1. Topics  Renewable Energy  Electricity prices and retail competition  TXU Acquisition  Legislative Session

2. Texas Renewable Energy Program  1999 legislation introduced retail competition  Renewable issues –Renewable energy goal of 2,000 MW of new renewables by 2009 –Market-based mechanism to support efficient deployment: Renewable Energy Credits

3. Renewable Energy Credits Generators Generators earn RECs for production Customers Retailers required to retire RECs and may retire them to validate green products REP Retailers Retailers buy power and RECs

4. Renewable Capacity Goal 2003400 mw 2005850 mw 2007 1400 mw Actual 2003990 mw 20051190 mw Today 3990 mw

5. Renewable Legislation 2005  New renewable energy goal –5000 MW by 2015  Renewable targets –10,000 MW by 2025 –500 MW of non-wind by 2015  Competitive Renewable Energy Zones –Facilitate development of additional renewables that require transmission

6. Competitive Renewable Energy Zones  Coordinate transmission and generation development  Designate renewable energy zones  Develop transmission plan  Expedite licensing of transmission  Consider level of financial commitment in designating zone and licensing transmission

7. Designated CREZ Areas Panhandle McCamey Central

8. Transmission Study  All renewable energy from CREZs goes to ERCOT  Study of transmission facilities and cost for four scenarios for each area  ERCOT to also consider reliability issues Panhandle2500560087006600 McCamey800190029003200 Central1800410064007700

9. Natural Gas Prices and Electric Prices in the Competitive Market

10. Residential Customer Switching

11. TXU Acquisition  KKR and Texas Pacific announced acquisition of TXU Corp. in April  TXU is holding company that owns generation company, electric utility, and retail electric provider  Debate during legislative session about price levels and whether PUC should have power to approve/disapprove mergers  Legislation was enacted to give PUC authority to review future mergers of electric utilities  PUC staff and other parties have agreed to settlement recommending that the acquisition is in the public interest

12. Other 2007 Legislative Issues  Price levels for retail customers  Concentration in generation sector  Review of mergers  Discount program for low-income customers  Adequacy of generation to meet growth in demand  Emissions from projected coal plants  Additional energy efficiency programs