course of business.

From time to time affiliates of the Sponsor Group may acquire debt or debt securities issued by EFH Corp. in open market transactions or through loan syndications.



41



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##### Table of Contents

|14. | SEGMENT INFORMATION
|--- | -------------------

EFH Corp.s operations
are aligned into two reportable business segments: Competitive Electric and Regulated Delivery. The segments are managed separately because they are strategic business units that offer different products or services and involve different risks.

The Competitive Electric segment is engaged in competitive market activities consisting of electricity generation, the development and
construction of new generation facilities, wholesale energy sales and purchases, commodity risk management and trading activities, and retail electricity sales to residential and business customers, all largely in Texas. These activities are
conducted principally by subsidiaries of TCEH. The results of this segment also include equipment salvage and resale activities related to the eight canceled coal-fueled generation units.

The Regulated Delivery segment is engaged in regulated electricity transmission and distribution operations in Texas. These activities are conducted by
Oncor, including its wholly owned bankruptcy-remote financing subsidiary, and also include certain revenues and costs associated with installation of equipment that will facilitate Oncors technology initiatives.

Corporate and Other represents the remaining nonsegment operations consisting primarily of discontinued operations, general corporate expenses and
interest on EFH Corp. and EFC Holdings debt.

The accounting policies of the business segments are the same as those described in the
summary of significant accounting policies in Note 1 in the 2007 Form 10-K. EFH Corp. evaluates performance based on income from continuing operations. EFH Corp. accounts for intersegment sales and transfers as if the sales or transfers were to
third parties, that is, at current market prices.



42



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|                                                    |  |                                |        |   |  |  |                                |   |       |                              |  |   |        |   |                              |  |  |   |       |  
|--------------------------------------------------- |  | ------------------------------ | ------ | - |  |  | ------------------------------ | - | ----- | ---------------------------- |  | - | ------ | - | ---------------------------- |  |  | - | ----- | -
|                                                    |  | Successor                      |        |   |  |  | Predecessor                    |   |       | Successor                    |  |   |        |   | Predecessor                  | 
|                                                    |  | Three MonthsEndedJune 30, 2008 |        |   |  |  | Three MonthsEndedJune 30, 2007 |   |       | Six MonthsEndedJune 30, 2008 |  |   |        |   | Six MonthsEndedJune 30, 2007 | 
|Operating revenues:                                 |  |                                |        |   |  |  |                                |   |       |                              |  |   |        |   |                              |  |  |   |       |  
|Competitive Electric                                |  | $                              | 2,567  |   |  |  |                                | $ | 2,049 |                              |  | $ | 4,550  |   |                              |  |  | $ | 4,052 |  
|Regulated Delivery                                  |  |                                | 626    |   |  |  |                                |   | 589   |                              |  |   | 1,241  |   |                              |  |  |   | 1,207 |  
|Corporate and Other                                 |  |                                | 7      |   |  |  |                                |   | 12    |                              |  |   | 17     |   |                              |  |  |   | 23    |  
|Eliminations                                        |  |                                | (249   | ) |  |  |                                |   | (245  | )                            |  |   | (503   | ) |                              |  |  |   | (522  | )
|                                                    |  |                                |        |   |  |  |                                |   |       |                              |  |   |        |   |                              |  |  |   |       |  
|Consolidated                                        |  | $                              | 2,951  |   |  |  |                                | $ | 2,405 |                              |  | $ | 5,305  |   |                              |  |  | $ | 4,760 |  
|                                                    |  |                                |        |   |  |  |                                |   |       |                              |  |   |        |   |                              |  |  |   |       |  
|Regulated revenues included in operating revenues:  |  |                                |        |   |  |  |                                |   |       |                              |  |   |        |   |                              |  |  |   |       |  
|Competitive Electric                                |  | $                              |       |   |  |  |                                | $ |      |                              |  | $ |       |   |                              |  |  | $ |      |  
|Regulated Delivery                                  |  |                                | 626    |   |  |  |                                |   | 589   |                              |  |   | 1,241  |   |                              |  |  |   | 1,207 |  
|Corporate and Other                                 |  |                                |       |   |  |  |                                |   |      |                              |  |   |       |   |                              |  |  |   |      |  
|Eliminations                                        |  |                                | (241   | ) |  |  |                                |   | (232  | )                            |  |   | (484   | ) |                              |  |  |   | (497  | )
|                                                    |  |                                |        |   |  |  |                                |   |       |                              |  |   |        |   |                              |  |  |   |       |  
|Consolidated                                        |  | $                              | 385    |   |  |  |                                | $ | 357   |                              |  | $ | 757    |   |                              |  |  | $ | 710   |  
|                                                    |  |                                |        |   |  |  |                                |   |       |                              |  |   |        |   |                              |  |  |   |       |  
|Affiliated revenues included in operating revenues: |  |                                |        |   |  |  |                                |   |       |                              |  |   |        |   |                              |  |  |   |       |  
|Competitive Electric                                |  | $                              | 2      |   |  |  |                                | $ | 2     |                              |  | $ | 4      |   |                              |  |  | $ | 3     |  
|Regulated Delivery                                  |  |                                | 241    |   |  |  |                                |   | 232   |                              |  |   | 484    |   |                              |  |  |   | 497   |  
|Corporate and Other                                 |  |                                | 6      |   |  |  |                                |   | 11    |                              |  |   | 15     |   |                              |  |  |   | 22    |  
|Eliminations                                        |  |                                | (249   | ) |  |  |                                |   | (245  | )                            |  |   | (503   | ) |                              |  |  |   | (522  | )
|                                                    |  |                                |        |   |  |  |                                |   |       |                              |  |   |        |   |                              |  |  |   |       |  
|Consolidated                                        |  | $                              |       |   |  |  |                                | $ |      |                              |  | $ |       |   |                              |  |  | $ |      |  
|                                                    |  |                                |        |   |  |  |                                |   |       |                              |  |   |        |   |                              |  |  |   |       |  
|Income (loss) from continuing operations:           |  |                                |        |   |  |  |                                |   |       |                              |  |   |        |   |                              |  |  |   |       |  
|Competitive Electric                                |  | $                              | (3,257 | ) |  |  |                                | $ | 131   |                              |  | $ | (4,474 | ) |                              |  |  | $ | (340  | )
|Regulated Delivery                                  |  |                                | 85     |   |  |  |                                |   | 54    |                              |  |   | 170    |   |                              |  |  |   | 140   |  
|Corporate and Other                                 |  |                                | (159   | ) |  |  |                                |   | (75   | )                            |  |   | (296   | ) |                              |  |  |   | (188  | )
|                                                    |  |                                |        |   |  |  |                                |   |       |                              |  |   |        |   |                              |  |  |   |       |  
|Consolidated                                        |  | $                              | (3,331 | ) |  |  |                                | $ | 110   |                              |  | $ | (4,600 | ) |                              |  |  | $ | (388  | )
|                                                    |  |                                |        |   |  |  |                                |   |       |                              |  |   |        |   |                              |  |  |   |       |  



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|15. | SUPPLEMENTARY FINANCIAL INFORMATION
|--- | -----------------------------------

Regulated Versus
Unregulated Operations



|                                                             |  |                                |        |   |  |  |                                |   |       |                              |  |   |        |   |                              |  |  |   |        |  
|------------------------------------------------------------ |  | ------------------------------ | ------ | - |  |  | ------------------------------ | - | ----- | ---------------------------- |  | - | ------ | - | ---------------------------- |  |  | - | ------ | -
|                                                             |  | Successor                      |        |   |  |  | Predecessor                    |   |       | Successor                    |  |   |        |   | Predecessor                  | 
|                                                             |  | Three MonthsEndedJune 30, 2008 |        |   |  |  | Three MonthsEndedJune 30, 2007 |   |       | Six MonthsEndedJune 30, 2008 |  |   |        |   | Six MonthsEndedJune 30, 2007 | 
|Operating revenues                                           |  |                                |        |   |  |  |                                |   |       |                              |  |   |        |   |                              |  |  |   |        |  
|Regulated                                                    |  | $                              | 626    |   |  |  |                                | $ | 589   |                              |  | $ | 1,241  |   |                              |  |  | $ | 1,207  |  
|Unregulated                                                  |  |                                | 2,574  |   |  |  |                                |   | 2,061 |                              |  |   | 4,567  |   |                              |  |  |   | 4,075  |  
|Intercompany sales eliminations  regulated                  |  |                                | (241   | ) |  |  |                                |   | (232  | )                            |  |   | (484   | ) |                              |  |  |   | (497   | )
|Intercompany sales eliminations  unregulated                |  |                                | (8     | ) |  |  |                                |   | (13   | )                            |  |   | (19    | ) |                              |  |  |   | (25    | )
|                                                             |  |                                |        |   |  |  |                                |   |       |                              |  |   |        |   |                              |  |  |   |        |  
|Total operating revenues                                     |  |                                | 2,951  |   |  |  |                                |   | 2,405 |                              |  |   | 5,305  |   |                              |  |  |   | 4,760  |  
|                                                             |  |                                |        |   |  |  |                                |   |       |                              |  |   |        |   |                              |  |  |   |        |  
|Fuel, purchased power and delivery fees  unregulated (a)    |  |                                | (1,416 | ) |  |  |                                |   | (739  | )                            |  |   | (2,237 | ) |                              |  |  |   | (1,404 | )
|Net losses from commodity hedging and trading activities     |  |                                | (4,727 | ) |  |  |                                |   | (383  | )                            |  |   | (6,293 | ) |                              |  |  |   | (1,069 | )
|Operating costs  regulated                                  |  |                                | (208   | ) |  |  |                                |   | (207  | )                            |  |   | (407   | ) |                              |  |  |   | (402   | )
|Operating costs  unregulated                                |  |                                | (182   | ) |  |  |                                |   | (161  | )                            |  |   | (341   | ) |                              |  |  |   | (312   | )
|Depreciation and amortization  regulated                    |  |                                | (121   | ) |  |  |                                |   | (114  | )                            |  |   | (242   | ) |                              |  |  |   | (234   | )
|Depreciation and amortization  unregulated                  |  |                                | (269   | ) |  |  |                                |   | (86   | )                            |  |   | (543   | ) |                              |  |  |   | (169   | )
|Selling, general and administrative expenses  regulated     |  |                                | (43    | ) |  |  |                                |   | (49   | )                            |  |   | (83    | ) |                              |  |  |   | (90    | )
|Selling, general and administrative expenses  unregulated   |  |                                | (204   | ) |  |  |                                |   | (178  | )                            |  |   | (381   | ) |                              |  |  |   | (357   | )
|Franchise and revenue-based taxes  regulated                |  |                                | (58    | ) |  |  |                                |   | (60   | )                            |  |   | (119   | ) |                              |  |  |   | (121   | )
|Franchise and revenue-based taxes  unregulated              |  |                                | (23    | ) |  |  |                                |   | (29   | )                            |  |   | (48    | ) |                              |  |  |   | (55    | )
|Other income                                                 |  |                                | 15     |   |  |  |                                |   | 16    |                              |  |   | 29     |   |                              |  |  |   | 45     |  
|Other deductions                                             |  |                                | (26    | ) |  |  |                                |   | (122  | )                            |  |   | (42    | ) |                              |  |  |   | (891   | )
|Interest income                                              |  |                                | 8      |   |  |  |                                |   | 17    |                              |  |   | 13     |   |                              |  |  |   | 35     |  
|Interest expense and other charges                           |  |                                | (831   | ) |  |  |                                |   | (221  | )                            |  |   | (1,674 | ) |                              |  |  |   | (418   | )
|                                                             |  |                                |        |   |  |  |                                |   |       |                              |  |   |        |   |                              |  |  |   |        |  
|Income (loss) from continuing operations before income taxes |  | $                              | (5,134 | ) |  |  |                                | $ | 89    |                              |  | $ | (7,063 | ) |                              |  |  | $ | (682   | )
|                                                             |  |                                |        |   |  |  |                                |   |       |                              |  |   |        |   |                              |  |  |   |        |  



|(a) | Includes unregulated cost of fuel consumed of $456 million and $245 million for the three months ended June 30, 2008 and 2007, respectively, and $782 million and $477 million
for the six months ended June 30, 2008 and 2007, respectively. The balance represents energy purchased for resale and delivery fees net of intercompany eliminations.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Stock-Based Compensation

Under the terms of the 2007 Stock Incentive Plan, options to
purchase 17 million and 25 million shares of EFH Corp. common stock were issued to certain EFH Corp. management employees, directors and consultants in the three and six months ended June 30, 2008, respectively. The options provide
the holder the right to purchase EFH Corp. common stock for $5.00 per share, which was the fair market value at grant date. Vested awards must be exercised within 10 years of the grant date. The terms of the options were fixed at grant date. Options
to purchase 2 million shares were forfeited during the three months ended June 30, 2008.

In addition, 260,000 and 860,000
restricted shares of EFH Corp. common stock were granted in the three and six months ended June 30, 2008, respectively, and 440,000 shares of EFH Corp. common stock were awarded as compensation in the three months ended June 30, 2008 to
EFH Corp. management employees and directors. Regarding restricted shares, 32,500 and 65,000 vested in the three and six months ended June 30, 2008, respectively.

Expenses recognized for options granted totaled $4.1 million and $6.6 million for the three and six month periods ended June 30, 2008, respectively. Expenses recognized for share awards (restricted and
unrestricted) totaled $3.0 million and $3.3 million for the three and six months ended June 30, 2008, respectively.



44



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Interest Expense and Related Charges



|                                                                                                        |  |                                |     |   |  |  |                                |   |     |                              |  |   |       |   |                              |  |  |   |     |  
|------------------------------------------------------------------------------------------------------- |  | ------------------------------ | --- | - |  |  | ------------------------------ | - | --- | ---------------------------- |  | - | ----- | - | ---------------------------- |  |  | - | --- | -
|                                                                                                        |  | Successor                      |     |   |  |  | Predecessor                    |   |     | Successor                    |  |   |       |   | Predecessor                  | 
|                                                                                                        |  | Three MonthsEndedJune 30, 2008 |     |   |  |  | Three MonthsEndedJune 30, 2007 |   |     | Six MonthsEndedJune 30, 2008 |  |   |       |   | Six MonthsEndedJune 30, 2007 | 
|Interest                                                                                                |  | $                              | 854 |   |  |  |                                | $ | 237 |                              |  | $ | 1,724 |   |                              |  |  | $ | 452 |  
|Amortization of fair value debt discounts resulting from purchase accounting                            |  |                                | 19  |   |  |  |                                |   |    |                              |  |   | 36    |   |                              |  |  |   |    |  
|Amortization of debt issuance costs, premiums and discounts                                             |  |                                | 31  |   |  |  |                                |   | 8   |                              |  |   | 63    |   |                              |  |  |   | 12  |  
|Capitalized interest, primarily related to generation facility and regulated utility asset construction |  |                                | (73 | ) |  |  |                                |   | (24 | )                            |  |   | (149  | ) |                              |  |  |   | (46 | )
|                                                                                                        |  |                                |     |   |  |  |                                |   |     |                              |  |   |       |   |                              |  |  |   |     |  
|Total interest expense and related charges                                                              |  | $                              | 831 |   |  |  |                                | $ | 221 |                              |  | $ | 1,674 |   |                              |  |  | $ | 418 |  
|                                                                                                        |  |                                |     |   |  |  |                                |   |     |                              |  |   |       |   |                              |  |  |   |     |  

Restricted Cash



|                                                                  |  |                  |     |                      |   |               |  |                  |    |  |   |      
|----------------------------------------------------------------- |  | ---------------- | --- | -------------------- | - | ------------- |  | ---------------- | -- |  | - | -----
|                                                                  |  | Successor       
|                                                                  |  | At June 30, 2008 |     | At December 31, 2007
|                                                                  |  | CurrentAssets    |     | NoncurrentAssets     |   | CurrentAssets |  | NoncurrentAssets
|Amounts related to TCEHs Letter of Credit Facility (See Note 7)  |  | $                |    |                      | $ | 1,250         |  | $                |   |  | $ | 1,250
|Amounts related to margin deposits held                           |  |                  | 179 |                      |   |              |  |                  |   |  |   |     
|Pollution control revenue bond funds held by trustee (See Note 7) |  |                  |    |                      |   |              |  |                  |   |  |   | 29   
|Amounts related to securitization (transition) bonds              |  |                  | 48  |                      |   | 17            |  |                  | 56 |  |   | 17   
|                                                                  |  |                  |     |                      |   |               |  |                  |    |  |   |      
|Total restricted cash                                             |  | $                | 227 |                      | $ | 1,267         |  | $                | 56 |  | $ | 1,296
|                                                                  |  |                  |     |                      |   |               |  |                  |    |  |   |      

Inventories by Major Category



|                       |  |              |     |                  |   |    
|---------------------- |  | ------------ | --- | ---------------- | - | ---
|                       |  | Successor   
|                       |  | June 30,2008 |     | December 31,2007
|Materials and supplies |  | $            | 194 |                  | $ | 174
|Fuel stock             |  |              | 145 |                  |   | 138
|Natural gas in storage |  |              | 84  |                  |   | 93 
|                       |  |              |     |                  |   |    
|Total inventories      |  | $            | 423 |                  | $ | 405
|                       |  |              |     |                  |   |    



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Investments



|                                                                                                    |  |              |     |                  |   |    
|--------------------------------------------------------------------------------------------------- |  | ------------ | --- | ---------------- | - | ---
|                                                                                                    |  | Successor   
|                                                                                                    |  | June 30,2008 |     | December 31,2007
|Nuclear decommissioning trust                                                                       |  | $            | 456 |                  | $ | 484
|Assets related to employee benefit plans, including employee savings programs, net of distributions |  |              | 223 |                  |   | 306
|Land                                                                                                |  |              | 44  |                  |   | 44 
|Note receivable from Capgemini                                                                      |  |              | 25  |                  |   | 25 
|Investment in unconsolidated affiliates                                                             |  |              | 2   |                  |   | 2  
|Wind investment project                                                                             |  |              | 3   |                  |   | 3  
|Miscellaneous other                                                                                 |  |              | 4   |                  |   | 4  
|                                                                                                    |  |              |     |                  |   |    
|Total investments                                                                                   |  | $            | 757 |                  | $ | 868
|                                                                                                    |  |              |     |                  |   |    

Property, Plant and Equipment

As of June 30, 2008 and December 31, 2007, property, plant and equipment of $29.4 billion and $28.7 billion, respectively, is stated net of
accumulated depreciation and amortization of $4.8 billion and $4.1 billion, respectively. Property, plant and equipment was fair-valued in connection with purchase accounting for the Merger. As a result of cost-based regulatory rate-setting
processes, the book value of the majority of Oncors assets and liabilities effectively represent fair value, and no adjustments to those regulated assets or liabilities were recorded.

Asset Retirement Obligations

Asset retirement
obligations primarily relate to nuclear generation plant decommissioning, land reclamation related to lignite mining, removal of lignite/coal-fueled plant ash treatment facilities and generation plant asbestos removal and disposal costs. There is no
earnings impact with respect to the recognition of the asset retirement costs for nuclear decommissioning, as all costs are recoverable through the regulatory process as part of Oncors rates.

The following table summarizes the changes to the asset retirement liability, reported in other noncurrent liabilities and deferred credits in the
balance sheet, during the six months ended June 30, 2008:



|                                                |  |           |     |  
|----------------------------------------------- |  | --------- | --- | -
|                                                |  | Successor |    
|Asset retirement liability at January 1, 2008   |  | $         | 773 |  
|Additions:                                      |  |           |     |  
|Accretion and incremental reclamation costs (a) |  |           | 26  |  
|Reductions:                                     |  |           |     |  
|Mining reclamation payments                     |  |           | (10 | )
|                                                |  |           |     |  
|Asset retirement liability at June 30, 2008     |  | $         | 789 |  
|                                                |  |           |     |  



|(a) | Includes $2 million related to a new mine under development.
|--- | ------------------------------------------------------------



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Regulatory Assets and Liabilities



|                                                                     |  |              |       |                  |   |      
|-------------------------------------------------------------------- |  | ------------ | ----- | ---------------- | - | -----
|                                                                     |  | Successor   
|                                                                     |  | June 30,2008 |       | December 31,2007
|Regulatory assets                                                    |  |              |       |                  |   |      
|Generation-related regulatory assets securitized by transition bonds |  | $            | 919   |                  | $ | 967  
|Employee retirement costs                                            |  |              | 266   |                  |   | 265  
|Self insurance reserve (primarily storm recovery costs)              |  |              | 166   |                  |   | 149  
|Securities reacquisition costs                                       |  |              | 101   |                  |   | 105  
|Recoverable deferred income taxes  net                              |  |              | 81    |                  |   | 84   
|Nuclear decommissioning cost under-recovery                          |  |              | 34    |                  |   |     
|Employee severance costs                                             |  |              | 20    |                  |   | 20   
|Other                                                                |  |              | 6     |                  |   | 3    
|                                                                     |  |              |       |                  |   |      
|Total regulatory assets                                              |  |              | 1,593 |                  |   | 1,593
|                                                                     |  |              |       |                  |   |      
|Regulatory liabilities                                               |  |              |       |                  |   |      
|Credit due REPs under PUCT stipulation                               |  |              | 72    |                  |   | 72   
|Committed spending for demand side management initiatives            |  |              | 99    |                  |   | 100  
|Investment tax credit and protected excess deferred taxes            |  |              | 51    |                  |   | 55   
|Over-collection of securitization (transition) bond revenues         |  |              | 31    |                  |   | 34   
|Nuclear decommissioning cost over-recovery                           |  |              |      |                  |   | 13   
|Other regulatory liabilities                                         |  |              | 16    |                  |   | 14   
|                                                                     |  |              |       |                  |   |      
|Total regulatory liabilities                                         |  |              | 269   |                  |   | 288  
|                                                                     |  |              |       |                  |   |      
|Net regulatory assets                                                |  | $            | 1,324 |                  | $ | 1,305
|                                                                     |  |              |       |                  |   |      

Regulatory assets that have been reviewed and approved by the PUCT and are not earning a return
totaled $949 million and $997 million at June 30, 2008 and December 31, 2007, respectively, including the generation-related regulatory assets securitized by transition bonds that have a remaining recovery period of approximately eight
years. As part of purchase accounting, the carrying value of the generation-related regulatory assets was reduced by $213 million, and this amount is being accreted to other income over the approximate nine-year recovery period remaining as of the
date of the Merger.

Other regulatory assets totaling $502 million have not been reviewed by the PUCT but are deemed by management to be
probable of recovery.



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Other Noncurrent Liabilities and Deferred Credits

The balance of other noncurrent liabilities and deferred credits consists of the following:



|                                                        |  |              |       |                  |   |      
|------------------------------------------------------- |  | ------------ | ----- | ---------------- | - | -----
|                                                        |  | Successor   
|                                                        |  | June 30,2008 |       | December 31,2007
|Unfavorable purchase and sales contracts                |  | $            | 741   |                  | $ | 751  
|Uncertain tax positions (including accrued interest)    |  |              | 2,041 |                  |   | 1,939
|Asset retirement obligations                            |  |              | 789   |                  |   | 773  
|Retirement plan and other employee benefits             |  |              | 1,003 |                  |   | 1,076
|Other                                                   |  |              | 137   |                  |   | 111  
|                                                        |  |              |       |                  |   |      
|Total other noncurrent liabilities and deferred credits |  | $            | 4,711 |                  | $ | 4,650
|                                                        |  |              |       |                  |   |      

Unfavorable Purchase and Sales Contracts  Unfavorable purchase and sales contracts
primarily represent the extent to which contracts on a net basis were unfavorable to market prices at the Merger date. These are contracts for which: 1) TCEH has made the normal purchase or sale election allowed or 2) the contract did
not meet the definition of a derivative under SFAS 133. Under purchase accounting, TCEH recorded the value as of October 10, 2007 as a deferred credit. Amortization of the deferred credit related to unfavorable contracts is primarily on a
straight-line basis, which approximates the economic realization, and is recorded as revenues or a reduction of purchased power costs as appropriate. The amortization amount totaled $6 million and $13 million in the three and six months ended
June 30, 2008, respectively. Favorable purchase and sales contracts are recorded as intangible assets (see Note 3).

The estimated
amortization of unfavorable purchase and sales contracts for each of the five succeeding fiscal years from December 31, 2007 is as follows:



|     |  |                 |   
|---- |  | --------------- | --
|Year |  | SuccessorAmount
|2008 |  | $               | 30
|2009 |  |                 | 28
|2010 |  |                 | 27
|2011 |  |                 | 27
|2012 |  |                 | 27

Uncertain Tax Positions  EFH Corp. filed a claim in 2006 for refund of income taxes
and related interest paid in 2005 associated with IRS audits of 1993 and 1994 tax returns of a discontinued operation. Upon adoption of FIN 48 in 2007, the expected refund was accounted for as a reduction of noncurrent liabilities related to
uncertain tax positions. EFH Corp. believes it is reasonably possible this claim could be settled, including approval by the Joint Committee on Taxation, within the next 12 months. The recording of the receipt of the refund, which is expected to
total approximately $100 million, is not expected to have a material effect on EFH Corp.s net income. The carrying amount related to the claim, which is classified as a current income tax receivable as of June 30, 2008, includes $43
million of tax and $51 million of interest.

