04-A TXU Gas Statmt of Intent - Laserfiche WebLink

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Th.is is a 66% increase in the net plant in service over a five-year period. These investments were necessary to maintain the safety and reliability of the system. Much of the investment was to replace pipe and other facilities that had reached the end of their service lives. The investments were also made in response to the rapid economic growth in our servfce area, which required the replacement of pipe as development encroached on high pressure lines, relocations of pipe as roads and freeways were built or expanded, and extensions of pipe and increases in capacity as the population expanded into outlying areas. OPERATING AND MAINTENANCE EXPENDITURES Despite the rapid growth in the economy and the increased capital investment, TXU Gas has been able to closely control its operating and maintenance (O&M) expenses. Between 2001 and 2002, expenses in the field have slightly decreased. Operating expenses over all have slightly increased as a result of increased pension funding requirements and employee benefits, areas of expense that have been rapidly rising across the national economy and are largely outside of the Company's control. TXU Gas is continuing to take steps to limit increases in O&M expenses. This rate case contains several adjustments reflecting additional steps that have been taken to reduce O&M after the close of the recent calendar year. As a result of our WINS program, for example, O&M expenses have been adjusted downward in the rate case from actual costs by $6.7 million. SIMPLIFIED RATES We have taken great care in developing this rate case. We have simplified our approach so that it will be much easier for our customers and our regulators to understand our business. For instance, in this case we are proposing rates for only six customer classes: Four classes of service from the inlet of our system through both Page 2 of 4