SF6 Reduction Partnership
In 1999, TXU became a charter member of the EPA’s Emission Reduction Partnership for Electric Power Systems. This program was developed to encourage companies to reduce their emissions of sulfur hexafluoride (SF6), a greenhouse gas that is used throughout the utility industry as an insulator in electrical equipment. Since the program began, TXU has prevented the release of more than 34,000 pounds of SF6 to the atmosphere, which accounts for approximately 10% of the partnership’s cumulative emission reductions. Due to this exceptional performance, TXU was one of only four companies selected by the EPA in 2004 to participate in an equipment study program tracking and reporting leak rates for certain circuit breakers.

Independent Climate Change Study
In connection with shareholder requests, TXU retained independent consultants to evaluate its processes for following and evaluating air emission and climate policies and regulations. Subsequent discussions with these groups helped refine the scope of the consultants’ work. An independent study released in October 2004 by TXU, TXU Activities Regarding Actual and Potential U.S. Air Emissions and Climate Change Policies, evaluated the company’s processes, climate policies and actions regarding previous major air emission policies and compliance. Additionally, the study considered the financial consequences and related risks of prospective air emission and climate change policies, including assessment of the financial effects of reducing emissions now in anticipation of future requirements.

The study concluded that TXU has the appropriate processes and procedures in place and uses appropriate economic methodologies to evaluate the financial consequences of environmental regulatory policy changes and scenarios. The study also concluded that, absent certain specific circumstances, shareholders would not benefit if TXU devoted major financial resources now to reduce CO2 emissions in advance of uncertain future emission regulations. Finally, the study concluded that TXU’s efforts have consistently resulted in compliance with air emission limits. The study is available at www.txucorp.com/responsibility/default.aspx.

Renewable Energy
For more than 30 years, TXU has devoted company time and money to renewable energy research and development. Today, these investments are maturing and have made the company one of the largest purchasers of renewable energy in North America. TXU currently purchases wind energy from more than 700 wind turbines, as well as renewable energy from landfill gas operations. These renewable energy purchases provide enough energy capacity to power more than 120,000 homes – and the energy needs of about 260,000 Texans – each year. Actual company purchases from renewable sources currently total about 580 megawatts. These purchases represent 2% of TXU’s total energy resources. TXU expects to add new sources of wind generation in the future and is proud to be a major part of helping increase renewable capacity in Texas.

Future Air Compliance Issues
Throughout 2004, the EPA developed multi-pollutant legislation, as well as changes to existing parts of the Clean Air Act affecting utility emissions. In March 2005, the EPA issued a final rule to further reduce NOx and SO2 emissions from power plants. These reductions are proposed to be phased in by 2009 and 2015. Also in March, the EPA published a final rule requiring reductions in mercury emissions from coal-fired power plants. The requirements of this rule will be phased in by 2010 and 2018. Future SO2 emission reductions will also be required from certain older power plants under proposed regional haze/visibility rules. TXU will formulate coordinated compliance plans for these reductions based on the final requirements.

Mercury Emission Research
TXU’s research on mercury emission reductions began six years ago, when the EPA indicated that mercury regulations might be necessary. The research program is important because no established technology exists to specifically capture mercury from commercial lignite power plants, although current TXU air emission controls already capture some mercury emissions. TXU is partnering with the EPA, DOE and universities to conduct new mercury control tests. During 2004, the primary focus of this research was on developing, demonstrating and evaluating technologies that are applicable for control of power plant emissions. To assist in this effort, the company has received two mercury research grants from the DOE. TXU has also been researching and developing new technologies with partners at the University of Texas at Austin’s Applied Research Laboratories since 1996.

Working Together for Cleaner Air
TXU works within its communities to help improve air quality through partnerships, employee initiatives, internships, tree programs and other cooperative efforts. For Earth Day 2004, TXU joined with the North Texas Clean Air Coalition, 500 school children and a 120-foot-long wind blade to announce the Fourth Annual TXU Clean Air Grants to support community programs that educate about air quality.

Additionally, TXU is one of the largest purchasers of employee bus/train passes in the Dallas-Fort Worth area. TXU also subsidizes these passes for employees. Additionally, TXU financially supports carpools for daily employee travel to and from work. Together, these efforts reduce pollution and the number of vehicles on the road.

TXU also continues to sponsor the highly successful TXU Urban Tree Farm at Richland College in North Dallas in cooperation with the Texas Trees Foundation. The nation’s largest-known nonprofit urban tree farm, it expressly benefits the urban areas of North Texas with trees for planting at local schoolyards, along highways and in parks. The National Tree Trust has estimated the trees alone will sequester nearly 175 tons of CO2 over their 80-year life span. The TXU Urban Tree Farm is also a sustainable program. TXU provided the seed money to create it, and revenues from tree sales to community organizations fund subsequent years’ trees.