Supplemental Cash Flow Information



|                                            |  |                              |       |   |  |  |                              |   |     |  
|------------------------------------------- |  | ---------------------------- | ----- | - |  |  | ---------------------------- | - | --- | -
|                                            |  | Successor                    |       |   |  |  | Predecessor                  |  
|                                            |  | Six MonthsEndedJune 30, 2008 |       |   |  |  | Six MonthsEndedJune 30, 2007 |  
|Cash payments related to:                   |  |                              |       |   |  |  |                              |   |     |  
|Interest paid                               |  | $                            | 1,724 |   |  |  |                              | $ | 432 |  
|Capitalized interest                        |  |                              | (149  | ) |  |  |                              |   | (46 | )
|                                            |  |                              |       |   |  |  |                              |   |     |  
|Interest paid (net of capitalized interest) |  |                              | 1,575 |   |  |  |                              |   | 386 |  
|Income taxes                                |  |                              | 33    |   |  |  |                              |   | 214 |  
|Noncash investing and financing activities: |  |                              |       |   |  |  |                              |   |     |  
|Noncash construction expenditures (a)       |  |                              | 138   |   |  |  |                              |   | 213 |  
|Capital leases                              |  |                              | 9     |   |  |  |                              |   |    |  
|                                            |  |                              |       |   |  |  |                              |   |     |  



|(a) | Represents end-of-period accruals.
|--- | ----------------------------------



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|16. | SUBSEQUENT EVENTS
|--- | -----------------

Expected Impairment of Certain Intangible
Assets

In March 2005, the EPA issued regulations called the Clean Air Interstate Rule (CAIR) for 28 states, including Texas, where
EFH Corp.s generation facilities are located. CAIR required reductions of sulfur dioxide and nitrogen oxide emissions from power generation facilities in such states. The sulfur dioxide reductions were beyond the reductions required under the
Clean Air Acts existing acid rain cap-and-trade program (the Acid Rain Program). CAIR also established a new regional cap-and-trade program for nitrogen oxide emissions reductions.

In July 2008, the United States Court of Appeals for the D.C. Circuit (the Court) invalidated CAIR. The Court did not overturn the existing cap-and-trade
program for sulfur dioxide reductions under the Acid Rain Program.

Based on the Courts ruling as it stands, EFH Corp. expects to
record a non-cash impairment charge to earnings in the third quarter of 2008. EFH Corp. expects to impair nitrogen oxide allowances in the amount of up to approximately $400 million (before deferred income tax benefit). As a result of the
Courts decision, nitrogen oxide allowances are no longer expected to be needed and, thus, there is not likely to be an actively traded market for such allowances. Consequently, the nitrogen oxide allowances held by EFH Corp. are likely to have
very little value. In addition, EFH Corp. expects to impair sulfur dioxide allowances in the amount of up to approximately $200 million (before deferred income tax benefit). While the Court did not invalidate the Acid Rain Program, EFH Corp. now
expects to have more sulfur dioxide allowances than it will need to comply with the Acid Rain Program. While there continues to be a market for sulfur dioxide allowances, the Courts decision has resulted in a material decrease in the market
price of sulfur dioxide allowances since the more stringent rules proposed by CAIR are now not expected to take effect. Nitrogen oxide and sulfur dioxide emission allowances held by EFH Corp., substantially all of which were granted to EFH Corp. by
the EPA, were recorded as intangible assets at fair value in connection with purchase accounting for EFH Corp.s merger transaction in October 2007.

At this time EFH Corp. cannot predict the outcome of the Courts decision, including what action the EPA will take in response to the Courts decision or the timing of such action.

Oncor Minority Interest Sale

On
August 12, 2008, Oncor entered into a Contribution and Subscription Agreement (Contribution Agreement), with Texas Transmission Investment LLC (Buyer), an entity indirectly owned by a private investment group led by the OMERS Administration
Corporation, acting through its infrastructure investment entity Borealis Infrastructure Management Inc., and the Government of Singapore Investment Corporation Pte Ltd., acting through its private equity and infrastructure subsidiary GIC Special
Investments Pte Ltd., pursuant to which Oncor agreed to issue and sell between 19.75% and 19.97% of its equity interests to the Buyer (Issuance).

The consideration for the equity interests to be issued and sold to the Buyer in the Issuance will be approximately $1.254 billion (assuming the purchase by the Buyer of a 19.75% equity interest in Oncor). At the closing of the Issuance,
Oncor also expects to offer and sell up to 0.22% of its outstanding equity interests to certain members of Oncors management team (Management Equity Offering). Accordingly, immediately after the closing of the Issuance and the Management
Equity Offering, EFH Corp. will indirectly own 80.03% of Oncor, Oncor management will own approximately 0.22% of Oncor and the Buyer will own approximately 19.75% of Oncor. The Buyer will purchase any portion of the 0.22% of Oncors outstanding
equity interests not purchased in the Management Equity Offering, with a pro rata increase in the aggregate purchase price to be paid by the Buyer.



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The obligation of the Buyer to consummate the Issuance is not subject to any financing covenants or
conditions. The proceeds received by Oncor from the Buyer upon completion of the Issuance and the Management Equity Offering are expected to be distributed to EFH Corp. Under the terms of EFH Corp.s credit facilities, upon such distribution,
EFH Corp. must repay all outstanding intercompany loans from TCEH. As of June 30, 2008, $468 million of such intercompany loans were outstanding. Regarding any excess proceeds, EFH Corp. may retain the funds for general corporate purposes, use
the funds for repayment of debt, use the funds for certain investments, or contribute the funds to TCEH to be used for the same purposes.

Each of the parties obligations to complete the Issuance are subject to various conditions, including, among others the following: (i) the determination by the Committee on Foreign Investment in the United States (CFIUS) that the
transactions contemplated by the Contribution Agreement are not subject to Section 721 of the Defense Production Act of 1950, as amended, or the determination by CFIUS that there are no unresolved national security concerns with respect to such
transactions and action under Section 721 is therefore concluded, or receipt of notice that the President of the United States will not act to prohibit, suspend or otherwise prevent such transactions, (ii) the receipt by the Buyer of an
irrevocable and legally binding equity commitment from an additional third-party investor to acquire between 1% and 5% (up to approximately $63 million) of the capital stock and shareholder debt of Buyers direct parent and (iii) the
confirmation that, as of completion of the Issuance, certain of the Buyers indirect investors do not own certain direct or indirect equity interests in EFH Corp. EFH Corp. currently expects that the Issuance will close in the fourth quarter of
2008; however, there can be no assurance that the Issuance will be completed.

The Contribution Agreement may be terminated: (i) by
mutual consent of the parties if the Issuance has not occurred by December 31, 2008 or (ii) by either Oncor or the Buyer, as the case may be, upon certain material breaches of the terms of the Contribution Agreement by the other party.

In connection with the proposed issuance to Buyer, Oncor, Buyer, EFH Corp. and certain other subsidiaries of EFH Corp. have agreed to
enter into several other agreements at the closing, each in the respective form attached as an exhibit to the Contribution Agreement. These agreements will, among other things, establish the parties respective governance and other rights in
respect of their direct and indirect ownership interest in Oncor.

In accordance with applicable securities laws, the equity interests in
Oncor issued to the Buyer in the Issuance will be restricted securities and will be issued in a private transaction exempt from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(2) thereof and
Regulation D thereunder.



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Energy Future Holdings Corp.:

We have reviewed the accompanying condensed consolidated balance sheet of Energy Future Holdings Corp. and subsidiaries (EFH Corp.) as of June 30, 2008, and the related condensed statements of consolidated income (loss) and
comprehensive income (loss) for the three-month and six-month periods ended June 30, 2008 and 2007, and of cash flows for the six-month periods ended June 30, 2008 and 2007. These interim financial statements are the responsibility of
EFH Corp.s management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United
States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit
conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), 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 reviews, we are not aware of any material modifications that should be made to such condensed consolidated interim
financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1 to
the condensed consolidated financial statements, EFH Corp. reclassified the results of its commodity hedging and trading activities.

We have previously
audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Energy Future Holdings Corp. and subsidiaries as of December 31, 2007, prior to retrospective
adjustment for the adoption of FASB Staff Position No. FIN 39-1, Amendment of FASB Interpretation No. 39 (FIN 39-1) as described in Note 1 to the accompanying condensed financial statements and the related statements of
consolidated income (loss), comprehensive income (loss), cash flows, and shareholders equity for the period from October 11, 2007 through December 31, 2007 (successor) and the period from January 1, 2007 through October 10,
2007 (predecessor) (not presented herein); and in our report dated March 31, 2008 (which report includes an explanatory paragraph related to EFH Corp. completing its merger with Texas Energy Future Merger Sub Corp and becoming a subsidiary of
Texas Energy Future Holdings Limited Partnership on October 10, 2007), we expressed an unqualified opinion on those consolidated financial statements. We also audited the adjustments described in Note 1 that were applied to retrospectively
adjust the December 31, 2007 consolidated balance sheet of Energy Future Holdings Corp. and subsidiaries (not presented herein). In our opinion, such adjustments are appropriate and have been properly applied to the previously issued
consolidated balance sheet in deriving the accompanying retrospectively adjusted condensed consolidated balance sheet as of December 31, 2007.



|                             
|-----------------------------
|/s/ Deloitte & Touche LLP    
|                             
|Dallas, Texas August 14, 2008



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|Item 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

BUSINESS

EFH Corp., a Texas corporation, is a Dallas-based holding company conducting its operations
principally through its TCEH and Oncor subsidiaries. TCEH is a holding company for subsidiaries engaged in competitive electricity market activities largely in Texas, including Luminant, which is engaged in electricity generation, development and
construction of new generation facilities, wholesale energy sales and purchases, and commodity risk management and trading activities, and TXU Energy, which is engaged in retail electricity sales. Oncor is engaged in regulated electricity
transmission and distribution operations in Texas. As described in the 2007 Form 10-K, various ring-fencing measures have been taken to further separate Oncor from the other EFH Corp. businesses. See Note 1 to Financial Statements for
details of ring-fencing.

Operating Segments

EFH Corp. has aligned and reports its business activities as two operating segments: the Competitive Electric segment and the Regulated Delivery segment.

The Competitive Electric segment includes the activities of TCEH, as described above, as well as equipment salvage and resale activities related to eight
canceled coal-fueled generation units.

The Regulated Delivery segment includes the activities of Oncor, as described above, its
wholly-owned bankruptcy-remote financing subsidiary and certain 2007 revenues and costs associated with installation of equipment that will facilitate Oncors technology initiatives designed to improve system reliability.

See Note 14 to Financial Statements for further information regarding reportable business segments.

Significant Activities and Events

Long-Term Hedging Program  EFH Corp. has a long-term hedging program designed to reduce exposure to changes in future electricity prices due to changes in the price of natural gas. Under the program, subsidiaries of EFH
Corp. have entered into market transactions involving natural gas-related financial instruments. As of July 31, 2008, these subsidiaries have effectively sold forward approximately 2.4 billion MMBtu of natural gas (equivalent to the natural gas
exposure of approximately 320,000 GWh at an assumed 7.5 MMBtu/MWh market heat rate) over the period from 2008 to 2014 at average annual sales prices ranging from $7.25 per MMBtu to $8.25 per MMBtu. EFH Corp. currently expects to hedge approximately
80% of the equivalent natural gas price exposure of its expected baseload generation output on a rolling five-year basis. For the period from 2008 to 2014, and taking into consideration the estimated portfolio impacts of TXU Energys retail
electricity business, the hedging transactions described in the previous sentence result in EFH Corp. having effectively hedged approximately 83% of its expected baseload generation natural gas price exposure for such period (on an average basis for
such period). The hedges were entered into with the continuing expectation that wholesale electricity prices in ERCOT will be highly correlated with natural gas prices. If market heat rates decline in the future, which would indicate a lessening of
such correlation, EFH Corp. expects that the cash flows targeted under the long-term hedging program may not be achieved.

In the second
quarter of 2008, EFH Corp. entered into related put and call transactions (referred to as collars), primarily for outer years of the program, that effectively hedge natural gas prices within a range. These transactions represented approximately 5%
of the positions in the program at July 31, 2008, with the approximate weighted average strike prices under the collars being a floor of $7.80 per MMBtu and a ceiling of $11.75 per MMBtu. EFH Corp. expects to employ both collars and, as has
been the case, swap transactions for future hedging activity under its long-term hedging program. Under the terms of the collars, if forward natural gas prices are lower than the floor price, unrealized mark-to-market gains related to the hedges
would be recognized in net income, and if forward prices are higher than the ceiling price, unrealized mark-to-market losses related to the hedges would be recognized in net income.



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Prior to March 2007, a significant portion of the instruments under the long-term hedging program were
designated and accounted for as cash flow hedges. In March 2007, these instruments were dedesignated as allowed under SFAS 133. Subsequent changes in the fair value of these instruments are being recorded as unrealized gains and losses in net
income, which has and could continue to result in significantly increased volatility in reported net income. Based on the size of the long-term hedging program as of June 30, 2008, a $1.00/MMBtu change in natural gas prices across the period
from 2008 through 2014 would result in the recognition by EFH Corp. of up to approximately $2.4 billion in pretax unrealized mark-to-market gains or losses.

Reported unrealized mark-to-market losses associated with the long-term hedging program were significant in the three and six months ended June 30, 2008 ($4.7 billion and $6.1 billion, respectively) due to
increasing forward natural gas prices. Given the volatility of natural gas prices, it is not possible to predict future reported unrealized mark-to-market gains or losses and the actual gains or losses that will ultimately be realized upon
settlement of the hedge positions in future years. If natural gas prices at settlement are lower than the prices of the hedge positions, the hedges are expected to mitigate the otherwise negative effect on earnings of lower wholesale electricity
prices. However, if natural gas prices at settlement are higher than the prices of the hedge positions, the hedges are expected to dampen the otherwise positive effect on earnings of higher wholesale electricity prices and will in this context be
viewed as having resulted in an opportunity cost. The cumulative unrealized mark-to-market net losses related to positions in the long-term hedging program totaled $1.8 billion at December 31, 2007, $7.9 billion at June 30, 2008 and $3.6
billion at July 31, 2008. These values can change materially as market conditions change.

See Note 10 to Financial Statements for
discussion of certain long-dated hedging transactions involving natural gas-related financial instruments that resulted in day one losses totaling $39 million and $63 million in the three months ended June 30, 2008 and 2007,
respectively, and $58 million and $160 million in the six months ended June 30, 2008 and 2007, respectively. The day one losses essentially represent the cost to transact these positions given their size and long dating.

As of June 30, 2008, more than 95% of the long-term hedging transactions were secured by a first-lien interest in TCEHs assets (including
the transactions supported by the TCEH Commodity Collateral Posting Facility - see discussion below under Liquidity And Capital Resources) thereby reducing the cash and letter of credit collateral requirements for the hedging program.

Interest Rate Hedges TCEH has entered into a series of interest rate swaps that effectively fix the interest rates at
between 7.3% and 8.3% on $15.05 billion principal amount of its senior secured debt maturing from 2009 to 2014. Taking into consideration these swap transactions, approximately 15% of EFH Corp.s total long-term debt portfolio at June 30,
2008 is exposed to variable interest rate risk. The cumulative unrealized mark-to-market net losses related to these interest rate swaps (reported in other comprehensive income) totaled $280 million at December 31, 2007 and $278 million at
June 30, 2008 due to changes in market interest rates. These fair values can change materially as market conditions change. See Note 7 to Financial Statements for additional discussion of these swaps.

Sale of Oncor Minority Interest  On August 12, 2008, Oncor entered into an agreement to sell an approximate 20% minority stake
to an investor group to further enhance Oncors separation from Texas Holdings, EFH Corp. and EFH Corp.s other subsidiaries. The investor group is led by certain firms from Canada and Singapore and is not affiliated with any member of the
Sponsor Group, Texas Holdings or EFH Corp. Under the agreement, the investor group will pay approximately $1.254 billion for an approximate 19.75% minority interest in Oncor.

The transaction will be reviewed by the Committee on Foreign Investment in the United States, and will only close once that process is complete. EFH
Corp. and Oncor have also informed the PUCT, FERC, and state and federal lawmakers of the transaction. See Note 16 to Financial Statements for additional information.



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Environmental Regulatory Matters See discussion in Note 16 to Financial Statements
regarding the invalidation of the EPAs Clean Air Interstate Rule and the related anticipated impairment of intangible assets representing nitrogen oxide and sulfur dioxide emission allowances in the third quarter of 2008.

Oncor Technology Initiatives Oncor continues to invest in technology initiatives that include development of a modernized grid
through the replacement of existing meters with advanced digital metering equipment and development of advanced digital communication, data management, real-time monitoring and outage detection capabilities. This modernized grid is expected to
produce electricity service reliability improvements and provide the potential for additional products and services from REPs that will enable businesses and consumers to better manage their electricity usage and costs.

Under an agreement between Oncor and CURRENT Communications of Texas, LP (Current), in May 2008 Oncor acquired Currents existing broadband over
powerline (BPL) based Smart Grid network assets in Oncors service territory for $90 million in cash. These network assets include BPL equipment and technology such as fiber optics, embedded sensors and software analytics that are
intended to enable Oncor to better monitor its electricity distribution network over up to one-sixth of its service territory. The network assets also included certain finished goods inventory and additional components. In connection with the
transaction, Oncor also agreed to purchase software licenses and maintenance and operation services from an affiliate of Current for a three-year period for approximately $35 million, including $25 million paid at the closing of the transaction. In
addition, Oncor may, at its option, purchase additional equipment and utilize additional services from Current that would allow Oncor to expand the BPL network to up to one-half of its service territory.

Oncor Refund to Customers  Oncor expects to provide a one-time $72 million refund to its REP customers in September 2008. The refund
was a commitment made by Oncor in connection with the PUCTs review of the Merger and was recorded as a regulatory liability in the fourth quarter 2007 as part of purchase accounting. The refund will be in the form of a credit on distribution
fee billings.

While the refund will be provided to REPs, the intent is that it will be passed through to end-use retail consumers, and
only those REPs that agree to do so will receive their portion of the credit. Funds allocated to those REPs that do not agree to pass on the refunds will be redistributed to the other customers served by REPs agreeing to pass on the refunds to
ensure that the entire $72 million is refunded. To qualify, a retail customer must have been an electricity customer in the Oncor territory during December 2007 and still be served at the same location by a REP that agrees to pass on the refund.
Commercial and industrial customers will also receive a portion of the $72 million refund, although it will be based on their individual usage during calendar year 2007.

Oncor Matters with the PUCT See discussion below under Regulation and Rates.

Texas Generation Facilities Development Luminant is developing three lignite-fueled generation units (2 units at Oak Grove and 1 unit at Sandow) in the state of Texas with a total estimated capacity of approximately
2,200 MW. Agreements have been executed with EPC contractors to engineer and construct the units; design and procurement activities for the three units are essentially complete, and construction is well underway. Air permits for construction of all
three units have been obtained. Aggregate cash capital expenditures for these three units are expected to total approximately $3.25 billion including all construction, site preparation and mining development costs, of which approximately $2.3
billion was incurred as of June 30, 2008. Total recorded costs, including purchase accounting fair value adjustments and capitalized interest, are expected to total approximately $5.0 billion upon completion of the units. The expected
commercial operation dates of the units remain as follows: Sandow in 2009 and Oak Groves two units in 2009 and 2010. See discussion in Note 8 to Financial Statements under Litigation Related to Generation Development regarding
pending litigation related to the new units.



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The development program includes up to $500 million for investments in state-of-the-art emissions
controls for the three new units. The development program also includes an environmental retrofit program under which Luminant will install additional environmental control systems at its existing generation facilities. Estimated capital
expenditures associated with these additional environmental control systems total approximately $1.0 billion to $1.3 billion. Luminant has not yet completed all detailed cost and engineering studies for the additional environmental systems, and the
cost estimates could materially change as Luminant determines the details of and further evaluates the engineering and construction costs related to these investments.

PRESENTATION AND ANALYSIS OF RESULTS

The accompanying condensed statements of consolidated income
(loss) and cash flows are presented for four periods: three and six months ended June 30, 2008 (Successor) and three and six months ended June 30, 2007 (Predecessor), which relate to periods after and before the Merger, respectively. While
the results of operations of the Predecessor and Successor are not comparable due to the change in basis resulting from the application of purchase accounting for the Merger, the effects of purchase accounting on the results of the Successor are
discussed in the comparison of results for the 2008 and 2007 periods.

See Note 1 to Financial Statements under Basis of
Presentation for discussion of a change in classification of results from commodity hedging and trading activities.

All dollar
amounts in Managements Discussion and Analysis of Financial Condition and Results of Operations (including the tables) are stated in millions of US dollars unless otherwise indicated.

RESULTS OF OPERATIONS

EFH Corp. Consolidated Financial Results
 Three Months Ended June 30, 2008 Compared to Three Months Ended June 30, 2007

Reference is made to comparisons of
results by business segment following the discussion of consolidated results. The business segment comparisons provide additional detail and quantification of items affecting financial results.

EFH Corp.s operating revenues increased $546 million, or 23%, to $2.951 billion in 2008 as shown in the table below:



|                                   |  |                                |       |   |  |  |                                |   |       |  
|---------------------------------- |  | ------------------------------ | ----- | - |  |  | ------------------------------ | - | ----- | -
|                                   |  | Successor                      |       |   |  |  | Predecessor                    |  
|                                   |  | Three MonthsEndedJune 30,
2008 |       |   |  |  | Three MonthsEndedJune 30,
2007 |  
|Competitive Electric segment:      |  |                                |       |   |  |  |                                |   |       |  
|Total retail electricity revenues  |  | $                              | 1,590 |   |  |  |                                | $ | 1,440 |  
|Wholesale electricity revenues     |  |                                | 1,037 |   |  |  |                                |   | 535   |  
|Wholesale balancing activities     |  |                                | (148  | ) |  |  |                                |   |      |  
|Amortization of intangibles (a)    |  |                                | (11   | ) |  |  |                                |   |      |  
|Other operating revenues           |  |                                | 99    |   |  |  |                                |   | 74    |  
|                                   |  |                                |       |   |  |  |                                |   |       |  
|Total Competitive Electric segment |  |                                | 2,567 |   |  |  |                                |   | 2,049 |  
|Regulated Delivery segment         |  |                                | 626   |   |  |  |                                |   | 589   |  
|Net intercompany eliminations      |  |                                | (242  | ) |  |  |                                |   | (233  | )
|                                   |  |                                |       |   |  |  |                                |   |       |  
|Total consolidated revenues        |  | $                              | 2,951 |   |  |  |                                | $ | 2,405 |  
|                                   |  |                                |       |   |  |  |                                |   |       |  



|(a) | Represents amortization of the intangible net asset value of retail and wholesale power sales agreements resulting from purchase accounting.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Operating revenues in the Competitive Electric segment increased $518 million, or 25%, to $2.567 billion. The increase reflects $502 million in higher wholesale
electricity revenues, due to higher prices (driven by higher natural gas prices) and volumes, and $150 million in higher retail electricity revenues, driven by higher volumes.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Operating revenues in the Regulated Delivery segment increased $37 million, or 6%, to $626 million driven by higher average consumption, primarily due to warmer
than normal weather in 2008 and cooler than normal weather in 2007, and higher distribution and transmission tariffs.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Net intercompany sales eliminations increased $9 million, reflecting an increase in sales by Oncor to REP subsidiaries of TCEH.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------

Fuel, purchased power costs and delivery fees increased $677 million, or 92%, to $1.416 billion. The increase was driven by purchased power costs,
reflecting increased volumes and the effect of higher natural gas prices on wholesale power prices. Higher costs also reflect increased utilization of natural gas-fueled generation facilities. The increase also reflects $77 million of net expense
recorded in the 2008 period representing amortization of the intangible net asset values of environmental credits, coal purchase contracts and power purchase agreements and the stepped-up value of nuclear fuel resulting from purchase accounting. See
additional discussion below in the analysis of Competitive Electric segment results of operations.

The $4.344 billion increase in net
losses from commodity hedging and trading activities reflects unrealized mark-to-market net losses totaling $4.799 billion in 2008, driven by the effect of increasing forward market prices of natural gas on positions in the long-term hedging
program, compared to $418 million in such net losses in 2007. See discussion above under Long-Term Hedging Program and below in the analysis of Competitive Electric segment results of operations.

Operating costs increased $22 million, or 6%, to $390 million.



| |  |  | Operating costs in the Competitive Electric segment increased $22 million, or 14%, to $184 million primarily reflecting higher maintenance costs related to the
timing and scope of baseload generation facility outages.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Operating costs in the Regulated Delivery segment increased $1 million, or less than 1%, to $208 million, driven by several factors as discussed in the analysis of
Regulated Delivery segment results of operations.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Depreciation and amortization increased $190 million to $390 million.
The increase includes $159 million of incremental depreciation expense resulting from stepped-up property, plant and equipment values and $15 million in incremental amortization expense largely related to the intangible value of retail customer
relationships, both recorded in connection with purchase accounting and substantially all in the Competitive Electric segment. The remaining increase primarily reflects normal additions and replacements of property.



