EPE INTERNAL CODE OF CONDUCT

The EPE Internal Code of Conduct Policy is implemented in conjunction with the other EPE Policies which address the management of information: Code of Ethics EPE Employee Policy Handbook Insider Trader Policy Records Management Policies (Retention, Destruction, Offsite Storage and Central File)

EPE Accessible Utility Information Plan The purpose of this Plan is to define EPE’s procedures for providing information to the public and how it can be accessed. Information accessible to the public includes: - Information used to prepare electric tariffs; - Information used to provide electric service to customers; and - Information used to market, sell, or demonstrate any electric or energy-related service or product. Information with limited access includes: - Competitively sensitive - Proprietary customer information - T&D information

EPE INTERNAL CODE OF CONDUCT

EPE Internal Code of Conduct General Facts: Effective January 10, 2000, even though we are not in a competitive environment until August 2005 in Texas and January 2001 in New Mexico Provisions that cannot be implemented by January 10, 2000 will be phased in ASAP El Paso Electric will have one EPE Internal Code of Conduct that satisfies the requirements of both Texas and New Mexico Competition exemption in Texas (August 2005) does not apply to the EPE Internal Code of Conduct

Purpose of the EPE Internal Code of Conduct: Separate competitive functions from utility functions, so that the utility cannot subsidize its affiliate or provide its affiliate preferential treatment. For now, the ESBG* is the competitive function that will be separated. In the future, other functions will become competitive and will need to be separated from the T&D company. _______________ *ESBG is considered a “competitive affiliate” in EPE’s internal code of conduct.

Major Categories of the EPE Internal Code of Conduct: Separation of EPE from its Affiliates Transactions between EPE and its Affiliates Safeguards Relating to Provision of Products and Services Information Safeguards Safeguards Relating to Joint Marketing and Advertising Ensuring Compliance for New Affiliates

The EPE Internal Code of Conduct requires a variety of separations between competitive and regulated functions including: Accounting separations (cost tracking and allocation); Physical separation of office space; Restrictions on information exchange; and Restrictions on joint marketing, including the use of EPE’s logo, joint promotional activities, customer referrals and more.

EPE Internal Code of Conduct is primarily concerned with: Flow of information between Regulated Entities and Competitive Affiliates Services/Products shared or provided to an Affiliate Prevention of the subsidization of an Affiliate

What information can be shared between EPE and its Competitive Affiliates? All information that is considered public including these documents: Press Releases Filings with Governmental Agencies - Local, State, Federal Annual Reports 10-K, 10-Q, 8-K Financial Reports Public Advertising Information Contained on EPE’s Web Site Customer Informational Brochures, Bill Inserts

What services can be shared with an Affiliate? Financial Services Environmental Services Financial Planning Community Relations Information Technology Human Resources Accounting Services Corporate Support Services Corporate Communications Procurement Regulatory Services Corporate Secretary Legal Services Internal Audit Lobbying

Allocation of Costs for Corporate Support Services (Shared Services) Services shared will be allocated based on mechanisms established by Accounting Services Transition costs should be charged to Designation Code “TC-001” Managing costs is critical

Services Which Cannot be Shared with an Affiliate Examples of services which cannot be shared with an Affiliate are: Engineering Purchasing of Electric Transmission Facilities and Service Transmission and Distribution System Operations Marketing

Transactions Between EPE and Competitive Affiliates Must Be At Arms-Length EPE cannot provide a service (except corporate support services) or information to its Competitive Affiliate that it wouldn’t be willing to provide to any other competitive power/service supplier. That’s the Rule.

Ask yourself - By giving this Information/Service/Product to the ESBG, do they now have an unfair advantage? If yes, don’t do it. If you don’t know, contact Willie Silva at Ext. 5708 or e-mail wsilva@epelectric.com.

EPE cannot provide its Competitive Affiliate any special treatment: Products and services are provided equally to each competitive power/service supplier Any discounts, rebates, fee waivers provided to our Competitive Affiliate must be provided to other competitive power suppliers Restricted access to proprietary customer information - customer is required to provide written approval for the release of individual information No joint marketing or advertising Competitive Affiliate’s use of EPE name or logo must be accompanied with the disclaimer

Implementation Requirements of the EPE Internal Code of Conduct: EPE cannot share employees, facilities or other resources with our Competitive Affiliate (except corporate support services). Separate office space for ESBG Separate accounting for EPE and ESBG Restricted access to computer systems Limited credit support from EPE to ESBG

Compliance with the EPE Internal Code of Conduct: Compliance with the EPE Internal Code of Conduct will be audited Each employee will be responsible for compliance with the EPE Internal Code of Conduct Both the Company and employee are subject to penalties for violations of the EPE Internal Code of Conduct