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negotiation agreement with TXU for a capacity contract from the proposed Oak Grove lignite plant. On August 20th, TXU announced its intention to seek permits to construct 10 new coal fired plants in Texas. In July, Dallas Mayor Laura Miller began forming a group to challenge whether the coal pulverization technology proposed by TXU was the best available technology for such coal plants. In the meantime, CAPP Board members and its consultants visited the Oak Grove site and commenced contract negotiations. The draft contract provides for a 25 year term, beginning January 1,2009, with power to be provided at a fixed price throughout the term of the contract. By December, contract negotiations were nearing completion. As part of its due diligence, CAPP and its sister aggregation entity ST AP (South Texas Aggregation Project) hired a consultant to perform a load flow study to determine plant load flow efficiencies. If the TCEQ approves the Oak Grove air permit at the hearing scheduled for January 11,2007, CAPP will begin distributing specific contract information and providing a DVD presentation and in-person presentations to city managers, mayors, and city councils. CAPP members will then consider passage of resolutions committing to participate and authorize issuance of debt, or opt out of the long term contract. CAPP will also provide a renewable energy option so that CAPP members may choose to buy renewable energy credits (REC's) to address environmental concerns. Once the debt is issued and sold, CAPP members would then approve and sign a contract. The energy price under the long term contract would be fixed and be considerably lower and lack the volatility of traditional retail electric pricing. 2006 CAPP Saving and Membership Growth During 2005, CAPP member savings over Price to Beat was approximately 16.38%, or $15.6 million. In 2006, CAPP decreased its aggregation fee from 1.5 mils per kWh to 1.3 mils. Following the spike in energy costs caused by the Hurricanes Katrina and Rita, many cities and special districts not in CAPP began searching for an organization to assist them in procuring a cheaper and more stable energy supply. In addition, CAPP representatives aggressively marketed CAPP in the Houston area. Many were particularly interested in participating in the long term contract. Oak Point, Copperas Cove, Whitney, Celina, Aquilla Water Supply District, and Houston area cities Sugar Land and LaMarque joined CAPPo CAPP membership topped 90 members, with several others considering membership. Financial Stability CAPP is audited annually. It received an unqualified audit opinion for its 2005 financials. CAPP ended 2005 with equity of $1.3 million. The auditor, Weaver & Tidwell, noted CAPP's strong balance sheet. Initiative to Lower T & D Rates CAPP continued its cooperation with the TXU Cities Steering Committee in its effort to reduce transmission and distribution (T & D) rates charged by TXU Electric Delivery (TXUED). In January, the Steering Committee reached an agreement with 2 r' .