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TXU ELECTRIC STAN ING MEMO ND To: Members of the TXU Electric St ding teering Committee From: Jay Doegey, Chair of Standing S eering ommittee Date: July 21,2004 Subject: Steering Committee Recommend Initiat'on of Transmission and Distri tion Rate Inquiry On July 16, 2004, the Steering Committee met d disc ssed the need for an inquiry int the reasonableness of TXU's transmission and distri ution &D) rates set by the PUC in 2 01 in anticipation of the start of retail electric competi 'on. T e regulated T &D rates are the ires charges collected by TXU Electriç Delivery Co pany, ormerly Oncor. When the T &D rates were approved by the PUC in 2001, they were b sed up n a projection made in 2000 0 costs anticipated in 2002, rather than upon historic tes year c sts. Since the T &D rates were approved in 2001, enormous changes have occurred, such s larg reductions in the cost of capita, large reductions in TXU costs, mass TXU employee I yoffs, orporate reorganizations, and a complete change in TXU affiliate transactions stemming om the sale of numerous assets and bu inesses. As a result, the Steering Committee has reason t belie e that TXU's existing T &D rat s are excessive. The inflated T &D rates are largely re ponsi Ie for the high cost of electricit for street lighting and other off-peak load. Furtherm re, las year cities in South Texas took legal action that precipitated a T &D rate proceeding i volvin Texas Central Company ("TC "). TCC, the wires company, requested a $67 million incr ase, b the hearing examiner is reco ending a $30 million T &D rate reduction. The Steering Committee unanimously recom ende that cities pass a resolution t requires TXU Electric Delivery Company (T U) to how cause why its T &D rate not be reduced. The Steering Committee also uthor zed the retention of rate case attorneys and consultants and intervention in any re ated appeal. Finally, the Stee ing Committee approved a 10 cents per capita fee for 20 4 (according to the respectiv city's population listed in the most recent Texas Mu idpal League Directory of Texas Ci Officials. A model resolution initiating a rate rev ew is ttached. Also, cities passing thi resolution should advise the Committee's rate ca e atto ey Geoffrey Gay and Committ e Chair Jay Doegey of when your city has placed the res lution tem on the city council agenda nd provide them a copy of the resolution. Attachments c/o Jay Doegey, City Attorney. Box 90231. Arlington, T xas 76 04-3231.817-459-6878 (Metro 817) 265-3311. FAX(817)459-687