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SG&A expenses increased $20 million, or 9%, to $247 million in 2008.



| |  |  | SG&A expenses in the Competitive Electric segment increased $16 million, or 10%, to $171 million, primarily due to higher expenses in the retail operations.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | SG&A expenses in the Regulated Delivery segment decreased $8 million, or 16%, reflecting nonrecurring rebranding costs in 2007 and the absence of $2 million of
fees related to the sales of accounts receivable program.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Corporate and Other SG&A expenses increased $12 million, or 57%, to $33 million due primarily to Sponsor management fees of $9 million.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------

Other income totaled $15 million in 2008 and $16 million in 2007. The 2008 amount includes $11 million in accretion of
the fair value adjustment to certain regulatory assets due to purchase accounting, and the 2007 amount includes $11 million of amortization of a deferred gain on sale of a business that was eliminated in purchase accounting. Other deductions totaled
$26 million in 2008 and $122 million in 2007. The 2007 amount includes charges of $82 million related to the canceled development of eight coal-fueled generation units. See Note 5 to Financial Statements for details of other income and deductions.

Interest expense and related charges increased $610 million to $831 million in 2008 reflecting $467 million due to higher average
borrowings, driven by the Merger-related financings, and $192 million in higher average interest rates, including $19 million of amortization of debt fair value discount resulting from purchase accounting, partially offset by $49 million in
increased capitalized interest.

Income tax benefit on pretax losses totaled $1.803 billion in 2008 compared to income tax benefit of $21
million on income from continuing operations in 2007. The 2007 amount includes a deferred tax benefit of $51 million related to an amendment of the Texas margin tax by the Texas legislature. Excluding the effect of this 2007 item, the effective
income tax rates were 35.1% on a loss in 2008 compared to 33.7% on income in 2007. (The unusual deferred tax benefit in 2007 distorts the comparison; therefore it has been excluded for purposes of a more meaningful discussion). The effective rates
reflect the application of EFH Corp.s statutory tax rate to the unrealized mark-to-market net losses in 2007 and 2008. The increase in the effective tax rate is driven by the 2007 effect of production deduction, lignite depletion and
investment tax credit amortization benefits on a small income base, and also reflects lower interest accrued in 2008 related to uncertain tax positions as a result of lower interest rates. These effects were partially offset by the absence in 2008
of production deduction benefits due to net operating losses and, as a result of purchase accounting, the absence in 2008 of investment tax credit amortization related to unregulated operations.



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Results from continuing operations (an after-tax measure) decreased $3.441 billion to a loss of $3.331
billion in 2008.



| |  |  | Results in the Competitive Electric segment decreased $3.388 billion to a loss of $3.257 billion driven by significantly higher unrealized mark-to-market losses on
positions in the long-term hedging program, higher net interest expense and the effects of purchase accounting.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Earnings in the Regulated Delivery segment increased $31 million to $85 million primarily driven by higher revenues and reflecting higher other income, which
included the effects of purchase accounting.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Corporate and Other net expenses totaled $159 million in 2008 and $75 million in 2007. The amounts in 2008 and 2007 include recurring interest expense on
outstanding debt and notes and advances from subsidiaries, as well as corporate general and administrative expenses. The increase of $84 million reflects (all amounts are after-tax):
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a $49 million increase in net interest expense, driven by issuance of Merger-related debt;
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | a $21 million deferred tax benefit in 2007 related to the Texas Margin tax;
| | - |  | ---------------------------------------------------------------------------



| |  |  | an $8 million increase in SG&A expense as discussed above, and
| | - |  | --------------------------------------------------------------



| |  |  | $8 million in lower other income reflecting the absence, due to purchase accounting, of amortization of a gain on the sale of a business,
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------

partially offset by:



| |  |  | a $5 million write off in 2007 of deferred costs associated with a cancelled joint venture, and
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | $4 million in financial advisory, legal and other professional fees in 2007 related to the Merger.
| | - |  | --------------------------------------------------------------------------------------------------



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EFH Corp. Consolidated Financial Results  Six Months Ended June 30, 2008 Compared to Six Months Ended
June 30, 2007

EFH Corp.s operating revenues increased $545 million, or 11%, to $5.305 billion in 2008 as shown in the
table below:



|                                   |  |                              |       |   |  |  |                              |   |       |  
|---------------------------------- |  | ---------------------------- | ----- | - |  |  | ---------------------------- | - | ----- | -
|                                   |  | Successor                    |       |   |  |  | Predecessor                  |  
|                                   |  | Six MonthsEndedJune 30, 2008 |       |   |  |  | Six MonthsEndedJune 30, 2007 |  
|Competitive Electric segment:      |  |                              |       |   |  |  |                              |   |       |  
|Total retail electricity revenues  |  | $                            | 2,921 |   |  |  |                              | $ | 2,904 |  
|Wholesale electricity revenues     |  |                              | 1,663 |   |  |  |                              |   | 982   |  
|Wholesale balancing activities     |  |                              | (184  | ) |  |  |                              |   | 9     |  
|Amortization of intangibles (a)    |  |                              | (41   | ) |  |  |                              |   |      |  
|Other operating revenues           |  |                              | 191   |   |  |  |                              |   | 157   |  
|                                   |  |                              |       |   |  |  |                              |   |       |  
|Total Competitive Electric segment |  |                              | 4,550 |   |  |  |                              |   | 4,052 |  
|Regulated Delivery segment         |  |                              | 1,241 |   |  |  |                              |   | 1,207 |  
|Net intercompany eliminations      |  |                              | (486  | ) |  |  |                              |   | (499  | )
|                                   |  |                              |       |   |  |  |                              |   |       |  
|Total consolidated revenues        |  | $                            | 5,305 |   |  |  |                              | $ | 4,760 |  
|                                   |  |                              |       |   |  |  |                              |   |       |  



|(a) | Represents amortization of the intangible net asset value of retail and wholesale power sales agreements resulting from purchase accounting.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Operating revenues in the Competitive Electric segment increased $498 million, or 12%, to $4.550 billion. The increase was driven by wholesale electricity revenues,
reflecting higher sales volumes and increased prices due to higher natural gas prices.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Operating revenues in the Regulated Delivery segment increased $34 million, or 3%, to $1.241 billion driven by higher distribution and transmission tariffs and
volume growth.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Net intercompany sales eliminations decreased $13 million, reflecting lower sales by Oncor to REP subsidiaries of TCEH, while Oncors sales to nonaffiliated
REPs increased.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Fuel, purchased power costs and delivery fees increased $833 million, or 59%, to $2.237 billion. The
increase was driven by purchased power costs, reflecting increased volumes and the effect of higher natural gas prices on wholesale power prices. Higher costs also reflect increased utilization of natural gas-fueled generation facilities. The
increase also reflects $159 million of net expense recorded in the 2008 period representing amortization of the intangible net asset values of environmental credits, coal purchase contracts and power purchase agreements and the stepped-up value of
nuclear fuel resulting from purchase accounting. See additional discussion below in the analysis of Competitive Electric segment results of operations.

The $5.224 billion increase in net losses from commodity hedging and trading activities reflects unrealized mark-to-market losses totaling $6.393 billion in 2008, driven by the effect of increasing forward market
prices of natural gas on positions in the long-term hedging program, compared to $1.182 billion in 2007. See discussion above under Long-Term Hedging Program and below in the analysis of Competitive Electric segment results of
operations.



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Operating costs increased $34 million, or 5%, to $748 million.



| |  |  | Operating costs in the Competitive Electric segment increased $28 million, or 9%, to $342 million reflecting higher maintenance costs related to the timing and
scope of baseload generation facility outages and other factors as discussed in the analysis of the segments results of operations.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Operating costs in the Regulated Delivery segment increased $5 million, or 1%, to $407 million, driven by several factors as discussed in the analysis of the
segments results of operations.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Depreciation and amortization increased $382 million to $785 million. The increase
includes $333 million of incremental depreciation expense resulting from stepped-up property, plant and equipment values and $29 million in incremental amortization expense largely related to the intangible value of retail customer relationships,
both recorded in connection with purchase accounting and substantially all in the Competitive Electric segment. The remaining increase primarily reflects normal additions and replacements of property.

SG&A expenses increased $17 million, or 4%, to $464 million in 2008.



| |  |  | SG&A expenses in the Competitive Electric segment increased $11 million, or 4%, to $325 million driven by several factors as discussed in the analysis of
Competitive Electric segment results of operations.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | SG&A expenses in the Regulated Delivery segment decreased $10 million, or 11%, to $83 million reflecting lower incentive compensation, nonrecurring rebranding
costs in 2007 and the absence of $3 million in fees related to the sale of accounts receivable program.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Corporate and Other SG&A expenses increased $16 million, or 40%, to $56 million due primarily to Sponsor management fees of $18 million.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------

Other income totaled $29 million in 2008 and $45 million in 2007. The 2008 other income amount includes $22 million in
accretion of the fair value adjustment to certain regulatory assets due to purchase accounting. Other deductions totaled $42 million in 2008 and $891 million in 2007. The 2007 amount includes charges of $795 million related to the canceled
development of eight coal-fueled generation units. See Note 5 to Financial Statements for details of other income and deductions.

Interest
expense and related charges increased $1.256 billion to $1.674 billion in 2008 reflecting $914 million due to higher average borrowings, driven by the Merger-related financings, and $445 million in higher average interest rates, including $37
million of amortization of debt fair value discount resulting from purchase accounting, partially offset by $103 million in increased capitalized interest.

Income tax benefits on pretax losses totaled $2.463 billion in 2008 and $294 million in 2007. The 2007 amount includes a deferred tax benefit of $51 million related to an amendment of the Texas margin tax by the Texas
legislature. Excluding the effect of this 2007 item, the effective income tax rates on losses were 34.9% in 2008 compared to 35.6% in 2007. (The unusual deferred tax benefit in 2007 distorts the comparison; therefore it has been excluded for
purposes of a more meaningful discussion). The effective rates reflect the application of EFH Corp.s statutory tax rate to the unrealized mark-to-market net losses in 2007 and 2008 as well as the 2007 impairment charge related to the
cancellation of certain generation facility development activities (see Note 4 to Financial Statements). The decrease in the effective tax rate reflects the absence of production deduction benefits in 2008 due to net operating losses and, as a
result of purchase accounting, the absence of investment tax credit amortization in 2008 related to unregulated operations, partially offset by lower interest accrued related to uncertain tax positions as a result of lower interest rates.



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Net loss (an after-tax measure) increased $4.212 billion to $4.600 billion in 2008.



| |  |  | Net loss in the Competitive Electric segment increased $4.134 billion to $4.474 billion driven by unrealized mark-to-market losses on positions in the long-term
hedging program, higher net interest expense and the effects of purchase accounting, partially offset by the effect of the 2007 impairment charge related to the cancellation of certain generation facility development activities.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Earnings in the Regulated Delivery segment increased $30 million to $170 million primarily driven by higher revenues and reflecting higher other income, which
included the effects of purchase accounting.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Corporate and Other net expenses totaled $296 million in 2008 and $188 million in 2007. The amounts in 2008 and 2007 include recurring interest expense on
outstanding debt and notes and advances from subsidiaries, as well as corporate general and administrative expenses. The increase of $108 million reflects (all amounts are after-tax):
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a $85 million increase in net interest expense, driven by issuance of Merger-related debt;
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | a $21 million deferred tax benefit in 2007 related to the Texas Margin tax;
| | - |  | ---------------------------------------------------------------------------



| |  |  | a $10 million increase in SG&A expense as discussed above, and
| | - |  | --------------------------------------------------------------



| |  |  | $20 million in lower other income reflecting the absence, due to purchase accounting, of amortization of a gain on the sale of a business,
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------

partially offset by:



| |  |  | the write-off in 2007 of $19 million in previously deferred costs related to anticipated strategic transactions (including expected financings) that were no longer
expected to be completed as a result of the Merger, and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | $20 million in financial advisory, legal and other professional fees in 2007 related to the Merger.
| | - |  | ---------------------------------------------------------------------------------------------------



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##### Table of Contents

Competitive Electric Segment

Financial Results



|                                                         |  |                                |        |   |  |  |                                |   |       |                              |  |   |        |   |                              |  |  |   |        |  
|-------------------------------------------------------- |  | ------------------------------ | ------ | - |  |  | ------------------------------ | - | ----- | ---------------------------- |  | - | ------ | - | ---------------------------- |  |  | - | ------ | -
|                                                         |  | Successor                      |        |   |  |  | Predecessor                    |   |       | Successor                    |  |   |        |   | Predecessor                  | 
|                                                         |  | Three MonthsEndedJune 30,
2008 |        |   |  |  | Three MonthsEndedJune 30,
2007 |   |       | Six MonthsEndedJune 30, 2008 |  |   |        |   | Six MonthsEndedJune 30, 2007 | 
|Operating revenues                                       |  | $                              | 2,567  |   |  |  |                                | $ | 2,049 |                              |  | $ | 4,550  |   |                              |  |  | $ | 4,052  |  
|Fuel, purchased power costs and delivery fees            |  |                                | (1,658 | ) |  |  |                                |   | (971  | )                            |  |   | (2,723 | ) |                              |  |  |   | (1,902 | )
|Net losses from commodity hedging and trading activities |  |                                | (4,727 | ) |  |  |                                |   | (383  | )                            |  |   | (6,293 | ) |                              |  |  |   | (1,069 | )
|Operating costs                                          |  |                                | (184   | ) |  |  |                                |   | (162  | )                            |  |   | (342   | ) |                              |  |  |   | (314   | )
|Depreciation and amortization                            |  |                                | (262   | ) |  |  |                                |   | (82   | )                            |  |   | (531   | ) |                              |  |  |   | (161   | )
|Selling, general and administrative expenses             |  |                                | (171   | ) |  |  |                                |   | (155  | )                            |  |   | (325   | ) |                              |  |  |   | (314   | )
|Franchise and revenue-based taxes                        |  |                                | (24    | ) |  |  |                                |   | (27   | )                            |  |   | (49    | ) |                              |  |  |   | (53    | )
|Other income                                             |  |                                | 3      |   |  |  |                                |   | 1     |                              |  |   | 6      |   |                              |  |  |   | 11     |  
|Other deductions                                         |  |                                | (17    | ) |  |  |                                |   | (93   | )                            |  |   | (27    | ) |                              |  |  |   | (808   | )
|Interest income                                          |  |                                | 15     |   |  |  |                                |   | 85    |                              |  |   | 26     |   |                              |  |  |   | 163    |  
|Interest expense and related charges                     |  |                                | (599   | ) |  |  |                                |   | (123  | )                            |  |   | (1,219 | ) |                              |  |  |   | (211   | )
|                                                         |  |                                |        |   |  |  |                                |   |       |                              |  |   |        |   |                              |  |  |   |        |  
|Income (loss) before income taxes                        |  |                                | (5,057 | ) |  |  |                                |   | 139   |                              |  |   | (6,927 | ) |                              |  |  |   | (606   | )
|Income tax (expense) benefit                             |  |                                | 1,800  |   |  |  |                                |   | (8    | )                            |  |   | 2,453  |   |                              |  |  |   | 266    |  
|                                                         |  |                                |        |   |  |  |                                |   |       |                              |  |   |        |   |                              |  |  |   |        |  
|Net income (loss)                                        |  | $                              | (3,257 | ) |  |  |                                | $ | 131   |                              |  | $ | (4,474 | ) |                              |  |  | $ | (340   | )
|                                                         |  |                                |        |   |  |  |                                |   |       |                              |  |   |        |   |                              |  |  |   |        |  



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Competitive Electric Segment

Sales Volume and Customer Count Data



|                                                                   |  |                                |   |  |                                |   |  |          |   |  |                              |   |  |                              |   |  |          |  
|------------------------------------------------------------------ |  | ------------------------------ | - |  | ------------------------------ | - |  | -------- | - |  | ---------------------------- | - |  | ---------------------------- | - |  | -------- | -
|                                                                   |  | Successor                      |   |  | Predecessor                    |   |  |          |   |  | Successor                    |   |  | Predecessor                  |   |  |          |  
|                                                                   |  | Three MonthsEndedJune 30, 2008 |   |  | Three MonthsEndedJune 30, 2007 |   |  | Change % |   |  | Six MonthsEndedJune 30, 2008 |   |  | Six MonthsEndedJune 30, 2007 |   |  | Change % |  
|Sales volumes:                                                     |  |                                |   |  |                                |   |  |          |   |  |                              |   |  |                              |   |  |          |  
|Retail electricity sales volumes - gigawatt hours (GWh):           |  |                                |   |  |                                |   |  |          |   |  |                              |   |  |                              |   |  |          |  
|Residential                                                        |  | 6,941                          |   |  | 6,082                          |   |  | 14.1     |   |  | 13,055                       |   |  | 12,467                       |   |  | 4.7      |  
|Small business (a)                                                 |  | 1,867                          |   |  | 1,741                          |   |  | 7.2      |   |  | 3,561                        |   |  | 3,548                        |   |  | 0.4      |  
|Large business and other customers                                 |  | 3,574                          |   |  | 3,653                          |   |  | (2.2     | ) |  | 6,913                        |   |  | 7,043                        |   |  | (1.8     | )
|                                                                   |  |                                |   |  |                                |   |  |          |   |  |                              |   |  |                              |   |  |          |  
|Total retail electricity                                           |  | 12,382                         |   |  | 11,476                         |   |  | 7.9      |   |  | 23,529                       |   |  | 23,058                       |   |  | 2.0      |  
|Wholesale electricity sales volumes                                |  | 12,568                         |   |  | 9,290                          |   |  | 35.3     |   |  | 23,058                       |   |  | 17,977                       |   |  | 28.3     |  
|Net sales (purchases) of balancing electricity to/from ERCOT       |  | (1,236                         | ) |  | 302                            |   |  |         |   |  | (1,480                       | ) |  | 626                          |   |  |         |  
|                                                                   |  |                                |   |  |                                |   |  |          |   |  |                              |   |  |                              |   |  |          |  
|Total sales volumes                                                |  | 23,714                         |   |  | 21,068                         |   |  | 12.6     |   |  | 45,107                       |   |  | 41,661                       |   |  | 8.3      |  
|                                                                   |  |                                |   |  |                                |   |  |          |   |  |                              |   |  |                              |   |  |          |  
|Average volume (kWh) per retail customer (b):                      |  |                                |   |  |                                |   |  |          |   |  |                              |   |  |                              |   |  |          |  
|Residential                                                        |  | 3,665                          |   |  | 3,299                          |   |  | 11.1     |   |  | 6,919                        |   |  | 6,731                        |   |  | 2.8      |  
|Small business                                                     |  | 7,368                          |   |  | 6,676                          |   |  | 10.4     |   |  | 13,955                       |   |  | 13,476                       |   |  | 3.6      |  
|Large business and other customers                                 |  | 116,989                        |   |  | 100,336                        |   |  | 16.6     |   |  | 222,117                      |   |  | 175,727                      |   |  | 26.4     |  
|Weather (service territory average)  percent of normal (c):       |  |                                |   |  |                                |   |  |          |   |  |                              |   |  |                              |   |  |          |  
|Percent of normal:                                                 |  |                                |   |  |                                |   |  |          |   |  |                              |   |  |                              |   |  |          |  
|Cooling degree days                                                |  | 120.8                          | % |  | 85.3                           | % |  |          |   |  | 123.8                        | % |  | 88.8                         | % |  |          |  
|Customer counts:                                                   |  |                                |   |  |                                |   |  |          |   |  |                              |   |  |                              |   |  |          |  
|Retail electricity customers (end of period and in thousands) (d): |  |                                |   |  |                                |   |  |          |   |  |                              |   |  |                              |   |  |          |  
|Residential                                                        |  |                                |   |  |                                |   |  |          |   |  | 1,899                        |   |  | 1,833                        |   |  | 3.6      |  
|Small business (a)                                                 |  |                                |   |  |                                |   |  |          |   |  | 255                          |   |  | 259                          |   |  | (1.5     | )
|Large business and other customers                                 |  |                                |   |  |                                |   |  |          |   |  | 28                           |   |  | 36                           |   |  | (22.2    | )
|                                                                   |  |                                |   |  |                                |   |  |          |   |  |                              |   |  |                              |   |  |          |  
|Total retail electricity customers                                 |  |                                |   |  |                                |   |  |          |   |  | 2,182                        |   |  | 2,128                        |   |  | 2.5      |  
|                                                                   |  |                                |   |  |                                |   |  |          |   |  |                              |   |  |                              |   |  |          |  



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



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



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



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



63



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##### Table of Contents

Competitive Electric Segment

Revenue and Market Share Data



|                                                                                                                             |  |                                |        |   |  |  |                                |   |        |                              |  |   |        |   |                              |  |  |   |        |  
|---------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------ | ------ | - |  |  | ------------------------------ | - | ------ | ---------------------------- |  | - | ------ | - | ---------------------------- |  |  | - | ------ | -
|                                                                                                                             |  | Successor                      |        |   |  |  | Predecessor                    |   |        | Successor                    |  |   |        |   | Predecessor                  | 
|                                                                                                                             |  | Three MonthsEndedJune 30,
2008 |        |   |  |  | Three MonthsEndedJune 30,
2007 |   |        | Six MonthsEndedJune 30, 2008 |  |   |        |   | Six MonthsEndedJune 30, 2007 | 
|Operating revenues:                                                                                                          |  |                                |        |   |  |  |                                |   |        |                              |  |   |        |   |                              |  |  |   |        |  
|Retail electricity revenues:                                                                                                 |  |                                |        |   |  |  |                                |   |        |                              |  |   |        |   |                              |  |  |   |        |  
|Residential                                                                                                                  |  | $                              | 937    |   |  |  |                                | $ | 841    |                              |  | $ | 1,708  |   |                              |  |  | $ | 1,733  |  
|Small business (a)                                                                                                           |  |                                | 274    |   |  |  |                                |   | 256    |                              |  |   | 518    |   |                              |  |  |   | 514    |  
|Large business and other customers                                                                                           |  |                                | 379    |   |  |  |                                |   | 343    |                              |  |   | 695    |   |                              |  |  |   | 657    |  
|                                                                                                                             |  |                                |        |   |  |  |                                |   |        |                              |  |   |        |   |                              |  |  |   |        |  
|Total retail electricity revenues                                                                                            |  |                                | 1,590  |   |  |  |                                |   | 1,440  |                              |  |   | 2,921  |   |                              |  |  |   | 2,904  |  
|Wholesale electricity revenues                                                                                               |  |                                | 1,037  |   |  |  |                                |   | 535    |                              |  |   | 1,663  |   |                              |  |  |   | 982    |  
|Net sales (purchases) of balancing electricity to/from ERCOT                                                                 |  |                                | (148   | ) |  |  |                                |   |       |                              |  |   | (184   | ) |                              |  |  |   | 9      |  
|Amortization of intangibles (b)                                                                                              |  |                                | (11    | ) |  |  |                                |   |       |                              |  |   | (41    | ) |                              |  |  |   |       |  
|Other operating revenues                                                                                                     |  |                                | 99     |   |  |  |                                |   | 74     |                              |  |   | 191    |   |                              |  |  |   | 157    |  
|                                                                                                                             |  |                                |        |   |  |  |                                |   |        |                              |  |   |        |   |                              |  |  |   |        |  
|Total operating revenues                                                                                                     |  | $                              | 2,567  |   |  |  |                                | $ | 2,049  |                              |  | $ | 4,550  |   |                              |  |  | $ | 4,052  |  
|                                                                                                                             |  |                                |        |   |  |  |                                |   |        |                              |  |   |        |   |                              |  |  |   |        |  
|Commodity hedging and trading activities:                                                                                    |  |                                |        |   |  |  |                                |   |        |                              |  |   |        |   |                              |  |  |   |        |  
|Unrealized net losses, including cash flow hedge ineffectiveness, related to unsettled positions                             |  | $                              | (4,768 | ) |  |  |                                | $ | (406   | )                            |  | $ | (6,305 | ) |                              |  |  | $ | (1,173 | )
|Unrealized net losses representing reversals of previously recognized fair values of positions settled in the current period |  |                                | (31    | ) |  |  |                                |   | (12    | )                            |  |   | (88    | ) |                              |  |  |   | (9     | )
|Realized net gains on settled positions (c)                                                                                  |  |                                | 72     |   |  |  |                                |   | 35     |                              |  |   | 100    |   |                              |  |  |   | 113    |  
|                                                                                                                             |  |                                |        |   |  |  |                                |   |        |                              |  |   |        |   |                              |  |  |   |        |  
|Net loss                                                                                                                     |  | $                              | (4,727 | ) |  |  |                                | $ | (383   | )                            |  | $ | (6,293 | ) |                              |  |  | $ | (1,069 | )
|                                                                                                                             |  |                                |        |   |  |  |                                |   |        |                              |  |   |        |   |                              |  |  |   |        |  
|Average revenues per MWh:                                                                                                    |  |                                |        |   |  |  |                                |   |        |                              |  |   |        |   |                              |  |  |   |        |  
|Residential                                                                                                                  |  | $                              | 134.94 |   |  |  |                                | $ | 138.36 |                              |  | $ | 130.82 |   |                              |  |  | $ | 139.01 |  
|Estimated share of ERCOT retail markets (d) (e) (f):                                                                         |  |                                |        |   |  |  |                                |   |        |                              |  |   |        |   |                              |  |  |   |        |  
|Residential                                                                                                                  |  |                                |        |   |  |  |                                |   |        |                              |  |   | 36     | % |                              |  |  |   | 36     | %
|Business markets                                                                                                             |  |                                |        |   |  |  |                                |   |        |                              |  |   | 26     | % |                              |  |  |   | 27     | %



