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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) - JUNE 18, 1999
TEXAS UTILITIES COMPANY
DOING BUSINESS AS
TXU CORP
(Exact name of registrant as specified in its charter)
TEXAS 1-12833 75-2669310
(State or other (Commission (I.R.S. Employer
jurisdiction of incorporation) File Number) Identification No.)
TXU ELECTRIC COMPANY
FORMERLY KNOWN AS
TEXAS UTILITIES ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)
TEXAS 1-11668 75-1837355
(State or other (Commission (I.R.S. Employer
jurisdiction
of incorporation) File Number) Identification No.)
ENERGY PLAZA, 1601 BRYAN STREET, DALLAS, TEXAS 75201-3411
(Address of principal executive offices, including zip code)
REGISTRANTS' TELEPHONE NUMBER, INCLUDING AREA CODE - (214) 812-4600
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ITEM 5. OTHER EVENTS.
On June 18, 1999, a bill was signed into law that will restructure
the electric utility industry in Texas to, among other matters, authorize
competition in the retail and generation markets for electricity
beginning January 1, 2002; provide for the opportunity to recover
stranded costs; require reductions in nitrogen oxide and sulfur dioxide
emissions; require a rate freeze for all customers until January 1, 2002,
and certain rate reductions for residential and small commercial
customers for three to five years; and set certain limits on capacity
owned and controlled by power generation companies. TXU Corp and TXU
Electric Company are analyzing how this legislation will affect their
respective financial positions, results of operations and cash flows.
Additional information about the legislation is contained in the
news release of TXU Corp dated June 18, 1999 which is incorporated
herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(C) EXHIBITS.
Exhibit Description
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99 -- News Release, dated June 18, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrants have duly caused this report to be signed on
their behalf by the undersigned thereunto duly authorized.
TEXAS UTILITIES COMPANY,
doing business as TXU CORP
By:/s/ Kirk R. Oliver
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Name: Kirk R. Oliver
Title: Treasurer and Assistant Secretary
Date: June 29, 1999
TXU ELECTRIC COMPANY
By: /s/ Kirk R. Oliver
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Name: Kirk R. Oliver
Title: Treasurer and Assistant Secretary
Date: June 29, 1999
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EXHIBIT INDEX
EXHIBIT DESCRIPTION
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99 News Release, dated June 18, 1999.
Exhibit 99
NEWS RELEASE [LOGO] TXU
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1601 Bryan Street
Dallas, Texas 75201-3411
FOR IMMEDIATE RELEASE
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GOVERNOR SIGNS ELECTRIC UTILITY RESTRUCTURING BILL INTO LAW
DALLAS, TEXAS - JUNE 18, 1999 - Governor George W. Bush today signed
into law a bill that will restructure the electric utility industry in Texas,
allowing electricity customers a choice and positioning the state as a leader in
economic development.
"Today's action by the Governor represents a great step forward for the
people of Texas," said Tom Baker, president of distribution for TXU Electric &
Gas. "It also signals the beginning of a very exciting period for the company."
Baker said the company has a team of executives that is leading the
company's preparation for competition. The team will coordinate the
restructuring of TXU Electric into regulated transmission and distribution and
non-regulated generation and retail electric provider entities, which will be
complete for the January 1, 2002 date for opening competition. The team will
also coordinate any other actions necessary to effectively comply with the new
law and prepare the company as a leading provider of energy services.
"Through continuous cost management and customer focus and the lessons
learned in TXU's other markets, the company is uniquely positioned to succeed in
a competitive market," Baker added.
The electric industry restructuring bill, Senate Bill 7, was authored
by Senator David Sibley (R-Waco) and approved by the Senate on March 17. The
bill was amended in the House under the sponsorship of Representative Steve
Wolens (D-Dallas) and approved on May 21. The Senate voted on May 27 to concur
with the House version.
Key provisions of the bill include:
COMPETITION BEGINS ON JANUARY 1, 2002. Choice of electric service
providers will begin on January 1, 2002 for customers of most investor-owned
utilities in Texas. The affiliated retail electric provider (REP) of the utility
that serves the customer on December 31, 2001 will continue to serve the
customer unless the customer chooses another REP. Municipally owned utilities
and cooperatives may elect to offer customer choice after January 1, 2002. Each
electric utility will launch a pilot project beginning June 1, 2001 to offer
choice to 5 percent of the utility's combined load.
