TXU ELECTRIC DELIVERY CO - 10-Q Quarterly Report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2005

— 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)

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 þ No ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ

Common Stock outstanding at May 11, 2005: 48,864,775 shares, without par value

TXU Electric Delivery Company meets the conditions set forth in General Instructions (H) (1) (a) and (b) of Form 10-Q and is therefore filing this report with the reduced disclosure format.

TABLE OF CONTENTS


		Page
GLOSSARY		ii

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements

	Condensed Statements of Consolidated Income and Comprehensive Income— Three Months Ended March 31, 2005 and 2004	1

	Condensed Statements of Consolidated Cash Flows — Three Months Ended March 31, 2005 and 2004	2

	Condensed Consolidated Balance Sheets — March 31, 2005 and December 31, 2004	3

	Notes to Condensed Consolidated Financial Statements	4

	Report of Independent Registered Public Accounting Firm	13

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	20

Item 4.	Controls and Procedures	24

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	25

Item 6.	Exhibits	25

SIGNATURE		26

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-Q.

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

2004 Form 10-K		TXU Electric Delivery Company’s Annual Report on Form 10-K for the year ended December 31, 2004

Capgemini		Capgemini Energy LP, a subsidiary of Cap Gemini North America Inc. that provides business support services to TXU Corp.

Commission		Public Utility Commission of Texas

ERCOT		Electric Reliability Council of Texas, the Independent System Operator and the regional reliability coordinator of the various electricity systems within Texas

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

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.

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

SFAS		Statement of Financial Accounting Standards issued by the FASB

SFAS 140		SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities — a Replacement of FASB Statement No. 125”

SG&A		selling, general and administrative

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, a subsidiary of US Holdings, and/or its consolidated wholly-owned bankruptcy remote financing subsidiary, TXU 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 TXU Energy Holdings and TXU Electric Delivery

iii

PART I. FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

TXU ELECTRIC DELIVERY COMPANY

CONDENSED STATEMENTS OF CONSOLIDATED INCOME

(Unaudited)


	Three Months Ended March 31,
	2005		2004
	(millions of dollars)
Operating revenues:
Affiliated	$	311	$	349
Nonaffiliated		239		174

Total operating revenues		550		523
Operating expenses:
Operation and maintenance		193		190
Depreciation and amortization		105		87
Income taxes		27		27
Taxes, other than income		93		92

Total operating expenses		418		396

Operating income		132		127

Other income and deductions:
Other income		1		2
Other deductions		5		1
Nonoperating income taxes		4		3
Interest income — affiliates		15		12
Interest expense and related charges		68		71

Net income	$	71	$	66

CONDENSED STATEMENTS OF CONSOLIDATED

COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended March 31,
	2005		2004
	(millions of dollars)
Net income	$	71	$	66
Other comprehensive income, net of tax effects:
Cash flow hedges:
Amounts realized in earnings during the year		1		1

Total		1		1

Comprehensive income	$	72	$	67

See Notes to Financial Statements.

TXU ELECTRIC DELIVERY COMPANY

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS

(Unaudited)


	Three Months Ended March 31,
	2005			2004
	(millions of dollars)
Cash flows — operating activities:
Net income	$	71		$	66
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		105			87
Deferred income taxes and investment tax credits — net		37			39
Stock-based compensation expense		3			—
Changes in operating assets and liabilities		(161	)		(183	)

Cash provided by operating activities		55			9

Cash flows — financing activities:
Retirements/repurchases of long-term debt		(21	)		(8	)
Changes in notes payable — banks		50			—
Repurchase of common stock		—			(38	)
Net change in advances from affiliates		79			(5	)
Decrease in note receivable from TXU Energy Holdings related to transition bonds		17			—
Debt premium, discount, financing and reacquisition expenses		(3	)		—

Cash provided by (used in) financing activities		122			(51	)

Cash flows — investing activities:
Capital expenditures		(164	)		(110	)
Proceeds from sale of assets		5			—
Other		(17	)		1

Cash used in investing activities		(176	)		(109	)

Net change in cash and cash equivalents		1			(151	)
Cash and cash equivalents — beginning balance		—			245

Cash and cash equivalents — ending balance	$	1		$	94

See Notes to Financial Statements.

