UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
__________________________________________
FORM
10-K
[Ö]
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For
the Fiscal Year Ended December 31, 2004
— OR
—
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
Commission
File Number 333-100240
TXU
Electric Delivery Company
(Exact
Name of Registrant as Specified in its Charter)
|
Texas |
75-2967830 |
|
(State
of Incorporation) |
(I.R.S.
Employer Identification No.) |
| |
|
|
500
N Akard Street, Dallas, TX 75201 |
(214)
486-2000 |
|
(Address
of Principal Executive Offices)(Zip Code) |
(Registrant’s
Telephone Number) |
__________________________________________
Securities
registered pursuant to Section 12(b) of the Act: None
Securities
registered pursuant to Section 12(g) of the Act: None
__________________________________________
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes Ö No
__
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of the registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ Ö
]
Indicate
by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Act). Yes __ No Ö
- -
Aggregate
market value of TXU Electric Delivery Company Common Stock held by
non-affiliates: None
Common
Stock outstanding at March 18, 2005: 48,864,775 shares, without par
value
TXU
Electric Delivery Company meets the conditions set forth in General Instructions
(I) (1) (a) and (b) of Form 10-K and is therefore filing this report with the
reduced disclosure format.
__________________________________________
DOCUMENTS
INCORPORATED BY REFERENCE -
None
TABLE
OF CONTENTS
| |
Page
|
|
Glossary
|
ii
|
|
PART
I
|
|
|
Items
1. and 2. BUSINESS and PROPERTIES
|
1
|
|
TXU
ELECTRIC DELIVERY COMPANY AND SUBSIDIARY |
1
|
|
DESCRIPTION
OF TXU ELECTRIC DELIVERY’S BUSINESS |
2
|
|
REGULATION
AND RATES |
3
|
|
ENVIRONMENTAL
MATTERS |
4
|
|
Item
3. LEGAL
PROCEEDINGS
|
4
|
|
Item
4. SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
|
4
|
|
PART
II
|
|
|
Item
5. MARKET
FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
|
5
|
|
Item
6. SELECTED
FINANCIAL DATA
|
5
|
|
Item
7. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
|
5
|
|
Item
7A QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
5
|
|
Item
8. FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
|
5
|
|
Item
9. CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL
DISCLOSURE
|
5
|
|
Item
9A. CONTROLS
AND PROCEDURES
|
5
|
|
Item
9B. OTHER
INFORMATION
|
5
|
|
PART
III
|
|
|
Item
10. DIRECTORS
AND EXECUTIVE OFFICERS OF REGISTRANT
|
6
|
|
Item
11. EXECUTIVE
COMPENSATION
|
6
|
|
Item
12 SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
|
6
|
|
Item
13. CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
|
6
|
|
Item
14. PRINCIPAL
ACCOUNTING FEES AND SERVICES
|
7
|
|
PART
IV
|
|
|
Item
15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|
8
|
|
APPENDIX
A - Financial Information of TXU Electric Delivery Company
|
|
|
APPENDIX
B -Exhibits to 2004 Form 10-K
|
|
Periodic
reports on Form 10-K and Form 10-Q and current reports on Form 8-K that contain
financial information of TXU Electric Delivery Company are made available to the
public, free of charge, on the TXU Corp. website at http://www.txucorp.com,
shortly after they have been filed with the Securities and Exchange Commission.
TXU Electric Delivery Company will provide copies of current reports not posted
on the website upon request. The information on TXU Corp.’s website shall not be
deemed a part of, or incorporated by reference into, this report of Form 10-K.