ENVIRONMENTAL PROVISIONS. The law calls for a statewide reduction of 50
percent in the generation of nitrogen oxides (NOx) and a 25 percent reduction in
sulfur dioxides (SO2) from "grandfathered" power plants. Costs associated with
the air quality improvements are recoverable. The law also calls for tripling
the state's renewable power generation by the year 2009.
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CUSTOMER AND COMPETITION PROTECTIONS. Customers' interests and fair
competition are also protected. Customers will receive information to permit
comparisons between service and prices. They will also be protected from unfair
practices, such as slamming, and may elect to be put on a list to prevent
unwanted telephone solicitations from REPs. REPs must be certified by the Public
Utility Commission of Texas (PUC) and electric generators and other parties must
register with the PUC. The PUC may suspend registrations and certifications or
impose administrative penalties for violation of its rules. One such rule is
that during the first three years of competition, any REP that serves aggregated
load in excess of 300 megawatts must serve residential customers for at least 5
percent of the company's total load or pay a fee into the system benefit fund. A
system benefit fund is established to fund customer education, provide low
income assistance programs and replace any state and local school funding
reductions that may result from restructuring the electric industry.
ELECTRICITY RATES/PRICE TO BEAT. The bill freezes rates of most
investor-owned utilities until competition begins January 1, 2002, then provides
a 6 percent reduction for residential and small commercial customers. Rates will
be capped at this "price to beat" for five years. Affiliates of the
investor-owned utilities may compete for large business customers immediately
and for residential and small commercial customers after three years or when 40
percent of the designated customer classes have chosen new providers. The "price
to beat" applies to the utility's certified service area.
MITIGATION OF STRANDED COSTS. Each utility that has stranded costs may
redirect depreciation expenses relating to transmission and distribution assets
to its generation plant assets from 1998 through 2001. The utility may also
apply any earnings during the rate freeze period of 1999 through 2001 that are
above the utility's most recently approved cost of capital to generation
depreciation. The reduction and acceleration of depreciation expenses are
similar to TXU Electric's existing rate settlement that in 1998 resulted in
additional generation depreciation of $353 million ($183 million from
redirection and $170 million from acceleration).
STRANDED COST RECOVERY. Electric utilities are allowed to recover all
net, verifiable, nonmitigated stranded costs incurred in purchasing power and
providing electric generation service. Securitization, allowed as a mechanism
for recovery, permits utilities to refinance investments and costs incurred
under a regulated environment. For recovery, a utility may securitize 100
percent of its regulatory assets and initially up to 75 percent of its stranded
costs as estimated using the Economic Cost Over Market (ECOM) model of the PUC.
Remaining stranded costs can be securitized after a true-up proceeding in 2004.
In the true-up proceeding, the actual level of stranded costs will be determined
using market-based methods, with the possible use of the ECOM model for certain
nuclear generation assets.
CAPACITY LIMITS AND REMEDIES. Capacity owned and controlled by a power
generation company is limited to 20 percent of the installed generation capacity
in a power region. Most of Texas is in the Electric Reliability Council of
Texas, ERCOT, power region. The capacity limitation for certain utilities,
including TXU Electric, is reduced if the company commits to meeting certain air
quality standards for "grandfathered" plants in non-attainment areas. TXU
Electric is committed to meeting these air quality standards.
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Most investor-owned utilities will auction entitlements to at least
15 percent of their generating capacity for five years or until 40 percent of
the residential and small commercial consumption of electricity in the utility's
service area is provided by a nonaffiliated REP. Such auctioned entitlements
also reduce the utility's capacity limitation discussed above.
TXU Electric, formerly TU Electric, is a wholly owned subsidiary of TXU
and is the leading supplier of electricity in Texas, serving over 2.5 million
customers.
TXU (NYSE: TXU) is one of the largest investor-owned energy service
companies in the world with assets of $40 billion. Today TXU provides over nine
million customers in Texas, the United Kingdom, continental Europe and Australia
with electric and natural gas services, energy marketing and trading,
telecommunications and other energy-related services.
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NEWS MEDIA: INVESTOR RELATIONS:
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CHRIS SCHEIN DAVID ANDERSON
214/812-5338 214/812-4641
[email protected]
JOAN HUNTER TIM HOGAN
214/812-4071 214/812-2756
[email protected]
www.txu.com
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