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



|(b) | Represents amortization of the intangible net asset value of retail and wholesale power sales agreements resulting from purchase accounting.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------



|(c) | Includes physical commodity trading activity not subject to mark-to-market accounting of $14 million and $5 million in net losses in the three months ended June 30, 2008 and
2007, respectively, and $18 and $6 million in net losses in the six months ended June 30, 2008 and 2007, respectively.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(d) | Based on number of meters at end of period.
|--- | -------------------------------------------



|(e) | Estimated market share is based on the number of customers that have choice.
|--- | ----------------------------------------------------------------------------



|(f) | Calculations based on TXU Energy customer segmentation and ERCOT total customer counts.
|--- | ---------------------------------------------------------------------------------------



64



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##### Table of Contents

Competitive Electric Segment

Production, Purchased Power and Delivery Cost Data



|                                                                                          |  |                                |       |  |  |                                |   |                              |  |   |       |                              |  |  |   |      
|----------------------------------------------------------------------------------------- |  | ------------------------------ | ----- |  |  | ------------------------------ | - | ---------------------------- |  | - | ----- | ---------------------------- |  |  | - | -----
|                                                                                          |  | Successor                      |       |  |  | Predecessor                    |   | Successor                    |  |   |       | Predecessor                 
|                                                                                          |  | Three MonthsEndedJune 30,
2008 |       |  |  | Three MonthsEndedJune 30,
2007 |   | Six MonthsEndedJune 30, 2008 |  |   |       | Six MonthsEndedJune 30, 2007
|Fuel, purchased power costs and delivery fees ($ millions):                               |  |                                |       |  |  |                                |   |                              |  |   |       |                              |  |  |   |      
|Nuclear                                                                                   |  | $                              | 21    |  |  |                                | $ | 21                           |  | $ | 44    |                              |  |  | $ | 39   
|Lignite/coal                                                                              |  |                                | 158   |  |  |                                |   | 152                          |  |   | 313   |                              |  |  |   | 290  
|                                                                                          |  |                                |       |  |  |                                |   |                              |  |   |       |                              |  |  |   |      
|Total baseload fuel                                                                       |  |                                | 179   |  |  |                                |   | 173                          |  |   | 357   |                              |  |  |   | 329  
|Natural gas fuel and purchased power                                                      |  |                                | 966   |  |  |                                |   | 435                          |  |   | 1,371 |                              |  |  |   | 818  
|Amortization of intangibles (a)                                                           |  |                                | 77    |  |  |                                |   |                             |  |   | 159   |                              |  |  |   |     
|Other costs                                                                               |  |                                | 114   |  |  |                                |   | 72                           |  |   | 210   |                              |  |  |   | 146  
|                                                                                          |  |                                |       |  |  |                                |   |                              |  |   |       |                              |  |  |   |      
|Fuel and purchased power costs                                                            |  |                                | 1,336 |  |  |                                |   | 680                          |  |   | 2,097 |                              |  |  |   | 1,293
|Delivery fees (b)                                                                         |  |                                | 322   |  |  |                                |   | 291                          |  |   | 626   |                              |  |  |   | 609  
|                                                                                          |  |                                |       |  |  |                                |   |                              |  |   |       |                              |  |  |   |      
|Total                                                                                     |  | $                              | 1,658 |  |  |                                | $ | 971                          |  | $ | 2,723 |                              |  |  | $ | 1,902
|                                                                                          |  |                                |       |  |  |                                |   |                              |  |   |       |                              |  |  |   |      
|Fuel and purchased power costs (which excludes generation plant operating costs) per MWh: |  |                                |       |  |  |                                |   |                              |  |   |       |                              |  |  |   |      
|Nuclear fuel                                                                              |  | $                              | 4.69  |  |  |                                | $ | 4.64                         |  | $ | 4.65  |                              |  |  | $ | 4.55 
|Lignite/coal (c)                                                                          |  | $                              | 16.62 |  |  |                                | $ | 15.05                        |  | $ | 16.09 |                              |  |  | $ | 14.38
|Natural gas fuel and purchased power                                                      |  | $                              | 93.78 |  |  |                                | $ | 62.86                        |  | $ | 83.11 |                              |  |  | $ | 61.37
|Delivery fees per MWh                                                                     |  | $                              | 25.83 |  |  |                                | $ | 24.90                        |  | $ | 26.30 |                              |  |  | $ | 25.94



|(a) | Represents amortization of the intangible net asset values of environmental credits, coal purchase contracts and power purchase agreements and the stepped up value of nuclear fuel
resulting from purchase accounting.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | Includes delivery fee charges from Oncor that are eliminated in consolidation.
|--- | ------------------------------------------------------------------------------



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



|                                              |  |                                |   |  |                                |   |  |          |   |  |                              |   |  |                              |   |  |          |  
|--------------------------------------------- |  | ------------------------------ | - |  | ------------------------------ | - |  | -------- | - |  | ---------------------------- | - |  | ---------------------------- | - |  | -------- | -
|                                              |  | Successor                      |   |  | Predecessor                    |   |  |          |   |  | Successor                    |   |  | Predecessor                  |   |  |          |  
|                                              |  | Three MonthsEndedJune 30, 2008 |   |  | Three MonthsEndedJune 30, 2007 |   |  | Change % |   |  | Six MonthsEndedJune 30, 2008 |   |  | Six MonthsEndedJune 30, 2007 |   |  | Change % |  
|Production and purchased power volumes (GWh): |  |                                |   |  |                                |   |  |          |   |  |                              |   |  |                              |   |  |          |  
|Nuclear                                       |  | 4,531                          |   |  | 4,492                          |   |  | 0.9      |   |  | 9,452                        |   |  | 8,555                        |   |  | 10.5     |  
|Lignite/coal                                  |  | 10,505                         |   |  | 10,955                         |   |  | (4.1     | ) |  | 21,457                       |   |  | 21,944                       |   |  | (2.2     | )
|                                              |  |                                |   |  |                                |   |  |          |   |  |                              |   |  |                              |   |  |          |  
|Total baseload generation                     |  | 15,036                         |   |  | 15,447                         |   |  | (2.7     | ) |  | 30,909                       |   |  | 30,499                       |   |  | 1.3      |  
|Natural gas-fueled generation                 |  | 1,192                          |   |  | 633                            |   |  | 88.3     |   |  | 1,718                        |   |  | 1,382                        |   |  | 24.3     |  
|Purchased power                               |  | 9,105                          |   |  | 6,287                          |   |  | 44.8     |   |  | 14,775                       |   |  | 11,957                       |   |  | 23.6     |  
|                                              |  |                                |   |  |                                |   |  |          |   |  |                              |   |  |                              |   |  |          |  
|Total energy supply                           |  | 25,333                         |   |  | 22,367                         |   |  | 13.3     |   |  | 47,402                       |   |  | 43,838                       |   |  | 8.1      |  
|Less line loss and power imbalances           |  | 1,619                          |   |  | 1,299                          |   |  | 24.6     |   |  | 2,295                        |   |  | 2,177                        |   |  | 5.4      |  
|                                              |  |                                |   |  |                                |   |  |          |   |  |                              |   |  |                              |   |  |          |  
|Net energy supply volumes                     |  | 23,714                         |   |  | 21,068                         |   |  | 12.6     |   |  | 45,107                       |   |  | 41,661                       |   |  | 8.3      |  
|                                              |  |                                |   |  |                                |   |  |          |   |  |                              |   |  |                              |   |  |          |  
|Baseload capacity factors (%):                |  |                                |   |  |                                |   |  |          |   |  |                              |   |  |                              |   |  |          |  
|Nuclear                                       |  | 90.3                           | % |  | 89.6                           | % |  | 0.8      |   |  | 94.2                         | % |  | 85.8                         | % |  | 9.8      |  
|Lignite/coal                                  |  | 82.2                           | % |  | 85.9                           | % |  | (4.3     | ) |  | 84.1                         | % |  | 86.6                         | % |  | (2.9     | )
|Total baseload generation                     |  | 84.5                           | % |  | 87.0                           | % |  | (2.9     | ) |  | 87.0                         | % |  | 86.3                         | % |  | 0.8      |  



65



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##### Table of Contents

Competitive Electric Segment  Financial Results

Three Months Ended June 30, 2008 Compared to Three Months Ended June 30, 2007



|                                  |  |                                |       |   |  |  |                                |   |      
|--------------------------------- |  | ------------------------------ | ----- | - |  |  | ------------------------------ | - | -----
|                                  |  | Successor                      |       |   |  |  | Predecessor                   
|                                  |  | Three MonthsEndedJune 30,
2008 |       |   |  |  | Three MonthsEndedJune 30,
2007
|Total retail electricity revenues |  | $                              | 1,590 |   |  |  |                                | $ | 1,440
|Wholesale electricity revenues    |  |                                | 1,037 |   |  |  |                                |   | 535  
|Wholesale balancing activities    |  |                                | (148  | ) |  |  |                                |   |     
|Amortization of intangibles (a)   |  |                                | (11   | ) |  |  |                                |   |     
|Other operating revenues          |  |                                | 99    |   |  |  |                                |   | 74   
|                                  |  |                                |       |   |  |  |                                |   |      
|Total operating revenues          |  | $                              | 2,567 |   |  |  |                                | $ | 2,049
|                                  |  |                                |       |   |  |  |                                |   |      



|(a) | Represents amortization of the intangible net asset values of retail and wholesale power sales agreements resulting from purchase accounting.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------

Operating revenues increased $518 million, or 25%, to $2.567 billion in 2008, as shown in the table above.

The $150 million, or 10%, increase in retail electricity revenues reflected the following:



| |  |  | An eight percent increase in retail sales volumes contributed $113 million to the revenue increase. Residential and small business market volumes increased 14% and
seven percent, respectively, primarily due to the effects of warmer than normal weather in 2008 combined with the cooler than normal weather experienced in 2007 and an increase in residential customer counts. Large business market volumes decreased
two percent.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Total retail electricity customer counts at June 30, 2008 increased three percent from June 30, 2007. Competitive activity resulted in a four percent
increase in residential customers that was partially offset by a two percent decline in small business customers and a 22% decline in large business customers.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Higher average pricing contributed $37 million to the revenue increase. Higher average retail pricing reflected higher average prices in the business markets driven
by higher natural gas prices, partially offset by an approximately $24 million effect of lower pricing in the residential customer market. Lower residential pricing was driven by price discounts, including a four percent price discount in June 2007
and another five percent price discount in October 2007 to those residential customers in EFH Corp.s historical service territory with month-to-month service plans and a rate equivalent to the former price-to-beat.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Wholesale electricity revenues increased $502 million, or 94%. A 43% increase in average wholesale electricity prices,
driven by higher natural gas prices, contributed $313 million to revenue growth, and a 35% increase in sales volumes contributed $189 million. The rise in natural gas prices reflected the overall trend of higher energy prices and increased demand in
natural gas-fueled generation due to warmer weather in 2008. Higher wholesale sales and purchase volumes reflected several factors, including increased demand (due to warmer weather), baseload plant outages and congestion, as well as increased
near-term bilateral power contracting activity due in part to increased demand and market volatility in 2008.

Wholesale balancing activity
comparisons are generally not meaningful because the activity represents intraday purchases and sales transactions with ERCOT for real-time balancing purposes, as measured in 15-minute intervals, which are highly variable. The relatively large
amount in 2008 reflects weather-driven volatility, generation facility outages and congestion effects.



66



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##### Table of Contents

Fuel, purchased power costs and delivery fees increased $687 million, or 71%, to $1.658 billion. The
increase was driven by higher purchased power costs, reflecting 45% growth in purchased power volumes as well as the effect of higher natural gas prices on wholesale power prices. The increase also reflected greater utilization of natural gas-fueled
generation facilities to meet peak demand and a 55% increase in fuel costs per MWh in those facilities due to the higher natural gas prices, as well as increased coal and mining costs. The increase also includes $77 million of net expense recorded
in the 2008 period representing amortization of the intangible net asset values of environmental credits, coal purchase contracts and power purchase agreements and the stepped-up value of nuclear fuel resulting from purchase accounting. Other power
production costs increased $42 million driven by congestion-related charges.

Results from commodity hedging and trading activities include
realized and unrealized gains and losses associated with financial instruments used for commodity hedging and trading purposes, as well as gains and losses on physical sales and purchases of commodities for trading purposes. A substantial majority
of the commodity hedging activities are intended to mitigate the risk of commodity price movements on future revenues and involve natural gas positions entered into as part of the long-term hedging program. The results of these activities have been
volatile because of the effects of movements in forward natural gas prices on unrealized mark-to-market valuations. Following is an analysis of activities for the three months ended June 30, 2008 and 2007:

Three Months Ended June 30, 2008 Unrealized mark-to-market net losses totaling $4.799 billion include:



| |  |  | $4.754 billion in net losses related to hedge positions, which includes $4.752 billion in net losses from changes in fair value and $2 million in net losses that
represent reversals of previously recorded fair values of positions settled in the period. These net losses are driven by the effect of higher natural gas prices in forward periods on positions in the long-term hedging program;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | $39 million in day one losses related to large hedge positions (see Note 10 to Financial Statements), and
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | $4 million in net losses related to trading positions, which includes $25 million in net gains from changes in fair value and $29 million in net losses that
represent reversals of previously recorded fair values of positions settled in the period.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Realized net gains totaling
$72 million include:



| |  |  | $44 million in net gains related to hedge positions that offset hedged electricity revenues and fuel and purchased power costs recognized in the period, and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | $29 million in net gains related to trading positions.
| | - |  | ------------------------------------------------------



67



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##### Table of Contents

Three Months Ended June 30, 2007 Unrealized mark-to-market net losses totaling $418
million include:



| |  |  | $366 million in net losses related to hedge positions, which includes $358 million in net losses from to changes in fair value and $8 million in net losses that
represent reversals of previously recorded fair values of positions settled in the period;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a $63 million day one loss on a related series of commodity price hedges and a $30 million day one gain on a long-term power purchase
agreement (see Note 10 to Financial Statements);
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | $10 million in net losses related to trading positions, which includes $12 million in net losses from changes in fair value and $2 million in net gains that
represent reversals of previously recorded fair values of positions settled in the period, and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | $5 million in hedge ineffectiveness net losses, which includes $1 million in net gains from changes in fair value and $6 million in net losses that represent
reversals of previously recorded unrealized net gains related to positions settled in the period. These amounts relate to positions accounted for as cash flow hedges.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Realized net gains totaling $35 million include:



| |  |  | $26 million in net gains related to hedge positions that offset hedged electricity revenues recognized in the period, and
| | - |  | -------------------------------------------------------------------------------------------------------------------------



| |  |  | $9 million in net gains related to trading positions.
| | - |  | -----------------------------------------------------

Operating costs increased $22 million, or 14%, to $184 million in 2008. The increase reflects $17 million in higher maintenance costs related to the timing and scope of planned and unplanned outages in baseload
generation facilities, $3 million in costs related to combustion turbines now being operated for TCEHs own benefit and $2 million in higher property taxes, partially offset by $4 million in lower insurance costs.

Depreciation and amortization increased $180 million to $262 million. The increase includes $159 million of incremental depreciation expense from
stepped-up property, plant and equipment values and $13 million in incremental amortization expense related to the intangible value of customer relationships, each resulting from the effects of purchase accounting. The remaining increase reflects
normal additions and replacements of property.

SG&A expenses increased $16 million, or 10%, to $171 million in 2008. The increase
reflects:



| |  |  | $9 million in higher expenses in the retail operations, including marketing and computer system enhancements, net of a $3 million reduction in fees associated with
the sale of accounts receivable program, and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | $4 million in higher retail customer bad debt expense.
| | - |  | ------------------------------------------------------

Other deductions totaled $17 million in 2008 and $93 million in 2007. The 2007 amount includes charges of $82 million in connection with the cancellation of the development of eight coal-fueled generation units.

Interest income decreased $70 million, or 82%, to $15 million in 2008 reflecting $68 million due to lower average balances of
notes/advances to parent and $2 million due to lower average rates.



68



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##### Table of Contents

Interest expense and related charges increased by $476 million to $599 million in 2008. The increase
reflects $554 million due to higher average borrowings, driven by the Merger-related financings, partially offset by $51 million in increased capitalized interest and $27 million in lower average interest rates, net of $4 million of amortization of
debt fair value discount resulting from purchase accounting.

Income tax benefit on a pretax loss totaled $1.8 billion in 2008 and income
tax expense on pretax income totaled $8 million in 2007. The 2007 amount includes a deferred tax benefit of $30 million related to an amendment of the Texas margin tax by the Texas legislature. Excluding the effect of this 2007 item, the effective
income tax rates were 35.6% on a loss in 2008 compared to 27.7% on income in 2007. (The unusual deferred tax benefit in 2007 distorts the comparison; therefore it has been excluded for purposes of a more meaningful discussion). The effective rates
reflect the application of EFH Corp.s statutory tax rate to the unrealized mark-to-market net losses in 2007 and 2008. The increase in the effective tax rate is driven by the 2007 effect of production deduction, lignite depletion and
investment tax credit amortization benefits on a relatively small income base, and also reflects lower interest accrued in 2008 related to uncertain tax positions as a result of lower interest rates. These effects were partially offset by the
absence in 2008 of production deduction benefits due to net operating losses and, as a result of purchase accounting, the absence in 2008 of investment tax credit amortization related to unregulated operations.

Results decreased $3.388 billion to a net loss of $3.257 billion in 2008 driven by unrealized mark-to-market losses on positions in the long-term hedging
program, higher net interest expense and the effects of purchase accounting.



69



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##### Table of Contents

Six Months Ended June 30, 2008 Compared to Six Months Ended June 30, 2007



|                                  |  |                               |       |   |  |  |                               |   |      
|--------------------------------- |  | ----------------------------- | ----- | - |  |  | ----------------------------- | - | -----
|                                  |  | Successor                     |       |   |  |  | Predecessor                  
|                                  |  | Six Months EndedJune 30, 2008 |       |   |  |  | Six Months EndedJune 30, 2007
|Total retail electricity revenues |  | $                             | 2,921 |   |  |  |                               | $ | 2,904
|Wholesale electricity revenues    |  |                               | 1,663 |   |  |  |                               |   | 982  
|Wholesale balancing activities    |  |                               | (184  | ) |  |  |                               |   | 9    
|Amortization of intangibles (a)   |  |                               | (41   | ) |  |  |                               |   |     
|Other operating revenues          |  |                               | 191   |   |  |  |                               |   | 157  
|                                  |  |                               |       |   |  |  |                               |   |      
|Total operating revenues          |  | $                             | 4,550 |   |  |  |                               | $ | 4,052
|                                  |  |                               |       |   |  |  |                               |   |      



|(a) | Represents amortization of the intangible net asset values of retail and wholesale power sales agreements resulting from purchase accounting.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------

Operating revenues increased $498 million, or 12%, to $4.550 billion in 2008, as shown in the table above.

The $17 million, or 1%, increase in retail electricity revenues reflected the following:



| |  |  | A two percent increase in retail sales volumes contributed $59 million to the revenue increase. Residential volumes increased five percent primarily due to the
effects of warmer than normal weather in 2008 combined with the cooler than normal weather experienced in 2007 and an increase in residential customer counts. Small business market volumes increased less than one percent, and large business market
volumes decreased two percent.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Lower average pricing reduced revenues by $42 million. Lower average retail pricing reflected an approximately $109 million effect of lower pricing in the
residential customer market, partially offset by the effect of higher average prices in the large business and small business markets driven by higher natural gas prices. Lower residential pricing reflected a six percent price discount in March
2007, an additional four percent price discount, effective in June 2007 and another five percent price discount in October 2007 to those residential customers in the historical service territory with month-to-month service plans and a rate
equivalent to the former price-to-beat.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Wholesale electricity revenues increased $681 million, or 69%. A 32% increase in
average wholesale electricity prices driven by higher natural gas prices contributed $403 million to revenue growth and a 28% increase in sales volumes contributed $278 million. The drivers of prices and volumes were consistent with those discussed
in the results for the three months ended June 30, 2008.

Wholesale balancing activity comparisons are not generally meaningful
because the activity represents intraday purchases and sales transactions with ERCOT for real-time balancing purposes, as measured in 15-minute intervals, which are highly variable. The relatively large amount in 2008 reflects weather-driven
volatility, generation facility outages and congestion effects.



70



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Fuel, purchased power costs and delivery fees increased $821 million, or 43%, to $2.723 billion. The
increase was driven by higher purchased power costs, reflecting 24% growth in purchased power volumes as well as the effect of higher natural gas prices on wholesale power prices. The increase also reflected greater utilization of natural gas-fueled
generation facilities to meet peak demand and a 54% increase in fuel costs per MWh in those facilities due to higher natural gas prices, as well as increased coal and mining costs. The increase also includes $159 million of net expense recorded in
the 2008 period representing amortization of the intangible net asset values of environmental credits, coal purchase contracts and power purchase agreements and the stepped-up value of nuclear fuel resulting from purchase accounting. Other power
production costs increased $64 million driven by higher congestion-related charges.

Following is an analysis of results from commodity
hedging and trading activities for the six months ended June 30, 2008 and 2007:

Six Months Ended June 30, 2008
Unrealized mark-to-market net losses totaling $6.393 billion include:



| |  |  | $6.337 billion in net losses related to hedge positions, which includes $6.318 billion in net losses from changes in fair value and $19 million in net losses that
represent reversals of previously recorded fair values of positions settled in the period. These losses are driven by the effect of higher natural gas prices in forward periods on positions in the long-term hedging program;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | $58 million in day one losses related to large hedge positions (see Note 10 to Financial Statements), and
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | $6 million in net gains related to trading positions, which includes $75 million in net gains from changes in fair value and $69 million in net losses that
represent reversals of previously recorded fair values of positions settled in the period.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Realized net gains totaling
$100 million include:



| |  |  | $29 million in net gains related to hedge positions that offset hedged electricity revenues and fuel and purchased power costs recognized in the period, and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | $71 million in net gains related to trading positions.
| | - |  | ------------------------------------------------------



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##### Table of Contents

Six Months Ended June 30, 2007 Unrealized mark-to-market net losses totaling $1.182
billion include:



| |  |  | $1.095 billion in net losses related to hedge positions, which includes $1.127 billion in net losses from changes in fair value and $32 million in net gains that
represent reversals of previously recorded fair values of positions settled in the period;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | $160 million in day one losses related to large hedge positions and a $30 million day one gain on a long-term power purchase agreement (see
Note 10 to Financial Statements);
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | $94 million in hedge ineffectiveness net gains, which includes $113 million in net gains from changes in fair value and $19 million in net losses that represent
reversals of previously recorded unrealized net gains related to positions settled in the period. These amounts relate to positions accounted for as cash flow hedges, and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | $46 million in net losses related to trading positions, which includes $24 million in net losses from changes in fair value and $22 million in net losses that
represent reversals of previously recorded fair values of positions settled in the period.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Realized net gains totaling
$113 million include:



| |  |  | $74 million in net gains related to hedge positions that offset hedged electricity revenues recognized in the period, and
| | - |  | -------------------------------------------------------------------------------------------------------------------------



| |  |  | $39 million in net gains related to trading positions.
| | - |  | ------------------------------------------------------

Operating costs increased $28 million, or 9%, to $342 million in 2008. The increase reflects $19 million in higher maintenance costs related to the timing and scope of planned and unplanned outages in baseload
generation facilities, $6 million in costs related to combustion turbines now being operated for TCEHs own benefit and $6 million in higher property taxes, partially offset by $5 million in lower insurance costs.

Depreciation and amortization increased $370 million to $531 million. The increase includes $333 million of incremental depreciation expense from
stepped-up property, plant and equipment values and $26 million in incremental amortization expense related to the intangible value of customer relationships, each resulting from the effects of purchase accounting. The remaining increase primarily
reflects normal additions and replacements of property.

SG&A expenses increased $11 million, or 4%, to $325 million in 2008. The
increase reflects:



| |  |  | $15 million in higher expenses in the retail operations, including marketing and computer systems enhancements, net of a $5 million decrease in fees associated with
the sale of accounts receivable program, and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | $9 million in higher retail customer bad debt expense,
| | - |  | ------------------------------------------------------

partially offset by a $15 million reduction in costs associated with the generation development program, reflecting the cancellation of certain development activities.

Other income totaled $6 million in 2008 and $11 million in 2007. The 2007 amount includes $5 million of royalty income and $3 million in penalties
received due to nonperformance under a coal transportation agreement.



72



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Other deductions totaled $27 million in 2008 and $808 million in 2007. The 2007 amount includes charges
of $795 million in connection with the cancellation of the development of eight coal-fueled generation units. See Note 5 to Financial Statements for more details.

Interest income decreased $137 million, or 84%, to $26 million in 2008 reflecting $134 million due to lower average balances of notes/advances to parent and $3 million due to lower average rates.

Interest expense and related charges increased $1.008 billion to $1.219 billion in 2008. The increase reflects $1.052 billion due to higher average
borrowings, driven by the Merger-related financings, and $60 million in higher average interest rates, including $7 million of amortization of debt fair value discount resulting from purchase accounting, partially offset by $104 million in increased
capitalized interest.