GLOSSARY
When the
following terms and abbreviations appear in the text of this report, they have
the meanings indicated below.
|
1999
Restructuring Legislation
|
legislation
that restructured the electric utility industry in Texas to provide for
retail competition
|
|
2002
Form 10-K
|
TXU
Electric Delivery Company’s Annual Report on Form 10-K for the year ended
December 31, 2002
|
|
2003
Form 10-K
|
TXU
Electric Delivery Company’s Annual Report on Form 10-K for the year ended
December 31, 2003
|
|
APB
25
|
Accounting
Principles Board Opinion No. 25, “Accounting for Stock Issued to
Employees”
|
|
Capgemini
|
Capgemini
Energy LP, a new company providing business process support services to
TXU Corp. and a subsidiary of Cap Gemini North America Inc.
|
|
Commission
|
Public
Utility Commission of Texas
|
|
EPA
|
Environmental
Protection Agency
|
|
ERCOT
|
Electric
Reliability Council of Texas, the Independent System Operator and the
regional reliability coordinator of the various electricity systems within
Texas
|
|
ERISA
|
Employee
Retirement Income Security Act
|
|
FASB
|
Financial
Accounting Standards Board, the designated organization in the private
sector for establishing standards for financial accounting and reporting
|
|
FERC
|
Federal
Energy Regulatory Commission
|
|
FIN
|
Financial
Accounting Standards Board Interpretation
|
|
FIN
46
|
FIN
No. 46, “Consolidation of Variable Interest Entities”
|
|
FIN
46R
|
FIN
No. 46 (Revised 2003), “Consolidation of Variable Interest
Entities”
|
|
Fitch
|
Fitch
Ratings, Ltd.
|
|
GWh
|
gigawatt-hours
|
|
historical
service territory
|
the
territory, largely in north Texas, being served by US Holdings as a
regulated utility at the time of entering retail competition on January 1,
2002.
|
|
IRS
|
Internal
Revenue Service
|
|
kV
|
kilovolts
|
|
Moody’s
|
Moody’s
Investors Services, Inc.
|
|
REP
|
retail
electric provider
|
|
S&P
|
Standard
& Poor’s, a division of the McGraw Hill Companies
|
|
Sarbanes-Oxley
|
Sarbanes-Oxley
Act of 2002
|
|
SEC
|
United
States Securities and Exchange Commission
|
|
Settlement
Plan
|
regulatory
settlement plan that received final approval by the Commission in January
2003
|
|
SFAS
|
Statement
of Financial Accounting Standards issued by the FASB
|
|
SFAS
71
|
SFAS
No. 71, “Accounting
for the Effects of Certain Types of Regulation”
|
|
SFAS
87
|
SFAS
No. 87, “Employers'
Accounting for Pensions”
|
|
SFAS
106
|
SFAS
No. 106, “Employers'
Accounting for Postretirement Benefits Other Than Pensions”
|
|
SFAS
109
|
SFAS
No. 109, “Accounting
for Income Taxes”
|
|
SFAS
123
|
SFAS
No. 123, “Accounting for Stock-Based Compensation”
|
|
SFAS
123R
|
SFAS
No. 123 (revised 2004), “Share-Based Payment”
|
|
SFAS
133
|
SFAS
No. 133, “Accounting
for Derivative Instruments and Hedging Activities”
|
|
SFAS
140
|
SFAS
No. 140, “Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities — a Replacement of FASB Statement No.
125”
|
|
SFAS
142
|
SFAS
No. 142, “Goodwill and Other Intangible Assets”
|
|
SFAS
143
|
SFAS
No. 143, “Accounting for Asset Retirement Obligations”
|
|
SFAS
145
|
SFAS
No. 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of
FASB Statement 13, and Technical Corrections”
|
|
SG&A
|
selling,
general, and administrative
|
|
TCEQ
|
Texas
Commission on Environmental Quality
|
|
TXU
Corp.
|
refers
to TXU Corp., a holding company, and/or its consolidated subsidiaries,
depending on context
|
|
TXU
Electric Delivery
|
refers
to TXU Electric Delivery Company (formerly Oncor Electric Delivery
Company) a subsidiary of US Holdings or TXU Electric Delivery and its
consolidated bankruptcy remote financing subsidiary, TXU Electric Delivery
Transition Bond Company LLC (formerly Oncor Electric Delivery Transition
Bond Company LLC) depending on context
|
|
TXU
Energy Holdings
|
refers
to TXU Energy Company LLC, a subsidiary of US Holdings, and/or its
consolidated subsidiaries, depending on context
|
|
TXU
Gas
|
TXU
Gas Company, a former subsidiary of TXU Corp.
