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Mr. Gay's Direct Line: (512) 322-5875 <br />Email: ggay~lglawrma~cora <br /> <br />MEMORANDUM <br /> <br /> TO: <br />FROM: <br />DATE: <br /> <br /> RE: <br /> <br />TXU Cities <br /> <br />Geoffrey M. Gay <br /> <br />February 6, 2001 <br /> <br />Cities Aggregation Power Project, Inc. <br /> <br /> In November a meeting of Cities, sponsored by TCCFUI and the North Central Texas <br />Council of Governments, was held in North Texas to discuss the role of aggregation in a <br />deregulated retail electric environment. In cooperation with the NCTCOG, the Steering <br />Committee of Cities Served by TXU investigated the matter further and formed a committee to <br />draft articles of incorporation and by-laws for the creation of a political subdivision corporation <br />to facilitate aggregation of the electric load of municipal facilities. On Thursday, February 1, <br />2001, representatives of various cities met at NCTCOG's offices and approved finalization of <br />documents to create Cities Aggregation Power Project, Inc. (CAPP). As a political subdivision <br />corporation the aggregation project will be controlled by a nine person board to be elected by <br />member cities. Membership is open to any city that passes a resolution approving the articles of <br />incorporation and by-laws and pays an initial fee of ½ of I% of the city's cost of electricity <br />during calendar year 2000. The initial fee will be credited back to member cities in future <br />administrative fees that may be assessed after 2003. Board selection and other votes by members <br />after 2003 will be based upon each city's proportionate share of the total aggregated load. <br /> <br /> The retail electric market is scheduled to be deregulated effective January 1, 2002. While <br />residential and small commercial customers, who decide to stay with the affiliated retail electric <br />provider of the incumbent utility, will have some price protection and relative price stability for <br />not more than five years from a legislatively mandated "price to beat," municipalities will need <br />to protect their budgets by becoming knowledgeable of power markets and their own electrical <br />load. Aggregation makes it possible for cities to enter the marketplace with greater clout. <br />Combined buying power is expected to lead to price breaks and may allow for bulk purchases in <br />the cheaper, wholesale market. <br /> <br />1669\02~machmmo010206grog <br /> <br /> <br />