Income tax benefit on a pretax loss totaled $2.453 billion in 2008 and $266 million in 2007. The 2007 amount
includes a deferred tax benefit of $30 million related to an amendment of the Texas margin tax by the Texas legislature. Excluding the effect of this 2007 item, the effective income tax rates on losses were 35.4% in 2008 compared to 38.8% in 2007.
(The unusual deferred tax benefit in 2007 distorts the comparison; therefore it has been excluded for purposes of a more meaningful discussion). The effective rates reflect the application of EFH Corp.s statutory tax rate to the unrealized
mark-to-market net losses in 2007 and 2008 as well as the 2007 impairment charge related to the cancellation of certain generation facility development activities (see Note 4 to Financial Statements). The decrease in the effective tax rate reflects
the absence of production deduction benefits in 2008 due to net operating losses and, as a result of purchase accounting, the absence of investment tax credit amortization in 2008 related to unregulated operations, partially offset by lower interest
accrued related to uncertain tax positions as a result of lower interest rates.

Net loss increased $4.134 billion to $4.474 billion in
2008 driven by unrealized mark-to-market losses on positions in the long-term hedging program, higher net interest expense and the effects of purchase accounting, partially offset by the effect of the 2007 impairment charge in connection with the
cancellation of certain generation facility development activities.



73



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##### Table of Contents

Regulated Delivery Segment

Financial Results



|                                             |  |                                |      |   |  |  |                                |   |      |                              |  |   |       |   |                              |  |  |   |       |  
|-------------------------------------------- |  | ------------------------------ | ---- | - |  |  | ------------------------------ | - | ---- | ---------------------------- |  | - | ----- | - | ---------------------------- |  |  | - | ----- | -
|                                             |  | Successor                      |      |   |  |  | Predecessor                    |   |      | Successor                    |  |   |       |   | Predecessor                  | 
|                                             |  | Three MonthsEndedJune 30,
2008 |      |   |  |  | Three MonthsEndedJune 30,
2007 |   |      | Six MonthsEndedJune 30, 2008 |  |   |       |   | Six MonthsEndedJune 30, 2007 | 
|Operating revenues                           |  | $                              | 626  |   |  |  |                                | $ | 589  |                              |  | $ | 1,241 |   |                              |  |  | $ | 1,207 |  
|Operating costs                              |  |                                | (208 | ) |  |  |                                |   | (207 | )                            |  |   | (407  | ) |                              |  |  |   | (402  | )
|Depreciation and amortization                |  |                                | (121 | ) |  |  |                                |   | (114 | )                            |  |   | (242  | ) |                              |  |  |   | (234  | )
|Selling, general and administrative expenses |  |                                | (43  | ) |  |  |                                |   | (51  | )                            |  |   | (83   | ) |                              |  |  |   | (93   | )
|Franchise and revenue-based taxes            |  |                                | (58  | ) |  |  |                                |   | (60  | )                            |  |   | (119  | ) |                              |  |  |   | (121  | )
|Other income                                 |  |                                | 11   |   |  |  |                                |   | 1    |                              |  |   | 22    |   |                              |  |  |   | 3     |  
|Other deductions                             |  |                                | (8   | ) |  |  |                                |   | (10  | )                            |  |   | (15   | ) |                              |  |  |   | (19   | )
|Interest income                              |  |                                | 11   |   |  |  |                                |   | 14   |                              |  |   | 22    |   |                              |  |  |   | 29    |  
|Interest expense and related charges         |  |                                | (73  | ) |  |  |                                |   | (78  | )                            |  |   | (149  | ) |                              |  |  |   | (154  | )
|                                             |  |                                |      |   |  |  |                                |   |      |                              |  |   |       |   |                              |  |  |   |       |  
|Income before income taxes                   |  |                                | 137  |   |  |  |                                |   | 84   |                              |  |   | 270   |   |                              |  |  |   | 216   |  
|Income tax expense                           |  |                                | (52  | ) |  |  |                                |   | (30  | )                            |  |   | (100  | ) |                              |  |  |   | (76   | )
|                                             |  |                                |      |   |  |  |                                |   |      |                              |  |   |       |   |                              |  |  |   |       |  
|Net income                                   |  | $                              | 85   |   |  |  |                                | $ | 54   |                              |  | $ | 170   |   |                              |  |  | $ | 140   |  
|                                             |  |                                |      |   |  |  |                                |   |      |                              |  |   |       |   |                              |  |  |   |       |  



74



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##### Table of Contents

Regulated Delivery Segment

Operating Data



|                                                                         |  |                                |  |  |  |                                |  |          |  |                              |  |  |  |                              |  |         
|------------------------------------------------------------------------ |  | ------------------------------ |  |  |  | ------------------------------ |  | -------- |  | ---------------------------- |  |  |  | ---------------------------- |  | --------
|                                                                         |  | Successor                      |  |  |  | Predecessor                    |  |          |  | Successor                    |  |  |  | Predecessor                  |  |         
|                                                                         |  | Three MonthsEndedJune 30, 2008 |  |  |  | Three MonthsEndedJune 30, 2007 |  | Change % |  | Six MonthsEndedJune 30, 2008 |  |  |  | Six MonthsEndedJune 30, 2007 |  | Change %
|Operating statistics  volumes:                                          |  |                                |  |  |  |                                |  |          |  |                              |  |  |  |                              |  |         
|Electric energy delivered (GWh)                                          |  | 27,451                         |  |  |  | 24,972                         |  | 9.9      |  | 52,491                       |  |  |  | 49,966                       |  | 5.1     
|Reliability statistics (a):                                              |  |                                |  |  |  |                                |  |          |  |                              |  |  |  |                              |  |         
|System Average Interruption Duration Index (SAIDI) (nonstorm)            |  |                                |  |  |  |                                |  |          |  | 85.27                        |  |  |  | 77.92                        |  | 9.4     
|System Average Interruption Frequency Index (SAIFI) (nonstorm)           |  |                                |  |  |  |                                |  |          |  | 1.15                         |  |  |  | 1.15                         |  |        
|Customer Average Interruption Duration Index (CAIDI) (nonstorm)          |  |                                |  |  |  |                                |  |          |  | 73.86                        |  |  |  | 67.78                        |  | 9.0     
|Electricity points of delivery (end of period and in thousands):         |  |                                |  |  |  |                                |  |          |  |                              |  |  |  |                              |  |         
|Electricity distribution points of delivery (based on number of meters): |  |                                |  |  |  |                                |  |          |  | 3,108                        |  |  |  | 3,077                        |  | 1.0     



|                                       |  |                                |     |  |  |                                |   |                              |  |   |       |                              |  |  |   |      
|-------------------------------------- |  | ------------------------------ | --- |  |  | ------------------------------ | - | ---------------------------- |  | - | ----- | ---------------------------- |  |  | - | -----
|                                       |  | Successor                      |     |  |  | Predecessor                    |   | Successor                    |  |   |       | Predecessor                 
|                                       |  | Three MonthsEndedJune 30,
2008 |     |  |  | Three MonthsEndedJune 30,
2007 |   | Six MonthsEndedJune 30, 2008 |  |   |       | Six MonthsEndedJune 30, 2007
|Operating revenues:                    |  |                                |     |  |  |                                |   |                              |  |   |       |                              |  |  |   |      
|Electricity distribution revenues (b): |  |                                |     |  |  |                                |   |                              |  |   |       |                              |  |  |   |      
|Affiliated (TCEH)                      |  | $                              | 241 |  |  |                                | $ | 230                          |  | $ | 483   |                              |  |  | $ | 494  
|Nonaffiliated                          |  |                                | 307 |  |  |                                |   | 278                          |  |   | 605   |                              |  |  |   | 558  
|                                       |  |                                |     |  |  |                                |   |                              |  |   |       |                              |  |  |   |      
|Total distribution revenues            |  |                                | 548 |  |  |                                |   | 508                          |  |   | 1,088 |                              |  |  |   | 1,052
|Third-party transmission revenues      |  |                                | 69  |  |  |                                |   | 65                           |  |   | 135   |                              |  |  |   | 126  
|Other miscellaneous revenues           |  |                                | 9   |  |  |                                |   | 16                           |  |   | 18    |                              |  |  |   | 29   
|                                       |  |                                |     |  |  |                                |   |                              |  |   |       |                              |  |  |   |      
|Total operating revenues               |  | $                              | 626 |  |  |                                | $ | 589                          |  | $ | 1,241 |                              |  |  | $ | 1,207
|                                       |  |                                |     |  |  |                                |   |                              |  |   |       |                              |  |  |   |      



|(a) | SAIDI is the average number of minutes electric service is interrupted per consumer in a year. SAIFI is the average number of electric service interruptions per consumer in a year.
CAIDI is the average duration in minutes per electric service interruption in a year. The statistics presented are based on twelve months ended June 30, 2008 and 2007 data.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | Includes transition charge revenue associated with the issuance of securitization bonds totaling $34 million and $33 million for the three months ended June 30, 2008 and 2007,
respectively, and $68 million and $70 million for the six months ended June 30, 2008 and 2007, respectively. Also includes disconnect/reconnect fees and other discretionary revenues for services requested by REPs.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As discussed in the 2007 Form 10-K, Regulated Deliverys results have been impacted by the effects of the 2006 cities rate settlement. Incremental
expenses of approximately $70 million were recognized almost entirely over the period from May 2006 through June 2008, of which $9 million and $8 million has been recognized in the three months ended June 30, 2008 and 2007, respectively, and
$17 million and $16 million has been recognized in the six months ended June 30, 2008 and 2007, respectively.



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Three Months Ended June 30, 2008 Compared to Three Months Ended June 30, 2007

Operating revenues increased $37 million, or 6%, to $626 million in 2008. The revenue increase reflected:



| |  |  | an estimated $23 million effect of higher average consumption driven by warmer than normal weather in 2008 and cooler than normal weather in 2007;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | $11 million from increased distribution tariffs to recover transmission costs;
| | - |  | ------------------------------------------------------------------------------



| |  |  | an estimated $5 million impact of growth in points of delivery;
| | - |  | ---------------------------------------------------------------



| |  |  | $4 million in higher transmission revenues primarily due to rate increases to recover ongoing investment in the transmission system, and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | $1 million in higher charges to REPs related to transition bonds (offset by higher amortization of the related regulatory asset),
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------

partially offset by $7 million in lower revenues due to the absence in 2008 of revenues for installation of third party equipment related to Oncors
technology initiatives.

Operating costs increased $1 million, or less than 1%, to $208 million in 2008. The increase reflected:



| |  |  | $4 million in increased labor and benefits costs for restoration of service as a result of weather events, more stringent service requirements and equipment
installation activities;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | $4 million in higher vegetation management expenses, and
| | - |  | --------------------------------------------------------



| |  |  | $1 million in software license and service expenses related to Oncors purchase of the BPL based Smart Grid network from Current in May 2008,
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------

partially offset by $7 million of lower expenses due to the absence in 2008 of costs for installation of third party
equipment related to Oncors technology initiatives.

Depreciation and amortization increased $7 million, or 6%, to $121 million in
2008. The increase reflected higher depreciation due to ongoing investments in property, plant and equipment, as well as $1 million in higher amortization of the regulatory assets associated with the transition bonds (offset in revenues).

SG&A expenses decreased $8 million, or 16%, to $43 million in 2008. The decrease reflected:



| |  |  | $3 million in expenses in 2007 related to the rebranding of TXU Electric Delivery Company to Oncor Electric Delivery Company;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------



| |  |  | $2 million in lower incentive compensation expense;
| | - |  | ---------------------------------------------------



| |  |  | $2 million in lower fees due to Oncors exit from the sale of accounts receivable program;
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | $1 million in lower professional fees, and
| | - |  | ------------------------------------------



| |  |  | $1 million in lower shared services costs allocated by EFH Corp,
| | - |  | ----------------------------------------------------------------

partially offset by $1 million in increased employee benefit costs and $1 million in increased bad debt expense.

Franchise and revenue-based taxes decreased $2 million, or 3%, to $58 million in 2008. A decrease in state franchise taxes of $3 million due to the 2007 enactment of the Texas margin tax, which is accounted for as an income tax, was
partially offset by a $1 million increase in local franchise fees. Local franchise fees resulting from the 2006 cities rate settlement totaled $2 million for both the three months ended June 30, 2008 and 2007.



76



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##### Table of Contents

Other income totaled $11 million in 2008 and $1 million in 2007. The 2008 amount represents accretion of
the fair value adjustment to certain regulatory assets due to purchase accounting. See Regulatory Assets and Liabilities in Note 15 to Financial Statements for additional information.

Other deductions totaled $8 million in 2008 and $10 million in 2007. The 2008 amount includes:



| |  |  | $7 million in costs as a result of the 2006 cities rate settlement.
| | - |  | -------------------------------------------------------------------

The 2007 amount includes:



| |  |  | $7 million in costs as a result of the 2006 rate settlement, and
| | - |  | ----------------------------------------------------------------



| |  |  | $3 million in transition costs related to the InfrastruX Energy Services joint venture.
| | - |  | ---------------------------------------------------------------------------------------

Interest income decreased $3 million, or 21%, to $11 million in 2008. The decrease reflects $1 million in lower earnings on assets held for employee
benefit plans, a $1 million decrease in reimbursement of transition bond interest from TCEH and a $1 million decrease in earnings on restricted cash.

Interest expense decreased $5 million, or 6%, to $73 million in 2008. The variance reflected a decrease of $9 million due to lower average interest rates driven by increased short-term borrowings, partially offset by
a $4 million effect of higher average borrowings, reflecting the ongoing capital investment in the business, including the purchase of Currents existing BPL-based Smart Grid network. The average interest rate effect is net of a $1
million increase due to the amortization of the fair value discount related to transition bonds that was recorded due to purchase accounting.

Income tax expense totaled $52 million in 2008 compared to $30 million in 2007. The effective income tax rate increased to 38.0% in 2008 from 35.7% in 2007. The increased rate is primarily driven by non-deductible losses related to the
decline in value of assets held for employee benefit plans, principally employee savings programs.

Net income increased $31 million, or
57%, to $85 million driven by increased revenues and reflecting higher other income, which includes the effects of purchase accounting.



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##### Table of Contents

Six Months Ended June 30, 2008 Compared to Six Months Ended June 30, 2007

Operating revenues increased $34 million, or 3%, to $1.241 billion in 2008. The revenue increase reflected:



| |  |  | $18 million from increased distribution tariffs to recover transmission costs;
| | - |  | ------------------------------------------------------------------------------



| |  |  | an estimated $11 million impact of growth in points of delivery;
| | - |  | ----------------------------------------------------------------



| |  |  | $10 million in higher transmission revenues primarily due to rate increases to recover ongoing investment in the transmission system, and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an estimated $7 million effect of higher average consumption driven by warmer than normal weather in 2008 and cooler than normal weather in 2007,
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------

partially offset by $13 million in lower revenues due to the absence in 2008 of revenues for installation of third party
equipment related to Oncors technology initiatives, and $2 million in lower charges to REPs related to transition bonds (offset by lower amortization of the related regulatory asset).

Operating costs increased $5 million, or 1%, to $407 million in 2008. The increase reflected:



| |  |  | $9 million in increased labor and benefits costs for restoration of service as a result of weather events, more stringent service requirements and equipment
installation activities;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | $6 million in higher vegetation management expenses, and
| | - |  | --------------------------------------------------------



| |  |  | $1 million in software license and service expenses related to Oncors purchase of the BPL based Smart Grid network from Current in May 2008,
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------

partially offset by $12 million of lower expenses due to the absence in 2008 of costs for installation of third party
equipment related to Oncors technology initiatives.

Depreciation and amortization increased $8 million, or 3%, to $242 million in
2008. The increase reflected $11 million in higher depreciation due to ongoing investments in property, plant and equipment, partially offset by $2 million in lower amortization of the regulatory assets associated with the transition bonds (offset
in revenues).

SG&A expenses decreased $10 million, or 11%, to $83 million in 2008. The decrease reflected:



| |  |  | $5 million in lower incentive compensation expense;
| | - |  | ---------------------------------------------------



| |  |  | $3 million in expenses in 2007 related to the rebranding of TXU Electric Delivery Company to Oncor Electric Delivery Company;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------



| |  |  | $3 million in lower fees due to Oncors exit from the sale of accounts receivable program, and
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | $2 million in lower shared services costs allocated by EFH Corp,
| | - |  | ----------------------------------------------------------------

partially offset by,



| |  |  | $2 million in higher professional fees;
| | - |  | ---------------------------------------



| |  |  | $1 million in increased employee benefits costs, and
| | - |  | ----------------------------------------------------



| |  |  | $1 million in increased bad debt expense.
| | - |  | -----------------------------------------



78



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##### Table of Contents

Franchise and revenue-based taxes decreased $2 million, or 2%, to $119 million in 2008. A decrease in
state franchise taxes of $6 million due to the 2007 enactment of the Texas margin tax, which is accounted for as an income tax, was partially offset by a $4 million increase in local franchise fees. Local franchise fees resulting from the 2006
cities rate settlement totaled $4 million and $3 million for the six months ended June 30, 2008 and 2007, respectively.

Other income
totaled $22 million in 2008 and $3 million in 2007. The 2008 amount represents accretion of the fair value adjustment to certain regulatory assets due to purchase accounting. See Regulatory Assets and Liabilities in Note 15 to Financial
Statements for additional information.

Other deductions totaled $15 million in 2008 and $19 million in 2007. The 2008 amount includes:



| |  |  | $13 million in costs as a result of the 2006 cities rate settlement, and
| | - |  | ------------------------------------------------------------------------



| |  |  | $2 million in equity losses (representing amortization expense) related to the ownership interest in an EFH Corp. subsidiary holding the capitalized software
licensed to Capgemini.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The 2007 amount includes:



| |  |  | $13 million in costs a result of the 2006 cities rate settlement;
| | - |  | -----------------------------------------------------------------



| |  |  | $4 million in costs related to the canceled InfrastruX Energy Services joint venture, and
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | $2 million in equity losses (representing amortization expense) related to the ownership interest in an EFH Corp. subsidiary holding the capitalized software
licensed to Capgemini.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Interest income decreased $7 million, or 24%, to $22 million in 2008. The decrease reflects $3
million in lower earnings on assets held for employee benefit plans, a $2 million decrease in reimbursement of transition bond interest from TCEH and a $1 million decrease in earnings on restricted cash.

Interest expense decreased $5 million, or 3%, to $149 million in 2008. The change reflected a decrease of $13 million due to lower average interest rates
driven by increased short-term borrowings, partially offset by an $8 million effect of higher average borrowings, reflecting the ongoing capital investment in the business. The average interest rate effect is net of a $2 million increase due to the
amortization of the fair value discount related to transition bonds that was recorded due to purchase accounting.

Income tax expense
totaled $100 million in 2008 compared to $76 million in 2007. The effective income tax rate increased to 37.0% in 2008 from 35.2% in 2007. The increased rate is primarily driven by non-deductible losses related to the decline in value of assets held
for employee benefit plans, principally employee savings programs.

Net income increased $30 million, or 21%, to $170 million driven by
increased revenues and reflecting higher other income, which includes the effects of purchase accounting.



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

The table below summarizes the changes in commodity contract assets and liabilities for the six months ended June 30, 2008. The net changes in these
assets and liabilities, excluding other activity as described below, represent the pretax effect of mark-to-market accounting on net income for positions in the commodity contract portfolio that are not subject to cash flow hedge
accounting (see discussion below and in Note 10 to Financial Statements). For the six months ended June 30, 2008, this effect totaled $6.359 billion in unrealized net losses, which represented $6.301 billion in net losses on unsettled positions
and $58 million in net losses representing reversals of previously recognized fair values of positions settled in the current period. These positions represent both economic hedging and trading activities.



|                                                                |  |                               |        |  
|--------------------------------------------------------------- |  | ----------------------------- | ------ | -
|                                                                |  | Successor                     |       
|                                                                |  | Six Months EndedJune 30, 2008 |       
|Commodity contract net asset (liability) at beginning of period |  | $                             | (1,917 | )
|Settlements of positions (a)                                    |  |                               | (58    | )
|Unrealized mark-to-market valuations of positions (b)           |  |                               | (6,301 | )
|Other activity (c)                                              |  |                               | 13     |  
|                                                                |  |                               |        |  
|Commodity contract net asset (liability) at end of period       |  | $                             | (8,263 | )
|                                                                |  |                               |        |  



|(a) | Represents reversals of fair values previously recognized to offset gains and losses realized upon settlement of the positions in the current period. Includes settlements of
positions entered into in the current period.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | Primarily represents mark-to-market effects of positions in the long-term hedging program (see discussion above under Long-Term Hedging Program). Of this amount, $6.253
billion in net losses relates to positions not settled as of the end of the period. Includes $58 million in net losses recorded at contract inception dates (see Note 10 to Financial Statements).
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(c) | These amounts do not represent unrealized gains or losses. Includes initial values of positions involving the receipt or payment of cash or other consideration.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

Note: Of the $6.359 billion in unrealized net losses for the period, all but $30 million in net gains are reported in the
income statement as net losses from commodity hedging and trading activities. The $30 million in net gains relate to physically settled positions, with $79 million in net gains reported in revenues and $49 million in net losses reported in fuel,
purchased power costs and delivery fees.



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In addition to the effect on net income of recording unrealized mark-to-market gains and losses that are
reflected in the table above, similar effects arise in the recording of unrealized ineffectiveness gains and losses associated with commodity-related positions accounted for as cash flow hedges. These effects on net income, which include reversals
of previously recorded unrealized ineffectiveness gains and losses to offset realized gains and losses upon settlement, are reflected in the balance sheet as changes in cash flow hedge and other derivative assets and liabilities (see Note 10 to
Financial Statements). The total pretax effect of recording unrealized gains and losses in net income related to commodity contracts under SFAS 133 is summarized as follows:



|                                                                                          |  |                                |        |   |  |  |                                |   |      |                              |  |   |        |   |                              |  |  |   |        |  
|----------------------------------------------------------------------------------------- |  | ------------------------------ | ------ | - |  |  | ------------------------------ | - | ---- | ---------------------------- |  | - | ------ | - | ---------------------------- |  |  | - | ------ | -
|                                                                                          |  | Successor                      |        |   |  |  | Predecessor                    |   |      | Successor                    |  |   |        |   | Predecessor                  | 
|                                                                                          |  | Three MonthsEndedJune 30,
2008 |        |   |  |  | Three MonthsEndedJune 30,
2007 |   |      | Six MonthsEndedJune 30, 2008 |  |   |        |   | Six MonthsEndedJune 30, 2007 | 
|Unrealized gains (losses) related to contracts marked-to-market                           |  | $                              | (4,767 | ) |  |  |                                | $ | (413 | )                            |  | $ | (6,359 | ) |                              |  |  | $ | (1,276 | )
|Ineffectiveness gains (losses) related to contracts accounted for as cash flow hedges (a) |  |                                | (2     | ) |  |  |                                |   | (5   | )                            |  |   | (4     | ) |                              |  |  |   | 94     |  
|                                                                                          |  |                                |        |   |  |  |                                |   |      |                              |  |   |        |   |                              |  |  |   |        |  
|Total unrealized gains (losses) related to commodity contracts                            |  | $                              | (4,769 | ) |  |  |                                | $ | (418 | )                            |  | $ | (6,363 | ) |                              |  |  | $ | (1,182 | )
|                                                                                          |  |                                |        |   |  |  |                                |   |      |                              |  |   |        |   |                              |  |  |   |        |  



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

Maturity
Table  Following are the components of the net commodity contract liability at June 30, 2008:



|                                                                |  |   |        |  
|--------------------------------------------------------------- |  | - | ------ | -
|Net commodity contract liability                                |  | $ | (8,263 | )
|Net receipts of natural gas under physical swap transactions    |  |   | 11     |  
|                                                                |  |   |        |  
|Amount of net liability arising from recognition of fair values |  | $ | (8,252 | )
|                                                                |  |   |        |  



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##### Table of Contents

The following table presents the net commodity contract liability arising from recognition of fair values
as of June 30, 2008, scheduled by the source of fair value and contractual settlement dates of the underlying positions. See Note 12 to Financial Statements for fair value disclosures required under SFAS 157.



|                                          |  |                                                                              |        |   |           |   |        |           |  |   |                  |   |  |       |        |   |  |   |        |  
|----------------------------------------- |  | ---------------------------------------------------------------------------- | ------ | - | --------- | - | ------ | --------- |  | - | ---------------- | - |  | ----- | ------ | - |  | - | ------ | -
|                                          |  | Maturity dates of unrealized commodity contract liabilities at June 30, 2008 |       
|Source of fair value (a)                  |  | Less than1 year                                                              |        |   | 1-3 years |   |        | 4-5 years |  |   | Excess of5 years |   |  | Total |       
|Prices actively quoted                    |  | $                                                                            | (125   | ) |           | $ | (155   | )         |  | $ | (29              | ) |  | $     |       |   |  | $ | (309   | )
|Prices provided by other external sources |  |                                                                              | (958   | ) |           |   | (3,059 | )         |  |   | (2,786           | ) |  |       | (579   | ) |  |   | (7,382 | )
|Prices based on models                    |  |                                                                              | 33     |   |           |   | (133   | )         |  |   | (39              | ) |  |       | (422   | ) |  |   | (561   | )
|                                          |  |                                                                              |        |   |           |   |        |           |  |   |                  |   |  |       |        |   |  |   |        |  
|Total                                     |  | $                                                                            | (1,050 | ) |           | $ | (3,347 | )         |  | $ | (2,854           | ) |  | $     | (1,001 | ) |  | $ | (8,252 | )
|                                          |  |                                                                              |        |   |           |   |        |           |  |   |                  |   |  |       |        |   |  |   |        |  
|Percentage of total fair value            |  |                                                                              | 13     | % |           |   | 40     | %         |  |   | 35               | % |  |       | 12     | % |  |   | 100    | %



|(a) | Under this analysis, a contract can have more than one source of fair value. In such cases, the value of the contract is segregated by source of value.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------

The prices actively quoted category reflects only exchange traded contracts for which active quotes are readily available. The prices
provided by other external sources category represents forward commodity positions valued using prices for which over-the-counter broker quotes are available. Over-the-counter quotes for power in ERCOT generally extend through 2012 and
over-the-counter quotes for natural gas generally extend through 2015, depending upon delivery point. The prices based on models category contains the value of all over-the-counter traded options, valued using option pricing models. In
addition, this category contains other contractual arrangements that may have forward and option components, as well as other contracts that are valued using proprietary long-term pricing models that utilize certain market based inputs. In many
instances, these contracts can be broken down into their component parts and each component valued separately. Components valued as forward commodity positions are included in the prices provided by other external sources category.
Components valued as options are included in the prices based on models category.