|
|
US
|
United
States of America
|
|
US
GAAP
|
accounting
principles generally accepted in the US
|
|
US
Holdings
|
TXU
US Holdings Company, a subsidiary of TXU Corp. and parent of the TXU
Energy Holdings and TXU Electric Delivery businesses
|
PART
I
Items
1. and 2. BUSINESS and PROPERTIES
TXU
ELECTRIC DELIVERY COMPANY AND SUBSIDIARY
TXU
Electric Delivery Company (TXU Electric Delivery) is a regulated electricity
transmission and distribution company principally engaged in providing delivery
services to retail electric providers (REPs) that sell power in the
north-central, eastern and western parts of Texas.
As a
result of the 1999 Restructuring Legislation, which set into motion the
deregulation of the electric industry in Texas, effective January 1, 2002, TXU
Corp.’s integrated electric utility business was disaggregated (unbundled) and
its operations were transferred to the newly established TXU Electric Delivery
and TXU Energy Holdings subsidiaries. TXU US Holdings Company (US Holdings) is
the parent of TXU Energy Holdings and TXU Electric Delivery and is a subsidiary
of TXU Corp. Unbundled electricity delivery utilities within ERCOT, such as TXU
Electric Delivery, remain regulated by the Public Utility Commission of Texas
(Commission).
TXU Electric
Delivery complements the competitive operations of TXU Energy Holdings, using
asset management skills developed over more than one hundred years, to provide
reliable electricity delivery to consumers. TXU Electric Delivery operates the
largest distribution and transmission system in Texas, providing power to
approximately 3 million electric delivery points over 99,638 miles of electric
distribution lines and 14,191 miles of electric transmission lines. At December
31, 2004, TXU Electric Delivery had 3,743 full-time employees, including 175 in
a collective bargaining unit.
TXU
Electric Delivery operates within the ERCOT system. ERCOT is an intrastate
network of investor-owned entities, cooperatives, public entities, nonutility
generators and power marketers. ERCOT is the regional reliability coordinating
organization for member electricity systems in Texas, the Independent System
Operator of the interconnected transmission system of those systems, and is
responsible for ensuring equal access to transmission service by all wholesale
market participants in the ERCOT region.
TXU
Electric Delivery’s financial statements include its wholly-owned, bankruptcy
remote subsidiary TXU Electric Delivery Transition Bond Company LLC. TXU
Electric Delivery Transition Bond Company LLC was organized for the limited
purpose of issuing securitization bonds to recover regulatory asset stranded
costs and other qualified costs.
TXU
Electric Delivery is managed as a single, integrated electricity delivery
business; consequently, there are no separate reportable business
segments.
TEXAS
ELECTRIC INDUSTRY RESTRUCTURING
REGULATORY
SETTLEMENT PLAN
On
December 31, 2001, US Holdings filed a Settlement Plan with the Commission. It
resolved all major pending issues related to US Holdings’ transition to
competition pursuant to the 1999 Restructuring Legislation. The Settlement Plan,
which became final and nonappealable in January 2003, does not remove regulatory
oversight of TXU Electric Delivery’s business.
As part
of the Settlement Plan, US Holdings received a financing order authorizing the
issuance of securitization (transition) bonds in the aggregate principal amount
of up to $1.3 billion to recover regulatory asset stranded costs and other
qualified costs. Accordingly, TXU Electric Delivery issued an initial $500
million of securitization bonds in 2003 and the remaining $790 million in June
2004. The principal and interest on the bonds are recoverable through revenues
as a transition charge billed to all REPs, including TXU Energy Holdings. There
is no remaining issuance authorization under the financing order.
DESCRIPTION
OF TXU ELECTRIC DELIVERY’S BUSINESS
ELECTRICITY
TRANSMISSION
TXU
Electric Delivery’s electricity transmission business is responsible for the
safe and reliable operations of its transmission network and substations. These
responsibilities consist of the construction and maintenance of transmission
facilities and substations and the monitoring, controlling and dispatching of
high-voltage electricity over TXU Electric Delivery’s transmission facilities in
coordination with ERCOT.
