TXU Energy is privileged to do business in one of the nation’s best economies, which remains resilient even in the current slowdown. With a population of more than 21 million, the nation’s second largest state now accounts for more than seven percent of total US employment. This diverse economy and the hot weather demand huge amounts of energy, making Texas No. 1 in the nation in electricity consumption.

The Dallas-Fort Worth and Houston metropolitan areas, two of TXU Energy’s main markets, enjoy the state’s highest per capita income and have large concentrations of jobs in financial and business services as well as well-paying manufacturing jobs in electronics, motor vehicles, chemicals, machinery, and aerospace.

During the first year of customer choice, we maintained our position as the leading competitive electric provider, offsetting modest customer losses in our historical service area with gains in new markets. With customer growth in our traditional service territory, we maintained consumer retail load

levels in 2002 despite the entry of several new competitors in our home market.

Customer gains included the addition of almost 34,000 residential and small commercial customers in Houston who were formerly served by New Power Company. TXU Energy is now Houston’s No. 1 brand behind the incumbent.

Customer retention in our historical markets was ahead of plan at the end of 2002, and customer awareness of the TXU brand in new markets jumped from a little over 10 percent to more than 50 percent. At the end of the year, more than half of customers across the open Texas market said they were likely to recommend TXU Energy as an energy provider.

Deregulation resulted in cost savings for Texans. The Public Utility Commission of Texas has estimated that the state’s retail consumers saved, at a minimum, over $1.5 billion in electricity costs during the first year of competition as compared with the regulated rates in effect during 2001.