TXU ELECTRIC DELIVERY COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	March 31, 2005			December 31, 2004
	(millions of dollars)
ASSETS
Current assets:
Cash and cash equivalents	$	1		$	—
Restricted cash		46			43
Accounts receivable:
Affiliates (principally TXU Energy Holdings)		180			194
All other		76			72
Notes or other receivables due currently from TXU Energy Holdings		32			49
Materials and supplies inventories — at average cost		43			33
Other current assets		63			31

Total current assets		441			422

Investments		64			62
Property, plant and equipment — net		6,728			6,609
Notes or other receivables due from TXU Energy Holdings		386			386
Regulatory assets — net		1,876			1,891
Other noncurrent assets		131			123

Total assets	$	9,626		$	9,493


LIABILITIES AND SHAREHOLDER’S EQUITY
Current liabilities:
Notes payable — banks	$	50		$	—
Advances from affiliates		142			63
Long-term debt due currently		183			182
Accounts payable – trade		64			58
Accrued taxes		108			215
Accrued interest		68			77
Other current liabilities		130			122

Total current liabilities		745			717

Investment tax credits		62			63
Accumulated deferred income taxes		1,533			1,524
Other noncurrent liabilities and deferred credits		331			303
Long-term debt, less amounts due currently		4,178			4,199

Total liabilities		6,849			6,806
Contingencies (Note 4)

Shareholder’s equity (Note 3):
Common stock without par value:
Authorized shares – 100,000,000 shares;
Outstanding shares: 48,864,775 shares and 48,864,775 shares		2,079			2,061
Retained earnings		724			653
Accumulated other comprehensive loss		(26	)		(27	)

Total shareholder’s equity		2,777			2,687

Total liabilities and shareholder’s equity	$	9,626		$	9,493

See Notes to Financial Statements.

TXU ELECTRIC DELIVERY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.	SIGNIFICANT ACCOUNTING POLICIES AND BUSINESS

TXU Electric Delivery is a wholly-owned subsidiary of US Holdings, which is a wholly-owned subsidiary of TXU Corp. TXU Electric Delivery is a regulated electricity transmission and distribution company principally engaged in providing delivery services to REPs that sell power in the north-central, eastern and western parts of Texas. A majority of TXU Electric Delivery’s revenues represent fees for delivery services provided to TXU Energy Holdings, also a subsidiary of US Holdings. For the three months ended March 31, 2005, distribution revenues from TXU Energy Holdings represented 63% of TXU Electric Delivery’s total distribution revenues and 57% of TXU Electric Delivery’s total revenue.

TXU Electric Delivery’s financial statements include its consolidated wholly-owned bankruptcy remote financing 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 an integrated business; consequently, there are no separate reportable business segments.

Basis of Presentation — The condensed consolidated financial statements of TXU Electric Delivery, which include the results of operations of TXU Electric Delivery Transition Bond Company LLC, have been prepared in accordance with US GAAP and on the same basis as the audited financial statements included in its 2004 Form 10-K, except with respect to pension and other postretirement benefits as discussed in Note 5. In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the results of operations and financial position have been included therein. All intercompany items and transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with US GAAP have been omitted pursuant to the rules and regulations of the SEC. Because the condensed consolidated interim financial statements do not include all of the information and footnotes required by US GAAP, they should be read in conjunction with the audited financial statements and related notes included in the 2004 Form 10-K. The results of operations for an interim period may not give a true indication of results for a full year.

All dollar amounts in the financial statements and tables in the notes are stated in millions of dollars unless otherwise indicated.

2.	FINANCING ARRANGEMENTS

Short-term Borrowings — At March 31, 2005, TXU Electric Delivery had short-term borrowings consisting of bank borrowings of $50 million at a weighted average interest rate of 3.15% and advances from affiliates of $142 million at a weighted average interest rate of 3.81%. At December 31, 2004, TXU Electric Delivery had short-term advances from affiliates of $63 million at a weighted average interest rate of 3.40%.

Credit Facilities — At March 31, 2005, TXU Electric Delivery had access to credit facilities directly or through affiliates (some of which provide for long-term borrowings) as follows:


			At March 31, 2005
Facility	Maturity Date	Authorized Borrowers	Facility Limit		Letters of Credit		Cash Borrowings		Availability
Three-Year Revolving Credit Facility	June 2008	TXU Energy Holdings, TXU Electric Delivery	$	1,400	$	164	$	350	$	886
Five-Year Revolving Credit Facility	March 2010	TXU Energy Holdings, TXU Electric Delivery		1,600		—		—		1,600
Five-Year Revolving Credit Facility	June 2010	TXU Energy Holdings, TXU Electric Delivery		500		—		—

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