1. Creating The 21 st Century Grid Global Energy Management Institute Power Conference C. John Wilder Chief Executive Officer June 29, 2006

2. 2 Today’s Discussion Global electricity  20 th century’s greatest achievement  Global electrification challenge 21 st century power needs 21 st century power needs  Digitization of advanced economies  Historic lack of investment  Economic cost of outages Grid technology advances Grid technology advances  Evolving technology opportunities  Investment requirements  TXU technology examples Customer benefits of a smart grid Customer benefits of a smart grid  Lifestyle improvement  Innovative products and services

3. 3 Electrification Changed The World In The 20 th Century, But Faces Significant Challenges In The 21 st Century The world’s population is expected to reach 9 billion by 2050; electricity’s global impact must be even greater in the 21 st century to meet the world’s growing energy needs

4. 4 Universal Electrification Could Drive Step Changes In Productivity… Lights out: World population without power 05; Percent (100%=6.5 billion) Small price to pay: Cost to modernize grid vs. average electric bill 05; $/month per household In demand: Cost required for universal electrification 05; $ trillion Productivity pays: Est. annual GDP increase 25E-50E; $ trillions Source: EPRI Electricity Technology Roadmap With electricity Without electricity 12.0 Avg. billCost to modernize grid 12.212.4 Cost to build 10TW U.S. GDP 05E EU GDP 05E

5. 5 …And Improve Quality Of Life Around The Globe Lower infant mortality… Average infant mortality rate 03; Mortalities per 1000 births Source: EIA, CIA Factbook Abundant power supply drives better health care and stronger economies …and stronger economic output Average GDP per capita 03; $ per person 80% 829%

6. 6 Today’s Discussion Global electricity  20 th century’s greatest achievement  Global electrification challenge 21 st century power needs 21 st century power needs  Digitization of advanced economies  Historic lack of investment  Economic cost of outages Grid technology advances Grid technology advances  Evolving technology opportunities  Investment requirements  TXU technology examples Customer benefits of a smart grid Customer benefits of a smart grid  Lifestyle improvement  Innovative products and services

7. 7 The Emerging Digital Economy Is Testing The Limits Of The Current System… Without greater investment, the existing U.S. system will not reliably support the increasing demand for energy Growing demand: U.S. Electricity consumption 40-03; % of total energy use 9703 50 1,600 1,500% Stressed system: Congestion loading relief requests 97-03; Number 407003 300% Need for technology: “Digital quality” electrical load 80-20; Percent 800020E 400%

8. 8 Private sector R&D investment 95; % of net sales …Compounded By A Historical Lack Of Investment In R&D And Infrastructure… U.S. investment in energy R&D 90-00; $ billions U.S. federal R&D support for energy is only about 4% of total federal energy R&D outlays Source: EPRI Medi- cine Comm. equip. Svcs.Chem- icals Trans. equip. Energy 50%

9. 9 …Causing Outages That Cost Customers Billions Annually U.S. economic cost of outages $ billions/year  Today, outage costs represent 1% of GDP  This loss represents a cost of $0.50 for every $1 spent on electricity  Technology investments could reduce outage costs by 50-80%  If no investment is made to transform the grid system, the annual cost of outages could reach $300 billion  Today, outage costs represent 1% of GDP  This loss represents a cost of $0.50 for every $1 spent on electricity  Technology investments could reduce outage costs by 50-80%  If no investment is made to transform the grid system, the annual cost of outages could reach $300 billion Source: EPRI

10. 10 Today’s Discussion Global electricity  20 th century’s greatest achievement  Global electrification challenge 21 st century power needs 21 st century power needs  Digitization of advanced economies  Historic lack of investment  Economic cost of outages Grid technology advances Grid technology advances  Evolving technology opportunities  Investment requirements  TXU technology examples Customer benefits of a smart grid Customer benefits of a smart grid  Lifestyle improvement  Innovative products and services

11. 11 A Slate Of Breakthrough Technologies Are On The Horizon… Stage 1: Current technology Stage 2: Near-term technology Stage 3: Potential future technology  Automated switching  Digital fault analysis  Broadband over Power Line  Advanced load management with smart appliances  AC/DC microgrids  Advanced distributed energy solutions  Smart appliances  Power quality monitoring services  Customized power service packages TXU Electric Delivery is investing in today’s leading-edge technology, but more will be required as new “game changers” become commercially available

