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Deregulation Created Unanticipated Budgetary Problems. The chaotic billing problems experienced this year made it nearly impossible for cities to comply with budgetary and auditing requirements. Cities operate under a mandate of financial accountability and most undergo significant audit oversight to ensure that the costs incurred in a fiscal year are expensed against that fiscal year. The delays in billing and receipt of crediting/adjustments experienced this past year have complicated the financial accountability issue. Many cities were unable to determine with reasonable certainty the actual cost and amount of electricity used in 2002, making it difficult to establish budget figures for the 2002- 2003 fiscal year. The City of The Colony reports that some of its large accounts had yet to receive a single bill before the city's budget was required to be finalized. Many cities were forced to rely upon incomplete data to project 2003 electricity expense, oi~en missing information for high consumption months. The delayed billings, in some cases up to six months in arrears, made "closing the books" on FY2002 difficult and will probably result in significant FY2002 expenses for electricity that may end up being paid with FY2003 funds. The City of Sherman conveys that the failure to receive complete billings for its accounts through September, 2002, has presented some external audit issues related to the accrual of some portion of utility payments to ensure that twelve months of activity are reflected on the City's financial statements. Many market participants are quick to put these problems behind us, attributing them to the typical star~-up glitches inherent in a new market. While it may be that some of the initial problems will be solved, Cities believe that endemic billing and account transfer problems will repeat themselves each time a new provider is selected because of the multiple steps through which each account transfer must pass before it is completed. Such problems, and their attendant costs, diminish the anticipated benefit of lower competitive prices in the restructure market. Customer Service Quality Has Degraded Under Deregulation Resulting in Unacceptable Delays For Cities and Residents. Cities are reporting that service quality problems have multiplied since the start of competition. In particular, the time necessary to complete new service connections has increased without explanation. Service connections that used to be processed with a couple of phone calls and performed within 24 hours prior to deregulation now take weeks. The City of Weslaco described the lengthy process as taking at least six different steps necessitating the continuous involvement of city representatives to go back and forth between the T&D service provider and the REP. Even after proper procedures are followed, Weslaco and other cities report that the some or all of the request may be rejected by ERCOT for minor technical problems caused by the T&D service provider or the REP. The increased time and aggravation involved with establishing new accounts is especially problematic for Cities t~Ang to protect the public by installing traffic signals and street lights, run airports, and increase emergency response services. 1813\O0~nac~uno030113grog 7