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COMPREHENSIVE INCOME  Continuing Operations

Cash flow hedge activity reported in other comprehensive income from continuing operations included (all amounts after-tax):



|                                                                                                                        |  |                                |     |  |  |                                |   |     |                              |  |   |     |   |                              |  |  |   |      |  
|----------------------------------------------------------------------------------------------------------------------- |  | ------------------------------ | --- |  |  | ------------------------------ | - | --- | ---------------------------- |  | - | --- | - | ---------------------------- |  |  | - | ---- | -
|                                                                                                                        |  | Successor                      |     |  |  | Predecessor                    |   |     | Successor                    |  |   |     |   | Predecessor                  | 
|                                                                                                                        |  | Three MonthsEndedJune 30,
2008 |     |  |  | Three MonthsEndedJune 30,
2007 |   |     | Six MonthsEndedJune 30, 2008 |  |   |     |   | Six MonthsEndedJune 30, 2007 | 
|Net increase (decrease) in fair value of cash flow hedges:                                                              |  |                                |     |  |  |                                |   |     |                              |  |   |     |   |                              |  |  |   |      |  
|Commodities                                                                                                             |  | $                              | 7   |  |  |                                | $ | 30  |                              |  | $ | 1   |   |                              |  |  | $ | (297 | )
|Financing - interest rate swaps                                                                                         |  |                                | 378 |  |  |                                |   |    |                              |  |   | (44 | ) |                              |  |  |   |     |  
|                                                                                                                        |  |                                |     |  |  |                                |   |     |                              |  |   |     |   |                              |  |  |   |      |  
|                                                                                                                        |  |                                | 385 |  |  |                                |   | 30  |                              |  |   | (43 | ) |                              |  |  |   | (297 | )
|                                                                                                                        |  |                                |     |  |  |                                |   |     |                              |  |   |     |   |                              |  |  |   |      |  
|Derivative value net losses (gains) reported in net income that relate to hedged transactions recognized in the period: |  |                                |     |  |  |                                |   |     |                              |  |   |     |   |                              |  |  |   |      |  
|Commodities                                                                                                             |  |                                | 2   |  |  |                                |   | (14 | )                            |  |   | 2   |   |                              |  |  |   | (79  | )
|Financing - interest rate swaps                                                                                         |  |                                | 22  |  |  |                                |   | 2   |                              |  |   | 40  |   |                              |  |  |   | 4    |  
|                                                                                                                        |  |                                |     |  |  |                                |   |     |                              |  |   |     |   |                              |  |  |   |      |  
|                                                                                                                        |  |                                | 24  |  |  |                                |   | (12 | )                            |  |   | 42  |   |                              |  |  |   | (75  | )
|                                                                                                                        |  |                                |     |  |  |                                |   |     |                              |  |   |     |   |                              |  |  |   |      |  
|Total income (loss) effect of cash flow hedges reported in other comprehensive income from continuing operations        |  | $                              | 409 |  |  |                                | $ | 18  |                              |  | $ | (1  | ) |                              |  |  | $ | (372 | )
|                                                                                                                        |  |                                |     |  |  |                                |   |     |                              |  |   |     |   |                              |  |  |   |      |  

EFH Corp. has historically used, and expects to continue to use, derivative instruments that are
effective in offsetting future cash flow variability in interest rates and energy commodity prices. Amounts in accumulated other comprehensive income include (i) the value of unsettled transactions accounted for as cash flow hedges (for the
effective portion), based on current market conditions, and (ii) the value of dedesignated and terminated cash flow hedges at the time of such dedesignation, less amounts reclassified to earnings as the original hedged transactions are
recognized, unless the hedged transactions become probable of not occurring. The effects of the hedge will be recorded in the statement of income as the hedged transactions are actually settled and affect earnings. Also see Note 10 to Financial
Statements.



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FINANCIAL CONDITION

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows Cash used in operating activities from continuing
operations totaled $1.9 billion and $55 million for the six months ended June 30, 2008 and 2007, respectively. The increase in cash used of $1.845 billion largely reflects:



| |  |  | a $1.189 billion increase in cash interest payments, and
| | - |  | --------------------------------------------------------



| |  |  | a $916 million unfavorable change in margin deposits due to the effect of higher forward natural gas prices on positions in the long-term hedging program. The
majority of the margin deposits are funded by borrowings from the Commodity Collateral Posting Facility as discussed in Note 7 to Financial Statements.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

These increased uses were partially offset by,



| |  |  | a $181 million decrease in cash income taxes paid, and
| | - |  | ------------------------------------------------------



| |  |  | a $102 million premium paid in 2007 related to a structured natural gas-related option transaction entered into as part of EFH Corp.s long-term hedging
program.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

Cash provided by financing activities increased $1.529 billion as summarized below:



|                                                                                                  |  |                              |        |   |  |  |                              |   |        |  
|------------------------------------------------------------------------------------------------- |  | ---------------------------- | ------ | - |  |  | ---------------------------- | - | ------ | -
|                                                                                                  |  | Successor                    |        |   |  |  | Predecessor                  |  
|                                                                                                  |  | Six MonthsEndedJune 30, 2008 |        |   |  |  | Six MonthsEndedJune 30, 2007 |  
|Net issuances, repayments and repurchases of borrowings                                           |  | $                            | 3,414  |   |  |  |                              | $ | 2,448  |  
|Net issuances and repurchases of common stock                                                     |  |                              | 33     |   |  |  |                              |   | (9     | )
|Common stock dividends paid                                                                       |  |                              |       |   |  |  |                              |   | (397   | )
|Settlements of minimum withholding tax liabilities under stock-based incentive compensation plans |  |                              |       |   |  |  |                              |   | (93    | )
|Debt premium, discount, financing and reacquisition expenses                                      |  |                              | (6     | ) |  |  |                              |   | (15    | )
|Other                                                                                             |  |                              | 22     |   |  |  |                              |   |       |  
|                                                                                                  |  |                              |        |   |  |  |                              |   |        |  
|Total provided by financing activities                                                            |  | $                            | 3,463  |   |  |  |                              | $ | 1,934  |  
|                                                                                                  |  |                              |        |   |  |  |                              |   |        |  
|                                                                                                  |  |                              |       
|Cash used in investing activities increased $148 million as summarized below:                     |  |                              |        |   |  |  |                              |   |        |  
|                                                                                                  |  |                              |       
|                                                                                                  |  | Successor                    |        |   |  |  | Predecessor                  |  
|                                                                                                  |  | Six MonthsEndedJune 30, 2008 |        |   |  |  | Six MonthsEndedJune 30, 2007 |  
|Capital expenditures, including nuclear fuel purchases                                            |  | $                            | (1,564 | ) |  |  |                              | $ | (1,641 | )
|Proceeds from sale of assets                                                                      |  |                              | 46     |   |  |  |                              |   | 4      |  
|Change in restricted cash                                                                         |  |                              | (150   | ) |  |  |                              |   | 143    |  
|Other                                                                                             |  |                              | 14     |   |  |  |                              |   | (12    | )
|                                                                                                  |  |                              |        |   |  |  |                              |   |        |  
|Total used in financing activities                                                                |  | $                            | (1,654 | ) |  |  |                              | $ | (1,506 | )
|                                                                                                  |  |                              |        |   |  |  |                              |   |        |  



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Depreciation and amortization expense reported in the statement of cash flows exceeds the amount reported
in the statement of income by $252 million and $30 million for the six months ended June 30, 2008 and 2007, respectively. The 2008 difference represents amortization of intangible net assets and debt fair value discounts arising from purchase
accounting that is reported in various other income statement line items including operating revenues, fuel, purchased power costs and delivery fees, other income and interest expense and related charges. The 2008 and 2007 differences also reflect
the amortization of nuclear fuel, which is reported as fuel cost in the statement of income consistent with industry practice.

Debt
Financing ActivityActivities related to short-term borrowings and long-term debt during the six months ended June 30, 2008 are as follows (all amounts presented are principal and include amounts related to capital
leases):



|                     |  |            |       |                          |   |    
|-------------------- |  | ---------- | ----- | ------------------------ | - | ---
|                     |  | Borrowings |       | RepaymentsandRepurchases
|TCEH                 |  | $          | 1,004 |                          | $ | 348
|EFC Holdings         |  |            |      |                          |   | 2  
|EFH Corp.            |  |            |      |                          |   | 205
|Oncor                |  |            |      |                          |   | 50 
|                     |  |            |       |                          |   |    
|Total long-term      |  |            | 1,004 |                          |   | 605
|                     |  |            |       |                          |   |    
|TCEH                 |  |            | 2,640 |                          |   |   
|Oncor                |  |            | 375   |                          |   |   
|                     |  |            |       |                          |   |    
|Total short-term (a) |  |            | 3,015 |                          |   |   
|                     |  |            |       |                          |   |    
|Total                |  | $          | 4,019 |                          | $ | 605
|                     |  |            |       |                          |   |    



|(a) | Short-term amounts represent net borrowings.
|--- | --------------------------------------------

See Note 7
to Financial Statements for further detail of long-term debt and other financing arrangements.

Credit Facilities  The
following table summarizes changes in liquidity available under EFH Corp.s committed credit facilities for the seven months ended July 31, 2008:



|                                     |  |                   |       |               |   |        |  |   |        |  
|------------------------------------ |  | ----------------- | ----- | ------------- | - | ------ |  | - | ------ | -
|                                     |  | Availability      |      
|                                     |  | December 31, 2007 |       | July 31, 2008 |   | Change | 
|TCEH Delayed Draw Term Loan Facility |  | $                 | 1,950 |               | $ | 1,119  |  | $ | (831   | )
|TCEH Revolving Credit Facility       |  | $                 | 2,636 |               | $ | 2,303  |  | $ | (333   | )
|                                     |  |                   |       |               |   |        |  |   |        |  
|Total TCEH                           |  | $                 | 4,586 |               | $ | 3,422  |  | $ | (1,164 | )
|                                     |  |                   |       |               |   |        |  |   |        |  
|Oncor Revolving Credit Facility      |  | $                 | 720   |               | $ | 370    |  | $ | (350   | )

The TCEH Delayed Draw Term Loan Facility is used to fund certain specified capital expenditures,
principally related to the construction of the new generation facilities, and related expenses (of which approximately $59 million represents expenditures already incurred for which funding was available as of July 31, 2008). The TCEH Revolving
Credit Facility is used for working capital and other general corporate purposes. EFH Corp. has unlimited availability under the committed TCEH Commodity Collateral Posting Facility to fund the collateral posting requirements for specified natural
gas hedging transaction volumes. (See discussion below under Liquidity Effects of Commodity Hedging and Trading Activities).

The Oncor Revolving Credit Facility is used for working capital and other general corporate purposes. Oncor may increase the commitments under its facility in any amount up to $500 million, subject to the satisfaction of certain conditions.
Oncor expects to refinance a significant portion of the current outstanding debt balance under its revolving credit facility through the issuance of long-term debt, however, there can be no guarantee that Oncor will be able to complete the
refinancing nor can Oncor guarantee that the terms of such long-term debt will be favorable to Oncor.

See Note 7 to Financial Statements
for additional discussion of the facilities.



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Liquidity Effects of Commodity Hedging and Trading Activities  Hedging and trading
transactions typically require collateral to support potential future payment obligations. In particular, commodity transactions typically require a counterparty to post collateral if the forward price of the underlying commodity moves such that the
hedging or trading instrument is below fair value to such counterparty. EFH Corp. and its subsidiaries use cash and letters of credit and other collateral structures to satisfy such collateral obligations. In addition, in connection with the Merger,
TCEH entered into the TCEH Commodity Collateral Posting Facility, which is an uncapped senior secured revolving credit facility that will fund the cash collateral posting requirements due to trading counterparties for a significant portion of the
positions in the long-term hedging program not otherwise secured by a first-lien in the assets of TCEH. The aggregate principal amount of this facility is determined by the exposure arising from higher forward market prices, regardless of the amount
of such exposure, on a portfolio of certain natural gas hedging transaction volumes. Including those hedging transactions where margin deposits are covered by unlimited borrowings under the TCEH Commodity Collateral Posting Facility, at
June 30, 2008, more than 95% of EFH Corp.s long-term natural gas hedging program transactions were secured by a first-lien interest in the assets of TCEH that is pari passu with the TCEH Senior Secured Facilities, the effect of which is a
significant reduction in EFH Corp.s liquidity exposure associated with collateral requirements for those hedging transactions. See Note 7 to Financial Statements for more information about this facility.

As of June 30, 2008, subsidiaries of EFH Corp. have received or posted cash and letters of credit for hedging and trading activities as follows:



| |  |  | $325 million in cash has been posted with counterparties for exchange cleared transactions (including initial margin), as compared to $79 million posted as of
December 31, 2007,
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | $2.186 billion in cash has been posted with counterparties for over-the-counter and other non-exchanged cleared transactions, as compared to $429 million posted as
of December 31, 2007, and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | $1.221 billion in letters of credit have been posted with counterparties, as compared to $592 million posted as of December 31, 2007.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------

Borrowings under the TCEH Commodity Collateral Posting Facility funded the substantial majority of the above cash
postings. The posted letters of credit were largely supported by restricted cash borrowed under the TCEH Letter of Credit Facility. See Notes 7 and 8 to Financial Statements.

With respect to exchange cleared transactions, these transactions typically require initial margin (i.e. the upfront cash and/or letter of credit posted
to take into account the size and maturity of the positions and credit quality) in addition to variance margin (i.e. the daily cash margin posted to take into account changes in the value of the underlying commodity). The amount of initial margin
required is generally defined by exchange rules. Clearing agents, however, typically have the right to request additional initial margin based on various factors including market depth, volatility and credit quality, which may be in the form of
cash, letters of credit, a guaranty or other forms as negotiated with the clearing agent. With respect to cash collateral that is received, such cash collateral is either used by EFH Corp. and its subsidiaries for working capital and other corporate
purposes, including reducing short-term borrowings under credit facilities, or it is required to be deposited in a separate account and restricted from being used for working capital and other corporate purposes. On over-the-counter transactions,
such counterparties generally have the right to substitute letters of credit for such cash collateral. In such event, the cash collateral previously posted would be returned to such counterparties thereby reducing EFH Corp.s liquidity in the
event that it was not restricted. As of June 30, 2008, cash collateral received totaled $179 million. See Note 15 to Financial Statements regarding restricted cash.

As a result of the long-term hedging program, increases in natural gas prices result in increased cash collateral and letter of credit margin requirements. As a representative example, as of July 31, 2008, for
each $1.00 per MMBtu increase in forward natural gas prices across the period from 2008 through 2014, EFH Corp.s cash collateral posting requirements associated with the long-term hedging program would increase by approximately $845 million,
essentially all of which would be funded by the TCEH Commodity Collateral Posting Facility.



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Dividends from Oncor Oncor has jointly filed an Initial Statement of Interest with
the PUCT indicating its interest in constructing and operating transmission facilities related to Competitive Renewable Energy Zones. See discussion below under Regulation and Rates  Matters with the PUCT. If Oncor is awarded
construction and operation of all or a part of such facilities, EFH Corp. expects that Oncor may retain its available cash to fund such construction instead of paying dividends to EFH Corp.

Pension Plan Funding EFH Corp. expects to make required contributions of $113 million and $22 million to its pension plan in the
third and fourth quarters of 2008, respectively. EFH Corp. made required pension contributions of $7 million and $18 million in January and April of 2008, respectively.

Sale of Accounts Receivable  Certain subsidiaries of EFH Corp. participate in an accounts receivable securitization program, the
activity under which is accounted for as a sale of accounts receivable in accordance with SFAS 140. Under the program, subsidiaries of EFH Corp. (originators) sell trade accounts receivable to TXU Receivables Company, a consolidated wholly-owned
bankruptcy-remote direct subsidiary of EFH Corp., which sells undivided interests in the purchased accounts receivable for cash to special purpose entities established by financial institutions. All new trade receivables under the program generated
by the originators are continuously purchased by TXU Receivables Company with the proceeds from collections of receivables previously purchased. Funding under the program totaled $482 million and $363 million at June 30, 2008 and
December 31, 2007, respectively. See Note 6 to Financial Statements for a more complete description of the program including the impact of the program on the financial statements for the periods presented and the contingencies that could result
in a reduction of funding available under the program.

Covenants and Restrictions under Financing Arrangements Each
of the TCEH Senior Secured Facilities and indentures governing the TCEH Notes and the EFH Corp. Notes contains covenants that could have a material impact on the liquidity and operations of EFH Corp. and its subsidiaries. A brief description of
certain of these covenants is provided below. See also Note 7 to Financial Statements for additional discussion of the covenants contained in these financing arrangements. Certain series of TCEHs pollution control revenue bonds, which were
remarketed in June 2008, include covenants similar to those discussed below.

When the term Adjusted EBITDA is referenced in
the covenant description below, it is a reference to, and generally synonymous with, the term Consolidated EBITDA that is used in the TCEH Senior Secured Facilities and a reference to, and generally synonymous with, the term
EBITDA that is used in the indentures governing the EFH Corp. Notes. Adjusted EBITDA (as used in the restricted payments covenants contained in the indentures governing the EFH Corp. Notes) for the twelve months ended June 30, 2008
totaled $4.9 billion for EFH Corp. See Exhibit 99(b) for a reconciliation of net income to Adjusted EBITDA for EFH Corp. for the six and twelve months ended June 30, 2008 and 2007. See glossary for definition of Adjusted EBITDA.

Maintenance CovenantUnder the TCEH Senior Secured Facilities, TCEH and its restricted subsidiaries are required to maintain
a consolidated secured debt to Adjusted EBITDA ratio (as defined in the TCEH Senior Secured Facilities) measured over a rolling four-quarter measurement period, which cannot exceed 7.25 to 1.00 for the first measurement period ending
September 30, 2008, declining over time to 5.75 to 1.00 for the measurement periods ending March 31, 2014 and thereafter. In the event that TCEH fails to comply with this ratio, it has the right to cure its non-compliance by soliciting a
cash investment in an amount necessary to become compliant.



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Debt Incurrence CovenantsUnder the indenture governing the EFH Corp. Notes,
EFH Corp. and its restricted subsidiaries (other than TCEH and its restricted subsidiaries) are not permitted to incur indebtedness or issue certain classes of stock unless, on a pro forma basis, after giving effect to such incurrence or issuance,
the fixed charge coverage ratio (as defined in the indenture) on a consolidated basis for EFH Corp. and its restricted subsidiaries is at least 2.0 to 1.0 or such incurrence or issuance is otherwise permitted in the indenture. The fixed charge
coverage ratio is generally defined as the ratio of Adjusted EBITDA of EFH Corp. to fixed charges of EFH Corp., in each case, on a consolidated basis. In addition, under this indenture, TCEH and its restricted subsidiaries are not permitted to incur
indebtedness or issue certain classes of stock unless, on a pro forma basis, after giving effect to such incurrence or issuance, the fixed charge coverage ratio (as defined in the indenture) on a consolidated basis for TCEH and its restricted
subsidiaries is at least 2.0 to 1.0 or such incurrence or issuance is otherwise permitted in the indenture. The fixed charge coverage ratio is generally defined as the ratio of Adjusted EBITDA of TCEH to fixed charges of TCEH, in each case, on a
consolidated basis.

Under the TCEH Senior Secured Facilities, TCEH and its restricted subsidiaries are generally not permitted to incur
indebtedness unless, on a pro forma basis, after giving effect to such incurrence, the Adjusted EBITDA to consolidated interest expense ratio (as defined in the credit agreement) is at least 2.0 to 1.0 or such incurrence is otherwise permitted in
the TCEH Senior Secured Facilities.

Under the indenture governing the TCEH Notes, TCEH and substantially all of its subsidiaries are not
permitted to incur indebtedness or issue certain classes of stock unless, on a pro forma basis, after giving effect to such incurrence or issuance, the fixed charge coverage ratio (as defined in the applicable debt agreements) on a consolidated
basis for TCEH and its restricted subsidiaries is at least 2.0 to 1.0 or such incurrence or issuance is otherwise permitted in the applicable debt agreements. The fixed charge coverage ratio is generally defined as the ratio of Adjusted EBITDA of
TCEH to fixed charges of TCEH, in each case, on a consolidated basis.

Restricted Payments/Limitation on InvestmentsUnder the indenture governing the EFH Corp. Notes, EFH Corp. and its restricted subsidiaries have limitations, subject to certain exceptions, on making restricted payments (as defined in the indenture), including certain dividends, equity
repurchases, debt repayments and investments, unless the amount of such restricted payments is less than a formula based on 50% of consolidated net income (as defined in the indenture) and unless a restricted payment coverage ratio (as defined in
the indenture), on a pro forma basis, after giving effect to such restricted payment, is at least 2.0 to 1.0 (or 2.0 to 1.0 of TCEH in the case of certain restricted payments by TCEH and its restricted subsidiaries) or as such restricted payment is
otherwise permitted under the indenture. The restricted payment coverage ratio is generally defined as the fixed charge coverage ratio of EFH Corp. and all of its restricted subsidiaries, including Oncor Holdings and its subsidiaries as restricted
subsidiaries for purposes of such calculation. However, in the case of payments to the Sponsor Group, the restricted payment coverage ratio is defined as the fixed charge coverage ratio of EFH Corp. and its restricted subsidiaries (but not including
Oncor Holdings and its subsidiaries as restricted subsidiaries for purposes of such calculation). Notwithstanding any other provisions of the indenture, EFH Corp. or its restricted subsidiaries may not pay any dividends or other returns to the
Sponsor Group unless, on a pro forma basis, after giving effect to such payment, the consolidated leverage ratio of EFH Corp. is equal to or less than 7.0 to 1.0. Consolidated leverage ratio is generally defined as the ratio of consolidated total
indebtedness (as defined in the indenture) of EFH Corp. to Adjusted EBITDA of EFH Corp., in each case, on a consolidated basis, excluding Oncor Holdings and its subsidiaries.

Under the TCEH Senior Secured Facilities and indentures governing the TCEH Notes, TCEH and its restricted subsidiaries have limitations (subject to
certain exceptions) on making restricted payments or investments (as defined in the applicable debt agreements), including certain dividends, equity repurchases, debt repayments, extensions of credit and certain types of investments.



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Financial Covenants, Credit Rating Provisions and Cross Default Provisions  The terms
of certain financing arrangements of subsidiaries of EFH Corp. contain financial covenants that require maintenance of leverage ratios and/or contain minimum net worth covenants. As of June 30, 2008, EFH Corp.s subsidiaries were in
compliance with all such applicable covenants.

Credit Ratings The rating agencies assign issuer credit ratings for EFH Corp.
and its subsidiaries. The issuer credit ratings as of August 13, 2008 for EFH Corp. and its subsidiaries, except for Oncor, are B-, B2 and B by S&P, Moodys and Fitch, respectively. The issuer credit ratings for Oncor are BBB+, Ba1 and
BBB- by S&P, Moodys and Fitch, respectively.

Additionally, the rating agencies assign credit ratings on certain debt securities
issued by EFH Corp. and its subsidiaries. The credit ratings assigned for debt securities issued by EFH Corp. and certain of its subsidiaries as of August 13, 2008 are presented below:



|                                 |  |      |  |         |  |      
|-------------------------------- |  | ---- |  | ------- |  | -----
|                                 |  | S&P  |  | Moodys |  | Fitch
|EFH Corp. (Senior Unsecured) (a) |  | B-   |  | B3      |  | B+   
|EFH Corp. (Unsecured)            |  | CCC  |  | Caa1    |  | CCC+ 
|EFC Holdings (Senior Unsecured)  |  | CCC  |  | Caa1    |  | CCC+ 
|TCEH (Senior Secured)            |  | B+   |  | Ba3     |  | BB   
|TCEH (Senior Unsecured) (b)      |  | CCC  |  | B3      |  | B+   
|TCEH (Unsecured)                 |  | CCC  |  | Caa1    |  | B-   
|Oncor (Senior Secured)           |  | BBB+ |  | Ba1     |  | BBB  
|Oncor (Senior Unsecured)         |  | BBB+ |  | Ba1     |  | BBB- 



|(a) | EFH Corp. Cash Pay Notes and EFH Corp. Toggle Notes
|--- | ---------------------------------------------------



|(b) | TCEH Cash Pay Notes and TCEH Toggle Notes
|--- | -----------------------------------------

All three
rating agencies have placed the ratings for EFH Corp. and its subsidiaries on stable outlook.

