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TXUED to extend the interim T & 0 rate case settlement. TXUED agreed to continue making an annual $8 million payment to participating cities. It also agreed to make two $9 million public benefit payments over two years, begin increasing the franchise fee factor up to 5% over a 4 year period, make quarterly franchise fees, negotiate an underground electric utility line rate, sponsor a municipal electric rate class, and initiate a T & 0 rate case in 2008. 2007 Legislative Program During the 2007 Texas legislative session, CAPP will be proposing legislation to require all electric generators affiliated with former investor-owned utility monopoly providers to offer some portion of the output from their coal, lignite and/or nuclear plants at rates reflecting the cost of production. CAPP will also propose legislation that will mitigate the existence as well as the exercise of market power in the electric wholesale and retail markets. CAPP worked to have these two items included in the Texas Municipal League's 2007 legislative program. CAPP will also oppose any legislation that would impose surcharges and automatic adjustments, nodal pricing, securitization, or diminish cities' original rate making jurisdiction. CAPP may also seek to change the ERCOT practice of using the highest price in the balancing energy market. PUC and ERCOT Activities During 2006, CAPP participated in the nodal market proceedings and the project addressing REC's and Competitive Renewable Energy Zones. CAPP persuaded the PUC to adopt a rule requiring the establishment of criteria on when nodal zone boundaries may change. CAPP co-sponsored with the TXU Cities Steering Committee and TCCFUI a program on the workings of ERCOT. CAPP urged its members to join ERCOT. This effort greatly expanded city participation and influence on ERCOT policies. Cities now have three representatives in ERCOT -Nick Fehrenbach (City of Dallas) on the T AC Board; Chris Brewster (City of Eastland) TAC Consumer, Small Commercial; and Philip Boyd (City of Lewisville) TAC Consumer, Large Commercial. CAPP Annual Membership Meeting CAPP will be having its annual membership meeting in Grand Prairie on Thursday, December 7, 2006, for the purpose of considering membership business and electing Places 2, 4, 6, and 8 to the CAPP Board of Directors. The Board will meet immediately following the membership meeting and discuss adoption of the 2007 budget, setting of the administrative fee that funds CAPP operations, status of the long term electric supply contract and Oak Grove permit process, update on 2008 energy prices, load flow study, consideration of a resolution adding an additional At Large member to the Board of Directors, consideration of a By-Laws amendment concerning confidentiality of CAPP information, and adjustments to 2006 budget. Employees and officials of CAPP members are always welcome to attend meetings of the Board. These meetings are generally held the first Thursday of the month in Grand Prairie. 3 r'- ..