Texas

The Texas Restructuring Law required certain investor-owned electric utilities to separate power generation activities from transmission and distribution activities by January 1, 2002, and on that date, retail competition for generation services was instituted in some parts of Texas. The Texas Restructuring Law, however, specifically recognized and preserved EPE's Texas Rate Stipulation and Texas Settlement Agreement by, among other things, exempting EPE's Texas service area from retail competition until the end of the Freeze Period.

On October 13, 2004, the Texas Commission approved a rule further delaying retail competition in EPE's Texas service territory. The rule approved by the Texas Commission sets a schedule which identifies various milestones for EPE to reach before competition can begin.

The first milestone calls for the development, approval by the FERC, and commencement of independent operation of a RTO, including the development of retail market protocols to facilitate retail competition. The complete transition to retail competition would occur upon the completion of the last milestone which would be the Texas Commission's final evaluation of the market's readiness to offer fair competition and reliable service to all retail customers.

EPE believes that adoption of such a rule will likely delay retail competition in El Paso for at least several years.