Oncor has entered into an
agreement to sell an approximate 20% minority stake to an investor group to further enhance Oncors separation from Texas Holdings, EFH Corp. and EFH Corp.s other subsidiaries. In connection with Oncors execution of the agreement,
S&P upgraded Oncors issuer credit rating and Oncors long-term debt ratings by two notches from BBB- to BBB+. Should the sale not be completed, EFH Corp. believes that Oncors long-term debt and issuer credit ratings could be
adversely affected, including a potential downgrade to below investment grade. See Note 16 to Financial Statements for additional information on the minority interest sale.

A rating reflects only the view of a rating agency, and is not a recommendation to buy, sell or hold securities. Ratings can be revised upward or
downward at any time by a rating agency if such rating agency decides that circumstances warrant such a change.

Material Credit Rating
Covenants and Credit Worthiness Effects on Liquidity  Based upon terms of certain retail and wholesale commodity contracts, as of July 31, 2008 TCEH could have been required to post up to $191 million in additional collateral support.

Certain transmission and distribution utilities in Texas have tariffs in place to assure adequate credit worthiness of any REP to support
the REPs obligation to collect securitization bond-related (transition) charges on behalf of the utility. Under these tariffs, as a result of the previous downgrade of TCEHs credit rating to below investment grade, TCEH is required to
post collateral support in an amount equal to estimated transition charges over specified time periods. The amount of collateral support required to be posted, as well as the time period of transition charges covered, varies by utility. Based on
requests to post collateral support from utilities that have been received by TCEH and its subsidiaries as of July 31, 2008, TCEH has posted collateral support in the form of letters of credit to the applicable utilities in an aggregate amount
equal to $25 million, with $16 million of this amount posted for the benefit of Oncor.



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The PUCT has rules in place to assure adequate credit worthiness of any REP. Under these rules, TCEH
maintains availability under its credit facilities of an amount no less than the aggregate amount of customer deposits and any advanced payments received from customers, and maintains equity in an amount that exceeds the minimum required by PUCT
rules. As of July 31, 2008, the amount of customer deposits received from customers held by TCEHs REP subsidiaries totaled approximately $120 million.

The RRC has rules in place to assure adequate credit worthiness of parties that have mining reclamation obligations. Under these rules, should the RRC determine that the credit worthiness of Luminant Generation
Company LLC is not sufficient to support Luminants reclamation obligations, TCEH may be required to post cash or letter of credit collateral support in an amount currently estimated to be approximately $600 million to $800 million. This amount
would vary depending upon numerous factors, including Luminant Generation Company LLCs credit worthiness and the level of mining reclamation obligations.

ERCOT also has rules in place to assure adequate credit worthiness of parties that schedule power on the ERCOT System. Under these rules, TCEH has posted collateral support, predominantly in the form of letters of
credit, totaling $245 million as of July 31, 2008 (which is subject to periodic adjustments).

Oncor and Texas Holdings agreed to the
terms of a stipulation with major interested parties to resolve all outstanding issues in the PUCT review related to the Merger. As part of this stipulation, TCEH is required to post a letter of credit in an amount equal to $170 million to secure
TXU Energys payment obligations to Oncor if two or more of Oncors credit ratings are below investment grade.

Other
arrangements of EFH Corp. and its subsidiaries, including Oncors credit facility, the accounts receivable securitization program (see Note 6 to Financial Statements) and certain leases, contain terms pursuant to which the interest rates
charged under the agreements may be adjusted depending on the credit ratings of certain EFH Corp. subsidiaries.

Material Cross Default
Provisions  Certain financing arrangements contain provisions that may result in an event of default if there were a failure under other financing arrangements to meet payment terms or to observe other covenants that could or does result
in an acceleration of payments due. Such provisions are referred to as cross default provisions.

A default by TCEH or any
restricted subsidiary in respect of indebtedness, excluding indebtedness relating to the sale of receivables program, in an aggregate amount in excess of $200 million may result in a cross default under the TCEH Senior Secured Facilities. Under
these facilities such a default may cause the maturity of outstanding balances ($22.206 billion at July 31, 2008) under such facility to be accelerated.

The indenture governing the $6.75 billion of TCEH Notes contains a cross acceleration provision where a payment default at maturity or on acceleration of principal indebtedness under any instrument or instruments of
TCEH and any of its restricted subsidiaries in the aggregate amount equal to or greater than $250 million may cause the acceleration of the TCEH Notes.

The indenture governing the $4.5 billion of EFH Corp. Notes contains a cross acceleration provision where a payment default at maturity or on acceleration of principal indebtedness under any instrument or instruments
of EFH Corp. and any of its restricted subsidiaries in the aggregate amount equal to or greater than $250 million may cause the acceleration of the EFH Corp. Notes.

The accounts receivable securitization program contains a cross default provision with a threshold of $200 million that applies in the aggregate to the originators, any parent guarantor of an originator and any
affiliate of TCEH acting as collection agent under the program. TXU Receivables Company and EFH Corporate Services Company, as collection agent, in the aggregate have a cross default threshold of $50,000. If any of the aforementioned defaults on
indebtedness of the applicable threshold were to occur, the program could terminate.



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EFH Corp. and its subsidiaries enter into energy-related and financial contracts, the master forms of
which contain provisions whereby an event of default or acceleration of settlement would occur if EFH Corp. or those subsidiaries were to default under an obligation in respect of borrowings in excess of thresholds, which vary, stated in the
contracts. The entities whose default would trigger cross default vary depending on the contract.

Each of TCEHs natural gas hedging
agreements that are secured with a lien on its assets on a pari passu basis with the TCEH Senior Secured Facilities contains a cross default provision. In the event of a default by TCEH or any of its subsidiaries relating to indebtedness (such
amounts varying by contract but ranging from $200 million to $250 million), then each counterparty under these hedging agreements would have the right to terminate its hedge agreement with TCEH and require all outstanding obligations under such
agreement to be settled.

In the event of a default by TCEH relating to indebtedness in an amount equal to or greater than $200 million
that results in the acceleration of such debt, then each counterparty under TCEHs interest rate swap agreements with a notional value totaling $17.145 billion would have the right to terminate its interest rate swap agreement with TCEH and
require all outstanding obligations under such agreement to be settled.

A default by Oncor or any subsidiary thereof in respect of
indebtedness in a principal amount in excess of $50 million may result in a cross default under its credit facility. Under this facility such a default may cause the maturity of outstanding balances ($1.630 billion at July 31, 2008) under such
facility to be accelerated.

Other arrangements, including leases, have cross default provisions, the triggering of which would not result
in a significant effect on liquidity.

OFF BALANCE SHEET ARRANGEMENTS

See discussion above under Sale of Accounts Receivable and in Note 6 to Financial Statements.

Also see Note 8 to Financial Statements regarding guarantees.

COMMITMENTS AND CONTINGENCIES

See Note 8 to Financial Statements for discussion of commitments and contingencies.

CHANGES IN ACCOUNTING STANDARDS

See Note 1 to Financial Statements for a discussion of changes in
accounting standards.



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REGULATION AND RATES

Regulatory Investigations and Reviews

See Note 8 to Financial Statements.

Wholesale Market Design

In August 2003, the
PUCT adopted a rule that, when implemented, will alter the wholesale market design in the ERCOT market. The rule requires ERCOT:



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



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



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



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



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



| |  |  | to use zonal prices for loads, and
| | - |  | ----------------------------------



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

ERCOT currently has a zonal wholesale market structure consisting of four geographic zones. The proposed location-based congestion-management market is referred to as a nodal market because wholesale
pricing would differ across the various nodes on the transmission grid. The implementation of a nodal market is being done in conjunction with transmission improvements designed to reduce current congestion. In 2006, the PUCT approved a set of Nodal
Protocols, which was filed by ERCOT and describes the operation of a wholesale nodal market, and set an implementation date of no later than January 1, 2009. ERCOT has delayed the implementation of the nodal market. EFH Corp. expects a new
schedule to be proposed in September 2008 and implementation to follow no earlier than April 2009.

In August 2006, the PUCT adopted an
interim order approving ERCOTs application for a surcharge imposed on all Qualified Scheduling Entities in the ERCOT market (including subsidiaries of TCEH) for the purpose of financing 38% of ERCOTs expected nodal implementation costs.
The surcharge took effect in October 2006. Additionally, at its January 15, 2008 meeting, the ERCOT Board of Directors agreed to request an increase in the surcharge to be effective in June 2008. ERCOT filed this request at the PUCT in March
2008 and it was approved by the PUCT in May 2008. EFH Corp. expects that the annual impact of the surcharge will be approximately $10 to $11 million in additional expenses; however, EFH Corp. is unable to predict the ultimate impact of the proposed
nodal wholesale market design on its operations or financial results.

Environmental Regulations

See discussion in Note 16 to Financial Statements regarding the invalidation of the EPAs Clean Air Interstate Rule and the related anticipated
impairment of intangible assets representing nitrogen oxide and sulfur dioxide emission allowances.

Matters with the PUCT

Stipulation Approved by the PUCTIn April 2008, the PUCT entered an
order on rehearing approving the terms of a stipulation relating to the filing in 2007 by Oncor and Texas Holdings of a Merger-related Joint Report and Application with the PUCT pursuant to Section 14.101 (b) of PURA and PUCT Substantive
Rule 25.75. As discussed in the 2007 Form 10-K, the stipulation required the filing of a rate case by Oncor no later than July 1, 2008 based on a test year ended December 31, 2007. Oncor filed the rate case with the PUCT on June 27,
2008 as discussed below. The order became final in June 2008. In July 2008, Nucor Steel filed an appeal of the PUCTs order in the 200thDistrict Court of Travis County, Texas. Oncor was named a defendant in the appeal and intends to vigorously defend this appeal.



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Rate CaseIn June 2008, Oncor filed for a rate review with the PUCT (Docket
No. 35717) and 204 cities, as committed to in the stipulation discussed above. If approved as requested, this review would result in an aggregate annual rate increase of approximately $275 million, the majority of which relates to increased
depreciation expense due to capital investments and recovery of costs that have been recorded as regulatory assets. Oncor filed a proposed procedural schedule in July 2008, with a hearing on the merits tentatively scheduled to commence on
January 13, 2009. Resolution of Oncors proposed increase is expected to occur in 2009.

Advanced Meter Rulemaking
 In 2005, the Texas Legislature passed legislation that authorized electric utilities to impose a surcharge to recover costs incurred in deploying advanced metering and meter information networks. Benefits of the advanced metering installation
include improved safety, on-demand meter reading, enhanced outage identification and restoration and system monitoring of voltages. In 2007, the PUCT issued its advanced metering rule to implement this legislation. This rule outlined the minimum
required functionality for an electric utilitys advanced metering systems to qualify for cost recovery under a surcharge. Subsequent to the issuance of the rule, the PUCT opened an implementation proceeding for market participants to fine-tune
the rule requirements, address the impacts of advanced metering deployment on retail and wholesale markets in ERCOT, and help ensure that retail customers receive benefits from advanced metering deployment. The implementation proceeding is expected
to conclude by the fall of 2008.

Advanced Metering Deployment Surcharge Case In May 2008, Oncor filed with the PUCT
(Docket No. 35718) a description and request for approval of its proposed advanced metering system deployment plan and its proposed surcharge for the recovery of its estimated future investment for advanced metering deployment. Oncors
plan provides for the full deployment of over three million advanced meters by the end of 2012 to all residential and most non-residential retail electric customers in Oncors service area. Oncor installed approximately 5,000 advanced meters in
a pilot program in the three months ended June 30, 2008, and expects to begin full deployment of advanced meters in the third quarter of 2008.

On August 11, 2008, a non-unanimous settlement was reached with the majority of the parties to the case. The proposed settlement includes the following major provisions (the comparisons are against amounts filed in the request):



| |  |  | a surcharge beginning January 1, 2009 and continuing for 11 years;
| | - |  | ------------------------------------------------------------------



| |  |  | a total revenue requirement over the surcharge period of $1.035 billion (reduced from $1.069 billion);
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | estimated capital expenditures for advanced metering facilities of $686 million (reduced from $690 million);
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | related operation and maintenance expenses for the surcharge period of $153 million (increased from $148 million);
| | - |  | ------------------------------------------------------------------------------------------------------------------



| |  |  | $28 million of additional savings (in addition to the $176 million in the original filing), and
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | an advanced metering cost recovery factor of $2.22 per month per residential retail customer (reduced from $2.29 per month) and varying from $2.41 to $5.18 per
month for non-residential retail customers (reduced from $2.49 to $5.35 per month).
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The PUCT is generally required to
approve or disapprove Oncors plan within 150 days, but the deadline may be extended by the PUCT for good cause. In addition, Oncor may, through subsequent reconciliation proceedings, request recovery of additional costs that are reasonable and
necessary. While there is a presumption that costs spent in accordance with a plan approved by the PUCT are reasonable and necessary, any costs that are found not to have been spent or properly allocated, or not to be reasonable or necessary, must
be refunded.

As of December 31, 2007, Oncor had installed approximately 600,000 automated meters in its service territory at a
capital cost of approximately $125 million. These meters are not part of the surcharge request, and Oncor is seeking recovery of the costs of these meters in the general rate case discussed above.



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Oncor Energy Efficiency Cost Recovery FilingIn June 2008, Oncor filed with
the PUCT a Request for Approval of Energy Efficiency Cost Recovery Factor (Docket No. 35634). Oncor requested a nonbypassable charge that, if approved, will be billed to REPs serving customer classes that receive services under Oncors
energy efficiency program. The proposed recovery factor is $0.22 per month for each residential customer and will vary for non-residential customers. The proposed charge will allow Oncor, in a timely manner, to recover reasonable and necessary costs
incurred in administering its energy efficiency program. If approved, the charge would go into effect on December 29, 2008, coinciding with the start of Oncors January 2009 billing month cycle.

In July 2008, a PUCT order was issued, establishing a schedule for the case, including an August 4, 2008 deadline to request a hearing, an
August 8, 2008 deadline for a PUCT Staff recommendation (if no hearing is requested) and an August 13, 2008 deadline for the filing of a proposed order. On August 1, 2008, the Steering Committee of Cities filed a request for a hearing
in the case. On August 5, 2008, the case was referred to the State Office of Administrative Hearings (SOAH). SOAH will set a procedural schedule after the PUCT adopts a preliminary order, which is expected to occur at its August 28, 2008
open meeting.

Transmission Rates  In order to recover increases in its transmission costs, including
fees paid to other transmission service providers, Oncor is allowed to request an update twice a year to the transmission cost recovery factor (TCRF) component of its retail delivery rate charged to REPs. In January 2008, an application was filed to
increase the TCRF, which was administratively approved in February 2008 and became effective March 1, 2008. This increase is expected to increase annualized revenues by $12 million. In July 2008, an application was filed to increase the TCRF,
which is expected to be approved in August 2008 and become effective September 1, 2008. This increase is expected to increase annualized revenues by $26 million.

In February 2008, Oncor filed an application for an interim update of its wholesale transmission rate. The PUCT approved Oncors application at its
April 25, 2008 open meeting and the new rate went into effect immediately. Annualized revenues are expected to increase by approximately $39 million. Approximately $25 million of this increase is recoverable through transmission rates charged
to wholesale customers, and the remaining $14 million is recoverable from REPs through the TCRF component of Oncors delivery rates charged to REPs and is included in the filing discussed immediately above.

Competitive Renewable Energy Zones (CREZ)  In the first quarter of 2007, the PUCT initiated a docket to identify the transmission
facilities necessary to interconnect future renewable energy generating facilities. As part of the docket, the PUCT considered which zones would contain the best renewable energy sources. In July 2007, the PUCT voted to designate zones with
generation potential of over 20,000 MW.

The PUCT also opened a project to evaluate potential transmission service providers who are
interested in constructing the designated transmission facilities. In connection with this project, Oncor indicated to the PUCT its interest in constructing any designated transmission facilities, particularly those within its traditional service
territory and those that interconnect with Oncors transmission facilities.

In the fourth quarter of 2007, the PUCT issued its
Proposal for Publication for a new rule regarding the Selection of Transmission Service Providers (TSP) to establish a process for entities interested in constructing transmission improvements to submit expressions of interest to the PUCT. The rule
also establishes the procedure whereby the PUCT selects the entities responsible for constructing the transmission improvements, and specifies requirements to ensure that such entities complete the ordered improvements in a timely and cost-effective
manner. The TSP selection rule was approved by the PUCT in May 2008, and the order adopting the new rule was issued in June 2008.



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In March 2008, the PUCT issued an Order Requiring Settlement Conference regarding the selection of
transmission service providers to construct facilities necessary to serve CREZ. The Order specifies the intent of the PUCT to continue the existing rulemaking process, but also initiates a parallel process by ordering a settlement conference
regarding the selection of transmission service providers for the CREZ transmission facilities. All entities that are interested in constructing and operating CREZ transmission facilities are required to participate in the settlement conference.
Oncor is participating in the settlement conference.

In April 2008, ERCOT filed the results of a CREZ Transmission Optimization
Study with the PUCT. The study included four scenarios of wind capacity, ranging from approximately 12,000 MW to 25,000 MW, with estimated transmission investment across ERCOT of $3.0 billion to $6.4 billion. In July 2008, the PUCT approved a
scenario with an estimated transmission facilities cost of $4.9 billion to accommodate over 18,000 MW of wind capacity. The PUCT will select the transmission service providers that will construct the facilities.

In July 2008, Oncor, AEP Texas Central Company, AEP Texas North Company, Electric Transmission Texas, Lower Colorado River Authority Transmission
Services Corp. and Sharyland Utilities, LP jointly filed an Initial Statement of Interest with the PUCT indicating their desire to construct and operate all of the CREZ transmission facilities and intent to file CREZ Transmission Plan proposals. As
part of this filing, Oncor proposes to build at least 1,000 miles of transmission lines and facilities in and around Oncors service territory, which Oncor estimates will require an investment of more than $2 billion. Other interested
transmission service providers have also filed statements of interest. Oncor plans to file its CREZ Transmission proposal in September 2008. Hearings on the CREZ Transmission Plan proposals are scheduled to commence December 1, 2008. Oncor
cannot predict the amount of transmission facilities in CREZ, if any, that it will be awarded and construct.

Summary

Although EFH Corp. cannot predict future regulatory or legislative actions or any changes in economic and securities market conditions, no changes are
expected in trends or commitments, other than those discussed in this report, which might significantly alter its basic financial position, results of operations or cash flows.



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|Item 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- | ----------------------------------------------------------

Market risk is the risk that EFH Corp. may experience a loss in value as a result of changes in market conditions affecting factors such as commodity prices and interest rates, to which EFH Corp. is exposed in the ordinary course of
business. EFH Corp.s exposure to market risk is affected by a number of factors, including the size, duration and composition of its energy and financial portfolio, as well as the volatility and liquidity of markets. EFH Corp. enters into
instruments such as interest rate swaps to manage interest rate risk related to its indebtedness, as well as exchange traded, over-the-counter contracts and other contractual commitments to manage commodity price risk as part of its wholesale
activities. EFH Corp.s interest rate risk discussed below was significantly affected by debt issuances in connection with the Merger.

Risk
Oversight

TCEHs wholesale operation manages the commodity price, counterparty credit and commodity-related operational risk
related to the unregulated energy business within limitations established by senior management and in accordance with EFH Corp.s overall risk management policies. Interest rate risk is managed centrally by the corporate treasury function.
Market risks are monitored by risk management groups that operate independently of the wholesale commercial operations, utilizing defined practices and analytical methodologies. These techniques measure the risk of change in value of the portfolio
of contracts and the hypothetical effect on this value from changes in market conditions and include, but are not limited to, Value at Risk (VaR) methodologies. Key risk control activities include, but are not limited to, transaction review and
approval (including credit review), operational and market risk measurement, validation of transaction capture, portfolio valuation and reporting, including mark-to-market valuation, VaR and other risk measurement metrics.

EFH Corp. has a corporate risk management organization that is headed by a Chief Risk Officer. The Chief Risk Officer, through his designees, enforces
applicable risk limits, including the respective policies and procedures to ensure compliance with such limits and evaluates the risks inherent in the various businesses of EFH Corp. and their associated transactions.

Commodity Price Risk

EFH Corp.s
businesses are subject to the inherent risks of market fluctuations in the price of electricity, natural gas and other energy-related products they market or purchase. EFH Corp.s businesses actively manage their portfolio of owned generation
assets, fuel supply and retail sales load to mitigate the near-term impacts of these risks on results of operations. These businesses, similar to other participants in the market, cannot fully manage the long-term value impact of structural declines
or increases in natural gas and power prices and spark spreads (differences between the market price of electricity and its cost of production).

In managing energy price risk, subsidiaries of EFH Corp. enter into a variety of market transactions including, but not limited to, short- and long-term contracts for physical delivery, exchange traded and over-the-counter financial
contracts and bilateral contracts with customers. Activities in the wholesale operations include hedging, the structuring of long-term contractual arrangements and proprietary trading. The wholesale operation continuously monitors the valuation of
identified risks and adjusts positions based on current market conditions. EFH Corp. strives to use consistent assumptions regarding forward market price curves in evaluating and recording the effects of commodity price risk.

Long-Term Hedging Program See discussion above under Significant Activities and Events for an update of the program,
including potential effects on reported results.



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VaR Methodology  A VaR methodology is used to measure the amount of market risk that
exists within the portfolio under a variety of market conditions. The resultant VaR produces an estimate of a portfolios potential for loss given a specified confidence level and considers among other things, market movements utilizing
standard statistical techniques given historical and projected market prices and volatilities.

A Monte Carlo simulation methodology is
used to calculate VaR and is considered by management to be the most effective way to estimate changes in a portfolios value based on assumed market conditions for liquid markets. The use of this method requires a number of key assumptions,
such as use of (i) an assumed confidence level; (ii) an assumed holding period (i.e. the time necessary for management action, such as to liquidate positions); and (iii) historical estimates of volatility and correlation data.

Trading VaR  This measurement estimates the potential loss in fair value, due to changes in market conditions, of all
contracts entered into for trading purposes based on a 95% confidence level and an assumed holding period of five to 60 days.



|                               |  |                               |    |                             |   |   
|------------------------------ |  | ----------------------------- | -- | --------------------------- | - | --
|                               |  | Successor                    
|                               |  | Six Months EndedJune 30,
2008 |    | Year EndedDecember 31, 2007
|Month-end average Trading VaR: |  | $                             | 9  |                             | $ | 9 
|Month-end high Trading VaR:    |  | $                             | 15 |                             | $ | 14
|Month-end low Trading VaR:     |  | $                             | 5  |                             | $ | 6 

VaR for Energy-Related Contracts Subject to Mark-to-Market (MtM) Accounting 
This measurement estimates the potential loss in fair value, due to changes in market conditions, of all contracts marked-to-market in net income (principally hedges not accounted for as cash flow hedges and trading positions), based on a 95%
confidence level and an assumed holding period of five to 60 days.



|                           |  |                               |       |                             |   |      
|-------------------------- |  | ----------------------------- | ----- | --------------------------- | - | -----
|                           |  | Successor                    
|                           |  | Six Months EndedJune 30,
2008 |       | Year EndedDecember 31, 2007
|Month-end average MtM VaR: |  | $                             | 2,310 |                             | $ | 1,081
|Month-end high MtM VaR:    |  | $                             | 3,549 |                             | $ | 1,576
|Month-end low MtM VaR:     |  | $                             | 1,087 |                             | $ | 322  

Earnings at Risk (EaR) This measurement estimates the potential reduction of
pretax earnings for the periods presented, due to changes in market conditions, of all energy-related contracts marked-to-market in net income and contracts not marked-to-market in net income that are expected to be settled within the fiscal year
(physical purchases and sales of commodities). For this purpose, cash flow hedges are also included with transactions that are not marked-to-market in net income. A 95% confidence level and a five to 60 day holding period are assumed in determining
EaR.



|                       |  |                               |       |                             |   |      
|---------------------- |  | ----------------------------- | ----- | --------------------------- | - | -----
|                       |  | Successor                    
|                       |  | Six Months EndedJune 30,
2008 |       | Year EndedDecember 31, 2007
|Month-end average EaR: |  | $                             | 2,338 |                             | $ | 1,070
|Month-end high EaR:    |  | $                             | 3,916 |                             | $ | 1,559
|Month-end low EaR:     |  | $                             | 1,069 |                             | $ | 318  

The increases in the risk measures (MtM VaR and EaR) above were driven by higher natural gas
prices and significant increases in market volatility.



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Interest Rate Risk

As discussed in Note 7 to the Financial Statements, EFH Corp. has entered into variable-to-fixed interest rate swaps with respect to $15.05 billion principal amount of debt. As of June 30, 2008, the potential
reduction of annual pretax earnings due to a one-point increase in interest rates totaled approximately $41 million, taking into account the interest rate swaps.

