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Lloyd t.\ A T Q?N~~~)!r:~--- - . 816 Congress Avenue, Suite 1900 Austin, Texas 7870 I Telephone: (512) 322-5800 . Facs~~I:.:J5EL~?~:_~~~.__.__ www.lglawfirm.com Ms. Doyle's Direct Line: (512) 322-5820 Ell1ail: kdoyle(i.l;lglawfim1.Coll1 MEMORANDUM TO: All CAPP Members FROM: Geoffrey Gay Kristen Doyle DATE: December 28, 2006 RE: CAPP's Year in Review This year marked the fifth anniversary of the Cities Aggregation Power Project, Inc. ("CAPP"). The CAPP Board, CAPP members, and CAPP consultants continued their dedication to protect city budgets by managing the volatile cost of power in the deregulated electric market. In honor of CAPP's fifth anniversary, this memo lists the top five highlights of the past year. We count our blessings and are thankful for CAPP's successes. Best wishes for the New Year. Highlight No.1 CAPP Members Save Monev Since 2002, CAPP members have saved more than $95 million off the Price to Beat. Once figures are totaled for 2006, we expect CAPP members' savings to meet or exceed CAPP's average of 20 percent off of the Price to Beat. The price for the first six months of CAPP's 2006 energy contract was heavily affected by the aftermath of Hurricanes Katrina and Rita. Fortunately, CAPP's consultants were able to negotiate terms with CAPP's energy provider, FPL Energy, allowing CAPP to reprice its load for the second half of 2006 in the spring, when electric prices decreased. The CAPP Board approved a very favorable 7.75 cents per kWh rate for the second half of 2006. As a result, CAPP's average price for the year was 9.8 cents per kWh. While CAPP was able to take advantage of energy price declines and reprice its load in the second half of 2006, the Price to Beat and other retail prices remained artificially high throughout the year. CAPP savings are attributable to well crafted contracts and timely market executions. Highlight No.2 2007 - 2008 Contract UniQuely Positions CAPP to Take Advanta2e of Electric Market In September, the CAPP Board approved a two year contract extension with CAPP's current provider, FPL Energy. The 2007 price will be 8.13 cents per kWh, which is a 17 percent savings off the average 2006 price. The two year contract extension continues the unique three party agreement between CAPP, FPL Energy (CAPP's power supplier) and Direct Energy (CAPP's REP). CAPP created this contractual arrangement that permits a REP to provide CAPP only administrative and billing services while a separate generator/wholesaler supplies the power Lloyd GosseJink Blevins Rochelle & Townsend. Pc. r' .