TXU
Electric Delivery is a member of ERCOT, and the transmission business actively
supports the operations of ERCOT and market participants. The transmission
business participates with ERCOT and other member utilities to plan, design,
construct and operate new transmission lines, with regulatory approval,
necessary to maintain reliability, increase bulk power transfer capability and
to minimize limitations and constraints on the ERCOT transmission grid.
Transmission
revenues are provided under tariffs approved by either the Commission and, to a
small degree, the FERC. Network transmission revenues compensate TXU Electric
Delivery for delivery of power over transmission facilities operating at 60 kV
and above. Transformation service revenues compensate TXU Electric Delivery for
substation facilities that transform power from high-voltage transmission to
distribution voltages below 60 kV. Other services offered by the transmission
business include, but are not limited to: system impact studies, facilities
studies and maintenance of transformer equipment, substations and transmission
lines owned by other non-retail parties.
TXU
Electric Delivery’s transmission facilities include 4,511 circuit miles of
345-kV transmission lines and 9,680 circuit miles of 138- and 69-kV transmission
lines. Forty generating plants totaling 32,699 megawatts are directly connected
to TXU Electric Delivery’s transmission system, and 697 distribution substations
are served from TXU Electric Delivery’s transmission system.
TXU
Electric Delivery is connected by eight 345-kV lines to CenterPoint Energy Inc.;
by four 345-kV lines (one of which is an asynchronous high voltage direct
current interconnection) with the Southwest Power Pool; by eight 138-kV and
twelve 69-kV lines to American Electric Power Company Inc.; by six 345-kV,
eighteen 138-kV and three 69-kV lines to the Lower Colorado River Authority; by
seven 345-kV and nine 138-kV lines to the Texas Municipal Power Agency; by nine
138 kV and eleven 69 kV lines with Texas New Mexico Power; by four 345-kV,
eighty-five 138-kV and twenty 69 kV lines with Brazos Electric Power
Cooperative; by twenty-five 138 kV and six 69 kV lines with Rayburn Country
Electric Cooperative; and at thirteen points with smaller systems operating
wholly within Texas.
ELECTRICITY
DISTRIBUTION
TXU
Electric Delivery’s electricity distribution business is responsible for the
overall safe and efficient operation of distribution facilities, including power
delivery, power quality and system reliability. The TXU Electric Delivery
distribution system supplies electricity to approximately 3 million points of
delivery. The electricity distribution business consists of the ownership,
management, construction, maintenance and operation of the distribution system
within TXU Electric Delivery’s certificated service area. Over the past five
years, the number of TXU Electric Delivery’s distribution system points of
delivery served has been growing an average of 2% per year.
TXU
Electric Delivery’s distribution system receives electricity from the
transmission system through substations and distributes electricity to end-users
and wholesale customers through 2,943 distribution feeders.
The TXU
Electric Delivery distribution system consists of 55,718 miles of overhead
primary conductors, 22,114 miles of overhead secondary and street light
conductors, 13,527 miles of underground primary conductors and 8,279 miles of
underground secondary and street light conductors. The majority of the
distribution system operates at 25-kV and 12.5-kV.
Most of
TXU Electric Delivery’s power lines have been constructed over lands of others
pursuant to easements or along public highways, streets and rights-of-way as
permitted by law.
CUSTOMERS
TXU
Electric Delivery’s transmission customers consist of municipalities, electric
cooperatives and other distribution companies. TXU Electric Delivery’s
distribution customers consist of 47 REPs in TXU Electric Delivery’s certified
service area, including affiliated REPs. For the year ended December 31, 2004,
distribution revenues from TXU Energy Holdings represented approximately 71% of
TXU Electric Delivery’s total distribution revenues and 64% of TXU Electric
Delivery’s total revenues. There are no individually significant unaffiliated
consumers upon which TXU Electric Delivery’s business or results are highly
dependent.
Since
January 1, 2002, the retail customers who purchase and consume electricity and
are connected to TXU Electric Delivery’s system have been free to choose their
electricity supplier from REPs who compete for their business. The changed
character of electric service, however, does not mean that the safe and reliable
delivery of dependable power is any less critical to TXU Electric Delivery’s
success. Service quality, safety and reliability are of paramount importance to
REPs, electricity consumers and TXU Electric Delivery. TXU Electric Delivery
intends to continue to build on its inherited tradition of low cost and high
performance.