Credit Risk

Credit Risk Credit risk relates to the risk of loss associated with nonperformance
by counterparties. EFH Corp. and its subsidiaries maintain credit risk policies with regard to their counterparties to minimize overall credit risk. These policies prescribe practices for evaluating a potential counterpartys financial
condition, credit rating and other quantitative and qualitative credit criteria and specify authorized risk mitigation tools including, but not limited to, use of standardized master netting contracts and agreements that allow for netting of
positive and negative exposures associated with a single counterparty. EFH Corp. has processes for monitoring and managing credit exposure of its businesses including methodologies to analyze counterparties financial strength, measurement of
current and potential future exposures and contract language that provides rights for netting and set-off. Credit enhancements such as parental guarantees, letters of credit, surety bonds and margin deposits are also utilized. Additionally,
individual counterparties and credit portfolios are managed to assess overall credit exposure. This evaluation results in establishing exposure limits or collateral requirements for entering into an agreement with a counterparty that creates
exposure. Additionally, EFH Corp. has established controls to determine and monitor the appropriateness of these limits on an ongoing basis. Prospective material adverse changes in the payment history or financial condition of a counterparty or
downgrade of its credit quality result in the reassessment of the credit limit with that counterparty. This process can result in the subsequent reduction of the credit limit or a request for additional financial assurances.

Credit Exposure  EFH Corp.s net exposure to credit risk associated with trade accounts receivable (retail and wholesale) and
net asset positions arising from hedging and trading activities totaled $2.542 billion at June 30, 2008.

Assets subject to credit
risk as of June 30, 2008 include $622 million in accounts receivable from the retail sale of electricity to residential and small business customers. The risk of material loss (after consideration of bad debt allowances) from nonperformance by
these customers is unlikely based upon historical experience. Allowances for uncollectible accounts receivable are established for the potential loss from nonpayment by these customers based on historical experience and market or operational
conditions.

Most of the remaining credit exposure is with large business retail customers and wholesale counterparties. These
counterparties include energy companies, financial institutions, electric utilities, independent power producers, oil and gas producers, local distribution companies and energy trading and marketing companies. As of June 30, 2008, the exposure
to credit risk from these customers and counterparties totaled $1.654 billion taking into account standardized master netting contracts and agreements described above and $218 million in credit collateral (cash, letters of credit and other security
interests) held by EFH Corp. subsidiaries.

Of this $1.654 billion net exposure, 77% is with investment grade customers and counterparties,
as determined using publicly available information including major rating agencies published ratings and EFH Corp.s internal credit evaluation process. Those customers and counterparties without a S&P rating of at least BBB- or
similar rating from another major rating agency are rated using internal credit methodologies and credit scoring models to estimate a S&P equivalent rating. EFH Corp. routinely monitors and manages its credit exposure to these customers and
counterparties on this basis.

In addition, Oncor has exposure to credit risk totaling $266 million at June 30, 2008, of which $231
million represents potential nonperformance by nonaffiliated REPs. This exposure consists almost entirely of noninvestment grade trade accounts receivable. Oncor does not have any customers that represent more than 10% of the nonaffiliated trade
accounts receivable at June 30, 2008.



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The following table presents the distribution of credit exposure as of June 30, 2008, for retail
trade accounts receivable from large business customers, wholesale trade accounts receivable and net asset positions arising from hedging and trading activities by investment grade and noninvestment grade, credit quality and maturity.



|                    |  |                                |       |   |                      |   |             |  |   |                          |   |                  |   |                    |  |       |     |  |   |     |  |   |       |  | 
|------------------- |  | ------------------------------ | ----- | - | -------------------- | - | ----------- |  | - | ------------------------ | - | ---------------- | - | ------------------ |  | ----- | --- |  | - | --- |  | - | ----- |  | 
|Successor          
|                    |  |                                |       |   |                      |   |             |  |   | Net Exposure by Maturity
|                    |  | ExposurebeforeCreditCollateral |       |   | CreditCollateral (a) |   | NetExposure |  |   | 2 years orless           |   | Between2-5 years |   | Greaterthan 5years |  | Total
|Investment grade    |  | $                              | 1,465 |   |                      | $ | 184         |  | $ | 1,281                    |   |                  | $ | 792                |  | $     | 110 |  | $ | 379 |  | $ | 1,281
|Noninvestment grade |  |                                | 407   |   |                      |   | 34          |  |   | 373                      |   |                  |   | 209                |  |       | 22  |  |   | 142 |  |   | 373  
|                    |  |                                |       |   |                      |   |             |  |   |                          |   |                  |   |                    |  |       |     |  |   |     |  |   |       |  | 
|Totals              |  | $                              | 1,872 |   |                      | $ | 218         |  | $ | 1,654                    |   |                  | $ | 1,001              |  | $     | 132 |  | $ | 521 |  | $ | 1,654
|                    |  |                                |       |   |                      |   |             |  |   |                          |   |                  |   |                    |  |       |     |  |   |     |  |   |       |  | 
|Investment grade    |  |                                | 78    | % |                      |   |             |  |   | 77                       | % |                  |   |                    |  |       |     |  |   |     |  |   |      
|Noninvestment grade |  |                                | 22    | % |                      |   |             |  |   | 23                       | % |                  |   |                    |  |       |     |  |   |     |  |   |      



|(a) | Does not include liens held by EFH Corp. on counterparty assets in relation to $25 million of net exposure.
|--- | -----------------------------------------------------------------------------------------------------------

EFH Corp. does not anticipate any material adverse effect on its financial position or results of operations due to nonperformance by any customer or
counterparty.

EFH Corp.s subsidiaries had credit exposure to three counterparties each having an exposure greater than 10% of the
net $1.654 billion credit exposure. These three counterparties represented 12%, 11% and 11%, respectively, of the net exposure. EFH Corp. views exposure to these three counterparties to be within an acceptable level of risk tolerance as they are
rated investment grade; however, this concentration increases the risk that a default would have a material effect on EFH Corp.s net income and cash flows.

With respect to credit risk related to the long-term hedging program, over 92% of the transaction volumes are with counterparties with an A credit rating or better. Additionally, EFH Corp. has potential credit
concentration risk related to the limited number of counterparties in the program. The transactions with these counterparties contain certain credit rating provisions that would require the counterparties to post collateral in the event of
significant declines in natural gas prices and a material downgrade in the credit rating of the counterparties. EFH Corp. views the potential concentration of risk with these counterparties to be within an acceptable risk tolerance due to the strong
financial profile of the counterparties and their respective A or above credit rating.



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FORWARD-LOOKING STATEMENTS

This report and other presentations made by EFH Corp. contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other
than statements of historical facts, that are included in this report, or made in presentations, in response to questions or otherwise, that address activities, events or developments that EFH Corp. expects or anticipates to occur in the future,
including such matters as projections, capital allocation, future capital expenditures, business strategy, competitive strengths, goals, future acquisitions or dispositions, development or operation of power production assets, market and industry
developments and the growth of EFH Corp.s business and operations (often, but not always, through the use of words or phrases such as will likely result, are expected to, will continue, is
anticipated, estimated, projection, target, outlook), are forward-looking statements. Although EFH Corp. believes that in making any such forward-looking statement its expectations are based on
reasonable assumptions, any such forward-looking statement involves uncertainties and is qualified in its entirety by reference to the discussion of risk factors discussed under Risk Factors in the 2007 Form 10-K and this Form 10-Q and
the following important factors, among others, that could cause the actual results of EFH Corp. to differ materially from those projected in such forward-looking statements:



| |  |  | prevailing governmental policies and regulatory actions, including those of the Texas Legislature, the Governor of Texas, the US Congress, FERC, the PUCT, the RRC,
the NRC, the EPA and the TCEQ, with respect to, among other things:
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | allowed prices;
| | - |  | ---------------



| |  |  | allowed rates of return;
| | - |  | ------------------------



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



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



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



| |  |  | operations of mines;
| | - |  | --------------------



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



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



| |  |  | decommissioning costs;
| | - |  | ----------------------



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



| |  |  | changes in tax laws and policies, and
| | - |  | -------------------------------------



| |  |  | changes in and compliance with environmental and safety laws and policies, including climate change initiatives;
| | - |  | ----------------------------------------------------------------------------------------------------------------



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



| |  |  | general industry trends;
| | - |  | ------------------------



| |  |  | EFH Corp.s ability to attract and retain profitable customers;
| | - |  | ---------------------------------------------------------------



| |  |  | EFH Corp.s ability to profitably serve its customers;
| | - |  | ------------------------------------------------------



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



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



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



| |  |  | unanticipated changes in market heat rates in the ERCOT electricity market;
| | - |  | ---------------------------------------------------------------------------



| |  |  | EFH Corp.s ability to effectively hedge against changes in commodity prices, market heat rates and interest rates;
| | - |  | -------------------------------------------------------------------------------------------------------------------



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



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



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



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



| |  |  | unanticipated changes in interest rates, commodity prices, rates of inflation or foreign exchange rates;
| | - |  | --------------------------------------------------------------------------------------------------------



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



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



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



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| |  |  | inability of various counterparties to meet their obligations with respect to EFH Corp.s financial instruments;
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | changes in technology used by and services offered by EFH Corp.;
| | - |  | ----------------------------------------------------------------



| |  |  | significant changes in EFH Corp.s relationship with its employees, including the availability of qualified personnel, and the potential adverse effects if
labor disputes or grievances were to occur;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in assumptions used to estimate future executive compensation payments;
| | - |  | -------------------------------------------------------------------------------



| |  |  | significant changes in critical accounting policies;
| | - |  | ----------------------------------------------------



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



| |  |  | the ability of EFH Corp. to implement cost reduction initiatives, and
| | - |  | ---------------------------------------------------------------------



| |  |  | with respect to EFH Corp.s lignite coal-fueled generation construction and development program, more specifically, EFH Corp.s ability to fund such
investments, changes in competitive market rules, unexpected judicial rulings, changes in environmental laws or regulations, changes in electric generation and emissions control technologies, changes in projected demand for electricity, the ability
of EFH Corp. and its contractors to attract and retain, at projected rates, skilled labor for constructing the new generating units, changes in wholesale electricity prices or energy commodity prices, transmission capacity and constraints, supplier
performance risk, changes in the cost and availability of materials necessary for the construction program and the ability of EFH Corp. to manage the significant construction program to a timely conclusion with limited cost overruns.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Any forward-looking statement speaks only as of the date on which it is made, and EFH Corp. undertakes no obligation to
update any forward-looking statement to reflect events or circumstances after the date on which it is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for EFH Corp. to predict
all of them; nor can EFH Corp. 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.



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|Item 4T. | CONTROLS AND PROCEDURES.
|-------- | ------------------------

An evaluation was
performed under the supervision and with the participation of EFH Corp.s management, including the principal executive officers and principal financial officer, of the effectiveness of the design and operation of the disclosure controls and
procedures in effect as of the end of the current period included in this quarterly report. Based on the evaluation performed, EFH Corp.s management, including the principal executive officer and principal financial officer, concluded that the
disclosure controls and procedures were effective. During the most recent fiscal quarter covered by this quarterly report, there has been no change in EFH Corp.s internal control over financial reporting that has materially affected, or is
reasonably likely to materially affect, EFH Corp.s internal control over financial reporting.

PART II. OTHER INFORMATION



|Item 1. | LEGAL PROCEEDINGS.
|------- | ------------------

Reference is made to the
discussion in Note 8 regarding legal proceedings.



|Item 1A. | RISK FACTORS.
|-------- | -------------

Other than the risk factors
presented below, there have been no material changes from the risk factors disclosed under the heading Risk Factors in Item 1A of the 2007 Form 10-K, except for information disclosed elsewhere in this Form 10-Q that provides factual
updates to risk factors contained in the 2007 Form 10-K. The risk factors below update, and should be read in conjunction with, the risk factors disclosed in the 2007 Form 10-K.

EFH Corp.s revenues and results of operations may be adversely impacted by decreases in market prices of power due to the development of wind generation power sources.

A significant amount of investment in wind generation in the ERCOT market over the past few years has increased overall wind power generation capacity.
Generally, the increased capacity has led to lower wholesale electricity prices (driven by lower market heat rates) in the zones at or near wind generation development, especially in, but not exclusive to, the West Zone where most of the new wind
power generation is located. As a result, the profitability of EFH Corp.s generation facilities and power purchase contracts, including certain wind generation power purchase contracts, have been impacted by the effects of the wind power
generation, and the value could significantly decrease if wind power generation has a material sustained effect on market heat rates.

EFH
Corp.s revenues and results of operations may be adversely impacted as ERCOT transitions the current zonal market structure to a nodal wholesale market.

Substantially all of EFH Corp.s competitive businesses are located in the ERCOT market, which is currently in the process of transitioning from a zonal market structure with four Congestion Management Zones to a
nodal market structure that will directly manage congestion on a localized basis. In a nodal market, the prices received and paid for power will be based on pricing determined at specific interconnection points on the transmission grid (i.e.,
Locational Marginal Pricing), which could result in lower revenues or higher costs for EFH Corp.s competitive businesses. This market structure change could have a significant impact on the profitability and value of EFH Corp.s
competitive businesses depending on how the Locational Marginal Pricing develops.



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Oncors credit ratings could negatively affect Oncors ability to access capital.

Downgrades in Oncors long-term debt ratings generally cause borrowing costs to increase and the potential pool of investors and funding sources to
decrease. In connection with the Merger, Fitch, Moodys and S&P downgraded Oncors long-term debt ratings. On August 12, 2008, Oncor entered into an agreement for the proposed sale of an approximate 20% minority stake in Oncor.
The proposed sale of the approximate 20% minority stake is intended to further enhance Oncors separation from Texas Holdings, EFH Corp. and EFH Corp.s other subsidiaries. In addition, upon announcement of the agreement to sell the
minority stake, S&P upgraded Oncors issuer ratings and credit ratings for senior unsecured debt and senior secured debt from BBB- to BBB+. Completion of the proposed sale of the minority stake is subject to various conditions, including
the receipt of certain regulatory approvals. Neither EFH Corp. nor Oncor can make assurances that the proposed sale will be completed. Should the sale not be completed, Oncors long-term debt ratings could be adversely affected, including a
downgrade to non-investment grade. In the event any downgrade occurs and causes Oncors borrowing costs to increase, Oncor may not be able to recover such increased costs as a result of the commitment it made to the PUCT in connection with the
Merger that it will, in its 2008 general rate case, seek recovery for a cost of debt that does not exceed its actual cost of debt immediately prior to the announcement of the Merger.

Most of Oncors large customers, suppliers and counterparties require an expected level of creditworthiness in order for them to enter into
transactions. If Oncors credit ratings decline, the costs to operate Oncors businesses would likely increase because counterparties could require the posting of collateral in the form of cash-related instruments, or counterparties could
decline to do business with Oncor.



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds
|------- | -----------------------------------------------------------

In the six months ended June 30, 2008, EFH Corp. issued an aggregate of approximately 1.36 million shares of its common stock to, or for the benefit of, certain of its officers, directors and employees for an aggregate
consideration of approximately $6.8 million, including an aggregate of 0.6 million shares of its common stock that were issued during the three months ended March 31, 2008 for an aggregate consideration of $3 million.

These issuances were exempt from the registration requirements of the Securities Act, pursuant to Section 4(2) of the Securities Act, Regulation D
of the Securities Act and/or Rule 701 promulgated under of the Securities Act, as transactions by an issuer not involving a public offering and/or transactions pursuant to compensatory benefit plans and contracts relating to compensation as provided
under Rule 701. There were no underwriters involved in connection with the issuance of these securities.



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|Item 5. | Other Information
|------- | -----------------

Oncor Minority Interest Sale

On August 12, 2008, Oncor entered into a Contribution and Subscription Agreement (Contribution Agreement), with Texas
Transmission Investment LLC (Buyer), an entity indirectly owned by a private investment group led by the OMERS Administration Corporation, acting through its infrastructure investment entity Borealis Infrastructure Management Inc., and the
Government of Singapore Investment Corporation Pte Ltd., acting through its private equity and infrastructure subsidiary GIC Special Investments Pte Ltd., pursuant to which Oncor agreed to issue and sell between 19.75% and 19.97% of its equity
interests to the Buyer (Issuance).

The consideration for the equity interests to be issued and sold to the Buyer in the Issuance will be
approximately $1.254 billion (assuming the purchase by the Buyer of a 19.75% equity interest in Oncor). At the closing of the Issuance, Oncor also expects to offer and sell up to 0.22% of its outstanding equity interests to certain members of
Oncors management team (Management Equity Offering). Accordingly, immediately after the closing of the Issuance and the Management Equity Offering, EFH Corp. will indirectly own 80.03% of Oncor, Oncor management will own approximately 0.22% of
Oncor and the Buyer will own approximately 19.75% of Oncor. The Buyer will purchase any portion of the 0.22% of Oncors outstanding equity interests not purchased in the Management Equity Offering, with a pro rata increase in the aggregate
purchase price to be paid by the Buyer.

The obligation of the Buyer to consummate the Issuance is not subject to any financing covenants
or conditions. The proceeds received by Oncor from the Buyer upon completion of the Issuance and the Management Equity Offering are expected to be distributed to EFH Corp. Under the terms of EFH Corp.s credit facilities, upon such
distribution, EFH Corp. must repay all outstanding intercompany loans from TCEH. As of June 30, 2008, $468 million of such intercompany loans were outstanding. Regarding any excess proceeds, EFH Corp. may retain the funds for general corporate
purposes, use the funds for repayment of debt, use the funds for certain investments, or contribute the funds to TCEH to be used for the same purposes.

The Contribution Agreement contains customary representations and warranties by Oncor and the Buyer. In addition, each of the parties has agreed to customary covenants, including, among others, the following:
(i) Oncor will provide the Buyer and its representatives access and information prior to the completion of the Issuance, (ii) Oncor has agreed that prior to the Issuance it will operate its business in the ordinary course consistent with
past practice and to preserve intact in all material respects the business and relationships of Oncor and its subsidiary with third parties, (iii) the Buyer has agreed not to take any actions that are reasonably likely to prevent or materially
delay the completion of the Issuance, (iv) the parties have agreed to seek required consents and use reasonable best efforts to satisfy the closing conditions and (v) the parties have agreed to enter into certain other agreements described
below at the closing.

Each of the parties obligations to complete the Issuance are subject to various conditions, including, among
others the following: (i) the determination by the Committee on Foreign Investment in the United States (CFIUS) that the transactions contemplated by the Contribution Agreement are not subject to Section 721 of the Defense Production Act
of 1950, as amended, or the determination by CFIUS that there are no unresolved national security concerns with respect to such transactions and action under Section 721 is therefore concluded, or receipt of notice that the President of the
United States will not act to prohibit, suspend or otherwise prevent such transactions, (ii) the receipt by the Buyer of an irrevocable and legally binding equity commitment from an additional third-party investor to acquire between 1% and 5%
(up to approximately $63 million) of the capital stock and shareholder debt of Buyers direct parent and (iii) the confirmation that, as of completion of the Issuance, certain of the Buyers indirect investors do not own certain
direct or indirect equity interests in EFH Corp. EFH Corp. currently expects that the Issuance will close in the fourth quarter of 2008; however, there can be no assurance that the Issuance will be completed.



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The Contribution Agreement may be terminated: (i) by mutual consent of the parties if the Issuance
has not occurred by December 31, 2008 or (ii) by either Oncor or the Buyer, as the case may be, upon certain material breaches of the terms of the Contribution Agreement by the other party.

At completion of the Issuance, the members of Oncor are expected to enter into a Second Amended and Restated Limited Liability Company Agreement of Oncor
(LLC Agreement) substantially in the form attached as an exhibit to the Contribution Agreement. In addition, Oncor and certain other parties, including the Buyer, have agreed to enter into an Investor Rights Agreement, a Registration Rights
Agreement and an Amended and Restated Tax Sharing Agreement (Tax Sharing Agreement), each substantially in the respective form attached as an exhibit to the Contribution Agreement.

The LLC Agreement will, among other things, set out the members respective governance rights in respect of their ownership interests in Oncor.
Among other things, the LLC Agreement will provide for the management of Oncor by a board of directors consisting of 11 members, including at least six Independent Directors (as defined in the LLC Agreement), two directors designated directly or
indirectly by the Buyer, subject to certain conditions, two directors designated indirectly by EFH Corp. and one director that is also an officer of Oncor.

The LLC Agreement will also prohibit Oncor and its subsidiaries from taking certain material actions without prior special approvals by the members, some or all of the Independent Directors and/or the directors
designated by one or more of the members. It also requires that any changes to Oncors procedures and limitations on declaring and paying distributions be approved by (i) a majority of the independent directors, (ii) all of the EFH
Corp. directors and (iii) the Buyer director(s) present and voting, provided that at least one Buyer director must be present and voting in order to approve such matter. In addition, any annual budget with an aggregate amount of the capital and
operating and maintenance expenditures that is more than 10% less than the capital and operating and maintenance expenditures in the annual budget for the immediately prior fiscal year must be approved by (i) a majority of the independent
directors and (ii) the Buyer director(s) present and voting, provided that at least one Buyer director must be present and voting in order to approve such action.

The Investor Rights Agreement will govern certain rights of certain members of Oncor and EFH Corp. arising out of their direct or indirect ownership of Oncor membership interests, including, without limitation,
transfers of Oncor membership interests and restrictions thereon. The Registration Rights Agreement will grant customary registration rights to certain members of Oncor.

The Tax Sharing Agreement will provide a contractual framework for cash taxes paid by Oncor to EFH Corp., as the indirect parent company of Oncor, and certain of Oncors members, including the Buyer.

The foregoing descriptions of the Contribution Agreement and the forms of the LLC Agreement, the Investor Rights Agreement, the Registration Rights
Agreement and the Tax Sharing Agreement are not complete and are qualified in their entirety by reference to the copy of the Contribution Agreement filed by Oncor on Form 8-K with the SEC on August 13, 2008.

The equity interests in Oncor issued to the Buyer in the Issuance will be restricted securities and will be issued in a private transaction exempt from
the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(2) thereof and Regulation D thereunder.



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|Item 6. | Exhibits
|------- | --------



| | (a) | Exhibits filed or furnished as part of Part II are:
| | --- | ---------------------------------------------------



|         |  |                                                                      |  |           |  |   |  |                                                                                                                                                           
|-------- |  | -------------------------------------------------------------------- |  | --------- |  | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibits |  | Previously FiledWith File Number*                                    |  | AsExhibit |  |   |  |                                                                                                                                                           
|         |  |                                                                     
|(10)     |  | Material Contracts.                                                  |  |          
|         | 
|         |  | Management Contracts; Compensatory Plans, Contracts and Arrangements
|         |  |                                                                      |  |          
|10(a)    |  |                                                                      |  |           |  |  |  | Employment Agreement, dated May 23, 2008, by and between M. Rizwan Chand and Energy Future Holdings Corp.                                                 
|         |  |                                                                      |  |          
|10(b)    |  | 1-12833 Form 8-K (filed June 6, 2008)                                |  | 10.2      |  |  |  | Amended and Restated Employment Agreement, dated June 6, 2008, by and among Luminant Holding Company LLC, EFH Corp. and Michael McCall                    
|         |  |                                                                      |  |          
|10 (c)   |  | 1-12833 Form 8-K (filed June 6, 2008)                                |  | 10.1      |  |  |  | Employment Agreement, dated as of July 1, 2008, by and between Paul M. Keglevic and Energy Future Holdings Corp.                                          
|         |  |                                                                      |  |          
|10 (d)   |  |                                                                      |  |           |  |  |  | Employment Agreement, dated July 7, 2008, by and between Luminant Holding Company LLC, Energy Future Holdings Corp. and Mark Allen McFarland              
|         |  |                                                                      |  |          
|10 (e)   |  |                                                                      |  |           |  |  |  | Form of Non-Qualified Stock Option Agreement (For Executive Officers)                                                                                     
|         |  |                                                                      |  |          
|10 (f)   |  |                                                                      |  |           |  |  |  | Form of Management Stockholders Agreement (For Executive Officers)                                                                                       
|         |  |                                                                      |  |          
|10 (g)   |  |                                                                      |  |           |  |  |  | Form of Sale Participation Agreement (For Executive Officers)                                                                                             
|         | 
|         |  | Other Material Contracts                                            
|         |  |                                                                      |  |          
|10 (h)   |  | 333-100240 Form 8-K (filed August 13, 2008)                          |  | 10.1      |  |  |  | Contribution and Subscription Agreement, dated as of August 12, 2008, by and between Oncor and Texas Transmission Investment LLC                          
|         | 
|31       |  | Rule 13a  14(a)/15d  14 (a) Certifications.                       
|         |  |                                                                      |  |          
|31(a)    |  |                                                                      |  |           |  |  |  | Certification of John Young, principal executive officer of Energy Future Holdings Corp., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.      
|         |  |                                                                      |  |          
|31(b)    |  |                                                                      |  |           |  |  |  | Certification of Paul M. Keglevic, principal financial officer of Energy Future Holdings Corp., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|         |  |                                                                      |  |          
|(99)     |  | Additional Exhibits.                                                 |  |           |  |   |  |                                                                                                                                                           
|         |  |                                                                      |  |          
|99(a)    |  |                                                                      |  |           |  |  |  | Condensed Statements of Consolidated Income  Twelve Months Ended June 30, 2008.                                                                          
|         |  |                                                                      |  |          
|99(b)    |  |                                                                      |  |           |  |  |  | Adjusted EBITDA reconciliation for the six and twelve months ended June 30, 2008 and 2007.                                                                



|* | Incorporated here by reference.
|- | -------------------------------



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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.



Energy Future Holdings Corp.By:

/s/ Stan SzlauderbachName:

Stan SzlauderbachTitle:

Senior Vice President and Controller


Date: August 14, 2008



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