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<br />SETILEMENT AGREEMENT <br /> <br />This Settlement Agreement ("Agreement'') is made and entered into betWeen TXU <br />Electric Delivery Company ("Electric Delivery") and the Steering Conunittee of Cities Served <br />by TXU Electric Delivery Company on behalf of all cities listed on Exhibit A to this Agreement <br />(''Cities''), hereinafter referred to jointly herein as "Signatories." <br /> <br />WHEREAS, the city councils of 23 cities who are members of Cities passed resolutions <br />in 2004 requiring Electric Delivery to file with those cities infonnation that demonstrates good <br />cause for showing that Electric Delivery's transmission and distribution rates should not be <br />reduced (hereinafter referred to as "Show Cause Actions''); <br /> <br />WHEREAS, other cities who an: members Qf Cities an: contemplating initiating similar <br />Show Cause Actions against Electric Delivery; <br /> <br />WHEREAS, Cities and Electric Delivery desire to resolve all outstanding issues related <br />to the existing and potential Show Cause Actions and other regulatory issues; and <br /> <br />WHEREAS, after extensive negotiations, Cities and Electric Delivery have reached a <br />compromise and settlement to resolve those issues. <br /> <br />NOW, THEREFORE, the Signatories, through their undersigned representatives, hereby <br />agree to the following: <br /> <br />1. Electric Delivery agrees to propose and support in its next system-wide rate case or city <br />rate inquiry one or more municipal rates, each without a demand ratchet, that together will cover <br />all municipal accounts, including a street lighting rate and municipal pumping rate that will be <br />lower than they otherwise would be. Cities agree to provide to Electric Delivery any infonnation <br />needed to design the rates described in this paragraph. <br /> <br />2. Electric Delivery agrees to file a system-wide rate case at the Public Utility Commission <br />of Texas ("PUC") no later than July 1,2006, based on a test year ending December 31, 2005 <br />unless Cities and Electric Delivery mutually agree that such a filing is unnecessary. For those <br />cities that do not have a City Council meeting in July, 2006, Electric Delivery will extend its <br />effective date to accomplish suspension by August 31, 2006. However, if Electric Delivery files <br />a system-wide rate case at the PUC on or before June I, 2006, then Electric Delivery will not <br />extend its effective date. <br /> <br />3. Cities agree that Electric Delivery is not required to respond to any pending Show Cause <br />Action initiated by any city listed on Exln'bit A to this Agreement prior to July I, 2006. Cities <br />further agree to abate or dismiss all pending Show Cause Actions, not to pursue any abated Show <br />Cause Actions, and not to initiate similar actions before July I, 2006, provided the provisions of <br />this Settlement Agreement an: honored. Cities agree not to intervene in, or participate in any <br />manner in, any show cause action initiated at the PUC or in any other jurisdiction prior to the <br />proceeding described in paragraph 2, or in any appeals of such show cause actionS, except as <br />necessary to protect the tariff or tariff-efforts associated with paragraph I or to protect the city or <br /> <br />." . ,.. <br /> <br />1 <br /> <br />EXHIBIT A. <br />