STRATEGY
TXU
Electric Delivery’s primary mission is to deliver electricity safely, reliably
and economically to end-use consumers with a focus on operational excellence and
performance management that is critical for success.
TXU
Electric Delivery will continue to focus on providing top decile reliability,
world-class strategic sourcing and a lean administrative cost structure to
achieve operational excellence. TXU Electric Delivery has developed and
implemented a multiyear Comprehensive Maintenance Program in order to improve
reliability of its poorer performing facilities. This program is a proactive
strategy that includes both heavy maintenance activities and selective
replacement of aging infrastructure to avoid or minimize outages. This program
is expected to continue through 2006. TXU Electric Delivery has also implemented
a Transmission Grid Enhancement Program to invest in major electricity
transmission projects to further improve reliability and reduce congestion.
In 2004,
TXU Electric Delivery achieved top quartile performance levels of SAIDI and
CAIDI, two of the three key reliability indicators. This top quartile measure is
based on performance averages of a broad group of electric transmission and
distribution companies in North America. SAIDI performance, the average number
of total electric service outage minutes per customer in the past year, was
75.54 minutes and CAIDI performance, the average number of electric service
outage minutes per interruption in the past year, was 68.67 minutes. In
addition, the year-end 2004 SAIFI performance level, the average number of
electric service interruptions per customer per year, improved to 1.10
interruptions and is moving towards first-quartile levels.
TXU
Electric Delivery intends to focus on performance management in the future by
creating a high performance culture that aligns individual performance with
business objectives.
REGULATION
AND RATES
As its
operations are wholly within Texas, TXU Electric Delivery believes that it is
not a public utility as defined in the Federal Power Act and has been advised by
its counsel that it is not subject to general regulation under such act.
The
Commission has original jurisdiction over transmission rates and services and
over distribution rates and services in unincorporated areas and in those
municipalities that have ceded original jurisdiction to the Commission and has
exclusive appellate jurisdiction to review the rate and service orders and
ordinances of municipalities. Generally, the Texas Public Utility Regulatory Act
(PURA) prohibits the collection of any rates or charges by a public utility (as
defined by PURA) that does not have the prior approval of the Commission.
At the
state level, PURA, as amended, requires owners or operators of transmission
facilities to provide open access wholesale transmission services to third
parties at rates and terms that are nondiscriminatory and comparable to the
rates and terms of the utility's own use of its system. The Commission has
adopted rules implementing the state open access requirements for utilities that
are subject to the Commission's jurisdiction over transmission services, such as
TXU Electric Delivery.
Provisions
of the 1999 Restructuring Legislation allow TXU Electric Delivery to annually
update its transmission rates to reflect changes in invested capital. These
provisions encourage investment in the transmission system to help ensure
reliability and efficiency by allowing for timely recovery of and return on new
transmission investments.
ENVIRONMENTAL
MATTERS
Water
The TCEQ
has jurisdiction over water discharges (including storm water) from all domestic
facilities. TXU Electric Delivery’s facilities are presently in compliance with
applicable state and federal requirements relating to discharge of pollutants
into the water. TXU Electric Delivery holds all required waste water discharge
permits from the TCEQ for facilities in operation and has applied for or
obtained necessary permits for facilities under construction. TXU Electric
Delivery believes it can satisfy the requirements necessary to obtain any
required permits or renewals. Recent changes to federal rules pertaining to
Spill Prevention, Control and Countermeasure Plans for oil-filled electrical
equipment and bulk storage facilities for oil will require updating of certain
plans and facilities. TXU Electric Delivery is unable to predict at this time
the impact of these changes.
Other
Treatment,
storage and disposal of solid and hazardous waste are regulated at the state
level under the Texas Solid Waste Disposal Act and at the federal level under
the Resource Conservation and Recovery Act of 1976, as amended, and the Toxic
Substances Control Act. The EPA has issued regulations under the R