12. 12 …Requiring Significant Investment To Realize The Full Benefits Transmission investment needs 05-25E; $ billions Load growth Correcting deficiencies Transformed delivery system Distribution investment needs 05-25E; $ billions To achieve this grid transformation, annual transmission and distribution investment would have to increase by 65% and the 20-year total is over $850 billion Load growth Correcting deficiencies Transformed delivery system

13. 13 “Self-Healing” Technologies Will Change The Way We Manage And Respond To Outages… Tree limb falls on line causing a feeder outage 1 2 Automated switches reconfigure system to restore service to majority of customers within 1 min. 3 Dispatcher notifies field technician who inspects entire feeder for outage source; average restoration time of 40 mins. 3 Disruption location pinpointed and service restored to remaining customers within 24 mins. Old Way New Way Where deployed, automation technology enhances customer service by eliminating sustained interruptions for 2/3 of the customers and reducing restoration time up to 40% for the remaining 1/3 of the customers 2 Customer calls outage in and Operations Center receives notification

14. 14 …And Digital Fault Analysis Could Prevent Disruptions…  A tree limb was hanging over a line, causing 17 poletop recloser operations over 23 hours  There were no substation breaker trips, so Operations did not recognize a problem  The tree limb burned down the line, locking out the recloser and interrupting 140 customers for 62 mins.  A tree limb was hanging over a line, causing 17 poletop recloser operations over 23 hours  There were no substation breaker trips, so Operations did not recognize a problem  The tree limb burned down the line, locking out the recloser and interrupting 140 customers for 62 mins. Source: TAMU/EPRI study

15. 15 …Resulting In Industry-Leading Reliability Performance U.S. electric delivery company performance 05; SAIDI 1 TXU Electric Delivery has achieved top quartile cost and reliability Distribution O&M and capital cost ($/customer) 1 Excluding major events and planned outages TXU Top quartile SAIDI Top quartile cost TXU ED’s target

16. 16 TXU Is Redefining Utility Service Enabled By BPL

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18. 18 Today’s Discussion Global electricity  20 th century’s greatest achievement  Global electrification challenge 21 st century power needs 21 st century power needs  Digitization of advanced economies  Historic lack of investment  Economic cost of outages Grid technology advances Grid technology advances  Evolving technology opportunities  Investment requirements  TXU technology examples Customer benefits of a smart grid Customer benefits of a smart grid  Lifestyle improvement  Innovative products and services

19. 19 Advanced Grid Technologies Are Enhancing The Quality Of Life In The Communities We Serve… Lifestyle AreaBenefits of Electricity 1 Basic needs  Lighting  Medicine storage  Food preparation and preservation 2 Comfort  Heating/Hot water  Air conditioning 3 Security  Well maintained electric infrastructure  Video surveillance 4 Productivity  Enabling digital devices, e.g. PCs  Enhanced reliability  Power quality 5 Conservation/ Environment  Remote monitoring and meter reading  Smart home applications

20. 20 Bundled svcs. (data, video) …And Unleashing The Potential For Innovative New Products And Services For Customers 990001020304050607080910 One regulated price Rewards+ Term savings Simple Savings Renewable Freedom Plan YesterdayTomorrow (06+)Today Indexed Savings PTB Discount Surge Protection Market Tracker+ Smart homes Time of use Power quality mgmt On-site load mgmt Energy efficiency Future products will give customers greater choice and control over their energy consumption and costs

21. 21 Advancements And Investments In Technology Can Provide The Solution To The World’s Energy Needs  The world is facing bigger energy challenges than ever before –Digital economy –World population will increase more than 33% by 2050 –25% of the world has little or no access to power (and growing)  Investments in technology and infrastructure can provide universal electrification –In the U.S. alone, GDP could increase by $3 trillion –In the world, GDP could increase by $11 trillion  Technology advances will drive benefits for society –Better reliability and power quality –Innovative products and services allowing customer choice and control over energy usage –Improved safety and security of the system

22. Creating The 21 st Century Grid Global Energy Management Institute Power Conference C. John Wilder Chief Executive Officer June 29, 2006